ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made as of this
26th day of November 2001, by and among Wire One Technologies, Inc., a Delaware
corporation ("Buyer"), Axxis, Inc., a Kentucky corporation ("Seller"), and the
shareholders of Seller named on the signature page hereof (each, a
"Shareholder", and collectively, the "Shareholders") (Seller and the
Shareholders are sometimes referred to individually as a "Seller Party", and
collectively as "Seller Parties").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain
of the assets, properties and rights owned by or used in the business and
operations conducted by Seller's "Technologies" division (collectively, the
"Business"), upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Business constitutes only a portion of Seller's
operations, and Seller will continue to operate the remainder of its business
after the Closing (as hereinafter defined); and
WHEREAS, as consideration for such asset sale and purchase, (i) Buyer
desires to issue, and Seller desires to receive, shares of Buyer's common stock,
$0.0001 par value ("Common Stock") and the cash payments described herein, and
(ii) Buyer shall assume specified liabilities of Seller, upon the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, agreements, representations, warranties, and covenants herein
contained, the parties hereby agree as follows:
1. Closing; Registration Rights; Allocation
1.1 Closing Date; Effective Date; Effective Time. The closing
(the "Closing") of the purchase and sale of the Assets contemplated hereby shall
be held on the date hereof (the "Closing Date") at the offices of counsel to
Buyer, Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York 10103,
or such other location as may be mutually agreed upon by the parties.
Notwithstanding the foregoing, from and after the Closing, the purchase and sale
of the Assets shall be deemed to have occurred at 11:59 p.m. (the "Effective
Time") on September 30, 2001 (the "Effective Date").
1.2 Sale of Assets. At the Closing, Seller shall sell to
Buyer, free and clear of all liens, mortgages, security interests, encumbrances,
pledges, charges, restrictions on transfer, or adverse claims (collectively,
"Liens"), and Buyer shall buy from Seller, all of Seller's right, title and
interest in the assets used in, or necessary for the operation of, the Business
(the "Assets") that are not Excluded Assets (as hereinafter defined), including,
without limitation, the following:
(a) the right to bill customers of Seller for work performed
(but not yet billed) by Seller as part of the Business, on all jobs in progress
on the Effective Date based upon the terms of the agreements identified on
Schedule 2.9(a) (the "In-Progress Jobs"), which In-Progress Jobs include the
"backlog jobs" identified on Schedule 1.2(a)-1 and the net underbilling
receivables set forth in the last column of the chart set forth on Schedule
1.2(a)-2 (the "Underbilling Receivables");
(b) Seller's entire right, title and interest in, to and under
all In-Progress Jobs;
(c) all accounts receivable, and all notes and other
negotiable instruments and rights to receive payment, generated in the conduct
of the Business on or after the Effective Date, all of which are identified on
Schedule 1.2(c) (the "Post-Effective Date Receivables");
(d) Seller's inventory to be used to satisfy Seller's
obligations under In-Progress Jobs, as specified on Schedule 1.2(d);
(e) the vehicles of Seller specified on Schedule 1.2(e);
(f) the office furniture, warehouse equipment, office and
computer equipment technical equipment, media room equipment, demonstration
equipment, hardware, fixtures, office supplies and other tangible property and
any related documentation and user materials, and Seller's rights under all
related warranties, specified on Schedule 1.2(f);
(g) the leasehold interests of Seller specified on Schedule
1.2(g);
(h) all goodwill of the Business as a going concern;
(i) all rights of Seller under express or implied warranties
from suppliers or contractors with respect to the Assets;
(j) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind arising out of the Assets or the
Business;
(k) all existing business and marketing records related to the
Business, including accounting and operating records, asset ledgers, inventory
records, budgets, databases, event calendars, information and data respecting
leased or owned equipment, files, books, correspondence and mailing lists,
creative, promotional and advertising materials and brochures, and other
business records;
(l) all media, including, without limitation disks, tapes and
compact discs, and other tangible property necessary for the transfer of the
Assets from Seller to Buyer pursuant to the terms and conditions of this
Agreement; and
(m) all purchase or service orders of the Business taken by
Seller and not fulfilled as of the Effective Date (which are identified on
Schedule 2.9(a)).
1.3 Documentation of Sale. The sale and delivery of the Assets
shall be effected by:
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(a) a Bill of Sale and Assignment in substantially the form of
Exhibit A (the "Bill of Sale");
(b) an Assumption Agreement in substantially the form of
Exhibit B (the "Assumption Agreement");
(c) a Power of Attorney in favor of Buyer in substantially the
form of Exhibit C (the "Power of Attorney"); and
(d) such deeds, endorsements, assignments and other
instruments of transfer and conveyance, agreements, and documents reasonably
satisfactory in form and substance to Buyer and its counsel as may be requested
by Buyer.
1.4 No Other Liabilities or Obligations Assumed. Schedule 1.4
sets forth the liabilities of Seller to be assumed by Buyer upon the Closing
(the "Assumed Liabilities"), which Assumed Liabilities Buyer hereby assumes and
agrees to pay when due. Except as specifically set forth in Schedule 1.4, Buyer
expressly does not, and shall not, assume or be deemed to have assumed under
this Agreement or by reason of any transaction contemplated hereunder or
otherwise, any debts, liabilities (contingent or otherwise) or obligations of
Seller or the Business of any nature whatsoever, whether the same are direct or
indirect, fixed or contingent, or known or unknown, whether arising under an
agreement or contract or otherwise. Notwithstanding any other provision of this
Agreement, the Assumed Liabilities shall not include:
(a) any debts, liabilities (contingent or otherwise) or
obligations of Seller with respect to those Assumed Liabilities referred to in
this Section 1.4 arising out of any contract, agreement, commitment or lease (i)
required to be listed but not listed on Schedule 1.4 hereto regardless of any
knowledge thereof on the part of Buyer or (ii) the benefits of which are not
validly assigned to Buyer;
(b) any liabilities or obligations of Seller (whether direct
or indirect, contingent or otherwise) arising (i) under or in connection with
any Employee Benefit Plan (as hereinafter defined) or (ii) under Title IV or
Section 302 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), Section 412 of the Internal Revenue Code of 1986, as amended (the
"Code") or Section 4980B of the Code; or
(c) except as specifically set forth in Schedule 1.4, any
liabilities or obligations of Seller with respect to accounts payable and
payment obligations incurred in the conduct of the Business through and
including the Closing Date.
1.5 Purchase Price; Payment.
(a) Purchase Price. The consideration to be paid by Buyer for
the Assets shall consist of the following elements:
(i) 320,973 shares of Common Stock to be issued at
Closing (the "Shares"), such number of shares being equal to the
integral number of shares of Common Stock (rounded up to the nearest
share) that may be purchased for TWO MILLION FIFTY ONE THOUSAND
SEVENTEEN DOLLARS ($2,051,017) (the "Stock Purchase Price") at a price
per share of $6.39 (the "Per Share Price"), such Per Share Price being
equal to the closing sales price of Buyer's Common Stock on the Nasdaq
National Market on November 19, 2001;
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(ii) All expenses of the Business paid by Seller in
the ordinary course of business consistent with past custom and
practice after the Effective Time and through and including the Closing
Date and all cash relating to Post-Effective Date Receivables (as
hereinafter defined) and Underbilling Receivables collected during such
period shall be calculated (the definitive calculation of such sum is
referred to herein as the "Adjustment"). At the Closing, based upon the
estimate of the Adjustment calculated on Exhibit D hereto (the
"Estimated Adjustment"), to the extent such expenses exceed such cash,
Buyer shall pay Seller such excess in cash, and to the extent such
expenses are less than such cash, Seller shall pay Buyer such
deficiency in cash, subject to increase or decrease after the Closing
pursuant to Section 1.6 of this Agreement;
(iii) Buyer's assumption of the Assumed Liabilities;
and
(iv) The payment to Seller of $4,776.50 in cash on or
before the first day of each of the 18 consecutive months beginning
with December 1, 2001 and continuing through May 1, 2003.
(b) Delivery of Shares. At the Closing, Buyer shall:
(i) deliver to the Seller a certificate representing
272,827 (approximately 85%) of the Shares; and
(ii) deliver to Fulbright & Jaworski L.L.P., as
escrow agent (the "Escrow Agent"), a certificate representing 48,146
(approximately 15%) of the Shares (the "Escrowed Shares"), to be held
in escrow to secure Seller Parties' indemnification obligations under
this Agreement pursuant to the terms of an Escrow Agreement ("Escrow
Agreement") substantially in the form of Exhibit E.
(c) Registration of the Shares.
(i) Buyer shall:
(A) as soon as practicable after the
Closing, prepare and file with the Securities and Exchange Commission
(the "SEC") a registration statement on Form S-3 (the "Registration
Statement") relating to the resale of the Shares by Seller;
(B) use its reasonable best efforts, subject
to receipt of necessary information from Seller, to cause the SEC to
declare the Registration Statement effective as promptly as practicable
after the Registration Statement is filed by Buyer;
(C) promptly prepare and file with the SEC
(and provide notice to Seller of any such filing) such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep the Registration
Statement effective until the earlier of (1) the date all of the Shares
covered by the Registration Statement have been sold by Seller, or (2)
the date that is the second anniversary of the Closing Date;
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(D) furnish to Seller such number of copies
of prospectuses as Seller may reasonably request in order to facilitate
the public sale or other disposition by Seller pursuant to the
Registration Statement of all or any of the Shares owned by Seller;
(E) notify each holder of Shares covered by
such Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of 1933,
as amended (the "Securities Act"), of the happening of any event as a
result of which the prospectus included in such Registration Statement,
as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing. Buyer will use reasonable best efforts
to amend or supplement such prospectus in order to cause such
prospectus not to include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing; provided, however, that Buyer, in good
faith, may delay the filing of any such amendment or supplement for a
reasonable period of time in order to permit Buyer (1) to effect
disclosure or disposition or consummation of any transaction requiring
confidential treatment which is being actively pursued at such time and
which would require disclosure in the Registration Statement or (2) to
negotiate, effect or complete any transaction which Buyer reasonably
believes might be jeopardized, delayed or made more costly to Buyer by
disclosure in the Registration Statement; and
(F) bear all expenses in connection with the
procedures in paragraphs (A) through (E) of this Section 1.5(c)(i) and
the registration of the Shares pursuant to the Registration Statement,
other than fees and expenses, if any, of counsel and other advisers to
Seller or underwriting discounts, brokerage fees and commissions
incurred by Seller, if any.
(ii) (A) Notwithstanding the generality of the
foregoing clauses, Seller agrees that upon notice from Buyer at any
time or from time to time during the time the prospectus relating to
the Shares covered by the Registration Statement and proposed to be
sold by Seller is required to be delivered under the Securities Act of
the happening of any event as a result of which, in Buyer's opinion,
the prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing, Seller will forthwith discontinue Seller's
disposition of such Shares pursuant to the Registration Statement until
the time of Seller's receipt of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchaser of such Shares, such prospectus shall not include, in Buyer's
opinion, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing.
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(B) Seller shall furnish Buyer such
information regarding Seller and the distribution of the Shares covered
by the Registration Statement as Buyer may from time to time reasonably
request in writing.
(C) Seller agrees to give at least two (2)
Business Days' (as hereinafter defined) prior written notice to Buyer
of any proposed sale of the Shares pursuant to the Registration
Statement that would occur more than ten (10) Business Days after the
effective date of the Registration Statement and not to make such sale
(I) unless such two (2) Business Days elapse without response from
Buyer, or (II) in the event Buyer sends Seller written notice stating
that an amendment to the Registration Statement or supplement to the
prospectus must be filed in accordance with the second sentence of
Section 1.5(c)(i)(E), until Buyer notifies Seller that the Registration
Statement has been amended or the prospectus supplemented as required;
provided, however, that Buyer agrees to file such amendment or
supplement promptly upon the resolution of the disclosure issue
necessitating such delay, or, in any event, not more than thirty (30)
days after receipt of Buyer's written notice.
(iii) Buyer will use its commercially reasonable
efforts to cause the Shares covered by and to be sold pursuant to the
Registration Statement to be listed on any securities exchanges or
markets on which shares of Common Stock are then listed.
(iv) (A) In the event of a registration of any of the
Shares under the Securities Act pursuant to this Section 1.5(c), Buyer
will, to the extent permitted by applicable law, indemnify and hold
harmless Seller against all losses, claims, damages or liabilities to
which Seller may become subject under the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of Buyer), insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, including the prospectus, financial statements and
schedules, and all other documents filed as a part thereof, as amended
at the time of effectiveness of the Registration Statement, including
any information deemed to be a part thereof as of the time of
effectiveness pursuant to paragraph (b) of SEC Rule 430A, or pursuant
to SEC Rule 434, or the prospectus, in the form first filed with the
SEC pursuant to SEC Rule 424(b), or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) filing is
required, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse Seller for any
legal or other expenses reasonably incurred by Seller in connection
with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability or action; provided, however, that
Buyer will not be liable in any such case if and to the extent that any
such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished in writing by
Seller specifically for use in such Registration Statement. For
purposes of this Section 1.5(c)(iv), the term "Registration Statement"
shall include any final prospectus, exhibit, supplement or amendment
included in or relating to, and any document incorporated by reference
in, the Registration Statement referred to in Section 1.5(c)(i).
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(B) Seller will, to the extent permitted by
applicable law, indemnify and hold harmless Buyer, each person, if any,
who controls Buyer within the meaning of the Securities Act, each
officer of Buyer who signs the Registration Statement and each director
of Buyer, against all losses, claims, damages or liabilities, joint or
several, to which Buyer or such officer or director may become subject
under the Securities Act, the Exchange Act or any other federal or
state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is
effected with the written consent of Seller), insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement
or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse Buyer and each such officer,
director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action;
provided, however, that Seller will be liable hereunder in any such
case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement of a material fact or omission or alleged omission of
a material fact made in reliance upon and in conformity with
information pertaining to Seller furnished in writing to Buyer by
Seller specifically for use in the Registration Statement; and provided
further, however, that the liability of Seller hereunder shall not in
any event exceed the proceeds received from the sale of Seller's Shares
covered by such Registration Statement.
(C) Promptly after receipt by an indemnified
party under this Section 1.5(c)(iv) of notice of the threat or
commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 1.5(c)(iv), promptly notify the indemnifying party in writing
thereof; but the omission to so notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified
party for contribution or otherwise than under the indemnity agreement
contained in this Section 1.5(c)(iv) to the extent it is not prejudiced
as a result of such failure. In case any such action is brought against
any indemnified party and such indemnified party seeks or intends to
seek indemnity from an indemnifying party, the indemnifying party will
be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such
action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there
may be a conflict between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or
that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election
so to assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 1.5(c)(iv) for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (1) the indemnified party shall have
employed such counsel in connection with the assumption of legal
defenses in accordance with the proviso to the preceding sentence (it
being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, approved by
such indemnifying party in the case of paragraph (A), representing all
of the indemnified parties who are parties to such action) or (2) the
indemnified party shall not have employed counsel reasonably
satisfactory to the indemnifying party to represent the indemnified
party within a reasonable time after notice of commencement of action,
in each of which cases the reasonable fees and expenses of counsel
shall be at the expense of the indemnifying party.
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(D) In order to provide for just and
equitable contribution to joint liability under the Securities Act in
any case in which either (1) any indemnified party exercising rights
under this Agreement makes a claim for indemnification pursuant to this
Section 1.5(c)(iv) but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 1.5(c) provides for
indemnification in such case, (2) contribution under the Securities Act
may be required on the part of any such indemnified party in
circumstances for which indemnification is provided under this Section
1.5(c), or (3) the indemnification provided for by this Section 1.5(c)
is insufficient to hold harmless an indemnified party, other than by
reason of the exceptions provided therein, then, and in each such case,
Buyer and Seller will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution
from others) (x) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and the
indemnified party on the other or (y) if the allocation provided by
clause (x) above is not permitted by applicable law, or provides a
lesser sum to the indemnified party than the amount hereinafter
calculated, in such proportion as is appropriate to reflect not only
the relative fault referred to in clause (x) above but also the
relative benefits received by the indemnifying party and the
indemnified party from the registration of the securities as well as
the statements or omissions which resulted in such losses, claims,
damages or liabilities and any other relevant equitable considerations.
Seller will not be required to contribute any amount in excess of the
proceeds received from the sale of its Shares covered by such
Registration Statement and no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
(E) The obligations of the Buyer and Seller
under this Section 1.5(c)(iv) shall survive completion of any offering
of Shares pursuant to a Registration Statement and the termination of
Buyer's obligations under Section 1.5(c)(i). No indemnifying party, in
the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such
claim or litigation.
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(v) In the event that the Registration Statement has
not been declared effective by the SEC on or prior to the 10th Business
Day after the Closing Date, immediately upon effectiveness of such
Registration Statement, Buyer shall calculate the integral number of
shares of Common Stock (rounded up to the nearest share) that may be
purchased for the Stock Purchase Price at a price per share equal to
the average of the closing sales prices of Buyer's Common Stock on the
Nasdaq National Market on the ten (10) trading days immediately
preceding such effective date of the Registration Statement. As used
hereinafter, the term "Adjusted Shares" shall refer to such number of
shares of Common Stock calculated pursuant to the preceding sentence;
provided, however, that in the event that such number of shares of
Common Stock is greater than 385,168 (120% of the number of Shares
identified in Section 1.5(a)(i)), the term "Adjusted Shares" shall mean
385,168 shares of Common Stock (120% of the number of Shares identified
in Section 1.5(a)(i)). Buyer shall immediately notify Seller of such
calculation of Adjusted Shares, and, as soon as practicable thereafter,
(A) if the number of Shares exceeds the number of Adjusted Shares,
Buyer and Seller shall take such action as is necessary to cause 85% of
such excess number of Shares to be returned to Buyer by Seller and 15%
of such excess number of Shares to be returned to Buyer by the Escrow
Agent, or (B) if the number of Adjusted Shares exceeds the number of
Shares, Buyer shall take such action as is necessary to cause 85% of
such excess number of shares of Common Stock to be issued to Seller and
15% of such excess number of shares of Common Stock to be delivered to
the Escrow Agent to be held in escrow pursuant to the Escrow Agreement.
Notwithstanding the foregoing, in the event that the delay in causing
the Registration Statement to be declared effective by the SEC is due
to Seller's failure to provide necessary information required therefor,
the 10-Business Day period contemplated in this Section 1.5(c)(v) shall
be extended by the number of Business Days of delay caused by such
failure of Seller. In the event any adjustment in the number of shares
of Common Stock issued to Seller under this Agreement is necessary
pursuant to this Section 1.5(c)(v), as used in this Agreement, the term
"Shares" shall refer to the Adjusted Shares (except in Sections
1.5(a)(i), 1.5(b), 1.5(c)(i)(A) and 5.2(a)), and the term "Escrowed
Shares" shall refer to the shares of Common Stock held by the Escrow
Agent after giving effect to the adjustment required under this Section
1.5(c)(v) (except in Sections 1.5(b)(ii) and 5.2(a)).
(d) Allocation. Within 60 days following the Closing Date,
Buyer, subject to the approval of Seller, shall prepare and finalize a schedule
setting forth an allocation of the consideration described in Section 1.5(a)
(including any adjustment to the Estimated Adjustment pursuant to Section 1.6
hereof and any adjustment to the number of Shares pursuant to Section 1.5(c)(v))
among the Assets (the "Allocation Schedule"). Each party agrees to report the
transactions contemplated hereby for federal income tax and all other tax
purposes (including, without limitation, for purposes of Section 1060 of the
Code) in a manner consistent with the Allocation Schedule, and in accordance
with all applicable rules and regulations, and to take no position inconsistent
with the allocation set forth therein in any administrative or judicial
examination or other proceeding. Each of Buyer and Seller shall timely file the
appropriate forms in accordance with the requirements of Section 1060 of the
Code and this Section 1.5(d).
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1.6 Post-Closing Adjustment.
(a) On or prior to February 1, 2002 (or such later date as
Buyer and Seller may mutually agree in writing) (the "Deadline"),
representatives of Buyer and Seller shall jointly determine the Adjustment. Upon
certification in writing of the amount of the Adjustment jointly by such
representatives:
(i) if the Adjustment is greater than Estimated
Adjustment, Buyer shall, within five Business Days of such
certification, pay to Seller in cash the amount of such deficiency; or
(ii) if the Estimated Adjustment exceeds the
Adjustment, Seller shall, within five Business Days of such
certification, pay to Buyer in cash the amount of such excess.
(b) In the event that the representatives of Seller and Buyer
are unable jointly to determine the amount of the Adjustment by the Deadline,
Seller and Buyer hereby agree that such determination shall be referred to a
mutually satisfactory independent public accounting firm of national stature
that has not been employed by any party hereto for the two (2) years preceding
the date of such referral (the "Selected Accountants"), which shall promptly
make a determination. The determination of the Selected Accountants shall be
conclusive and binding on Buyer and Seller. One-half of the fees of the Selected
Accountants shall be borne by Seller, and one-half shall be borne by Buyer. If
the Selected Accountants determine that the Adjustment is greater than Estimated
Adjustment, Buyer shall, within five Business Days of such determination, pay to
Seller in cash the amount of such deficiency. If the Selected Accountants
determine that the Estimated Adjustment exceeds the Adjustment, Seller shall,
within five Business Days of such determination, pay to Buyer in cash the amount
of such excess.
1.7 Excluded Assets. Anything to the contrary notwithstanding,
the Assets shall not include any of the following rights, properties or assets
(the "Excluded Assets"):
(a) all accounts receivable of Seller generated by Seller
prior to the Effective Time for which Seller has prepared and issued invoices
(excluding the Underbilling Receivables);
(b) this Agreement, and any of the other documents to be
executed in connection herewith (collectively, the "Other Transaction
Documents"), or any right, title or interest of Seller or any of the
Shareholders hereunder or thereunder;
(c) any and all rights to any tax refund due to Seller,
accrued and prepaid expenses and deposits, and any and all prepaid insurance
premiums, whether or not related to the Business;
(d) the Shares;
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(e) any records relating to the internal governance of Seller;
(f) the names "Axxis", "Allied" and "Allied Communications";
(g) the accounting software applications system known as "SBT"
and "AVAIL" (the "Accounting Software") (provided that Buyer and its
representatives shall be entitled to reasonable access to the Accounting
Software in accordance with Section 7.4(b) of this Agreement); and
(h) all assets primarily used in, or necessary for the
operation of, Seller's ongoing studio and rental business (the "Other
Business").
1.8 Office Space Leases. At the Closing:
(a) Buyer will enter into an assumption agreement, in
substantially the form attached hereto as Exhibit F (the "Indianapolis Lease
Assumption"), for Seller's lease for office space in Indianapolis, Indiana;
(b) Buyer will enter into a sublease, in substantially the
form attached hereto as Exhibit G (the "Louisville Sublease"), for approximately
21,225 square feet of Seller's office space in Louisville, Kentucky; and
(c) Buyer will enter into an assumption agreement, in
substantially the form attached hereto as Exhibit H (the "Richmond Amended Lease
Assumption"), for Seller's amended lease for office space in Richmond, Indiana.
2. Representations and Warranties of Seller and the
Shareholders
Seller and the Shareholders hereby, jointly and severally, represent
and warrant to Buyer as follows:
2.1 Organization and Standing. Seller (a) is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Kentucky, (b) has full right, power and authority to enter into and
perform and do all things contemplated under this Agreement and the Other
Transaction Documents to which it is a party necessary to give effect to the
provisions of this Agreement and such Other Transaction Documents, to own and
lease the Assets and to carry on and operate the Business as now being conducted
and proposed to be conducted by it under existing agreements, (c) is duly
qualified or licensed to do business and is in good standing as a foreign
corporation in every jurisdiction in which the character of the Assets or nature
of the Business requires such qualification, and (d) does not own any of the
Assets, and does not conduct any of the Business, through any other corporation,
limited liability company, partnership or other entity.
2.2 Authorization and Binding Obligations. The execution,
delivery and performance by Seller of this Agreement and the Other Transaction
Documents to which Seller is a party have been duly and validly authorized by
all necessary corporate action, including, without limitation, any necessary
approval of the entire transaction by the requisite vote of Seller's
shareholders. This Agreement and the Other Transaction Documents to which Seller
is a party have been duly executed and delivered by Seller and constitute valid
and binding agreements of Seller, enforceable in accordance with their
respective terms, except as their enforceability may be limited by bankruptcy,
insolvency, moratorium or other laws relating to or affecting creditors' rights
generally and the exercise of judicial discretion in accordance with general
equitable principles. The Shareholders are the owners of 62.2% of the issued and
outstanding capital stock of Seller, the remainder of which is owned by Roy
Ridge.
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2.3 No Contravention. Except for the requirement of consent of
Fifth Third Bank, Seller's primary lender, the execution, delivery and
performance of this Agreement and the Other Transaction Documents to which
Seller is a party, the consummation of the transactions contemplated hereby and
thereby and the compliance with the provisions hereof and thereof by Seller do
not (a) violate any provision of the articles of incorporation or bylaws of
Seller, (b) conflict with, result in the breach of, or constitute a default
under, or result in the creation of any Lien upon any of the Assets, or require
any authorization, consent, approval, exemption or other action by or notice to
any third party (including any shareholder of Seller not a party to this
Agreement), court or other governmental or administrative body, under the
provisions of any agreement or other instrument to which Seller is a party or by
which any of the Assets are bound or affected or (c) violate any laws,
regulations, orders or judgments applicable to Seller or the Business.
2.4 Compliance with Laws. Seller has complied with, and is now
in compliance with, all laws, rules, regulations, orders, judgments and decrees
of any governmental, regulatory or administrative body, agency or authority, or
any court or judicial authority (each, an "Authority") applicable to the
Business. Seller possesses each franchise, license, permit, authorization,
certification, consent, variance, permission, order or approval of or from any
Authority, and has filed all filings, notices or recordings with any such
Authority (collectively, "Licenses") material to, or necessary for the conduct
of, the Business and is now and, has at all times in the past, been in
compliance with each of such Licenses. No proceeding or other action is pending
or, to the best knowledge of Seller and the Shareholders, threatened, to revoke,
amend, or limit any License, and Seller and the Shareholders have no basis to
believe that any such proceeding or action would result from the consummation of
the transactions contemplated by this Agreement or by the Other Transaction
Documents, or that any such License would not be renewed in the ordinary course.
2.5 Environmental and Safety Laws. Seller is not in violation
of any applicable law relating to the environment with respect to the facilities
identified in Section 1.8 hereof or occupational health and safety, and no
material expenditures are or will be required by Seller in order to comply with
any such existing law.
2.6 Tax Matters. Seller has, within the times and in the
manner prescribed by law, filed all required tax returns, including sales and
use tax returns, has paid or provided for all taxes, including sales and use
taxes owed by Seller, with respect to the Business (whether or not shown on any
tax return to be due and owing by it), has paid or provided for all deficiencies
or other assessments of taxes, interest or penalties owed by it, and all such
tax returns were correct and complete in all material respects when filed. No
taxing Authority has asserted, or will successfully assert, any claim for the
assessment of any additional taxes of any nature with respect to any periods
covered by any such tax returns, and all taxes or other charges required to be
withheld or collected by Seller with respect to the Business have been duly
withheld or collected and, to the extent required, have been paid to the proper
taxing Authority or properly segregated or deposited as required by law.
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2.7 Employee Benefit Plans; ERISA; Employees.
(a) As used in this Agreement, the term "ERISA Affiliate"
means any person or entity (whether or not incorporated) which, by reason of its
relationship with Seller or a subsidiary is required to be aggregated with
Seller or a subsidiary under Sections 414(b), 414(c), 414(m) or 414(o) of the
Code, or which, together with Seller or a subsidiary is a member of a controlled
group within the meaning of Section 4001(a) of ERISA.
(b) Schedule 2.7(b) lists each "employee benefit plan" as
defined in Section 3(3) of ERISA, whether or not subject to ERISA, and each
other employment, severance, consulting, confidentiality, deferred, incentive,
fringe benefit, change in control, retention, stock option or other equity based
or other compensatory or benefit plan, policy, agreement or arrangement that (i)
is maintained, administered, contributed to or required to be contributed to by
Seller, or its ERISA Affiliates or to which Seller or any ERISA Affiliate is a
party, and (ii) covers any current or former employee or other personnel of
Seller or any of its ERISA Affiliates who provides or has provided services to
or in connection with the Business (the "Business Employees"). Each such plan,
policy, agreement or arrangement is herein referred to as an "Employee Benefit
Plan." Copies of the Employee Benefit Plans, including, but not limited to, any
trust instruments, insurance contracts and all amendments thereto have been
furnished to Buyer. Except as set forth on Schedule 2.7(b), neither Seller nor
any of its ERISA Affiliates is or ever was obligated to contribute to or a
participating employer under a multiemployer plan within the meaning of Section
3(37) of ERISA or an employee pension plan covered by Title IV of ERISA, Section
302 of ERISA or Section 412 of the Code.
(c) With respect to any funded employee pension plan within
the meaning of Section 3(2) of ERISA, there has been no accumulated funding
deficiency within the meaning of Section 302(a)(2) of ERISA or Section 412 of
the Code, which has resulted or could result in the imposition of a Lien upon
any of the Assets, and no event has occurred and no circumstance exists under
which Seller has incurred or may incur, a liability (directly or indirectly),
under Title IV of ERISA or Section 4980B of the Code which could become a
liability of Buyer or which could result in the imposition of a Lien upon any of
the Assets.
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(d) Schedule 2.7(d) contains a true and complete list of all
employees, independent contractors, officers or directors of Seller who are
employed or performing services primarily for the Business (including for such
purposes certain corporate and administrative personnel, as specified therein)
on the date hereof (collectively, the "Closing Date Employees"), the title and
rate of compensation of each Closing Date Employee, and the amount of any
accrued vacation leave as of the date of this Agreement. Seller has, on or prior
to the Closing Date, (i) paid all accrued salary and bonuses, and accrued
amounts for sick leave, maternity leave and other leave (other than accrued
vacation leave) due and payable to the Closing Date Employees on or prior to the
Closing Date, and (ii) notified each Closing Date Employee that his or her
employment by Seller shall be terminated as of the Closing. Seller is not in
default with respect to any withholding or other employment taxes or payments
with respect to accrued vacation or severance pay on behalf of any Closing Date
Employee, former employee of the Business or independent contractor of the
Business for which it is obligated on the date hereof, and has made all such
necessary payments or adjustments arising through the Closing Date. Seller has
not instituted any "freeze" of, or delayed or deferred the grant of, any
cost-of-living or other salary adjustment for any Closing Date Employee.
Schedule 2.7(d) lists the name, title and rate of compensation of each employee
of the Business whose employment was terminated within 90 days prior to the date
of this Agreement. Seller has not engaged in any unfair labor practice or
discriminated on the basis of race, color, religion, sex, national origin, age,
disability or handicap in its employment conditions or practices with respect to
the Business. No employee or independent contractor of the Business has filed
or, to the best knowledge of Seller and the Shareholders, threatened, any
claims, and there is no reasonable basis for a claim against Seller relating to
employment or similar matters (including, without limitation, compensation and
benefits) with Seller with respect to the Business. There are not in existence
or, to the best knowledge of Seller and the Shareholders, threatened any work
stoppages respecting employees or independent contractors of Seller with respect
to the Business or unfair labor practice complaints against Seller with respect
to the Business. Seller is not a party to any collective bargaining agreement,
no representation question exists respecting the Closing Date Employees and no
collective bargaining agreement is currently being negotiated by Seller covering
its employees, nor is any grievance procedure or arbitration proceeding pending
under any collective bargaining agreement and no claim therefor has been
asserted. Seller has not received notice from any union or any employee setting
forth demands for representation, elections or for present or future changes in
wages, terms of employment or working conditions. There have been no audits of
the equal employment opportunity practices of Seller, nor does any basis for any
such audit exist. Seller does not have any severance agreement, policy, practice
or other arrangement with respect to severance with any Closing Date Employee
other than the Employee Benefit Plans.
2.8 Litigation. Except as set forth on Schedule 2.8, there is
no pending or, to the best knowledge of Seller and the Shareholders, threatened,
adverse claim, dispute, governmental investigation, suit, action, arbitration,
legal, administrative or other proceeding of any nature, domestic or foreign,
criminal or civil, at law or in equity, by or against or otherwise affecting the
Business or the Assets.
2.9 Agreements.
(a) Schedule 2.9(a) sets forth a true and complete list of all
In-Progress Jobs, all purchase or service orders taken but not fulfilled by
Seller as of the Effective Date, and all other agreements relating to the
Business or the Assets that involve payments to or by Seller in excess of $5,000
individually or $15,000 in the aggregate, including, without limitation,
commitments, including guarantees of any indebtedness, or instruments binding
Seller as of the Closing Date with respect to the Business or the Assets, and
all powers of attorney. True and complete copies of each such agreement,
commitment or instrument have been delivered to Buyer.
(b) To the best knowledge of Seller and the Shareholders, each
such agreement is the valid and binding obligation of the other contracting
party, enforceable in all material respects in accordance with its terms against
the other contracting party, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws and by general principles of equity, has not been cancelled
in whole or in part and is in full force and effect.
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(c) Seller has fulfilled all material obligations required to
have been performed by it prior to the date hereof with respect to each such
agreement, and Seller has no reason to believe that the other contracting party
will not be able to fulfill all of its or his obligations when due in respect
thereof.
(d) To the best knowledge of Seller and the Shareholders, no
other contracting party to any such agreement is now in breach thereof, and
there are not now, nor have there been in the twelve (12) month period prior to
the date hereof, any material disputes between Seller and any such other
contracting party.
(e) Each such agreement shall be assigned to Buyer at Closing.
(f) Seller is not a party to, or bound by, any agreement or
commitment that restricts the conduct of the Business anywhere in the world.
(g) Schedule 2.9(g) sets forth a true and complete list of
each proposed agreement, commitment, arrangement, or other understanding under
discussion since the Effective Date, including, without limitation, any proposed
purchase or service order relating to the Business, between Seller and any third
party that would, or reasonably could be expected to, be required to be
disclosed pursuant to any provision of this Agreement, if same had been executed
prior to and remained in effect as of the date hereof. True and complete copies
of the most recent draft of each such agreement and all other documents
evidencing the current state of such discussions have been delivered to Buyer.
2.10 Suppliers and Customers. Schedule 2.10 is a true and
complete list of the suppliers and customers with whom Seller has done business
with respect to the Business within six (6) months prior to the Closing Date,
and lists each outstanding purchase or service order (or correspondence with
respect to a proposed purchase or service order) with respect to the Business,
identifying in each case the vendor, supplier, contractor or inventor and the
items being purchased and stating the quantity and price thereof. The
relationships of Seller with the persons listed in Schedule 2.10 are good
commercial working relationships, and no such person has canceled or otherwise
terminated, or threatened to cancel or terminate, its relationship with Seller,
or decreased or limited materially, or threatened to decrease or limit
materially, its business done with Seller, and there is no reason to believe
that any such person would not continue its business relationship with Buyer
following the Closing on substantially the same terms as such person has
heretofore done business with Seller.
2.11 Tangible Property. Seller has good and marketable title
to each item of tangible personal property that is an Asset, free and clear of
all liens and other encumbrances, and, with immaterial exceptions, each such
item of tangible personal property is in good operating condition and repair,
ordinary wear and tear excepted, and useable in the ordinary course of the
Business. Schedule 2.11 contains a complete and accurate list setting forth a
description of each item of tangible property that is an Asset, and describes
the nature of Seller's interest in any property listed thereon that is not owned
entirely by Seller free and clear of any Lien.
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2.12 Real Property.
(a) Schedule 2.12(a) identifies each real property leased or
subleased by any Seller Party and used in the Business ("Leased Real Property").
No such lease or sublease with respect to such Leased Real Property (the "Real
Property Leases") is subject to any Lien.
(b) True and complete copies of the Real Property Leases have
been delivered to Buyer by Seller. Subject to the terms of the respective Real
Property Leases, the Seller Party party thereto has a valid and subsisting
leasehold or subleasehold estate in each Leased Real Property. The Real Property
Leases are in full force and effect and neither the Seller Party party thereto
nor, to the knowledge of the Seller Parties, any other party to any Real
Property Lease is in default thereunder, and no event exists which, with the
giving of notice or the passage of time, or both, may become a default under any
Real Property Lease. Seller Parties' occupation, possession and use of the
Leased Real Property has not been disturbed and no claim has been asserted or
threatened adverse to the rights of any Seller Party to the continued
occupation, possession and use of any of the Leased Real Property.
(c) All buildings, structures, improvements and facilities
included within the Leased Real Property, including, but not limited to, the
roofs and structural elements thereof, and the heating, ventilation, air
conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water,
paving and parking equipment, systems and facilities included therein
(collectively, the "Improvements") are in good operating condition and repair,
reasonable wear and tear not caused by neglect excepted. There are no
unsatisfied requests for any repairs, restorations or improvements to the Leased
Real Property and Improvements from any Authority; there are no ongoing repairs
to the Leased Real Property and/or Improvements being made by or on behalf of
any Seller Party, and all repairs for which payment is due have been paid for.
No portion of the Leased Real Property has suffered any damage by fire or other
casualty which heretofore has not been repaired and restored. The walls, roof
and subterranean portions, if any, of the Improvements are sound and watertight
and there is no water, chemical or gaseous seepage, diffusion or other intrusion
into said Improvements which would impair the beneficial use of the Leased Real
Property and Improvements by Buyer and/or its subtenants, licensees or other
occupants thereof permitted by Buyer.
2.13 Third Party Components, Rights, etc.
(a) Seller has validly and effectively obtained the right and
license to use the third-party programs included in the Assets and, with respect
to such third-party programs, such other rights and licenses as provided for
under the agreements relating thereto, and Seller has the right to assign and
transfer to Buyer the foregoing rights and licenses.
(b) Seller has not granted, transferred, or assigned any
right, title or interest in or to any Asset to any person or entity. There are
no contracts, agreements, licenses, and other commitments and arrangements in
effect with respect to the marketing, distribution, licensing, or promotion of
any material Asset by any independent salesperson, distributor, sublicensor, or
other remarketer or sales organization.
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2.14 Insurance. Seller has, through the Closing Date,
maintained the insurance policies set forth on Schedule 2.14 with respect to the
Assets, the conduct of the Business and the Leased Real Property, which policies
are, and at all times from the Effective Time to the Closing Date have been, in
full force and effect, and are sufficient in amount (subject to reasonable
deductibles) to allow Seller to replace any of the Assets that might be damaged
or destroyed or to satisfy any claim with respect to the conduct of the Business
or to any of the Leased Real Property.
2.15 Financial Statements. Seller has delivered to Buyer (i)
unaudited balance sheets of the Business as of December 31, 2000 and 1999, and
related statements of income for the fiscal years then ended (the "Year-End
Financials") and (ii) the unaudited balance sheet of the Business as of the
Effective Date (the "Effective Date Balance Sheet"), and the related unaudited
statement of income of the Business for the period ended on the Effective Date
(collectively with the Effective Date Balance Sheet, the "Interim Financials").
The Year-End Financials and the Interim Financials are correct in all material
respects and have been prepared in material compliance with generally accepted
accounting principles ("GAAP"). The Year-End Financials and Interim Financials
present fairly in all material respects the financial condition and operating
results of Seller as of the dates and during the periods indicated therein,
subject, in the case of the Interim Financials, to normal year-end adjustments,
which will not be material in amount or significance. A true, correct and
complete copy of the Effective Date Balance Sheet is attached hereto as Exhibit
I.
2.16 Certain Transactions. Since the Effective Date, Seller
has conducted the Business in the ordinary course consistent with past custom
and practice and has not, in any manner with respect to the Business or the
Assets:
(a) suffered any change, event or condition that, individually
or in the aggregate, has had or could reasonably be expected to have a material
adverse effect upon the Business, the Assets or Seller's and the Shareholders'
ability to consummate the transactions contemplated herein;
(b) entered into any transaction, contract or commitment
individually involving payments from Seller in excess of $10,000 (other than
this Agreement or as disclosed on Schedule 2.16(b));
(c) except in the ordinary course of business consistent with
past custom and practice, including as to quantity and frequency, incurred or
paid any liability or obligation, incurred any indebtedness for borrowed money
or assumed, guaranteed, endorsed or otherwise become responsible for the
obligations of any other individual, corporation or other entity;
(d) entered into or amended any employment, consulting or
other agreement with, increased any compensation payable to, awarded any bonus
to, made any loan to, paid any expense or contribution on behalf of, given any
gift to, or otherwise conferred any benefit (directly or indirectly) upon, any
of its officers, employees, shareholders or consultants, except in the ordinary
course of business consistent with past custom and practice including as to
quantity and frequency;
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(e) made any capital expenditures in excess of $10,000 other
than those made the ordinary course of business, consistent with past custom and
practice;
(f) sold, transferred, leased, assigned or otherwise disposed
of any Asset or properties of the Business, except in the ordinary course of
business, consistent with past custom and practice;
(g) created or assumed or permitted to be created or assumed
any Lien affecting any Asset or properties of the Business;
(h) made any tax election or settled or compromised any
federal, state, local or other tax liability either not in accordance with past
practice, or which has had or could reasonably be expected to have a material
adverse effect upon the Business or the Assets;
(i) taken any action that was intended or may reasonably be
expected to result in any of the representations and warranties set forth in
this Agreement being or becoming untrue;
(j) made a material change in the methods of accounting in
effect as of the date that the December 31, 2000 financial statements of the
Business were finalized;
(k) except in the ordinary course of business consistent with
past custom and practice, created, renewed, amended or terminated or given
notice of a proposed renewal, amendment of termination of, any material
contract, agreement or lease for goods or services to which Seller is a party or
by which Seller or any of the Assets are bound;
(l) except in the ordinary course of business consistent with
past custom and practice, rendered services under any In-Progress Contract or
taken purchase or service orders relating to the business of the Business; or
(m) agreed to do any of the foregoing.
2.17 No Undisclosed Liabilities. Except as set forth on the
Schedules to this Agreement, as of the date hereof, Seller has no direct or
indirect indebtedness, liabilities, claims, losses, damages, deficiencies,
obligations or responsibilities, liquidated or unliquidated, accrued, absolute,
contingent, or otherwise, relating to the Assets.
2.18 Receivables. Schedule 1.2(a)-2 includes an accurate and
complete breakdown of all Underbilling Receivables as of the Effective Date, and
Schedule 1.2(c) includes an accurate and complete breakdown of all
Post-Effective Date Receivables as of the Closing Date (the Underbilling
Receivables and Post-Effective Date Receivables are referred to collectively as
the "Receivables"). All such Receivables (a) have arisen only from bona fide
transactions in the ordinary course of business consistent with past custom and
practice, (b) represent valid obligations, and (c) are expected to be
collectible in the aggregate face amounts thereof without any counterclaim or
set-off when due, except, in the case of Underbilling Receivables, to the extent
of the normal allowance for doubtful accounts with respect to accounts
receivable that are computed in a manner consistent with GAAP and as reflected
in the Effective Date Balance Sheet, or, in the case of Post-Effective Date
Receivables, as reflected in the books and records of Seller, and (d) are owned
by Seller free of all Liens. No discount or allowance from any Receivable as of
the Closing Date has been made or agreed to (other than customary payment
discounts in the ordinary course of business consistent with past custom and
practice). For the purposes of this Agreement, any person or entity shall be
deemed to own subject to a Lien any property or asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
property or asset.
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2.19 Interested Party Transactions. As it relates to the
Business, neither the Shareholders nor any manager of Seller (nor, to the actual
knowledge of Seller and the Shareholders, any ancestor, sibling, descendant or
spouse of any of such persons, or any trust, partnership or corporation in which
any of such persons has or has had an interest) has or has had, directly or
indirectly, (i) an interest in any entity that furnished or sold, or furnishes
or sells, services, products or technology that Seller furnishes or sells in the
conduct of the Business, or proposes to furnish or sell in the conduct of the
Business, or (ii) any interest in any entity that purchases from or sells or
furnishes to Seller, any goods or services, except for the Louisville, Kentucky
office space lease between Seller and Columbia Properties, LLC and the Richmond,
Indiana office space lease between Seller and Roy Ridge, or (iii) a beneficial
interest in any agreements of Seller; provided, however, that ownership of no
more than one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed to be an "interest in any entity" for purposes
of this Section 2.19.
2.20 Assets. Except for the Excluded Assets, the Assets are
all of the assets, properties, goodwill, and rights of every nature, kind and
description, whether tangible or intangible, real, personal or mixed, wherever
located, used in and material to, or necessary for the operation of, the
Business.
2.21 Brokers or Finders. Seller has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement,
the Other Transaction Documents or any transaction contemplated hereby or
thereby. Seller and the Shareholders, jointly and severally, shall indemnify and
hold Buyer harmless with respect to any claim by any broker, agent, or finder
claiming to have acted on behalf of Seller or the Shareholders, respecting the
subject matter hereof.
2.22 Securities Act Matters.
(a) Seller acknowledges that its representations and
warranties contained herein are being relied upon by Buyer as a basis for the
exemption of the issuance of the Shares hereunder from the registration
requirements of the Securities Act and any applicable state securities laws.
(b) Seller understands that (i) when issued, the Shares will
not be registered under the Securities Act or any state securities laws by
reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act and applicable state securities laws (but
that the Shares will be registered as set forth in Section 1.5(c) of this
Agreement) and (ii) the Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act and applicable state
securities laws or is exempt from such registration.
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(c) Seller is acquiring the Shares for its own account and not
with a view to, or for sale in connection with, directly or indirectly, any
distribution thereof that would violate the Securities Act or applicable state
securities laws.
(d) Seller has relied upon independent investigations that it
and its representatives have made and is fully familiar with the business,
results of operations, financial condition, prospects and other affairs of Buyer
and realizes that the Shares are a speculative investment involving a high
degree of risk for which there is no assurance of any return.
(e) Seller has such knowledge and experience in financial and
business affairs and is capable of determining the information necessary to make
an informed investment decision, of requesting such information from Buyer, and
of utilizing the information that it has received from Buyer to evaluate the
merits and risks of its investment in the Shares and is able to bear the
economic risk of its investment in the Shares, and understands that it must do
so for an indefinite period of time.
(f) Seller and its attorneys, accountants, investment and
financial advisors, if any, have been provided access to such information about
Buyer as it or its advisors, if any, have requested.
(g) Seller is an "accredited investor" as defined in
Regulation D under the Securities Act.
(h) Seller understands that until the Registration Statement
has been declared effective, the certificates representing the Shares will bear
the following legend (or a substantially similar legend):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT SUCH
REGISTRATION OR THE DELIVERY TO THE COMPANY OF AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
DISPOSITION WILL NOT REQUIRE REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED."
2.23 No Misleading Statements. No information furnished by or
on behalf of Seller to Buyer contains any untrue statement of a material fact or
omits to state a material fact necessary to make such statement, in the light of
the circumstances under which it was made, not misleading. All written
information, in whatever form, furnished by Seller to Buyer was true and correct
as of the date so furnished and, except as the accuracy thereof is affected by
the passage of time, remains true and correct in all material respects as of the
date hereof.
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3. Representations and Warranties of the Shareholders
Each of the Shareholders, severally and not jointly, represents,
warrants and covenants to Buyer that:
3.1 Binding Obligations. This Agreement and the Other
Transaction Documents to which such Shareholder is a party have been duly
executed and delivered by such Shareholder and constitute valid and binding
agreements of such Shareholder, enforceable in accordance with their respective
terms, except as their enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws relating to or affecting creditors' rights generally
and the exercise of judicial discretion in accordance with general equitable
principles. Such Shareholder is a shareholder of Seller.
3.2 No Contravention. The execution, delivery and performance
of this Agreement and the Other Transaction Documents to which such Shareholder
is a party, the consummation of the transactions contemplated hereby and thereby
and the compliance with the provisions hereof and thereof by such Shareholder do
not (a) conflict with, result in the breach of, or constitute a default under,
or require any authorization, consent, approval, exemption or other action by or
notice to any third party (including any shareholder of Seller not a party to
this Agreement), court or other governmental or administrative body, under the
provisions of any agreement or other instrument to which such Shareholder is a
party or by which the property of such Shareholder is bound or affected or (b)
violate any laws, regulations, orders or judgments applicable to such
Shareholder.
3.3 No Misleading Statements. No information furnished by or
on behalf of such Shareholder to Buyer contains any untrue statement of a
material fact or omits to state a material fact necessary to make such
statement, in the light of the circumstances under which it was made, not
misleading. All written information, in whatever form, furnished by such
Shareholder to Buyer was true and correct as of the date so furnished and,
except as the accuracy thereof is affected by the passage of time, remains true
and correct in all material respects as of the date hereof.
3.4 Brokers or Finders. Such Shareholder has not incurred, and
will not incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement, the Other Transaction Documents or any transaction contemplated
hereby or thereby. Seller and the Shareholders, jointly and severally, shall
indemnify and hold Buyer harmless with respect to any claim by any broker,
agent, or finder claiming to have acted on behalf of Seller or the Shareholders,
respecting the subject matter hereof.
4. Representations and Warranties of Buyer
Buyer represents and warrants to Seller and the Shareholders as
follows:
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4.1 Organization and Standing. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with full corporate right, power and authority to enter into and
perform and do all things contemplated under this Agreement and the Other
Transaction Documents to which it is a party necessary to give effect to the
provisions of this Agreement and such Other Transaction Documents.
4.2 Authorization and Binding Obligations. The execution,
delivery and performance by Buyer of this Agreement and the Other Transaction
Documents to which Buyer is a party have been duly and validly authorized by all
necessary corporate action, including approval of the entire transaction by the
requisite vote of the board of directors of Buyer. This Agreement and the Other
Transaction Documents to which Buyer is a party have been duly executed and
delivered by Buyer and constitute valid and binding agreements of Buyer,
enforceable in accordance with their respective terms, except as their
enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws relating to or affecting creditors' rights generally and the exercise of
judicial discretion in accordance with general equitable principles.
4.3 No Contravention. The execution, delivery and performance
of this Agreement and the Other Transaction Documents to which Buyer is a party,
the consummation of the transactions contemplated hereby and thereby and the
compliance with the provisions hereof and thereof by Buyer do not (a) violate
any provision of the certificate of incorporation or bylaws of Buyer, (b)
conflict with, result in the breach of, or constitute a default under, or
require any authorization, consent, approval, exemption or other action by or
notice to any third party, court or other governmental or administrative body,
under the provisions of any agreement or other instrument to which Buyer is a
party or by which the property of Buyer is bound or affected, or (c) violate any
laws, regulations, orders or judgments applicable to Buyer.
4.4 Issuance of the Shares. Upon issuance hereunder, the
Shares shall be validly issued, fully paid and non-assessable and shall be free
and clear of any Liens, except that the Escrowed Shares shall be subject to the
provisions of the Escrow Agreement.
4.5 SEC Filings. The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act, and Buyer has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act, including material
filed pursuant to Section 13(a) or 15(d) thereof. Buyer has delivered or made
available to Seller and the Shareholders true and complete copies of the
following documents (the "SEC Documents") filed with the SEC:
(a) Buyer's Annual Report on Form 10-K for the year ended
December 31, 2000;
(b) Buyer's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2001, June 30, 2001 and September 30, 2001;
(c) Buyer's Current Report on Form 8-K, filed on August 1,
2001, and the amendments thereto filed on October 1, 2001 and October 3, 2001;
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(d) Buyer's proxy statement (and the supplement thereto) in
connection with its Annual Meeting of Stockholders held on May 25, 2001; and
(e) Buyer's registration statement on Form S-3 (No.
333-69432), filed on September 14, 2001, and post-effective amendment No. 1
thereto, filed on September 26, 2001.
Buyer has not provided Seller or any Shareholder any material non-public
information or any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by Buyer but which has not been
so disclosed. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such SEC Documents, and none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The SEC Documents contain all material information
concerning Buyer, and no event or circumstance has occurred which would require
Buyer to disclose such event or circumstance in order to make the statements in
the SEC Documents not misleading on the date hereof but which has not been so
disclosed.
4.6 Brokers or Finders. Buyer has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement,
the Other Transaction Documents or any transaction contemplated hereby or
thereby. Buyer shall indemnify and hold Seller and the Shareholders harmless
with respect to any claim by any broker, agent, or finder claiming to have acted
on behalf of Buyer respecting the subject matter hereof.
4.7 No Misleading Statements. No information furnished by or
on behalf of Buyer to any Seller Party contains any untrue statement of a
material fact or omits to state a material fact necessary to make such
statement, in the light of the circumstances under which it was made, not
misleading. All written information, in whatever form, furnished by Buyer to any
Seller Party was true and correct as of the date so furnished and, except as the
accuracy thereof is affected by the passage of time, remains true and correct in
all material respects as of the date hereof.
5. Closing Conditions and Deliveries
5.1 Conditions to Buyer's Obligations. The obligations of
Buyer under this Agreement are subject to the fulfillment on or before the
Closing of each of the following conditions, except such conditions as may be
waived by Buyer:
(a) Delivery of Other Transaction Documents. Seller and the
Shareholders shall have delivered to Buyer the following Other Transaction
Documents, duly executed by all Seller Parties party to each such Other
Transaction Document:
(i) the Bill of Sale;
(ii) the Assumption Agreement;
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(iii) the Power of Attorney;
(iv) the Indiana Lease Assumption, Louisville
Sublease and Richmond Amended Lease Assumption (collectively, the "Real
Estate Documents");
(v) the Escrow Agreement;
(vi) a Management Services Agreement (the "Service
Agreement"), in substantially the form of Exhibit J, between Seller and
Buyer with respect to the transition services described therein; and
(vii) such other instruments of sale, transfer,
conveyance or assignment as Buyer and its counsel reasonably shall have
requested prior to the Closing Date for the sale, transfer, conveyance
and assignment of the Assets to Buyer.
(b) Secretary's Certificate. Seller shall have delivered to
Buyer a certification of the secretary of Seller, dated the Closing Date, (i)
attaching resolutions of the board of directors of Seller and any required
consent of the shareholders of Seller in connection with the authorization and
approval of the execution, delivery and performance by Seller of this Agreement
and the Other Transaction Documents to which Seller is a party, certified as
being in full force and effect as of the Closing Date; and (ii) setting forth
the incumbency of the officers of Seller who have executed and delivered this
Agreement and each of the Other Transaction Documents to which Seller is a
party, including therein a signature specimen of each such officer.
(c) Good Standing Certificates. Seller shall have delivered to
Buyer certificates, dated as of the Closing Date or within three (3) Business
Days prior to the Closing Date, executed by the proper official in each
jurisdiction, as to the good standing of Seller in State of Kentucky and in each
jurisdiction in which the character of the Assets or nature of the Business
requires that Seller be qualified as a foreign corporation, including, without
limitation, the State of Indiana.
(d) Consents. Seller shall have delivered to Buyer all written
consents which are required under any contract or agreement being assigned to
Buyer hereunder; provided, however, that as to any such contract or agreement
the assignment of which by its terms requires prior consent of any of the
parties thereto, if such consent is not obtained prior to or on the Closing
Date, Seller shall deliver to Buyer written documentation setting forth
arrangements for the transfer of the economic benefit of such contracts or
agreements to Buyer as of the Closing Date under terms and conditions acceptable
to Buyer.
(e) Payment of Estimated Adjustment. Seller shall have paid to
Buyer the Estimated Adjustment, if such adjustment was in favor of Buyer.
5.2 Conditions to Seller's and the Shareholders' Obligations.
The obligations of Seller and the Shareholders under this Agreement are subject
to the fulfillment on or before the Closing of each of the following conditions,
except such conditions as may be waived by Seller and the Shareholders:
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(a) Delivery of Shares. Buyer shall have delivered to Seller a
certificate representing the portion of the Shares set forth in Section
1.5(b)(i), and shall have delivered to the Escrow Agent a certificate
representing the Escrowed Shares pursuant to Section 1.5(b)(ii).
(b) Payment of Estimated Adjustment. Buyer shall have paid to
Seller the Estimated Adjustment, if such adjustment was in favor of Seller.
(c) Other Transaction Documents. Buyer shall have delivered to
Seller and the Shareholders the following Other Transaction Documents, duly
executed by Buyer:
(i) the Assumption Agreement;
(ii) the Real Estate Documents;
(iii) the Escrow Agreement; and
(iv) the Service Agreement.
6. Indemnification
6.1 Indemnification by Seller and the Shareholders.
(a) Joint and Several Obligations. Seller and each of the
Shareholders, jointly and severally, shall indemnify and hold harmless Buyer,
its successors and assigns, at all times after the Closing Date, against and in
respect of:
(i) Liabilities of Seller. Other than liabilities
expressly assumed by Buyer as provided in Section 1.4 of this
Agreement, all liabilities and obligations of Seller and the Business
of any kind or nature whatsoever relating to Seller or the Business,
whether accrued, absolute, fixed, contingent or otherwise, known or
unknown;
(ii) Misrepresentations. Any damage, loss, cost,
expense or liability (including reasonable attorneys' fees) resulting
to Buyer from any false, misleading or inaccurate representation,
breach of warranty or non-fulfillment of any agreement or condition on
the part of Seller under this Agreement or any Other Transaction
Document to which Seller is a party or from any misrepresentation in or
any omission from any certificate, schedule or other instrument
furnished or to be furnished to Buyer hereunder;
(iii) Taxes. Any tax, including any use or sales tax,
for which Seller or any of Seller's officers and directors is or may be
liable in respect of the conduct of the Business prior to the Closing;
(iv) Conduct of the Business. Any claim arising out
of or in connection with the conduct of the Business prior to the
Effective Time, including severance costs for discharged employees, and
any negligence, willful misconduct, fraud or other tort claim arising
out of or in connection with the conduct of the Business by Seller from
the Effective Time through the Closing; and
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(v) Actions and Suits. All claims, actions, suits,
proceedings, demands, assessments, judgments, costs and expenses,
including, without limitation, legal fees and expenses, incident to any
of the foregoing.
(b) Several Obligations. Each of the Shareholders, severally
and not jointly, shall indemnify and hold harmless Buyer, its successors and
assigns, at all times after the Closing Date, against and in respect of:
(i) Misrepresentations. Any damage, loss, cost,
expense or liability (including reasonable attorneys' fees) resulting
to Buyer from any false, misleading or inaccurate representation,
breach of warranty or non-fulfillment of any agreement or condition on
the part of such Shareholder under this Agreement or any Other
Transaction Document to which such Shareholder is a party or from any
misrepresentation in or any omission from any certificate, schedule or
other instrument furnished or to be furnished by such Shareholder to
Buyer hereunder; and
(ii) Actions and Suits. All claims, actions, suits,
proceedings, demands, assessments, judgments, costs and expenses,
including, without limitation, legal fees and expenses, incident to any
of the foregoing.
6.2 Indemnification by Buyer. Buyer shall indemnify and hold
harmless Seller and the Shareholders, at all times after the Closing Date,
against and in respect of:
(a) Assumed Liabilities. All Assumed Liabilities;
(b) Misrepresentations. Any damage, loss, cost, expense or
liability (including reasonable attorneys' fees) resulting to Seller and the
Shareholders from any false, misleading or inaccurate representation, breach of
warranty or non-fulfillment of any agreement or condition on the part of Buyer
under this Agreement or any Other Transaction Document to which Buyer is a party
or from any misrepresentation in or any omission from any certificate or other
instrument furnished or to be furnished to Seller or any Shareholder hereunder;
and
(c) Actions and Suits. All claims, actions, suits,
proceedings, demands, assessments, judgments, costs and expenses, including,
without limitation, legal fees and expenses, incident to any of the foregoing.
6.3 Indemnification Procedure.
(a) Notice of Claim; Right to Cure. A party that may be
entitled to indemnification pursuant to Section 6.1 or 6.2 (the "Indemnitee")
shall promptly give written notice (a "Notice of Claim") to the party liable for
such indemnification (the "Indemnitor"). A Notice of Claim shall set forth (a) a
description, in reasonable detail, of the facts and circumstances with respect
to the subject matter of such claim or potential claim for indemnification, and
(b) a breakdown of the anticipated total amount (the "Claimed Amount") of the
actual damage, liability or loss, including reasonable attorneys' fees and other
costs and expenses ("Damages") comprising the indemnification claim. Upon
receipt of a Notice of Claim, the Indemnitor may elect to cure the circumstances
giving rise to the indemnification claim within thirty (30) days after the date
of receipt of the Notice of Claim. If such cure cannot be effected within such
30-day period, the Indemnitor shall proceed in accordance with Section 6.3(b),
in the case of a claim other than a third-party claim, or in accordance with
Section 6.3(c), in the case of a claim made against an Indemnitee by a third
person. The Indemnitee's failure to give prompt notice or to provide copies of
documents or to furnish relevant data shall not constitute a defense (in whole
or in part) to any claim by the Indemnitee against the Indemnitor for
indemnification, except and only to the extent that such failure shall have
caused or increased such liability or materially adversely affected the ability
of the Indemnitor to defend against or reduce its liability.
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(b) Claims Other Than Third-Party Claims. In the case of an
indemnification claim other than a third-party claim:
(i) If the Indemnitor does not elect to cure the
circumstances giving rise to the indemnification claim in accordance
with Section 6.3(a), within 30 days after its receipt of a Notice of
Claim, the Indemnitor shall provide to the Indemnitee a written
response (a "Response Notice") in which the Indemnitor shall: (A) agree
that the full Claimed Amount is due to such Indemnitee, (B) agree that
a portion, but not all, of the Claimed Amount is due to such Indemnitee
or (C) contest that any portion of the Claimed Amount is due to such
Indemnitee.
(ii) If the Indemnitor in the Response Notice agrees
that an amount equal to all or a portion of the Claimed Amount is due
to the Indemnitee (the "Agreed Amount"), the Indemnitor shall promptly
pay to the Indemnitee the Agreed Amount.
(iii) If the Indemnitor in the Response Notice
contests an amount equal to all or any portion of the Claimed Amount
(the "Contested Amount"), the Indemnitor and Indemnitee shall, within
30 Business Days after the Indemnitee's receipt of the Response Notice,
select a mutually acceptable arbitrator and submit the dispute with
respect to such Contested Amount for binding and final determination by
such arbitrator in accordance with the then-current regulations of the
American Arbitration Association. The parties agree that any
arbitration shall be conducted by an individual arbitrator, as opposed
to a panel consisting of several arbitrators. Judgment upon the award
rendered by the arbitrator resulting from such arbitration shall be in
writing, and shall be final and binding upon all involved parties. The
site of any arbitration shall be within New York, New York. The award
may be confirmed and enforced in any court of competent jurisdiction.
If the arbitrator determines that an amount equal to all or a portion
of the Contested Amount is due to the Indemnitee (the "Award Amount"),
the Indemnitor shall promptly pay to the Indemnitee the Award Amount.
(c) Third-Party Claims. In the case of a claim made against an
Indemnitee by a third person, if the Indemnitor does not elect to cure the
circumstances giving rise to the indemnification claim in accordance with
Section 6.3(a), the Indemnitor shall have the right, at its election, by written
notice to the Indemnitee, to assume the defense of the claim as to which such
notice has been given. Except as provided in the next sentence, if the
Indemnitor so elects to assume such defense, it shall diligently and in good
faith defend such claim and shall keep the Indemnitee reasonably informed of the
status of such defense, and the Indemnitee shall cooperate fully with the
Indemnitor in the defense of such claim, provided that in the case of any
settlement providing for remedies other than monetary damages for which
indemnification is provided, the Indemnitee shall have the right to approve the
settlement, which approval shall not be unreasonably withheld or delayed. If the
Indemnitor does not so elect to defend any claim as aforesaid or shall fail to
defend any claim diligently and in good faith (after having so elected), the
Indemnitee may assume the defense of such claim and take such other action as it
may elect to defend or settle such claim as it may determine in its reasonable
discretion, provided that the Indemnitor shall have the right to approve any
settlement, which approval will not be unreasonably withheld or delayed.
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6.4 Limitations on Indemnification.
(a) Basket Amount.
(i) The indemnification provided for in Section 6.1
shall not apply until Buyer's claims for Damages exceed $25,000 in the
aggregate, whereupon claim may be made for all amounts in excess of
$25,000.
(ii) The indemnification provided for in Section 6.2
shall not apply until Seller's and the Shareholders' collective claims
for indemnification exceed $25,000 in the aggregate, whereupon claim
may be made for all amounts in excess of $25,000.
(b) Liability Cap. Notwithstanding anything to the contrary in
this Agreement, in no event shall the aggregate amount of collective liability
of Seller and the Shareholders pursuant to Section 6.1 exceed the market value
of the Shares (or, in the event that any adjustment has occurred pursuant to
Section 1.5(c)(v), the market value of the Adjustment Shares) on the effective
date of the Registration Statement. For purposes of this Section 6.4(b), the
market value of each Share shall equal the average of the closing sale prices of
Buyer's Common Stock on the Nasdaq National Market on the ten (10) trading days
immediately preceding the effective date of the Registration Statement.
(c) Insurance Proceeds and Other Set-Offs. The amount of any
Damages for which indemnification is provided under Section 6.1 or Section 6.2
shall be net of any amounts recovered or recoverable by the Indemnitee under
insurance policies with respect to such Damages and shall be (i) increased to
take account of any net tax cost incurred by the Indemnitee arising from the
receipt of indemnity payments hereunder (grossed up for such increase) and (ii)
reduced to take account of any net tax benefit realized by the Indemnitee
arising from the incurrence or payment of any such Damages. In computing the
amount of any such tax cost or tax benefit, the Indemnitee shall be deemed to
recognize all other items of income, gain, loss, deduction or credit before
recognizing any item arising from the receipt of any indemnity payment hereunder
or the incurrence or payment of any indemnified Damages.
6.5 Payment of Indemnification Claims. In the event that
Seller or the Shareholders are entitled to indemnification pursuant to Section
6.2, Buyer shall make payment of such indemnification claim in cash. In the
event that Buyer is entitled to indemnification pursuant to Section 6.1, the
payment of such indemnification by Seller or the Shareholders shall be in cash;
provided, however, that Buyer may elect to satisfy any part of an
indemnification obligation owed by any Seller Party pursuant to Section 6.1(a)
by, jointly with the Sellers' Representative (as hereinafter defined), directing
the Escrow Agent to (i) return to Buyer an integral number of Escrowed Shares
equal in value to any portion of the indemnification obligation that Buyer has
elected to satisfy in such manner, (ii) pay to Buyer any portion of the cash, if
any, deposited in the Escrow Account (as defined in the Escrow Agreement) by
Seller in lieu of Escrowed Shares, up to the amount of the outstanding
indemnification obligation in favor of Buyer, or (iii) tender to Buyer a
combination of Escrowed Shares and cash deposited in the Escrow Account in
accordance with clauses (i) and (ii) of this Section 6.5; provided, however,
that the combined value of the Escrowed Shares and cash from the Escrow Account
tendered to Buyer shall not exceed the amount of the outstanding indemnification
obligation in favor of Buyer. For purposes of this Section 6.5, the value of
each Escrowed Share to be returned to Buyer in payment of an indemnification
obligation shall be equal to the average of the closing sale prices of the
Common Stock on the Nasdaq National Market during the ten (10) trading days
immediately preceding the date upon which Buyer and the Sellers' Representative
direct that the Escrow Agent return such Escrowed Share to Buyer.
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7. Post-Closing Covenants
7.1 Further Assurances; Cooperation. The parties shall, at any
time, and from time to time, after the Closing Date, execute and deliver such
further instruments of conveyance and transfer and take such additional action
as may be reasonably necessary to effect, consummate, confirm or evidence the
transactions contemplated by this Agreement and the Other Transaction Documents,
including, without limitation: (i) inventorying and listing of the Assets, (ii)
using their best efforts to obtain any third party consents not obtained as of
the Closing Date, (iii) filing of tax returns, including, without limitation,
the filing of sales and use tax returns and notices as any party hereto may
reasonably require, (iv) conducting, at the expense of Buyer, a financial audit
of the Business in connection with the integration of the financial statements
of the Business into the financial statements of the Buyer, (v) cooperating to
facilitate the transition of Business customers and suppliers to Buyer, and (vi)
releasing the liens in favor of Panasonic, Yamaha and Sony referenced on
Schedule 2.11.
7.2 Delivery of Assets. Seller agrees that it will transfer or
make available to Buyer, promptly after the receipt thereof, any property that
Seller receives after the Closing Date in respect of the Assets transferred or
intended to be transferred to Buyer under this Agreement.
7.3 Payment of Liabilities. Seller shall, as of the Closing
Date or when due, satisfy all of its liabilities or obligations relating to the
Business that are not Assumed Liabilities. Buyer shall satisfy each Assumed
Liability when due.
7.4 Books and Records; Accounting Software.
(a) Buyer shall preserve and retain the corporate, accounting,
tax, legal and other records of the Business that shall come into Buyer's
possession as a result of the transactions contemplated hereby for a period of
not less than five (5) years from the Closing Date and give reasonable access to
Seller and the Shareholders, and Seller's officers, auditors, counsel, and other
representatives for the purpose of preparing or defending tax returns or for
other reasonable business purposes.
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(b) For a period of 180 days after the Closing, Seller shall
give Buyer's officers, employees, auditors and other representatives reasonable
access to the Accounting Software for the purpose of effecting the transition to
Buyer's accounting software and for other reasonable business purposes.
7.5 Destruction of Copies of Certain Assets. After the Closing
Date, Seller shall, upon the written request of Buyer, immediately destroy or
erase all of Seller's copies of computer software and Business records included
in the Assets and, upon Buyer's request, promptly confirm destruction of same by
signing and returning to Buyer an "affidavit of destruction" acceptable to
Buyer; provided, however, that Seller shall be entitled to retain a copy of
those specific records, and only those specific records, that contain
information that (i) is not related to the Business, (ii) is neither
confidential nor privileged and (iii) Seller has a reasonable need to retain.
7.6 Employee Matters.
(a) Buyer does not and will not assume the sponsorship of, the
responsibility for contributions to, or any liability under or in connection
with, any Employee Benefit Plan. Without limiting the foregoing, Seller shall be
liable for continuation coverage (including any penalties, excise taxes or
interest resulting from the failure to provide continuation coverage) required
by Section 4980B of the Code with respect to (i) qualifying events incurred by
any Business Employee who does not become an employee of Buyer on or immediately
following the Closing (or covered dependents or qualified beneficiaries of such
employee), and (ii) any qualifying events which occur on or before the Closing
Date incurred by any Business Employee who becomes an employee of Buyer on or
immediately following the Closing Date (or covered dependents or qualified
beneficiaries of such employee). Buyer will in no event be deemed to be a
successor employer (within the meaning of Treasury Regulation Section
54.4980B-2) of Seller for purposes of applying the provisions of Section 4980B
of the Code following the Closing with respect to any current or former employee
of Seller.
(b) Buyer shall, as of the Closing Date, offer employment to
the Closing Date Employees. Any such Closing Date Employee who accepts Buyer's
offer of employment and who, within seven days of the Closing Date, commences
employment with Buyer by reporting for work and being actively employed by Buyer
for at least one day is hereinafter referred to as a "Transferred Employee."
Buyer shall offer to provide or cause to be provided to Transferred Employees,
through December 31, 2001, compensation and benefits that are substantially
comparable, in the aggregate, to the compensation and benefits (exclusive of any
such compensation and benefits consisting of or based on any equity securities)
provided to them by Seller under the Employee Benefit Plans immediately prior to
the Closing. Subject to the satisfaction of applicable enrollment requirements,
each Transferred Employee (and his or her eligible spouse or dependents) who, as
of the Closing Date, participates in Employee Benefit Plans of Seller shall, as
soon as administratively feasible following such Transferred Employee's
commencement of employment with Buyer, become eligible to participate in
employee benefit plans maintained by Buyer for its employees. Each Transferred
Employee will carry with him or her and have available for use, in accordance
with Buyer's policies, the amount of vacation leave available to him or her
under Seller's vacation policy on the day prior to the Closing Date. For all
purposes of Buyer's employee benefit plans, the date of hire for each
Transferred Employee shall be the date such Transferred Employee was originally
hired by Seller.
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(c) With respect to any Transferred Employee (including any
dependent thereof) who is hospitalized or is on short-term disability under any
Employee Benefit Plan on or prior to the Closing Date and who remains
hospitalized or on short-term disability after such date, Seller shall be
responsible for claims and expenses incurred both before and after the Closing
Date in connection with such individual, to the extent that such claims and
expenses are covered by an Employee Benefit Plan of Seller, until such time (if
any) that, in the case of a Transferred Employee, such individual commences
full-time employment with Buyer, and, in the case of a dependent of a
Transferred Employee, such dependent's hospitalization has terminated.
(d) Seller shall be responsible for, and Buyer does not and
will not assume any liability (direct or indirect, contingent or otherwise) that
may arise under or in connection with any state or local law similar to the
Worker Adjustment and Retraining Notification Act, 29 U.S. Stat. ss. 2010 et.
seq., as a result of the transactions contemplated hereby.
7.7 Non-Competition.
(a) During and for a period of two (2) years following the
Closing, no Seller Party shall, without the prior written consent of Buyer,
engage directly or indirectly in a Competitive Business Activity (as defined
below) anywhere in the Restricted Territory (as defined below). The term
"Competitive Business Activity" shall mean (i) engaging in, or managing or
directing persons engaged in, the business of the Business as of the Closing
Date (including, without limitation, rendering services after the Closing under
any In-Progress Jobs or taking purchase or service orders relating to the
business of the Business); (ii) acquiring of having an ownership interest in any
entity that competes with the Business as of the Closing Date (except for
ownership of one percent (1%) or less of any entity whose securities have been
registered under the Securities Act or Section 12 of the Exchange Act); or (iii)
participating in the financing, operation, management or control of any firm,
partnership, corporation, business or other entity described in clause (ii) of
this sentence. The term "Restricted Territory" shall mean the United States of
America and each and every state, county, city, municipality or other political
subdivision thereof. Buyer acknowledges that the Business comprises only a
portion of Seller's operations and that during the two-year post-Closing period
contemplated under this Section 7.7, Seller will continue to operate the Other
Business in the ordinary course of business within the historical parameters of
the Other Business, and that neither the operation of the Other Business within
such parameters, nor the performance of Seller's obligations under the Service
Agreement, shall constitute a "Competitive Business Activity" for purposes of
this Section 7.7.
(b) The covenants contained in Section 7.7(a) shall be
construed as a series of separate covenants, one for each state, county, city,
municipality or other political subdivision of the Restricted Territory. Except
for geographic coverage, each such separate covenant shall be deemed identical
in terms to the covenant contained in Section 7.7(a).
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(c) Each Seller Party acknowledges that the covenants
contained in this Section 7.7 are reasonable and valid in geographical and
temporal scope and content and in all other respects, and are necessary for the
adequate protection of Buyer's legitimate business interests, because, among
other things, Buyer conducts business throughout the United States, Buyer is
engaged in a highly competitive industry, and Seller Parties have had unique
access to confidential business information relating to the Business and the
Assets. Each Seller Party also acknowledges that any breach of the covenants set
forth in this Section 7.7 will give rise to irreparable injury to Buyer, that
the remedy at law of Buyer for any such breach or threatened breach will be
inadequate and that, in addition to any other remedy therefor that Buyer may
have, it shall be entitled to temporary injunctive relief before trial from any
court of competent jurisdiction as a matter of course and to permanent
injunctive relief without the necessity of proving actual damages and without
the requirement of any bond or other security.
(d) Each Seller Party agrees that the existence of any claim
or cause of action by such Seller Party against Buyer shall not constitute a
defense to the enforcement by Buyer of the covenants set forth in this Section
7.7, and that any such claim or cause of action against Buyer shall be litigated
separately.
(e) If, in any judicial proceeding, a court refuses to enforce
any of the separate covenants (or any part thereof) set forth in this Section
7.7, then such unenforceable covenant (or such part) shall be eliminated from
this Agreement to the extent necessary to permit the remaining separate
covenants (or parts thereof) to be enforced, and such remaining covenants shall
be given full effect without regard to the invalid covenant (or part thereof).
In the event that any of the separate covenants (or any part thereof) set forth
in this Section 7.7 is deemed by a court to exceed the geographical or temporal
scope or content or other limitations permitted by applicable laws, then such
covenant (or part thereof) shall be reformed to the geographical or temporal
scope or content or other limitations, as the case may be, permitted by
applicable laws, and, in such reduced form, shall be given full effect.
7.8 Non-Solicitation. During and for a period of two (2) years
following the Closing, no Seller Party shall, without Buyer's prior written
consent, directly or indirectly, (i) solicit the employment of any of the
Transferred Employees or any officer, senior manager or other key employee of
Buyer or any subsidiary of Buyer or (ii) hire any Transferred Employee, officer,
senior manager or other key employee whose employment Buyer or any subsidiary of
Buyer has terminated within 90 days following such solicitation or hire;
provided, however, that this Section 7.8 shall not prevent advertisements,
solicitations, position listings or notices of employment opportunities that are
published or made available to the public or hiring of personnel responding
thereto and shall not impair the rendering of services to Seller by Transferred
Employees pursuant to and in accordance with the Service Agreement.
Notwithstanding anything herein to the contrary, if Buyer terminates its
employment of any Transferred Employee and such Transferred Employee approaches
Seller for employment without solicitation, direct or indirect, from Seller,
Seller shall not be prohibited from offering employment to such terminated
Transferred Employee during the two-year post-Closing period contemplated in
this Section 7.8.
8. Miscellaneous
8.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of New York, without giving effect to any
choice or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction that would cause the application of the laws of any
jurisdiction other that the State of New York).
32
8.2 Jurisdiction. Except as otherwise provided in Section 6.3,
any suit, action or proceeding seeking to enforce any provision of, or based on
any matter arising out of or in connection with, this Agreement, the Other
Transaction Documents or the transactions contemplated hereby or thereby shall
be brought exclusively in a New York State or United States Federal court
sitting in New York County, and each of the parties hereby expressly submits to
such jurisdiction and venue of such court (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
in any such court or that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.
8.3 Survival. Except as otherwise expressly provided herein,
the several representations, warranties, covenants, and agreements of the
parties contained in this Agreement or in any Other Transaction Document shall
be deemed to be material and to have been relied upon by Buyer, Seller and the
Shareholders notwithstanding any investigation made by Buyer, Seller or the
Shareholders, shall survive the Closing Date and shall remain operative and in
full force and effect until December 31, 2002, except insofar as an
indemnification claim has been asserted by any party and has not been resolved
prior to the end of such two-year period; provided, however, that the
representations and warranties of Seller and the Shareholders set forth in
Sections 2.5, 2.6 and 2.7 shall survive for the period of the applicable statute
of limitations, and the respective representations, warranties, covenants and
agreements of Buyer, Seller and the Shareholders contained in Sections 2.11,
2.13, 2.17, 2.21, 3.4, 4.4, 4.6, 6.1(a)(i), 6.1(a)(iii), 6.1(a)(iv), 6.2(a),
6.4, 6.5, 7.1, 7.2 and 8.11 shall continue without any time limitation.
8.4 Notices. Any notices authorized to be given hereunder
shall be in writing and deemed given, if delivered personally or by overnight
courier, on the date of delivery, if a Business Day, or if not a Business Day,
on the first Business Day following delivery, or if mailed, three days after
mailing by registered or certified mail, return receipt requested, and in each
case, addressed, as follows:
If to Buyer:
Wire One Technologies, Inc.
225 Long Avenue
Hillside, New Jersey 07205
Attention: Jonathan Birkhahn, Esq.
Facsimile: (973) 391-9776
E-mail address: jbirkhahn@wireone.com
and a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Neil Gold, Esq.
Facsimile: (212) 318-3400
E-mail address: ngold@fulbright.com
33
If to Seller Parties or Sellers' Representative:
Axxis, Inc.
845 South Ninth Street
Louisville, Kentucky 40203
Attention: President
Facsimile: (502) 568-6326
and a copy to:
Wyatt, Tarrant & Combs, LLP
2700 PNC Plaza
500 West Jefferson Street
Louisville, Kentucky 40202
Attention: Michael B. Vincenti, Esq.
Facsimile: (502) 589-0309
E-mail address: mvincenti@wyattfirm.com
or if delivered by facsimile, on a Business Day before 4:00 p.m. local time of
addressee, on transmission confirmed electronically, or if at any other time or
day on the first Business Day succeeding transmission confirmed electronically,
to the facsimile numbers provided above, or to such other mailing or personal
delivery address or facsimile number as any party shall specify to the other,
pursuant to the foregoing notice provisions. When used in this Agreement, the
term "Business Day" shall mean a day other than a Saturday, Sunday or a day on
which commercial banks in New York, New York are generally closed for business.
8.5 Entire Agreement; Amendments. Except for the Mutual
Confidentiality Agreement between Seller and Buyer dated August 10, 2001, this
Agreement and the Other Transaction Documents (i) set forth the entire agreement
of the parties respecting the subject matter hereof, (ii) supersede any prior
and contemporaneous understandings, agreements, or representations by or among
the parties, written or oral, to the extent they related in any way to such
subject matter, and (iii) may not be amended orally, and no right or obligation
of any party may be altered, except as expressly set forth in a writing signed
by such party.
8.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall for all purposes be deemed an original, and
all such counterparts shall together constitute but one document.
8.7 Headings. The section and subsection headings do not
constitute any part of this Agreement and are inserted herein for convenience of
reference only.
8.8 Public Announcements. Neither Buyer on the one hand nor
Seller or any Shareholder on the other shall make any press release or other
public statement concerning the matters covered by this Agreement without the
approval of the other party, except as in the opinion of counsel for the party
making the release or statement is required by law or applicable regulation, and
shall, in any event, to the extent practicable, permit the other party an
opportunity to review any such release or statement prior to dissemination.
34
8.9 Waiver. No waiver of a breach of, or default under, any
provision of this Agreement shall be deemed a waiver of such provision or of any
subsequent breach or default of the same or similar nature or of any other
provision or condition of this Agreement.
8.10 Binding Effect and Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their successors
and assigns. Neither Seller nor the Shareholders, on the one hand, nor Buyer, on
the other, may assign any obligation under this Agreement except with the prior
written consent of the other party hereto.
8.11 Expenses. Each party shall bear its own expenses incurred
with respect to the preparation of this Agreement and the Other Transaction
Documents and, except as otherwise provided herein, the consummation of the
transactions contemplated hereby and thereby.
8.12 Appointment of Representative.
(a) Powers of Attorney. Each Seller Party irrevocably
constitutes and appoints J. Michael Smith (the "Sellers' Representative") as
such Seller Party's true and lawful agent, proxy, and attorney-in-fact and
authorizes the Sellers' Representative to act for such Seller Party and in such
Seller Party's name, place, and stead, in any and all capacities to do and
perform every act and thing required or permitted to be done in connection with
the transactions contemplated by this Agreement and any Other Transaction
Document, as fully to all intents and purposes as such person might or could do
in person, including, without limitation, the power to:
(i) receive all notices required to be delivered to
such Seller Party under this Agreement, including, without limitation,
any notice of a claim for which indemnification is sought under Section
6 hereof;
(ii) take any and all action on behalf of such Seller
Party from time to time as the Sellers' Representative may deem
necessary or desirable to defend, pursue, resolve, and/or settle claims
under this Agreement, including, without limitation, claims for
indemnification under Section 6 hereof; and
(iii) engage and employ agents and representatives
(including accountants, legal counsel, and other professionals) and
incur such other expenses as he deems necessary or prudent in
connection with the administration of the foregoing.
Each Seller Party grants unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing necessary or desirable
to be done in connection with the transactions contemplated by this Agreement
and any Other Transaction Document, as fully to all intents and purposes as such
Seller Party might or could do in person, hereby ratifying and confirming all
that the Sellers' Representative may lawfully do or cause to be done by virtue
hereof. Each Seller Party, by executing this Agreement, agrees that such agency,
proxy, and power of attorney are coupled with an interest, and are therefore
irrevocable without the consent of the Sellers' Representative and shall survive
the death, incapacity, or bankruptcy of such Seller Party to the extent
permitted by applicable law. Each Seller Party acknowledges and agrees that,
upon execution of this Agreement, any delivery by the Sellers' Representative of
any waiver, amendment, agreement, opinion, certificate, or other documents
executed by the Sellers' Representative or any decisions made by the Sellers'
Representative pursuant to this Section 8.12 shall bind such Seller Party with
respect to such documents or decision as fully as if such Seller Party had
executed and delivered such documents or made such decisions.
35
(b) Not Liable. The Sellers' Representative shall not have, by
reason of this Agreement, a fiduciary relationship in respect of any Seller
Party, except in respect of amounts received on behalf of such Seller Party. The
Sellers' Representative shall not be liable to any Seller Party for any action
taken or omitted by him or any agent employed by him hereunder or under any
Other Transaction Document, or in connection therewith, except that the Sellers'
Representative shall not be relieved of any liability imposed by law for gross
negligence or willful misconduct. The Sellers' Representative shall not be
liable to the Seller Parties for any apportionment or distribution of payments
made by him in good faith and, if any such apportionment or distribution is
subsequently determined to have been made in error, the sole recourse of any
Seller Party to whom payment was due, but not made, shall be to recover from the
other Seller Parties any payment in excess of the amount to which they are
determined to have been entitled. The Sellers' Representative, in such capacity,
shall not be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions, or conditions of this Agreement or
any Other Transaction Document.
(c) Replacement of the Sellers' Representative. Upon the
death, disability, or incapacity of the initial Sellers' Representative
appointed pursuant to Section 8.12(a) above, each Seller Party acknowledges and
agrees that such Sellers' Representative's executor, guardian, or legal
representative, as the case may be, shall (in consultation with the Seller
Parties) appoint a replacement reasonably believed by such person to be capable
of carrying out the duties and performing the obligations of the Sellers'
Representative hereunder within thirty (30) days. In the event that the Sellers'
Representative resigns for any reason, the Sellers' Representative shall (in
consultation with the Seller Parties) select another representative to fill such
vacancy. Any substituted representative shall be deemed the Sellers'
Representative for all purposes of this Agreement and any Other Transaction
Document.
(d) Actions of the Sellers' Representative; Liability of the
Sellers' Representative. Each Seller Party agrees that Buyer shall be entitled
to rely on any action taken by the Sellers' Representative, on behalf of the
Seller Parties, pursuant to Section 8.12(a) above (each, an "Authorized
Action"), and that each Authorized Action shall be binding on each Seller Party
as fully as if such Seller Party had taken such Authorized Action. Buyer agrees
that the Sellers' Representative shall have no liability to Buyer for any
Authorized Action, except to the extent that such Authorized Action is found by
a final order of a court of competent jurisdiction to have constituted fraud or
willful misconduct. The Seller Parties hereby release and discharge Buyer from
and against any liability arising out of or in connection with the Sellers'
Representative's failure to distribute any amounts received by the Sellers'
Representative on Seller Parties' behalf to the Seller Parties.
[The remainder of this page is intentionally left blank.]
36
IN WITNESS WHEREOF, the undersigned have executed this Asset Purchase
Agreement as of the date first written above.
BUYER:
WIRE ONE TECHNOLOGIES, INC.
By:
---------------------------------------------
Name: Jonathan Birkhahn
Title: Executive Vice President Business
Affairs and General Counsel
SELLER:
AXXIS, INC.
By:
---------------------------------------------
Name: David T. Richardson
Title: President
SHAREHOLDERS:
------------------------------------------------
Stephen A. Smith
------------------------------------------------
J. Michael Smith
------------------------------------------------
Kenneth W. Rousseau
------------------------------------------------
Michael R. Graves
------------------------------------------------
R. Blake Harris
SCHEDULES
Schedule Subject Matter
-------- --------------
1.2(a)-1 Backlog jobs
1.2(a)-2 Underbilling Receivables
1.2(c) Post-Effective Date Receivables
1.2(d) Inventory
1.2(e) Vehicles
1.2(f) Furniture, equipment and other tangible assets
1.2(g) Leasehold interests
1.4 Assumed Liabilities
2.7(b) Employee Benefit Plans, multiemployer plans
2.7(d) Closing Date Employees, terminated employees
2.8 Litigation
2.9(a) In-Progress Jobs, orders and other agreements
2.9(g) Proposed agreements
2.10 Suppliers and customers
2.11 Tangible property
2.12(a) Leased Real Property
2.14 Insurance policies
2.16(b) Certain transactions