Ex 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
INNOVATIVE SOFTWARE TECHNOLOGIES, INC.,
IST INTEGRATED SOLUTIONS, INC.,
LIETZ DEVELOPMENT, INC.,
SAPPHIRE OF TAMPA BAY, INC.,
AND
CHRISTOPHER LIETZ AND TODD LIETZ
Dated as of May 6, 2005
TABLE OF CONTENTS
PAGE NO.
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ARTICLE I SALE OF ASSETS; ASSUMPTION OF LIABILITIES; CLOSING.....................................................1
Section 1.1 Sale of Assets........................................................................1
Section 1.2 Excluded Assets.......................................................................3
Section 1.3 Assumption of Liabilities.............................................................3
Section 1.4 Purchase Price and Performance Consideration..........................................4
Section 1.5 Allocation of Purchase Price..........................................................5
Section 1.6 Closing...............................................................................5
Section 1.7 Deliveries at Closing.................................................................5
Section 1.8 Collection of Accounts Receivable.....................................................6
Section 1.9 Nonassignability of Assets............................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS.............................................7
Section 2.1 Representations and Warranties of Seller and Stockholders.............................7
Section 2.2 Organization and Good Standing........................................................7
Section 2.3 Corporate Authority; Legal Capacity; Stock............................................7
Section 2.4 No Conflict; Approvals................................................................7
Section 2.5 Financial Statements..................................................................8
Section 2.6 Books and Records.....................................................................8
Section 2.7 Title to the Assets...................................................................8
Section 2.8 Real Property.........................................................................8
Section 2.9 Leases................................................................................8
Section 2.10 Fixed Assets..........................................................................9
Section 2.11 Contracts.............................................................................9
Section 2.12 Litigation............................................................................9
Section 2.13 Taxes.................................................................................9
Section 2.14 Inventory............................................................................10
Section 2.15 Accounts Receivable..................................................................10
Section 2.16 No Subsidiaries......................................................................10
Section 2.17 Broker's or Finder's Fees............................................................10
Section 2.18 Insurance Policies...................................................................11
Section 2.19 Employee Benefit Plans...............................................................11
Section 2.20 Employees............................................................................13
Section 2.21 Employee Relations...................................................................13
Section 2.22 Compliance with Laws.................................................................14
Section 2.23 Environmental Matters................................................................14
Section 2.24 Disclosure...........................................................................15
Section 2.25 Discounts............................................................................15
Section 2.26 Commissions and Royalties............................................................15
Section 2.27 Intellectual Property................................................................15
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Section 2.28 No Undisclosed Liabilities...........................................................15
Section 2.29 Absence of Certain Changes...........................................................16
Section 2.30 Investment...........................................................................17
Section 2.31 Tax Matters..........................................................................17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER.........................................................17
Section 3.1 Representations and Warranties of Purchaser..........................................17
Section 3.2 Organization and Good Standing.......................................................17
Section 3.3 Corporate Authority..................................................................18
Section 3.4 No Conflict; Authorization...........................................................18
Section 3.5 Litigation...........................................................................18
Section 3.6 Broker's or Finder's Fees............................................................18
Section 3.7 Tax Matters..........................................................................18
ARTICLE IV CONDITIONS TO PURCHASER'S OBLIGATIONS................................................................18
Section 4.1 Conditions to Purchaser's Obligations................................................18
Section 4.2 Transfer Documents...................................................................18
Section 4.3 Good Standing Certificate............................................................19
Section 4.4 No Litigation Threatened.............................................................19
Section 4.5 Approvals and Consents...............................................................19
Section 4.6 Representations and Warranties True and Accurate as of Closing.......................19
Section 4.7 Absence of Liens.....................................................................19
Section 4.8 Material Adverse Changes.............................................................19
Section 4.9 Due Diligence; Schedules.............................................................20
Section 4.10 Employment Agreement.................................................................20
Section 4.11 Lease Assignments....................................................................20
Section 4.12 Opinion of Seller's Counsel..........................................................20
Section 4.13 Non-Foreign Affidavit................................................................20
Section 4.14 Bank Accounts........................................................................20
Section 4.15 Bill of Sale.........................................................................20
Section 4.16 Assignment and Assumption............................................................20
Section 4.17 Tax Matters..........................................................................20
Section 4.18 Other Documents......................................................................21
ARTICLE V CONDITIONS TO SELLER'S AND STOCKHOLDERS'S OBLIGATIONS.................................................21
Section 5.1 Conditions to Seller's Obligations...................................................21
Section 5.2 Representations, Warranties and Covenants............................................21
Section 5.3 No Litigation Threatened.............................................................21
Section 5.4 Assumption of Assumed Liabilities....................................................21
ARTICLE VI COVENANTS............................................................................................22
Section 6.1 Further Assurances...................................................................22
Section 6.2 Disclosure...........................................................................22
Section 6.3 Tax Matters..........................................................................22
Section 6.4 Non-competition; Non-Solicitation....................................................23
Section 6.5 Confidentiality......................................................................23
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Section 6.6 Forbearance by Seller................................................................24
Section 6.7 Affirmative Covenants Pending Closing................................................25
Section 6.8 Insurance and Maintenance and Location of Assets.....................................25
Section 6.9 Access...............................................................................26
Section 6.10 Sales and Use Taxes..................................................................26
Section 6.11 Consent of Seller....................................................................26
Section 6.12 Duty to Supplement...................................................................26
Section 6.13 Exclusive Dealing....................................................................26
Section 6.14 Employees and Employee Benefits......................................................27
Section 6.15 IST Common Stock.....................................................................27
ARTICLE VII TERMINATION.........................................................................................28
Section 7.1 Termination..........................................................................28
Section 7.2 Effect of Termination................................................................28
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION........................................29
Section 8.1 Survival of Representations and Warranties...........................................29
Section 8.2 Seller's and Stockholders's Obligation to Indemnify..................................29
Section 8.3 Limitations on Seller's and Stockholders's Indemnification...........................30
Section 8.4 Survival of Purchaser Obligations....................................................30
Section 8.5 Purchaser Obligation to Indemnify....................................................30
Section 8.6 Limitations on Purchaser Indemnification.............................................31
Section 8.7 Procedures Relating to Indemnification...............................................31
Section 8.8 Characterization of Indemnification Payments.........................................32
ARTICLE IX MISCELLANEOUS........................................................................................32
Section 9.1 Certain Definitions..................................................................32
Section 9.2 Professional Expenses................................................................33
Section 9.3 Governing Law........................................................................33
Section 9.4 Jurisdiction.........................................................................34
Section 9.5 Captions.............................................................................34
Section 9.6 Notices..............................................................................34
Section 9.7 Parties in Interest..................................................................35
Section 9.8 Counterparts.........................................................................35
Section 9.9 Entire Agreement.....................................................................35
Section 9.10 Amendments; Waivers..................................................................35
Section 9.11 Severability.........................................................................35
Section 9.12 Rules of Construction................................................................35
Section 9.13 Risk of Loss.........................................................................36
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TABLE OF DEFINED TERMS
12-31-04 Balance Sheet Section 2.5
Accounts Receivable Section 1.1(a)
Accredited Investor Section 2.30
Act Section 2.30
Affected Employees Section 6.14(a)
Affiliate Section 9.1(a)
Allocation Section 1.6
Applicable Cap Section 8.3(b)
Assignment and Assumption Agreement Section 4.18
Assumed Liabilities Section 1.3
Belief Section 9.1(d)
Business Preamble
Cap Amount Section 8.2(f)
Closing Section 1.7
Closing Date Section 1.7
COBRA Section 2.19(a)(ii)
Code Section 9.1(b)
Competing Business Section 6.4
Contracts Section 1.1(e)
Deductible Amount Section 8.3(b)
DOL Section 2.19(a)(iii)
Employee Section 2.19(a)(v)
Employee Agreement Section 2.19(a)(vi)
Environmental Requirements Section 2.23(a)
ERISA Section 2.19(a)(iv)
ERISA Affiliate Section 2.19(a)(i)
Excluded Assets Section 1.2
Expiration Date Section 8.1(a)
Financial Statements Section 2.5
Fixed Assets Section 1.1(d)
GAAP Section 9.1(c)
Government Contracts Section 2.11
Governmental Authorities Section 2.11
Indemnification Obligation Section 1.5(i)
Indemnified Party Section 8.7(a)
Indemnifying Party Section 8.7(a)
Information Section 9.1(d)
Intellectual Property Section 1.1(j)
Inventory Section 1.1(c)
IRS Section 2.19(a)(vii)
IST Common Stock Section 1.4
Knowledge Section 9.1(d)
Leased Real Property Section 2.8
Leases Section 1.1(f)
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Liens Section 2.3(b)
Losses Section 8.2(a)
Material to the Business Section 9.1(e)
New Sub Preamble
Ordinary Course of Business Section 9.1(f)
Pension Plan Section 2.19(a)(viii)
Performance Consideration Section 1.5
Person Section 9.1(g)
Premises Section 1.1(c)
Purchase Price Section 1.4
Purchased Assets Section 1.1
Purchaser Preamble
Purchaser Indemnified Persons Section 8.2(a)
Returns Section 2.13
Seller Preamble
Seller Disclosure Schedule Section 2.1
Seller Employee Plan Section 2.19(a)(ix)
Stock Consideration Section 1.4
Stockholder Preamble
Tax Section 9.1(h)
Taxing Authority Section 9.1(i)
Third Party Claim Section 8.7(b)
Trade Secrets Section 6.5
Transfer Tax Section 6.3(b)
Unaudited Financial Statements Section 2.5
Uncollected Accounts Receivable Section 1.9
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SCHEDULES
Schedule 1.1(a) Accounts Receivable
Schedule 1.1(c) Inventory
Schedule 1.1(d) Fixed Assets
Schedule 1.1(e) Contracts
Schedule 1.1(f) Leases
Schedule 1.5 Purchase Price Allocation
Schedule 4.5 Required Consents
Schedule 4.6 Seller Officer Certificate
Schedule 4.10 Employment Agreements
Schedule 5.2 Purchaser Officers Certificate
Schedule 6.14(a) Employee List
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SELLER DISCLOSURE SCHEDULE
Disclosure Schedule 2.4 Conflicts
Disclosure Schedule 2.5 Financial Statements
Disclosure Schedule 2.6 Bank Accounts
Disclosure Schedule 2.7 Liens
Disclosure Schedule 2.9 Leases
Disclosure Schedule 2.12 Litigation
Disclosure Schedule 2.14 Inventory
Disclosure Schedule 2.15 Accounts Receivable
Disclosure Schedule 2.15 Aged Schedule of Accounts Receivable
Disclosure Schedule 2.18 Seller's Insurance Policies
Disclosure Schedule 2.19(b) Seller Employee Plans and Agreements
Disclosure Schedule 2.20(a) Officers and Employees
Disclosure Schedule 2.20(b) Non-Competition Agreements
Disclosure Schedule 2.21 Employee Relations
Disclosure Schedule 2.22 Licenses and Permits
Disclosure Schedule 2.25 Discounts
Disclosure Schedule 2.26 Commissions
Disclosure Schedule 2.27 Intellectual Property
Disclosure Schedule 2.27(a) Intellectual Property Claims
Disclosure Schedule 2.29 Absence of Changes
EXHIBITS
Exhibit A Assumed Liabilities
Exhibit B Employment Agreement between Chris
Lietz and Purchaser
Exhibit C Employment Agreement between Todd
Lietz and Purchaser
Exhibit D Opinion of Seller's Counsel
Exhibit E Bill of Sale
Exhibit F Assignment and Assumption Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT dated this 6th day of May, 2005 by and
between Lietz Development, Inc., Sapphire of Tampa Bay, Inc., both Florida
corporations (the "Seller"), Christopher Lietz and Todd Lietz (the
"Stockholders"), Innovative Software Technologies, Inc., a California
Corporation ("Purchaser"), and IST Integrated Solutions, Inc., a Delaware
corporation and a wholly owned subsidiary of Purchaser (the "New Sub").
BACKGROUND
Seller desires to sell, transfer and assign to Purchaser, and Purchaser
desires to purchase and assume from Seller, pursuant to and in accordance with
the terms and conditions of this Agreement, substantially all of the assets and
certain of the liabilities of Seller, which is engaged in the business of
selling hardware and software, setting up and maintaining networks, hosting
client servers, managing IT on behalf of clients, and developing software
applications (the "Business"). Stockholders own all of the issued and
outstanding shares of capital stock of Seller and agree to be jointly and
severally liable with Seller, subject to the terms and conditions set forth
below, for certain of the obligations of Seller hereunder. Purchaser and Seller
intend this transaction to qualify as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
SALE OF ASSETS; ASSUMPTION OF LIABILITIES; CLOSING
Section 1.1 Sale of Assets. Subject to the terms and conditions of this
Agreement, at the Closing (as defined herein), Seller shall sell, assign,
transfer and deliver to New Sub, and Purchaser shall purchase from Seller, all
of Seller's right, title and interest in and to all Seller's assets other than
the Excluded Assets (as defined below), including the following assets
(collectively, the "Purchased Assets"). The Purchased Assets shall include, but
not be limited to, the following:
(a) all accounts and other receivables of Seller as of the Closing
Date (as defined herein), including but not limited to all accounts receivable
to be set forth on Schedule 1.1(a) hereto (the "Accounts Receivable");
(b) all cash of Seller as of the Closing Date;
(c) all inventory of Seller located at 4201 West Cypress Street,
Tampa, Florida 33607, (the "Premises") on hand as of the Closing Date, all
inventory of Seller in the possession of a contractor or subcontractor of Seller
as of the Closing Date, all inventory of Seller consigned to customers of Seller
as of the Closing Date and all inventory of Seller in transit as of the Closing
Date pursuant to purchase orders issued by Seller in the ordinary course of
business, including but not limited to all inventory which is itemized,
accounted for, located and set forth on Schedule 1.1(c) to this Agreement
(collectively, the "Inventory");
(d) all machinery, equipment, furniture, trade fixtures, tools,
trailers and motor vehicles of Seller, and all supplies (including office
supplies), manuals, maintenance and other records pertaining thereto, including
those set forth on Schedule 1.1(d) (the "Fixed Assets");
(e) all Seller's rights in, to and under all agreements, contracts,
leases, license agreements and other executory instruments to which Seller is a
party relating to the Business, and all pending purchase and sales orders
incurred in the ordinary course of the Business other than Leases (as defined
herein), including, but not limited to, those listed on Schedule 1.1(e) (which
Schedule 1.1(e) shall list all such agreements, contracts, leases, license
agreements, other executory instruments and purchase and sales orders) (the
"Contracts");
(f) all leases for real property leased from third parties by Seller
and used in the conduct of the Business, including the leases set forth on
Schedule 1.1(f) hereto (the "Leases");
(g) all security deposits and prepaid expenses of Seller, if any;
(h) all transferable guaranties, warranties, indemnities and similar
rights in favor of Seller to the extent related to any Purchased Asset;
(i) all goodwill associated with or attributable to the Business;
(j) all Seller's interest in any Intellectual Property. As used
herein, the term "Intellectual Property" shall mean and include: (i) all
trademark rights, business identifiers, trade dress, service marks, trade names,
and brand names; (ii) all copyrights and all other rights associated therewith
and the underlying works of authorship; (iii) all patents and all proprietary
rights associated therewith; (iv) all contracts or agreements granting any
right, title, license or privilege under the intellectual property rights of any
third party; (v) all inventions, mask works and mask work registrations, know
how, discoveries, improvements, designs, trade secrets, shop and royalty rights,
employee covenants and agreements respecting intellectual property and non
competition and all other types of intellectual property; and (vi) all
registrations of any of the foregoing, all applications therefor, all goodwill
associated with any of the foregoing, and all claims for infringement or breach
thereof;
(k) all permits, approvals, qualifications and the like used by
Seller in the conduct of the Business issued by any governmental body or other
instrumentality to the extent assignable by Seller;
(l) all customer lists and records, files and correspondence,
technical information, and all sales, advertising, and promotional literature,
catalogs, artwork, and other items associated with or attributable to the
Business;
(m) all computer source codes, programs and other software of
Seller, including all machine readable code, printed listings of code,
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documentation and related property and information of Seller. However, the
parties agree that the Scorpion and Automated Patient Interface ("API") products
being purchased in this transaction will automatically revert to the ownership
of Christopher Lietz should IST cease operations or file for bankruptcy within
two years of Closing.
(n) all records and files of Seller of every kind including, without
limitation, invoices, customer and vendor lists, blueprints, specifications,
designs, drawings, and operating and marketing plans, and all other documents,
tapes, discs, programs or other embodiments of information of Seller;
(o) the names "Data Tech" and "Graphics Tech" and all rights to use
or allow others to use such name; and
t 12 (p) all causes of action relating to the Business arising out of
occurrences before the Closing, and other intangible rights and assets.
Section 1.2 Excluded Assets. The provisions of Section 1.1
notwithstanding, Seller shall not sell, transfer, assign, convey or deliver to
New Sub, and Purchaser will not purchase or accept the following assets of
Seller (collectively, the "Excluded Assets"):
(a) the consideration delivered by Purchaser pursuant to this
Agreement;
(b) all Seller's rights and obligations in, to and under all
employment agreements, and
(c) Seller's certificate of incorporation, corporate seal, stock
books, minute books and other corporate records having exclusively to do with
corporate organization and capitalization of Seller, except that Purchaser shall
have reasonable access to such books and records and may make excerpts therefrom
and copies thereof.
Section 1.3 Assumption of Liabilities. Subject to the terms and conditions
of this Agreement, at the Closing, Purchaser shall assume and pay, discharge or
perform when due only those liabilities set forth on Exhibit "A" attached hereto
(collectively, the "Assumed Liabilities").
Without limiting the foregoing, except as set forth on Exhibit A,
Purchaser shall not be liable for any liability, obligation or claim:
(a) based upon any written or implied warranty or any theory of
product liability, including but not limited to claims for bodily injury and
property damage, with respect to goods sold, leased, processed, manufactured,
consigned, distributed or transferred by Seller prior to the Closing;
(b) for any and all severance or other termination benefits owing to
any employee of Seller arising out of or resulting from severance or termination
by Seller prior to or in connection with the Closing;
(c) for Taxes;
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(d) relating to employee benefits or compensation arrangements
existing on or prior to the Closing Date, including, without limitation, any
liability or obligation under any of Seller's employee benefit agreements, plans
or other arrangements as set forth in Section 2.19(b) of the Seller Disclosure
Schedule hereof;
(e) arising under or in connection with any event occurring or
circumstance existing prior to the Closing with respect to any pension plan,
profit sharing plans or other employee benefit plan of Seller;
(f) to a third party for infringement of such third party's
Intellectual Property arising under or in connection with any event occurring
prior to Closing;
(g) with respect to any action, suit, proceeding, arbitration,
investigation or inquiry, whether civil, criminal or administrative arising
under or in connection with any event occurring prior to Closing;
(h) incurred by Seller in connection with this Agreement and the
transactions contemplated hereby;
(i) of Seller to its present or former stockholders;
(j) relating to indebtedness of Seller for borrowed money;
(k) in connection with any violation by Seller of or failure by
Seller to comply with any statute, law, ordinance, rule or regulation or any
order writ, injunction, judgment, plan or decree of any court arbitrator,
department, commission, board, bureau, agency, authority, instrumentality or
other body, whether federal, state, municipal, foreign or other prior to
Closing;
(l) with respect to any items listed in Sections 2.12 of the Seller
Disclosure Schedule; or
(m) arising under or in connection with any of the Excluded Assets.
Section 1.4 Purchase Price and Performance Consideration. The purchase
price for the Purchased Assets shall be $440,000 comprising (i) the assumption
of the Assumed Liabilities, and (ii) the issuance of a number of shares of
common stock of Purchaser ("IST Common Stock") having an aggregate fair market
value equal to the difference between the Purchase Price and the Assumed
Liabilities at Closing (the "Stock Consideration"). For the purposes of this
Agreement, the fair market value per share of IST Common Stock shall be the
average closing price of such shares on the OTC Bulletin Board during the twenty
(20) trading days immediately prior to the Closing Date. The Stock Consideration
shall not exceed one million three hundred fifty thousand (1,350,000) shares.
The Purchase Price is based upon certain expectations of future
revenue generation by Purchaser. Therefore, one-half of the Stock Consideration
shall be paid upon Closing and one-half of the Stock Consideration will be
payable one year following Closing (the "Performance Consideration") contingent
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upon the attainment of $2,000,000 in gross revenue for Purchaser for the 2005
calendar year. The Performance Consideration shall be adjusted pro rata should
gross revenue fall short of this amount.
The assumption of the Assumed Liabilities together with the Stock
Consideration shall collectively be referred to as the "Purchase Price."
The parties further agree that New Sub will pay royalties to
Christopher Lietz in the amount of 3% of net sales of the Scorpion product and
3% of the net sales of the API product for a period from Closing until Three
Years following the official product release.
Notwithstanding anything to the contrary in this Agreement, if Purchaser
does not receive the affidavit described in Section 4.16 on or before the
Closing, Purchaser shall be entitled to withhold from any amounts payable
pursuant to this Agreement any and all amounts required to be withheld pursuant
to Section 1445 of the Code an applicable Treasury Regulations.
Section 1.5 Allocation of Purchase Price. The parties shall mutually agree
on the allocation of the Purchase Price (the "Allocation") among the Purchased
Assets as set forth on Schedule 1.5. Seller and Purchaser agree (i) to be bound
by the Allocation; (ii) act in accordance with the Allocation in the filing of
all Tax returns (including, without limitation filing Form 8594 with the federal
income Tax return for the taxable year that includes the date of the Closing)
and in the course of any Tax audit, review or litigation relating thereto; and
(iii) take no position and cause their Affiliates to take no position
inconsistent with the Allocation. Seller and Purchaser mutually agree to file a
Form 8594 which will set forth the allocation of the Purchase Price among the
Purchased Assets as set forth on Schedule 1.5, and not later than 30 days prior
to the filing of their respective Forms 8594 relating to this transaction, each
party shall deliver to the other party a copy of its Form 8594.
Section 1.6 Closing. The closing of the purchase and sale of the Purchased
Assets and the assignment and assumption of the Assumed Liabilities (the
"Closing") shall take place at the offices of Purchaser's counsel, Foley &
Lardner LLP, 100 North Tampa Street, Suite 2700, Tampa, Florida on or before May
4th, 2005 (the "Closing Date").
Section 1.7 Deliveries at Closing.
(a) Deliveries by Purchaser. At or prior to the Closing, Purchaser
shall deliver or cause to be delivered to Seller the following:
(i) Stock certificates representing that number of shares of
IST Common Stock equal to the Stock Consideration;
(ii) the officer's certificate referred to in Section 5.2
hereof; and
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(iii) any other documents, certificates, instruments or
writings required to be delivered by Purchaser at or before the
Closing pursuant to this Agreement or otherwise.
(b) Deliveries by Seller. At or prior to the Closing, Seller shall
deliver to Purchaser the following:
(i) the certificates referred to in Section 4.6 hereof; and
(ii) any other documents, certificates, instruments or
writings required to be delivered by the Purchaser at or before the
Closing pursuant to this Agreement or otherwise required in
connection herewith.
Section 1.8 Collection of Accounts Receivable. Seller shall promptly
transfer and deliver to Purchaser any cash or other property that it may receive
following Closing in payment of any of the Accounts Receivable. Seller shall
refer to Purchaser any inquiries received by Seller following Closing relative
to the Accounts Receivable. In the event that any of the Accounts Receivable as
itemized on Section 2.15 of the Seller Disclosure Schedule are not collected by
Purchaser after using commercially reasonable collection efforts (which shall
not require Purchaser to incur any expense) within one hundred eighty (180) days
from the Closing Date, Seller shall pay to Purchaser within three days
thereafter (which payment may be accomplished in whole or in part, at the option
of the Purchaser, by the Purchaser setting off any amount owed to Seller or
Stockholders by Purchaser) the amount of such uncollected Accounts Receivable
(the "Uncollected Accounts Receivable"), net of any reserves for accounts
receivable included in the 12/31/04 Balance Sheet. Any such Uncollected Accounts
Receivable that are not with continuing customers and are not the result of
billing error shall be assigned to Seller without recourse and Seller shall have
the right to pursue collection of such Uncollected Accounts Receivable (and
Purchaser agrees that such collection actions shall not violate any
non-competition or non-solicitation covenants to which Seller is bound
hereunder). Purchaser agrees to credit collections of Accounts Receivable in
accordance with customer payment instructions, if indicated, and otherwise using
a first in, first out method. If and to the extent that Seller does not pay to
Purchaser the full amount owed to Purchaser pursuant to this Section 1.9, the
Stockholders shall be obligated, without further demand or notice, to pay to
Purchaser such amount as is necessary to cause the aggregate payments to
Purchaser to equal the amount of any Uncollected Accounts Receivable.
Section 1.9 Nonassignability of Assets. To the extent that the sale,
assignment or transfer to Purchaser of any asset that is intended to be a
Purchased Asset would require any third party approval and such approval shall
not have been obtained prior to the Closing, at Purchaser's option, the Closing
shall proceed without the sale, assignment or transfer of any such asset and (i)
the asset (and its related liabilities) will not be considered a Purchased Asset
or an Assumed Liability for the purposes hereof unless and until such approval
has been obtained; (ii) the parties shall use their reasonable best efforts to
obtain such approval; and (iii) pending such approval the parties shall
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cooperate with each other in any mutually agreeable, reasonable and lawful
arrangement designed to provide Purchaser with the economic and operational
equivalent of the use of such asset and its related liabilities.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS
Section 2.1 Representations and Warranties of Seller and Stockholders.
Seller and Stockholders hereby jointly and severally represent and warrant to
Purchaser that the following are true and correct as of the date first above
written and shall be true and correct on the Closing Date and shall be
unaffected by any investigation heretofore or hereafter made by Purchaser or any
knowledge of Purchaser other than as specifically disclosed in the Disclosure
Schedule delivered to Purchaser at the time of execution of this Agreement (the
"Seller Disclosure Schedule"):
Section 2.2 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and is duly qualified to transact business and is in good standing in
each jurisdiction in which the character or location of the properties owned or
leased by it or the nature of the business conducted by it makes such
qualification necessary.
Section 2.3 Corporate Authority; Legal Capacity; Stock.(a) Seller has full
corporate power and authority to own and use its property, to carry on its
business as now being conducted and to execute, deliver and perform all of its
obligations under this Agreement and all other agreements to be executed,
delivered and performed by it hereunder. Stockholders has full legal capacity to
execute, deliver and perform all of his obligations under this Agreement and all
other agreements to be executed, delivered and performed by him hereunder.
Seller has taken all necessary corporate action to authorize and approve the
execution, delivery and performance of this Agreement. This Agreement has been,
and all other agreements to be executed hereunder upon such execution and
delivery will have been, duly and validly executed and delivered by Seller and
Stockholders and constitute, and will constitute, a legal, valid and binding
obligation of Seller and Stockholders, enforceable against each of them in
accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent conveyance, moratorium and similar laws affecting creditors' rights
and general equity principles.
(b) Stockholders owns beneficially and of record, and Stockholders
has good and valid title to all of the common stock of Seller, free and clear of
all liens, encumbrances, security interests, mortgages, pledges, claims or
options of any kind whatsoever (collectively "Liens"), The common stock of
Seller is not subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding.
Section 2.4 No Conflict; Approvals. Neither the execution and delivery of
this Agreement nor the consummation or performance of any of the transactions
contemplated hereby will (i) violate or conflict with any provision of the
Articles of Incorporation or By-laws of Seller or any statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction of any
government, governmental agency or court to which Seller or any Stockholders or
any of their respective assets is subject, (ii) except as set forth on Section
7
2.4 of the Seller Disclosure Schedule, result in the breach or of any provision
of, or create in any party the right to accelerate, terminate, modify or cancel
or exercise any remedy under, any agreement or other instrument or obligation to
which any of the Purchased Assets may be subject, bound or affected, or (iii)
require notice, authorization, consent, exemption, approval or other action of
any public body or authority (including under any "plant closing" or similar
law).
Section 2.5 Financial Statements. Seller has delivered to Purchaser
unaudited balance sheets of Seller for the fiscal years ended December 31, 2004
and 2003, and the related statements of income and cash flows for the years then
ended (collectively, the "Financial Statements"). Except as provided on Section
2.5 of the Seller Disclosure Schedule, all of such Financial Statements
(including all notes and schedules contained therein or annexed thereto) are
true, complete and accurate, have been prepared in accordance with GAAP (except
for the absence of footnote disclosure) applied on a consistent basis, have been
prepared in accordance with the books and records of Seller, and fairly present,
in accordance with GAAP, the assets, liabilities and financial position, the
results of operations and cash flows of Seller as of the dates and for the years
and periods indicated.
Section 2.6 Books and Records. The material books of account and other
records of the Business, all of which have been made available to Purchaser
prior to the Closing, are complete and accurate in all material respects. Set
forth in Section 2.6 of the Seller Disclosure Schedule is a list of each bank in
which Seller has an account or safe deposit box, the name and number of each
such account or box and the names of all persons authorized to draw thereon or
who have access thereto, with the amounts they are authorized to draw.
Section 2.7 Title to the Assets. Except as set forth in Section 2.7 of the
Seller Disclosure Schedule, Seller has and at the Closing will transfer to
Purchaser good and marketable title to the Purchased Assets, free and clear of
all Liens. The Purchased Assets include all rights, properties and other assets
necessary for Seller to conduct the Business in the same manner as its business
has been conducted.
Section 2.8 Real Property. Seller does not own any real property. The real
property located at 4201 West Cypress Street, Tampa, Florida 33607, that is the
subject of the Leases ("Leased Real Property"), is not subject to any building
use restrictions, exceptions, variances, reservations or limitations and none of
the buildings, structures and appurtenances situated thereon, and the use
thereof by Seller does not, and the use thereof by Purchaser (assuming Purchaser
continues the same use as Seller) will not, violate in any material respect any
restrictive covenant or any provision of any federal, state or local law,
ordinance, rule or regulation, or encroach on any property owned by others. No
condemnation proceeding is pending or, to the best of Seller's or Stockholders's
knowledge, threatened which would preclude or impair the use of any Leased Real
Property by Purchaser.
Section 2.9 Leases. Schedule 1.1(f) contains an accurate and complete list
of all Leases. Each Lease is in full force and effect, all rents and additional
sums due from Seller to date on each Lease have been paid, in each case Seller
is in peaceable possession thereunder and is not in material default thereunder
and no waiver, indulgence or postponement of Seller's obligations thereunder has
8
been granted by the lessor, and to Seller's and Stockholders's knowledge there
exists no event of default or event, occurrence, condition or act (including the
purchase of the Purchased Assets hereunder) which, with the giving of notice,
the lapse of time or the happening of any further event or condition, would
become a material default by Seller under any Lease. Seller has not violated or
been given written notice of violation of any of the terms or conditions under
any Lease and, to Seller's and Stockholders's knowledge, all of the material
covenants to be performed by any other party under any Lease have been fully
performed. The properties leased by Seller and used in the Business have no
material defects except as set forth on Section 2.9 of the Seller Disclosure
Schedule and are adequate and suitable for the purposes for which they are
presently being used. Seller has provided Purchaser with a true, correct and
complete copy of each Lease.
Section 2.10 Fixed Assets. Schedule 1.1(d) is a complete and accurate
description of all machinery, equipment, furniture, trade fixtures, tools,
trailers, and motor vehicles owned by Seller and used in the operation of
Business. Schedule 1.1(d) correctly reflects the location of all of the items
listed thereon. The Fixed Assets are free of material defects, and are adequate
and suitable for the purposes for which they are currently being used by Seller.
Section 2.11 Contracts. Schedule 1.1(e) contains an accurate and complete
list of all Contracts. All Contracts of Seller are freely assignable except as
indicated on Schedule 1.1(e) hereto. Complete and correct copies of all such
Contracts have been delivered to Purchaser. All such Contracts are valid and
binding, in full force and effect and enforceable in accordance with their
respective terms (subject to bankruptcy, insolvency, fraudulent conveyance,
moratorium and similar laws affecting creditors' rights and general equity
principles). Seller is not in breach or default under any of the Contracts, nor
has there occurred an event or condition which, with the passage of time or
giving of notice (or both) would constitute a breach or default by Seller under
any such Contract, nor, to the best knowledge, information and belief of Seller
and Stockholders, are any of the other parties to such Contracts in breach of
default thereunder. All Contracts (the "Government Contracts") with federal,
state, local or foreign governmental entities or any subdivision thereof (the
"Governmental Authorities") have been performed by the Seller in compliance with
all applicable statutes, rules, regulations, orders, ordinances, laws, decrees
and codes of Governmental Authorities, applicable to contracting with such
Governmental Authorities.
Section 2.12 Litigation. Except as set forth in Section 2.12 of the Seller
Disclosure Schedule, there is no action, suit, proceeding at law or in equity by
any person or entity, or any arbitration or any administrative or other
proceeding by or before or, to the best of Seller's and Stockholders's
knowledge, threatened against or affecting Seller nor has Seller received notice
of or otherwise have knowledge of any investigation by any governmental or other
instrumentality or agency concerning Seller or any of its properties or rights
which is or could reasonably be expected to (i) adversely affect the right or
ability of Seller to carry on the Business as now conducted; (ii) adversely
affect the condition, whether financial or otherwise, of the Business; or (iii)
question the validity of this Agreement or any of Seller's agreements and
covenants regarding transactions contemplated hereby.
Section 2.13 Taxes. Seller has filed, or prior to the Closing will timely
file, within the times and within the manner prescribed by law, all federal,
state and local tax returns, information returns, forms, reports, declarations
and all other tax reports and returns ("Returns") which are required to be filed
by it as of the Closing with respect to the Business or the Assets. Each Return
is true, correct and complete in all material respects and accurately reflects
9
or will fully and accurately reflect all required and appropriate liability for
taxes of Seller for the periods covered thereby, and no Return has been amended.
All Taxes payable by or due from Seller prior to the Closing Date with respect
to the Business have been fully and timely paid and those Taxes with respect to
the Business that are not due prior to the Closing Date are fully provided for
in the books and records of Seller. Seller is not currently under audit by any
Taxing Authority and has no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Return. There are no
unresolved audit issues with respect to prior Returns, there are no requests for
rulings or determinations in respect of any Tax pending between the Seller and
any Taxing Authority, and there are no circumstances or pending questions
relating to potential Tax liabilities or claims asserted for Taxes that, if
adversely determined, could result in a Tax liability that would have an adverse
effect on Seller or the Assets for any period. The provision made for Taxes on
the 12-31-04 Balance Sheet is sufficient for the payment of all Taxes, whether
or not disputed at the date of the 12-31-04 Balance Sheet, and for all years and
periods prior thereto. Since the date of the 12-31-04 Balance Sheet, Seller has
not incurred any Taxes other than taxes incurred in the ordinary course of
business consistent in type and amount with past practices of Seller and
adequately reflected on the Final Closing Balance Sheet.
Section 2.14 Inventory. Except as stated in Section 2.14 of the Seller
Disclosure Schedule, the Inventory of Seller has been acquired and maintained by
Seller in the ordinary course of the Business and consists of a quality and
quantity useable or saleable in the ordinary course of the Business, has a
commercial value at least equal to the value shown on the 12-31-04 Balance Sheet
and is valued in accordance with GAAP at the lower of cost (on a FIFO basis) or
market, except that all obsolete inventory has either been reserved for on the
12-31-04 Balance Sheet or written down in accordance with Seller's inventory
accounting policies and procedures as reflected on the inventory valuation
reports delivered to Purchaser. Except as set forth in Section 2.14 of the
Seller Disclosure Schedule, all Inventory is located at 4201 West Cypress
Street, Tampa, Florida 33607.
Section 2.15 Accounts Receivable. All accounts receivable of Seller
reflected on the 12-31-04 Balance Sheet and as incurred in the normal course of
business since the date thereof, represent arm's length sales actually made in
the ordinary course of Business consistent with past practice; are fully
collectible (net of reserves shown on the 12-31-04 Balance Sheet) within 180
days without the necessity of commencing legal proceedings; and are not subject
to valid defenses, set-offs or counterclaims, and are not in dispute, except as
set forth in Section 2.15 of the Seller Disclosure Schedule, which shall also
indicate the amount reserved for such accounts receivable, if any, on the
12-31-04 Balance Sheet. Section 2.15 of the Seller Disclosure Schedule contains
an aged schedule of accounts receivable included in the 12-31-04 Balance Sheet.
Section 2.16 No Subsidiaries. Seller does not own any interest in any
corporation, partnership or other entity.
Section 2.17 Broker's or Finder's Fees. Seller and Stockholders have not
used the services of a broker in connection with the consummation of the
transactions contemplated hereby. To the extent that any broker is or will be
10
entitled to any commission or fee, Seller and Stockholders shall be responsible
for payment of such commission or fee and such commission or fee shall not be
deemed to be an account payable of Seller assumed by Purchaser at the Closing.
Section 2.18 Insurance Policies. Section 2.18 of the Seller Disclosure
Schedule contains a complete list of all of Seller's insurance policies relating
to the Business. All such insurance policies are in full force and effect and
all premiums due thereunder have been paid on a timely basis. Seller has not
been notified by any representative of any insurer of the existence of any
ground for cancellation of said policies or for the reduction of coverages
provided thereby.
Section 2.19 Employee Benefit Plans.
(a) Definitions. The following terms shall have the meanings set forth
below:
(i) "ERISA Affiliate" shall mean any other Person or entity
controlled by or under common control with Seller within the meaning
of Section 414(b), (c), (m) or (o) of the Code and the regulations
thereunder;
(ii) "COBRA" shall mean Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iii) "DOL" shall mean the United States Department of Labor;
(iv) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(v) "Employee" shall mean any current, former, or retired
employee, officer, or director of Seller or any ERISA Affiliate;
(vi) "Employee Agreement" shall refer to each management,
employment, severance, consulting, relocation, repatriation,
expatriation, visas, work permit or similar agreement or contract
between Seller or any ERISA Affiliate and any Employee or
consultant;
(vii) "IRS" shall mean the United States Internal Revenue
Service;
(viii) "Pension Plan" shall refer to each Seller Employee Plan
that is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA; and
(ix) "Seller Employee Plan" shall refer to any plan, program,
policy, practice, contract, agreement or other arrangement providing
for compensation, deferred compensation, incentive compensation,
severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or
unfunded, including without limitation each "employee benefit plan",
11
within the meaning of Section 3(3) of ERISA that is or has been
maintained, contributed to, or required to be contributed to, by
Seller or any ERISA Affiliate for the benefit of any Employee, and
pursuant to which Seller or any ERISA Affiliate has or may have any
liability, contingent or otherwise.
(b) Schedule. Section 2.19(b) of the Seller Disclosure Schedule
contains an accurate and complete list of each Seller Employee Plan and each
Employee Agreement. Neither Seller nor any ERISA Affiliate has any plan or
commitment to establish any new Seller Employee Plan or Employee Agreement, or
to modify any Seller Employee Plan or Employee Agreement.
(c) Documents. Seller has provided or made available to Purchaser
true and complete copies of (i) all documents comprising each written Seller
Employee Plan and each written Employee Agreement, including all amendments
thereof and any trust agreements, insurance contracts, and other funding
agreements and a complete description of any unwritten Seller Employee Plan or
Employee Agreement; (ii) the three most recent annual reports (Series 5500 and
all schedules thereto), if any, required under ERISA or the Code in connection
with each Seller Employee Plan or related trust; (iii) the most recent actuarial
reports, if any, prepared for each of the Seller Employee Plans for which such
report is required or was prepared and the most recent certified financial
statements for each of the Seller Employee Plans, if any, for which such report
is required or was prepared; (iv) the most recent summary plan description
together with the most recent summary of modifications thereto, if any, required
under ERISA with respect to each Seller Employee Plan; and (v) all IRS
determination letters and rulings, if any, relating to Seller Employee Plans and
copies of all applications and correspondence to or from the IRS or the DOL with
respect to any Seller Employee Plan.
(d) Employee Plan Compliance. (i) Seller and each ERISA Affiliate
have performed all obligations required to be performed by it under each Seller
Employee Plan, and each Seller Employee Plan has been established and maintained
in accordance with its terms and in compliance with all applicable laws,
statutes, orders, rules and regulations, including but not limited to ERISA or
the Code; (ii) no "prohibited transaction," within the meaning of Section 4975
of the Code or Section 406 of ERISA, has occurred with respect to any Seller
Employee Plan that would result in liability to Seller; (iii) there are no
actions, suits or claims pending, or, to the knowledge of Seller, threatened or
anticipated (other than routine claims for benefits) against any Seller Employee
Plan or against the assets of any Seller Employee Plan that would result in
liability to Purchaser; (iv) except as provided under COBRA, each Seller
Employee Plan can be amended, terminated or otherwise discontinued after the
Closing in accordance with its terms, without liability to Seller, or any of its
ERISA Affiliates (other than for ordinary administration expenses typically
incurred in a termination event and benefits accrued through the effective date
of such amendment, termination or discontinuance); (v) there are no inquiries or
proceedings pending or, to the knowledge of the Seller or Stockholders,
threatened by the IRS or DOL with respect to any Seller Employee Plan; (vi) the
Seller is not subject to any penalty or tax with respect to any Seller Employee
Plan under Section 502(i) of ERISA or Section 4975 through 4980 of the Code; and
(vii) all contributions, premiums or other payments due and owing from Seller or
its ERISA Affiliates with respect to any Seller Employee Plan have been timely
paid or adequately provided for on the 12-31-04 Balance Sheet.
12
(e) No Pension Plans. Neither Seller nor an ERISA Affiliate now
sponsors nor have they ever sponsored, maintained, contributed to or been
required to contribute to a Pension Plan.
(f) No Post-Employment Obligations. Except as required under the
COBRA, no Seller Employee Plan provides, or has any liability to provide, life
insurance, medical benefits or other employee benefits to any Employee upon or
following his or her retirement or termination of employment for any reason,
except for benefits accrued through the date of termination and as may be
required by statute, and neither Seller nor any ERISA Affiliate has ever
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to its Employees as a group) that such
Employee(s) would be provided with life insurance, medical or other employee
welfare benefits upon their retirement or termination of employment.
Section 2.20 Employees. Section 2.20(a) of the Seller Disclosure Schedule
sets forth an accurate and complete list of all officers and employees of
Seller, showing as to each the nature of the officer's or employee's job, years
of service, the amount or rate of compensation, all accruals of vacation,
personal days and sick leave and eligibility to participate in any of Seller's
pension, retirement, profit sharing, deferred compensation, stock bonus, stock
option, stock ownership, insurance, medical or any other employee benefit plan,
and indicating whether such officer or employee is on short-term or long-term
disability, leave of absence or lay-off. The reserves for all of the foregoing
compensation and benefits set forth on the 12-31-04 Balance Sheet and
established as of the Closing Date on the books and records of Seller are or
will be adequate and established in accordance with GAAP consistently applied.
To the best of Seller's and Stockholders's knowledge, no employee of Seller is a
party to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition or proprietary rights agreement, that in any
way adversely affects (i) the performance of his or her duties as an employee of
Seller, (ii) the ability of Seller to conduct its business as presently
conducted and contemplated to be conducted or (iii) the consummation of the
transactions contemplated by this Agreement. Section 2.20(b) of the Seller
Disclosure Schedule contains a complete and accurate list of all non-competition
agreements between Seller and (i) any current employee of Seller and (ii) any
former employee of Seller if the term of the non-competition agreement with such
former employee has not expired. Copies of all such non-competition agreements
have been provided to Purchaser. Except as set forth on Section 2.20(a) of the
Seller Disclosure Schedule, Seller has not received any notice of termination
from any of its officers or employees as a result of the consummation of the
transactions contemplated by this Agreement.
Section 2.21 Employee Relations. Except as set forth in Section 2.21 of
the Seller Disclosure Schedule, Seller has complied in all material respects
with all federal, state, local, foreign or other applicable laws, rules and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours and has not and is not engaged in any unfair
labor practice or discrimination which would have or are reasonably likely to
have an adverse effect Material to the Business of Seller. There is no unfair
labor practice or discrimination complaint against Seller pending before the
National Labor Relations Board, the Equal Employment Opportunity Commission or
any other governmental body; no labor strike, dispute, slow down or stoppage is
13
pending or, to the best of Seller's and Stockholders's knowledge, threatened
against or involving Seller; to the best of Seller's and Stockholders's
knowledge, no representation question exists respecting the employees of Seller;
no formal labor grievance against Seller is currently outstanding; no
arbitration proceeding arising out of or under any collective bargaining
agreement is pending and no claim therefor has been asserted; no collective
bargaining agreement is currently being negotiated by Seller; and Seller has not
experienced any material labor difficulty.
Section 2.22 Compliance with Laws. Seller has not received any notice from
any governmental entity asserting a violation by Seller of, or ordering Seller
to comply with, any laws, regulations, or governmental pronouncements of any
type, and there are not pending any claims or, to Seller's and Stockholders's
knowledge, investigations involving asserted violations thereof. Seller is in
compliance in all material respects with all applicable statutes, rules,
regulations, ordinances, orders, judgments, decrees and governmental
pronouncements of each and every jurisdiction applicable to Seller and has
acquired all licenses and permits required for the operation of the Business. A
complete and accurate list of all such licenses and permits is set forth on
Section 2.22 of the Seller Disclosure Schedule.
Section 2.23 Environmental Matters.
(a) Seller has obtained all permits, licenses and other
authorizations which are required to be obtained by Seller for the operation of
the Business under federal, state and local laws relating to the environment,
and Seller has handled, stored, transported and disposed of the Business's
wastes, toxic, hazardous or otherwise, in compliance with all such laws
(collectively, "Environmental Requirements").
(b) Seller has not violated any Environmental Requirements or
engaged in or permitted any operations or activities upon, or any use or
occupancy of the Leased Real Property, or any portion thereof, for the purpose
of or in any way involving the unlawful handling, manufacture, treatment,
storage, use, generation, release, discharge, dumping or disposal of any
hazardous material, substance or waste (whether accidental or intentional) on,
under or in the Leased Real Property, nor is any hazardous material, substance
or waste, in violation of any Environmental Requirement, presently constructed,
deposited, stored or otherwise located on, under or in the Leased Real Property,
nor has any hazardous material, substance or waste migrated from the Leased Real
Property upon or beneath other properties. Seller's use, maintenance and
operation of the Leased Real Property, and all activities and conduct of
business related thereto, have at all times been in compliance with all
Environmental Requirements.
(c) With respect to the Business and the Leased Real Property,
Seller has not received notice of any conditions, activities, practices, or
plans which may interfere with or prevent continued compliance with any of the
foregoing, or which may give rise to any liability, or otherwise form the basis
of any claim, action, proceeding, or investigation, relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
handling, discharge, or release into the environment, of any pollutant,
contaminant, or hazardous or toxic material or waste.
14
(d) There exists no writ, injunction, decree, order or judgment
outstanding, nor any lawsuit, claim, proceeding, citation, directive, summons or
investigation or to Seller's and Stockholders's knowledge, pending or
threatened, relating to the ownership, use, maintenance or operation of the
Leased Real Property, or from alleged violation by Seller of Environmental
Requirements, or from the suspected presence of hazardous material, substance or
waste.
Section 2.24 Disclosure. There is no matter known to Seller or
Stockholders not disclosed to Purchaser which may have, or is having, an adverse
effect Material to the Business of Seller. The information contained in the
Exhibits and Schedules attached and to be attached to this Agreement and in all
other documents delivered and to be delivered hereunder by Seller or
Stockholders to Purchaser is and will be complete and accurate and, subject to
the qualifications and limitations identified in this Agreement and its related
exhibits, schedules, disclosures and disclaimers, no representation or warranty
made or to be made herein or therein contains or will contain an untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the representations contained herein or therein not
misleading.
Section 2.25 Discounts. Except as set forth in Section 2.25 of the Seller
Disclosure Schedule, with respect to the Business, Seller is not a party to any
coupon or other type of arrangement whereby it is required to sell products or
services at a material discount from its normal price.
t 6 0 Section 2.26 Commissions and Royalties. Except as set forth in
Section 2.26 of the Seller Disclosure Schedule, with respect to the Business,
Seller is not a party to any arrangement whereby it is required to pay a
commission or royalty to any third party for any sales of its products or
services.
Section 2.27 Intellectual Property. Section 2.27 of the Seller Disclosure
Schedule contains a true and complete list of all Intellectual Property of
Seller. The Intellectual Property is owned by Seller free and clear of all
liens, claims, restrictions and encumbrances of any nature whatsoever, and
Seller has the exclusive right to use the Intellectual Property in the operation
of its business without payment to a third party. Except as set forth in Section
2.27(a) of the Seller Disclosure Schedule, no Intellectual Property infringes or
is infringed upon by any rights of third parties or is involved in any
opposition, invalidation or cancellation action. The Intellectual Property is
sufficient for the operation of Seller's business as currently conducted.
Complete and correct copies of any and all license agreements for the
Intellectual Property have been delivered to Purchaser. All of such license
agreements are valid and binding, in full force and effect and enforceable in
accordance with their respective terms. Neither Seller nor to Seller's and
Stockholders's knowledge, any other party thereto is in violation of any of the
terms of or in default under any such license agreements, nor has there occurred
any event or condition which, with the passage of time or giving of notice (or
both), would constitute a violation or default by Seller, nor to Seller's and
Stockholders's knowledge, any other party thereunder.
Section 2.28 No Undisclosed Liabilities. Seller has no material
liabilities or obligations of any nature known by Seller (whether absolute,
accrued or contingent) except for liabilities or obligations adequately
15
reflected or reserved against in the Financial Statements and current
liabilities incurred since 12-31-04 in the ordinary course of business to the
extent such liabilities are reflected on Seller's books and records.
Section 2.29 Absence of Certain Changes. Except as set forth on Section
2.29 of the Seller Disclosure Statement, since 12-31-04 there has not been:
(a) Adverse Change. Any adverse change Material to the Business;
(b) Damage. Any loss, damage or destruction, whether covered by
insurance or not, affecting that is Material to the Business; (c) Increase in
Compensation. Any increase in the compensation, salaries or wages payable or to
become payable to any employee or agent of Seller (including, without
limitation, any increase or change pursuant to any bonus, pension, profit
sharing, retirement or other plan or commitment), or any bonus or other employee
benefit granted, made or accrued;
(d) Labor Disputes. Any labor dispute or disturbance, other than
routine individual grievances which are not material to the business, financial
condition or results of operations of Seller;
(e) Commitments. Any commitment or transaction by Seller (including,
without limitation, any borrowing or capital expenditure in excess of $5,000)
other than in the ordinary course of Business consistent with past practice;
(f) Dividends. Any declaration, setting aside, or payment of any
dividend or any other distribution in respect of Seller's capital stock; any
redemption, purchase or other acquisition by Seller of any capital stock of
Seller, or any security relating thereto; or any other payment to any
shareholder of Seller as such a shareholder (other than S corporation
distributions);
(g) Disposition of Property. Any sale, lease or other transfer or
disposition of any properties or assets of Seller, except for the sale of
inventory items in the ordinary course of business;
(h) Indebtedness. Any indebtedness for borrowed money incurred,
assumed or guaranteed by Seller;
t 12 (i) Liens. Any Lien made on any of the properties or assets of
Seller;
(j) Amendment of Contracts. Any entering into, amendment or
termination by Seller of any contract, or any waiver of material rights
thereunder, other than in the ordinary course of business;
(k) Loans and Advances. Any loan or advance (other than advances to
employees in the ordinary course of business for travel and entertainment in
accordance with past practice) to any person including, but not limited to, any
officer, director or employee of Seller, or any Stockholders or their
Affiliates;
16
(l) Credit. Any grant of credit to any customer or distributor on
terms or in amounts more favorable than those which have been extended to such
customer or distributor in the past, any other change in the terms of any credit
heretofore extended, or any other change of Seller's policies or practices with
respect to the granting of credit; or
(m) Unusual Events. Any other event or condition not in the ordinary
course of Business of Seller.
Section 2.30 Investment
Seller (i) understands that the shares of IST Common Stock comprising the
Purchase Price have not been, and shall not be, registered under the Securities
Act or under any state securities laws, and are being offered and sold in
reliance upon federal and state exemptions for transactions not involving any
public offering, (ii) is acquiring the shares of IST Common Stock comprising the
Purchase Price solely for its own account for investment purposes, and not with
a view to the distribution thereof, (iii) is a sophisticated investor with
knowledge and experience in business and financial matters, (iv) has received
certain information concerning Purchaser and NewSub and has had the opportunity
to obtain additional information and ask such questions as desired in order to
evaluate the merits and the risks inherent in holding shares of common stock of
Purchaser, (v) is able to bear the economic risk and lack of liquidity inherent
in holding shares of common stock of Purchaser, and (vi) is an Accredited
Investor. "Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act of 1933, as amended (the "Act").
Section 2.31 Tax Matters
Seller has not knowingly taken, or knowingly agreed or knowingly
failed to take, any action that would prevent this transaction from qualifying
as a reorganization under Section 368(a) of the Code. Seller has sought and
obtained its own advisor as to the tax consequences of this transaction and the
investment in the IST Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 3.1 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller and Stockholders that the following are true
and correct as of the date first written above and shall be true and correct on
the Closing Date and shall be unaffected by any investigation heretofore or
hereafter made by Seller or Stockholders other than as specifically disclosed in
the Disclosure Schedule delivered to Seller at the time of execution of this
Agreement.
Section 3.2 Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing and in good standing in the State of
California.
17
Section 3.3 Corporate Authority. Purchaser has full corporate power and
authority to execute, deliver and perform all of its obligations under this
Agreement and the other agreements to be executed, delivered and performed by
Purchaser hereunder; the execution, delivery and performance of this Agreement
has been duly authorized and approved by all required corporate action of
Purchaser; and this Agreement has been duly and validly executed and delivered
by Purchaser and constitutes a valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance, moratorium and similar laws
affecting creditors' rights and general equity principles.
Section 3.4 No Conflict; Authorization. Neither the execution and delivery
of this Agreement nor the consummation or performance of any of the transactions
contemplated hereby will violate or conflict with any provision of the Articles
of Incorporation or By-laws of Purchaser or any statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction of any
government, governmental agency or court to which Purchaser or any of its assets
or properties is subject or any material contract or agreement to which it is a
party. No authorization, consent or approval of any public body or authority or
any third party is necessary to permit the consummation on the part of Purchaser
of the transactions contemplated by this Agreement.
Section 3.5 Litigation. There is no action, claim, suit or proceeding
pending, or to Purchaser's knowledge threatened, by or against or affecting
Purchaser in connection with or relating to the transactions contemplated by
this Agreement or of any action taken or to be taken in connection herewith or
the consummation of the transactions contemplated hereby.
Section 3.6 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of Purchaser is or will be entitled to any commission or
broker's or finder's fees from any of the parties hereto or from any person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein.
Section 3.7 Tax Matters. Purchaser has not knowingly taken, or knowingly
agreed or knowingly failed to take, any action that would prevent this
transaction from qualifying as a reorganization under Section 368(a) of the
Code. Purchaser has sought and obtained its own advisor as to the tax
consequences of this transaction.
ARTICLE IV
CONDITIONS TO PURCHASER'S OBLIGATIONS
Section 4.1 Conditions to Purchaser's Obligations. Purchaser's obligation
to purchase and acquire the Purchased Assets and take the other actions required
to be taken by Purchaser at the Closing is subject to the conditions set forth
in this Article IV, unless any such condition shall have been waived by
Purchaser in its sole discretion in writing.
Section 4.2 Transfer Documents. Seller shall have delivered to Purchaser
bills of sale, assignments, certificates of title and other appropriate
documents of transfer, and any other documents required hereby in form and
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substance reasonably satisfactory to Purchaser transferring the Purchased Assets
to Purchaser. Purchaser's counsel shall have received true copies of all such
documents at or prior to the Closing.
Section 4.3 Good Standing Certificate. Seller shall have delivered to
Purchaser a certificate from the Secretary of State of the State of Florida, to
the effect that Seller is in good standing in such state. Such certificates
shall be dated not more than fifteen (15) days prior to the Closing Date.
Section 4.4 No Litigation Threatened. No action or proceeding shall have
been instituted or, to the best knowledge, information and belief of Seller and
Stockholders, shall have been threatened before a court or other government body
or by any public authority to restrain or prohibit any of the transactions
contemplated hereby or which would have a material adverse effect on the
Business.
Section 4.5 Approvals and Consents. Consents of the third parties to the
assignment to Purchaser of all leases and Contracts set forth on Schedule 4.5,
and all other governmental consents and approvals, if any, necessary to permit
the consummation of the transactions contemplated by this Agreement shall have
been received by Purchaser in a form and substance acceptable to Purchaser.
Section 4.6 Representations and Warranties True and Accurate as of
Closing. Each of the representations and warranties of the Seller and
Stockholders contained in this Agreement shall be true and correct, in each case
as of the date of this Agreement and (except to the extent such representations
speak as of a specific date or time in which case such representations and
warranties shall be or have been true as of such date or time) as of the Closing
Date as though made on and as of the Closing Date, except where the failures to
be true and correct (without regard to any materiality qualifications contained
therein), in the aggregate, have not had, and would not reasonably be expected
to have an adverse effect Material to the Business; and Purchaser shall have
received a certificate signed by Stockholders and Seller and Seller's Chief
Executive Officer and Chief Financial Officer to such effect. The Seller and the
Stockholders shall have performed or complied in all material respects with all
agreements, covenants and conditions required by this Agreement to be performed
or complied with by them at or prior to the Closing Date; and Purchaser shall
have received a certificate signed by each of the Stockholders and the Seller's
Chief Executive Officer and Chief Financial Officer to such effect.
Section 4.7 Absence of Liens. There shall be no Liens on the Purchased
Assets except for Liens for current taxes not yet due and payable and except for
Liens securing the payment of any of the Assumed Liabilities or which will be
released upon payments to Seller's creditors pursuant to payoff letters
delivered to Purchaser and its counsel not less than one business day prior to
Closing.
Section 4.8 Material Adverse Changes. There shall not have occurred after
the date hereof, from and to the Closing, any events, facts or circumstances
which individually or together with all such other events, facts or
circumstances have had or which could have an adverse effect Material to the
Business.
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Section 4.9 Due Diligence; Schedules. Purchaser shall have completed to
its sole satisfaction its business, financial and legal due diligence
investigation of Seller and shall have found, in the Purchaser's sole
discretion, the Seller's prospects, business, operations, assets, commitments,
rights and liabilities to be satisfactory.
Section 4.10 Employment Agreement. Chris Lietz and Purchaser shall have
entered into an employment agreement with Purchaser, substantially in the form
of Exhibit "B" hereto, under which Chris Lietz will serve as President of
Purchaser. Todd Lietz and Purchaser shall have entered into an employment
agreement with Purchaser, substantially in the form of Exhibit "C" hereto, under
which Todd Lietz will serve as Vice President of Purchaser.
Section 4.11 Lease Assignments. With respect to each of the Leases, Seller
shall have delivered estoppel certificates addressed to NewSub dated within two
(2) days of the Closing Date, (i) identifying the Lease documents and any
amendments thereto, (ii) stating that the Lease is valid and in full force and
effect (iii) stating to the best knowledge of the lessor, that the tenant is not
in default under the Lease and no event has occurred that, with notice or lapse
of time or both, would constitute a default by the tenant under the Lease, (iv)
stating the amounts payable by Seller under the Lease and the date to which the
same have been paid, (v) stating that the transactions contemplated by this
Agreement will not constitute a default under the Lease and that landlord
consents to the assignment of the Lease to Purchaser.
Section 4.12 Opinion of Seller's Counsel. Seller shall have delivered to
Purchaser an opinion of Seller's Counsel, Michael Addison, dated the Closing
Date in the form attached hereto as Exhibit "D."
Section 4.13 Non-Foreign Affidavit. Seller shall have furnished to
Purchaser an affidavit, in form reasonably satisfactory to Purchaser, of Seller
stating under penalty of perjury Seller's United States taxpayer identification
number and that Seller is not a foreign person within the meaning of Section
1445(b)(2) of the Code, and containing all such other information as is required
to comply with the requirements of such Section.
Section 4.14 Bank Accounts. Seller shall have transferred and assigned to
Purchaser, effective as of the Closing Date, (A) all accounts listed on Section
2.6 of the Seller Disclosure Schedule, whether or not such accounts are held in
the name of Seller, and (B) any power of attorney from Seller with respect to
such accounts to Purchaser.
Section 4.15 Bill of Sale. Seller shall have executed and delivered to
Purchaser a Bill of Sale substantially in the form of Exhibit "E" hereto.
Section 4.16 Assignment and Assumption. Seller shall have executed and
delivered an assignment and assumption agreement substantially in the form of
Exhibit "F" hereto ("Assignment and Assumption Agreement").
Section 4.17 Tax Matters. Purchaser shall have received the favorable
written opinion of Michael Addison, counsel to the Seller, to the effect that
the transaction will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code (and in
rendering such opinion, Michael Addison may require delivery of an rely upon
representation letters delivered by Purchaser in customary form).
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Section 4.18 Other Documents. Seller and Stockholders shall have delivered
all other documents, instruments or writings required to be delivered to the
Purchaser at or prior to the Closing pursuant to this Agreement and such other
certificates of authority and documents as the Purchaser may reasonably request
in form and substance reasonably satisfactory to Purchaser and Purchaser's
counsel.
ARTICLE V
CONDITIONS TO SELLER'S AND STOCKHOLDERS'S OBLIGATIONS
Section 5.1 Conditions to Seller's Obligations. Seller's obligation to
sell and assign the Purchased Assets and take the other actions required to be
taken by Seller at the Closing and Stockholders's obligation to take all actions
required to be taken by Stockholders at Closing are subject to receipt by Seller
of all of the documents required to be delivered by Purchaser pursuant to this
Article V and compliance by Purchaser with the following conditions, unless any
such condition shall have been waived in writing by Sellers in its sole
discretion.
Section 5.2 Representations, Warranties and Covenants. Each of the
representations and warranties of Purchaser contained in this Agreement shall be
true and correct, in each case as of the date of this Agreement and (except to
the extent such representations speak as of a specific date or time in which
case such representations and warranties shall be or have been true as of such
date or time) as of the Closing Date as though made on and as of the Closing
Date, except where the failures to be true and correct (without regard to any
materiality or qualifications contained therein), in the aggregate, have not
had, and would not reasonably be expected to have, a material adverse effect on
the financial condition, assets, liabilities or operations of Purchaser; and
Seller shall have received a certificate signed on behalf of Purchaser by an
authorized officer of Purchaser to such effect. Purchaser shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied by it at or prior to the Closing
Date; and Seller shall have received a certificate signed by an authorized
officer of Purchaser to such effect.
Section 5.3 No Litigation Threatened. No action or proceeding shall have
been instituted or, to the best knowledge, information and belief of Purchaser,
shall have been threatened before a court or other government body or by any
public authority to restrain or prohibit any of the transactions contemplated
hereby.
Section 5.4 Assumption of Assumed Liabilities. Purchaser shall have
delivered to Seller the Assignment and Assumption Agreement.
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ARTICLE VI
COVENANTS
Section 6.1 Further Assurances. From time to time after the Closing, each
of the parties shall execute and deliver such documents, further instruments of
sale, transfer, assignment and delivery and other papers and take such further
actions as may be reasonably required or desirable to carry out the provisions
hereof and the transactions contemplated by this Agreement, including the
transfer, assignment and delivery of the Purchased Assets to the Purchaser.
Without limiting the generality of the foregoing, the Seller and Stockholders
shall take any and all action necessary to ensure that the New Sub has good and
marketable title to all property and assets, tangible and intangible, and all
leases, licenses and other agreements, which are necessary to permit the New Sub
to carry on, or are currently used or held for use in, the business of the
Seller as presently conducted.
Section 6.2 Disclosure. Neither Seller, Stockholders, Purchaser, nor any
of their respective employees, agents or representatives shall make any public
disclosure or announcement concerning the transactions provided for herein other
than (i) a joint press release in agreed form issued by Purchaser and Seller if,
in the opinion of counsel for Purchaser, such public disclosure is required by
the Securities and Exchange Commission or OTC Bulletin Board, or (ii) any other
disclosures or announcements required, in the good faith judgment of Purchaser,
to be made by law. As to any such disclosures required by law a copy shall be
provided to all parties at least five (5) business days prior to the
dissemination thereof by a party.
Section 6.3 Tax Matters.
(a) Seller and Purchaser agree to furnish or cause to be furnished
to each other, upon request, as promptly as reasonably practicable, such
information and assistance (including access to books and records) relating to
the Business or the Purchased Assets as is reasonably necessary for the
preparation of any Tax return or claim for refund, the making of any election
relating to Taxes, the preparation for any audit and the prosecution or defense
of any claim, suit or proceeding relating to any Tax. Seller and Purchaser agree
to (i) retain all books and records with respect to Tax matters concerning the
Business and any taxable period beginning before the Closing Date for a period
of at least six years following the Closing Date and, at the end of such, give
each other at least ten days' prior written notice before transferring,
destroying or discarding any such books and records and, if the other party so
requests, allow the other party to take possession of such books and records.
Seller and Purchaser shall cooperate with each other in the conduct of any audit
or other proceeding relating to taxes involving the Assets or the Business.
(b) Any Taxes of whatsoever kind or nature which may be payable in
connection with the sale of the Purchased Assets to be transferred to Purchaser
hereunder ("Transfer Tax"), shall be borne solely by Seller and Stockholders who
shall certify to Purchaser that all such Taxes have been paid and hold Purchaser
harmless therefrom. Seller and Purchaser shall cooperate in providing each other
with any appropriate resale exemption certifications and other similar
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documentation. The party that is required by applicable law to make the filings,
reports or returns with respect to any applicable Transfer Taxes shall do so,
and the other party shall cooperate with respect thereto as necessary.
(c) Purchaser and Seller acknowledge and agree that it is intended
that this transaction will constitute a reorganization under Section 368(a) of
the Code. Purchaser and Seller shall not knowingly take actions or cause actions
to be taken that could reasonably be expected to prevent this transaction from
qualifying as a reorganization under Section 368(a) of the Code. Purchaser and
Seller shall, among other things, take those actions necessary to effect the
tax-free reorganization, including those actions required by Treas. Reg. Section
1.368-3.
Section 6.4 Non-competition; Non-Solicitation. Without the express prior
written consent of Purchaser and New Sub, Seller and Stockholders shall not at
any time during the three-year period immediately following the Closing Date, or
upon one-year following termination of employment of Seller with Purchaser
and/or New Sub, whichever period is shorter, on their own behalf or on behalf of
or for the benefit of any Competing Business (as hereinafter defined), do any of
the following:
(a) establish, acquire or engage in any Competing Business within
the United States or its territories; or
(b) directly or indirectly, solicit, contact, call upon, communicate
with or attempt to communicate with any customer or prospect of Seller,
Purchaser or New Sub or any representative of any customer or prospect of
Seller, Purchaser or New Sub, with a view to selling or providing any product,
equipment or service similar to that sold, provided or under development by
Purchaser, Seller or New Sub (except as an employee of Purchaser or New Sub); or
(c) directly or indirectly, solicit, entice, or attempt to do the
same to, any employee of Purchaser or New Sub or provide information about any
employee of Purchaser or New Sub to others for the purpose of soliciting any
such employee to leave his/her employment with Purchaser or New Sub to work for
any Competing Business.
For purposes of this Agreement, "Competing Business" shall mean any
business or enterprise, however conducted or organized, whether by Seller,
Stockholders, or by others, which is the same or essentially the same as, or
which performs any substantial part of the business of Purchaser, New Sub or
Seller, including the Hosting and IT Managed Services business. The parties
acknowledge and agree that Purchaser, New Sub and Seller are involved in the
business of researching and developing, creating, designing, manufacturing,
marketing, distributing and selling Hosting and IT Managed Services, and related
products.
Seller and Stockholders shall not use the name "Data Tech" or "Graphics
Tech" or any derivative thereof in any Competing Business.
Section 6.5 Confidentiality. Each of Seller, Stockholders, Purchaser and
New Sub agree to treat as confidential and as a trade secret pursuant to and in
accordance with the Uniform Trade Secrets Act (Florida Statutes 688, as amended)
any and all business information of the other party in its possession, in each
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case by using the same degree of care as is used for its own trade secrets, but
no less than a reasonable standard of care, to prevent the unauthorized use,
dissemination, misappropriation or disclosure of such trade secrets. Neither
party may misappropriate the business information of the other party in its
possession. For purposes hereof, "trade secrets" shall include all supplier and
customer lists and files, techniques, processes, know how, advertising,
distribution and sales methods, sales and profit figures, budgets, capital
spending plans, acquisition and divestiture plans, marketing data, financial
information, employee lists, real property information (leasing or otherwise)
and the like.
Section 6.6 Forbearance by Seller. From the date hereof until the Closing,
Seller and Stockholders shall conduct the Business prudently and in the ordinary
course consistent with past practice. Without the prior consent of Purchaser,
from the date hereof until the Closing, Seller and Stockholders shall not in
connection with the conduct of the Business, do or agree to do any of the
following;
(a) Guarantee or otherwise become responsible for the obligations of
any other Person;
(b) Permit any of the Purchased Assets to be subjected to any new
mortgage, pledge, security interest, lien or restriction or encumbrance of any
kind;
(c) Sell or transfer any of the Purchased Assets other than sales of
inventory in the ordinary course of Business;
(d) Enter into a lease or contract relating to the Business
providing for total payments in excess of $5,000 other than purchase orders
entered into in the ordinary course of business;
(e) Terminate any leases relating to the Business, terminate any
contracts relating to the Business (other than terminating in the ordinary
course of business contracts that are not Material to the Business) or make any
material changes to any leases or contracts, except as contemplated herein;
(f) Incur any new obligation that would extend beyond the Closing
Date which would increase in any manner the compensation of any of the
Business's employees, Stockholderss or professionals (including an increase in
fringe benefits or the provision of fringe benefits to employees not previously
entitled thereto) except for normal merit and cost of living increases granted
in the ordinary course of business;
(g) Pay or agree to pay any pension or retirement allowance not
required by any existing plan or agreement to any employees of the Business, or
enter into or modify any employment agreements or adopt any new pension,
retirement, or profit sharing plan or agreement relating to any such employees;
(h) Hire or terminate any employee of the Business who occupies the
position of supervisor or a higher level position (except with prior written
notice to and consent of Purchaser);
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(i) Adopt any new method of accounting with respect to the Business;
(j) Make any capital expenditures with respect to the Business in
excess of $5,000;
(k) Incur any other indebtedness or liability, except in the usual
and ordinary course of business of Seller consistent with its past practice;
(l) Discharge or satisfy any claims, liabilities or obligations
other than in the usual or ordinary course of business (other than subchapter S
tax distributions to shareholders); or
(m) Grant any option, warrant or other right to purchase, or to
convert any obligation into, shares of its capital stock, (B) issue any shares
of its capital stock or (C) redeem or otherwise acquire any shares of its
capital stock;
(n) Enter into or modify any material agreement with any other
Person or entity;
(o) Commence any legal action; or
(p) Agree to do any of the foregoing.
Section 6.7 Affirmative Covenants Pending Closing. From the date hereof
until the Closing, Seller and Stockholders will:
(a) Use reasonable commercial efforts to preserve intact Seller's
business organization and keep available the services of present employees, in
each case in accordance with past practice;
(b) Use reasonable commercial efforts to keep in effect on behalf of
Seller, casualty, public liability, worker's compensation and other insurance
policies in coverage amounts not less than those in effect at the date of this
Agreement;
t 12 (c) Use reasonable commercial efforts to preserve Seller's businesses
and, in accordance with past practice, advertise, promote and market its
services, keep its properties intact, preserve its goodwill and maintain all
physical properties in good operating condition;
(d) Operate Seller's Business in only the ordinary course and
consistent with past practice; and
(e) Maintain working capital in a manner consistent with operations
in the ordinary course of business.
Section 6.8 Insurance and Maintenance and Location of Assets. Until the
Closing, Seller shall continue to insure the Business and the Purchased Assets
against all insurable risks in the manner and to the extent such items were
insured on the date hereof and the Purchased Assets and any property leased by
Seller shall be used, maintained, and repaired in a manner consistent with prior
25
practice. On the Closing Date, all of the Purchased Assets and any property to
which Seller has a right of possession shall be located on the Premises or at
such other location as specified on Schedule 1.1(c) hereto.
Section 6.9 Access. Until the Closing, Seller shall grant Purchaser and
its employees, auditors, legal counsel, and other authorized representatives all
reasonable opportunity and access to inspect, investigate, and audit the
Purchased Assets, Assumed Liabilities, contracts, operations and business of
Seller before Closing, subject to such reasonable restrictions as Seller may
request to maintain the confidentiality of this Agreement and the transactions
contemplated hereby. Purchaser will conduct its on-site non-financial due
diligence, inspection and investigation as determined necessary by Purchaser and
at any other times during Purchaser's due diligence period as mutually agreed
upon between Purchaser and Seller. Seller's approval of such additional due
diligence requests shall not be unreasonably withheld. Purchaser will conduct
its investigation of Seller's financial records with its auditors on the
premises of Seller.
Section 6.10 Sales and Use Taxes. Seller will provide Purchaser with proof
of filing of all sales and/or use taxes for the last three years and proof of
payment of the tax shown to be due thereon. For the reporting period ending on
the Closing Date, Seller will file the sales and use tax returns for the sales
and purchases at the Premises for such period on or before the due date and will
provide Purchaser with copies of such returns and proof of payment of the taxes
due thereon.
Section 6.11 Consent of Seller. Seller will provide, at Purchaser's
expense, all consents necessary in order for Purchaser to comply with any filing
requirements of Purchaser pursuant to the rules and regulations of the
Securities and Exchange Commission and OTC Bulletin Board.
Section 6.12 Duty to Supplement. If either Seller or any Stockholders
discovers any fact, event, condition or circumstance that causes any
representation or warranty made by the Seller and Stockholders to Purchaser in
this Agreement to become untrue or inaccurate at any time after the date of this
Agreement, such Seller or Stockholders shall promptly (but in no event later
than 48 hours) notify the Purchaser of such fact, event, condition or
circumstance. If either the Seller or any Stockholders discovers any
development, event, circumstance or condition occurring after the date hereof
that individually or in the aggregate, would reasonably be expected to have an
adverse effect Material to the Business, such Seller shall promptly (but in no
event later than 48 hours) notify the Purchaser of such development, event or
circumstance or condition. In such event, Purchaser shall have the option to
terminate this Agreement under Section 7.1(c).
Section 6.13 Exclusive Dealing. Until the date this Agreement is
terminated in accordance with Section 7.1 hereof, Seller and Stockholders will
not, directly or indirectly, through any representative or otherwise, solicit or
entertain offers from, negotiate with or in any manner encourage, discuss,
accept or consider any proposal of any other person relating to the acquisition
of Seller, its capital stock, its assets or its business, in whole or in part,
whether directly or indirectly, through purchase, merger, consolidation or
otherwise (other than sales of inventory in the ordinary course of business).
Seller shall immediately notify Purchaser regarding any contact between Seller
or any Stockholders, and any potential acquirer or their respective
26
representatives and any other person regarding any such offer or proposal or
related inquiry.
Section 6.14 Employees and Employee Benefits.
(a) Affected Employees. "Affected Employees" shall mean those
employees of Seller set forth on Schedule 6.14(a) who are employed by Purchaser
immediately after the Closing.
(b) Retained Responsibilities. Seller agrees to indemnify and hold
Purchaser harmless from, all claims for benefits, whether insured or otherwise
(including, but not limited to, workers' compensation, life insurance, medical
and disability programs, including coverage continuation under group health
plans pursuant to Section 608 et seq. of ERISA), under Seller's employee benefit
programs brought by, or in respect of, Affected Employees and other employees
and former employees of Seller, which claims arise out of events occurring on or
prior to the Closing Date, in accordance with the terms and conditions of such
programs or applicable workers' compensation statutes without interruption as a
result of the employment by Purchaser of any such employees after the Closing
Date
(c) Payroll Tax. Seller agrees to make a clean cut-off of payroll
and payroll tax reporting with respect to the Affected Employees paying over to
the federal, state and city governments those amounts respectively withheld or
required to be withheld for periods ending on or prior to the Closing Date.
Seller also agrees to issue, by the date prescribed by IRS Regulations, Forms
W-2 for wages paid through the Closing Date. Except as set forth in this
Agreement, Purchaser shall be responsible for all payroll and payroll tax
obligations after the Closing Date for Affected Employees.
(d) Termination Benefits. If (i) any action on the part of Seller
prior to the Closing, (ii) the sale to Purchaser of the business and assets of
Seller pursuant to this Agreement or any other transactions contemplated by this
Agreement, or (iii) if the failure by Purchaser to hire any employee of Seller,
shall result in any liability for severance payments or termination benefits
under agreements or plans of Seller, such Liability shall be the sole
responsibility of Seller, and Seller and Stockholders shall, jointly and
severally, indemnify and hold harmless Purchaser against such liability.
Section 6.15 IST Common Stock. Seller and Stockholders acknowledge that
the certificates representing shares of IST Common Stock comprising the Purchase
Price shall be imprinted with a legend substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ISSUED IN RELIANCE ON
EXEMPTIONS, FROM REGISTRATION THEREUNDER. THE SECURITIES EVIDENCED BY THIS
CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT REGISTRATION UNDER THE ACT OR UNDER ANY APPLICABLE STATE
SECURITIES LAWS, UNLESS THE CORPORATION RECEIVES AN OPINION OF COUNSEL
27
SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE.
If Seller desires to transfer any of the shares of common stock of IST
comprising the Purchase Price, Seller must furnish Purchaser with a written
opinion satisfactory to Purchaser in form and substance from counsel
satisfactory to Purchaser by reason of experience to the effect that the holder
may transfer such shares as desired without registration under the Securities
Act.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written agreement of Purchaser and Seller;
(b) by either Seller or Purchaser by written notice to the other
party if (i) the Closing shall not have occurred on or before 5:00 p.m. EST on
May 4th, 2005, unless such date shall be extended by the mutual written consent
of Seller and Purchaser;
(c) by Purchaser if (i) the representations and warranties of Seller
and Stockholders shall not have been true and correct in all respects (in the
case of any representation or warranty containing any materiality qualification)
or in all material respects (in the case of any representation or warranty
without any materiality qualification) as of the date when made, (ii) Seller or
Stockholders shall have breached any covenants set forth herein, or (iii) if any
of the conditions set forth in this Agreement shall not have been fulfilled by
the Closing Date (or such other date as specified in this Agreement), unless
such failure shall be due to the failure of Purchaser to perform or comply with
any of the covenants, agreements or conditions hereof to be performed or
complied with by it prior to the Closing; or
(d) by Seller if (i) the representations and warranties of Purchaser
shall not have been true and correct in all respects (in case of any
representation or warranty containing any materiality qualification) or in all
material respects (in the case of any representation or warranty without any
materiality qualification) as of the date when made, (ii) the Purchaser shall
have breached any covenants set forth herein, or (iii) if any of the conditions
set forth in this Agreement shall not have been fulfilled by the Closing Date
(or such other date as specified in this Agreement), unless such failure shall
be due to the failure of Seller to perform or comply with any of the covenants,
agreements or conditions hereof to be performed or complied with by it prior to
the Closing.
Section 7.2 Effect of Termination. In the event this Agreement is
terminated pursuant to Section 7.1 hereof, this Agreement shall become void and
of no effect and there shall be no liability on the part of the parties hereto;
provided, however, that termination of this Agreement shall be without prejudice
to any rights any party may have hereunder against any other party for any
28
intentional breach of this Agreement prior to its termination; provided further,
that Sections 6.5, 8.2 (with respect to third party claims), 9.2 and 9.4 hereof
shall survive any termination.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
Section 8.1 Survival of Representations and Warranties.
(a) The representations and warranties of the Seller and
Stockholders in this Agreement or any document delivered pursuant hereto shall
survive the Closing for a period beginning on the Closing Date and ending on the
third anniversary of the Closing Date and shall terminate and be of no further
force or effect as of the day after such date (the "Expiration Date"), except
that the representations and warranties in Sections 2.3 and 2.7 shall survive
the Closing forever and shall not terminate.
(b) The covenants and agreements of the Seller, Stockholders and
Purchaser in this Agreement or any document delivered pursuant thereto shall
survive the Closing and shall be fully effective and enforceable for the periods
therein indicated or where not indicated forever.
Section 8.2 Seller's and Stockholders's Obligation to Indemnify.
(a) Subsequent to the Closing, Seller and Stockholders, jointly and
severally, shall indemnify and hold harmless the Purchaser and New Sub and their
respective directors, officers, employees, agents, affiliates and assigns, other
than any Seller, (collectively, the "Purchaser Indemnified Persons") from and
against all losses, liabilities, damages, deficiencies, costs or expenses,
including interest and penalties imposed or assessed by any judicial or
administrative body and reasonable attorneys' fees, whether or not arising out
of third-party claims and including all amounts paid in investigation, defense
or settlement of the foregoing (collectively, "Losses") suffered or incurred by
any Purchaser Indemnified Person based upon, arising out of or otherwise in
respect of (i) any inaccuracy in or breach of (without regard to any knowledge,
dollar threshold, materiality or Material Adverse Effect qualifications
contained therein) any representation or warranty of the Seller or Stockholders
in this Agreement or in any document delivered pursuant hereto, (ii) any breach
of (without regard to any knowledge, dollar threshold, materiality or Material
Adverse Effect qualifications contained therein) any covenant or agreement of
the Seller or Stockholders in this Agreement or in any document delivered
pursuant hereto; provided that in determining the amount of any Loss suffered or
incurred by any Purchaser Indemnified Person hereunder, such Loss shall be
reduced by the economic benefit to any Purchaser Indemnified Person, if any,
occurring or reasonably anticipated to occur from any applicable insurance
coverage and the benefits actually received under federal, state and local Tax
laws then applicable and the allowance of an appropriate discount for timing
factors.
(b) No indemnification shall be payable pursuant to Section 8.2(a)
with respect to any inaccuracy or breach of any representation or warranty or
breach of any covenant or agreement after termination thereof in accordance with
29
Section 8.1, except with respect to claims made prior to such termination
pursuant to Section 8.7 but not then resolved (such representation, warranty,
covenant or agreement surviving with respect to such claim until resolution of
such claim).
Section 8.3 Limitations on Seller's and Stockholders's Indemnification.
Notwithstanding any provision of this Agreement to the contrary:
(a) The limitations of Sections 8.2(b) and 8.3(b) shall not apply in
the case of a fraudulent or intentional misrepresentation or breach by the
Seller.
(b) The Seller and Stockholders shall have no obligation to
indemnify any Purchaser Indemnified Person pursuant to Section 8.2(a) until the
aggregate amount of the Losses subject thereto exceed $10,000 (the "Deductible
Amount"), after which, subject to the next sentence of this section, the
obligation of the Seller and Stockholders shall be to indemnify the Purchaser
Indemnified Persons to the full extent of such Losses in excess of the
Deductible Amount. Subject to the provisions of Section 8.3(a), the
indemnification obligations under this Section 8.3(b) and shall be the sole and
exclusive remedy of the Purchaser Indemnified Persons with respect to any Losses
incurred by any Purchaser Indemnified Persons relating to or in connection with
the transactions contemplated by this Agreement and the aggregate liability of
the Seller and Stockholders for indemnification hereunder shall be limited to
the sum of the Purchase Price (the "Applicable Cap"). Notwithstanding the
preceding sentences, the Seller and Stockholders shall indemnify any Purchaser
Indemnified Person pursuant to Section 8.2(a) in connection with any Losses
subject thereto, without reference to the Deductible Amount, for any claims made
that are related to Intellectual Property infringement, theft or related cause,
and the obligation of the Seller and Stockholders shall be to indemnify the
Purchaser Indemnified Persons to the full extent of such Losses.
(c) Each party hereto shall use all reasonable efforts to mitigate
the amount of any Loss.
Section 8.4 Survival of Purchaser Obligations.
(a) The representations and warranties of the Purchaser in this
Agreement or any document delivered pursuant hereto shall survive the Closing
for a period beginning on the Closing Date and ending on the Expiration Date and
shall terminate and be of no further force or effect as of such date, except
that the representations and warranties in Section 3.2 shall survive the Closing
forever and shall not terminate.
(b) The covenants and agreements of the Purchaser in this Agreement
or any document delivered pursuant hereto shall survive the Closing and shall be
fully effective and enforceable for the periods therein indicated or where not
indicated, for the periods ending upon the expiration of the last statute of
limitations applicable to any claim arising under any such covenant or
agreement.
Section 8.5 Purchaser Obligation to Indemnify.
(a) Subsequent to the Closing, the Purchaser shall indemnify and
hold harmless the Seller and Stockholders from and against all Losses suffered
or incurred by any Seller or Stockholders based upon, arising out of or
30
otherwise in respect of (i) any inaccuracy in or breach of any representation or
warranty of the Purchaser in this Agreement or any document delivered pursuant
hereto or (ii) any breach of any covenant or agreement of the Purchaser in this
Agreement or any document delivered pursuant hereto; provided that in
determining the amount of any Loss suffered or incurred by Seller or
Stockholders hereunder, such Loss shall be reduced by the economic benefit to
Seller or Stockholders, if any, occurring or reasonably anticipated to occur
from any applicable insurance coverage and the benefits actually received under
federal, state and local Tax laws then applicable and the allowance of an
appropriate discount for timing factors.
(b) No indemnification shall be payable pursuant to Section 8.5(a)
with respect to any inaccuracy or breach of any representation or warranty or
breach of any covenant or agreement after termination thereof in accordance with
Section 8.4, except with respect to claims made prior to such termination
pursuant to Section 8.7 but not then resolved (such representation, warranty,
covenant or agreement surviving with respect to such claim until resolution of
such claim).
Section 8.6 Limitations on Purchaser Indemnification.
(a) The limitations of Sections 8.5(b) and 8.6(b) shall not apply in
the case of a fraudulent or intentional misrepresentation or breach by the
Purchaser.
(b) The Purchaser shall have no obligation to indemnify the Seller
or Stockholders pursuant to Section 8.5(a) until the aggregate amount of the
Losses subject thereto exceed the Deductible Amount, after which, subject to the
following sentence, the obligation of the Purchaser shall be to indemnify the
Seller or Stockholders to the full extent of such Losses in excess of the
Deductible Amount. Subject to the provisions of Section 8.6(a), the
indemnification obligations of the Purchaser under this Section 8.6(b) shall be
the sole and exclusive remedy of the Seller and Stockholders with respect to any
Losses incurred by any Seller or Stockholders relating to or in connection with
the transactions contemplated by this Agreement and the aggregate liability of
the Purchaser for indemnification hereunder shall be limited to the Applicable
Cap; provided, however, that nothing contained in this Section 8.6(b) shall
limit the Purchaser's obligation to pay the Purchase Price pursuant to Section
1.1.
Section 8.7 Procedures Relating to Indemnification.
(a) An indemnified Person under Sections 8.2(a) or 8.5(a) (the
"Indemnified Party") shall give prompt written notice to the indemnifying party
(the "Indemnifying Party") of any Loss in respect of which such Indemnified
Party is seeking indemnification under Sections 8.2(a) or 8.5(a), specifying in
reasonable detail the nature of such Loss, the section or sections of this
Agreement to which the Loss relates, and the amount of such Loss (or if not then
determinable, its best estimate of the amount of such Loss), except that any
delay or failure to so notify the Indemnifying Party shall only relieve the
Indemnifying Party of its obligations hereunder to the extent, if at all, that
it is prejudiced by reason of such delay or failure. Any such notice given by
any Indemnified Party under Section 8.7(a) shall be given to the Seller.
31
(b) If a Loss is suffered or incurred for or on account of or arises
from or in connection with any demand, claim, suit, action, cause of action,
investigation or inquiry by a Person not party to this Agreement (a "Third Party
Claim"), the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all expenses. The Indemnified Party shall have the right to employ
separate counsel in such Third Party Claim and participate in such defense
thereof at its own expense. The Indemnifying Party shall not, without the
Indemnified Party's prior written consent, which shall not be unreasonably
withheld, settle or compromise any Third Party Claim or consent to the entry of
any judgment with respect to any Third Party Claim. If the Indemnifying Party
fails to assume the defense of any Third Party Claim within 20 business days
after notice thereof, the Indemnified Party shall have the right to undertake
the defense, compromise or settlement of such Third Party Claim for the account
of the Indemnifying Party.
(c) With respect to any Loss (other than any Loss suffered or
incurred for or on account of or arising from or in connection with any Third
Party Claim), the Indemnifying Party shall have 30 business days from receipt of
notice from the Indemnified Party of such Loss within which to respond thereto.
If the Indemnifying Party does not respond within such 30 business day period,
the Indemnifying Party shall be deemed to have accepted responsibility to make
payment and shall have no further right to contest the validity of such Loss.
(d) The Indemnifying Party shall promptly pay the Indemnified Party
any amount due under this Article VIII, which payment may be accomplished in
whole or in part, at the option of the Indemnified Party, by the Indemnified
Party setting off any amount owed to the Indemnifying Party by the Indemnified
Party. To the extent set-off is made by an Indemnified Party in satisfaction or
partial satisfaction of an indemnity obligation under this Article VIII that is
disputed by the Indemnifying Party, upon a subsequent determination by final
judgment not subject to appeal that all or a portion of such indemnity
obligation was not owed to the Indemnified Party, the Indemnified Party shall
pay the Indemnifying Party the amount that was set off and not owed, plus
interest at the rate per annum of [6% (600 basis points)] beginning on the date
of set-off and continuing until the date of payment to the Indemnifying Party of
all such funds by the Indemnified Party. The right to set-off in this Section
8.7(d) shall be without prejudice and in addition to any right of set-off, lien
or other right to which the Indemnified Party is at any time otherwise entitled
(whether by operation of law, agreement or otherwise).
Section 8.8 Characterization of Indemnification Payments. Any payments
made pursuant to Article VIII of this Agreement shall be treated for all Tax
purposes as adjustments to the consideration to be paid hereunder and no party
or any of its Affiliates shall take any position on a Tax Return or in any
proceeding with any taxing authority contrary to such treatment, unless
otherwise required by law.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings unless the context otherwise requires.
32
(a) "Affiliate" means any Person who controls, is controlled by or
is under common control with Seller, Stockholders or Purchaser, as the case may
be.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "GAAP" means generally accepted accounting principles utilized
in the United States of America, consistently applied.
(d) "Knowledge," "Information" or "Belief" means, with respect to
Seller or Purchaser, the actual knowledge of their respective executive officers
after they have made due and diligent inquiry as to the matters that are the
subject of such representations and warranties and, with respect to
Stockholders, the actual knowledge of such Stockholders after he has made due
and diligent inquiry as to the matters that are the subject of such
representations and warranties.
(e) "Material to the Business" means material to the business,
assets, properties, operations, results of operations, or financial condition of
Seller, taken as a whole.
(f) "Ordinary Course of Business" means the conduct of Seller's
business and operations in the ordinary course in a manner consistent with past
custom and practices.
(g) "Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a limited liability company, a trust, an
unincorporated organization, a government, and any other legal entity.
(h) "Tax" means (i) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, registration, recording, documentary,
conveyancing, gains, withholding on amounts paid to or by the Seller, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other tax, governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any
governmental authority or (ii) liability for the payment of any amounts of the
type described in (i) as a result of being party to any agreement or any express
or implied obligation to indemnify any other Person.
(i) "Taxing Authority" means any governmental authority responsible
for the imposition of any Tax (domestic or foreign).
Section 9.2 Professional Expenses. Seller and Stockholders, on the one
hand, and Purchaser, on the other hand, shall each pay all of its own
professional expenses relating to negotiating, drafting and closing the
transactions contemplated by this Agreement, including, without limitation, the
fees and expenses of its respective counsel, financial advisers, investment
bankers and accountants, whether or not the transactions contemplated hereby are
consummated.
Section 9.3 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Florida
without giving effect to conflicts of laws principles.
33
Section 9.4 Jurisdiction. Any judicial proceeding brought against any of
the parties to this Agreement on any dispute arising out of this Agreement or
any matter related hereto shall be brought in the appropriate courts of the
State of Florida or the United States District Court for the Middle District of
Florida. By execution and delivery of the Agreement, each of the parties to this
Agreement consents to the exclusive jurisdiction of the aforesaid courts, waives
any objection to venue therein and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. Process in any such
proceeding may be served on any party hereto anywhere. The prevailing party in
any such proceeding shall be entitled to an award of its attorney's fees,
paralegal fees, costs and expenses incurred at the trial and appellate levels
and in any proceedings in Bankruptcy Court. ANY RIGHT TO TRIAL BY JURY WITH
RESPECT TO ANY CLAIM OR PROCEEDING RELATED TO OR ARISING OUT OF THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY IS WAIVED.
Section 9.5 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 9.6 Notices. Any notice or other communications required or
permitted hereunder shall be sufficiently given if delivered in person or sent
by express mail or by registered or certified mail, postage prepaid, addressed
as follows:
(i) If to Seller or Stockholders:
Lietz Development, Inc.
4201 West Cypress Street
Tampa, FL 33607
Attention: Chris Lietz
with a copy to:
Attention: Michael Addison
(ii) If to Purchaser:
IST Integrated Solutions, Inc.
100 North Tampa Street, Suite 2410
Tampa, FL 33602
Attention: Christopher J. Floyd
with a copy to:
Foley & Lardner LLP
100 North Tampa Street
Suite 2700
Tampa, Florida 33602
Attention: Curt Creely, Esquire
34
or such other address as shall be furnished in writing by any such party in
accordance with this Section 9.6, and such notice or communication shall be
deemed to have been given as of the date so personally delivered or received by
mail.
Section 9.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement. Nothing expressed or referred to herein is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
hereunder.
Section 9.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which taken together
shall constitute one instrument.
Section 9.9 Entire Agreement. This Agreement, including the Schedules,
certificates and other documents referred to herein which form a part hereof,
contains the entire understanding of the parties hereto with respect to the
subject matter contained herein and therein. This Agreement supersedes all prior
agreements and understandings (oral or written) between the parties with respect
to such subject matter. The parties hereto acknowledge and agree that the only
representations and warranties made by the parties in connection with the
transactions contemplated hereby are those expressly made in writing herein
(including the exhibits and schedules hereto and the certificates and other
agreements delivered in accordance herewith). No oral representations or
warranties have been made or implied by any party hereto.
Section 9.10 Amendments; Waivers. This Agreement may only be amended by an
agreement in writing signed by Purchaser and Seller. Neither the failure nor any
delay by any party in exercising any right hereunder will operate as a waiver of
such right, and no single or partial exercise of any such right will preclude
any other or further exercise of such right or the exercise of any other right.
Waiver of the benefit of any provision of this Agreement must be in writing to
be effective. No due diligence investigation conducted by the representatives of
Purchaser shall be deemed to constitute a waiver by Purchaser of any
representations, warranties, covenants or other obligations contained in this
Agreement.
Section 9.11 Severability. In case any provision in this Agreement shall
be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby. Any provision held invalid, illegal or
unenforceable in part will remain in full force and effect to the extent not
held invalid, illegal or unenforceable.
Section 9.12 Rules of Construction. The normal rules of construction which
require the terms of an agreement to be construed most strictly against the
drafter of such agreement are hereby waived since each party has been
represented by counsel in the drafting and negotiation of this Agreement.
35
Section 9.13 Risk of Loss. Risk of loss of, or damage or destruction to,
the Purchased Assets shall be borne by Seller until the Closing. In the event of
damage or destruction to the Assets, Seller shall promptly notify Purchaser. If
the loss of, or damage or destruction to, the Purchased Assets is
inconsequential and immaterial, and the Purchaser is able to obtain the full
benefit of its bargain, the Purchaser shall not have the right to terminate this
Agreement.
36
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date and year first above written.
"Purchaser" "Seller"
INNOVATIVE SOFTWARE TECHNOLOGIES, INC. LIETZ DEVELOPMENT, INC.
By: /s/ Peter M. Peterson By: /s/ Chris Lietz
--------------------- ---------------
Peter M. Peterson, CEO Chris Lietz, President
IST INTEGRATED SOLUTIONS, INC. SAPPHIRE OF TAMPA BAY, INC.
By: /s/ Christopher J. Floyd By: /s/ Chris Lietz
------------------------ ---------------
Christopher J. Floyd, CFO Chris Lietz, President
CHRIS LIETZ, Shareholder
/s/ Chris Lietz
TODD LIETZ, Shareholder
/s/ Todd Lietz
37
Schedule 1.1(a)
Accounts Receivable
$81,346 per the attached
Supplemental Package
Schedule 1.1(c)
Inventory
$9,735 per the attached
Supplemental Package
Schedule 1.1(d)
Fixed Assets
$97,280 net fixed assets per the attached
Supplemental Package
Schedule 1.1(e)
Contracts
Schedule 1.1(f)
Leases
Schedule 1.2(b)
Employment Agreement Rights
Schedule 1.7
Purchase Price Allocation
Schedule 4.5
Required Consents
Schedule 4.11
Employment Agreements
1. Chris Lietz
2. Todd Lietz
Schedule 6.14(a)
Employee List
Disclosure Schedule 2.4
Conflicts
Disclosure Schedule 2.5
Financial Statements
Disclosure Schedule 2.6
Bank Accounts
Disclosure Schedule 2.7
Liens
Disclosure Schedule 2.9
Leases
Disclosure Schedule 2.12
Litigation
Disclosure Schedule 2.14
Inventory
Disclosure Schedule 2.15
Accounts Receivable
Disclosure Schedule 2.18
Seller's Insurance Policies
Disclosure Schedule 2.19(b)
Seller Employee Plans and Agreements
Disclosure Schedule 2.20(a)
Officers and Employees
Disclosure Schedule 2.20(b)
Non-Competition Agreements
Disclosure Schedule 2.21
Employee Relations
Disclosure Schedule 2.22
Licenses and Permits
Disclosure Schedule 2.25
Discounts
Disclosure Schedule 2.26
Commissions
Disclosure Schedule 2.27
Intellectual Property
Disclosure Schedule 2.27(a)
Intellectual Property Claims
Disclosure Schedule 2.29
Absence of Changes
EXHIBIT A
Debt to be assumed in Transaction
$250,000 per the attached
Supplemental Package