ASSET PURCHASE AGREEMENT by and among GLOBALOPTIONS SERVICES, INC. as Purchaser, GLOBALOPTIONS GROUP, INC. as Parent and GLOBALOPTIONS, INC. as Seller June 11, 2010

 

 

ARTICLE 1.	DEFINITIONS	1
1.1.	Certain Defined Terms	1
1.2.	Other Defined Terms	7
1.3.	Accounting Terms	9
1.4.	Other Definitional Provisions	9
ARTICLE 2.	PURCHASE AND SALE OF ASSETS	9
2.1.	Purchase and Sale of the Purchased Assets	9
2.2.	Non-Transferable Contracts and Permits	11
2.3.	Assumption of Liabilities	12
2.4.	Purchase Price	13
2.5.	Adjustment of Purchase Price	13
2.6.	Transfer Taxes	14
2.7.	Purchase Price Allocation	15
2.8.	Closing	15
2.9.	Escrow	17
ARTICLE 3.	REPRESENTATIONS AND WARRANTIES OF PURCHASER	17
3.1.	Organization and Corporate Power	17
3.2.	Due Authorization	17
3.3.	No Violation; Consents and Notices	18
3.4.	Broker’s and Finders	18
3.5.	Investigation by Purchaser	18
3.6.	Disclaimer of Other Warranties	18
ARTICLE 4.	REPRESENTATIONS AND WARRANTIES OF Parent and SELLER	18
4.1.	Organization, Power and Authority	19
4.2.	Due Authorization	19
4.3.	No Violation; Consents and Notices	19
4.4.	Ownership and Condition of Purchased Assets	20
4.5.	Financial Statements; Other Information	20
4.6.	Absence of Changes	20
4.7.	Absence of Undisclosed Liabilities	21
4.8.	Leased Personal Property	21
4.9.	Real Property	22

4.10.	Contracts	22
4.11.	Intellectual Property	23
4.12.	Sufficiency of Assets	25
4.13.	Insurance	25
4.14.	Litigation	25
4.15.	Tax Matters	25
4.16.	Employees; Employee Benefit Plans.	26
4.17.	Labor Matters	26
4.18.	Compliance with Laws	27
4.19.	Accounts Receivable	27
4.20.	Customers and Vendors	27
4.21.	Permits	27
4.22.	Transactions with Affiliates	28
4.23.	Broker’s and Finders	28
4.24.	Disclosure	28
4.25.	Disclaimer of Other Warranties	28
ARTICLE 5.	COVENANTS	28
5.1.	Efforts	28
5.2.	Conduct of Business Prior to Closing	29
5.3.	Access and Cooperation Prior to Closing	30
5.4.	Notification of Changes	30
5.5.	Consents	30
5.6.	Certain Tax Matters	30
5.7.	Employees and Benefit Plans	31
5.8.	No Solicitation	32
5.9.	Confidential Information	34
5.10.	Public Statements	34
5.11.	Collection; Inquiries	35
5.12.	Non-Competition; Non-Solicitation	35
5.13.	Post-Closing Access to Records	37
ARTICLE 6.	CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER	37
6.1.	Representations and Warranties	38
6.2.	Covenants	38

6.3.	No Injunction; Etc	38
6.4.	Required Consents	38
6.5.	Minimum Working Capital	38
6.6.	Documents	38
ARTICLE 7.	CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND SELLER	38
7.1.	Representations and Warranties	38
7.2.	Covenants	38
7.3.	No Injunction; Etc	38
7.4.	Documents	39
ARTICLE 8.	TERMINATION	39
8.1.	Termination	39
8.2.	Effect of Termination; Termination Fee.	40
ARTICLE 9.	INDEMNIFICATION	40
9.1.	Survival	40
9.2.	Obligation to Indemnify	41
9.3.	Procedures for Indemnification: Third Party Claims	42
9.4.	Procedures for Indemnification:  Other Claims	44
ARTICLE 10.	GENERAL PROVISIONS	44
10.1.	Fees and Expenses	44
10.2.	Bulk Sales Laws	44
10.3.	Notices	44
10.4.	Further Assurances	45
10.5.	Assignment; Binding Effect	45
10.6.	No Third Party Beneficiaries	46
10.7.	Headings	46
10.8.	Counterparts	46
10.9.	Integration of Agreement; Amendments and Waivers	46
10.10.	Schedules	46
10.11.	Governing Law	46
10.12.	Partial Invalidity	46
10.13.	Construction	47
10.14.	Guaranty of North Atlantic Value LLP and Balmoral Advisors LLC.	47

 

(i)           all of Seller’s office space and lease obligations in Nashville, Tennessee and Brea, California;

 

(ii)          all Contracts other than the Assigned Contracts;

 

(iii)         all pending litigation and claims;

 

(iv)         all Tax Returns of Seller or any of its Affiliates;

 

(v)          all refunds, rebates or similar payments in respect of Taxes to the extent such Taxes were paid by or on behalf of Seller or any of its Affiliates, or are not, or if not so paid would not be, Assumed Liabilities; and

 

(vi)         all Employee Benefit Plans

 

(vii)        all of the assets listed on Schedule A attached hereto.

(i)           a counterpart to the Bill of Sale, duly executed on behalf of Parent and Seller;

 

(ii)          a counterpart to a Transition Services Agreement substantially in the form of Exhibit C hereto (the “Transition Services Agreement”), duly executed on behalf of Parent and Seller;

 

 

(iii)         a counterpart to a License Agreement substantially in the form of Exhibit D hereto (the “License Agreement”), duly executed on behalf of Parent and Seller;

 

(iv)        a counterpart to a Rapid License Agreement substantially in the form of Exhibit E hereto (the “License Agreement”), duly executed on behalf of Parent and Seller;

 

(v)         a counterpart to an Escrow Agreement, duly executed on behalf of Parent and Seller;

 

(vi)         assignments, in forms of the applicable IP Assignments, in respect of all registered patents, trademarks, service marks and copyrights and applications for any of the foregoing included in the Intellectual Property;

 

(vii)       a certificate from the Secretary of State of the State of Delaware, dated a recent date prior to Closing, certifying as to each of Parent’s and Seller’s good standing;

 

(viii)      a certificate from the Secretary of each of Parent and Seller, certifying as to (i) the resolutions adopted or other written records of the actions taken by the Board of Directors of each of Parent and Seller approving with the transactions contemplated by this Agreement and (ii) to the incumbency of each individual signing this Agreement or any of the other Transaction Documents on behalf of each of Parent and Seller;

 

(ix)         evidence, in form reasonably satisfactory to Purchaser, that all Required Consents have been obtained;

 

(x)          a certificate dated the Closing Date, of an executive officer of each of Parent and Seller certifying as to the satisfaction of the conditions set forth in Sections 6.1 and 6.2;

 

(xi)         a certificate, signed by an executive authorized officer of each of Parent and Seller, certifying as to each of Parent’s and Seller’s non-foreign status, respectively complying with the provisions of U.S. Treasury Regulations section 1.1445-2(b);

 

(xii)        a properly completed and executed IRS Form W-9; and

 

(xiii)       releases, in form reasonably satisfactory to Purchaser, terminating, releasing and discharging any and all Liens on the Purchased Assets in favor of Silicon Valley Bank.

 

(c)           Purchaser’s Closing Deliverables.  At the Closing, Purchaser shall deliver or cause to be delivered to Parent and Seller, the following:

 

(i)           the Purchase Price payable to Seller on the Closing Date, in accordance with Section 2.4;

 

(ii)          a counterpart to the Bill of Sale, duly executed on behalf of Purchaser;

 

 

(iii)         a counterpart to the Transition Services Agreement, duly executed on behalf of Purchaser;

 

(iv)         a counterpart to the License Agreement, duly executed on behalf of Purchaser;

 

(v)          a counterpart to the Rapid License Agreement, duly executed on behalf of Purchaser;

 

(vi)         a counterpart to the Escrow Agreement, duly executed on behalf of Purchaser;

 

(vii)        a certificate from the Secretary of Purchaser, certifying as to (i) the resolutions adopted or other written records of the actions taken by the Board of Directors of Purchaser approving with the transactions contemplated by this Agreement and (ii) to the incumbency of each individual signing this Agreement or any of the other Transaction Documents on behalf of Purchaser;

 

(viii)       a certificate from the Secretary of State of the State of Delaware, dated a recent date prior to Closing, certifying as to Purchaser’s good standing; and

 

(ix)         a certificate, dated the Closing Date, of an executive officer of Purchaser, certifying as to the satisfaction of the conditions set forth in Sections 7.1 and 7.2.

 

2.9.           Escrow.  At Closing, Purchaser shall deposit the Escrow Amount in an interest-bearing account with the Escrow Agent (the “Escrow Account”) for the sole purpose of securing any payment obligations of Seller that may arise pursuant to Article 9.  The Escrow Amount shall be held in escrow by the Escrow Agent pursuant to the terms of an escrow agreement in the form attached hereto as Exhibit F to be entered into on the Closing Date among Parent, Seller, Purchaser and the Escrow Agent (t he “Escrow Agreement”).

 

 

Purchaser hereby represents and warrants to Parent and Seller as follows:

 

3.1.           Organization and Corporate Power.  Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  Purchaser has full power, capacity and authority necessary to enter into and perform its obligations under this Agreement and the Transaction Documents to which it is a party, to consummate the transactions contemplated hereby and thereby and to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted.

 

3.2.           Due Authorization.  The execution and delivery by Purchaser of this Agreement and the other Transaction Documents and the consummation by Purchaser of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Purchaser and no other corporate proceeding is necessary for the execution and delivery of this Agreement or such other agreements by Purchaser, the performance by Purchaser of its obligations hereunder or thereunder and the consummation by Purchaser of the transactions contemplated hereby and thereby.  This Agreement has been, and, when executed and delivered in accordance herewith the other Transaction Documents t o which Purchaser is a party shall have been, duly executed and delivered by Purchaser and constitute or shall constitute, as applicable, legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their terms.

 

 

3.3.           No Violation; Consents and Notices.

 

(a)           The execution, delivery and performance by Purchaser of this Agreement and the other Transaction Documents to which it is a party do not and will not (i) violate any Law or any decree or judgment of any court or other Governmental Authority applicable to Purchaser; (ii) violate or conflict with, result in a breach of, constitute a default (or an event which, with or without notice or lapse of time or both, would constitute a default) under, permit cancellation of any material Contract to which Purchaser is a party or by which it is bound; or (iii) violate or conflict with any provision of the Certificate of Incorporation or By-laws of Purchaser.

 

(b)           No material consents or approvals of, or notices, filings or registrations by Purchaser to or with, any Governmental Authority or any other Person not a party to this Agreement are necessary in connection with the execution, delivery and performance of this Agreement or the other Transaction Documents or Purchaser’s assumption of the Assumed Liabilities.

 

3.4.           Broker’s and Finders.  Except as set forth on Schedule 3.4, neither Purchaser nor any of its Affiliates has employed any investment banker, broker or finder, or incurred any liability for any investment banking fees, brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement.

 

3.5.           Investigation by Purchaser.  Purchaser acknowledges and agrees that, other than as set forth in this Agreement and in the documents and instruments delivered in accordance with the terms of this Agreement, none of Parent, Seller nor any of their respective directors, officers, employees, stockholders, affiliates, agents or other representatives makes any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information provided or made available to Purchaser or its agents or other representatives prior to the execution of this Agreement.

 

3.6.           Disclaimer of Other Warranties.  Except for the representations and warranties set forth in this Agreement and in the documents and instruments delivered in accordance with the terms of this Agreement, neither Purchaser nor any Person acting on behalf of Purchaser makes any representation or warranty relating to Purchaser.

 

 

The representations and warranties of Parent and Seller set forth in this Article IV are qualified by the Disclosure Schedules of Parent and Seller, which set forth certain disclosures concerning Parent and Seller (provided that any fact or item disclosed with respect to one representation or warranty shall be deemed to be disclosed with respect to each other representation or warranty, but only to the extent that it is reasonably apparent that such disclosures, on their face, are responsive to such other representation or warranty).  Parent and Seller, jointly and severally, represent and warrant to Purchaser that:

 

 

4.1.           Organization, Power and Authority.  As of the date hereof and as of the Closing Date, each of Parent and Seller is duly organized, validly existing and in good standing under the laws of Delaware.  Each Parent and Seller has full power, capacity and authority necessary under all applicable Laws to enter into and perform its respective obligations under this Agreement and the Transaction Documents to which it is a party, to consummate the transactions contemplated hereby and thereby and to own, operate or lease the properties that it purports to own, operate or lease and to carry on its respective business as it is now being conducted.

 

4.2.           Due Authorization.  The execution and delivery by Parent and Seller of this Agreement and the other Transaction Documents and the consummation by Parent and Seller of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of both Parent and Seller and no other corporate proceeding is necessary for the execution and delivery of this Agreement or such other agreements by Parent and Seller, the performance by Parent and Seller of their respective obligations hereunder or thereunder and the consummation by Parent and Seller of the transactions contemplated hereby and thereby.  This Agreement has been, and, when executed and delivered in accordance herewith the other Transaction Documents to which Parent or Seller is a party shall have been, duly executed and delivered by Parent or Seller, as applicable, and constitutes or shall constitute, as applicable, legal, valid and binding obligations of Parent or Seller, enforceable against Parent or Seller in accordance with their respective terms.

 

4.3.           No Violation; Consents and Notices.

 

(a)           Except as disclosed on Schedule 4.3(a), the execution, delivery and performance by Parent and Seller of this Agreement and the other Transaction Documents to which each is a party do not and will not (i) violate in any material respect any Law or any decree or judgment of any court or other Governmental Authority applicable to Parent, Seller, any of the Purchased Assets, or the Business; (ii) violate or conflict with, result in a breach of, constitute a default (or an event which, with or without notice or lapse of time or both, would constitute a default) under, permit cancellation of, or result in the creation of any Lien upon any of the Purchased Assets under, any Contract (subject to Parent and Seller obtaining the consents set forth on Schedule 4.3(b)); or (iii) violate or conflict with any provision of the Certificate of Incorporation or By-laws of either Parent or Seller.

 

(b)           Except as disclosed on Schedule 4.3(b), no consents or approvals of, or notices, filings or registrations by Parent or Seller to or with, any Governmental Authority or any other Person not a party to this Agreement are necessary in connection with the execution, delivery and performance of this Agreement or the other Transaction Documents, or in connection with the sale, transfer, conveyance, assignment or delivery of the Purchased Assets or Purchaser’s assumption of the Assumed Liabilities.

 

 

4.4.           Ownership and Condition of Purchased Assets.  Except as set forth on Schedule 4.4, either Parent or Seller has sole good and indefeasible or marketable, as appropriate, title to, or a valid leasehold interest in, or valid license to use, all of the Purchased Assets, and except as set forth on Schedule 4.4, the Purchased Assets are subject to no Liens except for Permitted Liens.  Except as set forth on Schedule 4.4, there are no leases, subleases, licenses, concession or other agreements grantin g to any party or parties the right of use any Purchased Asset, or any portion thereof or interest therein.  There are no outstanding options or rights of first refusal to purchase any Purchased Asset, or any portion thereof or interest therein.  To Parent’s Knowledge, the Equipment and other tangible Purchased Assets are in good operating condition, ordinary wear and tear excepted, and are in all material respects fit for the uses to which they are now being put.

 

4.5.           Financial Statements; Other Information.  Attached hereto as Exhibit G are the unaudited pro forma income statements for the Business for the year ended December 31, 2009 and for the four (4) months ended April 30, 2010 (collectively, the “Financial Statements”).  Such Financial Statements present fairly the financial position and results of operations of the Business as of the respective dates thereof and for the respective periods covered thereby.  The Financial Statements have been prepared in accordance with the books and records of Parent and Seller relating to the Business and except as set forth on Schedule 4.5 in accordance with GAAP applied on a consistent basis throughout the periods covered thereby.  Except as set forth on Schedule 4.5, the books, records and accounts of Parent and Seller relating to the Business accurately and fairly reflect, in all material respects and in reasonable detail, the transactions and the assets and Liabilities of Parent and Seller pertaining to the Business.  Except as set forth on Schedule 4.5, neither Parent nor Seller has engaged in any transaction with respect to the Business, maintained any bank account for the Business, or used any of its funds in the conduct of the Business, except for transactions, bank accounts, and funds which have been and are reflected in the normally maintai ned books and records of Parent and Seller.

 

4.6.           Absence of Changes.  To the Knowledge of Parent, since December 31, 2009, no fact, event or circumstance has occurred or arisen which has had or is reasonably expected to have a Material Adverse Effect.  Without limiting the foregoing, except as set forth on Schedule 4.6, since such date, to the Knowledge of Parent:

 

(a)           Neither Parent nor Seller has incurred any Liabilities of any nature pertaining to the Business, the Purchased Assets or the Assumed Liabilities, other than Accounts Payable incurred in the Ordinary Course of Business;

 

(b)           Neither Parent nor Seller has entered into any Contracts pertaining to the Business, the Purchased Assets or the Assumed Liabilities, other than purchase orders in respect of Accounts Receivable and Accounts Payable incurred in the Ordinary Course of Business;

 

(c)           Neither Parent nor Seller has modified the salary or other compensation (including benefits) of any Subject Employee, other than in the Ordinary Course of Business consistent with past practice;

 

(d)           Neither Parent nor Seller has sold, leased, transferred, licensed, assigned or otherwise disposed of any Purchased Asset, other than in the Ordinary Course of Business and neither Parent nor Seller has permitted, allowed or suffered any of the Purchased Assets to become subjected to any Lien, other than Permitted Liens;

 

 

(e)           Neither Parent nor Seller has determined as collectible any Accounts Receivable or any portion thereof which were previously considered uncollectible or written off as uncollectible any Accounts Receivable or any portion thereof, except in the Ordinary Course of Business and consistent with GAAP;

 

(f)            Neither Parent nor Seller has entered into any collective bargaining or labor agreement (oral and legally binding or written) or experienced any organized slowdown, work interruption, strike or work stoppage;

 

(g)           Neither Parent nor Seller has made any material change in any method of accounting or accounting principle, practice or policy applicable to the Business, the Purchased Assets or the Assumed Liabilities;

 

(h)           No party (including both Parent and Seller) has accelerated, terminated, modified, or canceled any Contract applicable to the Business, the Purchased Assets or the Assumed Liabilities involving more than $20,000 individually or together with any related Contracts;

 

(i)             Neither Parent nor Seller has delayed or postponed the payment of any Accounts Payable or other Liabilities included among the Assumed Liabilities;

 

(j)             Neither Parent nor Seller has canceled, compromised, waived, or released any right or claim (or series of related rights or claims) either involving more than $20,000 or outside the Ordinary Course of Business;

 

(k)            Neither Parent nor Seller has suffered any casualty losses or damages affecting the Business or any assets of the Business in excess of $20,000 in the aggregate (whether or not insured against);

 

(l)             Neither Parent nor Seller has experienced any other material occurrence, event, incident, action, failure to act, or transaction affecting the Business outside the Ordinary Course of Business; and

 

(m)           Neither Parent nor Seller has agreed or committed to take any of the actions described in the foregoing clauses of this Section 4.6 not otherwise expressly permitted by this Agreement.

 

4.7.           Absence of Undisclosed Liabilities.  Except as set forth on Schedule 4.7, to the Knowledge of Parent, neither Parent nor Seller has any Liabilities, contingent or otherwise, nor any unrealized or anticipated losses, with respect to the Business or the Purchased Assets, except Liabilities incurred by Parent or Seller in the Ordinary Course of Business since December 31, 2009.

 

4.8.           Leased Personal Property.  Except as set forth on Schedule 4.8, to the Knowledge of Parent, each of the leases described on Schedule 2.1(e) is in full force and effect and to the Knowledge of Parent there are no existing defaults or events of default, real or claimed, under any of such leases by Parent or Seller or any other party to such leases and to the Knowledge of Parent, there has been no occurrence or condition which, with notice or lapse of time or both, would constitute a default thereunder by Parent or Seller or any other party to such leases.  No rights of Parent or Seller under such leases have been assigned or otherwise transferred as security for any obligation of Parent or Seller.  Except as described on Schedule 4.8, to the Knowledge of Parent, the consummation of the transactions provided for in this Agreement and the other Transaction Documents will not create or constitute a default or event of default under any such lease or require the consent of any other party to any such lease in order to avoid a default or event of default.

 

 

4.9.           Real Property.  Schedule 4.9 lists all of the Leased Real Property and the addresses thereof and includes a reasonable description of the Purchased Assets located, and aspects of the Business conducted, at such Leased Real Property.

 

4.10.         Contracts.  To the Knowledge of Parent, Schedule 4.10 contains an accurate and complete list (delineated by reference to the appropriate clause below) of all Contracts of the following types to which Parent or Seller is a party and which relate to the Business, the Purchased Assets or the Assumed Liabilities (the “Material Contracts”):

 

(a)           any Contract for the lease of personal property to or from any Person providing for lease payments in excess of $20,000 for any one lease;

 

(b)           any Contract for the purchase or sale of raw materials, equipment, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year or involve consideration of more than $20,000, in the aggregate;

 

(c)           any Contract between Parent or Seller and any Major Customer or Major Vendor;

 

(d)           any capitalized lease, pledge, conditional sale or title retention agreement involving the payment of more than $20,000, in the aggregate;

 

(e)           any Contract with a sales representative or agent, sales agency, advertising agency or other Person engaged in sales, distributing or promotional activities, or any agreement to act as one of the foregoing on behalf of any Person, the performance of which will extend over a period of more than one year or involve or potentially involve payments of more than $20,000, in the aggregate;

 

(f)            any Contract (including confidentiality or other similar arrangements) with any Person containing covenants limiting the freedom or ability of Parent or Seller to engage in any line of business or compete with any Person;

 

(g)           any license, royalty or other Contract relating to Intellectual Property;

 

(h)           any Contract with any Governmental Authority;

 

 

(i)            any collective bargaining agreement or similar labor Contract and any employment Contract;

 

(j)            any Contract under which the consequences of a default or termination would reasonably be expected to have a Material Adverse Effect;

 

(k)           any Contract between Parent, Seller or any of their Affiliates, including any Contract pursuant to which Parent or Seller has borrowed or advanced or loaned any amount to any Affiliate;

 

(l)            any Contract concerning a partnership or joint venture; and

 

(m)          any other Contract (or group of related Contracts) the performance of which involves consideration in excess of $20,000.

 

True and complete copies of each of the Material Contracts, including all amendments, supplements and modifications to each such Material Contract, have been made available for review by Purchaser.  In the case of any Material Contract described above which is not written, Parent or Seller has provided to Purchaser a written description of the material terms of such Material Contract.  Except as disclosed on Schedule 4.10: each Material Contract is in full force and effect and is a valid, legal and binding agreement of Parent or Seller, and to Parent’s Knowledge, enforceable against the other party or parties thereto in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other s imilar laws relating to or affecting creditors’ rights generally or general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

4.11.         Intellectual Property.

 

(a)           Schedule 2.1(f) contains a complete and accurate list of all Registered Intellectual Property and applications to register Owned Intellectual Property.

 

(b)           Schedule 4.11 contains a complete and accurate list of all material Intellectual Property used or held for use by Parent or Seller in the conduct of the Business.  Schedule 4.11 also sets forth whether each such Intellectual Property is (i) Owned Intellectual Property or (ii) licensed by the Parent or Seller by a third party.

 

(c)           Except as disclosed in Schedule 4.11, to Parent’s Knowledge: (i) Parent or Seller owns or has all necessary rights in, to and under the Intellectual Property necessary for or used by the operation of the Business as presently conducted, free and clear of all Liens and other rights of third Persons; (ii) Parent or Seller has the right to use without payment to a third Person all of the Intellectual Property; (iii) Parent’s or Seller’s rights in, to and under the Intellectual Property are freely transferable and assignable; and (iv) all Intellectual Property that is licensed from another Person by Parent or Seller is being used substantially in accordance with the applicable license, agreem ent or arrangement.

 

 

(d)           To Parent’s Knowledge, Parent and Seller have taken reasonable actions to protect the Owned Intellectual Property.  Except as disclosed in Schedule 4.11, to Parent’s Knowledge, the transactions contemplated by this Agreement shall have no effect on the validity and enforceability of any of the Owned Intellectual Property and the rights, title and interest thereto of Purchaser after the Closing shall be identical to that of the Parent and Seller immediately prior to the Closing.  Except as disclosed in Schedule 4.11 and to Parent’s Knowledge, neither Parent nor Seller has received any opinion of counsel (w hether internal or external) relating to the patentability, infringement, validity or enforceability of any Owned Intellectual Property.  Except as disclosed in Schedule 4.11, there are no material agreements or arrangements pursuant to which Parent or Seller have licensed to any other Person or otherwise permitted any other Person to use (through non-assertion, settlement or similar agreements or otherwise) any of the Owned Intellectual Property.  Except as disclosed in Schedule 4.11, none of the agreements being assigned to Purchaser under this Agreement include any undertaking by Parent or Seller to indemnify any Person against a charge of infringement arising out of the authorized use of the Owned Intellectual Property.

 

(e)           Except as disclosed in Schedule 4.11, to Parent’s Knowledge: (i) the Registered Intellectual Property has not been sold, assigned or transferred to a third Person, or abandoned or permitted to lapse, is not the subject of any pending opposition proceedings, pending cancellation proceedings, pending interference proceedings, pending lawsuit naming Parent, Seller or any of their Affiliates as a party or any other pending challenges or proceedings, and is valid and enforceable; (ii) all of the Registered Intellectual Property that is registered with the applicable Governmental Authority in the United States is currently in compliance with all legal requirements (including timely payment of all filing, e xamination and maintenance fees and the timely filing of all applications and affidavits of working, use and incontestability); and (iii) either the Parent or Seller has the sole and exclusive right to bring actions for infringement or  unauthorized use of all of the Owned Intellectual Property.

 

(f)            Except as disclosed in Schedule 4.11, to Parent’s Knowledge: (i) neither the Intellectual Property nor the development or use thereof by Parent or Seller misappropriates or infringes or has misappropriated or infringed, nor shall Purchaser’s use thereof following the Closing in substantially the same manner it was used prior to the Closing, misappropriate or infringe, any Copyright, Trademark, Patent, Trade Secret or other property or proprietary right of any third Person; (ii) no claim of any such misappropriation or infringement has been made or asserted against Parent, Seller or any of their Affiliates; (iii) neither Parent, Seller nor any of their Affiliates have had any notice (whether wr itten or oral) of any such claim; (iv) no basis for such a claim exists, and no such claim is threatened or is likely to be threatened, in connection with any of the Intellectual Property, the Purchased Assets or the Business; (v) the software and databases to be transferred, whether through license or assignment shall not contain any disabling devices, trojan horses, or other embedded mechanisms by which use thereof may be impeded; (vi) none of the Intellectual Property to be transferred, licensed or assigned hereunder requires any payment for the use of Intellectual Property right or technology owned by any third party; and (vii) none of the Intellectual Property to be transferred, licensed or assigned hereunder that is software is subject to any “copyleft” or other obligation or condition (including any obligation or condition under any “open source” license such as the GNU Public License, Lesser GNU  Public License or Mozilla Public License) that (a) requires or could re quire, or condition or could condition, the use or distribution of such software on the disclosure, licensing or distribution of any source code for any portion of such software or (b) otherwise imposes or could impose any limitation, restriction or condition on the right or ability to use or distribute such software.

 

 

(g)           Collectively, Parent and Seller own or have the rights to use all of the Records free and clear of any encumbrances as used by them in the conduct of the Business.

 

(h)           To Parent’s Knowledge, Parent and Seller are in compliance in all material respects with their own privacy policies, in case, applicable to its collection, use, disclosure, maintenance and transmission of personal, private, health or financial information about individuals (“Consumer Privacy Information”).  To Parent’s Knowledge, as of the date hereof, neither Parent nor Seller is prohibited by any applicable Law concerning privacy or their own privacy policies from providing Purchaser with the Consumer Privacy Information that has been, or will be, provided to Purchaser, on or after the date hereof, in connection with the transactions and provision of services contemplate d hereby.

 

4.12.           Sufficiency of Assets.  Except as set forth on Schedule 4.12, the Purchased Assets constitute all of the properties and assets, tangible and intangible, real, personal and mixed, of any nature whatsoever, necessary for the conduct of the Business as currently conducted.

 

4.13.           Insurance.  Schedule 4.13 contains a list of each insurance policy currently providing coverage for the Purchased Assets or liabilities of the Business and a copy of each such policy has been made available to Purchaser.  Such insurance policies provide types and amounts of insurance customarily obtained by businesses similar to the Business.

 

4.14.           Litigation.  Except as listed and described in reasonable detail on Schedule 4.14, to the Knowledge of Parent, there are no claims, charges, arbitrations, grievances, actions, suits, proceedings or investigations pending, or to Parent’s Knowledge, threatened, against Parent, Seller or their Affiliates in respect of the Purchased Assets or the operations of the Business, at law or in equity, before or by any Governmental Authority.

 

4.15.           Tax Matters.

 

(a)           All Tax Returns with respect to the Purchased Assets or income attributable therefrom that are required to be filed before the Closing Date, have been or will be filed, the information provided on such Tax Returns is or will be complete and accurate in all material respects, and all Taxes shown to be due on such Tax Returns have been or will be paid in full, to the extent that a failure to file such Tax Returns or pay such Taxes, or an inaccuracy in such Tax Returns, could result in Purchaser being liable for such Taxes or could give rise to a Lien on the Purchased Assets.

 

(b)           Except as disclosed on Schedule 4.15(b), neither Parent, Seller nor any member of their Affiliated Groups has requested any extension of time within which to file any Tax Return, which Tax Return has not since been filed.

 

(c)           There is no pending or, to the knowledge of the Parent or Seller, threatened action, audit, proceeding, or investigation by any taxing authority with respect to the assessment or collection of Taxes of the Parent, Seller or any member of their Affiliated Group.

 

(d)           Neither Parent nor Seller is a “foreign person” within the meaning of Section 1445(f)(3) of the Code.

 

 

4.16.         Employees; Employee Benefit Plans.

 

(a)           Schedule 5.7(a) sets forth a complete and accurate list of (A) all present personnel retained by, or engaged in, the Business pursuant to the Employee Leasing Agreement or any other similar arrangement (collectively, the “Leased Employees”), which arrangements are set forth on Schedule 5.7(a), and (B) each employee of the Seller employed in the Business (together with the Leased Employees, the “Subject Employees”).  Schedule 5.7(a) sets forth a complete and accurate list, giving, name, job title, current compensation paid or payable, vacation leave that is accrued and unused, and services credited for purposes of vesting and eligibility to participate under any Employee Benefit Plan (as hereinafter defined) for each Subject Employee and identifies any Subject Employee on leave of absence or layoff status.

 

(b)           No Employee Benefit Plan is subject to Title IV of ERISA or Section 412 of the Code.  Neither Parent, Seller nor any of their ERISA Affiliates maintains or has any obligation to contribute to an employee pension benefit plan, as defined in section 3(2) of ERISA, which is subject to Title IV or ERISA or Section 412 of the Code.

 

4.17.         Labor Matters.

 

(a)           Except as set forth on Schedule 4.17, both Parent and Seller are neither a party to nor has any obligation pursuant to any collective bargaining or other Contract regarding the rates of pay or working conditions of the Subject Employees.  Neither Parent nor Seller is obligated under any Contract to recognize or bargain with any labor organization or union on behalf of such employees.  Neither Parent nor Seller nor any of their respective officers or directors or any of the Subject Employees are subject to a charge or, to Parent’s Knowledge, threatened with the charge, of any unfair labor practice applicable to or affecting the Business or the activities of the Subject Employees.&# 160; There is no strike, work stoppage, walkout, slowdown, handbilling, picketing or other “concerted action” involving any Subject Employees, and no grievance proceeding or other controversy is in progress, pending or threatened between Parent or Seller and any Subject Employee or any union or collective bargaining unit relating thereto.

 

(b)           With respect to the operations of the Business and the activities of the Subject Employees, both Parent and Seller are in material compliance with all applicable Laws concerning the employer-employee relationship and with all Contracts relating to the employment of the Subject Employees including all Laws relating to terms and conditions of employment, wages, hours, collective bargaining, workers’ compensation, occupational safety and health, equal employment opportunity and immigration, and are not engaged in any unfair labor or unlawful employment practice. Parent and Seller have not received any notice alleging that either has failed to comply with any such Laws.  With respect to the Business, there are no pending or threatened Proceedings regarding a ny alleged misclassification of Subject Employees as independent contractors.

 

(c)            Except as set forth on Schedule 4.17, there is no employment Contract, retention Contract, or consulting or services Contract between Parent or Seller and any Subject Employee.

 

 

(d)           Except as described on Schedule 4.17, neither Parent nor Seller has taken any action that could constitute a “mass layoff” or “plant closing” within the meaning of the Worker Adjustment and Retraining Notification (“WARN”) Act or could otherwise trigger any notice requirement or liability under any local or state plant closing notice Law.   Further, both Parent and Seller have fully complied with the WARN Act and its rules and regulations.

 

4.18.         Compliance with Laws.  To Parent’s Knowledge, neither Parent nor Seller is engaging in any activity or omitting to take any action so as to create a violation of any Law, applicable to the operations of the Business, the Purchased Assets and the Assumed Liabilities.  To Parent’s Knowledge, neither Parent nor Seller is subject to any judgment, order, writ, injunction or decree issued by any Governmental Authority which pertains in any way to the Business, the Purchased Assets or the Assumed Liabilities.

 

4.19.         Accounts Receivable.  All of the Accounts Receivable to be included among the Purchased Assets have or will have arisen out of bona fide transactions in the Ordinary Course of Business and are carried on Parent’s or Seller’s books and records at values determined in accordance with GAAP and consistently applied.   Each such Account Receivable constitutes a valid and binding obligation of the obligor, maker, co-maker, guarantor, endorser or debtor thereof or thereunder.  Except as set forth on Schedule 4.19, to Parent’s Knowledge, no request or agreement for deduction or discount has been made with re spect to any of such Account Receivable.

 

4.20.         Customers and Vendors.  Schedule 4.20 sets forth (i) a list of names and addresses of the ten (10) largest customers (each, a “Major Customer”) and the ten (10) largest vendors (each, a “Major Vendor”) (measured in each case by dollar volume of purchases or sales during the year ended December 31, 2009) of the Business and the dollar amount of purchase or sales which each such Major Customer or Major Vendor represented during the year ended December 31, 2009 and the period from January 1, 20 10 through March 31, 2010.  To the Knowledge of Parent, except as set forth in Schedule 4.20, there exists no actual or threatened, material termination, cancellation, reduction or limitation of, or any modification or change in, the business relationship of Parent or Seller with any customer or group of customers listed in Schedule 4.20, or whose purchases individually or in the aggregate are material to the Business, or with any supplier or group of suppliers listed in Schedule 4.20, or whose sales individually or in the aggregate are material to the operation of the Business, and there exists no present or reasonably foreseeable condition or state of facts or circumstances involving customers, suppliers or sales representatives which would reasonably be expected to have a Material Adverse Effect or mater ially impair the conduct of the Business after the consummation of the transactions contemplated by this Agreement in essentially the same manner in which the Business is currently being conducted.

 

4.21.         Permits.  To the Knowledge of Parent, the Transferred Permits constitute all of the Permits necessary to (i) operate the Business as currently conducted and (ii) use, occupy and own, as applicable, all of the Purchased Assets in the same manner as the Purchased Assets are currently used, occupied and owned.  To the Knowledge of Parent, all of the Transferred Permits are valid and in full force and effect and both Parent and Seller have paid all fees that are currently due in connection therewith.  To the Knowledge of Parent, neither Parent nor Seller has received any notice alleging a violation under any Transferred Permits or a failure to obtain any Permit applicable to the Business or the Purchased Assets.  To the Knowledge of Parent, except as described on Schedule 4.21, the consummation of the transactions provided for herein will not violate the terms of, or create a default or event of default under, any Transferred Permits or require the consent of any other party in order to avoid such a violation or default.

 

 

4.22.         Transactions with Affiliates.  Except as described in Schedule 4.22 and with respect to remuneration for services rendered as an officer or employee in the Ordinary Course of Business, (i) no Affiliate of either Parent or Seller provides or causes to be provided any assets, services or facilities to either Parent or Seller in relation to the Business, (ii) neither Parent nor Seller provides nor causes to be provided any assets, services or facilities to their Affiliates in relation to the Business, (iii) neither Parent nor Seller beneficially owns, directly or indirectly, any investment assets issued by their Affiliates in relation to the Bus iness, (iv) neither Parent nor Seller has entered into any agreement, understanding or arrangement with their Affiliates in relation to the Business and (v) as of the Closing Date, there will be no Indebtedness, Accounts Receivable or accounts payable, between Parent or Seller, on the one hand, and their Affiliates, on the other in relation to the Business.

 

4.23.         Broker’s and Finders.  Except as set forth on Schedule 4.23, neither Parent, Seller nor any of their Affiliates has employed any investment banker, broker or finder, or incurred any liability for any investment banking fees, brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement.

 

4.24.         Disclosure.  To the Knowledge of Parent, neither any representation or warranty by either Parent or Seller in this Agreement, nor any exhibit or schedule to this Agreement contains an untrue statement of material fact or omits to state a material fact necessary to make the statements contained herein and therein not misleading.

 

4.25.         Disclaimer of Other Warranties.  Except for the representations and warranties set forth in this Agreement and in the documents and instruments delivered in accordance with the terms of this Agreement, neither Parent, Seller nor any Person acting on either of their respective behalves, makes any representation or warranty relating to Parent, Seller, the Business, the Purchased Assets or the Assumed Liabilities.  Parent and Seller hereby disclaim any implied warranty with respect to each of them, the Business, the Purchased Assets or the Assumed Liabilities, including, without limitation, any implied warranty of merchantability or fitness for a particular purpose.

 

 

The parties hereto covenant and agree as follows:

 

5.1.           Efforts.  Upon the terms and subject to the conditions of this Agreement, each of the parties hereto shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Law to consummate the transactions contemplated by this Agreement and to cause each of the conditions to Closing set forth in Articles 6 and 7 below to be satisfied and shall otherwise act in good faith in connection with the transactions contemplated hereby and by the other Transaction Docu ments.

 

 

5.2.           Conduct of Business Prior to Closing.  On and after the date hereof until the Closing Date, except as expressly permitted or required by this Agreement or as otherwise expressly consented to by Purchaser in writing, Parent and Seller shall use their reasonable efforts to:

 

(a)           operate the Business only in the Ordinary Course of Business;

 

(b)           not purchase or acquire any assets or properties for use in the Business, whether real or personal, tangible or intangible, other than supplies purchased in the Ordinary Course of Business, and not sell or otherwise dispose of any property or asset constituting or used in the Business, except in the Ordinary Course of Business;

 

(c)           maintain the tangible Purchased Assets in their present order and condition, reasonable wear and tear excepted, and maintain all policies of insurance on the tangible Purchased Assets in amounts and on terms substantially equivalent to those in effect on the date hereof;

 

(d)           not take any action or omit to take any action which will cause a material breach of any Assigned Contract or Assumed Liability, or modify, amend or otherwise alter or change any material term of any Assigned Contract or Assumed Liability;

 

(e)           take all steps reasonably necessary to maintain the Intellectual Property and the Intangibles;

 

(f)           pay all Accounts Payable, and collect all Accounts Receivable, in the Ordinary Course of Business;

 

(g)           comply with all Laws applicable to Parent, Seller, the Business, the ownership and operation of the Purchased Assets and the Assumed Liabilities;

 

(h)           maintain the books and records and accounts of or applicable to the Business in the Ordinary Course of Business;

 

(i)            continue the employment of each of the Subject Employees and not modify the salary or other compensation (including benefits) of any Subject Employee;

 

(j)            use commercially reasonable efforts to preserve the goodwill and patronage of the customers, employees, suppliers and others having a business relationship with the Parent or Seller related to the Business;

 

(k)           not institute or settle or compromise any Proceeding involving the Business, the Purchased Assets or the Assumed Liabilities;

 

 

(l)            not engage in any practice, enter into any transaction, take any action or omit to take any action which, if engaged in, entered into, taken or omitted to be taken prior to the date of this Agreement, would be required to be disclosed on Schedule 4.6; and

 

(m)           not agree or commit to take any action precluded by any of the foregoing clauses of this Section 5.2.

 

Notwithstanding the foregoing, if as a result of the actions by Frank Pinder beyond the exercise of his customary authority and taken without the prior knowledge of Harvey W. Schiller or Jeffrey O. Nyweide, any of the foregoing is breached, such breach shall not be deemed a breach of this Section or this Agreement by Parent or Seller.

 

5.3.           Access and Cooperation Prior to Closing.  Between the date of this Agreement and the Closing Date, Parent and Seller shall afford or cause to be afforded to the employees, authorized representatives and financing sources of Purchaser reasonable access to the offices, facilities, properties, assets, inventories, books, records, and documents of Parent and Seller relating to the Business during regular business hours, and will furnish Purchaser with such additional financial and operating data and other information relating to the Business, the Assumed Liabilities, the Purchased Assets and the Subject Employees as Purchaser may from time to time reasonably request.  Parent and Seller sha ll use its commercially reasonable efforts to make its officers and employees available to Purchaser and its representatives to the extent as Purchaser and its representatives shall from time to time reasonably request.

 

5.4.           Notification of Changes.  Each Party will give prompt written notice to the other Party of any discovery or material adverse development (such discovery or material adverse development by Parent shall mean Parent’s Knowledge of such discovery or of such material development) constituting or causing a breach of any of its own representations and warranties in Article 3 and Article 4 above or precluding or materially impairing or delaying its ability to perform its obligations under this Agreement or the other Transaction Documents or to satisfy the conditions to the other party’s obligations hereunder.  No disclosure by any Party pursuant to this Section 5.4, however, shall be deemed to amend or supplement the Schedules to this Agreement or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant.

 

5.5.           Consents.  Parent and Seller shall use their commercially reasonable best efforts to obtain, make or give, as applicable, prior to the Closing, all of the consents and approvals of, and notices, filings or registrations with or to, third parties set forth on Schedule 4.3(b).  In any case, subject to Section 2.2, where a necessary consent or approval has not been obtained at or prior to the Closing, Parent or Seller shall use their commercially reasonable best efforts to assist Purchaser, at Purchaser’s request and at Parent’s or Seller’s ex pense, to obtain such consent or approval after Closing.

 

5.6.           Certain Tax Matters.

 

(a)           Parent and Seller will (i) prepare properly and file duly and validly all Tax Returns, or proper extensions thereof, required to be filed prior to the Closing Date with the appropriate taxing authority, (ii) pay duly and fully all Taxes that are due with respect to the periods covered by such Tax Returns or otherwise levied or assessed upon the Parent or Seller or any of their assets or properties and (iii) to withhold or collect and pay to the proper taxing authorities all Taxes that the Parent and Seller are required to so withhold or collect and pay, unless such taxes are being contested in good faith.

 

 

(b)           All real estate, personal property and ad valorem taxes related to the Purchased Assets which shall have accrued and become payable prior to the Closing Date shall be paid by the Parent or Seller.

 

5.7.           Employees and Benefit Plans.

 

(a)           At least five days prior to the Closing Date, (i) Purchaser shall provide Seller a written list of the Subject Employees that Purchaser intends to offer employment from and after the Closing Date (the “Available Employees”), (ii) Seller shall, effective as of the Closing Date, terminate all of the Available Employees, and (iii) subject to Section 5.7(d), Purchaser shall offer, effective as of the Closing Date, employment to all of the Available Employees at substantially the same compensation as they received from Seller prior to the Closing, and pursuant to a new and separate employee leasing agreement by and between Purchaser an d Century II.  Effective as of the Closing, the Available Employees shall cease to be employed by Seller, and Available Employees who have accepted Purchaser’s offer of employment shall become leased employees of Purchaser (such Available Employees, the “Transferred Employees”).  Purchaser shall make commercially reasonable efforts to ensure that the Transferred Employees receive credit for all of their service with Seller and Parent under all welfare and benefit plans for purposes of eligibility and vesting (but not for purposes of accrual of benefits under a defined benefit pension plan).  Purchaser shall also use commercially reasonable efforts to ensure that no pre existing condition, limitation or exclusion shall apply to participation and coverage for such Transferred Employees under a group welfare or health benefit plan.  Effective as of the Closing Date and subject to Section 5.12 (to the extent applicable), Seller shall release, or cause to be released, Available Employees from the provisions of any restrictive covenants and/or agreements with Seller so as to enable Purchaser to offer employment to such Available Employees.  Purchaser will not have any responsibility, liability or obligation, to the Subject Employees or to any other Person with respect to any Employee Benefit Plan.

 

(b)           Seller will be responsible for (i) the payment of all wages, fees and other remuneration due to all of its Subject Employees, consultants and contractors with respect to their respective services as Subject Employees, consultants and contractors of Seller and/or the Business through the close of business on the Closing Date, and (ii) compliance with all applicable Laws respecting the termination of the Subject Employees.

 

(c)           Transferred Employees (and their eligible dependents) who experience a “qualifying event” (as defined in the Internal Revenue Code of 1986, as amended (the “Code”), section 4980B) after the Closing Date shall be eligible to elect health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), under Purchaser’s group health plan.  All other Subject Employees (and their eligible dependents) who are receiving (i) COBRA continuation coverage under Seller’s group health plan prior to the Closing Date and/or (ii) whom Purchaser does n ot offer employment or who refuse such offer of employment and who experience a “qualifying event” (as defined in the Code, section 4980B) shall be eligible to elect COBRA continuation coverage under Seller’s group health plan.

 

 

(d)           From and after the Execution Date and through and until the Closing Date, Parent and/or Seller shall cooperate with Purchaser’s efforts to negotiate and execute a new employee leasing agreement with Century II with respect to the Transferred Employees, pursuant to which Century II shall, to the extent requested by Purchaser, continue to employ and provide benefits to the Transferred Employees on terms and conditions acceptable to Purchaser, in its sole and absolute discretion.

 

(e)           It is understood and agreed between the parties that all provisions contained in this Agreement with respect to employee benefit plans or employee compensation are included for the sole benefit of the respective parties hereto and do not and shall not create any right in any other person, including, but not limited to, any Transferred Employee, any participant in any benefit or compensation plan or any beneficiary thereof.

 

5.8.           No Solicitation.

 

(a)           Parent and Seller will, and will cause their Affiliates and their respective officers, directors, employees, investment bankers, financial advisors, attorneys, accountants and other representatives and agents to, immediately cease any existing discussions or negotiations, if any, with any parties (other than Purchaser) with respect to any Takeover Proposal.  Parent and the Seller shall not, and shall ensure that their Affiliates and their respective officers, directors, employees, investment bankers, financial advisors, attorneys, accountants and other representatives or agents do not, directly or indirectly (i) solicit, initiate or encourage, or take any other action designed or reasonably likely to facilitate, any inquiries with respect to, or the making of any proposal which constitutes or reasonably may give rise to, any Takeover Proposal, (ii) provide any information with respect to the Business to any Person, other than Purchaser, relating to a possible Takeover Proposal by any Person, (iii) enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement constituting or related to, or reasonably likely to lead to, any Takeover Proposal (each, an “Acquisition Agreement”), (iv) participate in any discussions or negotiations (whether initiated by Seller or not) regarding any Takeover Proposal, or (v) make or authorize any statement, recommendation or solicitation in support of any possible Takeover Proposal; provided, however, that if, during the twenty-five (25) calendar days following the date of this Agreement, (1) Parent or Seller has received an unsolicited Takeover Proposal that did not result from a breach of this Section 5.8(a), and (2) the Parent’s Board of Directors determines in good faith, after consultation with its financial advisors and legal counsels, that (A) such Takeover Proposal constitutes a Superior Proposal, and (B) failure to do so would reasonably likely result in a breach of its fiduciary duties to the stockholders of Parent under Delaware Law, then Parent or Seller may, in response to such Superior Proposal, (x) furnish information with respect to the Business to the Person making such Takeover Proposal pursuant to a customary confidentiality agreement not more favorable to the recipient of such information than the Confidentiality Agreement (it being understood that such confidentiality agreement shall not prohibit disclosure to Purchaser of any of the information and materials required to be disclosed or provided to Purchaser pursuant to Section 5.8(c)), and (y) participate in negotia tions with such Person regarding such Superior Proposal to the extent required by the fiduciary duties of the Parent’s Board of Directors regarding such Takeover Proposal under Delaware Law.  Without limiting the foregoing, it is understood that any violation of the restrictions set forth in this Section 5.8(a) by any director, officer or employee of Parent, Seller, their respective Affiliates or any investment banker, financial advisor, attorney, accountant or other representative of any of them shall be deemed to be a breach of this Section by the Seller.

 

 

(b)           Except as expressly permitted by this Section 5.8(b), neither the Parent’s Board of Directors nor any committee thereof may (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent or Purchaser, the approval or recommendation by the Parent’s Board of Directors or such committee of the Transactions, (ii) approve or recommend, propose publicly to approve or recommend, accept or enter into, or otherwise permit or cause Parent or the Seller to accept or enter into any Takeover Proposal or Acquisition Agreement, (iii) release any third party from, or waive any provisions of, any confidentiality or standstill agreement to which the Seller is a party, or (iv) ag ree or resolve to take actions set forth in clauses (i) through (iii) of this sentence.  Notwithstanding the foregoing, in the event that the Parent’s Board of Directors determines in good faith that (1) the Parent has received an unsolicited Superior Proposal that did not result from a breach of Section 5.8(a), and (2) the Parent’s Board of Directors determines in good faith, after consultation with its financial advisors and legal counsels, that (A) such Takeover Proposal constitutes a Superior Proposal, and (B) failure to do so would reasonably likely result in a breach of its fiduciary duties to the stockholders of Parent under Delaware Law, then Parent or Seller may, in response to such Superior Proposal, withdraw or modify its approval or recommendation of the Transactions, approve or reco mmend such Superior Proposal, or terminate this Agreement pursuant to Section 8.1(c)(iii); provided, however, that the Seller may only exercise its right to terminate this Agreement pursuant to this Section 5.8 or Section 8.1(c)(iii) if (x) within five (5) Business Days following Purchaser’s receipt of written notice from the Seller advising Purchaser that the Parent Board intends to take such action and specifying the reasons therefor, including, without limitation, the information and materials to be provided pursuant to Section 5.8(c) relating to the Superior Proposal that is the basis of the Parent’s Board of Directors proposed action, Purchaser has not agreed to match in all material respects the terms of such Superior Proposal (includi ng, if the Superior Proposal includes any non-cash consideration, the right to substitute therefor the equivalent value in cash) and (y) the Termination Fee is paid on the second Business Day following such five (5) Business Day period following Purchaser’s failure to agree to match such Superior Proposal.  Any material amendment to the terms of any Superior Proposal shall require a new notice to Purchaser and a new five (5) Business Day period.  The Parent’s Board of Directors shall take into account any material changes to the terms of this Agreement proposed by Purchaser in response to any such notice in determining whether to terminate this Agreement and shall negotiate in good faith with Purchaser during the period prior to any such termination.

 

(c)           In addition to the obligations of Parent and the Seller set forth in Sections 5.8(a) and 5.8(b), Parent and the Seller will (i) promptly, and in any event within two (2) Business Days, advise Purchaser in writing of any request for information in relation to a potential Takeover Proposal or of any actual Takeover Proposal, the financial and other material terms and conditions of such request in relation to a potential Takeover Proposal or actual Takeover Proposal and the identity of the Person making such request in relation to a potential Takeover Proposal or actual Takeover Proposal, (ii) keep Purchaser reasonably informed of the status and details (including amendments or proposed amendments) of any and all such requests or Takeover Proposals, and (iii) provide to Pu rchaser as soon as practicable after receipt or delivery thereof (and in any event within two (2) Business Days) copies of all written requests, Takeover Proposals and amendments sent or provided to Parent or the Seller from any third party in connection with any Takeover Proposal or sent or provided by Parent or the Seller to any third party in connection with any Takeover Proposal.  Notwithstanding anything to the contrary in this Section 5.8(c) or in Section 5.8(a), if this Section 5.8(c) or Section 5.8(a) is breached as a result of the actions by Frank Pinder, taken without the prior knowledge of Harvey W. Schiller or Jeffrey O. Nyweide, such breach shall not be deemed a breach of this Section 5.8(c), Section 5.8(a) or this Agreement by Parent or Seller.

 

 

(d)           Nothing contained in this Section 5.8 shall permit Parent or Seller to enter into any Acquisition Agreement or other agreement with respect to a Takeover Proposal during the term of this Agreement, it being agreed that, during the term of this Agreement, neither Parent nor Seller shall enter into any agreement with any Person that provides for, or in any way facilitates, a Takeover Proposal, other than a confidentiality agreement containing terms no more favorable to the Person making the Takeover Proposal than those applicable to Purchaser under the Confidentiality Agreement.

 

5.9.           Confidential Information.  From and after the Closing Date, Parent and Seller shall not, and Parent and Seller shall ensure that their Affiliates do not, use or disclose to any Person any trade secrets, confidential information or other proprietary information of the Business it possesses or has knowledge of, including any of the forgoing relating to (i) product designs, drawings and specifications, (ii) production or manufacturing processes, (iii) product pricing and (iv) the terms of agreements with customers or suppliers (the “Confidential Information”).  This restriction shall not apply to (a) the continue d use by Parent, Seller or any of their Affiliates in the Ordinary Course of Business (but not the disclosure to third parties) of any Confidential Information which Parent, Seller or any of their Affiliates currently uses in the Ordinary Course of Business, other than solely in respect of the Business, (b) the disclosure of any Confidential Information which becomes generally available to the public, other than as a result of a breach of this Agreement or (c) the disclosure of any Confidential Information which is required by any Law, order, decree or directive from any Governmental Authority, provided that Parent or Seller gives Purchaser prior written notice of any such disclosure and cooperates with Purchaser in any reasonable manner to protect the confidentiality of such information to the fullest extent possible.  Parent and Seller, on behalf of themselves and their Affiliates, acknowledge that in view of the nature of the Business and the objectives of the parties in entering into the Agreem ent, the restrictions contained in this Section 5.9 are reasonable and necessary to protect the legitimate business interests of Purchaser after the Closing, and that any breach or threatened breach of the provisions of this Section 5.9 will cause irreparable injury to Purchaser for which an adequate monetary remedy does not exist.  Accordingly, in the event of any such breach or threatened breach of this Section 5.9, Purchaser shall be entitled, in addition to the exercise of other remedies, to seek and obtain injunctive relief, without necessity of posting a bond, restraining Parent, Seller or their Affiliate from committing such breach or threatened breach.

 

5.10.         Public Statements.  The parties shall consult with each other prior to issuing any public announcement or statement with respect to this Agreement or the transactions contemplated hereby and neither party shall issue any such public announcement or statement without the prior written consent of the other party hereto, except as may be required by applicable Law or pursuant to a form of press release agreed upon by the parties hereto prior to the Closing.

 

 

5.11.         Collection; Inquiries.  In recognition of the fact that following the Closing Parent or Seller may continue to receive payments in connection with the Accounts Receivable included among the Purchased Assets or in connection with any other Purchased Assets, Parent and Seller shall  promptly upon the receipt by Parent or Seller of good funds (i.e. upon funds clearing Parent’s or Seller’s lock-box or other applicable bank account), but no less frequently than each Friday (or other mutually agreed day each week) following the Closing Date (or next Business Day, in the event a such mutually agreed day is not a Business Day), remit all such payments to Purchaser by wire transfer.   ;Parent and Seller agree to use their reasonable best efforts to cooperate in notifying customers, or prior customers, of the Business to make payments in connection with the aforementioned Accounts Receivable and other Purchased Assets directly to Purchaser and shall otherwise direct correspondence and inquiries relating to the Business to Purchaser.  Parent and Seller agree to provide Purchaser daily with details of all amounts received by Parent and Seller for the purposes of effecting the provisions of this Section 5.11.

 

5.12.         Non-Competition; Non-Solicitation.

 

(a)           In consideration of the Purchase Price to be received under this Agreement, each of Parent and Seller agrees that, for a period of two years after the Closing Date, none of Harvey W. Schiller, Jeffrey O. Nyweide or Parent (the “Restricted Persons”) shall directly or indirectly, do any of the following:

 

engage in, or invest in, own, manage, operate, finance, control, be employed by, associated with or in any manner connected with, or render services or advice to, any Person engaged in or planning to become engaged in, or any other business whose products or activities compete in whole or in part with, the Business, anywhere in the world, provided, however, the Restricted Persons may passively invest in or own up to 2% of any such entity; induce or attempt to induce any employee of Purchaser to leave the employ of Purchaser, or solicit, offer employment to, otherwise attempt to hire, employ, or otherwise engage as an employee, any such employee of Purchaser; provided, however, the Restricted Persons are not prohibited from (1) making general solicitations through recruiters, newspapers, the Internet or otherwise, and (2) hiring unsolicited persons that contact the Restricted Persons for employment; or induce or attempt to induce any Person that was a customer of Purchaser at any time during the one year period preceding the Closing Date to cease doing business with Purchaser, in any way interfere with the relationship between Purchaser and any such customer or solicit the business of any such customer.

(b)           Without limiting the generality of the foregoing, Parent further agrees that, for a period of two (2) years after the Closing Date, Parent shall not and shall cause the Seller not to, engage in any transaction or a series of related transactions in which Parent or Seller, as the case may be, acquires (i) the power to direct or cause the direction of the management and policies of or (ii) all or substantially all of the assets of, any Person engaged in, or planning to become engaged in, the Business.

 

 

Notwithstanding anything contained in Section 5.12(a) or Section 5.12(b) to the contrary, if Parent or Seller (1) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger and neither Harvey W. Schiller nor Jeffrey O. Nyweide are employed by, providing consulting services to, or otherwise affiliated with such corporation or entity, or (2) transfers or conveys any or all of its properties and assets to any Person and neither Harvey W. Schiller nor Jeffrey O. Nyweide are employed by, providing consulting services to, or otherwise affiliated with such Person, then none of the provisions of Section 5.12(a) shall be applicable to such acquiring entity and none of the provisions of Section 5.12(c) shall be applicable to Purchaser as it relates to such acquiring entity.  For the sake of clarity, Purchaser agrees that Parent, Seller, Harvey W. Schiller and Jeffrey O. Nyweide shall not be in breach of this Section 5.12 if they, and they shall be permitted to, (i) provide to Witt and SafirRosetti certain transition services following the sales of such divisions and to Bode, if such division is sold, and (ii) continue to make customer or client  introductions and referrals to Witt and/or Bode, including following the sales of such divisions.

(c)           In consideration of the mutual promises contained in this Agreement, Purchaser agrees that for a period commencing on the date of this Agreement and continuing for two years after the Closing Date, Purchaser shall not directly or indirectly, do any of the following:

 

(i)           engage in, or invest in, own, manage, operate, finance, control, be employed by, associated with or in any manner connected with, or render services or advice to, any Person engaged in or planning to become engaged in, or any other business that is competitive with Parent’s and Seller’s current forensic DNA analysis and casework business unit (“Bode”) and/or preparedness services business unit which develops and implements crisis management and emergency response plans for disaster mitigation, continuity of operations and other emergency management issues for governments, corporations and individuals (“Witt̶ 1;) and/or, except to the extent currently conducted by the FSIU Business Unit, former security consulting and investigations business unit which delivers specialized security and investigative services, such as security assessments and threat analyses, to governments, corporations and individuals (“SafirRosetti” and together with Bode and Witt, the “Remaining Businesses”), anywhere in the world, provided, however, Purchaser may passively invest in or own up to two percent (2%) of any such entity;

 

(ii)          except for the employees set forth on Schedule 5.12(c), induce or attempt to induce any employee of the Remaining Businesses to leave the employ of the Remaining Businesses, or solicit, offer employment to, otherwise attempt to hire, employ, or otherwise engage as an employee, any such employee of the Remaining Businesses; provided, however, Purchaser is not prohibited from (1) making general solicitations through recruiters, newspapers, the Internet or otherwise, and (2) hiring unsolicited persons that contact the Purchaser for employment; or

 

(iii)         induce or attempt to induce any Person that was a customer of the Remaining Businesses at any time during the one (1) year period preceding the date of this Agreement to cease doing business with the Remaining Businesses or in any way interfere with the relationship between the Remaining Businesses and any such customer:

 

 

provided, however, that if Parent of any affiliate thereof enters into any definitive agreements with respect to the sale of the Remaining Business and such definitive agreements do not require the potential purchasers of such Remaining Business to comply with non-competition and non-solicitation covenants substantially similar to the covenants set forth in this Section 5.12(c), then this Section 5.12(c) shall be of no further force and effect and, for the avoidance of doubt, Purchaser shall no longer be required to comply with the terms of this Section 5.12(c).

 

(d)           Each of Parent and Seller, on the one hand, and Purchaser, on the other hand, acknowledges that all of the foregoing provisions are reasonable and are necessary to protect and preserve the value of the Property to Purchaser, and the Remaining Businesses, and to prevent any unfair advantage being conferred on Parent and Seller, or Purchaser, as the case may be.  If any of the covenants set forth in this Section 5.12 are held to be unreasonable, arbitrary, or against public policy, the restrictive time period will be deemed to be the longest period permissible by Law under the circumstances and the restrictive geographical area will be deemed to comprise the largest territory permissible by Law und er the circumstances.

 

5.13.         Post-Closing Access to Records.

 

(a)           For a period of five years after the date of this Agreement, (a) Parent and Seller shall preserve those of Seller’s books and records relating to the Business as are not delivered to Purchaser hereunder and shall make available to Purchaser for inspection and copying, at Purchaser’s expense, such books and records as reasonably required by Purchaser for all purposes reasonably related to this Agreement or any of the documents and instruments delivered in accordance with its terms; and (b) Purchaser shall preserve those of Seller’s books and records as are delivered to Purchaser hereunder and shall make available to Parent and Seller for inspection and copying, at Parent’s or Seller’s expense, such books and records as reasonably required by them for all purposes reasonably related to this Agreement or any of the documents and instruments delivered in accordance with its terms.

 

(b)           For a period ending on the later of (i) one (1) year after the Closing Date or (ii) the date that Parent and Seller timely file all 2010 federal, state, local and foreign tax returns and tax reports required to be filed by each of them in relation to the Business (subject to one six month extension by Parent and/or Seller commensurate with Parent’s and Seller’s right to extend the filing deadline for such tax returns and tax reports), and in all cases upon reasonable advance notice from Parent or Seller, Purchaser shall make available to Parent or Seller, upon Parent’s or Seller’s reasonable request and at Parent’s or Seller’s expense and in all cases at times reasonable to Purchaser, certain Transferred Employees to assist Parent and Seller in the completion of certain audits and regulatory filings and such tax returns and tax reports; provided, however, that in no event shall Purchaser be obligated to make any Transferred Employee available to Parent or Seller if, as reasonably determined by Purchaser, such availability would interfere with such Transferred Employee’s ability to perform his or her duties to Purchaser.

 

 

The obligation of Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions all or any of which may be waived in writing, in whole or in part, by Purchaser:

 

 

6.1.           Representations and Warranties.  The representations and warranties set forth in Article 4 shall be true and correct in all material respects at and as of the Closing Date, except to the extent that such representations and warranties are qualified by terms such as “material” and “Material Adverse Effect”, in which case such representations and warranties shall be true and correct in all respects at and as of the Closing Date.

 

6.2.           Covenants.  Parent and Seller shall have performed and complied in all material respects with all covenants and agreements contained herein and required to be performed or complied with by it on or prior to the Closing Date.

 

6.3.           No Injunction; Etc.  No action, proceeding, investigation, regulation or legislation shall be pending or threatened which seeks to enjoin, restrain or prohibit Purchaser, or to obtain substantial damages from Purchaser, in respect of the consummation of the transactions contemplated hereby, or which seeks to enjoin the operation of all or a material portion of the Business.

 

6.4.           Required Consents.  All consents, authorizations, orders or approvals of any Person listed on Schedule 6.4 (the “Required Consents”), shall have been obtained.

 

6.5.           Minimum Working Capital.  The calculation of Seller’s Working Capital delivered to Purchaser pursuant to Section 2.5(b) shall be at least seventy five percent (75%) of the Target Working Capital.

 

6.6.           Documents.  Purchaser shall have received all of the agreements, documents and items specified in Section 2.8(b).

 

 

The obligation of Parent and Seller to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions, all or any of which may be waived, in whole or in part, by Parent or Seller.

 

7.1.           Representations and Warranties.  The representations and warranties set forth in Article 3 shall be true and correct in all material respects at and as of the Closing Date, except to the extent that such representations and warranties are qualified by terms such as “material” and “Material Adverse Effect”, in which case such representations and warranties shall be true and correct in all respects at and as of the Closing Date.

 

7.2.           Covenants.  Purchaser shall have performed and complied in all material respects with all covenants and agreements contained herein and required to be performed or complied with by it on or prior to the Closing Date.

 

7.3.           No Injunction; Etc.  No action, proceeding, investigation, regulation or legislation shall be pending or threatened which seeks to enjoin, restrain or prohibit Parent or Seller, or to obtain substantial damages from Parent or Seller, in respect of the consummation of the transactions contemplated hereby, which, in the reasonable judgment of Parent or Seller, would make it inadvisable to consummate such transactions.

 

 

7.4.           Documents.  Purchaser shall have received all of the agreements, documents and items specified in Section 2.8(c).

 

 

8.1.           Termination.  This Agreement may be terminated at any time prior to the Closing as follows:

 

(a)           Purchaser, Parent and Seller may terminate this Agreement by mutual written consent;

 

(b)           Purchaser may terminate this Agreement by giving written notice to Parent and Seller at any time prior to the Closing (i) if the Closing shall not have occurred on or before September 30, 2010 (the “Drop-Dead Date”), by reason of the failure of any condition precedent under Article 6 hereof (provided that Purchaser is not responsible for such failure of the Closing to occur through a breach of any of its representations, warranties, covenants or agreements contained herein), (ii) if Purchaser is not in breach of any of its representations, warranties, covenants or ag reements under this Agreement which individually or in the aggregate would constitute a Material Adverse Effect and if there has been a breach by Parent or Seller of any of their respective representations, warranties, covenants or agreements contained in this Agreement, or if any representation or warranty of Parent or Seller shall have become untrue or inaccurate, in either case that would result in a failure of a condition set forth in Section 6.1 or 6.2 (a “Terminating Seller Breach”), provided, however, that if such Terminating Seller Breach is reasonably curable by Parent or Seller, within 20 days after Parent or Seller has received written notice from Purchaser of such T erminating Seller Breach, through the exercise of reasonable best efforts and for as long as Parent or Seller continues to exercise such reasonable best efforts, Purchaser may not terminate this Agreement under this Section 8.1(b) until the earlier of the expiration of such 20-day period and the Drop-Dead Date; or (iii) if the Parent’s Board of Directors has exercised its rights pursuant to Section 5.8(b) to withdraw or modify its approval or recommendation of the Transactions, or to otherwise approve, recommend or accept a Superior Proposal, all in accordance with Section 5.8(b); or

 

(c)           Parent or Seller may terminate this Agreement by giving written notice to Purchaser at any time prior to the Closing (i) if the Closing shall not have occurred on or before the Drop-Dead Date, by reason of the failure of any condition precedent under Article 7 hereof (provided that neither Parent nor Seller is responsible for such failure of the Closing to occur through a breach of any of its representations, warranties, covenants or agreements contained herein), (ii) if neither Parent nor Seller is in breach of any of their respective representations, warranties, covenants or agreements under this Agreement which individually or in the aggre gate would constitute a Material Adverse Effect and if there has been a breach by Purchaser of any of its representations, warranties, covenants or agreements contained in this Agreement, or if any representation or warranty of Purchaser shall have become untrue or inaccurate, in either case that would result in a failure of a condition set forth in Section 7.1 or 7.2 (a “Terminating Purchaser Breach”); provided, that if such Terminating Purchaser Breach is reasonably curable by Purchaser, within 20 days after Purchaser has received written notice from Parent or Seller of such Terminating Purchaser Breach, through the exercise of reasonable best efforts and for as long as Purchaser continues to exercise such reasonable best efforts, Parent and Seller may not terminate this Agreement under this Section 8.1(c) until the earlier of the expiration of such 20-day period and the Drop-Dead Date or (iii) if the Parent’s Board of Directors has exercised its rights pursuant to Section 5.8(b) to withdraw or modify its approval or recommendation of the Transactions, to otherwise approve, recommend or accept a Superior Proposal or to provide notice to Purchaser of a Superior Proposal, all in accordance with Section 5.8(b).

 

 

8.2.           Effect of Termination; Termination Fee.

 

(a)           If this Agreement is terminated pursuant to Section 8.1, all obligations of the parties hereunder shall terminate, except that the obligations set forth in Section 10.1 shall survive the termination of this Agreement, and except that no such termination shall relieve any party from liability for any prior breach of this Agreement.

 

(b)           Notwithstanding Section 8.2(a), if Purchaser terminates this Agreement pursuant to Section 8.1(b)(iii) or Seller terminates this Agreement pursuant to Section 8.1(c)(iii), Seller will pay to Purchaser an amount equal to $675,000 (the “Termination Fee”).  Parent, Seller and Purchaser acknowledge and agree that (i) the payment of a Termination Fee pursuant to this Section 8.2(b) shall be as liquidated damages, and not a penalty and will be Purchaser’s sole and exclusive remedy against Parent and Seller, and (ii) such amounts are reasonable in light of the circumstances relating to such a termination.

 

(c)           If Seller or Parent terminates this Agreement pursuant to Section 8.1(c)(iii), Parent or Seller will pay the Termination Fee simultaneously with the delivery of notice of such termination.  If Purchaser terminates this Agreement pursuant to Section 8.1(b)(iii), Parent or Seller will pay the Termination Fee to Purchaser within three (3) Business Days of the date of such termination.  Upon failure to timely pay any such amount, interest shall accrue on such unpaid amount at a variable rate of interest equal to the prime rate (as reported in the Wall Street Journal “Money Rates” section) plus five percent (5%) per annum.

 

 

9.1.           Survival.  All of the representations, warranties, agreements and covenants contained herein or in any instrument or document delivered or to be delivered pursuant to this Agreement, shall survive the execution of this Agreement and the Closing Date.  Notwithstanding the foregoing, the representations and warranties contained herein shall survive and continue for fifteen (15) months from the Closing Date; provided, however, that in all cases, representations and warranties in respect of which an indemnification claim shall be pending as of the end of the app licable period referred to above shall survive with respect to such indemnification claim until the final disposition thereof.  Unless otherwise stated, the agreements and covenants set forth in this Agreement shall survive and continue indefinitely or until all obligations set forth therein shall have been performed and satisfied.

 

 

9.2.           Obligation to Indemnify.

 

(a)           Subject to the terms and conditions of this Article 9, Parent and Seller shall indemnify Purchaser, its Affiliates and each of their respective directors, officers, employees, stockholders and partners (each a “Purchaser Indemnitee” and, collectively the “Purchaser Indemnitees”) in respect of, and save and hold each Purchaser Indemnitee harmless against any Losses such Purchaser Indemnitee suffers, sustains or becomes subject to as a result of or by virtue of, without duplication:

 

(i)           the breach or inaccuracy of any representation or warranty of Parent or Seller contained in this Agreement or any other Transaction Document;

 

(ii)          a breach of or failure to duly and timely perform any covenant or agreement of Parent or Seller made pursuant to this Agreement or any other Transaction Document;

 

(iii)         any Excluded Liability;

 

(iv)         any claim, demand, action or proceeding brought by any Person against any Purchaser Indemnitee after Closing asserting any Liability arising from Parent’s or Seller’s failure or delay in paying Taxes due prior to Closing or due after Closing (except income Taxes) with respect to any period or portion of a period prior to Closing; or

 

(v)          any claim by creditors of Parent or Seller arising out of or based upon the failure of Parent or Seller to satisfy its creditors or to comply with Bulk Sales Laws in connection with the transactions contemplated hereby except to the extent that such claim is a liability or obligation expressly assumed by Purchaser as an Assumed Liability;

 

provided, however, that (1) Parent and Seller shall not be required to indemnify Purchaser Indemnitees in respect of any Losses any Purchaser Indemnitee suffers, sustains or becomes subject to as a result of or by virtue of any of the occurrences referred to in Section 9.2(a)(i) above unless and until the aggregate of all such Losses exceeds $100,000 (the “Indemnification Threshold”), at which point Seller will be obligated to indemnify the applicable Purchaser Indemnitee(s) for all such Losses, from and including the first Dollar thereof and (2) in no event sha ll Parent or Seller be obligated to indemnify Purchaser Indemnitees in respect of any Losses any Purchaser Indemnitee suffers, sustains, or becomes subject to, as a result of or by virtue of any of the occurrences referred to in Section 9.2(a)(i) in excess of $4,125,000, in the aggregate (the “Indemnification Cap”).  Notwithstanding any other provision of this Section 9.2(a), the Indemnification Threshold and the Indemnification Cap shall not apply with respect to any Loss any Purchaser Indemnitee suffers, sustains or becomes subject to as a result of or by virtue of the fraud or the willful misconduct on the part of Parent, Seller or their Affiliates.  Solely for the purpose of measuring Losses based upon the breach of any representation or warranty or for satisfying the Indemnif ication Threshold, to the extent that such representation or warranty is qualified by reference to “materiality” or Material Adverse Effect, such representation or warranty shall be deemed not to contain such qualifier.

 

 

(b)           Subject to the terms and conditions of this Article 9, Purchaser shall indemnify Parent, Seller, and their Affiliates and each of their respective directors, officers, employees, stockholders and partners (each a “Seller Indemnitee” and, collectively the “Seller Indemnitees”) in respect of, and save and hold each Seller Indemnitee harmless against any Losses such Seller Indemnitee suffers, sustains or becomes subject to as a result of or by virtue of, without duplication:

 

(i)           the breach or inaccuracy of any representation or warranty of Purchaser contained in this Agreement or any other Transaction Document;

 

(ii)           a breach of or failure to duly and timely perform any covenant or agreement of Purchaser made pursuant to this Agreement or any other Transaction Document; or

 

(iii)           any Assumed Liability;

 

provided, however, that (1) Purchaser shall not be required to indemnify Seller Indemnitees in respect of any Losses any Seller Indemnitee suffers, sustains or becomes subject to as a result of or by virtue of any of the occurrences referred to in Section 9.2(b)(i) above unless and until the aggregate of all such Losses exceeds the Indemnification Threshold, at which point Purchaser will be obligated to indemnify the applicable Seller Indemnitee(s) for all such Losses, from and including the first Dollar thereof and (2) in no event shall Purchaser be obligated to indemnify Seller Indemnitees in respect of any Losses any Seller Indemnitee suffers, sustains, or becomes subject to, as a result of or by virtue of any of the occurrences referred to in Section 9.2(b)(i) in excess of the Indemnification Cap.  Notwithstanding any other provision of this Section 9.2(b), the Indemnification Threshold and the Indemnification Cap shall not apply with respect to any Loss any Seller Indemnitee suffers, sustains or becomes subject to as a result of or by virtue the fraud or the willful misconduct on the part of Purchaser.  Solely for the purpose of measuring Losses based upon the breach of any representation or warranty or for satisfying the Indemnification Threshold, to the extent that such representation or warranty is qualified by reference to “materiality”, such representation or warranty shall be deemed not to contain such qualifier.

 

(c)           The right to indemnification or other remedy based on representations, warranties, covenants, and obligations contained herein or in the other agreements or instruments delivered pursuant hereto will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation, recognizing, in part, the negotiated and agreed allocation of risk, obligation and liability between the parties.  The waiver of any condition based on the accuracy of any representation or warranty, or on the performanc e of or compliance with any covenant or obligation, will not affect the right to indemnification, for Losses attributable to any breach of such representation, warranty, covenant or obligation, recognizing, in part, the negotiated and agreed allocation of risk, obligation and liability among the parties.

 

9.3.           Procedures for Indemnification: Third Party Claims.

 

(a)           Notification of Proceeding.  After receipt by an indemnified party under Section 9.2 of notice of the commencement of any Proceeding against it, such indemnified party, if a claim is to be made against an indemnifying party under such Section, shall promptly notify each indemnifying party thereof in writing; provided, however, that no delay on the part of the indemnified party in notifying any indemnifying party shall relieve the indemnifying party from any obligation hereunder unless (and then solely to the extent) the indemnifying party thereby is prejudiced.

 

 

(b)           Right of Indemnifying Party to Defend Against Proceeding.  Any indemnifying party will have the right to defend the indemnified party against the Proceeding with counsel of its choice reasonably satisfactory to the indemnified party so long as (i) the indemnifying party notifies the indemnified party in writing within 15 days after the indemnified party has given notice of the Proceeding that the indemnifying party will indemnify the indemnified party from and against the entirety of any damages the indemnified party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the claim, (ii) the indemnifying party provides the indemnified party with evidence acceptable to the indemnified party that the indemnifying party will have the financial resources to defend against the Proceeding and fulfill its indemnification obligations hereunder, (iii) the claim for indemnification will not exceed the indemnifying party’s limitation of liability set forth in Section 9.1(a) or 9.1(b), as the case may be, (iv) the Proceeding involves only money damages and does not seek an injunction or other equitable relief, (v) settlement of, or an adverse judgment with respect to, the Proceeding is not, in the good faith judgment of the indemnified party, likely to establish a precedential custom or practice materially adverse to the continuing business interests or the reputation of the indemnified party or otherwise adversely affect its or its Affiliates other than as a result of monetary damages for which it would be entitled to indemnification, (vi) if the indemnifying party is also a party to such Proceeding, the indemnified party has determined in good faith that joint representation would not be inappropriate or result in different, conflicting, or adverse legal positions or interests, and (vii) the indemnifying party conducts the defense of the Proceeding actively and diligently.

 

(c)           Participation in Defense; Consent to Entry of Judgment.  So long as the indemnifying party is conducting the defense of the Proceeding in accordance with Section 9.3(b) above, (i) the indemnified party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Proceeding, (ii) the indemnified party will not consent to the entry of any judgment or enter into any settlement with respect to the Proceeding without the prior written consent of the indemnifying party (not to be withheld unreasonably), and (iii) the indemnifying party will not consent to the entry of any judgment or enter into any set tlement with respect to the Proceeding without the prior written consent of the indemnified party (not to be withheld unreasonably).

 

(d)           Assumption of Defense; Reimbursement for Costs; Responsibility for Losses.  In the event any of the conditions in Section 9.3(b) above is not satisfied or becomes unsatisfied, (i) the indemnified party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Proceeding in any manner it may deem appropriate (and the indemnified party need not consult with, or obtain any consent from, any indemnifying party in connection therewith), (ii) the indemnifying parties will reimburse the indemnified party promptly and periodically for the costs of defending against the Proceeding (includi ng reasonable attorneys' fees and expenses), and (iii) the indemnifying parties will remain responsible for any Losses the indemnified party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Proceeding to the fullest extent provided in this Article 9.

 

 

(e)           Consent to Jurisdiction; Process.  Parent and Seller hereby consent to the non-exclusive jurisdiction of any court in which a Proceeding is brought against any indemnified party for purposes of any claim that an indemnified party may have under this Agreement with respect to such Proceeding or the matters alleged therein, and agree that process may be served on Parent or Seller with respect to such a claim anywhere in the world.

 

9.4.           Procedures for Indemnification:  Other Claims.  A claim for indemnification for any matter not involving a third-party claim may be asserted by written notice to the Party from whom indemnification is sought.

 

 

10.1.         Fees and Expenses.  Except as specifically provided in this Agreement, Purchaser, Parent and Seller each shall pay its respective fees and expenses incidental to the preparation, negotiation and consummation of this Agreement and the transactions contemplated hereby.

 

10.2.         Bulk Sales Laws.  The parties hereto waive compliance with the requirements of the Bulk Sales Laws in connection with the consummation of the transactions contemplated hereby.

 

10.3.         Notices.  All notices, request, demands and other communications hereunder shall be in writing and shall be delivered (a) in person or by courier or nationally recognized overnight courier service, (b) mailed by first class registered or certified mail, postage prepaid, return receipt requested, or (c) by facsimile transmission, as follows:

 

(a)           If to Parent or Seller:

 

GlobalOptions Group, Inc.

75 Rockefeller Plaza

New York, NY 10019

Attention: Chief Executive Officer

 

with a copy (which shall not constitute notice) to:

 

Olshan Grundman Frome Rosenzweig & Wolosky LLP

Park Avenue Tower

65 East 55th Street

New York, NY 10022

Attention: Robert H. Friedman, Esq.

Telephone: (212) 451-2300

Facsimile: (212) 451-2222

 

 

(b)           If to Purchaser:

 

GlobalOptions Services, Inc.

c/o Private Equity Partners LLC

8 Wood Hill Road

Weston, CT 06883

Attention: Geoffrey Gorman

Telephone: (203) 984-5103

Facsimile: (203) 227-8693

 

and

 

GlobalOptions Services, Inc.

c/o Balmoral Advisors LLC

11150 Santa Monica Blvd., Suite 825

Los Angeles, CA 90025

Attention: Jonathan Victor

Telephone: (310) 473-4892

Facsimile: (310) 479-1740

 

with a copy (which shall not constitute notice) to:

 

Mayer Brown LLP

1675 Broadway

New York, NY  10019

Attention: Thomas M. Vitale

Telephone: (212) 506-2510

Facsimile: (212) 849-5510

 

Any party may change the address to which notices are to be sent by giving written notice of such change of address to the other parties in the manner above provided for giving notice.  If delivered personally or by courier, the date on which the notice, request, instruction or document is delivered shall be the date of deemed receipt; if delivered by nationally recognized overnight courier service, the Business Day after the date such notice, request, instruction or document is delivered shall be the date of deemed receipt; if delivered by facsimile transmission there shall be no deemed receipt unless a confirming copy is sent by another permissible means, and the date of deemed receipt shall occur in accordance with such other permissible means; and if delivered by mail as aforesaid, three Business Days after the date on which such notice, request, instruction or document is delivered shall be the date of deemed receipt.

 

10.4.         Further Assurances.  Each of the Parties shall execute such documents and other papers and take such further actions as may be reasonably required to carry out the provisions hereof and the transactions contemplated hereby.

 

10.5.         Assignment; Binding Effect.  This Agreement shall not be assignable by any of the parties hereto without the written consent of the other parties; provided, however, that Purchaser may designate one or more wholly owned direct or indirect subsidiaries to be the transferees of any Purchased Assets transferred hereunder and to be the beneficiary of Parent’s and Seller’s representations, warranties and covenants hereunder with respect to such Purchased Assets.  This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns.

 

 

10.6.         No Third Party Beneficiaries.  The representations, warranties, covenants and agreements contained in this Agreement are for the sole benefit of the parties hereto and their successors and permitted assigns, and in the case of Article 9 hereof, the Purchaser Indemnitees and Seller Indemnitees, and they shall not be construed as conferring any rights on any other Persons.

 

10.7.         Headings.  All section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.

 

10.8.         Counterparts.  This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one counterpart has been signed by each party and delivered to the other party hereto.

 

10.9.         Integration of Agreement; Amendments and Waivers.  This Agreement supersedes all prior agreements, oral and written, between the parties hereto with respect to the subject matter hereof and may be amended or modified only by a written instrument executed by Purchaser, Parent and Seller.  The waiver by one party of any breach of this Agreement by the other party shall not be considered to be a waiver of any succeeding breach (whether of a similar or a dissimilar nature) of any such provision or other provision or a waiver of any such provision itself.  No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either Party hereto.

 

10.10.       Schedules.  The Schedules to this Agreement constitute a part of this Agreement and are incorporated into this Agreement for all purposes as if fully set forth herein.

 

10.11.       Governing Law.  This Agreement shall be construed under the laws of the State of New York, United States of America.  The parties hereby irrevocably and unconditionally submit to the exclusive jurisdiction of any State or Federal court sitting in New York, New York over any suit, action or proceeding arising out of or relating to this letter.  Each of the parties hereby agrees that service of any process, summons, notice or document by U.S. registered mail addressed to it at the address set forth above shall be effective service of process for any action, suit or proceeding brought against it in any such court.  The parties hereby irrevocably and unconditionally waive any objection to th e laying of venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Each of the parties agrees that a final, non-appealable judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon it and may be enforced in any other courts to whose jurisdiction such party is or may be subject, by suit upon such judgment.

 

10.12.       Partial Invalidity.  Whenever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein unless the deletion of such provision or provisions would result in such a material change as to cause completion of the transactions contemplated hereby to be unreasonable.