EXHIBIT B
MEMBERSHIP INTEREST PURCHASE AGREEMENT
MEMBERSHIP INTEREST PURCHASE AGREEMENT
AMONG
E-TAXI, INC.
AND
ALL OF THE MEMBERS
OF
IMPACT TEAM INTERNATIONAL, LLC
DATED AS OF JUNE 14, 1999
TABLE OF CONTENTS
Page
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ARTICLE I
PURCHASE AND SALE OF MEMBERSHIP INTERESTS OF THE COMPANY
SECTION 1.1 Agreement to Sell and Purchase Membership
Interests; Consideration............................2
SECTION 1.2 Intentionally Omitted...............................3
SECTION 1.3 Closing.............................................3
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
SECTION 2.1 LLC Existence and Power; Status and Title
of Purchased Membership Interests and Options.......4
SECTION 2.2 Authority Relative to this Agreement................4
SECTION 2.3 No Conflicts; Consents..............................4
SECTION 2.4 Charter Documents and LLC Records...................5
SECTION 2.5 Financial Information...............................5
SECTION 2.6 Liabilities.........................................6
SECTION 2.7 Company Receivables.................................6
SECTION 2.8 Absence of Certain Changes..........................6
SECTION 2.9 Properties; Title...................................7
SECTION 2.10 Contracts...........................................8
SECTION 2.11 Intangible Property.................................9
SECTION 2.12 Claims and Proceedings.............................10
SECTION 2.13 Taxes..............................................10
SECTION 2.14 Employee Benefit Plans.............................15
SECTION 2.15 Employee-Related Matters...........................18
SECTION 2.16 Insurance..........................................18
SECTION 2.17 Compliance with Laws...............................19
SECTION 2.18 Permits............................................19
SECTION 2.19 Environmental Matters..............................19
SECTION 2.20 Customers and Clients..............................20
SECTION 2.21 Potential Conflicts of Interest....................20
SECTION 2.22 Finders' Fees......................................21
SECTION 2.23 Depositaries; Powers of Attorney, Etc..............21
SECTION 2.24 Year 2000..........................................21
SECTION 2.25 Disclosure.........................................21
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 3.1 Authority Relative to This Agreement....................21
SECTION 3.2 No Conflicts; Consents..................................22
SECTION 3.3 Corporate Existence and Power...........................22
SECTION 3.4 Finders' Fees...........................................22
ARTICLE IV
COVENANTS AND AGREEMENTS PRIOR TO
AND SUBSEQUENT TO CLOSING
SECTION 4.1 Conduct of Business of the Company......................23
SECTION 4.2 LLC Examinations and Investigations.....................24
SECTION 4.3 Additional Financial Statements.........................25
SECTION 4.4 Consents, Filings and Authorizations;
Efforts to Consummate...................................25
SECTION 4.5 Negotiations With Others................................25
SECTION 4.6 Notices of Certain Events...............................26
SECTION 4.7 Public Announcements....................................26
SECTION 4.8 Confidentiality.........................................26
SECTION 4.9 Expenses................................................27
SECTION 4.10 Claims Under Insurance Policies.........................27
SECTION 4.11 Supplements to Disclosure Schedules.....................27
SECTION 4.12 Further Assurances......................................27
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1 Conditions to the Obligations of Sellers and Purchaser..28
SECTION 5.2 Conditions to the Obligations of Sellers................28
SECTION 5.3 Conditions to the Obligations of Purchaser..............29
ARTICLE VI
TERMINATION
SECTION 6.1 Termination.............................................31
SECTION 6.2 Effect of Termination; Right to Proceed.................32
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ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Survival of Representations and Warranties..............33
SECTION 7.2 Obligation of Sellers to Indemnify......................33
SECTION 7.3 Obligation of Purchaser to Indemnify....................33
SECTION 7.4 Notice and Opportunity to Defend Third Party Claims.....34
SECTION 7.5 Limitation on Indemnification; Payments of Losses.......35
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices.................................................36
SECTION 8.2 Entire Agreement........................................37
SECTION 8.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies................................37
SECTION 8.4 Governing Law...........................................37
SECTION 8.5 Consent to jurisdiction and Service of Process..........37
SECTION 8.6 Binding Effect; No Assignment...........................38
SECTION 8.7 Exhibits................................................38
SECTION 8.8 Severability............................................38
SECTION 8.9 Counterparts............................................38
ARTICLE IX
DEFINITIONS
SECTION 9.1 Definitions.............................................38
SECTION 9.2 Interpretation..........................................44
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EXHIBITS
Exhibit A - Form of Gupta Note
Exhibit B - Form of Escrow Agreement
Exhibit C - Registration Rights Agreement
Exhibit D - Form of Opinion of Counsel to Purchaser
Exhibit E - Form of Opinion of Counsel to Sellers
Exhibit F - Form of Agreement for Waiver of Right of First Refusal
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SCHEDULES
Schedule A-1 - Purchased Membership Interests; Percentage
Ownership Interest of Sellers in the Company;
Purchase Price Allocation
Schedule 2.1 - Jurisdictions
Schedule 2.3 - Company's Required Consents
Schedule 2.6 - Certain Liabilities; Company Debt
Schedule 2.6B - Company Debt on Execution
Schedule 2.7 - Company Receivables
Schedule 2.8 - Absence of Certain Changes
Schedule 2.8(c) - Distributions
Schedule 2.8(f) - Accrued Bonuses
Schedule 2.9A - Owned Real Property
Schedule 2.9B - Leased Real Property
Schedule 2.9C - Occupancy Rights of Others
Schedule 2.9D - Personal Property; Liens
Schedule 2.10 - Contracts
Schedule 2.11 - Intangible Property
Schedule 2.12 - Claims and Proceedings
Schedule 2.13 - Taxes
Schedule 2.13(l) - Allocation of Purchase Price
Schedule 2.14 - Employee Benefit Plans; ERISA Matters
Schedule 2.15 - Employee-Related Matters
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SCHEDULES
Schedule 2.16 - Insurance
Schedule 2.17 - Compliance with Laws
Schedule 2.18 - Permits
Schedule 2.19 - Environmental Matters
Schedule 2.20 - Customers and Clients
Schedule 2.21 - Potential Conflicts of Interest
Schedule 2.22 - Finders' Fees
Schedule 2.23 - Depositories; Powers of Attorney
Schedule 2.24 - Year 2000 Problems
Schedule 3.2 - Conflicts or Consents
Schedule 4.1(10) - Membership Interest Issuances
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AGREEMENT dated as of the 14th day of June, 1999 by and among E-TAXI,
INC., a Delaware corporation with offices at c/o Gateway Advisors, 000 Xxxxx
Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxxxxxxxxx 00000 ("Purchaser"), and XXXXXX
X. XXXXX, an individual residing at - 00000 Xxxxxxx Xx., Xxxxxxx, XX 00000
("Gupta"), XXXXXXX XXXXXX, an individual residing at 000 Xxxxxxxx Xx.,
Xxxxxxxxx, XX 00000 ("Xxxxxx"), XXXXX XXXX, an individual residing at 0000
Xxxxxxxxx Xxx., Xxxxxxx, XX 00000 ("Xxxx") and XXX XXXXXXX, an individual
residing at 000 Xxxxxxxx Xx., Xxxxxxxx Xxxx, XX 00000 ("Xxxxxxx"). Gupta,
Scully, Xxxx and Xxxxxxx are sometimes collectively referred to as "Seller" or
"Sellers". Certain capitalized terms used herein have the respective meanings
set forth in Article IX.
RECITALS
1. Impact Team International, LLC, a California limited liability
company (the "Company"), is a provider of consulting services
and contract labor to the software industry (the "Business").
2. Each Seller owns the percentage membership interest of the
total membership interests of the Company as set forth
opposite such Seller's name in Schedule A-1 hereto, which
represents 100% of the issued and outstanding membership
interests of the Company (collectively, the "Purchased
Membership Interests").
3. Sellers desire to sell and transfer to Purchaser, and
Purchaser desires to purchase and acquire from Sellers, all of
Sellers' right, title and interest in and to the Purchased
Membership Interests (the "Acquisition"). In connection with
the Acquisition, Sellers will waive their rights of first
refusal relating to the transfer of the Purchased Membership
Interests, pursuant to the terms and conditions set forth in
an Agreement for Waiver of Right of First Refusal (the "Right
of First Refusal Agreement") in the form attached hereto as
Exhibit F, to be entered into concurrently with the Closing
hereunder.
4. In furtherance of the consummation of the Acquisition and the
other transactions contemplated hereby (the "Contemplated
Transactions"), the parties hereto desire to enter into this
Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
expressly acknowledged, the parties, intending to be legally bound hereby, agree
as follows:
ARTICLE I
PURCHASE AND SALE OF MEMBERSHIP INTERESTS OF THE COMPANY
SECTION 1.1: AGREEMENT TO SELL AND PURCHASE MEMBERSHIP INTERESTS;
CONSIDERATION.
(a) Subject to the terms and conditions of this Agreement and in
reliance upon the representations, warranties, covenants and agreements of the
Sellers contained herein, at the Closing, Sellers shall sell, transfer and
deliver to Purchaser, and Purchaser shall purchase and accept from Sellers, free
and clear of all Liens, each Seller's right, title and interest in and to the
respective Purchased Membership Interests set forth opposite each Seller's name
in Schedule A-1 hereto. The parties agree that the purchase price (the "Purchase
Price") to be paid at Closing by Purchaser in consideration of the Purchased
Membership Interests is payable to Sellers as follows:
(b) Purchaser shall pay to Gupta the following:
(i) An amount equal to $100,000.00 will be paid to Gupta by
delivery of a Note in such amount (the "Note"), in the form annexed hereto as
Exhibit A. The Note will bear interest at a per annum rate of 7.0% which is all
due and payable on the date which is 12 months after the Closing. The Note will
permit Purchaser to offset against any principal and interest due thereunder up
to 100% of indemnifiable Losses suffered or incurred by Purchaser hereunder, as
provided in Article VII hereof.
(c) (i) Purchaser shall issue to Xxxxxx, Xxxxxxx and Xxxx shares of
common stock of Computer Marketplace, Inc., a Delaware corporation and
Purchaser's parent company ("MKPL") as follows:
Xxxxxx 45,000 shares of MKPL common stock
Xxxxxxx 45,000 shares of MKPL common stock
Xxxx 45,000 shares of MKPL common stock
(ii) Purchaser shall retain and place in the escrow ("Escrow")
15,000 shares of common stock of MKPL
(the "Escrow Shares") allocated among Xxxxxx, Xxxxxxx and Xxxx as follows:
Xxxxxx 5,000 shares of the Escrow Shares
Xxxxxxx 5,000 shares of the Escrow Shares
Xxxx 5,000 shares of the Escrow Shares
for the express purpose of providing a fund from which to pay up to 100% of the
indemnifiable losses suffered or incurred by Purchaser hereunder as provided in
Article VII hereof. The Escrow Shares shall be held in Escrow in accordance with
the terms of an escrow agreement (the "Escrow Agreement"), in the form annexed
hereto as Exhibit B. To the extent not surrendered as payment to Purchaser
pursuant to Article VII, the Escrow Shares will be released to each of Xxxxxx,
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Xxxxxxx, and Xxxx at the conclusion of the survival period of all
representations and warranties pursuant to Section 7.1(a).
(iii) The shares of MKPL common stock issued to Sellers
pursuant to this Agreement shall be unregistered shares and may not be offered
or sold without registration under the Securities Act of 1933 or pursuant to
state and federal exemptions from registration. Each of the Sellers shall have
demand and piggy-back registration rights with respect to the shares of MKPL
common stock received by such Seller pursuant to this Agreement as set forth in
the Registration Rights Agreement attached hereto as Exhibit C.
(e) (i) At the Closing hereunder, the Sellers shall deliver to
Purchaser a schedule (the "Closing Company Debt Schedule") of the estimated
amount of Company Debt as of the Closing Date in accordance with section
5.3(g)(xix). The Closing Company Debt Schedule shall indicate the respective
amounts of Company Debt as of the Closing Date and the respective lenders,
payees or other obligees thereof.
(ii) To the extent that Purchaser determines to pay off any of
the Estimated Closing Company Debt on the Closing Company Debt Schedule, such
payments shall be made pursuant to instructions contained in payoff letters (the
"Payoff Letters") from the lenders or payees of such Company Debt addressed to
the Company and Purchaser.
SECTION 1.2: INTENTIONALLY OMITTED.
SECTION 1.3: CLOSING. Unless otherwise mutually agreed upon the parties
hereto, the closing (the "Closing") of the Acquisition and the other
Contemplated Transactions shall take place at the offices of Xxxxxx, Parachini,
Steinberg, Matzger & Xxxxxxx, LLP, 000 Xxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx,
XX 00000, at 10:00 a.m., local time, within three (3) days after all conditions
precedent to Closing hereunder shall have been satisfied, or waived, or, at such
other time and place as the parties hereto shall agree. The date of the Closing
is hereinafter called the "Closing Date". The parties hereto hereby agree to
deliver at the Closing such documents, certificates of officers and such other
instruments as are specified in Article V hereof and as reasonably may be
required to effect the transfer by Sellers of the Purchased Membership Interests
pursuant to and as contemplated by this Agreement and to consummate the
Contemplated Transactions. All events which shall occur at the Closing shall be
deemed to occur simultaneously.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
The Sellers, jointly and severally, represent and warrant to Purchaser
as of the date of this Agreement and as of the Closing Date (as if each such
representation and warranty was remade on the Closing Date), that:
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SECTION 2.1: LLC EXISTENCE AND POWER: STATUS AND TITLE OF PURCHASED
MEMBERSHIP INTERESTS.
(a) The Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of the
Company's organization as indicated in Schedule 2.1 and has all requisite powers
and all material Permits required to own, lease and operate its properties and
to conduct the Business as currently conducted. Except as set forth on Schedule
2.1, the Company is duly qualified to do business as a foreign limited liability
company and is in good standing in each jurisdiction where the character of the
property owned or leased by the Company or the nature of its activities makes
such qualification necessary or where the failure to so qualify would have a
material adverse effect on the Business, Assets, financial condition, prospects
or the results of operations of the Company, which jurisdictions are listed in
Schedule 2.1.
(b) Except as set forth in Schedule 2.1, the Company does not have any
Subsidiaries and does not directly or indirectly own any interest or investment
in any other person.
(c) As of the date of this Agreement, the only authorized, issued and
outstanding membership interests of the Company are the membership interests
included in the Purchased Membership Interests and as set forth on Schedule A-1
hereto. The Purchased Membership Interests have been validly issued and are
fully paid and non-assessable. Each Seller owns and holds good and marketable
title to the Purchased Membership Interests as set forth opposite such Sellers
name on Schedule A-1, free and clear of any Lien of any kind. Except as set
forth on Schedule A-1, there are no outstanding options, warrants, commitments,
agreements or any other rights of any character entitling any person other than
Purchaser to acquire any of the membership interests or other interest in the
Company.
SECTION 2.2: AUTHORITY RELATIVE TO THIS AGREEMENT. Each Seller has full
power, capacity and authority to execute and deliver this Agreement, to execute
and deliver each other Transaction Document to which he is a party and to
consummate the Contemplated Transactions. No other proceedings on the part of
Sellers (or any other person) are necessary to authorize the execution and
delivery by Sellers of this Agreement or the other Transaction Documents to
which he is a party or the consummation of the Contemplated Transactions. This
Agreement and the other Transaction Documents to which Sellers are a party have
been duly and validly executed and delivered by each Seller and (assuming the
valid execution and delivery thereof by the other parties thereto) constitute
the legal, valid and binding agreements of Sellers, enforceable against each
Seller in accordance with their respective terms, except as such obligations and
their enforceability may be limited by applicable bankruptcy and other similar
Laws affecting the enforcement of creditors' rights generally and except that
the availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought (whether at law or in
equity).
SECTION 2.3: NO CONFLICTS; CONSENTS. Except as set forth in SCHEDULE
2.3 (the "COMPANY'S REQUIRED CONSENTS"), neither the execution, delivery and
performance by any Seller of this Agreement or any of the Transaction Documents
to which he is a party, nor the consummation of the Contemplated Transactions
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(1) violates any provision of the Articles of Organization or Operating
Agreement (or comparable instruments) of the Company; (ii) requires the Company
or any Seller to obtain any consent, approval, Permit or action of or waiver
from, or make any filing with, or give any notice to, any Governmental Body or
any other person; (iii) violates, conflicts with or results in a breach or
default under (after the giving of notice or the passage of time or both), or
permits the termination of, any Contract, right, other obligation or restriction
relating to or which affects the Purchased Membership Interests, Sellers or the
Company to which the Company or any Seller is a party or by which any of them or
their Assets may be bound or subject, or results in the creation of any Lien
upon the Purchased Membership Interests or upon any of the Assets of the Company
pursuant to the terms of any such Contract or otherwise; (iv) violates any Law
or Order of any Governmental Body against, or binding upon, the Company, any
Seller or the Purchased Membership Interests or upon their respective Assets or
the Business; or (v) violates or results in the revocation or suspension of any
Permit.
SECTION 2.4: CHARTER DOCUMENTS AND LLC RECORDS.
(a) The Sellers have heretofore delivered to Purchaser true and
complete copies of the Articles of Organization and Operating Agreement (or
comparable instruments) of the Company, as in effect on the date hereof. The
stock and transfer books (or comparable documents) of the Company have been made
available to Purchaser for its inspection and are true and complete. The Sellers
have heretofore delivered to Purchaser true and complete copies of the minutes
of meetings (or written consents in lieu of meetings) of the members of the
Company. All actions taken by the members of the Company are reflected in such
minutes, written consents and other documentation.
(b) All financial, business and accounting books, ledgers, accounts and
official and other records relating to the Company and the Business have been
properly and accurately kept and completed in all material respects, and, to the
knowledge of Sellers, there are no material inaccuracies or discrepancies
contained or reflected therein.
SECTION 2.5: FINANCIAL INFORMATION. The Sellers have previously
furnished to Purchaser true and complete copies of (i) the Company's audited
financial statements at and for the years ended December 31, 1998 and 1997
(together, the "Annual Statements"), and (ii) all management letters, audit
letters and attorney audit response letters issued in connection with the
Company's financial statements for each of the two years ended December 31,
1998. The Company's Annual Statements have been prepared in accordance with GAAP
as set forth in the notes thereto and were audited by the Company's accountants.
Each of the Annual Statements presents fairly the financial position of the
Company as of its date, and the Company's earnings and cash flow for the periods
then ended and have been prepared in accordance with GAAP as set forth in the
notes thereto. Each balance sheet contained in the Annual Statements fully sets
forth all Assets and Liabilities of the Company existing as of its date which,
under GAAP, should be set forth therein, and each statement of earnings
contained therein sets forth the items of income and expense of the Company
which should appear therein under GAAP.
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SECTION 2.6: LIABILITIES. As to the knowledge of Sellers, except as and
to the extent reflected in the audited balance sheet of the Company at December
31, 1998 (the "Latest Balance Sheet Date") referred to in Section 2.5, the
Company does not have, as of the Latest Balance Sheet Date, any Liabilities or
obligations (other than obligations of continued performance under Contracts and
other commitments and arrangements entered into in the ordinary course of the
Business); and except as described in Schedule 2.6A hereto, the Company has not
incurred any Liabilities since the Latest Balance Sheet Date, except (i) current
Liabilities for trade or business obligations incurred in connection with the
purchase of goods or services in the ordinary course of the Business and
consistent with past practice, and (ii) Liabilities in respect of borrowings
under the Company Debt. Schedule 2.6B contains a true and correct list of all
Company Debt with respect to the Company as of the date hereof.
SECTION 2.7: COMPANY RECEIVABLES. As to the knowledge of Sellers,
except to the extent of the amount of the reserve for doubtful accounts
reflected in the Latest Balance Sheet or as set forth in Schedule 2.7, all the
Receivables of the Company reflected therein and all Receivables that have
arisen since the Latest Balance Sheet Date (except Receivables that have been
collected since such date) are valid and enforceable claims, and constitute bona
fide Receivables resulting from the sale of goods and services in the ordinary
course of the Business. The Receivables are subject to no valid defense,
offsets, returns, allowances or credits of any kind, and are fully collectible
within 90 days from their due date, except to the extent of the amount of the
reserve for doubtful accounts reflected in the Latest Balance Sheet. Except for
Receivables, the Company has not made any loan or advance to any person.
SECTION 2.8: ABSENCE OF CERTAIN CHANGES. Since the Latest Balance Sheet
Date, except as set forth in this Agreement or disclosed in Schedule 2.8. the
Company has conducted the Business in the ordinary course consistent with past
practices and, as to the knowledge of Sellers, there has not been:
(a) Any material adverse change in the Business, or the Assets,
financial condition, prospects or the results of operations of the Company
(collectively, the "Condition of the Business") or any event, occurrence or
circumstance that could reasonably be expected to cause such a material adverse
change;
(b) Any transaction or Contract with respect to the purchase,
acquisition, lease, disposition or transfer of any Assets or to any capital
expenditure (in each case, other than in the ordinary course of the Business in
accordance with past practice) or creation of any Lien on any Asset;
(c) Except as set forth on Schedule 2.8(c), any declaration, setting
aside or payment of any dividend or other distribution with respect to any
interest in the Company;
(d) Any damage, destruction or other casualty loss (whether or not
covered by insurance), condemnation or other taking affecting the Assets of the
Company;
6
(e) Any change in any method of accounting or accounting practice by
the Company;
(f) Except as set forth on SCHEDULE 2.8(F), other than in the ordinary
course of the Business with respect to employees of the Company whose base
salary is less than $50,000.00, any increase in the compensation payable or to
become payable to any officer, shareholder, director, consultant, agent, sales
representative or full-time employee of the Company, or any alteration in the
benefits payable to any thereof;
(g) Any material adverse change in the relationships of the Company
with their customers or clients;
(h) Except for any changes made in the ordinary course of the Business,
any material change in the Company's business policies, including advertising,
marketing, pricing, purchasing, personnel, returns or budget policies;
(i) Except in the ordinary course of the Business, consistent with past
practice, any payment, directly or indirectly, of any Liability before it became
due in accordance with its terms; or
(j) Any material modification, termination, amendment or other
alteration or change in the terms or provisions of any Contract.
SECTION 2.9: PROPERTIES; TITLE.
(a) A Complete list and general description of all real property owned
by the Company is set forth in SCHEDULE 2.9A and a complete list of all real
property leased by the Company is set forth in SCHEDULE 2.9B (Collectively, the
"Real Property"). With respect to owned Real Property, the Company has good,
marketable and insurable fee simple title to such property, free and clear of
all Liens and other title defects of any nature whatsoever, except real estate
Taxes (general and specific) not yet due and payable, restrictions imposed by
zoning ordinances, Liens with respect to Company Debt, or as disclosed in
SCHEDULE 2.9A. SCHEDULE 2.9A also sets forth with respect to such owned Real
Property a list of all title insurance policies, deeds, appraisal reports,
surveys and environmental reports held or controlled by the Company, true and
complete copies of which have been provided to Purchaser.
(b) With respect to the leased Real Property, SCHEDULE 2.9B also sets
forth the commencement date of any such lease and any amendments thereto, the
term thereof, including any renewal options, options to purchase, rights of
first refusal, and the aggregate monthly rental payable thereunder. The Company
enjoys peaceful and undisturbed possession under all such leases, all of such
leases are valid and neither the Company nor the Sellers are in default, except
as disclosed in SCHEDULE 2.9B.
(c) All structures and buildings occupied by the Business (whether
leased or owned) are in such operating condition (subject to normal wear and
tear) with no structural or other defects that could interfere with the
7
operation of the Business, and are suitable for the purposes for which they are
currently used. The Business is not in violation of any building, zoning,
anti-pollution, health, occupational safety or other Law or any Order or Permit
in respect of such Real Property, structures and buildings. Except as disclosed
in SCHEDULE 2.9C, no person, other than the Company, has any right to occupy or
possess any of the Real Property or any such structures or buildings.
(d) Except as disclosed in SCHEDULE 2.9D, the Company has good, valid,
marketable, legal and beneficial title to (or valid leasehold interest in) all
of its Assets and is the lawful owner of its Assets, free and clear of all
Liens. The equipment and other tangible personal property constituting part of
the Company's Assets (whether owned or leased) have been well-maintained in
accordance with customary industry standards, are in good condition and repair
(subject to normal wear and tear) and are adequate in quantity and quality for
the operation of the Business as presently conducted. There are no outstanding
options, warrants, commitments, agreements or any other rights of any character,
entitling any person other than Purchaser to acquire any interest in all, or any
part of, the Assets. SCHEDULE 2.9D contains a list and description of all (i)
equipment, and (ii) other tangible personal property of the Company with a book
value (before depreciation) of $10,000.00 or more.
SECTION 2.10: CONTRACTS. As to the knowledge of Sellers, SCHEDULE 2.10
lists all Contracts, arrangements and agreements, written or oral, of the
following types to which the Company is a party or by which the Company, the
Business or any of the Assets is bound as of the date hereof:
(a) mortgages, indentures, guarantees, security agreements, installment
obligations and other agreements and instruments relating to the borrowing of
money or extension of credit;
(b) employment, consulting and agency agreements and collective
bargaining agreements;
(c) sales agency, manufacturer's representative or distributorship
agreements;
(d) agreements, orders or commitments for the purchase by the Company
of raw materials, supplies or finished products exceeding $10,000;
(e) agreements, orders or commitments for the sale by the Company of
services of the Business or Assets exceeding $10,000, including each Contract
relating to a Major Customer (as defined in Section 2.20 below);
(f) licenses or patents, trademarks, copyrights and other intangible
property rights;
(g) all capitalized leases and each lease of real or personal property
in excess of $10,000;
8
(h) joint venture agreements, shareholders' agreements and any
agreement between the Company and any Affiliate of the Company;
(i) agreements limiting the freedom of the Company or its officers and
employees to compete in any line of business similar to the Business; and
(j) other agreements, contracts and commitments material to the
Business, or which in any case involve payments or receipts of more than $10,000
or which may not be canceled on no more than 30 days' notice without penalty or
premium.
All such Contracts are valid, in full force and effect and binding upon
the Company, as the case may be, and the other parties thereto in accordance
with their terms. The Company is not in default (or alleged default) under any
such Contract, nor is any other party thereto in default thereunder, nor does
any condition exist that with notice or the lapse of time or both would
constitute a default (or give rise to a, termination right) thereunder. None of
the other parties to any such Contract intends to terminate or alter the
provisions thereof by reason of the Contemplated Transactions or otherwise.
Since the Latest Balance Sheet Date, except as set forth in SCHEDULE 2.10,
neither the Company nor any Seller has waived any right under any such Contract,
amended or extended any such Contract or failed to renew (or received notice of
termination or failure to renew with respect to) any such Contract. Except as
set forth on SCHEDULE 2.3, no consent of any party to the Contracts is required
for the execution, delivery or performance of this Agreement or the consummation
of the Contemplated Transactions. Neither the Company nor any Seller has
received written or oral notice of cancellation or termination of any oral
Contract. The Sellers have heretofore delivered to Purchaser true, correct and
complete copies of all of the written Contracts and summaries of the material
provisions of all oral Contracts,
SECTION 2.11: INTANGIBLE PROPERTY. As to the knowledge of Sellers,
SCHEDULE 2.11 sets forth a true, correct and complete list of all trademarks,
registered copyrights, service marks or trade names (and all applications for
any of the foregoing), Permits, grants and licenses and all other intangible
assets, properties and rights running to or from, or used by, the Company in the
conduct of the Business, and there are no other trademarks, copyrights, service
marks, trade names or other intangible assets, properties or rights that are
material to the Business (the "INTELLECTUAL PROPERTY RIGHTS"). Except as
disclosed in SCHEDULE 2.11:
(a) The Company owns all right, title and interest, or possesses
adequate rights, in and to the Intellectual Property Rights necessary to conduct
the Business and there are no agreements, arrangements, or, to the Sellers'
knowledge, Claims or any other rights of any character entitling any person
other than Purchaser to any interest in the Intellectual Property Rights;
(b) The Intellectual Property Rights do not infringe on or conflict
with the rights or intellectual property of third parties, and neither the
Sellers nor the Company has received any notice contesting it's right to use any
such Intellectual Property Rights;
9
(c) The Intellectual Property Rights have not been and are not the
subject of any pending or, to the Sellers' knowledge threatened litigation or
Claim of infringement;
(d) No license or royalty agreement to which the Company is a party is
in breach or default by any party thereto or the subject of any notice of
termination given or, to the Sellers' knowledge, threatened;
(e) the Company has not granted any license or agreed to pay or receive
any royalty in respect of any Intellectual Property Rights; and
(f) The Contemplated Transactions will not adversely affect the right,
title and interest of the Company in and to the Intellectual Property Rights.
SECTION 2.12: CLAIMS AND PROCEEDINGS. Except as set forth in SCHEDULE
2.12, there are no outstanding Orders of any Governmental Body against or
involving the Company, the Assets or the Business. Except as set forth in
SCHEDULE 2.12, there are no actions, suits, claims or counterclaims or legal,
administrative or arbitration proceedings or investigations (collectively,
"Claims") (whether or not the defense thereof or Liabilities in respect thereof
are covered by insurance), pending or, to the Sellers' knowledge, threatened on
the date hereof, against or involving the Company, the Purchased Membership
Interests, the Assets or the Business. SCHEDULE 2.12 also indicates those Claims
the defense thereof or Liabilities in respect thereof are covered by insurance
subject to deductibles. Except as set forth in SCHEDULE 2.12, on the date hereof
there are no Claims pending or, to the Sellers' knowledge, threatened, other
than Claims that, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the Condition of the Business.
There exists on the date hereof, and there will exist as of the Closing, no
fact, event or circumstance known to the Sellers that would give rise to any
Claim that I pending or threatened on the date hereof or on the Closing Date,
could reasonably be expected to have a material adverse effect on the Condition
of the Business. All notices required to have been given to any insurance
company listed as insuring against any Claim set forth in SCHEDULE 2.12 have
been timely and duly given and, except as set forth in SCHEDULE 2.12, no
insurance company has asserted that such Claim is not covered by the applicable
policy relating to such Claim. There are no Claims pending or, to the Sellers'
knowledge, threatened that would give rise to any right of indemnification on
the part of any director or officer of the Company or the heirs, executors or
administrators of such director or officer, against the Company.
SECTION 2.13: TAXES.
(a) Except as set forth in SCHEDULE 2.13:
(i) the Company and each Subsidiary, if any, has timely filed
or timely requested extensions to file those tax returns which are currently due
or, if not yet due, will timely file or timely request extensions to file all
Tax Returns required to be filed by it for all taxable periods ending on or
before the Closing Date and all such Tax Returns are, or will be when filed,
10
true, correct and complete. Copies of all such Tax Returns for periods ending on
or after December 31, 1985 have been given to the Purchaser;
(ii) the Company and each Subsidiary, if any, has paid, to the
appropriate Tax Authority, or, if payment is not yet due, will pay, to the
appropriate Tax Authority, or has established, in accordance with GAAP and
consistent with past practice, accruals that are reflected on the Company's
Interim Financial Statements for the payment of all Taxes imposed on a Company
or any Subsidiary or for which a Company or any Subsidiary is or could be
liable, whether to taxing authorities or to other persons (pursuant to a tax
sharing agreement or otherwise) for all taxable periods beginning on or Closing
Date;
(iii) no extension of time has been requested or granted for
either the Company or any Subsidiary to file any Tax Return that has not yet
been filed or to pay any Tax that has not yet been Paid;
(iv) neither the Company nor any Subsidiary has received
notice of a determination by a Tax Authority that Taxes are owed by the Company
or such Subsidiary, (Such determination to be referred to as a "Tax Deficiency")
and, to the Sellers' knowledge, no Tax Deficiency is proposed or threatened;
(v) all Tax Deficiencies have been paid or finally settled and
all amounts determined by settlement to be owed have been paid;
(vi) there are no Tax liens on or pending against the Company
or any Subsidiary or any of its properties that arose in connection with any
failure to pay any Tax;
(vii) there are no presently outstanding waivers or extensions
or requests for waiver or extension of the time within which a Tax Deficiency
may be asserted or assessed;
(viii) no issue has been raised in any examination,
investigation, audit, suit, action, claim or proceeding relating to Taxes (a
"Tax Audit") which, by application of similar principles to any past, present or
future period, would result in a Tax Deficiency for such period and no claim has
ever been made by a Tax Authority in a Jurisdiction where the Company or any
Subsidiary does not file Tax Returns that it is or may be subject to taxation by
that Jurisdiction;
(ix) there are no pending or, to the Sellers' knowledge,
threatened, Tax Audits of the Company or any Subsidiary;
(x) all Tax Returns filed with respect to taxable years of the
Company through the taxable year ended December 31, 1998 have either been
examined and such examinations have closed or are Tax Returns with respect to
which the applicable period for assessment under applicable law, after giving
effect to extensions or waivers, has expired;
11
(xi) there are no requests for rulings in respect of any Tax
pending between the Company or any Subsidiary and any Tax authority;
(xii) the Company and each Subsidiary has complied with all
applicable laws, rules and regulations relating to the withholding and payment
of Taxes and has timely withheld and paid to the proper governmental authorities
all amounts required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor or shareholder;
(xiii) the Company and each Subsidiary has not made any
payments, is not obligated to make any payments nor is a party to any agreement
that under certain circumstance could obligate it to make any payments that will
not be deductible under Code Section 280G or Code Section 162(m);
(xiv) the Company and each Subsidiary has disclosed on its
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code;
(xv) after the date hereof, no election with respect to Taxes
will be made without the written consent of Purchaser other than those elections
which would have no material adverse effect and which are consistent with past
practices of the Company;
(xvi) none of the Assets of the Company or any Subsidiary is
property that it is required to treat as being owned by any other person
pursuant to the "safe harbor lease" provisions of former Section 168(0)(8) of
the Code;
(xvii) none of the Assets of the Company or any Subsidiary
directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code;
(xviii) none of the Assets of the Company or any Subsidiary is
"tax-exempt use property" within the meaning of Section 168(h) of the Code;
(xix) the Company, and each Subsidiary, has not agreed to
make, nor to the Sellers' knowledge is required to make, any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise;
(xx) the Company, and each Subsidiary has not participated in,
and will not participate between the date hereof through the Closing Date in, an
international boycott within the meaning of Section 999 of the Code;
(xxi) the Company and each Subsidiary has not been a United
States real property holding corporation as defined in Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code;
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(xxii) the Company and each Subsidiary does not have, and has
not had, a permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and such foreign
country;
(xxiii) the Company and each Subsidiary is not a party to any
Tax allocation or Tax sharing agreement;
(xxiv) the Company and each Subsidiary is not a person other
than a United States person within the meaning of the Code; and
(xxv) the Contemplated Transactions herein are not subject to
tax withholding provisions of the Code.
(a) The Company's basis, deferred intercompany gains and excess loss
account, if any, in each Subsidiary is set forth in SCHEDULE 2.13. The earnings
and profits (and any adjustment required by Section 1503(e) of the Code) for
each Subsidiary are set forth in Schedule 2.1
(b) To the Sellers' knowledge, no previous ownership change, as defined
under Section 382 of the Code has occurred, direct or indirectly, with respect
to the Company or any Subsidiary.
(c) Except as set forth in SCHEDULE 2.13, neither the Company nor any
Subsidiary has been at any time a member of any combined, consolidated or
affiliated group of corporations, any partnership or joint venture or the holder
of a beneficial interest in any trust for any period for which the statute of
limitations for any Tax has not expired.
(d) Except as set forth in SCHEDULE 2.13, neither the Company nor any
Subsidiary:
(i) has or is projected to have any amount includible in its
income for the current taxable year under Section 951 of the Code,
(ii) has been a passive foreign investment company within the
meaning of the Section 1296 of the Code, or
(iii) has an unrecaptured overall foreign loss within the
meaning of Section 904(0) of the Code.
(a) Neither the Company nor any Subsidiary has any (i) income
reportable for a period ending after the Closing Date but attributable to a
transaction (e.g., installment sale) or a change in accounting method occurring
in or made for a period ending on or prior to the Closing Date which resulted in
a deferred reporting on income from such transaction or from such change in
13
accounting method (other than a deferred intercompany transaction), or (ii) a
deferred gain or loss arising out of any deferred intercompany transaction.
(b) The [Sellers] shall be responsible for the good faith timely
preparation of all federal corporate income Tax Returns and state corporate
income Tax Returns for the Company (the "Corporation Returns"), including
extensions, for taxable periods ending on or prior to the date hereof. Purchaser
shall timely file all Corporation Returns timely delivered to it by the Sellers
and shall furnish the Sellers with evidence regarding the filing of such
Corporation Returns; PROVIDED, that Purchaser shall have the right to review and
approve such Corporation Returns, which approval shall not be unreasonably
withheld; PROVIDED, FURTHER, that Purchaser shall retain the right to timely
file all tax returns relating to the Company if the Sellers shall have not
timely prepared the Corporation Returns, if any disputes relating to the
Corporation Returns shall not have been resolved or if for any other reason the
Corporation Returns require filing under applicable Law.
(c) SCHEDULE 2.13 contains (i) a schedule of the filing dates of all
Tax Returns required to be filed by the Company, (ii) a description of all past
Tax Audits involving the Company, (iii) a list of all elections made by the
Company relating to Taxes, including, but not limited to, whether the Company
has made an election pursuant to Section 754 of the Code, and (iv) a list of the
states, territories and jurisdictions (whether foreign or domestic) to which any
Tax is properly payable by the Company. Except as set forth in Schedule 2.13,
the Company has retained all supporting and backup papers, receipts,
spreadsheets and other information necessary for (i) the preparation of all Tax
Returns that have not yet been filed, and (ii) the defense of all Tax Audits
involving taxable periods either ending on or during the 6 years prior to the,
Closing Date or from which there are unutilized net operating loss, capital loss
or investment tax credit carryovers.
(d) The Company has collected and remitted to the appropriate Tax
Authority all sales and use or similar Taxes required to have been collected,
including any interest and any penalty, addition to tax or a additional amount
unpaid, and has been furnished properly completed exemption certificates for all
exempt transactions. The Company has collected and/or remitted to the
appropriate Tax Authority all withholding, payroll, employment, property,
customs duty, fee, assessment or charge of any kind whatsoever (Including but
not limited to Taxes assessed to real property and water and sewer rents
relating thereto), including any interest and any penalty, addition to tax or
additional amount unpaid.
(e) The parties agree that the Purchase Price and the liabilities of
the Company (plus other relevant items) will be allocated to the assets of the
Company, respectively for all purposes (including Tax and financial accounting
purposes) based on their relative fair market values, as reflected in SCHEDULE
2.13(J) hereof. The Purchaser, the Company and the Sellers will file all Tax
Returns (including amended returns and claims for refund) and information
reports in a manner consistent with such allocation.
14
SECTION 2.14: EMPLOYEE BENEFIT PLANS.
(a) Set forth in Schedule 2.14 is a list of each employee benefit plan
(within the meaning of Section 3(3) of ERISA), written or oral employment or
consulting agreement, severance pay plan or agreement, the policies and
procedures of the Company, employee relations policy (or practice, agreement or
arrangement), agreements with respect to leased or temporary employees, vacation
plan or arrangement, sick pay plan, membership interest purchase plan,
membership interest option plan, fringe benefit plan, incentive plan, bonus
plan, cafeteria or flexible spending account plan and any deferred compensation
agreement (or plan, program, or arrangement) covering any present or former
employee of the Company and which is, or at any time during the six year period
preceding the Closing Date was, sponsored or maintained by (or to which
contributions are, were, or at any time during the six year period preceding the
Closing Date were required to have been, made by) either (i) the Company, or
(ii) any other organization which is a member of a controlled group of
organizations (within the meaning of Code Sections 414(b), (c), (m) or (o) of
which the Company is a member (the "CONTROLLED GROUP"). Each and every such
plan, program, policy, practice, arrangement and agreement included on the list
set forth In SCHEDULE 2.14 is hereinafter referred to as an "EMPLOYEE BENEFIT
PLAN."
(b) With respect to each Employee Benefit Plan, there has been made
available to Purchaser (i) current, accurate and complete copies of each such
Employee Benefit Plan (including all trust agreements, insurance or annuity
contracts, descriptions, general notices to employees or beneficiaries and any
other material documents or instruments relating thereto); (ii) where
applicable, the most recent audited financial statement With respect to each
such Employee Benefit Plan; (iii) copies of the most recent determination
letters with respect to any such Employee Benefit Plan which is an employee
pension benefit plan (as such term is defined in Section 3(2) of ERISA) intended
to qualify under the Code; (iv) where applicable, copies of the most recent
actuarial reports; and (v) where applicable, copies of the three most recent
annual reports (Forms 5500).
(c) With respect to each Employee Benefit Plan:
(i) each such Employee Benefit Plan which is an employee
pension benefit plan (as such term is defined in ERISA Section 3(2)) intended to
qualify under the Code so qualifies and has received a favorable determination
letter as to its qualification under the Code, and, to the Sellers' knowledge,
no event has occurred that will or could be expected to give rise to
disqualification or loss of tax-exempt status of any such plan or related trust;
(ii) the Company and each member of the Controlled Group has
complied in all material respects with all provisions of ERISA, the Code and
other applicable Law, and no act or omission by the Company or each member of
the Controlled Group has occurred that will or could be expected to give rise to
a material liability for a breach of fiduciary responsibilities under ERISA or
to any material fines or penalties under ERISA Section 502(l);
(iii) no Employee Benefit Plan provides for any
post-retirement life, medical, dental or other welfare benefits (whether or not
insured) for any current or former employee except as required under Code
Section 4980B, Part 6 of Title I of ERISA or applicable state or local Law;
15
(iv) all contributions insurance and annuity premiums and
salary deferrals elected by an employee required to have been made by the
Company or any member of the Controlled Group under law or under the terms of
any contract, agreement or Employee Benefit Plan for all complete and partial
periods up to and including the date hereof have been made or will be made;
(v) the Contemplated Transactions will not be the direct or
indirect cause of any amount paid or payable from such Employee Benefit Plan
being classified as an excess parachute payment under Code Section 280G;
(vi) to the Sellers' knowledge, there are no matters pending
before the IRS, the United States Department of Labor or the Pension Benefit
Guaranty Corporation ("PBGC");
(vii) to the Sellers' knowledge, there have been no claims or
notice of claims filed under any fiduciary liability insurance policy covering
any Employee Benefit Plan;
(viii) to the Sellers' knowledge, each and every such Employee
Benefit Plan which is a group health plan (as such term is defined under Section
5000(b)(1) of the Code or Section 607(1) of ERISA) complies, and in each and
every case has complied in all material respect, with the applicable
requirements of Code Section 4980B, Part 6 of Title I of ERISA, the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996,
and all other federal, state or local Laws or ordinances requiring the provision
or continuance of health or medical benefits; and
(ix) neither the Company nor any member of the Controlled
Group maintains, sponsors or has contributed to (or has at any time maintained,
sponsored or contributed to, or been obligated to maintain, sponsor or
contribute to): (1) any voluntary employees' beneficiary association within the
meaning of Section 501(c) (9) of the Code; (2) any welfare benefit fund within
the meaning of Section 419 of the Code; (3) any plan or arrangement which is
subject to (A) the minimum funding requirements of Code Section 412, (B)
Subtitle B Part 3 of Title I of ERISA, or (C) Title Iv of ERISA; or (4) any
multi-employer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
other than those set forth in Schedule 2.14.
(a) With respect to any Employee Benefit Plan:
(i) there are no actions, suits or claims (other than routine
claims for benefits in the ordinary course) Pending or, to the Sellers'
knowledge, threatened, and the Sellers do not have any knowledge of any facts
which could give rise to any such actions, suits or claim's (other than routine
claims for benefits in the ordinary course), which could subject any member of
the Controlled Group to any material liability;
16
(ii) neither the Company, any member of the Controlled Group
or, to the Sellers' knowledge, any other person has engaged in a prohibited
transaction, as such term is defined in Code Section 4975 or ERISA Section 406,
which would subject any member of the Controlled Group to any material taxes,
penalties or other liabilities resulting from prohibited transactions under Code
Section 4975 or under ERISA Sections 409 or 502(i);
(iii) no event has occur and no condition exists that could
subject any member of the Controlled Group to any material tax or penalty under
Code Sections 511, 4971, 4972, 4976, 4977, 4978, 4979, 4979A, 4980B or 5000, or
to a material fine under ERISA Section 502(c);
(iv) neither the Company nor any member of the Controlled
Group is subject to (1) any liability, lien or other encumbrance under any
agreement imposing secondary liability on either the Company or on any member of
the Controlled Group as a seller of the assets of a business in accordance with
Section 4204 of ERISA or under any other provision of Title IV of ERISA or Code
Section 412, (2) contingent liability under Title IV of ERISA to the PBGC or to
any plan, participant or other person, or (3) a lien or other encumbrance under
Section 4068 of ERISA; and
(v) the Company is not subject to any liability pursuant to
Section 4069 of ERISA.
(e) (i) neither the Company nor any member of the Controlled Group is
subject to any legal, contractual, equitable or either obligation to (1)
establish as of any date any employee benefit plan of any nature, including)
without limitation, any pension, profit sharing, welfare, post-retirement
welfare, membership interest option, membership interest or cash award,
non-qualified deferred compensation or executive compensation plan, policy or
practice, or (2) continue any employee benefit plan of any nature, including,
without limitation, any Employee Benefit Plan or any other pension, profit
sharing, welfare or post-retirement welfare plan, or any membership interest
option, membership interest or cash award, non-qualified deferred compensation
or executive compensation plan, policy or practice (or to continue their
anticipation in any such benefit plan, policy or practice) on or after the date
hereof;
(ii) the Company and each member of the Controlled Group may,
in any manner, and without the consent of any employee, beneficiary or other
person, terminate, modify or amend any such Employee Benefit Plan or any other
plan, program or practice (or its participation in such Employee Benefit Plan or
any other plan, program or practice) effective as of any date on or after the
date hereof; and
(iii) to the Sellers' knowledge, no representations or
communications (directly or indirectly, orally, in writing or otherwise) with
respect to participation, eligibility for benefits, vesting, benefit accrual
coverage or other material terms of any Employee Benefit Plan have been made to
17
any employee, beneficiary or other person other than those which are in
accordance with the terms and provisions of each such Plan as in effect
immediately prior to the date hereof and the Closing Date.
SECTION 2.15: EMPLOYEE-RELATED MATTERS.
(a) Schedule 2.15 contains a true and correct list of all members,
full-time employees (listed by job classification), and consultants of the
Company as of the date set forth herein, [which persons shall be terminated on
or before the Closing] using any agreement relating thereto, and a description
of the rate and nature of all compensation payable by the Company to each such
person. Schedule 2.15 also contains a description of all existing severance,
accrued vacation obligations or retiree benefits of any current former member,
officer, employee or consultant (to the extent not included in Schedule 2.14) of
the Company. Except as set forth on such Schedule 2.15, the employment or
consulting arrangement of all such persons is terminable at will.
(b) Except as set forth in Schedule 2.15, (i) the Company is not a
party to any Contract with any labor organization or other representative of its
employees; (ii) there is no unfair labor practice charge or complaint pending
or, to the Sellers' knowledge, threatened against the Company; (iii) the Company
has not experienced any labor strike, slowdown, work stoppage or similar labor
controversy within the past 3 years; (iv) no representation question has been
raised respecting the Company employees working within the past 3 years, nor, to
the Sellers' knowledge, are there any campaigns being conducted to solicit
authorization from the Company's employees to be represented by any labor
organization; (v) no Claim before any Governmental Body brought by or on behalf
of any employee, prospective employee, former employee, retiree, labor
organization or other representative of the Company's employees, is pending or,
to the Sellers' knowledge, threatened against the Company; (vi) the Company is
not a party to, or otherwise bound by, any Order relating to its employees or
employment practices; and (vii) except with respect to ongoing disputes of a
routine nature involving immaterial amounts, the Company has paid in full to all
of their employees all wages, salaries, commissions, bonuses, benefits and other
compensation due and payable to such employees.
SECTION 2.16: INSURANCE. SCHEDULE 2.16 sets forth a list of all
insurance policies, fidelity and surety bonds and fiduciary liability policies
(the "INSURANCE POLICIES") covering the Assets, the Business, operations,
employee, officers and directors of the Company and true and complete copies of
all such Insurance Policies have been delivered to Purchaser. Schedule 2.16 also
sets forth (a) with respect to each Insurance Policy, the applicable deductible
amounts and any limitations to coverage, (b) any letter of credit relating to
such Insurance Policies and all inspections and reports delivered to the Company
by any insurer with respect to such Insurance Policies, copies of which have
been delivered to Purchaser, and (c) a true and complete list of Claims made in
respect of Insurance Policies during the 5 years prior to the date hereof. There
is no Claim by the Company pending under any of such Insurance Policies as to
which coverage has been questioned, denied or disputed by the underwriters
Insurance Policies or requirement by any insurer to perform work which has not
been satisfied, other than standard reservation of rights made at the time of
undertaking the defense of certain claims. All premiums due under all Insurance
Policies have been paid and the Company is otherwise in material compliance with
18
the terms and conditions of all such Insurance Policies. All Insurance Policies
are in full force and effect. The Sellers do not know of any threatened
termination of, premium increase with respect to, or uncompleted requirements
under, any Insurance Policy. No premiums are or will be payable by Purchaser
under Insurance, Policies after the Closing in respect of insurance provided for
periods Prior to the Closing Date, except as accrued on the Interim Financial
Statements.
SECTION 2.17: COMPLIANCE WITH LAWS. Except as set forth on Schedule
2.17. the Company is not in violation of any order, judgment, injunction, award,
citation, decree, consent decree or writ (collectively, "Orders"), or any law,
statute, code, ordinance, rule regulation or other requirement (collectively,
"Laws"), of any government or political subdivision thereof, whether federal,
state, local or foreign, or any agency or instrumentality of any such government
or political subdivision, or any court or arbitrator (collectively,
"Governmental Bodies") affecting its Assets, the Purchased Membership Interests
or the Business.
SECTION 2.18: PERMITS. The Company has obtained all licenses, permits,
certificates, certificates of occupancy, orders, authorizations and approvals
(collectively, "Permits") and all Environmental Permits of, and has made all
required registrations and filings with, any Governmental Body that are required
for the conduct of its Business. All Permits and Environmental Permits that are
required for the conduct of the Business by the Company are listed in SCHEDULE
2.18 and are in full force and effect; no violations are or have been recorded
in respect of any Permit and no proceeding is pending or, to the Sellers'
knowledge, threatened to revoke or limit any Permit and no Permit will terminate
by reason of the Contemplated Transactions.
SECTION 2.19: ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 2.19:
(1) The Company is in full compliance with all Environmental
Laws;
(2) There have been no reportable Releases of Hazardous
Substances by the Company or violations of Environmental Laws alleged by
regulatory authorities or any third-party against the Company;
(3) The Company holds all Environmental Permits, licenses or
other authorizations necessary for lawful operation of the Business and all are
in full force and are disclosed in Schedule 2.19;
(4) Neither the Company nor any Seller has received oral or
written notice of a violation or of a claim of potential or actual liability by
any regulatory authority or third-party against the Company under Environmental
Laws, nor are any such potential claims known to the Company or any Seller.
19
(5) To the Sellers' knowledge, none of the sites or facilities
owned, leased or controlled by the Company (both currently or ever in the past)
(A) are or have been used by the Company or any other entity to generate,
manufacture, process, refine, handle, use or dispose of any Hazardous
Substances, or (B) have or have had areas of contamination from Releases of
Hazardous Substances that have been remediated or that require remediation under
Environmental Laws; and
(6) To the Sellers' knowledge, no underground storage tanks,
polychlorinated biphenyl-containing or asbestos-containing structures or items
are in place at any facility owned or leased or controlled by the Company (both
currently or ever in the past) and any such previously located tanks, items or
structures have been removed (and area of location remediated) in accordance
with applicable Environmental Laws.
(b) SCHEDULE 2.19 also lists with particularity all off-site locations
where the Company, directly or indirectly, has stored, discharged, transported,
deposited or otherwise used for, Hazardous Substances.
SECTION 2.20: CUSTOMERS AND CLIENTS. SCHEDULE 2.20 lists, by dollar
volume paid for [the year ended December, 1998], the 10 largest customers and
clients of the Company (collectively, the "MAJOR CUSTOMERS"). Except as set
forth in SCHEDULE 2.20, the relationship of the Company with its Major Customers
are reasonable commercial working relationships and (i) all amounts owing from
its Major Customers, if not in dispute, have been paid in accordance with their
respective terms, (ii) none of its Major Customers within the last twelve months
has threatened in writing to cancel, or otherwise terminate, the relationship of
such person with the Company, and (iii) none of its Major Customers during the
last twelve months has decreased materially or threatened to decrease or limit
materially, its relationship with the Company or, to the Sellers' knowledge,
intends to decrease or limit materially its purchases from the Company.
SECTION 2.21: POTENTIAL CONFLICTS OF INTEREST. Except as set forth in
SCHEDULE 2.21, no officer, member or Affiliate of the Company, no spouse of any
such officer, member or Affiliate, and, to the Sellers' knowledge, no entity
controlled by one or more of the foregoing:
(a) owns, directly or indirectly, any interest in (excepting less than
1% stock holdings for investment purposes, in securities of publicly held and
traded companies), or is an officer, director, employee or consultant of, any
person that carries on business in competition with the Company;
(b) owns, directly or indirectly, in whole or in part, any material
Asset that the Company uses in the conduct of its Business; or
(c) has any material Claim whatsoever against, or owes any amount to,
the Company, except for claims in the ordinary course of the Business such as
for accrued vacation pay and accrued benefits under employee benefit plans.
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SECTION 2.22: FINDERS' FEES. Except as set forth in SCHEDULE 2.22,
there is no investment banker, broker, finder or other intermediary which has
been retained by or authorized to act on behalf of any of Sellers or the Company
who might be entitled to any fee or commission from Sellers or the Company upon
consummation of the Contemplated Transactions.
SECTION 2.23: DEPOSITARIES; POWERS OF ATTORNEY, ETC. SCHEDULE 2.23 sets
forth (i) the name of each bank or similar entity in which the Company has an
account, lock box or safe deposit box and the names of all persons authorized to
draw thereon or to have access thereto, and (ii) the name of each person holding
a general or special power of attorney from the Company and a description of the
terms of.
SECTION 2.24: YEAR 2000. The Sellers have reviewed the areas within the
business and operations of the Company which could be adversely affected by, and
have developed or are developing a program to address on a timely basis, (the
"Year 2000 Problem") (that is, the risk that computer applications used by the
Company may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date on or after December 31, 1999),
and have made related appropriate inquiry of material suppliers and vendors.
Except as set forth on SCHEDULE 2.24, based on such a review and program, to the
Sellers' knowledge the Year 2000 Problem will not have a Material adverse effect
on the Condition of the Business.
SECTION 2.25: DISCLOSURE. Neither this Agreement, the Schedules hereto,
nor any audited or unaudited financial statements, documents or certificates
furnished or to be furnished to Purchaser or any of its Representative
Affiliates by or on behalf of Sellers or the Company pursuant to this Agreement
or in connection with the Contemplated Transactions contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading. There are no facts known to the Sellers and not disclosed herein or
on the Schedule hereto, which might reasonably be expected to directly and
materially adversely affect the value of the Purchased Membership Interests or
the Condition of the Business. All representation and warranties made by the
Sellers will be deemed to have been relied on by Purchaser (notwithstanding any
investigation by Purchaser).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Sellers, as of the date of
this Agreement and as of the Closing Date (as if each such representation and
warranty was made on the Closing Date), that:
SECTION 3.1: AUTHORITY RELATIVE TO THIS AGREEMENT. Purchaser has full
power and authority to execute and deliver this Agreement and each other
Transaction Document to which it is a party and to consummate the Contemplated
Transactions. The execution, delivery and performance by Purchaser of this
Agreement and the other Transaction Documents to which it is a party and the
21
consummation by it of the Contemplated Transactions have been duly and validly
authorized and approved by Purchaser's board of directors, and no other
corporate proceedings on the part of Purchaser are necessary to authorize the
execution and delivery by Purchaser of this Agreement or the other Transaction
Documents to which Purchaser is a party or the consummation of the Contemplated
Transactions to which Purchaser is a party. This Agreement has been duly and
validly executed and delivered by Purchaser and, (assuming the valid execution
and delivery of this Agreement by the other parties hereto) constitutes the
legal, valid and binding agreement of Purchaser, enforceable against Purchaser
in accordance with its terms, except as such obligations and their
enforceability may be limited by applicable bankruptcy and other similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought (whether at law or in
equity).
SECTION 3.2: NO CONFLICTS; CONSENTS. Except as set forth in SCHEDULE
3.2, neither the execution, delivery and performance by Purchaser of this
Agreement and each other Transaction Document to which it is a party nor the
consummation of the Contemplated Transactions to which Purchaser is a party (i)
violates any provision of the Certificate of Incorporation or By-laws of
Purchaser; (ii) requires Purchaser to obtain any consent, approval or action of
or waiver from, or make any filling with or give any notice to, any Governmental
Body or any other person; (iii) violates, conflicts with or results in the
breach or default under (after the giving of notice or the passage of time), or
Permits the termination of, any material Contract to which Purchaser is a party
or by which it or any of its assets may be bound or subject; or (iv) violates
any Law or Order of any Governmental Body against, or binding upon, Purchaser or
upon its assets
SECTION 3.3: CORPORATE EXISTENCE AND POWER. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite powers and all material Permits required
to own, lease and operate its properties and to conduct its business as
currently conducted. Purchaser is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by Purchaser or the nature of its activities, makes
such qualification necessary, except for those jurisdictions where the failure
to be so qualified would not, individually or in the aggregate, have a material
adverse effect on the Condition of the Business or the results of operations of
the Purchaser.
SECTION 3.4: FINDERS' FEES. There is no investment banker broker,
finder or other intermediary, which has been retained by or is authorized to act
on behalf of Purchaser who might be entitled to any fee or commission from
Purchaser upon consummation of the Contemplated Transactions.
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ARTICLE IV
COVENANTS AND AGREEMENTS PRIOR TO
AND SUBSEQUENT TO CLOSING
SECTION 4.1: CONDUCT OF BUSINESS OF THE COMPANY.
(a) From the date hereof through the Closing Date, the Sellers agree to
cause the Company:
(1) To operate the Business in a reasonable and prudent
manner, to conduct its operations according to the ordinary and usual course of
the Business consistent with past practice, to preserve intact its present
business organization and structure, to keep available the services of its
present officers, agents and full-time employees, to use best efforts to
preserve and maintain its Assets and the goodwill of the Business and to use
best efforts to preserve its relationships with customers, clients, independent
contractors, employees and other persons having business dealings with it or
material to the operation of the Business;
(2) To maintain in the ordinary course of the Business,
consistent with past practice and in accordance with all Contracts, the Real
Property, all its material structures, equipment and other tangible property in
their present repair, order and condition, subject to ordinary wear and tear;
(3) To maintain the books and records relating to the Business
in the usual and ordinary manner and in a manner that fairly and correctly
reflects the income, expenses, Assets and Liabilities of the Company consistent
with GAAP, and to record and effect services rendered in the usual and customary
manner consistent with past practices;
(4) To pay all account and trade payables on a current basis;
(5) Not to incur any Liability (other than Liabilities
incurred in the ordinary course of the Business, consistent with past practice,
which are not in the aggregate material thereto) or any Company debt;
(6) Not to undertake (nor permit to be undertaken) any of the
actions specified in SECTION 2.8;
(7) Not to pay, discharge or satisfy any material Claim or
Liability, other than the payment, discharge or satisfaction in the ordinary
course, of the Business of Claims or Liabilities incurred in the ordinary course
of the Business, consistent with past practice;
(8) Not to sell, transfer convey, assign or otherwise dispose
of any Assets, except in the ordinary course of the Business consistent with
past practices, or create, incur or assume any Lien on any Assets;
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(9) Not to waive, release or cancel any material claims
against third parties or debts owing to the Company or any material rights which
have any value or make any Tax election or settle or compromise any federal,
state, local or foreign income Tax liability, or waive or extend the statute of
limitations in respect of any such Taxes;
(10) Except as disclosed on SCHEDULE 4.1(10), not to authorize
for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, convertible or
exchangeable securities, commitments, subscriptions, rights to purchase or
otherwise) any membership interests of the Company's or any other securities, or
amend any of the terms of any such securities;
(11) Not to terminate, modify, amend or otherwise alter or
change any of the terms or provisions of any Contract or breach the terms of any
Contract or pay any amount not required by Law or by any Contract; or
(12) Not to increase the compensation payable or to become
payable to any officer, member, consultant, agent, sales representative or
employee of the Company, or any alteration in the benefits payable to any
thereof, or pay any bonuses or compensation to any such employee or officer of
the Company other than in respect of salaries in effect on the date hereof; or
(13) Except as disclosed on SCHEDULES 2.8(C) AND 2.8(F) not to
declare, set aside, distribute or pay any dividend or other distribution with
respect to any interest in the Company or otherwise to the Company's members.
(b) From the date hereof through the Closing Date, the Sellers agree to
use best efforts to cause the affairs of the Company to be conducted in such a
manner so that the representations and warranties of the Sellers contained
herein shall continue to be true and correct on and as of the Closing Date as if
made on and as of the Closing Date.
(c) From the date hereof through the Closing Date, the Sellers shall
cause the Company to consult with Purchaser prior to any renewal, amendment,
extension or termination of, waiver of any material night under, or any failure
to renew, any Contract and will not take any such action if Purchaser objects
thereto in writing.
(d) From the date hereof through the Closing Date, the Sellers shall
cause the Company to continue to carry all Insurance Policies and shall not
allow any known breach, default, termination or cancellation of such Insurance
Policies to occur or exist.
SECTION 4.2: CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the
Closing Date, the Sellers agree that Purchaser shall be entitled, through its
directors, officers, Affiliates, employees, attorneys, accountants,
representatives, lenders, consultants and other agents (collectively,
"Representatives"), to make such investigation of the Assets, the Business and
operations of the Company, and such examination of the books, records and
financial condition of the Company, as Purchaser reasonably deems necessary. Any
such investigation and examination shall be conducted upon reasonable notice,
and the Sellers shall, and shall cause the Company to, cooperate fully therein.
In that connection, the Sellers shall make available, and shall cause the
24
Company to make available, to the Representatives of Purchaser during such
period, without however causing any unreasonable interruption in the operations
of the Business, all such information and copies of such documents and records
concerning the affairs of the Company as such Representatives may reasonably
request, shall permit the Representatives of Purchaser access to the Assets and
all parts thereof and to its employees, customers, suppliers and others, and
shall cause the Company's Representatives to cooperate fully in connection with
such review and examination. No investigation by Purchaser shall diminish or
obviate any of the representations, warranties, covenants or agreements of the
Sellers contained in this Agreement.
SECTION 4.3: ADDITIONAL FINANCIAL STATEMENTS. Prior to the Closing
Date, as soon as available and in any event within forty-five (45) calendar days
after the end of each monthly accounting period of the Company ending after the
date hereof, the Sellers shall furnish Purchaser with an unaudited financial
statement of the Company for such month in form and substance comparable to the
Annual Statements and with such other financial or other information routinely
prepared by the Company.
SECTION 4.4: CONSENTS, FILINGS AND AUTHORIZATIONS; EFFORTS TO
CONSUMMATE. As promptly as practicable after the date hereof, Purchaser shall
make and the Sellers shall cause the Company to make all filings and submissions
under such Laws as are applicable to them or to their respective Affiliates as
may be required for them to consummate the Contemplated Transactions in
accordance with the terms of this Agreement and shall furnish copies thereof to
each other party prior to such filing and shall not make any such filing or
submission to which the Sellers or Purchaser, as the case may be, reasonably
objects in writing. All such filings shall comply in form and content in all
material respects with applicable Laws. Subject to the terms and conditions
herein, each party hereto, without payment or further consideration, shall use
its good faith efforts to take or cause to be taken all action and to do or
cause to be done all things necessary, proper or advisable under applicable
Laws, Permits and Orders, to consummate and make effective, as soon as
reasonably practicable, the Contemplated Transactions, including, but not
limited to, the obtaining of all the Company's Required Consents and Permits or
consents of any third party, whether private or governmental, required in
connection with such party's performance of such transactions and each party
hereto shall cooperate with the other in all of the foregoing.
SECTION 4.5: NEGOTIATIONS WITH OTHERS. From and after the date hereof
unless and until this Agreement shall have been terminated in accordance with
its terms, the Sellers hereby agree that (i) the Company, the Sellers and their
Representatives shall immediately cease any existing discussions or negotiations
with any parties conducted heretofore with respect to any sale of any of the
Assets or the sale of the Sellers' membership interests of the Company; and (ii)
the Company, the Sellers and their Representatives will not solicit, initiate,
assist, encourage, continue or enter into negotiations or discussions of any
type, directly or indirectly, with, or furnish any information or data to, any
person, firm or corporation relating to any such sale, including any person with
whom the Company or any of the Sellers are currently negotiating, other than
25
Purchaser, with respect to an offer for the sale of the Company, or any
substantial portion of the Company's Business or Assets, or the Company's
membership interests, directly or by merger or consolidation.
SECTION 4.6: NOTICES OF CERTAIN EVENTS. Prior to the Closing Date, the
Sellers and Purchaser shall promptly notify the other of:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the Contemplated
Transactions;
(b) any notice or other communication from any Governmental Body in
connection with the Contemplated Transactions;
(c) any event, condition or circumstance occurring from the date hereof
through the Closing Date that would constitute a violation or breach of any
representation or warranty, whether made as of the date hereof or as of the
Closing Date, or that would constitute a violation or breach of any covenant of
any party contained in this Agreement; and
(d) any notice or other communication from a Governmental Body relating
to Taxes of the Company.
SECTION 4.7: PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, the
Sellers and Purchaser will consult with each other before issuing any press
release or otherwise making any public statement with respect to the
Contemplated Transactions, and will not issue any such press release or make any
such public statement without the prior approval of Sellers or Purchaser, as the
case may be, except as may be required by applicable Law in which event the
other party shall have the right to review and comment upon (but not approve)
any such press release or public statement prior to its issuance.
SECTION 4.8: CONFIDENTIALITY.
(a) Prior to the Closing Date, Purchaser shall hold in strict
confidence, and shall use its best efforts to cause all its Representatives to
hold in strict confidence, unless compelled to disclose by judicial or
administrative process, or by other requirements of Law, all information
concerning Sellers and the Company which it has obtained from the Sellers or;
their Representatives prior to, on or after the date hereof in connection with
the Contemplated Transactions, and Purchaser shall not use or disclose to
others, or permit the use of or disclosure of, any such information so obtained,
and will not release or disclose such information to any other person, except
its Representatives who need to know such information in connection with this
Agreement (and who shall be advised of the provisions of this Section 4.8). The
foregoing provision shall not apply to any such information to the extent (i)
known by Purchaser prior to the date such information was provided to Purchaser
by Sellers in connection with the Contemplated Transactions, (ii) made known to
Purchaser from a third party not in breach of any confidentiality requirement,
or (iii) made public through no fault of Purchaser or any of their
Representatives.
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(b) If this Agreement is terminated as provided herein and the
Contemplated Transactions are not consummated and if requested by the Sellers,
Purchaser shall return to the Sellers all tangible evidence of such information
regarding Sellers and the Company.
SECTION 4.9: EXPENSES. Except as otherwise specifically provided in
this Agreement, the parties hereto shall bear their respective expenses incurred
in connection with the preparation, execution and performance of this Agreement
and the Contemplated Transactions, including, without limitation, all fees and
expenses of their respective Representatives. Notwithstanding the foregoing,
Purchaser shall pay the accounting costs and expenses incurred in connection
with the audit of the Company's financial statements for the two years ended
December 31, 1998 PROVIDED, HOWEVER, that in the event Sellers terminate this
Agreement or fail to proceed with the sale of all of their respective shares of
common stock of Company and their respective interest in SSPS, Inc. then
Company, not Purchaser, shall be responsible for the costs and expenses of such
audit and Purchaser shall have no obligation or duty to pay any of the costs or
expenses associated, or incurred in connection with such two-year financial
audit.
SECTION 4.10: CLAIMS UNDER INSURANCE POLICIES. After the Closing Date,
the Sellers shall, and shall cause their Affiliates to, cooperate with Purchaser
in respect of Claims made after the Closing Date under occurrence-based
Insurance Policies based upon events occurring prior to the Closing Date. The
Sellers agree not to, and shall not permit their Affiliates to, limit, modify or
otherwise compromise Purchaser's ability to make claims under any such Insurance
Policies.
SECTION 4.11: SUPPLEMENTS TO DISCLOSURE SCHEDULES. It is understood and
agreed that, from time to time prior to the Closing, the Sellers may amend or
supplement the Schedules attached to this Agreement with respect to any matter
that is required to be set forth or described in such a Schedule or that is
necessary to complete or correct any information in any representation or
warranty of the Sellers contained in this Agreement; provided, that the
disclosure provided in any such amended, supplemented or revised Schedule shall
in no way affect or be deemed to limit Purchaser's ability to terminate this
Agreement and the Contemplated Transactions prior to the Closing.
SECTION 4.12: FURTHER ASSURANCES. The Sellers hereby agree, without
further consideration, to execute and deliver following the Closing such other
instruments of transfer and take such other action as Purchaser may reasonably
request in order to put Purchaser in possession of, and to vest in Purchaser,
good, valid, and unencumbered title to the Purchased Membership Interests in
accordance with this Agreement and to consummate the Contemplated Transactions.
Purchaser hereby agrees, without further consideration, to take such other
action following the Closing and execute and deliver such other documents as the
Sellers may reasonably request in order to consummate the Contemplated
Transactions in accordance with this Agreement.
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ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1: CONDITIONS TO THE OBLIGATIONS OF SELLERS AND PURCHASER.
The obligations of Sellers and Purchaser to consummate the Contemplated
Transactions are subject to the satisfaction of the following conditions on or
prior to the Closing Date:
(a) NO INJUNCTION. No provision of any applicable Law and no Order
shall prohibit the consummation of the Contemplated Transactions.
(b) NO PROCEEDING OR LITIGATION. No Claim instituted by any person
shall have been commenced or pending against the Company, Sellers or Purchaser
or any of their respective Affiliates, officers or directors which Claim seeks
to restrain, prevent, change or delay in any material respect the Contemplated
Transactions or seeks to challenge any of the material terms or provisions of
this Agreement or seeks material damages in connection with any of such
transactions.
SECTION 5.2: CONDITIONS TO THE OBLIGATIONS OF SELLERS. All obligations
of Sellers to consummate the Contemplated Transactions hereunder are subject to
the fulfillment (or waiver by Sellers) on or prior to the Closing of each of the
following further conditions:
(a) PERFORMANCE. Purchaser shall have performed and complied with all
agreements, obligations and covenants required by this Agreement to be performed
or complied with by it on or prior to the Closing Date.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Purchaser contained in this Agreement and in any certificate or other writing
delivered by Purchaser pursuant hereto shall be true in all material respects at
and as of the Closing Date as if made at and as of such time.
(c) PURCHASE PRICE. The Purchase Price shall have been paid by
Purchaser in accordance with Section 1.1.
(d) DOCUMENTATION. There shall have been delivered to the Sellers the
following:
(i) A certificate dated the Closing Date, of Purchaser
confirming the matters set forth in Section 5.2(a) and (b) hereof.
(ii) A certificate dated the Closing Date, of the Secretary of
Purchaser certifying, among other things, that attached or appended to such
certificate (A) is a true and correct copy of its Certificate of Incorporation
and all amendments if any thereto as of the date thereof; (B) is a true and
correct copy of its By-laws as of the date thereof; (C) is a true copy of all
corporate actions taken by it, including resolutions of its board of directors
authorizing, the consummation of the Contemplated Transactions and the
28
execution, delivery and performance of this Agreement and each other Transaction
Document to be delivered by Purchaser pursuant hereto; and (D) are the names and
signatures of its duly elected or appointed officers who are authorized to
execute and deliver this Agreement, the Transaction Documents to which Purchaser
is a party and any certificate, document or other instrument in connection
herewith.
(iii) A signed opinion of Purchaser's counsel, dated the
Closing Date and addressed to Sellers, substantially in the form of opinion
annexed as Exhibit D hereto.
(iv) Good standing certificates for Purchaser from the
Secretary of State of the State of Delaware and each of the jurisdictions in
which Purchaser is qualified to do business as a foreign corporation.
SECTION 5.3: CONDITIONS TO THE OBLIGATIONS OF PURCHASER. All
obligations of Purchaser to consummate the Contemplated Transactions hereunder
are subject to the fulfillment (or waiver by Purchaser) on or prior to the
Closing of each of the following further conditions:
(a) PERFORMANCE. The Sellers shall have performed and complied with all
agreements, obligations all covenants required by this Agreement to be performed
or complied with by it or them on or prior to the Closing Date. The Company
shall be in actual compliance with the provisions of Section 4.1.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Sellers contained in this Agreement and in any certificate or other
writing delivered by the Sellers pursuant hereto shall be true in all material
respects at and as of the Closing Date as if made at and as of such time.
(c) NO ADVERSE CHANGE. During the period from the date hereof to the
Closing Date, there shall not have been (i) any material adverse change in the
Condition of the Business or in the Company's relationship with their respective
Major Customers; (ii) any damage, destruction, casualty, determination or other
event to or affecting the Assets of the Company which has a material adverse
effect on the Assets or the Business of the Company; or (iii) any Claims or
Liens filed or threatened, against or affecting the Company or the Assets which,
if adversely determined, is reasonably likely to have a material adverse effect
on the Condition of the Business.
(d) COMPANY'S REQUIRED CONSENTS. All the Company's Required Consents
shall have been obtained.
(e) Intentionally omitted.
(f) DOCUMENTATION. There shall have been delivered to Purchaser the
following:
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(i) A certificate, dated the Closing Date, of the Sellers
confirming the matters set forth in Sections 5.3(a) and (b).
(ii) A certificate, dated the Closing Date, of the Sellers
certifying, among other things, that attached or appended to such certificate
(i) is a true and correct copy of the Certificate of Organization and Operating
Agreement (or comparable instruments) of the Company, and all amendments if any
thereto as of the date thereof; (ii) are the names of the members and officers
of the Company; (iii) is a true copy of all corporate actions taken by the
members of the Company (which actions shall have been taken prior to the date of
entering into this Agreement) to authorize the Contemplated Transactions; and
(iv) are the names and signatures of the duly elected or appointed members of
the Company who are authorized to execute and deliver the Transaction Documents
to which the Company is a party and any certificate, document or other
instrument in connection herewith;
(iii) True, correct and complete copies of all the Company's
Required Consents and Permits.
(iv) An executed Escrow Agreement among Sellers, Purchaser and
the escrow agent identified therein, in the form annexed hereto as Exhibit B.
(v) The resignations, dated on or before the Closing Date, of
any trustees of Benefit Plans as may have been requested by Purchaser.
(vi) A certificate, dated the Closing Date, executed by the
Sellers to the effect that as of the Closing Date and except as otherwise set
forth in Schedule 2.20, (i) the Major Customers of the Company remain as
customers, (ii) there has been no substantial reduction in the level of any
Major Customer's purchases from the Company, and (iii) the Principal Shareholder
have no knowledge or any indications that any Major Customer intends to
substantially reduce its purchases from the Company.
(vii) The membership interest certificates representing the
Purchased Membership Interests duly endorsed in blank or accompanied by duly and
properly executed powers with all required transfer taxes, if any, paid.
(viii) Possession and control of the Assets of the Company
(including all corporate books, bank accounts, records and documents).
(xix) The resignation of all managers of the Company.
(x) An executed estoppel certificate from the landlord under
each lease of Real Property.
(xi) [Intentionally Omitted]
(xii) [Intentionally Omitted]
30
(xiii) Good standing certificates for the Company from the
Secretary of State of the jurisdiction of organization of the Company and each
of the jurisdictions identified in Schedule 2.1 in which the Company is
qualified to do business as a foreign limited liability company.
(xiv) A signed opinion of Sellers' counsel, dated the Closing
Date, addressed to Purchaser, substantially in the form of opinion annexed as
Exhibit E hereto.
(xv) The Payoff Letters and the original promissory note(s),
if any, of the Company issued in connection with the related Company Debt,
marked canceled. In addition, Purchaser shall have been provided evidence
satisfactory to it of the preparation of UCC-3 termination statements releasing
all Liens (the "UCC-3s"), if any, on the Assets relating to the Company Debt to
be paid off pursuant to the Payoff Letters in accordance with Section 1.1(c),
which UCC-3s the Sellers shall cause to be delivered to Purchaser immediately
after the Closing hereunder.
(xvi) [Intentionally Omitted]
(xvii) The Closing Company Debt Schedule, certified as true,
correct and complete by the Sellers.
(xviii) Purchaser shall have obtained all necessary consents
or approvals from applicable federal and state governmental entities to transfer
the MKPL Shares hereunder in accordance with all applicable federal and state
securities laws.
ARTICLE VI
TERMINATION
SECTION 6.1: TERMINATION. This Agreement may be terminated and the
Contemplated Transactions may be abandoned at any time prior to the Closing:
(a) By mutual written consent of the parties hereto, and after July 1,
1999, by any party hereto, if the Closing has not occurred by that date and if
failure to close is not the result of a breach of this Agreement or a willful
failure to complete closing conditions by such party.
(b) By the Sellers if (i) there has been a material misrepresentation
or breach of warranty on the part of Purchaser in the representations and
warranties contained herein and such material misrepresentation or breach of
warranty, if curable, is not cured within 30 days after written notice thereof
from Sellers, (ii) Purchaser has committed a material breach of any covenant
31
imposed upon it hereunder and fails to cure such breach within 30 days after
written notice hereof from Sellers, or (iii) any condition to the Sellers'
obligations hereunder becomes incapable of fulfillment through no fault of the
Sellers and is not waived by the Sellers.
(c) By Purchaser if (i) there has been a material misrepresentation or
breach of warranty on the part of the Sellers in the representations and
warranties contained herein and such material misrepresentation or breach of
warranty, if curable, is not cured within 30 days after written notice thereof
from Purchaser, (ii) the Sellers have committed a material breach of any
covenant imposed upon it hereunder and falls to cure such breach within 30 days
after written notice thereof from Purchaser, or (iii) any condition to
Purchaser's obligations hereunder becomes incapable of fulfillment through no
fault of Purchaser and is not waived by Purchaser.
(d) By Purchaser or the Sellers, on the other hand, if there shall be
any Law that makes consummation of the Contemplated Transactions illegal or
otherwise prohibited, or if any Order enjoining Purchaser, on the one hand, or
the Company and Sellers, on the other hand, from consummating the Contemplated
Transactions is entered and such Order shall have become final add
nonappealable.
SECTION 6.2: EFFECT OF TERMINATION; RIGHT TO PROCEED. In the event that
this Agreement shall be terminated pursuant to Sections 6.1(a) or (d), all
further obligations of the parties under the Agreement shall terminate without
further liability of any party hereunder (except with respect to Sections 4.7,
4.8 and 4.9 as provided below). Notwithstanding any other provision in this
Agreement to the contrary, upon termination of this Agreement pursuant to
Section 6.1(b), Purchaser will remain liable to the Sellers for any
misrepresentation or breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement of Purchaser existing at the time of such
termination, and upon termination of this Agreement pursuant to Section 6.1(c),
the Sellers, jointly and severally, will remain liable to Purchaser for any
misrepresentation or breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement of the Sellers existing at the time of such
termination, and in any such event the terminating party(ies) may seek such
remedies, including without limitation, Losses (as defined in Section 7.2 below)
against the other with respect to any such breach as are provided in this
Agreement or as are otherwise available at Law or in equity. Without limiting
the generality of the foregoing sentence, in the event that this Agreement shall
be terminated by the Sellers pursuant to Section 6.1(b) or by Purchaser pursuant
to Section 6.1(c), the party in breach of its covenants, agreements or
obligations hereunder shall reimburse the non-breaching party for all costs and
expenses resulting from any such breach. The agreements contained in Sections
4.7, 4.8 and 4.9 shall survive the termination hereof. In the event that a
condition precedent to its obligation is not met, nothing contained herein shall
be deemed to require any party to terminate this Agreement, rather than to waive
such condition precedent and proceed with the Contemplated Transactions.
32
ARTICLE VII
INDEMNIFICATION
SECTION 7.1: SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Notwithstanding any right of Purchaser fully to investigate the
affairs of the Company and any knowledge of facts determined or determinable by
Purchaser pursuant to such investigation or right of investigation, Purchaser
has the right to rely fully upon the representations, warranties, covenants and
agreements of the Sellers contained in this Agreement, or listed or disclosed on
any Schedule hereto or in any instrument delivered in connection with or
pursuant to any of the foregoing. All of the representations, warranties,
covenants, agreements and Closing certifications made by the Sellers shall
survive the execution and delivery of this Agreement and the Closing hereunder
for a period of 18 months following the Closing Date; provided, that the
representations, warranties, covenants, agreements and Closing certifications
made by Sellers in (A) Section 2.1 with respect to the Purchased Membership
Interests, (B) Section 2.2 with respect to due authority, (C) Section 2.9(D)
with respect to title to the Assets, and (D) Section 2.22 with respect to
finder's fees and commissions (together with the representations, warranties,
covenants and agreements listed in clauses (A), (B), (C) and (D) of this proviso
and Unassumed Taxes (the "Special Representations, Covenants and Items"), shall
survive the execution and delivery of this Agreement and the Closing hereunder
for the respective applicable statute of limitations; provided, further that the
representations and warranties made by Sellers in (i) Section 2.13 with respect
to Tax matters, (ii) Section 2.14 with respect to ERISA/Benefit Plan matters,
and (iii) Section 2.19 with respect to environmental matters, shall survive the
execution and delivery of this Agreement and the Closing hereunder for the
period of any applicable statute of limitations or indefinitely if no statute of
limitation applies.
(b) All representations and warranties, covenants and agreements of
Purchaser shall survive the execution and delivery of this Agreement and the
Closing hereunder for a period of 18 months following the Closing Date.
SECTION 7.2: OBLIGATION OF SELLERS TO INDEMNIFY. Subject to the
limitations set forth in Sections 7.1 and 7.5, the Sellers, jointly and
severally, hereby agree to indemnify, defend and hold harmless Purchaser and its
directors, officers, employees, Affiliates, successors, assigns and
Representatives, from and against all Claims, losses, liabilities, damages,
deficiencies, judgments, settlements, costs of investigation or other expenses
(including interest, penalties and reasonable attorneys' fees and disbursements
and expenses incurred in enforcing this indemnification or in any litigation
between the parties or with third parties) (collectively, the "Losses") suffered
or incurred by Purchaser or any of the foregoing persons arising out of (a) any
breach of the representations, warranties, covenants, agreements and Closing
certifications of the Sellers contained in this Agreement, the Schedules or the
Transaction Documents or warranty, or, (b) any Taxes of Sellers or Taxes of the
Company relating to periods prior to the Closing Date (the "Unassumed Taxes").
SECTION 7.3: OBLIGATION OF PURCHASER TO INDEMNIFY. Purchaser hereby
agrees to indemnify, defend and hold the Sellers and their successors, assigns
and Representatives harmless from and against any Losses suffered by Sellers by
33
reason of any breach of the representations and warranties of Purchaser or of
the covenants and agreements of Purchaser contained in this Agreement, the
Schedules or the Transaction Documents.
SECTION 7.4: NOTICE AND OPPORTUNITY TO DEFEND THIRD PARTY CLAIMS.
(a) Promptly after receipt by any party hereto (the "Indemnitee") of
notice of any demand, claim, circumstance or Tax Audit which would or might give
rise to a claim or the commencement (or threatened commencement) of any action,
proceeding or investigation (an "Asserted Liability") that may result in a Loss,
the Indemnitee shall give prompt notice thereof the "Claims Notice") to the
party or parties obligated to provide indemnification pursuant to Section 7.2 or
7.3 (the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail and shall indicate the amount (estimated, if
necessary, and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) The Indemnifying Party may elect to defend, at its own expense and
with its own counsel satisfactory to Indemnitee, any Asserted Liability, but
only if (A) the Indemnifying Party notifies the Indemnitee in writing within 30
days after the Indemnitee has given notice of the Asserted Liability that the
Indemnifying Party will indemnify the Indemnitee from and against the entirety
of any Losses the Indemnitee may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Asserted Liability, (B) the Indemnifying
Party provides the Indemnitee with evidence reasonably acceptable to the
Indemnitee that the Indemnifying Party will have the financial resources to
defend against the Asserted Liability and fulfill its indemnification
obligations hereunder, (C) the Asserted Liability involves only money damages
and does not seek an injunction or other equitable relief, (D) settlement of, or
an adverse judgement with respect to, the Asserted Liability is not, in the good
faith judgment of the Indemnitee, likely to establish a precedential custom or
practice adverse to the continuing business interests of the Indemnitee, (E) the
Indemnifying Party conducts the defense of the Asserted Liability actively and
diligently, and (F) the Indemnitee shall have reasonably concluded that (x)
there is no conflict of interest between the Indemnitee and the Indemnifying
Party in the conduct of such defense, and (y) the Indemnitee shall have no
defenses available to the Indemnifying Party. If the Indemnifying Party elects
to defend such Asserted Liability, it shall within 30 days (or sooner, if the
nature of the Asserted Liability so requires) notify the Indemnitee of its
intent to do so, and the Indemnitee shall cooperate, at the expense of the
Indemnifying Party, in the defense of such Asserted Liability. If the
Indemnifying Party assumes the defense against any Asserted Liability it will be
conclusively established for purposes of this Agreement that such Asserted
Liability is within the scope of, and subject to indemnification. If the
Indemnifying Party elects not to defend the Asserted Liability, is not permitted
to defend the Asserted Liability by reason of the first sentence of this Section
7.4(b), fails to notify the Indemnitee of its election as herein provided or
contests its obligation to indemnify under this Agreement with respect to such
Asserted Liability, the Indemnitee may pay, compromise or defend such Asserted
Liability at the sole cost and expense of the Indemnifying Party if determined
to be liable to the Indemnitee hereunder. In any event, the Indemnitee and the
Indemnifying Party may participate, at their own expense, in the defense of such
Asserted Liability. If the Indemnifying Party chooses to defend any Asserted
Liability, the Indemnitee shall make available to the Indemnifying Party any
books, records or other documents within its control that are necessary or
appropriate for such defense. Any expenses of any Indemnitee for which
indemnification is available hereunder shall be paid upon written demand
therefor.
34
SECTION 7.5: LIMITATION ON INDEMNIFICATION PAYMENTS OF LOSSES.
(a) The Sellers' liability for Indemnifiable damages pursuant to this
Article VII shall not be payable unless and until the amount of Losses suffered
or incurred by Purchaser exceeds in the aggregate $50,000 (the "Basket Amount");
thereafter, the Sellers, jointly and severally, shall be responsible for the
payment of Losses subject to the limitations set forth in this Section 7.5;
provided, that any Losses arising from, or directly or indirectly relating to
the Special Representations, covenants and items shall not be subject to or
limited by the Basket Amount.
(b) The Sellers shall not have any liability for indemnifiable damages
pursuant to this Article VII to the extent the aggregate amount of Losses
suffered or incurred by Purchaser exceeds the aggregate Purchase Price (the
"Cap").
(c) Intentionally Omitted
(d) Intentionally Omitted
(e) In the event that Purchaser intends to make any offset of
indemnifiable damages against the Note and/or the Escrow Shares, it shall first
have given written notice thereof to Sellers (the "Offset Notice"). If no
objection to such proposed offset is made by Sellers within thirty (30) days
after the giving of the Offset Notice, Purchaser shall be entitled to proceed
with the proposed offset. If any objection is raised by Sellers during such
period, the parties agree that any portion of the proposed offset which is
subject to such disagreement shall not be offset by Purchaser and,
notwithstanding anything contained in the Note to the contrary, that portion of
the principal amount shall not be due and payable and Purchaser shall not be
required to pay interest in respect thereof until such time as such disagreement
has been resolved by negotiation or by Final Determination of such dispute. Any
Loss to which Purchaser shall be entitled to exercise offset rights pursuant to
this Article VII shall accrue interest from the date which is thirty (30) days
after the Offset Notice until paid at an annual rate equal to the interest rate
applicable under the Note.
(f) Notwithstanding anything to the contrary hereunder, any amounts
payable by the Indemnifying Party pursuant to this Article VII shall be reduced
by the amount of any insurance proceeds recovered by the Indemnitee in
connection with such Claim.
(g) The parties will act in good faith so that any amounts payable by
an Indemnifying Party to an Indemnitee pursuant to this Article VII shall be
treated, for Tax purposes, as an adjustment to the Purchase Price, unless a
Final Determination with respect to an Indemnitee or any of its Affiliates
causes any such payment not to be treated as an adjustment to Purchase Price for
United States federal income tax purposes. Subject to the Cap, if such payment
cannot be treated as an adjustment to the Purchase Price for Tax purposes, then
35
such indemnification payment shall be increased to take account of any net Tax
cost incurred by the Indemnitee as a result of the receipt or accrual of such
payments.
(h) In the absence of fraud, the remedies provided by the foregoing
provisions of this Article VII, after the Closing Date, shall be in lieu of any
other remedies to which the respective party is entitled at law or in equity for
any breach or noncompliance by a party with the provisions of this Agreement;
however, this clause shall not operate as a bar to any suit for specific
performance (which does not seek monetary damages) contemplated by this
Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1: NOTICES.
(a) Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally by hand or by recognized
overnight courier, telecopied or mailed (by registered or certified mail,
postage prepaid) as follows:
If to Purchaser, one copy to:
E-TAXI, INC.
c/o Gateway Advisors
000 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopier: (000) 000-0000
with a simultaneous copy to:
Xxxxxx, Parachini, Steinberg, Matzger & Xxxxxxx, LLP
000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
Telecopier: (000) 000-0000
36
If to any Seller, one copy to each Seller at the address set forth opposite each
Seller's name on Schedule A-1.
(b) Each such notice or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in Section 8.1 (a) (with confirmation of transmission), or (ii) if
given by any other means, when delivered at the address specified in Section 8.1
Any party by notice given in accordance with this Section 8.1 to the other party
may designate another address (or telecopier number) or person for receipt of
notices hereunder. Notices by a party may be given by counsel to such party.
SECTION 8.2: ENTIRE AGREEMENT. This Agreement (including the Schedules
and Exhibits hereto) and the collateral agreements executed in connection with
the consummation of the Contemplated Transactions contain the entire agreement
between the parties with respect to the subject matter hereof and related
transactions and supersede all prior agreements, written or oral, with respect
thereto.
SECTION 8.3: WAIVERS AND AMENDMENTS, NON-CONTRACTUAL REMEDIES,
PRESERVATION OF REMEDIES. This Agreement may be amended, superseded, canceled,
renewed or extended only by a written instrument signed by the parties hereto.
The provisions hereof may be waived in writing by the parties hereto. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. Except as otherwise
provided herein, the rights and remedies herein provided are cumulative and are
not exclusive of any rights or remedies that any party may otherwise have at law
or in equity.
SECTION 8.4: GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of California applicable to
agreements made and to be performed entirely within such State, without regard
to the conflict of laws rules thereof.
SECTION 8.5: CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The
parties hereto irrevocably (a) agree that any suit., action or other legal
proceeding arising out of this Agreement may be brought in the courts of the
State of California or the courts of the United States located in the State of
California, (b) consent to the jurisdiction of each court in any such suit,
action or proceeding, (c) waive any objection which they, or any of them, may
37
have to the laying of venue of any such suit, action or proceeding in any of
such courts, and (d) waive the right to a trial by jury in any such suit, action
or other legal proceeding.
SECTION 8.6: BINDING EFFECT, NO ASSIGNMENT. This Agreement and all of
its provisions, rights and obligations shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors, heirs and
legal representatives. Except to the extent contemplated by the final sentence
of Section 4.12, this Agreement may not be assigned (including by operation of
Law) by a party without the express written consent of Purchaser (in the case of
assignment by the Sellers) or the Sellers (in the case of assignment by
Purchaser) and any purported assignment, unless so consented to, shall be void
and without effect. Nothing herein express or implied is intended or shall be
construed to confer upon or to give anyone other than the parties hereto and
their respective heirs, legal representatives and successors any rights or
benefits under or by reason of this Agreement and no other party shall have any
right to enforce any of the provisions of this Agreement.
SECTION 8.7: EXHIBITS. All Exhibits and Schedules attached hereto are
hereby incorporated by reference into, and made a part of, this Agreement.
SECTION 8.8: SEVERABILITY. If any provision of this Agreement for any
reason shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such illegal, invalid or unenforceable provision had never
been included herein.
SECTION 8.9: COUNTERPARTS. The Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
ARTICLE IX
DEFINITIONS
SECTION 9.1: DEFINITIONS.
(a) The following terms, as used herein, have the following meanings:
"ACTUAL CLOSING COMPANY DEBT" is equal to the aggregate amount of Company Debt
as reflected on the Audited Balance Sheet.
"AFFILIATE" of any person means any other person directly or indirectly through
one or more intermediary persons, controlling, controlled by or under common
control with such person.
38
"AGREEMENT" or "THIS AGREEMENT" means, and the words "herein", "hereof" and
"hereunder" and words of similar import refers to, this agreement as it from
time to time may be amended.
"ARTICLES OF ORGANIZATION" means, in the case of any limited liability company,
the certificate of organization, articles of organization or charter of a
limited liability company, howsoever denominated under the laws of the
Jurisdiction of its incorporation.
"ASSETS" means properties, rights, interests and assets of every kind, real,
personal or mixed, tangible and intangible, used or usable by the Company in the
Business.
The term "AUDIT" or "AUDITED" when used in regard to financial statements means
an examination of the financial statements by a firm of independent certified
public accountants in accordance with generally accepted auditing standards for
the purpose of expressing an opinion thereon.
"COMPANY DEBT", with respect to the Company, means (i) money borrowed by the
Company from any person; (ii) any indebtedness of such Company arising under
leases required to be capitalized under GAAP or evidenced by a note, bond,
debenture or similar instrument; (iii) any indebtedness of the Company arising
under purchase money obligations or representing the deferred purchase price of
property and services (other than accounts payable and current trade payables
incurred in the ordinary course of the Business); (iv) any Liability of the
Company under any guaranty, letter of credit, performance credit or other
agreement having the effect of assuring a creditor against loss; and (v) any
advances against client trust funds and/or net amounts due to clients in excess
of funds held in trust for clients.
"CONTRACT" means any contract, agreement, indenture, note, bond, lease,
conditional sale contract, mortgage, license, franchise, instrument, commitment
or other binding arrangement, whether written or oral.
"CODE" means the Internal Revenue Code of 1986, as amended.
The term "CONTROL", with respect to any person, means the power to direct the
management and policies of such person, directly or indirectly, by or through
stock or membership interest ownership, agency or otherwise, or pursuant to or
in connection with an agreement, arrangement or understanding (written or oral)
with one or more other persons by or through stock or membership interest
ownership, agency or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
"CURRENT ASSETS" means the amounts reflected as current assets of the Company on
its financial statements determined in accordance with GAAP and includes, but is
not limited to, items such as cash and cash equivalents, accounts receivable
(less reserves for doubtful accounts), short-term investments, inventory and
current prepaid assets.
"CURRENT LIABILITIES" means the amounts reflected as current liabilities of the
Company on its financial statements determined in accordance with GAAP and
includes, but is not limited to, items such as accounts payable, current
maturities of long-term debt, accrued expenses, and unpaid accrued taxes.
39
"ENVIRONMENTAL LAWS" means any and all Laws (including common law), Orders,
Permits, agreements or any other requirement or restriction promulgated,
imposed, enacted or issued by any federal, state, local and/or foreign
Governmental Bodies relating to human health or the environment, including the
emission, discharge or Release of pollutants, contaminants, Hazardous Substances
or wastes into the environment (which includes, without limitation, ambient air,
surface water, ground water, or land), and the remediation thereof, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof, including
without limitation, the Clean Air Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Emergency Planning and Community Right To
Know Act, the Federal Water Pollution Control Act, the Oil Pollution Act of
1990, the Pollution Prevention Act of 1990, the Resource Conservation and
Recovery Act, the Safe Drinking Water Act, the Endangered Species Act, the Toxic
Substances Control Act, each as amended, and any state or local counterparts
thereof.
"ENVIRONMENTAL PERMITS", with respect to the Company, means those Permits
required to be obtained by the Company under Environmental Laws in connection
with the Business or the use and operation of the Assets owned or leased by the
Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"FINAL DETERMINATIONS" means (i) with respect to United States federal income
Taxes, a "determination" as defined in Section 1313(a) of the Code or execution
of an Internal Revenue Service Form 870AD; (ii) with respect to Taxes other than
United States federal income Taxes and any final determination of liability in
respect of a Tax provided for under applicable Law, and shall include the
payment of Tax by Purchaser or the Company, whichever is responsible for payment
of such Tax under applicable law, with respect to any item disallowed by a Tax
Authority, provided that the other party is notified that such Purchaser or the
Company, whichever is responsible, determines that no action should be taken to
recoup such disallowed item, and such other party agrees with such
determination; and (iii) any final determination of liability in respect of a
Loss provided for under applicable law, including, without limitation, a final
ruling by an arbitrator.
"GAAP" means generally accepted accounting principles applied on a consistent
basis in effect on the date hereof as set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accountings profession of the
United States.
"HAZARDOUS SUBSTANCES" means any dangerous, toxic, radioactive, caustic or
otherwise hazardous material, pollutant, contaminant, chemical, waste or
substance defined, listed or described as any of such in or governed by any
Environmental Law, including but not limited to, urea-formaldehyde,
40
polychlorinated biphenyls, asbestos or asbestos-containing materials, radon,
explosives, known carcinogens petroleum and its derivatives, petroleum products,
or any substance which might cause any injury to human health or safety or to
the environment or might subject the owner or operator of real property owned,
leased or controlled by the Company (both currently or ever in the present) to
any Regulatory Actions or Claims.
"IRS" means the Internal Revenue Service.
The term "KNOWLEDGE" with respect to (a) any individual means actual knowledge
after reasonable due inquiry, and (b) any corporation or limited liability
company means the actual knowledge after reasonable due inquiry of the
directors, members or the executive officers of such corporation or entity; and
"knows" has a correlative meaning.
"LIABILITY" means any direct or indirect indebtedness, liability, assessment,
claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed,
xxxxxx or inchoate, liquidated or unliquidated, secured or unsecured, accrued,
absolute, actual or potential, contingent or otherwise (including any liability
under any guaranties, letters of credit, performance credits or with respect to
insurance loss accruals).
"LIEN" means, with respect to any Asset, any mortgage, lien (including
mechanics, warehousemen, laborers and landlords liens), claim, pledge, charge,
security interest, preemptive right, right of first refusal, option, judgment,
title defect or encumbrance of any kind in respect of or affecting such Asset.
"NET WORKING CAPITAL" means the difference between the Current Assets and the
Current Liabilities of the Company as of the date of computation.
"PERSON" means an individual, corporation, limited liability company,
partnership, joint venture, association, trust, unincorporated organization or
other entity, including a government or political subdivision or an agency or
instrumentality thereof.
"RECEIVABLES" means as of any date any trade accounts receivable, notes
receivable, sales representative advances and other miscellaneous receivables of
the Company arising in the ordinary course of the Business.
"REGULATORY ACTIONS" means any claim, demand, action, suit or proceeding brought
or instigated by any Governmental Body in connection with any Environmental Law,
including, without limitation, civil, criminal and/or administrative
proceedings, whether or not seeking costs, damages, penalties or expenses.
"RELEASE" means the intentional or unintentional, spilling, leaking, disposing,
discharging or disturbance of, or emitting, depositing, injecting, leaching,
escaping or any other release or threatened release, however defined, of any
Hazardous Substance.
41
"SUBSIDIARY" of the Company means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are owned
directly or indirectly through one or more intermediaries, or both, by the
Company.
"TAX" (including, with correlative meaning, the terms "Taxes" and "Taxable")
means any net income gross income, gross receipts sales, use, ad valorem,
transfer, transfer gains, franchise, profits, license, withholding, payroll,
employment, social security (or similar), unemployment disability, excise,
severance, stamp, rent, recording registration, occupation, premium, real or
personal property, intangibles, environmental (including taxes under Code ss.
59A) or windfall profits tax, alternative or add-on minimum tax, capital stock,
customs duty or other tax, fee, duty, levy, impost, assessment or charge of any
kind whatsoever (including but not limited to taxes assessed to real property
and water and sewer rents relating thereto), together with any interest and any
fine penalty, addition to tax or additional amount or deductions imposed by any
Governmental Body (domestic or foreign) (a "Tax Authority") responsible for the
imposed of any such tax, whether disputed or not, including any liability
arising under any tax sharing agreement, with respect to the Company, the
Business or the Assets (or the transfer thereof); (ii) any liability for the
payment of any amount of the type described in the immediately preceding clause
(i) as a result of the Company being a member of an affiliated or combined group
with any other corporation at any time on or prior to the Closing Date; and
(iii) any liability of the Company for the payment of any amounts of the type
described in the immediately preceding clause (i) as a result of a. contractual
obligation to indemnify any other person.
"TAX RETURN" means any return or report (including elections, declarations,
disclosures, schedules, attachments, estimates and information returns) relating
to Taxes required to be supplied to any Tax Authority, and including any
amendment thereof
"TRANSACTION DOCUMENTS" means, collectively, this Agreement, and each of the
other agreements and instruments to be executed and delivered by all or some of
the parties hereto in connection with the consummation of the transactions
contemplated hereby. The term "voting power" when used with reference to the
capital stock of, or units of equity interests in, any person means the power
under ordinary circumstances (and not merely upon the happening of a
contingency) to vote in the election of directors of such person (if such person
is a corporation) or to participate in the management and control of such person
(if such person is not a corporation).
(b) The following additional terms are defined in the following
sections of this Agreement:
Term Section
---- -------
Acquisition Recital
Applicable Percentage 1.1(b)
Asserted Liability 7.4(a)
Basket Amount 7.5(a)
Cap 7.5(b)
42
Term Section
---- -------
Business Recital
Claims 2.12
Claims Notice 7.4(a)
Closing 1.3
Closing Company Debt Schedule 1.1(f)
Closing Date 1.3
Company(ies) Recital
Company's Required Consents 2.3
Condition of the Business 2.8(a)
Contemplated Transactions Recital
Controlled Group 2.14(a)
Employee Benefit Plan 2.14(a)
Escrow 1.1(c)(ii)
Escrow Agreement 1.1(c)(ii)
Governmental Bodies 2.17
Indemnifying Party 7.4(a)
Indemnitee 7.4(a)
Insurance Policies 2.16
Intellectual Property Rights 2.11
MKPL 1.1(c)(i)
Latest Balance Sheet 2.6
Latest Balance Sheet Date 2.6
Laws 2.17
Losses 7.2
Major Customers 2.20
Offset Notice 7.5(e)
Orders 2.17
Payoff Letters 1.1(f)(ii)
PBGC 2.14(c)(iv)
Permits 2.18
Projections 2.24
Purchase Price 1.1(a)
Purchased Membership Interests Recital
Purchaser Preamble
Real Property 2.9(a)
Representatives 4.2
Right of First Refusal Agreement Recital
Seller(s) Preamble
Special Representations,
Covenants and Items 7.1(a)
Tax Audit 2.13(a)(viii)
Tax Deficiency 2.13(a)(iv)
Unassumed Taxes 7.2
Year 2000 Problem 2.24
43
SECTION 9.2: INTERPRETATION. Unless the context otherwise requires, the
terms defined in Section 9.1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms defined herein. All accounting terms defined in Section 9.1,
and those accounting terms used in this Agreement not defined in Section 9. 1,
except as otherwise expressly provided herein, shall have the meanings
customarily given thereto in accordance with GAAP. When a reference is made in
this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
PURCHASER
E-TAXI, INC.
By: /s/ XXXXXX X. XXXXXXX
-------------------------------------------------------
Name: XXXXXX X. XXXXXXX
Title: CEO
SELLERS
/s/ XXXXXX X. XXXXX
------------------------------------------------------------
XXXXXX X. XXXXX
/s/ XXXXXXX XXXXXX
------------------------------------------------------------
XXXXXXX XXXXXX
/s/ XXX XXXXXXX
------------------------------------------------------------
XXX XXXXXXX
/s/ XXXXX XXXX
------------------------------------------------------------
XXXXX XXXX
WITH RESPECT TO SECTION 1.1,
COMPUTER MARKETPLACE, INC.
By: /s/ XXXXXX X. XXXXXXX
--------------------------------------------
Name: XXXXXX X. XXXXXXX
Title: Chairman
44
