EXHIBIT 2.9
ASSET PURCHASE AGREEMENT
by and among
XXXXX/XXXXXX CONSULTING, INC.
and
XXXXX/XXXXXX, INC.
as Purchasers
and
XXXXX COMPENSATION & BENEFITS, LLC.
as Seller
and
J. XXXXX XXXXX, XXXXXXXXXXX XXXX, XXXXXX X. XXXXXXX, III
and XXXXXX X. XXXXXX
as Shareholders
August 31, 2001
TABLE OF CONTENTS
PAGE
ARTICLE 1 PURCHASE AND SALE OF ASSETS................................................................1
1.1 Purchased Assets...............................................................................1
1.2 Excluded Assets................................................................................3
1.3 Assumption of Liabilities......................................................................3
1.4 Excluded Liabilities...........................................................................4
ARTICLE 2 CONSIDERATION FOR THE PURCHASED ASSETS.....................................................4
2.1 Purchase Price.................................................................................4
2.2 Purchase Price Adjustment......................................................................5
2.3 Procedures for Final Determination of Net Asset Amount.........................................5
2.4 Net Asset Amount Definition....................................................................6
2.5 Vesting of Contingent Consideration............................................................6
2.6 CBI Stock......................................................................................9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS.................................11
3.1 Organization and Power........................................................................11
3.2 Subsidiaries..................................................................................11
3.3 Authorization; No Breach......................................................................11
3.4 Financial Statements..........................................................................12
3.5 Absence of Undisclosed Liabilities............................................................12
3.6 No Material Adverse Changes/Absence of Certain Developments...................................13
3.7 Title and Condition of Properties.............................................................14
3.8 Tax Matters...................................................................................15
3.9 Contracts and Commitments.....................................................................16
3.10 Proprietary Rights............................................................................18
3.11 Litigation; Proceedings.......................................................................18
3.12 Brokerage.....................................................................................18
3.13 Governmental Consent, etc.....................................................................18
3.14 Employees.....................................................................................19
3.15 Employee Benefit Plans........................................................................19
3.16 Insurance.....................................................................................21
3.17 Affiliated Transactions.......................................................................21
3.18 Compliance with Laws; Permits; Certain Operations.............................................21
3.19 Software......................................................................................22
3.20 Environmental Health and Safety...............................................................22
3.21 Product and Warranty Claims; Warranties.......................................................23
3.22 Disclosure....................................................................................23
3.23 Customers.....................................................................................23
i
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASERS..............................................23
4.1 Corporate Organization and Power..............................................................23
4.2 Authorization.................................................................................24
4.3 No Violation..................................................................................24
4.4 Litigation....................................................................................24
4.5 Brokerage.....................................................................................25
4.6 Governmental Consent, etc.....................................................................25
4.7 Issuance of CBI Stock.........................................................................25
4.8 Reports and Financial Statements..............................................................25
4.9 Absence of Certain Changes or Events..........................................................26
4.10 Disclosure....................................................................................26
4.11 Private Placement.............................................................................26
4.12 Availability of Funds.........................................................................26
ARTICLE 5 SELLERS' OBLIGATIONS AT CLOSING...........................................................26
5.1 Sellers' Obligations at Closing...............................................................26
ARTICLE 6 PURCHASERS' OBLIGATIONS AT CLOSING........................................................28
6.1 Purchasers' Obligations at Closing............................................................28
ARTICLE 7 CLOSING TRANSACTIONS......................................................................29
7.1 The Closing...................................................................................29
7.2 Action to Be Taken at the Closing.............................................................29
7.3 Closing Documents.............................................................................29
7.4 Possession....................................................................................30
7.5 Nonassignable Contracts.......................................................................30
ARTICLE 8 INDEMNIFICATION...........................................................................31
8.1 Indemnification by Seller and Shareholders....................................................31
8.2 Indemnification by Purchasers.................................................................31
8.3 Method of Asserting Claims....................................................................32
8.4 Escrow Amount and Contingent Consideration....................................................33
8.5 Limitation of Liability.......................................................................33
8.6 Sole Remedy...................................................................................33
8.7 Adjustment to Purchase Price..................................................................33
ARTICLE 9 ADDITIONAL AGREEMENTS.....................................................................34
9.1 Survival......................................................................................34
9.2 Mutual Assistance.............................................................................34
9.3 Press Release and Announcements...............................................................34
9.4 Expenses......................................................................................34
9.5 Further Transfers.............................................................................34
9.6 Transition Assistance.........................................................................34
9.7 Confidentiality...............................................................................35
ii
TABLE OF CONTENTS
(continued)
PAGE
9.8 Non-Compete; Non-Solicitation.................................................................35
9.9 Specific Performance..........................................................................36
9.10 Remittances...................................................................................36
9.11 Best Efforts To Consummate Closing Transactions...............................................36
9.12 Employees and Agents of Seller................................................................36
9.13 Assignment of Commissions.....................................................................37
ARTICLE 10 MISCELLANEOUS.............................................................................37
10.1 Amendment and Waiver..........................................................................37
10.2 Notices.......................................................................................37
10.3 Assignment....................................................................................38
10.4 Severability..................................................................................38
10.5 No Third-Party Beneficiaries..................................................................38
10.6 No Strict Construction........................................................................39
10.7 Captions......................................................................................39
10.8 Complete Agreement............................................................................39
10.9 Counterparts..................................................................................39
10.10 Governing Law.................................................................................39
10.11 Remedies Cumulative...........................................................................39
iii
EXHIBITS
Exhibit A -- Form of Escrow Agreement
Exhibit C -- Opinion of Seller's Counsel
Exhibit D -- Form of Investment Letter
Exhibit E -- Opinion of Purchasers' Counsel
DISCLOSURE SCHEDULES
Schedule 1.1(a) -- Accounts Receivable Schedule
Schedule 1.1(d) -- Tangible Property Schedule
Schedule 1.1(e) -- Assumed Insurance Schedule
Schedule 1.1(g) -- Intellectual Property Schedule
Schedule 1.1(k) -- Customer List Schedule
Schedule 1.2 -- Excluded Assets Schedule
Schedule 2.1 -- Consideration Allocation Schedule
Schedule 3.1 -- Qualifications Schedule
Schedule 3.2 -- Subsidiaries Schedule
Schedule 3.6 -- Developments Schedule
Schedule 3.7 -- Leases Schedule
Schedule 3.8 -- Tax Matters Schedule
Schedule 3.9(a) -- Contracts Schedule
Schedule 3.9(d) -- Customer Contracts Schedule
Schedule 3.10 -- Proprietary Rights Schedule
Schedule 3.11 -- Litigation Schedule
Schedule 3.13 -- Consents Schedule
Schedule 3.14 -- Employees Schedule
Schedule 3.15 -- Employee Benefits Schedule
Schedule 3.16 -- Insurance Schedule
Schedule 3.17 -- Affiliated Transactions Schedule
Schedule 3.18(a) -- Compliance Schedule
Schedule 3.18(b) -- Permits Schedule
Schedule 3.19 -- Software Schedule
Schedule 3.22 -- Claims Schedule
Schedule 4.6 -- Purchasers Consents Schedule
iv
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT made as of August 31, 2001 (this "Agreement")
by and among XXXXX/XXXXXX CONSULTING, INC., a Delaware corporation
("Consulting"), and XXXXX/XXXXXX, INC., a Delaware corporation ("CBI") (CBI and
Consulting shall collectively be referred to as "Purchasers"), XXXXX
COMPENSATION & BENEFITS, LLC., a Massachusetts limited liability company
("Seller"), J. XXXXX XXXXX ("Xxxxx"), XXXXXXXXXXX XXXX ("Rich"), XXXXXX X.
XXXXXXX, III ("Wyrtzen"), and XXXXXX X. XXXXXX ("Xxxxxx") (Xxxxx, Xxxx, Xxxxxxx
and Xxxxxx are collectively referred to as the "Shareholders").
WITNESSETH:
WHEREAS, the Seller is engaged in the business of designing and
administering executive and employee compensation and benefit plans (the
"Business"); and
WHEREAS, on the terms and subject to the conditions of this Agreement,
Purchasers desire to acquire from Seller and Seller desires to sell to
Purchasers, substantially all of the assets, properties and Business of the
Seller as a going concern.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchased Assets. On the terms and subject to the conditions of
this Agreement, on the Closing Date (as defined in Section 7.1), Purchasers
shall purchase from Seller, and Seller shall sell, convey, assign, transfer and
deliver to Purchasers, all properties, assets, rights and interests of every
kind and nature, whether real or personal, tangible or intangible, and wherever
located and by whomever possessed, of Seller as of the Closing Date related to
or used in, or otherwise associated with, the Business, including, without
limitation, all of the following assets (but excluding all Excluded Assets as
defined in Section 1.2 hereof) in each case, as of the Closing Date:
(a) all accounts and notes receivable (whether current or
non-current), a list, description and aging of which as of the date hereof is
set forth on Schedule 1.1(a);
(b) all prepayments, prepaid expenses (including, without
limitation, prepaid insurance premiums), deferred charges, advance payments and
security deposits as of the Closing Date;
(c) all inventories and related supplies located at Seller's
facilities, in transit to or from Seller's facilities or which otherwise relate
to the Business (the "Inventory");
(d) all interests in equipment, fixtures, fittings,
automobiles and other vehicles, and other tangible personal property, whether
owned, leased or otherwise (including,
without limitation, items which have been fully depreciated or expensed),
including, without limitation, such items as set forth on Schedule 1.1(d);
(e) all insurance, insurance reserves and deposits (including,
without limitation, reserves and deposits relating to workmen's compensation),
including, without limitation, such items as set forth on Schedule 1.1(e);
(f) all office furnishings and related assets;
(g) all intangible assets and intellectual property
(including, without limitation, registered and unregistered trademarks, service
marks and trade names, trade dress and other names, marks and slogans, including
the name "Xxxxx Compensation and Benefits, LLC." and all variations and
permutations thereof, excluding "The Xxxxx Companies"), all publishing and
distribution rights, and all associated goodwill; all statutory, common law and
registered copyrights; all patents, inventions, know-how, trade secrets and
confidential information; all registration applications for any of the
foregoing; together with all rights to use all of the foregoing forever and all
other rights in, to, and under the foregoing in all countries, including,
without limitation, such items as set forth on Schedule 1.1(g);
(h) all discoveries, improvements, processes, data,
confidential information, specifications and ideas, whether patentable or not,
all licenses and other similar agreements, and all drawings, records, books or
other indicia, however evidenced, of the foregoing; all rights in and to any
products or other intellectual property rights under research or development
prior to or on the Closing Date, in each case, related to the Business;
(i) all rights existing under contracts, leases, licenses,
permits, sales and purchase agreements and orders, variable annuity agreements,
agency agreements, employee benefit plans, trusts and other arrangements,
employment and consulting agreements, commission agreements, service agreements,
fee agreements, consignment arrangements, warranties, consents, orders,
registrations, privileges, franchises, memberships, certificates, approvals or
other similar rights and all other agreements, arrangements and understandings,
including, without limitation, all rights existing under the contracts listed on
the Contracts Schedule and Customer Contracts Schedule (as defined in Section
3.9 hereto) and all rights to commissions related to the Business;
(j) the right to receive all mail and other communications
addressed to Seller (including, without limitation, mail and communications from
customers, suppliers, distributors, agents and others and accounts receivable
payments), provided that Purchasers agree to forward any such mail and
communications that are of a personal nature to the officer or employee to which
it pertains promptly after receipt;
(k) all lists, records and files pertaining to customers,
including past, present and prospective customers solicited over the past two
(2) years, as referenced in Schedule 1.1(k);
(l) all lists and records pertaining to suppliers,
distributors, personnel, customers and agents and all other books, ledgers,
files, documents, correspondence, business analysis, illustrations, proposals
and records of every kind and nature relating to the Business;
2
(m) all business and marketing plans and proposals and pricing
and cost information relating to the Business;
(n) all computer hardware, software, systems and website,
including licenses related thereto, proprietary or otherwise, including related
source codes, data and documentation relating to the Business;
(o) all creative materials (including, without limitation,
photographs, films, art work, color separations and the like) advertising and
promotional materials and all other printed or written materials;
(p) all goodwill as a going concern and all other intangible
property; and
(q) all other property not referred to above which is either
represented on Seller's Latest Balance Sheet (as defined in Section 3.4) or
acquired by Seller thereafter (except for such property which has been sold or
otherwise disposed of in the ordinary course of business) related to the
Business.
For purposes of the Agreement, the term "Purchased Assets"
means all properties, assets and rights which Seller shall convey to Purchasers
or shall be obligated to convey to Purchasers under this Agreement.
1.2 Excluded Assets. Notwithstanding the foregoing, the following
assets (the "Excluded Assets") are expressly excluded from the purchase and sale
contemplated hereby and, as such, are not included in the Purchased Assets:
(a) cash and marketable securities;
(b) the minute books, capital stock records, articles of
incorporation, by-laws and corporate seal of Seller, together with annual and
other corporate reports filed with the Commonwealth of Massachusetts and other
states in which the Seller is qualified to do business, other documents and
correspondence that relate to Seller's corporate organization and maintenance
thereof;
(c) all rights of Seller under this Agreement;
(d) all claims, refunds, causes of action, rights of recovery
and rights of set-off of every kind and nature; and
(e) such other assets as set forth on Schedule 1.2 hereof.
1.3 Assumption of Liabilities. Subject to the conditions specified in
this Agreement, on the Closing Date, Purchasers shall assume and agree to pay,
defend, discharge and perform as and when due only the following liabilities and
obligations of Seller (the "Assumed Liabilities"):
(a) Any and all liabilities and obligations arising out of
Purchasers' activities of the Business after the Closing;
3
(b) Seller's obligations and liabilities under the contracts
listed on the Contracts Schedule (Schedule 3.10(a)) and on the Customer Contract
Schedule (Schedule 3.10(d)) for any activity following the Closing Date;
(c) obligations of continued performance under executory
vendor purchase orders for the purchase of supplies, equipment or services
entered into in the ordinary course of business and under which the supplies,
equipment or services subject thereto have not been received by the Seller prior
to the Closing Date (the "Vendor Orders"); and
(d) accrued payroll, vacation and other benefits of employees
of the Seller generated in the ordinary course of business to the extent
reflected on the liability side of the Seller's Closing Balance Sheet.
1.4 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement, Purchasers shall not assume or be liable for any
liabilities or obligations of Seller other than the Assumed Liabilities and all
such other liabilities or obligations shall be the responsibility of the Seller,
including but not limited to, any chargebacks related to the Business prior to
the Closing which arise after the Closing (the "Excluded Liabilities"). Any such
chargebacks shall be set off, initially against any commissions or draws owed to
the Shareholders by Consulting and then set off against any Contingent
Consideration owed the Seller.
ARTICLE 2
CONSIDERATION FOR THE PURCHASED ASSETS
2.1 Purchase Price. The aggregate purchase price for the Purchased
Assets shall be equal to an amount not to exceed Twelve Million Dollars
($12,000,000) as adjusted pursuant to Section 2.2 hereof (the "Purchase Price"),
which shall be payable to Seller as follows:
(a) on the Closing Date, by wire transfer of immediately
available funds to such account or accounts as shall have been designated in
writing by Seller not less than three (3) days prior to the Closing Date in an
amount equal to Four Million Seven Hundred Fifty Thousand Thirteen Dollars and
32/100 ($4,750,013.32), as adjusted pursuant to Section 2.2 hereof;
(b) on the Closing Date, by wire transfer of immediately
available funds to that certain interest bearing Escrow Account with interest
payable to the Seller for a period beginning on the Closing Date through
December 31, 2002 to be established pursuant to that certain Escrow Agreement in
the form of Exhibit A hereto, with such changes therein as the Escrow Agent
thereunder designated by Purchasers and Seller may request (the "Escrow
Agreement") in an amount equal to Two Hundred Fifty Thousand Dollars ($250,000);
(c) within ten (10) days of the Closing Date, by the issuance
of 39,558 shares of CBI common stock (the "CBI Stock") to the Shareholders as
designated by the Seller in accordance with Schedule 2.1 (the "Closing Stock
Consideration") valued at the average closing price of CBI Stock on the NASDAQ
National Market, as published in The Wall Street Journal for the ten (10)
trading days immediately prior to the Closing Date;
4
(d) subject to holdback in an amount limited to the amount of
any claims with respect to breaches of representations and warranties under this
Agreement as provided in and subject to the limitations contained in Article
VIII hereof, at the time of payment, additional payments of One Million Five
Hundred Thousand Dollars ($1,500,000) for the period from Closing Date through
2002, and for the years 2003, 2004 and 2005 for a total of Six Million Dollars
($6,000,000) (the "Contingent Consideration") shall be payable to Seller as
provided for in Section 2.5 hereof. Each payment of Contingent Consideration
shall be paid to the Seller, or its assignee, in the form of 75% cash and 25%
CBI Stock.
The Purchase Price shall be allocated among the Purchased
Assets as mutually agreed to by the parties within thirty (30) days following
the Closing Date consistent with GAAP. The parties agree that the allocation
agreed to shall be used by them for all purposes, including income tax purposes
if in conformance with the rules and regulations of the Internal Revenue Code of
1986, as amended (the "Code"), and that the parties shall follow such allocation
for all reporting purposes, including, without limitation, Internal Revenue
Service ("IRS") Form 8594. Any stock portion of the Purchase Price shall be
distributed to the Shareholders by the Seller in proportion to the percentages
in accordance with Schedule 2.1 hereto.
2.2 Purchase Price Adjustment. Within three (3) days prior to the
Closing Date, Seller shall notify Purchasers in writing of its good faith
estimate of the Net Asset Amount (as defined in Section 2.4 below) as of the
Closing Date determined in accordance with Section 2.4 below (the "Estimated Net
Asset Amount"). If the Estimated Net Asset Amount is less than $0, the Purchase
Price shall be decreased by the amount of such deficiency.
Upon the final determination of the Net Asset Amount pursuant to
Section 2.3 below, Purchasers and Seller shall re-compute the Purchase Price
based upon the Net Asset Amount as finally determined, and within three (3)
business days after such final determination, Seller shall pay Purchasers any
amount due Purchasers by wire transfer of immediately available funds. In the
event that the Purchase Price is reduced pursuant to this Section 2.2 and the
Net Asset Amount exceeds the Estimated Net Asset Amount, then the Purchasers
shall pay the Seller the lesser of (i) the excess of the Net Asset Amount over
the Estimated Net Asset Amount, and (ii) the reduction in the Purchase Price
pursuant to this Section 2.2.
2.3 Procedures for Final Determination of Net Asset Amount. Within
thirty (30) days after the Closing Date, Purchasers shall prepare and deliver to
Seller at Purchasers' expense a balance sheet for Seller as of the opening of
business on the Closing Date, together with a statement setting forth
Purchasers' determination of the Net Asset Amount. Within thirty (30) days after
receipt of such items, Seller shall deliver to Purchasers a detailed written
statement describing their objections, if any, to such balance sheet and
determination of the Net Asset Amount. If Seller does not raise any objections
within such thirty (30) day period, the balance sheet and Purchasers'
determination of the Net Asset Amount shall become final and binding upon all
parties. Upon request by Seller at any time after receipt of the aforementioned
balance sheet and statement, Purchasers shall make available to Seller and its
accountants and other representatives the work papers used in preparing the
balance sheet and in determining Purchasers' calculation of the Net Asset Amount
and such other documents as Seller may reasonably request in connection with its
review of the Net Asset Amount. If Seller does raise
5
any objections, Purchasers and Seller shall use reasonable efforts to resolve
any such disputes. If a final resolution is not obtained within thirty (30) days
after Seller shall have submitted its objections to Purchasers, any remaining
disputes shall be resolved by an accounting firm mutually agreeable to
Purchasers and Seller. If Purchasers and Seller are unable to mutually agree on
such an accounting firm within five (5) days after the expiration of said thirty
(30) day period, a "big-five" accounting firm (which accounting firm has not
within the previous two years performed services for Purchasers or Seller) shall
be selected by lot after elimination of one firm designated as objectionable by
each of Purchasers and Seller. The Independent Auditors shall consider only the
items in dispute and shall be instructed to act within thirty (30) days (or such
longer period as the Seller and Purchasers may agree) to resolve all items in
dispute. The determination of the accounting firm so selected shall be set forth
in writing and shall be conclusive and binding upon the parties, and the fees
and expenses of such accounting firm shall be paid one-half by Purchasers and
one-half by Seller. The final balance sheet prepared in accordance with this
Section 2.3 and Section 2.4 below and the related statement setting forth the
final determination of the Net Asset Amount are referred to as the "Closing
Balance Sheet."
2.4 Net Asset Amount Definition. For purposes hereof, "Net Asset
Amount" shall be determined as of the opening of business on the Closing Date
and shall be an amount equal to the excess of Seller's assets (other than the
Excluded Assets) at such time over Seller's liabilities (other than the Excluded
Liabilities) at such time. If the Net Asset Amount is a negative number, the
Purchase Price shall be decreased by the amount of such deficiency. The Closing
Balance Sheet shall be prepared, and the Net Asset Amount shall be determined,
in accordance with generally accepted accounting principles applied in a manner
consistent with those used in preparing Seller's balance sheets as of December
31, 2000 (the "Latest Balance Sheet"); provided that (a) all proper accruals and
reserves shall be recorded (including but not limited to vacation pay, customer
rebate accruals, bad debt reserves and warranty expenses, taxes and utility
charges prorated through the Closing Date), (b) no assets shall be included in
excess of their realizable value provided that fixed assets shall be included at
cost less depreciation, (c) no assets which have been fully expensed or
depreciated on the books and records of Seller in accordance with past practice
shall be included, (d) no prepaid expenses, intangible assets or other assets
shall be included if they shall not benefit Purchasers, (e) to the extent that
the Latest Balance Sheet was not prepared in accordance with generally accepted
accounting principles (based upon authoritative accounting pronouncements and
literature in effect on the Closing Date) and as a result the Net Asset Amount
would otherwise be overstated as of the Closing Date, the Closing Balance Sheet
shall be prepared and the Net Asset Amount shall be determined in accordance
with generally accepted accounting principles as in effect on the Closing Date,
and (f) all accounting entries (including all liabilities and accruals) shall be
taken into account regardless of their amount and all errors and omissions shall
be corrected and all adjustments made.
2.5 Vesting of Contingent Consideration.
(a) The Contingent Consideration shall be in the form of 75%
cash and 25% CBI Stock (such stock consideration to be referred to hereafter as
"Contingent Stock Consideration"). Receipt of payment of the Contingent
Consideration is contingent on a division of CBI which includes only the
Business of Seller purchased hereunder, as then currently
6
conducted (the "Xxxxx Division") achieving certain Net Revenue (as hereinafter
defined) objectives (the "Contingent Payment Target") that are measured
according to generally accepted accounting principles. Until December 31, 2005,
Purchasers shall maintain the Xxxxx Division as a separate department with
separate books and records necessary for purposes of calculating the Net
Revenue. The following table shows the annual Contingent Payment Target and the
related Contingent Consideration Payment:
Period Ending
12/31/XX Contingent Payment Target Contingent Consideration Payment
------------- ------------------------- --------------------------------
2002* $4,100,000 $1,500,000
2003 4,300,000 1,500,000
2004 4,400,000 1,500,000
2005 4,500,000 1,500,000
The full amount of the Contingent Consideration payment will be paid if the Net
Revenue levels of the Xxxxx Division meet or exceed the specified Contingent
Payment Target, and will be reduced $2.00 for each $1.00 by which actual Net
Revenue is below the Contingent Payment Target (the "Reduction Amount").
(b) To the extent the Contingent Payment Target is not
achieved in a given calendar year, there will be a "makeup" opportunity in the
next calendar year. Net Revenue which exceeds the Contingent Payment Target in a
year immediately following a year in which the Contingent Payment Target was not
met is eligible to be carried back for purposes of recalculating the Net Revenue
for such prior year (the "Carryback Amount"). If the prior year's Net Revenue
combined with the Carryback Amount exceeds the Contingent Payment Target for
such prior year, the Reduction Amount shall be paid back to the Seller (the
"Payback Amount"); provided, however, the Payback Amount shall be discounted at
an 8% annual rate. If the Carryback Amount is not sufficient to allow Xxxxx
Division to hit the Contingent Payment Target in the prior year, the Carryback
Amount will be paid to Seller; provided, however, the Payback Amount shall be
discounted at an 8% annual rate and in no event shall such Carryback Amount
payment along with the Contingent Consideration payments in the prior year
exceed $1,500,000. If a Reduction Amount exists with respect to 2005 and Net
Revenue for the twelve-month period ending December 31, 2006 exceeds $4,600,000
by an amount sufficient such that the Net Revenue for 2005 plus the applicable
Carryback Amount exceeds the Contingent Payment Target for 2005, the Payback
Amount shall be paid at the end of 2006 after appropriate discounting in
accordance herewith.
(c) Within 75 days of the end of each calendar year, from 2002
through 2005 (the "Contingent Payment Period"), Purchasers shall prepare at
their own expense, and deliver to Seller, a calculation of the Net Revenue for
the relevant period, together with certification of Purchasers signed by an
authorized officer of Purchasers that it was prepared in accordance with
--------
* The first period runs from the Closing Date through December 31, 2002.
7
this Agreement (the "Initial Annual Determination"). In connection therewith,
Purchasers shall provide Seller with such back-up information and calculations
as Seller may reasonably request.
(d) If Seller does not agree that any Initial Annual
Determination correctly states the Net Revenue of the Xxxxx Division through the
Contingent Payment Period under examination, the Seller shall promptly (but not
later than thirty (30) days after delivery of such Initial Annual Determination)
give written notice to Purchasers of any exceptions thereto (in reasonable
detail describing the nature of the disagreement asserted). If Seller and
Purchasers reconcile their differences, the Initial Annual Determination shall
be adjusted accordingly (as so adjusted, the "Adjusted Annual Determination")
and shall thereupon become final and conclusive upon all of the parties hereto.
If Seller and Purchasers are unable to reconcile their differences in writing
within twenty (20) days after written notice of exceptions is delivered by the
Seller, the items in dispute shall be submitted to the New York office of a
mutually acceptable accounting firm selected from among the twenty largest
accounting firms in the United States in terms of gross revenue for final
determination (the "Independent Auditors"). If Seller and Purchasers are unable
to mutually agree on such accounting firm within five (5) days after expiration
of the twenty (20) day period, the New York office of a "big-five" accounting
firm, which accounting firm has not within the previous two years performed
services for Purchasers or Seller or any affiliate, shall be selected by lot
after elimination of one firm by the Seller and one firm by Purchasers. The
determination of the accounting firm so selected shall be set forth in writing
and shall be conclusive and binding upon the parties. The Initial Annual
Determination shall be deemed adjusted (as so adjusted, the "Adjusted Annual
Determination") in accordance with the determination of the Independent Auditors
and shall become binding, final and conclusive upon all of the parties hereto.
The Independent Auditors shall consider only the items in dispute and shall be
instructed to act within thirty (30) days (or such longer period as the Seller
and Purchasers may agree) to resolve all items in dispute. If Seller does not
give notice of any exception within thirty (30) days after the delivery of an
Initial Annual Determination or if Seller in its discretion gives written
notification of its acceptance of an Initial Annual Determination prior to the
end of such 30-day period, such Initial Annual Determination shall thereupon
become binding, final and conclusive upon all the parties hereto. Each
Contingent Consideration Payment due hereunder shall be paid by Purchasers to
Seller within fifteen (15) days of the final determination of each Adjusted
Annual Determination in accordance with this Section 2.5.
(e) The Independent Auditors shall determine the party (i.e.,
Purchasers or Seller) whose asserted position as to the amount of Net Revenue
under examination before the Independent Auditors is furthest from the
determination thereof by the Independent Auditors, and the non-prevailing party
shall pay the fees and expenses of the Independent Auditors.
(f) For purposes of this Section 2.5, "Net Revenue" means
Gross Revenue less Expenses for any year in the Contingent Payment Period. For
purposes of this Section 2.5(f), "Gross Revenue" means all and every kind of
revenue generated by the Xxxxx Division following the Closing Date related to
(i) existing plans to existing clients, add-ons to such existing plans and new
business revenues generated in the states of Massachusetts, Rhode Island, New
Hampshire, Maine, Vermont and Connecticut (other than Fairfield County in
Connecticut), and (ii) the new business revenues and renewals related to cases
generated by the Xxxxx Division from other marketing territories which have been
approved by the CEO of
8
Xxxxx/Xxxxxx Consulting - Compensation Resource Group. Gross Revenue will
include incremental commissions or fees from 1035 exchanges of existing plans of
Consulting clients assigned to Seller and Seller's clients. "Expenses" means
expenses of the Xxxxx Division (excluding any corporate overhead allocation
related to CBI or its affiliates), including production bonuses, costs of
services (as defined below), commission expense (including EBS and EBC
commissions) , broker-dealer fees, finders' fees and case-specific professional
fees and other revenue - based expenses. For purposes hereof, "costs of
services" for existing plans as of the date hereof and for add-ons for existing
plans shall equal the lesser of (i) 10% of revenues related to such plans, or
(ii) the scheduled costs as provided for in that certain Xxxxx/Xxxxxx Consulting
- Compensation Group Schedule of Administrative Costs for Policies and Plans
Dated January 1, 2001 or Later, or any amendments thereto (as amended, the
"Scheduled Costs"); provided, however, for all New York Life Plans which exist
as of the date hereof and any add-ons related to such plans, the costs of
services in the aggregate for such New York Life Plans shall not exceed $50,000
per year. Future VEBA sales for New York Life Insurance Company will be
considered new business eligible for compensation under the Executive Benefit
Specialist or Consultants Agreements and subject to the Scheduled Costs at such
time. In the event the Net Revenue from any plan is zero, the costs of services
related to such plan shall be based on the Scheduled Costs. Costs of services
for all plans (other than add-ons for existing plans) put in place following the
date hereof shall be equal to the Scheduled Costs at such time. Revenue shall be
deemed earned for purposes of meeting the Contingent Payment Target when it is
generated by the Xxxxx Division and is recognized by the Purchasers as revenue
for accounting purposes in accordance with generally accepted accounting
principles consistently applied by Purchasers.
(g) In the event that Purchasers (i) sell the Division to a
third party, other than as part of a sale of substantially all of the assets or
stock of Purchasers, and as result there is a material reduction in the Net
Revenue generated by the Division, (ii) take an action that results in a
material reduction of the types and amounts of services and products sold which
generate Net Revenue for the Division, or (iii) cause a material decrease in the
personnel made available to sell products or perform services generating such
Net Revenue, the Seller and Purchasers shall make an equitable adjustment to the
Contingent Payment Targets to compensate for such adverse effect. In the event
the Purchasers and Shareholders cannot agree on such equitable adjustment, the
Independent Auditors will receive the items or amounts in dispute and compute
such adjustment. Such determination shall be made in writing within thirty (30)
days after the date on which the Independent Auditors begin their review and
shall be final and binding on the parties. The fees, costs and expenses of the
Independent Auditors shall be paid by the party whose calculation of the
equitable adjustment is further from the Independent Auditor's calculation.
2.6 CBI Stock.
(a) As to the Contingent Stock Consideration, the CBI Stock
shall be valued at the average closing price of CBI Stock on the NASDAQ National
Market, as published in The Wall Street Journal, for the ten (10) trading days
immediately prior to the date of payment. Any shares of CBI Stock to be
delivered as Contingent Stock Consideration shall be distributed by Purchasers
directly to the Shareholders in accordance with written instructions of Seller.
9
(b) During the period beginning on the date of receipt of the
stock and ending on the one (1) year anniversary of receipt of such stock
consistent with Rule 144 (a "Restriction Period"), Seller or its assignee shall
not sell, assign, exchange, transfer, distribute or otherwise dispose of (in
each case, "transfer") any shares of CBI Stock received by it hereunder except
as otherwise permitted under Rule 144. The recipient of the CBI Stock will
execute an Investment Letter (as hereinafter defined) upon his or her receipt of
such stock. Following the Restriction Period, Seller may transfer its shares of
CBI Stock so long as such transfer is in accordance with the Securities Act of
1933, as amended, including Rule 144 thereunder. The certificates evidencing the
CBI Stock delivered to Seller pursuant to this Agreement shall bear a legend
substantially in the form set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED (OTHER THAN IN CONNECTION WITH A PLEDGE, EXCHANGED,
TRANSFERRED, DISTRIBUTED, CHANGED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, ASSIGNMENT (OTHER THAN IN CONNECTION WITH A
PLEDGE), EXCHANGE, TRANSFER, DISTRIBUTION, OR OTHER
DISPOSITION OTHER THAN IN ACCORDANCE WITH SECTION 2.6 OF THAT
CERTAIN
ASSET PURCHASE AGREEMENT DATED AS OF AUGUST 31, 2001,
BY AND AMONG XXXXX/XXXXXX CONSULTING, INC., XXXXX/XXXXXX,
INC., XXXXX COMPENSATION & BENEFITS, LLC., J. XXXXX XXXXX,
XXXXXXXXXXX XXXX, XXXXXX X. XXXXXXX, III AND XXXXXX X. XXXXXX.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION (COLLECTIVELY, THE "SECURITIES
LAWS") AND MAY NOT BE SOLD, DISPOSED OF OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION, EXCEPT IN
ACCORDANCE WITH AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF ANY APPLICABLE SECURITIES LAWS PROVIDED THAT
XXXXX/XXXXXX CONSULTING, INC. AND XXXXX/XXXXXX, INC. SHALL
HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THEM
CONFIRMING THAT THE REQUIREMENTS OF SUCH EXEMPTION HAVE BEEN
SATISFIED.
(c) Seller shall not transfer any shares of the CBI Stock at
any time if such transfer would constitute a violation of any federal or state
securities or "blue sky" laws, rules or regulations (collectively, "Securities
Laws"), or a breach of the conditions to any exemption from registration of the
CBI Stock under any such Securities Law on which Seller is relying at
10
the time of his sale, or a breach of any undertaking or agreement of Seller
entered into with CBI pursuant to such Securities Laws or in connection with
obtaining an exemption thereunder.
(d) For purposes of this Agreement (and the restrictions set
forth in this Section 2.6), the term "CBI Stock" shall mean and include (i) the
shares of common stock of CBI issued, granted, conveyed and delivered to Seller
pursuant to Sections 2.1 and 2.5 hereof, and (ii) any and all other additional
shares of capital stock of CBI issued or delivered by CBI with respect to the
shares of CBI Stock described in clause (i) hereof, including without limitation
any shares of capital stock of CBI issued or delivered with respect to such
shares as a result of any stock split, stock dividend, stock distribution,
recapitalization or similar transaction.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
SELLER AND SHAREHOLDERS
As an inducement to Purchasers to enter into this Agreement, Seller and
the Shareholders hereby, jointly and severally, represent and warrant to
Purchasers as of the date hereof and as of the Closing Date that:
3.1 Organization and Power. Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of
Massachusetts. Seller is qualified to do business as a foreign corporation and
is in good standing in the jurisdictions specified on the "Qualifications
Schedule" attached hereto as Schedule 3.1, which are all jurisdictions in which
ownership of its properties or the conduct of its business requires it to be so
qualified, except where the failure to be so qualified would not have a Seller
Material Adverse Effect (as defined below). "Seller Material Adverse Effect"
shall mean any change in or effect on Seller or the Business that, individually
or in the aggregate is, or is reasonably likely to be, materially adverse to the
Business or Purchased Assets, provided, however, that Seller Material Adverse
Effect shall not be deemed to include the impact of (a) changes in generally
accepted accounting principles, (b) acts or omissions of Seller taken with the
prior written consent of Purchasers, (c) changes in general economic conditions
in the United States, and (d) any changes or effects as a result of the
announcement of the transactions contemplated by this Agreement. Seller has all
requisite power and authority and all material licenses, permits and other
authorizations necessary to own and operate the Purchased Assets and to carry on
the Business. The copies of the articles of organization and operating agreement
of Seller which have been previously furnished to Purchasers reflect all
amendments made thereto at any time prior to the date of this Agreement and are
correct and complete in all material respects.
3.2 Subsidiaries. Except as disclosed on Schedule 3.2 hereto, Seller
owns no stock, partnership interest, joint venture interest or other security or
interest in any other corporation, organization or entity related to the
Business.
3.3 Authorization; No Breach. The execution, delivery and performance
of this Agreement and the other agreements contemplated hereby and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by Seller. No other corporate act or proceeding on the
part of Seller, its Board of Managers or its members
11
is necessary to authorize the execution, delivery or performance by the Seller
of this Agreement, any other agreement contemplated hereby or the consummation
of the transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by Seller and the Shareholders and this Agreement
constitutes and the other agreements contemplated hereby upon execution and
delivery by Seller and the Shareholders shall each constitute, a valid and
binding obligation of Seller and the Shareholders, enforceable in accordance
with their terms. The execution, delivery and performance of this Agreement and
the other agreements contemplated hereby by Seller and the Shareholders and the
consummation of the transactions contemplated hereby and thereby do not and
shall not (a) conflict with or result in any breach of any of the provisions of,
(b) constitute a default under, result in a violation of, or cause the
acceleration of any obligation under, (c) result in the creation of any lien,
security interest, charge or encumbrance upon any of the Purchased Assets under,
or (d) require any authorization, consent, approval, exemption or other action
by or notice to any court or other governmental body under (i) the provisions of
Seller's articles of organization or operating agreement, or (ii) any indenture,
mortgage, lease, loan agreement or other agreement or instrument to which Seller
or the Shareholders are bound or affected or (iii) any law, statute, rule,
regulation, judgment, order or decree to which Seller or the Shareholders are
subject or by which any of the Purchased Assets are bound, except where failure
to get such authorization, consent, approval exemption or other action under
such law, statute, rule, regulation, judgment, order or decree would not have a
Seller Material Adverse Effect.
3.4 Financial Statements. Seller has furnished Purchasers with copies
of (a) its compiled balance sheet as of December 31, 2000 and the related
compiled financial statements for the twelve-month period then ended, (b) its
compiled balance sheets as of December 31, 1999 and the related compiled
financial statements for the fiscal years then ended, and (c) unaudited
financial statements for the Seller as at and for the six month period ended
June 30, 2001. Each of the foregoing financial statements has been based upon
the information contained in Seller's books and records (which are accurate and
complete in all material respects) and fairly presents in all material respects
the financial condition and results of operations of Seller as of the times and
for the periods referred to therein, and such financial statements contain
proper accruals and adequate reserves consistent with generally accepted
accounting principles and have been prepared in accordance with generally
accepted accounting principles, consistently applied throughout the periods
indicated, except as otherwise noted therein.
3.5 Absence of Undisclosed Liabilities. As of the Closing (as defined
in Section 8.1), Seller shall have no liabilities or obligations relating to the
Business whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to Seller, whether due or to become due, arising out of or
related to transactions entered into at or prior to the Closing, or out of any
action or inaction by Seller or any employee, agent, licensee or contractor of
any of them at or prior to the Closing, or out of any state of facts existing at
or prior to the Closing, regardless of when any such liability or obligation is
asserted, including, without limitation, taxes with respect to or based upon
transactions or events occurring on or before the Closing or any errors in
billing by Seller with respect to transactions or events occurring on or before
the Closing, except (a) liabilities and obligations with respect to post Closing
Date actions taken by Purchasers or related to business of the Purchasers under
agreements, contracts, leases or commitments described on the Leases Schedule
(as defined in Section 3.7(b) hereof) and the Contracts Schedule and the
Customer Contracts Schedule (as such terms are defined in Section 3.9 hereof)
12
or under agreements, leases, contracts and commitments which are not required
pursuant to this Agreement to be disclosed thereon (but not liabilities for
breaches thereof), (b) liabilities and obligations reflected on Seller's Latest
Balance Sheet, and (c) liabilities and obligations which have arisen after the
date of Seller's Latest Balance Sheet in the ordinary course of business (none
of which is a liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit).
3.6 No Material Adverse Changes/Absence of Certain Developments. Since
the date of the Latest Balance Sheet, there has been no change in the financial
condition, operating results, assets, operations, employee relations or customer
relations of Seller which has had a Seller Material Adverse Effect. Except as
set forth in the "Developments Schedule" attached hereto as Schedule 3.6, since
the date of the Latest Balance Sheet, Seller has not:
(a) borrowed or agreed to borrow any amount or incurred or
become subject to any material liabilities, except current liabilities incurred
in the ordinary course of business and liabilities under contracts entered into
in the ordinary course of business;
(b) discharged or satisfied, or agreed to discharge or
satisfy, any material lien or encumbrance or paid any material liability, other
than current liabilities paid in the ordinary course of business;
(c) mortgaged, pledged or subjected to any lien, charge or any
other encumbrance, any portion of the Purchased Assets, except liens for current
property taxes not yet due and payable;
(d) sold, assigned or transferred, or agreed to do so, any of
the Purchased Assets, except in the ordinary course of business or canceled
without fair consideration any material debts or claims owing to or held by it;
(e) sold, assigned, transferred, abandoned or permitted to
lapse any patents, trademarks, trade names, copyrights, trade secrets or other
intangible assets, or disclosed any material proprietary confidential
information to any person;
(f) made or granted, or agreed to make or grant, any bonus or
any wage or salary increase to any employee or group of employees or made or
granted any increase in any employee benefit plan or arrangement (except in
accordance with past custom and practice), or implement any employee retention
plan, or amended or terminated, or agreed to terminate or amend, any existing
employee benefit plan or arrangement or adopted any new employee benefit plan or
arrangement;
(g) made, or agreed to make, any capital expenditures or
commitments therefore that aggregate in excess of $10,000;
(h) made, or agreed to make, any loans or advances to, or
guarantees for the benefit of, any persons;
(i) suffered any extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of business or consistent
with past practice;
13
(j) entered into, or agreed to enter into, any other material
transaction other than in the ordinary course of business;
(k) failed to make any scheduled payment with respect to any
debt agreements or instruments;
(l) made or agreed to make, any charitable contributions or
pledges;
(m) made any purchase commitment of services or goods in
excess of the normal, ordinary and usual requirements of its business or at any
price in excess of the then current market price or upon terms and conditions
more onerous than those usual and customary in the industry, or made any change
in its selling, pricing, advertising or personnel practice inconsistent with its
prior practice and prudent business practices prevailing in the industry; or
(n) suffered any material damage, destruction or casualty loss
to the Purchased Assets, whether or not covered by insurance.
3.7 Title and Condition of Properties.
(a) The Seller owns no real estate.
(b) To Seller's knowledge, the lease occupancy agreement
described on the "Leases Schedule" attached hereto as Schedule 3.7 (the "Lease")
is in full force and effect, and Rich holds a valid and existing leasehold
interest under such agreement for the term and under the conditions set forth in
such lease. The Lease described on the Leases Schedule constitutes the only
lease under which Seller or Rich holds a leasehold interest in real estate
related to the Business. Seller has delivered to Purchasers complete and
accurate copies of the Lease described on the Leases Schedule, and such Lease
has not been modified in any respect, except to the extent that such
modifications are disclosed by the copies delivered to Purchasers. To Seller's
knowledge, Seller is not in default under such Lease, and to Seller's knowledge,
no third party to the Lease is in default thereunder.
(c) The real estate demised by the Lease described on the
Leases Schedule constitutes all of the real estate owned, used or occupied by
Seller.
(d) Seller owns good and marketable title, free and clear of
all liens, charges, security interests, encumbrances, encroachments and claims
of others, to all of the Purchased Assets, except for leased equipment, for
liens of current real property taxes, personal property taxes or ad valorem
taxes not yet due and payable (which shall be pro-rated) and liens disclosed on
the Latest Balance Sheet ("Permitted Encumbrances"). At the Closing, Seller
shall sell, assign, transfer and convey to Purchasers by customary Xxxx of Sale
good and marketable title to all of the personal property included within the
Purchased Assets, free and clear of all liens, security interests, charges,
encumbrances and claims of others, other than Permitted Encumbrances.
(e) Seller's leased premises, equipment and other tangible
assets are in good condition and repair in all material respects, normal wear
and tear excepted, have been maintained in accordance with normal industry
standards and are usable in the ordinary course of
14
business. Seller owns or leases under valid leases all buildings, equipment and
other tangible assets necessary for the conduct of the Business.
(f) Seller is not in violation of any applicable zoning,
building, fire or other ordinance or other law, regulation or requirement
relating to the operation of owned or leased properties, including, without
limitation, applicable environmental protection and occupational health and
safety laws and regulations, except for such violations which would not have a
Seller Material Adverse Effect. Within the three years prior to the date of this
Agreement, Seller has received no notice of any such violation or any
condemnation proceeding with respect to any properties owned, used or leased by
Seller.
(g) The Purchased Assets, together with the services and
arrangements described on the Contracts Schedule, comprise all assets and
services required for the continued conduct of the Business by the Purchasers as
now being conducted. Except for the Excluded Assets, there are no assets or
properties used in the operation of the Business and owned by any Person other
than the Seller that will not be leased or licensed to the Purchasers under
valid, current leases or license arrangements. The Purchased Assets are in all
material respects adequate for the purposes for which such assets are currently
used or are held for use, and are in reasonably good repair and operating
condition (subject to normal wear and tear) and there are no facts or conditions
affecting the Purchased Assets which could, individually or in the aggregate,
interfere in any material respect with the use, occupancy or operation thereof
as currently used, occupied or operated, or their adequacy for such use.
3.8 Tax Matters.
(a) Seller has duly filed all federal, foreign, state and
local tax information and tax returns of any and every nature and description
(the "Returns") required to be filed by it (all such returns being accurate and
complete in all material respects) and has duly paid or made provision for the
payment of all taxes and other governmental charges (including without
limitation any interest, penalty or additions to tax thereto) which have been
incurred or are shown to be due on said Returns or are claimed in writing to be
due from Seller or imposed on Seller or its properties, assets, income,
franchises, leases, licenses, sales or use, by any federal, state, local or
foreign taxing authorities (collectively, the "Taxes") on or prior to the date
hereof, other than Taxes which are being contested in good faith and by
appropriate proceedings and as to which Seller has set aside on its books
adequate reserves or which may be attributable to the transactions contemplated
hereby. The amounts recorded as reserves for Taxes on a gross or net basis on
the Latest Balance Sheet are sufficient in the aggregate for payment by Seller
of all unpaid Taxes (including any interest or penalties thereon) for the period
ended as of the date of the Latest Balance Sheet or for any year or period prior
thereto. Neither the IRS nor any state, local or foreign taxing authority has
ever audited any income tax return of the Seller, whether singly or as a member
of an affiliated group.
Except as set forth on the "Tax Matters Schedule" attached
hereto as Schedule 3.8, neither the IRS nor any foreign, state, local or other
taxing authority is in the process of examining any federal, foreign, state,
local or other tax return of Seller. There are no disputes pending, or claims
asserted, for Taxes upon Seller. Seller has not been required to give any
currently effective waivers extending the statutory period of limitation
applicable to any foreign,
15
federal, state or local return or for any period or agreed to an extension of
time with respect to a Tax assessment or deficiency. Seller has in effect no
power of attorney or authorization to anyone to represent it with respect to any
Taxes other than the Tax Matters Partner under the Seller's Operating Agreement.
No claim has ever been made by an authority in a jurisdiction where the Seller
does not file Returns that Seller is or may be subject to taxation by that
jurisdiction. Seller has no liability for Taxes as a transferee of, or successor
to, any other person. Seller has provided to Purchasers or their representatives
complete and correct copies of their respective federal, state and local income
tax returns filed on or prior to the date hereof and all examination reports, if
any, relating to the audit of such returns by the IRS or other tax authority for
each taxable year beginning on or after January 1, 1998. Except as disclosed in
Schedule 3.8, there exists no proposed assessment against Seller or the
Shareholders or notice, whether formal or informal, of any deficiency or claim
for additional Tax (including, without limitation, interest, additions to tax or
penalties).
(b) All monies required to be withheld from employees,
independent contractors, shareholders, or creditors of Seller for Taxes,
including, but not limited to, income taxes, back-up withholding taxes, social
security and unemployment insurance taxes or collected from customers or others
as Taxes, including, but not limited to, sales, use or other taxes, have been
withheld or collected and paid, when due, to the appropriate governmental
authority, or if such payment is not yet due, an adequate reserve has been
established for such Taxes.
3.9 Contracts and Commitments.
(a) Except as set forth in Section 3.15 or in the "Contracts
Schedule" attached hereto as Schedule 3.9(a) or in the "Customer Contracts
Schedule" attached hereto as Schedule 3.9(d), Seller is not a party to any of
the following contracts related to, or binding upon, the Business:
(i) bonus, pension, profit sharing, retirement or
deferred compensation plan or stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether formal
or informal, or severance agreements or arrangements or contracts
requiring Seller to pay post-retirement medical benefits;
(ii) contract for the employment of any officer,
individual employee or other person on a full-time, part-time or
consulting basis;
(iii) mortgage, pledge or otherwise place a lien on
any of the Purchased Assets;
(iv) guarantee of any obligation for borrowed money
or otherwise, other than endorsements made for collection in the
ordinary course of business;
(v) agreement or commitment with respect to the
lending or investing of funds to or in other persons or entities;
(vi) license or royalty agreement related to the
Business;
16
(vii) lease or agreement related to the Business
under which it is lessee of or holds or operates any personal property
owned by any other party;
(viii) lease or agreement related to the Business
under which it is lessor of or permits any third party to hold or
operate any property, real or personal, owned or controlled by it;
(ix) contract or group of related contracts related
to the Business with the same party for the purchase or sale of
products or services other than the Customer Contracts (as defined in
Section 3.9(d) hereof);
(x) other contract related to the Business with any
party continuing over a period of more than six months from the date or
dates thereof, not terminable by it on thirty (30) days' or less notice
without penalties;
(xi) contract which prohibits it from freely engaging
in business anywhere in the world and to which the Business or the
Purchased Assets are subject;
(xii) contract relating to the distribution of its
products as it relates to the Business; or
(xiii) other agreements related to the Business
whether or not entered into in the ordinary course of business.
(b) Except as specifically disclosed in the Contracts Schedule
or the Customer Contracts Schedule, (i) no contract or commitment related to the
Business has been breached in any material respect or canceled by the other
party, (ii) since December 31, 2000, no material supplier of the Business has
notified Seller that it shall stop or decrease in any material respect the rate
of business done with Seller, (iii) Seller has in all respects performed all the
obligations required to be performed by it to the date of this Agreement and is
not in receipt of any claim of default under any material lease, contract,
commitment or other agreement related to the Business to which it is a party;
(iv) no event has occurred which with the passage of time or the giving of
notice or both would result in a breach or default under any lease, contract,
instrument or other agreement related to the Business to which Seller is a party
and which is related to the Business; and (v) Seller is not a party to any
contract which is materially adverse to the Business's operations, financial
condition or operating results.
(c) Purchasers have been supplied with a true and correct copy
of all written contracts which are referred to on the Contract Schedule and
Customer Contracts Schedule, together with all amendments, waivers or other
changes thereto.
(d) Seller has no knowledge of any (i) pending or threatened
termination, cancellation, limitation, modification or change outside the
ordinary course in any of Seller's business relationship with any customer or
group of customers related to the Business or (ii) changes or pending changes in
any law, rule, regulation, technology, or business relationship or other
circumstance that could result in the loss of any customers related to the
Business after the date hereof in each case that would have a Seller Material
Adverse Effect. Except as indicated on the Customer Contract Schedule, (A) each
contract, agreement or lease with
17
customers of Seller relating to the Business ("Customer Contracts") is valid,
enforceable and in full force and effect in accordance with the terms thereof,
(B) there is no existing default or event or condition which, with notice or
lapse of time or both, would constitute an event of default under any Customer
Contract, (C) no Customer Contract has been amended, modified, supplemented or
otherwise altered orally, in writing or by course of conduct, (D) no Customer
Contract requires the consent of the Customer or any other party to affect a
valid assignment thereof to Purchasers without causing a default or giving rise
to a right of termination thereunder and (E) each Customer Contract complies in
all material respects with all applicable laws, rules and regulations.
3.10 Proprietary Rights. Set forth on the "Proprietary Rights Schedule"
attached hereto as Schedule 3.10 is a list of all patents, patent applications,
trademarks, service marks, trade names, corporate names and copyrights owned by
Seller which are related to the Business or used by Seller in the conduct of the
Business. Seller owns and possesses all right, title and interest in and to the
proprietary rights necessary to conduct the Business. Seller has taken all
necessary action to protect the proprietary rights necessary to conduct the
Business. Seller has not received any notices of infringement, misappropriation,
invalidity or conflict from any third party with respect to such proprietary
rights. To Seller's knowledge, Seller has not infringed, misappropriated or
otherwise conflicted with any proprietary rights of any third parties and, to
Seller's knowledge, Seller's proprietary rights have not been infringed by any
third parties.
3.11 Litigation; Proceedings. Except as disclosed on the "Litigation
Schedule" attached hereto as Schedule 3.11, there are no actions, suits,
proceedings, orders or investigations pending or, to Seller's knowledge,
threatened against (except for such claims which do not have a Seller Material
Adverse Effect) or affecting Seller or the Business or the Shareholders at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and there is no basis known to Seller for any of the
foregoing. No officer, director, employee or agent of Seller has been or is
authorized to make or receive, and Seller knows of no such person making or
receiving, any bribe, kickback or other illegal payment at any time. Within the
three (3) years preceding the date hereof, Seller has not received any opinion
or legal advice in writing to the effect that Seller is exposed from a legal
standpoint to any liability or disadvantage which may be material to the
Business as previously or presently conducted. Notwithstanding anything else
herein to the contrary, Seller has not received any opinion or legal advice from
any legal counsel that any of its activities or conduct constitutes a basis for,
or will expose the Seller to, liability, including liability for
misrepresentations or false statements, concerning the cost, performance, tax
treatment or results to be expected with respect to any of the plans or policies
placed by Seller.
3.12 Brokerage. There are no claims for brokerage commissions, finders
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Seller.
3.13 Governmental Consent, etc.
(a) No permit, consent, approval or authorization of, or
declaration to or filing with, any governmental or regulatory authority is
required in connection with the execution,
18
delivery or performance of this Agreement by Seller, or the consummation by
Seller of any of the transactions contemplated hereby and thereby, except as
disclosed on the "Consents Schedule" attached hereto as Schedule 3.13.
(b) The Consents Schedule attached hereto as Schedule 3.13
sets forth all governmental approvals or thirty-party consents necessary for, or
otherwise material to, the conduct of the Business, including but not limited
to, all consents and assignments required to transfer all fees and bonuses paid
by customers. Unless waived by the Purchasers, all such governmental approvals
and consents have been duly obtained and are in full force and effect, and
Seller is in compliance with each of such governmental approvals and consents
held by it with respect to the Purchased Assets and the Business.
3.14 Employees. Except as set forth on Schedule 3.14, to Seller's
knowledge, no key employee, nor group of Seller's employees related to the
Business, has any plans to terminate employment with Seller. Seller has complied
in all material respects with all applicable laws relating to the employment of
labor and independent contractors related to the Business, including provisions
thereof relating to wages, hours, equal opportunity, immigration, collective
bargaining, disabilities, family leave and the payment of social security and
other taxes. Except as disclosed on the "Employees Schedule" attached hereto as
Schedule 3.14, neither the Seller nor any Shareholder has any reason to believe
that the services of any of the present employees of Seller related to the
Business will not be available for continued conduct of the Business after the
Closing on substantially the same terms as now conducted.
3.15 Employee Benefit Plans.
(a) The "Employee Benefits Schedule" attached hereto as
Schedule 3.15, contains a list of each and every employee benefit plan, within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), which Seller and/or any corporation, partnership or
other trade or business which is or would be a member of a controlled group of
corporations, group of trades or business under common control, or an affiliated
service group including Seller, under the provisions of Code Section 414(b),
(c), (m) or (o) (each an "ERISA Affiliate") maintains, to which Seller or any
ERISA Affiliate contributes, or is obligated to contribute, or under which any
employee or former employee, officer or former officer, director, or former
director, shareholders or former shareholder of Seller or any ERISA Affiliate
(collectively, "Participants"), or any beneficiary of any Participant, is
covered or has benefit rights and pursuant to which any liability of Seller or
any ERISA Affiliate exists, and each other arrangement, program or plan pursuant
to which any benefit is or shall be provided by Seller or any ERISA Affiliate to
any Participant or any Participant's beneficiary, whether formal or informal,
including, without limitation, those providing any form of medical, health or
dental insurance, life, disability and accidental death and dismemberment
insurance, severance pay or benefits continuation, nonqualified deferred
compensation, relocation assistance, vacation pay, tuition aid or matching gifts
for charitable contributions to educational or cultural institutions
(collectively, the "Benefit Plans"). A true and correct copy of each of the
Benefit Plans, including all amendments thereto, has been delivered to
Purchasers. Except as set forth on the "Employee Benefits Schedule", neither the
Seller nor any ERISA Affiliate maintains or has entered into any Benefit Plan or
other document, plan or agreement which contains any change in control
provisions which would cause an increase or acceleration of benefits or benefit
19
entitlements to Participants or their beneficiaries, or other provisions, which
would cause an increase in liability of Seller or to Purchasers as a result of
the transactions contemplated by this Agreement. Each of such plans that is an
employee pension benefit plan within the meaning of Section 3(2) of ERISA that
is intended to be a qualified plan under Section 401(a) of the Code has been
amended to comply in all material respects with current law as required and each
such plan has obtained a favorable determination letter with respect to such
amendment.
(b) Except as set forth in the "Employee Benefits Schedule",
all accrued contributions and other payments to be made by Seller or any ERISA
Affiliate to any Benefit Plan through the date of the Latest Balance Sheet have
been made or reserves adequate for such purposes as of the date of the Latest
Balance Sheet have been set aside therefore and reflected on the Latest Balance
Sheet. Neither Seller nor any ERISA Affiliate is in default in any material
respect in performing any of its contractual obligations under any of the
Benefit Plans or any related trust agreement or insurance contract.
(c) There is no pending litigation or, to the knowledge of
Seller, overtly threatened litigation or pending claim (other than benefit
claims made in the ordinary course) by or on behalf of or against any of the
Benefit Plans (or with respect to the administration of any of the Benefit
Plans) now or heretofore maintained by Seller or any ERISA Affiliate which
allege violations of applicable state or federal law.
(d) Each Benefit Plan is and has been in compliance in all
material respects with, and each such Plan is and has been operated in
accordance in all material respects with the applicable laws, rules and
regulations governing such Plan, including, without limitation, the rules and
regulations promulgated by the Department of Labor, the Pension Benefit Guaranty
Corporation ("PBGC") and the IRS under ERISA, the Code or any other applicable
law.
(e) None of the Benefit Plans is or ever has been subject to
Title IV of ERISA, and neither Seller nor any ERISA Affiliate is or has been
required to contribute to an employee benefit plan that is a "multi-employer
plan" within the meaning of Section 3(37) of ERISA nor has been so required
during the five-year period ending on the Closing Date.
(f) All reporting and disclosure requirements of ERISA and the
Code applicable to the Benefit Plans have been satisfied in all material
respects.
(g) Neither Seller nor any ERISA Affiliate has any liability
on account of any accumulated funding deficiency (as defined in Section 412 of
the Code) or on account of any failure to make contributions to or pay benefits
under any Benefit Plan, nor is Seller aware of any claim pending or threatened
to be brought by any party regarding such matters. No prohibited transaction has
occurred with respect to any Benefit Plan that would result, directly or
indirectly, in the imposition of any excise tax under Section 4975 of the Code.
(h) None of the Benefit Plans provides for (or has ever
provided for) medical or health care or benefits for any former employee of
Seller or any ERISA Affiliate, except to the extent required by Section 4980B of
the Code or Part 6 of Title I of ERISA.
(i) Seller and all of its ERISA Affiliates have complied in
all material respects with the requirements of Part 6 of Title I of ERISA and
Code Section 4980B.
20
(j) Neither Seller nor any ERISA Affiliate is in possession of
any written notice which would indicate that any insurance company which has
issued an insurance policy or policies under any of the Benefit Plans is in
danger of becoming insolvent, within the meaning of applicable state law.
(k) The transactions contemplated by this Agreement will not
entitle any Participant or any Participant's beneficiary in any Benefit Plan to
any severance benefit under the terms of any Benefit Plan or any personnel or
employment policy of Seller or any ERISA Affiliate.
3.16 Insurance. The "Insurance Schedule" attached hereto as Schedule
3.16 lists and briefly describes each insurance policy maintained by Seller with
respect to the Purchased Assets and lists and briefly describes any life
insurance on any employee, including the purpose of the insurance and the
beneficiary. The Seller has delivered to the Purchasers complete and correct
copies of all such policies together with all riders and amendments thereto. All
of such insurance policies are in full force and effect, and Seller is not in
default in any material respect with respect to its obligations under any of
such insurance policies. Such insurance coverage is customary for well insured
entities engaged in similar lines of business. During the three-year period
ending on the date hereof, Seller has not ever been refused any insurance
coverage for which it has applied or had any insurance policy canceled. The
Seller shall provide tail coverage on its errors and omissions insurance
policies listing Seller, Purchasers and the Shareholders as beneficiaries for a
period of three (3) years from the date hereof to cover any claims following the
Closing Date.
3.17 Affiliated Transactions. Except as set forth on the "Affiliated
Transaction Schedule" attached hereto as Schedule 3.17, no officer, director,
shareholder or affiliate of Seller or any person related by blood or marriage to
any such person or any entity in which any such person owns any beneficial
interest is a party to any agreement, contract, commitment or transaction
related to the Business or has any interest in any Purchased Assets.
3.18 Compliance with Laws; Permits; Certain Operations.
(a) Seller and its officers, directors, agents and employees
have complied in all material respects with all applicable laws and regulations
of foreign, federal, state and local governments and all agencies thereof which
affect the Business or the Purchased Assets, and no claims have been filed
against Seller alleging a violation of any such law or regulation, except as set
forth on the "Compliance Schedule" attached hereto as Schedule 3.18(a). In
particular, but without limiting the generality of the foregoing, Seller has not
violated, or received a notice or charge asserting any violation and neither the
Seller nor the Shareholders have knowledge of any violation, of the Immigration
Reform and Control Act of 1986, the Occupational Safety and Health Act of 1970,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976, the Toxic Substances
Control Act of 1976, the Americans With Disabilities Act, or any other state or
federal act (including rules and regulations thereunder) regulating or otherwise
affecting the employment of aliens, employee health and safety, the environment,
zoning, building, fire or other ordinances or any other aspect of the Business
which would have a Seller Material Adverse Effect.
21
(b) Seller holds all of the permits, licenses, certificates
and other authorizations of foreign, federal, state and local governmental
agencies required for the conduct of the Business all of which are set forth in
the "Permits Schedule" attached hereto as Schedule 3.18(b). Seller has not
received any notice (and Seller has no reason to believe) that revocation is
being considered with respect to any of such licenses, permits, certificates or
authorizations, or that Seller is in violation of any such license, permit,
certificate or authorization.
(c) Seller and Shareholders represent that Seller has complied
in all material respects with all laws and regulations with respect to life
insurance policy illustrations and disclosures provided to customers by the
Seller and its agents. Seller and Shareholders represent that Seller includes
and has included all required disclosures and disclaimers with respect to
illustrations in sales materials. As part of the sales process, Seller and its
agents have represented to customers that the illustrations are based on
assumptions, that any change in assumptions will affect future results, that
actual results are determined by actual mortality and expense charges, that
investment performance of the investment portfolios selected by the participant
are not guaranteed, that a change in the investment return is inherent in the
applicable policy and that the customer has the right to select the investment
portfolio and change it in the future.
3.19 Software.
(a) Except as set forth on the "Software Schedule" attached
hereto as Schedule 3.19, Seller has the right to use all Software (as
hereinafter defined) for use in connection with the Business, pursuant to valid
leases or licenses therefore, and, except as otherwise disclosed in Schedule
3.19, to the knowledge of Seller, all such leases and licenses are in full force
and effect and there is no default, nor any event which with notice or the lapse
of time or both, will become such a default under any such lease or license by
Seller or any other parties thereto which will have a Seller Material Adverse
Effect.
(b) "Software" means any computer program, operating system,
applications system, data base, firmware or software of any nature whatsoever,
owned, used, licensed or sublicensed by Seller in the Business, currently used
in operations including all object code, source code, proprietary applications
of off-the-shelf software, modules, technical manuals, issuer manuals, program
flow charts, file layouts, report layouts, screen layouts and other
documentation therefore (including internal notes, memoranda, status
evaluations, marketing information and write-ups), and all improvements,
modifications, enhancements, new releases and revisions thereof, whether in
machine-readable form, programming language or any other language or symbols,
and whether stored, encoded, recorded or written on disk, tape, film, memory
device, paper or other media or any nature.
3.20 Environmental Health and Safety. (a) Seller and its affiliates has
complied with, and is currently in compliance with, in all material respects,
all environmental, health and safety laws and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been
threatened, filed or commenced against it alleging any failure so to comply,
alleging any liability under any environmental, health and safety laws or
requesting any investigation related thereto. No condition exists or event has
occurred which, with or without
22
notice or the passage of time, would constitute a violation of or give rise to a
lien under any environmental, health and safety laws, except for violations or
liens that would not have a Seller Material Adverse Effect.
(b) To Seller's knowledge, all properties and equipment used
in the Business of the Seller, its predecessors and affiliates, have been free
of asbestos, PCB's, mephylene chloride, trichlorethylene, 1, 2 - trans
dichloroethylene, dioxins, dibenzofurans and other hazardous substances, except
for such materials that would not have a Seller Material Adverse Effect.
3.21 Product and Warranty Claims; Warranties. Except as disclosed in
the "Claims Schedule" attached hereto as Schedule 3.22, Seller has no knowledge
of and has not received during the past five (5) years any claim or notice with
respect to any occurrences arising out of the use of, or related to, the
insurance products, policies and services designed, sold, implemented, monitored
or serviced by or on behalf of Seller related to the Business, which has
resulted in any claim or notice that any such products or services do not
conform to any agreement, representation or warranty made by Seller (or implied
by law) with respect to such products or services. Seller is insured against all
damages, liability and expenses for any claims based upon products designed,
sold, implemented or serviced by or on behalf of Seller (including, but not
limited to, costs of investigation and attorneys' fees and expenses) under
policies of insurance described on the Insurance Schedule, except as to claims
for breach of any agreement, representation or warranty made with respect to
such products against which Seller has established good and sufficient reserves
therefore on their books and records.
3.22 Disclosure. Neither this Agreement nor any of the schedules,
attachments or exhibits hereto contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading.
There is no material fact which has not been disclosed in writing to Purchasers
of which the Seller or any officer, director or key employee of Seller is aware
and which materially adversely affects or could reasonably be anticipated to
affect materially adversely the Business or the Purchased Assets.
3.23 Customers. The Seller has delivered to Purchasers an accurate list
(which is set forth on Schedule 1.1(k) of all customers of Seller, including any
customers with respect to which any transactions are pending as of the date
hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Purchasers hereby, jointly and severally, represent and warrant to
Seller as of the date hereof and as of the Closing Date that:
4.1 Corporate Organization and Power. Each Purchaser is a corporation
duly organized and validly existing under the laws of the State of Delaware with
full corporate power and authority to enter into this Agreement and the other
agreements contemplated hereby and perform its respective obligations hereunder
and thereunder.
23
4.2 Authorization. The execution, delivery and performance by each
Purchaser of this Agreement and the other agreements contemplated hereby and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all requisite corporate action, and no other corporate
act or proceedings on the part of either Purchaser are necessary to authorize
the execution, delivery or performance of this Agreement or the other agreements
contemplated hereby or the consummation of the transactions contemplated hereby
or thereby. This Agreement has been duly executed and delivered by each
Purchaser and constitutes, and upon execution and delivery by each Purchaser the
other agreements contemplated hereby shall each constitute, a valid and binding
obligation of each Purchaser enforceable against each Purchaser in accordance
with their respective terms.
4.3 No Violation. The execution, delivery and performance of this
Agreement and the other agreements contemplated hereby by Purchasers and the
consummation of the transactions contemplated hereby and thereby do not (a)
conflict with or result in any breach of any of the provisions of, (b)
constitute a default under, result in a violation of, or cause the acceleration
of any obligation under, or (c) require any authorization, consent, approval,
exemption or other action by or notice to any court or other governmental body
under (i) the provisions of either Purchaser's articles of incorporation or
by-laws, or (ii) any indenture, mortgage, lease, loan agreement or other
agreement or instrument to which either Purchaser is bound or affected or (iii)
except for any such matters which would not be a Purchaser Material Adverse
Effect, any law, statute, rule, regulation, judgment, order or decree to which
either Purchaser is subject. Neither Purchaser is subject to or obligated under
its respective articles of incorporation, any applicable law, rule or regulation
of any governmental authority, or any agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction or decree which
would have a Purchaser Material Adverse Effect (as defined below). "Purchaser
Material Adverse Effect" shall mean any change in or effect on Purchasers that,
individually or in the aggregate is, or is reasonably likely to be, materially
adverse to the Purchasers, provided, however, that Purchaser Material Adverse
Effect shall not be deemed to include the impact of (a) changes in generally
accepted accounting principles, (b) acts or omissions of Purchasers taken with
the prior written consent of Seller, (c) changes in general economic conditions
in the United States, and (d) any changes or effects as a result of the
announcement of the transactions contemplated by this Agreement.
4.4 Litigation. There are no actions, suits, proceedings, orders or
investigations pending or, to the best of each Purchaser's knowledge, threatened
against or affecting such Purchaser, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which would materially
adversely affect such Purchaser's performance under this Agreement or the
consummation of the transactions contemplated hereby except in connection with
(i) a complaint filed in the United States District Court for the District of
Maryland in the matter of Constellation Energy Group, Inc., et al. x.
Xxxxx/Xxxxxx, Inc., Xxxx Xx. XXX 00 XX 0000, (xx) a complaint filed in the
Superior Court of State of Arizona for the County of Maricopa in the matter of
Xxxxx X. Xxxxxx v. Banner Health System, Health Care Compensation Strategies and
Pacific Life and Annuity Company, Case No. CV2001-001271, and (iii) a complaint
filed in the District Court in LaSalle County, Texas in the matter of Xxxxxx
Xxxxxxx, Xxxxx Xxxxx, as the Executrix of the Estate of Xxxxx Xxxxxxx, April and
Xxxxxxx Xxxxxxx v. Hydra Mirza, The Mesquite Flight Center, Inc., Xxx Xxxxxxxx,
Xxxxx Xxxxxx Holdings, Inc., et al., Case No. 00-11-00088-CV.
24
None of the litigation matters described in this Section 4.4, if adversely
determined, would have a Purchaser Material Adverse Effect.
4.5 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Purchasers.
4.6 Governmental Consent, etc.
(a) No permit, consent, approval or authorization of, or
declaration to or filing with, any governmental or regulatory authority is
required in connection with the execution, delivery or performance of this
Agreement by Purchasers, or the consummation by Purchasers of any of the
transactions contemplated hereby and thereby.
(b) The Purchasers Consents Schedule attached hereto as
Schedule 4.6 sets forth all governmental approvals or third-party consents
necessary for, or otherwise material to, completing the transaction contemplated
hereunder. Unless waived by the Seller, all such governmental approvals and
consents have been duly obtained and are in full force and effect, and
Purchasers are in compliance with each of such governmental approvals and
consents held by them.
4.7 Issuance of CBI Stock. The CBI Stock will, when issued, be duly
authorized, validly issued, fully paid and nonassessable.
4.8 Reports and Financial Statements. CBI has previously furnished to
Seller true and correct copies of its (i) Form 10-K for each of the periods
ended December 31, 1999, (ii) all other reports filed by it with the Securities
and Exchange Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Exchange Act") since January 1, 2000 (collectively, the
"Reports"). As of their respective dates, the Reports complied in all material
respects with the then applicable published rules and regulations of the
Commission with respect thereto at the date of their issuance and did not or
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of the date hereof, no additional filings or amendments to
previously filed Reports are required pursuant to such rules and regulations.
Each of the audited consolidated financial statements and unaudited interim
financial statements included in CBI's Reports has been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and fairly presents
the financial position of the entity or entities to which it relates as at its
date or the results of operations, stockholders' equity or cash flows of such
entity or entities (subject, in the case of unaudited statements, to the absence
of footnote disclosure and in the case of unaudited interim statements to
year-end adjustments, which will not be material either individually or in the
aggregate). As of June 30, 2001 there were no material liabilities, material
claims or material obligations of any nature, whether accrued, absolute,
contingent, anticipated or otherwise, whether due or to become due, that are not
shown or provided for in the unaudited financial statements of CBI as of such
date.
25
4.9 Absence of Certain Changes or Events. Since December 31, 2000,
there has not been any events which have caused a Purchaser Material Adverse
Effect.
4.10 Disclosure. Neither this Agreement nor any of the exhibits hereto
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading. There is no material fact
which has not been disclosed in writing to Seller of which Purchasers or any
officer, director or key employee of Purchasers is aware which will have a
Purchaser Material Adverse Effect.
4.11 Private Placement. The offer, sale and issuance of the Closing
Stock Consideration as contemplated by this Agreement is exempt from the
registration and prospectus delivery requirements of the Securities Act, and
neither Purchasers nor any authorized agent acting on their behalf will take any
action from and after the date hereof which would reasonably be expected to
cause the loss of such exemption.
4.12 Availability of Funds. Purchasers will have available to it, at
the Closing Date, sources of capital and financing or cash on hand sufficient to
pay the Purchase Price and to pay any other amounts payable pursuant to this
Agreement and to effect the transactions contemplated hereby.
ARTICLE 5
SELLERS' OBLIGATIONS AT CLOSING
5.1 Sellers' Obligations at Closing. The Sellers shall satisfy the
following conditions on or before the Closing Date:
(a) Seller shall have performed in all material respects all
of the covenants and agreements required to be performed by it under this
Agreement prior to the Closing;
(b) there shall have been no change in the operations,
financial condition, operating results or assets of the Business or Seller which
has had a Seller Material Adverse Effect, and there shall have been no material
casualty loss or damage to the Purchased Assets, taken as a whole, whether or
not covered by insurance;
(c) all material consents by third parties that are required
for the transfer of the Purchased Assets and the Business to Purchasers as
contemplated hereby, that are required for the consummation of the transactions
contemplated hereby or that are required to prevent a breach of, or a default
under or a termination or modification of any instrument, contract, license,
lease or other agreement to which Seller is a party or to which any of the
Purchased Assets are subject, and releases of all liens, charges, security
interests, encumbrances and claims of others on or with respect to the Purchased
Assets shall have been obtained on terms and conditions satisfactory to
Purchasers in their sole discretion;
(d) no action or proceeding before any court or government
body shall be pending or threatened which results in a judgment, decree or order
which would prevent the carrying out of this Agreement or any of the
transactions contemplated hereby, declare unlawful
26
the transactions contemplated by this Agreement, cause such transactions to be
rescinded or affect the value or use of the Purchased Assets or Business;
(e) Purchasers shall have received from Seller's counsel,
Xxxxxxx, Xxxx, an opinion with respect to the matters set forth in Exhibit C
attached hereto, addressed to Purchasers and dated the Closing Date, in form and
substance satisfactory to Purchasers;
(f) not less than five (5) business days prior to the Closing
Date, Purchasers shall obtain UCC search reports ("UCC Searches") of Seller
disclosing no liens or encumbrances against the Purchased Assets, other than the
Permitted Encumbrances. If the UCC Searches disclose any title encumbrances,
defects, liens, encumbrances or matters other than Permitted Encumbrances,
Seller shall have caused the same to be removed, including but not limited to,
the liens of Citizens Bank of Massachusetts;
(g) proceedings to be taken by Seller in connection with the
consummation of the Closing and the other transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to effect
the transactions contemplated hereby requested by Purchasers shall be reasonably
satisfactory in form and substance to Purchasers and their counsel;
(h) Consulting shall have received consents from New York Life
Insurance Company and the landlord of the property located at 000 Xxxxx Xxxxxx,
Xxxxx 000, Xxxxxxx, XX (the "Landlord") (the "Lease Consent");
(i) Shareholders shall each have executed an Investment Letter
in the form set forth in Exhibit D hereto (the "Investment Letters").
(j) each of Rich and Wyrtzen will enter into EBS Agreements
with Consulting which are mutually acceptable to the parties;
(k) Consulting and Xxxxx shall have entered into that certain
Non-Employee EBC Agreement which shall be mutually acceptable to the parties
(the "Xxxxx EBC Agreement");
(l) Consulting and Xxxxxx shall have entered into that certain
Continuation Agreement materially agreeable to the parties (the "Xxxxxx
Agreement");
(m) Consulting and Xxxxx X. XxXxxxxx ("XxXxxxxx") shall enter
into that certain EBS Agreement, in a form mutually acceptable to the parties
(the "XxXxxxxx EBS Agreement"); and
(n) Consulting and Rich shall enter into that certain Managing
Director Agreement, in a form mutually acceptable to the parties (the "Rich
Director Agreement").
27
ARTICLE 6
PURCHASERS' OBLIGATIONS AT CLOSING
6.1 Purchasers' Obligations at Closing. The Purchasers shall satisfy
the following conditions on or before the Closing Date:
(a) Purchasers shall have performed in all material respects
all the covenants and agreements required to be performed by them under this
Agreement prior to the Closing;
(b) Seller shall have received from Purchasers' counsel,
Vedder, Price, Xxxxxxx & Kammholz, an opinion with respect to the matters set
forth in Exhibit E attached hereto, addressed to Seller and dated the Closing
Date, in form and substance reasonably satisfactory to Seller;
(c) there shall have been no change in the operations,
financial condition, operating results or assets of the Purchasers which has had
a Purchaser Material Adverse Effect;
(d) no action or proceeding before any court or government
body shall be pending or threatened which shall result in a judgment, decree or
order which would prevent the carrying out of this Agreement or any of the
transactions contemplated hereby, declare unlawful the transactions contemplated
by this Agreement or cause such transactions to be rescinded;
(e) Shareholders shall have executed the Investment Letters;
(f) Consulting and Xxxxxx shall have executed the Xxxxxx
Agreement;
(g) Consulting and Xxxxx X. XxXxxxxx shall have executed the
XxXxxxxx EBS Agreement;
(h) the Lease Consent shall have been delivered to Purchasers
and those certain consents to commission assignments from New York Life
Insurance Company shall have been delivered to Purchasers;
(i) the Xxxxx EBC Agreement, the Rich EBS Agreement and
Wyrtzen EBS Agreement shall have been delivered to Purchasers;
(j) the Rich Director Agreement shall have been entered into
by the parties thereto; and
(k) all proceedings to be taken by Purchasers in connection
with the consummation of the Closing and the other transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby reasonably requested by Seller
shall be reasonably satisfactory in form and substance to Seller and its
counsel.
28
ARTICLE 7
CLOSING TRANSACTIONS
7.1 The Closing. Subject to the conditions contained in this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Vedder, Price, Xxxxxxx & Kammholz at 10:00
a.m. local time on August 31, 2001, or at such other place or on such other date
as may be mutually agreeable to the parties. The date and time of the Closing
are referred to herein as the "Closing Date."
7.2 Action to Be Taken at the Closing. The sale, conveyance, assignment
and delivery of the Purchased Assets and the payment of the Purchase Price
pursuant to the terms of this Agreement shall take place at the Closing, and,
simultaneously, the other transactions contemplated by this Agreement shall take
place by the delivery of all of the closing documents set forth in Section 7.3.
7.3 Closing Documents.
(a) Seller and the Shareholders shall deliver to Purchasers at
the Closing the following documents, duly executed by Seller where necessary to
make them effective:
(i) copies of all necessary third-party and
governmental consents, approvals, releases and filings required in
order to effect the transactions contemplated by this Agreement;
(ii) such stamped recordable warranty deeds,
instruments of sale, transfer, assignment, conveyance and delivery
(including all vehicle titles), as are required in order to transfer to
Purchasers good and marketable title to the Purchased Assets, free and
clear of all liens, charges, security interests and other encumbrances,
except for Permitted Encumbrances;
(iii) certified copies of the resolutions duly
adopted by the Board of Managers and members of Seller authorizing the
execution, delivery and performance of this Agreement and each of the
other agreements contemplated hereby, and the consummation of all other
transactions contemplated by this Agreement;
(iv) copies of good standing certificates in all
jurisdictions where the Seller is qualified to do business in which
ownership of the Purchased Assets or the conduct of the Business
requires Seller to be so qualified;
(v) a certificate of the Secretary of Seller,
certifying as to the correctness and completeness of the Articles of
Organization and Operating Agreement of Seller, as appropriate, and all
amendments thereto;
(vi) the Lease Consent;
(vii) the Rich and Wyrtzen EBS Agreements;
29
(viii) the Xxxxx EBC Agreement and the XxXxxxxx EBS
Agreement;
(ix) the Xxxxxx Agreement;
(x) the Rich Director Agreement; and
(xi) such other documents or instruments as
Purchasers may request to effect the transactions contemplated hereby.
All of the foregoing documents in this Section 7.3(a) shall be
reasonably satisfactory in form and substance to Purchasers and shall be dated
the Closing Date.
(b) Purchasers shall deliver to Seller and the Shareholders at
the Closing the following items, duly executed by Purchasers where necessary to
make them effective:
(i) the amount of the Purchase Price payable at
Closing as provided in Section 2.1;
(ii) the Closing Stock Consideration;
(iii) copies of all necessary third-party and
governmental consents, approvals, releases and filings required in
order for Purchasers to effect the transactions contemplated by this
Agreement;
(iv) the Lease Consent;
(v) the Investment Letters;
(vi) the Rich and Wyrtzen EBS Agreements;
(vii) the Xxxxx EBC Agreement and XxXxxxxx EBS
Agreement;
(viii) the Xxxxxx Agreement; and
(ix) such other documents or instruments as Seller
reasonably may request to effect the transactions contemplated hereby.
All of the foregoing documents in this Section 7.3(b) shall be
reasonably satisfactory in form and substance to Seller and shall be dated as of
the Closing Date.
(c) Purchasers, Seller and the escrow agent shall execute and
deliver to one another at Closing the Escrow Agreement.
7.4 Possession. Simultaneously with the Closing, Seller shall take such
reasonable steps to put Purchasers in actual possession and operating control of
the Business and the Purchased Assets.
7.5 Nonassignable Contracts. To the extent that the assignment
hereunder by Seller to Purchasers of the Contracts is not permitted or is not
permitted without the consent of any
30
other party to the Contract, this Agreement shall not be deemed to constitute an
assignment of any such Contract if such consent is not given or if such
assignment otherwise would constitute a breach of, or cause a loss of
contractual benefits under, any such Contract, and Purchasers shall assume no
obligations or liabilities thereunder. Seller shall advise Purchasers promptly
in writing with respect to any Contract which it knows, should know or has
reason to know that it will not receive any required consent. Without in any way
limiting Seller's obligation to obtain all consents necessary for the sale,
transfer, assignment and delivery of the Contracts and the Purchased Assets to
Purchasers hereunder, if any such consent is not obtained or if such assignment
is not permitted irrespective of consent and the Closing hereunder is
consummated, Seller shall cooperate with Purchasers in any reasonable
arrangement designed by Purchasers to provide Purchasers with the rights and
benefits, subject to the obligations, under the Contract, including enforcement
for the benefit of Purchasers of any and all rights of Seller against any other
person arising out of breach or cancellation by such other person and, if
requested by Purchasers, Seller shall act as an agent on behalf of Purchasers or
as Purchasers shall otherwise reasonably require, in each case at Seller's cost.
Seller agrees to continue its existence for at least three (3) years from the
Closing Date.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by Seller and Shareholders. Seller, Xxxxx and Rich,
jointly and severally, and Wyrtzen and Xxxxxx, severally, agree to and shall
indemnify in full Purchasers and their officers, directors, employees, agents,
shareholders and partners (collectively, the "Purchaser Indemnified Parties")
and defend and hold them harmless against any loss, liability, deficiency,
damage, expense or cost (including reasonable legal expenses), that Purchaser
Indemnified Parties may suffer, sustain or become subject to, as a result of (a)
any misrepresentation in any of the representations or breach of any of the
warranties of Seller or the Shareholders contained in this Agreement or in any
exhibits, schedules, certificates or other agreements or documents delivered or
to be delivered pursuant to the terms of this Agreement or otherwise
incorporated in this Agreement (collectively, the "Related Documents"), or (b)
any breach of, or failure to perform, any agreement or covenant of Seller or the
Shareholders contained in this Agreement or any of the Related Documents
(collectively, "Purchaser Losses"). In the event any Purchaser Indemnified Party
incurs any Purchaser Losses, Purchasers, in addition to all other rights and
remedies available to them, shall have the right to set off the amount of such
Purchaser Losses first against the amount of the Purchase Price which is held in
an interest bearing escrow pursuant to the Escrow Agreement and second against
the Contingent Consideration that has been earned but not paid. In the event
that no Contingent Consideration has been earned or that the Contingent
Consideration that has been earned is less than the amount that is due and
payable to Purchasers as a result of an indemnification claim, the Purchasers
may take action against Seller and Shareholders for such indemnification claim
amount.
8.2 Indemnification by Purchasers. Purchasers agree to indemnify in
full Seller (the "Seller Indemnified Parties") and defend and hold them harmless
against any loss, liability, deficiency, damage, expense or cost (including
reasonable legal expenses), which the Seller Indemnified Parties may suffer,
sustain or become subject to as a result of (i) any misrepresentation in any of
the representations or breaches of any of the warranties of Purchasers
31
contained in this Agreement or in any of the Related Documents or (ii) any
breach of, or failure to perform, any agreement of Purchasers contained in this
Agreement or any of the Related Documents (collectively, "Seller Losses")
(Purchaser Losses and Seller Losses shall collectively be referred to as the
"Losses").
8.3 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a "Purchaser Indemnified Party" or "Seller Indemnified Party," as
applicable, the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Seller Losses or Purchaser Losses, as the case may be (any such third
party action or proceeding being referred to as a "Claim"), the Notifying Party
shall give the Indemnifying Party prompt notice thereof describing the Claim in
reasonable detail. The failure to give such notice shall not affect any
Indemnified Party's ability to seek reimbursement unless such failure has
materially and adversely affected the Indemnifying Party's ability to defend
successfully a Claim. The Indemnifying Party shall have the right to contest and
defend such Claim; provided, that the Indemnifying Party (i) has a reasonable
basis for concluding that such defense may be successful and (ii) diligently
contests and defends such Claim. Notice of the intention so to contest and
defend shall be given by the Indemnifying Party to the Notifying Party within
twenty (20) business days after the Notifying Party's notice of such Claim (but,
in all events, at least five (5) business days prior to the date that an answer
to such Claim is due to be filed). Such contest and defense shall be conducted
by reputable attorneys employed by the Indemnifying Party. The Notifying Party
shall be entitled at any time, at its own cost and expense (which expense shall
not constitute a Loss unless the Notifying Party reasonably determines that the
Indemnifying Party is not adequately representing or, because of a conflict of
interest, may not adequately represent, any interests of the Indemnified
Parties), to participate in such contest and defense and to be represented by
attorneys of its or their own choosing. If the Notifying Party elects to
participate in such defense, the Notifying Party shall cooperate with the
Indemnifying Party in the conduct of such defense. Neither the Notifying Party
nor the Indemnifying Party may concede, settle or compromise any Claim without
the consent of the other party, which consent shall not be unreasonably withheld
or delayed. Notwithstanding the foregoing, in the event the Indemnifying Party
fails or is not entitled to contest and defend a claim, the Notifying Party
shall be entitled to contest, defend and settle such Claim.
(b) In the event any Indemnified Party should have a claim
against any Indemnifying Party that does not involve a Claim, the Notifying
Party shall deliver a notice of such claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Notifying Party that
it does not dispute the claim described in such notice or fails to notify the
Notifying Party within thirty (30) days after delivery of such notice by the
Notifying Party whether the Indemnifying Party disputes the claim described in
such notice, the Loss in the amount specified in the Notifying Party's notice
shall be conclusively deemed a liability of the Indemnifying Party and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on
demand. If the Indemnifying Party has timely disputed its liability with
32
respect to such claim, a representative of each of the Indemnifying Party and
the Notifying Party (or their respective designees) shall proceed in good faith
to negotiate a resolution of such dispute, and if not resolved through the
negotiations of such representatives or designees within sixty (60) days after
the delivery of the Notifying Party's notice of such claim, such dispute (except
for any such dispute which gives rise or could give rise to equitable relief
under this Agreement) shall be resolved fully and finally in Chicago,
Illinois
by an arbitrator selected pursuant to, and an arbitration governed by, the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrator shall resolve the dispute within thirty (30) days after selection and
judgment upon the award rendered by such arbitrator may be entered in any court
of competent jurisdiction.
8.4 Escrow Amount and Contingent Consideration. Seller and Shareholders
agree that in addition to any other rights or remedies available to Purchasers,
Purchasers may draw upon the Escrow Account pursuant to the Escrow Agreement and
offset against any Contingent Consideration which is due and owing Seller for
amounts owed Purchasers by Seller or Shareholder, including, without limitation,
(i) any of the obligations of Seller and Shareholders or any of them under
Section 8.1 of this Agreement and (ii) any amount due from Seller or the
Shareholders in connection with the final determination of the Net Asset Amount.
8.5 Limitation of Liability. Any monetary liability of the Indemnified
Parties related to a Claim pursuant to this Agreement shall be limited to a
maximum amount of Six Million Dollars ($6,000,000) in the aggregate plus the
amount of any Contingent Consideration owed hereunder (collectively, the
"Maximum Limit"); provided, however, the Maximum Limit shall not exceed Seven
Million Five Hundred Thousand Dollars ($7,500.000). Any indemnification right
related to a Claim shall be subject to reaching a minimum aggregate obligation
(a "Threshold") of Twenty Thousand Dollars ($20,000), whereupon the entire
aggregate amount of all obligations and liabilities shall be immediately due and
payable as if the Threshold had not existed; provided, however, that neither
such dollar limitation nor the Threshold shall apply to any Claim for violations
under Section 3.8, a Claim for violations under Section 3.15 or any Claim
related to a breach of a representation or warranty where Seller had actual
knowledge of such breach at Closing and intentionally and willfully failed to
disclose such breach. Purchasers shall reimburse Seller for any insurance
proceeds collected and/or tax benefits realized as a result of a Purchaser Loss
which has been indemnified for by Seller or Shareholders related to a Claim
within fifteen (15) days of receipt of the benefit by the Purchasers.
8.6 Sole Remedy. Notwithstanding any other provision in this Agreement
to the contrary, the provisions of this Agreement, as limited by this Article
VIII, and the provisions of the Escrow Agreement will be the sole and exclusive
remedy of (and corresponding liability of any Shareholder in such shareholder's
capacity, excluding his or her capacity as employee or independent contractor)
Purchasers for any damage, claim, cause of action or right of any nature arising
out of this Agreement or the transactions contemplated hereby; provided,
however, that nothing in this Agreement or the Escrow Agreements will be deemed
to limit any right or remedy for criminal activity or fraud or willful
misstatements or omissions.
8.7 Adjustment to Purchase Price. The parties agree that to the
greatest extent possible, the payment of any indemnity hereunder shall be
treated as an adjustment to the Purchase Price paid by Purchasers hereunder for
tax purposes.
33
ARTICLE 9
ADDITIONAL AGREEMENTS
9.1 Survival. The representations, warranties, covenants and agreements
set forth in this Agreement or in any writing delivered to Purchasers or Seller
or the Shareholders in connection with this Agreement shall survive the Closing
Date and the consummation of the transactions contemplated hereby for a period
of eighteen (18) months and shall not be affected by any examination made for or
on behalf of Purchasers or Seller or the Shareholders, the knowledge of any of
Purchasers' or Seller's officers, directors, members, employees or agents, or
the acceptance by Purchasers or Seller of any certificate or opinion; provided,
however, that the representations, warranties, covenants and agreements made
with respect to Sections 3.7(d), 3.8 and 3.15 hereof shall survive until the
applicable statute of limitations has expired.
9.2 Mutual Assistance. Subsequent to the Closing, Seller on the one
hand and Purchasers on the other, at their own cost, shall assist each other
(including making records available) in the preparation of their respective tax
returns and the filing and execution of tax elections, if required, as well as
any audits or litigation that may ensue as a result of the filing thereof, to
the extent that such assistance is reasonably requested.
9.3 Press Release and Announcements. No press release related to this
Agreement or the transactions contemplated hereby, or other announcements to the
employees, customers or suppliers of Seller, shall be issued without the joint
approval of Purchasers and Seller. No other public announcement related to this
Agreement or the transactions contemplated hereby shall be made by either party,
except as required by law, in which event the parties shall consult as to the
form and substance of any such announcement required by law.
9.4 Expenses. Each party shall pay all of its expenses in connection
with the negotiation of this Agreement, the performance of its obligations
hereunder and the consummation of the transactions contemplated by this
Agreement.
9.5 Further Transfers. After the Closing, Seller shall, and shall cause
its affiliates to, execute and deliver such further instruments of conveyance
and transfer and take such additional action as Purchasers may reasonably
request to effect, consummate, confirm or evidence the transfer to Purchasers of
the Purchased Assets. Seller shall execute such documents as may be necessary to
assist Purchasers (or their designees) in preserving or perfecting its rights in
the Purchased Assets.
9.6 Transition Assistance. From the date hereof and until five (5)
years after the Closing, (i) Seller and Shareholders shall not in any manner
take any action which is designed, intended or might be reasonably anticipated
to have the effect of disparaging or discrediting the Purchasers with customers,
suppliers, lessors, employees, sales agents and other business associates and
(ii) Purchasers shall not in any manner take any action which is designed,
intended or might be reasonably anticipated to have the effect of disparaging or
discrediting the Sellers or Shareholders with customers, suppliers, lessors,
employees, sales agents and other business associates.
34
9.7 Confidentiality. If the transactions contemplated by this Agreement
are not consummated, Purchasers shall maintain the confidentiality of all
information and materials received by it from Seller, and Purchasers shall
return to Seller or destroy any materials (and copies thereof) obtained from
Seller in connection with the transactions contemplated hereby. Whether or not
the transactions contemplated hereby are consummated, Seller shall maintain the
confidentiality of all information received by it from Purchasers and shall
return to Purchasers or destroy any materials (and copies thereof) obtained from
Purchasers in connection with the transactions contemplated hereby. If the
transactions contemplated by this Agreement are consummated, Seller shall
maintain the confidentiality of all proprietary and other non-public information
regarding the Business and the Purchased Assets and shall turn over to
Purchasers all such materials in their possession.
9.8 Non-Compete; Non-Solicitation.
(a) Although it is understood among the parties that Seller
and Shareholders desire to no longer engage in business operations similar to
that of the Business except with Purchasers, as an additional inducement to
Purchasers to enter into and to perform their obligations under this Agreement,
Seller and Xxxxx, Xxxx and Xxxxxxx agree that, for a period of four (4) years
after the Closing Date and Xxxxxx agrees that, for a period of one (1) year
after the Closing Date (the "Non-Competition Period"), no such Seller or
Shareholder shall in the United States or in any foreign country in which Seller
currently does business, directly or indirectly, either for itself or any other
person or entity, own, manage, control, participate in, permit its name to be
used by, consult with, render services for or otherwise assist in any manner any
entity that owns, invests in, manages, controls or engages in the business of
selling and distributing products and services similar to those of the Business
other than the Purchasers.
(b) Seller agrees that for a period of four (4) years after
the Closing, it shall not directly or indirectly offer employment to or hire any
current or future employee of Seller without the prior written consent of
Purchasers.
(c) If, at the time of enforcement of this Section 9.8, a
court shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area.
(d) Seller and Shareholders recognize and affirm that in the
event of breach by them of any of the provisions of this Section 9.8 money
damages would be inadequate and neither Purchasers nor Seller would have any
adequate remedy at law. Accordingly, Seller and Purchasers agree that the other
party shall have the right, in addition to any other rights and remedies
existing in its favor, to enforce its rights and the obligations under this
Section 9.8 by an action or actions for specific performance, injunction and/or
other equitable relief without posting any bond or security to enforce or
prevent any violations, whether anticipatory, continuing or future, of the
provisions of this Section 9.8, including, without limitation, the extension of
the Non-Competition Period by a period equal to (i) the length of the violation
of this Section 9.8 as determined by a court or as otherwise agreed to by the
parties plus (ii) the length of any court proceedings necessary to stop such
violation without duplication. In the event of a breach or violation by Seller
of any of the provisions of this Section 9.8, the running
35
of the Non-Competition Period, but not of Seller's obligations under this
Section 9.8, shall be tolled during the period during which the occurrence of
any such breach or violation is investigated and during the continuance of any
such breach or violation.
9.9 Specific Performance. Seller and the Shareholders acknowledge that
the Business and the Purchased Assets are unique and recognize and affirm that
in the event of a breach of this Agreement by Seller or the Shareholders, money
damages would be inadequate and Purchasers would have no adequate remedy at law.
Accordingly, Seller and the Shareholders agree, jointly and severally, that
Purchasers shall have the right, in addition to any other rights and remedies
existing in its favor, to enforce its rights and Seller's and the Shareholders'
obligations hereunder by an action or actions for specific performance,
injunction and/or other equitable relief, without posting any bond or security.
9.10 Remittances. All remittances, mail and other communications
relating to the Purchased Assets or the Business received by Seller or the
officers and directors of Seller, at any time after the Closing Date shall be
promptly turned over to Purchasers by such parties. Seller shall cooperate with
Purchasers, and take such actions as Purchasers reasonably request, to assure
that customers of the Business send their remittances directly to Purchasers,
and to assure that remittances from customers of the Business which are
improperly sent to Seller are not commingled with Seller's assets and are turned
over to Purchasers.
9.11 Best Efforts To Consummate Closing Transactions. On the terms and
subject to the conditions contained in this Agreement, Seller and Purchasers
agree to use their best efforts to take, or to cause to be taken, all reasonable
actions, and to do, or to cause to be done, all reasonable things, necessary,
proper or advisable under applicable laws and regulations to consummate, as soon
as reasonably practicable, the Closing, including the satisfaction of all
conditions thereto set forth herein.
9.12 Employees and Agents of Seller. Purchasers are under no legal
obligation to employ any personnel presently employed by Seller. Prior to the
Closing Date, Purchasers may, but shall not be required to, offer employment to
such persons currently employed by Seller as Purchasers in their sole discretion
shall determine. Purchasers shall have the absolute right to establish all terms
and conditions of employment, including wages, benefits and benefit plans, for
any employees of Seller to whom they choose to make an offer of employment to be
employed by Purchasers. To the extent Purchasers hire Seller's employees, in
determining the level of benefits provided such persons, all of the employees
shall be credited with their years of service with the Seller when possible
except when an existing benefit plan prohibits it under Purchasers' existing
policies and programs. Further, it is expressly agreed that Purchasers are not
bound to assume, implement or continue any wages, terms and conditions of
employment, benefits or benefit plans which may currently exist for any of
Seller's employees. All such offers of employment shall be on the terms and
conditions established by Purchasers and shall be contingent upon employment
commencing with Purchasers only following the Closing Date. Seller agrees not to
discourage any individuals who are offered employment or an agency relationship
with Purchasers from accepting such employment or agency relationship with
Purchasers.
36
9.13 Assignment of Commissions. In consideration for amounts to be
received by Seller and Shareholders hereunder, Xxxxx, Xxxx and Xxxxxxx hereby
assign to Purchasers, or their successors and assigns, any and all rights in
first year commissions, renewals and other fees and commissions related to
insurance business developed for corporations, business organizations, financial
institutions, hospitals and not-for-profit organizations by the Seller,
excluding JPL Personal Business (as such term is defined in the Xxxxx EBC
Agreement).
ARTICLE 10
MISCELLANEOUS
10.1 Amendment and Waiver. This Agreement may be amended, and any
provision of this Agreement may be waived; provided that any such amendment or
waiver shall be binding on Seller and Shareholders only if such amendment or
waiver is set forth in a writing executed by Seller and Shareholders and that
any such amendment or waiver shall be binding upon Purchasers only if such
amendment or waiver is set forth in a writing executed by Purchasers. No course
of dealing between or among any persons having any interest in this Agreement
shall be deemed effective to modify, amend or discharge any part of this
Agreement or any rights or obligations of any person under or by reason of this
Agreement.
10.2 Notices. All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when personally delivered, mailed
by first class mail, return receipt requested or delivered by a nationally
recognized courier service. Notices, demands and communications to Seller or
Purchasers shall, unless another address is specified in writing in accordance
herewith, be sent to the address indicated below:
Notices to Seller
The Xxxxx Companies
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Corporate General
Counsel
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxx, LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
37
Notices to Purchasers
Xxxxx/Xxxxxx Consulting, Inc.
000 Xxxxxxxx Xxxx Xxxxx
Xxxxx Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxx, Chief Financial Officer
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Vedder, Price, Xxxxxxx & Kammholz
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Block, Esq.
Lane X. Xxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
10.3 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legatees, personal representatives, successors and permitted
assigns (including all successors and assignees in the event of Seller's
liquidation) as the case may be, but neither this Agreement nor any of the
rights, interests or obligations hereunder of Seller and Shareholders shall be
assignable by Seller and Shareholders without the prior written consent of
Purchasers. Purchasers may assign this Agreement without restriction to only any
of its affiliates, existing as of the date hereof or in the future; provided
Purchasers unconditionally guarantee to Seller and the Shareholders at the time
of such assignment the prompt and complete performance of all of such
affiliates' obligations hereunder.
10.4 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
10.5 No Third-Party Beneficiaries. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any other persons other than the parties hereto and
their respective successors, permitted assigns, heirs, legatees and personal
representatives, as the case may be, nor is anything in this Agreement intended
to relieve or discharge the obligation or liability of any third persons to any
party, nor shall any provision give any third parties any right of subrogation
or action over or against any party. This Agreement is not intended to and does
not create any third-party beneficiary rights whatsoever.
38
10.6 No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
person.
10.7 Captions. The captions used in this Agreement are for convenience
of reference only and do not constitute a part of this Agreement and shall not
be deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no caption had been used in this Agreement.
10.8 Complete Agreement. This document and the documents referred to
herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
10.9 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
instrument.
10.10 Governing Law. The internal law, not the law of conflicts, of the
State of
Illinois shall govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement.
10.11 Remedies Cumulative. Except as set forth in Section 8.3(b), all
remedies of the parties provided herein shall, to the extent permitted by law,
be deemed cumulative and not exclusive of any thereof or of any other remedies
available to the parties, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained herein, and
every remedy given herein or by law to any party hereto may be exercised from
time to time, and as often as shall be deemed expedient, by such party.
39
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
XXXXX/XXXXXX CONSULTING, INC.
By: /s/ XXXXXX X. XXXX
-------------------------------------
Its: CFO
-------------------------------------
XXXXX/XXXXXX, INC.
By: /s/ XXXXXX X. XXXX
-------------------------------------
Its: CFO
-------------------------------------
XXXXX COMPENSATION & BENEFITS, LLC.
By: /s/ XXXXXXXXXXX XXXX
-------------------------------------
Its: PRESIDENT
-------------------------------------
/s/ J. XXXXX XXXXX
-----------------------------------------
J. XXXXX XXXXX
/s/ XXXXXXXXXXX XXXX
-----------------------------------------
XXXXXXXXXXX XXXX
/s/ XXXXXX X. XXXXXX
-----------------------------------------
XXXXXX X. XXXXXX
/s/ XXXXXX X. XXXXXXX, III
-----------------------------------------
XXXXXX X. XXXXXXX, III
40