ASSET PURCHASE AGREEMENT
Dated as of June 11, 1998
Among
Xxxxxxx Corporation,
Xxxxxxx Acquisition Corporation,
and
Executech, Inc.,
World Wide Scan Services, LLC
the Shareholders of Executech, Inc.
and the Members of
World Wide Scan Services, LLC
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of June 11, 1998, is by and
between Xxxxxxx Corporation, a Minnesota corporation ("XXXXXXX"), Xxxxxxx
Acquisition Corporation a Minnesota Corporation (the "PURCHASER") and Executech,
Inc., a New York corporation ("EXECUTECH"), World Wide Scan Services, LLC, a
Connecticut limited liability company ("WORLD WIDE", which together with
Executech is hereinafter referred to as the "SELLERS"), Xxxxxxxx X. Xxxxx
("XXXXX") and Xxxxxxx X. Xxxxxxxx ("XXXXXXXX", who together with Xxxxx are
collectively referred to as the "SHAREHOLDERS")(Xxxxx and Xxxxxxxx are also
collectively referred to as the "MEMBERS") (the Members and the Shareholders are
collectively referred to as the "OWNERS").
A. The parties hereto wish to provide for the terms and conditions upon
which the Purchaser will purchase substantially all of the Sellers' business
(the "BUSINESS").
B. The parties hereto wish to make certain representations, warranties,
covenants and agreements in connection with the purchase of the assets and the
Business and also to prescribe various conditions to such transaction.
Accordingly, and in consideration of the representations, warranties,
covenants, agreements and conditions herein contained, the parties hereto agree
as follows:
1. PURCHASE OF ASSETS
1.1 ASSETS TO BE PURCHASED.
(a) Upon the terms and subject to the conditions of this Agreement,
the Sellers will sell, transfer, convey, assign and deliver to the
Purchaser, and the Purchaser will purchase, as a going concern, from the
Sellers, at the Closing, all of the businesses, assets, properties,
goodwill and rights of the Sellers, of every nature, kind and description,
tangible and intangible, real, personal or mixed, wheresoever located and
whether or not carried or reflected on the books and records of the
Sellers, including, without limitation, real and personal property that is
now owned or leased by the Sellers or in which the Sellers have any right
or interest; franchises; all right, title and interest in and to the use
of Sellers' corporate names and any derivatives or combinations thereof,
including, without limitation, those listed in Exhibit 1.1(a) hereto;
logos, trademarks, trademark registrations and trademark applications or
registrations thereof, including the goodwill associated therewith; the
goodwill of the Sellers' businesses; copyrights, copyright applications
and copyright registrations, patents and patent applications; rights under
or pursuant to licenses by or to the Sellers; development and prototype
hardware, software, processes, formula, trade secrets, inventories and
royalties, including all rights to xxx for past infringements; leaseholds
and other interests in land, inventory (accumulated costs of jobs and
supplies), equipment, machinery, furniture, fixtures, motor vehicles and
supplies; cash, money and deposits with financial institutions and others,
certificates of deposit, commercial paper, notes, evidences of
indebtedness, stocks, bonds and other investments;
accounts receivables; prepaid expenses; insurance policies, contracts,
purchase orders, customers, lists of customers and suppliers, sales
representative agreements, and all favorable business relationships,
causes of action, judgments, claims and demands of whatever nature;
telephone, telefax and telex numbers; all listings in all telephone books
and directories; all credit balances of or inuring to the Sellers under
any state unemployment compensation plan or fund; employment contracts;
obligations of the present and former officers and employees and of
individuals and corporations; rights under joint venture agreements or
arrangements; files, papers and records relating to the Sellers'
businesses and assets; and the assets as reflected on the Latest Balance
Sheet, with only such dispositions of such assets reflected on the Latest
Balance Sheet as shall have occurred in the ordinary course of Sellers'
businesses between the date thereof and the Closing and which are
permitted by the terms hereof (the foregoing are sometimes collectively
called the "ASSETS").
(b) Notwithstanding the foregoing, the Sellers will not sell,
transfer, convey, assign or deliver to the Purchaser, and the Purchaser
will not purchase from the Sellers, the following assets:
(i) the consideration delivered to the Sellers pursuant to
this Agreement for the Assets;
(ii) the minute books (and any documents related to the
Sellers' organization or foreign qualification contained in such
minute books), corporate seal, stock records of Executech and member
records of World Wide;
(iii) shares of capital stock of Executech, including shares
held by Executech as treasury shares;
(iv) membership interests or other interests representing the
ownership of World Wide;
(v) amounts owing to either of the Sellers by: (A) the Owners;
(B) officers and directors of Executech; and (C) managers of World
Wide;
(vi) all documentation pertaining to any liability of the
Sellers not assumed by Purchaser;
(vii) the Plans and Welfare Plans, except to the extent set
forth on the Liabilities Undertaking; and
(viii) the assets specifically described on Exhibit 1.1(b)
hereto.
1.2 LIABILITIES ASSUMED.
Upon satisfaction of all conditions to the obligations of the parties
contained herein (other than such conditions as have been made in accordance
with the terms hereof), the Purchaser will assume the liabilities of the Sellers
(the "ASSUMED LIABILITIES") set forth on Exhibit 1.2 (the
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"LIABILITIES UNDERTAKING"). The Sellers expressly understand and agree that,
except for the Assumed Liabilities, the Purchaser has not agreed to pay, will
not be required to assume and will have no liability or obligation, direct or
indirect, absolute or contingent, for the liabilities of the Sellers or any
respective affiliates or associates, which liabilities will, as between the
Sellers and the Owners, on the one hand, and the Purchaser, on the other hand,
remain the sole responsibility of, and will be satisfied by, the Sellers (the
"RETAINED LIABILITIES"), including without limitation:
(a) any debt, liability or obligation of the Sellers or any
affiliates or associates, direct or indirect, known or unknown, fixed,
contingent or otherwise, that (i) is unrelated to the Assets or the
Business; or (ii) relates to the Assets and is based upon or arises from
any act, omission, transaction, circumstance, sale of goods or services,
state of facts or other condition occurring or existing on or before the
Closing Date, whether or not then known, due or payable, except to the
extent that the same was expressly assumed by the Purchaser pursuant to
the terms of the Liabilities Undertaking;
(b) any obligation for Taxes related to any of the Assets for any
Tax period or portion thereof ending on or before the Closing Date
(including any tax liability (other than sales and use taxes) relating to
or arising from the transfer of Assets) and any obligation for other Taxes
of the Sellers or the Owners, except to the extent that the same was
expressly assumed by the Purchaser pursuant to the terms of the
Liabilities Undertaking;
(c) any debt, liability or obligation, direct or indirect, known or
unknown, fixed, contingent or otherwise, based upon or arising from any
act, omission, transaction, circumstance, state of facts or other
condition occurring or existing on or before the Closing Date and relating
to any collective bargaining agreement or any employee benefit plan,
policy, practice or agreement to which either of the Sellers are a party
or under which either of the Sellers' employees or former employees is
covered, including without limitation any obligation to contribute to, or
any obligation or liability for any withdrawal liability arising in
connection with, any Multiemployer Plan attributable to participation
therein by current or former employees of the Sellers as a result of this
Agreement and the transactions contemplated hereby or otherwise or any of
the matters described in Sections 2.16 or 2.19 of the Disclosure Schedule;
(d) (i) (A) any liability arising out of or related to the events,
circumstances or conditions described in Section 2.21 of the Disclosure
Schedule; (B) any liability arising out of or related to the management of
wastes, byproducts or spent materials generated by either of the Sellers,
any subsidiaries, former subsidiaries or affiliates; or (C) any liability
arising out of or related to any pollution or threat to human health or
the environment or violation of any Environmental and Occupational Safety
and Health Law that is related in any way to any of the Sellers', or any
previous owner's or operator's management, use, control, ownership or
operation of the Assets, any Property or the business of the Sellers, any
subsidiary, former subsidiaries or affiliates, including without
limitation any on-site or off-site activities involving Environmentally
Regulated Materials, and that occurred, existed, arises out of conditions
or circumstances that occurred or existed, or was caused, in whole or in
part, on or before the Closing Date, whether or not the pollution or
threat to
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human health or the environment or violation of any Environmental and
Occupational Safety and Health Law is described in the Disclosure
Schedule; and (ii) any Environmental Claim against any person or entity
whose liability for such Environmental Claim of the Sellers have or may
have assumed or retained either contractually or by operation of law;
(e) any debt, liability or obligation, direct or indirect, known or
unknown, fixed, contingent or otherwise owing by either of the Sellers to
(i) any of the Owners; (ii) officers or directors of Executech; or (iii)
managers of World Wide;
(f) any debt, liability or obligation, direct or indirect, known or
unknown, fixed, contingent or otherwise arising out of or under Executech,
Inc.'s Performance Share Plan which was adopted by Executech's Board of
Directors effective as of December 31, 1997 (the "EXECUTECH PERFORMANCE
SHARE PLAN") or its termination; and
(g) any liability arising out of or related to the events,
circumstances or conditions described in Sections 2.14 and 2.15 of the
Disclosure Schedule, to the extent such events, circumstances or
conditions occurred prior to the Closing Date.
At the Closing, the Sellers will convey, transfer, assign and delegate, and the
Purchaser will accept and assume, those contracts, agreements and commitments
listed on the Liabilities Undertaking to be assumed by the Purchaser (the
"ASSUMED CONTRACTS").
1.3 PURCHASE PRICE.
(a) The total consideration to be paid by the Purchaser to the
Sellers, or their designees, for the Assets (the "PURCHASE PRICE") will be
an amount equal to:
(i) Three Million Two Hundred Thousand Dollars ($3,200,000);
plus
(ii) the assumption by the Purchaser of the Assumed
Liabilities as of the Closing Date pursuant to the Liabilities
Undertaking referred to in Section 1.2 hereof; plus
(iii) any Contingent Purchase Price.
(b) PAYMENTS. At the Closing, the Purchaser will: (A) pay the
Sellers, by wire transfer, immediately available funds of Three Million
Two Hundred Thousand Dollars ($3,200,000) to a bank account of the Sellers
pursuant to written instructions of the Sellers given to the Purchaser at
least 48 hours prior to the Closing; and (B) execute and deliver to the
Sellers the Liabilities Undertaking.
(c) The Owners hereby acknowledge and agree that that amounts paid
to each Seller are adequate consideration for the purchase of the Assets
of each Seller and represent the fair market value of the Assets of each
Seller. Immediately prior to the Closing, the Shareholders were the sole
direct and indirect shareholders of Executech and the Members were the
sole direct and indirect members of World Wide. Executech will
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use reasonable efforts to redeem or otherwise terminate all award shares
outstanding under the Executech Performance Share Plan.
1.4 CONTINGENT PURCHASE PRICE.
(a) During the period from the Closing through the period ending
January 31, 2002 (the "CONTINGENT PURCHASE PRICE PERIOD"), the Purchaser
will pay additional amounts equal to a percentage of the After-Tax
Earnings, in excess of certain thresholds, generated by the "business," as
defined below, being acquired by the Purchaser. The threshold amounts of
After-Tax Earnings and the percentage payable for each fiscal year of the
Contingent Purchase Price Period are set forth according to the following
schedule (the "Contingent Purchase Price"):
--------------------------------------------------------------------------------
FISCAL YEAR CONTINGENT PURCHASE PRICE PAYMENT
--------------------------------------------------------------------------------
January 1, 1998 through January 31, 450% of the After-Tax Earnings for the
1999 ("FIRST FISCAL YEAR") First Fiscal Year (the "BASE YEAR
EARNINGS"); provided however, the Base
Year Earnings equal or exceed Four
Hundred Thousand Dollars ($400,000)
--------------------------------------------------------------------------------
February 1, 1999 through January 31, 50% of the After-Tax Earnings for the
2000 ("SECOND FISCAL YEAR") Second Fiscal Year in excess of the
greater of (x) 120% of Base Year
Earnings; and (y) Seven Hundred Twenty
Thousand Dollars ($720,000)
--------------------------------------------------------------------------------
February 1, 2000 through January 31, 50% of the After-Tax Earnings for the
2001 ("THIRD FISCAL YEAR") Third Fiscal Year in excess of the
greater of (x) 144% of the Base Year
Earnings; and (y) Eight Hundred Sixty
Four Thousand ($864,000)
--------------------------------------------------------------------------------
February 1, 2001 through January 31, 50% of the After-Tax Earnings for the
2002 ("FOURTH FISCAL YEAR") Fourth Fiscal Year in excess of the
greater of (x) 172.8% of the Base Year
Earnings; and (y) One Million
Thirty-Six Thousand Eight Hundred
Dollars ($1,036,800)
--------------------------------------------------------------------------------
For clarity purposes and not intending to create additional rights or
obligations, no Contingent Purchase Price will be paid to the Sellers for the
Second Fiscal Year, Third Fiscal Year and/or Fourth Fiscal Year in the event
that After-Tax Earnings for such year does not exceed both of the thresholds set
forth in clause (x) and (y) in the above table.
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(b) To the extent required by the Internal Revenue Code of 1986, as
amended (the "CODE"), any such Contingent Purchase Price will consist of
interest compounded semiannually at the applicable federal mid-term
interest rate.
(c) For purposes of this Section 1.4, the "AFTER-TAX EARNINGS"
generated by the "business" (as hereinafter defined in Section 1.4(c)(i))
for each period contained in the Contingent Purchase Price Period means
Purchaser's net income (or loss), after Taxes, determined in accordance
with generally accepted accounting principles consistently applied
("GAAP"). Assuming the accuracy of the representations and warranties of
the Sellers and the Owners contained in Section 2.7 hereof and except as
otherwise set forth in this Section 1.4(c), the Purchaser acknowledges and
agrees with the Sellers' application of GAAP for the Sellers' After-Tax
Earnings for the period from January 1, 1998 through June 5, 1998, as set
forth in Exhibit 1.4 attached hereto, and further agrees that the net
income shown therein will be used to calculate the After-Tax Net Earnings
for that portion of the First Fiscal Year provided that the underlying
numbers, as represented by the Sellers in Section 2.7 hereof, are correct.
Except as otherwise set forth in this Section 1.4(c), the Purchaser
further agrees that such methodology will be substantially the same
methodology used by the Purchaser in calculating the Contingent Purchase
Price, subject to future changes in and additions to GAAP. Notwithstanding
the foregoing, the Purchaser is, in no way, certifying or agreeing that
the numbers set forth in Exhibit 1.4 attached hereto, are accurate or
complete or otherwise fairly present the financial position of the Sellers
for such period. Notwithstanding the foregoing, the following provisions
will govern the computation of the After-Tax Earnings for purposes of this
Section 1.4.
(i) For purposes of this Section 1.4, the term "business" or
"businesses" means the operations of the Purchaser that represent a
succession to and a continuation of the Business conducted by the
Sellers prior to the Closing, as such "business" may be
reconstituted, expanded or developed. Specifically, the "business"
means the collection, organization, management and dissemination of
data via what is currently known as the E-TECH system and its
derivatives, successors, ancillary products and comparable tools
(the "E-TECH SYSTEM") and all scanning and imaging services provided
therewith, together with the installation and management of the
hardware associated with the E-TECH System and all training,
maintenance, support and consulting associated with the E-TECH
System. Notwithstanding the foregoing, the term "business" or
"businesses" does not include any software products, training,
maintenance, support or consulting services that are currently being
offered by the Purchaser or Xxxxxxx, and, to the extent that they
are not competitive with the E-TECH System, that are contemplated to
be offered by the Purchaser or Xxxxxxx. Notwithstanding the
foregoing, the term "business" does not include any products or
services that are acquired or purchased by Xxxxxxx, the Purchaser or
any of their respective affiliates as part of the acquisition of
substantially all of the business or assets of an entity, except to
the extent provided in Section 1.4(c)(vii);
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(ii) The Assets will be depreciated as though their basis had
not changed as a result of their purchase by Purchaser pursuant to
this Agreement. All Assets will be depreciated based on their
current depreciation schedules and no amortization related to the
purchase of the Assets will be included in the calculation of
After-Tax Net Earnings;
(iii) It is anticipated that Xxxxxxx will provide certain
services for the benefit of the "business" related to sales and
general and administrative expenses for which the "business" will be
charged (the "SG&A COSTS"). The SG&A Costs will be five percent (5%)
of Gross Revenues for the First Fiscal Year and ten percent (10%) of
Gross Revenues for the Second Fiscal Year, Third Fiscal Year and
Fourth Fiscal Year. For purposes of this Section 1.4, the term
"GROSS REVENUES" means the Purchaser's gross revenues, determined in
accordance with GAAP, net of allowances, discounts and returns,
generated from the "business." The SG&A Costs include costs incurred
from the following services to be provided by Xxxxxxx: accounting,
tax, legal, human resources, finance/cash management, cost of
capital, general corporate and equipment insurance, executive
management of Xxxxxxx, MIS support provided by Xxxxxxx,
telecommunications, purchasing, sales and marketing related expenses
(e.g., marketing, public relations, market research, brochures,
advertising, trade shows, web presence, promotions, sales force and
sales force support costs including, but not limited to, costs of
salaries, commissions, bonuses, benefits, facilities, equipment,
travel and entertainment and training for the E-Tech system and
services of the "business") and use of Xxxxxxx'x existing help
desk/customer support infrastructure (excluding incremental
personnel costs required solely for the purpose of supporting the
"business");
(iv) The benefit plans used in calculating the After-Tax
Earnings will be in conformance with the fringe benefit programs (A)
of the Sellers in effect as of the Closing Date for the First Fiscal
Year and (B) of Xxxxxxx in effect for the Second Fiscal Year, Third
Fiscal Year and Fourth Fiscal Year;
(v) An estimated combined federal, state, local and foreign
income tax rate of 38% will be applied to pre-tax income to
calculate After-Tax Net Earnings;
(vi) Except as otherwise provided for in this Section 1.4, the
After-Tax Earnings will be computed as if the "business" were not
directly or indirectly an affiliate of the Purchaser or any of its
affiliates. All other intercompany transactions will be calculated
as if they were being done as independent, arms-length transactions.
It is anticipated that use of Xxxxxxx'x facilities or personnel for
providing services related to the "business" will be allocated at
prices reflective of reasonable market rates. Sales of the E-TECH
System and related services associated with the "business" to
Xxxxxxx and its wholly-owned subsidiaries will be treated as a sale
at a discount of 20% to the then prevailing market rates, unless
otherwise mutually agreed. Technology-related consulting services
performed by the Sellers on behalf of Xxxxxxx, but not related the
"business" will be priced at
7
market consulting rates and be included in the computation of
After-Tax Earnings;
(vii) Any reasonable expenses paid, incurred or charged in
connection with the expansion of the "business" as a result of
opening and staffing of new offices, and any income or revenues
directly derived therefrom, will be included in the computation of
After-Tax Earnings of the "business." In the event that Xxxxxxx
contemplates acquiring another entity, business or assets similar to
the "business," Xxxxxxx will present such opportunity to the Sellers
and Xxxxxxx and the Sellers will agree to work in good faith to
reach mutually agreeable terms on the treatment of such acquisition
and its effect on this Section 1.4. In the event the parties fail to
agree on the treatment of such acquisition and its effect on this
Section 1.4, neither the revenue nor the expense of such acquisition
will be included in the computation of After-Tax Earnings.
Notwithstanding the foregoing, nothing in this Section 1.4 (vii)
will prevent or otherwise prohibit Xxxxxxx from acquiring any
entity, assets or business whether or not similar to the "business."
It is anticipated that there will be circumstances when expenses
related to growth will be in the longer term strategic interest of
Xxxxxxx, but may be detrimental to the short-term interests of the
Sellers. The Purchaser and the Sellers agree to work in good faith
to equitably allocate these expenses. Expenses incurred in expanding
Xxxxxxx'x scanning and imaging operations in Xxxxxxx'x corporate
offices located in Saint Xxxx, Minnesota and Xxxxxxx'x document
service center located in Dallas, Texas will not be included in the
computation of After-Tax Earnings during the First Fiscal Year.
(viii) All costs and expenses associated with the development,
modification, enhancement or improvement of software products will
be treated consistently with Xxxxxxx'x accounting policies for such
costs and expenses, which such policy is currently to expense such
costs and expenses as incurred;
(ix) All revenue, including, without limitation, all license
and maintenance fees, will be recognized in accordance with GAAP,
which generally requires that revenue be recognized over the life of
the applicable contract; and
(x) No costs or expenses will be recognized for payments made
under the Executech Performance Share Plan.
(xi) In the event that any of the Employment Agreements with
Xxxxx, Xxxxxxxx or Xxxxxxx XxXxxx are terminated, for whatever
reason, After-Tax Earnings will include, in addition to other
charges contemplated by this Section 1.4, all reasonable expenses
paid, incurred or charged in connection with recruiting, replacing,
training and compensating (including benefits) replacement
personnel.
(d) The Purchaser agrees to provide Xxxxx and Xxxxxxxx monthly
financial reports consistent with those provided to Xxxxxxx'x regional
managers.
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(e) As soon as may be practicable after the end of each fiscal year
in the Contingent Purchase Price Period, but not later than March 25,
Purchaser will deliver to the Representative, a statement, prepared by the
Purchaser, setting forth in reasonable detail, Purchaser's calculation of
After-Tax Earnings for each fiscal year of the Contingent Purchase Price
Period and the amount of the Contingent Purchase Price, if any, to be paid
to the Sellers pursuant to this Section 1.4 (the "CONTINGENT PURCHASE
PRICE STATEMENT").
(f) Within 15 business days after receipt of the Contingent Purchase
Price Statement, the Representative will notify (the "REPRESENTATIVE
NOTICE") Purchaser if the Representative disagrees with the calculation of
the Contingent Purchase Price. If such notice is not given (or at such
time as the Representative provides written notice to Purchaser that the
Representative has no objection to such calculation), the Contingent
Purchase Price Statement provided by Purchaser will be final and
conclusive for all purposes and, upon payment in full of the Contingent
Purchase Price, the Purchaser will thereafter have no further liability to
the Sellers or the Owners pursuant to this Section 1.4. If the parties are
unable to resolve their differences within 60 days of the receipt of the
Representative Notice, the Sellers, the Owners and the Purchaser agree to
retain the accounting firm of Xxxxxx Xxxxxxxx LLP, or, if Xxxxxx Xxxxxxxx
LLP is not independent with respect to the Sellers, the Owners, the
Purchaser and Xxxxxxx, a mutually agreeable independent, Big-Six
accounting firm, (the "AUDITOR") to arbitrate the dispute and render a
decision within 30 days of such retention, which decision shall be final
and binding for all purposes. Any award pursuant to this Section 1.4(e)
may be entered in and enforced by any court having jurisdiction over the
matter and the parties hereby consent and commit themselves to the
jurisdiction of the courts of Delaware for the purposes of the enforcement
of any such award. If the amount of the Contingent Purchase Price, as
determined by the Auditor, is (A) less than five percent (5%) higher than
the amount set forth in the Contingent Purchase Price Statement, or (B)
lower than, or (C) equal to the amount set forth in the Contingent
Purchase Price Statement, the Purchaser and the Owners will each pay
one-half of the costs of services rendered by the Auditor. If the amount
of the Contingent Purchase Price, as determined by the Auditor, is higher
than the amount set forth in the Contingent Purchase Price Statement by
five percent or more, the Purchaser will pay such costs.
(g) Within five days after the earlier of (i) the receipt by the
Purchaser of written notice from the Representative that the
Representative has no objection to the calculation of the Contingent
Purchase Price pursuant to Section 1.4 hereof, (ii) the expiration of the
15-day period for giving notice of disagreement with such calculation, if
no such notice is given, or (iii) the resolution of any dispute pursuant
to Section 1.4(e), the Purchaser will by wire transfer in immediately
available funds make payment to the Representative of the Contingent
Purchase Price, if any. In the event that payment is not made within such
5-day period, the Purchaser will pay to the Sellers', in addition to the
amount due as Contingent Purchase Price, a late payment charge equal to
one percent (1%) per month of the Contingent Purchase Price due together
with interest at the Late Payment Rate. If the amount of the Contingent
Purchase Price is disputed and is being arbitrated in accordance with
Section 1.4(e), during the course of such arbitration and
9
until a final, non-appealable arbitration award is issued, no late payment
charge shall accrue, but, interest will be payable by the Purchaser on the
balance of the Contingent Purchase Price due but unpaid, at the Late
Payment Rate. For purposes of this Agreement, the term "LATE PAYMENT RATE"
means the prime rate, as published by Chase Manhattan Bank as its prime
lending rate from time to time, plus three percent (3%).
1.5 ALLOCATION OF PURCHASE PRICE.
The Purchase Price will be allocated among the Assets in the manner
required by Section 1060 of the Code. In making such allocation, the allocations
set forth in Exhibit 1.5 attached hereto will apply. In preparing Exhibit 1.5,
the Purchaser and the Sellers will negotiate in good faith the values of the
Assets and the resulting allocation of the Purchase Price among the various
Assets; it being understood that such determination will be binding on the
Purchaser only for the purposes of U.S. Federal, state and local taxation. The
Purchaser, the Sellers and the Owners will file all Tax Returns and tax reports
(including IRS Form 8594) in accordance with and based upon such allocation and
will take no position in any Tax Return, tax proceeding or tax audit which is
inconsistent with such allocation.
1.6 COLLECTION OF ACCOUNTS RECEIVABLE.
For a period of 180 days after the Closing Date, the Purchaser will use
its commercially reasonable efforts to collect the accounts receivable included
in the Assets reflected on the Latest Balance Sheet, other than accounts
receivable owing by World Wide to Executech (the "GUARANTEED RECEIVABLES") in
accordance with the Sellers' prior reasonable commercial practices, which
efforts will be in addition to the efforts engaged in by the Purchaser to
collect any accounts receivable included in the Assets reflected on the Closing
Balance Sheet that arose after the date of the Latest Balance Sheet. The
Purchaser may in its discretion, reasonably exercised, resort to litigation or
the use of collection agencies or similar efforts to collect the Guaranteed
Receivables. Any payment made to the Purchaser or any affiliate of the Purchaser
by an account debtor with more than one outstanding account receivable will be
applied to particular accounts receivable as specified by the account debtor;
provided, however, that if such account debtor does not specify to which account
receivable the payment is to be applied, the Purchaser will apply such payments
to the oldest account receivable of such account debtor and then to the next
oldest account receivable of such account debtor until such payment has been
fully reflected. The Contingent Purchase Price will be reduced by the amount, if
any, by which the net amount of the Guaranteed Receivables not collected on or
before the 180th day after the Closing Date exceeds the Bad Debt Reserve (as
hereinafter defined) (such excess is hereinafter referred to as the "GUARANTEED
RECEIVABLES SHORTFALL"). Any Guaranteed Receivables not collected within 180
days will be returned to the Sellers. For purposes of this Agreement, the term
"BAD DEBT RESERVE" means the Sellers' reserve for bad debts and reserve for
allowances as of the date of the Latest Balance Sheet, determined in a manner
consistent with the prior practices of the Sellers reflected in the Latest
Balance Sheet. The Purchaser will have the right to set-off any amount owing to
the Sellers as a Contingent Purchase Price payment for any reduction arising
from this Section 1.6.
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1.7 CLOSING.
Unless this Agreement has been terminated and the transactions
contemplated have been abandoned pursuant to Article 7 hereof, a closing (the
"CLOSING") will be held on June 9, 1998 at 9:00 a.m., New York, New York local
time or at such other time as the parties may agree upon (the "CLOSING DATE");
provided, however, that if any of the conditions provided for in Articles 5 and
6 hereof have not been satisfied or waived by such date, then the party to this
Agreement which is unable to satisfy such condition or conditions, despite the
best efforts of such party, will be entitled to postpone the Closing by notice
to the other parties until such condition or conditions will have been satisfied
(which such notifying party will seek to cause to happen at the earliest
practicable date) or waived, but in no event will the Closing occur later than
June 15, 1998 (the "TERMINATION DATE"). The parties will use their best efforts
to complete the Closing by June 9, 1998. The Closing will be held at such place
as the parties may agree, at such time as the parties may agree, at which time
and place the documents and instruments necessary or appropriate to effect the
transactions contemplated herein will be exchanged by the parties.
1.8 INSTRUMENTS OF TRANSFER TO PURCHASER.
(a) At the Closing, the Sellers will deliver to the Purchaser such
bills of sale, endorsements, assignments, deeds and other good and
sufficient instruments of conveyance and transfer, in form and substance
reasonably satisfactory to the Purchaser and its counsel, as will be
required to vest in the Purchaser title to the Assets, including without
limitation:
(i) a cashier's or certified check drawn by each of the
Sellers to the order of the Purchaser in the aggregate amount of all
of the Sellers' cash on hand and in banks less an amount equal to
the sum of (A) all uncleared checks which have been drawn by the
Sellers prior to the Closing and (B) such other amounts as the
parties may otherwise agree,
(ii) bills of sale executed by the Sellers vesting in the
Purchaser good and marketable title to all of the Assets in the form
attached as Exhibit 1.8 hereof;
(iii) appropriate endorsements and assignments of the
contracts, licenses, agreements, permits, plans, commitments and
other binding arrangements included in the Assets;
(iv) all data relating to the Assets, property, goodwill and
business included in the Sellers' business; and
(v) all copies of the source code and object code and all
documentation relating thereto for all computer software programs
included in the Assets.
(b) The Sellers will take all other actions necessary to put the
Purchaser in actual possession and operating control of the Assets.
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2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE OWNERS
The Sellers and Owners, jointly and severally, hereby represent and
warrant to the Purchaser as of the date hereof as follows:
2.1 DISCLOSURE SCHEDULE.
The disclosure schedule attached as Exhibit 2 hereto (the "DISCLOSURE
SCHEDULE") is divided into sections which correspond to the sections of this
Article 2. The Disclosure Schedule is accurate and complete. Nothing in the
Disclosure Schedule will be deemed adequate to disclose an exception to a
representation or warranty made herein, unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
will not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself).
2.2 CORPORATE ORGANIZATION.
(a) Executech is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York, has the full
corporate power and authority to carry on its business as it is now being
conducted and to own, lease and operate its properties and assets.
Executech is duly qualified or licensed to do business as a foreign
corporation in good standing in every other jurisdiction in which the
character or location of the properties and assets owned, leased or
operated by it or the conduct of the business requires such qualification
or licensing, except where the failure to so qualify would not have a
Material Adverse Effect. The Disclosure Schedule contains a list of all
jurisdictions in which Executech is qualified or licensed to do business.
(b) World Wide is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Connecticut with requisite power and authority to carry on its business as
it is now being conducted and to own, operate and lease its properties and
assets. World Wide is duly qualified or licensed to do business as a
foreign limited liability company in good standing in every other
jurisdiction in which the character or location of the properties and
assets owned, leased or operated by it or the conduct of its business
requires such qualification or licensing, except where the failure to so
qualify would not have a Material Adverse Effect. The Disclosure Schedule
contains a list of all jurisdictions in which World Wide is qualified or
licensed to do business.
2.3 CAPITALIZATION.
(a) The authorized capital stock of Executech is set forth on the
Disclosure Schedule. The number of shares of capital stock of Executech
outstanding as of the date of this Agreement is set forth on the
Disclosure Schedule. All issued and outstanding shares of capital stock of
Executech are duly authorized, validly issued, fully paid and
non-assessable. The Shareholders are the sole direct and indirect
shareholders of Executech.
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(b) The amount and type of membership interests of World Wide
outstanding as of the date of this Agreement are set forth on the
Disclosure Schedule. All issued and outstanding membership interests of
World Wide are duly authorized, validly issued, and are without, and were
not issued in violation of, preemptive rights. The Members are the sole
direct and indirect members of World Wide.
2.4 AUTHORIZATION.
The Sellers have full power and authority to enter into this Agreement and
to carry out the transactions contemplated herein. The Owners, and each of them,
have the legal capacity to enter into this Agreement and to carry out the
transactions contemplated herein, including without limitation, the legal
capacity to execute, deliver and perform the agreements or contracts, if any,
required by Article 5 to be executed and delivered by any of them as a condition
to the Closing. The Board of Directors of Executech and the Manager of World
Wide and the Owners have taken all action required by law, Executech's articles
of incorporation and bylaws, World Wide's articles of organization and operating
agreement and otherwise to authorize the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein.
This Agreement has been duly and validly executed and delivered by the Sellers
and no other corporate or limited liability company action, as the case may be,
is necessary. This Agreement has been duly and validly executed by the Owners.
This Agreement is the valid and binding legal obligation of the Sellers and the
Owners, enforceable against them in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
applicability relating to or affecting creditors' rights and general principles
of equity.
2.5 NON-CONTRAVENTION.
Except as set forth in the Disclosure Schedule, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated herein will: (i) violate or be in conflict with any
provision of the articles of incorporation or bylaws of Executech; (ii) violate
or be in conflict with any provision of the articles of organization or
operating agreement of World Wide; (iii) except for violations, conflicts,
defaults, accelerations, terminations, cancellations, impositions of fees or
penalties which would not, individually or in the aggregate, have a Material
Adverse Effect on the Business, be in conflict with, or constitute a default,
however defined (or an event which, with the giving of due notice or lapse of
time, or both, would constitute such a default), under, or cause or permit the
acceleration of the maturity of, or give rise to any right of termination,
cancellation, imposition of fees or penalties under any debt, note, bond, lease,
mortgage, indenture, license, obligation, contract, commitment, franchise,
permit, instrument or other agreement or obligation to which either of the
Sellers are a party or by which either of the Sellers or any of the Sellers'
properties or assets is or may be bound; (iv) result in the creation or
imposition of any mortgage, pledge, lien, security interest, conditional or
installment sales agreement, encumbrance, claim, easement, right of way,
tenancy, covenant, encroachment, restriction or charge of any kind of nature
(whether or not of record) (a "LIEN"), other than (A) mechanics', carriers',
workers' or other like liens arising in the ordinary course of business; (B)
minor imperfections of title which do not individually or in the aggregate,
impair the continued use and operation of the assets and fixtures to which they
relate in the operation of
13
the Business as currently conducted; (C) liens for current taxes not yet due and
payable; and (D) Liens created by this Agreement (clauses (A), (B), (C) and (D)
collectively "PERMITTED LIENS"), upon the Assets, under any Assumed Contract or
any debt, obligation, contract, agreement or commitment to which either of the
Sellers are a party or by which either of the Sellers or any of the Assets is or
may be bound; or (v) to Sellers' knowledge, violate any statute, treaty, law,
judgment, writ, injunction, decision, decree, order, regulation, ordinance or
other similar authoritative matters (referred to herein individually as a "LAW"
and collectively as "LAWS") of any foreign, federal, state or local governmental
or quasi-governmental, administrative, regulatory or judicial court, department,
commission, agency, board, bureau, instrumentality or other authority (referred
to herein individually as an "AUTHORITY" and collectively as "AUTHORITIES").
2.6 CONSENTS AND APPROVALS.
Except as set forth in the Disclosure Schedule, with respect to each of
the Sellers and the Owners, no consent, approval, order or authorization of or
from, or registration, notification, declaration or filing with ("CONSENT") any
individual or entity, including without limitation any Authority, is required
(that has not been obtained or waived) in connection with the execution,
delivery or performance of this Agreement by the Sellers or the Owners or the
consummation by the Sellers and the Owners of the transactions contemplated
herein, other than any Consent which, if not obtained, will not have a Material
Adverse Effect on the Business.
2.7 FINANCIAL STATEMENTS.
The Disclosure Schedule contains true and complete copies of unaudited
balance sheets of each of the Sellers as of December 31, 1997 and June 5, 1998,
and the related statement of operations (or income or loss) for the five (5)
months ended June 5, 1998. The balance sheet as of June 5, 1998 is referred to
herein as the "LATEST BALANCE SHEET." Except as disclosed therein, the June 5,
1998 financial statements (i) are in accordance with the books and records of
the Sellers; and (ii) fairly present the financial position of the Sellers as of
the respective dates thereof, and the results of operations (or income or loss)
for the periods then ended.
2.8 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as and to the extent (i) reflected and reserved against in the
Latest Balance Sheet, (ii) set forth on the Disclosure Schedule or (iii)
incurred in the ordinary course of business after the date of the Latest Balance
Sheet and not material in amount, either individually or in the aggregate, the
Sellers do not have any debt, liability or obligation, known or unknown, secured
or unsecured, whether accrued, absolute, contingent, unasserted or otherwise, of
any nature whatsoever, including without limitation any foreign or domestic tax
liabilities or deferred tax liabilities incurred in respect of or measured by
the Sellers' income, or any other debts, liabilities or obligations relating to
or arising out of any act, omission, transaction, circumstance, sale of goods or
services, state of facts or other condition which occurred or existed on or
before the date hereof, whether or not known, due or payable (collectively
"LIABILITY"). Sellers are not subject to any obligation or requirement to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any person or entity.
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2.9 ABSENCE OF CERTAIN CHANGES.
Except as set forth in the Disclosure Schedule, since the date of the
Latest Balance Sheet, the Sellers have owned and operated the Assets in the
ordinary course of business and consistent with past practice. Without limiting
the generality of the foregoing, subject to the foregoing exceptions:
(a) the Sellers have not experienced any change which has had a
Material Adverse Effect on either of the Sellers or experienced any event
or failed to take any action which reasonably could be expected to result
in a Material Adverse Effect on either of the Sellers;
(b) the Sellers have not suffered any material loss, damage,
destruction of property or Assets or other casualty to property or Assets
(whether or not covered by insurance);
(c) the Sellers have not suffered any loss of officers, directors,
managers, employees, dealers, distributors, independent contractors,
customers or suppliers which had or may reasonably be expected to result
in a Material Adverse Effect on either of the Sellers; and
(d) no event has taken place which if consummated following the date
hereof would constitute a violation of Section 4.1 hereof.
2.10 ASSETS.
(a) Except as set forth in the Disclosure Schedule, the Sellers have
good and marketable title to all of the Assets, free and clear of any
Lien, other than Permitted Liens.
(b) The Sellers have full right and power to, and at the Closing
will, deliver to the Purchaser good title to all of the Assets, free and
clear of any Lien, other than Permitted Liens.
(c) The machinery, equipment, vehicles and other personal property
used by the Sellers in the Business are in good operating condition and
repair, normal wear and tear excepted, and fit for the intended purposes
thereof, and no material maintenance, replacement or repair has been
deferred or neglected.
(d) The Assets constitute all of the property and assets, real,
personal and mixed, tangible and intangible, presently used to carry on
the Business of the Sellers, and the Assets are adequate to carry on the
Business of the Sellers as presently conducted.
(e) The Sellers do not own any real properties. Neither of the
Sellers are foreign persons and are not controlled by a foreign person, as
the term foreign person is defined in Section 1445(f)(3) of the Code.
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2.11 INVENTORIES.
The Sellers do not maintain any inventory.
2.12 RECEIVABLES AND PAYABLES.
(a) The Disclosure Schedule contains a listing of all of the
receivables, if any, of the Sellers included in the Assets. Except as set
forth on the Disclosure Schedule, (i) the Sellers have good right, title
and interest in and to the trade accounts receivable and notes receivable
constituting the Assets; (ii) none of such trade accounts receivable and
notes receivable is subject to any Lien, other than Permitted Liens; (iii)
all of the trade accounts receivable and notes receivable owing to either
of the Sellers constitute valid and enforceable claims arising from bona
fide transactions in the ordinary course of business, and there are no
known claims, refusals to pay or other rights of set-off against any
thereof; (iv) the aging schedule of the trade accounts receivable and
notes receivable accounts of the Sellers attached to the Disclosure
Schedule is complete and accurate; and (vi) the reserve established by the
Sellers on the Latest Balance Sheet is adequate to cover any doubtful
accounts.
(b) The Disclosure Schedule contains a listing of all trade accounts
payable and notes payable of the Sellers. All such trade accounts payable
and notes payable arose from bona fide transactions in the ordinary course
of the Sellers' Business and, except as set forth on the Disclosure
Schedule, no such account payable or note payable is delinquent by more
than 30 days in its payment.
2.13 INTELLECTUAL PROPERTY RIGHTS.
(a) The Disclosure Schedule contains a listing of all (i) patents,
patent applications (collectively the "PATENTS"), (ii) copyright
registration applications and copyright registration certificates (the
"COPYRIGHTS"), (iii) tradenames, registered and common law trademarks,
trademark applications (collectively, the "TRADEMARKS"), (iv) service
marks, service xxxx applications (collectively, the "SERVICE MARKS"), and
(v) computer programs and proprietary specifications, inventions and
technology (the "TRADE SECRETS") used as of the Closing Date in connection
with the Assets and for the conduct of the Business of the Sellers (the
Patents, Copyrights, Trademarks, Service Marks and Trade Secrets are
collectively referred to as "INTELLECTUAL PROPERTY RIGHTS"). All issued
Patents and registered Copyrights, Trademarks and Service Marks are
collectively referred to as the "REGISTERED INTELLECTUAL PROPERTY RIGHTS."
The Intellectual Property Rights are reasonably sufficient to conduct the
Business as conducted as of the Closing Date.
(b) The Sellers own, have the unrestricted right to use and have
sole and exclusive possession of and have good and valid title to, or
sufficient license or other rights to, all of the Intellectual Property
Rights, free and clear of all Liens other than Permitted Liens.
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(c) All Registered Intellectual Property Rights are in compliance
with formal legal requirements (including the payment of filing,
examination and maintenance fees and proofs of working or use), are valid
and enforceable and are not subject to any maintenance fees or taxes or
U.S. Patent and Trademark office actions falling due within 90 days after
the Closing Date. The Sellers do not own any Patents. Except as set forth
on the Disclosure Schedule, no Trademarks have been or are involved in any
opposition, invalidation or cancellation proceeding and, there is no basis
for the commencement of any such proceeding. To the Sellers' and the
Owners' knowledge, the Trademarks are valid and enforceable and no person
holds any infringing or potentially infringing trademark and no
application for any infringing or potentially infringing trademark has
been made.
(d) A copy of all available documentation relating to the Trade
Secrets has been furnished to the Purchaser. To the knowledge of the
Sellers and the Owners, the Trade Secrets are not part of the public
domain or literature nor have they been used, divulged or appropriated for
the benefit of any person or entity other than the Sellers or to the
detriment of either of the Sellers. The Sellers have taken reasonable
measures and precautions to protect the secrecy, confidentiality and value
of the Trade Secrets.
(e) Except as set forth on the Disclosure Schedule, the use of all
Intellectual Property Rights necessary or required for the conduct of the
Business of the Sellers as presently conducted as of the Closing Date does
not infringe or violate any trade secrets, plans and specifications,
patents, copyrights, tradenames, registered and common law trademarks,
trademark applications, service marks, service xxxx applications, computer
programs and other computer software, inventions, know-how, technology,
proprietary processes and formulae or other intellectual property rights
of any other person or entity (the "THIRD PARTY INTELLECTUAL PROPERTY
RIGHTS"). To the Sellers' and the Owners' knowledge, the Sellers are not
using any confidential information or trade secrets of others in an
unauthorized manner.
(f) All agreements relating to licenses of Intellectual Property
Rights granted by or to the Sellers or any of their respective Owners are
set forth on the Disclosure Schedule. All such licenses set forth on the
Disclosure Schedule are in good standing, valid and effective in
accordance with their respective terms and there is not, under any of such
licenses, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default, or would
constitute a basis for a claim of force majeure or other claim of
excusable delay or non-performance), in each case by either of the Sellers
or, to the knowledge of the Sellers and the Owners, by any other party
thereto. Except as set forth on the Disclosure Schedule, there are no
outstanding and, to the knowledge of the Sellers and the Owners, no
threatened disputes or disagreements with respect to any such agreement.
(g) Except as set forth on the Disclosure Schedule, the Sellers are
not obligated or under any Liability whatsoever to make any payments by
way of royalties, fees or otherwise to any owner of, licensor of, or other
claimant to, any Intellectual Property Rights or Third Party Intellectual
Property Rights.
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2.14 LITIGATION.
Except as set forth in the Disclosure Schedule, there is no legal,
administrative, arbitration, or other proceeding, suit, claim or action of any
nature or investigation, review or audit of any kind (including without
limitation a proceeding, suit, claim or action, or an investigation, review or
audit, involving any environmental Law or matter), judgment, decree, decision,
injunction, writ or order pending, noticed, scheduled, or, to the knowledge of
the Sellers, threatened or contemplated by or against or involving the Sellers,
their respective assets, properties or business or their officers, directors,
governors, managers, agents or employees (but only in their capacity as such),
whether at law or in equity, before or by any person or entity or Authority, or
which questions or challenges the validity of this Agreement or any action taken
or to be taken by the parties hereto pursuant to this Agreement or in connection
with the transactions contemplated herein.
2.15 TAX MATTERS.
(a) The Owners or the Sellers, as the case may be, will be
responsible for and will pay all Taxes attributable to or arising from the
business and operations of Sellers and will be responsible for their own
income and franchise Taxes, if any, arising from the transactions
contemplated by this Agreement. The Purchaser will be responsible for and
will pay all Taxes in the nature of sales and use Taxes attributable to or
arising from the transactions contemplated by this Agreement.
(b) There have been properly completed and duly filed on a timely
basis (subject to any valid extensions filed by the Sellers or the Owners,
as the case may be) and in form that is, in all material respects,
correct, all Tax Returns required to be filed on or prior to the date
hereof by the Sellers and the Owners, as the case may be, with respect to
Taxes of the Sellers (or relating to the business and operation of the
Sellers). As of the time of filing, the foregoing Tax Returns correctly
reflected, in all material respects, the facts regarding the income,
business, assets, operations, activities, status or other matters of the
Sellers or any other information required to be shown thereon. There is no
material omission, deficiency, error, misstatement or misrepresentation,
whether innocent, intentional or fraudulent, in any Tax Return filed by
the Sellers or the Owners for any period. Any Tax Returns filed after the
date hereof, but including periods through the Closing Date, will conform
with the provisions of this subsection 2.15(b).
(c) With respect to all amounts of Taxes imposed upon or reported by
the Sellers, with respect to all taxable periods or portions of periods
ending on or before or including the Closing Date, all applicable Tax Laws
and agreements have been or will be complied with, in all material
respects and all such amounts of Taxes required to be paid by the Sellers
to taxing Authorities or others on or before the date hereof have been
duly paid or will be paid on or before the Closing Date. Except for
Permitted Liens, there are no Liens for such Taxes upon any property or
assets of the Sellers. The Sellers have withheld and remitted all amounts
required to be withheld and remitted by them in respect of Taxes.
18
(d) Except as set forth in the Disclosure Schedule, neither the
federal Tax Returns of the Sellers nor any state, local or foreign Tax
Return of the Sellers have been examined by the Internal Revenue Service
or any similar state, local or foreign Authority, and, except to the
extent shown therein, all deficiencies asserted as a result of such
examinations have been paid or finally settled and no issue has been
raised by the Internal Revenue Service or any similar state, local or
foreign Authority in any such examination which, by application of similar
principles, reasonably could be expected to result in a proposed
deficiency for any other period not so examined. Except as set forth in
the Disclosure Schedule, all deficiencies and assessments of Taxes of the
Sellers resulting from an examination of any Tax Returns by any Authority
have been paid and there are no pending examinations currently being made
by any Authority nor has there been any written or oral notification to
the Sellers or the Owners of any intention to make an examination of any
Taxes by any Authority. Except as set forth in the Disclosure Schedule,
there are no outstanding agreements or waivers extending the statutory
period of limitations applicable to any Tax Return of the Sellers for any
period.
(e) For purposes of computing Taxes and the filing of Tax Returns,
the Sellers have only hired independent contractors through recognized
consulting firms. Such firms have been responsible for payment of all
necessary employment related Taxes.
2.16 BENEFIT PLANS
(a) PENSION BENEFIT PLANS
The Disclosure Schedule lists and the Sellers have delivered to the
Purchaser true and complete copies of all plans, programs, agreements,
commitments and arrangements maintained by or on behalf of Sellers that provide
benefits to, or for the benefit of, any employee or former employee of Sellers
(or their spouses, dependents or beneficiaries) that is an "employee pension
benefit plan" as such term is defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (the "PLANS"), including
without limitation any such plan that is excluded from coverage by Section 4 of
ERISA or is a "MULTIEMPLOYER PLAN" within the meaning of Section 3(37) of ERISA.
Each Plan that is not a Multiemployer Plan has been operated in all material
respects in accordance with its terms and in compliance in all material respects
with the applicable provisions of ERISA, the Code and all other applicable law.
All Plans that are not Multiemployer Plans which the Sellers operate as plans
that are qualified under Section 401(a) of the Code satisfy in all material
respects in form and operation all applicable qualification requirements.
Neither the Sellers nor any other "person" within the meaning of Section
7701(a)(1) of the Code, that together with the Sellers are considered a single
employer pursuant to Sections 414(b), (c), (m) or (o) of the Code or Sections
3(5) or 4401(b)(1) of ERISA (an "AFFILIATED ORGANIZATION"), sponsors, maintains,
contributes to or is required to contribute to, or has sponsored, maintained,
contributed to or been required to contribute to, a plan which is subject to the
requirements of Section 412 of the Code or Section 302 of ERISA or which is
covered by Title IV of ERISA. Neither the Sellers nor any Affiliated
19
Organization is contributing to, is or has been required to contribute to, or
could have any liability of any nature, whether known or unknown, direct or
indirect, fixed or contingent, arising under or in connection with, any Plan
which is a Multiemployer Plan. Neither the Sellers nor any Affiliated
Organization has, with respect to any Plan, engaged in any prohibited
transaction as defined in Sections 406 and 407 of ERISA or Section 4975 of the
Code which is not exempt from both the penalty in Section 502(i) of ERISA and
the excise tax in Section 4975 of the Code.
(b) WELFARE BENEFIT PLANS
Except as set forth in the Disclosure Schedule:
Neither the Sellers nor any Affiliated Organization sponsors,
maintains, contributes to, is required to contribute to or has or could have any
liability of any nature, whether known or unknown, direct or indirect, fixed or
contingent, with respect to, any "employee welfare benefit plan" ("WELFARE
PLAN") as such term is defined in Section 3(1) of ERISA, whether insured or
otherwise, including without limitation any such plan that is excluded from
coverage by Section 4 of ERISA or is a Multiemployer Plan within the meaning of
Section 3(37) of ERISA. Each Welfare Plan that is not a Multiemployer Plan has
been operated in all material respects in accordance with its terms and in
compliance in all material respects with the applicable provisions of ERISA, the
Code and all other applicable Law. Benefits under each Welfare Plan other than a
Multiemployer Plan are fully insured by an insurance company unrelated to the
Sellers or any Affiliated Organization. No insurance contract or policy requires
or permits any retroactive increase in premiums or payments due thereunder. Each
insurance contract may be transferred to or assumed by the Purchaser without the
consent of any other person and without any change in any material term of such
contract. Neither the Sellers nor any Affiliated Organization has established or
contributed to, or is required to contribute to or has or could have any
liability of any nature, whether known or unknown, direct or indirect, fixed or
contingent, with respect to any "voluntary employees' beneficiary association"
within the meaning of Section 501(c)(9) of the Code, "welfare benefit fund"
within the meaning of Section 419 of the Code, "qualified asset account" within
the meaning of Section 419A of the Code or "multiple employer welfare
arrangement" within the meaning of Section 3(40) of ERISA. Neither the Sellers
nor any Affiliated Organization is contributing to, is or has been required to
contribute to any Welfare Plan which is a Multiemployer Plan. Neither the
Sellers nor any Affiliated Organization maintains, contributes to or has or
could have any liability of any nature, whether known or unknown, direct or
indirect, fixed or contingent, with respect to medical, health, life or other
welfare benefits for present or future terminated employees or their spouses or
dependents other than as required by Part 6 of Subtitle B of Title I of ERISA,
Section 4980B of the Code or any comparable state law.
Exhibit 4.11(d) includes a complete list of each current or former
employee of the Sellers or any Affiliated Organization and each other individual
who is a "qualified beneficiary" with respect to such current or former employee
in connection with a "group health plan" maintained by the Sellers or any
Affiliated Organization (as such terms are defined in Section 4980B of the Code)
currently receiving, or eligible to receive, group health plan continuation
coverage in accordance with Section 4980B of the Code and Part 6 of Subtitle B
of Title I of ERISA under the Sellers group health plans.
20
There are no facts or circumstances which could, directly or
indirectly, subject the Sellers or any Affiliated Organization to any (1) excise
tax or other liability under Chapter 47 of Subtitle D of the Code, (2) penalty
tax or other liability under Chapter 68 of Subtitle F of the Code or (3) civil
penalty, damages or other liability arising under Section 502 of ERISA with
respect to any Welfare Plan.
Full payment has been made of all amounts which the Sellers or any
Affiliated Organization is required, under applicable Law, the terms of any
Welfare Plan, or any agreement relating to any Welfare Plan, to have paid as a
contribution, premium or other remittance thereto or benefit thereunder. The
Sellers and each Affiliated Organization has made adequate provisions for
reserves or accruals in accordance with GAAP to meet contribution, benefit or
funding obligations arising under applicable Law or the terms of any Welfare
Plan or related agreement and Sellers could not reasonably be expected to incur
any liability, whether known or unknown, direct or indirect, fixed or
contingent, with respect to any Welfare Plan that is not reflected on the Latest
Balance Sheet. There will be no change on or before Closing in the operation of
any Welfare Plan or any documents with respect thereto which will result in an
increase in the benefit liabilities under such plans, except as may be required
by Law.
The Sellers and each Affiliated Organization have timely complied in
all material respects with all reporting and disclosure obligations with respect
to the Welfare Plans imposed by the Code, ERISA or other applicable Law.
There are no pending or, to the Sellers' and the Owners' knowledge,
threatened audits, investigations, claims, suits, grievances or other
proceedings, and there are no facts known to the Sellers that could give rise
thereto, involving, directly or indirectly, any Welfare Plan, or any rights or
benefits thereunder, other than the ordinary and usual claims for benefits by
participants, dependents or beneficiaries.
The transactions contemplated herein do not result in the
acceleration of accrual, vesting, funding or payment of any contribution or
benefit under any Welfare Plan.
No action or omission of the Sellers or any officer, director,
governor, manager, employee, or agent thereof in any way restricts, impairs or
prohibits the Purchaser or the Sellers or any successor from amending, merging,
or terminating any Welfare Plan in accordance with the express terms of any such
plan and applicable Law.
The Disclosure Schedule lists and the Sellers have delivered to the
Purchaser true and complete copies of: (i) all Welfare Plans and related trust
agreements or other agreements or contracts evidencing any funding vehicle with
respect thereto; (ii) the three most recent annual reports on Treasury Form
5500, including all schedules and attachments thereto, with respect to any
Welfare Plan for which such a report is required; (iii) the form of summary plan
description, including any summary of material modifications thereto or other
modifications communicated to participants, currently in effect with respect to
each Welfare Plan; and (iv) all professional opinions, material internal
memoranda, material correspondence with regulatory authorities and
administrative policies, manuals, interpretations and the like with respect to
each Welfare Plan.
21
2.17 CONTRACTS AND COMMITMENTS; NO DEFAULT.
(a) The Disclosure Schedule contains an accurate and complete list
and brief description of:
(i) All real property owned by the Sellers included in the
Assets or in which the Sellers have a leasehold or other interest
and which is included in the Assets or which is used by the Sellers
in connection with the operation of their business, together with a
description of each lease, sublease, license, or any other
instrument under which the Sellers claim or hold such leasehold or
other interest or right to the use thereof or pursuant to which the
Sellers have assigned, sublet or granted any rights therein,
identifying the parties thereto, the rental or other payment terms,
expiration date and cancellation and renewal terms thereof.
(ii) All machinery, tools, equipment, motor vehicles and other
tangible personal property (other than inventory and supplies),
owned, leased or used by the Sellers and included in the Assets,
except for items having a cost of less than $5,000. The Sellers have
provided the Purchaser with either a copy of or a summary
description of all leases and Liens relating thereto, identifying
the parties thereto, the rental or other payment terms, expiration
date and cancellation and renewal terms thereof.
(iii) All contracts, agreements and commitments, whether or
not fully performed, in respect of the issuance, sale or transfer of
capital stock bonds, membership interests or other securities of the
Sellers or pursuant to which the Sellers have acquired any
substantial portion of their business or assets.
(iv) All contracts, agreements, commitments or understandings
that restrict the Sellers from carrying on their businesses or any
part thereof anywhere in the world or from competing in any line of
business with any person or entity.
(v) All purchase or sale contracts or agreements that call for
aggregate purchases or sales in excess over the course of such
contract or agreement of $5,000 or which continues for a period of
more than twelve months (including without limitation periods
covered by any option to renew or extend by either party) which is
not terminable on 60 days' or less notice without cost or other
Liability at or any time after the Closing.
(vi) Any contract, commitment, agreement or arrangement with
any "disqualified individual" (as defined in Section 280G(c) of the
Code) which contains any severance or termination pay liabilities
which would result in a disallowance of the deduction for any
"excess parachute payment" (as defined in Section 280G(b)(1) of the
Code) under Section 280G of the Code.
(vii) All Assumed Contracts.
22
(viii) The names and current annual salary rates of all
employees of and consultants to the Sellers, showing separately for
each such person the amounts paid or payable as salary, bonus
payments and any indirect compensation for the year ended December
31, 1997.
(ix) The names of all of the officers and directors of
Executech and managers of World Wide.
(x) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, employee option or purchase plans,
other employee arrangements or commitments, whether or not legally
binding, including without limitation, holiday, vacation, Christmas
and other bonus practices, to which either of the Sellers are a
party or is bound or which relates to the operation of the Business.
(b) The Assumed Contracts and all other contracts, agreements,
leases, licenses and commitments required to be listed on the Disclosure
Schedule (other than those which have been fully performed), are valid and
binding upon and enforceable in accordance with their respective terms in
all material respects, except as enforcement might be limited by
bankruptcy and other laws related to creditors' rights and principles of
equity, against the Sellers and are in full force and effect. Except as
otherwise specified in the Disclosure Schedule, the Assumed Contracts are
validly assignable to the Purchaser without the consent of any other party
so that, after the assignment thereof to the Purchaser pursuant hereto,
the Purchaser will be entitled to the full benefits thereof. Except as
disclosed in the Disclosure Schedule, none of the payments required to be
made under any Assumed Contract has been prepaid more than 90 days prior
to the due date of such payment thereunder. Except as set forth in the
Disclosure Schedule, the Sellers are not in material breach, violation or
default, however defined, in the performance of any of their obligations
under any Assumed Contract or any other contract, agreement, lease,
license or commitment required to be listed on the Disclosure Schedule,
and no facts and circumstances exist which, whether with the giving of due
notice, lapse of time, or both, would constitute such a material breach,
violation or default thereunder or thereof. Except as set forth in the
Disclosure Schedule, none of the Assumed Contracts is subject to
renegotiation with any government body. True and complete copies of all of
the Assumed Contracts (together with any and all amendments thereto) have
been delivered to the Purchaser and identified with a reference to this
Section of this Agreement.
2.18 ORDERS, COMMITMENTS AND RETURNS.
Except as set forth in the Disclosure Schedule, all accepted and
unfulfilled orders for the sale of products and the performance of services
entered into by the Sellers and all outstanding material contracts or material
commitments for the purchase of supplies, materials and services were made in
bona fide transactions in the ordinary course of business. To the best of the
Sellers' and the Owners' knowledge, neither of the Sellers are subject to any
outstanding sales or purchase contracts, commitments or proposals which is
anticipated to result in an overall loss upon completion or performance thereof.
23
2.19 LABOR MATTERS.
The Disclosure Schedule attached hereto includes a true and complete list
of all employees of Sellers, together with each person's job title and
compensation level. The Disclosure Schedule also identifies all employees of
Sellers on leave of absence and employees of Sellers and former employees of
Sellers and their dependents receiving health benefits, or eligible to receive
health benefits, as required by COBRA. Notice of the availability of healthcare
continuation coverage for employees and former employees of Sellers and their
respective dependents, in accordance with the requirements of COBRA, will have
been provided to all persons entitled thereto, and all persons electing such
coverage are being (or have been, if applicable) provided such coverage. Except
as set forth in the Disclosure Schedule:
(a) the Sellers are and have been in compliance in all material
respects with all applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours,
including without limitation any such Laws respecting employment
discrimination and occupational safety and health requirements, and have
not and are not engaged in any unfair labor practice;
(b) there is no unfair labor practice complaint against either of
the Sellers pending or threatened before the National Labor Relations
Board or any other comparable Authority;
(c) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or directly affecting the Sellers;
(d) no labor representation question exists respecting the employees
of either of the Sellers and there is not pending or threatened any
activity intended or likely to result in a labor representation vote
respecting the employees of either of the Sellers;
(e) no grievance or any arbitration proceeding arising out of or
under collective bargaining agreements is pending and no claims therefor
exist or have been threatened;
(f) no collective bargaining agreement is binding and in force
against the Sellers or currently being negotiated by the Sellers;
(g) the Sellers have not experienced any significant work stoppage
or other significant labor difficulty;
(h) the Sellers are not delinquent in payments to any persons for
any wages, salaries, commissions, bonuses or other direct or indirect
compensation for any services performed by them or amounts required to be
reimbursed to such persons, including without limitation any amounts due
under any Pension Plan, Welfare Plan or Compensation Plan; and
(i) upon termination of the employment of any person, neither the
Sellers, the Purchaser, Xxxxxxx or any subsidiary of Xxxxxxx will, by
reason of anything done at or prior
24
to or as of the Closing Date, be liable to any of such persons for
so-called "severance pay" or any other payments.
2.20 COMPLIANCE WITH LAW; PERMITS AND OTHER OPERATING RIGHTS.
Except as set forth in the Disclosure Schedule, and without limiting the
scope of any other representations or warranties contained in this Agreement,
but without intending to duplicate the scope of such other representations and
warranties, the assets, properties, business and operations of the Sellers, are
and have been in compliance in all material respects with all Laws applicable to
the Sellers' assets, properties, business and operations. Except as set forth in
the Disclosure Schedule, the Sellers do not require the Consent of any Authority
to permit them to operate in the manner in which they are presently being
operated. The Sellers possess all permits, licenses and other authorizations
from all Authorities necessary to permit them to operate the Business in the
manner in which it presently is conducted and the consummation of the
transactions contemplated by this Agreement will not prevent the Sellers from
being able to continue to use such permits and operating rights.
2.21 ENVIRONMENTAL AND SAFETY MATTERS.
Except as set forth on the Disclosure Schedule:
(a) Neither the Sellers, any subsidiary or former subsidiary of the
Sellers, nor, to the best of the Sellers' knowledge, any previous owner,
tenant, occupant or user of any property owned or leased by or to the
Sellers, or by or to any subsidiary or former subsidiary (the
"PROPERTIES") engaged in or permitted, direct or indirect operations or
activities upon, or any use or occupancy of the Properties, or any portion
thereof, for the purpose of or in any way involving the handling,
manufacture, treatment, storage, use, generation, emission, release,
discharge, refining, dumping or disposal of any Environmentally Regulated
Materials (whether legal or illegal, accidental or intentional, direct or
indirect) on, under, in or about the Properties, or transported any
Environmentally Regulated Materials to, from or across the Properties, nor
are any Environmentally Regulated Materials presently constructed,
deposited, stored, placed or otherwise located on, under, in or about the
Properties, nor have any Environmentally Regulated Materials migrated from
the Properties upon or beneath other properties, nor have any
Environmentally Regulated Materials migrated or threatened to migrate from
other properties upon, about or beneath the Properties. The Properties do
not contain any: (i) underground or aboveground storage tanks; (ii)
asbestos; (iii) equipment using PCBs; (iv) underground injection xxxxx; or
(v) septic tanks in which process waste water or any Environmentally
Regulated Materials have been disposed.
(b) (i) No violation or noncompliance with Environmental and
Occupational Safety and Health Laws has occurred with respect to the
Properties or operations conducted thereon during the period in which the
Sellers operated such Properties and conducted such operations and prior
to such time as the Sellers operated such Properties and conducted such
operations; the Sellers have obtained all permits, licenses and
authorizations required by, and the Sellers and the Properties are in
25
compliance with, all Environmental and Occupational Safety and Health Laws
including, without limitation, all applicable restrictions, conditions,
standards, limitations, prohibitions, requirements, obligations, schedules
and timetables contained in the Environmental and Occupational Safety and
Health Laws or contained in any regulation, code, plan, order, decree,
judgment, injection, notice or demand letter issued, entered, promulgated
or approved thereunder;
(ii) no enforcement, investigation, cleanup, removal,
remediation or response or other governmental or regulatory actions
have been, or could have been at any time in the past, asserted or
threatened (A) with respect to operations conducted by the Sellers
on the Properties or, (B) with respect to the Properties themselves
or (C) against the Sellers or any subsidiary or former subsidiary
with respect to or in any way regarding the Properties pursuant to
any Environmental and Occupational Safety and Health Laws; and
(iii) no claims or settlements relating to or arising out of
Environmental and Occupational Safety and Health Laws or
Environmentally Regulated Materials, have been made or, to the
knowledge of the Sellers, been threatened by any third party,
including any Authority, nor, to the knowledge of the Sellers, does
there exist any basis for any such claim (any such enforcement,
investigation, cleanup, removal, remediation or response, other
governmental or regulatory action, claim or settlement is herein
referred to as an "Environmental Claim") against the Sellers or any
subsidiary or former subsidiaries with respect to the Properties or
operations conducted thereon, or with respect to the Properties or
the operations thereon.
(c) With regard to the Sellers, there are no past or present events,
conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent compliance or continued
compliance with Environmental and Occupational Health and Safety Laws, as
in effect on the Closing Date.
2.22 INSURANCE.
The Disclosure Schedule contains a listing of all policies of fire and
other casualty, general liability, theft, life, workers' compensation, health,
directors and officers, business interruption and other forms of insurance owned
or held by the Sellers, specifying the insurer, the policy number, the risk
insured against, the term of the coverage, the limits of coverage, the
deductible amount (if any), the premium rate, the date through which coverage
will continue by virtue of premiums already paid and, in the case of any "claims
made" coverage, the same information as to predecessor policies for the previous
five years. All present policies are in full force and effect and all premiums
with respect thereto have been paid. The Sellers have not been denied any form
of insurance and no policy of insurance has been revoked or rescinded during the
past five years, except as described on the Disclosure Schedule.
26
2.23 BANK ACCOUNTS.
The Disclosure Schedule contains a list of the names of all financial
institutions, investment banking and brokerage houses, and other similar
institutions at which the Sellers maintain accounts, deposits, safe deposit
boxes of any nature, and the names of all persons authorized to draw thereon or
make withdrawals therefrom; and the names of all persons, if any, holding tax or
other powers of attorney from the Sellers and a summary of the terms thereof.
2.24 BROKERS.
Except as set forth in the Disclosure Schedule and except for amounts
owing to Southport Partners, which such amounts will be paid at Closing, neither
the Sellers, the Owners nor any of the Sellers' respective directors, officers,
shareholders, managers, members or employees have employed any broker, finder,
or financial advisor or incurred any liability for any brokerage fee or
commission, finder's fee or financial advisory fee, in connection with the
transactions contemplated hereby, nor is there any basis known to the Sellers or
the Owners for any such fee or commission to be claimed by any person or entity.
2.25 ABSENCE OF CERTAIN BUSINESS PRACTICES.
Neither the Sellers, nor any director, officer, manager, employee or agent
of the Sellers, nor any other person acting on their behalf, have, directly or
indirectly, within the past five years given or agreed to give any gift or
similar benefit to any customer, supplier, governmental employee or other person
who is or may be in a position to help or hinder the Sellers (or assist the
Sellers in connection with any actual or proposed transaction) which: (i) might
subject the Sellers, the Purchaser, Xxxxxxx or the Purchaser's or Xxxxxxx'x
affiliates to any damage or penalty in any civil, criminal or governmental
litigation proceeding; (ii) if not given in the past, might have had a Material
Adverse Effect on the Business; or (iii) if not continued in the future, might
materially adversely effect the Business or which might subject the Sellers, the
Purchaser, Xxxxxxx or the Purchaser's or Xxxxxxx'x affiliates to suit or penalty
in any private or governmental litigation or proceeding.
2.26 BUSINESS GENERALLY.
Except as set forth in the Disclosure Schedule, there has been no event,
transaction or information which has come to the attention of the Sellers which
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Sellers. Without limiting the generality of the
foregoing, except as set forth in the Disclosure Schedule, there has not been in
the 12-month period prior to the date hereof any material adverse change in the
business relationship of the Sellers with any customer, dealer or supplier to
the Sellers, except for such changes in the ordinary course of business
consistent with past practices.
2.27 TRANSACTIONS WITH CERTAIN PERSONS.
Except as set forth in the Disclosure Schedule and excluding transactions
between Executech and World Wide, during the past three years, the Sellers have
not, directly or indirectly, purchased, leased or otherwise acquired any
property or obtained any services from, or
27
sold, leased or otherwise disposed of any property or furnished any services to,
or otherwise dealt with, in the ordinary course of business or otherwise, any
affiliate or associate of the Sellers or any member, shareholder, or partner of
any affiliate or associate of the Sellers (except with respect to compensation
in the ordinary course of business for services rendered as a director, officer,
manager or employee of the Sellers). The Sellers do not owe any amount to, or
have any agreement or contract with or commitment to, any of its shareholders,
directors, officers, members, governors, managers, employees or consultants or
any affiliate or associate thereof (other than compensation for current services
not yet due and payable and reimbursement of expenses arising in the ordinary
course of business), and none of such persons owes any amount to either of the
Sellers.
2.28 CUSTOMERS.
Except as set forth on the Disclosure Schedule, there has not been in the
12-month period prior to the date hereof, any dispute with any customer of the
Sellers, nor any other set of circumstances, which is reasonably anticipated to
have a Material Adverse Effect on the relationship between either of the Sellers
and any of such customers. Except as set forth on the Disclosure Schedule, the
Sellers are not aware of any circumstances that could materially affect the
ability of any customer of either of the Sellers, to continue doing business
with either of the Sellers in the manner in which such business has been
conducted in the past.
2.29 ACCURACY OF INFORMATION.
No representation or warranty made by the Sellers or the Owners in this
Agreement, the Disclosure Schedule, or in any written agreement, instrument,
document, certificate, statement or letter furnished or to be furnished to the
Purchaser at the Closing by or on behalf of the Sellers or the Owners in
connection with any of the transactions contemplated by this Agreement contains
or will contain any untrue statement of material fact or omit or will omit to
state any material fact necessary in order to make the statements herein or
therein not misleading in light of the circumstances in which they are made, and
all of the foregoing completely and correctly present the information required
or purported to be set forth herein or therein. There is no material fact as of
the date hereof which has not been disclosed in writing to the Purchaser to
which the Sellers have knowledge related to either of the Sellers, its
operations, properties, financial condition or prospects which has a Material
Adverse Effect or, to the knowledge of the Sellers and the Owners, in the future
may have a Material Adverse Effect on either of the Sellers. The representations
and warranties contained in this Article 2 or elsewhere in this Agreement or any
document delivered pursuant hereto will not be affected or deemed waived by
reason of the fact that the Purchaser or its representatives should have known
that any such representation or warranty is or might be inaccurate in any
respect.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
The Purchaser represents and warrants to the Sellers as of the date hereof
as follows:
28
3.1 CORPORATE ORGANIZATION.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota and has the full
corporate power and authority to carry on its business as it is now being
conducted and to own, lease and operate its properties and assets.
3.2 AUTHORIZATION.
The Purchaser has all the requisite corporate power and authority to enter
into this Agreement and to carry out the transactions contemplated herein. The
Board of Directors of the Purchaser has taken all action required by law, its
articles of incorporation and bylaws or otherwise to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein and no action of the stockholders of the
Purchaser is required. This Agreement is a valid and binding legal obligation of
the Purchaser enforceable against it in accordance with its terms subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
applicability relating to or affecting creditors' rights and general principals
of equity.
3.3 NON-CONTRAVENTION.
Neither the execution, delivery and performance of this Agreement nor the
consummation of the transactions contemplated herein will: (i) violate any
provision of the articles of incorporation or bylaws of the Purchaser; or (ii)
except for such violations, conflicts, defaults, accelerations, terminations,
cancellations, impositions of fees or penalties, mortgages, pledges, liens,
security interests, encumbrances, restrictions and charges which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Purchaser, violate, be in conflict with, or constitute a default, however
defined (or an event which, with the giving of due notice or lapse of time, or
both, would constitute such a default), under, or cause or permit the
acceleration of the maturity of, or give rise to, any right of termination,
cancellation, imposition of fees or penalties under, any debt, note, bond,
lease, mortgage, indenture, license, obligation, contract, commitment,
franchise, permit, instrument or other agreement or obligation to which the
Purchaser is a party or by which the Purchaser or any of its properties or
assets is or may be bound (unless with respect to which defaults or other
rights, requisite waivers or consents shall have been obtained at or prior to
the Closing) or (iii) result in the creation or imposition of any Lien, upon any
property or assets of the Purchaser under any debt, obligation, contract,
agreement or commitment to which the Purchaser is a party or by which the
Purchaser or any of its assets or properties is or may be bound; or (iv) violate
any Law of any Authority.
3.4 CONSENTS AND APPROVALS.
No Consent is required by any person or entity, including without
limitation any Authority, in connection with the execution, delivery and
performance by the Purchaser of this Agreement, or the consummation of the
transactions contemplated herein, other than any Consent which, if not made or
obtained, will not, individually or in the aggregate, have a Material Adverse
Effect on the business of the Purchaser or the transactions contemplated herein.
29
3.5 BROKERS.
Except as set forth in the Disclosure Schedule, neither the Purchaser, nor
any of its officers, directors or employees have employed any broker, finder, or
financial advisor or incurred any liability for any brokerage fee or commission,
finder's fee or financial advisory fee, in connection with the transactions
contemplated hereby, nor is there any basis known to the Purchaser for any such
fee or commission to be claimed by any person or entity.
3.6 FINANCIAL STATEMENTS.
Except as disclosed therein, the audited financial statements of Xxxxxxx
as of and for the year ended January 31, 1998, included in its 1998 Annual
Report to Shareholders (i) are in accordance with the books and records of
Xxxxxxx and have been prepared in conformity with GAAP, and (ii) fairly present
the consolidated financial position of Xxxxxxx as of the date thereof, and the
results of operations (or income or loss), changes in shareholders' equity and
changes in cash flow for the period then ended, all in accordance with GAAP.
3.7 TAXES.
Xxxxxxx has properly completed and duly filed on a timely basis (subject
to any valid extensions filed by Xxxxxxx) and in a form that is correct, in all
materials respects, all Tax Returns required to be filed on or prior to the date
hereof by Xxxxxxx. As of the time of filing, the foregoing Tax Returns correctly
reflected, in all material respects, the facts regarding the income, business,
assets, operations, activities, status or other matters of Xxxxxxx.
4. COVENANTS OF THE PARTIES
4.1 INTENTIONALLY OMITTED.
4.2 INTENTIONALLY OMITTED.
4.3 INTENTIONALLY OMITTED.
4.4 CONFIDENTIALITY.
Each of the parties hereto agrees that it will not use, or permit the use
of, any of the information relating to any other party hereto furnished to it in
connection with the transactions contemplated herein ("INFORMATION") in a manner
or for a purpose detrimental to such other party or otherwise than in connection
with the transaction, and that they will not disclose, divulge, provide or make
accessible (collectively, "DISCLOSE"), or permit the Disclosure of, any of the
Information to any person or entity, other than their respective directors,
officers, governors, managers, employees, investment advisors, accountants,
counsel and other authorized representatives and agents, except as may be
required by judicial or administrative process or, in the opinion of such
party's counsel, by other requirements of Law; PROVIDED, HOWEVER, that prior to
any Disclosure of any Information permitted hereunder, the disclosing party
shall first obtain the recipients' undertaking to comply with the provisions of
this subsection with respect to such Information. The term "Information" as used
herein shall not include any information relating to
30
a party which the party disclosing such information can show: (i) to have been
in its possession prior to its receipt from another party hereto; (ii) to be now
or to later become generally available to the public through no fault of the
disclosing party; (iii) to have been available to the public at the time of its
receipt by the disclosing party; (iv) to have been received separately by the
disclosing party in an unrestricted manner from a person entitled to disclose
such information; or (v) to have been developed independently by the disclosing
party without regard to any information received in connection with this
transaction. Each party hereto also agrees to promptly return to the party from
whom it originally received such Information all original and duplicate copies
of materials in any media containing Information should the transactions
contemplated herein not occur. A party hereto shall be deemed to have satisfied
its obligations to hold the Information confidential if it exercises the highest
care as it takes with respect to its own similar information.
4.5 INTENTIONALLY OMITTED.
4.6 FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
Each party hereto will, before, at and after Closing, execute and deliver
such instruments and take such other actions as the other party or parties, as
the case may be, may reasonably require in order to carry out the intent of this
Agreement. Without limiting the generality of the foregoing, at any time after
the Closing, at the request of the Purchaser and without further consideration,
the Sellers will execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation and take such action as the Purchaser
may reasonably deem necessary or desirable in order to more effectively
consummate the transactions contemplated hereby and to vest in the Purchaser
good and marketable title to, all of the Assets, to put the Purchaser in actual
possession and operating control thereof and to assist the Purchaser in
exercising all rights with respect thereto, without further cost or expense to
the Purchaser.
4.7 INTENTIONALLY OMITTED.
4.8 INTENTIONALLY OMITTED.
4.9 TAX MATTERS.
(a) Intentionally Omitted.
(b) In addition to and without limiting those representations and
warranties set forth in Section 2.15 of this Agreement, in the event that
any sales or use Tax, or any Tax in the nature of a sales or use tax, or
any transactional Tax is payable or assessed relative to the transactions
contemplated herein, the Purchaser will pay all such Taxes and will not
collect any part thereof from the Sellers. The parties hereto will
cooperate to make any necessary filings with state and local or foreign
taxing Authorities and to furnish any required supplemental information
with respect to any state and local or foreign Tax liabilities resulting
from the consummation of the transactions contemplated herein.
(c) In addition to and without limiting those representations and
warranties set forth in Section 2.15 of this Agreement and except as
otherwise set forth in Section 4.9(b)
31
herein, the Sellers will pay all Taxes arising from or relating to the
transactions contemplated by this Agreement, including without limitation
Tax on any income or gains arising from the sale of the Assets. The
Sellers will file all federal, foreign and state income Tax Returns for
the Sellers reflecting all activities of the Sellers through and including
the Closing Date. Except as otherwise agreed to by the parties and
regardless of any prior practice, no distribution of cash or property will
be made by the Sellers on or before the Closing Date without the express
written consent of the Purchaser.
(d) The Sellers, the Owners and the Purchaser will:
(i) each provide the other with such assistance as may
reasonably be requested by any of them in connection with the
preparation of any Tax Return, audit or other examination by any
taxing Authority or judicial or administrative proceedings relating
to liability for Taxes,
(ii) each retain and provide the other with any records or
other information which may be relevant to such Tax Return, audit or
examination, proceeding or determination, and
(iii) each provide the other with any final determination of
such audit or examination, proceeding or determination that affects
any amount required to be shown on any Tax Return of the other for
any period.
(e) Without limiting the generality of the foregoing, the Sellers,
the Owners and the Purchaser will retain, until the applicable statutes of
limitations (including all extensions) have expired, copies of all Tax
Returns, supporting work schedules and other records or information which
may be relevant to such Tax Returns for all Tax periods or portions
thereof ending on or before the Closing Date and will not destroy or
otherwise dispose of any such records without first providing the other
party with a reasonable opportunity to review and copy the same.
4.10 BULK TRANSFERS.
The Sellers, the Owners and the Purchaser hereby waive the requirements of
the Uniform Commercial Code concerning bulk transfers, as in effect in the
various states in which the Sellers have assets, including without limitation
the requirement of notice to creditors.
4.11 EMPLOYEE BENEFITS.
(a) The Purchaser will not have any liability or obligation to
employ or offer employment to any employee of the Sellers in connection
with the transactions contemplated hereby other than those listed on
Exhibit 4.11 hereto. The Sellers hereby authorize the Purchaser to enter
into discussions with any of such employees listed on Exhibit 4.11
concerning the future employment of such individual by the Purchaser;
provided, however, that (i) such discussions will not be commenced prior
to the giving of notice by the Sellers to the employees of the Sellers of
the transactions contemplated by this Agreement; and (ii) all such
discussions will be conducted in such a manner as not to
32
interfere unreasonably with the business operations of the Sellers. The
terms and conditions of such employment will be established by the
Purchaser in its sole discretion.
(b) Except as expressly provided in this subsection (b), the Sellers
will be responsible for making any required payment of severance
compensation including any notice pay and severance pay in order to comply
with the requirements of the Worker Adjustment and Retraining Act ("WARN")
to any employee of the Sellers who is not offered employment by the
Purchaser or who refuses to accept any such offer of employment by the
Purchaser.
(c) The Sellers and the Owners will not, commencing with the Closing
Date and ending on January 31, 2002, take any action, other than with the
written consent of the Purchaser, to induce any employee who accepts an
offer pursuant to subsection(a) above, while still employed by the
Purchaser or any affiliate of the Purchaser, to enter into the employ of
the Sellers, the Owners or any affiliate of the Sellers or the Owners.
(d) The Purchaser will not be obligated under, and hereby
specifically disclaims any assumption or liability with respect to, any
collective bargaining agreement to which the Sellers are a party or under
which the Sellers' employees or former employees are covered or any
Pension Plan, Compensation Plan or except as provided in this subsection
(d), any Welfare Plan. Without limiting the generality of the foregoing,
the Purchaser is not assuming any obligation to contribute to, or any
obligation or liability for any withdrawal liability arising in connection
with, any Multiemployer Plan attributable to participation therein by
current or former employees of the Sellers as a result of this Agreement
or the transactions contemplated hereby. The Purchaser will be obligated
under, and hereby specifically agrees to assume, all group health plans
maintained by the Sellers as of the Closing Date that are listed on the
Disclosure Schedule (the "Assumed Group Health Plans"). Exhibit 4.11(d)
includes a complete list of each "qualified beneficiary" currently
receiving or eligible to receive group health plan continuation coverage
in accordance with Section 4980B of the Code and Part 6 of Subtitle B of
Title I of ERISA under the Assumed Group Health Plans in connection with
any "qualifying event" that has occurred on or before the Closing Date.
With respect to the "qualified beneficiaries" listed on Exhibit 4.11 who
have received proper notification of their continuation coverage rights
pursuant to Section 4980B of the Code and Part 6 of Subtitle B of Title I
of ERISA, in connection with any "qualifying event" that has occurred on
or before the Closing Date or with respect to whom the deadline for
providing such notice in connection with such qualifying event has not yet
passed, as between the
33
Purchaser, on the one hand, and the Sellers, on the other hand, the
Purchaser is responsible for providing group health plan continuation
coverage in accordance with Section 4980B of the Code and Part 6 of
Subtitle B of Title I of ERISA to such "qualified beneficiaries." With
respect to any other individual who is not listed on Exhibit 4.11 or who
has not received proper notification of their continuation coverage rights
pursuant to Section 4980B of the Code and Part 6 of Subtitle B of Title I
of ERISA, but who is a "qualified beneficiary" currently receiving or
eligible to receive group health plan continuation coverage under any of
the Assumed Group Health Plans or any other "group health plan" maintained
by the Sellers or any Affiliated Organization, as between the Purchaser,
on the one hand, and the Sellers, on the other hand, the Sellers are
responsible for providing group health plan continuation coverage in
accordance with Section 4980B of the Code and Part 6 of Subtitle B of
Title I of ERISA (without regard to whether the Purchaser is ultimately
determined to be responsible to provide such coverage to any such
individual) and the Sellers will indemnify, defend and hold harmless the
Purchaser and its affiliates from and against any liability, expense,
cost, tax or obligation of any nature with respect to such individual
arising in connection with group health plan coverage required under
Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA.
4.12 AUTHORIZATION.
(a) On or prior to the Closing, the Sellers will deliver to the
Purchaser a copy of the resolutions of the Board of Directors and
Shareholders of Executech and Members of World Wide, approving the
execution and delivery of this Agreement and the consummation of all of
the transactions contemplated hereby, duly certified by an officer of
Executech and a manager of World Wide.
(b) On or prior to the Closing, the Purchaser will deliver to the
Sellers a copy of the resolutions of the Board of Directors approving the
execution and delivery of this Agreement and the consummation of all of
the transactions contemplated hereby, duly certified by an officer of the
Purchaser.
4.13 ADDITIONAL POST-CLOSING OBLIGATIONS OF THE SELLERS.
Effective as of the Closing, the Sellers appoint the Purchaser their
successor and assigns, the true and lawful attorney or attorneys of the Sellers,
with full power of substitution, in the name of the Sellers but on behalf and
for the benefit of and at the expense of the Purchaser:
(a) to collect in the name of the Sellers for the account of the
Purchaser all receivables and other items included in the Assets, if any,
to be sold and transferred to the Purchaser as provided herein;
(b) to institute and prosecute, in the name of the Sellers or
otherwise, all proceedings which the Purchaser may reasonably deem
necessary or desirable in order to collect, assert or enforce any claim,
right or title of any kind arising with respect to the Assets, unless the
Sellers are controlling the claim as provided herein;
(c) to defend and compromise any and all actions, suits or
proceedings in respect of the Assets to the extent liability therefor has
been assumed by the Purchaser hereunder, unless the Sellers are
controlling the claim as provided herein; and
(d) to do all such acts and things in relation to the foregoing as
is reasonably necessary to exercise such powers, as the Purchaser may
reasonably deem advisable.
The foregoing power is coupled with an interest and will be irrevocable by the
Sellers or by their dissolution in any manner or for any reason. Except to the
extent indemnified by the Sellers or the Owners hereunder, the Purchaser will
retain for its own account any amounts collected
34
pursuant to the foregoing power, including any sums payable as interest in
respect thereof, and the Sellers will pay to the Purchaser, when received, any
amounts which will be received by the Sellers in respect of any receivables or
other assets or properties related to the Assets. The Purchaser will pay to the
Sellers, when received, any amounts which will be received by the Purchaser in
respect of any receivables or other assets or properties of the Sellers (other
than those related to the Assets), including any Guaranteed Receivables returned
to the Sellers Pursuant to Section 1.6.
4.14 GUARANTEE BY XXXXXXX.
Xxxxxxx hereby absolutely, unconditionally and irrevocably guarantees to
the Sellers and the Owners the prompt and full payment and other performance of
all of the obligations of the Purchaser under this Agreement and the Liabilities
Undertaking (the "Transaction Documents") when each of such obligations is due
or to be performed.
4.15 CAPITAL REQUIREMENTS.
The Purchaser will provide any capital requirements of the "business"
arising after the Closing Date on a basis consistent with Xxxxxxx'x policies and
procedures applicable to its document management service business unit in effect
at the time of such capital requirement.
4.16 TERMINATION OF PENSION PLANS.
Sellers will adopt resolutions and take all other necessary actions to
terminate all Plans, effective as of a date prior to the Closing Date. After the
Closing Date, and at the Sellers and the Owners expense, the Sellers will submit
requests to the Internal Revenue Service for determination letters stating that
the termination of the Plans does not adversely affect their qualification for
federal tax purposes.
5. INTENTIONALLY OMITTED.
6. INTENTIONALLY OMITTED.
7. INTENTIONALLY OMITTED.
8. SURVIVAL AND INDEMNIFICATION.
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INVESTIGATION.
All representations and warranties of the parties contained in this
Agreement will survive the Closing Date for a period of three (3) years (other
than the representations and warranties set forth in Section 2.10(a) and
2.13(b), which survive indefinitely, the representations and warranties set
forth in Sections 2.15, 2.16 and 2.21 which survive for the applicable statute
of limitations and the representations and warranties set forth in Sections 3.6
and 3.7 which do not survive the Closing Date). The covenants and agreements
contained herein and in the exhibits hereto will survive the Closing without
limitation as to time unless the covenant or agreement specifies the term, in
which case such covenant or agreement will survive until the expiration of
35
such specified term and will thereupon expire. The right to indemnification or
any other remedy based on representations, warranties, covenants and obligations
in this Agreement will not be affected by any investigation conducted with
respect to, or any knowledge capable of being acquired at any time, whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant or obligation. The waiver of the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification or any other remedy based on such covenants and obligations.
8.2 INDEMNIFICATION BY THE PURCHASER.
The Purchaser and Xxxxxxx, jointly and severally agree to indemnify,
defend and hold the Sellers and the Owners and their respective officers,
directors and employees ("SELLER INDEMNIFIED PARTIES") harmless from and against
any and all losses, liabilities, obligations, demands, judgments, settlements,
damages (but excluding consequential damages, lost profits or punitive damages
suffered directly by Seller Indemnified Parties as opposed to consequential
damages, lost profits or punitive damages paid by any Seller Indemnified Parties
to a third party), Taxes, or expense (including but not limited to interest,
penalties, fees and reasonable professional fees and expenses) and against all
claims in respect thereof (including, without limitation, amounts paid in
settlement and costs of investigation) or diminution in value, whether or not
involving a third-party claim (herein referred to collectively as "SELLERS'
LOSS" or "SELLERS' LOSSES") to which the Seller Indemnified Parties may suffer
or incur, directly or indirectly, as a result from or in connection with:
(a) any untrue representation, or breach of warranty by, the
Purchaser contained in Sections 3.1 through 3.5 of this Agreement; and
(b) the breach of or nonfulfillment of any covenant, agreement or
undertaking of the Purchaser in this Agreement;
(c) the operation of the Business and ownership of the Assets after
the Closing Date unless such Sellers' Losses or Sellers' Loss is subject
to indemnification by the Sellers and the Owners pursuant to Section 8.3
hereof;
(d) any Assumed Liabilities; and
(e) any Taxes arising out of the Purchaser's ownership of the Assets
or operation of the Business after the Closing Date.
8.3 INDEMNIFICATION BY THE SELLERS AND THE OWNERS.
The Sellers and the Owners, jointly and severally, agree to indemnify the
Purchaser and Xxxxxxx, their respective subsidiaries and affiliates and each of
their respective shareholders, officers, directors and employees (the "PURCHASER
INDEMNIFIED PARTIES") against all losses, liabilities, obligations, demands,
judgments, settlements, damages (but excluding any claims for consequential
damages, lost profits or punitive damages suffered directly by the Purchaser
Indemnified Parties as opposed to consequential damages, lost profits or
punitive damages
36
actually paid by the Purchaser Indemnified Parties to a third party), Taxes, or
expenses (including, but not limited to, interest, penalties, fees, and
reasonable professional fees and expenses) and against all claims in respect
thereof (including, without limitation, amounts paid in settlement and costs of
investigation) or diminution in value, whether or not involving a third-party
claim (herein referred to collectively as "PURCHASER'S LOSSES" or individually
as a "PURCHASER'S LOSS") to which the Purchaser Indemnified Parties, may become
subject to or which they may suffer or incur, directly or indirectly, as a
result from or in connection with:
(a) any untrue representation of or breach of express warranty, by
the Sellers or the Owners in any part of this Agreement;
(b) the breach of or nonfulfillment of any covenant, agreement or
undertaking of the Sellers or the Owners in this Agreement;
(c) any debt, liability or obligation, direct or indirect, known or
unknown, fixed contingent or otherwise not included in the Assumed
Liabilities, that relates to the Sellers or the Owners and is based upon
or arises from any act or omission, transaction, circumstance, state of
facts or other condition occurring or existing on or before the Closing
Date, whether or not then known, due or payable;
(d) any obligation for Taxes of the Sellers or the Owners for any
period (or portion thereof) prior to the Closing Date;
(e) any Retained Liabilities;
(f) the failure of the Sellers or the Owners to comply with the
requirements of the Uniform Commercial Code concerning bulk transfers, as
in effect in the various states in which the Sellers have assets,
including, without limitation, the requirement of notice to creditors,
unless such Purchaser's Loss or Purchaser's Losses is subject to
indemnification by the Purchaser and Xxxxxxx pursuant to Section 8.2(d);
(g) the failure of the Sellers or the Owners to obtain any clearance
certificate or similar document required by any taxing Authority in order
to relieve the Purchaser of any obligation to withhold any portion of the
Purchase Price or in order to avoid any successor liability for Taxes; and
(h) except as otherwise provided in Section 4.11, any liability,
expense, cost, tax or obligation of any nature with respect to such
current or former employee or other individual arising in connection with
group health plan coverage required under Section 4980B of the Code or
Part 6 of Subtitle B of Title I of ERISA.
8.4 BASKET AMOUNT.
Notwithstanding anything in Section 8.3 to the contrary, none of the
Purchaser Indemnified Parties will be entitled to any indemnification under
Section 8.3 if the aggregate amount of all claims thereunder is less than
$25,000; provided, however, if the aggregate amount of all claims equals or
exceeds such amount, then the Purchaser Indemnified Parties will be
37
entitled to full indemnification of all claims under Section 8.3 in excess of
$25,000. The parties hereto do not intend that such exception amount be deemed
to be a definition of what is "material" for any purpose in this Agreement.
8.5 RIGHT OF SET-OFF.
Following good faith discussions among the Sellers, the Owners and the
Purchaser, upon notice to the Sellers and the Owners, specifying in reasonable
detail the basis therefor, the Purchaser may set off the amount of any
Purchaser's Losses to which it may be entitled under this Article 8, that is
fixed or determinable, against amounts otherwise payable under Section 1.4. In
the event of Purchaser's Losses arising from third party claims that are not yet
fixed or determinable, the Purchaser may set off amounts to which it may be
entitled upon the earlier of the entry of a judgment, whether in a court of law
or arbitration proceeding, or upon settlement of such matter. In addition, the
Sellers and the Owners acknowledge that the Purchaser may set-off an amount
equal to its fees and expenses (including reasonable attorneys fees) as incurred
in resolving the contest of any claims made under this Article 8, against
amounts otherwise payable under Section 1.4. The exercise of such right of
set-off by the Purchaser will not constitute an event of default or a breach
under this Agreement if made in accordance with this Section 8.5. In the event
that the Sellers and the Owners do not agree with the appropriateness of such
set-off, the parties will resolve the dispute pursuant to Section 9.8 below. In
the event that the Purchaser improperly sets off amounts under this Section 8.5,
as determined by the arbitration panel appointed pursuant to Section 9.8 below,
the Sellers will be entitled to interest on the amounts improperly set off at an
interest rate equal to the Late Payment Rate from the date of such set-off to
the date of payment in full of the amount due together with such interest.
Neither the exercise of, nor the failure to exercise, such right of set-off will
constitute an election of remedies nor limit the Purchaser in any manner in the
enforcement of any other remedies that may be available to it.
8.6 CLAIMS FOR INDEMNIFICATION.
(a) GENERAL. The parties intend that all indemnification claims be
made as promptly as practicable by the party seeking indemnification (the
"INDEMNIFIED PARTY"). Whenever any claim will arise for indemnification
hereunder the Indemnified Party will promptly notify the party from whom
indemnification is sought (the "INDEMNIFYING PARTY") of the claim and,
when known, the facts constituting the basis for such claim. The failure
so to notify the Indemnifying Party will not relieve the Indemnifying
Party of any liability that it may have to the Indemnified Party except to
the extent the Indemnifying Party demonstrates that the defense of such
action is materially prejudiced thereby.
(b) CLAIMS BY THIRD PARTIES. With respect to claims made by third
parties, the Indemnifying Party will be entitled to assume control of the
defense of such action or claim with counsel reasonably satisfactory to
the Indemnified Party; provided, however, that:
38
(i) the Indemnified Party will be entitled to participate in
the defense of such claim and to employ counsel at its own expense
to assist in the handling of such claim;
(ii) no Indemnifying Party will consent to (A) the entry of
any judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by each claimant or
plaintiff to each Indemnified Party of a release from all liability
in respect of such claim or (B) if, pursuant to or as a result of
such consent or settlement, injunctive or other equitable relief
would be imposed against the Indemnified Party or such judgment or
settlement could materially interfere with the business, operations
or assets of the Indemnified Party; and,
(iii) if the Indemnifying Party does not assume control of the
defense of such claim in accordance with the foregoing provisions
within five (5) business days after receipt of notice of the claim,
the Indemnified Party will have the right to defend such claim in
such manner as it may deem appropriate at the cost and expense of
the Indemnifying Party, and the Indemnifying Party will promptly
reimburse the Indemnified Party therefore in accordance with this
Article 8; provided that the Indemnified Party will not be entitled
to consent to the entry of any judgment or enter into any settlement
of such claim that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to each Indemnifying Party
of a release from all liability in respect of such claim without the
prior written consent of the Indemnifying Party if, pursuant to or
as a result of such consent or settlement, injunctive or other
equitable relief would be imposed against the Indemnifying Party or
such judgment or settlement could materially interfere with the
business, operations or assets of the Indemnifying Party.
(c) REMEDIES CUMULATIVE. The remedies provided herein will be
cumulative and will not preclude assertion by any party of any rights or
the seeking of any other remedies against any other party.
8.7 LIMIT ON DAMAGES.
The aggregate amount payable by the Sellers and the Owners to the
Purchaser Indemnified Parties hereunder will not exceed the Purchase Price
(other than with respect to claims made pursuant to Section 8.3(e) related to
the Retained Liabilities described in Section 1.2 hereto, as to which there
shall be no limit). EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THE SELLERS AND THE
OWNERS MAKE NO WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE.
39
9. MISCELLANEOUS PROVISIONS.
9.1 EXPENSES.
The Purchaser, Xxxxxxx, the Sellers and the Owners will each bear their
own costs and expenses relating to the transactions contemplated hereby,
including without limitation, fees and expenses of legal counsel, accountants,
investment bankers, brokers or finders, printers, copiers, consultants or other
representatives for the services used, hired or connected with the transactions
contemplated hereby.
9.2 AMENDMENT AND MODIFICATION.
This Agreement may not be amended or modified by the parties hereto except
by means of a writing duly executed by each of the parties hereto.
9.3 WAIVER OF COMPLIANCE; CONSENTS.
Any failure of a party to comply with any obligation, covenant, agreement
or condition herein may be expressly waived in writing by the party entitled
hereby to such compliance, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition will not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. No single or partial exercise of a right or remedy will preclude any
other or further exercise thereof or of any other right or remedy hereunder.
Whenever this Agreement requires or permits the consent by or on behalf of a
party, such consent will be given in writing in the same manner as for waivers
of compliance.
9.4 NO THIRD PARTY BENEFICIARIES.
Nothing in this Agreement will entitle any person or entity (other than a
party hereto and his, her or its respective successors and assigns permitted
hereby) to any claim, cause of action, remedy or right of any kind.
9.5 NOTICES.
All notices, requests, demands and other communications required or
permitted hereunder will be made in writing by personal delivery, certified or
registered mail or recognized overnight courier and will be deemed to have been
duly given and effective: (i) on the date of delivery, if delivered personally;
(ii) on the date of the return receipt acknowledgment, if mailed, postage
prepaid, by certified or registered mail, return receipt requested; or (iii) on
the date of confirmed delivery, if sent by recognized overnight courier:
40
If to the Sellers and the Owners:
To: Xxxxxxxx X. Xxxxx, Representative
Executech, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
With copies to:
Brown, Raysman, Xxxxxxxxx, Xxxxxx & Xxxxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Xxxxxx X. Xxxxx, Esq.
or to such other person or address as the Representative will furnish to the
other parties hereto in writing in accordance with this subsection.
If to Purchaser:
To: Xxxxxxx Acquisition Corporation
Xxx Xxxxxxx Xxxxxx
Xx. Xxxx, XX 00000
Attn.: Xxxxxx X. Xxxxxx, Esq.
With a copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx LLP
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 0000, Xxxxx XXX
Xxxxxxxxxxx, XX 00000
Attn.: Xxxxxxxx X. Xxxxx, Esq.
or to such other person or address as the Purchaser will furnish to the other
parties hereto in writing in accordance with this subsection.
9.6 ASSIGNMENT.
This Agreement and all of the provisions hereof will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned (whether voluntarily, involuntarily,
by operation of law or otherwise) by any of the parties hereto without the prior
written consent of the other parties, PROVIDED, HOWEVER, that the Purchaser may
assign its rights (but not its obligations) under this Agreement, in whole or in
any part, and from time to time, to a wholly owned, direct or indirect,
subsidiary of Xxxxxxx.
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9.7 GOVERNING LAW.
This Agreement and the legal relations among the parties hereto shall be
governed by and construed in accordance with the internal substantive laws of
the State of New York (without regard to the laws of conflict that might
otherwise apply) as to all matters, including without limitation matters of
validity, construction, effect, performance and remedies.
9.8 ARBITRATION.
(a) The parties agree that any dispute arising out of or relating to
this Agreement or the formation, breach, termination or validity thereof,
except for injunctive relief contemplated by Section 9.12 (a "DISPUTE")
will be resolved as follows. If the Dispute cannot be settled through
direct discussions, the parties will first try to settle the Dispute in an
amicable manner by mediation under the Commercial Mediation Rules of the
American Arbitration Association, before resorting to arbitration. Any
Dispute that has not been resolved within 60 days of the initiation of the
mediation procedure (the "MEDIATION DEADLINE") will be settled by binding
arbitration in Delaware by a panel of three (3) arbitrators, selected in
accordance with subsection (b) below, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "AMERICAN
ARBITRATION RULES"). The arbitrators in any such arbitration will have the
discretion to order a pre-hearing exchange of information by the parties,
including, without limitation, production of requested documents, exchange
of summaries of testimony and proposed witnesses, and examination by
deposition of parties. The arbitrators are not empowered to award damages
in excess of compensatory damages, as limited by this Agreement, and each
party hereby irrevocably waives any damages in excess of compensatory
damages. Judgment upon any arbitration award may be entered in any court
having jurisdiction thereof and the parties consent to the jurisdiction of
the courts of the State of Delaware for this purpose. The parties agree
that service of process and of any notices required in connection with any
arbitration hereunder or any related court proceedings may be given in the
manner provided for the giving of notices under this Agreement as set
forth in Section 9.5.
(b) Within twenty (20) days of the Mediation Deadline, the Purchaser
will nominate one arbitrator and the Sellers and the Owners, together,
will nominate one arbitrator. Within thirty (30) days of the nomination
and appointment of the two arbitrators, the two arbitrators shall select a
third arbitrator, and if they fail to do so, a neutral arbitrator shall be
chosen in accordance with the American Arbitration Rules.
(c) The prevailing party in any Dispute will be entitled to recover
all of its reasonable fees and expenses (including reasonable attorneys
fees) in connection with mediating and arbitrating such Dispute. It is the
intent of the parties that the arbitrators are entitled to determine which
party actually prevails in the Dispute and to award fees and expenses to
such party in accordance with this Section 9.8(c)
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9.9 COUNTERPARTS.
This Agreement may be executed simultaneously in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
9.10 HEADINGS.
The table of contents and the headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not constitute a part
hereof.
9.11 ENTIRE AGREEMENT.
This Agreement, the Disclosure Schedule and the exhibits and other
writings referred to in this Agreement or in the Disclosure Schedule or any such
exhibit or other writing are part of this Agreement, together they embody the
entire agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement and together they are referred to as
this "AGREEMENT" or the "AGREEMENT". There are no restrictions, promises,
warranties, agreements, covenants or undertakings, other than those expressly
set forth or referred to in this Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the
transaction or transactions contemplated by this Agreement, including, but not
limited to, the letter of intent dated April 30, 1998. Any provision of this
Agreement that becomes invalid or unenforceable under applicable Law will be
stricken to the extent necessary and the remainder of such provisions and the
remainder of this Agreement will continue in full force and effect.
9.12 INJUNCTIVE RELIEF.
It is expressly agreed among the parties hereto that monetary damages
would be inadequate to compensate a party hereto for any breach by any other
party of its agreements and covenants in this Agreement. Accordingly, the
parties agree and acknowledge that any such violation or threatened violation
will cause irreparable injury to the other and that, in addition to any other
remedies which may be available, such party will be entitled to injunctive
relief against the threatened breach of this Agreement hereof or the
continuation of any such breach without the necessity or proving actual damages
and may seek to specifically enforce the terms thereof.
9.13 SHAREHOLDER'S REPRESENTATIVE.
(a) In order to efficiently administer (i) the waiver of any
condition to the obligations of the Sellers and the Owners to consummate
the transactions contemplated hereby, and (ii) the defense and/or
settlement of any claims for which the Sellers or the Owners may be
required to indemnify the Purchaser Indemnified Parties pursuant to
Article 8 hereof, each of the Sellers and each Owner hereby irrevocably
appoints and designates Xxxxxxxx Xxxxx as his, her or its representative
and attorney-in-fact (the "REPRESENTATIVE").
43
(b) The Sellers and the Owners hereby authorize the Representative
(i) to take all action necessary in connection with (aa) the waiver of any
condition to the obligations of any Seller or any Owner to consummate the
transactions contemplated hereby, or (bb) the defense and/or settlement of
any claims for which any Seller or Owner may be required to indemnify the
Purchaser Indemnified Parties pursuant to Article 8 hereof, and (iii) to
take any and all additional action as is contemplated to be taken by or on
behalf of the Sellers and the Owners by the terms of this Agreement.
(c) In the event that the Representative dies, becomes unable to
perform his responsibilities hereunder or resigns from such position, a
majority of the Owners will select another representative to fill each
such vacancy and such substituted representative will be irrevocably
appointed and designated the Representative for all purposes of this
Agreement.
(d) All decisions and actions by the Representative, including,
without limitation, (i) any agreement between the Representative and the
Purchaser or Xxxxxxx relating to the waiver of any condition to the
obligations of any Seller or Owner to consummate the transaction
contemplated hereby, or (ii) the defense or settlement of any claims for
which the Sellers or the Owners may be required to indemnify the Purchaser
Indemnified Parties pursuant to Article 8 hereof, will be binding upon
each of the Sellers and all of the Owners, and no Seller or Owner will
have the right to object, dissent, protest or otherwise contest the same.
(e) By their execution of this Agreement, each of the Sellers and
the Owners agree that:
(i) the Purchaser or Xxxxxxx will be able to rely conclusively
on the instructions and decisions of the Representative as to (aa)
the settlement of any claims arising out of Article 8 hereof, or
(bb) any other actions required to be taken by the Representative
hereunder, and no party hereunder will have any cause of action
against the Purchaser or Xxxxxxx for any action taken by the
Purchaser or Xxxxxxx in reliance upon the instructions or decisions
of the Representative;
(ii) all actions, decisions and instructions of the
Representative will be conclusive and binding upon each of the
Sellers and all of the Owners, and no party hereto will have any
cause of action against the Representative, in his capacity as a
Representative, for any action taken, decision made or instruction
given by the Representative under this Agreement, except for fraud
or willful misconduct by the Representative;
(iii) the provisions of this Section 9.13 are independent and
severable, are irrevocable and coupled with an interest and will be
enforceable notwithstanding any rights or remedies that either
Seller or any Owner may have in connection with the transactions
contemplated by this Agreement; and
44
(iv) the provisions of this Section 9.13 will be binding upon
the executors, heirs, legal representatives and successors of each
Seller and each Owner, and any references in this Agreement to a
Seller or an Owner will mean and include the successors to the
rights of the Sellers and the Owners hereunder, whether pursuant to
testamentary disposition, the laws of descent and distribution or
otherwise.
9.14 CERTAIN DEFINITIONS.
For purposes of this Agreement, the terms:
(a) "ENVIRONMENTAL AND OCCUPATIONAL SAFETY AND HEALTH LAW" means
any common law or duty, caselaw or other Law, that (i) regulates,
creates standards for or imposes liability or standards of conduct
concerning any element, compound, pollutant, contaminant, or toxic or
hazardous substance, material or waste, or any mixture thereof, or
relates in any way to emissions or releases into the environment or
ambient environmental conditions, or conduct affecting such matters, or
(ii) is designed to provide safe and healthful working conditions or
reduce occupational safety and health hazards. Such laws shall include,
but not be limited to, the National Environmental Policy Act, 42 U.S.C.
Sections 4321 et seq., the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Sections 9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et
seq., the Federal Water Pollution Control Act, 33 U.S.C. Sections 1251
et seq., the Federal Clean Air Act, 42 U.S.C. Sections 7401 et seq.,
the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq., the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section
11011, the Hazard Communication Act, 29 U.S.C. Sections 651 et seq.,
the Occupational Safety and Health Act, 29 U.S.C. Sections 651 et seq.,
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
Section 136, and any caselaw interpretations, amendments or
restatements thereof, or similar enactments thereto, as is now or at
any time hereafter may be in effect, as well as their international,
state and local counterparts.
(b) "ENVIRONMENTALLY REGULATED MATERIALS" means any element,
compound, pollutant, contaminant, substance, material or waste, or any
mixture thereof, designated, listed, referenced, regulated or identified
pursuant to any Environmental and Occupational Safety and Health Law.
(c) "MATERIAL ADVERSE EFFECT" means an individual or cumulative
material adverse change in or material adverse effect on the business,
customers, customer relations, operations, properties, working capital
condition (financial or otherwise), assets, properties or liabilities of
the Sellers, taken as a whole, or the Purchaser, Xxxxxxx and their
subsidiaries, taken as a whole, as the case may be or that would prevent
the Sellers and the Owners, on the one hand, or the Purchaser, on the
other hand, from consummating the transactions contemplated hereby.
(d) "TAXES" means all federal, state, local, foreign and other net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease,
45
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, real or personal property, windfall profits,
customs, duties or other taxes, fees, assessments, charges or levies of
any kind whatever, together with any interest and any penalties, additions
to tax or additional amounts with respect thereto, and the term "TAX"
means any one of the foregoing Taxes.
(e) "TAX RETURNS" means all returns, declarations, reports,
statements and other documents required to be filed with any Authority in
respect of Taxes, and the term "TAX RETURN" means any one of the foregoing
Tax Returns.
46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
XXXXXXX CORPORATION EXECUTECH, INC.
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxxxx X. Xxxxx
Its: /s/ Vice President, Its: President
General Counsel & Secretary
XXXXXXX ACQUISITION CORPORATION WORLD WIDE SCAN SERVICES, LLC
By: /s/ Xxxxxx X. Xxxxxx By: Xxxxxxxx X. Xxxxx
Its: /s/ Secretary Its: Manager
/s/ Xxxxxxxx X. Xxxxx
---------------------
Xxxxxxxx X. Xxxxx
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Xxxxxxx X. Xxxxxxxx
47
TABLE OF CONTENTS
1. PURCHASE OF ASSETS........................................................1
1.1 Assets to be Purchased..............................................1
1.2 Liabilities Assumed.................................................3
1.3 Purchase Price......................................................4
1.4 Contingent Purchase Price...........................................5
1.5 Allocation of Purchase Price.......................................10
1.6 Collection of Accounts Receivable..................................10
1.7 Closing............................................................11
1.8 Instruments of Transfer to Purchaser...............................11
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE OWNERS.............12
2.1 Disclosure Schedule................................................12
2.2 Corporate Organization.............................................12
2.3 Capitalization.....................................................13
2.4 Authorization......................................................13
2.5 Non-Contravention..................................................13
2.6 Consents and Approvals.............................................14
2.7 Financial Statements...............................................14
2.8 Absence of Undisclosed Liabilities.................................15
2.9 Absence of Certain Changes.........................................15
2.10 Assets............................................................15
2.11 Inventories.......................................................16
2.12 Receivables and Payables..........................................16
2.13 Intellectual Property Rights......................................16
2.14 Litigation........................................................18
2.15 Tax Matters.......................................................18
2.16 Benefit Plans.....................................................19
2.17 Contracts and Commitments; No Default.............................22
2.18 Orders, Commitments and Returns...................................24
2.19 Labor Matters.....................................................24
2.20 Compliance with Law; Permits and Other Operating Rights...........25
2.21 Environmental and Safety Matters..................................25
2.22 Insurance.........................................................27
2.23 Bank Accounts.....................................................27
2.24 Brokers...........................................................27
2.25 Absence of Certain Business Practices.............................27
2.26 Business Generally................................................27
2.27 Transactions with Certain Persons.................................27
2.28 Customers.........................................................28
2.29 Accuracy of Information...........................................28
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER..............................28
3.1 Corporate Organization.............................................29
i
3.2 Authorization......................................................29
3.3 Non-Contravention..................................................29
3.4 Consents and Approvals.............................................29
3.5 Brokers............................................................30
3.6 Financial Statements...............................................30
3.7 Taxes..............................................................30
4. COVENANTS OF THE PARTIES.................................................30
4.1 Intentionally Omitted..............................................30
4.2 Intentionally Omitted..............................................30
4.3 Intentionally Omitted..............................................30
4.4 Confidentiality....................................................30
4.5 Intentionally Omitted..............................................31
4.6 Further Assurances; Cooperation; Notification......................31
4.7 Intentionally Omitted..............................................31
4.8 Intentionally Omitted..............................................31
4.9 Tax Matters........................................................31
4.10 Bulk Transfers....................................................32
4.11 Employee Benefits.................................................32
4.12 Authorization.....................................................34
4.13 Additional Post-Closing Obligations of the Sellers................34
4.14 Guarantee by Xxxxxxx..............................................35
4.15 Capital Requirements..............................................35
4.16 Termination of Pension Plans......................................35
5. INTENTIONALLY OMITTED....................................................35
6. INTENTIONALLY OMITTED....................................................35
7. INTENTIONALLY OMITTED....................................................35
8. SURVIVAL AND INDEMNIFICATION.............................................35
8.1 Survival of Representations, Warranties and Covenants;
Investigation.....................................................35
8.2 Indemnification by the Purchaser...................................36
8.3 Indemnification by the Sellers and the Owners......................36
8.4 Basket Amount......................................................37
8.5 Right of Set-Off...................................................38
8.6 Claims for Indemnification.........................................38
8.7 Limit on Damages...................................................39
9. MISCELLANEOUS PROVISIONS.................................................40
9.1 Expenses...........................................................40
9.2 Amendment and Modification.........................................40
9.3 Waiver of Compliance; Consents.....................................40
9.4 No Third Party Beneficiaries.......................................40
9.5 Notices............................................................40
9.6 Assignment.........................................................41
9.7 Governing Law......................................................42
9.8 Arbitration........................................................42
9.9 Counterparts.......................................................43
9.10 Headings..........................................................43
ii
9.11 Entire Agreement..................................................43
9.12 Injunctive Relief.................................................43
9.13 Shareholder's Representative......................................43
9.14 Certain Definitions...............................................45
iii
The following documents are exhibits to the Asset Purchase Agreement and have
been omitted pursuant to Item 601(b)(2) of Regulation S-K. These exhibits will
be furnished supplementally to the Commission upon request.
LIST OF EXHIBITS
NAME OF EXHIBIT NUMBER OF EXHIBIT
--------------- -----------------
List of Trade Names to be Purchased.............................Exhibit 1.1(a)
Excluded Assets.................................................Exhibit 1.1(b)
Liabilities Undertaking...........................................Exhibit 1.2
Application of GAAP to June 5, 1998 Income Statement...............Exhibit 1.4
Allocation of Purchase Price Among the Assets......................Exhibit 1.5
Xxxx of Sale.......................................................Exhibit 1.8
Disclosure Schedule..................................................Exhibit 2
Employees to be Hired.............................................Exhibit 4.11
COBRA Participants.............................................Exhibit 4.11(d)
iv
LIST OF DEFINED TERMS
Term Page
---- ----
Affiliated Organization.....................................................20
After-Tax Earnings...........................................................6
Agreement...................................................................44
American Arbitration Rules..................................................43
Assets.......................................................................2
Assumed Contracts............................................................4
Assumed Liabilities..........................................................3
Auditor......................................................................9
Authorities.................................................................14
Authority...................................................................14
Bad Debt Reserve............................................................11
Base Year Earnings...........................................................5
Business.....................................................................1
Closing.....................................................................11
Closing Date................................................................11
Code.........................................................................6
Consent.....................................................................14
Contingent Purchase Price Statement..........................................9
Copyrights..................................................................17
Xxxxx........................................................................1
Disclose....................................................................31
Disclosure Schedule.........................................................12
Dispute.....................................................................43
Environmental and Occupational Safety and Health Law........................46
Environmental Claim.........................................................27
Environmentally Regulated Materials.........................................46
ERISA.......................................................................20
E-TECH System................................................................6
Executech....................................................................1
Executech Performance Share Plan.............................................4
First Fiscal Year............................................................5
Fourth Fiscal Year...........................................................5
GAAP.........................................................................6
Gross Revenues...............................................................7
Guaranteed Receivables......................................................10
Guaranteed Receivables Shortfall............................................11
Indemnified Party...........................................................39
Indemnifying Party..........................................................39
Information.................................................................31
Intellectual Property Rights................................................17
Late Payment Rate...........................................................10
Latest Balance Sheet........................................................15
Law.........................................................................14
Laws........................................................................14
Liabilities Undertaking......................................................3
Liability...................................................................15
Lien........................................................................14
Material Adverse Effect.....................................................46
Mediation Deadline..........................................................43
Members......................................................................1
Xxxxxxx......................................................................1
Multiemployer Plan..........................................................20
Owners.......................................................................1
Patents.....................................................................17
Permitted Liens.............................................................14
Plans.......................................................................20
Properties..................................................................26
Purchase Price...............................................................4
Purchaser....................................................................1
Purchaser's Loss............................................................38
Purchaser's Losses..........................................................38
Purchaser Indemnified Parties...............................................38
Registered Intellectual Property Rights.....................................17
Representative..............................................................45
Representative Notice........................................................9
Retained Liabilities.........................................................3
Second Fiscal Year...........................................................5
Seller Indemnified Parties..................................................37
Sellers......................................................................1
Sellers' Loss...............................................................37
Sellers' Losses.............................................................37
Service Marks...............................................................17
SG&A Costs...................................................................7
Shareholders.................................................................1
Xxxxxxxx.....................................................................1
Tax.........................................................................47
Tax Return..................................................................47
Tax Returns.................................................................47
Taxes.......................................................................47
Termination Date............................................................11
Third Fiscal Year............................................................5
Third Party Intellectual Property Rights....................................18
Trade Secrets...............................................................17
Trademarks..................................................................17
Transaction Documents.......................................................36
WARN........................................................................34
Welfare Plan................................................................21
World Wide...................................................................1
