STOCK PURCHASE AGREEMENT
BY AND AMONG
PRECEPT BUSINESS PRODUCTS, INC.
PRECEPT BUSINESS SERVICES, INC.
AND
MBF CORPORATION
X.X. XXXXX
JUNE 13, 1998
TABLE OF CONTENTS
PAGE
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ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SALE AND PURCHASE OF THE SHARES . . . . . . . . . . . . . . . . . . . . . . . .4
2.1 Sale of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.2 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.4 Closing Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND XXXXX . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.3 Minute Books. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.5 Title to the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.6 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.7 Government Consents . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.8 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.9 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.10 Absence of Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . .9
3.11 Absence of Material Adverse Change. . . . . . . . . . . . . . . . . . . .9
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.13 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14 Compliance with Laws and Regulations. . . . . . . . . . . . . . . . . . 12
3.15 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.16 Employee Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.17 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . 13
3.18 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.19 Condition of Properties . . . . . . . . . . . . . . . . . . . . . . . . 15
3.20 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.21 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.22 Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . . . 16
3.23 Subsidiaries and Investments. . . . . . . . . . . . . . . . . . . . . . 17
3.24 Competing Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.25 Illegal or Unauthorized Payments; Political Contributions . . . . . . . 17
3.26 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.27 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.28 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.29 Bank Accounts and Powers of Attorney. . . . . . . . . . . . . . . . . . 18
3.30 Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.31 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.32 Affiliate Transactions. . . . . . . . . . . . . . . . . . . . . . . . . 19
3.33 Tax Matters; Pooling. . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.34 Projections; Material Facts . . . . . . . . . . . . . . . . . . . . . . 19
3.35 No Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND PRECEPT . . . . . . . . . . . . . 20
4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 Parent Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . 21
4.5 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.6 Govenmental Consents. . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.8 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.9 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.10 Absence of Material Adverse Change. . . . . . . . . . . . . . . . . . . 22
4.11 Tax-Free Reorganization; Pooling. . . . . . . . . . . . . . . . . . . . 22
4.12 No Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 23
5.1 Certain Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 No-Shop Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Access and Information. . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5 Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Information for Filings . . . . . . . . . . . . . . . . . . . . . . . . 24
5.7 Fulfillment of Conditions by the Company and Xxxxx. . . . . . . . . . . 24
5.8 Fulfillment of Conditions by Buyer and Precept. . . . . . . . . . . . . 24
5.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.10 Release by Xxxxx. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.11 Covenants Relating to Taxes . . . . . . . . . . . . . . . . . . . . . . 25
5.12 Pooling; Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . 25
5.13 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.14 Customer Visits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.15 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.16 Precept 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.1 Conditions to Obligations of Buyer and Precept. . . . . . . . . . . . . 26
6.2 Conditions to Obligations of the Company and Xxxxx. . . . . . . . . . . 27
ARTICLE VII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
INDEMNIFICATION; HOLDBACK . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1 Indemnification of Buyer and Precept . . . . . . . . . . . . . . . . . . 28
7.2 Notification of Claim; Set Off . . . . . . . . . . . . . . . . . . . . . 29
7.3 Defense of Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Holdback for Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.10 Arbitration Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 35
8.11 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.12 Counterparts; Facsimile Signatures . . . . . . . . . . . . . . . . . . . 36
8.13 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.14 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
EXHIBITS
Exhibit A - Balance Sheet
Exhibit B - Consulting Agreement
Exhibit C - Finder's Fee Agreement
Exhibit D - Employment Agreement
Exhibit E - [Intentionally Omitted]
Exhibit F - Affiliate Agreement
Exhibit G - Closing Certificate for the Company and Xxxxx
Exhibit H - Closing Certificate for Buyer
Exhibit I - Secretary's Certificate
Exhibit J - Excluded Assets
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of June 13, 1998 by and among Precept Business Products, Inc., a
Delaware corporation (the "Buyer"), Precept Business Services, Inc., a Texas
corporation ("Precept"), MBF Corporation, a Louisiana corporation (the
"Company"), and X.X. Xxxxx ("Xxxxx").
RECITALS:
WHEREAS, all of the issued and outstanding capital stock of the
Company consists of an aggregate of 9,000 shares of Common Stock, $1.00 par
value per share (the "Shares"), all of which are owned by Xxxxx;
WHEREAS, Buyer desires to acquire from Xxxxx, and Xxxxx desires to
sell to Buyer, all of the Shares, on the terms and subject to the conditions
set forth in this Agreement in a transaction that is intended to qualify as a
tax-free reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended; and
WHEREAS, the transaction contemplated hereby is intended to be
treated as a "pooling of interests" for financial accounting purposes.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants, promises, representations, warranties and agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below or in the section of this Agreement
referenced below:
"Accounts Receivable" is defined in Section 3.9.
"Affiliate" shall mean any director, officer, employee or
shareholder of any Person, or member of the family of any such
Person, or any corporation, partnership, trust or other entity in
which any such Person, or any member of the family of any such
Person, has a substantial interest or is an officer, director,
trustee, partner or holder of more than five percent (5%) of the
outstanding capital stock thereof.
"Agreement" shall mean this Stock Purchase Agreement.
"Buyer" shall mean Precept Business Products, Inc., a Delaware
corporation.
"Buyer Party" is defined in Section 7.1.
"CERCLA" is defined in Section 3.26.
"Claim" is defined in Section 7.2.
"Closing" is defined in Section 2.3.
"Closing Date" is defined in Section 2.3.
"Code" is defined in Section 3.17(a).
"Common Stock" shall mean the Company's common stock, par value $1.00.
"Company" shall mean MBF Corporation, a Louisiana corporation.
"Compiled Financial Statements" is defined in Section 3.8.
"Customer Due Diligence" is defined in Section 5.14.
"Disclosure Schedule" is defined in the introductory paragraph to
Article III.
"Effective Date" is defined in Section 4.7(b).
"Employee Benefit Plans" is defined in Section 3.17(c).
"Environmental Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, or orders of any Governmental Body
pertaining to health or the environment currently in effect in any
and all jurisdictions in which the Company owns property or conducts
business, including without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental, Response, Compensation,
and Liability Act of 1980 ("CERCLA"), as amended, the Federal Water
Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and
Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking Water
Act, as amended, the Toxic Substances Control Act, as amended, the
Hazardous & Solid Waste Amendments Act of 1984, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended,
the Hazardous Materials Transportation Act, as amended, the Oil
Pollution Act of 1990, any state laws implementing the foregoing
federal laws, and all other environmental conservation or protection
laws. For purposes of this Agreement, the terms "hazardous
substance" and "release" have the meanings specified in CERCLA and
RCRA, and the term "disposal" has the meaning specified in RCRA;
PROVIDED, HOWEVER, that to the extent the laws of the state in which
the property is located establish a meaning for "hazardous
substance," "release," or "disposal" that is broader than that
specified in either CERCLA or RCRA, such broader meaning will apply.
"ERISA" is defined in Section 3.17(a).
"Excluded Assets" is defined in Section 5.1.
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"Financial Statements" is defined in Section 3.8.
"GAAP" shall mean United States generally accepted accounting
principles as may be modified from time to time.
"Xxxxx" shall mean X.X. Xxxxx, the Company's Chief Executive Officer.
"Governmental Body" is defined in Section 3.7.
"Holdback Period" is defined in Section 7.4(b).
"Holdback Shares" is defined in Section 7.4(a).
"Independent Firm" shall mean the Dallas, Texas office of Coopers &
Xxxxxxx.
"Intellectual Property" is defined in Section 3.22.
"Latest Balance Sheet" is defined in Section 3.8.
"Liabilities" is defined in Section 3.10.
"Lien" is defined in Section 3.5.
"Losses" is defined in Section 7.1.
"Material Agreements" is defined in Section 3.20.
"New Shares" is defined in Section 7.4(d)(i).
"Parent Class A Common Stock" shall mean the Class A Common Stock, par
value $0.01, of Precept Business Services, Inc., a Texas corporation.
"Pension Plans" is defined in Section 3.17(a).
"Permits" is defined in Section 3.15.
"Person" is defined in Section 3.13.
"Plans" is defined in Section 3.17(e).
"Pooling Transaction" is defined in Section 3.33(a).
"Precept" shall mean Precept Business Services, Inc., a Texas
corporation.
"Preliminary Closing Balance Sheet" is defined in Section 2.2(b).
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"Prepared Financial Statements" is defined in Section 3.8.
"Projections" is defined in Section 3.34.
"Proposed Final Balance Sheet" is defined in Section 2.2(b).
"Purchase Price" is defined in Section 2.2.
"RCRA" is defined in Section 3.26.
"Registered Intellectual Property" is defined in Section 3.22.
"S-4 Registration Statement" is defined in Section 4.7.
"Xxxxxxxxx" shall mean Xxxxx Xxxxxxxxx, the Company's President.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" is defined in Section 4.7(b).
"Shares" shall mean the shares of Common Stock owned by Xxxxx.
"Specfic Losses" is defined in Section 7.4(a).
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including
taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including
any interest, penalty or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment
thereof.
"Transaction Documents" is defined in Section 3.2.
"Welfare Benefit Plans" is defined in Section 3.17(b).
ARTICLE II
SALE AND PURCHASE OF THE SHARES
2.1 SALE OF SHARES. At the Closing (as defined in SECTION 2.3
hereof), subject to the terms and conditions of this Agreement, and on the
basis of the representations, warranties and
4
agreements herein contained, Xxxxx shall sell, convey, assign, transfer and
deliver the Shares to Buyer, and Buyer will purchase, acquire and accept the
Shares from Xxxxx, free and clear of all liens, encumbrances, mortgages,
pledges, security interests, restrictions or charges of any kind or character,
but together with all rights, privileges and advantages attached or accruing
thereto.
2.2 PURCHASE PRICE. Subject to SECTION 2.2(b) AND (c) below, the
purchase price (the "Purchase Price") payable to Xxxxx for the Shares shall be:
(a) $10,570,111, payable by the issuance of 3,796,735 shares
of Parent Class A Common Stock. On the Closing Date and subject to
the other terms and conditions hereof, Precept shall issue the
requisite number of shares of Parent Class A Common Stock to Xxxxx
on behalf of Buyer in accordance with this SECTION 2.2.
(b) Attached to this Agreement as EXHIBIT A is the balance
sheet of the Company, dated as of January 31, 1998, prepared by the
Company (the "Preliminary Closing Balance Sheet"). The Preliminary
Closing Balance Sheet has been prepared in accordance with GAAP,
except for the absence of footnotes and (i) the method of
depreciation of certain assets, and (ii) recording bad debts by the
direct write off method in lieu of providing for an allowance for
doubtful accounts. Within forty-five (45) days after the Closing
Date, Xxxxx and Buyer shall mutually agree upon a proposed final
balance sheet of the Company (the "Proposed Final Balance Sheet"),
dated as of the Closing Date, based on the actual results of the
Company through the Closing Date and prepared on a basis consistent
with past practice. If shareholders' equity in the Proposed Final
Balance Sheet exceeds the shareholders' equity figure in the
Preliminary Closing Balance Sheet, then, subject to Buyer's right to
dispute the numbers in the Proposed Final Balance Sheet pursuant to
Subsection (c) below, Buyer shall deliver to Xxxxx that number of
shares of Parent Class A Common Stock equal to such increase
(assuming a per share value of $2.784). If shareholders' equity in
the Proposed Final Balance Sheet is less than the shareholders'
equity figure in the Preliminary Closing Balance Sheet, then,
subject to Xxxxx'x right to dispute the Proposed Final Balance Sheet
pursuant to Subsection (c) below, Buyer shall have the right to
cancel that number of Holdback Shares equal to such decrease
(assuming a per share value of $2.784).
(c) If the parties are unable to determine the shareholders'
equity within such forty-five (45) day time period in accordance
with Subsection (b) above, then the parties shall continue to confer
in an attempt to settle such dispute prior to the 90th day after the
Closing. If the parties are unable to resolve such dispute within
such ninety (90) day period, then the parties shall notify the
Independent Firm of the dispute and request that the Independent
Firm render a final and binding determination of the Company's
shareholders' equity as of the Closing Date. The parties shall
cooperate with the Independent Firm by providing requested
information and assistance pertaining to the dispute. The
Independent Firm shall render its determination as soon as
practicable but, in any event, within thirty (30) days following the
submission of the dispute to the Independent Firm. Each party shall
be responsible for such party's own expenses incurred in connection
with any dispute pursuant to this Subsection (c). The party that
does not substantially prevail on the merits of the dispute (as
determined by the
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Independent Firm in its sole discretion) shall be responsible for
the payment of the fees charged by the Independent Firm.
2.3 CLOSING. The closing of the purchase and sale of the Shares
contemplated by this Agreement (the "Closing") will take place at the offices of
Xxxxxx Xxxxx Xxxx Xxxx & Xxxxx, P.C., 0000 Xxxxxxxx Xxxxx, 0000 Xxxx Xxxxxx,
Xxxxxx, Xxxxx 00000 on June 17, 1998 (the "Closing Date"), or at such other
place and on such other date as the parties may agree.
2.4 CLOSING DELIVERIES. At the Closing, the certificate(s), documents
and other items listed below will be executed and delivered by the appropriate
parties:
(a) Xxxxx will deliver stock certificate(s) to Buyer
representing all of the Shares, duly endorsed for transfer and
accompanied by duly executed stock power(s);
(b) Subject to SECTION 7.4 below, Buyer will deliver a stock
certificate to Xxxxx representing the shares of Parent Class A
Common Stock to be delivered as Purchase Price;
(c) Buyer and Xxxxx will execute and deliver a Consulting
Agreement substantially in the form of EXHIBIT B hereto;
(d) Buyer and each of Xxxxx and Xxxxxxxxx will execute and
deliver a Finder's Fee Agreement substantially in the form of
EXHIBIT C hereto;
(e) Buyer and Xxxxxxxxx will execute and deliver an Employment
Agreement substantially in the form of EXHIBIT D hereto;
(f) Buyer and Xxxxx will execute and deliver the
Confidentiality and Noncompetition Agreement substantially in the
form of EXHIBIT A attached to the Consulting Agreement;
(g) Buyer and Xxxxx will execute and deliver an Affiliate
Agreement substantially in the form of EXHIBIT F hereto;
(h) Xxxxx and the Company will execute and deliver to Buyer a
Closing Certificate substantially in the form of EXHIBIT G hereto;
(i) Buyer will execute and deliver to the Company and Xxxxx a
Closing Certificate substantially in the form of EXHIBIT H hereto;
(j) The Company will execute and deliver to Buyer, and Buyer
will execute and deliver to the Company and Xxxxx, a Secretary's
Certificate substantially in the form of EXHIBIT I hereto;
(k) If and to the extent requested by Buyer, each director and
officer of the Company will deliver to Buyer a written resignation;
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(l) The Company and Xxxxx will deliver to Buyer a legal
opinion of their counsel in such form as Buyer's counsel shall
reasonably request; and
(m) Buyer will deliver to the Company and Xxxxx a legal
opinion of its counsel in such form as the Company's counsel shall
reasonably request.
2.5 FURTHER ASSURANCES. At or after the Closing, and without further
consideration, Xxxxx will execute and deliver to Buyer and/or the Company such
further instruments of conveyance and transfer and such other documents as Buyer
may reasonably request in order to more effectively convey and transfer to Buyer
all of the Shares and to put Buyer in operational control of the Company and its
assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND XXXXX
The Company (until the Closing) and Xxxxx, jointly and severally,
hereby represent and warrant to Buyer that the statements contained in this
Article III are true, correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Article III), except as set forth in the Disclosure Schedule
attached hereto and delivered by Xxxxx to Buyer on the date hereof (the
"Disclosure Schedule"). The Disclosure Schedule will be arranged in sections
corresponding to the lettered and numbered sections contained in this Article
III.
3.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Louisiana
and has full corporate power to own its properties and to conduct its business
as presently conducted. The Company is duly authorized, qualified or licensed
to do business and is in good standing as a foreign corporation in each state
or other jurisdiction in which its assets are located or in which its business
or operations as presently conducted make such qualification necessary, except
where the failure to be so licensed or qualified would not be expected to have
a material adverse effect on the Company. The jurisdictions wherein the
Company is so qualified are listed in SECTION 3.1 OF THE DISCLOSURE SCHEDULE.
3.2 AUTHORITY. The Company has all requisite corporate power and
authority, and Xxxxx has all requisite power and authority, to execute,
deliver and perform under this Agreement and, where applicable, other
instruments, agreements or documents to be delivered pursuant to this
Agreement (collectively, the "Transaction Documents"). The execution, delivery
and performance of the Transaction Documents, by the Company and Xxxxx, as the
case may be, have been duly authorized by all necessary action, corporate or
otherwise, on the part of the Company and Xxxxx. This Agreement has been, and
the other Transaction Documents at Closing will be, duly executed and
delivered by the Company and Xxxxx and, where applicable, each of the
Transaction Documents will be legal, valid and binding agreements of the
Company and Xxxxx, respectively, enforceable against each of them in
accordance with their respective terms, except (a) as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally
and (b) as may be limited by laws
7
relating to the availability of specific performance, injunctive relief or
other equitable remedies.
3.3 MINUTE BOOKS. The Company and Xxxxx have delivered to Buyer
true, correct and complete copies of the Company's charter, bylaws, minute
books, stock certificate books and stock record books. The minute books of the
Company contain minutes or consents reflecting all actions taken by the
directors (including any committees) and shareholders of the Company.
3.4 CAPITALIZATION. The authorized capital stock of the Company
consists of: (i) 100,000 shares of common stock, $1.00 par value per share, of
which 9,000 shares are issued and outstanding and all of which are held
beneficially and of record by Xxxxx, and (ii) 10,000 shares of no par value
Preferred Stock, of which no shares are issued and outstanding. All of the
Shares are validly issued, fully paid and non-assessable and are held by Xxxxx
free and clear of preemptive or similar rights. The Shares constitute all of
the issued and outstanding capital stock of the Company. There are no
outstanding options, warrants, convertible securities or other rights,
agreements, arrangements or commitments obligating the Company, any
shareholders of the Company (including Xxxxx) or any other person or entity to
issue or sell any securities or ownership interests in the Company. Except as
set forth in SECTION 3.4 OF THE DISCLOSURE SCHEDULE, there are no
shareholders' agreements, voting agreements, voting trusts or similar
agreements or restrictions binding on any of the shareholders of the Company
(including Xxxxx) or applicable in any way to the Shares. To the Company's
and Xxxxx'x best knowledge, all of the outstanding capital stock of the
Company has been offered and sold in compliance with all applicable securities
laws, rules and regulations.
3.5 TITLE TO THE SHARES. Except as set forth in SECTION 3.5 OF THE
DISCLOSURE SCHEDULE, Xxxxx owns the Shares, of record and beneficially, free and
clear of any lien, pledge, security interest, liability, charge or other
encumbrance or claim of any person or entity, voting trusts, proxies, preemptive
rights, rights of first refusal, buy-sell arrangements or other shareholder
agreements (a "Lien"). On the Closing Date, Xxxxx will own the Shares, of record
and beneficially, free and clear of any Lien. Upon delivery of the Shares to
Buyer at the Closing hereunder, Buyer will acquire the entire legal and
beneficial interest in all of the Shares, free and clear of any Lien.
3.6 NO VIOLATION. Except as described in SECTION 3.6 OF THE
DISCLOSURE SCHEDULE, neither the execution nor the delivery of the Transaction
Documents nor the consummation of the transactions contemplated thereby,
including without limitation, the transfer of the Shares to Buyer, will
conflict with, contravene or result in the material breach of any term or
provision of, or violate, or constitute a material default under, or result in
the creation of any Lien on the Company's assets pursuant to, or relieve any
third party of any obligation or give any third party the right to terminate
or accelerate any obligation under any charter provision, bylaw, material
agreement (including those listed in SECTION 3.20 OF THE DISCLOSURE SCHEDULE
or with any customer set out in such SECTION 3.21 OF THE DISCLOSURE SCHEDULE),
Permit, order, law or regulation to which any of the shareholders of the
Company (including Xxxxx) is a party or by which the Company, any of the
shareholders of the Company (including Xxxxx) or any of their assets is in any
way bound or obligated.
3.7 GOVERNMENTAL CONSENTS. No material consent, approval, order or
authorization of, or material registration, qualification, designation,
declaration or filing with, any governmental or
8
quasi-governmental agency, authority, commission, board or other body
(collectively, a "Governmental Body") is required on the part of the Company
or any of the shareholders of the Company (including Xxxxx) in connection with
the transactions contemplated by this Agreement.
3.8 FINANCIAL STATEMENTS. Attached as SECTION 3.8 OF THE DISCLOSURE
SCHEDULE are true and complete copies of: (i) the unaudited balance sheet of the
Company and the unaudited statements of income, retained earnings and cash flows
for the periods ending October 31, 1997, October 31, 1996, and October 31, 1995,
which have been compiled by Xxxxxx, Xxxxxxx & Xxxxxx, Certified Public
Accountants (the "Compiled Financial Statements"), and (ii) the unaudited
balance sheet (the "Latest Balance Sheet") and related statements of income,
retained earnings and cash flows of the Company for the period ended April 30,
1998, which have been prepared by the Company (the "Prepared Financial
Statements," and together with the Compiled Financial Statements are
collectively referred to herein as the "Financial Statements"). The Financial
Statements present fairly the financial condition of the Company at the dates
specified and the results of its operations for the periods specified and have
been prepared in accordance with GAAP, except for the absence of footnotes and
(i) the method of the depreciation of certain assets, and (ii) recording bad
debts by the direct write off method in lieu of providing for an allowance for
doubtful accounts. The Financial Statements do not contain any material items
of a special or nonrecurring nature, except as expressly stated therein. The
Financial Statements have been prepared from the books and records of the
Company, which accurately and fairly reflect all the material transactions of,
acquisitions and dispositions of assets by, and incurrence of liabilities by the
Company.
3.9 ACCOUNTS RECEIVABLE. SECTION 3.9 OF THE DISCLOSURE SCHEDULE
sets forth the accounts receivable of the Company (including, without
limitation, all unbilled accounts receivable and miscellaneous receivables)
from sales made as of April 30, 1998 (the "Accounts Receivable"), and the
payments and rights to receive payments related thereto. Except as set forth
in SECTION 3.9 OF THE DISCLOSURE SCHEDULE, the amounts of all Accounts
Receivable, unbilled invoices and other debts due or recorded in the records
and books of account of the Company as being due to the Company as of the
Closing Date constitute valid claims against third parties not affiliated with
either Xxxxx or the Company and arise from bona fide transactions in the
ordinary course of the business of the Company. Except as set forth in
SECTION 3.9 OF THE DISCLOSURE SCHEDULE, the Accounts Receivable arose in the
ordinary course of business and are fully collectible in the ordinary course
of business, without resort to litigation, at the face amount thereof, less
any reserve reflected in the Company's Latest Balance Sheet, and in all cases
are not subject to: (a) the knowledge of Xxxxx and the Company, any
counterclaim, or (b) any set-off or other reduction.
3.10 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have
any direct or indirect debts, obligations or liabilities of any nature,
whether absolute, accrued, contingent, liquidated or otherwise, and whether
due or to become due, asserted or, to the knowledge of the Company and Xxxxx,
unasserted (collectively, "Liabilities"), except for (a) Liabilities
specifically identified in the Latest Balance Sheet, and (b) obligations to be
performed in the ordinary course of business or under the Material Agreements
(as defined in SECTION 3.20 below).
3.11 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date of the
Company's Latest Balance Sheet and except as otherwise set forth in SECTION
3.11 OF THE DISCLOSURE SCHEDULE, there
9
has not been: (a) any material adverse change in the condition (financial or
otherwise), results of operations, business, prospects, assets or Liabilities
of the Company (b) any payment (including without limitation any dividend or
other distribution or repayment of indebtedness) to any shareholder of the
Company (including Xxxxx), other than payment of compensation to employees of
the Company in the ordinary course of business and consistent with past
practices; (c) any breach or default (or event that with notice or lapse of
time or both would constitute a breach or default), termination or, to the
knowledge of the Company and Xxxxx, threatened termination under any Material
Agreement; (d) any material theft, damage, destruction, casualty loss,
condemnation or eminent domain proceeding affecting any of the Company's
assets, whether or not covered by insurance; (e) any sale, assignment or
transfer of any of the assets of the Company, except in the ordinary course of
business and consistent with past practices; (f) any waiver by the Company of
any material rights related to the Company's business, operations or assets;
(g) any other material transaction, agreement or commitment entered into by
the Company or its shareholders affecting the Company's business, operations
or assets, except in the ordinary course of business and consistent with past
practices; or (h) any agreement or understanding to do or resulting in any of
the foregoing.
3.12 TAXES.
(a) FILING OF TAX RETURNS. The Company has duly and timely
filed with the appropriate governmental agencies all income, excise,
corporate, franchise, property, sales, use, payroll, withholding and
other Tax Returns (including information returns) and reports
required to be filed by the United States or any state or any
political subdivision thereof or any foreign jurisdiction. All such
Tax Returns or reports are complete and accurate in all material
respects and reflect the taxes of the Company for the periods
covered thereby.
(b) PAYMENT OF TAXES. The Company has paid or accrued all
Taxes, penalties and interest that have become due with respect to
any Tax Returns that it has filed and any assessments of which it is
aware. The Company is not delinquent in the payment of any Tax,
assessment or governmental charge.
(c) NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR
AUDITS. No Tax deficiency or delinquency has been asserted against
the Company. There is no unpaid assessment, proposal for additional
taxes, deficiency or delinquency in the payment of any of the Taxes
of the Company that could be asserted by any taxing authority.
There is no taxing authority audit of the Company pending or, to the
knowledge of the Company or Xxxxx threatened, and the results of any
completed audits are properly reflected in the Financial Statements.
The Company has not violated any federal, state, local or foreign
tax law.
(d) NO EXTENSION OF LIMITATION PERIOD. The Company has not
been granted an extension by any taxing authority of the limitation
period during which any tax liability may be assessed or collected
or waived any statute of limitation in respect of Taxes.
(e) ALL WITHHOLDING REQUIREMENTS SATISFIED. All monies
required to be withheld by the Company and paid to governmental
agencies for all income, social security,
10
unemployment insurance, sales, excise, use and other Taxes have been
(i) collected or withheld and either paid to the respective
governmental agencies or set aside in accounts for such purpose or
(ii) properly reflected in the Financial Statements.
(f) STATE UNEMPLOYMENT TAXES. In respect of the Company's
most recently completed reporting period, the Company has paid all
state unemployment taxes, if any, to the State of Louisiana of the
wages paid by the Company during such period that are subject to
such tax. The Company does not know of any increase or proposed
increase, or facts that would lead to an increase, in the rate of
such state unemployment tax for any period in the future.
(g) TAX LIABILITY IN FINANCIAL STATEMENTS. The liabilities
(including deferred taxes) shown in the Financial Statements and to
be accrued on the books and records of the Company through the
Closing Date for Taxes, interest and penalties are and will be, to
the knowledge of the Company and Xxxxx, adequate accruals and have
been and will be accrued in a manner consistent with the practices
utilized for accruing tax liabilities in the tax year ended October
31, 1997 and take into account net operating losses, investment
credits and other carryovers for periods ended prior to the Closing
Date.
(h) TAX EXEMPT USE PROPERTY. None of the Assets of the
Company is "tax-exempt use property" within the meaning of Section
168(h) of the Code.
(i) COLLAPSIBLE CORPORATION. The Company has not at any time
consented to have the provisions of Section 341(f)(2) of the Code
apply to it.
(j) INDEPENDENT CONTRACTORS. Except as set forth in SECTION
3.12 OF THE DISCLOSURE SCHEDULE, all persons characterized as
independent contractors, and not as employees, were properly
characterized for all purposes under applicable laws (including,
without limitation, their characterization as independent
contractors for income and employment tax withholdings and payments).
(k) LIENS. There are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the
Company.
(l) SECURITY FOR TAX EXEMPT OBLIGATIONS. None of the assets
of the Company directly or indirectly secures any debt the interest
on which the Company has been advised is tax exempt under Section
103(a) of the Code.
(m) PARACHUTE PAYMENTS. The Company is not a party to any
agreement, contract, arrangement or plan that has resulted or would
result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G of
the Code or any similar provision of foreign, state or local law.
(n) EXISTING PARTNERSHIPS. The Company is not a party to any
joint venture, partnership, or other arrangement or contract which
could be treated as a partnership for federal income tax purposes.
11
(o) NO RULINGS OR REQUESTS FOR RULINGS. There are no
outstanding rulings of, or requests for rulings with, any Tax
authority addressed to the Company that are, or if issued would be,
binding on the Company.
3.13 LITIGATION. Except as described in SECTION 3.13 OF THE
DISCLOSURE SCHEDULE, there are currently no pending or, to the knowledge of
the Company or Xxxxx, threatened claims, actions, lawsuits, administrative
proceedings or reviews, or formal or informal complaints or investigations by
any individual, corporation, partnership, Governmental Body or other entity
(collectively, a "Person") against or relating to the Company or any of its
directors, employees or agents (in their capacities as such) or to which any
assets of the Company are subject. The Company is not subject to or bound by
any currently existing judgment, order, writ, injunction or decree.
3.14 COMPLIANCE WITH LAWS AND REGULATIONS. The Company is currently
complying with and has at all times complied with, and the use, operation and
maintenance of its assets comply with and have at all times complied with,
and neither the Company, its assets nor the use, operation or maintenance of
such assets is in violation or contravention of (a) any applicable statute,
law, ordinance, decree, order, rule or regulation, of any Governmental Body,
or (b) any federal, state and local laws relating to occupational health and
safety, employment and labor matters except where the failure to so comply
will not have a material adverse effect on the Company.
3.15 PERMITS. To the best of the knowledge of Xxxxx and the
Company, the Company owns or possesses from each appropriate Governmental
Body all right, title and interest in and to all permits, licenses,
authorizations, approvals, quality certifications, franchises or rights,
including any special permits (collectively, "Permits") issued by any
Governmental Body necessary to conduct its business except where the failure
to do so will not have a material adverse effect on the Company. No loss or
expiration of any such Permit is pending or, to the knowledge of the Company
or Xxxxx, threatened or reasonably foreseeable, other than expiration in
accordance with the terms thereof of Permits that may be renewed in the
ordinary course of business without lapsing.
3.16 EMPLOYEE MATTERS. Set forth in SECTION 3.16 OF THE DISCLOSURE
SCHEDULE is a complete list of all current employees of the Company,
including date of employment, current title and compensation, and date and
amount of last increase in compensation. The consummation of the transactions
contemplated by this Agreement will not accelerate the time of payment or
vesting or increase the amount of compensation due to any director, officer
or employee (present or former) of the Company. The Company does not have any
collective bargaining, union or labor agreements, contacts or other
arrangements with any group of employees, labor union or employee
representative. Neither the Company nor Xxxxx knows of any organization
effort currently being made or threatened by or on behalf of any labor union
with respect to employees of the Company. In addition, (a) the Company is in
compliance with all federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, terms and conditions
of employment and wages and hours, and has not and is not engaged in any
unfair labor practice, except where any such non-compliance will not have a
material adverse effect on the Company; (b) no unfair labor practice
complaint against the Company is pending before the National Labor Relations
Board or any similar agency; (c) there is no labor strike, dispute, slow down
or stoppage
12
actually pending or, to the Company's or Xxxxx'x knowledge, threatened
against or involving the Company; (d) no collective bargaining agreement is
currently being negotiated by the Company; (e) the Company has not
experienced any material labor difficulty or organizing activity during the
last three years; and (f) to the Company's and Xxxxx'x knowledge, and except
as set forth in SECTION 3.16 OF THE DISCLOSURE SCHEDULE, no director, officer
or other key employee of the Company intends to terminate his or her
employment with the Company. The Company does not have any noncompetition
agreements with its employees.
3.17 EMPLOYEE BENEFIT PLANS.
(a) SECTION 3.17 OF THE DISCLOSURE SCHEDULE lists all "employee
pension benefit plans," as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), ever
maintained or contributed to (or required to be contributed to) by
the Company or any Affiliate (the "Pension Plans"). As used in this
SECTION 3.17, "Affiliate" means any corporation, trade or business
the employees of which, together with the employees of the Company,
are required to be treated as employed by a single employer under
the provisions of ERISA or Section 414 of the Internal Revenue Code
of 1986, as amended from time to time (the "Code").
(b) SECTION 3.17 OF THE DISCLOSURE SCHEDULE lists each "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA) that
the Company or any Affiliate maintains, contributes to or is
required to contribute to on behalf of any employee or former
employee, including any multi-employer welfare plan (the "Welfare
Benefit Plans"), and sets forth the amount of any Liability of the
Company or any Affiliate for any payment past due with respect to
each Welfare Benefit Plan as of the date of the Closing. No
voluntary employees' beneficiary association or other funding
arrangement (other than insurance contracts) are being used to fund
or implement any Welfare Benefit Plan. The Company has not made any
written or oral representations to any employee or former employee
promising or guaranteeing any employer payment or funding for the
continuation of benefits or coverage under any Welfare Benefit Plan
for any period of time beyond the end of the current plan year
(except to the extent required under Code Section 4980B).
(c) SECTION 3.17 OF THE DISCLOSURE SCHEDULE lists each
deferred compensation plan, bonus plan, stock option plan, employee
stock purchase plan, and any other employee benefit plan,
arrangement, or commitment (whether written or oral) not required
to be listed under paragraph (a) or (b) above (other than normal
policies concerning holidays, vacations and salary continuation
during short absences for illness or other reasons) maintained by
the Company for employees (the "Employee Benefit Plans").
(d) Neither the Company nor any Affiliate maintains, or,
within the last five years, has maintained, contributed to, been
required to contribute to or had any employees participating in,
any "defined benefit plan" (as defined in Section 3(35) of ERISA)
or any multi-employer plan (as defined in Section 3(37) of ERISA).
(e) The Pension Plans, the Welfare Benefit Plans and the
Employee Benefit Plans and related trusts and insurance contracts
(collectively, the "Plans") are legally valid
13
and binding and in full force and effect. All of the Plans comply
currently, and have complied in the past, both as to form and
operation, with the provisions of all laws, rules and regulations
governing or applying to such Plans, including but not limited to
ERISA, the Code, the Americans with Disabilities Act, the Family
and Medical Leave Act of 1993 and the Age Discrimination in
Employment Act; all necessary governmental approvals for the
Pension Plans and the Welfare Benefit Plans have been obtained; and
a favorable determination as to the qualification under the Code of
each of the Pension Plans and each amendment thereto has been made
by the Internal Revenue Service, and, to the knowledge of the
Company and Xxxxx, nothing has occurred since the date of such
determination letters that could adversely affect the qualification
of such Plans or the tax exempt status of the related trust. All
reports and filings required by any Governmental Body (including
without limitation Form 5500 Annual Reports, Summary Annual Reports
and Summary Plan Descriptions) with respect to each Plan have been
timely and completely filed, and have been distributed to
participants as required by applicable law. To the knowledge of
the Company and Xxxxx, neither the Company, any Affiliate or any
plan fiduciary of any Plan has engaged in any transaction in
violation of Section 406(a) or (b) of ERISA or any "prohibited
transaction" (as defined in Code Section 4975(c)(1)) that would
subject the Company to any taxes, penalties or other Liabilities
resulting from such transaction. Neither the Company nor Xxxxx has
received notice that any of the Plans is being audited or
investigated by any Governmental Body. With respect to such Plans,
there are no actions, suits or claims (other than routine claims
for benefits in the ordinary course) pending or, to the knowledge
of the Company or Xxxxx, threatened, and there are no facts that
could reasonably be expected to give rise to any such actions,
suits or claims.
(f) The Company does not have any Liabilities to any Person
with respect to any Plan, except for (i) Liabilities that are fully
funded by assets set aside in trust or irrevocably dedicated for
that purpose, the fair market value of which assets exceed the
Liabilities to which they are set aside or dedicated, and (ii)
Liabilities that have been fully accrued on the Financial
Statements. The Company may terminate any Welfare Benefit Plan or
any Employee Benefit Plan immediately following the Closing without
any Liability to employees, former employees, beneficiaries or any
other Person except to the extent such Liabilities have been
accrued or funded as described in the preceding sentence.
(g) True and complete copies of the following documents have
been delivered by the Company or Xxxxx to Buyer: (i) each Welfare
Benefit Plan and each Pension Plan and each related trust agreement
or annuity contract (or other funding instrument); (ii) the most
recent determination letter issued by the Internal Revenue Service
with respect to each Pension Plan; (iii) Annual Reports on Form
5500 Series required to be filed with any Governmental Body for
each Welfare Benefit Plan and each Pension Plan for the two most
recent plan years; and (iv) the most recent actuarial report for
each Pension Plan.
3.18 TITLE TO ASSETS. Set forth in SECTION 3.18 OF THE DISCLOSURE
SCHEDULE is a complete list of (a) all real property owned by the Company;
(b) all real property leased by the Company; (c) each vehicle owned or leased
by the Company; and (d) each asset of the Company with a book value or fair
market value greater than $5,000. The Company has good and indefeasible
title to, or a valid leasehold interest in, all of its assets, including
without limitation, the assets listed in SECTION
14
3.18 OF THE DISCLOSURE SCHEDULE, the assets reflected on the Latest Balance
Sheet and all assets used by the Company in the conduct of its business
(except for assets disposed of in the ordinary course of business and
consistent with past practices since the Latest Balance Sheet Date and except
for assets held under leases or licenses disclosed pursuant to SECTION 3.20),
subject to no Liens, except for (a) Liens for current taxes not yet due; (b)
minor imperfections of title and encumbrances that do not materially detract
from or interfere with the present use or value of such assets; and (c) Liens
disclosed in SECTION 3.18 OF THE DISCLOSURE SCHEDULE.
3.19 CONDITION OF PROPERTIES. All facilities, machinery, equipment,
fixtures, vehicles and other tangible property owned, leased or used by the
Company are in good operating condition and repair, normal wear and tear
excepted, are reasonably fit and usable for the purposes for which they are
being used, to the knowledge of the Company and Xxxxx, will not likely require
major overhaul or repair in the foreseeable future, are adequate and sufficient
for the Company's business and, to the knowledge of the Company and Xxxxx,
substantially conform with all applicable laws, rules and regulations. The
Company maintains policies of insurance issued by insurers of recognized
responsibility insuring the Company and its assets and business against such
losses and risks.
3.20 MATERIAL AGREEMENTS.
(a) SECTION 3.20 OF THE DISCLOSURE SCHEDULE lists each
agreement and arrangement (whether written or oral and including
all amendments thereto) to which the Company is a party or a
beneficiary or by which the Company or any of its assets is bound
and that is material to the Company (collectively, the "Material
Agreements"), including without limitation (i) any real estate
leases; (ii) any contracts for the provision of goods or services
by the Company; (iii) any agreement evidencing, securing or
otherwise relating to any indebtedness for which the Company is
liable; (iv) any capital or operating leases, value-added reseller,
reseller, or conditional sales agreements relating to vehicles,
equipment or other assets of the Company; (v) any supply or
manufacturing agreements or arrangements pursuant to which the
Company is entitled or obligated to acquire any assets from a third
party; (vi) any insurance policies; (vii) any employment,
consulting, noncompetition, separation, collective bargaining,
union or labor agreements or arrangements; (viii) any agreement
with any shareholder of the Company (including Xxxxx), director,
officer or employee of the Company, or any Affiliate or family
member thereof; (ix) any joint marketing or similar agreement or
arrangement; and (x) any other agreement or arrangement pursuant to
which, based on historical or projected volume, the Company could
be required to make, or be entitled to receive, aggregate payments
in excess of $10,000 during any calendar year. Each of the
Company's agreements are subject to the laws, rules or regulations
relating to the Small Business Administration, Minority Business
Enterprises or Women Owned Business Enterprises.
(b) The Company has performed all material obligations
required to be performed by it in connection with the agreements
and arrangements required to be disclosed in SECTION 3.20 OF THE
DISCLOSURE SCHEDULE and is not in receipt of any claim of default
under any agreement or arrangement required to be disclosed in such
Schedule by this SECTION 3.20; the Company has no present
expectation or intention of not fully
15
performing any material obligation pursuant to any agreement or
arrangement required to be disclosed in SECTION 3.20 OF THE
DISCLOSURE SCHEDULE; and neither the Company nor Xxxxx has any
knowledge of any breach or anticipated breach by any other party to
any agreement or arrangement required to be disclosed in SECTION
3.20 OF THE DISCLOSURE SCHEDULE.
(c) The Company has delivered to Buyer a copy of the agreements
and arrangements (including all amendments and modifications
thereto) required to be disclosed in SECTION 3.20 OF THE DISCLOSURE
SCHEDULE and its standard form of customer agreement, all training
manuals and a description (with any written or other instructional
materials) of how the Company operates its business, undertakes
projects for customers or trains its employees.
3.21 CUSTOMERS. Set forth in SECTION 3.21 OF THE DISCLOSURE
SCHEDULE is a complete list of customers as of May 28, 1998, which also shows
for each such customer (i) revenues, if any, actually received by the Company
during the calendar year ended December 31, 1997, (ii) the expiration date of
the contract or agreement, and (iii) projected revenues for the calendar year
ending December 31, 1998. Except as set forth in SECTION 3.21 OF THE
DISCLOSURE SCHEDULE, no customer has advised the Company of such customer's
intent to discontinue doing business with the Company or to reduce the volume
of goods or services purchased from or supplied to the Company. Except as
set forth in SECTION 3.21 OF THE DISCLOSURE SCHEDULE, the Company has not
received from any customer either oral or written notice of such customer's
intention to terminate its account with the Company.
3.22 INTELLECTUAL PROPERTY RIGHTS. Set forth in SECTION 3.22 OF THE
DISCLOSURE SCHEDULE is a complete list of all registered patents, trademarks,
service marks, trade names and copyrights, and applications for and licenses
(to or from the Company) with respect to any of the foregoing (collectively,
"Registered Intellectual Property"), owned by the Company or with respect to
which the Company has any rights. To the knowledge of the Company and Xxxxx,
the Company has the sole and exclusive right to use all Registered
Intellectual Property and other computer software (both proprietary and third
party) and software licenses, intellectual property, proprietary information,
trade secrets, trademarks, trade names, copyrights, material and
manufacturers specifications, drawings and designs (collectively,
"Intellectual Property") used by the Company or necessary in connection with
the operation of the Company's business, without infringing on or otherwise
acting adversely to the rights or claimed rights of any Person, and neither
the Company nor Xxxxx has knowledge of any obligation to pay any royalty or
other consideration to any Person in connection with the use of any such
Intellectual Property. SECTION 3.22 OF THE DISCLOSURE SCHEDULE also includes
a description of the nature of the Company's rights in and to the
Intellectual Property. To the knowledge of the Company and Xxxxx, no other
Person is infringing the rights of the Company with respect to any of its
Intellectual Property. No consent of any third parties will be required for
the transfer of Intellectual Property rights to Buyer or the use thereof by
Buyer upon consummation of the transactions contemplated hereby, and the
Intellectual Property rights (other than with respect to required consents of
third party licensors and licensees of software under applicable licenses)
are freely transferable. The Company is the sole and exclusive owner of all
rights in and to the software described in SECTION 3.22 OF THE DISCLOSURE
SCHEDULE, including all source and object code and documentation related
thereto, except the third party software listed in
16
SECTION 3.22 OF THE DISCLOSURE SCHEDULE, as to which the Company has been
granted all rights and licenses necessary for the Company to sublicense such
software to third parties or to provide services to third parties in the
manner in which the Company has done so through the date hereof and the date
of Closing. The Company has licensed the software only to the third parties
listed in SECTION 3.22 OF THE DISCLOSURE SCHEDULE. There are no existing
material defaults, events of default or events, occurrences, acts or
omissions that, with the giving of notice or lapse of time or both, would
constitute material defaults by the Company or, to the Company's or Xxxxx'x
knowledge, the other parties thereto, with respect to the Company's licenses
of the software to licensees or the Company's licenses with third parties
with respect to third party software included in the Company's software.
3.23 SUBSIDIARIES AND INVESTMENTS. The Company does not own any
direct or indirect equity or debt interest in any other Person, including
without limitation, any interest in a partnership or joint venture, and is
not obligated or committed to acquire any such interest.
3.24 COMPETING INTERESTS. Except as disclosed in SECTION 3.24 OF
DISCLOSURE SCHEDULE, neither the Company, its shareholders (including Xxxxx)
nor any director, officer, relative or Affiliate of any of the foregoing
owns, directly or indirectly, an interest in any Person that is a competitor,
customer or supplier of the Company or that otherwise has material business
dealings with the Company.
3.25 ILLEGAL OR UNAUTHORIZED PAYMENTS; POLITICAL CONTRIBUTIONS.
Neither the Company nor any of its officers, directors, employees, agents or
other representatives or, to the knowledge of the Company or Xxxxx, any other
business entity or enterprise with which the Company is or has been
affiliated or associated, has, directly or indirectly, knowingly made or
authorized any payment, contribution or gift of money, property or services,
whether or not in contravention of applicable law, (a) as a kickback or bribe
to any Person or (b) to any political organization, or the holder of or any
aspirant to any elective or appointive public office, except for personal
political contributions not involving the direct or indirect use of funds of
the Company. To the knowledge of the Company and Xxxxx, the Company has not
violated any federal or state antitrust statutes, rules or regulations,
including without limitation those relating to unfair competition, price
fixing or collusion.
3.26 ENVIRONMENTAL MATTERS. Except for matters disclosed in SECTION
3.26 OF THE DISCLOSURE SCHEDULE, (a) the properties, operations, and
activities of the Company are in compliance in all material respects with all
applicable Environmental Laws; (b) the Company and the properties and
operations of the Company are not subject to any existing, pending, or, to
the knowledge of the Company and Xxxxx, threatened action, suit, claim,
investigation, inquiry or proceeding by or before any governmental entity
under any Environmental Laws (c) all notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed by the Company under
any Environmental Laws in connection with any aspect of the business of the
Company have been duly obtained or filed and will remain valid and in effect
after the Closing, and the Company is in compliance with the terms and
conditions of all such notices, permits, licenses, and similar authorizations;
(d) to the knowledge of the Company and Xxxxx, there are no physical or
environmental conditions existing on any property of the Company or resulting
from the Company's operations or activities, past or present, at any
location, that would give rise to any on-
17
site or off-site remedial obligations imposed on the Company under any
Environmental Laws; (e) there has been no material release of hazardous
substances into the environment by the Company; and (f) the Company has made
available to the Buyer all internal and external environmental audits and
studies and all correspondence on substantial environmental matters in the
possession of the Company relating to any of the current or former properties
or operations of the Company.
3.27 BROKERS. Except to the extent disclosed in SECTION 3.27 OF THE
DISCLOSURE SCHEDULE, no broker, finder, or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company or Xxxxx.
3.28 INSURANCE. Set forth in SECTION 3.28 OF THE DISCLOSURE
SCHEDULE is a list of all insurance policies currently in effect under which
the Company is a beneficiary or an insured. Such insurance coverage will
remain in effect (or will be replaced by similar policies) with respect to
the Company and its properties as to all events occurring on or prior to the
Closing. As of the date of this Agreement, neither the Company nor Xxxxx has
received any notice that any of the policies listed in SECTION 3.28 OF THE
DISCLOSURE SCHEDULE has been or will be canceled prior to its scheduled
termination date, or would not be renewed substantially on the same terms now
in effect if the insured party requested renewal or has received notice from
any of its insurance carriers that any insurance premiums will be subject to
increase in an amount materially disproportionate to the amount of the
increases with respect thereto (or with respect to similar insurance) in
prior years. The Company is not in material default under any such policy and
all premiums due and payable with respect to such coverage have been paid or
accrued.
3.29 BANK ACCOUNTS AND POWERS OF ATTORNEY. Set forth in SECTION
3.29 OF THE DISCLOSURE SCHEDULE is a complete list of (a) the name and
address of each bank or other depository institution in which the Company has
an account or safe deposit box, the number of such account or safe deposit
box and the names of all persons authorized to draw thereon or to have access
thereto, and (b) the names of all persons, if any, holding powers of attorney
from the Company and a summary statement of the terms thereof.
3.30 WARRANTIES. SECTION 3.30 OF THE DISCLOSURE SCHEDULE
summarizes all claims outstanding, pending or, to the knowledge of the
Company and Xxxxx, threatened for breach of any warranty relating to any
products or services sold by the Company prior to the date hereof. The
description of the Company's product and service warranties set forth in
SECTION 3.30 OF THE DISCLOSURE SCHEDULE is correct and complete.
3.31 INVENTORY. SECTION 3.31 OF THE DISCLOSURE SCHEDULE sets
forth, as of May 28, 1998, all inventory of the Company that is (a) owned by
the Company, and (b) owned by customers of the Company. All inventory owned
by the Company is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is obsolete, damaged or defective
in any material amount. Such inventory owned by the Company is not subject to
any liens, charges, pledges, security interests or other encumbrances.
3.32 AFFILIATE TRANSACTIONS. Except as disclosed in SECTION 3.32 OF
THE DISCLOSURE SCHEDULE and other than pursuant to this Agreement and the
Transaction Documents, neither Xxxxx
18
nor any Affiliate has any agreement, undertaking or understanding with the
Company (other than normal employment arrangements) or any interest in any
property, real, personal or mixed, tangible or intangible (including, without
limitation, intellectual property rights), used in or pertaining to the
business of the Company (other than ownership of capital stock of the
Company). Neither Xxxxx nor any Affiliate has any direct or indirect interest
in any competitor, supplier or customer of the Company or in any person, firm
or entity from whom or to whom the Company leases any property, or in any
other person, firm or entity with whom the Company transacts business of any
nature. For purposes of this SECTION 3.32 the members of the immediate family
of a director, officer, employee or shareholder shall consist of the spouse,
parents, children, siblings, mothers- and fathers-in-law, sons- and
daughters-in-law, and brothers- and sisters in-law of such director, officer,
employee or shareholder.
3.33 TAX MATTERS; POOLING.
(a) Neither the Company nor any of its Affiliates has taken
or agreed to take any action that would prevent the transaction
contemplated hereby from (i) constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code or
(ii) being treated for financial accounting purposes as a "pooling
of interests" in accordance with GAAP and the rules, regulations
and interpretations of the SEC (a "Pooling Transaction").
(b) There is no current plan or intention by Xxxxx to sell,
exchange or otherwise dispose of any of the Shares delivered to
Xxxxx at Closing to either Precept or the Company.
(c) The Company and Xxxxx will each pay their respective
expenses, if any, incurred in connection with the transaction
contemplated hereby.
(d) The Company is not an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(e) The Company is not under the jurisdiction of a court in a
title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
3.34 PROJECTIONS; MATERIAL FACTS. In connection with the
transactions contemplated by this Agreement, Xxxxx has furnished to Buyer
certain projections and estimates relating to the Company attached hereto as
SCHEDULE 3.34 (the "Projections"). The Company and Xxxxx represent and
warrant that the assumptions and projections in the Projections were prepared
by the Company and Xxxxx in good faith based on their best knowledge,
information and belief. The Company and Xxxxx know of no information or fact
that has or would have a material adverse effect on the financial condition,
business or business prospects of the Company that has not been disclosed to
Buyer. Since the date of the Projections, the Company and Xxxxx know of no
material adverse change in the business, business prospects, property,
condition or results of operations of the Company.
3.35 NO MISREPRESENTATIONS. Since January 31, 1998, neither the
Company nor Xxxxx has received any appraisal, report or other information
relating to the value or condition of
19
the Company or that indicates a material adverse change in the value or
condition of the Company or any of its material assets. The representations,
warranties and statements made by the Company and Xxxxx in or pursuant to
this Agreement (including the Disclosure Schedule) are true, complete and
correct in all material respects and do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make any such
representation, warranty or statement, under the circumstances in which it is
made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND PRECEPT
Buyer and Precept, respectively, represent and warrant to the
Company (until the Closing) and Xxxxx as follows:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
Precept is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Each of Buyer and Precept is
duly authorized, qualified or licensed to do business and is in good standing
as a foreign corporation in each state or other jurisdiction in which its
assets are located or in which its business or operations as presently
conducted make such qualification necessary, except where the failure to be
so licensed or qualified would not be expected to have a material adverse
effect on Buyer or Precept. The jurisdictions wherein Buyer and Precept are
so qualified are listed in SECTION 4.1 OF THE DISCLOSURE SCHEDULE.
4.2 AUTHORITY. Buyer and Precept have all requisite corporate
power and authority to execute, deliver and perform under the Transaction
Documents. The execution, delivery and performance of the Transaction
Documents by Buyer and Precept have been duly authorized by all necessary
action, corporate or otherwise, on the part of Buyer and Precept. This
Agreement has been, and the Transaction Documents at Closing will be, duly
executed and delivered by Buyer and Precept and are legal, valid and binding
agreements of Buyer and Precept, enforceable against each of them in
accordance with their respective terms, except (a) as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally
and (b) as may be limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
4.3 CAPITALIZATION. The authorized capital stock of Precept
consists of (a) 110,500,000 shares of Common Stock, of which 100,000,000
shares have been designated Class A Common Stock, $0.01 par value per share,
of which 35,509,503 shares are issued and outstanding as of March 31, 1998
and 10,500,000 shares of which have been designated Class B Common Stock, of
which 10,102,997 shares are issued and outstanding as of March 31, 1998, and
(b) 3,000,000 shares of Preferred Stock, of which no shares are issued and
outstanding as of March 31, 1998. All outstanding shares are validly issued,
fully paid and non-assessable and were offered and sold in compliance with
all applicable securities laws and regulations.
4.4 PARENT CLASS A COMMON STOCK. The shares of Parent Class A
Common Stock to be issued pursuant to this Agreement will be duly authorized,
validly issued, and upon receipt of
20
the consideration contemplated hereby, fully paid and nonassessable.
4.5 NO VIOLATION. The execution, delivery and performance of the
Transaction Documents by Buyer and Precept will not conflict with or result
in the breach of any term or provision of, or violate or constitute a default
under any charter provision or bylaw or under any material agreement,
instrument, order, law or regulation to which Buyer or Precept is a party or
by which Buyer or Precept is in any way bound or obligated.
4.6 GOVERNMENTAL CONSENTS. To the knowledge of Buyer and Precept,
no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental Body
is required on the part of Buyer or Precept in connection with the
transactions contemplated by this Agreement.
4.7 SEC DOCUMENTS.
(a) Precept has furnished or made available to the Company or
Xxxxx a true and complete copy of its Registration Statement on Form S-4
filed under the Securities Act of 1933, as filed with the SEC and declared
effective on February 10, 1998 (the "S-4 Registration Statement"). The S-4
Registration Statement is currently effective, and the shares of Parent Class
A Common Stock to be delivered to Xxxxx at the Closing will be registered
under the Securities Act pursuant to the S-4 Registration Statement.
(b) The S-4 Registration Statement was prepared in compliance in
all material respects with the applicable requirements of the Securities Act
of 1933, as amended (the "Securities Act"). As of February 10, 1998 (the
"Effective Date"), the S-4 Registration Statement (i) complied as to form in
all material respects with the applicable requirements of the Securities Act
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein not misleading. The prospectus relating to the S-4
Registration Statement (i) complied as to form in all material respects with
the applicable requirements of the Securities Act as of the date thereof, and
(ii) did not contain any untrue statement of a material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of Precept included in the S-4 Registration
Statement (including the related notes and schedules) fairly presents the
consolidated financial position of Precept as of the dates set forth therein
and each of the consolidated statements of income, cash flows and
shareholders' equity included in the S-4 Registration Statement (including
any related notes and schedules) fairly presents the results of income, cash
flows and shareholders' equity, as the case may be, of Precept for the
periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments that would not be material in amount or
effect), in each case in accordance with GAAP consistently applied during the
periods involved.
4.8 FINDERS' FEES. There is no investment banker, broker, finder
or other intermediary that has been retained by or is authorized to act on
behalf of Buyer who might be entitled to any fee or commission from Xxxxx or
the Company upon consummation of the transactions contemplated by this
Agreement.
21
4.9 LITIGATION. Except as set forth in the S-4 Registration
Statement, there are currently no pending or, to the knowledge of Precept or
Buyer, threatened material claims, actions, lawsuits, administrative
proceeding or reviews of formal or informal complaints or investigations by
any Person against or relating to Precept or Buyer or any of its directors,
employees, or agents (in their capacities as such) or to which any assets of
Precept or Buyer are subject. Except as otherwise set forth in the S-4
Registration Statement, neither Precept nor Buyer is bound by, or subject to,
any currently existing judgment, order, writ, injunction or decree that would
have a material adverse effect on Buyer or Precept.
4.10 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the Effective Date
and except as otherwise set forth in SECTION 4.10 OF THE DISCLOSURE SCHEDULE,
there has not been: (a) any material adverse change in the condition
(financial or otherwise), results of operations, business, prospects, assets
or Liabilities of Precept or Buyer; (b) any payment (including, without
limitation, any dividend or other distribution or repayment of indebtedness)
to any shareholder of Precept, other than payment of compensation to
employees of Precept or Buyer in the ordinary course of business and
consistent with past practices; (c) any breach or default (or event that with
notice or lapse of time or both would constitute a breach or default),
termination or, to the knowledge of the executive officers of Precept and
Buyer threatened termination, under any material agreement of Precept or
Buyer; (d) any material theft, damage, destruction, casualty loss,
condemnation or eminent domain proceeding affecting any of assets of Precept
or Buyer, whether or not covered by insurance; (e) any sale, assignment or
transfer of any of the assets of Precept or Buyer, except in the ordinary
course of business and consistent with past practices; (f) any waiver by
Precept or Buyer of any material rights related to Precept's or Buyer's
respective business, operations or assets; (g) any other material
transaction, agreement or commitment entered into by the Precept, Buyer or
their significant shareholders affecting Precept's or Buyer's respective
business, operations or assets, except in the ordinary course of business and
consistent with past practices, or (h) any agreement or understanding to do
or resulting in any of the foregoing.
4.11 TAX-FREE REORGANIZATION; POOLING.
(a) Neither Buyer nor Precept nor any of their Affiliates has
taken or agreed to take any action that would prevent the transaction
contemplated hereby from (i) constituting a reorganization qualifying under
the provisions of Section 368(a) of the Code or (ii) being treated for
financial accounting purposes as a Pooling Transaction.
(b) Buyer and Precept have no current plan or intention to
liquidate the Company, to merge the Company into any other corporation, to
cause the Company to sell or otherwise dispose of any of its assets, except
for dispositions made in the ordinary course of business, or to sell or
otherwise dispose of any of the Company stock acquired in the transaction
contemplated hereby, except for transfers described in Section 368(a)(2)(C)
of the Code.
(c) Buyer and Precept have no current plan or intention to
reacquire any of the Parent Class A Common Stock issued in the transaction
contemplated hereby.
(d) It is the present intention of Buyer to continue at least one
significant historic business line of the Company, or to use at least a
significant portion of the Company's historic
22
business assets in a business, in each case within the meaning of Treasury
Regulations Section 1.368-1(d).
4.12 NO MISREPRESENTATIONS. The representations, warranties and
statements made by Buyer and Precept in or pursuant to this Agreement
(including the Disclosure Schedule) are true, complete and correct in all
material respects and do not contain any untrue statement of a material fact
or omit to state any material fact necessary to make any such representation,
warranty or statement, under the circumstance in which it was made, not
misleading.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 CERTAIN EXCLUDED ASSETS. Buyer, Xxxxx and the Company
acknowledge and agree that certain of the Company's assets set forth on
EXHIBIT J hereto shall be excluded from the transaction contemplated hereby
(collectively, the "Excluded Assets").
5.2 CONDUCT OF BUSINESS. Prior to the Closing, the Company will,
and Xxxxx will cause the Company to (a) operate in the ordinary course of
business and consistent with past practices and use their reasonable best
efforts, consistent with past practice to preserve the goodwill of the
Company and of their employees, customers, suppliers, Governmental Bodies and
others having business dealings with the Company; (b) except as contemplated
by this Agreement, not engage in any transaction outside the ordinary course
of business, including without limitation by making any material expenditure,
investment or commitment or entering into any material agreement or
arrangement of any kind; (c) maintain all insurance policies and all Permits
that are required for the Company to carry on its business; (d) maintain
books of account and records in the usual, regular and ordinary manner and
consistent with past practices; and (e) not take any action that would result
in a breach (as of the Closing) of the representations and warranties set
forth in SECTION 3.11.
5.3 NO-SHOP PROVISIONS. Neither the Company nor Xxxxx has entered
into any agreement, commitment or understanding with any other Person with
respect to the sale of the Shares or a substantial portion of the business or
assets of the Company (whether through an asset sale, stock sale, merger or
otherwise). Until the Closing, the Company and Xxxxx agree to negotiate
exclusively and in good faith with Buyer with respect to the sale of the
Shares or the Company's assets, and neither the Company nor Xxxxx will,
directly or indirectly (through agents or otherwise), encourage or solicit
any inquiries or accept any proposals by, or engage in any discussions or
negotiations with or furnish any information to, any other Person concerning
a sale of the Shares or a substantial portion of the assets or business of
the Company (whether through an asset sale, stock sale, merger or otherwise),
and the Company and Xxxxx will promptly communicate to Buyer the material
substance of any inquiry or proposal concerning any such transaction that may
be received.
5.4 ACCESS AND INFORMATION. The Company will permit Buyer and its
representatives to have reasonable access to the Company's directors,
officers, employees, agents, assets and properties and all relevant books,
records and documents of or relating to the business and assets of the
Company during normal business hours and will furnish to Buyer such
information, financial records and other documents relating to the Company
and their respective operations and business
23
as Buyer may reasonably request. The Company and Xxxxx will permit Buyer and
its representatives reasonable access to the Company's accountants, auditors,
suppliers and Governmental Bodies having dealings with the Company for
consultation or verification of any information obtained by Buyer, on and
after the date of execution and delivery of this Agreement, and will use
their respective best efforts to cause such Persons to cooperate with Buyer
and its representatives in such consultation and in verifying such
information.
5.5 SUPPLEMENTAL DISCLOSURE. Each party hereto will promptly
supplement or amend each of the Schedules hereto with respect to any matter
that arises or is discovered after the date hereof that, if existing or known
at the date hereof, would have been required to be set forth or listed in the
Schedules hereto; provided that, for purposes of determining the rights and
obligations of the parties hereunder (other than the obligations of the
parties under this SECTION 5.5), any such supplemental or amended disclosure
will be deemed to have been disclosed to the other party for purposes of
SECTION 7.1 hereof and each party reserves the right, in the event of any
such supplemental disclosure, to terminate this Agreement pursuant to SECTION
8.1(b) or SECTION 8.1(e), as the case may be, of this Agreement if such
supplemental disclosure, in such party's reasonable opinion, could have a
material adverse effect on the assets, liabilities, financial condition or
prospects of either the Company, Precept or Buyer (as the case may be).
5.6 INFORMATION FOR FILINGS. Xxxxx and the Company will furnish
Buyer with all information concerning the Company as is required for
inclusion in any application or filing made by Buyer to any Governmental Body
in connection with the transactions contemplated by this Agreement.
5.7 FULFILLMENT OF CONDITIONS BY THE COMPANY AND XXXXX. The
Company and Xxxxx agree not to take any action that would cause the
conditions on the obligations of the parties to effect the transactions
contemplated hereby not to be fulfilled, including without limitation, by
taking or causing to be taken any action that would cause the representations
and warranties made by the Company or Xxxxx herein not to be true and correct
as of the Closing. The Company and Xxxxx will take all reasonable steps to
cause to be fulfilled the conditions precedent to Buyer's and Precept's
obligations to consummate the transactions contemplated hereby that are
dependent on the actions of the Company or Xxxxx, respectively.
5.8 FULFILLMENT OF CONDITIONS BY BUYER AND PRECEPT. Subject to
SECTION 5.13 below, Buyer and Precept agree not to take any action, unless
otherwise required by applicable legal requirements, that would cause the
conditions on the obligations of the parties to effect the transactions
contemplated hereby not to be fulfilled, including without limitation, by
taking or causing to be taken any action that would cause the representations
and warranties made by Buyer or Precept herein not to be true and correct as
of the Closing. Buyer and Precept will take all reasonable steps to cause to
be fulfilled the conditions precedent to the Company's and Xxxxx'x
obligations to consummate the transactions contemplated hereby that are
dependent on the actions of Buyer or Precept, respectively.
5.9 PUBLICITY. Buyer, Precept, the Company and Xxxxx will
cooperate with each other in the development and distribution of all news
releases and other public disclosures relating to the transactions
contemplated by this Agreement. Neither Buyer or Precept, on the one hand,
nor the
24
Company or Xxxxx, on the other hand, will issue or make, or allow to have
issued or made, any press release or public announcement concerning the
transactions contemplated by this Agreement without the advance approval in
writing of the form and substance thereof by the other parties, unless
otherwise required by applicable legal requirements; PROVIDED, HOWEVER, such
approval shall not be unreasonably withheld.
5.10 RELEASE BY XXXXX. Effective upon the Closing, Xxxxx, for
himself and his heirs, executors, administrators, successors and assigns,
hereby fully and unconditionally releases and forever discharges and holds
harmless the Company and its respective employees, officers, directors,
successors and assigns from any and all claims, demands, losses, costs,
expenses (including reasonable attorneys' fees and expenses), obligations,
liabilities and/or damages of every kind and nature whatsoever, whether or
not now existing or known, relating in any way, directly or indirectly, to
the Company, this Agreement or the transactions contemplated hereby, that
Xxxxx may now have or may hereafter claim to have against the Company or any
of such employees, officers, directors, successors or assigns.
5.11 COVENANTS RELATING TO TAXES.
(a) Buyer shall file all Tax Returns for the Company for all
periods ending on or prior to the Closing Date that are required to
be filed after the Closing Date.
(b) Notwithstanding anything to the contrary contained herein,
Buyer shall file any necessary Tax Return or other documentation with
respect to all transfer, sales, stamp, registration or other similar
Taxes or fees incurred in connection with this Agreement and shall be
responsible for payment of any such Tax; PROVIDED, HOWEVER, any
federal, state or local tax audits relating to the Company that
pertain to either the calendar year 1997 (if any) or the Company's
fiscal year ended October 31, 1997 shall be the sole responsibility of
Xxxxx, and Xxxxx hereby agrees to pay any and all cost and expense of
attorneys, accountants and other professionals employed by Xxxxx to
assist with such audits, provided that Xxxxx shall determine and
control his tax representative and any other cost sources.
(c) Except as otherwise provided in the Agreement, Xxxxx and
Buyer agree to cooperate fully with each other with respect to the
preparation of all Tax Returns and with respect to all matters
relating to Taxes, and to keep each other advised as to any issue
relating to Taxes which could have a bearing on such other party's
responsibilities hereunder.
5.12 POOLING; TAX TREATMENT. Each party hereto shall use all
reasonable efforts to cause the transaction contemplated hereby to be treated
for financial accounting purposes as a Pooling Transaction, and shall not
take, and shall use all reasonable efforts to prevent any Affiliate of such
party from taking, any actions that would prevent such transaction from being
treated for financial accounting purposes as a Pooling Transaction.
Additionally, each party hereto shall use all reasonable efforts to cause the
transaction contemplated hereby to qualify, and shall not take, and use all
reasonable efforts to prevent any Affiliate of such party from taking, any
actions that would prevent such transaction as qualifying as a reorganization
under the provisions of Section 368(a) of the Code.
25
5.13 CONFIDENTIALITY. From the date hereof to and including the
Closing Date, the parties hereto shall maintain, and cause their directors,
employees, agents and advisors to maintain, in confidence and not disclose or
use for any purpose, except the evaluation of the transactions contemplated
hereby and the accuracy of the respective representations and warranties of
the parties hereto contained herein, information concerning the other parties
hereto and obtained directly or indirectly from such parties, or their
directors, employees, agents or advisors, except such information as is or
becomes (a) available to the non-disclosing party from third parties not
subject to an undertaking of confidentiality or secrecy; (b) generally
available to the public other than as a result of a breach by the
non-disclosing party hereunder; or (c) required to be disclosed under
applicable law; and except such information that was in the possession of
such party prior to obtaining such information from such other party (as to
which the fact of prior possession such possessing party shall have the
burden of proof). In the event that the transactions contemplated hereby
shall not be consummated, all such information that is in writing shall be
returned to the party furnishing the same, including to the extent reasonably
practicable, copies or reproductions thereof which may have been prepared.
5.14 CUSTOMER VISITS. Upon execution of this Agreement, Precept
and/or Buyer shall conduct due diligence on the customers, suppliers and
Governmental Bodies having dealings with the Company in such manner and with
such customers, suppliers and Governmental Bodies as is mutually agreed upon
by the parties hereto (the "Customer Due Diligence").
5.15 REPORTING. Precept shall file in a timely manner any and all
reports required to be filed and shall take all actions necessary to maintain
its status as a reporting company under the Securities Exchange Act of 1934,
as amended.
5.16 PRECEPT 8-K. Precept agrees to use commercially reasonable
efforts to file its 8-K with respect to the transaction contemplated by this
Agreement on or prior to August 31, 1998, but in no event later than
September 15, 1998, that includes at least 30 days of combined operations,
combined sales and net income figures for the Company and Buyer and any other
financial information necessary as contemplated by and in accordance with the
terms of SEC Accounting Series Release No. 135 and related accounting rules.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF BUYER AND PRECEPT. The
obligations of Buyer and Precept under this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions, but
compliance with any such conditions may be waived by Buyer or Precept in
writing:
(a) All representations and warranties of the Company and Xxxxx
contained in this Agreement shall be true and correct at and as of the
Closing Date with the same effect as though such representations and
warranties were made at and as of the Closing Date.
26
(b) The Company and Xxxxx shall have performed and complied
with all the covenants and agreements and satisfied the conditions
required by this Agreement to be performed, complied with or
satisfied by them at or prior to the Closing Date, including without
limitation the delivery of all items required to be delivered by them
pursuant to SECTION 2.4.
(c) There shall be no pending or threatened litigation in any
court or any proceeding before or by any Governmental Body against the
shareholders of the Company (including Xxxxx), the Company, Precept or
Buyer to restrain or prohibit or obtain damages or other relief with
respect to this Agreement or the consummation of the transactions
contemplated hereby.
(d) All necessary contractual, governmental or other (including
shareholder) consents, approvals, orders or authorizations, if any,
necessary to permit the consummation of the transactions contemplated
by this Agreement shall have been obtained and all necessary
contractual, governmental or other notices, if any, necessary to
permit the consummation of the transactions contemplated by this
Agreement shall have been given.
(e) No supplemental disclosure to the Disclosure Schedules
pursuant to SECTION 5.5 of this Agreement shall have been made by
Xxxxx or the Company that discloses any fact or event that, in Buyer's
reasonable opinion, could have a material adverse effect on the
assets, liabilities, financial condition or prospects of the Company.
(f) The Company and Buyer shall have completed the Customer
Due Diligence and Buyer shall be satisfied (in Buyer's sole
discretion), based on such visits, that the Company's customer and
other business relationships are satisfactory.
(g) There shall have been no material adverse change in the
assets, liabilities or financial condition of the Company prior to
Closing as reflected in the Financial Statements, except for the
removal of the Excluded Assets.
(h) Precept and Buyer shall have been advised in writing by
Ernst & Young LLP prior to the Closing Date that the transaction
contemplated hereby shall be treated for financial accounting
purposes as a Pooling Transaction.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND XXXXX. The
obligations of the Company and Xxxxx under this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions, but
compliance with any such conditions may be waived by the Company or Xxxxx in
writing:
(a) All representations and warranties of Buyer and Precept
contained in this Agreement shall be true and correct at and as of
the Closing Date with the same effect as though such representations
and warranties were made at and as of the Closing Date.
(b) Buyer and Precept shall have performed and complied with
the covenants and agreements and satisfied the conditions required by
this Agreement to be performed,
27
complied with or satisfied by them at or prior to the Closing Date,
including without limitation the delivery of all items required to be
delivered by Buyer pursuant to SECTION 2.4.
(c) There shall be no pending or threatened litigation in any
court or any proceeding before or by any Governmental Body against
the shareholders of the Company (including Xxxxx), the Company,
Precept or Buyer to restrain or prohibit or obtain damages or other
relief with respect to this Agreement or the consummation of the
transactions contemplated hereby.
(d) All necessary contractual, governmental, or other consents,
approvals, orders or authorizations shall have been obtained and all
necessary governmental notices shall have been given, provided that
receipt of third party consents by Xxxxx shall not be deemed a
condition to Closing on the part of Xxxxx if Buyer provides
satisfactory indemnification to Xxxxx against any liabilities related
to failure to obtain such consents.
(e) No supplemental disclosure to the Disclosure Schedules
pursuant to SECTION 5.5 of this Agreement shall have been made by
Precept or Buyer that discloses any fact or event that, in Xxxxx'x
reasonable opinion, could have material adverse effect on the assets,
liabilities, financial condition or prospects of Precept or Buyer.
(f) Xxxxx shall have received a tax opinion from his counsel
that the transaction contemplated hereby shall be tax-free to the
Company and Xxxxx.
(g) There shall have been no material adverse change in the
assets, liabilities or financial condition of Buyer or Precept prior
to the Closing.
ARTICLE VII
INDEMNIFICATION; HOLDBACK
7.1 INDEMNIFICATION OF BUYER AND PRECEPT. The Company (until the
Closing) and Xxxxx (after the Closing), hereby agree to indemnify, defend and
hold Precept, Buyer and their subsidiaries (including the Company after the
Closing) and their respective directors, officers, employees and agents (each
a "Buyer Party" and collectively, the "Buyer Parties") harmless from any and
all liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all court costs and reasonable attorneys' fees
(collectively, "Losses"), that any Buyer Party may suffer or incur as a
result of or relating to a breach of any agreement, representation, warranty
or covenant made by the Company or Xxxxx in this Agreement or the Transaction
Documents to which Xxxxx is a party or pursuant hereto, or in any exhibit,
Disclosure Schedule, certificate or financial statement delivered hereunder
or in any document required to be delivered on the Closing Date, but only to
the extent such Losses exceed $100,000 individually or in the aggregate,
provided that the Buyer Parties shall be indemnified against the full amount
of such Losses once the Losses equal or exceed $100,000. The maximum amount
of Losses for which the Buyer Parties shall be entitled to indemnification
hereunder shall be $7,000,000, except with respect to intentional
misrepresentations or fraud by Xxxxx or the Company (if applicable), in
28
which case the limitation on indemnification set forth in the preceding
sentence shall not apply. The indemnification obligations under this Article
VII shall expire one (1) year from the Closing Date except with respect to
any Claims (as defined below) of the Buyer Parties pending as of such date
(which Claims shall continue until the final resolution thereof but, in no
event, shall such Claims remain unresolved past the first anniversary of the
Closing Date). Accordingly, each party hereto agrees to fully and finally
resolve any pending Claims for indemnification on or before the first
anniversary of the Closing Date.
7.2 NOTIFICATION OF CLAIM; SET OFF. Any of the Buyer Parties
seeking indemnification under this Article VII will promptly give notice to
Xxxxx (or the Company, if applicable) of any Losses or claims as to which it
asserts a right to indemnification (a "Claim"), and within thirty (30) days
thereafter, further notify Xxxxx (or the Company, if applicable) of the
details of such Claim and the amount thereof; PROVIDED, HOWEVER, that the
failure to give such notification shall not relieve Xxxxx (or the Company, if
applicable) from any liability that he may have pursuant to the provisions of
this Article VII as long as the failure to give such notice within such time
is not prejudicial to Xxxxx or the Company. Notice to one of the Buyer
Parties for the purpose of this SECTION 7.2 shall mean the filing of the
service upon such of the Buyer Parties of any legal action, receipt of any
claim in writing or similar form of actual notice. Buyer shall be entitled,
but not required, to set off the amount of any Claim or Claims in respect of
which Buyer Parties are entitled to indemnification against any payments
becoming due to Xxxxx (or the Company, if applicable) pursuant to this
Agreement, the Transaction Documents to which Xxxxx is a party or otherwise.
Buyer shall also be entitled, but not required, to cancel Holdback Shares (as
defined in SECTION 7.4 hereof) in accordance with SECTION 7.4(e) below.
7.3 DEFENSE OF CLAIMS. If any Claim by one of the Buyer Parties
arises out of a claim by a person other than one of the Buyer Parties, Buyer
will promptly give notice to Xxxxx (or the Company, if applicable) of any
such Claim, and thereafter Xxxxx (or the Company, if applicable) may, by
written notice, undertake to conduct any proceedings or negotiations in
connection therewith or necessary to defend the Buyer Parties and take all
other steps or proceedings to settle or contest such claim, including,
without limitation, the employment of counsel; PROVIDED, HOWEVER, that (a)
Xxxxx (or the Company, if applicable) shall not enter into any agreement in
compromise or settlement of any claim that could affect the Taxes
attributable to any taxable period of the Company beginning on or after the
Closing Date without the prior written consent of Buyer, and (b) Xxxxx (or
the Company, if applicable) shall reasonably consider the advice of the Buyer
Parties as to the defense and settlement of such claim and the Buyer Parties
shall have the right to participate, at their own expense, in such defense.
Except as otherwise provided herein, control of such litigation and
settlement shall remain with Xxxxx (or the Company, if applicable). The Buyer
Parties shall provide all reasonable cooperation in connection with any such
defense by Xxxxx (or the Company, if applicable). Counsel and auditor fees,
filing fees and court fees of all proceedings, contests or lawsuits with
respect to any such claim shall be borne by Xxxxx (or the Company, if
applicable). If any such Claim is made hereunder and Xxxxx (or the Company,
if applicable) elects not to undertake the defense thereof by written notice
to the Buyer Parties, the Buyer Parties shall be entitled to indemnification
with respect thereto pursuant to the terms of this Article VII. If any Claim
for indemnification by Buyer arises out of a Claim by Buyer and not a third
party, then Buyer shall be entitled to immediate indemnification hereunder.
29
7.4 HOLDBACK FOR CLAIMS.
(a) RECOURSE TO HOLDBACK ACCOUNT. At the Closing, 451,513
shares of Parent Class A Common Stock to be issued to Xxxxx at
Closing under this Agreement (plus any additional New Shares (as
defined below) as may be issued in respect thereof after the Closing)
(collectively, the "Holdback Shares"), will be issued in the name of
Xxxxx and held by Buyer to partially secure the indemnification
obligations of Xxxxx under SECTION 7.1. Of the 451,513 Holdback
Shares, 71,839 shares are held by Buyer to partially secure the
indemnification obligations of Xxxxx arising (i) from the breach by
the Company or Xxxxx of SECTION 3.12 hereof relating to Taxes, or
(ii) the failure of the Company to properly remit sales taxes
(collectively, the "Specific Losses"). The parties hereto have agreed
to allocate 71,839 of the Holdback Shares to the Specific Losses set
forth in the preceding sentence.
(b) HOLDBACK PERIOD; DISTRIBUTION UPON TERMINATION OF HOLDBACK
PERIOD. Subject to the following requirements, the Holdback Shares
shall be retained by Buyer for the duration of the indemnification
obligations of Xxxxx and the Company, if applicable (the "Holdback
Period"). Upon the expiration of the Holdback Period, Buyer will
deliver to Xxxxx the remaining Holdback Shares, if any; PROVIDED,
HOWEVER, that the number of Holdback Shares with a value (assuming a
per share value of $2.784) equal to the amount of the Losses or other
indemnification obligations as to which the Buyer has properly made a
Claim under SECTION 7.2 shall be retained by Buyer until such Claims
have been resolved, subject, however, to SECTION 7.4(h) below.
Within five (5) business days following resolution of such Claims,
Buyer shall deliver to Xxxxx all Holdback Shares retained by Buyer
and not required to satisfy such Claims.
(c) PROTECTION OF HOLDBACK SHARES. Buyer shall hold and
safeguard the Holdback Shares during the term of the Holdback Period,
shall treat such Holdback Shares as a trust fund in accordance with
the terms of this Agreement and not as the property of Buyer and
shall hold and dispose of the Holdback Shares only in accordance with
the terms hereof.
(d) DISTRIBUTIONS; VOTING.
(i) Any shares of Parent Class A Common Stock or other
equity securities issued or distributed by Precept (including shares
issued upon a stock split) (the "New Shares") in respect of Holdback
Shares that have not been released to Xxxxx shall be added to the
Holdback Shares and become a part thereof. New Shares issued in
respect of Holdback Shares that have been released shall not be added
to the Holdback Shares, but shall be distributed to the holders
thereof. When and if cash dividends on Holdback Shares shall be
declared and paid, they shall not be added to the Holdback Shares but
shall be paid to the holders thereof.
(ii) Xxxxx shall be the record owner of the Holdback Shares
and shall have voting rights with respect to the Holdback Shares
(including any New Shares that are voting securities) so long as such
Holdback Shares are retained by Buyer.
30
(e) CLAIM UPON HOLDBACK SHARES.
(i) Upon written notification by Buyer to Xxxxx at any
time on or before the last day of any Holdback Period:
(A) that Buyer has paid or properly accrued Losses in
an aggregate stated amount to which Buyer is entitled to indemnity
pursuant to this Agreement, and
(B) in the case of such Losses, specifying in
reasonable detail the individual items of Losses included in the
amount so stated, the date each such item was paid or properly
accrued and the nature of the misrepresentation or breach of warranty,
if any, or claim to which such item is related; then Buyer shall,
unless Xxxxx objects in accordance with the provisions of SECTION
7.4(f) hereof, cancel the number of shares of Parent Class A Common
Stock having a value equal to such Losses.
(ii) For the purposes of determining the number of shares of
Parent Class A Common Stock to be cancelled from the Holdback Shares
pursuant to SECTION 7.4(e)(i), the shares of Parent Class A Common
Stock shall be valued at $2.784 per share.
(f) OBJECTIONS TO CLAIMS. At the time of receipt of any
notification as set forth in SECTION 7.4(e)(i), Xxxxx shall have a
period of thirty (30) days after such delivery to object in a written
statement to the claim made in the notification, and such statement
shall have been delivered to Buyer prior to the expiration of such
thirty (30) day period. If Buyer does not receive any such objection
from Xxxxx within such thirty (30) day period, Buyer may cancel the
shares of Parent Class A Common Stock from the Holdback Shares equal
to the amount of Losses paid or properly accrued.
(g) NO LIMITATION. The existence of this SECTION 7.4 and the
rights set forth herein are not intended to limit any other claims by
Buyer for indemnification against Xxxxx (or the Company, if
applicable).
(h) ONE YEAR LIMITATION. Notwithstanding anything to the
contrary herein, each party hereto agrees to fully and finally
resolve any pending Claims on or before the first anniversary of the
Closing Date and, therefore, the Holdback Shares, if any, shall be
either cancelled or returned to Xxxxx on or before the first
anniversary of the Closing Date.
7.5 SURVIVAL. All representations and warranties made in or
pursuant to this Agreement will survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby for a
period of one (1) year after the Closing Date and the right to
indemnification with respect thereto shall expire on such date (unless there
is a Claim pending on such date, in which case the indemnification
obligations, hereunder shall continue until the final resolution of such
Claim but, in no event, shall such indemnification obligations
31
extend beyond the first anniversary of the Closing Date). All statements
contained in any Schedule to this Agreement will constitute representations
and warranties under this Agreement.
7.6 EXCLUSIVE REMEDY. Subject to the terms and conditions of
SECTION 7.1, the indemnification provisions of this Article VII shall be the
sole and exclusive remedy of Precept or Buyer for a breach of any
representation, warranty, covenant or agreement of the Company or Xxxxx under
this Agreement, except with respect to intentional misrepresentations or
fraud by Xxxxx or the Company.
ARTICLE VIII
MISCELLANEOUS
8.1 TERMINATION OF AGREEMENT. Certain of the parties to this
Agreement may terminate this Agreement as follows:
(a) Buyer, Precept, the Company and Xxxxx may terminate this
Agreement by mutual written consent at any time prior to the Closing.
(b) Buyer and Precept may terminate this Agreement by giving
written notice to the Company and Xxxxx at any time prior to the
Closing Date in the event the Company or Xxxxx has materially
breached any representation or warranty pursuant to Article III of
this Agreement or otherwise materially breached any covenant or
agreement herein.
(c) Buyer and Precept may terminate this Agreement by giving
written notice to the Company and Xxxxx at any time prior to the
Closing Date if the Closing shall not have occurred on or before
June 30, 1998, by reason of the failure of any condition precedent
set forth in Article VI hereof (unless the failure results primarily
from Buyer or Precept breaching any representation, warranty or
covenant contained in this Agreement as contemplated in Subsection
(b) of this SECTION 8.1); or
(d) The Company and Xxxxx may terminate this Agreement by
giving written notice to Buyer and Precept at any time prior to the
Closing Date if the Closing shall not have occurred on or before
June 30, 1998, by reason of the failure of any condition precedent
set forth in Article VI hereof (unless the failure results primarily
from Xxxxx himself breaching any representation, warranty or covenant
contained in this Agreement as contemplated in Subsection (e) of this
SECTION 8.1).
(e) The Company and Xxxxx may terminate this Agreement by giving
written notice to Buyer and Precept at any time prior to the Closing
Date in the event Buyer or Precept has materially breached any
representation or warranty pursuant to Article IV of this Agreement
or otherwise materially breached any covenant or agreement herein.
(f) The Company and Xxxxx may terminate this Agreement if the
per share closing price of the Parent Class A Common Stock is below
$2.50 at any time prior to the Closing Date, and Precept and Buyer
may terminate this Agreement if the per share closing
32
price of the Parent Class A Common Stock exceeds $3.50 at any time
prior to the Closing Date.
8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in SECTION 8.1, this Agreement shall forthwith become
void, there shall be no liability on the part of Buyer and Precept, on the
one hand, and the Company and Xxxxx, on the other, and all rights and
obligations of any party hereto shall cease, except that nothing herein shall
relieve any party of any liability for (i) any breach of such party's
covenants or agreements contained in this Agreement, or (ii) any willful
breach of such party's representations or warranties contained in this
Agreement.
8.3 NOTICES. All notices that are required or may be given
pursuant to this Agreement must be in writing and delivered personally, by a
recognized courier service, by a recognized overnight delivery service, by
facsimile or by registered or certified mail, postage prepaid, to the parties
at the following addresses (or to the attention of such other person or such
other address as any party may provide to the other parties by notice in
accordance with this SECTION 8.3):
IF TO BUYER: Precept Business Services, Inc.
0000 Xxxxxxx Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: General Counsel
Facsimile No.: 214/220-1082
WITH A COPY TO: Xxxxxx Xxxxx Xxxx Xxxx & Xxxxx, P.C.
5000 Plaza on the Lake, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Xx., Esq.
Facsimile No.: 512/306-6201
IF TO THE COMPANY OR XXXXX: MBF Corporation
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxx 00000
Attention: X.X. Xxxxx
WITH A COPY TO: Xxxxx Xxxx
0000 Xxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxx, Esq.
Facsimile No.: 202/828-2488
Any such notice or other communication will be deemed to have been
given and received (whether actually received or not) on the day it is
personally delivered or delivered by courier or overnight delivery service or
by facsimile or, if mailed, when actually received.
8.4 EXPENSES. Buyer and Xxxxx will each bear their own respective
costs and expenses
33
in connection with the transactions contemplated by this Agreement. Xxxxx
shall bear any costs, expenses or fees payable to any financial advisors,
attorneys, accountants or other representatives retained by the Company or
Xxxxx on their behalf and on behalf of the Company, with regard to the
transactions contemplated by this Agreement. Buyer and its Affiliates shall
bear any costs, expenses or fees payable to any financial advisors,
attorneys, accountants or other representatives retained by Buyer or its
Affiliates with regard to the transaction contemplated by this Agreement. If
attorneys', accountants' or financial advisors' fees or other fees or costs
are incurred to secure performance of any obligations under this Agreement or
any agreement contemplated hereby, or to establish damages for the breach
thereof or to obtain any other appropriate relief, whether by way of
prosecution or defense, the prevailing party will be entitled to recover
reasonable attorneys' fees and costs incurred in connection therewith.
8.5 FURTHER ASSURANCES. Each party agrees to execute any and all
documents and to perform such other acts as may be necessary or expedient to
further the purposes of this Agreement and the transactions contemplated
hereby.
8.6 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned or delegated by the
Company, Xxxxx or Buyer, without the prior written consent of the other
parties hereto; except that Buyer may assign its rights and obligations under
this Agreement to any direct or indirect subsidiary of Precept (provided that
Buyer shall remain obligated to perform Buyer's obligations hereunder) and
except that the rights of Xxxxx shall inure to the benefit of his heirs,
executors, administrators and beneficiaries. This Agreement is not intended
to confer any rights or benefits to any Person (including without limitation
any employees of the Company) other than the parties hereto.
8.7 ENTIRE AGREEMENT. This Agreement, the other Transaction
Documents, and the documents contained as Exhibits and Disclosure Schedules
hereto contain the entire understanding of the parties relating to the
subject matter hereof and supersede all prior written or oral and all
contemporaneous oral agreements and understandings relating to the subject
matter hereof. This Agreement cannot be modified or amended except in writing
signed by the party against whom enforcement is sought. The Exhibits and
Disclosure Schedules to this Agreement are hereby incorporated by reference
into and made a part of this Agreement for all purposes.
8.8 SEVERABILITY. If any provision of this Agreement is declared
or found to be illegal, unenforceable or void, in whole or in part, then the
parties will be relieved of all obligations arising under such provision, but
only to the extent it is illegal, unenforceable or void. The intent and
agreement of the parties to this Agreement is that this Agreement will be
deemed amended by modifying any such illegal, unenforceable or void provision
to the extent necessary to make it legal and enforceable while preserving its
intent, or if that is not possible, by substituting another provision that is
legal and enforceable and achieves the same objectives as the provisions.
Notwithstanding the foregoing, if the remainder of this Agreement will not be
affected by such declaration or finding and is capable of substantial
performance, then each provision not so affected will be enforced to the
extent permitted by law.
8.9 GOVERNING LAW. This Agreement will be governed by and
construed and interpreted in accordance with the substantive laws of the
State of Texas, without giving effect to
34
any conflicts of law rule or principle that might require the application of
the laws of another jurisdiction.
8.10 ARBITRATION PROCEEDINGS.
(a) NEGOTIATION PERIOD. Any dispute, controversy or claim
arising out of or relating to this Agreement, or any alleged breach
hereof, will be subject to binding arbitration in accordance with
this SECTION 8.10. If such a dispute, controversy or claim exists,
the parties shall attempt for a 30-day period (the "Negotiation
Period") from the date any party gives any one or more of the other
parties notice (a "Dispute Notice") pursuant to this Section, to
negotiate in good faith, a resolution of the dispute. The Dispute
Notice shall set forth with specificity the basis of the dispute.
During the Negotiation Period, representatives of each party involved
in the dispute who have authority to settle the dispute shall meet
at mutually convenient times and places and use their best efforts to
resolve the dispute.
(b) COMMENCEMENT OF ARBITRATION. If a resolution is not
reached by the parties prior to the end of the Negotiation Period,
either party may provide a written request to the American Arbitration
Association within ten (10) days from the end of such period
requesting the selection of three (3) arbitrators (the "Panel") to
arbitrate the parties' respective rights and obligations with respect
to the matter set forth in the Dispute Notice. Each arbitrator on
the Panel shall be experienced in the arbitration of complex
commercial disputes.
(c) DISCOVERY. Each party to an arbitration shall be entitled
to such discovery as the Panel shall determine is appropriate.
(d) EXPENSES OF ARBITRATORS. The expenses of the Panel shall
be paid by the party that does not substantially prevail on the
merits in the arbitration (as determined by the award of the Panel).
(e) LOCATION OF ARBITRATION. The arbitration shall take place
in Ouachita Parish, Louisiana.
(f) AAA RULES. Except as expressly provided in this SECTION
8.10, the arbitration shall be conducted in accordance with the
Commercial Rules of the American Arbitration Association as then in
effect.
(g) FEES AND EXPENSES. The party that substantially prevails
on the merits of the arbitration (as determined by the Panel) shall
be entitled to reasonable attorneys' fees, costs, expenses and
necessary disbursements in addition to any other relief to which
such party may be entitled.
8.11 INTERPRETATION. When used in this Agreement, the masculine,
feminine or neuter gender and the singular or plural number shall each be
deemed to include the others whenever the context so indicates or permits.
35
8.12 COUNTERPARTS; FACSIMILE SIGNATURES. One or more counterparts
of this Agreement may be delivered by facsimile transmission, with the
intention that they shall have the same effect as an original counterpart
hereof. This Agreement may be executed by the parties on one or more
counterparts, all of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
8.13 HEADINGS. The section headings contained in this Agreement
are included for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
8.14 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
BUYER: COMPANY:
PRECEPT BUSINESS PRODUCTS, INC., MBF CORPORATION,
a Delaware corporation a Louisiana corporation
By: By:
--------------------------------- ------------------------------------
Xxxxx X. Xxxxx, X.X. Xxxxx,
Chief Executive Officer Chief Executive Officer
PRECEPT: XXXXX:
PRECEPT BUSINESS SERVICES, INC.,
a Texas corporation
By:
--------------------------------- ---------------------------------------
Xxxxx X. Xxxxx, X.X. Xxxxx, individually
Chief Executive Officer
