CONFORMED COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
XXXXXX XXXXXXXXX,
XXXXXXX XXXXXXXXXX,
AND
PRT GROUP, INC.
DATED AS OF JULY 1, 1997
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF THE SHARES
Section 1.1 Purchase and Sale............................................ 1
Section 1.2 Consideration................................................ 1
Section 1.3 [Reserved]................................................... 2
Section 1.4 Closing...................................................... 2
Section 1.5 Deliveries by Sellers........................................ 2
Section 1.6 Deliveries by Buyer.......................................... 3
Section 1.7 Post-Closing Adjustments..................................... 3
ARTICLE II
RELATED MATTERS
Section 2.1 Books and Records of the Company.............................. 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 3.1 Organization................................................. 6
Section 3.2 Authorization................................................ 7
Section 3.3 Capital Stock................................................ 7
Section 3.4 Ownership of the Shares...................................... 8
Section 3.5 Consents and Approvals; No Xxxxx-
tions........................................................ 9
Section 3.6 Financial Statements......................................... 9
Section 3.7 Absence of Undisclosed Liabilities........................... 10
Section 3.8 Related-Party Transactions................................... 10
Section 3.9 Title, Ownership and Related Mat-
ters......................................................... 10
Section 3.10 Leases....................................................... 11
Section 3.11 Intellectual Property........................................ 11
Section 3.12 Computer Software............................................ 13
Section 3.13 Litigation................................................... 14
Section 3.14 Compliance with Applicable Law............................... 14
Section 3.15 Certain Contracts and Arrangements........................... 14
[Section 3.16 Employee Benefit Plans; ERISA; Em-
ployees...................................................... 15
Section 3.17 Taxes........................................................ 16
Section 3.18 Certain Fees................................................. 16
Section 3.19 Environmental Protection..................................... 16
Section 3.20 Receivables.................................................. 18
Section 3.21 Accuracy of Minute Books, Stock
Books and Ledger Books....................................... 18
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Page
Section 3.22 Disclosure................................................... 18
Section 3.23 Insurance.................................................... 18
Section 3.24 Bank Accounts................................................ 19
Section 3.25 Customers and Suppliers...................................... 19
Section 3.26 Warranties................................................... 19
Section 3.27 Proprietary Information of Third
Parties...................................................... 20
Section 3.28 Restricted Securities........................................ 20
Section 3.29 Legends...................................................... 21
Section 3.30 Accredited Investor.......................................... 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1 Organization and Authority of Buyer.......................... 21
Section 4.2 Consents and Approvals; No Violations........................ 22
Section 4.3 Availability of Funds........................................ 23
Section 4.4 Litigation................................................... 23
Section 4.5 Capitalization............................................... 23
Section 4.6 Financial Statements......................................... 24
Section 4.7 Buyer Common Stock........................................... 24
Section 4.8 Certain Fees................................................. 24
ARTICLE V
COVENANTS
Section 5.1 Conduct of the Company's Business............................ 25
Section 5.2 Access to Information........................................ 25
Section 5.3 Consents..................................................... 26
Section 5.4 Best Efforts................................................. 26
Section 5.5 Covenant to Satisfy Conditions............................... 27
Section 5.6 Certain Tax Matters.......................................... 27
Section 5.7 Registration Rights.......................................... 34
Section 5.8 Further Limitations on Disposition........................... 35
Section 5.9 No Sales to Competitors...................................... 36
Section 5.10 No Solicitation.............................................. 37
Section 5.11 Certain Litigation........................................... 37
Section 5.12 Covenant Not to Compete and Secrecy
Agreement.................................................... 37
Section 5.13 Optional Repurchase.......................................... 39
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Page
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 6.1 Conditions to Each Party's Obligation........................ 41
Section 6.2 Conditions to Obligations of Sellers........................ 42
Section 6.3 Conditions to Obligations of Buyer........................... 42
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.1 Termination.................................................. 43
Section 7.2 Procedure and Effect of Termination.......................... 44
Section 7.3 Amendment, Modification and Waiver........................... 44
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 8.1 Survival of Representations, Warranties and Agreements....... 45
Section 8.2 Sellers' Agreement to Indemnify.............................. 45
Section 8.3 Third Party Indemnification.................................. 47
ARTICLE IX
MISCELLANEOUS
Section 9.1 Fees and Expenses............................................ 48
Section 9.2 Further Assurances........................................... 48
Section 9.3 Notices...................................................... 48
Section 9.4 Severability................................................. 50
Section 9.5 Binding Effect; Assignment................................... 50
Section 9.6 No Third Party Beneficiaries................................. 50
Section 9.7 Interpretation............................................... 50
Section 9.8 Jurisdiction and Consent to Ser-
vice......................................................... 51
Section 9.9 Entire Agreement............................................. 51
Section 9.10 Governing Law................................................ 51
Section 9.11 Specific Performance......................................... 51
Section 9.12 Counterparts................................................. 52
iii
INDEX OF DEFINED TERMS
Page
Agreement.................................................................. 1
Xxxxxxxxx.................................................................. 1
Xxxxxxxxxx................................................................. 1
Sellers .................................................................. 1
Buyer .................................................................. 1
Shares .................................................................. 1
Common Stock............................................................... 1
Company .................................................................. 1
Closing .................................................................. 1
Purchase Consideration..................................................... 1
Cash Consideration......................................................... 1
Promissory Note............................................................ 2
Buyer Common Stock......................................................... 2
Warrants .................................................................. 2
Closing Date............................................................... 2
Working Capital Statement.................................................. 4
Final Working Capital Statement............................................ 4
Independent Accounting Firm................................................ 4
Final Working Capital Statement............................................ 5
Closing Working Capital.................................................... 5
Current Assets............................................................. 5
Current Liabilities........................................................ 5
Material Adverse Effect.................................................... 6
Disclosure Schedule........................................................ 7
Liens .................................................................. 8
Share Ownership Claim...................................................... 8
Financial Statements....................................................... 10
Business .................................................................. 11
Leases .................................................................. 11
License Agreements......................................................... 12
Intellectual Property...................................................... 12
Cases .................................................................. 14
employee benefit plan...................................................... 15
ERISA .................................................................. 15
ERISA Affiliate............................................................ 15
single employer............................................................ 15
Plans .................................................................. 15
Code .................................................................. 15
qualified.................................................................. 15
IRS .................................................................. 15
reportable event........................................................... 15
Taxes .................................................................. 16
Tax Return................................................................. 16
Environmental Laws......................................................... 17
restricted securities...................................................... 20
Securities Act............................................................. 21
Options .................................................................. 23
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Page
Convertible Preferred Stock................................................ 23
Buyer Financial Statements................................................. 24
Confidentiality Agreement.................................................. 26
Election .................................................................. 27
Election Taxes............................................................. 27
Pre-Closing Period......................................................... 27
Sellers Group.............................................................. 27
Straddle Period............................................................ 27
Straddle Period............................................................ 27
Aggregate Deemed Sales Price............................................... 28
Aggregate Deemed Sales Price............................................... 28
Aggregate Deemed Sales Price............................................... 28
Aggregate Deemed Sales Price............................................... 28
Pre-Closing Period Returns................................................. 29
Straddle Period Returns.................................................... 29
Indemnification Statement.................................................. 30
Tax Indemnified Party...................................................... 33
Tax Indemnifying Party..................................................... 33
Tax Claim.................................................................. 33
Piggy-Back Registration.................................................... 35
Cutback .................................................................. 35
Requesting Seller.......................................................... 39
Repurchase Request......................................................... 39
Repurchase Price........................................................... 40
Parties' Appraisers........................................................ 40
Third Appraiser............................................................ 40
Repurchase Date............................................................ 41
Repurchase Notice.......................................................... 41
Indemnity Period........................................................... 45
Buyer Indemnitees.......................................................... 45
Buyer Damages.............................................................. 45
threshold.................................................................. 46
Claim .................................................................. 47
person .................................................................. 50
affiliate.................................................................. 51
v
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of, and deemed to occur as of, July
1, 1997 (the "Agreement"), by and among Xxxxxx Xxxxxxxxx ("Xxxxxxxxx"), Xxxxxxx
Xxxxxxxxxx ("Xxxxxxxxxx" and collectively with Xxxxxxxxx, the "Sellers"), and
PRT Group, Inc., a Delaware corporation ("Buyer").
WHEREAS, pursuant to the terms and conditions of this Agreement,
Sellers desire to sell to Buyer, and Buyer desires to purchase from Sellers,
1,000 shares (the "Shares") of common stock, par value $1.00 per share (the
"Common Stock"), representing all of the issued and outstanding shares of
capital stock of Computer Management Resources, Inc., a Connecticut corporation
(the "Company").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree
as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
Section 1.1 Purchase and Sale. Subject to the terms and conditions of
this Agreement, at the Closing provided for in Section 1.4 hereof (the
"Closing"), Sellers will sell, transfer and deliver to Buyer, and Buyer will
purchase, acquire and accept from Sellers, the Shares.
Section 1.2 Consideration. Subject to the terms and conditions of this
Agreement, in consideration of the aforesaid sale, transfer and delivery of the
Shares, Buyer will deliver or cause to be delivered to Sellers at the Closing
the purchase consideration (the "Purchase Consideration"), which shall consist
of:
(a) $2,850,000 in cash (such amount, as adjusted pursuant to
Section 1.7 hereof, the "Cash Consideration"), to be delivered to the Sellers
in the
amounts set forth on Exhibit A hereto by wire transfer of immediately available
funds to such bank accounts as shall be designated by Sellers prior to the
Closing;
(b) a promissory note (the "Promissory Note") in the amount of
$2,000,000, the form of which is attached hereto as Exhibit B;
(c) 119,181 shares of Buyer common stock, par value $.01 per
share ("Buyer Common Stock") to be delivered to the Sellers in the amounts set
forth on Exhibit A hereto; and
(d) 119,181 fully paid-up warrants (the "Warrants"), a form of
which is attached hereto as Exhibit C, convertible into additional shares of
Buyer Common Stock upon the occurrence of certain events, as set forth therein,
to be delivered to the Sellers in the amounts set forth on Exhibit A hereto.
Section 1.3 [Reserved].
Section 1.4 Closing. The Closing of the transactions contemplated by
this Agreement shall take place on July 18, 1997 at 9:00 a.m., local time, at
the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx, 919 Third Avenue, New
York, New York, or on such other date and at such other time or place as the
parties may agree. The date of the Closing is sometimes referred to herein as
the "Closing Date."
Section 1.5 Deliveries by Sellers. At the Closing, Sellers will
deliver or cause to be delivered to Buyer (unless delivered previously) the
following:
(a) The stock certificate or certificates representing all (and
not less than all) of the Shares, accompanied by stock powers duly executed in
blank or duly executed stock transfer forms or instruments of transfer, with
any applicable transfer stamps affixed, which validly transfer title of the
Shares to Buyer free and clear of any Liens (as defined in Section 3.4 hereof);
(b) Documentation, effective as of the Closing and satisfactory
to Buyer, with respect to the designation of Xxxxxxx Xxxxxxxxx, Xxxxxxx
Xxxxxxxxx and
2
the designee of the holders of Buyers Series A Convertible Preferred Stock as
directors of the Company, and (ii) the resignations of Xxxxxx Xxxxxxxxx and
Xxxxxxx Xxxxxxxxxx as directors of the Company;
(c) The corporate seal, books and records of the Company, other
than the stock books and minute books of the Company;
(d) The officer's certificate referred to in Section 6.3 hereof,
if any is required;
(e) The opinion of Sellers' counsel referred to in Section
6.3(e) hereof;
(f) The Employment Agreements, forms of which are attached hereto
as Exhibits D and E, duly executed and delivered by each of Xxxxxxxxx and
Xxxxxxxxxx, as the case may be; and
(g) All other documents, instruments and writings required or
reasonably requested to be delivered by Sellers at or prior to the Closing
pursuant to this Agreement or otherwise required in connection herewith.
Section 1.6 Deliveries by Buyer. At the Closing, Buyer will deliver or
cause to be delivered to Sellers (unless previously delivered) the following:
(a) The Purchase Consideration referred to in Section 1.2 hereof;
(b) A letter of credit in the amount of $1,000,000 securing the
Promissory Note in favor of and reasonably acceptable to the Sellers;
(c) The officer's certificate referred to in Section 6.2(c)
hereof, if any is required;
(d) The Employment Agreements duly executed and delivered by an
appropriate officer of Buyer; and
(e) All other documents, instruments or writings required or
reasonably requested to be delivered by Buyer at or prior to the Closing
pursuant to this Agreement or otherwise required in connection herewith.
3
Section 1.7 Closing Date Working Capital Adjustments.
(a) On the Closing Date, Sellers will deliver to Buyer a
statement (the "Working Capital Statement") setting forth the Closing Working
Capital (as hereinafter defined) of the Company as of the opening of business
on the Closing Date, which Working Capital Statement shall be prepared on a
basis consistent with the unaudited balance sheet of the Company as of May 31,
1997, described in Section 3.6 hereof, including the notes thereto.
(b) The Cash Consideration shall be (i) increased by the amount
by which the Closing Working Capital as set forth in the Working Capital
Statement is greater than $557,000, or (ii) decreased by the amount by which
the Closing Working Capital is less than $557,000.
(c) The term "Closing Working Capital" shall mean Current Assets
minus Current Liabilities. The term "Current Assets" shall mean cash, accounts
receivable and prepaid expenses, reflected in a manner consistent with the
account classifications and basis of preparation used in the Financial
Statements (as defined in Section 3.6 below), as of the Closing Date. The term
"Current Liabilities" shall mean accounts payable, accrued liabilities and
deferred revenue, as the case may be, reflected in a manner consistent with the
account classifications and basis of preparation used in the Financial
Statements, as of the Closing Date.
(d) Buyer's rights to indemnification pursuant to Article VIII
hereof (and any limitations on such rights) shall not be deemed to limit,
supersede or otherwise affect Buyer's or Sellers' rights to a full purchase
price adjustment pursuant to this Section 1.7, provided that no claim for
indemnification may be made with respect to any matters or categories of items
to the extent reflected in the Final Working Capital Statement.
4
ARTICLE II
RELATED MATTERS
Section 2.1 Books and Records of the Company. Sellers shall cause the
Company to deliver to Buyer at or prior to the Closing all books and records of
the Company (including, but not limited to, correspondence, memoranda, books of
account, personnel and payroll records and the like, excluding the Company's
minute books and stock ledgers). All books and records delivered by the Company
to Buyer will be preserved by Buyer for a period of at least ten (10) years
following the Closing and Buyer will permit Sellers and their authorized
representatives to have reasonable access to, and examine and make copies of,
all such books and records as reasonably requested by Sellers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers jointly and severally represents and warrants to
Buyer (provided that any representation or warranty herein made by either
Seller in his individual capacity shall be solely that of such individual
Seller and shall not be made jointly and severally by both of the Sellers) as
follows:
Section 3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Connecticut and has all requisite corporate and other power and corporate
authority to own, lease and operate its properties and to carry on its business
and operations as now being conducted (the "Business"), except where any such
failure to be so organized, existing and in good standing or to have such power
and authority would not individually or in the aggregate have a material
adverse effect on the Business, operations, assets, liabilities, results of
operations or financial condition of the Company (a "Material Adverse Effect").
The Company is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the property owned, leased or operated by the
Company or the nature of the Business makes such qualification necessary,
except in any such jurisdictions where the failure to be so duly qualified or
licensed and
5
in good standing would not have a Material Adverse Effect. Sellers have
heretofore delivered to Buyer complete and correct copies of the Company's
Certificate of Incorporation and By-laws, as currently in effect.
Section 3.2 Authorization. Each Seller has the power and authority to
execute and deliver this Agreement and consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized and
no other actions are necessary to authorize the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
such Seller and constitutes, and when executed and delivered each of the
other agreements, documents and instruments to be executed and delivered by
such Seller pursuant hereto will constitute, a valid and binding agreement of
such Seller, enforceable against such Seller in accordance with their
respective terms, except that (a) such enforcement may be subject to any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting creditors'
rights generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought. To the Sellers' knowledge, the Company's minute books and stock
ledgers cannot be located, but warrant that no Buyer Damages (as defined in
Section 8.2(a)) shall result from the contents, or the purported contents (by
any third party or otherwise), thereof.
Section 3.3 Capital Stock. Set forth on Section 3.3 of the Disclosure
Schedule being delivered to Buyer by Sellers herewith (the "Disclosure
Schedule"), is the number of authorized shares of capital stock of the Company,
the par value of such shares, and the number of such shares which are issued
and outstanding. No shares of capital stock of the Company are held in the
Company's treasury. All of the Shares are validly issued, fully paid and
non-assessable. There are no outstanding securities convertible into,
exchangeable for, or carrying the right to acquire, equity securities of the
Company, nor are there any subscriptions, warrants, options, rights or other
arrangements or commitments (other than
6
pursuant to this Agreement) which could obligate the Company to issue or
Sellers to sell any shares of capital stock of the Company. Except as set forth
on Section 3.3 of the Disclosure Schedule, the Company has no outstanding debt,
equity, hybrid, derivative or other securities of any kind.
Section 3.4 Ownership of the Shares.
(a) Each Seller is the record and beneficial owner of the
number of Shares set forth opposite his name on Section 3.4 of the Disclosure
Schedule, which Shares comprise all of the issued and outstanding shares of all
classes of capital stock of the Company. Each Seller has good title to the
Shares owned by him, free and clear of all Liens (as hereafter defined). Upon
the transfer by Sellers to Buyer of the certificate or certificates evidencing
the Shares, Sellers will have transferred to Buyer good title to the Shares
free and clear of all Liens, other than Liens which become applicable as a
result of the business or activities of Buyer or as a result of any acts or
omissions by, or the status of any facts pertaining to, Buyer, and except as
set forth on Section 3.4 of the Disclosure Schedule.
As used herein, "Liens" shall mean any pledge, mortgage, charge,
claim, title imperfection, defect or objection, security interest, conditional
and installment sales agreement, encumbrance, charge, easement, encroachment or
restriction, of any kind.
(b) Notwithstanding the fact that information with respect to
the pending lawsuit among Xxxxxxx Xxxxxxx, Computer Management Resources, Inc.,
Xxxxxx Xxxxxxxxx and Xxxxxxx Xxxxxxxxxx concerning Shares (the "Share Ownership
Claim") is disclosed in the Disclosure Schedule, Buyer shall have the right to
indemnification by Sellers under Article VII hereof with respect to any Buyer
Damages (as defined in Section 8.2 hereof) suffered by the Company, Buyer, or
any Buyer Indemnitee (as defined in Section 8.2 hereof) as a result of the
Share Ownership Claim.
(c) The Company has never had and currently has no
subsidiaries. The Company has never had and currently does not own, directly or
indirectly, any capital stock or equity securities of any person or
7
entity or have any direct or indirect equity or ownership interest in any
business other than the Business.
Section 3.5 Consents and Approvals; No Violations. Except as set forth
on Section 3.5 of the Disclosure Schedule, neither the execution, delivery or
performance of this Agreement nor the consummation by Sellers of the
transactions contemplated hereby (including the transfer of the Shares) will
(a) conflict with or result in any breach or violation of any provision of the
Certificate of Incorporation or By-Laws of the Company; (b) require any filing
or registration with, or notice or declaration to, or the obtaining of any
permit, license, authorization, consent or approval of, any court, arbitral
tribunal, administration agency or commission or other federal or state
governmental or regulatory authority whether within or outside the United
States; (c) violate, breach, conflict with or result in a default (or any event
which, with notice or lapse of time or both, would constitute a default) under,
or result in any termination, cancellation or acceleration or give rise to any
such right of termination, cancellation or acceleration or require any consent
under, any of the terms, conditions or provisions of any note, mortgage, other
evidence of indebtedness, guarantee, license, agreement, lease or other
contract or instrument or obligation to which the Company or Sellers
(individually or collectively) are a party or by which the Company or either of
the Sellers or any of their respective assets are subject or by which any of
them may be bound; (d) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or Sellers, or any of their
respective assets or properties, or (e) result in the creation or imposition of
any Lien upon any properties, assets or the Business of the Company or Sellers,
excluding from the foregoing clauses (b), (c), (d) and (e) such requirements,
conflicts, defaults, rights, security interests, claims, Liens, charges, other
encumbrances or violations which would not have a Material Adverse Effect and
would not adversely affect the ability of Sellers to consummate the
transactions contemplated by this Agreement, or which become applicable as a
result of the business or activities (other than the business currently
conducted by the Company) in which Buyer is or proposes to be engaged or as a
result of any acts or omissions by, or the status of or any facts pertaining
to, Buyer.
8
Section 3.6 Financial Statements. Attached as Schedule 3.6(a) of the
Disclosure Schedule are copies of the Company's unaudited (a) balance sheet as
of May 31, 1997 and (b) income statement for the year ended February 28, 1997
and five months ended May 31, 1997 (the financial statements referred to in
clauses (a) and (b) above are referred to herein collectively as the "Fi-
nancial Statements"). Except as disclosed in the Financial Statements or as
set forth on Schedule 3.6(b) of the Disclosure Schedule, such balance sheet
fairly presents, in all material respects, the financial position of the
Company as of the date thereof, and such income statement fairly presents, in
all material respects, the results of operations of the Company for the period
indicated and have been derived from the books and records of the Company;
provided, that the Financial Statements present such information in accordance
with the Company's historical practices and do not conform to U.S. generally
accepted accounting principles consistently applied ("GAAP"); provided,
further, that all such accounting practices to the extent material and all
deviations from historical practices with respect to the May 31, 1997 Financial
Statements, have been fairly disclosed to Buyer by the Sellers.
Section 3.7 Absence of Undisclosed Liabilities. Except to the extent
reflected or reserved against in the Financial Statements or otherwise
disclosed herein or in the Disclosure Schedule, the Company had, as of May 31,
1997, no material liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise and whether due or to become due that would
be required to be reflected or reserved against in such Financial Statements
under the Company's historical accounting practices.
Section 3.8 Related Party Transactions. Except as set forth in Section
3.8 of the Disclosure Schedule, no current or former employee, officer,
director or stockholder of the Company or member of his or her immediate family
(collectively, the "Related Parties") is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit) to
any of them. To each Seller's knowledge, none of such Related Parties (other
than Xxxxxxx Xxxxxx) has any direct or indirect ownership interest in any firm
or corporation with which the Company is affiliated or with
9
which the Company has a business relationship, or any firm or corporation that
competes with the Company, the Business or Buyer, except that such Related
Parties may own stock in publicly traded companies that may compete with the
Company, the Business or Buyer. No Related Party is directly or indirectly
interested in any material contract with the Company other than employment
contracts with employees disclosed or made available to Buyer.
Section 3.9 Title, Ownership and Related Matters.
(a) As of the date hereof, the Company does not own any real
property.
(b) Except as set forth in Section 3.9(b) of the Disclosure
Schedule, the Company has, or will as of the Closing have (i) good title to all
material owned properties and assets of the Company, whether real, personal,
mixed or other, free from any Liens (as hereafter defined); or (ii) rights by
license, lease or other agreement to use all material properties and assets not
owned by the Company, whether real, personal, mixed or other, necessary to
permit the Company to conduct the Business as currently conducted.
As used herein "Permitted Liens" shall mean (i) liens for current
taxes not yet due, (ii) mechanic's, materialmen's, warehousemen's and similar
liens attaching by operation of law, incurred in the ordinary course of
business and securing payments not delinquent or payments which are being
contested in good faith by the Company, and (iii) imperfections of title,
easements and zoning restrictions, if any, which do not materially detract from
the value of the property subject thereto for the uses and purposes to which
such property is currently employed or materially impair the operations of the
Company and which have arisen only in the ordinary course of business and
consistent with past practice.
Section 3.10 Leases. Section 3.10 of the Disclosure Schedule lists, as
of the date hereof, all real property leases for space occupied by the Company
(collectively, the "Leases"). The Company is not a party to any sublease of
real property. True and complete copies of the Leases and all amendments and
agreements
10
relating thereto have been delivered or made available to Buyer. To the best
knowledge of Sellers, all of the Leases are valid, binding and enforceable in
accordance with their respective terms, and neither the Company nor the other
party to any Lease is in default under such Lease in any material respect.
Section 3.11 Intellectual Property.
(a) Schedule 3.11(a) of the Disclosure Schedule contains a complete
and correct list of all material Intellectual Property (as hereafter defined)
owned by the Company other than off-the-shelf software. Schedule 3.11(b) of the
Disclosure Schedule identifies each material agreement pertaining to the
licensed use of such Intellectual Property in the Business and listing, in each
case, whether the Company is the licensor or licensee thereunder, the subject
matter of the license, and whether the rights granted are exclusive or
non-exclusive (the "License Agreements").
As used herein, "Intellectual Property" shall mean all U.S. and
foreign patents and patent applications, registered and unregistered copyrights
and copyright applications (including copyrights in proprietary computer
software and databases), trademarks, service marks, trade dress, logos,
tradenames and similar business identifiers, including, in each case, all
registrations and applications therefor, and the goodwill of the business
symbolized by any of the foregoing, confidential or proprietary technical and
business information, know-how and trade secrets, formulae, processes,
inventions (whether patentable or unpatentable) and other technical
information.
(b) Except as set forth in Section 3.11 of the Disclosure Schedule,
the Company owns all material Intellectual Property or possesses adequate
licenses or other valid right to the material Intellectual Property used in or
necessary to conduct the Business as currently conducted, in each case without
the payment of any royalties except under the agreements set forth on Schedule
3.11(b) of the Disclosure Schedule. The Company is the sole and exclusive owner
of the Intellectual Property set forth on Section 3.11(a) of the Disclosure
Schedule, free and clear of all Liens, except as set forth therein. All
applications and registrations that exist for the Intel-
11
lectual Property set forth on Schedule 3.11(a) of the Disclosure Schedule stand
in the name of the Company. To the knowledge of the Sellers, the Intellectual
Property set forth on Schedule 3.11(a) of the Disclosure Schedule has not
lapsed, expired or been abandoned and is valid and enforceable. To the
knowledge of the Sellers, no application or registration therefor is the
subject of any opposition or cancellation proceeding before any registration
authority in any jurisdiction for which notice has been provided to the Company
nor is any such proceeding threatened.
(c) To the knowledge of the Sellers, the activities, products and
services of the Company do not infringe upon, violate or conflict with the
Intellectual Property rights of any other person or entity. There are no claims
or suits pending for which notice has been provided or, to the knowledge of the
Sellers, threatened (i) alleging that the Company's activities or products
infringe upon or constitute the unauthorized use of a third party's
Intellectual Property rights or (ii) challenging the Company's ownership of,
right to use, or the validity or enforceability of any Intellectual Property
owned or used by the Company. To the knowledge of the Sellers, there are no
infringements by third parties of any Intellectual Property owned by the
Company. The Company has not entered into any consent, indemnification,
forbearance to xxx, or settlement agreement with any third party relating to
Intellectual Property.
(d) The License Agreements constitute binding and enforceable
obligations of the Company, and, to the knowledge of the Sellers, the Company
is not in breach of or default under the License Agreements nor has an event or
condition occurred (or is alleged by any other party to have occurred) which,
with or without due notice or lapse of time or both, would constitute a breach
or event of default on the part of the Company or would provide a basis for a
valid claim, acceleration or termination by any other party under the License
Agreements. To the knowledge of the Sellers, no other party is in breach of or
default under the License Agreements nor has any event or condition occurred
(or is alleged by any other party to have occurred) which, with or without due
notice or lapse of time or both, would constitute a breach or event of default
on the part of such other party under the License Agreements. The consummation
of the transactions
12
contemplated by this Agreement will not result in the loss or impairment of any
of the Company's rights pursuant to the License Agreements in the Intellectual
Property used in or necessary to conduct the Business as currently conducted.
Except as disclosed in Section 3.11(b) of the Disclosure Schedule, the Company
is not a party to any technology license agreement or sales agency or
distributorship agreement that limits in any material manner the ability of the
Company to compete or to conduct any significant line of business or compete
with any person or entity in any geographic area or during any period of time
exceeding one year from the date hereof.
Section 3.12 Computer Software. Except as set forth in Section 3.12 of
the Disclosure Schedule, the Company has such title to or the right to use, by
license or other agreement, all material computer software programs used by
the Company as are necessary to permit the Company to conduct the Business as
currently conducted, without any known conflict with the rights of others or
any known use by others which conflicts, in any material respect, with the
rights of the Company.
Section 3.13 Litigation. Set forth in Section 3.13 of the Disclosure
Schedule is a list and brief description of all material actions, claims,
suits, administrative, arbitration or other proceedings and governmental
investigations and inquiries pending (collectively "Cases") and, to the
knowledge of Sellers, threatened against Sellers or the Company or any of their
respective properties, assets and business operations, as of the date hereof,
by or before any court, governmental or regulatory authority or by any third
party which if determined adversely to the Company would have a Material
Adverse Effect on the Company or would prevent the Sellers or the Company from
consummating the transactions contemplated hereby. To the best knowledge of
Sellers, no investigation with respect to the Company is pending, or
threatened, by any federal, state, local or foreign governmental authority or
by any agency or instrumentality thereof, the effect of which could reasonably
be expected to have a Material Adverse Effect.
Section 3.14 Compliance with Applicable Law. The Company is, and
conducts the Business, in compliance with all applicable laws, ordinances,
rules and regulations of any federal, state, local or foreign governmen-
13
tal authority applicable to the Company or the Business, except for violations,
if any, which would not have a Material Adverse Effect. The Company holds all
licenses, permits, variances and approvals of governmental entities necessary
for the lawful conduct of the Business as currently conducted, except where the
failure to hold such licenses, permits, variances and approvals would not have
a Material Adverse Effect.
Section 3.15 Certain Contracts and Arrangements. Except as set forth
in Section 3.15 of the Disclosure Schedule, as of the date hereof, the Company
is not a party to any material written or oral (a) employment agreement,
independent contractor agreement, consulting agreement, personal service or
similar agreement; (b) indenture, mortgage, note, installment obligation,
agreement or other instrument relating to the borrowing of money by the
Company, or the guaranty by the Company of any obligation for the borrowing of
money; or (c) other agreement, including, without limitation, any purchase
order or work order, which individually, or together with related agreements
with the same or related parties, involves the receipt or payment after the
date hereof of more than $25,000 on an annual basis or $25,000 over the
remaining term thereof. All such agreements are valid, binding and enforceable
in accordance with their terms and, to the best knowledge of Sellers, neither
the Company nor any other party thereto is in default under any of the
aforesaid agreements.
Section 3.16 Employee Benefit Plans; ERISA; Employees. (a) Section
3.16(a) of the Disclosure Schedule contains a true and complete list of each
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, change-in-control, hospitalization or
other medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, or retirement plan, program, agreement or arrangement,
and each other employee benefit plan, program, agreement or arrangement, with
respect to which the Company or any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with the Company would be
deemed a "single employer" within the meaning of section 4001(b)(1) of ERISA,
has a liability (the "Plans"). With respect to each of the Plans, the Company
has heretofore delivered to Buyer true and complete copies of each of the
following documents:
14
(i) a copy of the Plan, if any; (ii) a copy of the most recent annual report
with respect to each such Plan for which annual reports are required to be
filed; (iii) a copy of the most recent Summary Plan Description with respect to
such Plan, if any; (iv) a copy of the trust or other funding agreement, if any;
and (v) the most recent opinion letter received from the Internal Revenue
Service by the sponsor of any so-called "prototype" retirement plan.
(b) No liability under Title IV of ERISA has been incurred by the
Company or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a material risk of incurring a liability under
such Title. None of the Plans is subject to Title IV of ERISA. No Plan is a
"multiemployer plan," as such term is defined in section 3(37) of ERISA.
(c) The Sellers do not have any knowledge that the Company, any ERISA
Affiliate, any of the Plans, any trust created thereunder or any trustee or
administrator thereof has engaged in a transaction or has taken or failed to
take any action in connection with which the Company, any ERISA Affiliate, any
of the Plans, any such trust, any trustee or administrator thereof, or any
party dealing with the Plans or any such trust could be subject to either a
civil penalty assessed pursuant to section 409 or 502(i) of ERISA or a tax
imposed pursuant to section 4975, 4976 or 4980B of the Internal Revenue Code of
1986, as amended (the "Code").
(d) Full payment has been made, or will be made in accordance with
section 404(a)(6) of the Code, of all amounts which the Company is required to
pay under the terms of each of the Plans and section 412 of the Code, and all
such amounts properly accrued through the Closing with respect to the current
plan year thereof will be paid by the Company on or prior to the Closing or
will be properly recorded in the Financial Statements; and none of the Plans or
any trust established thereunder has incurred any "accumulated funding
deficiency" (as defined in section 302 of ERISA and section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of
each of the Plans ended prior to the date of this Agreement.
15
(e) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Laws, including but not limited
to ERISA and the Code. Each of the Plans that is intended to be "qualified"
within the meaning of section 401(a) of the Code is a so-called
"nonstandardized prototype plan" with respect to which the Internal Revenue
Service has issued a favorable opinion letter. Sellers have no knowledge of any
facts or circumstances that would preclude the Internal Revenue Service from
issuing a favorable determination letter with respect to said Plans if
applications for determination were made on the Closing Date.
(f) No amounts payable under the Plans or any other agreement or
arrangement to which any of the Company or any ERISA Affiliate is a party will,
as a result of the transaction contemplated hereby, fail to be deductible for
federal income tax purposes by virtue of section 280G of the Code.
(g) Except for the retirement plans identified in Section 3.16(a) of
the Disclosure Schedule, no Plan provides benefits, including without
limitation death or medical benefits (whether or not insured), with respect to
current or former employees after retirement or other termination of service,
other than coverage mandated by applicable law.
(h) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or officer of the
Company to severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee or officer.
(i) There are no pending or threatened claims by or on behalf of any
Plan, by any employee or beneficiary covered under any such Plan, or otherwise
involving any such Plan (other than routine claims for benefits).
(j) Sellers have previously delivered to Buyer a list of all employees
of the Company and the total compensation of each such employee for the year
ended December 31, 1996.
16
Section 3.17 Taxes. (a) Except as set forth as Section 3.17 of the
Disclosure Schedule:
(i) Giving effect to all extensions obtained, the Company has (x) duly
and timely filed (or there has been filed on its behalf) with the appropriate
governmental authorities all Tax Returns (as hereafter defined) required to be
filed by it, and all such Tax Returns are true, correct and complete in all
material respects and (y) timely paid all Taxes (as hereafter defined) shown
thereon as due or for which notification of a claim has been received by the
Company from any taxing authority;
(ii) The Company has complied in all respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of taxes pursuant to Sections 1441
and 1442 of the Code or similar provisions under any foreign laws) and have,
within the time and manner prescribed by law, withheld and paid over to the
proper governmental authorities all amounts required to be withheld and paid
over under all applicable laws;
(iii) There are no Liens for Taxes upon the assets or properties of
the Company except for statutory Liens for current Taxes not yet due;
(iv) The Company has not requested any extension of time within which
to file any Tax Return that has not since been filed and no outstanding waivers
or comparable consents regarding the application of the statute of limitations
with respect to any Taxes or Tax Returns has been given by or on behalf of the
Company;
(v) No federal, state, local or foreign audits or other administrative
proceedings or court proceedings ("Audits") exist or have been initiated with
regard to any Taxes or Tax Returns of the Company, and the Company has not
received any notice that such an Audit is pending or threatened with respect to
any Taxes due from or with respect to the Company or any Tax Return filed by or
with respect to the Company;
(vi) The Company has not requested a ruling or received an adverse
ruling from any taxing authority or signed a closing or similar agreement with
any taxing au-
17
thority which could have an adverse effect on the Company;
(vii) The Tax Returns of the Company for the taxable periods ending
before February 28, 1997 have been examined by the appropriate governmental
authority (or the applicable statue of limitations for the assessment of Taxes
for such periods has expired) and a list of all Audits commenced or completed
with respect to the Company from such date to the present is set forth on
Section 3.17 of the Disclosure Schedule;
(viii) All Tax deficiencies which have been claimed, proposed or
asserted against the Company have been fully paid or finally settled, and no
issue has been raised in any examination by any taxing authority which, by
application of similar principles, could be expected to result in the proposal
or assertion of a Tax deficiency for any other year not so examined;
(ix) The Company is not required to include in income any adjustment
pursuant to Section 481(a) of the Code, by reason of any voluntary or
involuntary change in accounting method (nor has any taxing authority proposed
in writing any such adjustment or change of accounting method);
(x) The Company is not a party to, is not bound by, and has no
obligation under, any Tax sharing agreement, Tax indemnification agreement or
similar contract or arrangement. The Company is not aware of any potential
liability or obligation to any person as a result of, or pursuant to, any such
agreement, contract or arrangement;
(xi) No power of attorney has been granted by or with respect to the
Company with respect to any matter relating to Taxes that is currently in
effect;
(xii) No amounts paid by the Company to any ERISA Plan would fail to
be deductible under Section 404 of the Code;
(xiii) The Company has not filed a consent pursuant to Section 341(f)
of the Code (or any predecessor provision) or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset
18
(as such term is defined in Section 341(f)(4) of the Code) owned by the
Company;
(xiv) The reserves for Taxes (determined in accordance with GAAP)
reflected in the June 30, 1997 Financial Statements are adequate for the
payment of all Taxes incurred or which may be incurred by the Company through
the date hereof for all periods covered thereby or prior thereto. Since the
date of the Financial Statements, the Company has not incurred any liability
for Taxes other than in the ordinary course of business;
(xv) The Company is not and has never been a member of an affiliated
group (or similar state or local filing group);
(xvi) The Company is not and has never been a United States real
property holding company as defined in Section 897(c)(2) of the Code;
(xvii) The Company has not knowingly taken any position on any Tax
Return that could give rise to an understatement of federal income tax
liability within the meaning of Section 6662(d) of the Code;
(xviii) The Company has not participated in, or cooperated with, an
international boycott within the meaning of Section 999 of the Code;
(xix) Section 3.17 of the Disclosure Schedule sets forth (as actual
or, in the case of Tax Attributes (as hereafter defined), for the preceding and
current taxable year, as estimated) the net operating losses, Section 1231
losses (as such term is defined under Section 1231(a)(3)(B) of the Code),
capital losses, alternative minimum tax credits, and other similar tax
attributes ("Tax Attributes") (for federal, state, local, foreign and all other
tax purposes, as applicable) of the Company and the date on which such Tax
Attributes will expire. Prior to the consummation of the transaction
contemplated by this Agreement none of such Tax Attributes are subject to
Section 382 of the Code or any other applicable law disallowing, limiting or
reducing their use on any other basis;
(b) All material elections with respect to Taxes required to be
specifically described on a Tax
19
Return listed in Section 3.17 of the Disclosure Schedule including affecting
the Company are set forth in Section 3.17 of the Disclosure Schedule.
(c) The Company has previously delivered or made available to Buyer
complete and accurate copies of (i) all audit reports, letter rulings,
technical advice memoranda and similar documents issued by a governmental
authority relating to the United States federal, state, local or foreign Taxes
due from or with respect to the Company, (ii) the United States federal, and
any state, local and foreign income Tax Returns filed by the Company and (iii)
any closing agreements entered into by the Company with any taxing authority in
each case existing on the date hereof. The Company will deliver to Buyer all
materials with respect to the foregoing for all matters arising after the date
hereof.
(d) For purposes of this Agreement, (i) "Taxes" (including, with
correlative meaning, the term "Tax") shall mean all taxes, charges, fees,
levies, penalties or other assessments of any kind whatsoever imposed by any
federal, state, local or foreign taxing authority, including, but not limited
to, income, gross receipts, excise, property, sales, transfer, franchise,
payroll, withholding, social security or other taxes, including any interest,
penalties or additions attributable thereto and (ii) "Tax Return" shall mean
any return, report, information return or other document (including any related
or supporting information) required to be filed with a governmental taxing
authority with respect to Taxes.
Section 3.18 Certain Fees. Neither the Company nor either Seller has
employed any financial advisor or finder or incurred any liability for any
financial advisory or finders' fees in connection with this Agreement or the
transactions contemplated hereby.
Section 3.19 Environmental Protection.
(a) The Company has obtained, with respect to the Business, all
material permits, licenses, and other authorizations which are required under
federal, state and local statutes, ordinances, and other laws relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases, or
20
threatened releases of pollutants, contaminants, chemicals, or industrial,
hazardous, or toxic materials or waste into the environment (including, without
limitation, ambient air, surface water, ground water, land surface, or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, hazardous, or toxic
materials or wastes, or any regulation, rule, code, plan, judicial order,
decree, judgment, injunction, or notice issued, entered, promulgated, or
approved thereunder ("Environmental Laws"). To the best knowledge of Sellers,
the Company is in substantial compliance with all terms and conditions of such
required permits, licenses, and authorizations, and is also in substantial
compliance, with respect to the Company's business, with all other requirements
of Environmental Laws.
(b) To the best knowledge of Sellers, there is no pending or
threatened civil or criminal litigation, material notice of violation, or
administrative proceeding, with respect to the Business, relating in any way to
the Environmental Laws.
(c) To the best knowledge of Sellers, there have not been and there
are not any events, conditions, circumstances, activities, practices, incidents
or actions which may reasonably be expected to interfere with or prevent
continued substantial compliance with existing Environmental Laws after the
Closing, or which may reasonably be expected to give rise to any substantial
liability under common law precedents, or otherwise form the basis of any
claim, action or suit under existing Environmental Law based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release, or threatened
release into the environment, of any pollutant, contaminant, chemical,
industrial, hazardous, or toxic material or waste, including, without
limitation, any liability arising, or any claim, action, demand, suit,
proceeding, hearing, study, or investigation which may be brought, under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
and the Resource Conservation and Recovery Act of 1976, or similar federal,
state or local laws.
21
Section 3.20 Receivables. Except to the extent of any reserves
reflected in the Financial Statements, all of the receivables reflected in the
Financial Statement are bona fide accounts receivable accrued in the ordinary
course of the Business and to the best knowledge of Sellers none of such
account receivables are subject to set-offs, counterclaims, or disputes
existing or asserted with respect thereto or subject to any Lien.
Section 3.21 Accuracy of Minute Books, Stock Books and Ledger Books.
Sellers represent and warrant that the minute books, stock books and ledger
books of the Company are true, complete and accurate in all material respects.
Any minute books delivered to Buyer pursuant to this Agreement, if any, are
replacements of the original minute books of the Company, which minute books
have been lost.
Section 3.22 Disclosure. (a) Sellers have not knowingly failed to
disclose to Buyer any material facts relating to Sellers, the Company, the
Business or the results of operations, assets, liabilities, financial condition
and prospects of the Company. To the best knowledge of Sellers, no
representation or warranty by Sellers in this Agreement and no statement by
Sellers in any other document referred to herein (including the Schedules of
the Disclosure Schedule), contains any untrue statement of a material fact or
omits to state any material fact necessary, in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading.
Section 3.23 Insurance. Section 3.23(a) of the Disclosure Schedule
sets forth a complete and correct list as of the Closing of all primary, excess
and umbrella policies, bonds and other forms of insurance, and renewals
thereof, owned or held by or on behalf of the Company, copies of which have
previously been made available to the Buyer. All of such insurance policies are
in full force and effect, all premiums currently payable or previously due have
been paid, no notice of cancellation or termination has been received with
respect to any such policy and no assignment of proceeds or Liens exist with
respect to the proceeds of any such policy. Except as and to the extent set
forth on Section 3.23(b) of the Disclosure Schedule, there are no pending
claims against such policies.
22
Section 3.24 Bank Accounts. Section 3.24 of the Disclosure Schedule
sets forth a complete and correct list of (i) the names and locations of all
financial institutions at which the Company maintains a checking account,
deposit account, securities account, safety deposit box or other deposit or
safekeeping arrangement, (ii) the number or other identification of all such
accounts and arrangements and (iii) the names of all persons authorized to draw
thereon or have access thereto.
Section 3.25 Customers and Suppliers. Section 3.25(a) of the
Disclosure Schedule sets forth a complete and correct list of (i) the names of
the ten largest customers (by revenues generated) of the Company and the
approximate amount of revenues generated by each such customer in the year
ended February 28, 1997 and (ii) the names of suppliers to whom the Company
paid more than $50,000 in the year ended February 28, 1997 and the approximate
total purchases by the Company from each such supplier during such year. Except
as and to the extent set forth on Section 3.25(b) of the Disclosure Schedule,
there have been no material adverse changes in the relationships between the
Company and its customers and suppliers since February 28, 1997. The Company
has not been provided with any notice that any material supplier, manufacturer
or customer intends to cease doing business with the Company. To the knowledge
of the Sellers, there are no facts or circumstances that could reasonably be
expected to have an adverse affect on the Company's relationships with its
customers and suppliers.
Section 3.26 Warranties. Section 3.26 of the Disclosure Schedule sets
forth a complete and correct list of all material express written warranties
with respect to any products or services created, sold, distributed, rendered
or licensed by the Company, including warranties in customer contracts. Except
as and to the extent set forth on Section 3.26(a) of the Disclosure Schedule,
there are no material express or implied warranties outstanding with respect
to any products or services created, sold, distributed, rendered or licensed by
the Company (other than those imposed by applicable law).
Section 3.27 Proprietary Information of Third Parties. To each
Seller's knowledge, except for the
23
Share Ownership Claim, no third party has claimed that any person employed by
or under the control of the Company has (i) violated or may be violating any of
the material terms or conditions of his employment, independent contractor,
non-competition or non-disclosure agreement with such third party, (ii)
disclosed or may be disclosing or utilized or may be improperly utilizing any
trade secret or proprietary information or documentation of such third party or
(iii) interfered or may be interfering in the employment relationship between
such third party and any of its present or former employees and to Sellers'
knowledge, no third party has requested information from the Company which
suggests that such a claim might be contemplated. To each Seller's knowledge,
none of the execution or delivery of this Agreement, or the carrying on of the
Business by any officer, director, independent contractor, or employee of the
Company, or the conduct of the Business, will conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any such person is
obligated. To each Seller's knowledge, no person employed by or under the
control of the Company has, in connection with such person's performance of any
employment or other services rendered to the Company, employed any material
trade secret or any information or documentation proprietary to any former
employer, and to each Seller's knowledge, no person employed by or under the
control of the Company has, in connection with such person's performance of any
employment or other services rendered to the Company, violated any material
confidentiality obligation which such person may have owed to any third party.
Section 3.28 Restricted Securities. Each Seller understands that the
shares of Buyer Common Stock and the Warrants to be received by such Seller
hereunder as part of the Purchase Consideration are characterized as
"restricted securities" under the federal securities laws inasmuch as such
securities are being acquired from the Company in a transaction not involving a
public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder (the "Secu-
rities Act"), only in certain limited circumstances.
24
Section 3.29 Legends. It is understood that the Promissory Note, the
certificates evidencing the shares of Buyer Common Stock and the Warrants to be
received hereunder may bear a legend substantially similar to the following:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 PROMULGATED
UNDER SUCH ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES ARE FURTHER SUBJECT TO CERTAIN CONTRACTUAL
RESTRICTIONS ON DISPOSITION PURSUANT TO THE STOCK PURCHASE AGREEMENT BY AND
AMONG XXXXXX XXXXXXXXX, XXXXXXX XXXXXXXXXX AND PRT GROUP INC., DATED AS OF JULY
1, 1997, A COPY OF WHICH WILL BE PROVIDED TO THE HOLDER HEREOF UPON REQUEST TO
PRT GROUP INC."
Section 3.30 Accredited Investor. Each Seller is an accredited
investor within the definition set forth in Rule 501(a) under the Securities
Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
Section 4.1 Organization and Authority of Buyer. (a) Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware. Buyer has heretofore delivered to Sellers
complete and correct copies of its Certificate of Incorporation and By-laws, as
currently in effect. Buyer has the corporate power and authority to execute and
deliver this Agreement and consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Buyer and no other corporate proceedings on the part of
Buyer are necessary to autho-
25
rize the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered by Buyer and
constitutes, and when executed and delivered each of the other agreements,
documents and instruments to be executed and delivered by Buyer pursuant hereto
will constitute, a valid and binding agreement of Buyer, enforceable against
Buyer in accordance with its terms, except that (i) such enforcement may be
subject to any bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws, now or hereafter in effect, relating to or limiting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
Section 4.2 Consents and Approvals; No Violations. Neither the
execution, delivery or performance of this Agreement nor the consummation by
Buyer of the transactions contemplated hereby will (a) conflict with or result
in any breach or violation of any provision of the Certificate of Incorporation
or By-Laws of Buyer; (b) require any filing or registration with, or notice or
declaration to, or the obtaining of any permit, license, authorization, consent
or approval of, any court, arbitral tribunal, administrative agency or
commission, or other governmental or regulatory authority whether within or
outside the United States; (c) violate, breach, conflict with or result in a
default (or any event which, with notice or lapse of time or both, would
constitute a default) under, or result in any termination, amendment
cancellation or acceleration, or give rise to any such right of termination,
cancellation or acceleration or require any consent under, any of the terms,
conditions or provisions of any note, mortgage, other evidence of indebtedness,
guarantee, license, agreement, lease or other instrument or obligation to which
Buyer is a party or by which Buyer or any of its assets are subject or by which
it may be bound; (d) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Buyer, or (e) result in the creation or imposition
of any Lien upon any properties, assets or business of Buyer, excluding from
the foregoing clauses (b), (c), (d)
26
and (e) such requirements, conflicts, defaults, rights, security interests,
Liens, or violations which would not adversely affect the ability of Buyer to
consummate the transactions contemplated by this Agreement or which become
applicable as a result of any acts or omissions by, or the status of or any
facts pertaining to, the Company or Sellers.
Section 4.3 Availability of Funds. Buyer currently has sufficient cash
equivalents and will have at the Closing sufficient immediately available
funds, in cash, to pay the Cash Consideration, to provide the Company with
sufficient working capital and to pay any other amounts payable pursuant to
this Agreement and to effect the transactions contemplated hereby. The Promis-
sory Note to be delivered to Sellers at the Closing will be the duly authorized
and enforceable obligation of the Buyer.
Section 4.4 Litigation. There is no claim, action, suit,
administrative, arbitration or other proceeding or governmental investigation
or inquiry pending or, to the best knowledge of Buyer, threatened against
Buyer, by or before any court, governmental or regulatory authority or by any
third party which challenges the validity of this Agreement.
Section 4.5 Capitalization. The capital structure of Buyer consists of
(i) 50,000,000 authorized shares of Buyer Common Stock, par value $.001 per
share, (ii) 275,961 authorized shares of Series A Convertible Preferred Stock,
par value $.01 per share (the "Convertible Preferred Stock"), all of which
shares are issued and outstanding, and (iii) 224,039 authorized shares of
undesignated preferred stock, of which none are issued and outstanding. A
summary of equity ownership is attached hereto as Schedule 4.5. No shares of
capital stock of the Company are held in the Company's treasury. All of the
issued and outstanding shares of Buyer capital stock are validly issued, fully
paid and non-assessable. Other than the Warrant, dated as of November 21, 1996,
by and between Capital Research and Buyer, employee stock options (the
"Options") and the Convertible Preferred Stock, there are no outstanding
securities convertible into, exchangeable for, or carrying the right to
acquire, equity securities of Buyer, nor are there any subscriptions,
warrants, options, rights or other arrangements or
27
commitments (other than pursuant to this Agreement) which could obligate the
Buyer to issue any shares of capital stock of Buyer.
Section 4.6 Financial Statements. Buyer has furnished to Sellers the
audited consolidated balance sheet of Buyer as at December 31, 1996 and the
related statements of operations, stockholders' equity and cash flows of Buyer
for the period from January 1, 1996 through December 31, 1996, and the related
unaudited statements of income, stockholders' equity and cash flows of Buyer
for the three months ended March 31, 1997 (collectively, the "Buyer Financial
Statements"). All such Buyer Financial Statements have been prepared in accor-
dance with GAAP (except that such unaudited financial statements do not contain
all of the required footnotes) and fairly present the financial position of the
Buyer and its subsidiaries as of March 31, 1997 and December 31, 1996,
respectively, and the results of their operations and cash flows for the year
ended December 31, 1996 and the three months ended March 31, 1997,
respectively.
Section 4.7 Buyer Common Stock. Upon the issuance to the Sellers by
Buyer of the shares of Buyer Common Stock and Warrants as part of the Purchase
Consideration at the Closing, (i) the shares of Buyer Common Stock received
by each Seller, and the shares of Buyer Common Stock issuable upon conversion
of the Warrants, when so issued, will be validly issued, fully paid, non-
assessable, duly authorized and free of any preemptive rights, and (ii) each
Seller will have good and marketable title to such shares of Buyer Common
Stock, and to the shares of Buyer Common Stock to be issued upon the conversion
of the Warrants, if any, free and clear of any Liens.
Section 4.8 Certain Fees. Neither Buyer nor any of its affiliates has
employed any financial advisor or finder or incurred any liability for any
financial advisory or finders' fees in connection with this Agreement or the
transactions contemplated hereby.
28
Section 4.9 Violations of Sellers' representations and Warranties. To
the knowledge of Buyer, except for the Share Ownership Claim, nothing has come
to the attention of Buyer during the course of its due diligence investigation
of the Company as of the date hereof which would give rise to a claim for
indemnification of Buyer Damages (as defined in Section 8.2 hereof) under
Article VII hereof.
ARTICLE V
COVENANTS
Section 5.1 Confidentiality of Information.
(a) All information concerning Sellers or Buyer, respectively,
furnished or provided by Sellers or Buyer or their respective affiliates to
Buyer or Sellers, respectively, or their representatives (whether furnished
before or after the date of this Agreement) shall be held subject to the
confidentiality agreement between Sellers and Buyer, dated as of June 9, 1997
(the "Confidentiality Agreement").
Section 5.2 Consents. Each of the Sellers and Buyer shall cooperate,
and use its reasonable efforts, to make all filings and obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties necessary to consummate the
transactions contemplated by this Agreement. In addition to the foregoing,
Buyer agrees to provide such assurances as to financial capability, resources
and creditworthiness as may be reasonably requested by any third party whose
consent or approval is sought hereunder. Notwithstanding the foregoing, nothing
herein shall obligate or be construed to obligate Sellers, the Company or Buyer
to make any payment to any third party in order to obtain the consent or
approval of such third party.
Section 5.3 Reasonable Efforts. Each Seller and Buyer shall cooperate,
and use its reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement.
29
Section 5.4 Covenant to Satisfy Conditions. Each Seller will use its
reasonable efforts to ensure that the conditions set forth in Article VI hereof
are satisfied, insofar as such matters are within the control of either of
them, and Buyer will use its reasonable efforts to ensure that the conditions
set forth in Article VI hereof are satisfied, insofar as such matters are
within its control. Sellers and Buyer further covenant and agree, with respect
to any threatened or pending preliminary or permanent injunction or other
order, decree or ruling or statute, rule, regulation or executive order that
would adversely affect the ability of the parties hereto to consummate the
transactions contemplated hereby, to use all reasonable efforts to prevent or
lift the entry, enactment or promulgation thereof, as the case may be.
Section 5.5 Certain Tax Matters.
(a) Certain Definitions. As used in this Agreement:
(i) "Pre-Closing Period" means any taxable period which ends
on or before the Closing Date.
(ii) "Straddle Period" means any taxable period that
includes (but does not end on) the Closing Date.
(iii) "Straddle Period Return" means a Tax Return filed for
a Straddle Period.
(b) Return Filings, Refunds and Credits.
(i) Sellers shall prepare, or cause to be prepared, and
file, or cause to be filed, on a timely basis all Tax Returns with respect
to the Company for the Pre-Closing Period (the "Pre-Closing Period
Returns") except that Sellers may, in their discretion and solely at their
expense, request Buyer to cause the Company to prepare any Pre-Closing
Period Return. Sellers shall indemnify the Buyer for and pay, or cause to
be paid, all Taxes with respect to the Company shown to be due on the
Pre-Closing Period Returns.
30
(ii) Buyer shall prepare, or cause to be prepared, and shall
file, or cause to be filed, on a timely basis all Tax Returns with respect
to the Company not described in Section 5.5(b)(i), including any Straddle
Period Returns. Buyer shall pay, or cause to be paid, all Taxes shown to be
due on such Tax Returns.
(iii) Sellers and Buyer shall reasonably cooperate, and
shall cause their respective affiliates, officers, employees, agents,
auditors and representatives reasonably to cooperate, in preparing and
filing all Tax Returns (including amended returns and claims for refund),
including maintaining and making available to each other all records
necessary in connection with Taxes and in resolving all disputes and audits
with respect to all taxable periods relating to Taxes. Buyer and Sellers
recognize that Sellers will need access, from time to time, after the
Closing Date, to certain accounting and tax records and information held by
the Company to the extent such records and information pertain to events
occurring on or prior to the Closing Date; therefore, Buyer agrees that
from and after the Closing Date Buyer shall, and shall cause the Company
to, (A) retain and maintain such records of the Company pertaining to the
period prior to the Closing Date until such time as Sellers determine that
such retention and maintenance is no longer necessary (subject to the terms
and conditions of Section 5.5(b)(iv) below) and (B) allow Sellers and its
agents and representatives, to inspect, review and make copies of such
records during Company's regular business hours as Sellers may deem
necessary or appropriate from time to time.
(iv) For a period of ten years from the Closing Date, Buyer
shall not, and shall cause the Company not to, dispose of or destroy any of
the business records and files of the Company pertaining to Taxes related
to periods prior to the Closing Date without first offering to turn over
possession thereof to Sellers by written notice to Sellers at least thirty
days prior to the proposed date of such disposition or destruction.
31
(v) Buyer (solely at the expense of Sellers) shall file, and
shall cause the Company to file, any Tax refund claims requested by
Sellers. Any refunds and credits of Taxes of the Company with respect to
any taxable period ending on or before the Closing Date shall be for the
account of Sellers, and if received or utilized by Buyer or the Company,
shall be paid to Sellers within ten business days after Buyer or the
Company receives such refund or utilizes such credit.
(c) Elections. Buyer shall not, and shall cause the Company
not to, make, amend or revoke any Tax election if such action would adversely
affect Sellers with respect to any taxable period ending on or before the
Closing Date or for the Pre-Closing Period or any Tax refund with respect
thereto.
(d) Tax Indemnification.
(i) Notwithstanding anything in this Agreement to the
contrary, Sellers shall indemnify, defend and hold harmless Buyer and its
affiliates, at any time after the Closing, from and against any liability
for Taxes of the Company for the PreClosing Period for which Sellers are
liable pursuant to Section 5.5(b)(i). The indemnity provided for in this
Section shall be independent of and in addition to any other indemnity
provision of this Agreement and shall not be subject to any monetary
limitations or time bars.
(ii) Notwithstanding anything in this Agreement to the
contrary, Buyer shall indemnify, defend and hold harmless Sellers, at any
time after the Closing, from and against any liability for (A) Straddle
Period Taxes, and (B) any liability for taxes of the Company for any
taxable period ending after the Closing Date which is not a Straddle
Period.
(iii) If a claim for Taxes shall be made by any taxing
authority in writing, which, if successful, might result in an indemnity
payment pursuant to this Section 5.5, the party seeking indemnification
(the "Tax Indemnified Party") shall promptly notify the other party (the
"Tax Indemni-
32
fying Party") in writing of such claim (a "Tax Claim") within a reasonably
sufficient period of time to allow the Tax Indemnifying Party effectively
to contest such Tax Claim, and in reasonable detail to apprise the Tax
Indemnifying Party of the nature of the Tax Claim, and provide copies of
all correspondence and documents received by it from the relevant taxing
authority. Failure to give prompt notice of a Tax Claim hereunder shall not
affect the Tax Indemnifying Party's obligation under this Section except to
the extent that the Tax Indemnifying Party is prejudiced by such failure to
give prompt notice.
(iv) With respect to any Tax Claim which might result in an
indemnity payment to Buyer pursuant to this Section 5.5(d), Sellers shall
control all proceedings taken in connection with such Tax Claim and,
without limiting the foregoing, may in their sole discretion and at their
sole expense pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any taxing authority with
respect thereto, and may, in their sole discretion, either pay the Tax
claimed and xxx for a refund where applicable law permits such refund suits
or contest such Tax Claim. Buyer shall not under any circumstances settle
or otherwise compromise any Tax Claim referred to in the preceding sentence
without Sellers' prior written consent; provided, that, if Buyer does so
settle or otherwise compromise such a Tax Claim, Sellers shall not
indemnify Buyer for any such Taxes. In connection with any proceeding taken
in connection with such Tax Claim, (A) Sellers shall keep Buyer informed of
all material developments and events relating to such Tax Claim if
involving a material liability for Taxes and (B) Buyer shall have the
right, at its sole expense, to participate in any such proceedings;
provided, that, the final decision with respect to any settlement or
compromise of any such Tax Claims shall be that of Sellers. Buyer shall
cooperate with Sellers in contesting such Tax Claim, which cooperation
shall include, without limitation, the retention and the provision to
Sellers of records and information which are reasonably relevant to such
Tax Claim, and making employees available to Sellers to provide additional
33
information or explanation of any material provided hereunder or to testify
at proceedings relating to such Tax Claim. Sellers shall reimburse Buyer
for reasonable out-of-pocket expenses incurred by Buyer in providing such
assistance to Sellers.
(v) With respect to any Tax Claim not described in Section
5.5(d)(iv) hereof which might result in an indemnity payment to Sellers
pursuant hereto, Buyer shall control all proceedings in accordance with
provisions that are parallel to those in Section 5.5(d)(iv) hereof.
(e) Any Indemnification payment made pursuant to this Section 5.5
shall be treated by the parties hereto as an adjustment to the Purchase
Consideration for federal, state, local and foreign tax purposes.
Section 5.6 Registration Rights. (a) If Buyer proposes to file a
registration statement under the Securities Act with respect to an offering by
Buyer for its own account or for the account of any of its respective
securityholders (other than the Sellers) of any shares of Buyer Common Stock or
securities convertible into or exchangeable for shares of Buyer Common Stock
(other than a registration statement on Form S-4 or S-8 or any substitute form
that may be adopted by the Securities and Exchange Commission (the "SEC")) then
Buyer shall give written notice of such proposed filing to each Seller as soon
as practicable (but in no event less than 30 days before the anticipated filing
date), and such notice shall offer such Seller the opportunity to register such
number of shares of Buyer Common Stock as such Seller may request (a
"Piggy-Back Registration"). Buyer shall use all reasonable efforts to cause the
securities requested to be included in a Piggy-Back Registration by each Seller
to be included on the same terms and conditions as any similar securities of
Buyer included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering determine that the aggregate
number of shares proposed to be included in such registration statement exceeds
the maximum number of shares that should be included therein, then the amount
of shares of Buyer Common Stock to be offered for the account of Buyer and
Sellers to be included in such offering shall be first reduced, pro-rata on
based on the number of shares requested to be sold by Buyer and
34
Sellers, to the extent necessary to reduce the total amount of securities to be
included in such offering to the amount recommended by such managing
underwriter or underwriters (a "Cutback"). The number of shares of Buyer Common
Stock to be sold for the account of any of the holders of (i) Buyer's
Convertible Preferred Stock or (ii) the Units, each comprised of one share of
Buyer Common Stock and one warrant, issued pursuant to the Common Stock and
Warrant Unit purchase Agreement, dated as of November 21, 1996, by and between
Buyer, Xxxxxx Xxxxxxxxx and Capital Research and Management Company, shall not
be subject to a Cutback under any circumstances as a result of any Piggy-Back
Registration hereunder without the prior approval of such securityholders.
(b) Each Seller agrees that he may not participate in any
underwritten registration unless he (i) agrees to sell his shares of Buyer
Common Stock on the basis provided in any underwriting arrangements approved by
Buyer and (ii) completes and executes all customary questionnaires, powers of
attorney, indemnities (including those in favor of the underwriter or
underwriters and Buyer for, among other things, misstatements or omissions of
the Sellers), underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
(c) In the case of any offering registered pursuant to this
Section 5.6, Buyer agrees to indemnify and hold each Seller harmless against
any and all losses, claims, damages or liabilities to which they or either of
them may become subject under the Securities Act or any other statute or common
law or otherwise, and to reimburse each of them, from time to time upon
request, for any legal or other expenses incurred by them in connection with
investigating any claims and defending any actions, insofar as any such losses,
claims, damages, liabilities or actions shall arise out of or shall be based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in the registration statement relating to the sale of their
respective shares of Buyer Common Stock, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (ii) any untrue statement or
alleged untrue statement or a material fact contained in any preliminary
prospectus (as amended or supplemented if
35
Buyer shall have filed with the SEC any amendment thereof or supplement
thereto), if used prior to the effective date of such registration statement,
or contained in the prospectus (as amended or supplemented if Buyer shall have
filed with the SEC any amendment thereof or supplement thereto), or the
omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the indemnification
agreement contained in this paragraph (c) shall not apply to such losses,
claims, damages, liabilities or actions which shall arise from the sale of
shares of Buyer Common Stock to any person if such losses, claims, damages,
liabilities or actions shall arise out of or shall be based upon any such
untrue statement or alleged untrue statement, or any such omission or alleged
omission, if such statement or omission shall have been made in reliance upon
and in conformity with information furnished to Buyer by the Seller seeking
such indemnification specifically for use in connection with the preparation of
the registration statement or any preliminary prospectus or prospectus
contained in the registration statement or any such amendment thereof or
supplement thereto.
Section 5.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth in Section 3.28 above, each Seller
further agrees not to make any disposition of all or any portion of the shares
of Buyer Common Stock or Warrants to be received hereunder unless:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b) (i) (A) Such Seller shall have notified Buyer of the
proposed disposition and shall have furnished Buyer with a reasonably detailed
statement of the circumstances surrounding the proposed disposition, including,
without limitation, the offer price and the name of the offeror, (B) Buyer
shall have right to purchase such shares of Buyer Common Stock on terms no less
favorable than those disclosed pursuant to clause (A), above, and Buyer shall
have failed to give Seller notice of its intent to purchase such shares of
Buyer Common
36
Stock within 15 days of Buyer's receipt of the Seller notice pursuant to clause
(A), (ii) if reasonably requested by Buyer, such Seller shall have furnished
Buyer with a satisfactory opinion of counsel that such disposition will not
require registration of the Buyer Common Stock under the Securities Act, (iii)
the transferee has agreed in writing for the benefit of Buyer to be bound by
this Section 5.7, provided and to the extent such section is then applicable,
and to be bound by all other provisions of this Agreement, to the extent then
applicable, and (iv) such sale to the third party shall have occurred within 30
days after the provisions of clause (i)(B) have expired. Notwithstanding the
foregoing, the requirements of this paragraph (b) shall not be applicable to
sales of Buyer Common Stock made pursuant to Rule 144 under the Securities Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement, notice to Buyer or opinion of counsel
shall be necessary for (i) a transfer by a Seller to the estate of such Seller
or the transfer by gift, will or intestate succession of such Seller to his
spouse or to the siblings, lineal descendants or ancestors of such Seller or
his spouse, or (ii) a transfer by a Seller to a trust of which such Seller is
the grantor; provided, in any such case, that the transferee agrees in writing
to be subject to the terms hereof to the same extent as if he was a party
hereunder.
Section 5.8 No Sales to Competitors. Prior to an initial public
offering of Buyer Common Stock, each Seller covenants not to sell any Buyer
Common Stock or other securities of Buyer to any purchaser known by such Seller
to be a competitor of the Company, the Business or Buyer.
Section 5.9 [RESERVED]
Section 5.10 Certain Litigation. From and after the Closing, Sellers
shall indemnify and hold harmless Buyer, its affiliates and their successors
and assigns from and against any litigation, claim or proceeding, whether
commenced or threatened, to which Buyer or any of its affiliates and their
respective successors and assigns are named as a defendant which relates to the
37
Share Ownership Claim subject to the limitations set forth in Section 8.2(b)(i)
hereof.
Section 5.11 Covenant Not to Compete and Secrecy Agreement.
(a) Each Seller agrees that, for a period of two (2) years from
and after the termination, for any reason, of such Seller's employment under
his respective Employment Agreement, such Seller shall not, either directly or
indirectly, through any subsidiary or affiliate or otherwise, own, manage or
operate any business or enterprise, which competes or would compete (i) in any
material way with the Company, the Business, Buyer, or any of their respective
affiliates, or (ii) in the business of computer software consulting, including,
without limitation, programming, troubleshooting, planning, training, project
management and year 2000 compliance.
Notwithstanding the foregoing, either Seller may (i) own, solely
as a passive investor, up to 5% of the equity securities of any company which
has a class of securities that are publicly traded which may compete with the
Company, the Business, Buyer, or their affiliates, or (ii) become an employee
of a client of the Buyer to the extent permitted by such Seller's Employment
Agreement.
(b) Each Seller agrees that he shall not, for a period of two (2)
years from and after the termination, for any reason, of such Seller's
employment under his respective Employment Agreement, except:
(i) as otherwise may be required by applicable law, governmental
regulation, subpoena or order of any court or governmental body, or
(ii) as may be necessary in connection with the filing of Tax
Returns, or
(iii) in connection with the defense of any claim, action, suit
or proceeding to which either Seller or any affiliate of either of
them is a party or as to which they are indemnifying Buyer hereunder,
or
38
(iv) as may be necessary to carry out its obligations under this
Agreement or to enforce any obligation of Buyer under this Agreement
or any document executed and delivered in connection herewith, or
(v) for disclosures to accountants, financial advisors, counsel
or other representatives of such Seller,
disclose to anyone, use, sell, or otherwise transfer any trade secrets,
Confidential Information (as defined in the Confidentiality Agreement),
proprietary information, customer or supplier lists, or other nonpublic
information pertaining to the financial condition, business, manner of
operation, affairs (including labor matters), plans or prospects of the
Company. In the event that either Seller shall make or be required to make
disclosures as set forth above, each Seller agrees to do so in such manner as
to preserve to the fullest extent reasonably practicable the confidentiality of
all confidential business records and information and the attorney-client and
work-product privileges.
(c) Each Seller agrees that he shall not, until the second
anniversary of the date of this Agreement, (i) solicit, or induce, directly or
indirectly, any employee or independent contractor of the Company to terminate
his or her employment or contract or other agreement with the Company or to
refrain from rendering services to the Company or to enter into an employment
or independent contractor relationship with a competitor of the Company; (ii)
approach any such employee or independent contractor for any of the foregoing
purposes; or (iii) knowingly authorize, approve or assist in the taking of any
such actions by any person other than the Company, Buyer or their respective
affiliates.
(d) Each Seller acknowledges that no adequate remedy at law
exists for a breach of this Section. In addition to any other right or remedy
Buyer may have at law or in equity, Buyer shall be entitled to seek appropriate
injunctive relief, including preliminary and mandatory injunctive relief,
without the posting of any bond or other security, enjoining or restraining
either or both Sellers or any affiliate of either of them from any violation or
threatened violation of this Section.
39
(e) The invalidity or unenforceability of any provision of this
Section shall in no way affect the validity or enforceability of any other
provision hereof. Moreover, if any provision of this Section shall be held to
be unenforceable because it is excessively broad as to either scope or subject,
it is agreed by the parties that such provision shall be construed by a court
of competent jurisdiction by limiting or reducing it so as to be enforceable to
the extent compatible with the then applicable law.
Section 5.12 Optional Repurchase. (a) On or after December 31, 1999,
provided that there has not previously occurred an initial public offering of
Buyer Common Stock, upon the written request of either Seller, (a "Requesting
Seller"), delivered to the Buyer (a "Repurchase Request"), Buyer shall
repurchase such number of shares of Buyer Common Stock then held by each
Requesting Seller as shall be specified in such notice by such Requesting
Seller. Repurchases pursuant to this Section 5.12 shall be made in quarterly
installments equal to the lesser of (i) five percent (5%) of the quarterly net
income (determined in accordance with GAAP) of the Buyer and (ii) $200,000;
provided, that the Buyer shall not be required to make any such repurchase
installment except to the extent that the Buyer shall have funds legally
available therefor.
The repurchase price for each share of Buyer Common Stock redeemed
pursuant to this Section 5.12 shall be the greater of (i) $10.90 per share of
Buyer Common Stock, and (ii) the current fair market value of the shares of
Buyer Common Stock on the date fixed for repurchase of such shares (the greater
of (i) and (ii) being the "Repurchase Price"). In the event that both Sellers
have Repurchase Requests outstanding simultaneously, each repurchase of shares
of Buyer Common Stock shall be made pro rata (based on the levels of funds to
be received) among Sellers, based upon the number of shares of Buyer Common
Stock to requested to be repurchased in the Repurchase Request.
For the purposes of this Section 5.12, the fair market value of such
shares of Buyer Common Stock shall be determined in good faith by the Board of
Directors of the Buyer at the time of the repurchase payment. In the event of
any dispute between the Sellers and the Buyer
40
regarding the determination of the fair market value of such shares of Buyer
Common Stock, other than a claim that Buyer has breached its obligation to make
such determination in good faith, the Buyer and the Sellers shall each select
qualified appraisers for the Buyer Common Stock (the "Parties' Appraisers"),
and the Parties' Appraisers shall together select a third appraiser (the "Third
Appraiser"). Each of the Parties' Appraisers and the Third Appraiser shall
establish a fair market value for the Buyer Common Stock. The final fair market
value of the Buyer Common Stock, which shall be binding upon all parties, shall
be the average of (i) the appraisal of the Parties' Appraiser closest to that
of the Third Appraiser, and (ii) the appraisal of the Third Appraiser. Each
party shall bear the costs of its Party Appraiser and shall share the costs of
the Third Appraiser, with fifty percent (50%) of such Third Appraiser costs to
be paid by the Company and fifty percent (50%) of such Third Appraiser costs to
be paid by the Sellers.
(b) The Buyer Common Stock Repurchase Price set forth in this Section
5.12 shall be subject to equitable adjustment whenever there shall occur a
stock split, stock dividend, combination, recapitalization, reclassification or
other similar event involving a change in the Buyer Common Stock.
(c) At least seven (7) days prior to the anticipated date of each
quarterly repurchase installment payment, which shall occur on a date not more
than 45, nor less than 30, days after the end of a quarter (the "Repurchase
Date"), written notice (a "Repurchase Notice") shall be mailed, first class or
certified mail, postage prepaid, by the Buyer to each Seller whose Buyer Common
Stock which is to be redeemed, at its address shown an the records of the
Buyer. The Repurchase Notice shall contain the following information:
(i) the number of shares of Buyer Common Stock held by the Seller
which shall be repurchased by the Buyer and the total number of shares
of Buyer Common Stock held by both Sellers to be so repurchased;
(ii) the Repurchase Date and the Repurchase Price; and
41
(iii) instructions with respect to the Seller's surrender to the
Buyer of certificates representing the shares of Buyer Common Stock to
be repurchased.
Section 5.13 Certain Finders Fees. Buyer shall pay any finder's fee,
if any, due to Xxxxx Xxxxxx.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 6.1 Conditions to Each Party's Obligation. The respective
obligation of each party to consummate the transactions contemplated herein is
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) No statute, rule or regulation shall have been enacted,
entered, promulgated or enforced by any court or governmental authority which
prohibits or restricts the consummation of the transactions contemplated
hereby;
(b) There shall not be in effect any judgment, order, injunction
or decree of any court of competent jurisdiction enjoining the consummation of
the transactions contemplated hereby; and
(c) There shall not be any suit, action, investigation, inquiry
or other proceeding instituted, pending or threatened by any governmental or
other regulatory or administrative agency or commission which seeks to enjoin
or otherwise prevent consummation of the transactions contemplated hereby.
Section 6.2 Conditions to Obligations of Sellers. The obligations of
Sellers to consummate the transactions contemplated hereby are further subject
to the satisfaction (or waiver) at or prior to the Closing of the following
conditions:
(a) The representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at the date hereof
and as of the Closing as if made at and as of such time, except
42
for changes permitted or contemplated hereby and except for representations
which are as of a specific date;
(b) Buyer shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Closing pursuant to the terms hereof;
(c) If the date hereof is not also the Closing Date, Buyer shall
have delivered to Sellers a certificate, reasonably satisfactory to Sellers,
with respect to the accuracy of the representations and warranties, and
fulfillment of the obligations of Buyer set forth herein, dated as of the
Closing Date executed by an officer of Buyer; and
(d) Buyer shall have delivered to Sellers those items set forth
in Section 1.6 hereof.
Section 6.3 Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated hereby are further subject to
the satisfaction (or waiver) at or prior to the Closing of the following
conditions:
(a) The representations and warranties of Sellers contained in
this Agreement shall be true and correct in all material respects at the date
hereof and as of the Closing as if made at and as of such time, except for
changes permitted or contemplated hereby and except for representations which
are as of a specific date;
(b) Sellers shall have each performed in all material respects
their obligations under this Agreement required to be performed by them at or
prior to the Closing pursuant to the terms hereof;
(c) If the date hereof is not also the Closing Date, Sellers
shall have delivered to Buyer a certificate, reasonably satisfactory to Buyer,
with respect to the accuracy of the representations and warranties and
fulfillment of the obligations of Sellers set forth herein, dated as of the
Closing Date and executed by each of the Sellers;
43
(d) Sellers shall have delivered to Buyer those items set forth
in Section 1.5 hereof; and
(e) Buyer shall have received the opinion of Day, Xxxxx & Xxxxxx,
legal counsel to Sellers, dated as of the Closing Date and reasonably
satisfactory to Buyer, with respect to, among other things, the due
incorporation, valid existence and good standing of the Company, the
capitalization of the Company, the valid issuance, non-assessability of and
title to the Shares and the authorization and enforceability of this Agreement
with respect to Sellers.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written consent of Sellers and
Buyer; or
(b) at any time on or after August 31, 1997, by either Sellers,
on the one hand, or Buyer, on the other hand, if the Closing shall not have
occurred on or prior to such date; provided that the party so terminating this
Agreement may not then be in default of any of its obligations, representations
or warranties set forth herein.
Section 7.2 Procedure and Effect of Termination. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to Section 7.1(b) hereof, written notice thereof
shall forthwith be given by the party so terminating to the other party hereto
and this Agreement shall terminate and the transactions contemplated hereby
shall be abandoned, without further action by Sellers, on the one hand, or
Buyer, on the other hand. If this Agreement is terminated pursuant to Section
7.1 hereof:
(a) each party shall redeliver all documents, work papers and
other materials of the other parties relating to the transactions
contemplated hereby,
44
whether so obtained before or after the execution hereof, to the party
furnishing the same, and all confidential information received by any party
hereto with respect to the other party shall be treated in accordance with the
Confidentiality Agreement;
(b) all filings, applications and other submissions made pursuant
hereto shall, at the option of Sellers, and to the extent practicable, be
withdrawn from the agency or other person to which made; and
(c) there shall be no liability or obligation hereunder on the
part of Sellers or Buyer or any of their respective directors, officers,
employees, affiliates, controlling persons, agents or representatives, except
that Sellers or Buyer, as the case may be, may have liability to the other
party if the basis of termination is a willful, material breach by Sellers or
Buyer, as the case may be, of one or more of the provisions of this Agreement,
and except that the obligations provided for in Sections 7.2(a), 7.2(b) and 9.1
hereof shall survive any such termination.
Section 7.3 Amendment, Modification and Waiver. This Agreement may be
amended, modified or supplemented at any time by written agreement of Sellers
and Buyer. Any failure of Sellers, on the one hand, or Buyer, on the other
hand, to comply with any term or provision of this Agreement may be waived,
with respect to Buyer, by Sellers and, with respect to Sellers, by Buyer, by an
instrument in writing signed by or on behalf of the appropriate party, but such
waiver or failure to insist upon strict compliance with such term or provision
shall not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure to comply.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 8.1 Survival of Representations, Warranties and Agreements.
Except for Section 3.4(b), which shall survive indefinitely, the
representations and warranties, but not the agreements and covenants, of each
of Sellers and Buyer, made in this Agreement shall survive the Closing until
the first anniversary of the Closing
45
(the "Indemnity Period"), but, except as provided in Section 7.2(c) hereof,
shall not survive any termination of this Agreement. The agreements and
covenants of the parties, including, without limitation, Section 5.10 hereof,
shall survive the Closing in accordance with their terms. The parties intend to
shorten the statute of limitations and agree that no claims or causes of action
may be brought against Sellers, Buyer or any of its directors, officers,
employees, affiliates, controlling persons, agents or representatives based
upon, directly or indirectly, any of the representations or warranties
contained in this Agreement after the Indemnity Period or, except as provided
in Section 7.2(c) hereof, any termination of this Agreement. This Section 8.1
shall not limit any covenant or agreement of the parties which contemplates
performance after the Closing, including, without limitation, the covenants and
agreements set forth in Sections 5.5 and 5.7 hereof.
Section 8.2 Sellers' Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, from
and after the Closing, Sellers shall, jointly and severally, indemnify and hold
harmless Buyer, the Company and their respective directors, officers,
employees, affiliates, controlling persons, agents and representatives and
their successors and assigns (collectively, the "Buyer Indemnitees") from and
against all liability, demands, claims, actions or causes of action,
assessments, losses, damages, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) (collectively "Buyer
Damages") asserted against or incurred by any Buyer Indemnitee as a result of
or arising out of (i) a breach of any representation or warranty contained in
this Agreement when made or at and as of the Closing as though such
representations and warranties were made at and as of the Closing and (ii) the
Share Ownership Claim.
(b) Each Seller's obligations to indemnify the Buyer
Indemnitees pursuant to (x) clause (i) of Section 8.2(a) hereof with respect to
a breach of a representation or warranty contained in this Agreement, and (y)
Section 5.10 hereof, are subject to the following limitations:
46
(i) Except as otherwise expressly provided herein, no
indemnification shall be made by Sellers unless the aggregate amount
of Buyer Damages exceeds $50,000 and, in such event, indemnification
shall be made by Sellers for all Buyer Damages in excess of $50,000,
it being understood that such $50,000 shall be a "deductible".
(ii) Except as otherwise expressly provided herein, Sellers shall
be obligated to indemnify the Buyer Indemnitees only for those claims
giving rise to Buyer Damages as to which the Buyer Indemnitees have
given Sellers written notice thereof prior to the end of the Indemnity
Period in the event that the Indemnity Period applies to such Buyer
Damages. Any written notice delivered by a Buyer Indemnitee to Sellers
with respect to Buyer Damages shall set forth with as much specificity
as is reasonably practicable the basis of the claim for Buyer Damages
and, to the extent reasonably practicable, a reasonable estimate of
the amount thereof.
(c) In the event of any conflict or inconsistency between any of
the provisions of Sections 8.1, 8.2 and 8.4 and any other section of this
Agreement, on the one hand and Section 5.5 on the other hand, the provisions of
Section 5.5 will control.
(d) Sellers agree to each bear their prorata share of any Buyer
Damages indemnified based on the proportion of the Purchase Consideration
received by such Seller hereunder.
(e) Sellers agree that any indemnification of Buyer Damages
under this Article VIII shall be first made by set-off against the principal
amount of the Promissory Note, as described in the form of Promissory Note
attached hereto, and next by payment in cash by the Sellers to the affected
Buyer Indemnitee.
Section 8.3 Third Party Indemnification. The obligations of either
party to indemnify the other under Section 8.2 or 8.4 hereof with respect to
Buyer Damages or Seller Damages, as the case may be, resulting from the
assertion of liability by third parties (a "Claim"), will be subject to the
following terms and conditions:
47
(a) A Buyer Indemnitee or Seller Indemnitee, as the case may be
(the "Indemnified Party"), against whom any Claim is asserted will give Sellers
or Buyer, as the case may be (the "Indemnifying Party"), written notice of any
such Claim promptly after learning of such Claim, and the Indemnifying Party
may at its option undertake the defense thereof by representatives of their own
choosing. Failure to give prompt notice of a Claim hereunder shall not affect
the Indemnifying Party's obligations under this Section 8.3, except to the
extent the Indemnifying Party is materially prejudiced by such failure to give
prompt notice. If the Indemnifying Party, within 30 days after notice of any
such Claim, or such shorter period as is reasonably required, fails to assume
the defense of such Claim, the Indemnified Party against whom such Claim has
been made will (upon further notice to the Indemnifying Party) have the right
to undertake the defense, compromise or settlement of such Claim on behalf of
and for the account and risk, and at the expense, of the Indemnifying Party
subject to the right of the Indemnifying Party to assume the defense of such
Claim at any time prior to settlement, compromise or final determination
thereof.
(b) Anything in this Section 8.3 to the contrary notwithstanding,
the neither party shall enter into any settlement or compromise of any action,
suit or proceeding or consent to the entry of any judgment (i) which does not
include as an unconditional term thereof the delivery by the claimant or
plaintiff to the other party of a written release from all liability in respect
of such action, suit or proceeding and (ii) for other than monetary damages to
be borne by the other party without the prior written consent of the other
party, which consent shall not be unreasonably withheld.
Section 8.4 Buyer's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, from
and after the Closing, Buyer shall indemnify and hold harmless each of the
Sellers and their respective heirs, successors and assigns (collectively, the
"Seller Indemnitees") from and against all liability, demands, claims, actions
or causes of action, assessments, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively "Seller Damages") asserted against
48
or incurred by any Seller Indemnitee as a result of or arising out of (i) a
breach of any representation or warranty contained in this Agreement when made
or at and as of the Closing as though such representations and warranties were
made at and as of the Closing and (ii) the operation of the business of the
Company from and after the Closing, including any liabilities of the Company
incurred prior to the Closing that are provided for in the Financial
Statements.
(b) Buyer's obligations to indemnify the Seller Indemnitees
pursuant to clause (i) of Section 8.4(a) hereof with respect to a breach of a
representation or warranty contained in this Agreement are subject to the
following limitations:
(i) Except as otherwise expressly provided herein, no
indemnification shall be made by Sellers unless the aggregate amount
of Seller Damages exceeds $50,000 and, in such event, indemnification
shall be made by Buyers for all Seller Damages in excess of $50,000,
it being understood that such $50,000 shall be a "deductible".
(ii) Except as otherwise expressly provided herein, Buyer shall
be obligated to indemnify the Seller Indemnitees only for those claims
giving rise to Seller Damages as to which the Seller Indemnitees have
given Buyer written notice thereof prior to the end of the Indemnity
Period in the event that the Indemnity Period applies to such Seller
Damages. Any written notice delivered by a Seller Indemnitee to Buyer
with respect to Seller Damages shall set forth with as much
specificity as is reasonably practicable the basis of the claim for
Seller Damages and, to the extent reasonably practicable, a reasonable
estimate of the amount thereof.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Fees and Expenses. Whether or not the transactions
contemplated herein are consummated pursuant hereto, except as otherwise
provided herein, each of Sellers, on the one hand, and Buyer, on the other
hand, shall pay all fees and expenses incurred by, or on behalf of, such party
in connection with, or in anticipa-
49
tion of, this Agreement and the consummation of the transactions contemplated
hereby; provided, that, the Company may pay Sellers' professional fees and
expenses incurred in connection with the transactions contemplated hereby;
provided, further, that such Company paid professional fees and expenses shall
be reflected in the Working Capital Statement. Each of Sellers, on the one
hand, and Buyer, on the other hand, shall indemnify and hold harmless the other
party from and against any and all claims or liabilities for financial advisory
and finders' fees incurred by reason of any action taken by such party or
otherwise arising out of the transactions contemplated by this Agreement by any
person claiming to have been engaged by such party.
Section 9.2 Further Assurances. From time to time after the Closing
Date, at the request of another party hereto and at the expense of the party so
requesting, each of the parties hereto shall execute and deliver to such
requesting party such documents and take such other action as such requesting
party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
Section 9.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (a) personal
delivery; (b) registered or certified mail, postage prepaid, return receipt
requested; or (c) reputable, national, overnight delivery service. Notices
shall be sent to the appropriate party at its address given below (or at such
other address for such party as shall be specified by notice given hereunder):
If to Buyer, to:
PRT Group Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
50
with a copy to:
Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Xxxxxx
If to Sellers, to:
Computer Management Resources, Inc.
Liberty Plaza
000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx and
Xxxxxxx Xxxxxxxxxx
with a copy to:
Day, Xxxxx & Xxxxxx
CityPlace I
Hartford, CT 06103-3499
Attention: Xxxxxxx X. Xxxxx
All such notices, requests, demands, waivers and communications shall be deemed
received upon (i) if by personal delivery, upon actual receipt thereof by the
addressee, (ii) if by mail, upon receipt of the return receipt, or (iii) if by
overnight delivery, on the day following delivery to the overnight delivery
service.
Section 9.4 Severability. Should any provision of this Agreement for
any reason be declared invalid or unenforceable, such decision shall not affect
the validity or enforceability of any of the other provisions of this
Agreement, which remaining provisions shall remain in full force and effect and
the application of such invalid or unenforceable provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall be valid and enforced to the fullest extent permitted by law.
Section 9.5 Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties
51
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, directly or indirectly, including, without limitation, by operation
of law, by any party hereto without the prior written consent of the other
parties hereto.
Section 9.6 No Third Party Beneficiaries. This Agreement is solely for
the benefit of Sellers, and their successors and permitted assigns, with
respect to the obligations of Buyer under this Agreement, and for the benefit
of Buyer and its respective successors and permitted assigns, with respect to
the obligations of Sellers, under this Agreement, and this Agreement shall not
be deemed to confer upon or give to any other third party any remedy, claim
liability, reimbursement, cause of action or other right.
Section 9.7 Interpretation.
(a) The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
(b) As used in this Agreement, the term "person" shall mean and
include an individual, a partnership, a joint venture, a corporation, a trust,
an unincorporated organization and a government or any department or agency
thereof.
(c) As used in this Agreement, the term "affiliate" shall have
the meaning set forth in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended.
Section 9.8 Jurisdiction and Consent to Service. Notwithstanding the
jurisdiction or venue of any other court, each of Sellers and Buyer (a) agree
that any suit, action or proceeding arising out of or relating to this
Agreement may be brought only in the state or federal courts of the States of
New York or Connecticut; (b) consents to the exclusive jurisdiction of each
such court in any suit, action or proceeding relating to or arising out of this
Agreement; (c) waives any objection which it may have to the laying of venue in
any such suit, action
52
or proceeding in any such court; and (d) agrees that service of any court paper
may be made in such manner as may be provided under applicable laws or court
rules governing service of process.
Section 9.9 Entire Agreement. This Agreement, the Confidentiality
Agreement, the Disclosure Schedule, and the Exhibits and other documents
referred to herein or delivered pursuant hereto which form a part hereof
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties or any of them with respect to the
subject matter hereof.
Section 9.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York (regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.
Section 9.11 Specific Performance. The parties acknowledge and agree
that any breach of the terms of this Agreement would give rise to irreparable
harm for which money damages would not be an adequate remedy and accordingly
the parties agree that, in addition to any other remedies, each shall be
entitled to enforce the terms of this Agreement by a decree of specific
performance without the necessity of proving the inadequacy of money damages as
a remedy.
Section 9.12 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
SELLERS
/s/ XXXXXX XXXXXXXXX
------------------------------
Xxxxxx Xxxxxxxxx
/s/ XXXXXXX XXXXXXXXXX
------------------------------
Xxxxxxx Xxxxxxxxxx
PRT GROUP INC.
By: /s/ XXXXXXX X. XXXXXXXXX
---------------------------
Name: Xxxxxxx x. Xxxxxxxxx
Title: Chief Operating Officer
54
