Exhibit 10.20
EXCHANGE AGREEMENT
This Agreement is made this 30 day of March, 1998 by and among Xxxxxxxx-
Xxxx, Inc., a Delaware corporation ("WHI"), QCC, Inc., a Massachusetts
corporation ("QCC"), and Xxxxxx X. Xxxxx and Xxxxxxxx X. Xxxxxxxx, Xx. (each
individually a "Shareholder" and collectively, the "Shareholders"). QCC, the
Shareholders and WHI are collectively referred to herein as the "Parties".
BACKGROUND
QCC is engaged in the business of marketing and selling the services of
computer software analysts, programmers, engineers and project managers in the
following area: System Software Associates and XX Xxxxxxx software products,
and AS/400 custom application software development services (collectively, the
"Business");
WHI desires to acquire all of the outstanding capital stock of QCC through
an exchange of capital stock;
The Shareholders own beneficially and of record all of the outstanding
shares of capital stock of QCC and desire to transfer their shares to WHI in
exchange for shares of capital stock in WHI;
NOW, THEREFORE, in consideration of the premises and promises made herein,
the Parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"ADJUSTED NET WORKING CAPITAL" means (i) all cash, cash equivalents,
prepaid expenses useable by WHI and collectable receivables (less proper
allowance for doubtful accounts) minus (ii) all indebtedness of QCC of any
nature computed on the accrual method, whether for borrowed money, trade
payables, accruals (including accrued vacations, income taxes and client credit
balances or advances and excluding any liability arising from the Conversion
Tax) or otherwise, and all interest, penalties, prepayment fees and other
charges accrued through the date as of which a computation is being made,
regardless of whether such amounts are then due.
"ADJUSTMENT PROPOSAL" has the meaning set forth in section2.6(b) below.
"AFFILIATE" shall mean:
(a) any corporation, partnership, trust or other entity (i) in
which QCC or any person listed in (b) or (c) below has, directly or
indirectly, a five percent (5%) or greater interest or (ii) which
controls, is controlled by, or is under common control with QCC, any
person listed in (b) or (c) below, any of the entities described in
the preceding clause (i) or any combination thereof;
(b) the Shareholders; and
(c) any descendant, ancestor, spouse, brother, sister or other
relation of any person described in (b) above.
"BUSINESS" has the meaning set forth in the preface above.
"CLOSING" has the meaning set forth in section2.1 below.
"CLOSING DATE" has the meaning set forth in section2.1 below.
"CODE" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations promulgated thereunder.
"CONVERSION TAX" means any tax which is attributable to income which must
be recognized by QCC by reason of it being required to change from the cash
method to the accrual method of accounting for Federal income tax purposes.
"DISPUTE NOTICE" has the meaning set forth in section2.6.
"EXCHANGE CONSIDERATION" has the meaning set forth in section2.4 below.
"EXCHANGE CONSIDERATION ADJUSTMENT" has the meaning set forth in
section2.6.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"HELD BACK SHARES" has the meaning set forth in section2.5.
"INDEPENDENT AUDITOR" has the meaning set forth in section2.6.
"KNOWLEDGE" means actual knowledge following review and participation in
preparation of the Schedule 3 to this Agreement. Knowledge of QCC shall include
knowledge of any of the Shareholders.
"LAWS" means all laws, statutes, codes, rules, regulations, ordinances or
other requirements applicable to the Business.
"MATERIAL CONTRACT" has the meaning ascribed in Paragraph 26 of Schedule 3.
"MATERIAL ADVERSE EFFECT" means an adverse effect which is material to the
business or properties of QCC as a whole.
"ORDINARY COURSE OR ORDINARY COURSE OF BUSINESS" means the ordinary course
of business consistent with past custom and practice (including with respect to
quantity and frequency).
"REGISTER", "REGISTERED" and "REGISTRATION" refer to a registration of the
offering and sale of securities effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or ordering
of the effectiveness of such registration statement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, claim, charge or lien of any kind or character, direct or indirect,
whether accrued, absolute, contingent or otherwise.
"STOCK PRICE" means $33.00 per share.
"QCC GROUP" has the meaning set forth in the preamble.
"WHI SHARES" has the meaning set forth in section2.4(a) below.
"INDEMNIFIED DISPUTE" means the claim by a former QCC employee, as
disclosed by the Shareholders on Schedule 3.20.
ARTICLE II
EXCHANGE
OF SHARES; CLOSING
2.1 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxx X. Xxxxxxxxx,
Xx. immediately following signing of this Agreement assuming satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby which is deemed to be at the opening of
business on March 30, 1998 (the "Closing Date").
2.2 Actions at the Closing. At the Closing, (a) the Shareholders shall
deliver, and shall cause QCC to deliver, to WHI the various certificates,
instruments and documents referred to in section6.1 below, and (b) WHI shall
deliver to the Shareholders the various certificates, instruments and documents
referred to in section6.2 below.
2.3 Delivery of QCC Capital Stock. Each of the Shareholders agrees to and
will sell, convey, transfer, assign and deliver to WHI at the Closing (as
defined in Section 2.1), on the terms and subject to the conditions set forth in
this Agreement, all his or her capital stock in QCC.
2.4 Exchange for WHI Shares. At and as of the Closing Date, WHI shall
issue to the Shareholders in exchange for the transfer to WHI of the shares of
QCC common stock owned by the Shareholders, in aggregate, on the Closing Date,
300,000 shares of WHI's common stock ("WHI Shares") (the "Exchange
Consideration"). WHI Shares to be issued as the Exchange Consideration shall be
allocated among the Shareholders in proportion to their respective QCC common
stock ownership interest in QCC, all as set forth on Schedule 2.4, (provided
that no fractional shares shall be issued, and the value of any fractional
shares, valued at the Stock Price shall be payable in cash).
2.5 Hold Back. (a) After the execution of this Agreement and prior to
the close of business on the Closing Date, no transfers of shares in QCC shall
be registered other than as contemplated by this Agreement. Subject to the
provisions of Section 2.5(b) and 2.5(c), WHI shall hold WHI Shares not subject
to registration under Article X which constitute 10% of each Shareholder's pro-
rata share of Exchange Consideration after any Exchange Consideration Adjustment
("Held Back Shares", such Held Back Shares being identified on Schedule 2.5(a)),
with executed stock powers, to be surrendered to WHI (valued at the Stock Price)
in satisfaction of any WHI Indemnification Amount (other than with respect to
the Indemnified Dispute as set forth below) due within one year following the
Closing except that the Held Back Shares may be utilized to satisfy claims for
WHI Indemnification Amounts for breach of representations and warranties
regarding the existence and/or value of assets and liabilities reflected on the
Financial Statements only if such claims are asserted by WHI by the date of the
issuance of the first audited statements reflecting combined operations of QCC
and WHI. Any WHI Indemnification Amount with respect to the Indemnified Dispute
shall be satisfied by the surrender of Held Back Shares only if the Shareholders
fail to pay such WHI Indemnification Amount directly in cash. Any surrender of
shares under this clause shall be effected on a pro-rata basis. In no event
shall any Held Back Shares be released from escrow to WHI in settlement of any
WHI Indemnification Amount alleged to be due unless and until such dispute is
settled by written agreement of the parties hereto or final court judgement not
subject to appeal.
(b) If there is no dispute pending regarding a claimed WHI Indemnification
Amount and the Indemnified Dispute has been resolved and satisfied as of the
one-year anniversary of the Closing, any remaining Held Back Shares will be
released from escrow by WHI to the Shareholders. If there is a dispute pending
regarding a claimed WHI Indemnification Amount or the Indemnified Dispute has
not been resolved and satisfied by the Shareholders prior to the one-year
anniversary, an amount of Held Back Shares sufficient to satisfy the claimed
recovery under the Indemnified Dispute ("Special Holdback") and sufficient to
satisfy any other claimed WHI Indemnification Amount shall continue to be held
subject to surrender to WHI for any WHI Indemnification Amount incurred with
respect to the Indemnified Dispute or any pending dispute, not to be delivered
to the Shareholders until such time the Indemnified Dispute has been settled by
written agreement of the parties thereto or final court judgement not subject to
appeal, but any additional Held Back Shares which do not relate to the disputed
amount or the Indemnified Dispute shall be released to the Shareholders on the
one-year anniversary of the Closing. WHI shall permit the Shareholders, in the
event of a Special Holdback, to sell the Held Back Shares into the market and
the proceeds of such sale shall continue to be held under this Agreement as if
such proceeds were "Held Back Shares," except that such proceeds shall be
segregated and deposited in a separate account identified as the property of the
Shareholders over which WHI has control only pursuant to the terms of this
Agreement.
(c) WHI, as escrow agent, will hold and dispose of the Held Back Shares in
escrow for WHI and the Shareholders in regard of the indemnification obligations
of the Shareholders under Article VIII hereof until the Held Back Shares are to
be released pursuant to the terms hereof. The Held Back Shares deposited by
Shareholders pursuant hereto shall, until released to WHI or the Shareholders
pursuant to the terms hereof, remain registered in the name of such
Shareholders, and such Shareholders shall be entitled to vote the same and WHI
will take all reasonable steps to allow and facilitate the exercise of such
rights. Except for tax-free dividends paid in stock declared with respect to
the Held Back Shares pursuant to Section 305(a) of the Code, the Shareholders
shall be entitled to receive any cash dividends, dividends payable in securities
or distributions of any kind made in respect of the Held Back Shares. In the
event of any meeting of Stockholders of WHI during the period in which the Held
Back Shares are held by WHI pursuant hereto, WHI shall send to each Shareholder
promptly copies of any notices, proxies and proxy material in connection with
such meeting.
2.6 Reimbursement by Shareholders for QCC Net Liabilities.
(a) Adjustment to Exchange Consideration. The Exchange Consideration
is premised upon Adjusted Net Working Capital being at least $347,118 at
the Closing Date. In the event that Adjusted Net Working Capital on the
Closing Date is less than $347,118, then the Exchange Consideration shall
be reduced by a number of WHI Shares equal to (x) the difference between
the Adjusted Net Working Capital on the Closing Date and $347,118 (y)
divided by the Stock Price at the Closing Date ("Exchange Consideration
Adjustment")(or if any additional amount is later determined to be owed
under this Section 2.6, WHI shall be entitled to set off against Held Back
Shares in accordance with Section 2.5).
(b) Calculation of Adjusted Net Working Capital. On the Closing
Date, the Shareholders shall deliver to WHI a preliminary statement based
on the balance sheet as of the close of business on March 30, 1998 (the
"Preliminary Settlement Statement") (See Schedule 2.6(b) setting forth
their good faith estimate of the amount of Adjusted Net Working Capital,
which shall be the basis for any payment under Section 2.6(a). If at any
time thereafter (but not later than one year following the Closing), WHI
believes that the Preliminary Settlement Statement did not fully describe
Adjusted Net Working Capital on the Closing Date, then WHI may deliver to
the Shareholders a statement (the "Adjustment Proposal") setting forth in
detail its proposed adjustments to Adjusted Net Working Capital on the
Closing Date. WHI shall provide the Shareholders and their representatives
with full access to all assets, records and work papers necessary to
compute and verify the accuracy of the Adjustment Proposal. This
Adjustment Proposal as delivered to the Shareholders shall be final for
purposes of this Agreement unless, within sixty (60) days after delivery to
the Shareholders, they shall deliver to WHI a notice setting forth in
detail their disagreement with the Adjustment Proposal ("Dispute Notice").
After delivery of a Dispute Notice, WHI and the Shareholders shall promptly
negotiate in good faith with respect to the subject of the Dispute Notice,
and if they are unable to reach an agreement within fifteen (15) days after
receipt by WHI of the Dispute Notice, the dispute (but only such disputed
items) shall be submitted to the Independent Auditor. The Independent
Auditor shall not have authority to redetermine any matter except those
which are in dispute. The Independent Auditor shall be directed to issue a
final and binding decision within sixty (60) days of submission of the
Dispute Notice, as to the issues of disagreement referred to in the Dispute
Notice and not resolved by the parties. The Adjustment Proposal, as so
adjusted by agreement or by the Independent Auditor (if required) shall be
final and binding on the parties.
(c) Preliminary Settlement Statement, Adjustment Proposal and Related
Procedures. The Preliminary Settlement Statement, Net Working Capital on
the Closing Date and Adjustment Proposal shall be prepared in accordance
with generally accepted accounting principles consistent with those
historically employed by QCC in preparation of its own financial
statements.
The "Independent Auditor" shall mean one of the "Big Six" U.S. public
accounting firms with no material relationship to either of the parties
chosen by agreement of the parties, or if they are unable to agree, shall
mean one of the "Big Six" firms with no such material relationship chosen
by lot. The fees and expenses of the Independent Auditor shall be
equitably allocated by the Independent Auditor based upon his decision.
The decision of the Independent Auditor with respect to the Adjustment
Proposal shall be final and binding on the parties. The full force and
effect of the representations and warranties shall in no way be diminished
by the Preliminary Settlement Statement, the Adjustment Proposal or the
determination of the Independent Auditor, provided that the Shareholders
shall not be liable for any breach of representation or warranty to the
extent that any liability giving rise to the breach is fully reflected in
the calculation of Adjusted Net Working Capital, as finally determined.
2.7 Accounting and Tax Treatment. It is further the intention of the
Parties that the transactions contemplated herein shall constitute for tax
purposes a tax deferred "reorganization" within the meaning of Sections
368(a)(1)(B) of the Code and for accounting purposes a pooling of interests
business combination. The Parties agree to take no position at any time which
is inconsistent with such intention, except as otherwise required by law. It is
understood that none of the Parties warrant to any of the others that the
intended treatment will be obtained.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
The Shareholders jointly and severally represent and warrant to WHI that
the statements contained in Schedule 3 are accurate, correct and complete as of
the date of this Agreement and as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout Schedule 3).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WHI
WHI represents and warrants to the Shareholders that the statements
contained in Schedule 4 are accurate, correct and complete as of the date of
this Agreement and as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout Schedule
4).
ARTICLE V
COVENANTS
The Parties agree as follows with respect to the period from and after the
execution of this Agreement.
5.1 General. Each of the Parties shall use its or her best efforts to
take all action and to do, or to cause to be done, all things necessary or
advisable to consummate and make effective the transactions contemplated by this
Agreement.
5.2 Notices and Consents. The Shareholders shall, and shall cause QCC to,
give any required notices to third parties, and shall obtain any third-party
consents necessary to ensure the continued effectiveness of all Material
Contracts (other than personal or real property leases) or otherwise necessary
or advisable in connection with the matters pertaining to QCC disclosed in the
Schedules. The Shareholders shall, and shall cause QCC to, obtain the prior
approval of WHI as to the form and content of each such notice and consent.
5.3 Regulatory Matters and Approvals. Each of the Parties will take any
action that may be necessary or advisable in connection with any other notices
to, filings with, and authorizations, consents and approvals of governments and
governmental agencies that it may be required to give, make or obtain.
5.4 Operation of Business. Except as specifically set forth below or
elsewhere in this Agreement, the Shareholder shall not permit QCC to engage in
any practice, take any action, embark on any course of inaction, or enter into
any transaction outside the Ordinary Course of Business in each case until the
Closing Date. Without limiting the generality of the foregoing until the
Closing Date:
(a) the Shareholders shall not permit QCC to authorize or effect
any change in its Articles of Incorporation or Bylaws or pass further
regulations or resolutions inconsistent therewith;
(b) the Shareholders shall not permit QCC to grant any options,
warrants, or other rights to purchase or obtain any of its capital
stock or issue, sell, or otherwise dispose of any of its capital
stock;
(c) the Shareholders shall not permit QCC to redeem, repurchase,
or otherwise acquire any of its capital stock, pay cash dividends or
make any other distributions (other than distributions to the
Shareholders with respect to their 1998 tax liability attributable to
QCC or in the ordinary course of business) during the period beginning
upon the execution of this Agreement and ending upon the earlier of
(i) Closing or (ii) termination of this Agreement;
(d) the Shareholders shall not permit QCC to create, incur,
assume or guarantee any indebtedness (including any capitalized lease
obligation) or other obligation or liability other than in the
Ordinary Course of Business, provided, however, QCC may incur
reasonable fees and expenses in connection with this Agreement and the
transactions contemplated hereby;
(e) the Shareholders shall not permit QCC to impose or permit
any Security Interest upon any of its assets;
(f) the Shareholders shall not permit QCC to make any capital
investment in, make any loan to, or acquire the securities or assets
of any other person;
(g) the Shareholders shall not permit QCC to make any change in
employment terms for any of its directors, officers or employees other
than to non-management employees in the ordinary course of business;
(h) the Shareholders shall not permit QCC to enter into any agreement
that requires the payment of royalties or similar arrangements, or renew
any existing arrangements other than in the ordinary course of business;
(i) the Shareholders shall not permit QCC to change its fiscal year;
(j) the Shareholders shall not permit QCC to commit to any of
the foregoing; and
(k) the Shareholders shall cause QCC to use its best efforts to
cause QCC to preserve, protect and maintain the Business, maintain and
keep in effect all insurance on assets and property, preserve intact
the organization and reputation of the Business, keep available the
services of present executives, employees and agents of the Business,
and preserve the goodwill of suppliers, subcontractors, customers and
others having business relationships with the Business through the
Closing.
5.5 Full Access. Until the Closing Date, the Shareholders shall cause QCC
to permit representatives of WHI to have full access to all premises,
properties, books, records, contracts, tax records, documents and third parties
with relationships with QCC, all on reasonable notice, provided, however, that
WHI will not interview employees of QCC and will only contact third parties
during the due diligence period after receiving approval from the Shareholders
of the manner, timing and form of any contact, such approval not to be
unreasonably withheld or delayed.
5.6 Notice of Developments. Until the Closing Date, the Shareholders
shall give prompt written notice to WHI of any material development affecting
the assets, liabilities, business, financial condition, operations, results or
prospects of QCC. Each Party shall give prompt written notice to the others of
any material development affecting the ability of the Parties to consummate the
transactions contemplated by this Agreement.
5.7 Exclusivity. Neither the Shareholders nor any person on their behalf
shall, nor shall the Shareholders permit QCC to, entertain, discuss, solicit or
respond to any offer or inquiry to purchase a significant portion of QCC's
assets or capital stock, directly or indirectly, or effect any business
combination with QCC during the period beginning upon the execution of this
Agreement and ending upon the earlier of (i) Closing or (ii) termination of this
Agreement. The Shareholders shall notify WHI immediately if any person makes
any proposal, offer, inquiry or contact with respect to any of the foregoing.
5.8 [Reserved]
5.9 Accounting Treatment. The Shareholders at any time will not, and will
not permit QCC prior to the Closing to, take any action restricted or fail to
take any action required pursuant to Article IX after the date hereof, except to
the extent waived in writing by WHI, to cause such transactions not to be
accounted for as pooling of interests business combinations.
ARTICLE VI
CONDITIONS TO OBLIGATION TO CLOSE
6.1 Conditions to Obligation of WHI. The obligation of WHI to consummate
the transactions to be performed by it in connection with the Closing is subject
to satisfaction of the following conditions:
(a) the Shareholders shall have caused QCC to have procured all
of the third party consents specified in section5.2 above;
(b) the representations and warranties set forth in Schedule 3
above shall be true and correct at and as of the Closing Date;
(c) the Shareholders shall have performed and complied with all
of their covenants hereunder through the Closing;
(d) no action, suit or proceeding shall be in effect, pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state or local jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement, or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation;
(e) the Parties shall have received all required authorizations,
consents and approvals of governments and governmental agencies (other
than as set forth on Schedule 3.3);
(f) WHI shall have received duly executed stock powers in favor of
WHI in respect of all QCC Shares together with all QCC Shares;
(g) WHI shall have received the resignations, effective as of
the Closing Date (except as otherwise agreed), of each director and
officer of QCC and a release from each officer and director in the
form of EXHIBIT A hereto (to include a release of indemnification
rights but to exclude obligations of WHI arising hereunder);
(h) all amounts owed to QCC by any shareholder of QCC (or their
Affiliates) shall have been paid in full;
(i) WHI shall have received the Inducement Agreement from each
of the Shareholders in the form of EXHIBIT B hereto;
(j) Xxxxxxxx X. Xxxxxxxx, Xx. shall have entered into an
Employment Agreement with QCC in the form attached hereto as EXHIBIT
C;
(j) Xxxxxx X. Xxxxx shall have entered into a Consulting
Agreement with QCC in the form attached hereto as EXHIBIT D;
(k) WHI shall have received from QCC's regular accountants, Andsager,
Xxxxxxxx & Company, a letter, dated the Closing Date, in form and substance
satisfactory to WHI and its auditor, confirming that to their knowledge
after due and diligent inquiry of management, there have been no
transactions or events with respect to QCC which would, and the ownership
structure and attributes of QCC and the Shareholders would not, prescribe
the transactions contemplated hereby, if consummated, from being accounted
for as pooling of interests business combinations;
(l) WHI shall have received a letter from each of the Shareholders
relating to "pooling of interests" criteria, in form and substance
satisfactory to WHI;
(m) all actions to be taken by QCC or the Shareholders in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments and other documents
required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to WHI; and
(n) WHI shall have received from Xxxxx X. Xxxxxxxxx, counsel to
QCC and the Shareholders, an opinion in the form of EXHIBIT E attached
hereto, addressed to WHI and dated as of the Closing Date;
(o) WHI shall have been advised by its auditors that to their
knowledge after due and diligent inquiry of management, there have
been no transactions or events with respect to QCC which would, and
the ownership structure and attributes of QCC and the Shareholders
would not, prescribe the transactions contemplated hereby, if
consummated, from being accounted for as pooling of interests business
combinations; and
(p) WHI shall have received resolutions, certified by the Secretary
of QCC, of it board of directors and the Shareholders, authorizing this
Agreement and the transactions contemplated hereby.
WHI may waive in writing any condition specified in this section6.1.
6.2 Conditions to Obligation of the Shareholders. The obligation of the
Shareholders to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Article 4
above shall be true and correct at and as of the Closing Date;
(b) WHI shall have performed and complied with all of its
covenants hereunder through the Closing;
(d) no action, suit or proceeding shall be in effect, pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state or local jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement, or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation;
(e) the Parties shall have received all required authorizations,
consents and approvals of governments and governmental agencies;
(f) WHI shall have entered into an Employment Agreement in the
form attached hereto as EXHIBIT C with Xxxxxxxx X. Xxxxxxxx, Xx.;
(g) WHI shall have entered into a Consulting Agreement in the
form attached hereto as EXHIBIT D with Xxxxxx X. Xxxxx;
(h) QCC shall have received from Xxxxx Xxxxxx, WHI's general
counsel, an opinion in the form of EXHIBIT F attached hereto,
addressed to QCC and the Shareholders and dated as of the Closing
Date; and
(i) all actions to be taken by WHI in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Shareholders.
the Shareholders may waive in writing any condition specified in this
section6.2.
ARTICLE VII
TERMINATION
7.1 Termination of Agreement. Any of the Parties may terminate this
Agreement as provided below:
(a) the Parties may terminate this Agreement by joint written
consent at any time prior to the Closing Date;
(b) WHI may terminate this Agreement by giving written notice to the
Shareholders at any time prior to the Closing Date in the event that any
Shareholder is in breach of any representation, warranty, covenant or
agreement contained in this Agreement in any material respect, the
Shareholders have been notified of such breach and the breach has not been
cured within fifteen (15) days of such notice;
(c) WHI may terminate this Agreement by giving written notice to
the Shareholders at any time prior to the Closing Date, if the Closing
shall not have occurred on or before April 1, 1998 by reason of the
failure of any condition precedent under section6.1 hereof (unless the
failure results primarily from WHI breaching any representation,
warranty, covenant or agreement contained in this Agreement);
(d) The Shareholders may terminate this Agreement by giving written
notice to WHI at any time prior to the Closing Date in the event that WHI
is in breach of any representation, warranty, covenant or agreement
contained in this Agreement in any material respect, WHI has been notified
of such breach and the breach has not been cured within fifteen (15) days
of such notice; or
(e) The Shareholders may terminate this Agreement by giving
written notice to WHI at any time prior to the Closing Date, if the
Closing shall not have occurred on or before April 1, 1998 by reason
of the failure of any condition precedent under section6.2 hereof
(unless the failure results primarily from Shareholders breaching any
representation, warranty, covenant or agreement contained in this
Agreement).
7.2 Effect of Termination. If any Party terminates this Agreement
pursuant to section7.1 above, all obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party, provided that
the confidentiality provisions contained in that certain Letter of Intent
between the Parties dated February 5, 1998 shall survive the termination of this
Agreement.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 Survival. All representations, warranties, covenants and agreements
contained in this Agreement or in any document delivered pursuant hereto shall
be deemed to be material and to have been relied upon by the Parties hereto.
All covenants and agreements shall survive the Closing and shall be fully
effective and enforceable until the covenant or agreement has been fully
performed. All representations and warranties shall survive the Closing for a
period of two years; provided however, that any representations or warranties
relating to breach of representations or warranties concerning tax liability
shall survive until ninety days following the expiration of any applicable
statute of limitations. Notwithstanding anything to the contrary contained
herein, the representations and warranties made by any Party to this Agreement
shall not be affected by any investigation, verification or examination by any
other Party or by anyone on behalf of any such Party in connection with their
due diligence review or otherwise.
8.2 Indemnification by WHI. WHI shall indemnify and hold Shareholders
harmless from and against any and all loss, cost, damage, diminution in value,
expense (including court costs and attorneys' fees) suit, action, claim,
deficiency, liability or obligation related to, caused by or arising from
(i) any breach of representation or warranty in Article IV or failure to fulfill
any covenant or agreement of WHI contained herein, and (ii) any and all claims
of third parties made based upon facts alleged that, if true, would have
constituted such a breach or failure. The amount to which the Shareholders
shall be entitled hereunder which has not been paid to the Shareholder shall be
referred to as the "Shareholder Indemnification Amount."
8.3 Indemnification by the Shareholders. The Shareholders shall
indemnify and hold WHI harmless from and against any and all loss, cost, damage,
diminution of value, expense (including court costs and attorneys' fees) suit,
action, claim, deficiency, liability or obligation related to, caused by or
arising from (i) any breach of representation or warranty in Article III or
failure to fulfill any covenant or agreement of QCC or the Shareholders
contained herein, (ii) any and all claims of third parties made based upon facts
alleged that, if true, would have constituted such a misrepresentation, breach
or failure, (iii) any taxes arising from the activities of QCC prior to the
Closing Date, (iv) obligations of QCC to indemnify, defend, provide contribution
or provide similar rights to any current or prior employee, agent, officer or
director, whether arising under charter, bylaw, statute, common law, agreement
or otherwise, with respect to events or occurrences prior to the Closing Date,
(v) any liability or expense arising out of the Indemnified Dispute, or (vi)
liabilities of QCC of any other nature whatsoever, other than those (A) shown on
the March 30, 1998 Balance Sheet or (B) those taken into account in the
calculation of Adjusted Net Working Capital and other than obligations or
performance post Closing under contracts entered into in the Ordinary Course
(except as they relate to pre-Closing breach) or (C) disclosed in writing as an
exception to Schedule 3 by the Shareholders. The amount to which WHI or the
Surviving Corporation shall be entitled hereunder which has not been paid to WHI
shall be referred to as the "WHI Indemnification Amount."
8.4 Notice of Claims. Each indemnified Party agrees to give the
indemnifying Party prompt written notice of any event or matter for which such
indemnified Party intends to assert a right of indemnification under this
Agreement; provided that any failure to provide such notice shall not reduce the
amount of indemnification to which the indemnified party is otherwise entitled,
except to the extent that such failure prejudices the indemnifying party. If a
third party claim is made for which an indemnified party is entitled to
indemnification pursuant to this Article VIII, then the indemnifying party shall
be entitled to participate in the defense of such claim, and if the amount
claimed pursuant to such third party claim, or the potential liability arising
out of such third party claim (in the judgement of indemnified party), does not,
after taking into account all other indemnification obligations of the
indemnifying party, exceed the indemnifying party's maximum indemnification
obligation pursuant to Section 8.5 and if the indemnifying party so chooses, and
providing that the indemnifying party acknowledges their obligation to indemnify
the indemnified party, then the indemnifying party may assume primary
responsibility for the defense of such claim with counsel selected by the
indemnifying party and not reasonably objected to by the indemnified party. If
the indemnifying party assumes the defense of a third party claim as set forth
in this paragraph, then (A) in no event shall the indemnified party admit any
liability with respect to, or settle, compromise or discharge, any such claim
without the indemnifying party's prior written consent and (B) the indemnified
party shall be entitled to participate in, but not control, the defense of such
claim with its own counsel at its own expense. If the indemnifying party does
not assume the defense of any such claim, the indemnified party may defend such
claim in a manner as it may deem appropriate (including, but not limited to,
settling such claim on such terms as the indemnified party may deem
appropriate). No settlement of a third party claim involving an assertion that
any WHI Indemnification Amount or Shareholder Indemnification Amount is due
shall be made without the prior written consent of the indemnified party, which
consent shall be granted unless such settlement may have an adverse effect on
the indemnified Party, in such indemnified party's reasonable determination.
Any claim by either Party for indemnification hereunder (other than with respect
to the Indemnified Dispute) must be asserted in writing prior to the second
anniversary of the Closing Date, provided however, that any claims by WHI
relating to breach of representations or warranties concerning tax liability may
be brought until ninety days following the expiration of any applicable statute
of limitations.
8.5 Limitation of Liability. (a) Notwithstanding anything to the contrary
contained herein,
(i) the Shareholders shall not have any liability to WHI for
indemnification hereunder until the total WHI Indemnification Amount
exceeds $60,000, whereupon the amount of the WHI Indemnification
Amount in excess of $60,000 shall be payable (it being understood that
this limitation on liability shall not apply to any liability with
respect to the Indemnified Dispute for which the Shareholders shall
have full liability); and
(ii) WHI shall not have any liability to the Shareholders for breaches
of representations or warranties until the total Shareholder
Indemnification Amount exceeds $60,000, whereupon the amount of the
Shareholder Indemnification Amount in excess of $60,000 shall be payable.
(b) Any indemnification or recovery by WHI under Article VIII of this
Agreement, any agreement or instrument contemplated hereby, any document
relating hereto or thereto or any Exhibit or Schedule to this Agreement or
otherwise relating to the transactions contemplated hereby shall not exceed
$9,900,000, except for indemnification regarding matters described in SECTION
8.3(V).
(c) Any recovery payable under Article VIII hereof shall be
calculated after giving effect to (A) any proceeds received from insurance
policies paid for by QCC prior to the Closing or for which reimbursement of the
premium amount is made by the Shareholders after Closing covering the damage,
loss, liability or expense that is the subject to the claim for indemnity and
(B) the actual realized tax benefit to WHI or QCC resulting from the damage,
loss, liability or expense that is the subject of the indemnity; provided that
to the extent that any tax benefit is realized in a tax year other than the year
in which the indemnity is paid, WHI shall make a payment to the Shareholders in
the amount of such realized tax benefit in the year in which it is realized.
For purposes of this Article VIII, an actual realized tax benefit is an actual
reduction in taxes payable net of lost tax benefits or a refund of taxes
previously paid net of lost tax benefits.
8.6 Exclusive Remedy. In the event of a breach of this Agreement by WHI
or the Shareholders, including the breach by such party of any representation or
warranty made in this Agreement or the failure to perform any obligation to be
performed by such party pursuant to this Agreement, the remedies of the
indemnitee, and the procedures to be followed by the indemnitee, shall be solely
and exclusively those specified in this Article VIII.
ARTICLE IX
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other disposition
after Closing Date of WHI Shares:
9.1 Disposition of Shares.
(a) The Shareholders acknowledge that they may be deemed to be
"affiliates" of QCC for purposes of qualifying the transactions contemplated
hereby as pooling of interests business combinations under applicable accounting
and regulations. Each of the Shareholders agrees that prior to Closing they
will not dispose of any shares of capital stock of any of the Companies, and
following the Closing they will not sell, transfer or otherwise dispose of any
of their WHI Shares until such time as final results of operations of WHI
covering at least 30 days of combined operations of WHI and QCC have been
published which is anticipated to be July 15, 1998.
(b) The Shareholders agree that they will not sell, transfer or
otherwise dispose of any WHI Shares distributed to them, except pursuant to (i)
an exemption from the registration requirements under the Securities Act, which
does not require the filing by WHI with the SEC of any registration statement,
offering circular or other document, in which case, each such Shareholder shall
first supply to WHI an opinion of counsel (which counsel and opinions shall be
satisfactory to WHI) that such exemption is available, or (ii) an effective
registration statement filed by WHI with the SEC under the Securities Act.
(c) The Shareholders agree that any sale of WHI Shares shall be
effected through a broker approved by WHI.
9.2 Legends. The certificates representing WHI Shares shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). IN ADDITION, SHAREHOLDERS
ACKNOWLEDGE THAT THE WHI SHARES BEING ACQUIRED BY THEM HAVE BEEN ISSUED UNDER
APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAW
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE ACT, AND IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO, OR
IN ACCORDANCE WITH AN OPINION OF COUNSEL (XXXXXXXX-XXXX, INC. OR OTHER) IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE, AND ALSO MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF BY THE HOLDER WITHOUT COMPLIANCE WITH THE SECURITIES AND EXCHANGE
COMMISSION'S ACCOUNTING SERIES RELEASES 130 AND 135. LEGENDS SHALL BE AFFIXED
TO ALL SHARES RECEIVED TO THIS EFFECT.
WHI may, unless a registration statement is in effect covering such shares,
place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
9.3 Obtaining of Governmental Approvals and Stock Exchange Listings. WHI
will (a) use its reasonable best efforts to have available adequate current
public information with respect to WHI as is required pursuant to Rule 144(c) in
connection with the sale and transfer by the Shareholders under Rule 144
promulgated under the Securities Act of 1993, as amended ("Rule 144") during the
two year period after the Closing, (b) direct the transfer agent of WHI's common
stock to remove the restrictive legend provided for in Section 9.2 and to
deliver such certificates to a purchaser of WHI Shares from any Shareholder in
connection with a sale under Rule 144, and (c) cause such shares of WHI common
stock to be received by such purchaser to be listed on the Nasdaq Stock Market.
ARTICLE X
REGISTRATION RIGHTS
10.1 Registration Rights for WHI; Filing of Registration Statement. WHI
will utilize its best efforts to cause within 30 days after the Closing Date a
registration statement to be filed under the Securities Act or an existing
registration statement to be amended for the purpose of registering half of the
WHI Shares owned by each Shareholder (the "Registration Shares") for resale by a
Holder thereof (the "Registration Statement"). For purposes of this Article X,
a person is deemed to be a "Holder" of Registration Shares whenever such person
is the record owner of Registration Shares. WHI will use its best efforts to
have the Registration Statement become effective and cause the Registration
Shares to be registered under the Securities Act, and registered, qualified or
exempted under the state securities laws of such jurisdictions as any Holder
reasonably requests, as soon as reasonably practicable following the Closing
Date.
10.2 Expenses of Registration. WHI shall pay all expenses incurred by WHI
in connection with the registration, qualification and/or exemption of the
Registration Shares, including any SEC and state securities law registration and
filing fees, printing expenses, fees and disbursements of WHI's counsel and
accountants, transfer agents' and registrars' fees, fees and disbursements of
experts used by WHI in connection with such registration, qualification and/or
exemption, and expenses incidental to any amendment or supplement to the
Registration Statement or prospectuses contained therein. WHI shall not,
however, be liable for any sales, broker's or underwriting commissions upon sale
by any Holder of any of the Registration Shares.
10.3 Furnishing of Documents. WHI shall furnish to the Holders such
reasonable number of copies of the Registration Statement, such prospectuses as
are contained in the Registration Statement and such other documents as the
Holders may reasonably request in order to facilitate the offering of the
Registration Shares.
10.4 Amendments and Supplements. WHI shall prepare and promptly file with
the SEC and promptly notify the Holders of the filing of such amendments or
supplements to the Registration Statement or prospectuses contained therein as
may be necessary to correct any statements or omissions if, at the time when a
prospectus relating to the Registration Shares is required to be delivered under
the Securities Act, any event shall have occurred as a result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, provided, however, that WHI shall be entitled to
delay any such filing and the use of the prospectus if WHI determines that such
filing would impede, delay, or interfere with any significant financing,
acquisition, or other transaction involving WHI, or require disclosure of
material information which WHI has a bona fide business purpose for preserving
as confidential. WHI shall also advise the Holders promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order by
the SEC suspending the effectiveness of the Registration Statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its reasonable efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued.
10.5 Duration. WHI shall maintain the effectiveness of the Registration
Statement until the first anniversary of the Closing Date. WHI's obligations
contained in Sections 10.1, 10.3 and 10.4 shall terminate on the first
anniversary of the Closing Date.
10.6 Further Information. If Registration Shares owned by a Holder are
included in any registration, such Holder shall furnish WHI such information
regarding itself as WHI may reasonably request and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
10.8 Indemnification.
a. WHI will indemnify and hold harmless the Holders and each person,
if any, who controls a Holder within the meaning of the Securities Act, from and
against any and all losses, damages, liabilities, costs and expenses to which
the Holders or any such controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that, WHI will not be liable in any such case to
the extent that any such loss, claim, damage, liability, cost or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information furnished by
or on behalf of any Holder or such controlling person in writing specifically
for use in the preparation thereof.
b. Each of the Holders, jointly and severally, will indemnify and
hold harmless WHI and each person, if any, who controls WHI within the meaning
of the Securities Act, from and against any and all losses, damages,
liabilities, costs and expenses to which WHI or any such controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf of any
Holder specifically for use in the preparation thereof.
c. Promptly after receipt by an indemnified party pursuant to the
provisions of Section 10.8(a) or (b) of notice of the commencement of any action
involving the subject matter of the foregoing indemnity provisions, such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of Section 10.8(a) or (b),
promptly notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it from any
liability which it may have hereunder unless the indemnifying party has been
materially prejudiced thereby nor will such failure to so notify the
indemnifying party relieve it from any liability which it may have to any
indemnified party otherwise than hereunder. In case such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, if the defendants in
any action include both the indemnified party and the indemnifying party and
there is a conflict of interest which would prevent counsel for the indemnifying
party from also representing the indemnified party, the indemnified party or
parties shall have the right to select separate counsel to participate in the
defense of such action on behalf of such indemnified party or parties. After
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of Section 10.8(a) or (b) for any
legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel in
accordance with the provisions of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the notice of the
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
ARTICLE XI
MISCELLANEOUS
11.1 Press Releases and Announcements. During the period beginning upon
full execution of this Agreement and ending upon the earlier of (i) Closing or
(ii) termination of this Agreement, no Party shall issue any press release,
public announcement or public disclosure relating to the subject matter of this
Agreement without the prior written approval of the other Parties; provided,
however, that the foregoing shall not prohibit disclosure to a Party's
attorneys, accountants, lenders or financial advisors (who shall be bound by
this provision), nor shall the foregoing prohibit WHI from making any public
disclosure it believes in good faith is required by law (in which case WHI will
advise the Shareholders prior to making the disclosure, which must be approved
in content by the Shareholders, which approval cannot be unreasonably withheld
or delayed). After Closing, WHI shall be entitled to make the first public
disclosure regarding the subject matter of this Agreement and WHI's consent
shall be required prior to any public disclosures made by the Shareholders.
11.2 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
11.3 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, that may have related in any way to the subject matter hereof,
including but not limited to the letter of intent dated February 5, 1998 except
as otherwise set forth in Section 7.2 hereof.
11.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective heirs,
successors and permitted assigns. Other than WHI, no Party may assign either
this Agreement or any of its rights, interests or obligations hereunder without
the prior written approval of the other Parties; provided that in the event of
an assignment by WHI, the assignor shall remain liable for all of the
obligations hereunder transferred to the Assignee. In no event shall any
assignment of this Agreement be made by WHI prior to Closing to a party other
than an Affiliate of WHI or after the Closing other than in connection with the
sale of the Business or WHI.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. Any reference herein to
an agreement or contract shall be deemed to refer also to the other (such terms
being interchangeable) and shall include commitments and understandings, whether
written or oral, including all amendments thereto.
11.6 Headings; Meaning. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement. The term "including" shall be interpreted to
mean "including without limitation." Any statement made based upon the
knowledge of a Party shall be deemed to be made based upon the best available
knowledge of such Party and its advisors after due inquiry.
11.7 Notices. All notices, requests, demands, claims and other
communications hereunder must be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
three (3) business days after) it is sent by facsimile, overnight courier, or
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to the Shareholders:
Xxxxxx X. Xxxxx
00 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Xxxxxxxx X. Xxxxxxxx, Xx.
00 Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
If to WHI:
Xxxxxxxx-Xxxx, Inc.
000 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxx, President
Fax No.: (000) 000-0000
Copies to:
Xxxxxxxx-Xxxx, Inc. Xxxx X. Xxxxx, P.C.
000 Xxxxx Xxxxxx Xxxxx XxXxxxxxx, Will & Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000 000 Xxxx Xxxxxx Xxxxxx
Attention: Xxxxx Xxxxxx, Esq. Xxxxxxx, Xxxxxxxx 00000
Fax No.: (000) 000-0000 Fax No.: (000) 000-0000
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change its address by giving the other
Parties notice in the manner herein set forth.
11.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Illinois.
11.9 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Closing Date. No amendment or waiver
of any provision of this Agreement shall be valid unless the same shall be in
writing and signed by the appropriate Parties. No waiver by any Party of any
misrepresentation or breach of warranty, covenant or agreement hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
misrepresentation or breach of warranty, covenant or agreement hereunder.
11.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified.
11.11 Expenses. Except as otherwise specifically set forth herein, WHI
will bear the costs and expenses (including legal fees and expenses) of WHI and
incurred in connection with this Agreement and the transactions contemplated
hereby, and WHI shall bear the costs and expenses (including legal fees and
expenses) of Shareholders and QCC incurred in connection with this Agreement and
the transactions contemplated hereby up to a limit of $325,000 plus any
Conversion Tax and the Shareholders shall bear the costs and expenses (including
legal fees and expenses) of Shareholders and QCC incurred in excess of $325,000
(other than the Conversion Tax), and QCC shall bear none of such expenses.
11.12 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
QCC, INC.
By:
XXXXXXXX-XXXX, INC.
By:
Xxxxxx X. Xxxxx
Xxxxxxxx X. Xxxxxxxx, Xx.
SCHEDULE 3
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
1. Authority and No Conflict. The Shareholders has full right, power
and authority, without the consent of or filing with any other person (including
any governmental authority), to execute and deliver this Agreement and the
agreements contemplated hereby and to carry out the transactions contemplated
hereby and thereby. All corporate and other acts required to be taken by the
Shareholders to authorize the execution, delivery and performance of this
Agreement and all agreements and transactions contemplated hereby have been
properly taken. Such execution, delivery and performance will not create any
encumbrance nor terminate nor accelerate any obligation of the Business and will
not violate or conflict with any provision of (i) the Articles of Incorporation
and Bylaws of QCC, (ii) except as set forth in SCHEDULE 3.1, any contract,
permit, license or other instrument to which QCC or any Shareholder is a party
or is bound, (iii) any injunction, decree or judgment of any court or
governmental agency, or (iv) any Law applicable to QCC, the Shareholders or the
Business.
2. Validity. Except as set forth in SCHEDULE 3.2, this Agreement has
been, and the agreements and other documents to be delivered at Closing will be,
duly executed and delivered and constitute the valid and legally binding
obligations of QCC and the Shareholders who sign them, enforceable in accordance
with their respective terms. No approval, registration, filing or other action
by or with any person, including any governmental authority, is required for QCC
or the Shareholders to execute and consummate this Agreement.
3. Due Organization. QCC is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts. Except as set forth in SCHEDULE 3.3, QCC has full power and
authority and all requisite licenses and rights to carry on the Business.
SCHEDULE 3.3 sets forth each state in which QCC is licensed or qualified to do
business, and there are no other states in which QCC is required to be licensed
or qualified by reason of the conduct of its Business or the ownership of its
assets. QCC has delivered to WHI correct and complete copies of the charter and
bylaws of QCC (as amended to date). Except as set forth in SCHEDULE 3.3, the
minute books (containing all records of meetings of the shareholders, the board
of directors, and any committees of the board of directors) and the stock record
books of QCC as made available to WHI are accurate and complete. QCC is not is
in default under or in violation of any provision of its charter or bylaws.
4. Capitalization. The entire authorized capital stock of QCC
consists of an aggregate of 15,000 shares of Common stock, no par value, of
which 400 shares are issued and outstanding and owned by the Shareholder free
and clear of liens, claims or encumbrances. No shares will be issued or
transferred in any manner by QCC after the date of this Agreement. All of the
issued and outstanding shares of QCC have been duly authorized and are validly
issued, fully paid, and nonassessable. All previously issued shares which are
not outstanding have been duly redeemed. There are no outstanding or authorized
options, warrants, rights, contracts, calls, puts, rights to subscribe,
conversion rights or other agreements or commitments to which the QCC is a party
or which are binding upon QCC providing for the issuance, disposition or
acquisition of any of QCC's capital stock or rights thereto. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to QCC or QCC shares.
No shares of QCC's capital stock were issued in violation of any
preemptive, subscription or other right of any person, including any right to
acquire securities of QCC. All shares of QCC's capital stock were issued and
sold in compliance with all Laws, including state and federal securities laws.
There are no voting trusts or other agreements, arrangements or understandings
applicable to the exercise of voting or any other rights with respect to any
shares of QCC common stock. Except as set forth in SCHEDULE 3.4, no shares of
QCC's common stock have ever been redeemed or otherwise reacquired by QCC.
5. Subsidiaries. QCC does not own stock or have any equity
investment or other interest in, does not have the right to acquire any such
interest, and does not control, directly or indirectly, any corporation,
association, partnership, joint venture or other entity and has not had such an
ownership or control relationship with any such entity.
6. Directors and Officers. SCHEDULE 3.6 sets forth a true and current
list of the officers and directors of QCC.
7. Transactions with Affiliates. Except as set forth in
SCHEDULE 3.7, no Shareholder or any Affiliate:
a. owns, directly or indirectly, any interest in any entity
which is a competitor, lessor, lessee, customer, licensor or supplier
of QCC;
b. has any cause of action or other claim against or owes any
amount to, or is owed any amount by, QCC or any licensor or supplier
of QCC; or
c. has any interest in or owns any assets, property, or rights
used in the conduct of the Business; or
d. is a party to any contract, lease, agreement, arrangement or
commitment used in the Business.
8. Banking Relationships and Investments. SCHEDULE 3.8 sets forth an
accurate, correct and complete list of all banks and financial institutions in
which QCC has an account, deposit, safe-deposit box or borrowing relationship,
factoring arrangement or other loan facility or relationship, including the
names of all persons authorized to draw on those accounts or deposits, or to
borrow under loan facilities, or to obtain access to such boxes. SCHEDULE 3.8
sets forth an accurate, correct and complete list of all certificates of
deposit, debt or equity securities and other investments owned, beneficially or
of record, by QCC (the "Investments"). QCC has good and legal title to all of
the Investments.
9. Insurance. SCHEDULE 3.9 sets forth an accurate, correct and
complete list and summary description (including the name of the insurer,
coverage, premium and expiration date) of all binders, policies of insurance or
fidelity bonds ("Insurance") maintained by QCC or in which QCC is a beneficiary
or a named insured. All Insurance has been issued under valid and enforceable
policies or binders for the benefit of QCC, and all such policies or binders are
in such types and full force and effect and are in amounts and for risks,
casualties and contingencies customarily insured against by enterprises in
operations similar to the Business. There are no pending or asserted claims
against any Insurance as to which any insurer has denied liability, and there
are no claims under any Insurance that have been disallowed or improperly
filed. SCHEDULE 3.9 sets forth QCC's complete claims experience (both
insured and self-insured). No notice of cancellation or nonrenewal with
respect to any Insurance has been received by QCC. QCC has no knowledge of
any facts or the occurrence of any event which could materially increase the
insurance premiums payable under any Insurance.
10. Motor Vehicles. SCHEDULE 3.10 sets forth an accurate, correct
and complete list of all motor vehicles used by QCC, whether owned or leased.
All such vehicles are (a) properly licensed and registered in accordance with
applicable law; and (b) insured as set forth in SCHEDULE 3.10.
11. Real Estate Ownership. QCC does not own any real property.
12. Zoning. The zoning of the facilities which are the used by QCC
(the "Facilities") permit the existing improvements and the continuation of the
business presently conducted thereon. To the knowledge of the Shareholders, QCC
has, or has the benefit of, all easements and rights, including easements for
all utilities, services, road-ways and other means of ingress and egress,
necessary to conduct the Business. To the knowledge of the Shareholders, no
Facility is located within a flood or lakeshore erosion hazard area. Neither
the whole nor any portion of the Facilities occupied or used by QCC has been
condemned or otherwise taken by any public authority, and no notice of any such
condemnation, requisition or taking has been received. To the knowledge of the
Shareholders, no such condemnation, requisition or taking is threatened or
contemplated. To the knowledge of the Shareholders, there are no public
improvements which may result in special assessments against or otherwise affect
the Facilities.
13. Leases. SCHEDULE 3.13 sets forth an accurate, correct and
complete list of all leases of personal property and real property used in the
Business. QCC has been in peaceable possession of the property covered by each
such lease since the commencement thereof. QCC has made available to WHI an
accurate, correct and complete copy of each such lease.
14. Financial Statements; Receivables. The reviewed financial
statements of the QCC attached hereto as SCHEDULE 3.14 for the years ending
December 31, 1995, December 31, 1996, and December 31, 1997 and the management
generated balance sheet and income statement dated March 30, 1998 and along with
various other selected financial, numerical and sales information so attached
(collectively, the "Financial Statements") are (i) accurate, correct and
complete in all material respects, (ii) in accordance with the books of account
and records of QCC and (iii) fair presentations of the financial condition,
results of operations and cash flows as of the dates and for the periods
indicated and (iv) prepared in accordance with GAAP, except as noted in SCHEDULE
3.14. QCC and the Business are not subject to any liability or obligation
(whether absolute, accrued, contingent or otherwise, known or unknown) which is
not shown or provided for on the Financial Statements or fully described in
narrative form on SCHEDULE 3.14, except for performance obligations under
contracts entered into in the Ordinary Course of Business not arising from
breach. SCHEDULE 3.14 reflects the principles followed in recording customer
deposits as liabilities and the timing of revenue recognition with respect
thereto. All accounts receivable were generated in the ordinary course of the
Business.
15. Interim Change. Except as set forth in SCHEDULE 3.15, since
March 30, 1998, QCC has operated the Business in the ordinary course, consistent
with past practice, and there has not been any of the following in connection
with the Business:
a. any event resulting in, or that could result in, a Material
Adverse Effect;
b. any material adverse change in personnel or relationships
with third parties, including suppliers, customers and others;
c. any material increase in the compensation, or benefits
payable or to become payable to or on account of employees or third
parties;
d. any work stoppage or labor dispute;
e. any material damage to, destruction of or claim against a
material asset, or any disposition of assets, other than sales in the
ordinary course of business on terms consistent with past practice;
f. any change in credit or accounting practices;
g. any material change in status of any Material Contract; and
h. any agreement to take any of the foregoing actions.
16. Title to Assets. Except as set forth on SCHEDULE 3.16(A), QCC is
the sole and exclusive legal and equitable owner of all right, title and
interest in and to all of the assets used in the Business or shown on the
Financial Statements, free and clear of the interests and rights of any other
party, including any lease, license, right, security interest, restriction or
royalty arrangement of any kind or character, direct or indirect, whether
accrued, absolute, contingent or otherwise, and no person other than QCC has any
interest in any assets employed in the Business. SCHEDULE 3.16(B) sets forth an
complete list of all depreciable assets. The tangible QCC assets are in good
repair, order and condition (reasonable wear and tear excepted), are suitable
for the purposes for which they are presently being used, and are adequate to
meet all present requirements of the Business. QCC's assets will continue to be
available and will furnish WHI with all of the rights to operate the Business in
the same manner as presently and historically operated by QCC.
17. Intellectual Property. SCHEDULE 3.17 sets forth a complete list
and summary description of all patents, trademarks, trade names, service marks,
copyrights and applications for any of the foregoing, inventions and trade
secrets owned by QCC or utilized in the Business (the "Intellectual Property").
There are no licenses or other agreements relating to any Intellectual
Property. Except as disclosed on SCHEDULE 3.17, with respect to the
Intellectual Property and any software used in the business, (a) QCC has the
sole and exclusive right to use the Intellectual Property and software free
of rights or claims of others; (b) no action, suit, proceeding or
investigation is pending or, to the Shareholder's knowledge, threatened; (c)
none of the Intellectual Property interferes with, infringes upon, conflicts
with or otherwise violates the rights of others, or is being interfered with
or infringed upon by others, and none is subject to any outstanding order,
decree, judgment, stipulation or charge; (d) there are no royalty, commission
or similar arrangements, and no licenses, sublicenses or agreements,
pertaining to any of the Intellectual Property; (e) none of the Intellectual
Property, the use thereof by QCC, or the activities of the Business infringe
upon or violate any rights of others; and (f) QCC has not agreed to indemnify
any person for or against any infringement of or by the Intellectual Property.
18. Software and Information Systems. For purposes of this Section,
the term "Software" means all computer software programs, program
specifications, charts, procedures, source codes (including annotations), object
codes, input data, diagnostic and other routines, data bases and report layouts
and formats, record file layouts, diagrams, functional specifications and
narrative descriptions and flow charts owned or used by QCC or employed in the
Business. For purposes of this Section, the term "computer software programs"
includes any set of arithmetic and/or logical instructions meant to run on, or
to control the operation of, any computer (i) whether those instructions are a
complete program, a collection of programs making up a subsystem or system, or
are merely subroutines or meant to operate in conjunction with other software,
and (ii) whether such instructions must be run through another computer program
before being useable on a computer, whether such instructions can be used at
execution time only in conjunction with another computer program (i.e., an
"interpreter") or whether such instructions are in a form that can be run on a
computer "as is," except for any necessary interfaces with the computer's
microcode, operating system or reference-resolving routines.
SCHEDULE 3.18 sets forth an accurate, correct and complete list and
summary description of all Software and identifies specifically (i) Software as
to which the source code is owned by QCC ("Owned Software"); (ii) Software which
is licensed to QCC by third parties and as to which QCC is in possession of the
source code; (iii) Software which is licensed to QCC by third parties but as to
which QCC does not have possession of the source code; (iv) Software purchased
by or licensed to QCC solely for resale or sublicense to its customers or which
a third party licenses or sells directly to such customers; (v) Software in
which the company has any use, possessory or proprietary rights other than as
set forth in (i) through (iv) above (Software described in the foregoing
subsections (ii) through (v) being referred to collectively as the "Third Party
Software"); (vi) any other Software employed in the Business which is not Owned
Software or Third Party Software, other than so called "shrink wrap" Software
which in any event is not a component of the Software licensed or sold to QCC
customers; (vii) in each case whether the particular component of Software is
employed in the Software licensed or sold by QCC to its customers; and (viii)
all Software development projects undertaken within the past two years with
persons other than "employees" (within the meaning of such term as used in the
Copyright Act of 1976, 17 U.S.C. section101), together with an identification of
the persons undertaking such projects. SCHEDULE 3.18 also identifies all
licenses, contracts and other arrangements with respect to the Third Party
Software (collectively the "Third Party Licenses"). With respect to the
Software:
d. QCC is the sole and exclusive owner of, and has the sole and
exclusive right to use the Owned Software free and clear of any claims
of others, except nontransferable rights to use the Software granted
to customers of QCC pursuant to license agreements disclosed in the
Schedules hereto;
e. except as specifically provided on SCHEDULE 3.18, the source
code with respect to the Owned Software is not in the possession of
any party other than QCC and has been maintained as confidential by
QCC;
f. the Owned Software and the licensing or sublicensing thereof
does not and the other Third Party Software and the licensing or
sublicensing thereof does not violate or infringe any trade secret
rights, work rights, mask copyrights, patents or other rights of
others and no assertion to the contrary has been made by any third
party;
g. QCC has not copied or used any of the Software in violation
of the applicable license or otherwise violated any of its agreements
or the rights of others with respect thereto;
h. all of the rights of the persons referred to in paragraph
(viii) of this Section to the Owned Software initially resided in or
have been assigned exclusively to the Company free of any remaining
royalties or other rights;
i. all Owned Software documentation is accurate and sufficient
in detail and content to identify and explain the nature of the Owned
Software, and to allow its full and proper use by reasonably
knowledgeable programmers without reliance on the special knowledge or
memory of others;
j. QCC does not use any unlicensed Software for development
purposes or as a component of the Software licensed or sold to its
customers;
k. no rights in favor of any party to any source code and/or
other documentation for Software which is the subject of escrow or
similar arrangements will be triggered, broadened or otherwise
effected by the transactions contemplated hereby ; and
l. except where no liability of QCC shall exist to the customer,
the Software licensed or sold to customers operates in conformance
with the warranties and representations made by QCC to customers with
respect thereto.
19. Customers and Suppliers. SCHEDULE 3.19 sets forth a complete
list of those customers and suppliers that have provided or purchased products
or services to or from QCC since January 1, 1997 valued at greater than $10,000
per year. SCHEDULE 3.19 sets forth an accurate, correct and complete list of
all former and current customers of QCC who have terminated or otherwise
cancelled their relationship with QCC or notified QCC that they may do so. The
Shareholders have no knowledge of any fact, condition or event (i) which would
cause WHI's relationship with any customer or supplier to be materially and
adversely different than the current relationship of such customer or supplier
with respect to the Business, or (ii) which would materially and adversely
affect any customer or supplier's ability to supply or purchase products or
services to or from WHI.
20. Employees; Independent Contractors. SCHEDULE 3.20 is an
accurate, correct and complete schedule containing:
a. a list of all employees (including name, title and position)
employed by QCC;
b. the employee's length of service and date of hire;
c. a list of all agreements, arrangements or understandings,
written or oral, with each employee, regarding services to be
rendered, terms and conditions of employment, confidentiality and
assignment of inventions (with respect to such items listed on
SCHEDULE 3.20, forms of such agreements have been delivered to WHI and
such forms are substantially identical to the agreements actually
executed by each employee);
d. the compensation (including date and amount of last salary
increase, terms of payment, bonuses, commissions and deferred
compensation, as well as any benefits) of each employee;
e. a summary of all current and other arrangements with
independent contractors.
Except as may be reflected on SCHEDULE 3.20 with respect to (c) above, all
employees of QCC are "at will employees" and can be terminated without notice
other than any notice required by law. With respect to the employees of QCC,
1) there are and have been no actual or alleged violations of any Laws
respecting the employment of any employees; no employees are represented by any
union or covered by any collective bargaining agreement and there has been no
question concerning representation raised or threatened; 2) all employment-
related books and records have been prepared in the ordinary course of business;
3) QCC is in compliance with all contracts of or respecting employment; 4) there
is no employment handbook, personnel policy manual, similar document or action
that creates prospective employment rights or obligations; and 5) there exists
no discrimination or harassment claims by any employees against QCC or the
Shareholder, and there are no circumstances which could give rise to any claim
or allegation in regard thereto. All past and present employees and independent
contractors of QCC have signed an assignment of inventions, copies of which have
been provided to WHI. No persons treated as independent contractors by QCC
should under applicable law have been treated as employees.
21. Employee Benefit Plans. Except as disclosed in SCHEDULE 3.21,
there are no "welfare benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), "employee pension
benefit plans" (as defined in Section 3(2) of ERISA), bonus, profit sharing,
deferred compensation, incentive or other compensation plans or agreements, and
other employee fringe benefit plans whether funded or unfunded, qualified or
unqualified (all the foregoing being herein called "Benefit Plans") maintained
or contributed to for the benefit of any of the employees of QCC.
22. Compliance With the Code and ERISA. The Benefit Plans comply
currently, and have complied in the past, both as to form and operation, with
the provisions of ERISA and the Internal Revenue Code of 1986, as amended
("Code") (including Section 410(b) of the Code relating to coverage) and all
other applicable laws, rules and regulations.
23. Administration. The Benefit Plans have been administered to date
in compliance with all requirements of law and in accordance with their terms.
All reports, returns and similar documents for the Benefit Plans required to be
filed with any government agency or distributed to any participant have been
duly and timely filed or distributed. There are no investigations, proceedings
or other claims (except claims for benefits payable in the normal operation of
either plan), against or involving any Benefit Plan that could give rise to any
material liability to such plan, nor, are there any facts that could give rise
to any material liability to any plan.
24. Prohibited Transactions. No "prohibited transaction" (as defined
in Section 4975 of the Code or Section 406 of ERISA) has occurred which involves
the assets of the 408(k) Plan. Neither QCC nor any trustee, administrator or
other fiduciary of any Benefit Plan nor any agent of any of the foregoing has
engaged in any transaction or acted or failed to act in a manner which could be
expected to subject QCC to any liability for breach of fiduciary duty under
ERISA or any other applicable law.
25. Multi-employer Plans. QCC has never been required to contribute
to any "multi-employer pension plan" (as defined in Section 3(37) of ERISA) with
respect to employees of the Business.
26. Licenses and Permits. SCHEDULE 3.26 contains a complete list and
summary description of all permits, licenses, approvals, registrations and
authorizations used or required for the operation of the Business (the "Licenses
and Permits"). QCC holds all the Licenses and Permits in its name. The
Licenses and Permits are valid and in full force and effect, no violations exist
in respect thereof and there are not pending, or to the knowledge of QCC,
threatened any proceedings or circumstances which could result in the
termination, revocation, limitation or impairment of any License or Permit. All
Licenses and Permits are freely assignable to WHI without the consent or
approval of any third party.
27. Material Contracts. SCHEDULE 3.27 sets forth a complete list of
all, written and oral contracts, instruments, commitments, agreements,
arrangements and understandings, including all amendments and supplements
thereto to which QCC is a party or otherwise related to the Business (i) which
are material to the operations (as historically conducted or presently
conducted), assets, liabilities, condition (financial or otherwise), operations
or prospects of the Business or (ii) which otherwise involve any of the
following types of contracts (the items in (i) and (ii) being collectively
referred to herein as the "Material Contracts"):
a. all purchase orders or contracts for the purchase of any
materials or services involving an amount in excess of $10,000 or
which were not entered into in the ordinary course of business;
b. any sales or service agreements;
c. any design, engineering, consulting, or distribution
agreement;
d. all personal or real property leases involving an amount in
excess of $1,000;
e. all agreements licensing or otherwise granting rights to the
Software (including escrow agreements) or creating maintenance or
other obligations with respect to the Software;
f. all contracts providing QCC with the right to reproduce or in any
way deal with the works of others;
g. any other contract, commitment, agreement, arrangement or
understanding which provides for payment or performance by any party
thereto having an aggregate value of $10,000 or more; and
h. any agreement not to compete or otherwise restricting
activities.
Accurate, correct and complete copies of each Material Contract (of the form of
each such contract) have been delivered to WHI. Each Material Contract is in
full force and effect and is valid, binding and enforceable in accordance with
its terms. Each party has complied with all material commitments and
obligations on its part to be performed or observed under each Material
Contract. No event has occurred which is or, after the giving of notice or
passage of time, or both, would constitute a default under or a breach of any
Material Contract by QCC, or, to the knowledge of the Shareholders, by any other
party. The consummation of the transactions contemplated hereby, without notice
to or consent or approval of any party, will not constitute a default under or a
breach of any provision of any Material Contract. With respect to each Material
Contract which is to be assigned to WHI pursuant to the terms hereof, WHI will
succeed to all the rights and benefits of QCC.
28. Grants and Allowances. QCC has not applied for or received any
grant, allowance, aid or subsidy from any supranational, national or local
authority or government agency.
29. Warranty; Product Complaints. There is no specific warranty with
respect to services or products provided by QCC other than with respect to
immaterial software maintenance. There has been no material return experience
since January 1, 1995.
30. Legal Proceedings. Except as set forth on SCHEDULE 3.30, QCC is
not engaged in or a party to or, to the knowledge of the Shareholders, is
threatened with any dispute, action, arbitration, suit or other proceeding,
including any relating to the Business or its assets and no basis exists for any
such proceeding. Except as set forth on SCHEDULE 3.30, the Shareholders have no
knowledge of any investigation threatened or contemplated by any governmental or
regulatory authority. Except as set forth on SCHEDULE 3.30, none of QCC, the
Shareholder, the Business or its assets is subject to any judgment, order, writ,
injunction, stipulation or decree of any court or any governmental agency or any
arbitrator.
31. Compliance with Law. QCC and the Business conform in all
material respects to all applicable Laws, and QCC has complied in all material
respects with all Laws with respect to the Business, and there is not and will
not be any liability to WHI arising from or related to any prior violations
thereof. QCC has not (a) made any unlawful political contributions, (b) had any
transactions or payments which are not recorded in its accounting books and
records or disclosed in its financial statements in a manner reflecting their
true nature, (c) made any payment to officials in their individual capacities
for the purpose of affecting their action or the action of the body they
represent or to obtain special concessions, or (d) made payments to individuals
or taken similar actions to obtain or retain business, other than customary
business gifts or entertainment.
32. Taxes.
a. QCC has filed all returns, and information returns and statements
(collectively, "Returns") required to be filed or sent with respect to all
foreign, federal, county, local and other taxes of every kind, including income,
gross receipts, excise, franchise, property, value added, import duties,
employment, payroll, sales and use taxes and any additions to tax and any
interest or penalties thereon (collectively, "Taxes") for any period ending on
or before the Closing Date. As of the time of filing, the Returns correctly
reflected, and Returns not yet filed as of the date hereof will correctly
reflect, the income, business, assets, operations, activities and status of QCC
and any other information required to be shown thereon. QCC has timely paid all
Taxes required to be paid prior to the date hereof and will timely pay all Taxes
that will be shown as due and payable on its Returns required to be filed or
sent after the date hereof.
b. QCC has obtained all appropriate sales Tax exemption certificates
for all sales made without charging or remitting a sales Tax absent which such a
sales tax would be due. QCC has withheld amounts from employees and others as
required under applicable law.
c. Except as set forth in SCHEDULE 3.32, no adjustment of or
deficiency for any Tax or claim for additional Taxes has been proposed,
threatened, asserted or assessed against QCC or any other person for which QCC
could be liable. Except as set forth in SCHEDULE 3.32, QCC has no dispute with
any taxing authority as to Taxes of any nature. Except as set forth in SCHEDULE
3.32, there are no audit examinations being conducted or proposed with respect
to Taxes. Except as set forth in SCHEDULE 3.32, QCC has not granted any
extension or waiver of any statute of limitations relating to the assessment or
collection of Taxes.
d. Any Conversion Tax liability has been disclosed to WHI and shall
be the liability of QCC following Closing.
33. Investment Intent; Accredited Investor Status; Securities
Documents. Each of the Shareholders has had the opportunity to discuss the
transactions contemplated hereby with WHI and has had the opportunity to obtain
such information pertaining to WHI as has been requested, including but not
limited to filings made by WHI with the SEC under the Exchange Act. Each of the
Shareholders is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act, and has such knowledge and experience in
business or financial matters that he or she is capable of evaluating the merits
and risks of an investment in the WHI Shares. Each of the Shareholders hereby
represents that he or she can bear the economic risk of losing his or her
investment in the WHI Shares and has adequate means for providing for his or her
current financial needs and contingencies. The Shareholders have received
copies of all reports, registrations and statements, together with any required
amendments thereto, that WHI was required to file with the SEC under the
Exchange Act, including, but not limited to Forms 10-K, Forms 10-Q, Forms 8-K
and proxy statements filed with the SEC since January 1, 1996.
34. Brokers. Except as set forth on SCHEDULE 3.34, the Shareholders
have not retained any broker, finder or agent or incurred any liability or
obligation for any brokerage fees, commissions or finders fees with respect to
this Agreement or the transactions contemplated hereby.
35. Disclosure. The representations and warranties of the
Shareholders contained in this Agreement and each agreement, attachment,
schedule, certificate or other written statement delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby do not omit
to state any material fact necessary in order to make the statements and
information contained herein or therein not misleading.
SCHEDULE 4
REPRESENTATIONS AND WARRANTIES OF WHI
1. Authority. WHI has full right, power and authority, without the
consent of any other person, to execute and deliver this Agreement and to carry
out the transactions contemplated hereby. All corporate and other acts or
proceedings required to be taken by WHI to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated hereby have been
duly and properly taken.
2. Validity. This Agreement has been, and the documents to be
delivered at Closing will be, duly executed and delivered and constitute lawful,
valid and legally binding obligations of WHI, enforceable in accordance with
their respective terms. The shares of WHI's common stock issuable under this
Agreement have been duly authorized and when issued in accordance with this
Agreement shall be validly issued, fully paid and nonassessable and are free and
clear of any liens arising from WHI. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
result in the creation of any security interest or the termination or
acceleration of any indebtedness or other obligation of WHI and are not
prohibited by, do not violate or conflict with any provision of, and do not
constitute a default under or a breach of (a) the charter or by-laws of WHI, (b)
any note, bond, Security Interest, indenture, contract, agreement, permit,
license or other instrument to which WHI is a party or by which either or any of
their respective assets is bound, (c) any order, writ, injunction, decree or
judgment of any court or governmental agency, or (d) any law, applicable to
WHI. No approval, authorization, registration, consent, order or other
action of or filing with any person, including any court, administrative
agency or other governmental authority, is required for the execution and
delivery by WHI of this Agreement or the consummation by WHI of the
transactions contemplated hereby.
3. Due Organization. WHI is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Delaware.
4. Brokers. WHI does not have any liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
5. SEC Filings; Financial Statements.
(a) As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), each report, registration statement (on a form other than Form S-
8) and definitive proxy statement filed by WHI with the Securities and Exchange
Commission ("SEC") between January 1, 1996 and the date of this Agreement (the
"WHI SEC Documents") complied in all material respects with the applicable
requirements of the Securities Act of 1933 or the Exchange Act of 1934 as the
case may be.
(b) The consolidated financial statements contained in the WHI SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statement and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to normal and recurring year-end audit
adjustments (which will not, individually or in the aggregate, be material in
magnitude); and (iii) fairly present the consolidated financial position of WHI
and its subsidiaries as for the respective dates thereof and the consolidated
results of operations of WHI and its subsidiaries for the periods covered
thereby.
INDUCEMENT AGREEMENT
This Inducement Agreement is made this 30th day of March, 1998 (the
"AGREEMENT") by and among Xxxxxxxx-Xxxx, Inc., a Delaware corporation (the
"WHI"), QCC, Inc., a Massachusetts corporation ("QCC") and Xxxxxx X. Xxxxx and
Xxxxxxxx X. Xxxxxxxx, Xx., the shareholders of QCC ("SHAREHOLDERS").
WHEREAS, pursuant to that certain Exchange Agreement among the QCC,
Shareholders and WHI, dated March 30, 1998 (the "EXCHANGE AGREEMENT") WHI is
acquiring all of the outstanding capital stock of QCC;
WHEREAS, the Shareholders will receive a substantial economic benefit
upon the consummation of the Exchange Agreement and wishes to induce WHI to
consummate the transactions contemplated by the Exchange Agreement; and
WHEREAS, one of the conditions to the obligations of WHI to complete
the Closing (as defined in the Exchange Agreement) is that the Shareholders
enter into this Agreement.
Accordingly, the parties agree as follows:
I. Non-Competition; Confidentiality; Related Covenants.
A. Shareholder Acknowledgements. Each of the Shareholders
acknowledges the following:
(i) QCC is engaged in the business of marketing and selling the
services of computer software analysts, programmers, engineers and
project managers in the following area: System Software Associates
and XX Xxxxxxx software products, and AS/400 custom application
software development services (all of the foregoing activities being
collectively referred to as the "BUSINESS").
(ii) he is one of the limited number of persons who developed
the Business;
(iii) QCC conducts the Business or markets the products of the
Business in Massachusetts, New Hampshire, Connecticut, Maine and Rhode
Island;
(iv) QCC has undertaken significant development of its products and
analysis in anticipation of marketing the products throughout the
Massachusetts, New Hampshire, Connecticut, Maine and Rhode Island, which
activities are of great value to WHI;
(v) his work for QCC has provided him valuable, confidential and
proprietary information concerning the Business and its future plans,
much of which he participated in developing;
(vi) the agreements and covenants contained in this Agreement
are essential to protect the interests of WHI in connection with the
transactions contemplated by the Exchange Agreement; and
(vii) WHI would not consummate the transactions contemplated by
the Exchange Agreement but for such agreements and covenants.
1. Agreement Not to Compete. For a period commencing on the
date hereof and terminating three (3) years from the date hereof (the
"RESTRICTED PERIOD"), none of the Shareholders shall, directly or
indirectly (as an owner (other than as a less than 5% owner of a
public company), employee, independent contractor, agent, consultant
or otherwise or through Affiliates), in any manner:
(a) market, maintain or support products or services of the nature
currently offered by or competitive with those offered by QCC to any
customer of QCC currently or within twenty four months prior to the date
hereof ("CUSTOMER");
(b) market, maintain or support products or services of the nature
currently offered by or competitive with those offered by QCC to any other
person within the "TERRITORY" (as hereinafter defined);
(c) engage in any portion of the Business within the Territory; or
(d) attempt in any way, directly or indirectly, to obtain for itself,
or others, or to divert from WHI or QCC any rights, benefits, sales or
profits arising out of or in connection with the Business;
(e) solicit to provide or provide to any Customer any business
competitive with that offered by QCC prior to the date hereof or cause any
Customer to curtail its relationship with WHI or QCC.
Notwithstanding the above, a Shareholder shall not be deemed to be in
breach or violation of this Section 1.1.1 if the Shareholder is employed by
a business or enterprise and the Shareholder does not apply his expertise
to that part of such business or enterprise that is or could be competitive
with the Business.
2. Territory. The Territory shall be:
(a) Westwood, MA and Salem, NH;
(b) A fifty mile radius of the cities in which QCC has customers;
(c) Massachusetts, New Hampshire, Connecticut, Maine and Rhode
Island;
(d) the New England states; and
(e) the United States of America.
3. Confidential Information. Each of the Shareholders
acknowledges that WHI and QCC has a legitimate and continuing
proprietary interest in QCC's confidential and proprietary information
which QCC has expended great sums to develop and maintain. None of
the Shareholders shall use, exploit, publish or disclose in any
manner, and each of the Shareholders shall maintain in the strictest
confidence, all confidential or proprietary information concerning the
Business (including information regarding software, development work,
suppliers, customers, details of contracts, pricing policies, market
information, operational methods, technical processes or future plans)
and shall keep all such information confidential.
4. Nonsolicitation. During the Restricted Period, none of the
Shareholders shall solicit the employment of, recruit or retain as an
independent contractor or otherwise, any current employee of QCC or in
any way induce any current employee of QCC or independent contractor
with whom QCC does business to terminate its relationship with QCC;
provided, however, that Xxxxxxx Xxxxxx may work for New England
Teledata, Inc. for a period of up to one (1) year and for no more than
five (5) hours per month on average and these limitations shall lapse
with respect to any current employee who shall have ceased to be
employed by QCC for a period of more than six months.
B. Rights and Remedies Upon Breach. Each of the Shareholders
acknowledges that any breach of this Agreement by him will result in irreparable
damage to WHI and QCC for which WHI and QCC will have no adequate remedy at
law. If any Shareholder breaches, or threatens to commit a breach of, any of
the provisions of Article 1 "Non-Competition; Confidentiality; Related
Covenants" (the "RESTRICTIVE COVENANTS"), WHI and QCC shall be entitled to,
and such Shareholder consents to, injunctive relief in addition to, and not
in limitation of, any other relief or rights to which WHI may be entitled at
law or in equity. The Restricted Period with respect to any Shareholder
shall be extended by any period during which such Shareholder is in breach
hereof.
C. Severability; Blue Penciling. The necessity of each of the
restrictions set forth above and the nature and scope of each such restriction
has been carefully considered, bargained for and agreed to by the parties
hereto. The parties hereby agree and acknowledge that the duration, scope and
geographic area applicable to each of the restrictions set forth in this
Agreement are fair, reasonable and necessary. The consideration provided for in
this Agreement and in the Exchange Agreement is sufficient and adequate to
compensate the Shareholders for agreeing to each of the restrictions contained
in this Agreement. However, in the event that any portion of this Agreement
shall be determined by any court of competent jurisdiction to be unenforceable,
including by reason of its being extended over too great a period of time or too
large a geographic area or over too great a range of activities, it shall be
interpreted to extend only over the maximum period of time, geographic area, or
range of activities as to which it may be enforceable. Each provision and part
of a provision herein shall be deemed a separate and severable covenant. It is
the desire and intent of the parties that the provisions of this Agreement shall
be enforced to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which such enforcement is sought. Accordingly,
a court of competent jurisdiction is directed to modify any provision to the
extent necessary to render such provision enforceable and if such cannot be
lawfully done, then to severe any such portion of a provision.
D. Enforceability in Jurisdiction. The parties confer jurisdiction
to enforce this Agreement upon the courts of each jurisdiction within the
Territory. If the courts of any jurisdiction hold any covenant to be
unenforceable, then it is the intention of the parties that such determination
not in any way affect the right of WHI or QCC to enforce the Agreement in the
courts of any other jurisdiction as to breaches within such other jurisdiction.
II. Miscellaneous.
A. Representations of Shareholders. Each of the Shareholders
represents and warrants that he has read and understands this Agreement, that he
has consulted with his legal counsel who has explained all of its terms and
provisions and that the agreed upon consideration for the undertakings made by
him hereunder is adequate. Each Shareholder acknowledges and agrees that the
restrictions on competitive activities and the other undertakings made by him in
this Agreement will adversely effect his ability to obtain future employment and
to engage in other pursuits, and, nevertheless, that he intends to be bound by
all of the restrictions, undertakings, and other obligations required in this
Agreement.
B. Amendments and Waiver. No amendment, waiver or consent with
respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing and signed by the parties hereto, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. Any party's lack of
enforcement of any provision herein shall not be construed as a waiver and the
nonbreaching party may elect to enforce any such provision at any time in the
event of a past, repeated or continuing breach. The rights and remedies herein
are cumulative and exclusive of any rights or remedies that any party may
otherwise have at law or in equity. WHI and QCC shall be entitled to
reimbursement from a Shareholder for the costs and expenses (including legal
fees) of enforcing this Agreement against such Shareholder.
C. Notices. All notices, requests, consents, demands and other
communications hereunder must be in writing and either (a) personally delivered
(with receipt), (b) sent by registered or certified mail, postage prepaid, (c)
sent by telecopier with verbal or electronic confirmation, or (d) sent by
prepaid courier service with receipt to the addresses indicated in the Exchange
Agreement, or such other addresses as are provided in a subsequent notice.
D. Governing Law. This Agreement shall be construed, enforced and
interpreted in accordance with the substantive laws of the State of Illinois
applicable to contracts made and to be performed wholly within said State.
E. Successors and Assigns. This Agreement, and the rights and
obligations of the parties hereunder, shall inure to and be binding on the
parties hereto and their respective successors and assigns. WHI and QCC may not
assign their rights under this Agreement except in the event of the sale of the
Business or WHI. None of the Shareholders may assign any rights, benefits,
duties or obligations under this Agreement.
F. Entire Agreement. This Agreement and the documents referred to
herein contain the entire agreement and understanding among the parties with
respect to the subject matter hereof.
G. Rules of Construction. The term "including" shall mean including
without limitation. The term "person" shall be broadly construed to mean any
individual, trust, partnership, corporation, limited liability company,
organization, joint venture or any other entity or body of any nature. The
Article, Section and other headings contained herein are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
H. Independence of Obligations. WHI and QCC agree and acknowledge
that each Shareholder is liable only for his own breach of any obligation
hereunder and not for any breach of any obligation of the other Shareholder, and
WHI and QCC covenant not to make any claim against a Shareholder in respect of
any breach of this Agreement by the other Shareholder.
* * *
IN WITNESS WHEREOF, the parties have executed this Inducement
Agreement as of the date first above written.
QCC, INC.
By:
XXXXXXXX-XXXX, INC.
By:
Xxxxxx X. Xxxxx Xxxxxxxx X. Xxxxxxxx, Xx.
