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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and among
XXXXX/XXXXXX, INC.
and
XXXXX/XXXXXX HOLDINGS, INC.
and
PHYNQUE, INC., d/b/a MANAGEMENT COMPENSATION
GROUP/HEALTHCARE and the undersigned SHAREHOLDERS of
PHYNQUE, INC.
April 5, 1999
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TABLE OF CONTENTS
ARTICLE 1
PURCHASE AND SALE OF ASSETS..............................................................................1
1.1 Purchased Assets................................................................................1
1.2 Excluded Assets.................................................................................4
1.3 Assumption of Liabilities.......................................................................4
1.4 Excluded Liabilities............................................................................5
ARTICLE 2
CONSIDERATION FOR THE PURCHASED ASSETS...................................................................5
2.1 Purchase Price..................................................................................5
2.2 Purchase Price Adjustment.......................................................................6
2.3 Procedures for Final Determination of Net Liability Amount......................................6
2.4 Net Liability Amount Definition.................................................................7
2.5 Holdings Stock Restrictions.....................................................................7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS................................................8
3.1 Organization and Power..........................................................................8
3.2 Subsidiaries....................................................................................8
3.3 Authorization; No Breach........................................................................8
3.4 Financial Statements............................................................................9
3.5 Absence of Undisclosed Liabilities..............................................................9
3.6 No Material Adverse Changes.....................................................................9
3.7 Absence of Certain Developments................................................................10
3.8 Title and Condition of Properties..............................................................11
3.9 Tax Matters....................................................................................12
3.10 Contracts and Commitments......................................................................14
3.11 Proprietary Rights.............................................................................15
3.12 Litigation; Proceedings........................................................................16
3.13 Brokerage......................................................................................16
3.14 Governmental Consent, etc......................................................................16
3.15 Employees......................................................................................17
3.16 Employee Benefit Plans.........................................................................17
3.17 Insurance......................................................................................19
3.18 Affiliated Transactions........................................................................19
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3.19 Compliance with Laws; Permits; Certain Operations..............................................19
3.20 Environmental Health and Safety................................................................20
3.21 Product and Warranty Claims; Warranties........................................................21
3.22 Disclosure.....................................................................................22
3.23 Year 2000 Problem..............................................................................22
3.24 Customers......................................................................................22
3.25 Closing Date...................................................................................22
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS............................................................22
4.1 Corporate Organization and Power...............................................................22
4.2 Authorization..................................................................................22
4.3 No Violation...................................................................................23
4.4 Litigation.....................................................................................23
4.5 Issuance of Holdings Stock.....................................................................23
4.6 Consents.......................................................................................23
4.7 Taxes..........................................................................................23
4.8 Closing Date...................................................................................23
ARTICLE 5
COVENANTS PRIOR TO CLOSING..............................................................................24
5.1 Affirmative Covenants..........................................................................24
5.2 Negative Covenants.............................................................................25
ARTICLE 6
CONDITIONS TO PURCHASERS' OBLIGATION TO CLOSE...........................................................25
6.1 Conditions to Purchasers' Obligation...........................................................25
ARTICLE 7
CONDITIONS TO SELLER'S OBLIGATION TO CLOSE..............................................................28
7.1 Conditions to the Seller's Obligations.........................................................28
ARTICLE 8
CLOSING TRANSACTIONS....................................................................................29
8.1 The Closing....................................................................................29
8.2 Action to Be Taken at the Closing..............................................................29
8.3 Closing Documents..............................................................................29
8.4 Possession.....................................................................................31
8.5 Nonassignable Contracts........................................................................31
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ARTICLE 9
INDEMNIFICATION.........................................................................................32
9.1 Indemnification by Seller and Shareholders.....................................................32
9.2 Indemnification by Purchasers..................................................................33
9.3 Method of Asserting Claims.....................................................................33
9.4 Escrow Amount..................................................................................34
ARTICLE 10
TERMINATION.............................................................................................34
10.1 Termination....................................................................................34
10.2 Effect of Termination..........................................................................35
10.3 Effect of Closing..............................................................................35
ARTICLE 11
ADDITIONAL AGREEMENTS...................................................................................35
11.1 Survival.......................................................................................35
11.2 Mutual Assistance..............................................................................35
11.3 Press Release and Announcements................................................................35
11.4 Expenses.......................................................................................35
11.5 Further Transfers..............................................................................36
11.6 Transition Assistance..........................................................................36
11.7 Confidentiality................................................................................36
11.8 Non-Compete; Non-Solicitation..................................................................36
11.9 Specific Performance...........................................................................37
11.10 Remittances....................................................................................37
11.11 Best Efforts To Consummate Closing Transactions................................................37
11.12 Employees and Agents of Seller.................................................................37
ARTICLE 12
MISCELLANEOUS...........................................................................................39
12.1 Amendment and Waiver...........................................................................39
12.2 Notices........................................................................................39
12.3 Assignment.....................................................................................41
12.4 Severability...................................................................................41
12.5 No Third Party Beneficiaries...................................................................41
12.6 No Strict Construction.........................................................................41
12.7 Captions.......................................................................................41
12.8 Complete Agreement.............................................................................41
12.9 Counterparts...................................................................................41
12.10 Governing Law..................................................................................42
12.11 Remedies Cumulative............................................................................42
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EXHIBITS
Exhibit A -- Form of Escrow Agreement
Exhibit B -- Form of Promissory Note
Exhibit C -- Allocation of Purchase Price
Exhibit D -- Form of Investment Agreement
Exhibit E -- Opinion of Seller's Counsel
Exhibit F -- Form of Lease Assignment (together with
Landlord's consent) and Estoppel Certificate
Exhibit G (1-9) -- Form of Employment Agreements
Exhibit H -- Purchased Artwork
Exhibit I (1-9) -- Distribution to Shareholders
Exhibit J -- Opinion of Purchasers' Counsel
Exhibit K -- Officer's Certificate of Seller
Exhibit L -- Officer's Certificate of Purchasers
Exhibit M -- Contingency Rollback Agreement
Exhibit N -- Seller's March 31, 1999 Balance Sheet
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DISCLOSURE SCHEDULES
Schedule 1.1(b) -- Accounts Receivable Schedule
Schedule 1.1(e) -- Real Estate Schedule
Schedule 1.1(f) -- Tangible Property Schedule
Schedule 1.1(g) -- Assumed Insurance Schedule
Schedule 1.1(h) -- Intellectual Property Schedule
Schedule 1.1(l) -- Customer List Schedule
Schedule 1.3(c) -- Vendor Order Schedule
Schedule 1.3(d) -- Employee Accrued Liability Schedule
Schedule 1.3(f) -- Other Assumed Liabilities
Schedule 3.1 -- Qualifications Schedule
Schedule 3.5 -- Other Liabilities Schedule
Schedule 3.7 -- Developments Schedule
Schedule 3.8(b) -- Leases Schedule
Schedule 3.9 -- Tax Matters Schedule
Schedule 3.10(a) -- Contracts Schedule
Schedule 3.10(d) -- Customer Contracts Schedule
Schedule 3.11 -- Proprietary Rights Schedule
Schedule 3.12 -- Litigation Schedule
Schedule 3.14 -- Consents Schedule
Schedule 3.15 -- Employees Breach Schedule
Schedule 3.16 -- Employee Benefits Schedule
Schedule 3.17 -- Insurance Schedule
Schedule 3.18 -- Affiliated Transactions Schedule
Schedule 3.19(a) -- Compliance Schedule
Schedule 3.19(b) -- Permits Schedule
Schedule 3.21 -- Claims Schedule
Schedule 3.24 -- Customers Schedule
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT made as of April 5, 1999 (this "Agreement")
by and among XXXXX/XXXXXX, INC., a Delaware corporation ("CBI"), XXXXX/XXXXXX
HOLDINGS, INC., a Delaware corporation ("Holdings") (CBI and Holdings shall be
individually referred to as "Purchaser" and collectively referred to as the
"Purchasers"), PHYNQUE, INC., d/b/a MANAGEMENT COMPENSATION GROUP/HEALTHCARE, a
Minnesota corporation ("Seller"), and the undersigned shareholders of the
Seller (individually, a "Shareholder" and collectively, the "Shareholders").
W I T N E S S E T H
WHEREAS, the Seller is engaged in the business of (i) advising and
consulting with large health care organizations regarding compensation and
benefit plans for executives, (ii) designing programs for physician groups, and
(iii) marketing life insurance policies, and related compensation, salary and
benefit plans (the "Business"); and
WHEREAS, on the terms and subject to the conditions of this Agreement,
Purchasers desire to acquire from Seller and Seller desires to sell to
Purchasers, substantially all of the assets, properties and Business of the
Seller as a going concern.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchased Assets. On the terms and subject to the conditions of
this Agreement, on the Closing Date (as defined in Section 8.1), Purchasers
shall purchase from Seller, and Seller shall sell, convey, assign, transfer and
deliver to Purchasers, all properties, assets, rights and interests of every
kind and nature, whether real or personal, tangible or intangible, and wherever
located and by whomever possessed, of Seller as of the Closing Date related to
or used in, or otherwise associated with, the Business, including, without
limitation, all of the following assets (but excluding all Excluded Assets as
defined in Section 1.2 hereof):
(a) cash, cash equivalents and marketable securities, including
but not limited to, those certain accounts at Resource Bank Trust (Payroll
Account number 0000000 and Checking Account number 0000000) and Norwest Bank
(Account number 000-0000000);
(b) all accounts and notes receivable (whether current or
noncurrent), a list, description and aging of which as of the date hereof is
set forth on Schedule 1.1(b);
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(c) all prepayments, prepaid expenses (including, without
limitation, prepaid insurance premiums), deferred charges, advance payments and
security deposits as of the Closing Date;
(d) any and all office and other inventory and supplies located
at Seller's facilities, in transit to or from Seller's facilities or which
otherwise relate to the Business (the "Inventory");
(e) all interests in real estate (including, without limitation,
land, buildings, improvements to the extent that the landlord agrees to assign
that certain Amended and Restated Lease Agreement dated April, 1994 between
Seller and T.H.S. Northstar Associates Limited Partnership, a Minnesota limited
partnership (as amended, the "Lease Agreement") to Purchasers, whether owned in
fee, leased or otherwise, including but not limited to, the interests listed on
Schedule 1.1(e) (collectively, the "Phynque Real Estate") and all licenses,
permits, approvals and qualifications relating to the Phynque Real Estate;
(f) any and all interests in office and other machinery and
equipment, fixtures, fittings, furniture, office furnishings, artwork,
automobiles and other vehicles, tools, fixtures, spare parts and supplies and
other tangible personal property, whether owned, leased or otherwise
(including, without limitation, items which have been fully depreciated or
expensed), including, without limitation, such items as set forth on Schedule
1.1(f);
(g) all insurance, insurance reserves and deposits (including,
without limitation, reserves and deposits relating to workmen's compensation),
including, without limitation, such items as set forth on Schedule 1.1(g);
(h) all intangible assets and intellectual property (including,
without limitation, registered and unregistered trademarks, service marks and
trade names, trade dress and other names, marks and slogans, including the name
"Phynque, Inc." and all variations and permutations thereof, and all rights
related thereto) and all rights, all publishing and distribution rights, and
all associated goodwill; all patents, inventions, shop rights, know-how, trade
secrets and confidential information; all registration applications for any of
the foregoing; all interests in and to telephone numbers and all listings
pertaining to Seller in all telephone books and other directories; together
with all rights to use all of the foregoing forever and all other rights in,
to, and under the foregoing in all countries, including, without limitation,
such items as set forth on Schedule 1.1(h);
(i) all discoveries, improvements, processes, data, confidential
information, specifications and ideas, whether patentable or not, all licenses
and other similar agreements, and all drawings, records, books or other
indicia, however evidenced, of the foregoing; all rights in and to any products
or other intellectual property rights under research or development prior to or
on the Closing Date related to the Business;
(j) all rights existing under contracts, leases, licenses,
permits, supply and distribution arrangements, sales and purchase agreements
and orders, broker/dealer agreements, employee benefit plans, trusts and other
arrangements, employment and consulting agreements,
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consignment arrangements, warranties, consents, orders, registrations,
privileges, franchises, memberships, certificates, approvals or other similar
rights and all other agreements, arrangements and understandings, including,
without limitation, all rights existing under the contracts listed on the
Contracts Schedule and Customer Contracts Schedule (as defined in Section 3.10
hereto);
(k) the right to receive all mail and other communications
addressed to Seller (including, without limitation, mail and communications
from customers, suppliers, distributors, agents and others and accounts
receivable payments), provided that CBI agrees to forward, if necessary, any
mail or communications received by CBI that is of a personal nature to the
applicable officer or employee of Seller promptly after CBI's receipt thereof;
(l) all lists, records and files, if any, pertaining to
customers, including past, present and prospective customers solicited over the
past five (5) years, as referenced in Schedule 1.1(l);
(m) all lists and records pertaining to suppliers, distributors,
personnel, customers and agents and all other books, ledgers, files, documents,
correspondence, business analysis, illustrations, proposals, reports and
records of every kind and nature;
(n) all business and marketing plans and proposals and pricing
and cost information;
(o) all computer software and systems, including licenses related
thereto, proprietary or otherwise, including related source codes, data and
documentation;
(p) all creative materials (including, without limitation,
photographs, films, art work, color separations and the like) advertising and
promotional materials and all other printed or written materials;
(q) all claims, refunds, causes of action, choses in action,
rights of recovery and rights of set-off of every kind and nature;
(r) all goodwill as a going concern and all other intangible
property;
(s) all other property not referred to above which is either
represented on Seller's Latest Balance Sheet (as defined in Section 2.4) or
acquired by Seller thereafter (except for Excluded Assets and such property
which has been sold or otherwise disposed of in the ordinary course of
business) related to the Business.
For purposes of the Agreement, the term "Purchased Assets" means all
properties, assets and rights which Seller shall convey to Purchasers or shall
be obligated to convey to Purchasers under this Agreement.
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1.2 Excluded Assets. Notwithstanding the foregoing, the following
assets (the "Excluded Assets") are expressly excluded from the purchase and
sale contemplated hereby and, as such, are not included in the Purchased
Assets:
(a) the minute books, capital stock records, articles of
incorporation, by-laws and corporate seal of Seller, together with annual and
other corporate reports filed with the State of Minnesota and other states in
which the Seller is qualified to do business, other documents and
correspondence that relate to Seller's corporate organization and maintenance
thereof;
(b) any cash payments to be received by the Shareholders under
the Incentive Compensation Plan Agreement with M Financial Holdings
Incorporated; and
(c) the name "Management Compensation Group/Healthcare.
1.3 Assumption of Liabilities. Subject to the conditions specified in
this Agreement, on the Closing Date, Purchasers shall assume and agree to pay,
defend, discharge and perform as and when due only the following liabilities
and obligations of Seller (the "Assumed Liabilities"):
(a) Seller's obligations and liabilities with respect to the (i)
Equitable Life Assurance Society of the United States pursuant to Amended and
Restated Loan Fund Promissory Note and Security Agreement in an amount not to
exceed $2,520,000 (the "Equitable Agreement") and (ii) Xxxx Xxxxxx Corporation
pursuant to that certain letter from Xxxx Xxxxxx Corporation dated December 21,
1995, to Xxxx Xxxxx, in an amount not to exceed $993,000 (the "Revere
Agreement"), in each case, accrued as of the Closing Date, but not including
any obligations or liability for any breach occurring with respect thereto
prior to the Closing Date;
(b) Seller's obligations and liabilities under the contracts
listed on the Contracts Schedule (Schedule 3.10(a)) and on the Customer
Contract Schedule (Schedule 3.10(d)) for any activity following the Closing
Date, but not including any obligation or liability accruing with respect
thereto on or prior to the Closing Date;
(c) obligations of continued performance under executory vendor
purchase orders for the purchase of supplies, equipment or services entered
into in the ordinary course of business (i) specifically set forth in the
"Vendor Order Schedule" (Schedule 1.3(c)), or (ii) as to which the supplies,
equipment or services subject thereto have not been received by the Seller
prior to the Closing Date (collectively, the "Vendor Orders"), but not
including any obligation or liability for any breach occurring with respect
thereto prior to the Closing Date;
(d) accrued payroll, vacation and other benefits of employees of
the Seller generated in the ordinary course of business to the extent
specifically set forth on "Employee Accrued Liability Schedule" (Schedule
1.3(d)), but not including any obligation or liability for any breach
occurring, or payment due, with respect thereto, prior to the Closing Date;
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(e) obligations of continued performance under the Assumed
Benefit Plans (as defined in Section 11.12(b)), to the extent expressly set
forth in Section 11.12(b); and
(f) other liabilities incurred in the ordinary course of business
and to the extent specifically set forth on the "Other Assumed Liabilities
Schedule" (Schedule 1.3(f)), but not including any obligation or liability for
any breach occurring, or payment due, with respect thereto, prior to the
Closing Date.
1.4 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement, Purchasers shall not assume or be liable for any
liabilities or obligations of Seller other than the Assumed Liabilities and all
such other liabilities or obligations shall be the responsibility of the Seller
(the "Excluded Liabilities").
ARTICLE 2
CONSIDERATION FOR THE PURCHASED ASSETS
2.1 Purchase Price. The aggregate purchase price for the Purchased
Assets shall be an amount equal to Thirty-Six Million Six Hundred Ninety-Five
Thousand Eight Hundred Eighty-Five Dollars ($36,695,885), as adjusted pursuant
to Section 2.2 hereof and pursuant to the Contingency Rollback Agreement (the
"Purchase Price"), of which $4,900,000 shall be for the Seller's accounts
receivable and $31,795,885 shall be for all other Purchased Assets. The Purchase
Price shall be payable to Seller on the Closing Date as follows:
(a) by wire transfer of immediately available funds to such
account or accounts as shall have been designated in writing by Seller not less
than three (3) days prior to the Closing Date in an amount equal to Fifteen
Million Two Hundred Seventy-Seven Thousand Three Hundred Ninety-Three Dollars
($15,277,393), as adjusted pursuant to Section 2.2 hereof;
(b) by wire transfer of immediately available funds to that
certain Escrow Account to be established pursuant to that certain Escrow
Agreement in the form of Exhibit A hereto, with such changes therein as the
Escrow Agent thereunder designated by Purchasers may request (the "Escrow
Agreement") in an amount equal to Five Hundred Thousand Dollars ($500,000);
(c) by a promissory note to be issued by Purchasers to Seller,
substantially in the form attached hereto as Exhibit B (the "Promissory Note"),
in the principal amount of Eight Million Seven Hundred Twenty-Four Thousand
Three Hundred Twenty-Eight Dollars ($8,724,328), with Ten Percent (10%) per
annum interest, payable in thirty-two (32) consecutive quarterly installments
of principal and interest in the amount of Four Hundred Thirty Thousand Dollars
($430,000) commencing April 5, 2000; provided, that the payments under the
Promissory Note shall be subject to reduction pursuant to the Contingency
Rollback Agreement;
(d) by the issuance of Holdings common stock to the Seller or its
assignees in a number of shares equal to the quotient obtained by dividing (i)
Five Million Five Hundred Forty-Eight
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Thousand One Hundred Sixty-Four Dollars ($5,548,164) by (ii) the Value Price
(as hereinafter defined). For purposes of this Agreement, the "Value Price"
means $17 per share, unless the average of the daily closing market price of
Holdings common stock as quoted on the NASDAQ national market for each day on
which such quotes are available from January 19, 1999 through the business day
immediately prior to the Closing Date (the "Guide Price"), is more than $21 per
share or less than $13 per share. In the event the Guide Price is greater than
$21 per share, the Value Price will be an amount equal to the sum of (x) $17
per share plus (y) the excess of the Guide Price over $21 per share. For
example, if the Guide Price is $24 per share, the Value Price for determining
the number of shares to be issued to Seller would be $20 per share
[$17+($24-$21)=$20]. In the event that the Guide Price is less than $13 per
share, the Value Price will be an amount equal to the difference of (a) $17 per
share minus (b) the excess of $13 per share over the Guide Price. For example,
if the Guide Price is $12 per share, the Value Price for determining the number
of share to be issued to Seller would be $16 per share [$17-($13-$12)=$16]; and
(e) by assuming certain Assumed Liabilities.
The Purchase Price shall be allocated among the Purchased Assets as
set forth in Exhibit C attached hereto as they relate to the items on Seller's
March 31, 1999 balance sheet, a copy of which is attached hereto as Exhibit N,
and valued at book value. The parties agree that the allocation set forth in
Exhibit C shall be used by them and respected for all purposes, including
income tax purposes if in conformance with the rules and regulations of the
Internal Revenue Code of 1986, as amended (the "Code"), and that the parties
shall follow such allocation for all reporting purposes, including, without
limitation, Internal Revenue Service ("IRS") Form 8594.
2.2 Purchase Price Adjustment. Within three (3) days prior to the
Closing Date, Seller shall notify Purchasers in writing of its good faith
estimate of the Net Liability Amount (as defined in Section 2.4 below) as of
the Closing Date determined in accordance with Section 2.4 below (the
"Estimated Net Liability Amount"). If the Estimated Net Liability Amount
exceeds One Million Nine Hundred Ninety-Two Thousand Dollars ($1,992,000), the
Purchase Price to be paid in cash to Seller or its assigns shall be decreased
by the amount of such excess.
Upon the final determination of the Net Liability Amount pursuant to
Section 2.3 below, Purchasers, Seller and the Shareholders shall recompute the
Purchase Price based upon the Net Liability Amount as finally determined, and
within three (3) business days after such final determination, Seller and/or
Shareholders shall pay Purchasers any amount due Purchasers by wire transfer of
immediately available funds.
2.3 Procedures for Final Determination of Net Liability Amount. Within
100 days after the Closing Date, Purchasers shall prepare and deliver to Seller
at Purchasers' expense a balance sheet for Seller as of the opening of business
on the Closing Date, together with a statement setting forth Purchasers'
determination of the Net Liability Amount. Within thirty (30) days after
receipt of such items, Seller shall deliver to Purchasers a detailed written
statement describing its objections, if any, to such balance sheet and
determination of the Net Liability Amount. If Seller does not raise any
objections within the thirty (30) day period, the audited balance sheet and
Purchasers' determination
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of the Net Liability Amount shall become final and binding upon all parties.
Upon request by Seller at any time after receipt of the aforementioned balance
sheet and statement, Purchasers shall make available to Seller and its
accountants and other representatives the work papers used in preparing the
balance sheet and in determining Purchasers' calculation of the Net Liability
Amount and such other documents as Seller may reasonably request in connection
with its review of the Net Liability Amount. If Seller does raise any
objections, Purchasers and Seller shall use reasonable efforts to resolve any
such disputes. If a final resolution is not obtained within thirty (30) days
after Seller shall have submitted its objections to Purchasers, any remaining
disputes shall be resolved by an accounting firm mutually agreeable to
Purchasers and Seller. If Purchasers and Seller are unable to mutually agree on
such an accounting firm within five (5) days after the expiration of said
thirty (30) day period, a "big-five" accounting firm shall be selected by lot
after elimination of one firm designated as objectionable by each of Purchasers
and Seller. The determination of the accounting firm so selected shall be set
forth in writing and shall be conclusive and binding upon the parties, and the
fees and expenses of such accounting firm shall be paid one-half by Purchasers
and one-half by Seller. The final balance sheet prepared in accordance with
this Section 2.3 and Section 2.4 below and the related statement setting forth
the final determination of the Net Liability Amount are referred to as the
"Closing Balance Sheet."
2.4 Net Liability Amount Definition. For purposes hereof, "Net
Liability Amount" shall be determined as of the opening of business on the
Closing Date and shall be an amount equal to the excess of (x) Seller's
liabilities (other than Excluded Liabilities and the future obligations due
with respect to the Lease Agreement and operating leases listed on Schedule
3.10(a)), over (y) the aggregate sum of Seller's (A) cash, plus (B) accounts
receivable (to the extent collected within ninety days (90) following the
Closing Date). The Closing Balance Sheet shall be prepared, and the Net
Liability Amount shall be determined, in accordance with generally accepted
accounting principles applied in a manner consistent with those used in
preparing Seller's balance sheets as of September 30, 1998 (the "Latest Balance
Sheet"); provided that (a) all proper accruals and reserves, if any, shall be
recorded (including but not limited to vacation pay, customer rebate accruals,
bad debt reserves and warranty expenses, taxes and utility charges prorated
through the Closing Date), (b) no assets shall be included in excess of their
realizable value, (c) to the extent that the Latest Balance Sheet was not
prepared in accordance with generally accepted accounting principles (based
upon authoritative accounting pronouncements and literature in effect on the
Closing Date) and as a result the Net Liability Amount would otherwise be
overstated as of the Closing Date, the Closing Balance Sheet shall be prepared
and the Net Liability Amount shall be determined in accordance with generally
accepted accounting principles as in effect on the Closing Date, and (d) all
accounting entries (including all liabilities and accruals) shall be taken into
account regardless of their amount and all errors and omissions shall be
corrected and all adjustments made.
2.5 Holdings Stock Restrictions. All shares of Holdings Stock (as
hereinafter defined) shall be unregistered and shall be subject to the
restrictions, terms and conditions set forth in that certain Investment
Agreement, dated of even date herewith, by and among the Purchasers and the
Shareholders, substantially in the form attached hereto as Exhibit D, including
but not limited to, a right of first refusal by Holdings. "Holdings Stock"
shall mean (i) the shares of Holdings issued, granted, conveyed and delivered
to Seller or its assignees pursuant to Section 2.1 hereof, and (ii) any
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and all other additional shares of capital stock of Holdings issued or
delivered by Holdings with respect to the shares of Holdings Stock described in
clause (i) hereof, including without limitation any shares of capital stock of
Holdings issued or delivered with respect to such shares as a result of any
stock split, stock dividend, stock distribution, recapitalization or similar
transaction.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
SELLER AND SHAREHOLDERS
As an inducement to Purchasers to enter into this Agreement, Seller
and the Shareholders hereby, jointly and severally, represent and warrant to
Purchasers as of the date hereof and as of the Closing Date that:
3.1 Organization and Power. Seller is a corporation duly organized,
validly existing and in good standing under the laws of Minnesota. Seller is
qualified to do business as a foreign corporation and is in good standing in
the jurisdictions specified on the "Qualifications Schedule" attached hereto as
Schedule 3.1, which are all jurisdictions in which ownership of its properties
or the conduct of its business requires it to be so qualified. Seller has all
requisite power and authority and all material licenses, permits and other
authorizations necessary to own and operate its properties and to carry on its
business as now conducted as they relate to the Business. The copies of the
certificate of incorporation and by-laws of Seller which have been previously
furnished to Purchasers reflect all amendments made thereto at any time prior
to the date of this Agreement and are correct and complete in all material
respects.
3.2 Subsidiaries. Seller owns no stock, partnership interest, joint
venture interest or other security or interest in any other corporation,
organization or entity related to the Business.
3.3 Authorization; No Breach. The execution, delivery and performance
of this Agreement and the other agreements contemplated hereby and the
transactions contemplated hereby and thereby have been duly and validly
authorized by Seller. No other corporate act or proceeding on the part of
Seller, its Board of Directors or its shareholders is necessary to authorize
the execution, delivery or performance of this Agreement, any other agreement
contemplated hereby or the consummation of the transactions contemplated hereby
or thereby. This Agreement has been duly executed and delivered by Seller and
the Shareholders and this Agreement constitutes and the other agreements
contemplated hereby upon execution and delivery by Seller and the Shareholders
shall each constitute, a valid and binding obligation of Seller and the
Shareholders, enforceable in accordance with their terms. The execution,
delivery and performance of this Agreement and the other agreements
contemplated hereby by Seller and the Shareholders and the consummation of the
transactions contemplated hereby and thereby do not and shall not (a) conflict
with or result in any breach of any of the provisions of, (b) constitute a
default under, result in a violation of, or cause the acceleration of any
obligation under, (c) result in the creation of any lien, security interest,
charge or encumbrance upon any of the Purchased Assets under, or (d) require
any authorization, consent, approval, exemption or other action by or notice to
any court or other governmental body under the
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provisions of Seller's certificate of incorporation, by-laws, any indenture,
mortgage, lease, loan agreement or other agreement or instrument to which
Seller or the Shareholders are bound or affected or any law, statute, rule,
regulation, judgement, order or decree to which Seller or the Shareholders are
subject or by which any of the Purchased Assets are bound.
3.4 Financial Statements. Seller has furnished Purchasers with copies
of (a) its audited balance sheets as of September 30, 1998, September 30, 1997
and September 30, 1996 and the related audited financial statements for the
periods then ended, (b) its unaudited balance sheet as of September 30, 1995
and the related unaudited financial statements for the fiscal year then ended,
and (c) unaudited interim financial statements for the Seller as at and for the
five-month period ended February 28, 1999 and six-month period ended March 31,
1999. Each of the foregoing financial statements has been based upon the
information contained in Seller's books and records (which are accurate and
complete in all material respects) and fairly presents the financial condition
and results of operations of Seller as of the times and for the periods
referred to therein, and such financial statements contain proper accruals and
adequate reserves and have been prepared in accordance with generally accepted
accounting principles, consistently applied throughout the periods indicated,
except as otherwise noted therein.
3.5 Absence of Undisclosed Liabilities. As of the Closing (as defined
in Section 8.1), Seller shall have no liabilities or obligations whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not known
to Seller, whether due or to become due, arising out of or related to
transactions entered into at or prior to the Closing, or out of any action or
inaction by Seller or any employee, agent, licensee or contractor of any of
them at or prior to the Closing, or out of any state of facts existing at or
prior to the Closing, regardless of when any such liability or obligation is
asserted, including, without limitation, taxes with respect to or based upon
transactions or events occurring on or before the Closing or any errors in
billing by Seller with respect to transactions or events occurring on or before
the Closing or any post-retirement medical liabilities, except (a) liabilities
and obligations with respect to post Closing Date actions taken by Purchaser or
related to business of the Purchasers under agreements, contracts, leases or
commitments described on the Leases Schedule (as defined in Section 3.8(b)
hereof) and the Contracts Schedule and the Customer Contracts Schedule (as such
terms are defined in Section 3.10 hereof) or under agreements, leases,
contracts and commitments which are not required pursuant to this Agreement to
be disclosed thereon (but not liabilities for breaches thereof), (b)
liabilities and obligations reflected on Seller's Latest Balance Sheet, (c)
liabilities and obligations which have arisen after the date of Seller's Latest
Balance Sheet in the ordinary course of business (none of which is a liability
for breach of contract, breach of warranty, tort, infringement, claim or
lawsuit) and (d) those liabilities set forth in the "Other Liabilities
Schedule" attached hereto as Schedule 3.5.
3.6 No Material Adverse Changes. Since the date of the Latest Balance
Sheet, there has been no material adverse change in the financial condition,
operating results, assets, operations, employee relations, customer relations
or business prospects of Seller.
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3.7 Absence of Certain Developments. Except as set forth in the
"Developments Schedule" attached hereto as Schedule 3.7, since the date of the
Latest Balance Sheet, Seller has not:
(a) borrowed or agreed to borrow any amount or incurred or become
subject to any material liabilities, except current liabilities incurred in the
ordinary course of business and liabilities under contracts entered into in the
ordinary course of business;
(b) discharged or satisfied, or agreed to discharge or satisfy,
any material lien or encumbrance or paid any material liability, other than
current liabilities paid in the ordinary course of business;
(c) mortgaged, pledged or subjected to any lien, charge or any
other encumbrance, any portion of the Purchased Assets, except liens for
current property taxes not yet due and payable;
(d) sold, assigned or transferred, or agreed to do so, any of the
Purchased Assets, except in the ordinary course of business, or canceled
without fair consideration any material debts or claims owing to or held by it;
(e) sold, assigned, transferred, abandoned or permitted to lapse
any patents, trademarks, trade names, copyrights, trade secrets or other
intangible assets, or disclosed any material trade secrets of Seller to any
person including, without limitation, customer information and lists and
information pertaining to Seller's "FLEX" products;
(f) made or granted, or agreed to make or grant, any bonus or any
wage or salary increase to any employee or group of employees or made or
granted any increase in any employee benefit plan or arrangement (except, in
each case, in accordance with past custom and practice), or amended or
terminated, or agreed to terminate or amend, any existing employee benefit plan
or arrangement or adopted any new employee benefit plan or arrangement, other
than in the ordinary course of business;
(g) made, or agreed to make, any capital expenditures or
commitments therefore that aggregate in excess of $1,000, other than in the
ordinary course of business;
(h) made, or agreed to make, any loans or advances to, or
guarantees for the benefit of, any persons, other than in the ordinary course
of business;
(i) suffered any extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of business or consistent
with past practice;
(j) entered into, or agreed to enter into, any other material
transaction other than in the ordinary course of business;
(k) made, or agreed to make, any charitable contributions or
pledges, other than in the ordinary course of business;
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(l) made any purchase commitment of services or goods in excess
of the normal, ordinary and usual requirements of its business or at any price
in excess of the then current market price or upon terms and conditions more
onerous than those usual and customary in the industry, or made any change in
its selling, pricing, advertising or personnel practice inconsistent with its
prior practice and prudent business practices prevailing in the industry;
(m) failed to make any scheduled payment with respect to any debt
agreements or instruments; or
(n) suffered any material damage, destruction or casualty loss to
the Purchased Assets, whether or not covered by insurance.
3.8 Title and Condition of Properties.
(a) The Seller owns no real estate.
(b) The lease described on the "Leases Schedule" attached hereto
as Schedule 3.8(b) (the "Lease") is in full force and effect, and Seller (as
indicated on such schedule) holds a valid and existing leasehold interest under
such lease for the term set forth on the Leases Schedule. The lease described
on the Leases Schedule constitutes the only lease under which Seller holds a
leasehold interest in real estate. Seller has delivered to Purchasers complete
and accurate copies of the lease described on the Leases Schedule, and such
lease has not been modified in any respect, except to the extent that such
modifications are disclosed by the copies delivered to Purchasers. Seller is
not in default under such lease, and no other party to such lease has the right
to terminate, accelerate performance under or otherwise modify such lease,
including upon the giving of notice or the passage of time. To the best of
Seller's knowledge, no third party to such lease is in default under such
lease.
(c) The real estate demised by the lease described on the Leases
Schedule constitutes all of the real estate owned, used or occupied by Seller,
and no other real estate is necessary for the conduct of the Business.
(d) Seller owns good and marketable title, free and clear of all
liens, charges, security interests, encumbrances, encroachments and claims of
others, to all of the Purchased Assets, except for leased equipment, for liens
of current taxes not yet due and payable (which shall be pro-rated) and liens
disclosed on the Latest Balance Sheet ("Permitted Encumbrances"), and all of
such personal property is necessary or useful in the conduct of the Business.
At the Closing, Seller shall sell, assign, transfer and convey to CBI by
customary Xxxx of Sale good and marketable title to all of the personal
property included within the Purchased Assets, free and clear of all liens,
security interests, charges, encumbrances and claims of others, other than
Permitted Encumbrances.
(e) Seller's leased premises, machinery, equipment and other
tangible assets are in good condition and repair in all material respects, have
been maintained in accordance with normal
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industry standards and are usable in the ordinary course of business. Seller
owns or leases under valid leases all buildings, machinery, equipment and other
tangible assets necessary for the conduct of the Business.
(f) To the best of Seller's knowledge, Seller is not in violation
of any applicable zoning, building, fire or other ordinance or other law,
regulation or requirement relating to the operation of owned or leased
properties, including, without limitation, applicable environmental protection
and occupational health and safety laws and regulations. Within the three years
prior to the date of this Agreement, Seller has received no notice of any such
violation or any condemnation proceeding with respect to any properties owned,
used or leased by Seller.
(g) Except as set forth on Schedule 1.1(b), Seller's accounts
receivable and notes receivable (i) are for services rendered in accordance
with bonafide sales and are fully collectible in the amount set forth on
Schedule 1.1(b) from the applicable account debtor or note debtor, (ii) are not
in any way contingent upon Seller's performance of any obligation or contract
past or future, (iii) are not subject to any defense, offset, or counterclaim,
deduction or discount, and (iv) are not disputed by the applicable account
debtor or note debtor and are not past due.
(h) The Purchased Assets, together with the services and
arrangements described on the Contracts Schedule, comprise all assets and
services required for the continued conduct of the Business by the Purchasers
as now being conducted. The Purchased Assets, taken as a whole, constitute all
the properties and assets relating to or used or held for use in connection
with the Business during the past twelve months (except supplies utilized, cash
disposed of, accounts receivable collected, prepaid expenses realized,
Contracts fully performed, properties or assets replaced by equivalent or
superior properties or assets, in each case in the ordinary course of
business). There are no assets or properties used in the operation of the
Business and owned by any Person other than the Seller that will not be leased
or licensed to the Purchasers under valid, current leases or license
arrangements other than the name "Management Compensation Group/Healthcare" and
rights related thereto. The Purchased Assets are in all material respects
adequate for the purposes for which such assets are currently used or are held
for use, and are in reasonably good repair and operating condition (subject to
normal wear and tear) and there are no facts or conditions affecting the
Purchased Assets which could, individually or in the aggregate, interfere in
any material respect with the use, occupancy or operation thereof as currently
used, occupied or operated, or their adequacy for such use.
3.9 Tax Matters.
(a) Seller has duly filed all federal, foreign, state and local
tax information and tax returns of any and every nature and description (the
"Returns") required to be filed by it (all such returns being accurate and
complete in all respects) and has duly paid or made provision for the payment
of all taxes and other governmental charges (including without limitation any
interest, penalty or additions to tax thereto) which have been incurred or are
shown to be due on said Returns or are claimed in writing to be due from Seller
or imposed on Seller or its properties, assets, income, franchises, leases,
licenses, sales or use, by any federal, state, local or foreign taxing
authorities
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(collectively, the "Taxes") on or prior to the date hereof, other than Taxes
which are being contested in good faith and by appropriate proceedings. The
"Tax Matters Schedule" attached hereto as Schedule 3.9 sets forth the date or
dates since the date of Seller's incorporation or organization through which
the IRS or any foreign, state, local or other taxing authority has examined or
is in the process of examining any foreign, state, local or other income tax or
other returns of Seller. Except as set forth on the "Tax Matters Schedule",
neither the IRS nor any foreign, state, local or other taxing authority is in
the process of examining any federal, foreign, state, local or other tax return
of Seller. There are no disputes pending, or claims asserted, for Taxes upon
Seller. Seller has not been required to give any currently effective waivers
extending the statutory period of limitation applicable to any foreign,
federal, state or local return or for any period or agreed to an extension of
time with respect to a Tax assessment or deficiency. Except as set forth in the
"Tax Matters Schedule", Seller has in effect no power of attorney or
authorization to anyone to represent it with respect to any Taxes. No claim has
ever been made by an authority in a jurisdiction where the Seller does not file
Returns that Seller is or may be subject to taxation by that jurisdiction.
Seller has not filed any consolidated federal income tax return with an
"affiliated group" (within the meaning of Section 1504 of the Code), where
Seller was not the common parent of the group. Seller is not nor has it been, a
party to any tax allocation agreement or arrangement pursuant to which it has
any contingent or outstanding liability to anyone. Seller has no liability for
Taxes as a transferee of, or successor to, any other person. Seller has not
filed a consent under Section 341(f) of the Code. Seller has provided to
Purchasers or their representatives complete and correct copies of their
respective federal, state and local income tax returns filed on or prior to the
date hereof and all examination reports, if any, relating to the audit of such
returns by the IRS or other tax authority for each taxable year beginning on or
after 1994. Except as disclosed in Schedule 3.9, there exists no proposed
assessment against Seller or the Shareholders or notice, whether formal or
informal, of any deficiency or claim for additional Tax (including, without
limitation, interest, additions to tax or penalties).
(b) All monies required to be withheld from employees,
independent contractors, shareholders, or creditors of Seller for Taxes,
including, but not limited to, income taxes, back-up withholding taxes, social
security and unemployment insurance taxes or collected from customers or others
as Taxes, including, but not limited to, sales, use or other taxes, if any,
have been withheld or collected and paid, when due, to the appropriate
governmental authority, or if such payment is not yet due, an adequate reserve
has been established for such Taxes.
(c) Seller has not made any payments, is not obligated to make
any payments, nor is a party to any agreement that could obligate it to make
any payments that will not be deductible under Code Section 280G. Seller has
not been a United States real property holding corporation within the meaning
of Code Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). Seller has not acquired any United States real
property interest, as defined in Code Section 897(c), from a foreign person
without complying with the withholding requirements contained in Code Section
1445.
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3.10 Contracts and Commitments.
(a) Except as set forth in Section 3.16 or in the "Contracts
Schedule" attached hereto as Schedule 3.10(a) or in the "Customer Contracts
Schedule" attached hereto as Schedule 3.10(d), Seller is not a party to any:
(i) bonus, pension, profit sharing, retirement or deferred
compensation plan or stock purchase, stock option, hospitalization
insurance or similar plan or practice, whether formal or informal, or
severance agreements or arrangements or contracts requiring Seller to
pay post-retirement medical benefits;
(ii) contract with any labor union or contract for the
employment of any officer, individual employee or other person on a
full-time, part-time or consulting basis;
(iii) mortgaging, pledging or otherwise placing a lien on any
of the Purchased Assets;
(iv) guarantee of any obligation for borrowed money or
otherwise, other than endorsements made for collection in the ordinary
course of business;
(v) agreement or commitment with respect to the lending or
investing of funds to or in other persons or entities;
(vi) license or royalty agreement related to the Business;
(vii) lease or agreement related to the Business under which
it is lessee of or holds or operates any personal property owned by
any other party;
(viii) lease or agreement related to the Business under which
it is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by it;
(ix) contract or group of related contracts related to the
Business with the same party for the purchase or sale of products or
services other than the Customer Contracts (as defined in Section
3.10(d) hereof);
(x) other contract related to the Business with any party
continuing over a period of more than six months from the date or
dates thereof, not terminable by it on thirty (30) days' or less
notice without penalties;
(xi) contract which prohibits it from freely engaging in
business anywhere in the world;
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(xii) contract relating to the distribution of its products
as it relates to the Business; or
(xiii) other agreements related to the Business whether or
not entered into in the ordinary course of business.
(b) Except as specifically disclosed in the Contracts Schedule or
the Customer Contracts Schedule, (i) no contract or commitment related to the
Business has been breached in any respect or canceled by the other party, (ii)
since September 30, 1998, no supplier of the Business has notified Seller that
it shall stop or decrease in any material respect the rate of business done
with Seller, (iii) Seller has in all respects performed all the obligations
required to be performed by it to the date of this Agreement and is not in
receipt of any claim of default under any material lease, contract, commitment
or other agreement related to the Business to which it is a party; (iv) no
event has occurred which with the passage of time or the giving of notice or
both would result in a breach or default under any lease, contract, instrument
or other agreement related to the Business to which Seller is a party and which
is related to the Business; and (v) Seller is not a party to any contract which
is adverse to the Business's operations, financial condition, operating results
or business prospects.
(c) Purchasers have been supplied with a true and correct copy of
all written contracts which are referred to on the Contract Schedule and
Customer Contracts Schedule, together with all amendments, waivers or other
changes thereto.
(d) Except as indicated on the "Customer Contract Schedule"
attached hereto as Schedule 3.10(d), (A) each contract agreement or lease with
any customer or group of customers relating to the Business ("Customer
Contracts") is valid, enforceable and in full force and effect in accordance
with the terms thereof, (B) there is no existing default or event or condition
which, with notice or lapse of time or both, would constitute an event of
default under any Customer Contract, (C) no Customer Contract has been amended,
modified, supplemented or otherwise altered orally, in writing or by course of
conduct, (D) no Customer Contract requires the consent of the Customer or any
other party to affect a valid assignment thereof to CBI without causing a
default or giving rise to a right of termination thereunder and (E) each
Customer Contract complies with all applicable laws, rules and regulations.
Except as set forth in the Customer Contract Schedule, neither the Seller nor
any Shareholder has any knowledge of any (i) pending or threatened termination,
cancellation, limitation, modification or change in any of Seller's business
relationships with any customer or group of customers related to the Business
or (ii) changes or pending changes in any law, rule, regulation, technology, or
business relationship or other circumstance that could result in the loss of
any customers related to the Business after the date hereof.
3.11 Proprietary Rights. Set forth on the "Proprietary Rights Schedule"
attached hereto as Schedule 3.11 is a list and summary description of all
patents, patent applications, trademarks, service marks, trade names, corporate
names and copyrights owned by Seller which are related to the Business or used
by Seller in the conduct of the Business. Seller owns and possesses all right,
title and interest in and to the proprietary rights necessary to conduct the
Business. Seller has taken all
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necessary or desirable action to protect the proprietary rights necessary or
desirable to conduct the Business. Seller has not received any notices of
infringement, misappropriation, invalidity or conflict from any third party
with respect to such proprietary rights. Seller has not infringed,
misappropriated or otherwise conflicted with any proprietary rights of any
third parties and, to the best of Seller's knowledge, Seller's proprietary
rights have not been infringed by any third parties.
3.12 Litigation; Proceedings. Except as disclosed on the "Litigation
Schedule" attached hereto as Schedule 3.12, there are no actions, suits,
proceedings, orders or investigations pending or, to the best of Seller's
knowledge, threatened against or affecting Seller or the Shareholders at law or
in equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, and there is no basis known to Seller for any of the foregoing. No
officer, director, employee or agent of Seller has been or is authorized to
make or receive, and Seller knows of no such person making or receiving, any
bribe, kickback or other illegal payment at any time. Except as set forth in
Schedule 3.12, within the three years preceding the date hereof, Seller has not
received any opinion or legal advice in writing to the effect that Seller is
exposed from a legal standpoint to any liability or disadvantage which may be
material to the Business as previously or presently conducted. Notwithstanding
anything else herein to the contrary, Seller has not received any opinion or
legal advice from any legal counsel that any of its activities or conduct
constitutes a basis for, or will expose the Seller to, liability, including
liability for misrepresentations or false statements, concerning the cost,
performance, tax treatment or results to be expected with respect to any of the
plans or policies placed by Seller.
3.13 Brokerage. There are no claims for brokerage commissions, finders
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Seller.
3.14 Governmental Consent, etc.
(a) No permit, consent, approval or authorization of, or
declaration to or filing with, any governmental or regulatory authority is
required in connection with the execution, delivery or performance of this
Agreement by Seller, or the consummation by Seller of any of the transactions
contemplated hereby and thereby, except as disclosed on the "Consents Schedule"
attached hereto as Schedule 3.14.
(b) The Consents Schedule attached hereto as Schedule 3.14 sets
forth all governmental approvals or third-party consents necessary for, or
otherwise material to, the conduct of the Business, including but not limited
to, all consents and assignments required to transfer all fees bonuses and
commissions paid by insurance carriers, customers and brokers/dealers. All such
governmental approvals and consents have been duly obtained and are in full
force and effect, and Seller is in compliance with each of such governmental
approvals and consents held by it with respect to the Purchased Assets and the
Business.
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3.15 Employees. To the knowledge of the Seller and each Shareholder,
except as set forth on Schedule 3.15, no key employee, nor group of Seller's
employees related to the Business, has any plans to terminate employment with
Seller and not continue employment with CBI. Seller has complied in all
material respects with all applicable laws relating to the employment of labor
and independent contractors related to the Business, including provisions
thereof relating to wages, hours, equal opportunity, immigration, collective
bargaining, disabilities, family leave and the payment of social security and
other taxes. Except as disclosed on the "Employees Schedule" attached hereto as
Schedule 3.15, Seller has no existing relationships with any union or employee
representative or any labor relations problems, and there has been no union
organization efforts with respect to the Business within the last five years.
Neither the Seller nor any Shareholder has any reason to believe that the
services of any of the present employees of Seller related to the Business will
not be available for continued conduct of the Business after the Closing on
substantially the same terms as now conducted.
3.16 Employee Benefit Plans.
(a) The "Employee Benefits Schedule" attached hereto as Schedule
3.16, contains a list of each and every employee benefit plan, within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), which Seller and/or any corporation, partnership or other
trade or business which is a member of a controlled group of corporations,
group of trades or business under common control, or an affiliated service
group including Seller, under the provisions of Code Section 414(b), (c), (m)
or (o) (each an "ERISA Affiliate") maintains, to which Seller or any ERISA
Affiliate contributes, or is obligated to contribute, or under which any
employee or former employee, officer or former officer, director, or former
director, shareholders or former shareholder of Seller or any ERISA Affiliate
(collectively, "Participants"), or any beneficiary of any Participant, is
covered or has benefit rights and pursuant to which any liability of Seller or
any ERISA Affiliate exists or is reasonably likely to occur, and each other
arrangement, program or plan pursuant to which any benefit is or shall be
provided by Seller or any ERISA Affiliate to any Participant or any
Participant's beneficiary, whether formal or informal, including, without
limitation, those providing any form of medical, health or dental insurance,
life, disability and accidental death and dismemberment insurance, severance
pay or benefits continuation, nonqualified deferred compensation, relocation
assistance, vacation pay, tuition aid, apprenticeship benefits or matching
gifts for charitable contributions to educational or cultural institutions
(collectively, the "Benefit Plans"). A true and correct copy of each of the
Benefit Plans, including all amendments thereto, has been delivered to
Purchasers. Except as set forth on the "Employee Benefits Schedule", neither
the Seller nor any ERISA Affiliate maintains or has entered into any Benefit
Plan or other document, plan or agreement which contains any change in control
provisions which would cause an increase or acceleration of benefits or benefit
entitlements to Participants or their beneficiaries, or other provisions which
would cause an increase in liability of Seller or Purchasers as a result of the
transactions contemplated by this Agreement or any related action thereafter.
Each of such Benefit Plans that is an employee pension benefit plan within the
meaning of Section 3(2) of ERISA and is intended to be a qualified plan under
Section 401(a) of the Code, has been amended to comply with current law, except
for certain amendments for which the remedial amendment period allowed by Code
Section 401(b) has not expired; and each such plan has obtained
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a favorable determination letter with respect to the most recent amendment to
such plan. Neither the Seller nor Shareholders are aware of any facts or
circumstances that might jeopardize the qualified status of any such Benefit
Plan.
(b) Except as set forth in the "Employee Benefits Schedule", all
accrued contributions and other payments to be made by Seller or any ERISA
Affiliate to any Benefit Plan through the date of the Latest Balance Sheet have
been made or reserves adequate for such purposes as of the date of the Latest
Balance Sheet have been set aside therefor and reflected on the Latest Balance
Sheet. Neither Seller nor any ERISA Affiliate is in default in performing any
of its contractual obligations under any of the Benefit Plans or any related
trust agreement or insurance contract, and there are no outstanding liabilities
of any Benefit Plan other than liabilities for (i) administration expenses, and
(ii) benefits to be paid to Participants and beneficiaries in such Benefit Plan
in the ordinary course of business.
(c) There is no pending litigation or, to the best knowledge of
Seller, overtly threatened litigation or pending claim (other than benefit
claims made in the ordinary course) by or on behalf of or against any of the
Benefit Plans (or with respect to the administration of any of the Benefit
Plans) now or heretofore maintained by Seller or any ERISA Affiliate which
allege violations of applicable state or federal law.
(d) Each Benefit Plan is and has been in compliance with, and
each such Plan is and has been operated in accordance with the applicable laws,
rules and regulations governing such Plan, including, without limitation, the
rules and regulations promulgated by the Department of Labor, the Pension
Benefit Guaranty Corporation ("PBGC") and the IRS under ERISA, the Code or any
other applicable law.
(e) None of the Benefit Plans is or ever has been subject to
Title IV of ERISA, and neither Seller nor any ERISA Affiliate is or has been
required to contribute to an employee benefit plan that is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA nor has been so required
during the five-year period ending on the Closing Date.
(f) All reporting and disclosure requirements of ERISA and the
Code applicable to the Benefit Plans have been satisfied.
(g) Neither Seller nor any ERISA Affiliate has any liability on
account of any accumulated funding deficiency (as defined in Section 412 of the
Code) or on account of any failure to make contributions to or pay benefits
under any Benefit Plan when due under applicable law, nor is Seller aware of
any claim pending or overtly threatened to be brought by any party regarding
such matters. No prohibited transaction has occurred with respect to any
Benefit Plan that would result, directly or indirectly, in the imposition of
any excise tax under Section 4975 of the Code.
(h) None of the Benefit Plans provides for (or has ever provided
for) medical or health care or benefits for any former employee of Seller or
any ERISA Affiliate, except to the extent
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required by Section 4980B of the Code or Part 6 of Title I of ERISA, or as set
forth in the Employee Benefit Schedule.
(i) Seller and all of its ERISA Affiliates have complied with the
requirements of Part 6 of Title I of ERISA and Code Section 4980B.
(j) Neither Seller nor any ERISA Affiliate is in possession of
any facts which would reasonably be expected to indicate to any prudent person
that any insurance company which has issued an insurance policy or policies
under any of the Benefit Plans is in danger of becoming insolvent, within the
meaning of applicable state law.
(k) Except as set forth in the Employee Benefit Schedule, the
transactions contemplated by this Agreement will not entitle any Participant or
any Participant's beneficiary in any Benefit Plan to any severance benefit
under the terms of any Benefit Plan or any personnel or employment policy of
Seller or any ERISA Affiliate.
3.17 Insurance. The "Insurance Schedule" attached hereto as Schedule
3.17 lists and briefly describes each insurance policy maintained by Seller with
respect to the Purchased Assets. The Seller has delivered to the Purchasers
complete and correct copies of all such policies together with all riders and
amendments thereto. All of such insurance policies are in full force and
effect, and Seller is not and never has been in default with respect to its
obligations under any of such insurance policies. Such insurance coverage is
customary for well insured entities engaged in similar lines of business.
During the three-year period ending on the date hereof, Seller has not ever
been refused any insurance coverage for which it has applied or had any
insurance policy canceled. The Seller shall provide tail coverage on its errors
and omissions insurance policies listing Seller, Purchaser and the Shareholders
as beneficiaries for a period of three (3) years from the date hereof to cover
any claims following the Closing Date.
3.18 Affiliated Transactions. Except as set forth on the "Affiliated
Transaction Schedule" attached hereto as Schedule 3.18, no officer, director,
shareholder or affiliate of Seller or any person related by blood or marriage
to any such person or any entity in which any such person owns any beneficial
interest is a party to any agreement, contract, commitment or transaction
related to the Business with Seller or has any interest in any property used by
Seller.
3.19 Compliance with Laws; Permits; Certain Operations.
(a) Seller and its officers, directors, agents and employees have
complied in all material respects with all applicable laws and regulations of
foreign, federal, state and local governments and all agencies thereof which
affect the Business or the Purchased Assets or to which Seller may otherwise be
subject, and no claims have been filed against Seller alleging a violation of
any such law or regulation, except as set forth on the "Compliance Schedule"
attached hereto as Schedule 3.19(a). In particular, but without limiting the
generality of the foregoing, Seller has not received a notice or charge
asserting any violation, and neither the Seller nor the Shareholders have
knowledge of any violation, of the Immigration Reform and Control Act of 1986,
the Occupational
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Safety and Health Act of 1970, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Toxic Substances Control Act of 1976, the Americans With
Disabilities Act, or any other state or federal act (including rules and
regulations thereunder) regulating or otherwise affecting the employment of
aliens, employee health and safety, the environment, zoning, building, fire or
other ordinances or any other aspect of the Business.
(b) Seller holds all of the permits, licenses, certificates and
other authorizations of foreign, federal, state and local governmental agencies
required for the conduct of the Business all of which are set forth in the
"Permits Schedule" attached hereto as Schedule 3.19(b). Seller has not received
any notice (and Seller has no reason to believe) that revocation is being
considered with respect to any of such licenses, permits, certificates or
authorizations, or that Seller is in violation of any such license, permit,
certificate or authorization.
(c) Seller and Shareholders represent that Seller has complied in
all material respects with all laws and regulations with respect to life
insurance policy illustrations and disclosures provided to customers by the
Seller and its agents. Seller and Shareholders represent that Seller includes
and has included all required disclosures and disclaimers with respect to
illustrations in sales materials. As part of the sales process, Seller and its
agents have represented to customers that the illustrations are based on
assumptions, that any change in assumptions will affect future results, that
actual results are determined by actual mortality and expense charges, that
investment performance of the investment portfolios selected by the participant
are not guaranteed, that a change in the investment return is inherent in the
applicable policy and that the customer has the right to select the investment
portfolio and change it in the future.
3.20 Environmental Health and Safety.
(a) To the knowledge of Seller and the Shareholders, Seller and
its predecessors and affiliates has complied with, and is currently in
compliance with all Environmental, Health and Safety Laws. No action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed or commenced against Seller, or to the knowledge of Seller and
the Shareholders, against any of Seller's predecessors or affiliates, or, to
the knowledge of Seller and the Shareholders, threatened against Seller, its
predecessors or affiliates, alleging any failure so to comply, alleging any
liability under any Environmental, Health and Safety Laws or requesting any
investigation related thereto. To the knowledge of Seller and the Shareholders,
no condition exists or event has occurred which, with or without notice or the
passage of time, would constitute a violation of or give rise to a lien under
any Environmental, Health and Safety Laws. Without limiting the generality of
the preceding sentences, to the knowledge of Seller and the Shareholders,
Seller and each of its predecessors and affiliates, has obtained and been in
compliance, and is currently in compliance, with all of the terms and
conditions of all permits, licenses and other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables which are contained in, all Environmental Health and Safety Laws.
For purposes hereof, "Environmental, Health and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976 and
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the Occupational Safety and Health Act of 1970, each as amended, together with
all other laws (including statutes, rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof)
relating to fines, injunctions, penalties, damages, liability, contribution,
cost recovery, compensation losses or injuries concerning pollution or
protection of the environment, natural resources, public health and safety, or
employee health and safety, or the protection of human, plant or animal welfare
or health, including laws relating to use, emissions, discharges, releases, or
threatened releases of Hazardous Materials, Extremely Hazardous Substances,
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into or onto ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of Hazardous Materials,
Extremely Hazardous Substances, pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes. For purposes hereof,
"Extremely Hazardous Substance" means such term as set forth in ss.302 of the
Emergency Planning and Community Right-to-Know Act of 1986, as amended. For
purposes hereof, "Hazardous Materials" means any dangerous, toxic or hazardous
pollutant, contaminant, chemical, waste, material or substance as defined in,
regulated by or governed by any Environmental, Health, and Safety Laws,
federal, state, local or foreign law, statute, code, ordinance, regulation,
rule or other requirement relating to such substance or otherwise relating to
the environment or human health or safety, including without limitation any
waste, material, substance, pollutant or contaminant that might cause any
injury to human health or safety or to the environment or might subject the
Seller to any imposition of penalties, fines, orders, decrees, licenses,
permits, judgments, costs or liability under any Environmental, Health or
Safety Laws.
(b) To the knowledge of Seller and each of the Shareholders, all
properties and equipment used in the Business of the Seller, its predecessors
and affiliates, have been free of asbestos, PCB's, methylene chloride,
trichlorethylene, 1, 2 - trans-dichloroethylene, dioxins, dibenzofurans and
other hazardous substances.
3.21 Product and Warranty Claims; Warranties. Except as disclosed in
the "Claims Schedule" attached hereto as Schedule 3.21, Seller has no knowledge
of and has not received during the past five (5) years any claim or notice with
respect to any occurrences arising out of the use of, or related to, the
products designed, sold, implemented, monitored or serviced by or on behalf of
Seller related to the Business, which has resulted in any claim or notice that
any such products do not conform to any agreement, representation or warranty
made by Seller (or implied by law) with respect to such products. Seller is
covered against all damages, liability and expenses for any claims based upon
products designed, sold, implemented, monitored or serviced by or on behalf of
Seller (including, but not limited to, costs of investigation and attorneys'
fees and expenses) under policies of insurance described on the Insurance
Schedule, except as to claims for breach of any agreement, representation or
warranty made with respect to such products against which Seller has
established good and sufficient reserves therefor on their books and records.
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3.22 Disclosure. Neither this Agreement nor any of the schedules,
attachments or exhibits hereto contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading.
There is no material fact which has not been disclosed in writing to Purchasers
of which the Seller or any officer, director or key employee of Seller is aware
and which materially adversely affects or could reasonably be anticipated to
affect materially adversely the Business or the Purchased Assets.
3.23 Year 2000 Problem. Based on previous and ongoing internal reviews,
Seller represents that the computer equipment and software used by Seller will
function properly with respect to dates in the year 2000 and thereafter. Seller
has requested information from third parties addressing any potential year 2000
issues with such third parties; however, Seller is not able to determine the
extent to which such third parties, such as insurance companies and clients,
may experience year 2000 issues.
3.24 Customers. The Seller has delivered to Purchaser an accurate list
(which is set forth on Schedule 3.24) of all customers of Seller, including any
customers with respect to which any transactions are pending as of the date
hereof.
3.25 Closing Date. All of the representations and warranties of Seller
and the Shareholders in this Article 3 and elsewhere in this Agreement and all
information delivered in any schedule, attachment or exhibit hereto or in any
certificate delivered to either Purchaser are true and correct in all respects
on the date of this Agreement and shall be true and correct in all respects on
the Closing Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Purchasers hereby represents and warrants to Seller as of the date
hereof and as of the Closing Date that:
4.1 Corporate Organization and Power. Each Purchaser is a corporation
duly organized and validly existing under the laws of the State of Delaware with
full corporate power and authority to enter into this Agreement and the other
agreements contemplated hereby and perform its obligations hereunder and
thereunder.
4.2 Authorization. The execution, delivery and performance by each
Purchaser of this Agreement and the other agreements contemplated hereby and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all requisite corporate action, and no other
corporate proceedings on the part of either Purchaser are necessary to
authorize the execution, delivery or performance of this Agreement or the other
agreements contemplated hereby. This Agreement constitutes and, upon execution
and delivery by each Purchaser, the other
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agreements contemplated hereby shall each constitute a valid and binding
obligation of each Purchaser enforceable against each Purchaser in accordance
with their respective terms.
4.3 No Violation. Neither Purchaser is subject to or obligated under
its respective certificate of incorporation, any applicable law, rule or
regulation of any governmental authority, or any agreement or instrument, or
any license, franchise or permit, or subject to any order, writ, injunction or
decree which would materially, adversely affect its ability to perform this
Agreement or the other agreements contemplated hereby.
4.4 Litigation. There are no actions, suits, proceedings, orders or
investigations pending or, to the best of each Purchaser's knowledge,
threatened against or affecting such Purchaser, at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which would materially adversely affect such Purchaser's performance under this
Agreement or the consummation of the transactions contemplated hereby.
4.5 Issuance of Holdings Stock. The shares of Holdings Stock that are
required to be issued by Holdings to the Seller pursuant to, and in accordance
with, the terms and conditions set forth in this Agreement, shall, upon
issuance and delivery, be duly authorized, validly issued, fully paid and
non-assessable.
4.6 Consents. No permit, consent, approval or authorization of,
declaration to or filing with, any governmental or regulatory authority is
required for the execution, delivery or performance of this agreement by
Purchasers, except as have been or will be obtained on or before the Closing
Date.
4.7 Taxes. The Purchasers have filed all United States federal tax
returns and all other tax returns which are required to be filed and have paid
all taxes due pursuant to such returns or pursuant to assessments received by
Purchasers except such taxes, if any, as are being contested in good faith and
as to which adequate reserves have been provided in accordance with generally
accepted accounting principles or where the failure to file such tax returns
and pay such taxes would not have a materially adverse effect on the
Purchasers' businesses or properties, taken as a whole.
4.8 Closing Date. All of the representations and warranties of each
Purchaser contained in this Article 4 and elsewhere in this Agreement and all
information delivered by Purchasers in any schedule, attachment or exhibit
hereto or in any certificate delivered by Purchasers to Seller is true and
correct in all material respects as of the date of this Agreement and shall be
true and correct in all material respects as of the Closing Date.
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ARTICLE 5
COVENANTS PRIOR TO CLOSING
5.1 Affirmative Covenants. Prior to the Closing, Seller shall:
(a) conduct the Business only in the usual and ordinary course of
business in accordance with past custom and practice and as otherwise described
in the Letter of Intent;
(b) keep in full force and effect its corporate existence and all
material rights, franchises and intellectual property;
(c) use best efforts to retain its employees and sales agents, if
any, and preserve its present business relationships and continue to compensate
such employees and sales agents in accordance with past custom and practice;
(d) maintain the Purchased Assets in good and customary repair,
order and condition and maintain insurance reasonably comparable to that in
effect on the date of this Agreement; replace in accordance with past practice
its inoperable, worn out and obsolete assets with assets of comparable quality;
in the event of any casualty, loss or damage to any of the Purchased Assets
prior to Closing, either repair or replace such assets with assets of
comparable quality or, if Purchasers agree, transfer to CBI at Closing the
proceeds of any insurance recovery with respect thereto;
(e) maintain its books, accounts and records in accordance with
past custom and practice as used in the preparation of the financial statements
described in Section 3.4 hereof and file with the appropriate taxing
authorities any and all returns required to be filed by them for the periods
covered thereby;
(f) permit Purchasers and their employees, agents, accounting and
legal representatives and potential lenders and their representatives to have
access to its books, records, invoices, contracts, leases, key personnel,
independent accountants, property, facilities, equipment and other things
reasonably related to the Business or the Purchased Assets;
(g) use its best efforts to obtain all consents and approvals
necessary or desirable to consummate the transactions contemplated hereby and
to cause the other conditions to Purchasers' obligation to close to be
satisfied;
(h) pay accounts payable and other obligations of the Business
when they become due and payable in the ordinary course of business consistent
with prior practice;
(i) promptly inform Purchasers in writing of any variances from
the representations and warranties contained in Article 3 hereof; and
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(j) contribute to each Benefit Plan that is intended to be a
qualified plan under Code Section 401(a) an amount sufficient to satisfy any
benefit or expense obligation that will have accrued thereunder as of the
Closing Date and as to which they have not, as of the Closing Date, made a full
and complete contribution, whether or not the legal deadline for making a
contribution has then yet arrived.
5.2 Negative Covenants. Prior to the Closing, without the prior
written consent of Purchasers, Seller shall not:
(a) directly or indirectly (including through any agent, broker,
finder or other third party), offer to sell, merge, consolidate or otherwise
dispose of, negotiate for the sale, merger, consolidation or other disposition
of, initiate or continue discussions concerning the sale, merger, consolidation
or other disposition of, Seller as a whole, or the sale or other disposition of
any of its shares of capital stock or any of the Purchased Assets (other than
inventory in the ordinary course of business);
(b) take or omit to take any action, or permit its affiliates to
take or omit to take any action, which would reasonably be anticipated to have
a material and adverse effect upon the Business or the Purchased Assets; or
(c) declare, set aside, or pay any dividend, including but not
limited to dividends to pay shareholder taxes, or make any distribution with
respect to its capital stock or redeem, purchase or otherwise acquire any of
its capital stock.
ARTICLE 6
CONDITIONS TO PURCHASERS' OBLIGATION TO CLOSE
6.1 Conditions to Purchasers' Obligation. The obligation of Purchasers
to consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article 3
hereof shall be true and correct at and as of the Closing as though then made
and as though the Closing Date was substituted for the date of this Agreement,
without taking into account any disclosures made by Seller to Purchasers
pursuant to Section 5.1(i) hereof;
(b) Seller shall have performed all of the covenants and
agreements required to be performed by it under this Agreement prior to the
Closing;
(c) there shall have been no adverse change in the operations,
financial condition, operating results, assets or business prospects of the
Business, taken as a whole, and there shall have been no casualty loss or
damage to the Purchased Assets, taken as a whole, whether or not covered by
insurance;
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(d) all consents by third parties that are required for the
transfer of the Purchased Assets, including consents to receive renewals, and
the Business to Purchasers as contemplated hereby, that are required for the
consummation of the transactions contemplated hereby or that are required to
prevent a breach of, or a default under or a termination or modification of any
instrument, contract, license, lease or other agreement to which Seller is a
party or to which any of the Purchased Assets are subject, and releases of all
liens, charges, security interests, encumbrances and claims of others on or
with respect to the Purchased Assets shall have been obtained on terms and
conditions satisfactory to Purchasers in their reasonable discretion;
(e) no action or proceeding before any court or government body
shall be pending or threatened which, in the judgment of Purchasers, made in
good faith and upon the advice of counsel, makes it inadvisable or undesirable
to consummate the transactions contemplated hereby by reason of the probability
that the action or proceeding shall result in a judgment, decree or order which
would prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement, cause such transactions to be rescinded or affect the value or use
of the Purchased Assets or Business;
(f) Purchasers shall have received from Seller's counsel, Xxxxxxx
& Xxxxxxxxx Ltd., an opinion with respect to the matters set forth in Exhibit E
attached hereto, addressed to Purchasers and dated the Closing Date, in form
and substance satisfactory to Purchasers;
(g) not less than five (5) business days prior to the Closing
Date, Seller shall have provided Purchasers at Seller's expense, with UCC
search reports ("UCC Searches") of Seller disclosing no liens or encumbrances
against the Purchased Assets, other than the Permitted Encumbrances. If the UCC
Searches disclose any title encumbrances, defects, liens, encumbrances or
matters, other than Permitted Encumbrances, Seller shall have caused the same
to be removed; provided, that, notwithstanding the foregoing, Seller shall
cause the security interests, liens and claims of Equitable Insurance and
Resource Trust Bank in, on or to any of Seller's assets to be terminated and
released at or prior to the Closing;
(h) all proceedings to be taken by Seller in connection with the
consummation of the Closing and the other transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to effect
the transactions contemplated hereby requested by Purchasers shall be
satisfactory in form and substance to Purchasers and their counsel;
(i) CBI and the landlord of the property located at 000 Xxxxxx
Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000 (the "Landlord") shall
have entered into that certain Assignment of Lease regarding the lease of such
property (the "Lease Assignment"), the form of which is attached hereto as
Exhibit F;
(j) each Purchaser's Board of Directors shall have approved the
transaction contemplated hereby;
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(k) CBI and each Shareholder shall have entered into that certain
Employment Contract applicable to such Shareholder in the form attached hereto
as Exhibit G (1-9) (the "Employment Agreements");
(l) Purchasers and each Shareholder shall have entered into the
Investment Agreement;
(m) Purchasers' existing lenders shall have consented to the
transaction;
(n) Xxxx Xxxx shall immediately following the Closing (i) pay CBI
$600,000 for the obligations of Xx. Xxxx to Seller in respect of compensation
advances purchased by Purchasers hereunder, and (ii) purchase artwork purchased
by CBI hereunder having a book value on Seller's books of $800,000 listed on
Exhibit H;
(o) Xxxxxx Xxxxx shall immediately following the Closing pay CBI
$343,164 for the liabilities of Xx. Xxxxx to the Seller in respect of
compensation advances purchased by Purchasers hereunder;
(p) Xxxxxx Xxxx shall immediately following the Closing pay CBI
$177,040 for the liabilities of Mr. Erra to the Seller in respect of
compensation advances, purchased by Purchasers hereunder;
(q) Xxxxx Xxxxx shall immediately following the Closing purchase
artwork purchased by Purchasers hereunder having a book value on Seller's books
of $50,000 listed on Exhibit H;
(r) Seller and each Shareholder shall have entered into an
agreement regarding the distribution of the Purchase Price to the Shareholders
which is consistent with the summaries attached as Exhibit I (1- 9).
(s) Seller and each Shareholder shall have entered into an
agreement regarding the distribution of any and all tax liability as a result
of entering into the transactions contemplated hereunder, which shall include a
mutual release and a release of Purchasers, and evidence of such agreement
shall be delivered to Purchasers.
(t) Purchasers shall have obtained financing for the transaction
in amounts and on terms satisfactory to Purchasers in their sole discretion;
provided, however, Purchasers shall use their best efforts to obtain such
financing and agrees that they shall not unreasonably reject otherwise
acceptable financing terms;
(u) Purchasers shall have concluded (through their accountants,
counsel and other representatives) an investigation of the business, condition
(financial and other), properties, assets, prospects, operations and affairs of
the Seller and shall be satisfied, in their sole discretion, with the results
thereof;
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(v) Seller shall have paid Xxxxxxx Xxxxx, Xxxx Xxx Xxxxxx and
Xxxx Xxxx (i) the deferred compensation amounts owed by Seller to such
individuals in the aggregate amount of $2,685,353, and evidence of such
payments shall be delivered to Purchasers and (ii) the amounts owed or which
will be owed by Seller to Xxxxxxx Xxxxx and Xxxx Xxxx pursuant to that certain
Stock Purchase Agreement dated May 1, 1992, as amended by the First Amendment
dated April 1, 1993, and Amendment Number Two dated November 1, 1996, by and
among Seller, the Shareholders, Xxxx Xxx (Xxxxxx) Xxxxxx, Xxxxxxx Xxxxx and
Xxxx Xxxx and evidence of such payment, and cancellation and release by such
individuals of their repurchase and compensation rights under such Stock
Purchase Agreement shall be delivered to Purchasers
(w) Seller and each of the Shareholders shall have entered into
that certain Contingency Rollback Agreement in the form set forth in Exhibit M
(the "Contingency Rollback Agreement")
Any conditions specified in this Section 6.1 may be waived by Purchasers;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by Purchasers, except as otherwise provided in Section 10.3.
ARTICLE 7
CONDITIONS TO SELLER'S OBLIGATION TO CLOSE
7.1 Conditions to the Seller's Obligations. The obligation of Seller
to consummate the transactions contemplated by this Agreement are subject to
the satisfaction of the following conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article 4
hereof shall be true and correct in all material respects at and as of the
Closing as though then made and as though the Closing Date was substituted for
the date of this Agreement throughout such representations and warranties;
(b) each Purchaser shall have performed in all material respects
all the covenants and agreements required to be performed by it under this
Agreement prior to the Closing;
(c) CBI and each Shareholder shall have entered into the
Employment Agreement applicable to each Shareholder;
(d) Seller shall have received from Purchasers' counsel, Vedder,
Price, Xxxxxxx & Kammholz, an opinion with respect to the matters set forth in
Exhibit J attached hereto, addressed to Seller and dated the Closing Date, in
form and substance reasonably satisfactory to Seller;
(e) all proceedings to be taken by Purchasers in connection with
the consummation of the Closing and the other transactions contemplated hereby
and all certificates, opinions,
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instruments and other documents required to effect the transactions
contemplated hereby reasonably requested by Seller shall be reasonably
satisfactory in form and substance to Seller and its counsel.
Any condition specified in this Section 7.1 may be waived by Seller; provided
that no such waiver shall be effective against Seller unless it is set forth in
a writing executed by Seller, except as otherwise provided in Section 10.3.
ARTICLE 8
CLOSING TRANSACTIONS
8.1 The Closing. Subject to the conditions contained in this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Seller at Crown Plaza North Star, 000 Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 at 10:00 a.m. local time on April 5,
1999, or at such other place or on such other date as may be mutually agreeable
to the parties. The date and time of the Closing are referred to herein as the
"Closing Date."
8.2 Action to Be Taken at the Closing. The sale, conveyance, assignment
and delivery of the Purchased Assets and the payment of the Purchase Price
pursuant to the terms of this Agreement shall take place at the Closing, and,
simultaneously, the other transactions contemplated by this Agreement shall
take place by the delivery of all of the closing documents set forth in Section
8.3.
8.3 Closing Documents.
(a) Seller and the Shareholders shall deliver to Purchasers at
the Closing the following documents, duly executed by Seller and Shareholders
where necessary to make them effective:
(i) an officer's certificate in the form set forth in Exhibit
K attached hereto, stating that the preconditions specified in Section
6.1(a) through (v) have been satisfied;
(ii) copies of all necessary third party and governmental
consents, approvals, releases and filings required in order to effect
the transactions contemplated by this Agreement;
(iii) such stamped recordable warranty deeds, instruments of
sale, transfer, assignment, conveyance and delivery (including all
vehicle titles), as are required in order to transfer to CBI good and
marketable title to the Purchased Assets, free and clear of all liens,
charges, security interests and other encumbrances, except for
Permitted Encumbrances;
(iv) such estoppel certificates and assignment of Leases as
Purchasers may reasonably request;
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(v) certified copies of the resolutions duly adopted by the
Board of Directors and Shareholders of Seller authorizing the
execution, delivery and performance of this Agreement and each of the
other agreements contemplated hereby, and the consummation of all
other transactions contemplated by this Agreement;
(vi) all of Seller's contracts and commitments, files, books,
records and other data relating to the Business and the Purchased
Assets;
(vii) copies of good standing certificates in all
jurisdictions where the Seller is qualified to do business in which
ownership of the Purchased Assets or the conduct of the Business
requires Seller to be so qualified;
(viii) a certificate of the Secretary of Seller, certifying
as to the correctness and completeness of the Articles of
Incorporation and Bylaws of Seller, as appropriate, and all amendments
thereto;
(ix) the Lease Assignment;
(x) the Employment Agreements;
(xi) the Investment Agreement (together with an Investment
Letter from each Shareholder);
(xii) the Contingency Rollback Agreement;
(xiii) an accounts payable listing and an accounts receivable
listing as of the Closing Date, along with a listing of all
outstanding checks; and
(xiv) such other documents or instruments as Purchasers may
request to effect the transactions contemplated hereby.
All of the foregoing documents in this Section 8.3(a) shall be
reasonably satisfactory in form and substance to Purchasers and shall be dated
the Closing Date.
(b) Purchasers shall deliver to Seller and the Shareholders at
the Closing the following items, duly executed by Purchasers where necessary to
make them effective:
(i) the amount of the Purchase Price payable at Closing as
provided in Section 2.1;
(ii) the Common Stock Consideration;
(iii) the Promissory Note;
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(iv) an officer's certificate in the form set forth as
Exhibit L attached hereto, stating that the preconditions specified in
Section 7.1 (a) through (d) hereof have been satisfied;
(v) copies of all necessary third party and governmental
consents, approvals, releases and filings required in order for
Purchasers to effect the transactions contemplated by this Agreement;
(vi) the Lease Assignment;
(vii) the Employment Agreements;
(viii) the Investment Agreement;
(ix) the Contingency Rollback Agreement; and
(x) such other documents or instruments as Seller reasonably
may request to effect the transactions contemplated hereby.
All of the foregoing documents in this Section 8.3(b) shall be
reasonably satisfactory in form and substance to Seller and shall be dated as
of the Closing Date.
(c) Purchasers, Seller and the escrow agent shall execute and
deliver to one another at Closing the Escrow Agreement in the form set forth in
Exhibit A.
8.4 Possession. Simultaneously with the Closing, Seller shall take such
steps as may be requisite or desirable to put Purchasers in actual possession
and operating control of the Business and the Purchased Assets.
8.5 Nonassignable Contracts. To the extent that the assignment
hereunder by Seller to CBI of the Contracts is not permitted or is not
permitted without the consent of any other party to the Contract, this
Agreement shall not be deemed to constitute an assignment of any such Contract
if such consent is not given or if such assignment otherwise would constitute a
breach of, or cause a loss of contractual benefits under, any such Contract,
and Purchasers shall assume no obligations or liabilities thereunder. Seller
shall advise Purchasers promptly in writing with respect to any Contract which
it knows, should know or has reason to know that it will not receive any
required consent. Without in any way limiting Seller's obligation to obtain all
consents necessary for the sale, transfer, assignment and delivery of the
Contracts and the Purchased Assets to Purchasers hereunder, if any such consent
is not obtained or if such assignment is not permitted irrespective of consent
and the Closing hereunder is consummated, Seller and the Shareholders shall
cooperate with Purchasers in any reasonable arrangement designed by Purchasers
to provide Purchasers with the rights and benefits, subject to the obligations,
under the Contract, including enforcement for the benefit of Purchasers of any
and all rights of Seller against any other person arising out of breach or
cancellation
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by such other person and, if requested by Purchasers, Seller shall act as an
agent on behalf of Purchasers or as Purchasers shall otherwise reasonably
require, in each case at Seller's cost. Seller agrees to continue its existence
for fifty-one (51) weeks from the Closing Date.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Seller and Shareholders. Seller and the
Shareholders, jointly and severally, agree to and shall indemnify in full
Purchasers and their respective officers, directors, employees, agents,
shareholders and partners (collectively, the "Purchaser Indemnified Parties")
and defend and hold them harmless against any loss, liability, deficiency,
damage, expense or cost (including reasonable legal expenses), that Purchaser
Indemnified Parties may suffer, sustain or become subject to, as a result of
(a) any misrepresentation in any of the representations or breach of any of the
warranties of Seller or the Shareholders contained in this Agreement or in any
exhibits, schedules, certificates or other agreements or documents delivered or
to be delivered pursuant to the terms of this Agreement or otherwise
incorporated in this Agreement (collectively, the "Related Documents"), (b) any
breach of, or failure to perform, any agreement or covenant of Seller or the
Shareholders contained in this Agreement or any of the Related Documents, or
(c) any matters disclosed on any schedule hereto (collectively, "Purchaser
Losses"). In the event any Purchaser Indemnified Party incurs any Purchaser
Losses, Purchasers, in addition to all other rights and remedies available to
Purchasers, shall have the right to set off the amount of such Purchaser Losses
against the amount of the Purchase Price which is held in escrow (the "Escrow
Fund") pursuant to the Escrow Agreement. Notwithstanding anything to the
contrary set forth in this Section 9.1, in the event that any Purchaser
Indemnified Party incurs any Purchaser Losses as a direct result of a
misrepresentation or breach of warranty in Section 3.5 ("Absence of Undisclosed
Liabilities"), then (i) such Purchaser Indemnified Party shall first proceed
against the Escrow Fund to the extent of the Escrow Fund, and thereafter
against the Shareholders, and (ii) the indemnification obligation of any
Shareholder with respect to such Purchaser Losses shall not exceed such
Shareholder's Allocable Portion (as hereinafter defined) of such Purchaser
Losses. For purposes of this Section 9.1, "Allocable Portion" means, with
respect to any Shareholder at any point in time, that portion of a particular
amount which, when expressed as a percentage, is equal to the percentage set
forth next to such Shareholder's signature line on the applicable signature
page of this Agreement.
9.2 Indemnification by Purchasers. Purchasers, jointly and severally,
agree to indemnify in full Seller (the "Seller Indemnified Party") and hold it
harmless against any losses, loss, liability, deficiency, damage, expense or
cost (including reasonable legal expenses), which the Seller Indemnified Party
may suffer, sustain or become subject to as a result of (i) any
misrepresentation in any of the representations or breaches of any of the
warranties of Purchasers contained in this Agreement or in any of the Related
Documents or (ii) any breach of, or failure to perform, any agreement of
Purchasers contained in this Agreement or any of the Related Documents
(collectively, "Seller Losses") (Purchaser Losses and Seller Losses shall
collectively be referred to as the "Losses").
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9.3 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a "Purchaser Indemnified Party" or "Seller Indemnified Party,"
as applicable, the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify
such Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Seller Losses or Purchaser Losses, as the case may be (any such third
party action or proceeding being referred to as a "Claim"), the Notifying Party
shall give the Indemnifying Party prompt notice thereof. The failure to give
such notice shall not affect any Indemnified Party's ability to seek
reimbursement unless such failure has materially and adversely affected the
Indemnifying Party's ability to defend successfully a Claim. The Indemnifying
Party shall be entitled to contest and defend such Claim; provided, that the
Indemnifying Party (i) has a reasonable basis for concluding that such defense
may be successful and (ii) diligently contests and defends such Claim. Notice
of the intention so to contest and defend shall be given by the Indemnifying
Party to the Notifying Party within twenty (20) business days after the
Notifying Party's notice of such Claim (but, in all events, at least five (5)
business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the Indemnifying Party. The Notifying Party shall be entitled at
any time, at its own cost and expense (which expense shall not constitute a
Loss unless the Notifying Party reasonably determines that the Indemnifying
Party is not adequately representing or, because of a conflict of interest, may
not adequately represent, any interests of the Indemnified Parties), to
participate in such contest and defense and to be represented by attorneys of
its or their own choosing. If the Notifying Party elects to participate in such
defense, the Notifying Party shall cooperate with the Indemnifying Party in the
conduct of such defense. Neither the Notifying Party nor the Indemnifying Party
may concede, settle or compromise any Claim without the consent of the other
party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, in the event the Indemnifying Party fails or is
not entitled to contest and defend a claim, the Notifying Party shall be
entitled to contest, defend and settle such Claim.
(b) In the event any Indemnified Party should have a claim
against any Indemnifying Party that does not involve a Claim, the Notifying
Party shall deliver a notice of such claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Notifying Party that
it does not dispute the claim described in such notice or fails to notify the
Notifying Party within thirty (30) days after delivery of such notice by the
Notifying Party whether the Indemnifying Party disputes the claim described in
such notice, the Loss in the amount specified in the Notifying Party's notice
shall be conclusively deemed a liability of the Indemnifying Party and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified Party
on demand. If the Indemnifying Party has timely disputed its liability with
respect to such claim, a representative of each of the Indemnifying Party and
the Notifying Party (or their respective designees) shall proceed in good faith
to negotiate a resolution of such dispute, and if not resolved through the
negotiations of such representatives or designees within sixty (60) days after
the delivery of the Notifying Party's notice of such claim, such dispute
(except for any such dispute which gives rise or could give rise to
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equitable relief under this Agreement) shall be resolved fully and finally in
Chicago, Illinois by an arbitrator selected pursuant to, and an arbitration
governed by, the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall resolve the dispute within thirty (30) days
after selection and judgment upon the award rendered by such arbitrator may be
entered in any court of competent jurisdiction.
9.4 Escrow Amount. Seller and Shareholders agree that in addition to
any other rights or remedies available to Purchasers, Purchasers may draw upon
the Escrow Account pursuant to the Escrow Agreement, including, without
limitation, (i) any of the obligations of Seller and Shareholders or any of
them under Section 9.1 of this Agreement and (ii) any amount due from Seller or
the Shareholders in connection with the final determination of the Net
Liability Amount.
ARTICLE 10
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent of Purchasers and Seller;
(b) by either Purchasers or Seller if there has been a material
misrepresentation or breach of warranty or breach of covenant on the part of
the other party in the representations and warranties or covenants set forth in
this Agreement and any such misrepresentation or breach, if capable of cure, is
not cured within fifteen (15) days after written notice thereof to such other
party, or if events have occurred which have made it impossible to satisfy a
condition precedent to the terminating party's obligations to consummate the
transactions contemplated hereby (other than as a result of any willful act or
omission by the terminating party); or
(c) by either Purchasers or Seller if the transactions
contemplated hereby have not been consummated by April 30, 1999; provided, that
neither Purchasers nor Seller shall be entitled to terminate this Agreement
pursuant to this subsection (c) if such party's willful breach of this
Agreement, respectively, has prevented the consummation of the transactions
contemplated hereby.
10.2 Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void, and
there shall be no liability on the part of Seller or Purchasers, except for
willful breaches of this Agreement prior to the time of such termination and
except for the provisions of Section 11.7. In the event that Purchasers fail to
close the transaction contemplated hereby other than for the reasons set forth
in Sections 10.1(a) - (c), Purchasers shall promptly pay Seller $250,000 as
liquidated damages for such failure to close.
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10.3 Effect of Closing. Seller and Purchasers shall be deemed to have
waived their respective rights to terminate this Agreement upon the completion
of the Closing. No such waiver shall constitute a waiver of any other rights
arising from the non-fulfillment of any condition precedent set forth in
Article 6 or 7 unless such waiver is made in writing.
ARTICLE 11
ADDITIONAL AGREEMENTS
11.1 Survival. The representations, warranties, covenants and
agreements set forth in this Agreement or in any writing delivered to
Purchasers or Seller in connection with this Agreement shall survive the
Closing Date and the consummation of the transactions contemplated hereby and
shall not be affected by any examination made for or on behalf of Purchasers or
Seller, the knowledge of any of Purchasers' or Seller's officers, directors,
shareholders, employees or agents, or the acceptance by Purchasers or any
Seller of any certificate or opinion.
11.2 Mutual Assistance. Subsequent to the Closing, Seller on the one
hand and Purchasers on the other, at their own cost, shall assist each other
(including making records available) in the preparation of their respective tax
returns and the filing and execution of tax elections, if required, as well as
any audits or litigation that may ensue as a result of the filing thereof, to
the extent that such assistance is reasonably requested.
11.3 Press Release and Announcements. No press release related to this
Agreement or the transactions contemplated hereby, or other announcements to
the employees, customers or suppliers of Seller, shall be issued without the
joint approval of Purchasers and Seller. No other public announcement related
to this Agreement or the transactions contemplated hereby shall be made by
either party, except as required by law, in which event the parties shall
consult as to the form and substance of any such announcement required by law.
11.4 Expenses. Each party shall pay all of its expenses in connection
with the negotiation of this Agreement, the performance of its obligations
hereunder and the consummation of the transactions contemplated by this
Agreement. Seller shall pay the cost of recording all documents necessary to
place record title to the Purchased Assets in the condition warranted by or
required of Seller by this Agreement.
11.5 Further Transfers. After the Closing, Seller shall, and shall
cause its affiliates to, execute and deliver such further instruments of
conveyance and transfer and take such additional action as Purchasers may
reasonably request to effect, consummate, confirm or evidence the transfer to
Purchasers of the Purchased Assets. Seller shall execute such documents as may
be necessary to assist Purchasers (or their designees) in preserving or
perfecting their rights in the Purchased Assets.
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11.6 Transition Assistance. From the date hereof and until five (5)
years after the Closing, Seller shall not in any manner take any action which
is designed, intended or might be reasonably anticipated to have the effect of
discouraging customers, suppliers, lessors, employees, sales agents and other
business associates from maintaining the same business relationships with
Purchasers after the date of this Agreement as were maintained with Seller
prior to the date of this Agreement.
11.7 Confidentiality. If the transactions contemplated by this
Agreement are not consummated, Purchasers shall maintain the confidentiality of
all information and materials received by it reasonably designated by Seller as
confidential, and Purchasers shall return to Seller or destroy any materials
(and copies thereof) obtained from Seller in connection with the transactions
contemplated hereby. Whether or not the transactions contemplated hereby are
consummated, Seller shall maintain the confidentiality of all information and
materials regarding Purchasers and their affiliates, reasonably designated as
confidential by Purchasers. If the transactions contemplated by this Agreement
are consummated, Seller shall maintain the confidentiality of all proprietary
and other non-public information regarding the Business and the Purchased
Assets and shall turn over to Purchasers all such materials in their
possession.
11.8 Non-Compete; Non-Solicitation.
(a) Although it is understood among the parties that Seller
desires to no longer engage in business operations similar to that of the
Business, as an additional inducement to Purchasers to enter into and to
perform their obligations under this Agreement, Seller agree that, for a period
of five (5) years after the Closing Date (the "Non-Competition Period"), Seller
shall not in the United States or in any foreign country in which Seller
currently does business, directly or indirectly, either for itself or any other
person or entity, own, manage, control, participate in, permit its name to be
used by, consult with, render services for or otherwise assist in any manner
any entity that owns, invests in, manages, controls or engages in the business
of selling and distributing products similar to those of the Business.
(b) Seller agrees that for a period of five (5) years after the
Closing, it shall not directly or indirectly offer employment to or hire any
current or future employee or sales agent of Seller without the prior written
consent of Purchasers.
(c) If, at the time of enforcement of this Section 11.8, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area.
(d) Seller recognizes and affirms that in the event of breach by
it of any of the provisions of this Section 11.8 money damages would be
inadequate and neither Purchasers nor Seller would have any adequate remedy at
law. Accordingly, Seller and Purchasers agree that the other party shall have
the right, in addition to any other rights and remedies existing in its favor,
to enforce its rights and the obligations under this Section 11.8 by an action
or actions for specific performance, injunction and/or other equitable relief
without posting any bond or security to enforce or prevent any
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violations, whether anticipatory, continuing or future, of the provisions of
this Section 11.8, including, without limitation, the extension of the
Non-Competition Period by a period equal to (i) the length of the violation of
this Section 11.8 plus (ii) the length of any court proceedings necessary to
stop such violation. In the event of a breach or violation by Seller of any of
the provisions of this Section 11.8, the running of the Non-Competition Period,
but not of Seller's obligations under this Section 11.8, shall be tolled during
the period during which the occurrence of any such breach or violation is
investigated and during the continuance of any such breach or violation.
11.9 Specific Performance. Seller and the Shareholders acknowledge
that the Business and the Purchased Assets are unique and recognize and affirm
that in the event of a breach of this Agreement by Seller or the Shareholders,
money damages would be inadequate and Purchasers would have no adequate remedy
at law. Accordingly, Seller and the Shareholders agree, jointly and severally,
that Purchasers shall have the right, in addition to any other rights and
remedies existing in its favor, to enforce their rights and Seller's and the
Shareholders' obligations hereunder by an action or actions for specific
performance, injunction and/or other equitable relief, without posting any bond
or security.
11.10 Remittances. All remittances, mail and other communications
relating to the Purchased Assets or the Business received by Seller or the
officers and directors of Seller, at any time after the Closing Date shall be
immediately turned over to Purchasers by such parties. Seller shall cooperate
with Purchasers, and take such actions as Purchasers reasonably request, to
assure that customers of the Business send their remittances directly to
Purchasers, and to assure that remittances from customers of the Business which
are improperly sent to Seller are not commingled with Seller's assets and are
turned over to Purchasers.
11.11 Best Efforts To Consummate Closing Transactions. On the terms and
subject to the conditions contained in this Agreement, Seller and Purchasers
agree to use their respective best efforts to take, or to cause to be taken,
all reasonable actions, and to do, or to cause to be done, all reasonable
things, necessary, proper or advisable under applicable laws and regulations to
consummate, as soon as reasonably practicable, the Closing, including the
satisfaction of all conditions thereto set forth herein.
11.12 Employees and Agents of Seller.
(a) Effective as of the Closing Date, all employees of the Seller
will be offered employment by CBI as of the Closing Date and those individuals
that accept employment with CBI (the "Transferees") shall become employees of
CBI, except that any employee of Seller who is absent from employment on the
Closing Date due to a leave of absence shall not become an employee of CBI
until he or she returns to active employment without restrictions or with only
such restrictions as are required to be accommodated under applicable law.
Except as expressly set forth in the Employment Agreement for Xxxxxx X.
Xxxxxxxxx CBI shall have the absolute right to establish all terms and
conditions of employment, including wages, benefits and benefit plans, for any
Transferee. Further, it is expressly agreed that neither Purchaser is bound to
assume, implement or continue any wages, terms and conditions of employment,
benefits or benefit plans (except as set forth in Section
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11.12(a)), which may currently exist for any of Seller's employees. All such
offers of employment shall be on the terms and conditions established by CBI
and shall be contingent upon employment commencing with CBI only following the
Closing Date. Seller agrees not to discourage any individuals who are offered
employment or an agency relationship with CBI from accepting such employment or
agency relationship with CBI.
(b) Assumed Employee Benefit Plans. As of the Closing Date, CBI
shall assume sponsorship of the
A. _____________________________________________ [Pension Plan];
B. _____________________________________________ [401K Plan];
C. MCG/Healthcare Flexible Benefits Plan, as restated effective October
1, 1997;
D. _____________________________________________ [Medical Plan];
E. _____________________________________________ [Medical Reimbursement
Plan];
F. _____________________________________________ [Salary Continuation
Plan]; and
G. _____________________________________________ [Prudential Keyman
Insurance Policies]
(collectively, the "Assumed Benefit Plans"). Seller, the Shareholders and
Purchasers agree:
(i) that Seller will use its best efforts to obtain the
consents of insurers, third party administrators, record keepers,
trustees and other parties involved in the Assumed Benefit Plans to
continuing all contracts, agreements and fee and premium arrangements
with respect to such plans;
(ii) that Seller shall remain liable for all contributions,
costs and premiums relating to the maintenance and administration of
the Assumed Benefit Plans prior to the Closing Date and CBI shall be
liable for all contributions and expenses relating to the maintenance
and administration of the Assumed Benefit Plans after the Closing
Date;
(iii) that Seller shall promptly reimburse Purchasers for
claims under self-insured employee welfare benefit plans of Seller's
employees incurred but not reported prior to the Closing Date;
(iv) that Seller shall make any contributions due and pay any
liabilities accrued as of the Closing Date under any Assumed Benefit
Plan on the Closing Date and provide evidence thereof to Purchasers;
(v) that all documents and records concerning the Assumed
Benefit Plans shall be transferred to the Purchasers, provided that
Purchasers shall allow Seller reasonable access to such documents and
records for purposes of governmental audits relating to periods on or
prior to the Closing Date and for other issues which arise with
respect to the period of Seller's sponsorship of such plans;
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(vi) CBI will assume and perform Seller's obligations to
former employees under Part 6 of Title I of ERISA and Section 4980B of
the Internal Revenue Code for periods from and after the Closing Date
as if Seller had continued the Assumed Benefit Plans subject to such
statutes; and
(vii) that nothing in this Section 11.12(b) shall be
construed to require the continuation of any employee benefit plan by
Purchasers for any definite period of time after the Closing Date,
except as otherwise provided by law.
ARTICLE 12
MISCELLANEOUS
12.1 Amendment and Waiver. This Agreement may be amended, and any
provision of this Agreement may be waived; provided that any such amendment or
waiver shall be binding on Seller and Shareholders only if such amendment or
waiver is set forth in a writing executed by Seller and Shareholders and that
any such amendment or waiver shall be binding upon Purchasers only if such
amendment or waiver is set forth in a writing executed by Purchasers. No course
of dealing between or among any persons having any interest in this Agreement
shall be deemed effective to modify, amend or discharge any part of this
Agreement or any rights or obligations of any person under or by reason of this
Agreement.
12.2 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when personally delivered,
mailed by first class mail, return receipt requested or delivered by a
nationally recognized courier service. Notices, demands and communications to
Seller or Purchasers shall, unless another address is specified in writing in
accordance herewith, be sent to the address indicated below:
Notices to Seller & Shareholders
Phynque, Inc., d/b/a Management
Compensation Group/Healthcare
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxx Xxxxxxxxx, Partner President
Phone: (000) 000-0000
Fax: (000) 000-0000
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with a copy to:
Xxxxxxx & Xxxxxxxxx, Ltd.
Xxx Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Xxxxxx Xxxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Notices to Purchasers
Xxxxx/Xxxxxx, Inc.
0000 Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxx X. Xxxx, President
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Vedder, Price, Xxxxxxx & Kammholz
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Block, Esq.
Lane X. Xxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
12.3 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legatees, personal representatives, successors and permitted
assigns (including all successors and assignees in the event of Seller's
liquidation) as the case may be, but neither this Agreement nor any of the
rights, interests or obligations hereunder of Seller and Shareholders shall be
assignable by Seller and Shareholders without the prior written consent of
Purchasers. Either Purchaser may assign its interest under this Agreement
without restriction to any of its affiliates, existing as of the date hereof or
in the future; provided each Purchaser unconditionally guarantees to Seller and
the Shareholders at the time of such assignment the prompt and complete
performance of all of such affiliates' obligations hereunder.
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12.4 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Agreement.
12.5 No Third Party Beneficiaries. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any other persons other than the parties hereto and
their respective successors, permitted assigns, heirs, legatees and personal
representatives, as the case may be, nor is anything in this Agreement intended
to relieve or discharge the obligation or liability of any third persons to any
party, nor shall any provision give any third parties any right of subrogation
or action over or against any party. This Agreement is not intended to and does
not create any third party beneficiary rights whatsoever.
12.6 No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
person.
12.7 Captions. The captions used in this Agreement are for convenience
of reference only and do not constitute a part of this Agreement and shall not
be deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no caption had been used in this Agreement.
12.8 Complete Agreement. This document and the documents referred to
herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way
including, without limitation any term sheet.
12.9 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
instrument. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile shall also deliver a manually executed
counterpart of this Agreement, but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Agreement.
12.10 Governing Law. The internal law, not the law of conflicts, of
the State of Texas shall govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement.
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12.11 Remedies Cumulative. Except as set forth in Section 9.3(b), all
remedies of the parties provided herein shall, to the extent permitted by law,
be deemed cumulative and not exclusive of any thereof or of any other remedies
available to the parties, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained herein, and
every remedy given herein or by law to any party hereto may be exercised from
time to time, and as often as shall be deemed expedient, by such party.
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IN WITNESS WHEREOF, the parties hereto have executed this Asset
Purchase Agreement as of the date first written above.
PURCHASERS: XXXXX/XXXXXX, INC.
By: /s/ X.X. XXXXXXX
---------------------------------------
Its:
--------------------------------------
XXXXX/XXXXXX HOLDINGS, INC.
By: /s/ X.X. XXXXXXX
---------------------------------------
Its:
--------------------------------------
SELLER: PHYNQUE, INC., d/b/a MANAGEMENT
COMPENSATION GROUP/HEALTHCARE
By: /s/ XXXXXX X. XXXXXXXXX
---------------------------------------
Its: President
--------------------------------------
50
SHAREHOLDERS:
/s/ XXXX X. XXXX
-------------------------- 51.93%
Xxxx X. Xxxx
Address:
/s/ XXXXXX X. XXXXXXXXX
-------------------------- 21.93%
Xxxxxx X. Xxxxxxxxx
Address:
/s/ XXXXXX X. XXXXX
-------------------------- 8.56%
Xxxxxx X. Xxxxx
Address:
/s/ XXXXXX X. XXXX
-------------------------- 4.30%
Xxxxxx X. Xxxx
Address:
/s/ XXXXXX X. XXXXXXXX
-------------------------- 2.19%
Xxxxxx X. Xxxxxxxx
Address:
/s/ XXXXX X. XXXXX
-------------------------- 3.05%
Xxxxx X. Xxxxx
Address:
51
/s/ XXXXX X. XXXXXX
-------------------------- 2.92%
Xxxxx X. Xxxxxx
Address:
/s/ XXXX X. XXXXXXXX
-------------------------- 2.74%
Xxxx X. Xxxxxxxx
Address:
/s/ M. XXX XXXXXXXX
-------------------------- 2.38%
M. Xxx Xxxxxxxx
Address:
Total 100%
