Exhibit 2.1
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made this 23rd day
of June, 2001 by and among SYSTEMS & COMPUTER TECHNOLOGY CORPORATION, a Delaware
corporation ("SCT"), SCT TECHNOLOGIES (CANADA), INC., a company organized and
existing under the laws of the Province of Ontario, Canada ("SCT Canada"), SCT
FINANCIAL CORPORATION, a Delaware corporation ("SCT Financial"), SCT PROPERTY,
INC., a Delaware corporation ("SCT Property"), SCT GOVERNMENT SYSTEMS, INC., a
Delaware corporation (the "Company"), OMNI-TECH SYSTEMS, LTD., a company
organized and existing under the laws of the Province of British Columbia,
Canada ("Omni-Tech"), AFFILIATED COMPUTER SERVICES, INC., a Delaware corporation
("ACS"), ACS ENTERPRISE SOLUTIONS, INC., a Delaware corporation and a wholly-
owned subsidiary of ACS ("ACS-Enterprise") and ACS-ALBERTA, INC., a company
organized and existing under the laws of the Province of Alberta, Canada ("ACS-
Alberta" and collectively with ACS-Enterprise, the "Purchasers"). For
convenience, SCT, SCT Canada, SCT Financial and SCT Property, the Company and
Omni-Tech are sometimes collectively referred to in this Agreement as the "SCT
Parties," and individually as an "SCT Party." For convenience, ACS and the
Purchasers are sometimes together referred to in this Agreement as the "ACS
Parties," and individually as an "ACS Party."
BACKGROUND
SCT Financial owns 1,000 shares of the common stock, par value $0.01
per share, of the Company, which shares represent 100% of the issued and
outstanding shares of the Company (collectively, the "Company Shares"). SCT
Canada owns 539 Class B Common Shares, 205 Class C Common Shares, 356 Class D
Common Shares, each without par value, and 6,292 Class G Preference Shares, par
value $0.01 per share, 4,418 Class H Preference Shares, par value $0.01 per
share, and 10 Class I Preference Shares (voting), par value $1.00 per share of
Omni-Tech, which shares represent 100% of the issued and outstanding shares of
Omni-Tech (collectively, the "Omni-Tech Shares," and collectively with the
Company Shares, the "Shares"). The Company and Omni-Tech are in the business of
developing, licensing and supporting enterprise software, and jury management
software and providing outsourcing, systems implementation, systems integration
and maintenance and enhancements, directly and indirectly to governments (the
"Business"). The Purchasers desire to purchase from SCT Financial and SCT
Canada, and SCT Financial desires to sell to ACS Enterprise and SCT Canada
desires to sell to ACS-Alberta, the Company Shares and the Omni-Tech Shares,
respectively, in accordance with the terms and subject to the conditions set
forth in this Agreement, including electing to treat the purchase and sale of
the Company Shares as a purchase and sale of the assets of the Company for
purposes of the United States federal income tax laws.
NOW THEREFORE, in consideration of the premises and of the mutual
promises, covenants, representations and warranties made in this Agreement, the
SCT Parties and the ACS Parties, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
DEFINITIONS
The following terms, as used herein, shall have the following respective
meanings, unless the context otherwise require:
1.1 "Accounts Receivable" shall mean all of the Company's and Omni-Tech's
accounts receivable (and notes receivable, if any) created or arising in respect
of the sale of Software Licenses, products and services.
1.2 "Affiliate" shall mean, (a) as to any specified Person, any other
Person controlling, controlled by or under common control with such specified
Person, (b) any officer, director or partner of such specified Person, or (c)
any member of the Family Group of such specified Person or of any individual who
is an Affiliate of such specified person by reason of clause (a) or (b) of this
definition. The term "control," with respect to any person, means possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities or a partnership interest, by contract or otherwise. "Family Group"
means, as to any individual, such individual's spouse, parents, grandparents,
lineal descendants and trusts for the benefit of any of the foregoing, provided
that all the income beneficiaries and remainderman of any such trust are such
individual's spouse, ancestors or lineal descendants.
1.3 "Affiliated Company" shall have the meaning assigned to it in
Section 4.32 of this Agreement.
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1.4 "Assets" shall mean the Accounts Receivable, Equipment, Intellectual
Property and Information, Leased Real Property, Leasehold Improvements and
Fixtures, Prepaid Items and Rights and Other Property of the Company and Omni-
Tech.
1.5 "Books and Records" shall mean all records, documents, lists and
files, relating to the Assets and the Business of the Company and Omni-Tech,
including, without limitation, all contracts, purchase orders, sales orders,
price lists, lists of accounts, customers, suppliers and personnel, shipping
records, all product, business and marketing plans, sales and product brochures
and catalogs and other sales literature and materials, historical sales data and
all books, ledgers, files and business records, whether in hard copy, electronic
form or otherwise.
1.6 "Broward County Litigation" shall mean that certain lawsuit styled
as Broward County (Plaintiff) vs. Xxxxxx Xxxxxxxxxxx (Defendant) vs. SCT
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Government Systems Inc. (Third Party Defendant) in the United States District
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Court of the Southern District of Florida, together with any and all causes of
actions, counterclaims and cross-claims thereto and all appeals thereof.
1.7 "Broward County Receivables" shall mean all Accounts Receivables of
the Company owing from Xxxxxx Xxxxxxxxxxx which are the subject matter of the
Broward County Litigation.
1.8 "Cash" shall mean all of the Company's and Omni-Tech's cash and cash
equivalents in any currency held by the Company and Omni-Tech.
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1.9 "Charter Documents" shall mean the articles or certificate of
incorporation, as applicable, and the by-laws, in each case as amended and
restated, of any Person that is a corporation.
1.10 "Closing" shall have the meaning assigned to it in Section 3.1(a) of
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this Agreement.
1.11 "Closing Date" shall have the meaning assigned to it in Section
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3.1(a) of this Agreement.
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1.12 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.13 "Condition" shall mean the assets, liabilities, results of
operations, financial condition and, to the extent that any of the individuals
identified on Schedule 1.39 has Knowledge thereof after reasonable inquiry of
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the Employees who report to such individual, prospects of the Company and Omni-
Tech, taken as a whole.
1.14 "Consents" shall mean any consent, waiver, approval, authorization,
certification or exemption required from any person or under any Contract or
Requirements of Law, as applicable.
1.15 "Contract" shall mean any written agreement, contract, commitment,
lease and other instrument, document and undertaking.
1.16 "Court Link Receivable" shall mean, the $2,000,000 receivable of the
Company owing from CourtLink, Inc. reflected on the March 2001 Financial
Statements.
1.17 "Deductible Amount" shall have the meaning assigned to it in Section
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10.4 of this Agreement.
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1.18 "Distribution Agreement" shall mean the Distribution Agreement,
dated February 1, 1999 between SCT Property (as assignee of Ploegos Technologies
Limited) and Omni-Tech.
1.19 "DOJ" shall mean the antitrust division of the United States
Department of Justice.
1.20 "Employees" shall mean each of the employees of the Company and
Omni-Tech.
1.21 "Environmental Claim" shall mean any written demand, claim, suit,
lien, action, expense, cause of action, investigation or notice by any Person
alleging actual or potential liability under Environmental Laws (including,
without limitation, potential or actual liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties).
1.22 "Environmental Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, or orders of any Governmental Entity pertaining
to health or the environment
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currently in effect in any and all jurisdictions in which the Company or Omni-
Tech owns property or conducts business, including without limitation, the Clean
Air Act, as amended, the Comprehensive Environmental, Response, Compensation,
and Liability Act of 1980 ("CERCLA"), as amended, the Occupational Safety and
Health Act of 1970, as amended, the Federal Water Pollution Control Act, as
amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Hazardous & Solid Waste Amendments Act of 1984, as amended,
the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, the Oil Pollution Act of
1990, any state laws implementing the foregoing federal laws, and all other
environmental conservation or protection laws.
1.23 "Equipment" shall mean all of the Company's and Omni-Tech's
furniture, fixtures, machinery, equipment, motor vehicles, office equipment,
computers, tools and replacement parts, wherever located.
1.24 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.25 "Financial Statements" shall have the meaning assigned to it in
Section 4.15 of this Agreement.
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1.26 "FAS 106" shall mean Financial Accounting Standards Board Statement
No. 106.
1.27 "FAS 112" shall mean Financial Accounting Standards Board Statement
No. 112.
1.28 "FTC" shall mean the United States Federal Trade Commission.
1.29 "Funded Indebtedness" shall mean, as to the Company and Omni-Tech
(without duplication), the aggregate amount (including the current portions
thereof) of all indebtedness for money borrowed from others (including accrued
but unpaid interest thereon) and all obligations of such Person as a lessee
under leases that have been, in accordance with GAAP, recorded as capital
leases.
1.30 "FY 2000 Financial Statements" shall have the meaning assigned to it
in Section 4.15 of this Agreement.
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1.31 "GAAP" shall mean generally accepted accounting principles in the
United States, with such adjustments as set forth in, and applied on a basis
consistent with, the historical internal accounting practices and procedures
utilized by SCT with respect to the Business for preceding years and throughout
the periods involved.
1.32 "Governmental Entity" shall mean any governmental or regulatory
authority, or any administrative agency, department, commission, board, body,
official, bureau or other governmental authority or instrumentality, domestic or
foreign.
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1.33 "HSR Act" shall mean Section 7A of the Xxxxxxx Act (Title II of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976) and the rules and
regulations promulgated thereunder, as amended.
1.34 "HSR Filings" shall mean the filings legally required to be made
with the FTC and DOJ pursuant to the HSR Act with respect to the transactions
contemplated by this Agreement.
1.35 "HSR Waiting Period" shall mean all applicable waiting periods under
the HSR Act.
1.36 "Indemnified Party" shall have the meaning assigned to it in Section
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10.1(c).
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1.37 "Indemnifying Party" shall have the meaning assigned to it in
Section 10.1(c).
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1.38 "Intellectual Property and Information" shall mean all the following
of each of the Company and Omni-Tech on a world-wide basis: patents, patent
applications, registered trademark and service marks, trademark and service xxxx
applications, trademark and service xxxx rights, trade names, registered
copyrights, copyright rights, copyright applications, Software, trade secrets,
product-related artwork, logos, materials and manufacturing specifications,
drawings, designs and know-how.
1.39 "Knowledge" shall mean the actual knowledge of any of the
individuals identified on Schedule 1.39.
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1.40 "Leased Real Property" shall mean the real property leased by the
Company and Omni-Tech.
1.41 "Leasehold Improvements and Fixtures" shall mean all of the
leasehold improvements, fixtures and appurtenances owned by the Company and
Omni-Tech and attached to the Leased Real Property.
1.42 "Leases" shall mean the leases pursuant to which the Company or
Omni-Tech leases the Leased Real Property.
1.43 "Legal Expenses" shall mean any and all reasonable out-of-pocket
fees, costs and expenses of any kind incurred by such person and its counsel in
investigating, preparing for, defending against or providing evidence, producing
documents or taking other similar action with respect to any threatened or
asserted claim.
1.44 "Legal Proceeding" shall mean any action, suit, arbitration, or
claim by or before any court, tribunal, arbitrator, Governmental Entity,
arbitration or alternative dispute resolution panel.
1.45 "Liabilities" shall mean any and all obligations or liabilities of
the Company and Omni-Tech whatsoever, express or implied, matured or unmatured,
disputed,
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liquidated, unliquidated, absolute, fixed or contingent, known or unknown,
except for any Permitted Liabilities.
1.46 "Liens" shall mean all liens, pledges, charges, security interests,
and other similar encumbrances.
1.47 "Losses" shall mean any and all damages, losses, obligations,
deficiencies, liabilities, claims, encumbrances, penalties, fines, costs and
expenses, including, without limitation, any diminution in value of any real or
personal property, reasonable attorneys' fees, and reasonable fees on a
solicitor-client basis (but excluding punitive damages other than Allowable
Punitive Damages). The term "Allowable Punitive Damages" shall mean punitive
damages required to be paid by an indemnified party to a Third Party except to
the extent such punitive damages are the result of the acts of the indemnified
party.
1.48 "March 2001 Balance Sheet" shall mean the balance sheet for the
accounting period ending in March 31, 2001 included in the March 2001 Financial
Statements.
1.49 "March 2001 Financial Statements" shall have the meaning assigned to
it in Section 4.15(a)(ii) of this Agreement.
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1.50 "Material Adverse Effect" shall mean a material adverse effect upon
the Condition; provided, however, that in the case of representations and
warranties qualified by the phrase "Material Adverse Effect", material adverse
effects shall not include events and conditions affecting the economy in general
or the industry generally in which the Company and Omni-Tech compete.
1.51 "Material Contracts" shall have the meaning assigned to it in
Section 4.23 of this Agreement.
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1.52 "Material Customer" shall have the meaning assigned to it in Section
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4.33(a) of this Agreement.
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1.53 "Materials of Environmental Concern" means any toxic, reactive,
corrosive, carcinogenic, flammable or hazardous pollutant or other hazardous
substance or waste, as defined in Environmental Laws.
1.54 "Order" shall mean any judgment, order, writ, decree, injunction or
other determination whatsoever of any court, tribunal, arbitrator, Governmental
Entity or any other entity or body whose finding, ruling or holding is legally
binding or is enforceable as a matter of right (in any case, whether preliminary
or final).
1.55 "Permits" shall have the meaning assigned to it in Section 4.17 of
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this Agreement.
1.56 "Permitted Liabilities" shall mean Liabilities of the Company and
Omni-Tech reflected in the March 2001 Financial Statements, Liabilities incurred
in the ordinary course of business since the date of the March 2001 Financial
Statements, Liabilities disclosed in this Agreement or any Schedules under this
Agreement, and Liabilities that, under GAAP, are
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not required to be included on the March 2001 Balance Sheet, in each case
incurred consistent with past practice.
1.57 "Permitted Liens" shall have the meaning assigned to it in Section
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4.8 of this Agreement.
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1.58 "Person" shall mean an individual, a sole proprietorship, a
corporation, a partnership, a joint venture, an association, a trust, or any
other entity or organization, including a Governmental Entity.
1.59 "Plans" shall have the meaning assigned to it in Section 4.32 of
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this Agreement.
1.60 "Prepaid Items" shall mean all of the Company's and Omni-Tech's
prepaid expenses accrued in the ordinary course of business consistent with past
practice, including but not limited to advances and deposits, as reflected on
the March 2001 Financial Statements.
1.61 "Purchase Price" shall have the meaning assigned to it in Section
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2.2 of this Agreement.
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1.62 "Requirements of Law" shall mean, with respect to any Person, any
provision of law, statute, treaty, rule, regulation, ordinance or pronouncement
having the effect of law, to which, in each case, such Person or any of such
Person's properties, operations, business or assets is bound or subject.
1.63 "Rights and Other Property" shall mean all of the Company's and
Omni-Tech's assets (other than Cash) not included in the Accounts Receivable,
Equipment, Intellectual Property and Information, Inventory, Leasehold
Improvements and Fixtures and Prepaid Items, including, without limitation, all
of the following: rights of offset, bank and mutual fund accounts, safe deposit
boxes, credits, claims against third parties for refunds, causes of action,
judgments, proceeds of insurance in respect of damage to or destruction or loss
of assets, going concern value, goodwill, contract rights, warranties and
licenses received from manufacturers and sellers of Equipment, vendor and
customer records, franchises, licenses, permits, consents, approvals,
certificates of public convenience, waivers and authorizations for the operation
of the Business.
1.64 "San Xxxx Litigation" shall mean that certain lawsuit styled as SCT
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vs. Municipality of San Xxxx in the Superior Court of Puerto Rico, San Xxxx
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Sector.
1.65 "San Xxxx Receivables" shall mean all Accounts Receivables of the
Company owing from the Municipality of San Xxxx which are the subject matter of
the San Xxxx Litigation.
1.66 "Software" shall mean all computer software programs and related
object code, objects and source codes owned by the Company and which is licensed
by the Company or Omni-Tech to Third Parties or under development by the Company
or Omni-Tech in connection with the Business, together with all related user
documentation.
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1.67 "Software Licenses" shall mean the license agreements (and related
user documentation) between the Company or Omni-Tech, on the one hand, and each
end-user licensee to whom the Company or Omni-Tech has granted rights to use any
of the Software or Third Party Software for such end-user licensee's own
internal computing operations, on the other hand.
1.68 "Subsidiary" shall mean any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the voting stock
or otherwise has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
1.69 "Survival Period" shall have the meaning assigned to it in Section
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10.3 of this Agreement.
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1.70 "Taxes" shall mean (a) all taxes, charges, fees, levies,
assessments, or duties including, without limitation, all net income, gross
income, gross receipts, sales, use, minimum, alternative or add-on minimum ad
valorem, value-added service, license and custom, duties, imposts, charges,
levies or other similar assessments of any kind, transfer, franchise, profits,
payroll, withholding, disability, employment, social security, workers
compensation, utility, severance, windfall profits, transfer and gains,
unemployment, excise, estimated, stamp, occupancy, occupation, real or personal
property or other similar taxes, including any interest or penalties thereon,
and additions to tax or additional amounts, imposed by any Governmental Entity
(a "Taxing Authority") and (b) all liability for the payment of any such taxes,
interest, penalty, addition to tax or like additional amount resulting from the
application of United States Treasury Regulation Section 1.1502-6 or a
comparable law or regulation in any other jurisdiction.
1.71 "Tax Return" shall mean any declaration, return, report, estimate,
information return, schedule, statement or other document filed or required to
be filed in respect of any Tax.
1.72 "Third Party" shall mean any Person other than any of the ACS
Parties, any of the SCT Parties and any of the ACS Parties' or the SCT Parties'
respective Affiliates.
1.73 "Third Party Claim" shall have the meaning assigned to it in Section
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10.1(d) of this Agreement.
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1.74 "Third Party Software" shall mean all computer software programs and
related object code, objects and source code, if any, of any Third Party which
has granted to the Company or Omni-Tech the right to grant licenses in such
programs, object code and source code to end-user licensees for such end-user
licensee's own internal computing operations.
ARTICLE 2
SALE AND PURCHASE OF SHARES
2.1 Sale and Purchase of the Shares and European Distribution Rights.
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Subject to the terms and conditions contained in this Agreement, at the Closing:
(a) SCT Financial shall sell to ACS Enterprise all right, title and interest in
and to the Company Shares, free and clear of all Liens; (b) SCT Canada shall
sell to ACS-Alberta all right, title and interest in and to the Omni-
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Tech Shares, free and clear of all Liens; (c) SCT Property shall assign to
Purchasers all rights, title and interest in and to the Distribution Agreement;
and (d) ACS-Enterprise and ACS-Alberta, shall purchase the Company Shares and
the Omni-Tech Shares from SCT Financial and SCT Canada, respectively, and ACS-
Enterprise shall accept the assignment of the Distribution Agreement.
2.2 Purchase Price and Payment; Allocation. As full consideration for
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the Shares and the assignment of the Distribution Agreement, at the Closing the
Purchasers shall pay, deliver or cause to be delivered (and ACS shall cause the
Purchasers to pay, deliver or cause to be delivered) to SCT the sum of (a)
Eighty-Five Million United States Dollars ($85,000,000), plus (b) Cash held by
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the Company and Omni-Tech as of the Closing, minus (c) the amount of Funded
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Indebtedness assumed by the Purchasers as of the Closing (after giving effect to
any reduction of such Funded Indebtedness by application of such amount of cash
necessary to cover checks or other remittances which have been written, mailed
or otherwise delivered by the Company or Omni-Tech on account of such Funded
Indebtedness which have not been cleared as of the Closing) (the "Purchase
Price"). The Purchase Price shall be paid to SCT in cash by wire transfer of
immediately available United States federal funds to the account designated in
writing by SCT at least two days prior to the Closing. The Purchase Price shall
be allocated among the Company Shares, the Omni-Tech Shares, the Distribution
Agreement and the Copyright Assignment (as defned in Section 7.17) as follows:
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(i) One Million Eight Hundred Thousand Dollars ($1,800,000) shall be allocated
to the Omni-Tech Shares, (ii) One Million Dollars ($1,000,000) shall be
allocated to the Distribution Agreement, (iii) One Million Dollars ($1,000,000)
shall be allocated to the Copyright Assignment and the balance shall be
allocated to the Company Shares.
ARTICLE 3
CLOSING
3.1 Closing.
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(a) General. Unless otherwise agreed in writing by SCT and the
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Purchasers, the consummation of the purchase and sale of the Shares under this
Agreement (the "Closing") will be held at the offices of Xxxxxx & Xxxx, L.L.P.,
0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000 within two (2) business days
after the satisfaction or waiver of the conditions set forth in Article 7 of
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this Agreement (other than those conditions that, by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions). The date on which the Closing actually occurs is referred to in
this Agreement as the "Closing Date."
(b) Transfer and Deliveries. At the Closing:
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(i) SCT Financial shall deliver (and SCT shall cause SCT
Financial to deliver) to ACS Enterprise a certificate or certificates registered
in the name of SCT Financial, properly endorsed or with assignments separate
from the certificate, with all required transfer stamps, representing the
Company Shares, against receipt of the Purchase Price as provided in Section
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3.1(b)(vi) of this Agreement;
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(ii) SCT Canada shall deliver (and SCT shall cause SCT Canada to
deliver) to ACS-Alberta a certificate or certificates registered in the name of
SCT Canada, properly endorsed or with assignments separate from the certificate,
with all required transfer stamps, representing the Omni-Tech Shares, against
receipt of the Purchase Price as provided in Section 3.1(b)(vi) of this
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Agreement;
(iii) SCT Financial shall deliver (and SCT shall cause SCT
Financial to deliver) to ACS-Enterprise all of the Company's Books and Records,
including without limitation all minute books, stock books, stock transfer
ledgers, financial and accounting records, and files; provided, however, that
only the Company's minute books, stock books and stock transfer legends will be
required to be delivered at the location of the Closing, and the remainder of
the Books and Records may be delivered at the Company's principal executive
offices;
(iv) SCT Canada shall deliver (and SCT shall cause SCT Canada to
deliver) to ACS-Alberta all of the Omni-Tech's Books and Records, including
without limitation all minute books, stock books, stock transfer ledgers,
financial and accounting records, and files; provided, however, that only Omni-
Tech's minute books, stock books and stock transfer legends will be required to
be delivered at the location of the Closing, and the remainder of the Books and
Records may be delivered at Omni-Tech's principal executive offices;
(v) The SCT Parties shall each deliver each of the documents,
certificates and items required to be delivered by such SCT Party pursuant to
Article 7 of this Agreement;
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(vi) The Purchasers shall deliver (and ACS shall cause the Purchasers
to deliver) the Purchase Price as provided for in Section 2.2 of this Agreement;
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and
(vii) The ACS Parties shall each deliver each of the
documents, certificates and items required to be delivered by such ACS Party
pursuant to Article 8 of this Agreement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
RESPECTING THE SCT PARTIES
The SCT Parties hereby jointly and severally represent and warrant to
the ACS Parties as follows:
4.1 Organization, Power and Authority. SCT is a corporation, duly
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organized and validly existing and in good standing under the laws of the State
of Delaware. SCT Canada is a corporation, duly organized and validly existing
under the laws of the Province of Ontario, Canada. Each of the Company and Omni-
Tech is a corporation, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Each of the Company and
Omni-Tech is duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required, except where
the lack of such qualification would not have a Material Adverse Effect. Each of
the Company and Omni-Tech has full power and authority, and all requisite
rights, franchises and governmental permits, licenses and
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consents, to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. Neither the Company nor Omni-Tech owns any
equity interest in any corporation or other entity other than those listed in
Schedule 4.1. Each of the Company and Omni-Tech has the power and authority to
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own its property and to carry on its business as presently conducted, and each
of the SCT Parties has the right, power and authority to enter into and perform
this Agreement and to carry out the transactions contemplated by this Agreement
to be performed by such SCT Party. Correct and complete copies of the Charter
Documents of the Company and Omni-Tech have been previously furnished to the ACS
Parties. The Company and Omni-Tech are not in violation of any term of their
respective Charter Documents.
4.2 Authorization. This Agreement constitutes the valid and binding
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obligation of each of the SCT Parties enforceable against each of them in
accordance with its terms. The execution, delivery and performance of this
Agreement by each of the SCT Parties has been duly authorized by all necessary
corporate action required to be taken on the part of each of them.
4.3 Capitalization.
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(a) The Company's authorized capital stock consists of 1,000
shares of common stock, par value $0.01 per share, of which only the Company
Shares are issued and outstanding. The Company Shares are owned of record and
beneficially solely by SCT Financial. The Company Shares have been validly
issued, and are fully paid and non-assessable and none of the Company Shares has
been issued in violation of any preemptive or similar right, created by statute,
the Company's Charter Documents, or any Contract by which the Company is bound.
(b) Omni-Tech's authorized capital stock consists of 100 Class A
Common Shares (voting), without par value, 1,650 Class B Common Shares, without
par value, 4,125 Class C Common Shares, without par value, 4,125 Class D Common
Shares, without par value, 100,000 Class E Preference Shares, par value $100 per
share, 100,000 Class F Preference Shares, par value $100 per share, 100,000
Class G Preference Shares, par value $0.01 per share, 100,000 Class H Preference
Shares, par value $0.01 per share, 100,000 Class I Preference Shares (voting),
par value $1.00 per share, of which only the Omni-Tech Shares are issued and
outstanding. The Omni-Tech Shares are owned of record and beneficially solely by
SCT Canada. The Omni-Tech Shares have been validly issued and are fully paid and
non-assessable and none of the Omni-Tech Shares has been issued in violation of
any preemptive or similar right, created by statute, Omni-Tech's Charter
Documents or any Contract by which Omni-Tech is bound.
(c) Except for the Company Shares and the Omni-Tech Shares,
neither the Company nor Omni-Tech has issued other shares of capital stock,
there are no outstanding warrants, options or other rights, commitments,
agreements or understandings to purchase or acquire any shares of capital stock
or other equity securities of the Company or of Omni-Tech , there are no
outstanding debt securities of the Company or of Omni-Tech convertible into
equity securities or otherwise containing equity provisions, and there are no
outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to the Company or Omni-Tech.
Neither the Company nor Omni-Tech has reserved any of its authorized shares of
capital stock for any purpose. Except for restrictions imposed by the Securities
Act of 1933, as amended, or any other securities laws, there are no restrictions
on the transfer of the Company's or Omni-Tech's capital stock and neither the
Company nor Omni-
-11-
Tech has any understandings or agreements with SCT, SCT Financial, SCT Canada or
any other Person respecting the Company's or Omni-Tech's capital stock or other
securities. Neither SCT, SCT Financial nor SCT Canada has entered into or
granted any outstanding warrants, options, commitments, agreements or
understandings with any Person (except for the transactions contemplated by this
Agreement) to sell, transfer or otherwise dispose of any of the Company Shares
or the Omni-Tech Shares, respectively. Neither the Company nor Omni-Tech is
under any obligation whatsoever to issue any further shares or debentures.
(d) There are no obligations, contingent or otherwise, of the
Company or Omni-Tech to repurchase, redeem or otherwise acquire any Company
Shares or Omni-Tech Shares, or except as set forth on Schedule 4.3(d), to make
---------------
any material investment in (whether in the form of a loan, capital contribution
or otherwise) or provide any guarantee with respect to the obligations of, any
Person.
4.4 Title to Shares.
---------------
(a) SCT Financial has good and valid title to the Company
Shares, free and clear of all Liens, and upon transfer of the Company Shares to
ACS Enterprise and the receipt of payment for the Company Shares in accordance
with this Agreement, good and valid title to the Company Shares will pass to ACS
Enterprise, free and clear of all Liens.
(b) SCT Canada has good and valid title to the Omni-Tech Shares,
free and clear of all Liens, and upon transfer of the Omni-Tech Shares to ACS-
Alberta and the receipt of payment for the Omni-Tech Shares in accordance with
this Agreement, good and valid title to the Omni-Tech Shares will pass to ACS-
Alberta, free and clear of all Liens.
4.5 Subsidiaries; Investments in Other Entities. Neither the Company nor
-------------------------------------------
Omni-Tech has any Subsidiaries. Except as identified on Schedule 4.5, neither
------------
the Company nor Omni-Tech has any direct or indirect investments in, or interest
convertible into or exchangeable or exercisable for capital stock or interest in
any Person, and neither the Company nor Omni-Tech is a party to any Contract
requiring the Company or Omni-Tech or has otherwise agreed to purchase or
acquire any interest in, the equity of any corporation, trust, partnership or
business entity, or debt securities convertible into such securities or
otherwise containing equity provisions.
4.6 Conflict with other Instruments; Absence of Restrictions. The
--------------------------------------------------------
execution, delivery and performance of this Agreement by the SCT Parties (a)
will not contravene any provision of their respective Charter Documents, and (b)
except as set forth on Schedule 4.6, will not result in a breach of, or
------------
constitute a default under, any Contract to which any of the SCT Parties is a
party or by which any of the SCT Parties or any of their respective properties
are bound, or any Order or Requirements of Law which is binding on any of the
SCT Parties or any of the Company's or Omni-Tech's Assets, or result in the
creation or imposition of any Lien on any of the Shares or any of the Company's
or Omni-Tech's Assets or give to others any interest or rights therein or create
in any Third Party the right to modify, terminate or accelerate (or to make a
claim for damages in respect of) any Contract to which the Company or Omni-Tech
is a party or by which the Company or Omni-Tech is bound.
-12-
4.7 Government and Third-Party Approvals. Except for the filing of the HSR
------------------------------------
filings with the DOJ and the FTC pursuant to the requirements of the HSR Act and
the expiration of the HSR Waiting Period and except as listed on Schedule 4.7,
------------
none of the SCT Parties are required to obtain any Consent of or file, register
or qualify with any Governmental Entity, or any Third Party (including any Third
Party to any Contract with SCT or SCT Canada or any Third Party to any Contract
with the Company or Omni-Tech) (a) for the execution, delivery and performance
of this Agreement by the SCT Parties or (b) in order to vest in the Purchasers
good and marketable title in and to all of the Shares upon the Closing.
4.8 Title to Properties. The Company and Omni-Tech have good and
-------------------
marketable title to their properties and assets, whether tangible or intangible
which are reflected as owed in the March 2001 Balance Sheet and those acquired
since the date thereof (except for properties and assets sold or otherwise
disposed of in the ordinary course of business consistent with past practice
since the date thereof), free and clear of all Liens, except (a) Liens for Taxes
not yet due and payable, (b) utility easements, rights of way and other
imperfections of title and encumbrances which do not and will not have a
Material Adverse Effect, (c) Liens reflected in any Financial Statements, or (d)
as specifically disclosed in Schedule 4.8 (collectively, the "Permitted Liens").
------------
All of such properties and assets are in good working order, ordinary wear and
tear excepted, and are sufficient to carry on the Business in the same manner as
it is currently being conducted. Except as set forth on Schedule 4.8, no
------------
property used by the Company or Omni-Tech in connection with the Business (other
than the Leased Real Property) is held under any lease, security agreement,
pledge agreement or security arrangement or is located other than in the
possession of the Company or Omni-Tech. All of the leases of personal property
to which the Company or Omni-Tech is a party are effective and afford the
Company and Omni-Tech possession of the subject matter of the lease in
accordance with their respective terms.
4.9 Accounts Receivable. All of the Accounts Receivable as of March 31,
-------------------
2001 are reflected on the March 2001 Balance Sheets. Each of the Accounts
Receivable constitutes a valid claim against the debtor charged therewith on the
books of the Company and Omni-Tech, as applicable, net of reserves therefor as
reflected in the Books and Records, and arose in bona fide transactions in the
ordinary course of business. No account debtor has any valid set-off, deduction
or defense with respect thereto, and no account debtor has asserted such set-
off, deduction or defense except as set forth in Schedule 4.9. Except as set
------------
forth on Schedule 4.9, the Accounts Receivable as of the Closing Date are
------------
collectible in the ordinary course of business in the aggregate recorded amounts
thereof, net of the aggregate reserves therefor, as reflected in the Books and
Records and will be collected within one hundred eighty (180) days after the
later of (a) the due date for the applicable Accounts Receivable and (b) the
Closing Date (the "Collection Period"). Since the commencement of the Services
Agreement by and between SCT Government Systems, Inc. and the City of Memphis,
Tennessee, dated December 15, 2000, the Company has not made reserves or offset
any amounts due from the City of Memphis.
4.10 Equipment. The items of Equipment are in good working order, ordinary
---------
wear and tear excepted. The Equipment reflected in the Books and Records
includes all of the furniture, fixtures, machinery, equipment, motor vehicles,
office equipment, computers, tools and replacement parts (a) currently used in
the operation of the Business or (b) required to operate the Business as
presently conducted by the Company and Omni-Tech.
-13-
4.11 Leasehold Improvements and Fixtures. The Leasehold Improvements and
-----------------------------------
Fixtures are in good working order, ordinary wear and tear excepted. The
Leasehold Improvements and Fixtures reflected in the Books and Records include
all of the leasehold improvements, fixtures and appurtenances currently used by
the Company and Omni-Tech in operating the Company's and Omni-Tech's businesses.
4.12 Owned Real Property. Neither the Company nor Omni-Tech owns any real
-------------------
property and neither the Company nor Omni-Tech is a party to any Contract
pursuant to which the Company or Omni-Tech has the right or obligation to
purchase or acquire title to or any interest in any real property.
4.13 Leased Real Property.
--------------------
(a) The Leased Real Property identified on Schedule 4.13(a)
----------------
constitutes all of the real property which is leased or used by the Company and
Omni-Tech. The full and accurate address of each parcel of Leased Real Property
and the lessor of each parcel of Leased Real Property is identified on Schedule
--------
4.13(a). SCT and SCT Canada have previously delivered to the ACS Parties correct
-------
and complete copies of all the Leases.
(b) Except for the occupancy and use of the Leased Real
Property by the Company or Omni-Tech, there are no leases, tenancies, licenses
or other rights of occupancy or use for any portion of the Leased Real Property
in favor of Third Parties, and no Person other than the Company or Omni-Tech
occupies or uses any portion of the Leased Real Property.
(c) There are no pending or, to the Knowledge of the SCT
Parties, threatened, condemnations, eminent domain or similar proceedings which
could affect any part of the Leased Real Property.
(d) The buildings and improvements constituting a part of the
Leased Real Property, and the operation or maintenance thereof as operated and
maintained, do not contravene any zoning, building or safety Requirements of Law
or violate any restrictive covenant relating thereto in any manner. Neither the
Company nor Omni-Tech has received any notice of violation of any such
Requirements of Law or covenant which it has not cured. There is no outstanding
notice of violation, Order or citation specifically against the Company or Omni-
Tech under any Requirements of Law relating to any of the Leased Real Property.
4.14 Use of Assets. The Assets reflected in the Books and Records include
-------------
all Assets that are used in or required to operate the Business as presently
conducted by the Company and Omni-Tech. Except as set forth on Schedule 4.14,
-------------
the Accounts Receivable, Equipment, Intellectual Property and Information,
Leased Real Property, Leasehold Improvements and Fixtures, Prepaid Items and
Rights and Other Property reflected on the March 2001 Balance Sheet (other than
such assets as the Company or Omni-Tech shall have been acquired or disposed of
since March 31, 2001 in the ordinary course of business consistent with past
practices), to the extent the same are required to be reflected thereon in
accordance with GAAP, constitute all of the Assets of the Company and Omni-Tech
and, except as set forth on Schedule 4.14, there are no assets used by the
-------------
Company and Omni-Tech in operating the Business as presently conducted, other
than the Assets.
-14-
4.15 Financial Statements.
--------------------
(a) Schedule 4.15 consists of the following, referred to in
-------------
this Agreement collectively as the "Financial Statements:"
(i) the unaudited consolidating financial statements of
the Company and Omni-Tech for the fiscal year ended September 30, 2000
(including a balance sheet and a statement of operations and a statement of cash
flow) (collectively, the "FY 2000 Financial Statements"); and
(ii) the unaudited consolidating financial statements of
the Company and Omni-Tech for the six months ended March 31, 2001 (including a
balance sheet and a statement of operations and a statement of cash flow) (the
"March 2001 Financial Statements").
(b) The Financial Statements were prepared in accordance with
GAAP and present fairly in all material respects the financial condition, the
results of the operations and cash flow of the Company and of Omni-Tech, as
applicable, as at the respective dates thereof and for the periods reported
therein, except that notes required under GAAP are not included and subject to
normal recurring year-end audit adjustments, the effect of which adjustments are
not reasonably expected to have a Material Adverse Effect.
4.16 Absence of Undisclosed Liabilities. Except for Permitted Liabilities
----------------------------------
and as set forth on Schedule 4.16, the Company and Omni-Tech had no Liabilities
-------------
other than as reflected in the March 2001 Balance Sheets.
4.17 Permits and Approvals. Schedule 4.17 lists all licenses, permits,
--------------------- -------------
approvals, authorizations, and consents granted by any Governmental Entity for
the Company and Omni-Tech to conduct the Business as is currently conducted
(collectively, the "Permits"). All Permits have been obtained, are in full force
and effect, and the Business is currently being operated in compliance with the
terms of each of the Permits. Except as set forth on Schedule 4.17, there are no
-------------
pending, nor, to the Knowledge of the SCT Parties, threatened, any Legal
Proceedings which would reasonably be expected to result in the termination,
revocation, limitation or impairment of any Permit. Except as set forth on
Schedule 4.17, no SCT Party has received any written notice of violation with
-------------
respect to any Permit within the past (2) years.
4.18 Compliance with Law. Except as set forth on Schedule 4.18, the Company
------------------- -------------
and Omni-Tech have complied with, and are not in violation of, any Requirements
of Law to which the Company or Omni-Tech is subject. Except as set forth on
Schedule 4.18, no written notice from any Governmental Entity of any violation
-------------
of any Requirements of Law by the Company or Omni-Tech has been received by any
SCT Party since June 1, 1999.
4.19 Environmental Protection.
------------------------
(a) Except as set forth in Schedule 4.19(a), no SCT Party has
----------------
received any written notice from any Governmental Entity or other Third Party
that the Company or Omni-Tech is not in compliance in all material respects with
all Environmental Laws applicable to the Business.
-15-
(b) Except as set forth on Schedule 4.19(b), and for matters
----------------
that would not result, individually or in the aggregate with all other such
matters, in liability to the Company or Omni-Tech of $50,000 or more: (i) the
properties, operations and activities of the Company or Omni-Tech are in
compliance with all applicable Environmental Laws; (ii) the Company and Omni-
Tech and the operations and properties of the Company and Omni-Tech are not
subject to any existing, pending or, to the Knowledge of any SCT Party,
threatened Legal Proceeding by or before any Governmental Entity under any
Environmental Law; (iii) all Permits, if any, required to be obtained or filed
by the Company or Omni-Tech under any Environmental Law in connection with any
aspect of the business of the Company or Omni-Tech, including without limitation
those relating to the treatment, storage, disposal or release of a hazardous or
otherwise regulated substance, have been duly obtained or filed and will not
terminate because of the consummation of the purchase and sale of the Shares
under this Agreement and the Company and Omni-Tech are in compliance with the
terms and conditions of all such Permits; (iv) each of the Company and Omni-Tech
has satisfied and is currently in compliance in all material respects with all
financial responsibility requirements applicable to its operations and imposed
by any Governmental Entity under any Environmental Law, and no SCT Party has
received any notice of noncompliance with any such financial responsibility
requirements; (v) to the Knowledge of the SCT Parties, there are no physical or
environmental conditions existing on any property of the Company or Omni-Tech or
resulting from the Company's or Omni-Tech's operations or activities, past or
present, at any such location, that would give rise to any on-site or off-site
remedial obligations imposed on the Company or Omni-Tech under any Environmental
Laws or that would impact the soil, groundwater, surface water or human health;
(vi) to the Knowledge of the SCT Parties, since the effective date of the
relevant requirements of applicable Environmental Laws and to the extent
required by such applicable Environmental Laws, all hazardous or otherwise
regulated substances generated by the Company or Omni-Tech have been transported
only by carriers authorized under Environmental Laws to transport such
substances and wastes, and disposed of only at treatment, storage and disposal
facilities authorized under Environmental Laws to treat, store or dispose of
such substances and wastes; (vii) there has not been any release of hazardous
substances or any pollutant or contaminant into the environment by the Company
or Omni-Tech or in connection with their operations, which exposure or release
forms the basis of a valid Environmental Claim against the Company and Omni-
Tech; and (viii) the Company and Omni-Tech have made available to the ACS
Parties all internally and externally prepared environmental audits and studies
and all correspondence on substantial environmental matters in possession of any
SCT Party relating to any of the current or former properties or operations of
the Company or Omni-Tech.
For purposes of this Section 4.19, the term "properties" shall mean
------------
any and all real property in which the Company or Omni-Tech now hold or
previously held equitable or legal title or, in the case of properties which are
or were leased by the Company or Omni-Tech, shall be deemed to include only that
specific leased or subleased premises, as the case may be, for which the Company
or Omni-Tech are or were contractually obligated, or those specific leased or
subleased premises from which the Company or Omni-Tech have caused or
contributed to the release of any hazardous substance, as hereinafter defined.
For purposes of this Agreement, the terms "hazardous substance" and "release"
have the meanings specified in CERCLA and RCRA and shall include petroleum and
petroleum products, radon and PCBs, and the term "disposal" has the meaning
specified in RCRA; provided, however, that to the extent the laws of the state
in which the property is located establish a meaning for "hazardous
-16-
substance," "release," or "disposal" that is broader than that specified in
either CERCLA or RCRA, such broader meaning shall apply with respect to such
state laws.
4.20 Litigation. Except as set forth on Schedule 4.20: (i) no Legal
---------- -------------
Proceeding is pending or, to the Knowledge of the SCT Parties, threatened
against the Company or Omni-Tech or the transactions contemplated by this
Agreement; (ii) no SCT Party has received within the last two (2) years any
written notice of any investigation threatened or contemplated by any
Governmental Entity relating to the Company or Omni-Tech or the Business; and
(iii) none of the Company and Omni-Tech are a party or subject to the provisions
of any Order.
4.21 Conduct of Business. Since March 31, 2001, the Business of the
-------------------
Company and Omni-Tech has been conducted only in the ordinary course and in a
manner consistent with past practices.
4.22 Absence of Changes. Since March 31, 2001, except as set forth in
------------------
Schedule 4.22, there has not been:
-------------
(a) any change in the Condition, except changes in the ordinary
course of business, none of which (individually or in the aggregate) has had or
would reasonably be expected to have a Material Adverse Effect;
(b) any damage, destruction or Loss relating to the Business or the
Assets, whether or not covered by insurance which (individually or in the
aggregate) has had or would reasonably be expected to have a Material Adverse
Effect;
(c) except for the execution, delivery and performance of this
Agreement, any transaction by the Company or Omni-Tech not in the ordinary
course of business as conducted on that date;
(d) any amendment to the Charter Documents of the Company or Omni-
Tech;
(e) the creation or attachment, or written notice thereof, of any
Lien on any of the Assets, except for Permitted Liens;
(f) except for the agreement of SCT Property to assign the
Distribution Agreement to the Purchasers pursuant to this Agreement, any sale or
transfer of any of the Assets having a value of $50,000 or more not in the
ordinary course of business;
(g) any incurrence of any Liabilities except in the ordinary course
consistent with past practice, or any waiver of any rights of substantial value;
(h) any discharge or satisfaction of any Liens, or any payment of
any Liens or Liabilities, except in the ordinary course of business, consistent
with past practice;
(i) any increase in the salary or other compensation payable by the
Company or Omni-Tech to any of its executive officers, key employees or
directors or the
-17-
declaration, payment, commitment or obligation of any kind for the payment by
the Company or Omni-Tech of a bonus or other additional salary or compensation
to any such person;
(j) except for the agreement of SCT Financial and SCT Canada to sell
the Shares to the Purchasers pursuant to this Agreement, any sale, transfer or
issuance of any capital stock, equity security or debt security of the Company
or Omni-Tech or any option, warrant, right or commitment or agreement entered
into requiring or permitting any such sale, transfer or issuance; or
(k) any agreement by the Company or Omni-Tech to do any act which
would render any of the preceding clauses of this Section 4.22 inaccurate (other
------------
than the transactions contemplated by this Agreement).
4.23 Material Contracts.
------------------
(a) Except as listed on Schedule 4.23(a), neither the Company nor
----------------
Omni-Tech is a party to any Contracts of the type described below (collectively,
the "Material Contracts"):
(i) agreement or commitment with any of their respective
current or former shareholders, directors, or officers or any of their
Affiliates;
(ii) agreement or commitment with any labor union or other
representative of Employees;
(iii) employment agreement or severance agreement with any
Employee;
(iv) any agreement with any consultant or independent
contractor retained by the Company or Omni-Tech to provide personal services to
the Company or Omni-Tech (as opposed to independent contractors or consultants
retained by the Company or Omni-Tech as a subcontractor, vendor, supplier,
distributor, reseller, VAR, licensee, licensor and in other similar capacities)
involving payment of annual compensation by the Company or Omni-Tech to such
consultants or independent contractors in excess of $200,000;
(v) any Software License, the payment terms of which permit
license fees in excess of $100,000 to be paid after the date of this Agreement;
(vi) agreement to provide outsourcing services;
(vii) agreement to provide software services such as systems
implementation, modification, training and systems integration which, by its
terms and assuming the Company's or Omni-Tech's performance thereof, provides
for revenues to the Company or Omni-Tech in excess of $200,000 during the period
beginning on July 1, 2001 and ending June 30, 2002;
(viii) agreement to provide maintenance and enhancements such
as telephone support, regulatory updates, and financial and technical
enhancements which, by its
-18-
terms and assuming the Company's or Omni-Tech's performance thereof, provides
for revenues to the Company or Omni-Tech in excess of $50,000 during the period
beginning on July 1, 2001 and ending June 30, 2002;
(ix) agreement where the Company or Omni-Tech is acting as a
distributor or reseller of any Third Party Software;
(x) lease (including capital, operating or conditional sales)
under which the Company or Omni-Tech is either lessor or lessee of personal
property requiring annual rental payments in excess of $100,000, and any lease
under which the Company or Omni-Tech is the lessor of Real Property;
(xi) note, debenture, mortgage, pledge, security agreement, bond,
conditional sale agreement, equipment trust agreement, letter of credit
agreement, loan agreement or other contract or commitment for borrowing or
lending of money, agreement or arrangements for a line of credit or guarantee,
pledge or undertaking of the indebtedness of any other Person;
(xii) agreement or commitment for any charitable or political
contribution;
(xiii) agreement, contract or commitment for any capital expenditure
which will require payment in excess of $100,000;
(xiv) agreement or commitment limiting or restraining it from
engaging or competing in any lines of business with any person;
(xv) agreement with any Governmental Entity (other than agreements
where the Governmental Entity is a customer of the Company or Omni-Tech);
(xvi) power of attorney granted by the Company or Omni-Tech
in favor of any Person;
(xvii) except for agreements entered into with Third Parties
in the ordinary course of business, any warranty agreements or guarantees under
which the Company or Omni-Tech has any liability;
(xviii) joint ventures and royalty agreements;
(xix) any agreement with any vendor or other Third Party
contractor involving payment of annual amounts to such vendor or Third Party
contractor during the twelve (12) month period ended May 31, 2001 in excess of
$200,000; or
(xx) any agreement pursuant to which the Company or Omni-Tech is
required to make to, or receive from, the other parties thereto, aggregate
annual payments in excess of $100,000 (specifically excluding any agreements
which would have been required to be disclosed by any of clauses (i) through
(xix) above but for the dollar thresholds or period limitations provided for
therein).
-19-
The SCT Parties have delivered or made available to the Purchasers a
copy of each written agreement listed in Schedule 4.23(a).
----------------
(b) Each of the Contracts is valid and enforceable against the
Company or Omni-Tech and, against any other party thereto in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting creditor's rights or by general principles of equity. The
Company and Omni-Tech, the other parties thereto, are in compliance with the
provisions of the Contracts. Except as set forth on Schedule 4.23(b), (i) the
----------------
Company and Omni-Tech, and to the Knowledge of the SCT Parties, none of the
other parties to any Contract, is in default in the performance, observance or
fulfillment of any obligation, covenant or condition contained in such Contract
and (ii) no event has occurred which, with or without the giving of notice or
lapse of time, or both, would constitute a default thereunder by the Company or
Omni-Tech, or to the Knowledge of the SCT Parties, any other party thereto.
(c) Except as set forth on Schedule 4.23(c), none of the
----------------
Contracts to which the Company or Omni-Tech is a party, contains any provisions
which would cause the Company or Omni-Tech to be liable to the other party
thereto for any amount (or any increased price for goods or services being
provided by the other party thereto) as a result of the consummation of the
transactions contemplated by this Agreement.
4.24 Warranties and Liabilities. Except as set forth on Schedule 4.24, no
-------------------------- -------------
written claims for breach of product or service warranties or guarantees to
customers have been received by the Company or Omni-Tech which were not, or
would not be, satisfied by the performance of the Company's or Omni-Tech's
obligations pursuant to agreements entered into in the ordinary course of
business in accordance with their respective terms. Other than the warranties
set forth in the Company's and Omni-Tech's Contracts with their respective
customers, neither the Company nor Omni-Tech has given or made any warranties to
Third Parties with respect to any Software Licenses or other products sold or
services performed by it.
4.25 Taxes.
-----
(a) Except as set forth in Schedule 4.25, all material Tax
-------------
Returns required to be filed on or before the Closing Date by or in respect of
any of the Company and Omni-Tech have been or will be duly and timely filed and
all Taxes shown as due thereon have been or will be duly and timely paid. Such
Tax Returns are or will be true, complete and correct in all material respects.
Except as set forth in Schedule 4.25(a), the Company and Omni-Tech have made
----------------
sufficient provision for the payment of all Taxes required to be accrued which
are not yet due and payable. No deficiency in the payment of any Taxes for any
period to the date hereof has been assessed against the Company or Omni-Tech by
any Taxing Authority which has not been discharged in full. Except as set forth
on Schedule 4.25, no audits or other proceedings have been instituted against
-------------
the Company or Omni-Tech which are still pending and, to the Knowledge of the
SCT Parties, no audits or other proceedings are proposed or threatened against
the Company or Omni-Tech for any Taxes. There are not now in force any waivers
or agreements by the Company or Omni-Tech of any statute of limitation for the
assessment of any Tax. All Taxes required to have been withheld or deducted from
any payment and paid over to any Taxing
-20-
Authority by the Company or Omni-Tech have been so withheld or deducted and paid
to the extent due and payable.
(b) None of the assets of the Company or Omni-Tech is subject to
a safe-harbor lease (pursuant to Section 168(f)(8) of the Internal Revenue Code
of 1954 as in effect after the Economic Recovery Tax Act of 1981 and before the
Tax Reform Act of 1986) or is "tax-exempt use property" (within the meaning of
Section 168(h) of the Code) or "tax-exempt bond financed property" (within the
meaning of Section 168(g)(5) of the Code).
(c) Except as set forth on Schedule 4.25(c), (i) the Company has
----------------
not been, within the past seven (7) years, subject to taxation by any
jurisdiction outside the United States, and (ii) Omni-Tech has not been, within
the past seven (7) years, subject to taxation by any jurisdiction outside
Canada.
(d) No disclosure statement pursuant to Section 6662 of the Code
or any comparable disclosure with respect to foreign, state and/or local tax
statutes has been filed with respect to any item relating to the Company or
Omni-Tech.
(e) Except as set forth on Schedule 4.25(e), no material claim
----------------
has been made against the Company or Omni-Tech by any taxing authority in any
jurisdiction where the Company or Omni-Tech did not file sales, use, value-
added, or similar Tax Returns or did not pay sales, use, value-added, goods and
services, or similar Taxes, that the Company or Omni-Tech is or may be subject
to sales, use value-added or similar taxation by that jurisdiction.
(f) None of the Company or Omni-Tech has agreed to make any
adjustment pursuant to Section 481 of the Code or pursuant to any other similar
provision of the tax laws of any state, local or foreign jurisdiction, which
could have an adverse effect on Taxes or taxable income, or which could have an
adverse effect on any tax credit, net operating losses or capital losses of the
Company or Omni-Tech in any taxable period after the Closing. Neither the
Company nor Omni-Tech has any application pending with any taxing authority
requesting permission for any changes in any accounting method. No taxing
authority has proposed, in writing, any such adjustment or change in accounting
method. The Company has not failed to comply with any applicable provisions
related to the filing of any application for any accounting method change that
would cause the application to be rejected.
(g) No agreements relating to allocation or sharing of, or
liability or indemnification for, Taxes exist between the Company and any other
Person.
(h) The Company has not made any payments, is not obligated to
make any payments, and is not a party to any agreement that could obligate it to
make any payments that will not be deductible under Code Section 280G.
(i) The Company has been a member of the affiliated group of
corporations (as defined in Code Section 1504(a)) of which SCT is the common
parent since 1992.
(j) No closing agreement or settlement agreement pursuant to any
provision of any Tax law has been entered into with any Taxing Authority by or
with respect to
-21-
the Company that requires the Company to include any item of income in, or
exclude any item of deduction from, any Tax Return for any taxable period ending
after the Closing Date.
(k) Without limiting the foregoing, with respect to Canadian tax
issues:
(i) Except pursuant to this Agreement or as specifically
disclosed in writing to the Purchaser, for purposes of (other than SCT Parties)
the Income Tax Act (Canada) or any other applicable Tax statute, no person or
group of persons has ever acquired or had the right to acquire control of Omni-
Tech;
(ii) None of Sections 78, 80, 80.01, 80.02, 80.03 or 80.04
of the Income Tax Act (Canada), or any equivalent provision of the Tax
legislation of any province or any other jurisdiction, have applied or will
apply to Omni-Tech at any time up to and including the Closing Date;
(iii) Omni-Tech has not acquired property from a non-arm's
length person, within the meaning of the Income Tax Act (Canada), for
consideration, the value of which is less than the fair market value of the
property acquired in circumstances which could subject it to a liability under
Section 160 of the Income Tax Act (Canada);
(iv) For all transactions between Omni-Tech and any non-
resident person with whom Omni-Tech was not dealing at arm's length during a
taxation year commencing after 1998 and ending on or before the Closing Date,
Omni-Tech has made or obtained records or documents that meet the requirements
of paragraphs 247(4)(a) to (c) of the Income Tax Act (Canada);
(v) Omni-Tech is duly registered under subdivision (d) of
Division V of Part IX of the Excise Tax Act (Canada) with respect to the goods
and services tax and harmonized sales tax and the registration number is: 13116-
5045-RT0001;
(vi) The only reserves under the Income Tax Act (Canada)
or any equivalent provincial statute to be claimed by Omni-Tech for the taxation
year ended immediately prior to the acquisition of control by the Purchaser are
disclosed in Schedule 4.25(i)(vi);
--------------------
(vii) Omni-Tech has not filed any elections, designations
or similar filings which will be applicable for any period ending after the
Closing.
(viii) SCT Canada is a resident of Canada for purposes of
the Income Tax Act (Canada).
4.26 Insurance. SCT maintains for the benefit of the Company and Omni-Tech,
---------
insurance policies or binders of fire, commercial liability, worker's
compensation, and vehicular insurance as set forth on Schedule 4.26. Such
-------------
policies and binders are valid and in full force and effect. Neither the Company
nor Omni-Tech is in default with respect to any provision contained in any such
policy or binder or in violation of any statutory regulation applicable to such
policy or binder and neither the Company nor Omni-Tech has failed to give any
notice or present any claim covered thereunder of which it has Knowledge under
any such policy or binder in a timely
-22-
fashion, except for such defaults, violations, or failures which would not
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor Omni-Tech has failed to report to any of its insurance carriers any material
change in the state of facts or the occurrence of any event which is reasonably
likely to result in its insurance carriers not having to cover the Company or
Omni-Tech for any damages resulting from any insured event pursuant to and in
accordance with the provisions of such policies or any statutory provisions
applicable to such policies. The Company and Omni-Tech has complied with all
statutory obligations to maintain insurance with respect to any of its assets,
liabilities and staff.
4.27 Intellectual Property and Information.
-------------------------------------
(a) Schedule 4.27(a)(i) sets forth, as to each item of the
-------------------
Intellectual relevant application or registration number, (ii) relevant filing,
registration, issue or application date, (iii) record owner, (iv) country and
(v) title. Schedule 4.27(a)(ii), sets forth all Intellectual Property the
--------------------
Company or Omni-Tech owns (other than registered Intellectual Property set forth
on Schedule 4.27(a)(i)) or has a right to use. Except as set forth on Schedule
-------------------- --------
4.27(a)(iii), the Company and Omni-Tech own or have a valid right to use the
-----------
Intellectual Property and Information necessary for the Business as now being
conducted. The SCT Parties have not filed for registration for any Intellectual
Property or Information being developed for, or in use by, the Business that is
not listed on Schedule 4.27(a)(i).
-------------------
(b) Except as set forth in Schedule 4.27(b), the Company and
----------------
Omni-Tech have obtained an enforceable written assignment of all right, title
and interest in and to each item of the Intellectual Property and Information
owned by the Company or Omni-Tech, from each Person participating in the
discovery, development or creation of such item or is a party to a relationship
with any such Person whereby, in accordance with applicable Requirements of Law,
the Company or Omni-Tech have been accorded full, effective and original
ownership of such item. Except as otherwise provided in Schedule 4.27(b),
----------------
neither the Company nor Omni-Tech has the obligation to compensate, or to obtain
the consent of, any Third Party for the use of any item of the Intellectual
Property and Information. Except as disclosed on Schedule 4.27(b) there is
----------------
neither pending (nor to the SCT Parties' Knowledge, threatened) any Legal
Proceeding against the Company or Omni-Tech contesting the validity of, or the
Company's or Omni-Tech's right to use, any of the Intellectual Property and
Information. Except as otherwise provided on Schedule 4.27(b) and except for (x)
----------------
employees and authorized agents and contractors of Company and Omni-Tech who
have a need to know or who have the right to use the Intellectual Property and
Information in connection with the performance of their duties and (y) the
Company's and Omni-Tech's customers with whom Software Licenses have been
entered in the ordinary course of business, (i) neither the Company nor Omni-
Tech has granted any license or other right to use, in any manner, any item of
the Intellectual Property and Information, whether or not requiring the payment
of royalties, and (ii) no Third Party has any right to use any of the
Intellectual Property and Information.
4.28 Infringement.
------------
-23-
(a) Except as set forth on Schedule 4.28(a), to the SCT Parties'
----------------
Knowledge, no Third Party is infringing all or any portion of the Intellectual
Property and Information.
(b) There is no interference action or other Legal Proceeding
pending or, to the SCT Parties' Knowledge, threatened before any Governmental
Entity (including, without limitation, the United States Patent and Trademark
Office or corresponding Governmental Entities in non-U.S. jurisdictions) in
regard to any of the Intellectual Property and Information.
(c) The modification, use, promotion, distribution, licensure
and/or sale of the Intellectual Property and Information has not infringed and
does not infringe any Intellectual Property and Information right of any Third
Party. Neither the Company nor Omni-Tech has received written notice of
infringement upon, misappropriation of or conflict with any asserted right of
any Third Party.
(d) The creation, development and reduction to practice of the
Intellectual Property and Information have not constituted or involved, and do
not constitute or involve, the misappropriation of trade secrets of any other
Person (including, without limitation, any Governmental Entity).
4.29 Software.
--------
(a) The Software functions in accordance with the generally
available published user documentation and specifications therefor in all
material respects. Except as set forth on Schedule 4.29(a) and except for
----------------
Software under development, all of the Software is available in "general
release" form (as opposed to only "alpha," "beta" or "early release" forms) and
except as set forth in Schedule 4.29(a), the Company or Omni-Tech has user and
----------------
technical documentation that describes the functionality provided by such
Software and which is accurate in all material respects.
(b) Except as set forth on Schedule 4.29(b), neither the Company
----------------
nor Omni-Tech has licensed, leased, sold or otherwise transferred or disclosed
the source code for any of the Software Licenses to any Person other than
pursuant to a valid and binding Software License, and other than disclosure of
such source code to Employees and Third Parties pursuant to an agreement
protecting the intellectual property rights therein.
(c) The Company or Omni-Tech has taken all steps reasonably
necessary to protect all right, title, and interest in and to the Software owned
by the Company or Omni-Tech, including to the extent reasonably necessary,
without limitation, the use of written agreements containing appropriate
confidentiality provisions with all third parties having access to the source
code relating to the Software.
(d) The Company or Omni-Tech possesses or has access to the
original and all copies of all documentation, including, without limitation, all
source code for all Software. Upon consummation of the transactions contemplated
by this Agreement, the Company or Omni-Tech will continue to own all the
Software owned by it, free and clear of all Liens except for Permitted Liens and
the rights granted under any Software License or any other
-24-
license granted by the Company or Omni-Tech in the ordinary course of business
consistent with past practices.
(e) Any programs, modifications, enhancements or other
inventions, improvements, discoveries, methods, or works of authorship included
in the Software that were created by employees of the Company or Omni-Tech were
made in the regular course of such employee's employment with the Company or
Omni-Tech using the facilities and resources of the Company or Omni-Tech and, as
such, constitute "works made for hire."
4.30 Employment Matters
------------------
(a) Schedule 4.30(a)(i) lists, with respect to each Employee
-------------------
whose total cash compensation paid during the calendar year 2000 equaled or
exceeded $75,000: (i) the base salary, as currently in effect, for each such
Employee: (ii) the bonus arrangements, if any, currently in effect for each such
Employee; (iii) the commission arrangements, if any, currently in effect for
each such Employee, and (iv) the date on which the most recent salary increase
went into effect for each of the Employees and the amount of each such increase.
Schedule 4.30(a)(ii) lists, with respect to all Employees other than those
--------------------
identified on Schedule 4.30(a)(i): (x) the name of each Employee and (y) the
-------------------
base salary, as currently in effect for each Employee. There is not pending or,
to the Knowledge of the SCT Parties, threatened any labor dispute or work
stoppage involving the Employees. Except as disclosed on Schedule 4.30 or the
-------------
Contracts referred to therein, neither the Company nor Omni-Tech has agreed to
increase the compensation level of any of its officers, directors, Employees or
independent contracts or has any understanding respecting such an increase.
(b) Except as shown in Schedule 4.30(b), all Employees are
----------------
terminable at the will of the Company and Omni-Tech (subject to Requirements of
Law which are exceptions to the principle of "at will" employment), and neither
the Company and Omni-Tech, as applicable, nor any present or former director, or
officer, Employee or agent of either, has made any binding commitments on behalf
of the Company or Omni-Tech, written or oral, to any present or former director,
officer, agent or Employee concerning his term, conditions, benefits or
employment. No SCT Party is a party to any non-competition agreement with an
Employee that would restrict such Employees' employment by Purchasers following
the Closing.
(c) The Company and Omni-Tech has paid or made provision for the
payment of all wages accrued to or for the benefit of the Employees incurred
before the Closing. Except as set forth on Schedule 4.30(c), Company and Omni-
----------------
Tech (i) are in compliance in all material respects with all applicable
Requirements of Law concerning employment, employment practices, leave, safety,
discrimination, immigration, labor relations, wages, hours and the payment and
withholding of Taxes, and (ii) have withheld and paid to the appropriate
Governmental Entity, or are holding for payment not yet due to the Governmental
Entity, all amounts required by law or agreement to be withheld from the
salaries or wages of the Employees. There are no claims pending against Omni-
Tech relating to Canadian workers' compensation legislation.
(d) Except as shown on Schedule 4.30(d), neither the Company nor
----------------
Omni-Tech is a party to any collective bargaining or other labor union contract.
Except as shown on
-25-
Schedule 4.30(d), neither the Company nor Omni-Tech is negotiating any
----------------
collective bargaining agreements. Except as shown on Schedule 4.30(d), there are
----------------
no pending, or, to the Knowledge of the SCT Parties, any threatened grievances,
mediation or arbitration proceedings. There have been no prior grievances,
mediations or arbitrations under any agreement identified on Schedule 4.30(d).
----------------
No union organizing or election activities involving any nonunion Employees of
the Business are in progress or, to the Knowledge of the SCT Parties,
threatened. Except as shown on Schedule 4.30(d), there is no pending or, to the
----------------
Knowledge of the SCT Parties, threatened labor dispute, slowdown, strike or work
stoppage against the Company or Omni-Tech. Neither the Company nor Omni-Tech nor
any of their respective representatives or Employees has committed any unfair
labor practice in connection with the operation of the Business. There is no
pending or, to the Knowledge of the SCT Parties threatened charge or complaint
against the Company or Omni-Tech by or before the National Labor Relations Board
or any comparable state agency or any Canadian agency.
(e) With respect to any Person retained by the Company or Omni-
Tech as an independent contractor or consultant who is required by applicable
law to be classified as an employee under any applicable Requirements of Law
relating to employment, employment practices, leave, safety, discrimination,
immigration, labor relations, employee benefits, wages, hours and the payment
and withholding of taxes, neither the Company nor Omni-Tech has any material
unpaid liability for any claims under any Company or Omni-Tech benefit plan with
respect to such independent contractors and consultants. Except as set forth on
Schedule 4.30(e), independent contractors and consultants currently retained by
----------------
the Company or Omni-Tech to provide personal services to the Company or Omni-
Tech (as opposed to independent contractors or consultants retained by the
Company or Omni-Tech as a subcontractor, vendor, supplier, distributor,
reseller, VAR, licensee, licensor and in other similar capacities) are
terminable at will on not more than thirty (30) days' prior notice, without
additional cost to the Company or Omni-Tech other than amounts due for services
rendered in the ordinary course of business.
4.31 Overtime, Back Wage, Vacation, and Discrimination Claims. Except as
--------------------------------------------------------
set forth on Schedule 4.31, there are no outstanding claims against the Company
-------------
or Omni-Tech asserted by any present or former Employee on account of or for:
(a) overtime pay, other than overtime pay for work done during the current
fiscal year; (b) wages or salary for any period other than the current fiscal
year; (c) any amount of vacation pay or pay in lieu of vacation time, other than
vacation time or pay in lieu thereof earned in or in respect of the calendar
year 2000; (d) any amount of unused vacation days or pay in lieu of unused
vacation days enjoyed before or during the calendar year 2000 or (e) any
violation of any Requirement of Law relating to minimum wages or maximum hours
of work.
4.32 Pension and Other Employee Benefit Plans. Except for the items listed
----------------------------------------
on Schedule 4.32 (the "Plans"), there are no plans, funds, policies, programs,
-------------
agreements, arrangements or understandings sponsored, maintained or contributed
to by or on behalf of the Company or Omni-Tech or any Affiliated Company (as
hereinafter defined) or to which the Company or Omni-Tech is a party (other than
Contracts with Employees required to be disclosed under Schedule 4.30) which
-------------
provide any employee of the Company or Omni-Tech (or any dependent or
beneficiary of any such employee) with (a) retirement benefits or deferred
compensation; (b) severance or separation from service benefits; (c) incentive,
performance, stock, stock appreciation or bonus awards; (d) health care
benefits; (v) disability income or wage
-26-
continuation benefits; (e) supplemental unemployment benefits; (f) life
insurance, death or survivor's benefits; (g) accrued sick pay or vacation pay;
or (h) any other type of employee benefit offered under any arrangement, whether
or not subject to characterization as an "employee benefit plan" within the
meaning of Section 3(3) of ERISA. As to the Plans, each of the following is
true: (i) all amounts due as contributions to the Plans or payments from the
Plans have been timely paid; (ii) the Company, Omni-Tech and any Affiliated
Company have performed or satisfied all material obligations required to be
performed or satisfied by them under, and are not in default under or in
violation of, the Plans; (iii) the form and operation of each of the Plans
complies in all material respects with the requirements (including, but not
limited to, reporting and disclosure requirements applicable to them) prescribed
by all statutes, orders or governmental rules or regulations applicable to the
Plans; (iv) neither the Company, Omni-Tech nor any Affiliated Company or any
other "disqualified person" or "party in interest" (as defined in Section 4975
of the Code and Section 3(14) of ERISA, respectively) has engaged in any
"prohibited transaction," as such term is defined in Section 4975 of the Code or
Section 406 of ERISA, which could reasonably be expected to subject the Plans
(or its related trust), the Company or Omni-Tech, the Purchasers, any
shareholder, officer, director, partner or employee of the Company or Omni-Tech
or the Purchasers, or any trustee, administrator or other fiduciary of the Plans
to the tax or penalty imposed under Section 4975 of the Code or Section 502(i)
of ERISA; (v) there are no Legal Proceedings or claims pending (other than
routine claims for benefits) or, to the Knowledge of the SCT Parties,
threatened, against the Plans or against the assets of the Plans; (vi) each of
the Plans intended to be qualified under Section 401 of the Code, has been so
qualified during the period from its adoption; (vii) each trust maintained in
connection with any of the Plans and intended to be exempt from tax under
Section 501(a) of the Code, has been so exempt during the period from its
adoption and (viii) no FAS 106 or FAS 112 liability exists. For purposes of this
Section 4.32, "Affiliated Company" means (x) a member of any "controlled group"
------------
(as defined in Section 414(b) of the Code) of which the Company is a member, (y)
a trade or business, whether or not incorporated, under common control (within
the meaning of Section 414(c) of the Code) with the Company, or (z) a member of
any affiliated service group (within the meaning of Section 414(m) of the Code)
of which either of the Company is a member. The Company and any Affiliated
Company do not sponsor or contribute to, and have not in the past sponsored or
contributed to, and have no Liabilities with respect to, any defined benefit
plan subject to Title IV of ERISA or any "multi-employer plan" (as defined in
Section 3(37) of ERISA). The SCT Parties have delivered to the ACS Parties a
complete copy of the Plans, including any related trust agreement, all
amendments to the Plans or such trust agreement, the three most recent annual
reports (Form 5500, including all Schedules thereto) prepared in connection with
the Plans and the most recent Internal Revenue Service determination letters
received with respect to any of the Plans intended to be qualified under Code
Section 401.
4.33 Customers.
---------
(a) The SCT Parties have made available to Purchasers on
Schedule 4.33(a) a list of major active customers of the Business from whom
----------------
revenues totaled $500,000 or more for the twelve months ended March 31, 2001
(the "Current Major Customers"), with the amount of monthly revenues
attributable to each such Current Major Customer for each of the twelve (12)
months ended March 31, 2001.
-27-
(b) Except as described in Schedule 4.33(b), no Current Major
----------------
Customer or other customer of the Business from whom revenues totaled $500,000
or more during any of the fiscal years ended September 30, 1999 or 2000 has
terminated or materially adversely altered its relationship with the Company or
Omni-Tech since September 30, 1999, or otherwise notified the Company or Omni-
Tech of any intention to do so.
4.34 Year 2000. All equipment and computer software and hardware of the
---------
Company or Omni-Tech are Year 2000 Compliant (as defined below) and there are no
Y2K Deficiencies (as defined below) in connection with computer software code
used in or by the Business or the Software provided by the Business to its
customers. The term "Y2K Deficiencies," means any cessation of functioning,
generation of incorrect data or production of incorrect results when processing,
providing or receiving (a) date-related data from, into and between the
twentieth and the twenty-first centuries, or (b) date-related data in connection
with any valid date in the twentieth and twenty-first centuries. The term "Year
2000 Compliant" means, with respect to equipment, software and hardware, no
cessation of functions or generation or production of incorrect results as a
result of Y2K Deficiencies.
4.35 Illegal or Unauthorized Payments, Political Contributions; Antitrust.
--------------------------------------------------------------------
(a) None of the SCT Parties has, directly or indirectly, made or
authorized on behalf of the Company or Omni-Tech any payment, contribution or
gift of money, property or services in contravention of any Requirements of Law
(i) as a kickback or bribe to any person or entity, or (ii) to any political
organization, or the holder of or any aspirant to any elective or appointive
public office.
(b) None of the Company and Omni-Tech has violated any federal
or state antitrust statutes, rules or regulations, including without limitation
those relating to unfair competition, price fixing or collusion.
4.36 No Brokers. Except for X. X. Xxxxxxxxx, Towbin and Xxxxx X. Xxxxxxx
----------
Company Limited, whose respective fees will be paid by SCT, none of the SCT
Parties and no Person on their behalf has made any agreement or taken any action
which would cause the Company or Omni-Tech or any of the ACS Parties to be
obligated to pay a commission as a result of the sale of the Shares or the other
transactions contemplated pursuant to this Agreement.
4.37 Securities Compliance. The offer and sale of the Omni-Tech Shares to
---------------------
ACS-Alberta in the manner provided for in this Agreement is exempt from the
prospectus and registration requirements of the securities laws of the
applicable Provinces in Canada. The offer and sale of the Company Shares to ACS
Enterprise in the manner provided for in this Agreement will be pursuant to
valid exemptions from the registration requirements of applicable U.S. federal
and state securities laws and no SCT Party or any authorized agent acting on
behalf of an SCT Party will take any action hereafter that would cause the loss
of such exemptions.
4.38 Statements and Other Documents Not Misleading. No financial statement,
---------------------------------------------
document or other instrument furnished by any of the SCT Parties to the ACS
Parties in connection with the transactions contemplated by this Agreement
contains any untrue statement of any material fact or omits to state any
material fact required to be stated in order to make such
-28-
statement, document or other instrument not misleading in light of the
circumstances under which they were made or provided. The ACS Parties understand
and acknowledge that the SCT Parties do not make any representation or warranty
as to the future operations or financial forecasts or future results of any kind
with respect to the Company or Omni-Tech which may be contained in any business
plans or other documents or information furnished to any of the ACS Parties and
that such discussions of the future operations and financial forecasts may not
be realized, that such estimates or forecasts are based on assumptions which may
or may not occur, and that no assurances can be given that the actual results of
operations or financial condition of the Company and Omni-Tech will conform to
such estimates or forecasts.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
RESPECTING PURCHASERS
The ACS Parties hereby jointly and severally represent and warrant to
the SCT Parties as follows:
5.1 Organization; Power and Authority. ACS Enterprise and ACS are
------------
corporations duly formed, validly existing and in good standing under the laws
of the State of Delaware. ACS-Alberta is a corporation duly formed and validly
existing under the laws of the Province of Alberta, Canada. Each of the
Purchasers and ACS has the right, power and authority to enter into and perform
this Agreement and any other agreements contemplated by this Agreement.
5.2 Authorization. The execution and delivery of this Agreement by the
-------------
Purchasers and ACS and performance of the obligations of the Purchasers and ACS
contemplated by this Agreement have been duly and validly authorized by all
necessary corporate action required to be taken on the part of the Purchasers
and ACS. This Agreement constitutes the valid and binding obligations of the
Purchasers and ACS enforceable against each of them in accordance with its
terms.
5.3 Conflict With Other Instruments; Absence of Restrictions. The
--------------------------------------------------------
execution, delivery and performance of this Agreement by the Purchasers and ACS
(a) will not contravene any provision of the Purchasers' or ACS's Charter
Documents and (b) will not result in a breach of, or constitute a default under,
any Contract to which the Purchasers or ACS is a party or by which the
Purchasers or ACS is bound, or any Order or provision of any Requirements of Law
which is binding on the Purchasers or ACS or any of their assets. Except for the
filing of HSR Filings with the DOJ and the FTC under the HSR Act and the
expiration of the HSR Waiting Period, neither the Purchasers nor ACS is required
to obtain any Consent of or file, register or qualify with, any Governmental
Entity, or Third Party (including any Third Party to any Contract with the
Purchasers and ACS) (i) for the execution, delivery, and performance of this
Agreement by the Purchasers or ACS and (ii) in order for the Purchasers and ACS
to consummate the transactions contemplated by this Agreement.
5.4 No Broker. Neither the Purchasers, ACS nor anyone on their respective
---------
behalves has made any agreement or taken any action which would cause any of the
SCT Parties
-29-
to become obligated to pay a commission as a result of the sale of the Shares or
the other transactions contemplated pursuant to this Agreement.
5.5 Financing. The Purchasers' and ACS's obligation to consummate the
---------
transactions contemplated by this Agreement is not subject to or conditioned
upon obtaining financing, and the Purchasers and ACS have sufficient funds and
resources to pay in full the Purchase Price in accordance with the provisions of
this Agreement.
5.6 Investment Purpose. The Purchasers are acquiring the Shares for their
------------------
own account for investment purposes and not with a view toward any resale or
distribution in connection therewith.
5.7 No Legal Actions. There is no Legal Proceeding or Order pending
----------------
against or, to the knowledge of the Purchasers or ACS, threatened against or
affecting, the Purchasers, ACS or any of their respective properties or
otherwise that could adversely affect or restrict the ability of the Purchasers
and ACS to consummate fully the transactions contemplated by this Agreement or
that in any manner draws into question the validity of this Agreement.
ARTICLE 6
CERTAIN COVENANTS AND OTHER MATTERS
6.1 Corporate Examinations and Investigations. Until the Closing, the SCT
-----------------------------------------
Parties shall cooperate reasonably with the ACS Parties and with its counsel,
accountants and representatives in the conduct of their investigation of the
Company and Omni-Tech and, in connection with such investigation, to grant to
the ACS Parties and such representatives reasonable access to the properties,
Books and Records and Contracts of the Company and Omni-Tech. Any such
investigation and access shall be conducted during regular business hours, upon
reasonable prior notice under the circumstances and in a manner not disruptive
to the SCT Parties' respective businesses. Nothing contained in this Section 6.1
-----------
shall require any of the SCT Parties to disclose or deliver any information or
documents to either of the ACS Parties before the Closing Date the disclosure or
delivery of which, under the advice of their respective counsel, would cause
such information or documents no longer to be protected by the attorney-client
privilege or work product doctrine.
6.2 Confidentiality. SCT and ACS shall continue to adhere to their
---------------
respective obligations under that certain Confidentiality Agreement, dated April
6, 2001 (the "Confidentiality Agreement"). The Purchasers hereby agree that the
terms and conditions of the Confidentiality Agreement shall be binding upon the
Purchasers as a "Recipient," as such term is defined in the Confidentiality
Agreement and that such terms and conditions shall inure to the benefit of each
of SCT Financial, SCT Property, the Company or Omni-Tech as a "Company," as such
term in defined in the Confidentiality Agreement.
6.3 Restriction on Certain Discussions and Actions.
----------------------------------------------
(a) Until the Closing Date, the SCT Parties shall, and shall
cause their respective attorneys, accountants and other agents and
representatives to, refrain from taking any action, directly or indirectly, to
solicit, encourage, initiate or participate in any way in discussions or
negotiations with, or furnish any information with respect to the Company or
-30-
Omni-Tech to, any Person (other than the ACS Parties and their representatives)
in connection with any possible or proposed sale of capital stock of, sale of
twenty percent (20%) or more of the assets of, or merger or other business
combination involving, the Company or Omni-Tech or the acquisition of an equity
interest in the Company or Omni-Tech or any similar transaction in which the
Company or Omni-Tech is a party; provided, however, that if, at any time prior
to the Closing Date, the SCT board of directors (the "SCT Board") determines in
good faith, after consultation with (and receipt of advice from) its financial
advisor and outside legal counsel, that any such action is necessary for the SCT
Board to comply with its fiduciary duties to SCT's shareholders under applicable
Requirements of Law, then the SCT Parties may, in response to a bona fide
written proposal to enter into any such sale, merger, business combination or
acquisition which SCT received without breach of this Section 6.3 and which, in
-----------
the good faith determination of the SCT Board (after consultation with and
receipt of advice from its financial advisor and outside legal counsel) is a
superior transaction to the transaction contemplated by this Agreement (a
"Superior Proposal"): (i) furnish information with respect to the Company or
Omni-Tech to any Person pursuant to a customary confidentiality agreement (as
determined by the Company after consultation with its outside counsel), (ii)
participate in negotiations regarding such Superior Proposal, (iii) provide
access to Employees, accountants, lawyers, financial advisors and other advisors
to the SCT Parties, (iv) provide access to the properties, Books and Records and
Contracts of the Company and Omni-Tech; (v) conduct meetings regarding such
Superior Proposal and (vi) terminate this Agreement. The SCT Parties shall
promptly notify the ACS Parties of all relevant terms of any such Superior
Proposal with respect to which any of the SCT Parties proposes to take any one
or more of the actions described in clauses (i) through (vi) above.
(b) Nothing contained in this Section 6.3 will prohibit SCT
-----------
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2 (promulgated under the Securities Exchange Act of 1934, as amended), or
from making any disclosure to SCT's stockholders if, in the good faith judgment
of the SCT Board, after consultation with and receipt of advice from outside
legal counsel, the failure to so disclose would violate applicable Requirements
of Law.
6.4 Conduct of Business Prior to the Closing. Until the Closing:
----------------------------------------
(a) The Company and Omni-Tech shall preserve their respective
business organizations intact and conduct their Business, operations, activities
and practices in the usual and ordinary course, consistent with its past
practices;
(b) Except as set forth in Schedule 6.4(b), neither the
---------------
Company nor Omni-Tech shall grant or otherwise make, or agree to grant or
otherwise make, any increase in the compensation payable or to become payable by
it to any directors, executive officers and Employees of the Company or Omni-
Tech other than in the ordinary course, consistent with past practice;
(c) Neither the Company nor Omni-Tech shall sell or dispose of
any of its Assets used or useful in the operation of its Business (otherwise
than in the ordinary course of business consistent with past practice) with an
aggregate value of $50,000 or more;
-31-
(d) Neither the Company nor Omni-Tech shall enter into any
agreement not in the ordinary course of business consistent with past practice;
(e) Neither the Company nor Omni-Tech shall cancel, waive or
modify any claims or rights owned by, or running in favor of, it, the
cancellation, waiver or modification of which would reasonably be expected to
have a Material Adverse Effect;
(f) Neither the Company nor Omni-Tech shall make any amendment
to their respective Charter Documents;
(g) Neither the Company nor Omni-Tech shall permit the
creation or attachment of any Lien on any of the Company's or Omni-Tech's Assets
other than Permitted Liens;
(h) Neither the Company nor Omni-Tech shall incur any
Liabilities or waive of any rights of substantial value, except in the ordinary
course consistent with past practice, and except pursuant to any existing loan
agreements as in effect on the date of this Agreement;
(i) Neither the Company nor Omni-Tech shall discharge or
satisfy of any Liens, or any payment of any Liens or Liabilities, except in the
ordinary course of business, consistent with past practice or except as
contemplated by this Agreement, other than discharges or satisfactions that
would not have a Material Adverse Effect;
(j) Neither the Company nor Omni-Tech shall, (i) redeem,
purchase or otherwise acquire any shares of its capital stock or other ownership
or participating interests, or any securities or obligations convertible into or
exchangeable for same, or any options, warrants or conversion or other rights to
acquire same; (ii) effect any reorganization or recapitalization; or (iii)
split, combine or reclassify any of its capital stock or other ownership or
participating interests or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of, or in substitution for, shares or
other ownership or participating interests;
(k) Neither the Company nor Omni-Tech shall, acquire or agree
to acquire, by merging or consolidating with, by purchasing an equity interest
in or a portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets of any other Person
(other than the purchase of assets from suppliers or vendors in the ordinary
course of business and consistent with past practice);
(l) Neither the Company nor Omni-Tech shall, except for the
agreement of SCT Financial and SCT Canada to sell the Shares to the Purchasers
pursuant to this Agreement, make or authorize any sale, transfer or issuance of
any capital stock, equity security or debt security of the Company or Omni-Tech
or any option, warrant, right or commitment or agreement entered into requiring
or permitting any such sale, transfer or issuance, except to the extent
disclosed in this Agreement; and
(m) Neither the Company nor Omni-Tech shall agree in writing
or otherwise to do any of the foregoing.
-32-
Nothing contained in this Agreement will be deemed to prohibit either
of the Company or Omni-Tech from entering into any Material Contract of the type
described in clauses (v), (vi), (vii), (viii), (ix), (x), (xii), (xv), (xvi),
(xvii), (xix) and (xx) (provided that the Company's and Omni-Tech's ability to
enter into Material Contracts of the type described in (xx) shall not permit the
Company or Omni-Tech to take any action prohibited in this Section 6.4) of
Section 4.23(a) in the ordinary course of business consistent with past
---------------
practice; provided, that Schedule 4.23(a) is updated at the Closing and
----------------
delivered to the Purchasers at the Closing.
6.5 Publicity. The SCT Parties and the ACS Parties will consult with one
---------
another and provide the other with the opportunity to review the completed
proposed press release or statement before issuing any press release or
otherwise making any public statements in respect of the transactions
contemplated by this Agreement and will not issue any such press release or make
any such public statement prior to such consultation and review, except as any
of the SCT Parties or any of the ACS Parties may be required by any applicable
Requirements of Law or by obligations pursuant to the requirements of any
national securities exchange or any listing agreement with the Nasdaq National
Market or the Nasdaq SmallCap Market, as determined by the SCT Parties or the
ACS Parties, as the case may be, in consultation with the applicable party's
legal counsel.
6.6 Antitrust Notification. To the extent required under the HSR Act, the
----------------------
SCT Parties and the ACS Parties shall file promptly with the DOJ and the FTC the
notifications and reports required to be filed pursuant to the HSR Act and shall
promptly file any supplemental information that may be requested in connection
therewith. All such notifications, reports and supplemental information, if any,
shall comply with the requirements of the HSR Act. SCT and ACS shall provide
such assistance to the other party as such party may reasonably request to
enable such other party to make the notifications and filings required to be
made under this Section 6.6. The ACS Parties will pay all filing fees required
-----------
to be paid in connection with the filings to be made under the HSR Act, and the
SCT Parties will reimburse the ACS Parties for one-half of such filing fees if
the Closing does not occur for any reason other than any of the ACS Parties'
breach of this Agreement.
6.7 Performance of Conditions. Each of the SCT Parties and each of the ACS
-------------------------
Parties shall take all reasonable actions necessary or appropriate and use
commercially reasonable efforts in an attempt to effect as promptly as
practicable the fulfillment of the conditions required for the SCT Parties and
the ACS Parties to consummate the transactions contemplated by this Agreement
including, without limitation, all conditions precedent set forth in each of
Article 7 and Article 8 of this Agreement. Subject to the terms and conditions
--------- ---------
of this Agreement, in furtherance and not in limitation of the covenants of the
parties contained in Section 6.6 and Section 6.7 of this Agreement, if any Legal
----------- -----------
Proceeding is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as violative of any Requirements of
Law, then the SCT Parties and the ACS Parties shall cooperate with each other
and use its respective commercially reasonable efforts to contest and resist any
such Legal Proceeding and to have vacated, lifted, reversed or overturned any
Order , whether temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts consummation of the transactions contemplated
by this Agreement. Nothing contained in this Section 6.7 or in any other
-----------
provision of this Agreement shall require any of the SCT Parties, the ACS
Parties or any of their respective Affiliates to sell, hold separate or
otherwise dispose of or
-33-
conduct their business in a specified manner, or agree to sell, hold separate or
otherwise dispose of or conduct their business in a specified manner, or permit
the sale, holding separate or other disposition of, any assets of any of the SCT
Parties, the ACS Parties or any of their respective Affiliates or the conduct of
any of their respective business in a specified manner, whether as a condition
to obtaining any approval from a Governmental Entity or any other Person or for
any other reason or shall limit either of SCT's or the Purchasers' right to
terminate this Agreement in accordance with Article 11 of this Agreement.
----------
6.8 Duty to Update Prior to Closing.
-------------------------------
(a) Promptly upon any SCT Parties' discovery prior to the
Closing of any fact, event, condition or circumstance that causes any
representation or warranty contained in Article 4 of this Agreement, which as of
---------
the date of this Agreement was true and correct but that, as a result of such
fact, event, condition or circumstance becomes untrue and incorrect at any time
after the date of this Agreement but prior to the Closing, the SCT Parties shall
notify the ACS Parties of such fact, event, condition or circumstance. The
Purchasers shall have the option either (i) to terminate this Agreement and,
provided that the occurrence of such fact, event, condition or circumstance was
not the result of any SCT Party's breach of this Agreement, such termination
shall be done without liability to any of the SCT Parties or (ii) to waive all
claims against the SCT Parties arising from the resulting breach of
representation or warranty and to complete the transactions contemplated by this
Agreement.
(b) Promptly upon any ACS Parties' discovery prior to the
Closing of any fact, event, condition or circumstance that causes any
representation or warranty contained in Article 5 of this Agreement, which as of
---------
the date of this Agreement was true and correct but that, as a result of such
fact, event, condition or circumstance becomes untrue and incorrect at any time
after the date of this Agreement but prior to the Closing, the ACS Parties shall
notify the SCT Parties of such fact, event, condition or circumstance. SCT shall
have the option either (i) to terminate this Agreement and, provided that the
occurrence of such fact, event, condition or circumstance was not the result of
any ACS Party's breach of this Agreement, such termination shall be done without
liability to any of the ACS Parties or (ii) to waive all claims against the ACS
Parties arising from the resulting breach of representation or warranty and to
complete the transactions contemplated by this Agreement.
ARTICLE 7
CONDITIONS TO THE OBLIGATION OF THE ACS PARTIES
The obligation of the ACS Parties to proceed with the Closing under
this Agreement is subject to the satisfaction, on or prior to the Closing, of
each of the following conditions, each of which may be waived by the Purchasers:
7.1 Representations and Warranties True. The representations and
-----------------------------------
warranties contained in Article 4 of this Agreement and the information
---------
contained in the Schedules to this Agreement and any certificates, documents and
instruments to be delivered by any of the SCT Parties at the Closing shall have
been true and correct in all material respects (except to the extent such
representation and warranties are qualified in their entirety as to materiality
in which case such representation and warranties shall be true and correct in
all respects) when made and
-34-
shall be true and correct in all material respects (except to the extent such
representations and warranties are qualified in their entirety as to materiality
in which case such representations and warranties shall be true and correct in
all respects) on the Closing Date as though made at such time, and at the
closing the SCT Parties shall have executed and delivered to the Purchasers an
officer's certificate to that effect.
7.2 Performance of Obligations. The obligations of the SCT Parties to be
--------------------------
performed by the SCT Parties on or before the Closing pursuant to the terms of
this Agreement shall have been duly performed and complied with in all material
respects and, at the Closing, the SCT Parties shall have executed and delivered
to the Purchasers an officer's certificate to that effect.
7.3 Consents. All Consents from the Third Parties (other than Consents
--------
required by the Outsourcing Agreements identified on Schedule 10.9) and
-------------
applicable Governmental Entities, required to consummate the transactions
contemplated by this Agreement, shall have been obtained.
7.4 HSR Waiting Period. The HSR Waiting Period shall have expired or been
------------------
earlier terminated by all applicable Governmental Entities.
7.5 Absence of Litigation. There shall not be any Legal Proceeding pending
---------------------
or threatened to restrain or invalidate the sale and purchase of the Shares or
the other transactions contemplated by this Agreement.
7.6 Good Standing Certificates. The Purchasers must have received (a) a
--------------------------
certificate issued by the Secretary of State of the State of Delaware and of the
Province of Ontario, Canada as to the good standing of each of SCT Financial and
SCT Property in the State of Delaware and SCT Canada in the Province of Ontario,
Canada, respectively, and (b) a certificate issued by the appropriate
Governmental Entity of the jurisdiction of incorporation or formation of each of
the Company and Omni-Tech as to their respective good standing in such
jurisdiction.
7.7 Secretary's Certificate. The Purchasers must have received from each
-----------------------
of the SCT Parties a certificate of their respective Secretary or Assistant
Secretary, dated the Closing Date, certifying as to: (a) their respective
charter documents, certified by the appropriate Governmental Entity of the
jurisdiction of incorporation or formation of such SCT Party, together with a
certification that no amendments thereto have been made since such date; (b)
their respective bylaws, together with a certification that no amendments
thereto have been made since such date; (c) the resolutions of the board of
directors of the applicable SCT Party authorizing the execution and delivery of
this Agreement and the performance of the transactions contemplated by this
Agreement; and (d) incumbency and signatures of the respective officers of the
SCT Parties signing this Agreement and any of the other documents, instruments
or certificates being executed and delivered by the applicable SCT Party at the
Closing.
7.8 Assignment of Distribution Agreement. The Purchasers must have
------------------------------------
received SCT Property's duly executed counterpart to an assignment of the
Distribution Agreement in a form and substance satisfactory to the Purchasers
and SCT (the "Distribution Assignment").
-35-
7.9 Non-Competition Agreement. The Purchasers must have received each of
-------------------------
SCT's, SCT Financial's, SCT Property's and SCT Canada's duly executed
counterparts to the Non-Competition Agreement, in a form and substance
satisfactory to the Purchasers and SCT (the "Non-Competition Agreement").
7.10 Release from Mellon Obligations. The Purchasers must have received
-------------------------------
Mellon Bank, N.A.'s duly executed consent to the transactions contemplated by
this Agreement and the release of the Company from all obligations relating to
that certain Credit Agreement, dated June 24, 1994, as amended, and of all Liens
on the Company's Assets, if any, granted by the Company to Mellon Bank, N.A. to
secure the Company's obligations thereunder, each in a form and substance
satisfactory to the Purchasers.
7.11 Receivables Assignment. The Purchasers must have received SCT's duly
----------------------
executed counterpart to the Assignment Agreement regarding the Broward County
Receivables and the San Xxxx Receivables, in a form and substance satisfactory
to the Purchasers and SCT (the "Receivables Assignment").
7.12 Absence of Material Adverse Effect. There shall have occurred no
----------------------------------
change in the Condition since May 31, 2001, except changes in the ordinary
course of business, none of which (individually or in the aggregate) has had or
would reasonably be expected to have a Material Adverse Effect.
7.13 Absence of Regulatory Conditions. There shall not be any action taken,
--------------------------------
or statute, rule, regulation or order enacted (or any new interpretation of any
existing statute, rule, regulation or order), by any Governmental Entity in
connection with the grant of a regulatory approval necessary to the continuing
operation of the Business which imposes any condition or restriction upon the
Purchasers or the Business or operations of the Company or Omni-Tech which would
be materially burdensome in the context of the transactions contemplated by this
Agreement.
7.14 Opinion of Counsel to SCT Parties. U.S. and Canadian Counsel to the
---------------------------------
SCT Parties shall deliver a legal opinion(s) in a form and substance
satisfactory to the Purchasers.
7.15 Director and Officer Resignations. Resignations of all of the
---------------------------------
directors and officers of the Company and Omni-Tech shall have been obtained.
7.16 Transition Services. The Purchasers must have received SCT's duly
-------------------
executed counterpart to a Transition Agreement in a form and substance
satisfactory to the Purchasers and SCT (the "Transition Agreement").
7.17 License Agreements. The Purchasers must have received the SCT Parties'
------------------
duly executed counterparts to license agreements relating to the Intellectual
Property identified in Schedule 4.27(a)(ii) as being the subject of the license
agreement each in a form and substance satisfactory to the Purchasers and SCT
(collectively, the "License Agreements").
7.18 Minute Books. The Purchasers must have received a complete original
------------
set of minute books for each of the Company and Omni-Tech.
-36-
7.19 Assignment of Copyrights. The Purchasers must have received SCT
------------------------
Property's duly executed counterpart to an assignment of the copyrights
identified on Schedule 4.27(a)(ii) as being owned by SCT Property (although the
--------------------
registered owner is identified as SCT) as being the subject of the copyright
assignment in a form and substance satisfactory to the Purchasers and SCT (the
"Copyright Assignment").
ARTICLE 8
CONDITIONS TO THE OBLIGATION OF THE SCT PARTIES
The obligation of the SCT Parties to proceed with the Closing under
this Agreement is subject to the satisfaction, on or prior to the Closing, of
each of the following conditions, each of which may be waived by SCT:
8.1 Representations and Warranties True. The representations and warranties
-----------------------------------
contained in Article 5 of this Agreement and the information in the Schedules to
---------
this Agreement and any certificates, documents and instruments to be delivered
by the ACS Parties at the Closing shall have been true and correct in all
material respects (except to the extent such representations and warranties are
qualified in their entirety as to materiality in which case such representations
and warranties shall be true and correct in all respects) when made and shall be
true and correct in all material respects (except to the extent such
representations and warranties are qualified in their entirety as to materiality
in which case such representations and warranties shall be true and correct in
all respects) at the Closing Date as though made at such time and, at the
Closing, the ACS Parties shall have delivered to the SCT Parties an officer's
certificate to that effect.
8.2 Performance of Obligations. Each of the obligations of the ACS Parties
--------------------------
to be performed by the ACS Parties on or before the Closing pursuant to the
terms of this Agreement shall have been duly performed and complied with in all
material respects and, at the Closing, the ACS Parties shall have delivered to
the SCT Parties an officer's certificate to that effect.
8.3 Absence of Litigation. There shall not be any Legal Proceeding pending
---------------------
or threatened to restrain or invalidate the sale and purchase of the Shares or
the other transactions contemplated herein.
8.4 HSR Waiting Period. The HSR Waiting Period shall have expired or been
------------------
earlier terminated by all applicable Governmental Entities.
8.5 Secretary's Certificate. The SCT Parties must have received from each
-----------------------
of the ACS Parties a certificate of their respective Secretary or Assistant
Secretary, dated the Closing Date, certifying as to: (a) their respective
Charter Documents, certified by the appropriate Governmental Entity of the
jurisdiction of incorporation or formation of such ACS Party, together with a
certification that no amendments thereto have been made since such date; (c)
their respective bylaws, together with a certification that no amendments
thereto have been made since such date; (d) the resolutions of the board of
directors of the applicable ACS Party authorizing the execution and delivery of
this Agreement and the performance of the transactions contemplated by this
Agreement; and (e) incumbency and signatures of the officers of the ACS
-37-
Parties signing this Agreement and any of the other documents, instruments or
certificated being executed and delivered by the applicable ACS Party at the
Closing.
8.6 Assignment of Distribution Agreement. SCT Property must have received
------------------------------------
the Purchasers' duly executed counterpart to the Distribution Assignment.
8.7 Non-Competition Agreement. Each of SCT and SCT Canada must have
-------------------------
received the Purchasers' duly executed counterpart to the Non-Competition
Agreement.
8.8 Receivables Assignment. SCT must have received the Company's duly
----------------------
executed counterpart to the Receivables Assignment.
8.9 Transition Services. SCT must have received the Company's duly executed
-------------------
counterpart to the Transition Agreement.
8.10 License Agreements. SCT must have received the Company's duly executed
------------------
counterpart to the License Agreements.
ARTICLE 9
POST-CLOSING COVENANTS
9.1 Books and Records of SCT. Following the Closing, SCT, SCT Financial,
------------------------
SCT Property and SCT Canada agree to permit the ACS Parties and its
representatives to inspect the books and records of SCT, SCT Financial, SCT
Property and SCT Canada insofar as they relate to the Company and Omni-Tech
before the Closing Date during regular business hours and at no expense to SCT,
SCT Financial, SCT Property and SCT Canada in order for the ACS Parties and such
representatives to obtain information relevant to the Transaction and to any of
the ACS Parties' respective tax returns, Third Party Claims or litigation
involving any of the ACS Parties, or as otherwise reasonably required for the
conduct of the Company's or Omni-Tech's businesses. SCT, SCT Financial, SCT
Property and SCT Canada agree to maintain such books and records insofar as they
relate to the Company and Omni-Tech before the Closing Date for a period of five
(5) years after the Closing Date. Nothing contained in this Section 9.1 shall
-----------
require SCT, SCT Financial, STC Property and SCT Canada to disclose or deliver
any information or documents to Purchasers the disclosure or delivery of which,
under the advise of its counsel, would cause such information or documents no
longer to be protected by the attorney-client privilege or work product
doctrine.
9.2 Books and Records of the Company and Omni-Tech. Following the Closing,
----------------------------------------------
the ACS Parties agree to permit SCT, SCT Financial, SCT Property and SCT Canada
and their representatives to inspect the books and records of ACS, the
Purchasers, the Company and Omni-Tech and Affiliates insofar as they relate to
the business of the Company and Omni-Tech before the Closing Date during regular
business hours and at no expense to ACS, the Purchasers or the Company or Omni-
Tech in order for SCT, SCT Financial, SCT Property and SCT Canada and such
representatives to obtain information relevant to the transactions contemplated
by this Agreement and to SCT's, SCT Financial's, SCT Property's and SCT Canada's
tax returns, Third Party Claims or litigation involving SCT, SCT Financial, SCT
Property or SCT Canada's, or as otherwise reasonably required for the conduct of
SCT's, SCT Financial's, SCT Property's or SCT Canada's respective businesses.
The ACS Parties agree to maintain, and to cause the
-38-
Company and Omni-Tech to maintain, such books and records for a period of five
(5) years after the Closing Date. Nothing contained in this Section 9.2 shall
-----------
require the Purchasers to disclose or deliver any information or documents to
SCT, SCT Financial, SCT Property or SCT Canada, the disclosure or delivery of
which, under the advise of its counsel, would cause such information or
documents no longer to be protected by the attorney-client privilege or work
product doctrine.
9.3 Intentionally omitted.
---------------------
9.4 Tax Matters.
-----------
(a) Pre-Closing Tax Returns. (i) Unless otherwise requested by
-----------------------
SCT, the ACS Parties shall cause the Company and Omni-Tech to consent to join,
for all taxable periods ending on or before the Closing Date for which they are
so eligible, in any unitary, consolidated or combined income tax returns with
SCT or any Affiliate thereof (including franchise tax returns based on income).
SCT shall cause to be prepared and filed all such Tax Returns. The ACS Parties
shall cooperate with SCT in the preparation of the portions of such Tax Returns
pertaining to the Company or Omni-Tech, and shall take no position that is
inconsistent with the status of the Company or Omni-Tech as a member of any such
group for all such periods. At least 30 days before the due date for filing any
such Tax Return that reflects the consequences of the transactions contemplated
under this Agreement, SCT shall provide to ACS, for review and comment, copies
of such Tax Returns or extracts therefrom sufficient to apprise ACS of the
proposed treatment of such transactions. SCT shall consider any reasonable
changes proposed in writing by ACS. To the extent the parties are permitted
under applicable Tax law to treat the Closing Date as the last day of a taxable
period, they will treat the taxable period as ending on the Closing Date. SCT
shall timely pay or cause to be paid all income taxes to which the Tax Returns
described in this Section 9.4(a)(i) relate for all periods covered thereby.
-----------------
(ii) SCT shall cause to be prepared and filed all
required Tax Returns of the Company and Omni-Tech (other than those described in
Section 9.4(a)(i)) for any taxable period ending on or before the Closing
-----------------
Date. At least 30 days before the due date for filing any such Tax Return, SCT
shall provide to ACS, for review and comment, copies of such Tax Returns or
extracts therefrom sufficient to apprise ACS of the proposed treatment of such
transactions. SCT shall consider any reasonable changes proposed in writing by
ACS. All such Tax Returns shall be prepared in a manner consistent with the
manner in which Tax Returns of the Company and Omni-Tech have been prepared for
prior periods. SCT shall timely pay or cause to be paid all Taxes to which the
Tax Returns described in this Section 9.4(a)(ii) relate for all periods covered
------------------
thereby.
(b) Straddle Periods.
----------------
(i) In the case of any Tax period that includes but
does not end on the Closing Date (a "Straddle Period"), any Taxes attributable
to such Straddle Period shall be allocated to (A) SCT to the extent allocable to
the portion of the Straddle Period ending on the Closing Date and (B) Purchasers
to the extent allocable to the portion of the Straddle Period beginning on the
date after the Closing Date. For these purposes, Taxes allocable to each portion
of a Straddle Period shall be determined on the basis of an interim closing of
the books as of the close of business on the Closing Date as if the Straddle
Period consisted of one taxable period
-39-
ending and including the Closing Date and another taxable period beginning on
the day after the Closing Date and ending on the last day of the Straddle
Period, or under such other reasonable method as the parties may agree. For this
purpose, Tax items that are calculated on a periodic basis, such as depreciation
deductions and Taxes not based on income, revenues or receipts (such as ad
valorem taxes), shall be apportioned on a daily basis.
(ii) At least 30 days before the due date for filing
any Tax Return in respect of a Straddle Period, ACS shall provide SCT, for
review and comment, a draft of such Tax Return and a statement setting forth the
amount of Tax shown as due on such Tax Return that is properly allocable to SCT
pursuant to Section 9.4(b)(i). Purchasers shall consider any reasonable changes
-----------------
proposed in writing by SCT. Not later than 5 days before the due date for filing
such Tax Return, SCT shall pay ACS an amount equal to its allocable share of
such Taxes, but only to the extent that such Taxes have not already been paid or
accrued or otherwise reflected as a liability on the books of any SCT Party or
any Affiliate thereof (including the Company or Omni-Tech). To the extent that
the sum of such prior payments and accruals exceeds SCT's allocable share of
such Taxes, ACS shall promptly pay or cause to be paid to SCT an amount equal to
such excess.
(c) Refunds. Any Tax refunds or credits received by or
-------
credited to the Company or Omni-Tech and attributable to any period ending on or
before the Closing Date shall be for the benefit of SCT, and the ACS Parties
shall use reasonable efforts to obtain any such Tax refund or credit and shall
pay or cause to be paid to SCT an amount equal to any such Tax refund or credit
(plus any interest received thereon) within 15 business days after receipt or
credit thereof; provided, however, that SCT shall reimburse the ACS Parties for
reasonable costs or expenses incurred in connection with obtaining any such Tax
refund or credit.
(d) Cooperation. The SCT Parties shall provide to the ACS
-----------
Parties, and the ACS Parties shall, and shall cause the Company and Omni-Tech
to, provide to the SCT Parties, such cooperation and information as any of them
may reasonably request of another in filing any Tax Return, amended Tax Return
or claim for Tax refund, determining a Tax liability or a right to a Tax refund,
participating in or conducting any audit or other proceeding in respect of
Taxes, or effectuating the terms of this Agreement. Each such party shall make
its employees reasonably available on a mutually convenient basis to provide
explanations of any documents or information provided hereunder. Each such party
will retain all Tax Returns, schedules and work papers and all material records
or other documents relating to Tax matters of the Company and Omni-Tech for the
Tax period first ending after the Closing Date and for all prior Tax periods
until the later of (i) expiration of the relevant statute of limitations,
without regard to extensions (except to the extent notified by another party in
writing of any such extension) and (ii) five years following the due date
(without regard to extensions) for such Tax Returns. Any information obtained
under this Section 9.4(d) shall be kept confidential, except as may otherwise be
--------------
necessary in connection with the filing of Tax Returns or claims for Tax refund
or in conducting an audit or other proceeding in respect of Taxes. The ACS
Parties shall prepare and provide to SCT such Tax information packages as SCT
shall reasonably request for use in preparing any Tax Return that relates to the
Company or Omni-Tech. Such information packages shall be completed by the ACS
Parties and provided to SCT within 60 days after a request therefor.
Notwithstanding any other provision hereof, (A) each party shall bear its own
-40-
expenses in complying with this Section 9.4(d) and (B) no party shall be
--------------
required unreasonably to obtain any document or provide any information not then
in its possession.
(e) Code Section 338(h)(10) Election.
--------------------------------
(i) At the Purchasers' request, SCT shall join in
making an election pursuant to Code Section 338(h)(10) with respect to the sale
and purchase of the Company Shares pursuant to this Agreement. SCT and the
Purchasers agree to comply with all of the applicable requirements and
conditions of Code Section 338(h)(10) and the United States Treasury Regulations
thereunder, including without limitation the timely filing of Department of
Treasury Form 8023 entitled "Elections Under Section 338 For Corporations Making
Qualified Stock Purchase." Neither SCT nor the Purchasers shall take any action,
including, without limitation, any action in connection with the filing of any
Tax Returns, that would be inconsistent with or prejudice a Code Section
338(h)(10) election. SCT agrees to indemnify Purchaser against any lost Tax
benefits (based on the present value of such lost benefits assuming a 15 year
reference period and 7% discount factor) resulting from an invalid Code Section
338(h)(10) election that would have been valid but for a failure by SCT to
fulfill the foregoing agreements. For purposes of this Section 9.4(c), Tax
benefit shall not include any tax basis in the Common Shares.
(ii) The portion of the Purchase Price allocated to
the Company Shares under Section 2.2 of this Agreement (together with
-----------
liabilities treated as Company in accordance with Code Section 338 and the
Treasury Regulations thereunder as follows. An allocation shall be proposed by
ACS and delivered to SCT at least 90 days before the date that Form 8023 is
required to be filed in respect of the Company Shares. Within 30 days after
receipt of such proposed allocation, SCT shall notify ACS of any reasonable
objections that SCT may have to the proposed allocation, which notification
shall include any proposed modification. Failure to so notify the ACS of any
objections shall constitute SCT's acceptance of ACS's proposed allocation as a
final allocation. If SCT timely notifies ACS of any objections, and SCT and ACS
are unable to resolve their differences within 15 days after Purchaser's receipt
of SCT's notification, the matter shall be referred for arbitration to a
mutually acceptable, nationally recognized independent accounting firm, the fees
and expenses of which shall be borne equally by SCT, on the one hand, and ACS,
on the other hand. The arbitrator's determination of a final allocation shall be
binding on the parties. SCT and the Purchasers each agrees that, to the extent
permitted by applicable law, they will adopt and utilize the amounts allocated
to each asset or class of assets pursuant to a final allocation for purposes of
all Tax Returns filed by them and that they will not voluntarily take any
position inconsistent therewith upon examination of any such Tax Returns, in any
claim for Tax refund, in any litigation or otherwise with respect to such Tax
Returns.
(iii) The Purchasers shall be entitled to make an
election under Code Section 338(g) with respect to the Omni-Tech Shares;
provided, however, that, for such purposes, Purchasers shall allocate to the
purchase of the Omni-Tech Shares an amount that is neither greater than nor less
than the portion of the Purchase Price so allocated pursuant to Section 2.2.
-----------
-41-
(f) Tax Contests.
------------
(i) SCT shall have the right to represent the
interests of the Company and Omni-Tech in any Tax audit or administrative or
court proceeding relating to Tax Returns for periods ending on or before the
Closing Date with respect to which SCT may be liable for Taxes pursuant to this
Agreement (including any such proceedings relating to the Company or Omni-Tech);
provided, however, that the Purchasers shall have the right to participate in
any such audit or proceeding to the extent that any such audit or proceeding may
affect the Tax liability of the Purchasers, any of their Affiliates, the Company
or Omni-Tech for any period ending after the Closing Date, and to employ counsel
of their choice at their own expense for purposes of such participation.
Notwithstanding anything to the contrary contained or implied in this Agreement,
without the prior written consent of ACS, which consent shall not be
unreasonably withheld or delayed, neither SCT nor any Affiliate of SCT shall
agree or consent to compromise or settle, either administratively or after the
commencement of litigation, any issue or claim arising in any such audit or
proceeding, or otherwise agree or consent to any Tax liability, to the extent
that any such compromise, settlement, consent or agreement may affect the Tax
liability of the Purchasers, any of their Affiliates, the Company or Omni-Tech
for any period ending after the Closing Date.
(ii) The Purchasers shall have the right to represent
the interests of the Company and Omni-Tech in any Tax audit or administrative or
court proceeding relating to Tax Returns for periods beginning after the Closing
Date (including any such proceedings relating to the Company or Omni-Tech);
provided, however, that SCT shall have the right to participate in any such
audit or proceeding to the extent that any such audit or proceeding may affect
the Tax liability of SCT, any of its Affiliates, the Company or Omni-Tech for
any period ending on or before the Closing Date and to employ counsel of its
choice at its own expense for purposes of such participation. Notwithstanding
anything to the contrary contained or implied in this Agreement, without the
prior written consent of SCT, which consent shall not be unreasonably withheld
or delayed, neither the Purchasers nor any Affiliate of any of the Purchasers
shall agree or consent to compromise or settle, either administratively or after
the commencement of litigation, any issue or claim arising in any such audit or
proceeding, or otherwise agree or consent to any Tax liability, to the extent
that any such compromise, settlement, consent or agreement may affect the Tax
liability of the Purchasers, any of their Affiliates, the Company or Omni-Tech
for any period ending on or before the Closing Date.
(g) Notice. The Purchasers shall promptly notify SCT in
------
writing upon receipt by the Purchasers, any Affiliate of Purchasers, the Company
or Omni-Tech of notice of any pending or threatened Tax audits or assessments
relating to the income, properties or operations of the Company or Omni-Tech, in
each case for periods ending on or before the Closing Date.
(h) Transfer Taxes. Each of ACS and SCT shall be liable
--------------
for, and shall pay when due 50% of any transfer, gains, documentary, sales, use,
registration, stamp, value added or other similar Taxes payable by reason of the
transactions contemplated by this Agreement or attributable to the sale,
transfer or delivery of the Shares under this Agreement, and the Purchasers
shall, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes.
-42-
(i) Amended Tax Returns. Without the prior written consent of
-------------------
SCT, Purchasers shall not file any amended Tax Return of the Company or Omni-
Tech for any period ending on or before the Closing Date.
9.5 Severance Obligations. SCT shall pay all severance payments on account
---------------------
of the termination of the employment of the Employee's identified on Schedule
--------
9.5 in accordance with SCT's severance policy applicable to such Employees. ACS
---
and the Purchasers shall pay all severance payments on account of the
termination after Closing of Employees not identified on Schedule 9.5.
------------
9.6 Removal of Guarantees and Sureties. After the Closing Date, the ACS
----------------------------------
Parties shall use their respective commercially reasonable efforts to obtain the
release and discharge of (without further obligation or liability to) each
Seller Indemnitee (as defined in Section 10.1(b)) and any Third Party which
----------------
provided any guarantee or surety (in either case, whether by agreement, the
posting of a bond or similar instrument or otherwise) with respect to any
liabilities and obligations of any of the Company or Omni Tech requiring
performance or continued performance from and after the Closing Date relating to
the operation of the Business (collectively, the "Guaranteed Obligations"). Such
commercially reasonable efforts shall include, without limitation (a) beginning
discussions with the applicable counter-party (i) to each of the agreements
identified on Schedule 9.6 within thirty (30) days after the Closing Date, and
------------
(ii) to any agreement identified by SCT after the Closing Date within thirty
(30) days after the date on which SCT identified such agreement and, in each
case, pursuing such release and discharge with commercially reasonable diligence
and (b) offering to such counter-party the guarantee or surety of ACS in
replacement of any guarantee or surety provided by any Seller Indemnitee and, in
the case of any performance bonds or similar instruments provided by any Third
Party Offering, a performance bond or similar instrument in replacement of bond
or instrument provided by the applicable Third Party.
ARTICLE 10
INDEMNIFICATION; EXPENSES
10.1 General Indemnification.
-----------------------
(a) From and after the Closing, SCT, SCT Financial, SCT Property
and SCT Canada hereby jointly and severally agree to indemnify, defend and hold
harmless the Purchasers, ACS and their respective Affiliates and each of their
respective directors, officers, employees, agents and shareholders
(collectively, the "Purchaser Indemnitees") from and against any and all Losses
arising out of, based upon or resulting from (i) any inaccuracy of any
representation or warranty contained in Article 4 of this Agreement or in any
---------
certificate, document or instrument delivered by any of the SCT Parties at the
Closing; (ii) any breach by the SCT Parties of any of their respective
agreements or obligations contained in or made pursuant to this Agreement; (iii)
except to the extent already paid by any SCT Party or any Affiliate thereof (A)
any and all Taxes imposed on any SCT Party for or relating to all periods ending
on or before the Closing Date, including any Taxes resulting from an election
pursuant to Section 9.4(e), and (B) any liability of the Company or Omni-Tech
--------------
for Taxes imposed under Treasury Regulation Section 1.1502-6 or any analogous
state, local or foreign tax provision, as a result of having been a member of a
consolidated, affiliated, combined, unitary or other similar group that
-43-
included SCT; (iv) performance of remedial work required to be performed as a
result of the Company's failure to perform prior to the Closing Date in breach
of the Services Agreement (R981540D) by and between SCT Government Systems,
Inc., and Palm Beach County, Florida, dated September 29, 1998; (v) amounts
required to be refunded as a result of the Company's failure to perform prior to
the Closing Date in breach of the Software License Agreement; Software Services
Agreement; and Technical Currency Agreement by and between SCT Government,
Systems, Inc., and Orange County, Florida dated March 31, 2000, (vi)
stachybotrys mold discovered at the Tulare County Courthouse prior to the
Closing Date or mold that is a continuation of such mold; (vii) any out of
pocket expenses required to be paid by any of the ACS Parties, the Company or
Omni-Tech to Oracle Corporation ("Oracle") or OTG Software, Inc. ("OTG")
covering the period beginning on the Closing Date and ending on the expiration
of the Survival Period in order for the Business to obtain (x) such number of
software development licenses that are necessary to enable the Business'
software development group as presently comprised (the "Software Development
Group") to develop certain of the Software with Oracle or OTG software programs,
as the case may be, in the same manner as presently used by the Software
Development Group, (y) such technical support that is necessary to enable the
Business' software support group as presently comprised (the "Software Support
Group") to provide maintenance and support in the same manner as presently
provided by the Software Support Group and (z) such value added reseller rights
as are presently held by the Business; in each case, only with respect to
licenses, rights and items of the type with respect to which the Business has
not reflected an expense in the Statement of Operations included in the FY2000
Financial Statements; provided that the ACS Parties and the Company shall limit
the number and size of such licenses to the extent necessary to operate the
Business as it is currently operated; and provided further that the ACS Parties
shall use all commercially reasonable efforts to obtain Oracle development and
support rights at no additional cost under ACS' existing Oracle agreements; and
(viii) any and all Third Party Claims arising out of any of the foregoing. In
addition, SCT shall indemnify, defend and hold harmless the Purchaser
Indemnitees from all Losses required to be paid by the any such Purchaser
Indemnitee to any party adverse to the Company in, and as a result of any final
and non-appealable order or judgment in, (x) the Broward County Litigation, (y)
the San Xxxx Litigation and (z) any of the Legal Proceedings identified in
Schedule 10.1(a). The Purchaser Indemnitees shall use all commercially
----------------
reasonable efforts to minimize the Losses associated with the matter described
in clause (vi) above.
(b) From and after the Closing, the ACS Parties (and the Company
and Omni-Tech in the event the Closing occurs) hereby jointly and severally
agree to indemnify, defend and hold harmless SCT, SCT Financial, SCT Property
and SCT Canada, their respective Affiliate entities, and each of their
respective directors, officers, employees, agents and shareholders
(collectively, the "Seller Indemnitees") from and against any and all Losses
arising out of, based upon or resulting from (i) any inaccuracy of any
representation or warranty contained in Article 5 of this Agreement or in any
---------
certificate, document or instrument delivered by any of the ACS Parties at the
Closing; (ii) any breach by any of the ACS Parties of any of their respective
agreements or obligations contained in or made pursuant to this Agreement; (iii)
any and all Losses arising out of, based upon or resulting from the operations
or conduct of the business of the Company or Omni-Tech on and after the Closing
Date (except to the extent that SCT, SCT Financial, SCT Property and SCT Canada
are liable for the same pursuant to Section 10.1(a)(i)) including, without
------------------
limitation, (x) all Losses incurred by any Seller Indemnities under any
guarantee or surety provided by any Seller Indemnitee with respect to any of the
Guaranteed
-44-
Obligations and (y) any Losses (other than the severance payments required to be
paid by SCT in accordance with Section 9.5) incurred by any Seller Indemnitee in
-----------
connection with the termination of the employment of the Employees identified on
Schedule 9.5; (iv) any and all Taxes imposed on any ACS Party, the Company and
------------
Omni-Tech, or any Affiliate of any of the foregoing, for or relating to all
periods beginning the day after the Closing Date; and (v) any and all Third
Party Claims arising out of the foregoing.
(c) In the event that a Person entitled to indemnification under
this Article 10 (the "Indemnified Party") shall incur or suffer any Losses in
----------
respect of which indemnification may be sought under this Article 10 against the
----------
Person required to provide indemnification under this Article 10 (the
----------
"Indemnifying Party"), the Indemnified Party must assert a claim for
indemnification within the Survival Period by a written notice which contains
reasonably sufficient detail and information of the Losses as then known (the
"Notice of Loss") to the Indemnifying Party stating the nature and basis of such
Notice of Loss. If the Notice of Loss relates to a Third Party Claim, then the
procedures set forth in Section 10.1(d) shall be applicable. If the Notice of
---------------
Loss does not relate to a Third Party Claim, then the Indemnifying Party shall
have forty-five (45) days to object to any of the subject matter and any of the
amounts of the Losses set forth in the Notice of Loss, as the case may be, by
delivering written notice of objection thereof to the Indemnified Party. If the
Indemnifying Party fails to send a notice of objection to the Notice of Loss
within such forty-five (45) day period, then the Indemnifying Party shall be
deemed to have agreed to the Notice of Loss and shall be obligated to pay to the
Indemnified Party the portion of the amount specified in the Notice of Loss to
which the Indemnifying Party has not objected. If the Indemnifying Party sends a
timely notice of objection, then the Indemnifying Party and the Indemnified
Party shall use their commercially reasonable efforts to settle (without an
obligation to settle) such claim for indemnification. If the Indemnifying Party
and the Indemnified Party do not settle such dispute within forty-five (45) days
after the Indemnified Party's receipt of the Indemnifying Party's notice of
objection, then each of the Indemnifying Party and the Indemnified Party shall
be entitled to seek enforcement of their respective rights under this Article
-------
10.
--
(d) Promptly after receipt by an Indemnified Party of notice of
the assertion of any claim or the commencement of any Legal Proceeding by a
Third Person ("Third Party Claim") in respect of which the Indemnified Party
will seek indemnification hereunder, the Indemnified Party shall so notify in
writing the person(s) from whom indemnification hereunder is sought
(collectively, the "Indemnifying Party"), but any failure so to notify the
Indemnifying Party shall not relieve it from any liability that it may have to
the Indemnified Party under this Section 10.1 except to the extent that the
------------
Indemnifying Party's ability to defend such claim is materially prejudiced by
the Indemnified Party's failure to give such notice. In no event will the
Indemnified Party admit any liability with respect thereto or settle,
compromise, pay or discharge the same without the prior written consent of the
Indemnifying Party, which shall not be unreasonably withheld. Subject to Section
-------
9.4(b) of this Agreement, the Indemnifying Party shall be entitled to
------
participate in the defense of such Third Party Claim and to assume control of
such defense (without admitting its liability under this Article 10); provided,
----------
however, that:
(i) the Indemnified Party shall be entitled to
participate in the defense of such Third Party Claim and to employ counsel at
the Indemnified Party's own expense to assist in the handling of such claim;
-45-
(ii) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into any settlement of such
Third Party Claim, if, pursuant to or as a result of such settlement, injunctive
or other equitable relief would be imposed against the Indemnified Party;
(iii) the Indemnifying Party shall not consent to the entry
of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
Indemnified Party of a release from liability in respect of such claim;
(iv) the Indemnified Party shall cooperate with the
Indemnifying Party in the contest or defense thereof; and
(v) the Indemnifying Party shall not be entitled to
control but shall be entitled to participate at the Indemnifying Party's own
expense in the defense of, and the Indemnified Party shall be entitled to have
sole control at the Indemnifying Party's expense over, the defense or settlement
of any Third Party Claim to the extent the Third Party Claim seeks an order,
injunction or other equitable relief against the Indemnified Party (U) which, if
successful, could reasonably be expected to adversely interfere with the
business, operations, assets, condition, prospects, customer relationships or
supplier relationships of the Indemnified Party, (V) which involves criminal
proceedings, (W) which involves a claim in which the Indemnifying Party is also
a party and joint representation would be inappropriate due to conflicting
interests because of the availability of different legal defenses to the
Indemnified Party, or (X) which involves claims that, upon petition by the
Indemnified Party, an appropriate court rules that the Indemnifying Party failed
or is failing to defend or pursue vigorously.
(e) After written notice by the Indemnifying Party to the
Indemnified Party of its election to assume control of the defense of any such
Third Party Claim, the Indemnifying Party shall not be liable to such
Indemnified Party hereunder for any Legal Expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof. If the Indemnifying
Party does not assume control of the defense of such Third Party Claim within
thirty (30) days (or, in the case of any Legal Proceeding, fifteen (15) days)
after the Indemnifying Party's receipt of the notice required pursuant to
Section 10.1(d) of this Agreement, then the Indemnified Party shall have the
---------------
to defend right such claim in such manner as it may deem appropriate at the
reasonable cost and expense of the Indemnifying Party, and the Indemnifying
Party will promptly reimburse the Indemnified Party therefor by periodic
payments during the course of the investigation or defense, as and when bills
are received or expenses incurred after the Indemnifying Party's receipt of the
Indemnified Party's written statement therefor, which statement shall itemize
and summarize in reasonable detail the costs and expenses incurred.
(f) The ACS Parties acknowledge that, anything to the contrary
contained in this Agreement notwithstanding, after the Closing, SCT or any of
its Affiliates will control the prosecution of SCT's claims and defenses in the
Broward County Litigation and in the San Xxxx Litigation, and as to the matters
set forth in Schedule 10.1(a) at SCT's sole expense. The ACS Parties will (and
----------------
will cause the Company and Omni-Tech to) provide such reasonable
-46-
cooperation and assistance (including the making available of witnesses) as SCT
may, from time to time, reasonably request in connection therewith and at the
expense of SCT.
10.2 No Contribution. Each of SCT, SCT Financial, SCT Property and SCT
---------------
Canada agrees that it will not seek, nor will it be entitled to, contribution
from, or indemnification by, the Company or Omni-Tech in respect of amounts due
from SCT, SCT Financial, SCT Property and SCT Canada to any Purchaser Indemnitee
under this Article 10 and SCT, SCT Financial, SCT Property and SCT Canada will
----------
hold the Company and Omni-Tech and the ACS Parties harmless in respect of all
such amounts and shall not seek to join the Company or Omni-Tech in connection
with any claim by any Purchaser Indemnitee under this Article 10. Nothing
----------
contained in this Section 10.2 shall impair the right of any of SCT, SCT
------------
Financial, SCT Property and SCT Canada to seek indemnification from the Company,
Omni-Tech or any of the ACS Parties on account of any breach by any of the
Company, Omni-Tech or any of the ACS Parties of any covenant or obligation to be
performed by any of them after the Closing.
10.3 Survival. The rights of the parties to assert a claim under this
--------
Article 10 for breach of any of the representations and warranties of the
----------
parties contained in Article 4 and Article 5 of this Agreement or in any
--------- ---------
certificate, document or instrument delivered at the Closing shall survive the
Closing Date for a period (the "Survival Period") beginning on the Closing Date
and ending on the last day of the fifteenth month after the Closing Date (such
Survival Period to begin with the month during which the Closing occurs), and
thereafter shall terminate and expire, except with respect to liabilities for
any item as to which, prior to the last day of the fifteenth month after the
Closing Date, an Indemnified Party shall have asserted a claim in writing as
required pursuant to the provisions of this Article 10, in which case the
----------
liability for such claim shall continue until it shall have been finally
settled, decided or adjudicated. Notwithstanding the foregoing, the period in
which any of Purchaser Indemnitee may make a claim for indemnification under
this Article 10 with respect to any breach of a representation or warranty made
----------
under Section 4.3, Section 4.4, Section 4.19, Section 4.25 and Section 4.32
----------- ----------- ------------ ------------ ------------
shall not expire until the expiration of the applicable statute of limitation
period imposed by applicable law. The covenants and agreements contained in this
Agreement shall survive until, by their respective terms, such covenants have
been fully performed or discharged.
10.4 Limitation on Liability.
-----------------------
(a) Any other provision of this Agreement to the contrary
notwithstanding, SCT, SCT Financial, SCT Property and SCT Canada shall not have
any liability under this Article 10 (i) resulting from the breach or inaccuracy
----------
of any of such party's representations or warranties contained in this Agreement
or in any certificate, document or instrument delivered by such party at the
Closing (including Third Party Claims arising as a result thereof), (ii) with
respect to any of the matters described in clauses (iv), (v) and (vii) of
Section 10.1(a) of this Agreement (including Third Party Claims as a result
---------------
thereof) and (iii) as to such matters described on Schedule 10.1(a), until the
----------------
aggregate Losses resulting from such inaccurate representations or warranties
and such matters, after aggregating 10.4(a)(i), 10.4(a)(ii) and 10.4(a)(iii)
exceeds an amount equal to Seven Hundred Fifty Thousand Dollars ($750,000) (the
"Deductible Amount"), whereupon SCT, SCT Financial, SCT Property and SCT Canada
shall be liable for indemnification for all Losses above and beyond the
Deductible Amount, subject to the limit on liability set forth in Section
-------
10.4(b); provided, that the Deductible Amount
-------
-47-
shall not apply to breaches or inaccuracies of any representations and
warranties contained in Section 4.3, Section 4.4, Section 4.19, Section 4.25 and
----------- ------------ ------------ ------------
Section 4.32.
------------
(b) Any other provision of this Agreement to the contrary
notwithstanding, the aggregate maximum monetary liability of SCT, SCT Financial,
SCT Property and SCT Canada under this Article 10 (i) resulting from the breach
----------
or inaccuracy of any of such party's representations or warranties contained in
this Agreement or in any certificate, document or instrument delivered by such
party at the Closing (including Third Party Claims arising as a result thereof),
(ii) with respect to any of the matters described in clauses (iv), (v), and
(vii) of Section 10.1(a) of this Agreement (including Third Party Claims arising
---------------
as a result thereof) and (iii) as to such matters described on Schedule 10.1(a),
----------------
shall not exceed an amount equal to Eight Million Two Hundred Fifty Thousand
Dollars ($8,250,000); provided, however, that the aggregate maximum monetary
liability of SCT, SCT Financial, SCT Property and SCT Canada for breach or
inaccuracy of any the representations and warranties contained in Section 4.3,
-----------
Section 4.4, Section 4.19, Section 4.25 and Section 4.32 of this Agreement
----------- ------------ ------------ ------------
(including Third Party Claims arising as a result thereof) and for the matter
described in clause (vi) of Section 10.1(a) of this Agreement (including Third
Party Claims arising as a result thereof) may exceed such amount, but shall not
exceed an amount equal to Eighty-Five Million Dollars ($85,000,000), less the
amount of any payments made by SCT pursuant to Section 10.9, when combined with
------------
the aggregate monetary liability of SCT, SCT Financial, SCT Property and SCT
Canada for breach or inaccuracy of any representations and warranties and any
breach of the agreements contained in Section 9.4(e)(i) of this Agreement.
(c) None of the Purchaser Indemnitees shall be entitled to recover
any Losses under this Agreement to the extent that such Losses have already been
recovered with respect to the breach or inaccuracy of any representation or
warranty, the breach of any of the covenants contained in Section 9.4 of this
Agreement, the Purchase Price Adjustment (as defined in Section 10.9) or any
other specific indemnity provided for in this Agreement.
10.5 Computation of Losses. Anything in this Agreement to the contrary
---------------------
notwithstanding, the amount of any Losses otherwise payable to an Indemnified
Party shall be reduced by the amount of net insurance proceeds received by such
Indemnified Party (giving effect to deductibles or self-insured or co-insurance
payments made and the reasonable costs, if any, incurred to obtain such
insurance proceeds) or of recoveries from third parties (reduced by the
reasonable costs, if any, incurred to obtain such recoveries) as compensation
for the damage or Losses caused by the act, omission, fact or circumstance
giving rise to the Losses. If, at any time after payment by an Indemnifying
Party to an Indemnified Party in respect of any Losses indemnified under this
Article 10, the Indemnified Party receives such insurance proceeds or third
----------
party recoveries, then the Indemnified Party shall hold such funds in trust for,
and shall promptly remit such funds to the Indemnifying Party or the
Indemnifying Party's designee after receipt thereof. If the Indemnified Party
received indemnification for Losses under this Article 10 and such Indemnified
----------
Party has a valid claim available to the Indemnified Party against third parties
with respect to Losses for which the Indemnified Party received indemnify under
this Article 10 the Indemnified Party will assign to the Indemnifying Party its
----------
rights to such claim against such third party (other than claims against the
Indemnified Party's customers, suppliers, vendors, or insurance companies) to
the extent of the Losses paid by the Indemnifying Party.
-48-
10.6 Matters Regarding Accounts Receivable.
-------------------------------------
(a) From and after the Closing Date, ACS, the Purchasers, the
Company, and Omni-Tech shall (and ACS shall cause the Purchasers, the Company
and Omni-Tech to) use all commercially reasonable and diligent efforts to
collect all of the Accounts Receivable outstanding as of the Closing Date (the
"Pre-Closing Receivables") within the Collection Period and use commercially
reasonable efforts to resolve the disputes under each of the Service Agreement
by and between the Company and the City of Memphis, Tennessee, dated December
15, 2000, and the Software License Agreement; Software Services Agreement; and
Technical Currency Agreement by and between the Company and Orange County,
Florida, and shall advise SCT in writing of the status of such efforts and
collections every thirty (30) days after the Closing Date until the expiration
of the Collection Period for the applicable Pre-Closing Receivables and the
resolution of such disputes. In no event will ACS, the Purchaser, the Company or
Omni-Tech admit any liability with respect to or settle, compromise, or
discharge either of such disputes without the prior written consent of SCT,
which consent shall not be unreasonably withheld. In addition, from and after
the Closing Date, ACS, the Purchasers, the Company and Omni-Tech shall (and ACS
shall cause the Purchasers, the Company and Omni-Tech to) comply in all material
respects with all obligations of the Company or Omni-Tech under any agreement
with any customer from whom Pre-Closing Receivables are outstanding that
provides for performance by the Company or Omni-Tech on or after the Closing
Date.
(b) For purposes of calculating the liability of SCT, SCT
Financial, SCT Property and SCT Canada under this Article 10 on account of the
----------
breach or inaccuracy of the representation and warranty contained in the last
sentence of Section 4.9 regarding the collectability of the Accounts Receivable
-----------
during the Collection Period, all amounts collected at any time from and after
the Closing Date from any customer which had an outstanding Pre-Closing
Receivable balance owing to the Company or Omni-Tech shall be deemed applied to
the oldest valid Pre-Closing Receivables owing from such customer until all of
the valid Pre-Closing Receivable owing from such customer have been collected in
full irrespective of any customer direction or reference to the invoice against
which such amounts are to be applied and irrespective of any new Accounts
Receivable created on or after the Closing Date. None of SCT, SCT Financial, SCT
Property or SCT Canada shall have any liability under this Article 10 on account
----------
of the breach or inaccuracy of the representation and warranty continued in the
last sentence of Section 4.9 regarding the collectability of the Accounts
-----------
Receivable during the Collection Period for any concessions, set-offs,
settlements or compromises involving any portion of the Pre-Closing Receivables
agreed upon by ACS, the Purchasers or any of their respective Affiliates.
(c) If any of SCT, SCT Financial, SCT Property and SCT Canada
make any payment to any Purchaser Indemnitee as a result of their respective
indemnification obligations with respect to a breach or inaccuracy of the
representations and warranties contained in Section 4.9, then contemporaneous
-----------
with such payment, ACS, the Purchasers, the Company or Omni-Tech, as applicable,
shall (and ACS shall cause the Purchasers, the Company and Omni-Tech, as
applicable, to) assign the applicable Pre-Closing Receivable (other than the
Court Link Receivable) to SCT or its designee; provided, that the customer from
whom such Pre-Closing Receivable was owing is not a customer from whom revenues
totaled $500,000 or more during the twelve (12) month period ending on, and is
not reasonably expected to provide revenues in
-49-
excess of $500,000 during the twelve (12) month period after, the date on which
any of SCT, SCT Financial, SCT Property or SCT Canada made such payment to any
Purchaser Indemnified Party. If, after the payment by any of SCT, SCT Financial,
SCT Property or SCT Canada on account of the non-collection of any Pre-Closing
Receivables (other than the Court Link Receivable) any Purchaser Indemnitee
shall receive any payment which would have been deemed applied in accordance
with Section 10.6(b), then such Purchaser Indemnitee shall (and ACS and the
---------------
Purchasers shall cause such Purchaser Indemnitee to) hold such funds in trust
for, and shall promptly remit such funds to SCT or SCT's designee promptly after
receipt thereof. If after payment by any of SCT, SCT Financial, SCT Property or
SCT Canada on account of the non-collection of the Court Link Receivable, any
Purchaser Indemnitee shall receive payments of the Court Link Receivable in
excess of $526,000, such Purchaser Indemnitee shall apply such excess amount
against any Losses for which indemnity may be obtained by such Purchaser
Indemnitee under this Article 10.
----------
10.7 Exclusive Remedy. From and after the Closing Date, the rights and
----------------
remedies of the parties under this Article 10 are the sole and exclusive rights
----------
and remedies of the parties with respect to any matters arising out of or
relating to this Agreement and the transactions contemplated by this Agreement.
10.8 Treatment of Indemnification Payments. To the extent permitted by
-------------------------------------
applicable law, the parties shall treat any indemnification payment made
hereunder as an adjustment to the Purchase Price allocate to the Company Shares
pursuant to Section 2.2.
-----------
10.9 Purchase Price Adjustment. (a) On or before the Closing, the SCT
-------------------------
Parties shall cause the assignment of the outsourcing agreements set forth on
Schedule 4.23(a)(vi) and identified as being with a Person other than the
--------------------
Company or Omni-Tech (the "Outsourcing Agreements") to the Company. If on or
before the date which is 9 months after the Closing Date, the counter- party to
any Outsourcing Agreement identified on Schedule 10.9 terminates such
-------------
Outsourcing Agreement in writing because of (i) the allegedly unauthorized
assignment of such Outsourcing Agreement to the Company or (ii) the allegedly
unauthorized assignment of such Outsourcing Agreement to the Company and an
alleged breach by the SCT Parties' of contractual obligations under such
Outsourcing Agreement which began before the Closing (a "Triggering Event"),
then, as a reduction to the Purchase Price, SCT shall cause to be paid to the
Purchasers an amount equal to: (1) (A) a fraction, the numerator of which is
equal to the revenue the Company received under such Outsourcing Agreement for
the twelve months ended on March 31, 2001, and the denominator of which is equal
to the total revenue of the Company, Omni-Tech and solely with respect to
revenue under the Distribution Agreement, SCT Property for the twelve months
ended March 31, 2001, multiplied by (B) $85,000,000, less (2) an amount equal to
12 1/2% of the revenue received under such Outsourcing Agreement after the
Closing during the period commencing on the Closing Date until the date of such
termination (the "Purchase Price Adjustment'); provided, however, that the
Purchase Price Adjustment will be reduced proportionately to reflect the extent
to which the termination is attributable to the breach by ACS or any of its
Affiliates of contractual obligations under the particular Outsourcing
Agreement, which breach was not begun before the Closing; provided further,
there shall be no Purchase Price Adjustment to the extent that the termination
is attributable to the breach by ACS or any of its Affiliates which breach first
occurred after the Closing; and provided further, that in the case of any
calculation of any Purchase Price Adjustment on account of the Outsourcing
-50-
Agreement with Dallas County, the product resulting from the application of the
formula contained in clause (1) above shall be multiplied by 0.33 before
subtracting the amounts provided in clause (2) above. If (x) SCT shall have
made any payment on account of any Purchase Price Adjustment or if SCT and the
Purchasers are seeking to resolve any dispute as to any Purchase Price
Adjustment pursuant to the other provisions of this Section 10.9 and (y) either
------------
ACS or any of its Affiliate entities, directly or indirectly, begins to provide
outsourcing services relating to the Business for the counter-party to any
Outsourcing Agreement which was the subject of the Triggering Event with respect
to which such Purchase Price Adjustment was made or such dispute occurred at any
time during the twelve (12) month period ending after the date on which the
Triggering Event occurred, then (A) the Purchasers, the Company and Omni-Tech
shall refund (and ACS shall cause the Purchasers, the Company or Omni-Tech to
refund), in the aggregate, to SCT a fraction (not greater than one) of the
portion of the Purchase Price Adjustment attributable to the Outsourcing
Agreement, where such fraction is comprised of a denominator equal to the
annualized revenues under the terminated Outsourcing Agreement for the twelve
months ended March 31, 2001 and a numerator equal to the projected annualized
revenues for the first year of the agreement replacing the Outsourcing Agreement
and (B) if SCT and the Purchasers are seeking to resolve any such dispute, then
SCT will have no liability under this Agreement on account of the applicable
Triggering Event and the circumstances surrounding the Triggering Event. With
respect to any Outsourcing Agreement so terminated, the Parties shall cooperate
in good faith to transition, at the sole cost and expense of the SCT Parties,
the account for the Business represented by such terminated Outsourcing
Agreement back to one or more of the SCT Parties.
(b) The Purchasers shall promptly notify SCT in writing of the
occurrence of a Triggering Event (each, a "Termination Notice"). If SCT
disputes the validity of the Triggering Event, then SCT and the Purchasers shall
resolve the dispute as provided in Sections 10.9(d), (e), (f), (g) and (h). In
---------------- --- --- --- --- ---
no event shall the Purchasers (and ACS shall not cause or permit any of the
Purchasers, the Company or Omni-Tech to) admit any liability with respect to any
Triggering Event or settle, compromise, pay or discharge the dispute underlying
such Triggering Event without the prior written consent of SCT, which consent
shall not be unreasonably withheld.
(c) Within 10 days after its sending of the Termination Notice, and
provided that SCT shall not then dispute the validity of the Triggering Event,
the Purchasers shall notify SCT in writing of the amount of the Purchase Price
Adjustment determined in accordance with Section 10.9(a) hereof (the "Purchase
---------------
Price Reduction Notice"). If SCT does not dispute either the validity of the
Triggering Event or the amount of the Purchase Price Adjustment referred to in
the Purchase Price Reduction Notice within 10 days after its receipt of the
Purchase Price Reduction Notice, then an amount equal to the amount of the
Purchase Price Reduction referred to in the Purchase Price Reduction Notice
shall be paid by SCT to the Purchasers in immediately available funds no later
than the second (2nd) day after the end of such 10 day period to the account
designated by the Purchasers in full satisfaction of the obligations of SCT
under this Agreement with respect to such terminated Outsourcing Agreement and
the circumstances surrounding such termination. If SCT disputes either the
validity of the Triggering Event or the amount of the Purchase Price Adjustment
referred to in the Purchase Price Reduction Notice within the 10 day period
referred to in the immediately preceding sentence, then SCT and the Purchasers
shall resolve the dispute as provided in Sections 10.9(d), (e), (f), (g) and
---------------- --- ---- ---
(h).
---
-51-
(d) SCT and the Purchasers shall attempt in good faith to resolve any
disputed matters referred to in Sections 10.9(b) and/or (c) hereof by
negotiation between their respective chief financial officers. All reasonable
requests for information made by one party to the other shall be honored. All
negotiations pursuant to this Section 10.9(d) shall be confidential and shall be
---------------
treated as compromise and settlement negotiations for purposes of applicable
rules of evidence and nothing stated or disclosed and no document produced in
connection with such negotiations that is not independently discoverable under
applicable law shall be offered or received as evidence or used for impeachment
or for any other purpose in any then current or future arbitration, judicial,
administrative or other legal proceeding. Any party hereto may give the other
party hereto written notice (an "Escalation Notice") at any time after the date
which is thirty (30) days after the commencement of such negotiations of such
party's desire to proceed as provided for in Section 10.9(e).
---------------
(e) If the disputed matter shall not have been resolved as provided
in Section 10.9(d) hereof, then SCT and the Purchasers shall attempt in good
---------------
faith to resolve any disputed matters referred to in Section 10.9(b) and/or (c)
-------------- ---
hereof by negotiation between SCT's and the Purchasers' respective chief
executive officers. Within 15 days after delivery of the Escalation Notice, the
receiving party shall submit to the other party a written response. Each of the
Escalation Notice and the response thereto shall include (i) a statement of such
party's position and a summary of the arguments supporting that position, and
(ii) the name and title of any other person who shall accompany the chief
executive officer in any meetings to be held to resolve the dispute. Within 30
days after the delivery of the Escalation Notice, the chief executive officers
of both parties shall meet at a mutually acceptable time and place, and
thereafter as often as they mutually deem necessary, to attempt to resolve the
disputed matters. All reasonable requests for information made by one party to
the other shall be honored. All negotiations pursuant to this Section 10.9(e)
---------------
shall be confidential and shall be treated as compromise and settlement
negotiations for purposes of applicable rules of evidence and nothing stated or
disclosed and no document produced in connection with such negotiations that is
not independently discoverable under applicable law shall be offered or received
as evidence or used for impeachment or for any other purpose in any then current
or future arbitration, judicial, administrative or other legal proceeding.
(f) If the disputed matters shall not have been resolved as provided
in Section 10.9(e) hereof within 30 days after the first meeting between the
---------------
respective chief executive officers of the parties, then SCT and the Purchasers
shall thereafter endeavor to settle such dispute by mediation under the then
current Commercial Mediation Rules of the American Arbitration Association. The
mediation shall be conducted before one independent and disinterested mediator
who is mutually agreeable to SCT, on the one hand, and the Purchasers, on the
other hand. The mediator shall be an attorney with expertise in the subject
matter of the dispute. If the parties are unable to agree upon a mediator within
ten (10) days of initiation of the mediation proceeding, then (i) SCT, on the
one hand, and the Purchasers, on the other hand, shall submit to the other a
list of three (3) independent and disinterested nominees to serve as the
mediator within three (3) days after the expiration of such ten (10) day period,
(ii) each party shall strike two (2) names from the other party's list and
advise such other party of the identity of the remaining nominee; and (iii) the
mediator shall be selected by lot between the two (2) remaining persons on both
lists. Within thirty (30) days after the mediator has been selected, a senior
executive representative of each party (the "Senior Representative") and their
respective
-52-
attorneys shall meet with the mediator for one mediation conference, it being
agreed that each party's Senior Representative shall have full authority to
settle the applicable dispute at such mediation conference. Each party may, no
more than three (3) days prior to the mediation conference, submit to the
mediator statements of fact regarding the nature of the dispute, together with
any supporting documentation and, if so submitted to the mediator, such party
shall deliver a copy thereof to the other party concurrently with, and pursuant
to the same delivery method of, delivery to the mediator. If the dispute is not
settled at such mediation conference or at any mutually agreed continuation
thereof, then either party may give the other a written notice declaring the
mediation process at an end, in which event each party shall be free to seek
arbitration as provided in Section 10.9(g). All negotiations pursuant to this
---------------
Section 10.9(f) shall be confidential and shall be treated as compromise and
---------------
settlement negotiations for purposes of applicable rules of evidence and nothing
stated or disclosed and no document produced in connection with such
negotiations that is not independently discoverable under applicable law shall
be offered or received as evidence or used for impeachment or for any other
purpose in any then current or future arbitration, judicial, administrative or
other legal proceeding.
(g) If such disagreement has not been resolved in accordance with
Sections 10.9 (d), (e), and (f) then the parties shall finally settle such
----------------- --- ---
dispute by binding arbitration conducted expeditiously in accordance with the
then existing rules (the "Rules") of the American Arbitration Association
("AAA"), and judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof; provided, however, that the law
applicable to any controversy shall be the law of the State of Delaware,
regardless of principles of conflicts of laws. Except to the extent otherwise
agreed by the parties and notwithstanding anything in the Rules to the contrary,
in any arbitration pursuant to this Agreement, (i) discovery shall be allowed
and governed by the rules of civil procedure as then in effect in the State of
Delaware and (ii) the award or decision shall be rendered by a panel of three
(3) arbitrators selected as follows: SCT, on the one hand, and the Purchasers,
on the other hand, shall select one (1) arbitrator within thirty (30) days after
the commencement of the arbitration proceeding and the third arbitrator shall be
selected by the mutual agreement of the two (2) arbitrators so selected by SCT
and the Purchasers within thirty (30) days after the selection of the last of
such two (2) arbitrators. In the event that such two (2) arbitrators cannot
mutually agree upon the third arbitrator within such thirty (30) day period,
such third arbitrator shall be appointed by the AAA in accordance with the
Rules. Upon the selection of the arbitrators, an award or decision shall be
rendered within the period required by the Rules. Judgment upon the award
rendered by the arbitrator may be entered into any court having jurisdiction
thereof.
(h) The parties shall conduct any mediation or arbitration
proceedings pursuant to Section 10.9(f) and Section 10.9(g). respectively, in
--------------- ---------------
Chicago, Illinois, and the arbitrator shall apply the substantive law of
Delaware as applicable to the dispute.
(i) If SCT is required to make any payment under this Section 10.9 on
------------
account of any Triggering Event, then concurrently with SCT's payment therefor,
the Purchasers shall to the extent of such payment by SCT assign (and ACS shall
cause the Purchasers, the Company and Omni-tech to assign) their respective
rights to any claim related to the Triggering Event that they may have against
the counter-party to such Outsourcing Agreement.
-53-
ARTICLE 11
TERMINATION
11.1 Termination. This Agreement may be terminated prior to the Closing as
-----------
follows:
(a) at any time before the Closing, by the mutual written
agreement between the SCT Parties and the ACS Parties;
(b) at any time before the Closing, by the Purchasers if any of
the representations or warranties contained in Article 4 of this Agreement were
---------
incorrect in any material respect when made or become incorrect in any material
respect;
(c) at any time before the Closing, by SCT if any of the
representations or warranties contained in Article 5 this Agreement were
---------
incorrect in any material respect when made or become incorrect in any material
respect;
(d) at any time before the Closing, by the SCT Parties, on the
one hand, or by the ACS Parties, on the other hand, upon any material breach by
any of the ACS Parties or by any of the SCT Parties, respectively, of their
respective covenants or agreements contained in this Agreement, and, in either
case, the failure of the breaching party to cure such breach, if curable, within
ten (10) days after written notice thereof is given by the non-breaching party
to the breaching party;
(e) at any time before the Closing, by SCT as permitted by
Section 6.3(a) of this Agreement, if, on or prior to the date of termination,
--------------
SCT pays the Purchasers Five Million Dollars ($5,000,000) (the "Termination
Fee") by wire transfer of immediately available funds to the account designated
on Schedule 11.1(e); and
----------------
(f) at any time after July 31, 2001 by the SCT Parties, on the
one hand, or by the ACS Parties, on the other hand, upon notification to the
non-terminating party by the terminating party if the Closing shall not have
occurred on or before such date and the failure of the Closing to occur is not
caused by a breach of this Agreement by the terminating party.
11.2 Effect of Termination.
---------------------
(a) Subject to Section 11.2(b) of this Agreement, if this
---------------
Agreement is validly terminated pursuant to Section 11.1 of this Agreement, then
------------
this Agreement shall forthwith become void, and, subject to Section 11.2(b) of
---------------
this Agreement, there shall be no liability under this Agreement on the part of
any of the SCT Parties, on the one hand, or the Purchasers, on the other hand,
and all rights and obligations of each party to this Agreement shall cease;
provided, that (i) the provisions of Section 12.1 of this Agreement shall
------------
indefinitely survive any such termination, (ii) the provisions of Section 6.2 of
-----------
this Agreement and the Confidentiality Agreement shall survive such termination
until its provisions have been fully performed in accordance with its terms or
have otherwise been fully discharged, (iii) this Section 11.2 shall indefinitely
------------
survive such termination.
-54-
(b) If this Agreement is validly terminated as a result of a
misrepresentation or a breach of any warranty made by any party or as a result
of a material breach by a party of any of such party's covenants or agreements
contained in this Agreement, or, if all conditions to the obligations of a party
at Closing contained in either of Article 7 or Article 8 of this Agreement have
--------- ---------
been satisfied (or waived by the party entitled to waive such conditions) and
such party does not proceed with the Closing, then any and all rights and
remedies available to the non-breaching parties, whether under this Agreement,
at law or in equity or otherwise shall be preserved and shall survive the
termination of this Agreement.
(c) If this Agreement is terminated as contemplated by Section
-------
6.3(a), then such termination will not be effective until wire transfer
------
confirmation of payment of the Termination Fee required by Section 11.1(e) has
---------------
been received by SCT from its bank.
ARTICLE 12
GENERAL
12.1 Expenses. The SCT Parties shall be responsible for the payment of
--------
costs they have incurred and will incur in connection with the negotiation,
execution and delivery of this Agreement and consummation of the transactions
contemplated by this Agreement by the SCT Parties; provided, that SCT Parties
shall be responsible for the payment of costs that the Company and Omni-Tech
have incurred and will incur in connection with the negotiation, execution and
delivery of this Agreement and the consummation of the Closing. The ACS Parties
shall be responsible for the payment of costs they have incurred and will incur
in connection with the negotiation, execution and delivery of this Agreement and
consummation of the transactions contemplated by this Agreement by the ACS
Parties.
12.2 Binding Effect and Assignment. This Agreement shall be binding upon
-----------------------------
and inure to the benefit of and be enforceable by each of the parties and their
respective successors, assigns, heirs, administrators and personal
representatives. This Agreement may be assigned by the Purchasers to an
Affiliate of the Purchasers and ACS, provided that such Affiliate assumes all
obligations of the Purchasers under this Agreement and provided, further, that
the Purchasers and ACS shall remain jointly and severally liable with such
Affiliate for all representations, warranties, agreements and liabilities under
this Agreement. This Agreement may not be assigned by any of the SCT Parties
without the prior written consent of the Purchasers. This Agreement may not be
assigned by ACS without the prior written consent of SCT.
12.3 Consents, Further Assurances. Consistent with the terms and
----------------------------
conditions of this Agreement, each party to this Agreement will use its
commercially reasonable efforts to execute and deliver such other documents and
take such other actions as reasonably requested by the other party to fulfill
the conditions precedent to the obligation of the other party to consummate the
purchase and sale of the Shares, or as the other party to this Agreement may
reasonably request in order to carry out this Agreement and the transactions
contemplated by this Agreement. The ACS Parties and the SCT Parties shall use
their respective commercially reasonable efforts and will cooperate with each
other to the extent reasonably necessary to obtain all consents, approvals and
waivers, if any, from Third Parties required to consummate the transactions
contemplated by this Agreement or which, if not obtained, would materially
-55-
adversely affect the Condition; provided, that, in obtaining such consents,
approvals and waivers, none of the SCT Parties or any of their respective
Affiliates and none of the ACS Parties or any of their respective Affiliates
shall be required to make any additional payment or guarantee or to take any
action which would impose any material additional cost, expense or liability on
any of the SCT Parties or any of their respective Affiliates or on any of the
ACS Parties or any of their respective Affiliates other than that which would
have been incurred by such SCT Party Affiliate or the ACS Party or such
Affiliate in the absence of this Section 12.3.
------------
12.4 Waiver. Any term or provision of this Agreement may be waived at any
------
time by the party entitled to the benefit thereof only by a written instrument
duly executed by such party.
12.5 Notices. All notices, requests, demands, waivers, consents,
-------
approvals, or other communications which are required or permitted under this
Agreement shall be in writing and shall be delivered personally, sent by
reputable overnight courier service (such as Federal Express), or sent by
registered or certified mail, return receipt requested, postage prepaid, to the
addresses set forth below:
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If to any of the SCT Parties:
c/o Systems & Company Technology Corporation
0 Xxxxxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Senior Vice President and General Counsel
With a copy to:
Xxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esquire
If to the ACS Parties:
c/o Affiliated Computer Services, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxx, Senior Vice President
With a copy to:
Xxxxxx & Xxxx LLP
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxx, Esquire
or to such other address as the party entitled to receive such notice may, from
time to time, specify in writing to the other party. Each such notice, request,
demand, waiver, consent, approval and other communications shall be deemed to be
received when delivered if delivered personally, the next business day after the
date sent if sent by a national overnight delivery service, or three (3)
business days after the date mailed if mailed by certified or registered mail.
12.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY
CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION OTHER THAN THE STATE OF DELAWARE.
12.7 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
--------------------
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE)
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ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
12.8 No Third-Party Beneficiaries. Except for the Purchaser Indemnitees
----------------------------
and SCT Indemnitees, no provision is intended to benefit any person other than
the signatories to this Agreement nor shall any such provision be enforceable by
any other person.
12.9 Severability. Any provision of this Agreement which is invalid or
------------
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
12.10 Schedules. All Schedules referred to in this Agreement are intended
---------
to be and are specifically incorporated by reference in this Agreement.
12.11 Section Headings. All Section headings in this Agreement have been
----------------
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions of this Agreement.
12.12 Gender and Number. Words denoting the singular number only shall
-----------------
include the plural and vice versa. Words denoting any gender include all genders
and words denoting persons shall include firms and corporations and vice versa.
12.13 Contents of Agreement. This Agreement sets forth the entire
---------------------
understanding of the parties to this Agreement with respect to the transactions
contemplated by this Agreement and shall not be amended or terminated except by
a written instrument duly executed by each of the parties to this Agreement. Any
and all prior agreements or understandings between or among the parties
regarding the subject matter hereof, including without limitation, the letter of
intent dated June 1, 2001, are superseded in their entirety by this Agreement.
12.14 Counterparts. This Agreement may be executed in two or more fully
------------
executed counterparts, each of which shall be deemed an original, but all of
such counterparts together shall constitute but one and the same instrument.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
By: /s/ Xxxx Xxxxxxx
----------------
Print Name: Xxxx Xxxxxxx
------------
Title: Senior Vice President
---------------------
SCT TECHNOLOGIES (CANADA), INC.
By: /s/ Xxxx Xxxxxxx
----------------
Print Name: Xxxx Xxxxxxx
------------
Title: Senior Vice President
---------------------
SCT FINANCIAL CORPORATION
By: /s/ Xxxx Xxxxxxx
----------------
Print Name: Xxxx Xxxxxxx
------------
Title: Senior Vice President
---------------------
SCT PROPERTY, INC.
By: /s/ Xxxx Xxxxxxx
----------------
Print Name: Xxxx Xxxxxxx
------------
Title: Senior Vice President
---------------------
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SCT GOVERNMENT SYSTEMS, INC.
By: /s/ Xxxx Xxxxxxx
----------------
Print Name: Xxxx Xxxxxxx
------------
Title: Senior Vice President
---------------------
OMNI-TECH SYSTEMS LTD.
By: /s/ Xxxx Xxxxxxx
----------------
Print Name: Xxxx Xxxxxxx
------------
Title: Senior Vice President
---------------------
AFFILIATED COMPUTER SERVICES, INC.
By: /s/ Xxxx Xxxxxxx
----------------
Print Name: Xxxx Xxxxxxx
------------
Title: Executive Vice President
------------------------
ACS ENTERPRISE SOLUTIONS, INC.
By: /s/ Xxxx Xxxxxxx
----------------
Print Name: Xxxx Xxxxxxx
------------
Title: Vice President
--------------
ACS-ALBERTA, INC.
By: /s/ Xxxx Xxxxxxx
----------------
Print Name: Xxxx Xxxxxxx
------------
Title: Vice President
--------------
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TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS............................................ 2
ARTICLE 2 SALE AND PURCHASE OF SHARES............................ 8
ARTICLE 3 CLOSING................................................ 9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES RESPECTING THE SCT
PARTIES................................................ 10
ARTICLE 5 REPRESENTATIONS AND WARRANTIES RESPECTING PURCHASERS... 29
ARTICLE 6 CERTAIN COVENANTS AND OTHER MATTERS.................... 30
ARTICLE 7 CONDITIONS TO THE OBLIGATION OF PURCHASERS............. 34
ARTICLE 8 CONDITIONS TO THE OBLIGATION OF THE SCT PARTIES........ 37
ARTICLE 9 POST-CLOSING COVENANTS................................. 38
ARTICLE 10 INDEMNIFICATION; EXPENSES.............................. 43
ARTICLE 11 TERMINATION............................................ 54
ARTICLE 12 GENERAL................................................ 55
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