Exhibit 10.8
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STOCK PURCHASE AGREEMENT
BY AND BETWEEN
ANSWERTHINK CONSULTING GROUP, INC.
AND
XXXXXXX X. XXXXXXX
RELATING TO THE ACQUISITION OF
THE XXXXXXX GROUP, INC.
DATED AS OF OCTOBER 13, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE OF STOCK..................................................................... 1
1.1 Purchase and Sale...................................................................... 1
1.2 Purchase Price......................................................................... 1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER........................................ 4
2.1 Corporate Organization, Etc............................................................ 4
2.2 Subsidiaries........................................................................... 4
2.3 Stock Record Books..................................................................... 5
2.4 Corporate Minute Books................................................................. 5
2.5 Title to Shares........................................................................ 5
2.6 Authorization, Etc..................................................................... 5
2.7 No Violation........................................................................... 5
2.8 Financial Statements................................................................... 6
2.9 Employees.............................................................................. 7
2.10 Absence of Certain Changes............................................................ 7
2.11 Contracts............................................................................. 7
2.12 True and Complete Copies.............................................................. 9
2.13 Title and Related Matters............................................................. 9
2.14 Litigation............................................................................10
2.15 Tax Matters...........................................................................10
2.16 Compliance with Law and Applicable Government Regulations.............................11
2.17 Pension and Other Benefit Plans.......................................................11
2.18 Intellectual Property.................................................................13
2.19 Capital Expenditures and Investments..................................................14
2.20 Dealings with Affiliates..............................................................15
2.21 Insurance.............................................................................15
2.22 Accounts Receivable...................................................................15
2.23 Brokerage.............................................................................15
2.24 Clients...............................................................................15
2.25 Permits...............................................................................16
2.26 Improper and Other Payments...........................................................16
2.27 Disclosure............................................................................16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................................16
3.1 Corporate Organization, Etc............................................................16
3.2 Authorization, Etc.....................................................................17
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3.3 No Violation...........................................................................17
3.4 Brokerage..............................................................................17
3.5 Improper and Other Payments............................................................17
3.6 Investment Representation..............................................................17
3.7 Disclosure.............................................................................18
ARTICLE IV COVENANTS OF THE PURCHASER...........................................................18
4.1 Corporation's Employees................................................................18
4.2 Operation of Business..................................................................18
ARTICLE V OTHER COVENANTS AND AGREEMENTS........................................................19
5.1 Agreement to Defend....................................................................19
5.2 Deliveries After Closing...............................................................19
5.3 Public Announcements...................................................................19
5.4 Tax Returns, Payments and Elections....................................................20
5.5 Financial Information..................................................................21
5.6 Bonus Payments.........................................................................21
5.7 Key Man Insurance......................................................................21
5.8 Use of Xxxxxxx Name....................................................................21
5.9 Employment Agreements with Non-Senior Executives.......................................21
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER.......................................22
6.1 Representations and Warranties; Performance............................................22
6.2 Consents and Approvals.................................................................22
6.3 Opinion of the Corporation's Counsel...................................................22
6.4 No Proceeding or Litigation............................................................22
6.5 Accounting Matters.....................................................................22
6.6 Proceedings and Documents..............................................................22
6.7 Certificates of Good Standing..........................................................23
6.8 Resignations...........................................................................23
6.9 Creditor Consents......................................................................23
6.10 Shareholders' Agreement...............................................................23
6.11 Employment Agreements.................................................................23
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE SELLER.........................................23
7.1 Representations and Warranties; Performance............................................23
7.2 Consents and Approvals.................................................................24
7.3 No Proceeding or Litigation............................................................24
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7.4 Opinion of the Purchaser's Counsel.....................................................24
7.5 Certificate of Good Standing...........................................................24
7.6 Employment Agreements..................................................................24
ARTICLE VIII CLOSING............................................................................24
ARTICLE IX SURVIVAL OF TERMS; INDEMNIFICATION...................................................24
9.1 Survival...............................................................................24
9.2 Indemnification by Seller..............................................................25
9.3 Indemnification by the Purchaser.......................................................25
9.4 Third-Party Claims.....................................................................26
9.5 Indemnification Limits.................................................................27
9.6 Offset.................................................................................27
ARTICLE X MISCELLANEOUS PROVISIONS..............................................................27
10.1 Amendment and Modification............................................................27
10.2 Waiver of Compliance; Consents........................................................27
10.3 Certain Definitions...................................................................28
10.4 Notices...............................................................................33
10.5 Assignment............................................................................35
10.6 Construction..........................................................................35
10.7 Governing Law.........................................................................35
10.8 Arbitration...........................................................................35
10.9 Counterparts..........................................................................36
10.10 Headings.............................................................................36
10.11 Entire Agreement.....................................................................36
10.12 Binding Effect.......................................................................37
10.13 Delays or Omissions..................................................................37
10.14 Severability.........................................................................37
10.15 Expenses.............................................................................37
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STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT, dated as of the 13th day of October, 1997 by and
between AnswerThink Consulting Group, a Florida corporation (the "Purchaser"),
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and Xxxxxxx X. Xxxxxxx (the "Seller"), relating to the acquisition of The
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Xxxxxxx Group, Inc., an ohio corporation (the "Corporation"). Terms used herein
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and not otherwise defined shall have the meanings set forth in Section 10.3
hereof.
W I T N E S S E T H:
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WHEREAS, Purchaser desires to purchase from the seller, and the Seller
desires to Sell to the purchaser, all of the 100 shares of Common Stock, no par
value, which are issued and outstanding of the Corporation (collectively, the
"Shares");
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NOW, THEREFORE, in consideration of the representations and warranties,
covenants and agreements, and subject to the conditions contained herein, the
Seller, and the Purchaser, hereby agree as follows:
ARTICLE I
PURCHASE OF STOCK
1.1 Purchase and Sale. Subject to the terms and conditions of this
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Agreement, the Seller hereby sells to the Purchaser, and the Purchaser hereby
purchases from the Seller, all of the Shares.
1.2 Purchase Price. In consideration for the conveyance of the Shares
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and in reliance on the representations and warranties, covenants and agreements
of the Seller contained herein and the documents contemplated hereby, the
Purchaser shall pay to the Seller the aggregate purchase price (the "Purchase
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Price") of Eleven Million Six Hundred Seventy Thousand Dollars ($11,670,000).
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(a) The Purchase Price shall be payable by delivery to the Seller at
Closing of (i) Six Million Five Hundred Twenty-Seven Thousand Dollars
($6,527,000) by wire transfer to Seller's account number 2005890490 at Key Bank
(Cleveland, Ohio, Routing Number 000000000) and (ii) a non-negotiable promissory
note substantially in the form attached hereto as Exhibit 1.2(a) (the "Note").
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Principal payments of the Note shall be on the dates and in the amounts set
forth below:
PAYMENT DATE AMOUNT
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I March 31, 1998 $3,750,000
II March 31, 1999 $ 497,000
III March 31, 2000 $ 896,000
Notwithstanding the foregoing, the Purchaser shall not be required to make
any portion of the March 31, 1998 payment if the Tier I Conditions have not been
fully met.
The full amount of the March 31, 1999 payment shall be made if the Tier II
Conditions have been fully met. In the event that Pre Tax Profit for the year
ended December 31, 1998 is less than the full Tier II requirement, but is more
than the result obtained by subtracting from $2,887,000 the amount, if any, by
which Pre Tax Profit for 1997 exceeded $2,887,000 or, if Pre Tax Profit for 1997
was less than $2,887,000, adding such shortfall to $2,887,000, the Seller shall
receive such portion of the March 31, 1999 payment which is equal to the result
obtained by multiplying $497,000 by a fraction, the numerator of which shall be
the result obtained by adding to Pre Tax Profit for 1998 the amount, if any, by
which Pre Tax Profit for 1997 exceeded $2,887,000 or, if Pre Tax Profit for 1997
was less than $2,887,000, subtracting such shortfall from Pre Tax Profit for
1998, and the denominator of which is $5,641,000. The full amount of the Tier
III payment shall be made if the Tier III Conditions have been fully met. In
the event the Tier III Conditions are not fully met, such portion of the March
31, 2000 payment shall be made as shall equal the result obtained by multiplying
$896,000 by a fraction the numerator of which shall be the Downstream Technology
Contracts and the denominator of which shall be $24,000,000.
Interest on the unpaid principal balance of the Note shall accrue at the
rate of eight percent (8%) per annum and shall be payable together with each
payment of principal (as determined above). Payments not made when due shall
bear interest at the rate of fifteen percent (15%) per annum.
(b) Notwithstanding anything in (a) above, in the event the Seller
terminates his employment with the Corporation without Good Reason or the
Corporation terminates his employment for Cause on a date which is prior to the
date which is four (4) years from the Closing Date, the Seller shall return to
the Purchaser (and Purchaser shall not be obligated to pay if Seller has not yet
received) that portion of the Purchase Price in accordance with the following
schedule:
2
MONTHS ELAPSED FROM CLOSING UNTIL PURCHASE PRICE
TERMINATION OF EMPLOYMENT RETURNED
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Less than 24 100%
More than 24 but less than 36 50%
More than 36 but less than 48 25%
More than 48 -0-
(c) Notwithstanding anything to the contrary set forth in (a) or (b)
above, the Seller shall not be required to return to the Purchaser any component
of the Purchase Price if employment is terminated within four years from the
date of this Agreement for the following reasons: (i) the Seller shall die or
become Disabled (as defined in his Employment Agreement with the Corporation),
(ii) the Seller shall be terminated from employment by the Corporation without
Cause; or (iii) the Seller shall terminate his employment with the Corporation
for Good Reason (as defined in his Employment Agreement with the Corporation).
(d) Payments of bonuses (the "Payments") as set forth in (a) above
shall be made based upon the books and records of the Corporation which shall be
subject to review by the Purchaser. The Seller shall cause all books and
records of the Corporation to be kept in accordance with GAAP consistently
applied for periods after January 1, 1996, and without giving effect to the
transactions contemplated herein. Promptly after the end of each of the
Corporation's 1997 and 1998 fiscal years, but in any event no later than 30 days
after each such fiscal year end, the Seller shall cause the Corporation to
present to the Purchaser the books and records of the Corporation "closed" with
respect to such period, together with the Corporation's calculation of Pre Tax
Profit and/or Downstream Technology Contracts. The Seller shall cause the
Corporation to allow the Purchaser and its representatives full and complete
access to all work papers, books and records and all additional information used
in preparing the Corporation's calculation of Pre Tax Profit and/or Downstream
Technology Contracts and shall make the Seller (or his successor) reasonably
available to discuss with the Purchaser and its representatives such papers,
books, records and calculations. The Corporation's calculation of Pre Tax
Profit and/or Downstream Technology Contracts, when delivered by the Corporation
to the Purchaser, shall be deemed final, conclusive and binding on the parties
and will be deemed to be Pre Tax Profit and/or Downstream Technology Contracts
calculations upon which the Payments shall be based, unless the Purchaser
notifies Seller, within 20 business days after receipt of the Corporation's
books and records and calculations of Pre Tax Profit and/or Downstream
Technology Contracts of its disagreement therewith. The Purchaser and Seller
shall negotiate in good faith to resolve any differences. If they reach
agreement on the amount of Pre Tax Profit and/or Downstream Technology Contracts
after review and discussion of the Corporation's books and records, such agreed
upon amount shall govern the determination of the Payments. In the event they
cannot resolve their differences within 5 days, the items and amounts in dispute
shall be submitted to the auditing firm of Xxxxxx Xxxxxxxx LLP (the "Resolution
Accountants") for resolution within 20 days of submission of any such dispute to
the Resolution Accountants. The sole function of the Resolution Accountants
shall be to select as
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most accurately reflecting the Corporation's Pre Tax Profits and/or Downstream
Technology Contracts, without adjustment or alteration, the calculations of such
amounts by the Corporation and the Purchaser, and the determination by such
independent auditing firm shall be binding and conclusive upon the parties. If
the Resolution Accountants select the calculations of the Corporation, the
Purchaser shall pay the fees and expenses of the Resolution Accountants; if the
Resolution Accountants select the calculations of the Purchaser, the Seller
shall pay the fees and expenses of the Resolution Accountants. Except as set
forth in the next sentence, all payments required to be made upon the
satisfaction of the Tiers I, II and III requirements shall be made on the first
to occur of (i) the payment date set forth in (c) above, or (ii) 20 business
days after the Purchaser's receipt of the Corporation's books and records and
calculations of Pre Tax Profit and/or Downstream Technology Contracts. If
applicable, payment will be made within three days after the Resolution
Accountants have selected either the Purchaser's or Seller's calculations of Pre
Tax Profit and/or Downstream Technology Contracts.
(e) In the event that the Tier III Conditions are met prior to the
applicable date set forth in Exhibit A hereto, the March 30, 2000 payment of the
applicable portion of the Purchase Price shall be accelerated to the date that
the Purchaser has completed its review of the reports of the Corporation
evidencing such compliance, unless there is a dispute as to whether the
Corporation is in compliance, in which case the dispute mechanism set forth in
(d) above shall be invoked to arrive at a conclusion as to the correct Tier III
payment to be made, if any.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as of the date hereof:
2.1 Corporate Organization, Etc. The Corporation is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Ohio with full corporate power and authority to carry on its business as it is
now being conducted and proposed to be conducted, and to own, operate and lease
its properties and assets. The Corporation is duly qualified or licensed to do
business and is in corporate and Tax good standing in every jurisdiction in
which the conduct of its business, the ownership or lease of its properties, the
proposed conduct of its business or ownership or lease of its properties, or the
transactions contemplated by this Agreement, require it to be so qualified or
licensed except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect. Such jurisdictions are set forth in Schedule
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2.1(a) hereto. True, complete and correct copies of the Corporation's Articles
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of Incorporation and Code of Regulations as presently in effect are set forth in
Schedule 2.1(b) hereto.
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2.2 Subsidiaries. The Corporation has no Subsidiaries.
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2.3 Stock Record Books. The stock record books of the Corporation which
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have been delivered to the Purchaser for inspection prior to the date hereof are
complete and correct in all material respects. The authorized, issued and
outstanding capital stock of the Corporation is as set forth in Schedule 2.3
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hereto. There are no shares of capital stock of the Corporation held in the
treasury of the Corporation and no shares of capital stock of the Corporation
are currently reserved for issuance for any purpose or upon the occurrence of
any event or condition.
2.4 Corporate Minute Books. The corporate minute books of the Corporation
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which have been made available to the Purchaser for inspection are complete and
correct in all material respects and contain all of the proceedings of the
shareholders and directors of the Corporation. A true and complete list of the
incumbent directors and officers of the Corporation is set forth in Schedule 2.4
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hereto. The books and records of the Corporation accurately reflect in all
material respects the assets, liabilities, business, financial condition and
results of operations of the Corporation and have been maintained in accordance
with normal business and bookkeeping practices.
2.5 Title to Shares. All of the outstanding shares of the capital stock of
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the Corporation are owned by the Seller, have been duly authorized and validly
issued and are fully paid and nonassessable, are free of all Liens and
Contracts, and have been issued in compliance with all applicable securities
laws. There is no outstanding Contract with the Corporation or any other Person
to purchase, redeem or otherwise acquire any outstanding shares of the capital
stock of the Corporation, or securities or obligations of any kind convertible
into any shares of the capital stock of the Corporation. The Corporation has not
redeemed any securities in violation of any Contract or Regulation. The Seller
is the sole owner of and has full right, power and authority to sell and vote
the Shares. Upon payment of the Purchase Price to the Seller at the Closing, the
Seller will convey good and marketable title to the Shares, free and clear of
all Liens, Contracts or other limitations whatsoever. The assignments,
endorsements, stock powers and other instruments of transfer delivered by the
Seller to the Purchaser at the Closing will be sufficient to transfer the
Seller's entire interest, legal and beneficial, in the Shares to the Purchaser.
2.6 Authorization, Etc. This Agreement constitutes the legal, valid and
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binding obligation of the Seller, enforceable against the Seller in accordance
with its terms.
2.7 No Violation. Except as set forth in Schedule 2.7 hereto, the
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execution, delivery and performance by the Corporation and the Seller of this
Agreement, and all other agreements contemplated hereby, and the fulfillment of
and compliance with the respective terms hereof and thereof by the Corporation
and the Seller, do not and will not (a) conflict with or result in a breach of
the terms, conditions or provisions of, (b) constitute a default or event of
default under (with due notice, lapse of time or both), (c) result in the
creation of any Lien upon the Corporation's capital stock or assets pursuant to,
(d) give any third party the right to accelerate any obligation under, (e)
result in a violation of, or (f) require any authorization, consent, approval,
exemption or other action by, notice to, or filing with any Authority pursuant
to,
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Articles of Incorporation or Code of Regulations of the Corporation or any
applicable Regulation, any Order or any Contract to which the Corporation, the
Seller or their respective properties or the Shares are subject. Each of the
Seller and the Corporation has complied with all applicable Regulations and
Orders in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby.
2.8 Financial Statements.
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(a) Attached as Schedule 2.8(a) hereto are Statements of Income and
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Shareholder's Equity for the years ended December 31, 1994, 1995 and 1996, the
four months ended April 30, 1997 and Balance Sheets as at each of such dates and
Statements of Cash Flows for the year ended December 31, 1996, and for the four
months ended April 30, 1997. The Balance Sheets, Statements of Income and
Shareholder's Equity and Statements of Cash Flows and the Notes thereto for the
year ended December 31, 1996, and for the four months ended April 30, 1997
fairly present the financial condition, assets and liabilities of the
Corporation at their respective dates and results of operations for the periods
therein referred to, all in accordance with GAAP. The Balance Sheets and
Statements of Income and Shareholder's Equity and Statements of Cash Flows at
April 30, 1997 and the notes thereto are herein collectively referred to as the
"Financial Statements." The Financial Statements and the Statements of Income
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and Shareholder's Equity and Statements of Cash Flows for the year ended
December 31, 1996 and the Balance Sheet as at such date have been audited by
Xxxxxx, Xxxxx & Company, the independent certified public accountants for the
Corporation.
(b) Attached as Schedule 2.8(b) are a Statement of Income and
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Shareholder's Equity and Statement of Cash Flows for the seven months ended July
31, 1997 and a Balance Sheet as at such date (the "Interim Financial
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Statements"). The Interim Financial Statements are (i) correct and complete in
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accordance with the books and records of the Corporation, (ii) fairly present
the financial condition, assets and liabilities of the Corporation as at such
dates and the results of operations and cash flows for the period covered
thereby and (iii) have been prepared in accordance with GAAP consistently
applied, except that the Interim Statements do not contain footnotes and except
for normal year-end adjustments, none of which individually or in the aggregate
would have a Material Adverse Effect on the balance sheet of the Corporation as
of July 31, 1997 or the Statement of Income for the Corporation for the seven-
month period ended July 31, 1997.
(c) Except as set forth in Schedule 2.8(c) hereto, the Corporation
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does not have any Indebtedness, obligation or liability (whether accrued,
absolute, contingent, unliquidated or otherwise, known to the Corporation,
whether due or to become due) arising out of transactions entered into at or
prior to the date hereof, or any state of facts existing at or prior to the date
hereof, other than: (i) liabilities set forth in the Financial Statements
(including any notes thereto), or (ii) liabilities and obligations which have
arisen after the Financial Statement Date in the ordinary course of business
(none of which is a liability resulting from breach of Contract, breach of
warranty, tort, infringement or Claim).
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2.9 Employees. Schedule 2.9 hereto sets forth a list of all officers,
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directors and key employees of the Corporation, together with a description of
the rate and basis for their total compensation. The Corporation is in
compliance with all applicable Regulations or Orders affecting employment and
employment practices of the Corporation, including terms and conditions of
employment and wages and hours, except where its failure to comply with such
Regulations and Orders would not have a Material Adverse Effect. The Corporation
has no collective bargaining agreements and, since January 1, 1995, there have
been no strikes, work stoppages nor any demands for collective bargaining by any
union or labor organization. There is no dispute or controversy with any union
or other organization of the Corporation's employees and no arbitration
proceedings pending or to the best knowledge of the Seller threatened involving
a dispute or controversy affecting the Corporation. The Corporation does not
have any liability to any of its employees, officers or directors other than for
the payment of employee salaries to be paid in the ordinary course of business
and which accrue after the date hereof.
2.10 Absence of Certain Changes. Since the Financial Statement Date, there
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has not been (a) any Material Adverse Change; (b) any damage, destruction or
loss, whether covered by insurance or not, having a Material Adverse Effect,
with regard to the Corporation's property and business; (c) any declaration,
setting aside or payment of any dividend or distribution (whether in cash, stock
or property) in respect of the Corporation's capital stock, or any redemption or
other acquisition of such stock by the Corporation except for the cash
distribution to the Seller of $456,000; (d) any increase (including as a result
of the transactions contemplated hereby) in the compensation payable to or to
become payable by the Corporation to its officers or employees or any adoption
of or increase in any bonus, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with any such officers or employees or
any Affiliate of the Corporation except for the payment of bonuses to employees
of the Corporation in an amount not to exceed $1,600,000; (e) a commission
payment to the Falls River Group of $622,000 in connection with the transaction
contemplated by this Agreement; (f) any entry into any Material Contract (as
defined hereafter) not in the ordinary course of business, including without
limitation, any borrowing or capital expenditure; (g) any borrowings or capital
expenditures; or (h) any change by the Corporation in accounting methods or
principles.
2.11 Contracts.
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(a) Except as set forth in Schedule 2.11 hereto, the Corporation is
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not a party to any written or oral:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan providing for deferred or other compensation to
employees or any other employee benefit plan, or any Contract with any
labor union;
(ii) Contract relating to loans to officers, directors, or
Affiliates;
(iii) Contract relating to the borrowing of money or the
mortgaging, pledging or otherwise placing a Lien on any asset of the
Corporation;
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(iv) Guarantee of any obligation;
(v) Contract under which the Corporation has advanced or
loaned any Person amounts in the aggregate exceeding $10,000;
(vi) Contract under which the Corporation is lessee of or
holds or operates any property, real or personal, owned by any other party,
except for any lease of real or personal property under which the aggregate
annual rental payments do not exceed $20,000;
(vii) Contract pursuant to which the Corporation is lessor of
or permits any third party to hold or operate any property, real or
personal, owned or controlled by the Corporation;
(viii) Contract or group of related Contracts with the same
party or group of affiliated parties the performance of which involves
annual consideration in excess of $10,000;
(ix) assignment, license, indemnification or Contract with
respect to any intangible property (including, without limitation, any
Proprietary Rights);
(x) warranty Contract with respect to its services rendered;
(xi) Contract under which it has granted any Person any
registration rights (including piggyback rights) with respect to any
securities;
(xii) Contract or non-competition provision in any Contract
prohibiting it from freely engaging in any business or competing anywhere
in the world;
(xiii) Contract for the purchase, acquisition or supply of
property and assets, whether for resale or otherwise in excess of $10,000;
(xiv) Contracts with independent agents, brokers, dealers or
distributors;
(xv) employment, consulting, sales, commissions, advertising
or marketing Contracts;
(xvi) Contracts providing for "take or pay" or similar
unconditional purchase or payment obligations;
(xvii) Contracts with Persons with which, directly or
indirectly, the Seller also has a Contract;
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(xviii) any other Contract which is material to its operations
and business prospects or involves a consideration in excess of $10,000
annually, excluding any purchase orders in the ordinary course of business;
or
(xix) any Contract where the consent of another is required in
connection with the execution, delivery or performance of this Agreement.
(b) The Corporation has performed in all material respects all
obligations required to be performed by it and is not in default in any respect
under or in breach of nor in receipt of any claim of default or breach under any
Contract which is identified on Schedule 2.11 hereto; no event has occurred
which with the passage of time or the giving of notice or both would result in a
default, breach or event of non-compliance under any Material Contract to which
the Corporation is subject (including without limitation all performance bonds,
warranty obligations or otherwise where the same would have a Material Adverse
Effect); the Corporation does not have any present expectation or intention of
not fully performing all such obligations; the Seller does not have any
knowledge of any breach or anticipated breach by the other parties to any such
Material Contract to which the Corporation is a party.
2.12 True and Complete Copies. The Corporation has delivered or made
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available to the Purchaser true and complete copies of all the Contracts and
documents listed in the schedules to this Agreement.
2.13 Title and Related Matters.
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(a) The Corporation owns no real property. Except as set forth in
Schedule 2.13(a) hereto, the Corporation has good and marketable title to all
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personal property and other assets reflected in the Financial Statements or
acquired after the Financial Statement Date, free and clear of all Liens or
Contracts of sale or lease other than Permitted Liens. All properties used in
the Corporation's business operations as of the Financial Statement Date are
reflected in the Financial Statements and are reflected therein in accordance
with and to the extent required by GAAP, except as to those assets which are
leased. Schedule 2.13(b) hereto sets forth a complete and accurate list of all
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such leased assets which have annual rental payments in excess of $10,000
(including the expiration date of such lease, the name of the lessor, the annual
rental payment and whether a consent is required from the lessor to consummate
the transactions contemplated hereby).
(i) All of the Corporation's leases are in full force and
effect, and valid and enforceable in accordance with their respective
terms. The Corporation has not received any notice of any, and there exists
no event of default or event which constitutes or would constitute (with
notice or lapse of time or both) a default by the Corporation or any other
Person under any lease .
(ii) All rent and other amounts due and payable with respect to
the Corporation's leases have been paid through the date of this Agreement.
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(iii) All lessors under the Corporation's real property leases
have consented (where such consent is necessary) to the consummation of the
transactions contemplated by this Agreement without requiring material
modification in the rights or obligations thereunder.
(iv) The Corporation has received no written notice that the
landlord with respect to any real property lease would refuse to renew such
lease upon expiration of the period thereof upon substantially the same
terms, except for rent increases consistent with past experience or market
rentals.
(b) There has not been since the Financial Statement Date any sale,
lease, or any other disposition or distribution by the Corporation of any of its
assets or properties except transactions in the ordinary and regular course of
business consistent with prior practice. After the Closing, the Purchaser will
own, or have the unrestricted right to use all properties and assets that are
currently used in connection with the Corporation's business and as contemplated
by this Agreement, subject to Permitted Liens.
2.14 Litigation. Except as set forth in Schedule 2.14 hereto, there is no
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Claim pending or, to the knowledge of the Seller, threatened against the
Corporation or the Seller which, if adversely determined, would have a Material
Adverse Effect on the Corporation or the Seller, nor is there any Order
outstanding against the Corporation or any Seller having, or which, insofar as
can be reasonably foreseen, in the future may have, a Material Adverse Effect on
the Corporation or the Seller.
2.15 Tax Matters.
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(a) The Corporation filed an election to be taxed under Subchapter S
of the Code and under analogous provisions of the income tax law of the State of
Ohio that was effective April 8, 1992. The foregoing elections were made in
compliance with the Code and State law and the Corporation has been an "S
Corporation" within the meaning of Code Section 1361(a)(i) for federal income
tax purposes (and under analogous provisions of State law) for the entire period
since such date. The Corporation is not and will not be subject to any tax
under Code Section 1374 after giving effect to the transactions contemplated
hereby.
(b) The Corporation has duly and timely filed its Tax Returns with the
appropriate Authority and has duly, completely and correctly reported all income
and all other amounts and information required to be reported thereon. The
Corporation has duly and timely paid all Taxes, including all installments on
account of Taxes for the current year, that are due and payable by it and the
Corporation has established reserves that are reflected on the Financial
Statements that are adequate for the payment by the Corporation of all Taxes
that are not yet due and payable and that relate to periods ending on or prior
to the Closing Date.
(c) The Corporation has not requested, or entered into any agreement
or other arrangement or executed any waiver providing for, any extension of time
within which (i) to file
10
any Tax Return covering any Taxes for which the Corporation is or may be liable;
(ii) to file any elections, designations or similar things relating to Taxes for
which the Corporation is or may be liable; (iii) the Corporation is required to
pay or remit any Taxes or amounts on account of Taxes; or (iv) any Authority may
assess or collect Taxes for which the Corporation is or may be liable.
(d) There are no actions, suits, proceedings, investigations, audits
or claims now pending or, to the knowledge of the Corporation or any Seller,
threatened, against the Corporation in respect of any Taxes and there are no
matters under discussion, audit or appeal with any Authority relating to Taxes.
(e) The Corporation has duly and timely withheld from any amount paid
or credited by it to or for the account or benefit of any person, including,
without limitation, any of its employees, officers and directors and any non-
resident person, the amount of all Taxes and other deductions required by any
applicable law, rule or regulation to be withheld from any such amount and has
duly and timely remitted the same to the appropriate Authority.
(f) The Corporation has not filed an election under Section 341(f) of
the Code that is applicable to the Corporation or any of its assets. The
Corporation has not made any payments, is obligated to make any payments, or is
a party to any agreement that under any circumstances could obligate it to make
any payments that will not be deductible under Code Section 280G. The
Corporation has not been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). The Corporation is not a party to
any tax allocation or sharing agreement or tax benefit transfer agreement. The
Corporation (or any predecessor of the Corporation), has never been a member of
an affiliated group that elected to file or was required to file consolidated
returns for federal income tax purposes or consolidated, combined or unitary tax
returns for state or local income tax purposes.
2.16 Compliance with Law and Applicable Government Regulations. The
---------------------------------------------------------
Corporation is in compliance with regard to its operations, practices, real
property, plants, structures, machinery, equipment and other property, and all
other aspects of its business, with all applicable Regulations and Orders,
including, but not limited to, all Regulations relating to the safe conduct of
business, environmental protection, quality and labeling, antitrust, Taxes,
consumer protection, equal opportunity, discrimination, health, sanitation,
fire, zoning, building and occupational safety except when the failure to be in
such compliance would not have a Material Adverse Effect. There are no Claims
pending, or, to the Seller's knowledge, threatened, nor has the Corporation
received any written notice, regarding any violations of any Regulations and
Orders enforced by any Authority claiming jurisdiction over the Corporation
including any requirement of OSHA or any pollution and environmental control
agency (including air and water).
2.17 Pension and Other Benefit Plans. (a) Except as disclosed on
-------------------------------
Schedule 2.17, the Corporation does not currently have, has not since the date
-------------
of its incorporation had and is under
11
no obligation to provide at any time in the future any Pension/Benefit Plans for
any of its officers, directors or employees, and does not have any obligations
or liabilities (either absolute or contingent) in respect of any such
Pension/Benefit Plans.
(b) Current and complete copies of all written Pension/Benefit Plans
or, where oral, written summaries of the material terms thereof, have been
provided or made available to the Purchaser together with current and complete
copies of all documents relating to the Pension/Benefit Plans, including,
without limitation, as applicable, (i) all documents establishing, creating or
amending any Pension/Benefit Plan; (ii) all trust agreements, funding
agreements, insurance contracts and investment management agreements; (iii) all
financial statements and accounting statements and reports, and investment
reports for each of the last [three] years and the [three] most recent actuarial
reports; (iv) all reports, returns, filings and material correspondence with any
regulatory authority in the last [three] years; and (v) all booklets, summaries
or manuals prepared for or circulated to, and written communications of a
general nature to employees concerning any Pension/Benefit Plan.
(c) Each Pension/Benefit Plan is, and has been, established,
registered, qualified, administered and invested, in compliance, in all material
respects, with (i) the terms thereof and (ii) all applicable laws; and the
Corporation has not received, in the last three years, any oral or written
notice from any person questioning or challenging such compliance (other that in
respect of any claim related solely to that person), and neither the Corporation
nor the Seller has knowledge of any such notice from any person questioning or
challenging such compliance beyond the last three years.
(d) All obligations under the Pension/Benefit Plans (whether pursuant
to the terms thereof or applicable Law) have been satisfied, and there are no
outstanding defaults or violations thereunder by the Corporation nor does the
Corporation have any knowledge of any default or violation by any other party to
any Pension/Benefit Plan.
(e) There have been no amendments, modifications or restatements of
any Pension Benefit Plan made, or any improvements in benefits promised, under
the Pension/Benefit Plans since the Financial Statement Date.
(f) All contributions or premiums required to be paid to or in respect
of each Pension/Benefit Plan have been paid in a timely fashion in accordance
with the terms thereof and all applicable law, and no Taxes, penalties or fees
or owing or eligible under any Pension/Benefit Plan.
(g) There is no proceeding, action, suit or claim (other than routine
claims for benefits) pending or threatened involving any Pension/Benefit Plan or
its assets, and, to the Seller's knowledge, no facts exist which could
reasonably be expected to give rise to any such proceeding, action, suit or
claim (other than routine claims for benefits).
12
(h) To the Seller's knowledge, no event has occurred respecting any
Pension/Benefit Plan which would entitle any person (without the consent of the
Corporation) to windup or terminate any Pension/Benefit Plan, in whole or in
part, or which could, reasonably be expected to adversely affect the tax status
thereof.
(i) There are no going concern unfunded actuarial liabilities, past
service unfunded liabilities or solvency deficiencies respecting any of the
Pension/Benefit Plans.
(j) No material changes have occurred in respect of any
Pension/Benefit Plan since the date of the most recent financial, accounting or
actuarial report, as applicable, issued in connection with any Pension/Benefit
Plan, which could reasonably be expected to adversely affect the relevant report
(including rendering it misleading in any material respect).
(k) The Corporation has not received, or applied for, any payment of
surplus out of any Pension/Benefit Plan.
(l) The Corporation has not taken any contribution holidays under any
Pension/Benefit Plan.
(m) There have been no improper withdrawals or transfers of assets
from any Pension/Benefit Plan.
(n) All employee data necessary to administer each Pension/Benefit
Plan is in the possession of the Corporation and is complete, correct and in a
form which is sufficient for the proper administration of the Pension/Benefit
Plans, and none of the Pension/Benefit Plans, other than the pension plans or
any group registered retirement savings plan or supplemental pension or
retirement plan, provide benefits to retired employees.
(o) None of the Pension/Benefit Plans require or permit a retroactive
increase in premiums or payments, and the level of insurance reserves, if any,
under any insured Pension/Benefit Plan is reasonable and sufficient to provide
for all incurred but unreported claims.
2.18 Intellectual Property.
---------------------
(a) Schedule 2.18(a) hereto sets forth a complete and accurate list
----------------
of all of the Corporation's Proprietary Rights, to the extent described in
clauses (i) through (viii) of the definition of "Proprietary Rights" in Section
10.3 hereof. The Corporation has delivered to the Purchaser correct and complete
copies of all Proprietary Rights (that are in written form) as amended to date
and has made available to the Purchaser correct and complete copies of all other
written documentation evidencing ownership of, and any Claims relating to, each
such item. The Corporation has taken all reasonable measures to protect the
proprietary nature of each Proprietary Right, and to maintain in confidence all
trade secrets and confidential information that it owns or uses.
13
(b) Except as set forth on Schedule 2.18(b) hereto, to the knowledge
of the Seller, (i) no other Person has any rights to any of the Proprietary
Rights owned or used by the Corporation, (ii) no other Person is infringing,
violating or misappropriating any such Proprietary Right that the Corporation
owns or uses, and (iii) no Proprietary Right is subject to any Outstanding Order
or Claim.
(c) Internal Software Applications.
------------------------------
(i) Internally Developed Software. The current software
-----------------------------
applications used by the Corporation in the operation of its business, to
the extent such software has been designed or developed by the Corporation
or by consultants on the Corporation's behalf, is set forth and described
on Schedule 2,18(c) (the "Internally Developed Software"), is original and
-----------------------------
the Corporation has complete rights to and ownership of such Software. To
Seller's knowledge, no part of any such Internally Developed Software is an
imitation or copy of, or infringes upon, the software of any other Person
or violates or infringes upon any common law or statutory rights of any
other person, including, without limitation, rights relating to defamation,
contractual rights, copyrights, trade secrets, and rights of privacy or
publicity. The Corporation has not sold, assigned, licensed, distributed
or in any other way disposed of or encumbered the Internally Developed
Software.
(ii) Licensed Software. Software, to the extent it is licensed
-----------------
from any third party licensor or constitutes "off-the-shelf" software
("Third Party Software"), is held or used by the Corporation lawfully and
--------------------
legitimately.
(iii) No Errors; Nonconformity. To the knowledge of the Seller,
------------------------
the Internally Developed Software is free from any software defect or
programming or documentation error, operates and runs in a reasonable and
efficient business manner, conforms to the specifications thereof, and, the
applications related to such Internally Developed Software can be recreated
from their associated source code.
(iv) No Bugs or Viruses. The Corporation has not knowingly
------------------
altered any Internally Developed Software, or supporting software which may
damage the integrity of the data stored in electronic, optical or magnetic
form.
(v) Documentation. The Corporation has furnished or made
-------------
available to purchaser all documentation relating to the use, maintenance
and operation of the Internally Developed Software, all of which, to the
knowledge of the Corporation, is true and accurate.
2.19 Capital Expenditures and Investments. Except as set forth on
------------------------------------
Schedule 2.19, the Corporation has no outstanding Contracts for capital
-------------
expenditures. Schedule 2.19 includes a schedule of all monies disbursed on
-------------
account of capital expenditures and investments made by the Corporation since
the Financial Statement Date.
14
2.20 Dealings with Affiliates. Schedule 2.20 sets forth a complete
------------------------ -------------
and accurate list, including the parties, of all oral or written Contracts to
which the Corporation is, will be or has been a party, at any time from December
31, 1996 to the Closing Date, and to which any one or more Affiliates of the
Seller is also a party. Since the Financial Statement Date, the Corporation has
not made any payments, loaned any funds or property or made any credit
arrangement with the Seller, an Affiliate or employee of the Corporation, except
for the payment of employee salaries, bonus payments as referred to in Section
2.10(d) herein and director compensation in the ordinary course of business
consistent with prior practices and as contemplated hereby.
2.21 Insurance. The Corporation currently has Policies in full force
---------
and effect which provide for coverages that are usual and customary as to amount
and scope in the business of the Corporation. All of the Policies are in full
force and effect, all premiums with respect thereto covering all periods up to
and including the date hereof have been paid or accrued therefor, and no notice
of cancellation or termination has been received with respect to any Policy.
Schedule 2.21 hereto sets forth a complete and accurate summary of all Policies,
-------------
including name of insurer, the types, dates and amounts of coverage, and any
material coverage exclusion. To the knowledge of the Seller, the Corporation
has not breached or otherwise failed to perform in any respect its obligations
under any of the Policies nor has the Corporation received any adverse notice or
communication from any of the insurers party to the Policies with respect to any
such alleged breach or failure in connection with any of the Policies. To the
Seller's knowledge, all Policies are sufficient for compliance with all
Regulations and all Contracts to which the Corporation is subject; are to the
Seller's knowledge, valid, outstanding, collectible and enforceable policies;
and will not in any way be affected by, or terminate or lapse by reason of, the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. The Corporation has never been refused any insurance with
respect to its assets or operations, nor has coverage ever been limited by any
insurance carrier to which the Corporation has applied for any Policy or with
which it has carried a Policy.
2.22 Accounts Receivable. The accounts receivable of the Corporation
-------------------
reflected in the Financial Statements and such accounts receivable as are
reflected on the books of the Corporation on the date hereof are, to the
Seller's knowledge, good and collectible, except to the extent reserved against
thereon (which reserves have been determined based upon actual prior experience
and are consistent with prior practices). All such accounts receivable (except
to the extent so reserved against) are valid, genuine and subsisting, arise out
of bona fide sales and deliveries of goods, performance of services or other
business transactions.
2.23 Brokerage. Except as set forth in Schedule 2.23, there are no
--------- -------------
claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon the Corporation.
2.24 Clients. No completed client contract or commitment to perform
-------
services will result in a loss to the Corporation upon completion of
performance. No client of the Corporation
15
has advised the Corporation in writing within the past year that it will stop,
or decrease the rate of, contracting for Services from the Corporation. Schedule
--------
2.24 sets forth a list of each client that accounted for more than 5% of the
----
consolidated revenues of the Corporation during the last full fiscal year and
the interim period through the Financial Statement Date and the amount of
revenues accounted for by such client during each such period. To the Seller's
knowledge, the consummation of the transactions contemplated hereby will not
have a Material Adverse Effect on the Corporation's relationship with any client
listed in Schedule 2.24.
-------------
2.25 Permits. The Permits listed in Schedule 2.25 are the only
------- -------------
Permits that are required for the Corporation to conduct its business as
presently conducted, except for those the absence of which would not have a
Material Adverse Effect. Each such Permit is in full force and effect and no
suspension or cancellation of any such Permit is threatened and there is no
basis for believing that such Permit will not be renewable upon expiration.
2.26 Improper and Other Payments. Except as set forth in Schedule
--------------------------- --------
2.26 hereto, to the knowledge of the Seller (a) neither the Corporation, any
----
director, officer, employee thereof, nor any agent or representative of the
Corporation nor any Person acting on behalf of any of them, has made, paid or
received any unlawful bribes, kickbacks or other similar payments to or from any
Person or Authority, (b) no contributions have been made, directly or
indirectly, to a domestic for foreign political party or candidate, (c) no
improper foreign payment (as defined in the U.S. Foreign Corrupt Practices Act)
has been made, and (d) the internal accounting controls of the Corporation are
adequate to detect any of the foregoing under current circumstances.
2.27 Disclosure. No representation or warranty by the Seller with
----------
respect to the Seller or the Corporation in this Agreement, and no exhibit,
statement, certificate or schedule furnished or to be furnished to Purchaser
pursuant hereto, or in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements or facts contained herein or therein not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as of the date hereof:
3.1 Corporate Organization, Etc. The Purchaser is a corporation duly
----------------------------
organized, validly existing and in good standing under the laws of the State of
Florida with full corporate power and authority to carry on its business as it
is now being conducted and to own, operate and lease its properties and assets.
The Purchaser is duly qualified or licensed to do business and is in corporate
and Tax good standing in every jurisdiction in which the conduct of its
business, the ownership or lease of its properties, or the execution of, and
performance of the transactions contemplated by, this Agreement, require it to
be so qualified or licensed except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. Such
16
jurisdictions are set forth in Schedule 3.1(a) hereto. True, complete and
---------------
correct copies of the Purchaser's charter and bylaws as presently in effect are
set forth in Schedule 3.1(b) hereto.
---------------
3.2 Authorization, Etc. The Purchaser has full corporate power and
------------------
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The Board of Directors of the Purchaser has duly
authorized the execution, delivery and performance of this Agreement and
consummate the transactions contemplated hereby, and no other corporate
proceedings on the part of the Purchaser is necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement constitutes
the legal, valid and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms.
3.3 No Violation. Except as set forth in Schedule 3.3(a) hereto, the
------------ ---------------
execution, delivery and performance by the Purchaser of this Agreement, and all
other agreements contemplated hereby, and the fulfillment of and compliance with
the respective terms hereof and thereof by the Purchaser, do not and will not
(a) conflict with or result in a breach of the terms, conditions or provisions
of, (b) result in a violation of, or (c) require any authorization, consent,
approval, exemption or other action by, or notice to, or filing with any court,
Authority or other Person pursuant to, the charter or bylaws of the Purchaser or
any applicable Regulation or Order to which the Purchaser or its properties are
subject, or any Contract to which the Purchaser is a party or by which it is
bound, including, but not limited to, that certain Confidential Settlement
Agreement (the "Settlement Agreement") among KPMG Peat Marwick LLP ("KPMG"),
--------------------
Purchaser and certain present and former officers and employees of the Purchaser
. The Purchaser has complied in all respects with all applicable Regulations,
Orders, and Contracts in connection with its execution, delivery and performance
of this Agreement and the transactions contemplated hereby. To Purchaser's
knowledge, except with respect to those entities on Schedule 3.3(b), the
Settlement Agreement will not have a Material Adverse Effect on the operation of
the Corporation's Non-Benchmark Business after the Closing Date.
3.4 Brokerage. Except as set forth in Schedule 3.4, there are no
--------- ------------
claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding on the Purchaser.
3.5 Improper and Other Payments. Except as set forth on Schedule 3.5
--------------------------- ------------
hereto (a) neither the Purchaser, any director, officer, employee thereof, nor
any agent or representative of the Purchaser nor any Person acting on behalf of
any of them, has made, paid or received any unlawful bribes, kickbacks or other
similar payments to or from any Person or Authority, (b) no contributions have
been made, directly or indirectly, to a domestic or foreign political party or
candidate, (c) no improper foreign payment (as defined in the U.S. Foreign
Corrupt Practices Act) has been made and (d) the internal accounting controls of
the Purchaser are adequate to detect any of the foregoing under current
circumstances.
3.6 Investment Representation. In connection with the purchase and
-------------------------
sale of the Shares hereunder, the Purchaser represents and warrants to the
Seller that:
17
(a) The Shares to be acquired by the Purchaser pursuant to this
Agreement are being acquired for the Purchaser's own account and not with a view
to, or intention of, distribution thereof in violation of the Securities Act of
1933, as amended (the "Securities Act"), or any applicable state securities
--------------
laws, and the Shares will not be disposed of in contravention of the Securities
Act or any applicable state securities laws.
(b) The Purchaser is an accredited investor for purposes of applicable
United States federal and state securities laws and regulations and is able to
evaluate the risks and benefits of the investment in the Shares.
3.7 Disclosure. No representation or warranty by the Purchaser with
----------
respect to the Purchaser in this Agreement and no exhibit, statement,
certificate or schedule furnished or to be furnished to Seller pursuant hereto,
or in connection with the transactions contemplated hereby, contains any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading.
ARTICLE IV
COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Seller that:
4.1 Corporation's Employees. The Purchaser will cause the Corporation
-----------------------
to enter into Employment Agreements, substantially in the forms attached hereto
as Exhibits 4.1(a), 4.1(b), 4.1(c), and 4.1(d), with the Seller and the other
employees of the Corporation with respect to when Seller delivers Employment
Agreements pursuant to Sections 5.9 and 6.11 hereof.
4.2 Operation of Business. The Purchaser will operate the Corporation
---------------------
as a separate corporate entity through at least December 31, 1998, and shall
conduct its business diligently and in good faith, consistent with past
management practices; shall maintain all of its properties in customary repair,
order and condition, reasonable wear and tear excepted and property disposed of
in the ordinary course of business; shall use reasonable efforts to maintain
(except for expiration due to lapse of time) all leases and Contracts in effect
without change except as expressly provided herein; shall comply in all respects
with the provisions of all Regulations and Orders applicable to the Corporation
and the conduct of its business, except when failure to so comply would not have
a Material Adverse Effect on the Corporation; shall not cancel, release, waive
or compromise any debt, Claim or right in its favor having a value in excess of
$5,000 other than in connection with cancellations for credit in the ordinary
course of business; shall not alter the rate or basis of compensation of any of
its officers, directors or employees other than in the ordinary course of
business. In addition, the Corporation will continue to account for its
operations and report its financial condition consistent with its practices
since January 1, 1996 in accordance with GAAP. In the event that the Seller is
employed by the Purchaser or the Corporation, the Seller shall use his best
efforts to cause the standards set forth in this Section 4.2
-----------
18
to be met. The Purchaser shall fund all capital expenditures deemed reasonable
and necessary by Seller for the conduct of the Corporation's business on a
"stand alone" basis, substantially as conducted prior to the Closing, such
capital expenditures not to exceed $1,000,000 through December 1, 1998. In
addition, the Purchaser will permit the Corporation to retain its current legal,
accounting and other professional support and information management systems and
providers ("Systems") related to the operation of the Corporation's business
through the completion of the Transition Period (as hereinafter defined). Upon
Closing, the parties will cooperate to transition from the Corporation's Systems
to those of the Purchaser. The Transition Period is defined as the period
commencing upon Closing and ending when the Purchaser's Systems, in the
reasonable discretion of Seller, are reasonably comparable to the Corporation's
Systems prior to Closing, not later, however, than December 31, 1998.
Notwithstanding the foregoing, the Purchaser will permit the Corporation, for a
period subsequent to the Transition Period until Seller's receipt of all
portions of the Purchase Price to which Seller is entitled hereunder, to retain
its own accounting and legal support for the purpose of monitoring (i) the
determination of Pre-Tax Profit and Downstream Technology Contracts, and (ii)
the Purchaser's and Seller's compliance with their respective obligations under
this Agreement and the Employment Agreements provided for by Section 4.1 hereof.
The Purchaser acknowledges and agrees that the Seller, Xxxxxxxxx Xxxxxxxxx, and
Xxxxx Xxxxx shall be and are hereby made express third party beneficiaries of
this Section 4.2.
-----------
ARTICLE V
OTHER COVENANTS AND AGREEMENTS
The parties further agree as follows:
5.1 Agreement to Defend. In the event any action, suit, proceeding or
-------------------
investigation of the nature specified in Section 6.5 or Section 7.3 hereof is
----------- -----------
commenced, whether before or after the Closing Date, all the parties hereto
agree to cooperate and use their best efforts to defend against and respond
thereto at their own cost and expense unless entitled to indemnification as
provided in this Agreement.
5.2 Deliveries After Closing. From time to time after the Closing, at
------------------------
the Purchaser's request and without expense to the Corporation and without
further consideration from the Purchaser or the Corporation, the Seller shall
execute and deliver such other instruments of conveyance and transfer and take
such other action as the Purchaser reasonably may require to convey, transfer to
and vest in the Purchaser and to put the Purchaser in possession of any rights
or property to be sold, conveyed, transferred and delivered hereunder.
5.3 Public Announcements. None of the Seller, the Corporation or the
--------------------
Purchaser nor any Affiliate or representative of any of the foregoing, shall
disclose any of the terms of this
19
Agreement to any third party without the prior written consent of the other
parties. The form, content and timing of all press releases, public
announcements or publicity statements with respect to this Agreement and
transactions contemplated hereby shall be subject to the prior approval of both
the Seller and the Purchaser, which approval shall not be unreasonably withheld.
5.4 Tax Returns, Payments and Elections.
-----------------------------------
(a) The Seller will include the income of the Corporation on the
Seller's Tax Returns for all periods through and including the Closing Date and
pay any Taxes (attributable to such income and any other Taxes that arise as a
result of the transactions contemplated hereby). The income of the Corporation
will be apportioned to the period up to and including the Closing Date and the
period after the Closing Date by closing the books of the Corporation as of the
end of the Closing Date.
(b) For all periods ending on or before the Closing Date, the Seller
will timely prepare and file or cause to be prepared and filed all Tax Returns,
after taking into account any applicable filing extensions, that are or were
required to be filed with respect to the Corporation pursuant to applicable
Regulations.
(c) The Purchaser agrees to indemnify the Seller for any additional
tax owed by the Seller (including tax owed by the Seller due to this
indemnification payment) resulting from any disposition of assets not in the
ordinary course of business of the Corporation occurring on the Closing Date
after the Purchaser's purchase of the Shares. The Purchaser and the Seller
agree to report all transactions not in the ordinary course of business
occurring on the Closing Date after the Purchaser's purchase of the Shares on
the Purchaser's tax returns. The Purchaser will, and the Purchaser will cause
the Corporation to, maintain all books and records of the Corporation relating
to the Taxes and Tax Returns of the Seller and the Corporation for so long as
the Seller may have any responsibility or liability therefor. The Seller will
maintain all books and records in his possession which relate to the Taxes and
Tax Returns of the Corporation for so long as the Purchaser may have any
responsibility or liability therefor.
(d) If any Claim is threatened or brought against the Purchaser or the
Corporation relating to Taxes for any period through and including the Closing
Date it shall give notice to the Seller of the commencement of such Claim,
whereupon the Seller shall be entitled, upon notice to the Person from whom
notice was received, to assume exclusive control of the defense and settlement
of such matter. Notwithstanding anything to the contrary expressed herein, the
Seller will not settle or otherwise resolve any issue which may affect the
liability for Taxes of the Purchaser and the Corporation for any period
subsequent to the Closing with respect to which the Purchaser and the
Corporation have any responsibility for payments thereof, without the
Purchaser's consent, which consent shall not be unreasonably withheld.
(e) The Purchaser and the Seller will join in making an election under
Section 338(h)(10) of the Code (and any corresponding elections under state,
local, or foreign tax law)
20
with respect to the purchase and sale of the Shares. The parties agree that (i)
the Purchase Price specified in Section 1.2 and the liabilities of the Seller
(plus other relevant items) will be allocated to the assets of the Corporation
for Tax purposes as follows: (i) first, among the tangible assets acquired in
accordance with their fair market value, which the parties agree is the net book
value thereof on the Closing Date; and (ii) next, to "Section 197 intangibles"
(as defined in Section 197 of the Code) other than to a covenant not to compete,
which the parties agree has been adequately provided for under the terms of
Seller's Employment Agreement with the Corporation. The Purchaser and the Seller
will file all Tax Returns (including amended returns and claims for refund) and
information reports in a manner consistent with such allocation.
5.5 Financial Information. The Seller understands that Purchaser or
---------------------
one of its affiliates may file a registration statement (the "Registration
------------
Statement") with the Securities and Exchange Commission, which Registration
---------
Statement might be required to include financial statements of the Corporation
prepared in accordance with Regulation S-X of the Securities Act of 1933, as
amended (the "S-X Financials"). Accordingly, the Seller shall furnish to
--------------
Purchaser any information or documents requested by Purchaser constituting, or
necessary or desirable for the completion of, the S-X Financials, and the Seller
agrees, following the Closing, to execute any necessary management
representation letters to permit Purchaser's or one of its affiliate's
independent accountants to issue unqualified reports with respect to the S-X
Financial Statements to be included in the Registration Statement and any
amendments thereto.
5.6 Bonus Payments. Total bonus payments paid to employees by the
--------------
Corporation during and with respect to performance in fiscal year 1997 shall not
exceed $194,000 paid to such employees in the ordinary course of the
Corporation's business, the $1.6 million payment referred to in Section 2.10(d)
herein plus an additional amount, paid after July 31, 1997 not to exceed
$100,000.
5.7 Key Man Insurance. The Purchaser shall, for a period commencing on
-----------------
the date of this Agreement and ending not sooner than March 31, 2000, maintain
and pay for key man life and disability insurance policies ("Key Man Insurance")
on the Seller and the Senior Executives and the Purchaser's Executive Officers,
naming the Purchaser as the sole beneficiary, in an amount not less than $5
million with respect to Seller and $2 million with respect to each of the Senior
Executives.
5.8 Use of Xxxxxxx Name. Seller agrees that he shall not use in any
-------------------
manner at any time after the date hereof the name "Xxxxxxx" in connection with
the naming or marketing of a business entity that competes, directly, or
indirectly with the Purchaser or the Corporation, without the express written
consent of the Purchaser.
5.9 Employment Agreements with non-Senior Executives. Seller shall cause
------------------------------------------------
at least seventy percent (70%) of the Corporation's employees (other than the
Corporation's Senior Executives) to enter into Employment Agreements in
substantially the form attached hereto as Exhibit 4.1(d) within twenty (20) days
of the Closing. As long as Purchaser enters into such agreements, Purchaser
shall be deemed to have complied with Section 4.1 hereof.
21
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement shall be
subject to the satisfaction, on or before the date hereof, of each of the
following conditions unless waived in writing by the Purchaser:
6.1 Representations and Warranties; Performance. The representations
-------------------------------------------
and warranties of the Seller contained in Article II and elsewhere in this
----------
Agreement and all information contained in any exhibit or schedule hereto
delivered by, or on behalf of, the Corporation or the Seller, to the Purchaser,
shall be true and correct. The Corporation and the Seller shall have performed
and complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by them prior to the Closing Date.
The Seller and the president of the Corporation shall have delivered to the
Purchaser a certificate (which shall be addressed to the Purchaser and its
lenders), dated the date hereof, in the form designated Exhibit 6.1 hereto,
-----------
certifying to the foregoing.
6.2 Consents and Approvals. The Purchaser and the Corporation shall
----------------------
have obtained any and all consents, approvals, Orders, qualifications, licenses,
Permits or other authorizations required by all applicable Regulations, Orders
and Contracts of the Corporation or binding on its properties and assets, with
respect to the execution, delivery and performance of this Agreement, the
financing and consummation of the transactions contemplated herein and the
conduct of the business of the Corporation in the same manner after the date
hereof as before the date hereof.
6.3 Opinion of the Corporation's Counsel. The Purchaser shall have
------------------------------------
received an opinion of the Seller's and the Corporation's counsel, dated the
date hereof, in the form of Exhibit 6.3 hereto.
-----------
6.4 No Proceeding or Litigation. No preliminary or permanent injunction
---------------------------
or other Order, decree or ruling issued by a court of competent jurisdiction or
by any governmental, regulatory or administrative agency or commission, or any
statute, rule, Regulation or executive order promulgated or enacted by any
governmental authority shall be in effect, which would prevent the consummation
of the transactions contemplated hereby.
6.5 Accounting Matters. The Purchaser shall have received (a) a
------------------
certificate, dated the date hereof, of the Seller in form and substance
satisfactory to the Purchaser, as to the accuracy of all of the Corporation's
Financial Statements and the Interim Financial Statements.
6.6 Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchaser and the
22
Purchaser's counsel, and the Corporation shall have made available to the
Purchaser for examination the originals or true, complete and correct copies of
all records and documents relating to the business and affairs of the
Corporation which the Purchaser may reasonably request in connection with said
transaction.
6.7 Certificates of Good Standing. The Corporation shall have delivered
-----------------------------
to the Purchaser certificates issued by the appropriate governmental authorities
evidencing the good standing, with respect to the conduct of business, of the
Corporation as of a date not more than fifteen (15) days prior to the date
hereof as a corporation organized under the laws of the State of Ohio.
6.8 Resignations. The Seller shall have resigned as the sole director
------------
of the Corporation.
6.9 Creditor Consents. The creditors set forth in Schedule 6.9 hereto
----------------- ------------
shall have agreed in writing with the Corporation as to the amounts owed in
order for such creditors to have been paid in full and to release all Liens in
favor of such creditors. The creditors set forth in Schedule 6.9 shall provide
------------
at Closing such UCC termination statements, releases of mortgages and other
releases of Liens as shall be required by the Purchaser and its lenders.
6.10 Shareholders' Agreement. The Seller shall, at the Closing, become
-----------------------
a party to the Shareholders' Agreement among the Purchaser and the Investors
made as of April 23, 1997.
6.11 Employment Agreements. The Seller shall have caused each of the
---------------------
Corporation's Senior Executives to enter into Employment Agreements in
substantially the forms attached hereto as Exhibits 4.1(a), 4.1(b), and 4.1(c).
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE SELLER
Each and every obligation of the Seller under this Agreement shall be
subject to the satisfaction, on or before the date hereof, of each of the
following conditions unless waived in writing by the Corporation, and the
Seller:
7.1 Representations and Warranties; Performance. The representations
-------------------------------------------
and warranties of the Purchaser contained in Article III and elsewhere in this
-----------
Agreement and all information contained in any exhibit or schedule hereto
delivered by, or on behalf of, the Purchaser to the Seller, shall be true and
correct. The Purchaser shall have performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed and complied
with by it prior to the date hereof. The president of the Purchaser shall have
delivered to the Seller a certificate, dated the date hereof, in the form
designated Exhibit 7.1 hereto, certifying to the foregoing.
-----------
23
7.2 Consents and Approvals. The Purchaser and the Corporation shall have
----------------------
obtained any and all consents, approvals, orders, qualifications, licenses,
permits or other authorizations required by all applicable Regulations, Orders
or Contracts of the Corporation or binding on its properties and assets, with
respect to the execution, delivery and performance of the Agreement, the
financing and consummation of the transactions contemplated herein and the
conduct of the business of the Corporation in the same manner after the date
hereof as before the date hereof, except when the failure to so comply would not
have a Material Adverse Effect on the Corporation.
7.3 No Proceeding or Litigation. No preliminary or permanent injunction
---------------------------
or other Order, decree or ruling issued by a court of competent jurisdiction or
by any governmental, regulatory or administrative agency or commission, or any
statute, rule, Regulation or executive order promulgated or enacted by any
governmental authority shall be in effect, which would prevent the consummation
of the transactions contemplated hereby.
7.4 Opinion of the Purchaser's Counsel. The Seller shall have received
----------------------------------
an opinion of the Purchaser's counsel, dated the date hereof, in the form of
Exhibit 7.4 hereto.
7.5 Certificate of Good Standing. The Purchaser shall have delivered
----------------------------
to the Seller a certificate issued by the appropriate government authorities
evidencing the good standing, with respect to the conduct of business, of the
Purchaser as of a date not more than fifteen (15) days prior to the date hereof
as a corporation organized under the laws of the State of Florida.
7.6 Employment Agreements. The Purchaser shall have caused the
---------------------
Corporation to enter into employment agreements with those employees of the
Corporation listed on Schedule 7.6 designated by Seller hereto on terms
satisfactory to such employees, the Corporation and the Purchaser.
ARTICLE VIII
CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall be held on the date hereof (the "Closing Date") by facsimile,
------- ------------
telephone, overnight mail or such other methods as the parties may select.
ARTICLE IX
SURVIVAL OF TERMS; INDEMNIFICATION
9.1 Survival. All of the terms and conditions of this Agreement,
--------
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this
24
Agreement and the Closing Date notwithstanding any investigation heretofore or
hereafter made by or on behalf of any party hereto; provided, however, that (a)
the agreements and covenants (other than the indemnification provisions set
forth in this Article IX, which shall survive as provided below) set forth in
----------
this Agreement shall survive and continue until all obligations set forth
therein shall have been performed and satisfied; and (b) all representations and
warranties, and the agreements of the Seller and the Purchaser to indemnify each
other set forth in this Article IX, shall survive and continue for, and all
----------
claims with respect thereto shall be made prior to the end of, three years from
the Closing Date, except for (i) the representations and warranties set forth in
Sections 2.5 and 2.15 and the covenants contained herein which shall survive
until, and all claims with respect thereto shall be made, within sixty days
after the expiration of the applicable statute of limitations, and (ii)
representations, warranties and indemnities for which an indemnification claim
shall be pending as of the end of the applicable period referred to above, in
which event such indemnities shall survive with respect to such claim until the
final disposition thereof.
9.2 Indemnification by Seller. The Seller agrees to, and shall, indemnify
-------------------------
the Purchaser and its subsidiaries and the Corporation and their respective
officers, directors, employees, shareholders, representatives and agents and
hold each of them harmless at all times after the date of this Agreement,
against and in respect of any and all damage, loss, deficiency, liability,
obligation, commitment, cost or expense (including the fees and expenses of
counsel) resulting from, or in respect of, any of the following (an "Adverse
Consequence"):
(a) Any misrepresentation, breach of warranty, or non-fulfillment of
any obligation on the part of the Corporation, or the Seller under this
Agreement, any document relating hereto or thereto or contained in any exhibit
to this Agreement or from any misrepresentation in or omission from any
certificate, schedule, other agreement or instrument by the Seller or the
Corporation hereunder.
(b) All demands, assessments, judgments, costs and reasonable legal
and other expenses arising from, or in connection with, any action, suit,
proceeding or Claim incident to any of the foregoing.
9.3 Indemnification by the Purchaser. The Purchaser agrees to, and shall,
--------------------------------
indemnify the Seller and hold him harmless at all times after the date of this
Agreement, against and in respect of any and all damage, loss, deficiency,
liability, obligation, commitment, cost or expense (including the fees and
expenses of counsel) resulting from, or in respect of, any of the following:
(a) Any misrepresentation, breach of warranty or non-fulfillment of
any obligation on the part of the Purchaser under this Agreement, any document
relating hereto or thereto or contained in any exhibit to this Agreement or from
any misrepresentation in or omission from any certificate, schedule, other
agreement or instrument by the Purchaser delivered on or prior to the date
hereof.
25
(b) Additional taxes relating to the recharacterization by any
Authority of the transactions contemplated by this Agreement (with respect to
any portion of the Purchase Price), with the result that such transactions are
deemed to have generated ordinary income (rather than capital gains) for
purposes of federal or state income tax treatment.
(c) All demands, assessments, judgments, costs and reasonable legal
and other expenses arising from, or in connection with, any action, suit,
proceeding or Claim incident to any of the foregoing.
9.4 Third-Party Claims.
------------------
(a) Except as otherwise provided in this Agreement, the following
procedures shall be applicable with respect to indemnification for third-party
Claims. Promptly after receipt by the party seeking indemnification hereunder
(hereinafter referred to as the "Indemnitee") of notice of the commencement of
----------
any (i) Tax audit or proceeding for the assessment of Tax by any Taxing
Authority or any other proceeding likely to result in the imposition of a Tax
liability or obligation or (ii) any action or the assertion of any Claim,
liability or obligation by a third party (whether by legal process or
otherwise), against which Claim, liability or obligation the other party to this
Agreement (hereinafter the "Indemnitor") is, or may be, required under this
----------
Agreement to indemnify such Indemnitee, the Indemnitee will, if a Claim thereon
is to be, or may be, made against the Indemnitor, notify the Indemnitor in
writing of the commencement or assertion thereof and give the Indemnitor a copy
of such Claim, process and all legal pleadings. The Indemnitor shall have the
right to participate in the defense of such action with counsel of reputable
standing. The Indemnitor shall have the right to assume the defense of such
action unless such action (i) may result in injunctions or other equitable
remedies in respect of the Indemnitee or its business; (ii) may result in
liabilities which, taken with other than existing Claims under this Article IX,
----------
would not be fully indemnified hereunder; (iii) may have an adverse impact on
the business or financial condition of the Indemnitee after the Closing Date
(including an effect on the tax liabilities, earnings or ongoing business
relationships of the Indemnitee) or (iv) is for an alleged amount of less than
$25,000. The Indemnitor and the Indemnitee shall cooperate in the defense of
such Claims. In the case that the Indemnitor shall assume or participate in the
defense of such audit, assessment or other proceeding as provided herein, the
Indemnitee shall make available to the Indemnitor all relevant records and take
such other action and sign such documents as are reasonably necessary to defend
such audit, assessment or other proceeding in a timely manner. If the
Indemnitee shall be required by judgment or a settlement agreement to pay any
amount in respect of any obligation or liability against which the Indemnitor
has agreed to indemnify the Indemnitee under this Agreement, the Indemnitor
shall promptly reimburse the Indemnitee in an amount equal to the amount of such
payment plus all reasonable expenses (including legal fees and expenses)
incurred by such Indemnitee in connection with such obligation or liability
subject to this Article IX. No Indemnitor, in the defense of any such Claim,
----------
shall, except with the consent of the Indemnitee, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnitee of a
release
26
from all liability with respect to such Claim. In the event that the Indemnitor
does not accept the defense of any matter for which it is entitled to assume
such defense as above provided, the Indemnitee shall have the full right to
defend against any such Claim, and shall be entitled to settle or agree to pay
in full such claim or demand, in its sole discretion. With respect to any matter
as to which the Indemnitor is not entitled to assume the defense pursuant to the
terms of this paragraph, the Indemnitee shall not enter into any settlement for
which an indemnification claim will be made hereunder without the approval of
the Indemnitor, which will not be unreasonably withheld.
(b) An Indemnitee shall have the right to employ its own counsel in any
case, but the fees and expenses of such counsel shall be at the expense of the
Indemnitee unless (i) the employment of such counsel shall have been authorized
in writing by the Indemnitor in connection with the defense of such action or
claim; (ii) the Indemnitor shall not have employed counsel in the defense of
such action or claim; or (iii) such Indemnitee shall have reasonably concluded
that there may be defenses available to it which are contrary to, or
inconsistent with, those available to the Indemnitor, in any of which events
such fees and expenses of not more than one additional counsel for the
indemnified parties shall be borne by the Indemnitor.
9.5 Indemnification Limits. Notwithstanding the foregoing provisions
----------------------
of this Article IX, Seller's aggregate obligation to the Purchaser for
indemnification hereunder shall not exceed Three Million Two Hundred Thousand
Dollars ($3,200,000). In addition, neither the Purchaser nor the Seller shall
be entitled to indemnification hereunder from the Seller until the aggregate of
all Claims for which such party seeks indemnification equals or exceeds One
Hundred Thousand Dollars ($100,000), in which case the Indemnitor shall be
responsible for the entire amount of all such Claims.
9.6 Offset. Notwithstanding anything contained herein to the contrary,
------
the Adverse Consequences which Purchaser suffers, sustains or becomes subject to
and is entitled to indemnification from Seller pursuant to this Section 9 may,
at the option of Purchaser, be satisfied by setting off all or any portion of
such Adverse Consequences against any amounts which such Purchaser owes to any
Seller or any of Seller's affiliates at such time.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. This Agreement may be amended,
--------------------------
modified and supplemented only by written agreement of the parties hereto, at
any time prior to the Closing Date with respect to any of the terms contained
herein.
10.2 Waiver of Compliance; Consents. Any failure of any party hereto
------------------------------
to comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
27
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
10.3 Certain Definitions.
-------------------
"AFFILIATE" means, with regard to any Person, any Person that,
---------
directly or indirectly, controls, is controlled by, or is under common control
with such Person.
"AUTHORITY" means any governmental, regulatory or administrative body,
---------
agency, commission, board, arbitrator or authority, any court or judicial
authority, any public, private or industry regulatory authority, whether
international, national or local.
"BENCHMARK BUSINESS" means the Corporation's business that consists of
------------------
comparing similar processes among organizations, companies and industries to
identify best practices and to set improvement targets.
"CAUSE" means Cause as defined in the Employment Agreement of even
-----
date herewith between Seller and the Corporation.
"CLAIM" means any action, claim, lawsuit, demand, suit, inquiry,
-----
hearing, investigation, notice of a violation, litigation, proceeding,
arbitration, appeals or other dispute, whether civil, criminal, administrative
or otherwise.
"CLOSING" shall have the meaning set forth in Section 8.1.
------- -----------
"CLOSING DATE" shall have the meaning set forth in Section 8.1.
------------ -----------
"CODE" means the Internal Revenue Code of 1986, as amended.
----
"CONTRACT" means any agreement, contract, commitment, instrument or
--------
other binding arrangement or understanding, whether written or oral.
"DOWNSTREAM TECHNOLOGY CONTRACTS" refers to service contracts entered
-------------------------------
into by the Purchaser evidenced by a signed engagement letter from the customer
and that are the result of a lead generated by an employee in the Corporation,
other than leads related to the entities listed on Schedule 3.3(b) hereto
(unless the Settlement Agreement is neither observed nor enforced with respect
to such leads). These contracts must provide for services limited to the
following areas: package integration limited to Oracle and PeopleSoft, knowledge
management systems, intranet and extranet solutions, sales and field force
automation, network integration, millenium consulting services, or such other
services as the Purchaser may provide.
"ENVIRONMENTAL PERMIT" shall mean Permits, certificates, approvals,
--------------------
licenses and other authorizations relating to or required by Environmental Law
and necessary or desirable for the Corporation's business.
"FINANCIAL STATEMENTS" shall have the meaning as set forth in Section
-------------------- -------
2.9.
---
28
"FINANCIAL STATEMENT DATE" shall mean April 30, 1997.
------------------------
"GAAP" means United States generally accepted accounting principles,
----
consistently applied, as in existence at the date hereof.
"GOOD REASON" means Good Reason as defined in the Employment Agreement
-----------
of even date herewith between the Seller and the Corporation.
"GROUP" means two or more Persons or entities (or a combination
-----
thereof) acting as a partnership, limited partnership, syndicate or other form
for any of the purposes contemplated in such section.
"GUARANTEE" means any guarantee or other contingent liability (other
---------
than any endorsement for collection or deposit in the ordinary course of
business), direct or indirect with respect to any obligations of another Person,
through an agreement or otherwise, including, without limitation, (a) any
endorsement or discount with recourse or undertaking substantially equivalent to
or having economic effect similar to a guarantee in respect of any such
obligations and (b) any Contract (i) to purchase, or to advance or supply funds
for the payment or purchase of, any such obligations, (ii) to purchase, sell or
lease property, products, materials or supplies, or transportation or services,
in respect of enabling such other Person to pay any such obligation or to assure
the owner thereof against loss regardless of the delivery or non-delivery of the
property, products, materials or supplies or transportation or services or (iii)
to make any loan, advance or capital contribution to or other investment in, or
to otherwise provide funds to or for, such other Person in respect of enabling
such Person to satisfy an obligation (including any liability for a dividend,
stock liquidation payment or expense) or to assure a minimum equity, working
capital or other balance sheet condition in respect of any such obligation.
"INDEBTEDNESS" with respect to any Person means any obligation of such
------------
Person for borrowed money, but in any event shall include (a) any obligation or
liabilities incurred for all or any part of the purchase price of property or
other assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the ordinary course
of business, (whether or not such Person has assumed or become liable for the
payment of such obligation) (whether accrued, absolute, contingent, unliquidated
or otherwise, known or unknown, whether due or to become due), (b) the face
amount of all letters of credit issued for the account of such Person and all
drafts drawn thereunder, (c) obligations incurred for all or any part of the
purchase price of property or other assets or for the cost of property or other
assets constructed or of improvements thereto, other than accounts payable
included in current liabilities and incurred in respect of property purchased in
the ordinary course of business (whether or not such Person has assumed or
become liable for the payment of such obligation) secured by Liens, (d)
capitalized lease obligations, and (e) all Guarantees of such Person.
"INDEMNITEE" shall have the meaning set forth in Section 9.4.
---------- -----------
"INDEMNITOR" shall have the meaning set forth in Section 9.4.
---------- -----------
29
"INVESTORS" mean Golder, Thoma, Xxxxxxx, Xxxxxx Fund V, L.P., MG
---------
Capital Partners II, L.P., Xxxx Ventures, Ltd. and Gator Associates, Ltd. and
each of their successors and assigns.
"LIEN" means any security interest, lien, mortgage, pledge,
----
hypothecation, encumbrance, Claim, easement, restriction on transfer or
otherwise, or interest of another Person of any kind or nature.
"MATERIAL ADVERSE CHANGE" means any developments or changes which
-----------------------
would have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any condition, change or effect that,
-----------------------
individually or when taken together with all other conditions, changes or
effects is, or could reasonably be, or is reasonably likely to be materially
adverse to the Corporation's business, operations, properties, assets and/or
condition (financial or otherwise).
"OPTION" means any subscription, option, warrant, right, security,
------
Contract, commitment, understanding, outstanding or stock appreciation, phantom
stock option, profit participation or arrangement by which (i) with respect the
Corporation, the Corporation is bound to issue any additional shares of its
capital stock or rights pursuant to which any Person has a right to purchase
shares of the Corporation's capital stock or (ii) with respect to Seller, Seller
is bound to sell or allow another Person to vote, encumber or control the
disposition of any shares of the Corporation's capital stock or rights pursuant
to which any Person has a right to purchase, vote, encumber or control the
disposition of shares of the Corporation's capital stock from Seller.
"ORDER" means any decree, order, judgment, injunction, rule, lien,
-----
voting right, consent of or by an Authority.
"PENSION/BENEFIT PLANS" means all plans, arrangements, agreements,
---------------------
programs, policies or practices, whether oral or written, formal or informal,
funded or unfunded, to which the Corporation is a party to or bound by or under
which the Corporation has any liability or contingent liability, relating to:
(a) retirement savings or pensions, including, without limitation, any
defined benefit pension plan, defined contribution pension plan, group
registered retirement saving plan, or supplemental pension or retirement plan;
or
(b) any bonus, profit sharing, deferred compensation, incentive
compensation, hospitalization, health, dental, disability, unemployment
insurance, vacation pay, severance pay or other benefit plan with respect to any
of its employees or former employees, individuals working on contract with it or
other individuals providing services to it of a kind normally provided by
employees, and all statutory plans which the Corporation is required to comply
with, including, without limitation, workers' compensation and unemployment
insurance legislation;
30
"PERMITS" means all permits, licenses, registrations, certificates,
-------
orders or approvals from any Authority or other Person (including without
limitation those relating to the occupancy or use of owned or leased real
property) issued to or held by the Corporation.
"PERMITTED LIENS" means (i) statutory Liens not yet delinquent, (ii)
---------------
such imperfections or irregularities of title, Liens, easements, charges or
encumbrances as do not materially detract from or interfere with the present use
of the properties or assets subject thereto or affected thereby, otherwise
impair present business operations at such properties, or do not detract from
the value of such properties and assets, taken as a whole, (iii) Liens reflected
in the Financial Statements or the notes thereto, (iv) the rights of customers
of the Corporation with respect to inventory or work in progress under orders or
contracts entered into by the Corporation in the ordinary course of business,
(v) mechanics', carriers', workers', repairmen's, warehousemen's, or other
similar Liens arising in the ordinary course of business in respect of
obligations not overdue or which are being contested in good faith and covered
by a bond in an amount at least equal to the amount of the Lien, and (vi)
deposits or pledges to secure workmen's compensation, unemployment insurance,
old age benefits or other social security obligations in connection with, or to
secure the performance of, bids, tenders, trade contracts not for the payment of
money or leases, or to secure statutory obligations or surety or appeal bonds or
other pledges or deposits for purposes of like nature in the ordinary course of
business.
"PERSON" means any corporation, partnership, joint venture,
------
organization, entity, Authority or natural person.
"POLICIES" means all Contracts that insure (i) the Corporation's or
--------
any of its Subsidiaries properties, plant and equipment for loss or damage, and
(ii) the Corporation or any of its Subsidiaries or their officers, directors,
employees or agents against any liabilities, losses or damages (or lost profits)
for any reason or purpose.
"PRE TAX PROFIT" means the "Revenues" of the Corporation less the
--------------
"Expenses" of the Corporation determined in accordance with GAAP, consistently
applied.
(a) For the purposes of determining "Revenues" of the Corporation, the
same shall include all projects generated, contracted and recorded in the
financial statements of the Corporation, as well as functional transformation
projects contracted and billed by the Purchaser where an employee of the
Corporation generated the lead or assisted in the sale related to such lead for
the project. The Revenues of the Corporation shall also include (i) time
incurred, on a per hour usage basis (based on a maximum 8-hour day and 40-hour
week), by any employee of the Corporation utilized by the Purchaser on projects
where the Revenues from such project are not paid to the Corporation but are
paid to and recorded in the financial statements of the Purchaser, at three
times the rates set forth in Schedule 10.3 hereto, (ii) any proceeds derived
from the Key Man Insurance, (iii) the amount of any proceeds that would be
derived from the Key Man Insurance, whether or not such Key Man Insurance is
actually purchased by the Purchaser, and (iv) lost revenues related to the
Corporation's withdrawal from any current,
31
ongoing engagement due to observation or enforcement of the terms of the
Settlement Agreement.
(b) For the purposes of determining "Expenses" of the Corporation, the same
shall include the actual cost of services expenses of the Purchaser for the
functional transformation projects referred to in (a) above which are contracted
and billed by the Purchaser. The expenses of the Corporation shall also include
(i) a charge from the Purchaser, on a per hour basis (based on a maximum 8-hour
day and 40-hour week), in an amount equal to the rates set forth in Schedule
10.3 ("Cost of Service), to the extent that the Corporation utilizes the
services of an employee of the Purchaser who is not an employee of the
Corporation , (ii) costs associated with Corporation's Systems and (iii)
estimated cost of service expenses applicable to lost revenues referred to in
(a)(iv) of the preceding paragraph. "Expenses" shall not include (x) the cash
bonuses referred to in Section 2.10(d) herein, and (y) the cash bonuses and
restricted stock awards payable to Seller and the Corporation's other employees
pursuant to Section 1(b) of their respective employment agreements with the
Corporation (and the payroll taxes related to either (x) or (y)), and (z) any
intercompany or similar direct or allocate charge from Purchaser, unless agreed
to in writing between the Purchaser and Seller.
"PROPRIETARY RIGHTS" means all (i) patents, patent applications,
------------------
patent disclosures and all related continuation, continuation-in-part,
divisional, reissue, reexamination, utility, model, certificate of invention and
design patents, patent applications, registrations and applications for
registrations, (ii) trademarks, service marks, trade dress, logos, trade names
and corporate names and registrations and applications for registration thereof,
(iii) copyrights and registrations and applications for registration thereof,
(iv) computer software, data and documentation, (v) trade secrets and
confidential business information, whether patentable or unpatentable and
whether or not reduced to practice, know-how, manufacturing and production
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information,
(vi) other proprietary rights relating to any of the foregoing and (vii) copies
and tangible embodiments thereof.
"REGULATION" means any rule, law, code, statute, regulation,
----------
ordinance, requirement, announcement or other binding action of or by an
Authority.
"SELLER" shall have the meaning set forth in the preamble.
------
"SENIOR EXECUTIVES" shall mean those employees of the Corporation
-----------------
designated as such on Schedule 2.9.
"SHARES" shall have the meaning set forth in the preamble.
------
"SUBSIDIARY" means any Person in which the Corporation has (i) an
----------
ownership interest or (ii) advanced funds or provided financial accommodations
that are, in either case, secured by an ownership interest in or an Option to
acquire an ownership interest in such Person.
32
"TAX RETURNS" includes, without limitation, all returns, reports,
-----------
declarations, elections, notices, filings, information returns and statements
filed in respect of Taxes.
"TAXES" includes, without limitation, all taxes, duties, fees,
-----
premiums, assessments, imposts, levies and other charges of any kind whatsoever
imposed by any Authority, together with all interest, penalties, fines,
additions to tax or other additional amounts imposed in respect thereof,
including, without limitation, those levied on, or measured by, or referred to
as income, gross receipts, profits, capital transfer, land transfer, sales,
goods and services, use, value-added, excise, stamp, withholding, business,
franchising, property, payroll, employment, health, social services, education
and social security taxes, all surtaxes, all customs duties and import and
export taxes, all license, franchise and registration fees and all unemployment
insurance and health insurance.
"TAXING AUTHORITIES" means any federal, state or local authority in
------------------
the United States which has the right to impose Taxes on the Corporation or the
Seller.
"TIER I", "TIER II", "TIER III" CONDITIONS shall have the meanings set
------ ------- -------- ----------
forth on Exhibit A.
"TRANSFER" means to sell, transfer, assign, pledge or otherwise
--------
dispose of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
10.4 Notices. All notices, requests, demands and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, by Federal Express, United Parcel
Service or other recognized overnight courier or sent by telefax:
(a) If to the Corporation or the Seller, to:
The Xxxxxxx Group, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Telephone: 000-000-0000
Telefax: 000-000-0000
33
with copies to:
Xxxxxx Xxxxxx & Xxxxxxxx
0000 XxXxxxxx Xxxxxxxxxx Center
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attn: Xxxxx Xxxxxx
Telephone: 000-000-0000
Telefax: 000-000-0000
and:
Falls River Group
0000 Xxxxxx Xxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Attn: Xxxxx Xxxxxx
Telephone: 000-000-0000
Telefax: 000-000-0000
or to such other person or address as the Corporation shall furnish by
notice to the Purchaser in writing.
(b) If to the Purchaser, to:
AnswerThink Consulting Group, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attn: Xxx X. Xxxxxxxxx, President
Telephone: 000-000-0000
Telefax: 000-000-0000
with copies to:
Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxxx
Xxxxx & Quentel, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxxxxx, Esq.
Telephone: 000-000-0000
Telefax: 000-000-0000
34
or to such other person or address as either party shall furnish by notice
to the other in writing.
10.5 Assignment. This Agreement and all of the provisions hereof shall be
----------
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties.
10.6 Construction. Where specific language is used to clarify by
------------
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict any manner the construction of the
general statement to which it relates. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against
either party hereto. Whenever required by the context, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa. The parties hereto intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party
hereto has breached any representation, warranty, or covenant contained herein
in any respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which such party has not breached shall not detract from or
mitigate the fact that such party is in breach of the first representation,
warranty or covenant.
10.7 Governing Law. The Agreement shall be governed by the laws of the
-------------
State of Florida as to all matters, including but not limited to matters of
validity, construction, effect and performance.
10.8 Arbitration. Subject to the dispute resolution mechanism provided
-----------
for in Section 1.2(d) hereof, all disputes and controversies of every kind and
nature between the parties hereto arising out of or in connection with this
Agreement as to the construction, validity, interpretation or meaning,
performance, non-performance, enforcement, operation or breach shall be
submitted to final and binding arbitration pursuant to the following procedures:
(i) After a dispute or controversy arises, either party may,
in a written notice delivered to the other party, demand such arbitration.
Such notice shall designate the name of the arbitrator appointed by such
party demanding arbitration, together with a statement of the matter in
controversy;
(ii) Within thirty (30) days after receipt of such demand, the
other party shall, in a written notice delivered to the other party, name
such party's arbitrator. If such party fails to name an arbitrator, then
the second arbitrator shall be named by the American Arbitration
Association, located in New York City, New York (the "AAA"). The two
arbitrators so selected shall name a third arbitrator within thirty (30)
days, or in
35
lieu of such agreement on a third arbitrator by the two arbitrators so
appointed, the third arbitrator shall be appointed by the AAA;
(iii) Each party shall bear its own arbitration costs and
expenses. The arbitration hearing shall be held in New York City, New York
at a location designated by a majority of the arbitrators. The then
prevailing rules of the AAA shall be incorporated by reference at such
hearing, and the substantive laws of the State of Florida (excluding
conflict of law provisions) shall apply;
(iv) The arbitration hearing shall be concluded within ten (10)
business days unless otherwise ordered by the arbitrators and the award
thereon shall be made as soon as practicable after the close of the
submission of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final and binding on all
parties to the proceeding, and judgment on such award may be entered by
either party in any court of competent jurisdiction, including, without
limitation, the United States District Court for the Southern District of
Florida and the United States District Court for the Northern District of
Ohio; and, for the purposes of this Section 17.4, each of the parties
hereto do hereby irrevocably submit to the jurisdiction of any of the
foregoing courts; and
(v) The parties stipulate that the provisions of this Section
10.8 shall be a complete defense to any suit, action or proceeding
instituted in any federal, state or local court or before any
administrative tribunal with respect to any controversy or dispute arising
out of this Agreement. The arbitration provisions hereof shall, with
respect to such controversy or dispute, survive the termination or
expiration of this Agreement.
Unless otherwise required to be disclosed by applicable federal or state
securities laws or pursuant to an order of any court of competent jurisdiction,
neither any party hereto nor the arbitrators may disclose the existence or
results of any arbitration hereunder without the prior written consent of all
the other parties hereto; nor will any party hereto disclose to any third party
any confidential information disclosed by any other party hereto in the course
of an arbitration hereunder without the prior written consent of such other
party.
10.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 Headings. The article and section headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.11 Entire Agreement. This Agreement, including the schedules and
----------------
exhibits hereto and the documents, certificates and instruments referred to
herein or related hereto, embodies the
36
entire agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement and supersedes all prior agreements,
representations, warranties, promises, covenants, arrangements, communications
and understandings, oral or written, express or implied, between the parties
with respect to such transactions. There are no agreements, representations,
warranties, promises, covenants, arrangements or understandings between the
parties with respect to such transactions, other than those expressly set forth
or referred to herein.
10.12 Binding Effect. This Agreement shall not be construed so as to
--------------
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
10.13 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party hereto, upon any breach or default of any
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach or default under this Agreement, or
any waiver on the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
10.14 Severability. Unless otherwise provided herein, if any provision of
------------
this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
10.15 Expenses. Except as otherwise provided herein, the Purchaser shall
--------
bear all expenses, including without limitation, legal and accounting fees and
expenses related to services rendered by Xxxxxx, Halter & Xxxxxxxx, LLP and
Xxxxxx, Xxxxx & Company, and out-of-pocket expenses with respect to this
Agreement and the transactions contemplated hereby, such amount not to exceed
$110,000 in the aggregate
* * *
37
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Stock Purchase Agreement as of the date first written above.
THE PURCHASER
ANSWERTHINK CONSULTING GROUP, INC.
By:/s/ Xxx X. Xxxxxxxxx
--------------------------------
Xxx X. Xxxxxxxxx, President
THE SELLER
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx, President
38
EXHIBIT A
TIER I CONDITIONS
Minimum of $2,887,000 in Pre Tax Profit for the year ended December 31,
1997.
TIER II CONDITIONS
Minimum of $5,641,000 in Pre Tax Profit for the year ended December 31,
1998, reduced by an amount by which Pre Tax Profit for the year ended December
31, 1997 exceeded $2,887,000, or increased by an amount by which Pre Tax Profits
for the year ended December 31, 1997 were less than $2,887,000.
TIER III CONDITIONS
Minimum of $24,000,000 in Downstream Technology Contracts provided to
Purchaser prior to January 1, 1999, plus Follow-on Work related to Downstream
Technology Contracts. Follow-on Work means work contracted no later than
December 31, 1999, and related to Downstream Technology Contracts in existence
prior to January 1, 1999. The Corporation shall receive a credit equal to 25%
of the contract value (as determined below), excluding reimbursable out-of-
pocket expenses, for projects where Purchaser is unsuccessful in obtaining any
portion of the work under either of the following conditions: (a) Corporation
includes and introduces Purchaser's technology integration professional into
Corporation's consulting assignments; Purchaser is required to provide such
technology integration professionals for such purpose, or (b) an employee of the
Corporation generates a lead for Purchaser unrelated to a consulting project
being conducted by the Corporation, and the Purchaser participates in a Request
for Proposal. The definition of contract value is the contracted value of the
work where Purchaser is engaged or the contracted value of the work if awarded
to another systems integrator or integrators. If the value of such other system
integrator's or integrators' contract cannot be reasonably established, then the
value of the contract related to such systems integration work will be deemed to
be that value established from the business case estimate developed by the
Corporation's consultants, based on prior similar experience, less any work
performed by client's systems staff. If the work is awarded to other system
integrators, and the nature of the work is outside the service areas identified
within the definition of Downstream Technology Contracts in Section 10.3 hereof,
the contract value for such work shall be deemed to have zero value.
