PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is entered into as of July 2,
1997, by and between Analytical Surveys, Inc., a Colorado corporation (the
"Buyer") and Xxx X. Xxxxxx (the "Shareholder").
RECITALS
The Shareholder owns all of the issued and outstanding capital stock of MSE
Corporation, an Indiana corporation (the "Company"). The Shareholder desires to
sell, and the Buyer desires to purchase, all of the issued and outstanding
capital stock of the Company as provided in this Agreement.
AGREEMENT
The parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1. For purposes of this Agreement:
Adjusted Net Worth means the assets minus the liabilities as shown on the
Latest Balance Sheet and the Closing Date Balance Sheet, as applicable.
Adjustment Date means the date that is agreed to by the Company and the
Shareholder, but if no agreement is reached then such date is the first business
day that falls 75 days after the Closing.
Adverse Consequences means all actions, suits, proceedings, investigations,
complaints, claims, demands, Orders, liabilities, liens, losses, damages,
penalties, fines, settlements, costs (including removal and remediation costs),
expenses and fees (including court costs and reasonable fees and expenses of
counsel and other experts).
Affiliate means any Person controlled by, controlling, or under common
control with another Person.
Affiliated Group means any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law.
Benefit Arrangement has the meaning given to such term in Section
3.1(n)(iii).
Buyer Indemnitee has the meaning given to such term in Section 6.2.
Change in Control means that the Buyer or the Company, directly or
indirectly, sells all or substantially all of the engineering services business
conducted by the Company's engineering division to a Person who is not an
Affiliate of the Company, or that all of the capital stock of the Company is
acquired by a Person who is not an Affiliate of the Company, whether by merger
or sale.
Closing and Closing Date have the meanings given to such terms in
Section 5.1.
Closing Date Balance Sheet has the meaning given to such term in
Section 2.3.
Code means the Internal Revenue Code of 1986, as amended.
Common Stock means the common stock of the Buyer, no par value.
Company Employee Benefit Plans have the meaning given in Section
3.1(n)(i).
Contract Value means the sum of revenues paid to the Company, amounts owed
to the Company, and amounts to become payable to the Company upon performance of
the services required under a contract, in progress as of the Closing Date,
signed by the Company and the customer but not yet commenced, or awarded to the
Company but not yet signed by both the Company and the customer.
Customer Negligence Claim means any Adverse Consequence suffered by any
Buyer Indemnitee that constitutes an insured claim under the errors and
omissions policy of the Company in place on the Closing Date (or would have
constituted an issued claim if such policy had remained in effect), to the
extent such Adverse Consequence arises from an act or omission that occurred
prior to the Closing.
Employee Benefit Plan means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan) or (d) Employee Welfare Benefit Plan.
Employee Pension Benefit Plan has the meaning given to such term in ERISA
Section 3(2).
Employee Welfare Benefit Plan has the meaning given to such term in ERISA
Section 3(1).
Encumbrance means any mortgage, pledge, conditional sale agreement, charge,
claim, interest of another Person, lien, security interest, title defect or
other encumbrance.
Engineering Contract means any contract for the performance of engineering
services (or the sale, lease or licensing of goods that is incidental to the
performance of engineering services) by the Company or any Subsidiary.
Environmental Obligations means all present Legal Requirements and Permits
concerning land use, public health, safety, welfare or the environment,
including, without limitation, the Resource Conservation and Recovery Act (42
U.S.C. 6901 et seq.), as amended, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. 9601 et seq.), as amended, and the
Occupational Safety and Health Act, as amended, and any civil liability (under
any Legal Requirement or under common law) to any Person.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations, rules or orders promulgated under the Employee
Retirement Income Security Act of 1974, as amended.
Escrow Agent will be BankOne Colorado.
Escrow Agreement means the Escrow Agreement among the Buyer, the
Shareholder, and the Escrow Agent in the form of Exhibit A with respect to the
period commencing on the Closing Date and ending on the first anniversary of the
execution of this Agreement (the "Escrow Period").
GAAP means generally accepted accounting principles as in effect from time
to time in the United States, as consistently applied, and in accordance with
all pronouncements of the Financial Accounting Standards Board.
Governmental Authority means the United States of America, any state,
commonwealth, territory or possession of the United States of America, any
political subdivision of any of them (including counties, municipalities,
home-rule cities and the like), and any agency, authority or instrumentality of
any of the foregoing, including, without limitation, any court, tribunal,
department, bureau, commission or board.
Income Tax means any federal, state or local Tax based on income, gross
receipts, or profits, including any interest, penalty, or similar payment
obligation arising in connection with such Tax.
Intellectual Property means all trade, corporate, business and product
names, trademarks, trademark rights, service marks, copyrights, patents, patent
rights, trade secrets, and computer software (other than software not used or
useful in the business of the Company or any Subsidiary, and other than readily
available software purchased at a cost of less than $5,000 in the aggregate for
all sites and seats using such software), and all registrations, licenses and
applications pertaining to any of them.
Latest Balance Sheet has the meaning given to such term in Section 3.1(e).
Legal Requirement means any constitution, statute, ordinance, code, or
other law (including common law), rule, regulation, Order, notice, standard,
procedure or other requirement enacted, adopted, applied or issued by any
Governmental Authority.
Multiemployer Plan has the meaning given to such term in ERISA Section
3(37).
Orders means all judgments, injunctions, orders, rulings, decrees,
directives, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
Other Buyer Agreements means any documents and instruments executed and
delivered by the Buyer at Closing, excluding this Agreement.
Other Seller Agreements means any documents and instruments executed and
delivered by the Shareholder at Closing, excluding this Agreement.
Permits means all permits, licenses, consents, franchises, authorizations,
approvals, privileges, waivers, exemptions, variances, exclusionary or
inclusionary Orders and other concessions, whether governmental or private,
including, without limitation, those relating to environmental, public health,
welfare or safety matters.
Permitted Encumbrances means: (i) liens for Taxes and other governmental
charges not yet due or delinquent; (ii) mechanics', carriers', workmen's,
repairmen's or other like Encumbrances arising or incurred in the ordinary
course of business with respect to liabilities that are not yet due or
delinquent; (iii) those Encumbrances listed on Schedule 1.1; and (iv) other
Encumbrances, if any, which, individually or in the aggregate, would not
materially detract from the value of the asset to which it relates or materially
impair the ability of the Company to use the asset to which it relates in
substantially the same manner as it was used prior to the Closing; provided, in
the case of each Encumbrance described in (i), (ii) and (iv), that the liability
secured by such Encumbrance is fully reflected on the face of the Closing Date
Balance Sheet and that such liability does not otherwise constitute a breach of
any representation, warranty or covenant of the Shareholder in this Agreement.
Person means an individual, partnership, corporation, association, joint
stock company, trust, joint venture, limited liability company, unincorporated
organization or Governmental Authority.
Premises means the real property, buildings and improvements on such real
property constituting the business premises of the Company and each Subsidiary
located at 941 and 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxx.
Prime Rate is the prime rate as published, from time to time, in The Wall
Street Journal.
Principal Customer has the meaning given to such term in Section 3.1(p).
Right means any right, property interest, concession, patent, trademark,
trade name, copyright, know-how or other proprietary right of another Person.
Section 338(h)(10) Election has the meaning given to such term in Section
4.8(a).
Seller Indemnitee has the meaning given to such term in Section 6.1.
Shareholder has the meaning given to such term in the preamble to this
Agreement.
Shares means all of the issued and outstanding capital stock of the
Company.
Subsidiary has the meaning given to such term in Section 3.1(b).
Survival Period means, with respect to a representation or warranty, the
applicable period after the Closing Date during which such representation or
warranty survives pursuant to Section 8.13.
Tax means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, documentary, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any interest,
penalty or addition.
Tax Return means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment to any of them, and including any amendment of any of them.
Terminable Contracts has the meaning given to such term in Section 4.9.
ARTICLE II.
PURCHASE AND SALE
2.1. Basic Transaction. Subject to the terms and conditions set forth in
this Agreement, the Buyer agrees to purchase from the Shareholder, and the
Shareholder agrees to sell to the Buyer, all of the Shares, free and clear of
any Encumbrance, for the consideration specified in Section 2.2. The Buyer will
have no obligation under this Agreement to purchase less than all of the Shares.
2.2. Purchase Price; Payment. The purchase price for the Shares is
$11,000,000 plus 925,000 shares of Common Stock. At Closing, the Buyer will (i)
pay to the Shareholder $10,700,000 and deliver to the Shareholder 832,500 shares
of Common Stock; and (ii) deposit $300,000 into an Escrow Account (as defined in
the Escrow Agreement) and deposit 92,500 shares of Common Stock with the Escrow
Agent. The cash payment at Closing will be made by wire transfer of federal or
immediately available funds to an account or accounts designated by the
Shareholder and the share payment at Closing will be made by delivery of
certificates representing such shares of Common Stock. Notwithstanding the
existence of an Escrow Account, nothing will prevent the Shareholder from paying
cash in satisfaction of its indemnification obligations under Article VI. The
Buyer Indemnitees shall be required to first seek recourse against the shares of
Common Stock deposited in the Escrow Agreement before seeking recourse directly
against the Shareholder for any indemnification obligation of the Shareholder
under Article VI, but only to the extent that the credited value of the Common
Stock held in Escrow exceeds the amount claimed by all Buyer Indemnitees.
2.3. Closing Balance Sheet. Within 45 days after the Closing, the
Shareholder will deliver to the Buyer at the Shareholder's expense a
consolidated balance sheet for the Company and any Subsidiary as of the close of
business on the Closing Date (the "Closing Date Balance Sheet"). The Closing
Date Balance Sheet will be prepared in accordance with GAAP on a basis
consistent with the accounting policies applied by the Company for the December
31, 1996 audited Financial Statements of the Company, subject to Schedule 2.3.
Notwithstanding the foregoing, the reserve for bad debts on the Closing Date
Balance Sheet will include a reserve equal to 100% of the unpaid balance of the
accounts receivable due from Xxxxxxxx and Sagamore as of the Closing Date.
2.4. Adjustment to the Purchase Price; Procedure. Following delivery of the
Closing Date Balance Sheet in accordance with Section 2.3, the Purchase Price
will be adjusted as follows:
(a) The Buyer will examine the Closing Date Balance Sheet to determine
whether it believes the Closing Date Balance Sheet was prepared in accordance
with the provisions of this Agreement. In connection with that examination, the
Shareholder will provide, and will cause his accountant to provide, the Buyer
and the Buyer's accountants with access to such information as the Buyer may
reasonably request to make that determination, including access to all work
papers and calculations of the Shareholder's accountants related to the
preparation of the Closing Date Balance Sheet.
(b) Within 15 days after receipt of the Closing Date Balance Sheet, the
Buyer will, in a written notice to the Shareholder, either accept the Closing
Date Balance Sheet or object to it by describing in reasonable detail any
proposed adjustments to the Closing Date Balance Sheet and the reasons for such
proposals. If the Shareholder has not received such notice of proposed
adjustments within such 15-day period, the Buyer will be deemed to have accepted
the Closing Date Balance Sheet; provided, however, that if the Buyer's failure
to give such notice results from the Shareholder's failure to timely provide
information requested by Buyer under Section 2.4(a), the time within which Buyer
must give such notice will be extended until a reasonable time after Shareholder
provides the information requested by Buyer.
(c) If any adjustments to the Closing Date Balance Sheet are proposed, the
Buyer and the Shareholder will negotiate in good faith to resolve any dispute,
provided that if the dispute is not resolved within 10 days following the
Shareholder's receipt of the proposed adjustments, the Buyer and the Shareholder
will retain a mutually acceptable nationally recognized independent public
accounting firm to resolve such dispute, which resolution will be final and
binding. The fees and expenses of any such accounting firm will be shared
equally by the Buyer and the Shareholder, and such accounting firm will be
retained by a retention letter executed by the parties that specifies that the
determination by said firm of any such disputes concerning the Closing Date
Balance Sheet will be resolved in accordance with GAAP on a basis consistent
with the accounting policies applied by the Company in its December 31, 1996
audited Financial Statements. If the Buyer and the Shareholder are unable to
agree on a mutually acceptable independent public accounting firm to resolve
such dispute, the dispute will be resolved by arbitration in accordance with
Section 7.2 of this Agreement.
(d) On the Adjustment Date (if a dispute occurs), or within 10 business
days after the resolution of a dispute (if a dispute occurs and is to be
resolved in accordance with Section 2.4(c)), as the case may be, then to the
extent that the Adjusted Net Worth of the Company as set forth on the Closing
Date Balance Sheet is less than $10,075,000, the Shareholder will pay to the
Buyer the difference between such two amounts. Such payment will include
interest accrued from the Closing Date to the date of such payment at the Prime
Rate.
2.5. Sales Taxes, Etc. The Shareholder will pay all sales, use, transfer,
licensing, recording, stamp and other Taxes, fees and charges payable in respect
of or as a result of the sale and transfer of the Shares to the Buyer pursuant
to this Agreement. The Buyer will pay all Taxes, fees and charges payable in
respect of or as a result of the sale and issuance of the shares of Common Stock
to the Shareholder pursuant to this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Shareholder. The Shareholder
represents and warrants to the Buyer as follows, as of the date of this
Agreement:
(a) Organization, Good Standing, Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Indiana, and is qualified to do business as a foreign corporation and is in good
standing in California and Florida, which are the only jurisdictions in which
such qualification is necessary and in which the failure to be so qualified
would have a material adverse effect on the business or properties of the
Company. The Company has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. True and complete copies of (i) the articles of incorporation
(certified by the Secretary of State of Indiana) and (ii) the bylaws of the
Company, both as currently in effect, have been delivered to the Buyer by the
Company and the Shareholder, and the Company is not in violation of any
provision of its articles of incorporation or bylaws. True copies of the minute
books, the stock certificate books, and stock record books of the Company have
been delivered to the Buyer by the Shareholder.
(b) Subsidiaries. Schedule 3.1(b) sets forth a correct and complete
description of (i) the name and jurisdiction of each entity of which the Company
owns, directly or indirectly, more than 50% of the capital stock, profits,
interest or interest in capital (individually a "Subsidiary" and collectively
the "Subsidiaries"), (ii) the number of shares of capital stock of each
Subsidiary authorized and outstanding and the number of shares of capital stock
of each Subsidiary owned by the Company or any other Subsidiary and (iii) the
jurisdictions, if any, in which each Subsidiary is qualified or licensed to do
business as a foreign entity. Each Subsidiary (i) is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, (ii) is duly qualified do business as a foreign entity in each
jurisdiction in which such qualification is necessary and in which the failure
to be so qualified would have a material adverse effect on the business or
properties of the Company, and (iii) has all requisite power to own, lease and
operate its properties and to conduct its business as it is now conducted. True
and complete copies of (i) the articles of organization (certified by the
Secretary of State of Indiana) and (ii) the operating agreement of each
Subsidiary, both as currently in effect, which have been delivered to the Buyer
by the Company, and no Subsidiary is in violation of any provision of its
articles of organization or operating agreement. Except for the Subsidiaries or
as otherwise disclosed in Schedule 3.1(b), the Company does not own, directly or
indirectly, any equity interest in any corporation, partnership, joint venture
or other business entity. The Company no longer owns any interest in MSE Realty
LLC.
(c) Ownership and Capitalization. The authorized capital stock of the
Company consists of 1,000,000 shares of common stock, no par value. The
Shareholder owns, beneficially and of record, free and clear of any Encumbrance,
all of the issued and outstanding capital stock of the Company. All of the
issued and outstanding shares of the Company's capital stock have been duly
authorized and validly issued and are fully paid and nonassessable. There is no
authorized or outstanding stock or security convertible into or exchangeable
for, or any authorized or outstanding option, warrant or other right to
subscribe for or to purchase, or convert any obligation into, any unissued
shares of the Company's capital stock or any treasury stock, and the Company has
not agreed to issue any security so convertible or exchangeable or any such
option, warrant or other right. There are no authorized or outstanding stock
appreciation, phantom stock, profit participation or similar rights with respect
to the Company, except pursuant to the Company's Equity Participation Plan.
There are no voting trusts, voting agreements, proxies or other agreements or
understanding with respect to any capital stock of the Company. There are no
existing rights of first refusal, buy-sell arrangements, options, warrants,
rights, calls, or other commitments or restrictions of any character relating to
any of the Shares, except those restrictions on transfer imposed by the
Securities Act of 1933, as amended, and applicable state securities laws.
(d) Authority; No Violation. The Shareholder has full and absolute right,
power, authority and legal capacity to execute, deliver and perform this
Agreement and all Other Seller Agreements to which the Shareholder, is a party,
and, assuming the due authorization, execution and delivery of this Agreement
and the Other Seller Agreements by the other parties to such agreements, this
Agreement constitutes, and the Other Seller Agreements constitute, the legal,
valid and binding obligations of, and will be enforceable in accordance with
their respective terms against, the Shareholder, except as such enforcement is
subject to the effect of (i) any applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting creditors' rights
generally and (ii) general principles of equity, including, without limitation,
concepts of reasonableness, good faith and fair dealing, and other similar
doctrines affecting the enforceability of agreements generally (regardless of
whether considered in a proceeding in equity or at law). The execution, delivery
and performance of this Agreement and the Other Seller Agreements and the
consummation of the transactions contemplated by each such agreement will not
(A) violate (x) any Legal Requirement to which the Company or the Shareholder is
subject or (y) any provision of the articles of incorporation or bylaws of the
Company, or (B) except as set forth in Schedule 3.1(d), violate, with or without
the giving of notice or the lapse of time or both, or result in the breach of
any provision of, or constitute a default under, or result in the creation of
any Encumbrance upon any properties, assets or business of the Company or of the
Shareholder, pursuant to, any indenture, mortgage, deed of trust, lien, lease,
license, Permit, agreement, instrument or other arrangement to which the
Company, any Subsidiary, or the Shareholder is a party or by which the Company,
any Subsidiary, or the Shareholder, or any of their respective assets and
properties is bound or subject, but for purposes of this representation and
warranty, any right on the part of the other party to such agreement to
terminate any such agreement upon the execution, delivery and performance of
this Agreement and the Other Seller Agreements or the consummation of the
transactions contemplated by each such agreement will not constitute a breach of
this representation and warranty (whether or not the agreement is listed on
Schedule 3.1(d)). Except for notices that have been given and consents that have
been obtained by the Shareholder prior to the execution of this Agreement (which
are set forth in Schedule 3.1(d)), neither the Company, the Shareholder or any
Subsidiary, need give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority in order for
the parties to consummate the transactions contemplated by this Agreement and
the Other Seller Agreements. Neither the Shareholder nor the Company or any
Subsidiary is a party to any litigation or proceeding (and, to the knowledge of
the Shareholders, no such litigation or proceeding has been threatened), that
seeks to prohibit or delay, or that seeks damages as a result of, the execution
and delivery of this Agreement by the Shareholder or the consummation of the
transactions contemplated by this Agreement.
(e) Financial Statements. The Shareholder has delivered to the Buyer
complete and correct copies of (i) audited balance sheets and related statements
of income, stockholders' equity and cash flow of the Company as of and for the
years ended December 31, 1996, and 1995 and all notes and schedules thereto and
(ii) the unaudited internally prepared balance sheets of the Company and the
related unaudited statements of income as of March 31, 1997 (collectively, the
"Financial Statements"). The Financial Statements are in accordance with the
books and records of the Company and of any Subsidiary and were prepared in
accordance with GAAP and present fairly the Company's and Subsidiary's financial
position, results of operations and changes in financial position as of the
dates and for the periods indicated, subject in the case of the unaudited
Financial Statements only to standard year-end adjustments (none of which will
be material in amount) and the omission of footnotes. The unaudited balance
sheet as of March 31, 1997, is called the Latest Balance Sheet. At the date of
the Latest Balance Sheet, neither the Company nor any Subsidiary had any
liability or obligation, whether accrued, absolute, fixed or contingent
(including liabilities for taxes or unusual forward or long-term commitments),
required by GAAP to be reflected or reserved against in that balance sheet that
were not fully reflected or reserved against on the Latest Balance Sheet. The
balance sheets included in the Financial Statements reflect capitalized computer
software costs and capitalized mapping inventory at net realizable value as
required by SFAS No. 86. The amount of start-up revenue recognized by the
Company during the period from January 1, 1997 to the date of the Closing Date
Balance Sheet did not exceed $300,000. Copies of the financial statements
described in clause (i) are attached as Schedule 3.1(e)(i), and copies of the
financial statements described in clause (ii) of this Section are attached as
Schedule 3.(e)(ii).
(f) Absence of Certain Changes or Events. Since March 31, 1997, except as
disclosed in Schedule 3.1(f), the Company and each Subsidiary have not (i)
incurred any debt, indebtedness or other liability, except current liabilities
incurred in the ordinary course of business; (ii) delayed or postponed the
payment of accounts payable or other liabilities or accelerated the collection
of any receivable beyond stated, normal terms except in the ordinary course of
business; (iii) sold or otherwise transferred any of their equipment or other
assets or properties, except in the ordinary course of business and except for
equipment no longer needed in the Company's business that was sold for fair
market value; (iv) cancelled, compromised, settled, released, waived,
written-off or expensed any account or note receivable, right, debt or claim
involving more than $10,000 in the aggregate, except to the extent that such
amount is reserved in the Closing Date Balance Sheet; (v) changed in any
significant manner the way in which they conduct business; (vi) made or granted
any individual wage or salary increase in excess of 10% or $2.00 per hour, any
general wage or salary increase, or increased employee benefits of any kind or
nature; (vii) entered into any contract or agreement, or made any commitment,
involving more than $50,000; (viii) accelerated, terminated, delayed, modified
or cancelled any agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses) involving more than $50,000; (ix)
suffered any material adverse change to or in their business, assets, financial
condition, or existing or prospective relationships with customers or suppliers;
(x) made any payment or transfer to or for the benefit of the Shareholder or
permitted any Person, including, without limitation, the Shareholder, to
withdraw assets from the Company or from any Subsidiary (other than the payment
to the Shareholder of the proportionate monthly amount of his normal annualized
salary due and payable during such period, distributions to the Shareholder to
pay Taxes on earnings of the Company attributable to him by reason of the
Company's election to be taxed as an S corporation (or to pay off previous loans
by the Company to the Shareholder to pay such Taxes), declarations of dividend
distributions to the Shareholder if and to the extent that the Adjusted Net
Worth of the Company as set forth on the Closing Date Balance Sheet exceeds
$10,075,000 (but not more than $664,000) and the transfer to the Shareholder or
an Affiliate of the Shareholder of a 1% interest in MSE Realty, LLC); (xi)
suffered any other significant occurrence, event, incident, action, failure to
act or transaction outside the ordinary course of business; or (xii) agreed to
incur, take, enter into, make or permit any of the matters described in clauses
(i) through (xi).
(g) Tax Matters.
i) The Company and each Subsidiary have filed all Income Tax Returns and,
to the knowledge of the Shareholder, all other Tax Returns that they were
required to file. All such Income Tax Returns and, to the knowledge of the
Shareholder, all other Tax Returns were correct and complete in all respects.
All Income Taxes and, to the knowledge of the Shareholder, all other Taxes owed
by the Company and by each Subsidiary (whether or not shown on any Tax Return)
have been paid. The Company and each Subsidiary are not currently the
beneficiaries of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where the Company and
each Subsidiary do not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Encumbrances on any of the assets of the
Company or on those of any Subsidiary that arose in connection with any failure
(or alleged failure) to pay any Tax.
ii) The Company and each Subsidiary withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, the Shareholder or other third
party.
iii) There is no pending or threatened dispute or claim concerning any Tax
liability of the Company or of any Subsidiary. Schedule 3.1(g)(iii) lists all
federal, state, local and foreign income Tax Returns filed with respect to the
Company and any Subsidiary for taxable periods ended on or after December 31,
1993, identifies those Tax Returns that have been audited and identifies those
Tax Returns that currently are the subject of audit. The Shareholder has
delivered to the Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies filed or assessed
against or agreed to by the Company and each Subsidiary since December 31, 1993.
iv) The Company and each Subsidiary have not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
v) Neither the Company, the Shareholder nor any Subsidiary has ever filed a
consent pursuant to Section 341(f) of the Code relating to collapsible
corporations. The Company and each Subsidiary have not made any payments, are
not obligated to make any payments and are not parties to any agreement that
under certain circumstances could obligate them to make any payments that will
not be deductible under Code Section 280G. The Company and each Subsidiary have
not been United States real property holding corporations within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). The Company and each Subsidiary disclosed on their federal
income Tax Returns all positions taken that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
The Company and each Subsidiary are not parties to any Tax allocation or sharing
agreement. The Company and each Subsidiary have not been members of an
Affiliated Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) and have no liability for the
Taxes of any Person (other than the Company) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract or otherwise.
vi) Since January 1, 1987, and for all taxable periods of the Company
thereafter, the Company has duly filed a valid S Corporation election, which
election was effective as of such date and has been continuously in effect from
such date.
vii) All Taxes payable by all present and former shareholders of the
Company and present and former shareholders or owners of any Subsidiary in
respect of the Company's and any Subsidiary's taxable income have been paid.
viii) [Intentionally omitted.]
ix) At all times since January 1, 1987, the Company (and any predecessor of
the Company) has been a validly electing S corporation within the meaning of
Code 1361 and 1362, and the Company will be an S corporation up to and including
the Closing Date.
x) Schedule 3.1(g)(x) identifies each Subsidiary that is a "qualified
subchapter S subsidiary" within the meaning of Code 1361(b)(3)(B). Each
Subsidiary so identified has been a qualified subchapter S subsidiary at all
time since the date shown on such schedule up to and including the Closing Date.
xi) The Company will not be liable for any Tax under Code 1374 in
connection with the deemed sale of the Company's assets (including the assets of
any qualified subchapter S subsidiary) caused by the Section 338(h)(10)
Election. Neither the Company nor any qualified subchapter S subsidiary of the
Company has, in the past 10 years, (A) acquired assets from another corporation
in a transaction in which the Company's Tax basis for the acquired assets was
determined, in whole or in part, by reference to the Tax basis of the acquired
assets (or any other property) in the hands of the transferor or (B) acquired
the stock of any corporation which is a qualified subchapter S subsidiary.
(h) Assets and Properties.
i) The Company has good title to (or, in the case of the assets that are
leased, valid leasehold interests in) all the assets that are used by the
Company in its business, free and clear of all Encumbrances (except for
Permitted Encumbrances). Such assets consist of the tangible and intangible
assets of the Company in existence as of the Closing Date. Such assets are all
of the tangible and intangible assets used by the Company in, or necessary for
the conduct of, its business as conducted by the Company since January 1, 1997.
Such assets and any equipment leased by the Company from third parties encompass
all equipment used by the Company to generate the income reflected in the
financial statements attached as Schedule 3.1(e)(i). Schedule 3.1(h)(i) lists
all the third party equipment leased by the Company as of the date of this
Agreement. The Company does not lease any equipment from the Shareholder, except
for fixtures attached to the Premises and leased to the Company by MSE Realty
LLC. All of the Company's tangible assets are located on the Premises, except
for field equipment used on job sites in the ordinary course of business.
Each Subsidiary has good title to (or, in the case of assets that are
leased, valid leasehold interests in) all of its respective assets, free and
clear of all Encumbrances (except for Permitted Encumbrances). These assets
consist of the tangible and intangible assets of each Subsidiary in existence as
of the Closing Date. These assets are all of the tangible and intangible assets
used by each Subsidiary in, or necessary for the conduct of, its business as
conducted by the Subsidiary since January 1, 1997. These assets and any
equipment leased by each Subsidiary from third parties encompass all equipment
used by each Subsidiary to generate the income reflected in the financial
statements attached as Schedule 3.1(e)(i). Schedule 3.1(h)(i) lists all the
third party equipment leased by each Subsidiary as of the date of this
Agreement. No Subsidiary leases any equipment from the Shareholder. All of the
tangible assets are located at each Subsidiary's principal place of business.
ii) The Premises constitute all of the real property, buildings and
improvements used by the Company and each Subsidiary in their business. The
Premises are supplied with utilities and other services necessary for the
operation of the Premises. Except as set forth on Schedule 3.1(h)(ii), the
Premises have been maintained in accordance with normal industry practice, are
in good operating condition and repair and are suitable for the purposes for
which they presently are used. To the knowledge of the Shareholder, the Premises
have received all approvals of Governmental Authorities (including Permits)
required in connection with the occupation and operation of the Premises and
have been occupied, operated and maintained in accordance with applicable Legal
Requirements. Neither the Shareholder, the Company nor any Subsidiary has
received notice of violation of any Legal Requirement or Permit relating to the
condition or their operation of the Premises which has an adverse effect on the
ability of the Company or any Subsidiary to utilize the Premises or requires the
Company or any Subsidiary to incur expense in order to utilize the Premises.
iii) No party to any lease with respect to any Premises has repudiated any
provision of such lease, and there are no disputes, oral agreements or
continuing waivers in effect as to any such lease.
(i) Attached as Schedule 3.1(i) is a list of the following contracts and
agreements not yet substantially performed to which the Company or any
Subsidiary is a party:
(i) Any agreement (or group of related agreements) for the sale of goods or
the furnishing of services involving reasonably anticipated total revenues in
excess of $300,000;
(ii) Any agreement (or group of related agreements) for the purchase of
goods or services involving reasonably anticipated total payments in excess of
$300,000;
(iii) Any agreement (or group of related agreements) for the lease of
personal property or real property to or from any Person providing for lease
payments in excess of $5,000 per annum, other than agreements that may be
terminated without cause and without penalty by the Company or the Subsidiary on
30 days or less notice to such Person;
(iv) All confidentiality and non-competition agreements, mortgages, deeds
of trust, indentures, loan agreements, credit agreements, promissory notes and
guaranties;
(v) Each note or account receivable from, loan or advance to, and agreement
for the purchase, sale or lease of goods or services to or from, the
Shareholder, or any Affiliate of the Shareholder, or any officer, director or
employee of the Company or any Subsidiary; and
(vi) All guaranty, warranty and indemnity agreements provided or delivered
by the Company or any Subsidiary to any of its customers of business (but
excluding such agreements included as provisions in the service agreements with
customers).
The contracts and agreements described in clauses (i) through (vi) of this
Section 3.1(i) are referred to in this Agreement as the "Material Contracts."
With respect to each such Material Contract: (A) the Material Contract is valid,
in full force and effect, and enforceable in accordance with its terms, except
as such enforcement is subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting creditors'
rights generally and general principles of equity, including, without
limitation, concepts of reasonableness, good faith and fair dealing, and other
similar doctrines affecting the enforceability of agreements generally
(regardless of whether considered in a proceeding in equity or at law); (B) no
action or claim is pending or, to the knowledge of the Shareholder, threatened
to revoke, modify, terminate or render invalid any such Material Contract; and
(C) except for financing agreements with The Fifth Third Bank of Central Indiana
and Terminable Contracts, to the knowledge of the Shareholder, neither the
Company, any Subsidiary nor any other party is in breach or default in the
performance of any of its respective obligations under, and, no event exists
which, with the giving of notice of the lapse of time or both, would constitute
a breach or default on the part of a party to, such Material Contract that is
continued unremedied, except for breaches or defaults which will not have a
material adverse effect on the business or properties of the Company. Copies of
the Material Contracts delivered to the Buyer are true and complete. The
prepayment of the Company's indebtedness to The Fifth Third Bank of Central
Indiana is not prohibited and will not result in the imposition of any
prepayment penalty or similar obligation. With respect to contracts and
agreements for the sale of goods or the furnishing of services by the Company or
any Subsidiary that is not a Material Contract, to the knowledge of the
Shareholder, neither the Company nor any Subsidiary is in breach or default in
the performance of its obligations under any such contracts or agreements.
Also set forth on Schedule 3.1(i) is a list setting forth the following
items:
(vii) All items of equipment, machinery and other tangible personal
property of the Company and of each Subsidiary (including that which, as of the
date of this Agreement, has no book value), and the original cost, depreciation
and current book value of all such items which are included in the Latest
Balance Sheet;
(viii) All Permits, licenses, Orders, registrations, certificates and
similar rights of the Company and each Subsidiary;
(ix) The names and current rates of compensation as of June 20, 1997 of all
employees of the Company and any Subsidiary whose annual rate of compensation is
$40,000 or more;
(x) All items of Intellectual Property owned by the Company or any
Subsidiary, or which is used by the Company in its business, and in each case
where the Company or any Subsidiary is not the owner, the name of the owner of
the Intellectual Property; and
(xi) The name of each bank or other financial institution or entity in
which the Company or any Subsidiary has an account or safe deposit box (with the
identifying account number or symbol) and the names of all persons authorized to
draw on such account or to have access to such safe deposit box.
(j) Litigation; Compliance with Applicable Laws and Rights.
i) There is no outstanding Order against, or, except as set forth on
Schedule 3.1(j)(i), is there any litigation, proceeding, arbitration or
investigation by any Governmental Authority or other Person pending or, to the
knowledge of the Shareholder, threatened against, the Company or any Subsidiary,
their properties or their business.
ii) Except as set forth on Schedule 3.1(j)(ii), to the knowledge of the
Shareholder, the Company and each Subsidiary and each of their assets (including
their Premises, facilities, machinery and equipment) are not in violation of any
applicable Legal Requirement. Except as set forth in Schedule 3.1(j)(ii),
neither the Shareholder, the Company nor any Subsidiary has received notice from
any Governmental Authority or other Person of any violation or alleged violation
of any Legal Requirement which has not been finally resolved on a basis that
involves no continuing obligation or liability to the Company.
(k) Accounts Receivable. The accounts receivable of the Company and of each
Subsidiary reflected on the Latest Balance Sheet and on the Closing Date Balance
Sheet have arisen in the ordinary course of business and reflect bona fide
business arrangements; no payor has given the Shareholder, the Company or any
Subsidiary written notice of any inability to pay such account receivable in due
course or of any claim or defense against payment of such account receivable; to
the Shareholder's knowledge, no oral statements to such effect have been made to
the Shareholder, the Company or any Subsidiary; to the Shareholder's knowledge,
no basis exists for any payor to raise any claim or defense against payment with
respect to any such account receivable; and Schedule 3.1(k) sets forth a true
and correct statement regarding the aging of such accounts receivable as of a
date within 10 days of the date of this Agreement.
(l) Product Quality, Warranty and Liability. No product or service provided
or delivered by the Company or any Subsidiary to customers on or prior to the
date of this Agreement is subject to any guaranty, warranty or other indemnity
beyond the terms set forth in the written agreement with such customer. All
product or service liability claims that have been asserted against the Company
or any Subsidiary since March 31, 1997, whether covered by insurance or not and
whether litigation has resulted or not, other than those listed and summarized
on Schedule 3.1(j)(i), are listed and summarized on Schedule 3.1(l).
(m) Insurance. The Company and each Subsidiary have policies of insurance
(i) covering risk of loss on the Company's and each Subsidiary's assets,
respectively, (ii) covering products and services liability and liability for
fire, property damage, personal injury and workers' compensation coverage and
(iii) for business interruption, all, to the knowledge of the Shareholder, with
responsible and financially sound insurance carriers in adequate amounts and in
compliance with governmental requirements and in accordance with good industry
practice. All such insurance policies are valid, in full force and effect and
enforceable in accordance with their respective terms and no party has
repudiated any provision of such policies. Neither the Company nor any other
party to any such policy is in breach or default (including with respect to the
payment of premiums or the giving of notices) in the performance of any of their
respective obligations under any such policy; no insurer under any such
insurance policy has denied coverage or reserved against coverage concerning any
claim made by the Company or any Subsidiary; and, to the knowledge of the
Shareholder, no event exists which, with the giving of notice or the lapse of
time or both, would constitute a breach, default or event of default, or permit
termination, modification or acceleration under any such policy. All premiums
have been paid on such policies as of the date of this Agreement. The Company
and each Subsidiary have been covered during the five years prior to the date of
this Agreement by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during such five-year period. All claims made
during such five-year period with respect to any insurance coverage of the
Company or any Subsidiary, other than claims made by or on behalf of employees
of the Company or any Subsidiary under the Company's health insurance policy and
other than those described on Schedule 3.1(l), are set forth on Schedule 3.1(m).
(n) Pension and Employee Benefit Matters.
i) Schedule 3.1(n) lists each Employee Benefit Plan of the Company and each
entity which is a member of the controlled group with the Company (as defined
under ERISA Section 4001(a)(14)) (the "Company Employee Benefit Plans") that:
(A) is subject to any provision of ERISA; (B) is maintained, administered or
contributed to by the Company or any controlled group member; (C) covers any
employee or former employee of the Company or any controlled group entity; or
(D) under which the Company or any controlled group entity has any liability to
make contributions or pay benefits. Copies of the current versions of all such
plans, summary plan descriptions, and, if applicable, related trust agreements,
and all amendments of such plans have been delivered by the Shareholder to the
Buyer and attached to this Agreement as part of Schedule 3.1(n), and has
delivered to the Buyer the three most recent annual reports (Form 5500 including
Schedule B if applicable) and summary annual reports prepared in connection with
each such plan required to file an annual report.
ii) The only Company Employee Benefit Plans that individually or
collectively would constitute Employee Pension Benefit Plans are identified in
Schedule 3.1(n). No Company Employee Benefit Plan is subject to the Plan
Termination Insurance provisions of Title IV of ERISA. The Company and each
controlled group member have not incurred any liability under Title IV of ERISA
arising in connection with the termination of any plan covered or previously
covered by Title IV of ERISA.
iii) The Shareholder has delivered to the Buyer a current, complete and
correct copy of the Company's Employee Benefit Workbook (the "Workbook") and the
Company's Personnel and Administrative Policy Guide (the "Guide"). The Workbook
and the Guide list each employment, severance or other similar contract,
arrangement or policy and each plan or arrangement (written or oral) providing
for insurance coverage (including any self-insured arrangements), disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits, deferred compensation, profit sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation, reduced interest
or interest free loans, mortgages, relocation assistance or post-retirement
insurance, compensation or other benefits that: (A) is not an Employee Benefit
Plan; (B) is entered into, maintained or contributed to, by the Company and each
controlled group member and (C) covers any employee or former employee of the
Company or any controlled group member. Such contracts, plans and arrangements
as are described in this Section are referred to collectively as the "Benefit
Arrangements." Copies of each of these Benefit Arrangements either are set forth
in full in the Workbook or the Guide or have been made available to the Buyer or
are listed as "Other Benefit Arrangements" on Schedule 3.1(n). Neither the
Company nor any Subsidiary has any liability under any other Benefit
Arrangements that no longer are in effect.
iv) Except as set forth in any Company Employee Benefit Plan or Benefit
Arrangement identified in Schedule 3.1(n) and except as provided by a Legal
Requirement or any collective bargaining agreement or any employment contract
identified on Schedule 3.1(n), the employment of all persons presently employed
or retained by the Company or any Subsidiary is terminable at will.
v) Except as expressly so identified in Schedule 3.1(n), no Company
Employee Benefit Plan is a "Multiemployer Plan."
vi) No Company Employee Benefit Plan is maintained in connection with any
trust described in Section 501(c)(9) of the Code. Any assets of any Company
Employee Benefit Plan that are subject to the trust requirement of ERISA Section
403 are held in trust in compliance with ERISA Section 403.
vii) Each Company Employee Benefit Plan that is an Employer Pension Benefit
Plan is intended to be qualified within the meaning of Section 401(a) of the
Code ("Qualified") is so Qualified, has been so Qualified during the period from
its adoption to date, has been administered in a manner that would not adversely
affect its Qualified status and has received a currently effective determination
letter (or a determination letter has been timely requested) from the Internal
Revenue Service that the Plan is (or continues to be) currently Qualified for
federal income tax purposes. The Shareholder has delivered to the Buyer copies
of such determination letters and any pending applications, and copies of such
letters and applications have been attached to this Agreement as part of
Schedule 3.1(n). Each trust in which the assets of any such Employee Pension
Benefit Plan are held is exempt from tax pursuant to Section 501(a) of the Code.
viii) There have been no prohibited transactions with respect to any
Company Employee Benefit Plan. No "Fiduciary" (as defined in Section 3(21) of
ERISA) has any liability for breach of fiduciary duty or any other failure to
act or comply in connection with the administration or investment of the assets
of any such Company Employee Benefit Plan. No action, suit, proceeding, hearing
or investigation with respect to the administration or the investment of the
assets of any Company Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the knowledge of the Shareholder is threatened. The
Shareholder has no knowledge of any basis for any such action, suit, proceeding,
hearing or investigation.
ix) The Company and each controlled group member do not maintain and have
never maintained nor contribute, or ever have contributed, or ever have been
required to contribute, to any Company Employee Benefit Plan providing health or
medical benefits for current or future retired or terminated employees, their
spouses or their dependents (other than in accordance with Code Section 4980B).
No condition exists that would prevent the Company or any controlled group
member from amending or terminating any Company Employee Benefit Plan or Benefit
Arrangement providing health or medical benefits in respect of any active or
retired employees of the Company or any controlled group member (other than in
accordance with Code Section 4980B).
x) Each Company Employee Benefit Plan and Benefit Arrangement has been
maintained and administered in compliance with its terms and with the
requirements prescribed by any and all Legal Requirements, including but not
limited to ERISA and the Code, that are applicable to such Plans. Nothing done
or omitted to be done and no transaction or holding of any asset under or in
connection with any Company Employee Benefit Plan or Benefit Arrangement has
made or will make the Company, any controlled group member, any officer or
director of the Company or of any controlled group member subject to any
liability under Title I of ERISA or any liability for any Tax under Section 4972
or Section 4975 through 4980B, inclusive, of the Code.
xi) Any Company Employee Benefit Plan that is a "group health plan" (as
defined in Code Section 5000(b)(l)) has been administered in accordance with the
requirements of Part 6 of Subtitle B of Title I of ERISA and Code Section 4980B
and nothing done or omitted to be done in connection with maintenance or
administration of any Company Employee Benefit Plan that is a "group health
plan" has made or will make the Company or any controlled group member subject
to any liability under Title I of ERISA, excise Tax liability under Code Section
4980B or has resulted or will result in any loss of income exclusion for a
participant under Code Sections 105(h) or 106.
xii) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company or any Subsidiary that, individually
or collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G or 162(a)(l) of the Code.
xiii) The Company and each controlled group member have made, before the
date of this Agreement, all required contributions and premium payments under
each Company Employee Benefit Plan and Benefit Arrangement for all completed
fiscal years including contributions that may not by law have otherwise been
required to be made until the due date for filing the Tax Return for any
completed fiscal year.
xiv) Except as disclosed in Schedule 3.1(n), there has not been with
respect to the Company's or any controlled group member's active or retired
employees, any amendment to, written interpretation or announcement (whether or
not written) by the Company or any Subsidiary relating to, or change in employee
participation or coverage under, any Company Employee Benefit Plan or Benefit
Arrangement that would increase the expense of maintaining or funding benefits
under such Company Employee Benefit Plan or Benefit Arrangement above the level
of the expense incurred in respect of such for the fiscal year ended on December
31, 1996, except as set forth in Schedule 3.1(n).
xv) No condition (other than pursuant to a Legal Requirement) exists that
would have prevented the Company or any Subsidiary from terminating any Company
Employee Benefit Plan, prior to the date of this Agreement. Seller acknowledges
that the Buyer will have no obligation to the Shareholder (other than pursuant
to a Legal Requirement) to employ any employee of the Company or to continue any
Company Employee Benefit Plan, and will have no liability to the Shareholder
under any plan or arrangement maintained by the Company and Subsidiary for the
benefit of any employee.
xvi) There are no retired employees of the Company or any controlled group
member who are receiving or are entitled to receive any payments from the
Company or any controlled group member which are not fully funded by an Employee
Pension Benefit Plan of the Company or a controlled group member, except those
former employees who are receiving or are entitled to receive any payments from
the Company pursuant to the Amended and Restated Equity Participation Plan of
the Company.
(o) Employees and Labor. Since March 31, 1997, the Company and each
Subsidiary have not received any notice, and to the knowledge of the
Shareholder, there is no reason to believe that any executive or key employee of
the Company or any Subsidiary, or any group of employees of the Company or any
Subsidiary, has any plans to terminate his, her or its employment with the
Company or any Subsidiary, except as set forth in Schedule 3.1(o). No executive
or key employee is subject to any agreement, obligation, Order or other legal
hindrance that impedes or might impede such executive or key employee from
devoting his or her full business time to the affairs of the Company or any
Subsidiary, and, if such person becomes an employee of the Buyer, to the affairs
of the Buyer after the date of this Agreement. The Company and each Subsidiary
will not be required to give any notice under the Worker Adjustment and
Retraining Notification Act, as amended, or any similar Legal Requirement as a
result of this Agreement, the Other Seller Agreements or the transactions
contemplated by them. Except as set forth on Schedule 3.1(o), the Company and
each Subsidiary do not have any labor relations problems or disputes, and
neither the Company nor any Subsidiary has experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes.
Neither the Company nor any Subsidiary is a party to or is bound by any
collective bargaining agreement, there is no union or collective bargaining unit
at the Company's or any Subsidiary's facilities, and no union organization
effort has been threatened, initiated or is in progress with respect to any
employees of the Company or of any Subsidiary.
(p) Customer Relationships. Schedule 3.1(p) lists each customer (the
"Principal Customers") that individually or with its affiliates accounted for a
Contract Value of $300,000 or more. To the knowledge of the Shareholder, the
Company and each Subsidiary have good commercial working relationships with the
Principal Customers. Since December 31, 1996, no Principal Customer has
cancelled or otherwise terminated its relationship with the Company or any
Subsidiary, materially decreased or limited its contribution of revenue to the
Company or any Subsidiary, or indicated an intention to take any such action.
The Shareholder has received no written or oral communication from a Principal
Customer that the execution and delivery of this Agreement by either party or
the consummation of the transactions contemplated by this Agreement will cause
such Principal Customer to terminate or materially reduce the service provided
by the Company under its agreements with such Principal Customer after the date
of this Agreement (other than in connection with normal rundowns in services
provided as a result of the completion of services contemplated in such
Agreements).
(q) Environmental Matters. Except as set forth on Schedule 3.1(q), neither
the Company nor any Subsidiary has ever owned any real property.
(r) Intellectual Property. The Company and each Subsidiary owns or has the
legal right to use each item of Intellectual Property required to be identified
on Schedule 3.1(i). Except as set forth on Schedule 3.1(r), the sale of the
Shares to the Buyer will not affect the Company's or any Subsidiary's right to
use any such Intellectual Property. To the knowledge of the Shareholder, the
continued operation of the business of the Company and any Subsidiary as
currently conducted will not interfere with, infringe upon, misappropriate or
conflict with any Intellectual Property rights of another Person. To the
knowledge of the Shareholder, no other Person has interfered with, infringed
upon, misappropriated or otherwise come into conflict with any Intellectual
Property rights of the Company or any Subsidiary. Except as set forth on
Schedule 3.1(i), neither the Company nor any Subsidiary has granted any license,
sublicense or permission with respect to any Intellectual Property owned or used
in the Company's or the Subsidiary's business.
(s) Disclosure. In connection with the sale of the Shares under this
Agreement, the Shareholder has complied with the requirements of Rule 10b-5 of
the Securities and Exchange Commission.
3.1. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Shareholder as follows, as of the date of this Agreement:
(a) Organization and Qualification, etc. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado and has corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as it is now being conducted.
The Buyer is duly qualified to do business and is in good standing in each
jurisdiction where the failure to be so qualified would have a material adverse
effect on the business or properties of the Company.
(b) Authority Relative to Agreement. The Buyer has full and absolute right,
power and authority to execute, deliver and perform this Agreement and the Other
Buyer Agreements, and to consummate the transactions contemplated on its part by
this Agreement and the Other Buyer Agreements. The execution and delivery of
this Agreement by Buyer, and the consummation by the Buyer of the transactions
contemplated on its part by this Agreement and the Other Buyer Agreements have
been duly authorized by the Buyer's board of directors. No other corporate
approvals on the part of the board of directors or shareholders of the Buyer are
necessary to authorize the execution and delivery of this Agreement, and the
Other Buyer Agreements. This Agreement and the Other Buyer Agreements have been
duly executed and delivered by the Buyer and, assuming the due authorization,
execution and delivery of this Agreement and the Other Buyer Agreements by the
other parties to such agreements, are valid and binding agreements, enforceable
against the Buyer in accordance with their respective terms, except as such
enforcement is subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting creditors'
rights generally and (ii) general principles of equity, including, without
limitation, concepts of reasonableness, good faith and fair dealing, and other
similar doctrines affecting the enforceability of agreements generally
(regardless of whether considered in a proceeding in equity or at law).
(c) Non-Contravention. The execution, delivery and performance of this
Agreement and the Other Buyer Agreements and the consummation by the Buyer of
the transactions contemplated by this Agreement and by the Other Buyer
Agreements will not, (i) violate any provision of the Articles of Incorporation
or By-laws of the Buyer, or (ii) violate, or result, with the giving of notice
or the lapse of time or both, in a violation of, any provision of, or result in
the acceleration of or entitle any party to accelerate (whether after the giving
of notice or lapse of time or both) any obligation under, or result in the
creation or imposition of any encumbrance upon any of the property of the Buyer
pursuant to any provision of any mortgage or lien or lease, agreement, license
or instrument or any order, arbitration award, judgment or decree to which the
Buyer is a party or by which any of its assets are bound and do not and will not
violate or conflict with any other material restriction of any kind or character
to which the Buyer is subject or by which any of its assets may be bound, and
the same does not and will not constitute an event permitting termination of any
such mortgage or lien or lease, agreement, license or instrument to which the
Buyer is a party or (iii) violate any Legal Requirement to which the Buyer is
subject. The Company is not party to any litigation or proceeding (and, to the
knowledge of the Company, no such litigation or proceeding has been threatened),
that seeks to prohibit or delay, or that seeks damages as a result of, the
execution and delivery of this Agreement by the Company or the consummation of
the transactions contemplated by this Agreement.
(d) Government Approvals. No consent, authorization, order or approval of,
or filing or registration with, any governmental commission, board or other
regulatory body is required for or in connection with the execution and delivery
of this Agreement and the Other Buyer Agreement by the Buyer, the execution and
delivery of this Agreement by the Buyer, and the consummation by the Buyer of
the transactions contemplated by this Agreement and the Other Buyer Agreements.
(e) SEC Reports. The Buyer has filed (and has provided the Company with
copies of all required forms, reports and documents which it has been required
to file with the Securities and Exchange Commission (the "Commission") since
September 30, 1996 (collectively, the "SEC Reports"), each of which has complied
in all material respects with all applicable requirements of the Securities Act
of 1933, as amended and the Securities Exchange Act of 1934, as amended. As of
their respective dates, the SEC Reports, including, without limitation, any
financial statements or schedules included in such financial statements, did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such financial statements or necessary in order to make
the statements in such financial statements, in light of the circumstances under
which they were made, not misleading, except, in the case of any SEC Report, any
statement or omission in such SEC Report that has been corrected or otherwise
disclosed in a subsequent SEC Report. The audited financial statements of the
Buyer in its Annual Report on Form 10-K for the fiscal year ended September 30,
1996, and the unaudited interim financial statements of the Buyer in its
Quarterly Reports on Form 10-Q for the fiscal quarters ended December 31, 1996
and March 31, 1997, have been prepared in accordance with GAAP, fairly present
the consolidated financial position of the Buyer and the Subsidiaries as of the
dates of such statements and their consolidated results of operations and
changes in financial position for the periods then ended (subject to normal
year-end adjustments and the absence of certain footnote disclosures in the case
of any unaudited interim financial statements).
(f) Capitalization of the Buyer. As of the date of this Agreement, the
authorized capital stock of the Buyer consists of 100,000,000 shares of common
stock, of which approximately 5,092,510 shares are validly issued and
outstanding, fully paid and nonassessable, and 2,500,000 shares of preferred
stock, no par value, none of which is outstanding. Except pursuant to the
Buyer's employee stock option and restricted stock purchase plans, as of the
date of this Agreement, the Buyer has no commitments to issue or sell any shares
of its capital stock or any securities or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or acquire
from the Buyer, any shares of its capital stock and no securities or obligations
evidencing such rights are outstanding. Schedule 3.2(f) sets forth, as of the
date of this Agreement, the total number of options not yet granted under any
stock option plan of the Buyer, the total number of shares of Common Stock
subject to unexercised options outstanding under all such plans and the weighted
average exercise price of such outstanding options.
(g) Investment Intent. The Buyer is acquiring the Shares for its own
account and not with any present intention of distributing or selling the Shares
in violation of any federal, state or other applicable securities laws.
(h) NASDAQ. The shares of Common Stock to be issued to the Shareholder at
the Closing will be issued in compliance with all requirements necessary for the
shares of Common Stock to be quoted on the NASDAQ national market.
(i) Common Stock Issued to the Shareholders. The shares of the Buyer's
Common Stock to be issued to the Shareholder as consideration in accordance with
Article II have been duly and validly authorized for issuance by the Buyer and,
when the shares of Common Stock of the Buyer are issued and delivered to the
Shareholder as provided by this Agreement, the shares of the Common Stock of the
Buyer issued to the Shareholder hereunder will have been validly issued, fully
paid and nonassessable, and the issuance of such shares will not be subject to
any preemptive or similar rights.
(j) Absence of Material Adverse Change. Since March 31, 1997, to the date
of this Agreement, the Buyer has not experienced any material adverse change to
its assets, its business, or its business prospects. As of the date of this
Agreement, there is no existing event or condition as to which the Company is
required to file a Current Report on Form 8-K, and no pending transactions
(other than the transaction contemplated by this Agreement) on anticipated
events or conditions that would require the filing of a Current Report on Form
8-K, which has not previously been disclosed in the SEC Reports.
(k) Brokers. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried out by the Buyer
directly with the Shareholder and the Company, without the intervention of any
person on behalf of the Buyer in such manner as to give rise to any valid claim
by any person against the Buyer for a finder's fee, brokerage commission, or
similar payment, except for the retention of Xxxx Xxxxxxxx Incorporated, whose
fees and expenses are to be borne by the Buyer and except for the payment due to
Utility Graphic Consultants Corporation under the agreement dated January 13,
1997, which is to be borne by the Company.
3.3. Representations as to Knowledge. Any representation and warranty made
in Article III to the "knowledge" or "best knowledge" of a party means matters
actually known by such party and matters which would come to such party's
attention in the course of due diligence to verify the accuracy of such
representation and warranty, including (i) in the case of the Shareholder,
inquiry of Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxx, Xxxxxx X. Xxxxxxxxxx, Xxxx X.
Xxxxxx III, and Xxxxxxx X. Xxxxxxxxx, and (ii) in the case of the Buyer, inquiry
of Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxxx.
ARTICLE IV.
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following Closing.
4.1. Further Assurances. If after Closing any further action is necessary
or desirable to carry out the purposes of this Agreement, each of the parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other party reasonably may request,
all at the sole cost and expense of the requesting party (unless the requesting
party is entitled to indemnification for such action under Article VI).
4.2. Cooperation. If and for so long as any party actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand in connection with (a) any transaction contemplated
by this Agreement or (b) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act or
transaction on or prior to the Closing Date involving any of the Company's or
any Subsidiary's assets or business, each of the other parties will cooperate
with such party and its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
will be reasonably necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending party (unless the
contesting or defending party is entitled to indemnification under Article VI).
4.3. Post-Closing Announcements. Following Closing, neither the Shareholder
nor the Buyer will issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the other party; provided, however, that the Buyer will not be
prohibited from issuing any press release or making any public announcements or
filings required by applicable federal and state securities laws.
4.4. Financial Statements. The Shareholder will, upon request of the Buyer,
cooperate with the Buyer to produce such historical and on-going financial
statements and audits concerning the Company as the Buyer may request, all at
the sole cost and expense of the Buyer.
4.5. Release of Shareholder. Within 10 days after the Closing, the Buyer
will deliver to the Shareholder a written release duly executed by The Fifth
Third Bank of Central Indiana, releasing the Shareholder from any and all
guaranties of the liabilities and obligations of the Company to The Fifth Third
Bank of Central Indiana, and pending delivery of such release, the Buyer will
indemnify the Shareholder and hold him harmless against any loss, liability,
cost or expense under such guaranties.
4.6. Shareholder's Election to Buyer's Board of Directors. At the Closing,
the Buyer will use its best efforts and will exercise all authority under
applicable laws to: (i) if necessary, increase the size of its Board of
Directors by one member, and (ii) cause the Shareholder to be elected as a
member of the Board of Directors of the Buyer until the next annual meeting of
the shareholders of the Buyer. Subject to the fiduciary duties of the Buyer and
its Board of Directors under applicable laws, the Buyer will nominate the
Shareholder as part of management's slate of nominees for election as a member
of the Board of Directors of the Buyer at each annual meeting of the
shareholders of the Buyer held in 1998, 1999 and 2000.
4.7. Access to Books and Records. Following the Closing, the Buyer will
permit the Shareholder and his authorized representatives, during normal
business hours and upon reasonable notice, to have access to, and examine and
make copies of, all books and records of the Company which relate to
transactions or events occurring on or prior to the Closing Date and
transactions or events occurring subsequent to the Closing Date which are
related to or arise out of transactions or events occurring prior to the Closing
Date, to the extent reasonably necessary for Shareholder to defend any claim for
indemnification under this Agreement, or to prepare any tax return or
effectively defend any tax audit or claim relating to periods prior to the
Closing.
4.8. Certain Tax Matters.
(a) Section 338(h)(10) Election. The Shareholder and the Company will join
with the Buyer in making an election under 338(h)(10) of the Code and Section
1.338(h)(10)-1 of the Treasury Regulations, and any corresponding election under
state, local and foreign tax laws, with respect to the purchase and sale of the
stock of the Company hereunder (a "Section 338(h)(10) Election"). The
Shareholder will include any income, gain, loss, deduction or other tax item
resulting from the Section 338(h)(10) Election on his Tax Returns to the extent
permitted by applicable laws. The Shareholder will also pay any Tax imposed on
the Company or its Subsidiaries attributable to the making of the Section
338(h)(10) Election, including, but not limited to, (i) any Tax imposed under
Code 1374, (ii) any tax imposed under Reg. 1.338(h)(10)-1(e)(5), or (iii) any
state, local or foreign Tax imposed on the Company's or its Subsidiaries' gain,
and the Shareholder will indemnify the Buyer, the Company and its Subsidiaries
against any Adverse Consequences arising out of any failure to pay any such
Taxes. The Company and the Shareholder will not revoke the Company's election to
be taxed as an S corporation within the meaning of Code 1361 and 1362. The
Company and the Shareholder will not take or allow any action that would result
in the termination of the Company's status as a validly electing S corporation
within the meaning of Code 1361 and 1362.
(b) Allocation of Purchase Price. The Buyer and the Shareholder agree that
the purchase price paid to the Shareholder hereunder and the liabilities of the
Company (plus other relevant items) will be allocated to the assets of the
Company for all purposes (including Tax and financial accounting purposes) as
mutually determined by the Buyer and the Shareholder in accordance with
applicable income tax laws and regulations, which allocation is set forth on
Schedule 4.9(b) to be attached to this Agreement following the final
determination of any adjustment to the purchase price pursuant to Section 2.4.
The Buyer and the Shareholder will file, and will cause the Company to file, all
Tax Returns and information reports in a manner consistent with such
allocations.
(c) Tax Periods Ending on or Before the Closing Date. The Shareholder will
prepare or cause to be prepared and filed or caused to be filed all Tax Returns
for the Company for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. The Shareholder will permit the Buyer to review
and comment on each such Tax Return described in the preceding sentence prior to
filing, and all such Tax Returns will be subject to the approval of the Buyer,
such approval not to be unreasonably withheld. To the extent permitted by
applicable law, the Shareholder will include any income, gain, loss, deduction
or other tax items for such periods on his Tax Returns in a manner consistent
with the Schedule K-1's prepared by the Shareholder for such periods. The
Shareholder will reimburse Buyer for any Taxes of the Company and its
Subsidiaries with respect to such periods within fifteen (15) days after payment
by Buyer or the Company and its Subsidiaries of such Taxes to the extent such
Taxes are not reflected in the reserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Closing Balance Sheet.
(d) Cooperation on Tax Matters. The Buyer and the Shareholder will, and
will cause the Company to, cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns
pursuant to this Section and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation will include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Buyer and
the Shareholder agree: (i) to retain all books and records with respect to Tax
matters pertinent to the Company relating to any taxable period beginning before
the Closing date until the expiration of the statute of limitations (and, to the
extent notified by the Buyer or the Shareholder, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the other party
reasonable written notice prior to the transferring, destroying or discarding
any such books and records, and, if the other party so requests, to allow the
other party to take possession of such books and records. The Buyer and the
Shareholder further agree, upon request, to use their best efforts to obtain any
certificate or other document form any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed, including without limitation, with respect to the transactions
contemplated by this Agreement.
4.9. Terminable Contracts. The Buyer acknowledges that certain contracts
pursuant to which the Company provides services or goods to a third Person are
terminable at will by such Person or are subject to termination by such Person
(or may otherwise give rise to remedies to such Person) if the execution of this
Agreement or the sale of the Shares by the Shareholder pursuant to this
Agreement is not consented to by such Person (the "Terminable Contracts"). The
Buyer agrees and acknowledges that the Shareholder will not be liable to the
Buyer in any manner whatsoever because of the failure to obtain any such consent
required by a Terminable Contract, except for a breach of the representation and
warranties of the Shareholder in Section 3.1(p). However, following the Closing,
if requested by the Buyer, the Shareholder will, at the expense of the Buyer,
use his reasonable best efforts to obtain such consents and will cooperate with
the Buyer in any lawful arrangement designed to provide to the Buyer with the
benefits under such Terminable Contracts.
4.10. Asset Transfer by Shareholder. Until November 30, 1999, the
Shareholder will not make any transfers of assets owned by him if the effect of
such transfer would be to reduce or further reduce the Shareholder's net worth
below $8,500,000.
ARTICLE V.
CLOSING
5.1. Simultaneous Closing. The consummation of the transactions
contemplated by this Agreement ("Closing") will occur simultaneously with the
execution of this Agreement. Closing will take place at the offices of Locke,
Reynolds, Xxxx & Weisell, in Indianapolis, Indiana, on the effective date of
this Agreement, which is July 2, 1997 (the "Closing Date").
5.2. Deliveries. The Shareholder and the Buyer have made deliveries to each
other at Closing and have acknowledged receipt of such deliveries by separate
documents.
ARTICLE VI.
REMEDIES FOR BREACHES OF THIS AGREEMENT
6.1. Indemnification by the Buyer. From and after Closing, the Buyer will
indemnify, defend and hold harmless the Shareholder and his heirs, personal
representatives, successors and permitted assigns (the "Seller Indemnitees")
from and against any and all Adverse Consequences resulting or arising from,
relating to or incurred in connection with: (a) any breach of any representation
or warranty of the Buyer contained in this Agreement or in any of the Other
Buyer Agreements, (b) any breach of any covenant of the Buyer contained in this
Agreement or in any of the Other Buyer Agreements, (c) any and all guaranties by
the Shareholder of any and all liabilities or obligations of the Company, except
to the extent that the existence of such liabilities or obligations constitute a
breach of the representations, warranties or covenants of the Shareholder in
this Agreement, and (d) any broker's or finder's fee or other commission
resulting from any services alleged to have been rendered to or at the request
of the Buyer with respect to this Agreement or any of the transactions
contemplated hereby.
6.2. Indemnification by the Shareholder. From and after Closing, the
Shareholder will indemnify, defend and hold harmless the Buyer, the Company and
their respective officers, directors and controlling persons (the "Buyer
Indemnitees") from and against any and all Adverse Consequences resulting or
arising from, relating to or incurred in connection with: (a) any breach of any
representation or warranty of the Shareholder contained in this Agreement or in
any of the Other Seller Agreements, (b) any breach of any covenant of the
Shareholder contained in this Agreement or in any of the Other Seller
Agreements, (c) any broker's or finder's fee or other commission resulting from
any services alleged to have been rendered to or at the request of the
Shareholder or the Company with respect to this Agreement or any of the
transactions contemplated thereby; (d) any Environmental Obligation incurred by
any Buyer Indemnitee, resulting or arising from, relating to or incurred in
connection with (i) any event, fact, circumstance or condition (to the extent
any such event, fact, circumstance or condition occurred or existed at or prior
to the Closing and even if the Adverse Consequence manifests itself after the
Closing) and (ii) any act or omission (to the extent such act or omission
occurred prior to the Closing Date and even if the Adverse Consequence manifests
itself after the Closing); and (e) any Contract Negligence Claims, subject to
the provisions of Section 6.6.
6.3. Notice of Claim; Right to Participate in and Defend Third Party Claim.
(a) If any indemnified party receives notice of the assertion of any claim,
the commencement of any suit, action or proceeding, or the imposition of any
penalty or assessment by a third party in respect of which indemnity may be
sought under this Agreement (a "Third Party Claim"), and the indemnified party
intends to seek indemnity under this Agreement, then the indemnified party will
promptly provide the indemnifying party with prompt written notice of such Third
Party Claim, but in any event not later than 30 calendar days after receipt of
such notice of Third Party Claim. The failure by an indemnified party to notify
an indemnifying party of a Third Party Claim will not relieve the indemnifying
party of any indemnification responsibility under this Article, except to the
extent, if any, that such failure prejudices the ability of the indemnifying
party to defend such Third Party Claim.
(b) The indemnifying party will have the right to control the defense,
compromise or settlement of a Third Party Claim with its own counsel (reasonably
satisfactory to the indemnified party) if the indemnifying party delivers
written notice to the indemnified party within seven days following the
indemnifying party's receipt of notice of a Third Party Claim from the
indemnified party which acknowledges its obligations to indemnify the
indemnified party with respect to such Third Party Claim in accordance with this
Article; provided, however, that the indemnifying party will not enter into any
settlement of any Third Party Claim which would impose or create any obligation
or any financial or other liability on the part of the indemnified party if such
liability or obligation (i) requires more than the payment of a liquidated sum
or (ii) is not covered by the indemnification provided to the indemnified party
under this Agreement. In its defense, compromise or settlement of any Third
Party Claim, the indemnifying party will timely provide the indemnified party
with such information with respect to such defense, compromise or settlement as
the indemnified party may request, and will not assume any position or take any
action that would impose an obligation of any kind on, or restrict the actions
of, the indemnified party. The indemnified party will be entitled (at the
indemnified party's expense) to participate in, but not control, the defense by
the indemnifying party of any Third Party Claim with its own counsel.
(c) If the indemnifying party does not undertake the defense, compromise or
settlement of a Third Party Claim in accordance with subsection (b) of this
Section, the indemnified party will have the right to control the defense or
settlement of such Third Party Claim with counsel of its choosing; provided,
however, that the indemnified party will not settle or compromise any Third
Party Claim without the indemnifying party's prior written consent (which
consent will not be unreasonably withheld), unless the terms of such settlement
or compromise release the indemnified party or the indemnifying party from any
and all liability with respect to the Third Party Claim. The indemnifying party
will be entitled (at the indemnifying party's expense) to participate in the
defense of any Third Party Claim with its own counsel.
(d) The indemnified party will assert any indemnifiable claim under this
Agreement that is not a Third Party Claim by promptly delivering notice of such
claim to the indemnifying party. If the indemnifying party does not respond to
such notice within 60 days after its receipt, it will have no further right to
contest the validity of such claim.
6.4. Basket and Deductible. No indemnified party will be entitled to
indemnification from an indemnifying party under Sections 6.1(a) or 6.2(a)
unless and until the aggregate amount of Adverse Consequences with respect to
which all Buyer Indemnitees or all Seller Indemnitees, as the case may be, would
otherwise be entitled to assert under Section 6.1(a) or 6.2(a), whichever is
applicable, exceeds $200,000, and then only for the amount by which such Adverse
Consequences exceed $200,000.
6.5. Limitations.
(a) The maximum aggregate amount that the Buyer Indemnitees, on the one
hand, or the Shareholder Indemnitees, on the other hand, may recover on account
of all Adverse Consequences under this Article VI will be limited to $8,500,000.
(b) To the extent that any breach of a representation, warranty or covenant
of the Shareholder results in an adjustment of the purchase price of the Shares
under Section 2.4, the amount of such adjustment will be offset against the
amount coverable under this Article VI.
(c) The indemnification provisions of this Article will constitute the
exclusive remedy by either party against the other arising by virtue of a breach
of any representation, warranty, or covenant under this Agreement, absent fraud.
The foregoing provision is not intended to limit any party from seeking recourse
against the other party under any law that provides a cause of action that is
independent of the rights granted by this Agreement.
(d) Notwithstanding the provisions of this Article VI, neither the Company
nor any Subsidiary will have any duty to indemnify the Shareholder or contribute
funds for the benefit of the Shareholder, under the articles of incorporation or
bylaws of the Company, under the articles of organization or operating agreement
of any Subsidiary, under any resolution, contract, insurance policy, arrangement
or understanding, or under the provisions of any statute governing the Company
or any Subsidiary, or otherwise, to the extent that the facts, circumstances, or
events that otherwise would give rise to a claim of indemnification or
contribution constitute a breach of a representation, warranty or covenant under
this Agreement. The Shareholder waives any right to indemnification or
contribution to the extent that the immediately preceding sentence applies. The
Buyer agrees that it will not amend the articles of incorporation or bylaws of
the Company in such a manner as to adversely affect the rights of the
Shareholder to indemnification as such rights existed immediately prior to the
Closing.
(e) The amounts for which the indemnifying party is liable to the
indemnified party under this Article VI will be (i) reduced by the amount of any
insurance proceeds received by the indemnified party in connection with the
event giving rise to the claim for indemnification, taking into account any
effect thereon of the indemnified party's receipt of any payment under this
Article 6 and (ii) increased by interest on the amount of Adverse Consequences,
at a rate equal to one-half of a percentage point above the Prime Rate, accrued
from the later of (x) the date that any Adverse Consequence becomes a liability
of the party suffering the Adverse Consequence as determined in accordance with
GAAP, and (y) the date that the party suffering the Adverse Consequence gives
the other party notice under Section 6.3(a).
(f) No Buyer Indemnitee will be entitled to indemnification for a breach by
the Shareholder of a representation and warranty in Section 3.1 to the extent
that Xxxxxx X. Xxxxxx or Xxxxx X. Xxxxxx at or prior to the Closing had actual
knowledge of the fact or circumstance constituting such breach and at or prior
to the Closing had actual knowledge that such fact or circumstance constituted a
breach, and neither the Shareholder nor any of Xxxxxxx X. Xxxxxx, Xxxxxx X.
Xxxx, Xxxxxx X. Xxxxxxxxxx, Xxxx X. Xxxxxx III, or Xxxxxxx X. Xxxxxxxxx had
actual knowledge of such fact or circumstance.
6.6. Indemnification for Customer Contract Losses.
(a) With respect to any Customer Negligence Claim under an Engineering
Contract, if the Adverse Consequences exceed $50,000, the Shareholder will
indemnify all Buyer Indemnitees for one-half of such Adverse Consequences (but
not in excess of a payment by the Shareholder of $150,000 for any such Customer
Negligence Claim).
(b) Solely for purposes of this Section 6.6, Adverse Consequences does not
include attorneys' fees and costs incurred in connection with such Customer
Negligence Claim.
(c) This Section 6.6 will apply only with respect to Customer Negligence
Claims as to which the Company receives a claim on or prior to November 30,
1999.
(d) This Section 6.6 will cease to apply with respect to any Customer
Negligence Claim as to which the Company receives a claim after a Change in
Control has occurred.
(e) The amount of any Customer Negligence Claim will be reduced to the
extent that the Buyer or the Company receives insurance proceeds with respect to
the Customer Negligence Claim, and the Buyer agrees to use, or to cause the
Company to use, reasonable efforts to pursue payment under any available
insurance policy with respect to any such Customer Negligence Claim.
ARTICLE VII.
ALTERNATIVE DISPUTE RESOLUTION
7.1. Mediation. If a dispute arises under or in connection with this
Agreement, including, without limitation, those involving claims for specific
performance or other equitable relief, notice must be given pursuant to Section
8.6. After such notice has been given by one party to the other, the parties in
good faith will attempt to negotiate or mediate a resolution of the dispute with
the aid of a mediator who has been mutually agreed upon by the parties.
7.2. Arbitration. If such efforts provided for in Section 7.1 do not within
30 days resolve the dispute, upon demand of any party, whether made before or
after the institution of any judicial proceeding, the dispute will be resolved
by binding arbitration under the Commercial Arbitration Rules of the American
Arbitration Association. Institution of a judicial proceeding by a party does
not waive the right of that party to demand arbitration under this Agreement,
provided that arbitration is commenced within 70 days after such judicial
proceedings are commenced. Disputes may include, without limitation, tort
claims, counterclaims, claims brought as class actions, claims arising from
documents executed in the future, or claims arising out of or connected with the
transactions contemplated by this Agreement and the Other Buyer Agreements and
Other Seller Agreements. The American Arbitration Association will choose one
arbitrator to hear the parties and settle any dispute. All arbitration hearings
will be conducted in Kansas City, Missouri. All applicable statutes of
limitation will apply to any dispute. The arbitrator will have no power to award
punitive or exemplary damages, to ignore or vary the terms of this Agreement or
any Other Buyer or Seller Agreement, and will be bound to apply controlling law.
The Shareholder and the Buyer each will pay for one-half of the arbitrator's
fees and expenses and each such party will bear its own costs and expenses
incurred in connection with the arbitration, except that the arbitrator will
award either party reimbursement of its share of the costs and expenses of
arbitration, such party's costs and expenses (including attorneys' fees and
expenses), and any special or extraordinary fees or costs incurred by the Escrow
Agent in connection with any such arbitration or dispute, if the other party
commences or conducts the arbitration in bad faith. A judgment upon the award
may be entered in any court having jurisdiction. Notwithstanding anything to the
contrary contained in this Section 7.2, the parties preserve, without
diminution, certain remedies that any of them may employ or exercise freely,
either alone, in conjunction with, or during a dispute. The parties to this
Agreement have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights of self-help including peaceful occupation of real property and
collection of rents, set off and peaceful possession of personal property; (ii)
obtaining provisional or ancillary remedies including injunctive relief,
requestration, garnishment, attachment, appointment of a receiver and filing an
involuntary bankruptcy proceeding; and (iii) when applicable, a judgment by
confession of judgment. Preservation of these remedies does not limit the power
of an arbitrator to grant similar remedies that may be requested by a party in a
dispute.
ARTICLE VIII.
MISCELLANEOUS
8.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
8.2. Entire Agreement. This Agreement (including the Other Seller
Agreements and Other Buyer Agreements) constitutes the entire agreement among
the parties and supersedes any prior understandings, agreements or
representations by or among the parties, written or oral, to the extent they
relate in any way to the subject matter of this Agreement.
8.3. Succession and Assignment. This Agreement will be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. At or after the Closing, either party may assign his or its
rights under this Agreement as permitted by law, including, without limitation,
any assignment of any claim of indemnification to any debt or equity financing
source, but no assignment will release the assigning party of his or its
obligations under this Agreement.
8.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original and all of which together
will be deemed to be one and the same instrument. The execution of a counterpart
of the signature page to this Agreement will be deemed the execution of a
counterpart of this Agreement.
8.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
8.6. Notices. All notices, requests, demands, claims, and other
communications under this Agreement will be in writing. Any notice, request,
demand, claim, or other communication under this Agreement will be deemed duly
given only if it is sent by registered or certified mail, return receipt
requested, postage prepaid, or by courier, telecopy or facsimile, and addressed
to the intended recipient as set forth below:
If to the
Shareholder: Copy to:
Xx. Xxx X. Xxxxxx Locke, Reynolds, Xxxx & Weisell
c/o Xx. Xxxxxxx X. Xxxxxx 1000 Capital Center South
Geo. S. Olive & Co. LLC 000 Xxxxx Xxxxxxxx Xxxxxx
000 Xxxxxxx Xxxxxx Xxxxx Xxxxxxxxxxxx, XX 00000
000 Xxxxx Xxxxxxxx Xxxxxx Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxxxxxxxxxx, XX 00000 Telecopy: (000) 000-0000
Telecopy: (000) 000-0000
If to the Buyer: Copy to:
Analytical Surveys, Inc. Xxxxxxx & Xxxxxx L.L.C.
0000 Xxxxxxxx Xxxxx, Xxxxx 000 633 Seventeenth Street, Suite 3000
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000 Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx Attn: Xxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Notices will be deemed given three business days after mailing if sent by
certified mail, when delivered if sent by courier, and one business day after
receipt of confirmation by person or machine if sent by telecopy or facsimile
transmission. Any party may change the address to which notices, requests,
demands, claims and other communications under this Agreement are to be
delivered by giving the other parties notice in the manner set forth in this
Agreement.
8.7. Governing Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Indiana without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Indiana or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Indiana.
8.8. Amendments and Waivers. No amendment of any provision of this
Agreement will be valid unless the same is in writing and signed by the Buyer
and the Shareholder. No waiver by any party of any default, misrepresentation or
breach of warranty or covenant under this Agreement, whether intentional or not,
will be deemed to extend to any prior or subsequent default, misrepresentation
or breach of warranty or covenant under this Agreement or affect in any way any
rights arising by virtue of any prior or subsequent such occurrence, and no
waiver will be effective unless set forth in writing and signed by the party
against whom such waiver is asserted.
8.9. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction will not affect the
validity or enforceability of the remaining terms and provisions of this
Agreement or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
8.10. Expenses. Except as otherwise provided in this Agreement, the Buyer,
the Company, and the Shareholder will each pay any and all fees and expenses
incurred by it or him in connection with the negotiation, preparation, execution
and performance of this Agreement, except that the Company will pay or reimburse
the Shareholder for all expenses incurred by the Shareholder prior to the
Closing in connection with this Agreement, including all reasonable attorneys'
and accountants' fees and expenses, but only if and to the extent that such
unpaid Shareholder expenses are reflected as a liability on the Closing Date
Balance Sheet.
8.11. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement will be construed as if drafted
jointly by the parties and no presumption or burden of proof will arise favoring
or disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. The word "including" will mean including without limitation. The
parties intend that each representation, warranty and covenant contained in this
Agreement will have independent significance. If any party breaches any
representation, warranty or covenant contained in this Agreement 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 the party has not breached will not detract from or mitigate the fact that
the party is in breach of the first representation, warranty or covenant.
8.12. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated in this Agreement by reference and
made a part of this Agreement.
8.13. Survival. The representations and warranties made in this Agreement
will survive the Closing Date until November 30, 1999, except that:
(a) the representations and warranties of the Shareholder in Sections
3.1(a), (b), (c) and (d) (but only as to the first sentence of, and clause
(A)(x) of, Section 3.1(d)) will survive for 15 years after the Closing;
(b) the representations and warranties of the Buyer in Sections
3.2(a), (b), (c) (but only as to clauses (i) and (iii) of Section 3.2(c)),
(d), (f), and (i) will survive for 15 years after the Closing; and
(c) the representations and warranties of Seller in Sections 3.1(g)
and (n) will survive until the expiration of the applicable statutes of
limitations with respect to any such claims that could be brought regarding
such matters (including any extensions of any statutes of limitations),
plus a period of 60 days.
No party will have any obligation to indemnify any person pursuant to this
Agreement with respect to any breach of a representation or warranty unless a
specific claim has been validly made under this Agreement on or prior to the
applicable period set forth above, except that, if a party has a reasonable
basis to believe that an indemnifiable claim will arise and gives notice to the
other party concerning such matter within the applicable period set forth above,
then all rights of such party to seek indemnification with respect to such
matter will survive.
The parties to this Agreement have executed this Agreement as of the date
first above written.
BUYER:
ANALYTICAL SURVEYS, INC.
By: /s/ Xxx X. Xxxxxx
-------------------------------
Name: Xxx X. Xxxxxx
Title: Chief Executive Officer
SHAREHOLDER:
/s/ Xxx X. Xxxxxx
-------------------------------
Xxx X. Xxxxxx
