ASSET PURCHASE AGREEMENT
dated
as of March 31, 1998
By and Among
The Xxxxxxx Group, Inc., a Delaware corporation,
as Buyer,
True North Communications Inc.,
a Delaware corporation,
as the Sole Shareholder of Buyer
and
XX Xxxxxxx & Associates, Inc. t/a The Xxxxxxx Group
a Pennsylvania corporation,
as Seller
and
Xxxxx X. Xxxxxxx,
as the Sole Shareholder of Seller
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS................................................ 1
1.1. Definitions................................................ 1
ARTICLE II. PURCHASE AND SALE.......................................... 6
2.1. Purchase and Sale.......................................... 6
2.2. Excluded Assets............................................ 7
2.3. Assumption of Liabilities.................................. 8
2.4. Excluded Liabilities....................................... 9
2.5. Purchase Price............................................. 9
2.6. Payment of the Purchase Price.............................. 9
2.7. Termination of Shareholder's Employment.................... 12
2.8. Working Capital Purchase Price Adjustment.................. 13
2.9. Collection of Accounts Receivable; Reduction of Earnout
Payments................................................... 13
2.10. Right of Endorsement....................................... 14
2.11. Valuation of Purchased Assets.............................. 14
2.12. Closing.................................................... 14
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER AND
SHAREHOLDER................................................ 15
3.1. Corporate Existence and Power.............................. 15
3.2. Corporate Authorization.................................... 16
3.3. Governmental Authorization................................. 16
3.4. Non-Contravention.......................................... 16
3.5. Seller Capitalization...................................... 16
3.6. Subsidiaries............................................... 17
3.7. Consents................................................... 17
3.8. Financial Statements....................................... 17
3.9. Absence of Certain Changes................................. 18
3.10. Properties; Title to the Purchased Assets.................. 18
3.11. Litigation................................................. 19
3.12. Contracts.................................................. 19
3.13. Licenses and Permits....................................... 19
3.14. Compliance with Laws....................................... 20
3.15. Intellectual Property...................................... 20
3.16. Clients; Xxxxxxxx.......................................... 21
3.17. Accounts Receivable........................................ 21
3.18. Deposits................................................... 21
3.19. Employees.................................................. 21
3.20. Benefit Plans.............................................. 22
i
3.21. Shareholder Transactions................................... 22
3.22. Real Property.............................................. 22
3.23. Accounts................................................... 23
3.24. Tax Matters................................................ 23
3.25. Environmental Laws......................................... 23
3.26. Finders' Fees.............................................. 23
3.27. Investment Representations................................. 24
3.28. Other Information.......................................... 24
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER.................... 25
4.1. Corporate Existence and Power.............................. 25
4.2. Corporate Authorization.................................... 25
4.3. Authorization.............................................. 25
4.4. Issuance of the Shares..................................... 25
4.5. Registration of the Shares................................. 25
4.6. Non-Contravention.......................................... 25
4.7. Finders' Fees.............................................. 26
4.8. Other Information.......................................... 26
4.9. SEC Filings................................................ 26
4.10. Absence of Material Adverse Change......................... 26
ARTICLE V. COVENANTS OF SELLER AND SHAREHOLDER PENDING CLOSING........ 26
5.1. Conduct of the Business.................................... 26
5.2. Access to Information...................................... 28
5.3. Notices of Certain Events.................................. 28
5.4. Exclusivity................................................ 29
5.5. Transfer of Name........................................... 29
5.6. Termination of 401(k) Plan................................. 29
ARTICLE VI. POST CLOSING COVENANTS..................................... 29
6.1.1. Confidentiality............................................ 29
6.1.2. Change of Name; Wind-Up of Seller.......................... 30
6.1.3. Performance of Excluded Liabilities........................ 30
6.1.4. No Distributions........................................... 30
6.1.5. Licenses and Permits....................................... 30
6.2. Buyer and True North jointly and severally covenant and
agree that: ............................................... 30
6.2.1. Operations of the Business During the Earnout Periods...... 30
6.2.2. Right of First Refusal..................................... 31
6.2.3. Continuity of Benefits..................................... 31
6.3. Tax Matters................................................ 31
ii
ARTICLE VII. COVENANTS OF BUYER ........................................ 32
7.1. Registration of True North Common Stock ................... 32
7.2. Delivery of SEC Filings ................................... 35
ARTICLE VIII. COVENANTS OF ALL PARTIES HERETO ........................... 36
8.1. Best Efforts; Further Assurances .......................... 36
8.2. Confidentiality of Transaction ............................ 36
8.3. Best Efforts to Obtain Consents ........................... 37
8.4. Payments and Obligations .................................. 37
ARTICLE IX. CONDITIONS TO CLOSING ..................................... 37
9.1. Condition to the Obligations of Buyer and Seller .......... 37
9.2. Conditions to Obligations of Buyer ........................ 37
9.3. Conditions to Obligations of Seller ....................... 39
ARTICLE X. INDEMNIFICATION ........................................... 40
10.1. Indemnification of Buyer .................................. 40
10.2. Indemnification of Seller and Shareholder by Buyer and
True North ................................................ 41
10.3. Procedure ................................................. 41
10.4. Periodic Payments ......................................... 43
10.5. Insurance ................................................. 43
10.6. Survival of Indemnification Rights ........................ 43
ARTICLE XI. DISPUTE RESOLUTION......................................... 44
11.1. Arbitration ............................................... 44
11.2. Waiver of Jury Trial; Exemplary Damages ................... 45
11.3. Attorneys' Fees ........................................... 46
ARTICLE XII. TERMINATION................................................ 46
12.1. Termination Without Default ............................... 46
12.2. Termination Upon Default .................................. 46
12.3. Survival .................................................. 47
ARTICLE XIII. MISCELLANEOUS ............................................. 47
13.1. Notices ................................................... 47
13.2. Amendments; No Waivers .................................... 48
13.3. Publicity ................................................. 49
13.4. Expenses .................................................. 49
13.5. Successors and Assigns .................................... 49
13.6. Governing Law ............................................. 49
13.7. Counterparts; Effectiveness ............................... 49
13.8. Entire Agreement .......................................... 49
13.9. Bulk Sales Laws ........................................... 49
13.10. Setoff .................................................... 49
iii
13.11. Disclosure ................................................ 50
13.12. Remedies .................................................. 50
13.13. Severability .............................................. 50
13.14. Captions .................................................. 50
13.15. Guarantee ................................................. 50
13.16. Permitted Transfers ....................................... 50
Exhibit A Legend
Exhibit B Assignment and Assumption Agreement
Exhibit C Employment Agreement
Exhibit D Opinion of Seller's and Shareholder's Counsel
Exhibit E Non-Compete Agreement
Exhibit F Opinion of Buyer's and True North's Counsel
iv
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of March 31, 1998, by and among The Xxxxxxx Group,
Inc., a Delaware corporation ("Buyer"), which is a wholly owned subsidiary of
True North Communications Inc., a Delaware corporation ("True North"), True
North, XX Xxxxxxx & Associates, Inc. t/a The Xxxxxxx Group, a Pennsylvania
corporation ("Seller"), and Xxxxx X. Xxxxxxx, the sole shareholder of Seller
("Shareholder").
W I T N E S E T H :
WHEREAS, Seller is in the business of providing public relations and
other marketing communications services (the foregoing being referred to
hereinafter collectively as the "Business");
WHEREAS, Shareholder is the sole shareholder of Seller; and
WHEREAS, Buyer desires to purchase certain of the assets and assume
certain liabilities of the Business from Seller, and Seller desires to sell such
assets and liabilities of the Business to Buyer, upon the terms and subject to
the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Definitions. The following terms, as used herein, have the
following meanings:
"Advertising Company" means Xxxxxxx & Partners, Inc., a Pennsylvania
corporation.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person. With respect to any natural person, the term Affiliate shall also
include any member of said person's immediate family.
"Arbitrator" has the meaning set forth in Section 11.1.
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Business" has the meaning set forth in the Recitals.
"Business Day" means any day other than a Saturday, Sunday or any day
on which banking institutions in New York are not open for business.
"Buyer Consents" means the consents, waivers and amendments to be
obtained by Buyer and its Affiliates with respect to the execution, delivery and
performance by Buyer and its Affiliates of this Agreement and the Guarantee and
all related matters between Buyer and its Affiliates and Seller.
"Closing" has the meaning set forth in Section 2.12.
"Closing Date" has the meaning set forth in Section 2.12.
"Closing Payment" has the meaning set forth in Section 2.5.
"Collection Period" has the meaning set forth in Section 2.9(a).
"Contracts" has the meaning set forth in Section 2.1(v).
"Conveyance Documents" has the meaning set forth in Section 2.12.
"Defaulted Contract" has the meaning set forth in Section 2.3.
"Earnout Payments" has the meaning set forth in Section 2.6.
"Employment Agreement" has the meaning set forth in Section 9.2(k).
"Environmental Laws" has the meaning set forth in Section 3.26.
2
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended from time to time.
"Excess Working Capital" means $1,207,045 which is the Working Capital
of Seller as of December 31, 1997 in excess of $1,000,000 as determined by
agreement of Seller, Shareholder, Buyer and True North pursuant to the Year End
Balance Sheet.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.4.
"Excluded Persons" has the meaning set forth in Section 5.4.
"Financial Statements" has the meaning set forth in Section 3.8.
"GAAP" means generally accepted accounting principles.
"Harrisburg Office Liabilities" has the meaning set forth in Section
2.3.
"Indemnifying Parties" has the meaning set forth in Section 10.3.
"Indemnified Parties" has the meaning set forth in Section 10.3.
"Intellectual Property Right" means any trademark, service xxxx,
registration thereof or application for registration therefor, trade name,
license, invention, patent, patent application, trade secret, trade dress, know-
how, copyright, copyrightable materials, copyright registration, application for
copyright registration, software programs and data bases, the "XX Xxxxxxx &
Associates" name and the "Xxxxxxx Group" name and all derivations thereof, and
any other type of proprietary intellectual property right, and all embodiments
and fixations thereof and related documentation, registrations and franchises
and all additions, improvements and accessions thereto, in each case which is
owned or licensed or filed by Seller or any of its Affiliates or used or held
for use in the Business.
"Law" means any domestic or foreign Federal, state, municipality or
local law, statute, ordinance, rule or regulation.
3
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
including, without limitation, any agreement to give any of the foregoing and
any conditional sale.
"Loss" has the meaning set forth in Section 10.1.
"Material Adverse Change" means a material adverse change in the
business, assets, condition (financial or otherwise), results of operations or
prospects of the Business.
"Material Adverse Effect" means a material adverse effect on the
business, assets, condition (financial or otherwise), results of operations or
prospects of the Business.
"Office Leases" has the meaning set forth in Section 2.1(i).
"Permits" has the meaning set forth in Section 3.13.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government,
domestic or foreign, or political subdivision or an agency or instrumentality
thereof.
"Philadelphia Lease" has the meaning set forth in Section 5.1(a).
"Profit Before Taxes" has the meaning set forth in Section 2.6.
"Prospectus" has the meaning set forth in Section 7.1(a).
"Purchase Price" has the meaning set forth in Section 2.5.
"Purchased Assets" has the meaning set forth in Section 2.1.
"Purchaser Indemnitees" has the meaning set forth in Section 10.1.
"Registration" has the meaning set forth in Section 7.1(a).
"Registration Statement" has the meaning set forth in Section 7.1(a).
"Restrictive Covenants" has the meaning set forth in Section 6.3.
4
"Scheduled Closing Date" has the meaning set forth in Section 12.1.
"SEC" has the meaning set forth in Section 7.1(a).
"SEC Filings" has the meaning set forth Section 7.2.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Consents" has the meaning set forth in Section 3.7.
"Seller Indemnitees" has the meaning set forth in Section 10.2.
"Shares" has the meaning set forth in Section 2.6(a).
"Shareholder Loans" has the meaning set forth in Section 2.5.
"Stock Certificate" has the meaning set forth in Section 2.6(a).
"Stock Purchase Agreement" has the meaning set forth in Section 2.11.
"Tangible Assets" has the meaning set forth in Section 2.1(ii) hereof.
5
"Tax" means any federal, state, local or foreign income,
alternative minimum, gross receipts, profits, sales, use, ad valorem, franchise,
license, withholding, employment, social security, workers compensation,
unemployment compensation, excise, import, real or personal property, or other
tax, fee or like assessment or charge, together with any interest, any penalty
and additional taxes and additions to tax imposed with respect thereto, imposed
by any governmental authority.
"Tax Payment" has the meaning set forth in Section 2.6(c).
"Xxxxxxx Name" has the meaning set forth in Section 6.1.2.
"True North Common Stock" means the common stock, $0.33 1/3 par
value per share, of True North.
"Working Capital" means current assets less current liabilities,
calculated on an accrual basis according to GAAP, consistently applied; provided
however that there shall be excluded from current assets those items referred to
in Section 2.2(ii), (iii), (iv), (v), (vi) and (viii).
"Year-End Acquired Receivables" has the meaning set forth in
Section 2.9(a).
"Year-End Balance Sheet" has the meaning set forth in Section
3.8.
ARTICLE II.
PURCHASE AND SALE
2.1. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, at the Closing Buyer agrees to purchase from
Seller and Seller agrees to (and Shareholder agrees to cause Seller to) sell,
convey, transfer, assign and deliver to Buyer, free and clear of all Liens, all
right, title and interest of Seller in, to and under all of the assets of
Seller, other than the Excluded Assets, including without limitation the
following described assets, properties and rights of Seller as the same shall
exist at the Closing (including all such assets, properties and rights acquired
by Seller on or after the date hereof) (the "Purchased Assets"):
(i) the goodwill of the Business;
6
(ii) the sublease with respect to Seller's Harrisburg office
described on Schedule 2.1(ii) attached hereto, together with all fixtures
and improvements erected on the premises leased thereby and together with
all fixtures and improvements erected on the premises subleased by Buyer
under the Philadelphia Lease (the "Office Leases");
(iii) all tangible personal property and interests therein,
including computers and accessories, furniture, office equipment,
communications equipment, vehicles and other tangible property, including
without limitation the items listed on Schedule 2.1(iii) (collectively, the
"Tangible Assets");
(iv) all work-in-process, supplies and other inventories of
Seller;
(v) the contracts, agreements, leases (including equipment leases
and capital leases), licenses, commitments, client contracts, sales and
purchase orders and other instruments listed on Schedule 2.1(v), and
similar instruments entered into by Seller in compliance with Section 5.1
after the signing hereof and prior to the Closing, and all rights
thereunder (together with the Office Leases, collectively, the
"Contracts");
(vi) all prepaid expenses and deposits pertaining to any of the
Purchased Assets, including but not limited to leases and rentals;
(vii) all of Seller's rights, claims, credits, causes of action
or rights of set-off against third parties relating to the Purchased
Assets, including, without limitation, unliquidated rights under
manufacturers' and vendors' warranties;
(viii) except as provided in Section 2.2(viii), all Intellectual
Property Rights and other intangible property of Seller (and all goodwill
associated therewith), including without limitation the items listed on
Schedule 3.15;
(ix) all cash, cash equivalents, deposits, including deposits
from clients for media purchases to run prior to Closing, securities
(except as set forth in Section 2.2(v)), commodities, deposit accounts,
checking accounts, brokerage accounts and all other accounts and all
securities and investments;
(x) all accounts, notes, and other receivables (except as set
forth in Section 2.2(iii), (iv) and (vi)), whether or not accrued, and
7
whether or not billed of Seller, including without limitation the items set
forth on Schedule 2.1(x);
(xi) all transferable licenses, permits or other governmental
authorizations of Seller, including without limitation the items listed on
Schedule 3.13; and
(xii) all books, records, film, files and papers of Seller,
whether in hard copy or computer format, including, without limitation,
sales and promotional literature, manuals and data, sales and purchase
correspondence, lists of present and former suppliers, lists of present and
former clients, and personnel and employment records.
2.2. Excluded Assets. Buyer expressly understands and agrees that the
following assets and properties of Seller (the "Excluded Assets") shall be
excluded from the Purchased Assets:
(i) all rights of Seller in and to this Agreement;
(ii) the artwork and office furniture located in Seller's offices
as set forth on Schedule 2.2 (ii);
(iii) liabilities owed to Seller by Shareholder or any Affiliate
of Shareholder including, but not limited to the Shareholder Loans;
(iv) all Intellectual Property Rights and all receivables
relating to the Atlantic Capital Conference that Seller organized in May
1996;
(v) the 30,242 shares of stock of Digital Broadband Applications
Corp. held by Seller;
(vi) the receivable of $159,601.47 relating to Seller's services
rendered for Xxx. Xxxxx Xxxxxx on or before December 31, 1997 (but not with
respect to any services rendered thereafter);
(vii) the stock books and minute books of Seller, Seller's
corporate seal and all books and records relating to any Excluded Asset or
Excluded Liability;
(viii) all Intellectual Property Rights (and all goodwill
associated therewith) in connection with "The Marriott Business Travel
Institute"; and
8
(ix) any assets which would otherwise be Purchased Assets which
are sold or otherwise disposed of in the ordinary course of the operation
of the Business and not in violation of any provisions of this Agreement
during the period from the date hereof until the Closing.
2.3. Assumption of Liabilities. Upon the terms and subject to the
conditions of this Agreement, at the Closing Buyer agrees to assume the
following liabilities and obligations of Seller (the "Assumed Liabilities"): all
current liabilities of Seller set forth on the Year-End Balance Sheet (except to
the extent paid or performed prior to the Closing Date and except for Taxes
based on net income), except for the profit sharing expense payable in the
amount of $78,463, and all liabilities and obligations arising in the ordinary
course of business after the date of the Year-End Balance Sheet including
without limitation City of Philadelphia taxes, City of Harrisburg taxes, and
sales, employment and other miscellaneous taxes (except to the extent paid or
performed prior to the Closing Date and except for Taxes based on net income),
including those liabilities and obligations arising under the Contracts other
than (a) Contracts as to which (i) a Seller Consent was required but was not
obtained, except if Seller notifies Buyer that the Seller Consent has not been
obtained and, notwithstanding such notification, Buyer desires to, and
effectively does, assume the Contract, or (ii) any party is in default (whether
with or without the passage of time or the giving of notice or both) or breach
as of the Closing Date (a "Defaulted Contract"), and (b) liabilities or
obligations attributable to any failure by Seller to comply with the terms
thereof prior to the Closing Date. If Seller notifies Buyer prior to the Closing
that any Contract is a Defaulted Contract, then Buyer shall have the option
whether or not to assume any liabilities associated with such Defaulted
Contract. Notwithstanding anything else set forth in this Section 2.3, any
liability that results from the failure of Seller to obtain the consent of the
landlord or sublandlord of the Harrisburg office sublease to the assignment to
Buyer of said Sublease ("Harrisburg Office Liabilities") is not an Assumed
Liability but is an Excluded Liability.
2.4. Excluded Liabilities. Notwithstanding any provision in this
Agreement or any other writing to the contrary, Buyer is assuming only the
Assumed Liabilities and is not assuming any other liability or obligation of
Seller of whatever nature whether presently in existence or arising hereafter.
All such other liabilities and obligations, including, without limitation, (i)
all liabilities existing or incurred on or prior to December 31, 1997, not set
forth on the Year-End Balance Sheet, (ii) any liability resulting from any tort
or any violation of any Law or the breach of any contract under which Seller is
bound or obligated; (iii) any liability relating to any employee benefit plan,
(iv) any liability for Taxes (except as otherwise specifically set forth in
Section 2.3), (v) Harrisburg Office Liabilities, (vi) any liability with respect
to any amounts payable to Xxxx Xxxxxx and Xxx Xxxxxx as referred to in Schedule
3.19(a) and (vii) any liability or obligation relating to any
9
Excluded Asset, shall be retained by and remain obligations and liabilities of
Seller (all such liabilities and obligations not being assumed being herein
referred to as the "Excluded Liabilities").
2.5. Purchase Price. The purchase price for the Purchased Assets shall
be the sum of the Closing Payments plus the Earnout Payments plus the Tax
Payment, subject to adjustment as set forth in Sections 2.7, 2.8 and 2.9
(collectively, the "Purchase Price"). The Closing Payment shall be the sum of
(i) $2,000,000 plus (ii) an amount equal to the Excess Working Capital of
$1,207,045 less the amount of any loans from Seller to Shareholder or any
Affiliate of Shareholder outstanding on the Closing Date that were made after
December 31, 1997 (such loans totalling $223,139) ("Shareholder Loans") plus
(iii) the issuance of the Shares.
2.6. Payment of the Purchase Price. The Purchase Price shall be
payable as follows, subject, however in each case to Sections 2.7 and 2.8 and,
in the case of the Earnout Payments, to Section 2.9:
(a) The Closing Payment shall be deliverable by Buyer on the Closing
Date in the form of (i) one stock certificate representing 82,092 shares (the
"Shares") of True North Common Stock (collectively, the "Stock Certificate")
issued in the name of Seller, (ii) $2,000,000 in cash and (iii) a cash amount
equal to the Excess Working Capital minus the amount of the Shareholder Loans,
such cash amounts to be delivered by wire transfer of immediately available
funds to an account of Seller, as shall have been designated in writing by
Seller to Buyer at least two (2) Business Days prior to the Closing. The Stock
Certificate shall bear the legend set forth on Exhibit A unless the Registration
Statement with respect to the Shares contemplated by Section 7.1 shall have been
declared effective by the SEC and no stop order with respect thereto shall have
been issued or threatened.
(b) Subject to the remaining provisions of this Section 2.6, the
Earnout Payments shall be payable to Seller or Shareholder as shall be directed
by Shareholder as follows:
(i) On or before March 15, 1999, a payment equal to 55.5% of
the Profit Before Taxes (as hereinafter defined) of the Business for
Buyer's fiscal year ending December 31, 1998 shall be deliverable by Buyer
to Seller.
(ii) On or before March 15, 2000, a payment equal to 55.5% of
the average of the Profit Before Taxes of the Business for Buyer's fiscal
year ending December 31, 1998 and Buyer's fiscal year ending December 31,
1999 shall be deliverable by Buyer to Seller.
10
(iii) On or before March 15, 2001, a payment equal to 55.5% of
the average of the Profit Before Taxes of the Business for Buyer's fiscal
year ending December 31, 1998, Buyer's fiscal year ending December 31, 1999
and Buyer's fiscal year ending December 31, 2000 shall be deliverable by
Buyer to Seller.
There shall be no ceiling on the Earnout Payments and each Earnout
Payment shall be delivered on or before the specified date by wire transfer of
immediately available funds to an account of Seller or Shareholder as shall have
been designated in writing by Shareholder to Buyer at least two (2) Business
Days prior to the designated payment date. If any such payment date is not a
Business Day, the Earnout Payment shall be delivered on the next Business Day.
The payments described in clauses (i), (ii), and (iii) of this Section
2.6(b) are referred to herein as the "Earnout Payments." For purposes of this
Section 2.6, subject to Section 2.7, the term "Profit Before Taxes" shall mean
with respect to any period the revenue earned by the Buyer from operations of
the Business minus the total of all operating costs, determined according to
GAAP, consistently applied on an accrual basis, in accordance with past
practices, including, without limitation, interest on inter-company borrowings
at the rate charged by True North to its Affiliates from time to time, which is
currently ten percent (10%) per annum, and interest, fees and other charges on
third party borrowings, salary and other compensation and benefits, general
administrative costs, depreciation and amortization, Taxes (other than Taxes
payable with respect to the net income of the Business), any charges for media
buying, in-house legal services and MIS charges for media buying invoiced by TN
Services consistent with existing practices of True North with respect to the
Advertising Company as well as charges for any other services performed by any
Affiliates of Buyer at the request or under the direction of and pre-approved by
Shareholder. Operating costs shall not include corporate allocations, any
goodwill amortization with respect to the transactions contemplated hereby or
any interest related to payments of Purchase Price. Operating costs shall
include all expenses accrued under the Employment Agreement for such year of
employment; provided however, that so long as Shareholder is also an employee of
the Advertising Company, Operating Costs shall include only 50% of all expenses
accrued under the Employment Agreement, and further provided, expenses relating
to benefits or salary payable under the Employment Agreement shall only accrue
in the year such benefits or salary is paid.
For purposes of this Section 2.6, Buyer's Profit Before Taxes for its
1998 fiscal year shall include the profit before taxes of Seller for the period
from January 1, 1998 through the Closing Date determined in the same manner as
"Profit Before Taxes" is to be determined with respect to Buyer.
11
As promptly as reasonably practicable after the end of each
fiscal year for which there is to be an Earnout Payment, but in any event prior
to March 15 of the following year, (i) Buyer at its expense shall prepare and
forward to Shareholder financial statements of Buyer and Buyer's preliminary
determination of Profit Before Tax for the previous fiscal year, and (ii) Buyer
and Shareholder shall mutually determine, or cause to be determined, the Profit
Before Taxes, for the relevant fiscal year of the Business. Such determination
shall be made in good faith and, upon the agreement of Shareholder and Buyer
thereto, shall be binding and conclusive upon all parties hereto.
If Shareholder and Buyer are unable to agree in good faith as to
the Profit Before Taxes for any relevant fiscal year by March 15 of the
following year, then Buyer and Shareholder shall submit any matter(s) in dispute
to a mutually acceptable certified public accountant at a "Big 6" accounting
firm located in Philadelphia, Pennsylvania for resolution. In the event
Shareholder and Buyer cannot agree upon the accountant, they shall each select a
certified public accountant at such a firm (which need not be the same firm) and
such accountants shall select the certified public accountant to make the
determination referred to this Section, provided however, such accountant shall
not be employed by or associated with any accounting firm which performs
services for Buyer, True North or Shareholder. Such accountant (whether mutually
determined by Shareholder and Buyer or selected pursuant to the immediately
preceding sentence) shall review such materials and conduct such procedures as
such accountant shall consider reasonably necessary to make a determination of
such matters as to which disagreement remains and shall deliver his written
opinion thereon to Buyer and Shareholder as soon as possible within thirty (30)
days of submission of the dispute to him, which determination, or any
determination of such matters mutually agreed to by Buyer and Shareholder, shall
be conclusive and binding on the parties hereto and shall not be subject to
arbitration under Section 11 below (the "Final Determination"). In connection
therewith, each party will furnish to the accountant such work papers and
schedules and other information relating to the disputed matter(s) as the
accountant may reasonably request and will be afforded an opportunity to present
to the accountant any material relating to the disputed matter(s) and to discuss
the disputed matter(s) with the accountant. The costs and expenses of the
accountant incurred with respect to this Section shall be shared equally by
Buyer and Shareholder and any expenses of the separate accountants referred to
in the second sentence of this Section shall be the responsibility of the party
selecting such accountant. Failure to make an Earnout Payment on or before March
15 of the year after the close of the fiscal year over which there is a dispute,
shall not be a breach by Buyer of this Agreement, so long as the Earnout Payment
is made within fifteen (15) days of the receipt by the Buyer of the Final
Determination.
12
(c) Buyer shall pay to Seller an amount equal to 51.6% of the
operating income of Seller on a cash basis for the period beginning on January
1, 1998 and ending on the Closing Date (the "Tax Payment").
2.7. Termination of Shareholder's Employment.
(a) In the event True North or its Affiliates terminates the
Shareholder's employment with True North or its Affiliates for "Cause" (as such
term is defined in the Employment Agreement) or the Shareholder terminates his
employment with True North or its Affiliates for any reason other than "Good
Reason" (as such term is defined in the Employment Agreement), death or
"Disability" (as such term is defined in the Employment Agreement), Seller shall
not be entitled to receive any Earnout Payments subsequent to such termination
(other than with respect to any fiscal year of Buyer completed prior to such
termination of employment), and Buyer shall not be under any obligation to make
such Earnout Payments.
(b) In the event True North or its Affiliates terminates the
Shareholder's employment with True North or its Affiliates without Cause or the
Shareholder terminates his employment with True North or its Affiliates for Good
Reason or if at any time Buyer or True North materially breaches the covenants
contained in Section 6.2, provided Shareholder delivers notice thereof to True
North and Buyer and such material breach is not cured within thirty (30) days of
receipt of such notice: (i) during 1998, then the Buyer shall pay Seller a cash
payment equal in the aggregate to $2,000,000 and payable in three (3) equal
installments at such time as the Earnout Payments are due under Section 2.6(b);
(ii) during 1999, then the Profit Before Taxes of the Business for Buyer's 1999
and 2000 fiscal years shall each be deemed to be equal to the Profit Before
Taxes of the Business for Buyer's 1998 fiscal year for purposes of calculating
the second and third Earnout Payments pursuant to Section 2.6(b)(ii) and (iii);
or (iii) during 2000, then the Profit Before Taxes of the Business for Buyer's
2000 fiscal year shall be deemed to be equal to the average of the Profit Before
Taxes of the Business for Buyer's 1998 and 1999 fiscal years for purposes of
calculating the third Earnout Payment pursuant to Section 2.6(b)(iii). The
Earnout Payments as calculated under this Section 2.7(b) shall be payable at
such time as the Earnout Payments are due under Section 2.6(b) regardless of the
termination of Shareholder's employment with True North or its Affiliates or the
occurrence of a breach of the covenants set forth in Section 6.2.
(c) In the event Shareholder's employment with True North or its
Affiliates terminates due to Shareholder's death or Disability then the Earnout
Payments shall be calculated as set forth in Section 2.6(b)(i), (ii) and (iii)
using the actual Profit Before Taxes of the Business for each relevant fiscal
year.
13
(d) Payments under this Section 2.7 are in lieu of, and not in
addition to any payments under Section 2.6(b).
2.8. Working Capital Purchase Price Adjustment. As promptly as
reasonably practicable but in any event no later than August 17, 1998 Buyer will
calculate the Working Capital of the Business on June 30, 1998. If the Working
Capital measured on June 30, 1998 is less than $1,000,000, Buyer shall pay to
Seller the amount equal to the excess of $1,000,000 over the Working Capital
measured on June 30, 1998 and such payment shall constitute an adjustment to the
cash portion of the Closing Payment.
2.9. Collection of Accounts Receivable; Reduction of Earnout
Payments.
(a) With respect solely to the accounts receivable set
forth on the Year End Balance Sheet, Buyer shall use reasonable efforts in good
faith to collect such of those accounts receivable which are outstanding as of
the Closing Date and included within the Purchased Assets (collectively, the
"Year-End Acquired Receivables") for a period of one hundred eighty (180) days
following the Closing Date (the "Collection Period"); provided that Buyer shall
have no obligation to threaten, commence or prosecute any legal proceeding or to
incur any unreasonable expense to collect the Year-End Acquired Receivables and
Buyer shall have the right in good faith to compromise or settle any Year-End
Acquired Receivables.
(b) In the event that payment is made by a client which
cannot be specifically matched to an invoice, then such payment shall be applied
to the accounts receivable in chronological order starting with the oldest
invoices first. Buyer shall make a good faith effort to match all payments to
their invoices.
(c) In the event the sum of the proceeds of Year-End
Acquired Receivables collected by Buyer within the Collection Period is less
than the amount of the Year-End Acquired Receivables as of the Closing Date,
then the Purchase Price shall be reduced by the amount of such shortfall. Such
reduction in the Purchase Price shall be applied by reducing Earnout Payments
otherwise payable in chronological order, and shall be Buyer's and True North's
sole remedy for any breach of Section 3.17 hereof.
(d) Buyer shall assign all right, title and interest in the
Year-End Acquired Receivables that are not collected during the Collection
Period to Seller promptly after the expiration of the Collection Period and
Seller shall have the right to collect and retain all amounts owed thereunder.
14
2.10. Right of Endorsement. After the Closing Date, Buyer shall
have the absolute and unconditional right and authority to endorse, without
recourse, the name of Seller on any check or other form of payment received by
Buyer on account of any of the Purchased Assets. In connection therewith, Seller
shall deliver to Buyer at the Closing copies of the resolutions duly adopted by
its Board of Directors certified by Seller's Secretary, and a letter of
instruction executed by Seller's President and the Secretary, sufficient to
permit Buyer to deposit such payments, so endorsed, in bank accounts in the name
of Buyer.
2.11. Valuation of Purchased Assets. Seller and Buyer hereby
agree that the Purchased Assets have the values, and the Closing Payment has
been allocated to the Purchased Assets, as follows: Tangible Assets, accounts
receivable, inventory and cash will be valued at their book value as set forth
on Seller's books and the balance of the Closing Payment will be applied to
goodwill. All other payments of the Purchase Price shall be allocated in their
entirety to goodwill. Seller and Buyer agree to act in accordance with such
allocation and to consult with each other in good faith in the preparation of
financial statements and filing of all Tax returns and in the course of any Tax
audit, review or dispute relating thereto.
2.12. Closing. Subject to the satisfaction or waiver of the
conditions set forth in Article IX, the closing (the "Closing") of the purchase
and sale of the Purchased Assets and the assumption of the Assumed Liabilities
hereunder shall take place at the offices of Loeb & Loeb LLP, 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, on April 9, 1998 at 10:00 a.m., or at such other date,
time or place as Buyer and Seller may agree (the date and time of the Closing
being the "Closing Date"). At the Closing,
(a) Buyer shall deliver the Closing Payment in accordance with
Section 2.6(a); and
(b) Seller and Buyer shall enter into an Assignment and
Assumption Agreement in the form of Exhibit B hereto, and Seller shall deliver
to Buyer such other bills of sale, endorsements, consents, assignments and other
good and sufficient instruments of conveyance and assignment (collectively, with
the Assignment and Assumption Agreement, the "Conveyance Documents") as Buyer
and its counsel shall deem reasonably necessary or appropriate to vest in Buyer
all right, title and interest in, to and under the Purchased Assets; and all
original documents that represent Purchased Assets, including without limitation
original Contracts and Permits.
The Closing shall be deemed to occur simultaneously with the
closing of the transactions contemplated under the Stock Purchase Agreement
dated
15
the date hereof (the "Stock Purchase Agreement"), by and between Shareholder and
True North.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF
SELLER AND SHAREHOLDER
Seller and Shareholder, jointly and severally, hereby represent
and warrant to Buyer that:
3.1. Corporate Existence and Power. Seller is a corporation
duly organized, validly existing and in good standing under the Laws of the
Commonwealth of Pennsylvania, and has all power and authority, corporate and
otherwise, and all governmental licenses, franchises, permits, authorizations,
consents and approvals required to carry on the Business. Seller is duly
qualified and in good standing to do business as a foreign corporation in each
jurisdiction set forth on Schedule 3.1 and other than the jurisdictions set
forth on Schedule 3.1, there is no other jurisdiction in which the character of
the property owned or leased by Seller or the nature of its activities make such
qualification necessary. Seller's only offices are located at (i) 000 Xxxxx
Xxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, (ii) 000 Xxxxx Xxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000 and (iii) 0000 X Xxxxxx, XX, Xxxxxxxxxx, XX
00000.
3.2. Corporate Authorization. The execution, delivery and
performance by Seller of this Agreement and the Conveyance Documents and the
consummation by Seller of the transactions contemplated hereby and thereby are
within the corporate powers of Seller and have been duly authorized by all
necessary corporate action on the part of Seller, including the approval of the
Shareholder. This Agreement constitutes, and upon their execution and delivery
the Conveyance Documents will constitute, a valid and legally binding agreement
of Seller and Shareholder, enforceable against both of Seller and Shareholder in
accordance with their respective terms.
3.3. Governmental Authorization. Neither the execution,
delivery nor performance by Seller or Shareholder of this Agreement or the
Conveyance Documents requires any consent, approval, license or other action by
or in respect of, or registration, declaration or filing with, any governmental
body, agency, official or authority other than the filing of the Certificate of
Amendment to Seller's articles of incorporation (to change Seller's name) with
the office of the Secretary of Senate of Pennsylvania and the filing of the
Certificate of Amendment to
16
the foreign qualification with the office of the Secretary of State of each
jurisdiction set forth on Schedule 3.1, as contemplated by Section 5.5.
3.4. Non-Contravention. None of the execution, delivery and
performance by Seller or Shareholder of this Agreement or the Conveyance
Documents does or will (i) contravene or conflict with the articles of
incorporation or bylaws of Seller, (ii) contravene or conflict with or
constitute a violation of any provision of any Law or judgment, injunction,
order, writ or decree binding upon or applicable to Seller or Shareholder, or
any part of the Purchased Assets or the Business, (iii) constitute a material
default (with or without the giving of notice or the passage of time or both)
under or breach of or violate or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Seller or Shareholder
or to a loss of any benefit relating to the Business to which Seller or
Shareholder is entitled under any provision of any agreement, commitment,
arrangement, contract or other instrument binding upon Seller or Shareholder or
by which any of the Purchased Assets is or may be bound or any Permit, or (iv)
result in the creation or imposition of any Lien on any Purchased Asset.
3.5. Seller Capitalization. Seller is authorized to issue
10,000 shares of stock, $1.00 par value per share, of which 5,000 are Class A
Common Stock and 5,000 are Class B Common Stock. Shareholder owns, beneficially
and of record 100 shares of Class A Common Stock of Seller free and clear of all
Liens, which constitutes all of the outstanding shares of capital stock of
Seller.
3.6. Subsidiaries. Except as set forth on Schedule 3.6, Seller
does not own and has never owned directly or indirectly, securities or other
ownership interests in any other entity. Seller is not a party to any agreement
relating to the formation of any joint venture, association or other entity.
3.7. Consents. The Contracts listed on Schedule 3.7 are the
only agreements, commitments, arrangements, contracts or other instrument
binding upon Seller or Shareholder or by which any of the Purchased Assets are
bound, requiring a consent, approval, authorization, order or other action of or
filing with any Person as a result of the execution, delivery and performance of
this Agreement or any of the Conveyance Documents or the consummation of the
transactions contemplated hereby or thereby (each of the foregoing, a "Seller
Consent").
3.8. Financial Statements. (a) Attached hereto as Schedule 3.8
are the (i) unaudited balance sheets of Seller as of December 31, 1997 (the
"Year-End Balance Sheet"), December 31, 1996 and December 31, 1995, and (ii)
statements of operations and retained earnings and cash flow statements of
Seller for the years ended December 31, 1997, and December 31, 1996 and the nine
months ended December 31, 1995, respectively, reviewed, in the case of the Year-
end Balance
17
Sheet, statements of operations and retained earnings and cash flow statements
for the year ended December 31, 1997, by BDO Xxxxxxx, LLP, accountants to
Seller, and in the case of the year ended December 31, 1996 and the nine months
ended December 31, 1995, by Miller, Glusman, Footer & Magarick, P.C.,
accountants to Seller (collectively, the "Financial Statements"). The Financial
Statements are complete and accurate and fairly present, in conformity with GAAP
applied on a consistent basis, the financial position of Seller as of the dates
thereof and the results of operations of Seller for the years then ended.
(b) Except as specifically disclosed, reflected or fully
reserved against on the Year-End Balance Sheet and for liabilities and
obligations of a similar nature and in similar amounts incurred in the ordinary
course of business since the date of the Year-End Balance Sheet, there are no
liabilities or obligations of any nature (whether accrued, absolute, contingent,
unasserted or otherwise) relating to Seller. All liabilities which should be
included under GAAP on an accrual basis on the Year-End Balance Sheet are
included therein.
(c) The Year-End Balance Sheet accurately reflects the
outstanding debt of Seller as of the date thereof. On December 31, 1997 Seller
had no indebtedness for borrowed money except $400,000 under the commercial line
of credit and $30,734 outstanding on the term loan extended by Commerce
Bank/Pennsylvania, N.A. As of the Closing Date there are no advances or interest
outstanding under the commercial line of credit advanced by Commerce
Bank/Pennsylvania, N.A. and $22,398 is outstanding under the term loan extended
by the same.
(d) On the Closing Date there will be no loans, advances
or borrowings that constitute Shareholder Loans except as set forth in the
Certificate delivered to Buyer and True North pursuant to Section 9.2(a).
3.9. Absence of Certain Changes. (a) Since December 31, 1997,
Seller has conducted the Business in the ordinary course consistent with past
practices, and there has not been:
(i) any Material Adverse Change or any event, occurrence,
development or state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Change; or
(ii) any transaction, contract, agreement or other
instrument entered into, or commitment made, by Seller relating to the
Business or any Purchased Asset (including the acquisition or disposition
of any assets) or any relinquishment by Seller of any contract or other
right, in either case other than transactions and commitments in the
ordinary course of
18
business consistent with past practices and those contemplated by this
Agreement.
(b) Since December 31, 1997 through and including the date
hereof, Seller has not taken any action nor has any event occurred which would
have violated Seller's covenants set forth in Section 5.1 herein if such action
had been taken or such event had occurred between the date hereof and the
Closing Date.
3.10. Properties; Title to the Purchased Assets. (a) The
Tangible Assets have no material defects, are in generally good operating
condition and repair (ordinary wear and tear excepted) and have been reasonably
maintained, and are suitable for their present uses. Schedule 2.1(iii) sets
forth a complete list of Tangible Assets as of a date within three days of the
date of this Agreement. All of the Tangible Assets are located at the offices of
Seller.
(b) Seller has, and upon consummation of the transactions
contemplated hereby Buyer will have acquired, good and marketable title in and
to, or, in the case of the Office Leases and the assets which are leased or
licensed pursuant to Contracts, a valid leasehold interest or license in, each
of the Purchased Assets or such other assets, free and clear of all Liens. The
Purchased Assets and the assets covered by the Contracts constitute all of the
assets, including good will, used or useful in the Business, other than the
Excluded Assets.
3.11. Litigation. There is no action, suit, investigation,
hearing or proceeding (or any basis therefor) pending against, or to the best
knowledge of Seller threatened against or affecting, Seller, any of its
officers, directors, or Shareholder, the Business or any Purchased Asset or any
Contract before any court or arbitrator or any governmental body, agency
official or which in any manner challenges or seeks to prevent, enjoin, alter or
delay the transactions contemplated hereby. There are no outstanding judgments
against Seller.
3.12. Contracts. To the best of Seller's and Shareholder's
knowledge, each Contract is a valid and binding agreement, and is in full force
and effect, and no party thereto is in breach or default (whether with or
without the passage of time or the giving of notice or both) under the terms of
any such Contract. Seller has not assigned, delegated, or otherwise transferred
any of its rights or obligations with respect to any Contracts, or granted any
power of attorney with respect thereto or to any Purchased Asset. No client
Contract requires Seller to post a bond or deliver any other form of security or
payment to secure its obligations thereunder. Seller has given true and correct
copies of each Contract to Buyer.
19
The Contracts constitute all the material agreements,
arrangements, understandings and other instruments in effect to which Seller is
a party, including, without limitation:
(i) all client Contracts which have generated revenues
to Seller or are expected to generate revenues to Seller in excess of $20,000 in
the current fiscal year or any of the two preceding fiscal years of Seller;
(ii) any other Contract pursuant to which Seller is
required to pay, have paid or entitled to receive or have received an amount in
excess of $20,000 during the current fiscal year or any one of the two preceding
fiscal years; and
(iii) all agreements relating to real and tangible
personal property.
3.13. Licenses and Permits. Schedule 3.13 correctly lists each
license, franchise, permit or other similar authorization affecting, or relating
in any way to, the Business, together with the name of the government agency or
entity issuing such license or permit (the "Permits"). Such Permits are valid
and in full force and effect and, assuming the related Seller Consents have been
obtained prior to the Closing Date, are transferable by Seller, and none of the
Permits will, assuming the related Seller Consents have been obtained or waived
prior to the Closing Date, be terminated or impaired or become terminable as a
result of the transactions contemplated hereby, except as set forth on Schedule
3.13.
3.14. Compliance with Laws. (a) Seller is not in violation of,
has not violated, and to Seller's best knowledge, is neither under investigation
with respect to nor has been threatened to be charged with or given notice of
any material violation or alleged violation of, any Law, or judgment, order or
decree entered by any court, arbitrator or governmental authority, domestic or
foreign.
(b) Without xxxxxx the foregoing paragraph, Seller is not in
violation of, has not violated, and to Seller's best knowledge is neither under
investigation with respect to nor has been threatened or charged with or given
notice of any violation of any provisions of:
(i) the Foreign Corrupt Practices Act including,
without limitation, provisions relating to payments to foreign officials,
contributions for foreign political office, and the internal record-keeping
requirements of the Foreign Corrupt Practices Act;
20
(ii) the Ethics in Government Act;
(iii) the Lobbying Disclosure Act; and
(iv) any comparable or similar Law of any jurisdiction.
No permit, license or registration is required by Seller in the conduct of the
Business under any of the laws described in this Section 3.14(b).
3.15. Intellectual Property. (a) Schedule 3.15 sets forth a true
and complete list of all Intellectual Property Rights, specifying as to each, as
applicable: (i) the nature of such Intellectual Property Right; (ii) the owner
of such Intellectual Property Right; (iii) the jurisdictions by or in which such
Intellectual Property Right has been issued or registered or in which an
application for such issuance or registration has been filed; and (iv) all
licenses, sublicenses and other agreements pursuant to which any Person is
authorized to use such Intellectual Property Right.
(b) Within the past five years (or prior thereto if the same
is still pending or subject to appeal or reinstatement) Seller has not been sued
or charged in writing with or been a defendant in any claim, suit, action or
proceeding that involves a claim of infringement of any Intellectual Property
Rights, and Seller has no knowledge of any other claim of infringement by
Seller, and no knowledge of any continuing infringement by any other Person of
any Intellectual Property Rights.
(c) The current use by Seller or any of its Affiliates of the
Intellectual Property Rights does not infringe the rights of any other Person.
(d) "The Marriott Business Travel Institute" and the
Intellectual Property Rights associated therewith have not been used in
connection with the Business since December 31, 1995 and the Company has never
earned any income or incurred any liabilities with respect thereto.
3.16. Clients; Xxxxxxxx. The list of Seller's clients, which
together with related billing information, is attached hereto as Schedule 3.16,
is true and complete. Except as indicated on Schedule 3.16, Seller has not been
notified, of the probability or actuality or otherwise have any reason to
believe that any of its clients that had xxxxxxxx in excess of $50,000 in its
1997 fiscal year (as shown on Schedule 3.16) intends to or will cancel,
substantially limit, terminate or materially modify the terms of its business
relationship with, or substantially reduce its xxxxxxxx with, Seller (or, after
the Closing, with Buyer).
21
3.17. Accounts Receivable. All accounts receivable of Seller, whether
reflected on Schedule 2.1(x) or otherwise, represent valid obligations arising
from services actually performed by Seller in the ordinary course of business.
To the best of Seller's and Shareholder's knowledge, there is no contest, claim,
or right of setoff in any agreement with any maker of an account receivable
relating to the amount or validity of such account receivable. Except as set
forth on Schedule 3.17, to the best knowledge of Seller all accounts receivable
are good and collectible in the ordinary course of business.
3.18. Deposits. Except as set forth on Schedule 3.18, Seller has not
received any payments with respect to any services to be rendered or goods to be
provided after the Closing.
3.19. Employees. (a) Schedule 3.19(a) sets forth a true and complete
list of the names, titles, annual salaries or wage rates and other compensation
and office location of all employees of Seller, indicating part-time and full-
time employment and all changes in salaries and wage rates per employee since
January 1, 1997. Neither Seller nor Shareholder has promised any employee,
consultant or agent of Seller that he or she will be employed by or receive any
particular benefits from Buyer or any of its Affiliates on or after the Closing.
(b) Seller is not a party to or subject to any employment contract,
consulting agreement, collective bargaining agreement, confidentiality agreement
restricting the activities of Seller, non-competition agreement restricting the
activities of Seller, or any similar agreement, and to the best of Seller's
knowledge there has been no activity or proceeding by a labor union or
representative thereof to organize any employees of Seller.
3.20. Benefit Plans. (a) Schedule 3.20 sets forth a true and complete
list of all employee benefit plans (including agreements) covering present and
former employees of Seller and of each of its subsidiaries, including, but not
limited to, any employee benefit plan within the meaning of Section 3(3) of
ERISA, any stock option or appreciation plan, bonus plan, fringe benefit, and
any deferred compensation plan. With respect to each such plan, Seller has
provided Buyer with a true and complete copy of the plan document and summary
plan description and, where applicable, the most recent Form 5500 filed for the
plan.
(b) Except as disclosed in Schedule 3.20, neither Seller nor any of
its ERISA Affiliates, as hereinafter defined, has incurred (nor has any event
occurred or condition been incurred or a claim been threatened which reasonably
can be anticipated to result in a Seller or any of its ERISA Affiliates
incurring) any material loss or liability in connection with any existing or
previously existing employee benefit plan which could become, on or after the
Closing Date, an
22
obligation or liability of Buyer or any of its affiliates or which has or could
give rise to any liens on any of the Purchased Assets. Without limiting the
foregoing, (i) Seller is not individually or jointly and severally liable for
any material liability relating to any employee benefit plan maintained or
formerly maintained by Seller or by an ERISA Affiliate, (ii) to the best
knowledge of Seller, no plan described in clause (i) is severely underfunded or
otherwise is reasonably likely to result in material liability to Seller, and
(iii) Seller does not currently and has not in the last six years contributed to
any "multiple employer plan", as such term is defined in Section 3(37) of ERISA.
For purposes hereof, the term "ERISA Affiliate" means a person or entity which,
together with Seller, are treated as a single employer under Section 414 of the
Internal Revenue Code.
(c) Each plan maintained by Seller which is a group health plan,
within the meaning of Section 607 of ERISA, has been operated in compliance with
the requirements of Sections 601 through 608 of ERISA ("COBRA"). Except as
required by COBRA, Seller does not maintain any plan or other arrangement which
provides for post-termination of employment health or other welfare benefits.
3.21. Shareholder Transactions. Except as set forth on Schedule 3.21,
there are no Contracts or other arrangements of any nature between Seller and
Shareholder.
3.22. Real Property. Seller does not own, or otherwise have an
interest in, any real property except for the Office Leases. Seller has good,
valid and subsisting title to the leasehold estates in the offices described in
Section 3.1, free and clear of all Liens. Seller has not breached or violated
and is not in default under any Office Lease or, to the best of Seller's
knowledge, any local zoning ordinance, and no notice from any Person has been
received by Seller or served upon Seller claiming any violation of the Office
Leases or any local zoning ordinance.
3.23. Accounts. Schedule 3.23 sets forth a true and complete list of
the Company's checking accounts, deposit accounts, safe deposit boxes, and
brokerage accounts, including the account number and name, the name of each
depositary or financial institution and the address where such account is
located and the authorized signatories thereto.
3.24. Tax Matters. Seller timely has paid and timely will pay all
Taxes, and all interest and penalties due thereon and payable by it for all
periods ending on or prior to December 31, 1997, the non-payment of which would
result in a Lien on any Purchased Asset, would otherwise adversely affect the
Business or would result in Buyer becoming liable or responsible therefor.
Seller will timely pay all Taxes based on net income which arise from or with
respect to the Purchased Assets or the operation of the Business and are
incurred in or attributable to the
23
period between January 1, 1998 and the Closing Date and which are payable after
the Closing Date, the non-payment of which would result in a Lien on any
Purchased Asset, would otherwise adversely affect the Business or would result
in Buyer becoming liable therefor.
3.25. Environmental Laws. Seller has complied in all material respects
with and is in compliance in all material respects with all Laws of any
governmental entity relating to pollution or the protection of the environmental
or human health or hazardous materials ("Environmental Laws"), and there is not
and there has not been at any time any notice, demand, request for information,
complaint, order, investigation, or review pending or, to the best knowledge of
Seller, threatened by any governmental entity with respect to any alleged
violation by Seller of any Environmental Law. Seller has not been requested by
any governmental body, agency, official or authority to pay any sum of money, or
otherwise aid or take any action or refrain from taking actions, to xxxxx or
remediate any environmental occurrence or condition (including without
limitation removal of asbestos or any other potentially hazardous substance).
3.26. Finders' Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Shareholder, Seller or any of its Affiliates who might be entitled to any fee
or commission from Buyer or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.
3.27. Investment Representations.
(a) Each of Seller and Shareholder is an "accredited investor"
within the meaning of Rule 501 of Regulation D under the Securities Act and has
sufficient knowledge and experience in investing in companies similar to True
North so as to be able to evaluate the risks and merits of the investments in
True North;
(b) Each of Seller and Shareholder is able to financially bear
the risks of loss of its entire investment in True North Common Stock issuable
as part of the Purchase Price hereunder;
(c) Seller is acquiring the Shares for its own account and not
with a view to or for sale in connection with any distribution thereof;
(d) Each of Seller and Shareholder understands that (i) the
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 thereunder,
(ii) such
24
securities may not be disposed of unless a subsequent disposition is registered
under the Securities Act or is exempt from registration, (iii) such securities
will bear a customary legend to such effect; and (iv) with respect to the
Shares, True North will make a notation on its stock transfer books to such
effect; and
(e) Each of Seller and Shareholder has had a full and complete
opportunity to inquire and examine all information deemed by it to be relevant
and material to make an informed decision about the transactions contemplated in
this Agreement. Each of Seller and Shareholder acknowledges and agrees that it
is not relying upon any representations or warranties of the Buyer or True North
except the representations and warranties specifically set forth in this
Agreement.
3.28. Other Information. Neither this Agreement nor any of the
schedules hereto or any other information provided by Seller or Shareholder to
Buyer or its Affiliates, attorneys, accountants, agents or representatives in
connection with Buyer's due diligence review of the Business contains any untrue
statement by Seller or Shareholder of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained
therein by Seller or Shareholder not misleading. Seller has provided Buyer all
material information regarding the Business requested by Buyer.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and True North hereby jointly and severally represent and
warrant to Seller that:
4.1. Corporate Existence and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of Delaware.
True North is a Corporation duly organized, validly existing and in good
standing under the Laws of Delaware.
4.2. Corporate Authorization. The execution, delivery and performance
by Buyer and True North of this Agreement and the consummation by Buyer and True
North of the transactions contemplated hereby are within the corporate powers of
Buyer and True North and have been duly authorized by all necessary corporate
action on the part of Buyer and True North. This Agreement, and upon execution
and delivery of the Conveyance Documents, the Conveyance Documents, constitute a
valid and legally binding agreement of Buyer and True North, enforceable against
each of them in accordance with its terms.
25
4.3. Authorization. The execution, delivery and performance by Buyer
and True North of this Agreement requires no action by or in respect of, or
filing with, any governmental body, agency, official or authority or any other
Person by Buyer or True North except for any filings required to be made with
the New York Stock Exchange and the Pennsylvania Securities Commission and the
filing of a Registration Statement with the SEC pursuant to Section 7 hereof.
4.4. Issuance of the Shares. The Shares, when issued in accordance
with this Agreement, will be duly authorized and validly issued, and will be
fully paid and nonassessable and free of all Liens.
4.5. Registration of the Shares. True North meets the requirements for
using Form S-3 under the Securities Act.
4.6. Non-Contravention. The execution, delivery and performance by
Buyer and True North of this Agreement do not and will not (i) contravene or
conflict with the certificate of incorporation or bylaws of Buyer or True North,
(ii) contravene or conflict with any provision of any Law, judgment, injunction,
order, writ, or decree binding upon Buyer or True North or (iii) assuming the
obtaining of all Buyer Consents, constitute a default under or breach of any
agreement, contract or other instrument binding upon Buyer or True North.
4.7. Finders' Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer, True North or any of its Affiliates who might be entitled to any fee
or commission from Seller or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.
4.8. Other Information. This Agreement does not contain any untrue
statement of a material fact by Buyer or True North or omits to state a material
fact necessary in order to make the statements contained herein by Buyer or True
North not misleading.
4.9. SEC Filings. The SEC Filings do not contain any untrue statement
of a material fact or omit to state any material fact necessary to make any
statement contained therein, under the circumstances in which it is made, not
misleading. True North has made all filings required to be made of it under the
Securities Exchange Act of 1934, as amended.
4.10. Absence of Material Adverse Change. Since the date of the latest
SEC Filing, there has not been: (a) any material adverse change in the condition
(financial or otherwise), results of operations, business, prospects, assets or
26
liabilities of True North; or (b) any event that would require True North to
file a Current Report on Form 8-K.
ARTICLE V.
COVENANTS OF SELLER AND SHAREHOLDER PENDING CLOSING
Seller and Shareholder jointly and severally covenant and agree that:
5.1. Conduct of the Business. From the date hereof until the Closing
Date, Seller shall conduct the Business only in the ordinary course, consistent
with past practices and will not enter into any material transactions without
the prior written consent of Buyer (which consent shall not be unreasonably
withheld), and shall use its best efforts to preserve intact the business
relationships with employees, clients, suppliers and other third parties.
Without limiting the generality of the foregoing, from the date hereof until the
Closing Date, without Buyer's prior written consent (which consent shall not be
unreasonably withheld) Seller will not:
(a) amend, waive any provision of, terminate prior to its scheduled
expiration date, or otherwise compromise in any way, any Contract (including
contracts described in clause (b) below), or any other right or asset of Seller
that is or otherwise would have been a Purchased Asset, provided, however that
Seller shall be permitted to terminate its sublease for the premises located at
000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx (the "Philadelphia Lease");
(b) enter into any contract, agreement, lease, license or commitment
(including without limitation any leases of real property), which (i) is with
respect to real property, (ii) extends for a term of one year or more or (iii)
obligates the payment of more than $100,000 (individually or in the aggregate);
(c) make any capital expenditures in excess of $100,000 (individually
or in the aggregate);
(d) sell, lease, license or otherwise dispose of any Purchased Assets
or assets covered by any Contract except (i) pursuant to existing contracts or
commitments disclosed herein and (ii) in the ordinary course consistent with
past practice;
(e) pay, declare or promise to pay any dividends or other
distributions with respect to its capital stock, or pay, declare or promise to
pay any
27
other payments to Shareholder, other than amounts consistent with Schedule
3.19(a) and other than Shareholder Loans;
(f) authorize any salary increase of more than 10% for any employee
making an annual salary of greater than $50,000;
(g) obtain any bank loan or make any guarantee including, but not
limited to, drawings under Seller's existing line of credit with Commerce
Bank/Pennsylvania, N.A.;
(h) suffer or incur any Lien on any Purchased Asset;
(i) delay or accelerate or cancel any receivables or indebtedness owed
to Seller or writeoff or make further reserves against the same;
(j) merge or consolidate with or acquire any other entity or be
acquired by any other Person;
(k) suffer any insurance policy protecting the Purchased Assets to
lapse without comparable replacement insurance; or
(l) agree to do any of the foregoing.
Seller will not (i) take or agree to take any action that would make any
representation or warranty of Seller hereunder inaccurate in any respect at, or
as of any time prior to, the Closing Date or (ii) omit to take, or agree to omit
to take, any action necessary to prevent any such representation or warranty
from being inaccurate in any respect at any such time.
5.2. Access to Information. From the date hereof until and including
the Closing Date, Seller (a) will continue to give Buyer, its counsel and other
representatives full access to the offices, properties, books and records of
Seller relating to the Business, (b) will furnish to Buyer, its counsel and
other representatives such information relating to the Business as such Persons
may reasonably request and (c) will instruct the employees, counsel, accountants
and representatives of Seller to cooperate with Buyer in its investigation of
the Business; provided that no investigation pursuant to this Section (or any
investigation prior to the date hereof) shall affect any representation or
warranty given by Seller; and provided further that any investigation pursuant
to this Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of Seller.
28
5.3. Notices of Certain Events. Seller shall promptly notify Buyer
of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with
the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to
or involving or otherwise affecting Seller or the Business that, if pending
on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.11 or that relate to the consummation of
the transactions contemplated by this Agreement; and
(iv) the occurrence of any fact or circumstance which would make
any representation made hereunder by Seller and/or Shareholder false in any
material respect or result in the omission or the failure to state a
material fact.
5.4. Exclusivity. So long as this Agreement is in effect, neither
Seller nor Shareholder shall, directly or indirectly, (i) encourage, solicit,
initiate or participate in discussions or negotiations with, or provide any
information to any Person, other than Buyer or its Affiliates (collectively
"Excluded Persons"), or an officer, partner, employee or other authorized
representative of an Excluded Person, concerning the sale of the Purchased
Assets or (ii) otherwise solicit, initiate or encourage the submission of any
proposal contemplating the sale of the Purchased Assets. Seller or Shareholder
shall promptly (within 24 hours) communicate to Buyer the terms of any proposal
which it may receive in respect of a sale of the Purchased Assets. The Seller's
or Shareholder's notice under this Section 5.4 shall include the identity of the
person making such proposal or offer, copies (if written) or a written
description of the terms (if oral) thereof and any other such information with
respect thereto as the Buyer may reasonably request.
5.5. Transfer of Name. Seller shall secure and transfer to Buyer all
of the rights in the name "X.X Xxxxxxx & Associates, Inc.," owned by Seller
including but not limited to any trademark registration or application for such
name.
29
5.6. Termination of 401(k) Plan. Seller shall terminate its
401(k) plan prior to Closing.
ARTICLE VI.
POST CLOSING COVENANTS
6.1. Seller and Shareholder jointly and severally covenant and
agree that:
6.1.1. Confidentiality. Except as otherwise required by law, on
and after the Closing, Seller and Shareholder shall not, without the prior
written consent of Buyer, or a person authorized thereby, disclose to any
other person or use (whether for the account of Seller or Shareholder or
any other party) any confidential information or proprietary work product
of Seller or any client of Seller. In the event Seller or Shareholder
believes that it is required to disclose any such confidential information
pursuant to applicable Laws, Seller or Shareholder shall give timely
written notice to Buyer so that Buyer may have an opportunity to obtain a
protective order or other appropriate relief.
6.1.2. Change of Name; Wind-Up of Seller.
(a) From and after the Closing, Seller shall cease using and
shall not authorize or permit the use of, the words "XX Xxxxxxx &
Associates, Inc. t/a The Xxxxxxx Group" or any derivatives or abbreviations
thereof (the "Xxxxxxx Name") as the name of any business (including any
trade name or fictitious name however denominated) that is substantially
similar to the Business. Provided, however, that if Buyer and its
Affiliates cease the use of or abandon for a period of two years the
Xxxxxxx Name as the name under which they actively conduct their business,
then the foregoing provisions of this Section 6.1.2(a) shall terminate and
be of no further force and effect, and Shareholder shall have the full and
unlimited right to use the Xxxxxxx Name.
(b) From and after the Closing, Seller shall cease to conduct
business, and its only activity shall be to pay the Excluded Liabilities
and otherwise to wind up its business and affairs in a prompt and orderly
fashion.
6.1.3. Performance of Excluded Liabilities. Seller timely shall
pay or perform, as applicable, all liabilities and obligations that
constitute Excluded Liabilities, including without limitation those
relating to Contracts and Taxes payable on earnings earned by Seller prior
to the Closing.
30
6.1.4. No Distributions. Except as otherwise provided in Section
13.16 Seller shall not distribute with respect to its capital stock the
Shares to any person other than Shareholder.
6.1.5. Licenses and Permits. Seller and Shareholder shall notify
the Secretary of the Senate of the Commonwealth of Pennsylvania of the
transfer of the lobbyist registrations listed on Schedule 3.13.
6.2. Buyer and True North jointly and severally covenant and
agree that:
6.2.1. Operations of the Business During the Earnout Periods.
During the Earnout Periods, True North and Buyer agree:
(a) that Buyer and True North or any Affiliate of Buyer or
True North shall not voluntarily cause or allow any significant change in
the Business as conducted by Seller prior to the Closing, and Buyer and
True North and any Affiliate of Buyer and True North, shall conduct the
Business in the ordinary course, consistent with prior practices, but in
any event consistent with True North's policies and practices;
(b) that Buyer shall maintain such separate records for the
Business as necessary to permit Buyer and Shareholder to mutually calculate
the Profit Before Taxes and the Tax Payment amounts as provided for
pursuant to this Agreement;
(c) that the Business of the Company shall be conducted under
the name "X.X. Xxxxxxx & Associates, Inc. t/a The Xxxxxxx Group" or any
derivation thereof or under any other name as Buyer shall determine in good
faith;
(d) at any time or from time to time, Shareholder and his
representatives shall have access to, and the right to make copies of and
extracts from, the books and records of the Buyer for the purposes of (a)
verifying the amount of the Earnout Payments and (b) defending against or
protesting any inquiry or claims made by Buyer, True North, any third party
or any government authority, relating to this Agreement or the operations
of the Business. Neither the Buyer or True North shall destroy or otherwise
dispose of any of the books, records, accounts, ledgers, contracts or
documents of the Buyer, or permit the destruction or disposition of the
same, without Shareholder's written consent.
6.2.2. Right of First Refusal. If at any time during the
period during which Seller is entitled to receive the Earnout Payments,
Buyer or True North
31
receive a bona fide arms-length offer from an unaffiliated third party, to
purchase the Business, Buyer and True North shall deliver notice of such offer
to Seller and Shareholder specifying such transaction in reasonable detail, and
Seller and Shareholder shall have thirty (30) days to agree to purchase the
Business on the same terms and conditions as contained in the third party offer.
6.2.3. Continuity of Benefits. Subject to applicable legal
requirements and the plan qualification requirements of Code Section 401, Buyer
(i) shall provide under its qualified 401(k) plan that all employees of Seller
who are hired by Buyer shall be credited with their periods of service with
Seller for purposes of satisfying eligibility and vesting requirements under
Buyer's plan; and (ii) shall allow each employee of Seller who is hired by Buyer
who so elects to directly roll over his or her account balance from Seller's
terminated 401(k) plan into Buyer's 401(k) plan.
6.3. Tax Matters. (a) Any transfer, documentary, sales, use or other
Taxes assessed upon or with respect to the transfer of the Purchased Assets to
Buyer and any recording or filing fees with respect thereto shall be shared
equally by Buyer and Seller.
(b) Seller shall be responsible for the filing of all Tax returns and
reports and for the payment of all Taxes based on the income of Seller for any
period ending on or prior to the Closing Date and the payment of all Taxes
attributable to or relating to the consummation of the transactions contemplated
hereby.
(c) Buyer shall be responsible for paying Taxes (other than Taxes
based on the net income of Seller) with respect to the operations of Seller for
the period from January 1, 1998 through the Closing.
ARTICLE VII.
COVENANTS OF BUYER
Buyer and True North covenant and agree that:
7.1. Registration of True North Common Stock.
(a) Registration Procedures. True North shall use its reasonable best
efforts to cause to be registered on Form S-3 under and in accordance with the
Securities Act (a "Registration") the Shares for purposes of the resale thereof
by Seller in ordinary brokerage transactions. In connection with such
Registration,
32
True North will, as expeditiously as reasonably practicable, after the date of
this Agreement and in any case, within forty-five (45) days after the Closing
Date:
(i) prepare and file with the Securities and Exchange Commission (the
"SEC") a registration statement on Form S-3 under the Securities Act
covering the Shares (a "Registration Statement") and use its reasonable
best efforts to cause such Registration Statement to become effective as
promptly after the Closing Date as reasonably practicable and to remain
effective as provided herein and shall use its reasonable best efforts to
comply with the Securities Act of 1933, as amended (the "Securities Act")
and the rules and regulations of the SEC in preparing and filing such
Registration Statement;
(ii) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep the
Registration Statement effective for a one (1) year period from the Closing
Date (or such earlier time by when the shares are disposed of); cause the
prospectus which is part of the Registration Statement ("Prospectus") to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Securities Act; and comply with
the provisions of the Securities Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement during
such one (1) year period;
(iii) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the
earliest practicable time; and
(iv) on or prior to the date on which the Registration Statement is
declared effective, use its reasonable best efforts to register or qualify
the True North Common Stock covered by such Registration Statement under
the securities laws of the Commonwealth of Pennsylvania (unless the sale of
the Shares by Seller is exempt from registration thereunder) and to list
the Shares on the New York Stock Exchange.
Notwithstanding the foregoing, True North shall be entitled to
postpone any registration, qualification or compliance under any Federal or
state securities laws, or to prohibit the use of any Prospectus forming a part
of any effective Registration Statement, for a period of up to ninety (90) days,
or such additional period as may be required, if a valid corporate purpose
exists for doing so in the good faith business judgment of True North,
including, without limitation, for the purpose of withholding the public release
of information which in the reasonable judgment of True North would be required
to be disclosed in such Prospectus.
33
(b) Obligations of Seller.
(i) Seller will furnish to True North in writing such information
and affidavits as True North may reasonably request or as may be required
in connection with any registration, qualification or compliance with
respect to the Shares. Seller shall give prompt notice to Buyer of each
sale by Seller of the Shares registered pursuant to the Registration
Statement.
(ii) Seller will not sell any Shares issued to Seller hereunder
until a Registration Statement covering the same shall become effective and
the same shall have been qualified for sale under applicable state
securities laws, except pursuant to applicable exemptions. Immediately on
notice from True North, Seller will cease sales of the Shares, for so long
as True North shall advise Company such cessation is required under
applicable Federal or state securities laws. Seller shall not adopt any
plan to dissolve Seller or distribute the Shares to its shareholders until
after at least one year from the Closing Date except to the extent that
such dissolution and distribution qualifies as an exempt transaction under
the Securities Act and the transferees deliver a certificate to True North
making the same representations and warranties contained in Section 3.27
herein.
(iii) At the end of any period during which True North keeps any
Registration Statement current and effective as provided by Section
7.1(a)(ii) hereof, Seller shall discontinue sales of the Shares pursuant to
such Registration Statement and the Company shall notify True North of the
number of the Shares registered which remain unsold at the end of such
period.
(c) Registration Expenses. All of the costs and expenses of the
registration hereunder will be borne by True North, including all registration
and filing fees, the fees and expenses of True North's counsel and accountants
and all other costs and expenses incident to True North's performance of or
compliance with this Agreement, including without limitation the preparation,
printing (or otherwise duplicating) and filing under the Securities Act of the
Registration Statement (and all amendments and supplements thereto) and
furnishing a reasonable number of copies thereof and of the Prospectus included
therein, and the costs and expenses incurred in connection with the
qualification of the Shares issued to Seller hereunder under the securities laws
of the Commonwealth of Pennsylvania; provided, that True North shall not bear
costs and expenses comprising brokerage fees or commissions, transfer taxes, the
fees and expenses of any counsel, accountants or other representatives retained
by Seller, or any fees, costs or expenses required to be borne by Seller under
state securities laws.
34
(d) Indemnification.
(i) True North shall indemnify and hold harmless
Shareholder, Seller and its officers and directors and each Person who
controls Seller (within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) and the persons or
entities described in Section 13.16, against any Losses, caused by any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus, or preliminary Prospectus or any
amendment or supplement to any of the foregoing or any omission or alleged
omission to state therein a material fact necessary to make the statements
therein (in the case of the Prospectus or any preliminary Prospectus, in
light of the circumstances under which they were made) not misleading,
except insofar as the same are caused solely by (A) or contained in any
written information furnished to True North or Buyer by Seller in
connection with the preparation of such Prospectus, (B) violation by Seller
of Section 7.1(b), or (C) the failure of Seller to deliver a copy of the
Registration Statement or Prospectus or any amendment or supplement thereto
after True North has furnished Seller with a copy thereof.
(ii) Seller and Shareholder, jointly and severally, agree to
indemnify and hold harmless, to the full extent permitted by law, Buyer,
True North, its directors and officers and each Person who controls True
North (within the meaning of the Securities Act and the Exchange Act)
against any Losses resulting solely from (A) any untrue or alleged untrue
statement of a material fact or any omission or alleged omission to state a
material fact necessary to make the statements in the Registration
Statement or Prospectus or preliminary Prospectus (in the case of the
Prospectus or any preliminary Prospectus, in light of the circumstances
under which they were made) not misleading to the extent that such untrue
statement or omission was made in reliance upon written information
furnished by Seller or Shareholder in connection with the preparation of
such Prospectus or (B) the breach of any covenant in Section 7.1(b).
(iii) Any Person entitled to indemnification hereunder will
(A) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification, and (B) unless in such
indemnified party's reasonable judgement a conflict of interest may exist
between such indemnified and indemnifying parties with respect to such
claim, permit such indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to the indemnified party. Whether or
not such defense is assumed by the indemnifying party, the indemnifying
party will not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld). The
failure of an indemnified party to give notice pursuant to clause (A) above
shall not relieve any indemnifying party of its obligations hereunder
except to the extent such indemnifying party is prejudiced by such failure.
No indemnifying party will consent
35
to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect of such claim or litigation. An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such claim,
unless, in the reasonable judgment of any indemnified party, a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel of counsels.
(iv) If for any reason the indemnification provided for in
the preceding clauses (i) and (ii) is unavailable to an indemnified party
as contemplated by the preceding clauses (i) and (ii), then the
indemnifying party shall contribute to the amount paid or payable as a
result of such Loss in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party
and the indemnifying party, as well as any other relevant equitable
considerations.
7.2. Delivery of SEC Filings. True North will deliver to Seller,
no later than the Closing Date (or in case of the proxy statement as soon as it
is available) true and complete copies (excluding exhibits) of the following
documents, in each case as filed with the SEC: (a) True North's Annual Report on
Form 10-K for the year ended December 31, 1997; (b) True North's Proxy Statement
for its Annual Meeting of Stockholders to be held in 1998; (c) all Current
Reports on Form 8-K filed by True North with the SEC since January 1, 1998
(collectively, the "SEC Filings").
ARTICLE VIII.
COVENANTS OF ALL PARTIES HERETO
The parties hereto agree that:
8.1. Best Efforts; Further Assurances. (a) Subject to the terms
and conditions of this Agreement, each party will use its best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable Laws to consummate the transactions
contemplated by this Agreement. The parties hereto each agree to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable in order to consummate
or implement expeditiously
36
the transactions contemplated by this Agreement and to vest in Buyer good and
marketable title to the Purchased Assets.
(b) Seller hereby constitutes and appoints, effective as of the
Closing, Buyer and its successors and assigns as the true and lawful attorney of
Seller with full power of substitution in the name of Buyer or in the name of
Seller, but for the benefit of Buyer for the limited purpose of (i) to collect
for the account of Buyer any items of Purchased Assets and (ii) to institute and
prosecute all proceedings which Buyer may in its sole discretion deem proper in
order to assert or enforce any right, title or interest in, to or under the
Purchased Assets, and to defend or compromise any and all actions, suits or
proceedings in respect of the Purchased Assets and the Contracts. Buyer shall be
entitled to retain for its own account any amounts collected pursuant to the
foregoing powers, including any amounts payable as interest in respect thereof.
8.2. Confidentiality of Transaction. Any information (except publicly
available or freely usable material obtained from another source) respecting any
party will be kept in strict confidence by all other parties to this Agreement
and their agents. Except as required by Law, Seller and any employees or agents
of Buyer and its Affiliates will not disclose the terms of the transactions
contemplated hereunder at any time, currently, on or after the Closing,
regardless of whether the Closing takes place, except as necessary to their
attorneys, accountants and professional advisors, in which instance such persons
and any employees or agents of Seller shall be advised of the confidential
nature of the terms of the transaction and shall themselves be required by
Seller to keep such information confidential. Except as required by Law, each
party shall retain all information obtained from the other and their lawyers on
a confidential basis except as necessary to their attorneys, accountants and
professional advisors, in which instance such persons and any employees or
agents of such party shall be advised of the confidential nature of the terms of
the transaction and shall themselves be required by such party to keep such
information confidential.
8.3. Best Efforts to Obtain Consents. Seller and Shareholder hereby
agree to use their best efforts to obtain each Seller Consent, and Buyer hereby
agrees to use its best efforts to obtain each Buyer Consent, in each case as
promptly as practicable hereafter.
8.4. Payments and Obligations. (a) If Buyer receives any payment
relating to Excluded Assets, then Buyer promptly shall forward such payment to
Seller; and if Seller receives any payment relating to the Purchased Assets,
then Seller promptly shall forward such payment to Buyer.
37
(b) If Buyer receives bills or other demands for payment or
performance relating to Excluded Liabilities, then Buyer will promptly forward
such bills and demands to Seller, and Seller shall pay or perform such
obligations when due. If Seller receives bills or other demands for payment or
performance relating to Assumed Liabilities, then Seller promptly will forward
such bills and demands to Buyer, and Buyer shall pay or perform such obligations
when due.
ARTICLE IX.
CONDITIONS TO CLOSING
9.1. Condition to the Obligations of Buyer and Seller. The obligations
of Buyer and Seller to consummate the Closing are subject to the satisfaction of
the following conditions: (a) no provision of any applicable Law, and no
judgment, injunction, order or decree shall prohibit the consummation of the
Closing, (b) there shall not be pending any proceeding brought by a third-party
non-Affiliate to enjoin or otherwise restrict the consummation of the Closing.
9.2. Conditions to Obligations of Buyer. The obligation of Buyer to
consummate the Closing is subject to the satisfaction, or the waiver at Buyer's
discretion, of the following further conditions:
(a)(i) Seller and Shareholder shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the Closing Date, (ii) the representations and warranties of Seller and
Shareholder contained in this Agreement and in any certificate or other writing
delivered by Seller or Shareholder pursuant hereto, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true at and as of the Closing Date, as if made
at and as of such date with only such exceptions as would not in the aggregate
reasonably be expected to have a Material Adverse Effect, (iii) there shall have
been no material adverse change to the Business or the Purchased Assets, and
(iv) Buyer shall have received a certificate signed by the President and Chief
Financial Officer of Seller and by Shareholder to the effect set forth in
clauses (i) and (ii) of this Section 9.2(a) and the amount of outstanding loans
or advances that constitute Shareholder Loans.
(b) All of the conditions to closing of True North set forth in
the Stock Purchase Agreement shall have been met.
(c) No court, arbitrator or governmental body, agency or official
shall have issued any order, or have pending before it a proceeding for the
issuance of any order, and there shall not be any statute, rule or regulation,
38
restraining or prohibiting the consummation of the Closing or the effective
operation by Buyer of the Purchased Assets or the use of the Contracts after the
Closing Date.
(d) Buyer shall have received a duly executed Certificate of
Amendment in proper form for filing with the office of the Secretary of the
State of Pennsylvania to change the name of Seller to a name which is not
prohibited by Section 6.4.
(e) Buyer shall have received all documents it may reasonably
request relating to the existence of Seller and the authority of Seller for this
Agreement, all in form and substance reasonably satisfactory to Buyer,
including, without limitation, (i) a copy of the certificate of incorporation of
Seller certified as of a recent date by the Secretary of State of its
jurisdiction of organization, (ii) copies of Seller's bylaws as effective on the
date hereof; (iii) copies of resolutions duly adopted by the Board of Directors
of Seller and by the unanimous vote or consent of Seller's shareholders
authorizing this Agreement and the Conveyance Documents and the transaction
contemplated hereby and thereby, (iv) a certificate of the Secretary of Seller
certifying as to signatures of the officer(s) executing this Agreement and any
certificate or document to be delivered pursuant hereto, together with evidence
of the incumbency of such Secretary, and (v) a recent good standing certificate
regarding Seller from the office of the Secretary of State of the Commonwealth
of Pennsylvania and any other jurisdiction in which Seller is qualified to do
business.
(f) No provision of any applicable Law and no judgment,
injunction, order or decree shall restrain, prohibit or otherwise interfere with
the effective operation or enjoyment by Buyer of all or any material portion of
the Purchased Assets.
(g) Buyer shall have received all Buyer Consents, in form and
substance reasonably satisfactory to Buyer, and no such Buyer Consent shall have
been revoked, and Buyer shall have received all necessary corporate approvals of
Buyer and its Affiliates which Buyer shall use its best efforts to obtain.
(h) Buyer shall have received all Seller Consents, in form and
substance reasonably satisfactory to Buyer, and no such Seller Consent shall
have been revoked except for the consent of the landlord of the Seller's
sublease in Harrisburg and the clients set forth on Schedule 3.7.
(i) Seller shall have delivered to Buyer documents satisfactory to
Buyer to evidence the release of all Liens on any portion of the Purchased
Assets and the filing of appropriate UCC-3 Termination Statements or, in the
instance of the Lien filed by Commerce Bank, N.A., shall undertake to file such
statements subsequent to the Closing.
39
(j) Shareholder shall have executed and delivered to True North an
employment agreement substantially in the form attached hereto as Exhibit C (the
"Employment Agreement"), between True North and Shareholder and the same shall
be in full force and effect.
(k) Seller shall have terminated the Philadelphia Lease.
(l) Blank Rome Xxxxxxx & XxXxxxxx LLP, counsel to Seller, shall
have delivered an opinion in the form of Exhibit D hereto.
(m) Shareholder and Seller shall have executed the Non-Compete
Agreement substantially in the form attached hereto as Exhibit E between Buyer,
True North, Shareholder and Seller and the same shall be in full force and
effect.
9.3. Conditions to Obligations of Seller. The obligation of Seller
to consummate the Closing is subject to the satisfaction or, the waiver of at
Seller's discretion, of the following further conditions:
(a)(i) Buyer and True North shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the Closing Date, (ii) the representations and warranties of Buyer and
True North contained in this Agreement and in any certificate or other writing
delivered by Buyer and True North pursuant hereto shall be true in all material
respects at and as of the Closing Date, as if made at and as of such date and
(iii) Seller shall have received a certificate signed by an officer of Buyer and
True North to the foregoing effect.
(b) All of the conditions to closing of Shareholder set forth in
the Stock Purchase Agreement shall have been met.
(c) True North shall have delivered to Seller a duly executed copy
of the Employment Agreement.
(d) Loeb & Loeb LLP, counsel to Buyer and True North, shall have
delivered an opinion substantially in the form of Exhibit F hereto.
40
ARTICLE X.
INDEMNIFICATION
10.1. Indemnification of Buyer. Seller and Shareholder hereby
jointly and severally agree to indemnify and hold harmless Buyer and True North
and each of their respective directors, officers, employees, shareholders,
agents and Affiliates thereof (the "Purchaser Indemnitees"), against and in
respect of any out-of-pocket loss, cost, expense, liability, damage or claim
(including reasonable attorneys' fees and other costs and expenses) (all of the
foregoing collectively, "Losses") incurred or sustained by any Purchaser
Indemnitee as a result of any breach, inaccuracy or nonfulfillment or the
alleged breach, inaccuracy or nonfulfillment of any of the representations,
warranties and covenants of the Indemnifying Parties contained herein. The total
payments made by the Seller and Shareholder to the Purchaser Indemnitees with
respect to Losses shall not exceed $4,000,000; provided, however, that no
Purchaser Indemnitee shall be entitled to indemnification pursuant to this
Section 10.1 unless and until the aggregate amount of Losses to all Purchaser
Indemnitees equals at least $75,000, at which time the Purchaser Indemnitees
shall be entitled to indemnification for the total amount of such Losses.
Notwithstanding anything set forth in this Section 10.1, (i) any Loss incurred
by Buyer or True North arising out of Seller's or Shareholder's breach of any
provision of Section 7.1 shall be subject to the indemnification provision set
forth therein and shall not be covered under this Section 10.1 nor shall any
amounts recovered under Section 7.1(d) be applied to the minimum amount of
Losses set forth in the previous sentence and (ii) any Loss incurred by Buyer or
True North arising out of Seller's or Shareholder's breach of or failure to
perform any covenant or obligation to be performed by Seller or Shareholder at
or after the Closing Date including, but not limited to, payment of the Excluded
Liabilities, shall not be subject to or applied against the minimum amount of
Losses or the cap set forth in the previous sentence.
10.2. Indemnification of Seller and Shareholder by Buyer and True
North. The Buyer and True North hereby agree to indemnify and hold harmless
Seller and Shareholder and all of Seller's directors, officers, employees,
agents and Affiliates thereof (the "Seller Indemnitees") against and in respect
of any Losses incurred or sustained by Seller Indemnitees as a result of any
breach, inaccuracy or nonfulfillment or the alleged breach, inaccuracy or
nonfulfillment of any of the representations, warranties and covenants of the
Buyer or True North contained herein. The total payments made by the Buyer and
True North to the Seller Indemnitees with respect to Losses shall not exceed
$4,000,000; provided, however, Seller Indemnitees shall not be entitled to
indemnification pursuant to this Section 8.2 unless and until the aggregate
amount of Losses to Seller Indemnitees equals at least $75,000, at which time
the Seller Indemnitees shall be entitled to indemnification for the total amount
of such Losses. Notwithstanding anything set forth in this Section
41
10.2, (i) any Loss incurred by Seller or Shareholder arising out of True North's
breach of any provision of 7.1 shall be subject to the indemnification provision
set forth therein and shall not be covered under this Section 10.2 nor shall any
amounts recovered under Section 7.1(d) be applied to the minimum amount of
Losses set forth in the previous sentence and (ii) any Loss incurred by Seller
or Shareholder arising out of Buyer's or True North's breach of or failure to
perform any covenant or obligation to be performed by Buyer or True North at or
after the Closing Date including, but not limited to, payment of the Purchase
Price or any Assumed Liabilities, shall not be subject to or applied against the
minimum amount of Losses or the cap set forth in the previous sentence.
10.3. Procedure. The following shall apply with respect to all
claims by either a Purchaser Indemnitee or a Seller Indemnitee (together,
"Indemnified Party") for indemnification: An Indemnified Party will give
Shareholder and Seller or True North and Buyer, as applicable (either,
"Indemnifying Parties"), prompt notice of any third-party claim, investigation,
action, suit, hearing or proceeding with respect to which such Indemnified Party
seeks indemnification pursuant to Section 10.1 or 10.2 (an "Indemnification
Notice"), which shall describe in reasonable detail the loss, liability or
damage that has been or may be suffered by the Indemnified Party. The failure to
give the Indemnification Notice shall not impair any of the rights or benefits
of such Indemnified Party under Section 10.1 or 10.2, except to the extent such
failure materially and adversely affects the ability of the Indemnifying Parties
to defend such claim or increases the amount of such liability. In the case of
any third-party claims as to which indemnification is sought by any Indemnified
Party, such Indemnified Party shall be entitled, at the sole expense and
liability of the Indemnifying Parties, to exercise full control of the defense,
compromise or settlement of any third-party claim, investigation, action, suit,
hearing or proceeding unless the Indemnifying Parties, within a reasonable time
after the giving of an Indemnification Notice by the Indemnified Party, shall
(i) deliver a written confirmation to such Indemnified Party that the
indemnification provisions of Section 10.1 or 10.2 are applicable to such claim,
investigation, action, suit, hearing or proceeding and the Indemnifying Parties
will indemnify such Purchaser Indemnitee in respect of such claim,
investigation, action or proceeding pursuant to the terms of Section 10.1 or
10.2 and, notwithstanding anything to the contrary, shall do so without
asserting any challenge, defense, limitation on Indemnifying Parties liability
for Losses, counterclaim or offset, (ii) notify such Indemnified Party in
writing of the intention of Indemnifying Parties to assume the defense thereof,
and (iii) retain legal counsel reasonably satisfactory to such Indemnified Party
to conduct the defense of such claim, investigation, action, suit, hearing or
proceeding. If the Indemnifying Parties assume the defense of any such claim,
investigation, action, suit, hearing or proceeding in accordance herewith, then
the Indemnified Party shall cooperate with the Indemnifying Parties in any
manner reasonably requested in connection with the defense, compromise or
settlement thereof. If the Indemnifying Parties so assume the
42
defense of any such claim, investigation, action, suit, hearing or proceeding,
the Indemnified Party shall have the right to employ separate counsel and to
participate in (but not control) the defense, compromise, or settlement thereof,
but the fees and expenses of such counsel employed by the Indemnified Party
shall be at the expense of such Indemnified Party unless (i) the Indemnifying
Parties have agreed to pay such fees and expenses, (ii) any relief other than
the payment of money damages is sought against such Indemnified Party or (iii)
the named parties to any such claim, investigation, action, suit, hearing or
proceeding (including any impleaded parties) include an Indemnified Party and an
Indemnifying Party and such Purchaser Indemnitee shall have been advised by its
counsel that there is a conflict of interest between such Indemnified Party and
the Indemnifying Parties in the conduct of the defense thereof, and in any such
case the reasonable fees and expenses of such separate counsel shall be borne by
the Indemnifying Parties. If the Indemnifying Parties elect to direct the
defense of any such claim, investigation, action, suit, hearing or proceeding,
the Purchaser Indemnitee shall not pay, or permit to be paid, any part of any
claim or demand arising from such asserted liability unless the Indemnifying
Parties withdraw from the defense of such asserted liability, or unless a final
judgment from which no appeal may be taken by or on behalf of the Indemnified
Party is entered against the Indemnified Party for such liability. If the
Indemnifying Parties do not elect to defend, or if, after commencing or
undertaking any such defense, the Indemnifying Parties fail to prosecute or
withdraw such defense, the Indemnified Party shall have the right to undertake
the defense or settlement thereof, at the Indemnifying Parties' expense. If the
Purchaser Indemnitee assumes the defense of any such claim, investigation,
action, suit, hearing or proceeding pursuant to this Section 10.1 or 10.2 and
proposes to settle the same prior to a final judgment thereon or to forgo appeal
with respect thereto, then the Indemnified Party shall give the Indemnifying
Parties prompt written notice thereof and the Indemnifying Parties shall have
the right to participate in the settlement, assume or reassume the defense
thereof or prosecute such appeal, in each case at the Indemnifying Parties'
expense. The Indemnifying Parties shall not, without the prior written consent
of such Indemnified Party settle or compromise or consent to entry of any
judgment with respect to any such claim, investigation, action, suit, hearing or
proceeding (i) in which any relief other than the payment of money damages is or
may be sought against such Indemnified Party or (ii) which does not include as
an unconditional term thereof the giving by the claimant, person conducting such
investigation or initiating such hearing, plaintiff or petitioner to such
Indemnified Party of a release from all liability with respect to such claim,
investigation, action, suit or proceeding and all other claims or causes of
action (known or unknown) arising or which might arise out of the same facts.
10.4. Periodic Payments. Any indemnification required by Section 10.1
or 10.2 for costs, disbursements or expenses of any Indemnified Party in
connection with investigating, preparing to defend or defending any claim,
action,
43
suit, hearing, proceeding or investigation shall be made by periodic payments by
the Indemnifying Parties to each Indemnified Party during the course of the
investigation or defense, as and when bills are received or costs, disbursements
or expenses are incurred.
10.5. Insurance. Any indemnification payments hereunder shall take
into account any insurance proceeds or other third party reimbursement actually
received.
10.6. Survival of Indemnification Rights. The representations and
warranties of Seller and Shareholder and Buyer and True North shall survive
until the second anniversary of the Closing Date, provided, however that any
representation or warranty made with regard to the Purchase Price shall survive
until the applicable statute of limitations expires. The indemnification to
which any Indemnified Party is entitled from the Indemnifying Parties pursuant
to Section 10.1 for Losses shall be effective so long as it is asserted prior to
the second year anniversary of the Closing Date.
ARTICLE XI.
DISPUTE RESOLUTION
11.1. Arbitration.
-----------
(a) The parties shall promptly submit any dispute, claim, or
controversy arising out of or relating to this Agreement (including, without
limitation, with respect to the meaning, effect, validity, termination,
interpretation, performance, or enforcement of this Agreement) or any alleged
breach hereof (including any action in tort, contract, equity, or otherwise), to
binding arbitration before one arbitrator ("Arbitrator), except that any dispute
arising out of the calculation of the Profit Before Taxes pursuant to Section
2.6 shall not be subject to this provision but rather to the dispute resolution
provision set forth in Section 2.6. The parties agree that, except as otherwise
provided in Section 2.6, binding arbitration shall be the sole means of
resolving any dispute, claim, or controversy arising out of or relating to this
Agreement (including, without limitation, with respect to the meaning, effect,
validity, termination, interpretation, performance or enforcement of this
Agreement) or any alleged breach (including any claim in tort, contract, equity,
or otherwise) hereof; provided however, that this Section 11.1 shall not be
interpreted as applying to any other agreement between Seller or Shareholder and
Buyer or its Affiliates.
(b) If the parties cannot agree upon the Arbitrator, the Arbitrator
shall be selected by the Philadelphia chapter head of the American
44
Arbitration Association upon the request of either side. The Arbitrator shall
be selected within thirty (30) days of request.
(c) The laws of the Commonwealth of Pennsylvania shall apply to any
arbitration hereunder. In any arbitration hereunder, this Agreement and any
agreement contemplated hereby shall be governed by the laws of the Commonwealth
of Pennsylvania applicable to a contract negotiated, signed, and wholly to be
performed in Pennsylvania, which laws the Arbitrator shall apply in rendering
his decision. The Arbitrator shall issue a written decision, setting forth
findings of fact and conclusions of law, within sixty (60) days after he shall
have been selected. The Arbitrator shall have no authority to award punitive or
other exemplary damages.
(d) The arbitration shall be held in Philadelphia, Pennsylvania in
accordance with and under the then-current provisions of the rules of the
American Arbitration Association, except as otherwise provided herein.
(e) On application to the Arbitrator, any party shall have rights to
discovery to the same extent as would be provided under the Federal Rules of
Civil Procedure, and the Federal Rules of Evidence shall apply to any
arbitration under this Agreement; provided, however, that the Arbitrator shall
limit any discovery or evidence such that his decision shall be rendered within
the period referred to in Section 11.1(c).
(f) The Arbitrator may, at his discretion and at the expense of the
party(ies) who will bear the cost of the arbitration, employ experts to assist
him in his determinations.
(g) The costs of the arbitration proceeding and any proceeding in
court to confirm any arbitration award or to obtain relief as provided in
Section 6.3, as applicable (including, without limitation, actual attorneys'
fees and costs), shall be borne by the unsuccessful party and shall be awarded
as part of the Arbitrator's decision, unless the Arbitrator shall otherwise
allocate such costs, for the reasons set forth, in such decision. The
determination of the Arbitrator shall be final and binding upon the parties and
not subject to appeal.
(h) Any judgment upon any award rendered by the Arbitrator may be
entered in and enforced by any court of competent jurisdiction. The parties
expressly consent to the non-exclusive jurisdiction of the courts (Federal and
state) in Philadelphia, Pennsylvania to enforce any award of the Arbitrator or
to render any provisional, temporary, or injunctive relief in connection with or
in aid of the Arbitration. The parties expressly consent to the personal and
subject matter jurisdiction of the Arbitrator to arbitrate any and all matters
to be submitted to
45
arbitration hereunder. None of the parties hereto shall challenge any
arbitration hereunder on the grounds that any party necessary to such
arbitration (including, without limitation, the parties hereto) shall have been
absent from such arbitration for any reason, including, without limitation, that
such party shall have been the subject of any bankruptcy, reorganization, or
insolvency proceeding.
(i) The parties shall indemnify the Arbitrator and any experts
employed by the Arbitrator and hold them harmless from and against any claim or
demand arising out of any arbitration under this Agreement or any agreement
contemplated hereby, unless resulting from the willful misconduct of the person
indemnified.
(j) This arbitration clause shall survive the termination of this
Agreement and any agreement contemplated hereby.
11.2. Waiver of Jury Trial; Exemplary Damages. ALL PARTIES
HEREBY WAIVE THEIR RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY DISPUTE ARISING
UNDER THIS AGREEMENT. No party shall be awarded punitive or other exemplary
damages respecting any dispute arising under this Agreement.
11.3. Attorneys' Fees. The unsuccessful party to any court
or other proceeding arising out of this Agreement that is not resolved by
arbitration under Section 11.1 shall pay to the prevailing party all attorneys'
fees and costs actually incurred by the prevailing party, in addition to any
other relief to which it may be entitled. As used in this Section 11.3 and
elsewhere in this Agreement, "actual attorneys' fees" or "attorneys' fees
actually incurred" means the full and actual cost of any legal services actually
performed in connection with the matter for which such fees are sought,
calculated on the basis of the usual fees charged by the attorneys performing
such services, and shall not be limited to "reasonable attorneys' fees" as that
term may be defined in statutory or decisional authority.
ARTICLE XII.
TERMINATION
12.1. Termination Without Default. In the event that the Closing of
the transactions contemplated hereunder has not occurred by June 30, 1998 (the
"Scheduled Closing Date") and no material breach of this Agreement by the party
seeking to terminate this Agreement shall have occurred or have been made (as
provided in Section 12.2 hereof) any party hereto shall have the right, at its
sole option, to terminate this Agreement without liability to the other side.
Such right may
46
be exercised by Buyer, on the one hand, or Seller on the other, as the case may
be, giving written notice to the other at any time after the Scheduled Closing
Date, specifying the event or state of facts giving rise to such right of
termination.
12.2. Termination Upon Default.
(a) Buyer may terminate this Agreement by giving notice to
Seller or Shareholder on or prior to the Closing, without prejudice to any
rights or obligations Buyer may have, if Seller or Shareholder shall have
materially breached any agreement, covenant, representation, or warranty
contained herein and such breach shall not be cured within the earlier of the
Scheduled Closing Date and 30 days following receipt by Seller or Shareholder of
a notice describing in reasonable detail the nature of such breach.
(b) Seller may terminate this Agreement by giving notice to
Buyer, without prejudice to any rights or obligations Seller may have, if Buyer
shall have materially breached any of its covenants, agreements,
representations, and warranties contained herein and such breach shall not be
cured within the earlier of the Scheduled Closing Date and 30 days following
receipt by Buyer of a notice describing in reasonable detail the nature of such
breach.
12.3. Survival. The provisions of Section 13.4 shall survive
any termination hereof pursuant to Article XII.
ARTICLE XIII.
MISCELLANEOUS
13.1. Notices. All notices, requests, demands and other
communications to any party hereunder shall be in writing and shall be given to
such party at its address or telecopier number set forth below, or such other
address or telecopier number as such party may hereinafter specify by notice to
each other party hereto:
if to Buyer, to:
The Xxxxxxx Group, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Valentine X. Xxxxxx
Telecopy: (000) 000-0000
47
if to True North:
True North Communications Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Valentine X. Xxxxxx
Telecopy: (000) 000-0000
in either case with a copy to:
True North Communications Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx
Telecopy: (000) 000-0000
- and -
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
if to Seller or Shareholder:
X.X. Xxxxxxx & Associates, Inc.
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
with a copy to:
Blank Rome Xxxxxxx & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
Each such notice, request or other communication shall be effective (i) if given
by telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the appropriate answerback is received or, (ii) if given by certified
mail, 72 hours
48
after such communication is deposited in the mails with first class postage
prepaid, properly addressed or, (iii) if given by any other means, when
delivered at the address specified herein.
13.2. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by each party hereto, or in the case of
a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
13.3. Publicity. Except as required by law, the parties agree that
they or their agents shall not issue any press release or make any other public
disclosure concerning the transactions contemplated hereunder without the prior
approval of the other party hereto.
13.4. Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
13.5. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that neither Seller nor Shareholder
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the prior written consent of Buyer.
13.6. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the Commonwealth of Pennsylvania, without
giving effect to the conflict of laws principles thereof.
13.7. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original and all of which
shall be deemed to be one and the same instrument, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
13.8. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, among
49
the parties with respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any party hereto. Neither this
Agreement nor any provision hereof is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder other than Purchaser
Indemnities as set forth in Section 10.1 hereof and True North, which shall be a
third party beneficiary hereof.
13.9. Bulk Sales Laws. Buyer hereby waives compliance by Seller with
the provisions of the "bulk sales", "bulk transfer" or similar laws of any
state. Seller and Shareholder jointly and severally agree to indemnify and hold
Buyer harmless from and against any and all Loss incurred by Buyer or any of its
Affiliates as a result of any failure to comply with any such "bulk sales",
"bulk transfer" or similar laws.
13.10. Setoff. Buyer shall have the right to set off against any
amounts payable by Buyer under this Agreement any amounts owed by Seller or
Shareholder to Buyer, True North or any other Purchaser Indemnitee; provided,
however, Buyer shall not have the right to set-off against any payments due
Seller under Seller's Employment Agreement.
13.11. Disclosure. All disclosures on the Schedules to this
Agreement shall be deemed to be disclosed herein in response to each relevant
and/or applicable Section of this Agreement and to each relevant and/or
applicable Schedule hereto.
13.12. Remedies. The remedies provided in Articles X and XI shall
constitute the exclusive remedies for all matters under this Agreement, except
any party shall be entitled to seek specific performance or other equitable
relief in connection with any breach of this Agreement, none of which rights or
remedies shall be affected or diminished by the remedies provided hereunder.
13.13. Severability. If any one or more provisions of this
Agreement shall, for any reasons, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein.
13.14. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
13.15. Guarantee. True North hereby unconditionally and irrevocably
guarantees to Seller and Shareholder, and agrees to act as surety for, the
50
full and prompt payment of the Purchase Price by Buyer and the full and prompt
performance of all of Buyer's obligations, covenants, and agreements under this
Agreement. This surety shall remain in full force and effect notwithstanding
any amendment or modification of this Agreement.
13.16. Permitted Transfers. At any time from and after the
Closing Date, Seller shall be permitted to transfer all or any portion of the
Shares to Shareholder, Shareholder's spouse or lineal descendants or a trust for
the benefit of any of the foregoing individuals or a charitable trust of which
Shareholder or Seller is the settlor, provided that such transfer to any such
individual or entity qualifies as an exempt transaction under the Securities Act
and any applicable state securities laws and any recipient of the Shares makes
the representations and warranties contained in Section 3.27 herein, unless the
Registration Statement has been deemed effective by the SEC in which case no
exemption would be required.
51
IN WITNESS WHEREOF, Buyer, Seller and Shareholder have caused this
Agreement to be duly executed by their respective authorized officers or
representatives as of the day and year first above written.
THE XXXXXXX GROUP, INC.
By: /s/ Xxxx Xxxxxx
-----------------------------
Name:
Title:
TRUE NORTH COMMUNICATIONS INC.
By: /s/ Xxxx Xxxxxx
-----------------------------
Name:
Title:
X.X. XXXXXXX & ASSOCIATES, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
/s/ Xxxxx X. Xxxxxxx
--------------------------------
Xxxxx X. Xxxxxxx
Shareholder
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
52
