PLAN AND AGREEMENT OF MERGER
----------------------------
THIS PLAN AND AGREEMENT OF MERGER (this "Agreement") is made and entered
into as of August 20, 1998 by and among The Xxxxxxx Group, Inc., a Delaware
corporation ("Xxxxxxx"), MGI Acquisition II, L.L.C., an Illinois limited
liability company and wholly-owned, direct subsidiary of Xxxxxxx ("Acquisition
Sub"), Xxxxxxxx Consulting L.L.C., an Illinois limited liability company doing
business as Xxxxxxxx Worldwide LLC, (the "Company"), and each of the members of
the Company's Board of Managers (individually a "Company Manager" and
collectively, the "Company Managers"). Xxxxxxx, Acquisition Sub, the Company and
the Company Managers are sometimes referred to herein individually as a "Party"
and collectively as the "Parties."
RECITALS
A. The managers of Acquisition Sub and the Company Managers have approved
the transactions contemplated hereby and have determined that it is advisable
and in their respective best interests to consummate the merger described in
Article 2 hereof (the "Acquisition").
B. As a result of the Acquisition, Acquisition Sub will be merged with
and into the Company, all of the outstanding membership interests of the Company
will be converted into common stock of Xxxxxxx, and the Company will be the
surviving corporation, all on the terms and subject to the conditions set forth
in this Agreement.
C. For Federal income tax purposes, the Parties intend that the
Acquisition shall qualify as a reorganization within the meaning of Section
368(a) of the Code (as defined herein).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties hereby agree as follows:
1. DEFINITIONS
1.1 Definitions. The following terms, when used herein and unless the
context clearly requires otherwise, shall have the following meanings:
"Affiliate" means, with respect to any particular Person, any Person
controlling, controlled by or under common control with such Person, whether by
ownership or control of voting securities, by contract or otherwise. Affiliates
of Xxxxxxx include the Surviving Entity (as defined in Section 2.3(a)).
"Affiliated Group" means any affiliated group within the meaning of Section
1504 of the Code.
"Adverse Consequences" means all charges and write-offs permitted to be
taken for GAAP, Security Interests, and out-of-pocket losses, expenses and fees,
(including all attorneys' fees and court costs) relating to complaints, actions,
suits, proceedings, hearings, investigations, claims, demands, costs of defense,
judgments, orders, decrees, stipulations, injunctions, damages, dues, penalties,
fines, costs, amounts paid in settlement, Liabilities, Taxes, Security
Interests, it being understood that Adverse Consequences shall take into account
and be net of any insurance recoveries.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any successor
agency.
"Confidential Information" means any information concerning the businesses
and affairs of a Party other than any such information that (i) is generally
available to or known by the public immediately prior to the time of disclosure
(except through the actions or inaction of the Person to whom disclosure has
been made by or on behalf of such Party) or (ii) has been acquired or developed
independent from such Party.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any corporation or other business entity that is
included in a controlled group of corporations within which the Company is also
included, as provided in Section 414(b) of the Code; or which is a trade or
business under common control with the Company, as provided in Section 414(c) of
the Code; or which constitutes a member of an affiliated service group within
which the Company is also included, as provided in Section 414(m) of the Code;
or which is required to be aggregated with the Company pursuant to regulations
issued under Section 414(o) of the Code.
"Escrow Agreement" means that certain Escrow Agreement to be mutually
agreed upon by the Parties and the Escrow Agent prior to the Merger Time.
"Escrow Agent" means the Person acting as the escrow agent under the Escrow
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2
"Existing Company Documents" means, collectively, the Operating Agreement
and all agreements between the Company and the Members and all options,
warrants, and other agreements or documents relating to the issuance or possible
issuance of Membership Interests, each as in existence as of the date hereof.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied on a consistent basis.
"HSR Act" means the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"IDR" means Insurance Data Resources, Inc., a Florida corporation, and
wholly-owned subsidiary of the Company.
"ILLCA" means the Illinois Limited Liability Company Act, as amended.
"Indebtedness" of any Person means all obligations of such Person which in
accordance with GAAP should be classified upon a balance sheet of such Person as
liabilities of such entity; and in any event, regardless of how classified in
accordance with GAAP, shall include (i) all obligations of such Person for
borrowed money or obligations of such Person evidenced by notes or similar
instruments which have been incurred in consideration for the acquisition of
property or assets, (ii) obligations secured by any Security Interest upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations, (iii) obligations created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person, notwithstanding the fact that the
rights and remedies of the seller, lender or lessor under such agreement in the
event of default are limited to repossession or sale of the property, and (iv)
capitalized lease obligations.
"Intellectual Property" means any and all of the following which is owned
by, licensed by, licensed to, used or held for use by the Company and/or any of
its Subsidiaries (including all copies and embodiments thereof, in electronic,
written or other media): (i) all registered and unregistered trademarks, trade
dress, service marks, logos, trade names, internet domain names, corporate names
(including the names "Xxxxxxxx Consulting L.L.C., Xxxxxxxx Worldwide L.L.C." and
all derivations thereof) and all applications to register the same (the
"Trademarks"); (ii) all issued U.S. and foreign patents and pending patent
applications, patent disclosures and improvements thereto (the "Patents"); (iii)
all registered and unregistered copyrights, mask work rights and all
applications to register the same (the "Copyrights"); (iv) all computer software
and databases owned or used (excluding software and databases licensed to the
Company under standard, non-exclusive software licenses granted to end-user
customers by third parties in the ordinary course of such third parties'
business) by the Company or under development for the Company by third parties
(the "Software"); (v) all categories of trade secrets, know-how, inventions
(whether or not patentable and whether or not reduced to practice), processes,
procedures, drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data, pricing
3
and cost information, business and marketing plans, client and supplier lists
and information and other confidential and proprietary information ("Proprietary
Rights"); (vi) all licenses and agreements pursuant to which the Company has
acquired rights in or to any of the Trademarks, Patents, Copyrights, Software or
Proprietary Rights (excluding software and databases licensed to the Company
under standard, non-exclusive software licenses granted to end-user customers by
third parties in the ordinary course of such third parties' business)
("Licenses-In"); and (vii) all licenses and agreements pursuant to which the
Company has licensed or transferred any rights to any of the Trademarks,
Patents, Copyrights, Software or Proprietary Rights ("Licenses-Out").
"Knowledge" means, (i) in the case of any individual, the actual knowledge
of such person, and (ii) in the case of a corporation, limited liability company
or other entity, the actual knowledge of the directors and officers (including
the Members) or managers of such corporation, limited liability company or other
entity, as appropriate.
"Liability" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), obligation or Indebtedness, including without limitation, any liability
for Taxes.
"Material Adverse Effect" means a material adverse effect or impact upon
the assets, financial condition, results of operations or business of the
Company and its Subsidiaries (taken as a single enterprise), or on the ability
of the Parties to consummate the transactions contemplated hereby.
"Member" means, with respect to the Company, each person who is a "member"
thereof within the meaning of the ILLCA.
"Membership Interest" means the aggregate capital contributions of a Member
in the Company at a particular time, and the right of such Member to any and all
benefits to which a Member may be entitled pursuant to the Operating Agreement
of the Company and under the ILLCA, together with all obligations of such Member
to comply with the terms and provisions of the Operating Agreement and the
ILLCA. A Membership Interest may be expressed as a percentage, which percentage
shall be based on the ratio which a Member's capital contributions bear to the
aggregate capital contributions of all Members.
"Xxxxxxx Common" means the Common Stock, par value $0.001 per share, of
Xxxxxxx.
"Xxxxxxx Common Value" means the average of the closing price of Xxxxxxx
Common as reported by the Nasdaq National Market for the 3 consecutive trading
days selected by Xxxxxxx commencing no earlier than August 19, 1998 and ending
no later than August 27, 1998 as such three day period is set forth in writing
by Xxxxxxx and delivered to the Company on the day following the third day of
such period.
4
"Operating Agreement" means the Amended and Restated Limited Liability
Company Operating Agreement of the Company dated as of June 28, 1996 and
effective as of January 15, 1997.
"Ordinary Course of Business" means the ordinary course of business of the
Company and its Subsidiaries consistent with past custom and practice of the
Company and its Subsidiaries, respectively, as the context herein may require
(including with respect to quantity and frequency).
"Person" means any individual, trust, corporation, partnership, limited
partnership, limited liability company or other business association or entity,
court, governmental body or governmental agency.
"Plans" means: (i) all employee benefit plans as defined in Section 3(3) of
ERISA; (ii) all other severance pay, deferred compensation, excess or
supplemental benefit, vacation, stock, stock option, and incentive plans,
contracts, schemes, programs, funds, commitments, or arrangements of any kind;
and (iii) all other plans, contracts, schemes, programs, funds, commitments, or
arrangements providing money, services, property, or other benefits, whether
written or oral, qualified or nonqualified, funded or unfunded, and including
any that have been frozen or terminated, which pertain to any employee, former
employee, director, officer, member, consultant, or independent contractor of
the Company or any ERISA Affiliate of the Company and (a) to which the Company
or any ERISA Affiliate of the Company is or within the last six years has been a
party or by which any of them is or within the last six years has been bound or
(b) with respect to which the Company or any ERISA Affiliate of the Company has
made any payments or contributions since December 31, 1991 or (c) to which the
Company or any ERISA Affiliate of the Company may otherwise currently have any
liability (including any such plan or arrangement formerly maintained by the
Company or any ERISA Affiliate of the Company).
"Pro Rata Percentage" means, with respect to each Member, the percentage
set forth opposite such Member's name on Section 3.1(d) of the Disclosure
Schedule.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, security interest, lien or
other similar encumbrance or right of any third party.
"Subsidiary" means any corporation, limited liability company, limited
partnership, partnership, trust or other entity with respect to which another
Person has the power, directly or indirectly through one or more intermediaries,
to vote or direct the voting of sufficient securities or interests to elect a
majority of the directors or management committee or similar governing body.
"Tax" or "Taxes" means any Federal, state, local, or foreign income, gross
receipts, sales, licenses, payroll, employment, excise, severance, stamp,
occupation, premium, windfall
5
profits, environmental (including taxes under Section 59A of the Code), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Proceeding" means, with respect to Taxes, any proceeding, judicial or
administrative, civil or criminal, including, without limitation, any audit or
investigation.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Total Transaction Value" means $191,000,000; provided, however, that the
Total Transaction Value shall be adjusted as set forth in Section 2.6 herein.
1.2 Principles of Construction.
(a) In this Agreement, unless otherwise stated or the context
otherwise requires, the following usage apply: (i) unless otherwise provided
herein, actions permitted, but not required, under this Agreement may be taken
at any time and from time to time in the actor's sole discretion; (ii) in
computing periods from a specified date to a later specified date, the words
"from" and "commencing on" (and the like) mean "from and including," and the
words "to," "until" and "ending on" (and the like) mean "to, but excluding";
(iii) the captions and headings of articles, sections, schedules and exhibits
appearing in or attached to this Agreement have been inserted for convenience of
reference only and are not a part of, nor shall they affect any construction or
interpretation of this Agreement or any of its provisions; (iv) unless otherwise
specified, indications of time of day mean Chicago, Illinois time; (v) all
references to articles, sections, schedules and exhibits are to articles,
sections, schedules and exhibits in or to this Agreement unless otherwise
specified; (vi) references to a statute shall refer to the statute as amended
from time to time and any successor statute, and to all rules and regulations
promulgated under or implementing the statute or successor, as in effect at the
relevant time; (vii) references to a governmental or quasi-governmental agency,
authority or instrumentality shall also refer to a regulatory body that succeeds
to the functions of the agency, authority or instrumentality; (viii) "including"
means "including, but not limited to"; (ix) unless the context requires
otherwise, all words used in this Agreement in the singular number shall extend
to and include the plural, all words in the plural number shall extend to and
include the singular and all words in any gender shall extend to and include all
genders; and (x) any reference to a document or set of documents in this
Agreement, and the rights and obligations of the parties under any such
documents, shall mean such document or documents as amended or otherwise
modified from time to time, and any and all extensions, renewals, substitutions
or replacements thereof.
(b) Except as otherwise expressly provided in this Agreement, all
accounting terms not specifically defined herein shall be construed in
accordance with United States GAAP applied on a consistent basis.
6
2. THE MERGER
----------
In connection with the Acquisition, the respective managers of Acquisition
Sub and the Company have, by resolutions duly adopted and approved the following
provisions of this Article 2 as the Plan of Reorganization within the meaning of
Code Section 368(a)(1)(B) and as a "Plan of Merger" within the meaning of
Section 37-20 of the ILLCA:
2.1. Articles of Merger. Subject to the provisions of this Agreement, a
Plan of Merger as required by Section 37-20 of the ILLCA, together with Articles
of Merger signed on behalf of each of Acquisition Sub and the Company, shall be
duly prepared, executed and acknowledged by the Company, Acquisition Sub and
such other parties as may be appropriate, and thereafter such Articles of Merger
shall be delivered to the Secretary of State of the State of Illinois (the
"Illinois Department") for filing on the date of Closing (as hereinafter
defined). The Acquisition shall become effective for corporate law issues at
5:00 p.m. Chicago time on the date such filings occur (the "Merger Time"). The
date on which the Merger Time occurs is referred to herein as the "Merger Date".
2.2. Closing. The closing of the transactions contemplated hereby (the
"Closing") will take place at the offices of Barack Xxxxxxxxxx Xxxxxxxxxx
Xxxxxxx & Xxxxxxxxx, 000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000,
on August 31, 1998, to the extent that the conditions set forth in Sections 4.5
and 4.6 have been satisfied or waived (where permissible), unless another time
or place is agreed to by the Parties. The effective date of this transaction
will be the date of Closing (the "Effective Date"). At the Closing, the Parties
shall make delivery of those materials set forth, respectively, in Sections 4.5
and 4.6 hereof.
2.3. Effects of the Merger.
(a) At the Merger Time, the separate legal existence of Acquisition
Sub shall cease and Acquisition Sub shall be merged with and into the Company
and the Company, as the surviving entity in the Acquisition (the "Surviving
Entity"), shall continue its legal existence under the laws of the State of
Illinois under the name "Xxxxxxxx Consulting L.L.C." doing business as "Xxxxxxxx
Worldwide L.L.C."
(b) At and after the Merger Time, the Acquisition will have the
effects set forth in Article 37 of the ILLCA.
2.4. Articles of Organization and Operating Agreement. The Articles of
Organization and the Operating Agreement of Acquisition Sub, in substantially
the form set forth as Exhibit A hereto, each as in effect immediately prior to
the Merger Time, shall respectively become the Articles of Organization and the
Operating Agreement of the Surviving Entity immediately after the Merger Time
and shall thereafter continue to be its Articles of Organization and the
Operating Agreement until amended as provided therein and under the ILLCA.
7
2.5. Directors and Officers. The manager of Acquisition Sub holding
office immediately prior to the Merger Time shall be the manager of the
Surviving Entity immediately after the Merger Time. Immediately after the Merger
Time, the officers of the Surviving Entity shall be the officers of Acquisition
Sub holding office immediately prior to the Merger Time and the officers listed
on Schedule 2.5 hereto.
2.6. Conversion of Securities. At the Merger Time, by virtue of the
Acquisition and without any action on the part of Acquisition Sub, the Company
or the Members, (x) the outstanding interests in equity securities of
Acquisition Sub held by Xxxxxxx immediately prior to the Merger Time shall be
converted into a 100% membership interest in the Company, and (y) the Membership
Interest held by the Members immediately prior to the Merger Time shall be
converted into shares of Xxxxxxx Common based on the Xxxxxxx Common Value as set
forth on Schedule 2.6 attached hereto; provided, however, that those Members who
dissent from the Acquisition shall receive, in lieu of Xxxxxxx Common, cash in
an amount equal to their Pro Rata Percentage of the Total Transaction Value;
and, further, provided, that if as the result of the conversion of any Member's
Membership Interests upon consummation of the Acquisition, a fractional interest
in a share of Xxxxxxx Common would be deliverable under this Section 2.6, in
lieu of a fractional share being delivered therefor, such fractional interest
shall automatically be converted into the right to receive an amount in cash
(without interest) equal to the product of the Xxxxxxx Common Value multiplied
by the amount of such fractional interest. No such holder will be entitled to
dividends, voting rights or any other rights as a shareholder of Xxxxxxx in
respect of any fractional share. For all purposes of this Agreement (including
all computations pursuant to Schedule 2.6, the Total Transaction Value shall be
adjusted in accordance with the following provisions:
(a) Closing Balance Sheet. As soon as practicable but no later than
45 days following the Closing Date, the Company Managers shall deliver to
Xxxxxxx a balance sheet (the "Closing Balance Sheet") for the Company dated as
of the close of business the day prior to the date of Closing (the "Closing
Balance Sheet Date"), which Closing Balance Sheet shall be prepared by the
Company and reviewed by Xxxxx Xxxxxx and Company LLP ("Xxxxx Xxxxxx") and shall
set forth the assets and liabilities of the Company as of the close of business
on the Closing Balance Sheet Date. The Closing Balance Sheet shall present
fairly the financial position of the Company as of the Closing Balance Sheet
Date, in accordance with GAAP (the "Interim Financial Statement Standards").
(i) If Xxxxxxx determines to dispute in good faith that the
Closing Balance sheet has not been prepared in accordance with the Interim
Financial Statement Standards, Xxxxxxx shall notify the Member's
Representative in writing thereof (the "Xxxxxxx Notice") within 14 days
after delivery to the Xxxxxxx of the Closing Balance Sheet (the "Notice
Period"). The Xxxxxxx Notice shall set forth in reasonable detail the
alleged non-conformance and the amount(s) being disputed. If Xxxxxxx does
not deliver the Xxxxxxx Notice within the Notice Period, the Closing
Balance Sheet shall become final and binding upon all parties.
8
(ii) If the Xxxxxxx Notice is delivered within the Notice Period,
the Members' Representative and Xxxxxxx shall attempt in good faith to
resolve all dispute(s). If Xxxxxxx and the Members are unable to resolve
any disputed item within 14 days after receipt of the Xxxxxxx Notice, such
disputed item(s), together with each party's calculation of the Company's
Working Capital, Total Assets and Net Members' Capital (in each case, as
defined below) as of the Closing Balance Sheet Date, shall be submitted to
a nationally recognized "Big Five" accounting firm or its successor (other
than the Company's or Xxxxxxx'x regular auditors or their successors)
chosen by lot, which accounting firm shall be instructed to arbitrate such
disputed item(s) and determine the Company's Working Capital, Total Assets
and Net Members' Capital as of the Closing Balance Sheet Date. The
resolution of disputes by the accounting firm so selected shall be set
forth in writing and shall be conclusive and binding upon all parties and
adjustment may be entered thereon by any court having jurisdiction over the
parties. The costs of such resolution by such accounting firm shall be
borne one half by the Members, in proportion to their respective Pro Rata
Percentages, on the one hand, and one half by Xxxxxxx, on the other hand.
(A) The term "Working Capital" means the excess of the Company's
current assets over its current liabilities as of the Closing Balance
Sheet Date, calculated in accordance with the Interim Financial
Statement Standards, all as finally determined in accordance with this
Section 2.6(a).
(B) The term "Total Assets" means the Company's total assets,
calculated in accordance with the Interim Financial Statement
Standards, all as finally determined in accordance with this Section
2.6(a).
(C) The term "Net Members' Capital" means the excess of the
Company's total assets over its total liabilities as of the Closing
Balance Sheet Date, calculated in accordance with the Interim
Financial Statement Standards, all as finally determined in accordance
with this Section 2.6(a).
(b) Adjustment. The Total Transaction Value shall be adjusted
downward, on a dollar-for-dollar basis and in accordance with this paragraph
(b), to account for the negative differential (the "Target Differential"), if
any, between Target Working Capital, Target Total Assets, and Target Net
Members' Capital (as each such term is hereafter defined) and each of,
respectively, Working Capital, Total Assets, and Net Members' Capital. For
purposes hereof, the Target Differential shall be the greater of the respective
differentials between (a) Target Working Capital and Working Capital, (b) Target
Total Assets and Total Assets, and (c) Target Net Members' Capital and Net
Members' Capital. Target Working Capital shall be $11,000,000, Target Total
Assets shall be $39,000,000, and Target Net Members' Capital shall be
$20,000,000. As of the Merger Date, an amount of shares of Xxxxxxx Common equal
to 10% of the number of shares of Xxxxxxx Common issued pursuant to the
Acquisition shall be deposited with the Escrow Agent and held in a segregated
escrow account (the "Adjustment Escrow") in accordance with the terms of the
Escrow Agreement. Within three days following the determination of the Target
Differential, if any, the Escrow Agent shall return to Xxxxxxx the
9
number of shares valued at the Xxxxxxx Common Value equal to the Target
Differential and shall promptly distribute to the Members the remaining shares
held in the Adjustment Escrow to the Members, pro rata in respect of their
respective Pro Rata Percentages.
2.7. Closing of Company Transfer Books. As of the Closing, no transfer of
Membership Interests shall thereafter be made or recognized.
2.8. Delivery of Stock Certificates. At the Merger Time, Xxxxxxx shall
issue and deliver (or deliver irrevocable instructions to its Transfer Agent to
issue and deliver), as applicable, to such holder of Membership Interests a
certificate or certificates representing the shares of Xxxxxxx Common to be
issued to such holder pursuant to Section 2.6 less the shares of Xxxxxxx Common
to be deposited in the Adjustment Escrow and to be deposited in the escrow for
"Indemnification Escrow Shares" pursuant to the Consent, Indemnification and
Noncompete Agreement (as hereinafter defined), and, in the case of payment for
any fractional interest in Xxxxxxx Common, a check payable to the holder. From
and after the date of the Closing, each Member shall for corporate law purposes
only (including, without limitation, voting rights, dividends and other
distributions) be deemed to be a record and beneficial holder of the Xxxxxxx
Common issuable to such Member pursuant to Schedule 2.6 after giving effect to
the adjustment contemplated by Section 2.6(b) hereof.
2.9. Rights of the Company Members. From and after the Merger Time, the
holders of Membership Interests as of the Merger Time shall have no rights with
respect to such Membership Interests.
2.10. Taking of Necessary Action; Further Action. Xxxxxxx and Acquisition
Sub on the one hand, and the Company and the Members, on the other hand, shall
use reasonable efforts to take all such action (including action to cause the
satisfaction of the conditions precedent to the Acquisition) as may be necessary
or appropriate in order to effectuate the Acquisition as promptly as possible.
If, at any time after the Merger Time, any further action is necessary or
desirable to vest the Surviving Entity with full possession of all the rights,
privileges, immunities and franchises of the Company and Acquisition Sub, the
officers of the Surviving Entity are fully authorized in the name of either the
Company or Acquisition Sub or otherwise to take, and shall take, all such
action.
3. REPRESENTATIONS AND WARRANTIES
------------------------------
3.1. Representations and Warranties Concerning the Company. As a material
inducement to Xxxxxxx and Acquisition Sub to enter into this Agreement and
consummate the transactions contemplated hereby, the Company and the Company
Managers hereby jointly and severally represent and warrant to Xxxxxxx and
Acquisition Sub that all of the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement, and hereby covenant that
said statements will be correct and complete as of the Merger Date (as though
made as of the Merger Date and as though the Merger Date were substituted for
the date of this Agreement throughout such statements), except, in each case, as
set forth in the schedule attached to this Agreement setting forth exceptions to
the representations and
10
warranties set forth herein (the "Disclosure Schedule"). The Disclosure Schedule
will be arranged in sections corresponding to the numbered and lettered sections
contained in this Section 3.1, and no matter disclosed with respect to one
section shall be deemed to be an exception to another section unless the
applicability of such item to such other section is reasonably apparent.
Notwithstanding anything herein to the contrary, the disclosure of any contract
agreement, arrangement or understanding herein shall not affect or qualify any
representation with respect to the effectiveness or enforceability of such
contract, agreement, arrangement or understanding or the absence of breaches or
defaults thereunder, unless otherwise specifically disclosed.
(a) Organization, Qualification and Corporate Power. The Company is
a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Illinois. Each Subsidiary of the
Company, as identified in Section 3.1(a) of the Disclosure Schedule, is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, as identified in Section 3.1(a) of the Disclosure
Schedule. Each of the Company and its Subsidiaries has all requisite limited
liability company or corporate power, as the case may be, and authority to carry
on the business in which it is engaged and to own and use the properties owned
and used by it. True and correct copies of the Company's Articles of
Organization and Operating Agreement, in each case as amended to date, have been
delivered to Xxxxxxx. Each of the Company and its Subsidiaries is qualified to
conduct business and is in good standing under the laws of each jurisdiction
wherein the nature of its business or its ownership of property requires it to
be so qualified, except where the failure to be so qualified, would not
individually or in the aggregate, have a Material Adverse Effect. Section 3.1(a)
of the Disclosure Schedule lists all jurisdictions in which the Company and each
of its Subsidiaries is qualified to do business.
(b) Authorization of Transaction. The Company has all requisite
limited liability company power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the prior sentence, the Board of Managers of the Company have duly
authorized the execution, delivery and performance of this Agreement and the
consummation of the Acquisition. This Agreement constitutes the valid and
legally binding obligation of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or
hereafter in effect relating to the rights and remedies of creditors generally
or (ii) general principles of equity.
(c) Noncontravention. Subject to compliance with the HSR Act and
except as set forth on Section 3.1(c) of the Disclosure Schedule, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will (i) violate any applicable statute,
regulation, law, rule or common law doctrine, (ii) violate any judgment, order,
decree, stipulation, injunction, or other restriction of any governmental body,
governmental agency or court to which the Company is subject, (iii) breach any
provision of the Articles of Organization or Operating Agreement of the Company,
or (iv) conflict with, result in a breach of, constitute a default under (with
or without notice or lapse of time, or both), result in the acceleration of,
create in any party the right to accelerate, terminate,
11
modify or cancel, or require any notice under, or result in the creation of any
Security Interest upon any of the Company's (or any of its Subsidiaries') assets
pursuant to the terms of, any contract, agreement, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement for borrowed money,
instrument of indebtedness, Security Interest or other binding arrangement to
which the Company (or any of its Subsidiaries) is a party or by which it is
bound or to which any of its assets are subject, except, in the case of clauses
(i) and (iv) above, for those violations or breaches which would not,
individually or in the aggregate, have a Material Adverse Effect. Except
pursuant to the HSR Act and as set forth on Section 3.1(c) of the Disclosure
Schedule, the Company is not required to give any notice to, make any material
filing with, or obtain any authorization, consent, or approval of any
government, governmental agency or court, or any other Person in order for the
parties to consummate the Acquisition and the transactions contemplated by this
Agreement or in order that the Acquisition and such transactions not constitute
a breach or violation of, or result in a right of termination or acceleration or
any encumbrance on any of the Company's (or any of its Subsidiaries') assets,
pursuant to the provisions of any material agreement, arrangement or
understanding or any material license, franchise or permit.
(d) Capitalization. The authorized equity of the Company consists
solely of the Membership Interests, all of which are owned by the Members. Set
forth on Section 3.1(d) of the Disclosure Schedule is a true and correct
description of (i) the full legal names, current address and social security
number of each owner of Membership Interests, (ii) the Pro Rata Percentage of
each of the Members, and (iii) all of the current managers and officers of the
Company. None of the Membership Interests are evidenced or represented by any
certificate or comparable writing. The Company has never authorized, offered,
sold or issued any securities other than Membership Interests. All offerings,
sales and issuances by the Company of any Membership Interests have been
conducted in compliance with and in accordance with or in reliance upon
exemptions from all applicable Federal and state securities laws and all other
applicable state laws. Except as set forth on Section 3.1(d) of the Disclosure
Schedule, there are no currently outstanding or authorized options, warrants,
rights, contracts, rights of first refusal or first offer, calls, puts, rights
to subscribe, conversion rights, or other agreements or commitments to which the
Company is a party or which are binding upon the Company or any of the Members
providing for the issuance, disposition, or acquisition of any Membership
Interests or securities convertible into or exchangeable for Membership
Interests. There are no voting trusts, proxies, or any other agreements,
restrictions or understandings with respect to the voting of any of the
Membership Interests, except for those agreements expressly contemplated hereby.
(e) No Subsidiaries. Except as set forth in Section 3.1(e) of the
Disclosure Schedule, the Company does not own or control any direct or indirect
equity interest or equity participation in any corporation, partnership, limited
liability company, trust, or other business association or Subsidiary.
12
(f) Financial Statements; Books and Records.
(i) The Company has provided Xxxxxxx with the following financial
statements, correct and complete copies of which are set forth on Section
3.1(f) of the Disclosure Schedule (collectively the "Financial
Statements"): (A) consolidated and consolidating balance sheet and related
statements of income and changes in members' equity for the Company as of
and for the fiscal years ended December 31, 1997, 1996 and 1995 (December
31, 1997 being the "Most Recent Fiscal Year End"), each audited by Xxxxx
Xxxxxx and (B) unaudited consolidated and consolidating balance sheet and
related statements of income for the Company as of and for the three months
ended June 30, 1998 and year to date (the "Latest Financials"). The
Financial Statements are correct and complete in all material respects and
have been prepared in accordance with GAAP, except, in the case of the
Latest Financials, for the absence of footnotes and normal year-end
adjustments. The Financial Statements fairly present, on such basis, the
consolidated financial condition and results of operations of the Company
and its Subsidiaries as of the times and for the periods referred to
therein.
(ii) The Company's and its Subsidiaries' books and records are
and have been properly prepared and maintained in form and substance
adequate for preparing audited financial statements in accordance with
GAAP, and fairly and accurately reflect in all material respects all of the
assets and Liabilities of the Company and its Subsidiaries and all
contracts and transactions to which the Company or any of its Subsidiaries
is or was a party or by which the Company or any of its Subsidiaries or any
of their respective business or assets is or was affected. The minute books
and related records of the Company and its Subsidiaries, correct and
complete copies of which have been made available to Xxxxxxx, correctly
reflect in all material respects all resolutions adopted and all other
material corporate actions taken at all meetings or through consents of the
managers or directors (including committees thereof) and the members or
shareholders.
(g) Recent Events. Except as set forth in Section 3.1(g) of the
Disclosure Schedule, since June 30, 1998, neither the Company nor any of its
Subsidiaries has experienced or suffered any Material Adverse Effect. Without
limiting the generality of the foregoing, except as set forth on the Latest
Financials or Section 3.1(g) of the Disclosure Schedule, since June 30, 1998,
neither the Company nor any of its Subsidiaries:
(i) sold, leased, transferred or assigned any of its assets,
tangible or intangible, with an aggregate value greater than $100,000,
other than in the Ordinary Course of Business;
(ii) accelerated, terminated, modified, canceled or committed any
breach of any contract, lease, sublease, license, or sublicense (or series
of related contracts, leases, subleases, licenses, and sublicenses) either
involving more than $50,000 or otherwise outside of the Ordinary Course of
Business;
13
(iii) canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more than
$50,000 or outside of the Ordinary Course of Business;
(iv) experienced any damage, destruction, or loss to its property
in excess of $50,000 (whether or not covered by insurance);
(v) created or suffered to exist any Security Interest upon any
of its assets, tangible or intangible, outside the Ordinary Course of
Business or securing any Liabilities in the aggregate in excess of
$100,000;
(vi) issued, sold, or otherwise disposed of any of its Membership
Interests or other equity securities, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion or exercise)
any interest in the Company or any of its equity securities, or any
securities convertible or exchangeable into any of its Membership Interests
or other equity securities;
(vii) declared, set aside, or paid any dividend or distribution
with respect to the Membership Interests or any of its equity securities
(whether in cash or in kind) or redeemed, purchased, or otherwise acquired
any of the Membership Interests or any of its equity securities;
(viii) entered into any transaction, arrangement or contract
with, or distributed or transferred any property or other assets to, any
officer, director, Member or other insider or Affiliate of the Company or
any of its Subsidiaries (other than salaries and employee benefits in the
Ordinary Course of Business and the contemplated sale of IDR);
(ix) made or committed to make any capital expenditures or
entered into any other material transaction outside the Ordinary Course of
Business involving an expenditure in excess of $50,000;
(x) amended or modified in any material respect any Plan (beyond
any amendments and modifications reflected in true and complete copies of
such Plans delivered to Xxxxxxx);
(xi) entered into any employment agreement for a base salary in
excess of $250,000 or collective bargaining agreement or granted any
increase in excess of $25,000 in the salary of any officer or management
employee of the Company (or increase in excess of $15,000 in the case of
any non-management employee) or paid or committed to pay any bonus to any
officer or employee;
(xii) changed in any material respect the manner in which the
business has been conducted, including, without limitation, billing of
clients or collection of accounts receivable, purchases of goods and
services or payment of accounts payable;
14
(xiii) changed the accounting principles, methods or practices or
any change in the depreciation or amortization policies or rates, except in
each case as required by GAAP other than applying SOP 98-1 and other
related pronouncements to 1998 Financial Statements;
(xiv) changed the relationships with any client, contractor or
supplier which might reasonably be expected to result in a Material Adverse
Effect; or
(xv) entered into any binding commitment (orally or in writing)
to do any of the foregoing.
(h) Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any Liability (and there is no Basis for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation, claim, or
demand against the Company or any of its Subsidiaries giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Latest
Financials, (ii) Liabilities (since June 30, 1998) in the Ordinary Course of
Business (none of which relates to any breach of contract, breach of warranty,
tort, infringement, or violation of law or arose out of any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand), (iii)
Liabilities in an aggregate amount of less than $10,000, and (iv) Liabilities
otherwise expressly disclosed in this Agreement or on the Disclosure Schedule
(it being understood that except as set forth in Section 3.1(f) no
representation or warranty is being made regarding the revenues or results of
operations of the Company).
(i) Tax Matters.
(i) Each of the Company and its Subsidiaries (including IDR) has
filed all Tax Returns that it was required to file on or prior to the date
hereof. All such Tax Returns were true, correct and complete in all
material respects and accurately reflected all Liability for Taxes for the
periods covered thereby and, with respect to any Member, accurately
reflected information necessary for such Member to determine his, her, or
its Liability for unpaid Taxes. The Liability of the Company and its
Subsidiaries for unpaid Taxes, whether to any governmental authority or to
another Person such as under a tax sharing agreement, for all periods
ending on or before the Merger Date do not exceed the amount of the
Liability accruals for Taxes (excluding reserves for deferred Tax assets or
deferred Tax Liabilities) on the Latest Financials. To the Knowledge of the
Company, neither the Company nor any of the Subsidiaries have received
notice of any claim made by an authority in a jurisdiction where the
Company or any of its Subsidiaries do not file Tax Returns that any of the
Company and its Subsidiaries is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of the
Company that arose in connection with any failure (or alleged failure) to
pay any Tax when due.
(ii) The Company and its Subsidiaries have withheld and paid when
due all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party.
15
(iii) The Company has no Knowledge of any Basis on which any
taxing authority could assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any
Tax Liability of the Company, of any of its Subsidiaries or of any Member
relating to the Company or any of its Subsidiaries either (A) claimed or
raised by any taxing authority in writing or (B) as to which the Company
has Knowledge. The Company has previously provided to Xxxxxxx correct
copies of all Federal, state, local, and foreign Tax Returns filed with
respect to the Company and its Subsidiaries for the prior three year end
periods. None of such Tax Returns have been audited by a government or
taxing authority, nor is subject to any audit or other Tax Proceeding in
process, pending, or threatened (either in writing, or verbally, formally
or informally) or are expected to be asserted with respect to Taxes (or the
collection of Taxes) of any of the Company, its Subsidiaries, or a Member
(to the extent such Taxes relate to the Company or any of its
Subsidiaries). There are no examination reports or statements of
deficiencies assessed against or agreed to by the Company, any of its
Subsidiaries or any of its Members relating to the Company or any of its
Subsidiaries for such taxable periods.
(iv) Neither the Company nor any of its Subsidiaries has filed a
consent under Section 341(f) of the Code concerning collapsible
corporations. Neither the Company nor any of its Subsidiaries has made any
material payments, is obligated to make any material payments, or is a
party to any agreement that would obligate it to make any material payments
that will not be deductible under Section 280G of the Code. Neither the
Company nor any of its Subsidiaries has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(A)(ii) of the
Code. Neither the Company nor any of its Subsidiaries is a party to any tax
allocation or sharing agreement. Neither the Company nor any of its
Subsidiaries has been a member of an Affiliated Group which filed federal
income tax returns, other than a group of which the Company was the common
parent. Neither the Company nor any of its Subsidiaries has any Liability
for Taxes owed by any Person (other than the Company), including without
limitation, (A) as a transferee, assignee or other successor or (B)
pursuant to a Tax sharing agreement or other contract.
(v) Neither the Company nor any of its Subsidiaries has waived
any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to any Tax assessment or deficiency.
(j) Title and Condition of Properties.
(i) Neither the Company nor any of its Subsidiaries owns any real
property.
(ii) The leases described in Section 3.1(j) of the Disclosure
Schedule (the "Property Leases") cover all of the real estate leased, used
or occupied by the Company or any of its Subsidiaries. Each of the Property
Leases is in full force and
16
effect and the Company or one of its Subsidiaries holds a valid and
existing leasehold or subleasehold interest under each of such Property
Leases. The Company has delivered to Xxxxxxx complete and accurate copies
of each of the Property Leases and none of such Property Leases has been
modified in any material respect, except to the extent that such
modifications are disclosed by the copies delivered to Xxxxxxx. Neither the
Company nor any of its Subsidiaries is in default, and to the Knowledge of
the Company no circumstances exist which would result in such default
(including upon the giving of notice or the passage of time, or both),
under any of such Property Leases, and no other party thereto has the right
to terminate, accelerate performance under or otherwise modify any of such
leases. To the Knowledge of the Company, no lessor under any such lease is
in default under any of such leases in its duties to the lessee. Except as
set forth in Section 3.1(j) of the Disclosure Schedule, neither the Company
nor any of its Subsidiaries has assigned, transferred, conveyed, subjected
to a Security Interest, or otherwise encumbered any interest in any of the
Property Leases.
(iii) The Company or one of its Subsidiaries owns good and
marketable title, free and clear of all Security Interests, to all of the
personal property and assets reflected on the Latest Financials or acquired
after June 30, 1998, except for (A) assets with an aggregate original
purchase price of less than $100,000 which have been disposed of to non-
affiliated third parties since June 30, 1998, in the Ordinary Course of
Business, (B) Security Interests securing liabilities reflected on the
Latest Financials and (C) Security Interests for current Taxes not yet due
and payable.
(iv) The Company's computer hardware, equipment and other
tangible personal property and assets are in good condition and repair,
except for ordinary wear and tear not caused by neglect, and are useable
for their respective intended purposes in the Ordinary Course of Business.
The personal property and assets shown on the Latest Financials or acquired
after June 30, 1998, the lease rights under the Property Leases and leases
of personal property and the Intellectual Property owned or used by the
Company or any of its Subsidiaries under valid license, collectively
include all assets necessary to the conduct of the Company's and its
Subsidiaries business as presently conducted. None of the Members, other
employees or independent contractors of the Company or their respective
Affiliates owns any rights, other than as would exist upon liquidation or
distribution of the Company, in any material assets, real or personal,
which are used by the Company or any of its Subsidiaries in its business.
(k) Intellectual Property.
(i) Section 3.1(k) of the Disclosure Schedule contains a complete
list and an accurate functional description by category and indication of
status (completed or in process) of all Patents, Trademarks, Copyrights,
Software, Licenses-In, Licenses-Out and other material items of
Intellectual Property which are owned, licensed by, licensed to, used or
held for use in or necessary for the conduct of the business of the Company
or any of its Subsidiaries as such business is currently conducted and
presently contemplated
17
to be conducted, or as to which the Company or any of its Subsidiaries has
a contractual right to an assignment.
(ii) No Person has any Security Interest (other than the right to
use Software under license) in the Company's or any of its Subsidiaries'
interest in any Intellectual Property owned by the Company or any of its
Subsidiaries. The Company and each of its Subsidiaries has all rights to
use the Intellectual Property owned or used by it in the manner in which
such Intellectual Property is currently being used. Neither the Company nor
any of its Subsidiaries is under any obligation to pay any royalty or other
compensation to any third party or to obtain any approval for use of any of
the Intellectual Property. To the Knowledge of the Company, none of the
Intellectual Property is subject to any outstanding judgment, order,
decree, stipulation, injunction or charge; no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand is pending or,
to the Knowledge of the Company, threatened, which challenges the legality,
validity, enforceability, use or ownership of any of the Intellectual
Property.
(iii) No breach or default (or event which with notice or lapse
of time or both would result in a breach or default) by the Company or any
of its Subsidiaries exists or has occurred under any material License-In or
other material agreement pursuant to which the Company or any of its
Subsidiaries uses any Intellectual Property, and the consummation of the
transactions contemplated by this Agreement will not violate or conflict
with or constitute a breach or default (or an event which, with notice or
lapse of time or both, would constitute a breach or default) or result in a
forfeiture under, or constitute a Basis for termination of, any such
License-In or such other agreement or impair the Company's or any of its
Subsidiaries' ability after consummation of the Acquisition to use the
Software in the same manner as such Software is currently used by the
Company or such Subsidiary, except where such breaches, defaults,
violations, conflicts or other events which would not, individually or in
the aggregate, result in a Material Adverse Effect.
(iv) Each of the Company and its Subsidiaries owns or has the
right to use all the Intellectual Property necessary to provide, produce,
sell and license the services and products currently provided, produced,
sold and licensed by the Company or any of its Subsidiaries, and to conduct
the Company's or any of its Subsidiaries' business as presently conducted,
and the consummation of the transactions contemplated hereby will not alter
or impair any such rights, including any right of the Company or any of its
Subsidiaries to use or sublicense any Intellectual Property owned by
others. The Intellectual Property includes all patents, trademarks, trade
names, service marks, copyrights, mask work rights and trade secrets, and
the Software includes all software, which are necessary to operate the
business of the Company and each of its Subsidiaries as it is presently
conducted and to satisfy and perform the contracts, commitments,
arrangements and understandings with customers of the Company and each of
its Subsidiaries. The Company has no Knowledge of any reason the Company
and each of its Subsidiaries will not be able to continue to own, possess
or have access to, and to use, license and sub-license as applicable, on
reasonable terms, all Intellectual Property and
18
other proprietary rights necessary for the lawful conduct of its business
as presently conducted and currently contemplated to be conducted, without
any infringement or conflict with the rights of others.
(v) No Intellectual Property owned by the Company or any of its
Subsidiaries, and no product or service practiced, offered, licensed or
sold by the Company or any of its Subsidiaries, infringes or, to the
Knowledge of the Company, is being infringed by any trademark, trade name,
copyright, trade secret, patent, right of publicity, right of privacy or
other proprietary right of any Person or would give rise to an obligation
to render an accounting to any Person as a result of co-authorship, co-
invention or an express or implied contract for any use or transfer.
Neither the Company nor any of its Subsidiaries has received notice of any
adversely held patent, invention, trademark, copyright, service xxxx, trade
name or trade secret of any other Person alleging or threatening to assert
that the Company's or any of its Subsidiaries' use of any of the
Intellectual Property infringes upon or is in conflict with any
intellectual property or proprietary rights of any third party. The
Company, has no Knowledge of any Basis for any claim, threatened claim or
any suit or action asserting any such infringement or conflict or asserting
that the Company or any of its Subsidiaries does not have the legal right
to own, enforce, sell, license, sublicense, lease or otherwise use any such
Intellectual Property, process, product or service, and the Company has no
Knowledge of any facts which should give such Person reason to believe that
there exists any Basis for such claim, threatened claim or suit or that any
such claim, threatened claim or suit may be asserted or instituted in the
future.
(vi) Neither the Company nor any of its Subsidiaries has sent or
otherwise communicated to any other Person any notice, charge, claim or
assertion of, and the Company has no Knowledge of any present, impending or
threatened infringement by any other Person of any Intellectual Property
owned by the Company or any of its Subsidiaries.
(vii) Except as disclosed in Section 3.1(k) of the Disclosure
Schedule, all the Company's and each of its Subsidiaries' Patents,
Trademarks and Copyrights listed in Section 3.1(k) of the Disclosure
Schedule as having been issued by, registered with or filed with the United
States Patent and Trademark Office or Register of Copyrights or the
corresponding offices of other countries identified in Section 3.1(k) of
the Schedule have been so duly registered, filed in or issued, as the case
may be, and have been properly maintained and renewed in accordance with
all applicable provisions of law and administrative regulations in the
United States and each such other country. The Company and each of its
Subsidiaries has used reasonable efforts to protect its rights in the
Intellectual Property. The Company or one of its Subsidiaries owns all
right, title and interest in and to the Intellectual Property, other than
the Software listed on Exhibit 2 to Section 3.1(k) Disclosure Schedule, as
to which the Company has a valid license. No current licenses for the use
of the Intellectual Property requires the Company or any of its
Subsidiaries to apply for or enforce appropriate legal protection of such
licensed Intellectual Property.
19
(viii) Each of the Company's and each of its Subsidiaries'
current or former employees and those current or former independent
contractors retained by the Company or any of its Subsidiaries who, either
alone or in concert with others, created or creates, developed or develops,
invented or invents, discovered or discovers, derived or derives,
programmed or programs or designed or designs any of the Intellectual
Property, has entered into a written agreement with the Company or any of
its Subsidiaries, copies of which have heretofore been furnished to
Xxxxxxx. No former employees or independent contractors of the Company or
any of its Subsidiaries have any claims or rights to any of the
Intellectual Property necessary for the conduct of the Company's or any of
its Subsidiaries' business as now conducted. To the Knowledge of the
Company, no employee of the Company or any of its Subsidiaries is a party
to or otherwise bound by any agreement with or obligated to any other
Person (including, any former employer) which in any respect conflicts with
any obligation, commitment or job responsibility of such employee to the
Company or one of its Subsidiaries under any agreement to which currently
he or she is a party or otherwise.
(ix) Exhibit 3 to Section 3.1(k) of the Disclosure Schedule
identifies each Person to whom the Company or any of its Subsidiaries has
sold, licensed, leased or otherwise transferred or granted any interest or
rights to any Intellectual Property, other than Intellectual Property
licensed to end users pursuant to standard, non-exclusive "shrink wrap"
license agreements in the Ordinary Course of Business, none of which is a
license of any source code ("Shrink Wrap Licenses"). The Company has
previously delivered to Xxxxxxx complete and accurate copies of all
agreements relating to each such sale, license, lease or other transfer or
grant. The Company has delivered to Xxxxxxx copies of all copyright and
trademark registration certificates and all letters patent.
(x) The Company has documented all of the Software owned by it or
any of its Subsidiaries and used in its or any of its Subsidiaries'
business in sufficient detail that a reasonably competent computer
professional conversant with the language in which such Software written
using such documentation alone, would be able to understand, support and
modify such Software. To the Knowledge of the Company and the Members, all
of the data used in the Software was obtained from public sources and is
not subject to any confidentiality obligation imposed on the Company.
(xi) To its Knowledge, neither the Company nor any of its
Subsidiaries has not taken any actions under the law of any applicable
foreign jurisdictions where the Company or any of its Subsidiaries has
marketed or licensed Software that would restrict or limit the ability of
the Company or any of its Subsidiaries to protect, or prevent it from
protecting, its ownership interests in, confidentiality rights of, and
rights to market, license, modify or enhance the Software.
(xii) Neither the Company nor any of its Subsidiaries has
granted any third party the right to market the Company's or any of its
Subsidiaries' Software.
20
(l) Contracts. Except as set forth on Schedule 3.1(l), with respect
to each written agreement that would be material to the Company and its
Subsidiaries as a whole (a "Material Contract"): (A) the Material Contract is
in full force and effect; (B) the Material Contract will continue to be in full
force and effect on identical terms immediately after the Merger Date; (C)
neither the Company nor any of its Subsidiaries (nor, to the Knowledge of the
Company, any other party) is in material breach or default (including, with
respect to any express or implied warranty), and no event has occurred which
with notice or lapse of time or both would constitute a material breach or
default or permit termination, modification, or acceleration, under any Material
Contract, except for any breaches, defaults, terminations, modifications or
accelerations which have been cured or waived; and (D) to the Knowledge of the
Company, no party has repudiated any material provision of any such Material
Contract. To the Knowledge of the Company, neither the Company nor any of its
Subsidiaries is a party to any verbal contract, agreement, or other arrangement
which, if reduced to written form, would be a Material Contract. Correct and
complete copies of the general forms of client engagement and services used by
the Company and each of its Subsidiaries have been made available to Xxxxxxx.
Except for those Material Contracts set forth on Section 3.1(l) of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any fixed fee or capped price contracts or engagement arrangements (the
"Fixed Rate Engagements"), nor does the Company nor any of its Subsidiaries have
any outstanding offers, bids or proposals to perform any services on a fixed fee
or capped basis in an amount in excess of $1,500,000 per year. With respect to
the Company's Fixed Rate Engagements, the ratio of the amount of revenues
recognized to date (in the aggregate) by the Company compared to the amount of
revenues payable thereunder is reasonably proportionate to the ratio of the
amount of work completed under such Fixed Rate Engagements to the work required
thereunder.
(m) Notes and Accounts Receivable. All notes and accounts receivable
of the Company and each of its Subsidiaries are reflected properly on its books
and records, such receivables are valid receivables subject to no set-offs or
counterclaims, are current and collectible in the aggregate amount shown, and
will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Latest
Financials, as adjusted for operations and transactions through the Merger Date
in accordance with the past custom and practice of the Company and its
Subsidiaries. Since June 30, 1998, there has not been an adverse change of more
than 10% in the aggregate amount of the accounts receivable of the Company or
any of its Subsidiaries or an increase of the average age of such receivables of
15 days.
(n) Intentionally Omitted.
(o) Litigation. Section 3.1(o) of the Disclosure Schedule sets forth
each instance in which the Company or any of its Subsidiaries (i) is subject to
any unsatisfied judgment, order, decree, stipulation or injunction or (ii) is a
party to or, to the Knowledge of the Company, is threatened to be made a party
to, any complaint, action, suit, proceeding, hearing, or investigation of or in
any court or quasi-judicial or administrative agency of any Federal, state,
local, or foreign jurisdiction or before any arbitrator for an amount in
controversy in excess of $100,000 individually or $250,000 in the aggregate.
None of the
21
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 3.2(o) of the Disclosure Schedule could reasonably be expected to
result in any Material Adverse Effect. To the Knowledge of the Company, there
does not exist a Basis on which any such complaint, action, suit, proceeding,
hearing, or investigation may be brought or threatened against the Company or
any of its Subsidiaries that could have a Material Adverse Effect on the
Company.
(p) Employees; Employment Matters.
(i) Except as set forth in Section 3.1(p) of the Disclosure
Schedule, to the Knowledge of the Company, no employee or group of
employees of the Company or any of its Subsidiaries who have in the last
twelve months generated more than $500,000 in revenues of the Company and
its Subsidiaries has notified the Company that they intend to terminate
their employment with the Company or any of its Subsidiaries generally or
as a result of the transactions contemplated hereby or otherwise. Neither
the Company nor any of its Subsidiaries is a party to or bound by any
collective bargaining agreement, and neither the Company nor any of its
Subsidiaries has experienced any strikes, grievances, other collective
bargaining disputes or, to the Knowledge of the Company, claims of unfair
labor practices. The Company has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Company or any of its Subsidiaries.
(ii) Section 3.1(p) of the Disclosure Schedule contains a true,
correct and complete list setting forth the names and current salaries or
rates of compensation of all employees of the Company and each of the
Subsidiaries with an annual base salary of at least $50,000 and independent
contractors who render services to the Company or any of its Subsidiaries
on more than a single occasion who are expected to be paid at least $50,000
in 1998. Except as disclosed on Section 3.1(p) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has any unsatisfied
Liability to any previously terminated employee or independent contractor.
The Company has made available all written (and summarized all oral)
employee handbooks, policies, programs and arrangements to Xxxxxxx.
(iii) Except as set forth in Section 3.1(p) of the Disclosure
Schedule, all Persons employed by the Company and each of its Subsidiaries
are employees at will. Except as set forth in Section 3.1(p) of the
Disclosure Schedule, none of the employees of the Company or any of its
Subsidiaries are subject to noncompete/nonsolicitation covenants in favor
of the Company.
(iv) The Company and each of its Subsidiaries has materially
complied with all applicable laws relating to labor, including, without
limitation, any provisions thereof relating to wages, termination pay,
vacation pay, fringe benefits, collective bargaining and the payment and/or
accrual of the same and all Taxes, insurance and all other costs and
expenses applicable thereto, and neither the Company
22
nor any of its Subsidiaries is liable for any material arrearage, or any
Taxes, costs or penalties for failure to comply with any of the foregoing.
Without limiting the generality of the foregoing, neither the Company nor
any of its Subsidiaries has incurred a violation of Part 6 of Subtitle B of
Title I of ERISA ("COBRA") or other applicable state insurance continuation
law. No material COBRA or other state insurance continuation law violation
exists or will exist with respect to any employees of the Company or any of
its Subsidiaries prior to the Merger Date.
(v) To the Knowledge of the Company, each Person whom the Company
or any of its Subsidiaries currently retains as an independent contractor
or previously retained as an independent contractor qualifies, or at all
times while performing services for the Company or any of its Subsidiaries
qualified, as an independent contractor and not as an employee of the
Company or any of its Subsidiaries, under the Code and all applicable state
laws. Neither the execution of this Agreement nor the consummation of the
Acquisition shall cause the Company or any of its Subsidiaries to be in
breach of any agreement with any employee, contractor or consultant or
cause the Company or any of its Subsidiaries to be liable to pay any
severance or other amount to any of its employees, contractors or
consultants.
(q) Employee Benefit Plans.
(i) All Plans of the Company and each of its Subsidiaries which
are "employee benefit plans" within the meaning of Section 3(3) of ERISA
are listed in Section 3.1(q) of the Disclosure Schedule. Each Plan is in
material compliance with its terms and with ERISA and other applicable laws
(including, without limitation, compliance with the health care
continuation requirements of COBRA and any proposed regulations promulgated
thereunder), and all agreements and instruments applicable to any Plan.
Section 3.1(q) of the Disclosure Schedule sets forth each former employee
of the Company or any of its Subsidiaries entitled to COBRA benefits and
the remaining period of such benefits. The Company has received favorable
determination letters as to the qualification under the Code of each Plan
which is a pension plan, as defined in Section 3(2) of ERISA ("Pension
Plan"), and, to the Company's Knowledge, there have been no amendments or,
to the Company's Knowledge, other developments since the date of such
determination letters which would cause the loss of such qualified status.
No material violation of ERISA has occurred within the last 6 years in
connection with the administration of any of the Plans, and there are no
actions, suits, or claims (other than routine, non-contested claims for
benefits) pending or threatened against the Plans, or any administrator or
fiduciary thereof, which could result in any material Liability.
(ii) With respect to all present Plans, the Company has
heretofore made available to Xxxxxxx true and complete copies of each of
the following to the extent such documents exist or are applicable:
23
(A) the Plan documents (and any applicable trust agreement
or insurance contract and including descriptions of vacation,
severance pay, sickness, and separation policies);
(B) the most recent Internal Revenue Service determination
letter request relating to each of the Pension Plans;
(C) the summary plan description (as currently in effect)
and any summary of material modification for each of the Plans;
(D) the most recent Annual Report (Form 5500 Series), and
accompanying schedules, filed for each of the Plans, and the most
recent summary annual report furnished for each of the Plans;
(E) the most recent actuarial valuations, and latest
financial statements for each of the Plans; and
(F) all documents filed with the Internal Revenue Service,
Department of Labor or Pension Benefit Guaranty Corporation since
January 1, 1992.
There is and has been no material violation of ERISA known to the Company with
respect to the filing of applicable reports, documents, and notices regarding
such past or present Plans with the Secretary of Labor or the Secretary of the
Treasury or the furnishing of such documents to the participants or
beneficiaries of such Plans.
(iii) Except as disclosed in Section 3.1(g) of the Disclosure
Schedule, each Plan maintained by the Company is maintained under a plan
document which does not provide for other participating employers except
for the Company or any ERISA Affiliate of the Company and no Plan provides
or has provided credit with respect to service other than with the Company
or any ERISA Affiliate of the Company.
(iv) Neither the Company nor any ERISA Affiliate of the Company
nor any of their employees, shareholders, or directors has engaged in any
transaction in connection with which any of them would be subject either to
a civil penalty assessed pursuant to Section 502 of ERISA or a tax imposed
by Section 4975 of the Code, other than transactions which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. The execution and performance of this Agreement will not involve
any prohibited transaction within the meaning of Section 406 of ERISA,
other than transactions which would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(v) None of the assets of any of the Plans is or has been
invested in any property constituting employer real property or any
employer security within the meaning of Section 407(d) of ERISA.
24
(vi) Intentionally Omitted.
(vii) Full payment as of the Merger Date will have been made of
all amounts which the Company and any ERISA Affiliate of the Company are
required, under the terms of all Plans, to have paid as contributions to
such Plans as of the last day of the most recent fiscal year prior to the
Merger Date.
(viii) The execution and performance of this Agreement will not
constitute a stated triggering event under any Plan or employment agreement
that will result in any material payment (whether of severance pay or
otherwise) becoming due to any employee of the Company or ERISA Affiliate
of the Company.
(ix) Neither the Company nor any ERISA Affiliate of the Company
provides, nor have they at any time provided, coverage under any welfare
plan (a Welfare Plan (as defined in Section 3(l) of ERISA) (including, but
not limited to, life insurance, disability, medical, dental, prescription
drugs, or accidental death or dismemberment) to any of their retirees,
other than any continuation or conversion coverage which any such retiree
may have purchased at his own expense, or a defined benefit plan (as
defined in Section 3(35) of ERISA).
(x) The financial statements of each Pension Plan as of the end
of the most recent plan year for which such statements are available, and
the list of the investments of such Pension Plan as of the most recent plan
year end for which such statements are available, accurately reflect the
financial conditions of the Pension Plans as of the date of such
statements, and there have been no material changes in such investments
between such date and the Merger Date.
(xi) To the Company's Knowledge, there have been no statements,
either written or oral, or communications made or materials provided to any
employee or former employee of the Company or any ERISA Affiliate of the
Company by any officer, director, employee, agent or representative of the
Company that provide for or could be construed as a contract or promise by
the Company or any ERISA Affiliate of the Company to provide for any
pension, welfare, or other insurance-type benefits to such employee or
former employee, whether before or after retirement, other than benefits
under the Plans.
(xii) Neither the Company nor any ERISA Affiliate of the Company
currently contributes, or at any time in the past has contributed to a
defined benefit plan (as defined in Section 3(35) of ERISA), including, but
not limited to, each multiemployer plan, as defined in Section 3(37) of
ERISA.
(r) Licenses, Permits and Approvals. Section 3.1(r) of the Disclosure
Schedule lists all material governmental and regulatory licenses, permits and
approvals necessary to the conduct of the Company's and each of its
Subsidiaries' business. All such licenses, permits and approvals are in full
force and effect. There are no violations by the
25
Company or any of its Subsidiaries of, or any claims or proceedings, pending or,
to the Knowledge of the Company, threatened, challenging the validity of or
seeking to discontinue, any such licenses, permits or approvals, except for such
violations, claims or proceedings which would not, individually or in the
aggregate, have a Material Adverse Effect.
(s) Unlawful Payments. No payments of either cash or other
consideration have been made to any Person by the Company, any of its
Subsidiaries or the Members or, to the Knowledge of the Company, on behalf of
the Company by any agent, employee, officer, director, shareholders or other
Person, that were unlawful under the laws of the United States or any state or
any other foreign or municipal government authority having appropriate
jurisdiction over the Company.
(t) Compliance with Laws. The Company and each of its Subsidiaries
and each of their respective facilities are in compliance in all material
respects with and have not in the past violated any applicable law, rule or
regulation of any Federal, state, local or foreign government or agency thereof,
including without limitation, environmental laws and laws relating to labor and
employment, and no notice, claim, complaint, action, suit, proceeding,
investigation or hearing has been received by the Company or any of its
Subsidiaries or filed, commenced or, to the Knowledge of the Company threatened
against the Company or any of its Subsidiaries alleging any such violation,
except in each instance for such failures to comply and such notices, claims,
complaints, actions, suits, proceedings, investigations or hearings which would
not, individually or in the aggregate, have a Material Adverse Effect.
(u) Suppliers and Clients. During the past twelve months, no material
licensor, vendor, supplier or licensee, or any client of the Company or any of
its Subsidiaries accounting for more than 1% of the Company's or any of its
Subsidiaries' revenues during such period, has canceled or otherwise materially
adversely modified its relationship with the Company or any of its Subsidiaries
and, to the Knowledge of the Company, no such Person has any intention to do so,
and, to the Knowledge of the Company, there are no disputes or notices of
dissatisfaction with or from any such client of the Company or any of its
Subsidiaries, which is reasonably likely to result in a cancellation,
termination or materially adverse modification of any such relationship and, to
the Knowledge of the Company, the consummation of the transactions contemplated
hereby shall not adversely affect any relationships with such clients.
(v) Insurance.
---------
(i) Attached as Schedule 3.1(v) is a list of each insurance
policy (including policies providing property, casualty, Liability, and
workers' compensation coverage and bond and surety arrangements) currently
carried by the Company or any of its Subsidiaries.
(ii) With respect to each such insurance policy: (A) the
consummation of the Acquisition will not cause a default or require any
consent under any such policy; (B) to the Knowledge of the Company, all
such insurance is in full force and effect, and the Company and the
Companies' Subsidiaries are in compliance
26
with all requirements and provisions thereof. The Company has not suffered
any adverse loss experience which could reasonably be expected to cause its
insurance coverage not to be renewed upon the expiration thereof at
premiums substantially equivalent to those currently being paid or
otherwise at commercially reasonable rates.
(w) Warranty. All services previously rendered by the Company and
each of its Subsidiaries have been in material conformity with all applicable
contractual commitments and all express and implied warranties, and the Company
and each of its Subsidiaries has no Liability (and the Company has no Knowledge
of any Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand giving rise to any Liability)
for damages in connection therewith, subject only to the reserve for customer
claims set forth on the face of the Latest Financials as adjusted for the
passage of time through the Merger Date in accordance with the past custom and
practice of the Company and its Subsidiaries. No services provided by the
Company or any of its Subsidiaries are subject to any contractual guaranty,
warranty, or other indemnity beyond the Company's or any of its Subsidiaries'
applicable standard terms and conditions of engagement. Neither the Company nor
any of its Subsidiaries is obligated to perform services or client work for
which it will not be paid in order to correct work previously performed that was
incorrect or deficient, complete work in excess of the fixed rate limit with
respect to a particular project or otherwise, other than reasonable and
customary efforts to maintain client satisfaction consistent with the size and
scope of a particular project and consistent with maintaining the reasonable
profitability of such project.
(x) Transaction-Related Accounting Matters. Neither the Company nor
any of its Subsidiaries has taken or agreed to take any action that it knows or
has been advised would prevent the transactions contemplated hereby from being
accounted for as a pooling of interests in accordance with GAAP.
(y) Brokers' Fees. None of the Company or the Company Managers has
any Liability or obligation to pay any fees or commissions to any broker or
finder with respect to the transactions contemplated by this Agreement for which
Xxxxxxx could become liable or otherwise obligated, except for the fees and
expenses, not to exceed $3,000,000 in aggregate, of Xxxxxxxxx, Lufkin & Xxxxxxxx
Securities Corporation, pursuant to its engagement Letter with the Company,
which letter has previously been delivered to Xxxxxxx.
(z) Potential Conflicts of Interest. Except as set forth on Schedule
3.1(z) hereof, no officer, manager, director or member of the Company or any of
its Subsidiaries: (i) owns, directly or indirectly, any interest in (excepting
not more than 5% stock holdings for investment purposes in securities of
publicly held and traded companies) or is a shareholder, officer, director,
employee or consultant of any Person which is a competitor, lessor, lessee,
customer or supplier of the Company or any of its Subsidiaries; (ii) owns,
directly or indirectly, in whole or in part, any interest in Intellectual
Property which the Company or any of its Subsidiaries is using or the use of
which is necessary for the business of the Company or any of its Subsidiaries;
(iii) has any loan outstanding to or, to the Knowledge of the Company, any cause
of action or other claim whatsoever against the Company or any of its
Subsidiaries,
27
except for claims in the Ordinary Course of Business, such as for accrued
salary, bonus, vacation pay and benefits under Benefit Plans and similar matters
and agreements existing on the date hereof; (iv) has made, on behalf of the
Company or any of its Subsidiaries, any payment or commitment to pay any
commission, fee or other amount to, or purchase or obtain or otherwise contract
to purchase or obtain any goods or services from, any corporation or other
Person of which any officer, manager or director of the Company or any of its
Subsidiaries, or, a relative of any of the foregoing, is a partner or
shareholder (except stock holdings solely for investment purposes in securities
of publicly held and traded companies). No Affiliate of any Member has any claim
against the Company, other than for wages for services performed and related
business expenses incurred in the Ordinary Course of Business.
(aa) Disclosure. None of the representations and warranties of the
Company contained in this Agreement or the Disclosure Schedule contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they were made, not misleading. There is no material fact which has not
been disclosed to Xxxxxxx which results in, or could reasonably be anticipated
to result in, a Material Adverse Effect on the Company (it being understood that
except as set forth in Section 3.1(f) no representation or warranty is being
made regarding the revenues or results of operations of the Company).
3.2. Representations and Warranties of Xxxxxxx and Acquisition Sub. As a
material inducement to the Company and the Company Managers to enter into this
Agreement and consummate the transactions contemplated hereby, Xxxxxxx and
Acquisition Sub hereby jointly and severally represent and warrant to the
Company and to the Members that all of the statements contained in this Section
3.2 are correct and complete as of the date of this Agreement and Xxxxxxx and
Acquisition Sub covenant that said statements will be correct and complete as of
the Merger Date (as though made as of the Merger Date and as though the Merger
Date were substituted for the date of this Agreement throughout this Section
3.2).
(a) Organization. Xxxxxxx is a corporation and Acquisition Sub is a
limited liability company duly incorporated or organized, as the case may be,
validly existing, and in good standing (i) in the case of Xxxxxxx, under the
laws of the State of Delaware and (ii) in the case of Acquisition Sub, under the
laws of the State of Illinois. Xxxxxxx is qualified to do business in and is in
good standing under the laws of each jurisdiction wherein the nature of its
business or its ownership of property requires it to be so qualified, except
where the failure to be so qualified would not, in the aggregate, have a
material adverse effect or impact upon the assets, business, financial condition
or results of operations of Xxxxxxx and its Subsidiaries, taken as a whole (a
"Xxxxxxx Adverse Effect").
(b) Authorization of Transaction. Xxxxxxx and Acquisition Sub have
all requisite corporate or limited liability company, as the case may be, power
and authority to execute and deliver this Agreement and to perform their
respective obligations hereunder. The Board of Directors of Xxxxxxx and the
Manager of Acquisition Sub have duly authorized the execution, delivery and
performance of this Agreement by Xxxxxxx and Acquisition Sub. This Agreement
constitutes the valid and legally binding obligation of Xxxxxxx and Acquisition
Sub,
28
enforceable against them in accordance with its terms, except as enforceability
may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to the rights and
remedies of creditors generally or (ii) general principles of equity.
(c) Noncontravention. Subject to compliance with the HSR Act,
neither the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby will (i) violate or conflict in any way
with any statute, regulation, law, rule or common law doctrine, (ii) violate or
conflict in any way with any judgment, order, decree, stipulation, injunction or
other restriction of any government, governmental agency or court, to which
Xxxxxxx or Acquisition Sub is subject (iii) breach any provision of the
Certificate of Incorporation or By-Laws of Xxxxxxx or the Articles of
Organization or Operating Agreement of Acquisition Sub or (iv) conflict with,
result in a breach of, constitute a default under (with or without notice or
lapse of time, or both), result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice under,
or result in the creation of any Security Interest upon any of Xxxxxxx'x or
Acquisition Sub's assets pursuant to the terms of, any contract, agreement,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement
for borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which Xxxxxxx or Acquisition Sub is a party or by which it is
bound or to which any of its assets are subject, except where such violations,
conflicts, breaches, defaults or other events would not, individually or in the
aggregate, result in a Xxxxxxx Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated hereby. Except pursuant to the HSR
Act, neither Xxxxxxx nor Acquisition Sub is required to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government, governmental agency or court, or any other Person in order for the
parties to consummate the transactions contemplated by this Agreement and in
order that the Acquisition and such transactions shall not constitute a breach
or violation of, or result in a right of termination or acceleration or any
encumbrance on any of Xxxxxxx'x or Acquisition Sub's assets pursuant to the
provisions of, any agreement, arrangement or understanding or any license,
franchise or permit.
(d) Xxxxxxx Common. Xxxxxxx has taken all actions necessary to
authorize and approve the issuance of the Xxxxxxx Common, and as of the Merger
Date the Xxxxxxx Common will, when issued in accordance herewith, be duly
authorized, validly issued, fully paid and nonassessable. There are no
statutory or contractual shareholders' preemptive rights or rights of refusal
with respect to the issuance of the Xxxxxxx Common upon consummation of the
Acquisition.
(e) Brokers' Fees. Subject to Section 3.1(y) hereof, neither Xxxxxxx
nor Acquisition Sub has any Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Member is or could become liable or
obligated.
29
(f) Capital Structure.
(i) The authorized capital stock of Xxxxxxx consists of
75,000,000 shares of Xxxxxxx Common and 3,000,000 shares of preferred
stock, par value $0.001 per share ("Xxxxxxx Preferred Stock"). As of
August 20, 1998, approximately 30,424,000 shares of Xxxxxxx Common and no
shares of Xxxxxxx Preferred Stock were issued and outstanding. All
outstanding shares of Xxxxxxx'x outstanding capital stock are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(ii) Except for options granted in the normal course pursuant to
Xxxxxxx'x stock option plans and employee stock purchase plan, as described
in Xxxxxxx SEC Reports (as defined below), and except as contemplated
herein, there are no options, warrants, calls, rights, commitments or
agreements of any character to which Xxxxxxx or any Subsidiary of Xxxxxxx
is a party or by which any of them is bound obligating Xxxxxxx or any
Subsidiary of Xxxxxxx or any securities or rights convertible into or
exchangeable for any such capital stock.
(g) Commission Filings. Xxxxxxx has made available to the Company
and the Members (on a non-confidential basis) and has filed all forms, reports
and documents required to be filed by Xxxxxxx with the Commission under the
Exchange Act and the Securities Act since October 4, 1996 (collectively, the
"Xxxxxxx SEC Reports"). The Xxxxxxx SEC Reports (i) at the time filed, complied
in all material respects with the applicable requirements of the Exchange Act,
or Securities Act, as applicable, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such Xxxxxxx SEC
Reports or necessary in order to make the statements in such Xxxxxxx SEC
Reports, in the light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of Xxxxxxx
included in the Xxxxxxx SEC Reports (the "Xxxxxxx Financial Statements")
complied when filed as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, and were, when filed, in accordance with the books and
records of Xxxxxxx, complete and accurate in all material respects, and
presented fairly the consolidated financial position and the consolidated
results of operations, changes in stockholders' equity and cash flows of Xxxxxxx
and its Subsidiaries as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles, consistently applied,
subject in the case of interim financial statements to normal year-end
adjustments and the absence of certain footnote information.
(h) No Material Adverse Changes. Since June 30, 1998, to the
Knowledge of Xxxxxxx, no event has occurred which has had a Xxxxxxx Adverse
Effect and no action, suit, claim or proceeding has been filed, or threatened in
writing, which if adversely determined, would result in a Xxxxxxx Adverse
Effect.
30
(i) Transaction-Related Tax Matters. Xxxxxxx has not taken or agreed
to take any action that would prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(j) Disclosure. None of the representations or warranties of Xxxxxxx
and Acquisition Sub contained herein contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, as of the Merger Date.
(k) Representations and Warranties of the Company. To the Knowledge
of Xxxxxxx, none of the representations, warranties or covenants of the Company
made in this Agreement are untrue or have been breached as of the date hereof.
4. PRE-CLOSING COVENANTS AND CONDITIONS
------------------------------------
4.1. Pre-closing Covenants.
(a) Conduct of Business. Except as set forth in Section 4.1(a) of the
Disclosure Schedule, from the date hereof until the Merger Date, the Company and
its Subsidiaries will carry on its business (the "Business") and operations in
the usual, regular and ordinary manner and, absent the prior written consent of
Xxxxxxx, which consent shall not be unreasonably withheld or delayed, or unless
expressly contemplated by this Agreement, neither the Company nor any of its
Subsidiaries will:
(i) change, alter or make any employment contracts or
arrangements with any of its management personnel or make, adopt, alter,
revise or amend any pension and/or profit sharing, bonus, stock option or
other employee benefit plan, except as may be required by law;
(ii) pay any bonuses to or increase the compensation (including
benefits) of any officer of the Company other than accrued 1997 bonuses;
(iii) declare or make any distribution (whether in cash or other
property) with respect to the Membership Interests of the Company;
(iv) issue, sell or become contractually committed to issue or
sell any Membership Interests, other membership interests, shares or other
securities, including derivative securities of the Company or any of its
Subsidiaries;
(v) sell or acquire property subject to, or create or assume,
any Security Interest except in the Ordinary Course of Business;
(vi) lend any money to or guaranty the debts of any Person;
31
(vii) incur outside the Ordinary Course of Business (I) any
indebtedness for borrowed money, (II) obligations evidenced by bonds,
debentures, notes or other similar instruments, (III) obligations to pay
the deferred purchase price of property or services in excess of $100,000,
and (IV) obligations under direct or indirect guaranties in respect of, and
obligations to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others
of the kinds referred to in clauses (I) through (III) above;
(viii) enter into any lease obligation with respect to equipment
that provides for payments in excess of $50,000 per month or enter into any
lease obligation with respect to real property;
(ix) make any equity investment in any Person or make any
capital expenditures in excess of $50,000;
(x) compromise any debt or claim except for adjustments made
with respect to contracts for the purchase of supplies and materials or for
the sale of products or services in the Ordinary Course of Business, which
in the aggregate are not material;
(xi) other than in the Ordinary Course of Business, enter into
any transaction, sell any assets, incur any obligation, or incur or make
any payment in respect of any Liabilities, in each case for an amount not
in excess of $50,000 and in the aggregate for an amount not to exceed
$250,000;
(xii) enter into or modify in any material respect any fixed fee
or capped price contract or other client engagement involving more than
$100,000;
(xiii) except for the payment of normal salaries in the Ordinary
Course of Business, enter into or engage in any transaction with any member
or shareholder of the Company or any of its Subsidiaries;
(xiv) alter or amend in any manner the Operating Agreement of
the Company;
(xv) alter, amend or enter into any licensing or contractual
arrangements with respect to any Intellectual Property of the Company,
other than in the Ordinary Course of Business; or
(xvi) take or permit any other action of the type referred to in
Section 3.1(g).
(b) Unless otherwise specifically provided in this Agreement or
consented to in writing and in advance by Xxxxxxx, the Company and each of the
Company's Subsidiaries shall (i) maintain its current insurance coverage
described on Schedule 3.1(v), or insurance in
32
amounts and kinds of a comparable nature to those so described, and pay all
premiums on such policies when due; (ii) use reasonable best efforts to preserve
its present business organization intact, keep available the services of its
present officers and employees, preserve its good will and preserve its present
relationships with Persons having business dealings with it; (iii) maintain its
books, accounts and records in a regular and ordinary manner, on a basis
consistent with GAAP; (iv) comply in all material respects with all legal
requirements applicable to it and to the conduct of its business; (v) file in a
timely manner all required filings with all governmental authorities and cause
such filings to be true and correct in all material respects; and (vi) comply in
all material respects with all contracts, agreements and documents listed (or
required to be listed) on the Disclosure Schedule.
4.2. Access to Records and Premises. From and after the date of this
Agreement, the Company shall, and shall cause each of the Company's Subsidiaries
to, give to Xxxxxxx, Xxxxxxx'x counsel, accountants and other representatives,
full access during normal business hours and upon reasonable notice to all
offices, clients, suppliers, personnel or properties (including the right to
conduct an inventory) and other books and records, of the Business, so that
Xxxxxxx may, at its expense, investigate and inspect them, and the Company will
furnish to Xxxxxxx copies of all documents and information concerning the
Business as Xxxxxxx may reasonably request (except that, in each case, documents
and materials relating to the possible sale, merger or other business
combination involving the Company need not be delivered until after the Merger
Date). All information obtained shall be held subject to that certain
Confidentiality Agreement (the "Confidentiality Agreement") by and between
Xxxxxxx and the Company.
4.3. Notice of Changes. Between the date of this Agreement and the Merger
Date, the Company and Xxxxxxx agree to notify the other party in writing
promptly of any occurrence or state of facts that makes any representation or
warranty of the Company or Xxxxxxx, as the case may be, under this Agreement
untrue or misleading in any material respect, or any covenant of the Company or
Xxxxxxx, as the case may be, under this Agreement incapable of being performed
in any material respect, it being understood that the obligation to provide
notice under this Section 4.3 shall in no way relieve the Company or Xxxxxxx, as
the case may be, of any liability for a breach by the Company or Xxxxxxx, as the
case may be, under this Agreement or otherwise impair any cure period of the
Company or Xxxxxxx, as the case may be, set forth herein.
4.4. Exclusivity. Neither the Company, nor any of its Subsidiaries, nor
any officer, director, employee or agent acting for any of them (collectively,
the "Restricted Persons"), shall, directly or indirectly, (a) solicit, encourage
or initiate any discussion with, (b) negotiate or otherwise deal with, (c)
accept any offer from, or provide any information to, any Person, other than
Xxxxxxx, concerning any disposition or sale of the Company or any of its
Subsidiaries, any material portion of the Company's assets or any portion of the
Business, whether by sale of Membership Interests, sale of other equity
interests, sale of assets, merger or otherwise, or any proposed debt or equity
investment in the Company or any of its Subsidiaries (any of the foregoing, a
"Transaction"), and none of the Restricted Persons shall
33
enter into any agreement concerning any such Transaction. The Company shall
forward to Xxxxxxx any third party offer or proposal with respect to any such
Transaction.
4.5. Conditions to Obligation of Xxxxxxx. The obligations of Xxxxxxx and
Acquisition Sub to effect the Acquisition are also subject to satisfaction at or
prior to the Closing of the following conditions. Xxxxxxx, on behalf of itself
and Acquisition Sub, may waive any condition, in whole or in part, specified in
this Section 4.5 in writing at or prior to the Closing.
(a) Accuracy of Representations and Warranties. The representations
and warranties set forth in Sections 3.1 shall be true and correct at and as of
the Merger Date with the same effect as though such representations and
warranties had been made or given at and as of the Merger Date, except for
changes contemplated by this Agreement and except for breaches which would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(b) Compliance with Agreement. The Company shall have performed and
complied in all material respects with all of its respective covenants,
agreements and other obligations under this Agreement which are to be performed
or complied with prior to or at the Merger Date.
(c) Absence of Certain Claims. There shall not have been, since June
30, 1998, any change in or effect on the Company or any of its Subsidiaries
which results in or may reasonably be expected to result in a Material Adverse
Effect, in each case other than the events set forth on Section 4.5(c) of the
Disclosure Schedule.
(d) Closing Deliveries.
(i) The Company shall have delivered to Xxxxxxx a certificate
of the Secretary of the Company and a certificate of the Secretary of each
of its Subsidiaries dated the Merger Date certifying (i) a copy of the text
of the resolutions by which the action on the part of the Company or such
Subsidiary, as the case may be, necessary to approve this Agreement and the
Acquisition were taken, (ii) incumbency of each officer executing this
Agreement or any other agreement, certificate or other instrument executed
pursuant hereto, (iii) the Operating Agreement or other governing document
of the Company or such Subsidiary, as the case may be, and (iv) a list of
Members or other equity holders, as the case may be, as of the Merger Date;
(ii) The Company shall have delivered to Xxxxxxx a certificate
signed by an executive officer of the Company to the effect that each of
the conditions set forth in Section 4.5(a), (b) and (c) are satisfied in
all respects;
(iii) A copy of the Company's Articles of Organization, as
amended to date, certified as of a recent date prior to the Merger Date by
the State Secretary of the State of Illinois;
34
(iv) Good standing certificates for the Company issued by the
State Secretary of the State of Illinois, and for each Subsidiary issued by
the applicable secretary of state (or other state agency) of the state or
organization of such Subsidiary, in each case dated as of a recent date
prior to the Merger Date; and
(v) Xxxxxxx shall have received (A) from each of the Members,
executed counterparts to the Registration Agreement substantially in the
form of Exhibit B hereto (the "Registration Agreement"), (B) from the
Company, each of the Members and the "Members' Representative" (as such
term is defined thereunder), executed counterparts of that certain Consent,
Indemnification and Noncompete Agreement between the foregoing parties,
Xxxxxxx and Acquisition Sub in the form attached hereto as Exhibit C (the
"Consent, Indemnification and Noncompete Agreement"), and (C) from the
Members' Representative and the Escrow Agent, executed counterparts of the
Escrow Agreement.
(e) Accounting Opinion. Xxxxxxx shall have received an opinion or
other advice, in form and substance satisfactory to Xxxxxxx, from its accounting
professionals that the Acquisition may be accounted for as a "pooling of
interests," in accordance with GAAP and all rules, regulations and policies of
the SEC.
(f) No Prohibitions. No court or other governmental entity having
jurisdiction over the Company or Xxxxxxx, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Acquisition or any of the transactions contemplated
hereby illegal.
(g) No Demands. There shall not have been any perfected demand for
appraisal remedies or dissent with respect to the Acquisition representing more
than 5% of the Total Transaction Value.
(h) Termination of Existing Documents. The Existing Company
Documents (other than the Operating Agreement) shall have been terminated.
(i) HSR Act. The applicable waiting period, if any, under the HSR
Act shall have expired or been terminated.
4.6. Conditions to Obligations of the Company. The obligations of the
Company to effect the Acquisition are subject to the satisfaction at or prior to
the Merger Date of the following conditions. The Company may waive, in whole or
in part, any condition specified in this Section 4.6 in writing at or prior to
the Merger Date.
(a) Accuracy of Representations and Warranties. The representations
and warranties set forth in Section 3.2 above shall be true and correct at and
as of the date of the Merger Date with the same effect as though such
representations and warranties had been made
35
or given at and as of the Merger Date, except for changes contemplated by this
Agreement, and except for breaches which would not, individually or in the
aggregate, have a Xxxxxxx Material Adverse Effect.
(b) Compliance with Agreement. Xxxxxxx and Acquisition Sub shall
have performed and complied in all material respects with all of their
respective covenants, agreements and other obligations under this Agreement
which are to be performed or complied with prior to or at the Merger Date.
(c) Closing Deliveries.
(i) Xxxxxxx shall have delivered to the Company a certificate
signed by an officer of Xxxxxxx to the effect that each of the conditions
specified above in Sections 4.6(a) and (b) are satisfied in all respects;
(ii) Xxxxxxx shall have delivered to the Company a certificate of
the Secretary or any Assistant Secretary of Xxxxxxx dated the Merger Date
certifying (A) a copy of the text of the director resolutions by which the
corporate action on the part of Xxxxxxx necessary to approve this Agreement
and the Acquisition were taken; and (B) incumbency of each officer
executing this Agreement or any other agreement, certificate or other
instrument executed pursuant hereto; and
(iii) Xxxxxxx shall have delivered to each of the Members the
Registration Agreement, the Escrow Agreement, and the Consent,
Indemnification and Noncompete Agreement.
(e) No Prohibitions. No court or other governmental entity having
jurisdiction over the Company or Xxxxxxx, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Acquisition or any of the transactions contemplated
hereby illegal.
(f) HSR Act. The applicable waiting period, if any, under the HSR
Act shall have expired or been terminated.
(g) Nasdaq listing. The shares of Xxxxxxx Common issuable pursuant
to the Acquisition shall have been authorized for listing on the Nasdaq
Stock Market, subject to notice of issuance.
4.7. Tax Matters. Neither Xxxxxxx, Acquisition Sub nor any direct or
indirect Subsidiary of Xxxxxxx shall take any action or agree to take any action
that would prohibit or impair the treatment of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
36
4.9. ILLCA Election. The Company has made or shall make prior to Closing,
a valid and effective election pursuant to Section 55-15 of ILLCA to be governed
by the Amendatory Act of 1997 relating to the ILLCA.
5. ADDITIONAL AGREEMENTS
---------------------
5.1. Post-Acquisition Covenants. The Parties agree as follows with
respect to the period following the Merger Date:
(a) General. In case at any time after the Merger Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents, and in the case of Xxxxxxx,
using its reasonable efforts to cause the listing of the shares of Xxxxxxx
Common issuable in the Acquisition on Nasdaq) as any other Party reasonably may
request, at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification with respect to such matter
under Section 5.4).
(b) Tax Matters. Xxxxxxx and the Company Managers shall cooperate
fully, as and to the extent reasonably requested by the other Party, in
connection with the filing of Tax Returns of the Company and its Subsidiaries
and any audit, litigation or other proceeding with respect to any Taxes of the
Company or any of its Subsidiaries or any Taxes incurred in connection with any
of the transactions contemplated by this Agreement.
(c) Indemnification of Managers and Officers. The Surviving Entity
shall indemnify, defend, hold harmless and advance expenses to the individuals
who are the Company Managers and officers of the Company as of the date of this
Agreement to the same extent, if any, that such Managers and officers are
indemnified under the terms of the Operating Agreement or otherwise in respect
of any claims brought after the date of this Agreement relating to events
occurring on or prior to the date of this Agreement. In the event the Surviving
Entity or its successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
in such consolidation or merger or (ii) transfers all or substantially all its
properties and assets to any Person, then, and in each case, proper provision
shall be made so that the successors and assigns of the Surviving Entity, as the
case may be, honor the indemnification obligations set forth in this Section (it
being understood that the amount of such indemnification and expenses shall
constitute Xxxxxxx Indemnifiable Losses to the extent they relate to a breach of
a representation or warranty by the Company).
6. TERMINATION
-----------
6.1. Termination. This Agreement may be terminated at any time prior to
the Effective Date (by written notice by the terminating party to the other
party) only as follows:
(a) Consent. By mutual written consent of Xxxxxxx and the Company;
or
37
(b) Failure to Close. By either Xxxxxxx or the Company if the
Closing shall not have occurred by September 1, 1998 (provided, however, that
the right to terminate this Agreement under this Section 6.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date); or
(c) Breach. By either party if a breach of any representation or
warranty on the part of the other party set forth in this Agreement was
inaccurate or untrue as of the time made or re-made, other than an inaccuracy or
untruth which would not, individually or in the aggregate, result in a Material
Adverse Effect on the breaching party; or
(d) Intentionally Omitted.
6.2. Effect of Termination. In the event of termination of this Agreement
pursuant to Section 6.1, there shall be no Liability or obligation on the part
of Xxxxxxx, the Company, or their respective officers, directors, managers,
stockholders, Members or Affiliates, except to the extent that such termination
results from the willful breach by a party of any of its representations,
warranties, covenants or agreements in this Agreement; and provided, that the
provisions of the confidentiality agreements contained or referred to herein
shall remain in full force and effect and survive any termination of this
Agreement.
7. MISCELLANEOUS
-------------
7.1. Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other Party (for purposes hereof, Xxxxxxx and
the Acquisition Sub shall be deemed one party and the Company and the Members
collectively shall be deemed another Party); provided, however, that any Party
may make any public disclosure it believes in good faith is required by law or
regulation, including, without limitation, any disclosures made necessary by
Xxxxxxx'x status as a public company (in which case the disclosing Party will
advise the other Party prior to making the disclosure).
7.2. No Third Party Beneficiaries. Except for Section 5.1(c), this
Agreement shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
7.3. Entire Agreement. This Agreement (including the other documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
7.4. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign this Agreement or any of such Party's
rights, interests, or obligations
38
hereunder without the prior written approval of the other Parties.
Notwithstanding the foregoing, Xxxxxxx may (i) cause the stock of the Company to
be acquired by a wholly owned subsidiary of Xxxxxxx and/or (ii) merge the
Company with or into a wholly-owned direct or indirect subsidiary of Xxxxxxx, in
either case without affecting its rights hereunder; provided that any such
actions shall not affect the tax treatment of the Acquisition.
7.5. Survival. All of the representations and warranties of the Company
and the Company Managers contained in Section 3.1 hereof (the "Company
Representations"), shall survive the consummation of the Acquisition (regardless
of any Knowledge or investigation of Xxxxxxx, Acquisition Sub or the Surviving
Entity) and shall continue in full force and effect until April 30, 1999 (the
"Survival Period"). All of the representations and warranties of Xxxxxxx
contained in Section 3.2 (the "Xxxxxxx Representations") shall survive the
consummation of the Acquisition (regardless of any Knowledge or investigation of
the Members or the Company) and shall continue in full force and effect until
the expiration of the Survival Period. All covenants (as opposed to
representations and warranties) of the Parties in this Agreement shall survive
the consummation of the Acquisition and shall continue in full force
notwithstanding the expiration of the Survival Period.
7.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
7.7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) three (3)
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, (ii) one day after receipt is electronically
confirmed, if sent by fax (provided that a hard copy shall be promptly sent by
first class mail), or (iii) one (1) business day following deposit with a
recognized national overnight courier service for next day delivery, charges
prepaid, and addressed to the intended recipient as set forth below or in the
case of the Member on the signature pages hereto:
39
If to the Company: With a Copy To:
------------------ ---------------
Xxxxxxxx Consulting, L.L.C. Sidley & Austin
One Mid America Xxxxx Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxx 000 Xxxxxxx, Xxxxxxxx 00000
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000 Attn: Xxxxxxx X Xxxxxx, Esq.
Attn: Xxxxxx X. Xxxxxxxxxx Fax: (000) 000-0000
Fax: (000) 000-0000
If to Xxxxxxx or Acquisition Sub: Copy to:
--------------------------------- --------
The Xxxxxxx Group, Inc. Barack Xxxxxxxxxx Xxxxxxxxxx
000 Xxxxx Xxxxxx Xxxxxx Xxxxxxx & Xxxxxxxxx
Xxxxxxx, Xxxxxxxx 00000 000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Attn: General Counsel Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000 Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is delivered to the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
7.8. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois, any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois. Each party hereto
(a) agrees that any suit, action or other legal proceeding relating hereto may
be brought in state court sitting in the County of Xxxx, Illinois or the United
States District Court for the Northern District of Illinois, as applicable; and
(b) consents to the jurisdiction of each such court in any such suit, action or
proceeding; and (c) waives any objection said party may have to the laying of
venue in any such suit, action or proceeding in either such court; and (d)
consents to service of process by U.S. mail.
7.9. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Xxxxxxx, the Company and the Members. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent occurrence of
such kind.
40
7.10. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the invalid or unenforceable term or provision
in any other situation or in any other jurisdiction. If a final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
7.11. Expenses. Each of Xxxxxxx and the Company will bear its own direct
and indirect costs and expenses (including fees and expenses of legal counsel,
investment bankers, brokers, accountants or other representatives or
consultants) incurred in connection with the negotiation, preparation and
execution of this Agreement and the consummation of the transactions
contemplated hereby, whether or not such transactions are consummated. If the
Acquisition is consummated, then expenses paid or accrued by the Company to
effect the Acquisition shall be paid by the Company, except that Xxxxxxx shall
pay such fees and expenses of each of (i) Xxxxxxxxx, Lufkin and Xxxxxxxx
Securities Corporation (not to exceed $3,000,000); (ii) $25,000 of the fees and
expenses of Sidley & Austin; and (iii) the Company's independent auditors
incurred in connection with the Company's participation in the Acquisition,
which costs and expenses shall in no event include costs and expenses incurred
in connection with the personal accounting and tax planning of individual
Members.
7.12. Construction. The Parties have jointly participated in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumptions or burdens of proof
shall arise favoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any Federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
Parties intend that each representation, warranty and covenant contained herein
shall have independent significance. If any Party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
7.13. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
41
7.14. Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
* * * * *
42
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
XXXXXXX: THE COMPANY:
------- -----------
THE XXXXXXX GROUP, INC., XXXXXXXX CONSULTING L.L.C.,
a Delaware corporation an Illinois limited liability company
By:_______________________________ By:_________________________________
Xxxxxx X. Xxxxx, President and
Chief Executive Officer
By:_______________________________ By:_________________________________
Xxxxxxx X. Xxxxxxxxx, Secretary
ACQUISITION SUB:
---------------
MGI ACQUISITION II, L.L.C., an
Illinois limited liability company
By:_______________________________
Xxxxxx X. Xxxxx, President and
Chief Executive Officer
By:_______________________________
Xxxxxxx X. Xxxxxxxxx, Secretary
[Company Managers' Signature Page Follows]
COMPANY MANAGERS:
__________________________________________
XXXXX X. XXXXXX
__________________________________________
XXXXXX XXXXX XXXXXX
__________________________________________
XXXXXXX X. XXXXXXXX
__________________________________________
XXXXX XXXXXXXXXX
__________________________________________
XXXXXX XXXX
List of Exhibits and Schedules
------------------------------
Exhibit A - Operating Agreement of Acquisition Sub
Exhibit B - Form of Registration Agreement
Exhibit C - Consent, Indemnification and Noncompete Agreement
Schedule 2.5 - Additional Officers of Surviving Entity
Schedule 2.6 - Conversion of Securities
Index to Disclosure Schedule
----------------------------
Section 3.1(a) - Organization, Qualification and Corporate Power
Section 3.1(d) - Capitalization
Section 3.1(c) - Consents
Section 3.1(f) - Financial Statements
Section 3.1(g) - Recent Events
Section 3.1(h) - Undisclosed Liabilities
Section 3.1(j) - Leased Real Property
Section 3.1(k) - Intellectual Property
Section 3.1(l) - Contracts
Section 3.1(n) - Bank Accounts
Section 3.1(o) - Litigation
Section 3.1(p) - Employment Matters
Section 3.1(q) - Employee Benefit Plans
Section 3.1(r) - Licenses, Permits and Approvals
Section 3.1(u) - Termination of Employment
Section 3.1(v) - Insurance
Section 4.1(a) - Conduct of Business
Section 4.5(c) - Absence of Certain Claims
EXHIBIT A
OPERATING AGREEMENT OF ACQUISITION SUB
--------------------------------------
See attached.
EXHIBIT B
FORM OF REGISTRATION AGREEMENT
------------------------------
See attached.
EXHIBIT C
CONSENT, INDEMNIFICATION
AND NONCOMPETE AGREEMENT
------------------------
See attached.
SCHEDULE 2.5
ADDITIONAL OFFICERS OF SURVIVING ENTITY
---------------------------------------
SCHEDULE 2.6
CONVERSION OF SECURITIES
------------------------
See attached.
