STOCK PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is being made this 26th day of September
1996, by and among XXXXX XXXXX and XXXXXXX X. XxXXXXXX (collectively "Sellers"),
THE BERKELEY ASSOCIATES CORPORATION and JUDGE, INC.
B A C K G R O U N D
A. The Berkeley Associates Corporation ("Corporation") is a corporation
organized and existing under the laws of the State of Delaware, and currently
has authorized capitalization of 3,000 shares of common stock with no par value.
2,075 shares of the Corporation's stock are issued and outstanding (the
"Shares"), 1150 of which are held by Xxxxx Xxxxx ("Xxxxx") and 925 shares of
which are held by Xxxxxxx X. XxXxxxxx ("XxXxxxxx").
B. Judge, Inc. ("Buyer") is a corporation organized and existing under the
laws of the Commonwealth of Pennsylvania.
C. It is anticipated that Buyer will change its name to The Judge Group,
Inc. subsequent to the Closing. It is currently anticipated that The Judge
Group, Inc. will complete closing on an initial public offering prior to
December 31, 1996.
X. Xxxxxxx desire to dispose of all Shares of their stock in Corporation.
The Buyer desires to purchase the Shares from Sellers subject to the terms and
conditions of this Agreement.
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T E R M S
NOW THEREFORE, the parties hereto, in consideration of the mutual covenants
set forth herein and other good and valuable consideration, and intending to be
legally bound hereby, agree as set forth below.
1. Purchase and Sale of Shares.
1.1 (a) For and in consideration of the consideration described below Xxxxx
hereby agrees to sell to Buyer, which agrees to purchase from Xxxxx, all of her
Shares of Corporation's stock.
(b) For and in consideration of the consideration described below,
XxXxxxxx hereby agrees to sell to Buyer, which agrees to purchase from XxXxxxxx,
all of his Shares of Corporation's stock.
1.2 Payment Terms. The purchase price for the Shares shall be paid as
follows:
(a) Provided the Buyer successfully closes on an initial public
offering by December 31, 1996 (the "IPO"):
(i) Upon Closing on this Agreement, each Seller shall receive
$87,500.00. Thereafter, on each monthly anniversary of the Closing date, each
Seller shall receive $25,000.00. Such payments shall be made only through
December, 1996.
(ii) The parties have made a portion of the purchase price
contingent on the future financial performance of the Corporation (the
"Purchase Holdback Payments"). The parties have also made the reimbursement of
certain funds provided to Corporation by Sellers contingent on the future
financial performance of the Corporation (the "Contingent Loan Holdback
Payments"). For
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purposes of this section, payments based on the future financial performance of
the Corporation shall be calculated pursuant to the formula in subsection (E)
below.
(A) 1996 Purchase Holdback Payment. Buyer shall deliver to each
Seller an executed promissory note, provided the variable X calculated in
subsection (E) utilizing 1996 Net Income is a positive amount. The principal
amount of each of the promissory notes executed under this subsection shall be
one-half of the calculated value of the variable X under this subsection. If
1996 Net Income exceeds $350,000, the aggregate principal amount of promissory
notes issued under this subsection shall not exceed $572,200 and Sellers shall
not receive any Purchase Holdback Payment under subsection (B).
(B) 1997 Purchase Holdback Payment. Sellers may qualify for an
additional Purchase Holdback Payment, if 1996 Net Income is less than $350,000.
If 1997 Net Income equals or exceeds $430,000, Buyer shall deliver to each
Seller an executed promissory note the principal amount of which shall be
one-half of the remainder of $572,200 less the sum of the principal amounts of
the promissory notes executed under subsection (A).
(C) Calculation of Holdback Payments. Sellers shall receive
payment for holdbacks utilizing the following formula:
X = Net Income - $250,000 x $572,200
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$100,000
Examples of the application of the foregoing formula are set forth in
Schedule 1.2(a)(ii)(C).
(D) Definition of Net Income. For purposes of the foregoing, Net
Income shall be the net income of the Corporation, determined by an audit for
the relevant calendar
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year, performed in accordance with generally accepted accounting principles and
utilizing the same methodology used in calculating the financial statements
attached in Exhibit "D". In making the computation, Net Income shall not be
reduced by (1) state and federal income taxes, (2) any management fees paid or
payable to Buyer or its affiliates, (3) accounting fees incurred in 1996 in
excess of $9,000.00 and in 1997 in excess of $10,000.00, (4) legal fees or
expenses paid by the Corporation due to the investigation, negotiations and
purchase of the Corporation by Buyer in excess of $4,000.00, and (5)
extraordinary expenses incurred outside the ordinary course of business, in the
aggregate of $15,000.00 in the relevant calendar year. Expenses incurred in
opening or expanding of offices in Lancaster, Pennsylvania or Baltimore,
Maryland shall not be considered extraordinary expenses for purpose of the
foregoing. Net Income shall be reduced by (1) all items of capital gain and
non-recurring profit(including the forgiveness of debt pursuant to
(section)1.6), less expenses attributable to that gain or profit, (2) the full
amount of Sellers' salaries, excluding any bonus payments under Sections 3.2,
3.3 and 3.4 of Sellers' Employment Agreement, regardless of whether any payments
are deferred or services are volunteered. Notwithstanding the foregoing, in 1996
Net Income shall not be reduced by any amount of salary earned in excess of
$152,000.00 for services rendered by Sellers in the aggregate and for which they
waive and forgive the actual receipt of such salary.
(E) Promissory Notes. The promissory notes referred to in
subsections (A) and (B), if any, shall be delivered to each Seller within thirty
(30) days after the acceptance by both Buyer and Sellers of the determination of
Net Income as provided in (section)1.2(a)(ii)(F). Each promissory note shall be
in the form attached hereto as Exhibit "A", in the principal amount required by
subsections (A) and (B) and shall accrue interest at the rate of eight percent
(8%) per annum. The promissory notes shall provide for thirty-six (36) equal
monthly payments of principal and interest commencing the first of the month
following execution of the promissory note.
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(F) Calculation of Net Income.
(1) Seller shall provide to Buyer an audited statement of Net
Income ("Statement") calculated in accordance with (section)1.2(a)(ii)(D) to
permit Buyer to determine if any amounts are due Sellers under
(section)1.2(a)(ii) or (b)(i) as it pertains to the notes provided for in
(section)1.2(a)(ii). Seller shall be solely responsible for all expenses and
costs incurred in preparing the Statement and neither Buyer nor Corporation
shall have any obligation to pay Sellers or any third party for use of the
Statement. If Sellers do not deliver the Statement to Buyer within one hundred
and twenty (120) days after the end of the year to which the statement pertains,
then Buyer may utilize the audit prepared by the certified public accountants
then servicing Buyer to determine if any amounts are due Sellers under
(section)1.2(a)(ii) or (b)(i) and the remaining provision of
(section)1.2(a)(ii)(F) shall not be applicable.
(2) Buyer shall have thirty (30) days from its receipt of the
Statement to accept, modify or reject the determination of Net Income. Buyer
shall notify each Seller in writing, within the aforesaid period, whether it has
accepted, modified or rejected the determination of Net Income. Failure of Buyer
to provide written notice of modification or rejection within the aforesaid
period shall constitute a waiver of Buyer's objection, modification or rejection
of the Statement. If the determination of Net Income is accepted by Buyer, Buyer
shall deliver the necessary promissory notes in accordance with
(section)1.2(a)(ii)(E). If the Buyer modifies the determination of Net Income,
each Seller shall provide Buyer with written notice of their acceptance or
rejection of the determination of Net Income as modified by the Buyer within
thirty (30) days of their receipt of notice of the modification. If the
modification is accepted by the Seller, the Buyer shall deliver the necessary
promissory notes in accordance with (section)1.2(a)(ii)(E). If either Seller
rejects the modification of the Net
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Income determination by Buyer or Buyer rejects the Seller's initial
determination of Net Income, the dispute shall be resolved as set forth in
(section)1.2(a)(ii)(F)(4).
(3) Sellers and their agents, contractors and employees shall
be given reasonable access to the records of Corporation to prepare the
Statement required by (section)1.2(a)(ii)(F)(1).
(4) In the event that a dispute exists with respect to the
determination of Net Income, such dispute shall be submitted for resolution to a
Big 6 accounting firm (the "Firm"). The Firm shall be selected jointly by the
Buyer and Sellers. In the event a Firm cannot be mutually agreed upon by the
Buyer and Sellers within ten (10) days after written notice from either party to
the other invoking this paragraph, then Sellers (as one party) and Buyer shall
each select a Big 6 accounting firm, which shall in turn jointly select a third
Big 6 accounting firm to serve as the Firm. The Firm shall determine any dispute
with respect to Net Income as required by (section)1.2(a)(ii)(D), based upon the
above definition and the work papers submitted by the parties. The decision of
the Firm shall be in writing and shall specify the actual bases for the
determination. Each party shall be bound by the determination of the Firm. Each
party shall bear its own costs and expenses and an equal share of the cost of so
employing the Firm. This dispute resolution provision shall not extend to any
other aspect of the Agreement or the Related Agreements.
(iii) Subsequent to the Closing on the IPO (the "IPO Closing"),
on January 2, 1997, each Seller shall receive a number of unregistered shares of
Buyer equivalent to $150,000.00 divided by the offer price per share in the IPO.
The shares issued pursuant to this Section shall be subject to the demand
registration rights set forth in Schedule 1.2(a)(iii). No fractional shares
shall be issued and each Seller shall receive the cash value of any fractional
share they would have received pursuant to this Section.
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(iv) Within thirty (30) days after the IPO Closing, each Seller
shall receive an amount equal to $530,000.00 in immediately available funds,
less any amounts paid to each of them pursuant to Section 1.2(a)(i).
(v) In addition, at the time of the IPO Closing, Buyer shall
deliver to each Seller an executed promissory note in the same form as that
attached as Exhibit "A" in the principal amount of $150,000.00 and shall accrue
interest at the rate of eight percent (8%) per annum. Equal payments of
principal and accrued interest amortized from January 1, 1997 through August 1,
2000 shall commence January 1, 1997 and shall be paid monthly thereafter until
the notes are fully satisfied.
(b) Provided Buyer does not successfully close on an IPO by December
31, 1996:
(i) The payments set forth in Section 1.2(a)(i) shall still be
made and the notes provided for in (section)1.2(a)(ii)(E) shall be delivered and
shall continue in effect, however no stock shall be issued by Buyer as provided
in (section)1.2(a)(iii) and the payments required by (section)1.2(a)(iv) and
1.2(a)(v) shall not be made and the promissory notes required by
(section)1.2(a)(v) shall not be delivered.
(ii) At Closing, Buyer shall deliver to Wisler, Pearlstine,
Xxxxxx, Xxxxx, Xxxxxxx & Potash, LLP as escrow agent for the parties ("Escrow
Agent") an executed promissory note, distinct from those issued under
(section)1.2(a)(ii)(E), for each Seller in the form attached hereto as Exhibit
"B". Each promissory note shall be in the principal amount of $830,000.00 less
any amounts paid or scheduled to be paid to each Seller pursuant to Section
1.2(a)(i) and shall accrue interest at the rate of eight percent (8%) per annum
commencing as of the date of Closing. The note shall provide for equal monthly
payments of principal and interest commencing January 1, 1997 and through
December 1, 1997 in the amount of $11,856.00 per month; commencing January 1,
1998 and through July 1, 2000 in the amount of $16,644.00 per month; and a final
payment in the amount of $9,264.00 plus any accrued but
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unpaid interest on August 1, 2000. On January 2, 1997, Escrow Agent shall
deliver to each respective Seller the promissory notes delivered by Buyer under
this Subsection.
(c) Provided the Judge Group, Inc. ("JGI") successfully closes on an
IPO subsequent to December 31, 1996, but before all obligations under Section
1.2(b) (ii) are fully paid and satisfied, then the payment obligations under the
promissory notes delivered pursuant to Section 1.2(b)(ii), may be accelerated as
then presently due and payable at the option of Sellers. This option shall be
exercised in a writing delivered to Buyer by either or both Sellers within five
(5) days following written notification to Sellers by Buyer of the proposed
closing of the IPO, notwithstanding anything stated herein to the contrary. The
exercise of the foregoing option by the parties hereto is subject to the
successful closing of the IPO and to any limitation or condition imposed by the
underwriters of the IPO, including complete cancellation of the option.
1.3 Manner of Payment. All payments made hereunder shall be by cash or
check, by hand delivery or at the address set forth in Section 11.5.
1.4 Closing. The purchase and sale provided for in this Agreement shall
take place on or before September 26, 1996 at 10:00 a.m. at the offices of Buyer
or at such other time and place as the parties may agree in writing (the
"Closing"). The Agreement shall be effective as of the time and date of Closing.
1.5 Buyer agrees that it shall appoint Sellers and Sellers agree to
serve upon its Board of Directors for a term of one year.
1.6 Pre-closing Transactions.
(a) Prior to Closing, Buyer had made a loan to the Corporation in
the amount of One Hundred Seventy-Five Thousand Dollars ($175,000.00). Buyer
shall forgive the full amount of
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the loan at a time to be determined by Buyer, subsequent to the Closing. Sellers
shall credit the amount of the loan to the payments owed by Buyer under
(section)1.2(a)(i) and (b)(i).
(b) Prior to the Closing, Sellers shall each withdraw from
Corporation's accumulated adjustment account the amount of Eighty-Seven Thousand
Five Hundred Dollars ($87,500.00). Sellers shall indemnify Corporation and
Buyer from any tax liability, interest or penalty resulting from the forgiveness
of debt or withdrawal of such sums pursuant to this section.
2. Representations and Warranties of Sellers and Corporation. Sellers
and Corporation make the following representations and warranties to Buyer:
2.1 Organization, Good Standing and Valid Authorization. Corporation is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, has the corporate power and authority to own all
of its properties and assets and to carry on its business, and is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its business or the ownership of its
properties or both, makes such qualification necessary. Corporation has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of Corporation and its stockholders and no other
corporate proceedings on the part of Corporation are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Corporation and Sellers and, this
Agreement constitutes the valid and binding agreement of Corporation and
Sellers, enforceable against them in accordance with its terms. Copies of the
Articles and Certificate of Incorporation and By-Laws of Corporation certified
to be correct by its Secretary are attached hereto as Exhibit "C" and are
complete and correct as at the date hereof. The minute book of Corporation, true
copies of the contents of which, authenticated by its
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Secretary, will be promptly delivered to Buyer, contains a complete and accurate
record of all meetings and other corporate actions of its shareholders and Board
of Directors.
2.2 Compliance. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Corporation and Sellers
will not: (a) violate any provision of the Articles of Incorporation or By-Laws
of Corporation; (b) violate any material provision, result in the breach or
acceleration, or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any material obligation under any mortgage,
lien, lease, agreement, contract, license, instrument, order, award, judgment or
decree to which Corporation or Sellers are a party or by which any of them are
bound; (c) result in the creation or imposition of any material lien, charge,
pledge, security interest or other encumbrance upon any property of Corporation
or Sellers; or (d) violate or conflict with any other material restriction or
any law, ordinance or regulation to which Corporation, Sellers or the property
of Corporation or Sellers is subject.
2.3 Approvals. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental authority is required
in connection with the execution and delivery of this Agreement by Corporation
and Sellers or the consummation by Corporation and Sellers of the transactions
contemplated hereby.
2.4 Capital Stock. At the Closing Date, the authorized capital stock of
Corporation shall consist of 3,000 shares of common voting stock, with no par
value, of which 2,075 shares shall be issued and outstanding. All outstanding
shares of stock of Corporation are and at the date of Closing shall be duly
authorized, validly issued, fully paid and nonassessable. At the date of
Closing, there shall be no treasury stock and no outstanding offers,
subscriptions, options, warrants, rights or other agreements or commitments
obligating Corporation to issue or sell, or cause to be issued or sold, any
shares of the capital stock of Corporation or any securities or obligations
convertible into or exchangeable
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for or giving any person any right to acquire any shares of such capital stock,
or obligating Corporation to enter into any such agreement or commitment.
2.5 Financial Statements of Corporation. The audited balance
sheets for the fiscal year ending December 31, 1995 of Corporation and the
related statements of operations, stockholders' equity and changes in financial
position (statement of cash flow) of Corporation examined and reported upon by
Xxxxxx Xxxxx & Company, LLP, certified public accountants and previously
delivered to Buyer the audited balance sheet as of June 30, 1996, and the
related audited statements of operations, stockholders' equity and changes in
financial position for the six (6) months ended June 30, 1996, complete copies
of which are attached hereto as Exhibit "D" (collectively the "Corporation
Financials") have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis and fairly present the financial
position of Corporation at such dates and the results of its operations and
changes in its financial positions for such periods. Except with respect to
matters referred to in Exhibit "D", Corporation did not have as of July 1, 1996,
through the date of the execution of this Agreement, any liabilities or
obligations, secured or unsecured (whether accrued, absolute, contingent, or
otherwise), of a nature that would be reflected or reserved against in a
corporate balance sheet or disclosed in the notes thereto, prepared in
accordance with the generally accepted accounting principles applied in the
preparation of such financial statements, that are not reflected or reserved
against in the June 30, 1996 balance sheet or disclosed in the notes thereto.
2.6 Absence of Certain Changes. Except as otherwise disclosed in
Exhibit "D", since December 31, 1995, there has been no material adverse change
in the financial condition, assets, liabilities, properties, operations,
business or prospects of Corporation taken as a whole, and Corporation has not:
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(a) authorized, issued or sold any stock, notes, bonds or other
securities, or any options to purchase the same, or entered into any agreement
with respect thereto, except to or with Buyer;
(b) declared, set aside or made any dividend or other distribution
on capital stock or redeemed, purchased or acquired any shares thereof or
entered into any agreement in respect of the foregoing;
(c) amended its Articles of Incorporation or By-Laws;
(d) other than inventory in the ordinary course of business: (i)
purchased, sold, assigned, granted or transferred any tangible assets or any
patent, trademark, trade name, copyright, license, franchise, design or other
intangible assets or property; (ii) mortgaged, pledged or granted or permitted
to exist any lien or other encumbrance or charge on any assets or properties,
tangible or intangible, except for liens for taxes not yet delinquent; or (iii)
waived any rights of material value or canceled any material debts or claims;
(e) incurred any obligation or liability (absolute or contingent),
except current liabilities and obligations incurred in the ordinary course of
business, or paid any liability or obligation (absolute or contingent) other
than current liabilities and obligations incurred in the ordinary course of
business;
(f) incurred any material damage by casualty or otherwise to its
properties, real or personal; or
(g) entered into or amended any employment or consulting agreement
or instituted or amended any bonus, stock option, profit sharing, pension,
retirement incentive, incentive or similar arrangement or plan.
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2.7 Tax Matters. Corporation has duly filed all federal, state, county,
local and foreign income, excise, sales, customs, property, withholding, social
security and other tax and information returns and reports required to have been
filed by them to the date hereof and paid (or, in the case of withholding taxes
and obligations, withheld and paid over as required) all taxes, assessments,
duties and other governmental charges (collectively, the "Taxes") (including
interest and penalties) shown on such returns or reports to be due or claimed to
be due prior to the date hereof to any federal, state, county, local or foreign
or other governmental authority. Corporation has paid or made adequate
provisions in the most recent balance sheet included in the Corporation
Financials (the "Corporation Balance Sheet") for all Taxes (including interest
and penalties) payable by Corporation with respect to all periods to and
including June 30, 1996. Corporation has no liability for any Taxes (including
interest or penalties) of any nature whatsoever other than as shown on the
Corporation Balance Sheet and, to the best knowledge of Corporation, there is no
basis for any additional material claims or assessments for the Taxes other than
with respect to liabilities for taxes that may have accrued since June 30, 1996,
in the ordinary course of business. Corporation has never been audited by the
Internal Revenue Service or Pennsylvania Department of Revenue for any period.
True copies of the federal, state and local income tax returns of Corporation
for the year ended December 31, 1995, and for each of the two immediately
preceding years have been, or will promptly hereafter be delivered to Buyer.
There are no agreements, waivers or other arrangements (oral or written)
providing for extensions of time with respect to the assessment or collection of
unpaid taxes nor are there any actions, suits, proceedings, investigations or
claims of any nature or kind whatsoever now pending or overtly threatened
against Corporation with respect to any such returns or reports, or any such
income taxes or any matters under discussion with any federal, state, county or
local authority relating to taxes.
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2.8. Material Contracts. Attached hereto as Schedule 2.8, and certified
by Sellers, is a complete and correct description as of the date hereof of all
agreements, contracts and commitments, written or oral, to which Corporation is
a party or by which it or any of its properties is bound as of the date hereof
including: (a) mortgages, indentures, notes, letters of credit, surety
agreements, security agreements and other agreements and instruments relating to
the borrowing of money or extension of credit to, or any guarantee by,
Corporation or a subsidiary; (b) employment and consulting agreements; (c) stock
option, incentive, employee benefit, profit sharing, pension and retirement or
other compensation plans or agreements; (d) collective bargaining agreements;
(e) the names and annual compensation, as of the date hereof, of directors,
officers, and other employees, consultants or agents of the Corporation; (f)
sales, technical rep, dealer, distributor, VAR, VAD agreements; (g) agreements,
orders or commitments for the purchase by Corporation of materials, supplies or
finished products; (h) agreements, orders or commitments for the sale by
Corporation of products or involving the furnishing of services to customers,
agencies and the like; (i) licenses of software and any patent, trademark,
copyright and other industrial property rights; (j) agreements or commitments
for capital expenditures; (k) brokerage or finders' agreements; (l) agreements,
contracts, leases, payables and commitments of a type other than those described
in the foregoing clauses which, in any case, involve aggregate payments or
receipts of more than $5,000.00 and/or which extend for a period of ninety (90)
days from the date hereof. Corporation has, or will promptly hereafter deliver
to Buyer complete and correct copies of all written agreements, contracts and
commitments, together with all amendments thereto, and accurate descriptions of
all oral agreements set forth in Schedule 2.8. All such agreements, contracts
and commitments are in full force and effect. All parties to such agreements,
contracts and commitments have performed all material obligations required to be
performed by them to date. None of such agreements, contracts or commitments is
in default, and there has been no material violation of any
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representation or warranty, explicit or implied, contained therein. No claim of
default by any party has been made or is now pending under any such agreement,
contract or commitment, and no event has occurred or continues to occur that
with notice or the passing of time or both would constitute a default thereunder
or would excuse performance by any party thereto. No such agreement, contract or
commitment materially affects or in the future may (so far as Sellers or
Corporation can now reasonably foresee) materially adversely affect the
business, financial condition, properties, assets, liabilities or operations of
Corporation taken as a whole. No such agreement was executed or continues in
effect on the basis that the Corporation is or was certified as a minority or
woman-owned enterprise and to the best of Seller's knowledge on the basis that
the Corporation is or was female owned.
2.9 Properties. Sellers have listed and described in Schedule 2.9 all
properties and assets of Corporation not fully described in the Corporation
Financials including accounts receivable, inventory, tangible fixed assets,
leasehold improvements, machinery, equipment, furniture, fixtures, bank accounts
and vehicles. Corporation owns and has good and marketable title in fee to all
of its assets and properties, tangible or intangible, reflected on the Balance
Sheet dated December 31, 1995 and June 30, 1996, or listed in Schedule 2.9 in
each case free and clear of any mortgage, lien, pledge, charge, claim,
conditional sales or other agreement, right, easement or encumbrance except: (i)
to the extent stated or reserved against in the Corporation Balance Sheet; (ii)
for liens for taxes not yet delinquent; and (iii) such other matters as have
been described in another exhibit attached hereto. Also described in Schedule
2.9 are all leases for real or personal property and material currently in force
involving Corporation. A true copy of all such leases have been, or will
promptly hereafter be, delivered to Buyer. All such leases are valid, subsisting
and effective in accordance with their terms and in good standing, and there
does not exist thereunder any default or event or condition which, after notice
or lapse of time or both, would constitute a default thereunder. All physical
properties owned or used by Corporation and all equipment
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necessary for the operation of its business are in good operating condition and
in a reasonable state of maintenance and repair. Corporation has received no
notice of violation of any applicable zoning regulation, ordinance or other law,
order, regulation, or requirement relating to its operations or its properties,
and there is no such violation, and all buildings and structures used by
Corporation substantially conform with applicable ordinances, codes and
regulations.
2.10 Litigation. Except as set forth in Schedule 2.10, there are no
actions, suits or proceedings or investigations pending or, to the knowledge of
Corporation, threatened against or affecting the business, operations or
financial condition of Sellers or Corporation at law or in equity in any court
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality. Neither Corporation nor
Sellers are in default in respect of any judgment, order, writ, injunction or
decree of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality.
2.11 Permits. Corporation has secured a license from the Pennsylvania
Department of Education as a school and has all other permits, licenses, orders
and approvals of all federal, state or local governmental or regulatory bodies
required for them to conduct its businesses as presently conducted. All such
permits, licenses, orders and approvals are in full force and effect and, to the
knowledge of Sellers and Corporation, no suspension or cancellation of any of
them is threatened. None of such permits, licenses, orders or approvals will be
adversely affected by the consummation of the transactions contemplated by this
Agreement. Corporation has complied in all material respects with the rules and
regulations of all governmental agencies having authority over it, including,
without limitation, agencies concerned with occupational safety, environmental
protection and employment practices, and Corporation has received no notice of
violation of any such rules or regulations, whether corrected or not, within the
last three (3) years.
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2.12 Patents, Trademarks, Copyrights, etc. Corporation owns or
possesses full legal rights to use all material patents, trade names,
trademarks, copyrights, inventions, processes, designs, formulae, trade secrets
and other property rights necessary for the conduct of its business as it is now
being conducted and is not aware of any conflict with or infringement of the
rights of others. Sellers and Corporation do not know of any infringement by any
third party upon any patent, trade name, trademark or copyright owned by
Corporation and Corporation has not taken or omitted to take any action which
would have the effect of waiving any of its rights under any such patent, trade
name, trademark or copyright. No director, officer or stockholder of Corporation
owns or has any interest in any of the Corporation products or in any software
or hardware or other proprietary information or trade secret used in
Corporation's business.
2.13 Insurance. Sellers shall promptly furnish to Buyer a complete and
correct list as of the date hereof of all insurance policies maintained by
Corporation with respect to Corporation liability for operations, casualty,
damage or destruction of properties, buildings, machinery, equipment, furniture,
fixtures, injury to persons or the lives of its key employees. All such policies
are in full force and effect and all premiums due thereon have been paid or
fully accrued as finally audited or determined on the Corporation Financials.
Corporation has complied in all material respects with the provisions of all
such policies. The insurance provided under such policies is, and has been,
adequate to protect Corporation and its assets and properties.
2.14 Accounting Controls. Neither Corporation nor any director,
officer, agent, employee, consultant or other person associated with or
acting on behalf of Corporation has: (a) used any corporate funds for any
unlawful contributions, gifts, entertainment or any other unlawful expenses
relating to political activity; or (b) made any direct or indirect unlawful
payments to government officials or others from corporate funds or established
or maintained any unlawful or unrecorded funds.
-17-
Corporation makes and keeps accurate books and records reflecting its assets and
maintains internal accounting controls which provide reasonable assurance that
transactions are executed in accordance with management's authorization and
transactions are recorded as necessary to permit preparation of Corporation's
consolidated financial statements and to maintain accountability for the
earnings and consolidated assets of Corporation.
2.15 Transactions with Affiliates. Except as disclosed in Corporation
Financials or in some other exhibit or schedule hereto, no officer or director,
or a shareholder owning 5% or more of Corporation's Common Stock, nor any
spouse, decedent or ancestor of such a person nor any corporation, partnership,
proprietorship, firm, association or trust in which such person has a direct or
indirect interest, has any existing contractual relationship with Corporation,
or has engaged in any material transaction with Corporation, nor has engaged in
competition, direct or indirect, with Corporation.
2.16 No Brokers. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any person acting on behalf of Sellers or Corporation in such manner as to
give rise to any valid claim against Sellers, Corporation or Buyer for any
broker's or finder's fee or similar compensation.
2.17 Directors, Officers and Stockholders. Attached herewith as
Schedule 2.17 is a complete and correct listing as of the date hereof of the
directors and officers of Corporation and the beneficial owners of the issued
and outstanding shares of Corporation Common Stock and the number of shares of
each class owned by them.
2.18 Non-Disclosure of Confidential Information. All persons and
entities (including, without limitation, employees of Corporation) who have or
had access to Corporation's trade secrets, confidential information, software
documentation, source codes, know-how and all other non-
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public information used or useful in Corporation's business have entered into
agreements with Corporation, which contain provisions to the general effect that
the recipients of such information agree to hold such information in confidence
and not disclose the same, directly or indirectly, to any person not having
Corporation-authorized access to such information, without the express
authorization of Corporation; and Sellers and Corporation are not aware of any
violation of any of such agreements. Corporation has, or will promptly hereafter
deliver to Buyer complete and correct copies of all such agreements, together
with all amendments thereto.
2.19 Foreign Assets. Corporation has no material interest in any
assets, real or personal, tangible or intangible, located outside of the
continental limits of the United States, including, but not limited to, stock,
securities or investments in, claims against or receivables from, any entities
or persons so located.
2.20 Accounts Receivable. The accounts and notes receivable reflected
in the Corporation Financials are collectable in the amounts there shown, and
the accounts and notes receivable acquired by Corporation subsequent to the date
of such Corporation Financials through the Closing Date are and shall be
collectable in the aggregate amounts shown upon Corporation's books after
application of the reserves for returns and bad debts set in such Financials and
maintained upon the books in accordance with generally accepted accounting
principles consistently applied by Corporation.
2.21 Inventories. The inventories set forth in the Corporation
Financials and reflected since then upon the books of Corporation are items
of a quality and quantity useable or saleable in the normal course of its
business and that market value is not less than the book value thereof; the
value of any obsolete materials and of materials below standard quality has been
written down to realizable market value or adequate reserves provided therefor;
the value at which such inventories are carried reflect an inventory evaluation
policy of stating inventory at the lower of first in, first out cost or market
and of
-19-
valuing finished goods and work in process at standard cost developed for
individual items using current materials, labor, and overhead cost at normal
production levels; and an obsolescence formula based on historical sales and
backlog orders is applied to inventories of finished goods in order to determine
the maximum quantities to be valued through each inventory date.
2.22 Disclosure. This Agreement and the certificates, statements and
other information furnished to Buyer in writing by or on behalf of Corporation
or Sellers in connection with the transactions contemplated herein, taken as a
whole, do not contain any untrue statements of a material fact or omit to state
a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Neither Sellers nor
Corporation know of any fact or condition which is peculiar to Corporation and
does not affect similarly situated businesses and which materially adversely
affects, or in the future may (so far as Sellers or Corporation can now
reasonably foresee) materially adversely affect the financial condition,
properties, assets, liabilities, business, operations or prospects of
Corporation taken as a whole which has not been set forth herein or in an
exhibit hereto.
2.23 Hazardous Substances.
(a) Except as disclosed on Schedule 2.23 hereto, to the knowledge of
Sellers or Corporation, there has been no Release (as defined below), actual or
threatened, of any Hazardous Substance (as defined below) by Corporation (or its
predecessor in interest) at or from any Facility (as defined below) currently or
previously owned or operated by Corporation (or its predecessor in interest). To
the knowledge of Corporation, there has been no Release of any Hazardous
Substance for which Corporation (or its predecessor in interest) is or may be
liable. For purposes of this Agreement, each of the terms "Release", "Hazardous
Substance" and "Facility" shall be defined as it is now, or shall in the future
be, defined under the Comprehensive Environmental Response, Compensation and
Liability
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Act of 1980, as amended 42 U.S.C. (section)(section) 9601 et seq. or
any other applicable federal, state or local law, statute, rule, regulation or
ordinance.
(b) Corporation has notified or reported to all federal, state or
local officials and agencies all Releases of Hazardous Substances subject to any
such notification or reporting requirements.
(c) Schedule 2.23 hereto sets forth a complete list of all
aboveground and underground storage tanks, vessels and related equipment and
containers located on any currently or previously (to the extent known) owned or
operated facility that are subject to federal, state or local laws, statutes,
rules, regulations or ordinances, and sets forth their present contents and, to
the knowledge of Corporation, what the contents have been at any time in the
past.
(d) There have been no discharges to surface waters or groundwaters
occurring prior to the date hereof other than permitted discharges.
(e) There have been no air emissions occurring prior to the date
hereof other than permitted discharges.
2.24 ERISA.
(a) Except as set forth on Schedule 2.24, Corporation does not
maintain, administer or contribute to, nor at any time during the past six years
has maintained, administered or contributed to, any (1) employee pension benefit
plan (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), whether or not excluded from coverage under
specific Title or Subtitles of ERISA) (the employee pension benefit plans
disclosed on Schedule 2.24 are hereinafter referred to as the "Pension Plans");
(2) employee welfare benefit plan (as defined in Section 3(1) of ERISA, whether
or not excluded from coverage under specific Titles or Subtitles of ERISA) (the
employee welfare benefit plans disclosed on Schedule 2.24 are hereinafter
referred to as
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the "Welfare Plans"); or (3) bonus, deferred compensation, stock purchase, stock
option, severance plan, insurance or similar arrangement (the plans, insurance
or similar arrangements so disclosed on Schedule 2.24 are hereinafter referred
to as the "Employee Benefit Plans").
(b) Except as explained in Schedule 2.24, all Pension Plans, Welfare
Plans and Employee Benefit Plans and any related trust agreements or annuity
contracts (or any related trust instruments) comply with and are and have been
operated in accordance with ERISA, the Internal Revenue Code of 1986, as amended
(the "Code"), other federal statutes, state law and the regulations and rules
promulgated pursuant thereto. Except as explained in Schedule 2.24, all
necessary governmental approvals for the Pension Plans, the Welfare Plans and
the Employee Benefit Plans have been obtained, a favorable determination as to
the qualification under the Code of each of the Pension Plans and each amendment
thereto has been made by the Internal Revenue Service, and all of the Pension
Plans remain qualified under the Code.
(c) Neither any Pension Plan nor any Welfare Plan has engaged in any
transaction in violation of Section 406 of ERISA or any "prohibited transaction"
(as defined in section 4974(c)(1) of the Code) other than any such transaction
which is exempt under Section 408 of ERISA or Section 4974(d) of the Code.
(d) Corporation has not incurred any liability to the Pension
Benefit Guaranty Corporation ("PBGC") as a result of the voluntary or
involuntary termination of any Pension Plan subject to Title IV of ERISA; there
is currently no active filing by Corporation with the PBGC (and no proceeding
has been commenced by the PBGC) to terminate any Pension Plan subject to Title
IV of ERISA maintained or funded, in whole or in part, by Company or any of the
Subsidiaries; and Corporation has not made a complete or partial withdrawal from
a multi-employer plan, as such term is defined in Section 3(37) of ERISA,
resulting in "withdrawal liability", as such term is defined in Section
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4201 of ERISA (without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA).
2.25 Employees.
(a) Schedule 2.25 contains a complete and accurate list of each
employee, officer or director of the Corporation, including each employee on
leave of absence or lay-off status: name; job title; current compensation paid
or payable and any change in compensation since January 1, 1994; vacation
accrued; and service credited for purposes of vesting eligibility to participate
under any pension, retirement, profit-sharing, thrift type and savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other employee pension benefit
plan or employee welfare benefit plan, or any other employee benefit plan or any
director plan of Corporation.
(b) No employee, officer or director of Corporation is a party to,
or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee, officer or director and any other person or entity that in any way
adversely affects or will affect (i) the performance of his or her duties as an
employee, officer or director of the Corporation, or (ii) the ability of
Corporation to conduct its business. To Sellers' knowledge, no director,
officer, or other key employee of Corporation intends to terminate his or her
employment with Corporation.
(c) Schedule 2.25 also contains a complete and accurate list of the
following information for each retired employee, officer or director of the
Corporation, or their dependents receiving benefits or scheduled to receive
benefits in the future: name; pension benefit; pension option election; retiree
medical insurance coverage; retiree life insurance coverage; and other benefits.
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(d) No union or collective bargaining unit represents any of
Corporation's employees.
3. Representations and Warranties of Buyer. The Buyer represents and
warrants to Sellers:
3.1 Valid Authorization and Compliance. That it has all requisite power
and authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby; the execution, delivery and performance of
this Agreement has been duly authorized by all requisite corporate action; this
Agreement has been duly executed and delivered by it and constitutes its valid
and binding obligation, fully enforceable against it in accordance with its
terms; and the execution of this Agreement and performance of the obligations
hereunder do not and will not render it insolvent or render it unable to pay its
obligations as they arise. Further, that the issuance of the Notes called for in
this Agreement are valid acts of the Buyer, have been approved by Buyer's Board
of Directors and are duly authorized and valid obligations of the Buyer pursuant
to the terms of this Agreement.
4. Access To and Information Concerning Properties, Records, Etc.
4.1 Access. Corporation and Sellers shall give to Buyer, its counsel,
accountants, financial advisors and other representatives full access, at
reasonable times and upon reasonable notice (so as not to interfere unreasonably
with the ordinary course and conduct of business of Corporation), throughout the
period prior to the Closing, to all of their respective properties, books,
contracts, commitments and records, including, but not limited to, minute books,
charters and by-laws, and shall furnish to Buyer all such information concerning
Corporation and Corporation's subsidiaries and Corporation's respective affairs
as the Buyer may reasonably request. In addition, Corporation shall make its
officers available at reasonable times and upon reasonable notice to discuss
with the Buyer's designated, appropriate representatives the substance of all
documents, financial statements and other
-24-
information provided by Corporation, and such other matters as the respective
parties shall reasonably deem pertinent to the transactions contemplated under
this Agreement. All information disclosed by any party hereto, to another party
pursuant to this Section shall be subject to Article 8 hereof (regarding
confidential treatment of confidential or non-public information). No
investigation pursuant to this Section shall affect any representations or
warranties made herein.
5. Covenants of Corporation.
5.1 Affirmative Covenants of Corporation. Corporation covenants that,
throughout the period commencing on the date hereof and ending at the Closing,
except for specific proposed actions or inaction as shall otherwise be consented
to by Buyer in writing, Corporation will for its own part:
(a) Conduct of Business. Conduct its business in a manner that will
not adversely affect Corporation's ability to obtain all necessary regulatory
approvals for the transactions contemplated hereby or Corporation's ability to
perform its obligations under this Agreement and conduct its business in the
ordinary course;
(b) Preservation of Business. Use its best efforts to maintain and
preserve its businesses, its good will and its relationships with its customers;
(c) Assets. Maintain and keep its assets in as good repair and
condition in all material respects as they presently exist, except for
depreciation due to ordinary wear and tear and damage due to casualty;
(d) Insurance. Maintain in full force and effect the policies of
insurance set forth in Section 2.13;
(e) Contracts, Etc. Perform all its material obligations under
material contracts, leases and documents relating to or affecting its material
assets, properties and businesses;
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(f) Financial Statements. Furnish to Buyer:
(i) Promptly upon receipt thereof, copies of all audit reports
submitted to Corporation by independent auditors in connection with each annual,
interim or special audit of the books of Corporation made by such accountants;
(ii) As soon as practicable, copies of all financial statements
and reports as it or its accounting firm shall generate;
(iii) Promptly upon any executive officer of Corporation
obtaining knowledge of any condition or event which would constitute a material
violation of the terms and conditions of this Agreement or which would
constitute a material default under any material indenture, mortgage, agreement
or other instrument securing or relating to any indebtedness of Corporation for
borrowed money, a certificate of the President of Corporation specifying the
nature of such material violation or default and what action Corporation has
taken or is taking or proposes to take with respect thereto;
(iv) Promptly upon becoming aware that any person has given
notice to Corporation or taken any other action with respect to a claimed
violation or default of the type referred to in subsection (iii) of this
Subsection, a written notice describing the notice given or action taken by such
person, the nature of such violation or default and what action Corporation has
taken or is taking or proposes to take with respect thereto; and
(v) With reasonable promptness, such additional financial data as
Buyer may reasonably request;
(g) Laws, Rules, Etc. Corporation shall comply with and perform all
material obligations and duties imposed upon it by all federal and state laws
and all rules, regulations and orders imposed by federal or state governmental
authorities, except in respects not materially adverse to
-26-
the financial condition, business, prospects or results of operations of
Corporation taken as a whole, or which would not materially impair the ability
of Corporation to consummate the transactions contemplated hereby;
(h) Corporate Existence. Maintain its existence, in the case of
Corporation, as a corporation validly existing in good standing under the laws
of the State of Delaware.
(i) Notices. Notify Buyer of (i) any fact or circumstance of which
the executive officers of Corporation have knowledge which would, absent
disclosure by Corporation to Buyer and Buyer's subsequent consent to such fact
or circumstance, not permit Corporation to satisfy the condition set forth in
Section 5.1(a) of this Agreement, (ii) any material breach of any of its
covenants contained herein, and (iii) any material adverse change in its
financial condition, business, prospects or operating results;
(j) Best Efforts. Use its best efforts to assure, to the extent
reasonably within its control, and subject to its fiduciary duties, as soon as
it is reasonably practicable, the satisfaction of the conditions to the
effectiveness of the transactions contemplated by this Agreement;
(k) Taxes. Withhold and pay over as they become due all withholding
taxes and provide for and pay any other taxes as they become due; or
(l) Accounts Receivable, Accounts Payable and Inventory. Maintain
accounts receivable, accounts payable and inventory at substantially the same
level as they exist as of the date of execution hereof.
5.2 Negative Covenants of Corporation. Corporation covenants that,
throughout the period commencing on the date hereof and ending on the date of
Closing, except for proposed specific actions as shall otherwise be consented to
by Buyer, Corporation will not:
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(a) Liabilities. Create, incur, assume, guarantee or otherwise
become directly or indirectly obligated with respect to any liabilities or
obligations outside the ordinary course of business nor become obligated under
any agreement to lend or borrow funds or purchase or supply goods or services
other than agreements that are not material and which are in the ordinary course
of business;
(b) Corporate Status. Merge into, consolidate with, affiliate with,
or be purchased or acquired by, any other corporation, entity or person (or
agree to any such merger, consolidation, affiliation, purchase or acquisition)
provided, however, that Buyer shall consent to such a transaction or agreement
upon receipt of a legal opinion satisfactory to Buyer and its counsel to the
effect that such a transaction or agreement is necessary to satisfy the
fiduciary duties of the Board of Directors of Corporation;
(c) Governing Documents. Amend its charter or by-laws, except that
Corporation shall amend the foregoing to the extent necessary to effect the
transactions contemplated hereby;
(d) Stock. Purchase, redeem, retire or otherwise acquire, or
hypothecate, pledge or otherwise encumber, any shares of capital stock;
(e) Dividends and Distributions. Make, declare or pay any dividend
on Common Stock, or declare or make any distribution on any shares of its
capital stock;
(f) Liability. Except for indebtedness and contingent liabilities
incurred in the ordinary course of business of Corporation, incur any
indebtedness or liability for borrowed money evidenced by notes, bonds,
debentures or other similar obligations;
(g) Assets. Solicit or encourage inquiries or proposals with respect
to, or, furnish any information relating to or participate in any negotiations
or discussions concerning, any acquisition or purchase or all or a material
portion of its assets whether owned by it directly or of a
-28-
substantial equity interest in, it or any business combination with it and
Corporation shall notify Buyer immediately if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with, Corporation shall
instruct its officers, directors, agents, advisors and affiliates to comply with
the above;
(h) Cash, Accounts Payable and Accounts Receivable. Except in the
ordinary course of business, incur accounts payable, forgive or write off
accounts receivable or deplete or expend cash-on-hand;
(i) Bank Debt. Increase the corporate line of credit or term loans
with Corestates or any other bank beyond Two Hundred Thousand Dollars
($200,000.00);
(j) Plant, Property and Equipment. Incur expenditures in excess of
Forty Thousand Dollars ($40,000.00) for the purchase or lease of plant, property
or equipment;
(k) Corporation Stock. Issue any additional shares of capital stock
or any options, warrants or other securities or instruments convertible into
shares of capital stock ;
(l) Dividends and Other Distributions. Declare or pay any dividends
or otherwise make distributions on any shares of its capital stock or sell,
transfer or otherwise dispose of, or enter into any agreement to sell, transfer
or otherwise dispose of, any of its assets other than in the ordinary course of
business; or
(m) Other Actions. Directly or indirectly agree to take any of the
foregoing actions specified in Section 5.2.
6. Conditions.
6.1 Conditions to the Obligations of Buyer, Sellers and Corporation.
The Closing shall be expressly conditioned upon the following:
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(a) Approval of Stockholders. Approval of this Agreement by the
affirmative vote of such number of the stockholders of Buyer, as is required by
applicable law, shall have been obtained.
(b) Approval of Regulatory Agencies. All required consents and
approvals of all regulatory agencies and other authorities having jurisdiction
over the transactions contemplated by this Agreement, including without
limitation the SEC if required, shall have been obtained, and all applicable
waiting periods shall have expired.
(c) Suits, Actions. No party hereto shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the purchase.
(d) Statutes, Orders. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or enforced
by any governmental authority which prohibits, restricts or makes illegal the
consummation of the purchase.
6.2 Conditions to the Obligations of Buyer. Consummation by Buyer of
the transactions contemplated hereby is subject to the following conditions
precedent, any of which, however, may be waived, to the extent permitted by
applicable law or regulation, by the consent in writing of Buyer:
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(a) Representations, Warranties and Covenants.
(i) The representations and warranties of Corporation and Sellers
contained herein (A) shall have been true and correct in all material respects
on the date hereof, and (B) other than as disclosed by Corporation and Sellers
to, and approved by, Buyer in writing prior to or at the Closing, shall be true
and correct in all material respects as of the Closing, except as otherwise
provided or permitted by this Agreement.
(ii) Corporation and Sellers shall have duly performed in all
material respects all covenants, not otherwise waived by Buyer in writing,
required by this Agreement to be performed by Corporation and Sellers prior to
or at the Closing.
(iii) Buyer shall have received a certificate of Corporation
dated as of the Closing, signed by the Chairman and the President of Corporation
and certifying in such detail as Buyer may reasonably request the fulfillment of
the conditions set forth in Section 6.2(a).
(b) Material Adverse Changes.
(i) Since the date of this Agreement there shall have been no
material adverse change in the overall financial condition, asset value,
earnings, businesses, prospects or results of operations of Corporation.
(ii) Buyer shall have received a certificate of Corporation dated
as of the date of the Closing, signed by the Chairman and the President of
Corporation and certifying in such detail as Buyer may reasonably request the
fulfillment of the conditions set forth in Section 6.2(b).
(c) Opinion of Counsel. All proceedings and legal details incident
to this Agreement shall be satisfactory to Wisler, Pearlstine, Xxxxxx, Xxxxx,
Xxxxxxx & Potash, LLP as counsel for Buyer, and Buyer shall have received an
opinion reasonably satisfactory to them from Xxxxxx,
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Xxxxxxxx & Xxxxxxxxx, as counsel for Corporation, dated as of the date of the
Closing and addressed to Buyer, to the effect that:
(i) Corporation is a Delaware corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the power and authority to execute, deliver and perform all transactions
contemplated by this Agreement.
(ii) The authorized capital stock of Corporation consists of
3,000 shares of common stock, with no par value, of which the number of shares
of Corporation Common Stock specified in the opinion are issued and outstanding
on the Closing Date. Each of such outstanding Shares of Corporation has been
validly issued and is fully paid and non-assessable. None of such outstanding
Shares of Corporation have been issued in violation of any preemptive rights. To
such counsel's knowledge, no unissued shares of Corporation Shares or any other
securities of Corporation are subject to any warrants, options, commitments,
preemptive or other rights of any kind or nature, and Corporation is not
obligated to issue any additional shares of capital stock or any other
securities of any kind or nature as of the date of this Agreement.
(iii) The execution, delivery and performance as of the date of
such opinion of all transactions contemplated by this Agreement have been duly
authorized by the board of directors and shareholders of Corporation and do not
and will not violate any of the provisions of, or constitute a default under or
give any person or party the right to accelerate payment or performance under
the certificate of incorporation or by-laws of Corporation or to such counsel's
knowledge any other material agreement or instrument to which Corporation is a
party or by which it or any of its properties or assets is bound other than (1)
violations, defaults or accelerations which in the aggregate would not have a
material adverse effect on the financial condition, business, prospects or
operating results of
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Corporation taken as a whole or (2) violations, defaults or accelerations that
in the aggregate would not materially impair the ability of Corporation to
consummate the transactions contemplated hereby.
(iv) This Agreement has been duly authorized, executed and
delivered by Corporation and constitutes valid and binding obligations of
Corporation, enforceable against Corporation in accordance with its terms except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights and except as may be limited by the exercise of
judicial discretion in applying general principles of equity (regardless of
whether such agreements or documents are considered in a proceeding in equity or
at law).
(v) To the actual knowledge of such counsel, the execution,
delivery and performance of the Agreement by Corporation will not violate any
provision of law or regulation applicable to Corporation other than (1)
violations which in the aggregate would not have a material adverse effect on
the financial condition, business, prospects or operating results of Corporation
taken as a whole, or (2) violations which in the aggregate would not materially
impair the ability of Corporation to consummate the transactions contemplated by
the Agreement.
(vi) All consents and approvals of (and filings with) all federal
or state regulatory agencies or other authorities having jurisdiction over the
transactions contemplated by this Agreement required by law for Corporation to
have been obtained or accomplished have been obtained or accomplished; such
opinion to express those agencies or authorities whose approvals have been
obtained or accomplished and to be given on a knowledge basis as to all others.
(d) Suit, Action, Etc. No suit, action or other proceeding shall be
pending or directly threatened by any federal, state or other governmental
agency, commission or authority having jurisdiction or authority over
Corporation or Buyer or by any other person, in which it is sought to restrain
or prohibit consummation of the transactions contemplated by this Agreement and
which in the
-33-
reasonable judgment of the management of Buyer is meritorious and materially
adversely affects the prospects of such consummation.
(e) Accountants' Letter. Buyer shall have received a "comfort"
letter from Corporation's independent certified public accountants dated (i) as
of the date of Closing substantially to the effect that:
(i) It is a firm of independent public accountants with respect
to Corporation; and
(ii) On the basis of generally accepted auditing standards,
nothing has come to its attention which causes it to believe:
(A) that the audited financial statements of Corporation are
not fairly presented in conformity with generally accepted accounting principles
applied on a basis consistent with that of audited financial statements; and
(B) that from July 1, 1996 through the date of Closing, there
are any liabilities or obligations, secured or unsecured (whether accrued,
absolute, contingent, or otherwise), of a nature that would be reflected or
reserved against in a corporate balance sheet or disclosed in the notes thereto,
prepared in accordance with the generally accepted accounting principles applied
in the preparation of such financial statements, that are not reflected or
reserved against in the June 30, 1996 balance sheet or disclosed in the notes
thereto, except as set forth in Exhibit "D" to the Agreement.
(f) Corporation Customer Base. As of Closing, there shall have been
no material adverse change in the current customer base of Corporation.
(g) Approval by Lenders. Corporation shall have obtained, prior to
Closing, the approval of the transactions required by this Agreement by the
lenders of Corporation.
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(h) Retirement Plans. Except as set forth in Schedule 2.24,
Corporation shall have fully funded all retirement plans for its officers and
other employees prior to Closing and there shall be no existing or potential
violation of applicable laws or regulations with regard to said retirement
plans.
(i) Due Diligence. The satisfactory completion by Buyer of its due
diligence review of Corporation prior to Closing.
(j) Delivery of Documents. All documents required to be delivered to
Buyer from Sellers or Corporation have been delivered.
6.3 Conditions to the Obligations of Sellers and Corporation.
Consummation by Sellers and Corporation of the transactions contemplated hereby
is subject to the following conditions precedent, any of which, however, may be
waived, to the extent permitted by applicable law or regulation, by the consent
in writing of Sellers and Corporation:
(a) Representations and Warranties.
(i) The representations and warranties of Buyer contained herein
(A) shall have been true and correct in all material respects on the date made,
and (B) other than as disclosed by Buyer to, and approved by, Sellers and
Corporation in writing prior to or at the Closing, shall be true and correct in
all material respects as of the Closing, except as otherwise permitted by this
Agreement.
(ii) Buyer shall have duly performed in all material respects all
covenants, not otherwise waived by Sellers and Corporation in writing, required
by this Agreement to be performed by Buyer prior to or at the Closing.
(iii) Sellers and Corporation shall have received a certificate
of Buyer dated as of the Closing, signed by the President and the Chief
Financial Officer of Buyer and certifying in such detail as Corporation may
reasonably request the fulfillment of the conditions set forth in Section
6.3(a).
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(b) Suit, Action, Etc. No suit, action or other proceeding shall be
pending or directly threatened by any federal, state or other governmental
agency, commission or authority having jurisdiction or authority over Sellers
and Corporation or Buyer or by any other person, in which it is sought to
restrain or prohibit consummation of the transactions contemplated by this
Agreement and which in the reasonable judgment of Sellers and of the management
of Corporation is meritorious and materially adversely affects the prospects of
such consummation.
(c) Opinion of Counsel. All proceedings and legal details incident
to this Agreement shall be satisfactory to Xxxxxx, Xxxxxxxx and Xxxxxxxxx as
counsel for Sellers, and Sellers shall have received an opinion reasonably
satisfactory to them from Wisler, Pearlstine, Xxxxxx, Xxxxx, Xxxxxxx & Potash,
LLP, as counsel for Buyer, dated as of the date of the Closing and addressed to
Seller, to the effect that:
(i) Buyer is a Pennsylvania corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has the power and authority to execute, deliver and perform all transactions
contemplated by this Agreement.
(ii) The execution, delivery and performance as of the date of
such opinion of all transactions contemplated by this Agreement have been duly
authorized by the board of directors and shareholders of Buyer and do not and
will not violate any of the provisions of, or constitute a default under or give
any person or party the right to accelerate payment or performance under the
certificate of incorporation or by-laws of Buyer or to such counsel's knowledge
any other material agreement or instrument to which Buyer is a party or by which
it or any of its properties or assets is bound other than (1) violations,
defaults or accelerations which in the aggregate would not have a material
adverse effect on the financial condition, business, prospects or operating
results of Buyer taken as a
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whole or (2) violations, defaults or accelerations that in the aggregate would
not materially impair the ability of Buyer to consummate the transactions
contemplated hereby.
(iii) This Agreement has been duly authorized, executed and
delivered by Buyer and constitutes valid and binding obligations of Buyer,
enforceable against Buyer in accordance with its terms except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights and except as may be limited by the exercise of judicial
discretion in applying general principles of equity (regardless of whether such
agreements or documents are considered in a proceeding in equity or at law).
(iv) To the actual knowledge of such counsel, the execution,
delivery and performance of the Agreement by Buyer will not violate any
provision of law or regulation applicable to Buyer other than (1) violations
which in the aggregate would not have a material adverse effect on the financial
condition, business, prospects or operating results of Buyer taken as a whole,
or (2) violations which in the aggregate would not materially impair the ability
of Buyer to consummate the transactions contemplated by the Agreement.
(v) All consents and approvals of (and filings with) all federal
or state regulatory agencies or other authorities having jurisdiction over the
transactions contemplated by this Agreement required by law for Buyer to have
been obtained or accomplished have been obtained or accomplished; such opinion
to express those agencies or authorities whose approvals have been obtained or
accomplished and to be given on a knowledge basis as to all others.
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6.4 Documents to be Delivered at Closing:
(a) At Closing, Sellers shall deliver the following documents to
Buyer:
(i) Xxxxx shall deliver an executed copy of the Employment
Agreement attached hereto as Exhibit "E";
(ii) XxXxxxxx shall deliver an executed copy of the Employment
Agreement attached hereto as Exhibit "F";
(iii) Xxxxx shall deliver Certificate(s) representing all of her
shares in Corporation, properly endorsed, for transfer to Buyer;
(iv) XxXxxxxx shall deliver Certificate(s) representing all of
his shares in Corporation, properly endorsed, for transfer to Buyer;
(v) Xxxxx shall submit her written resignation from her position
as director and an officer of the Corporation;
(vi) XxXxxxxx shall submit his written resignation from his
position as director and an officer of the Corporation;
(vii) Xxxxx and XxXxxxxx shall each deliver an executed copy of
the Subscription Agreement attached hereto as Exhibit "G";
(viii) Xxxxx and XxXxxxxx shall each deliver a completed and
executed Investors Questionnaire attached hereto as Exhibit "H".
(b) At Closing, Buyer shall deliver the following documents to
Seller:
(i) An executed copy of the Subscription Agreement to Xxxxx and
XxXxxxxx in the form attached hereto as Exhibit "G".
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7. Expenses.
7.1 Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby.
Provided however, Buyer shall pay the reasonable costs of the audit of
Corporation's financial statement for the period ending June 30, 1996 and the
cost of the bringdown audit for the period between June 30th and the date of
Closing. In addition, Buyer will pay Sellers' and Corporation's reasonable
attorney's fees incurred in connection with this transaction, to the extent such
fees exceed Four Thousand Dollars ($4,000.00). Sellers' and Corporation shall
pay the first Four Thousand Dollars ($4,000.00) of their attorney's fees.
8. Confidentiality.
8.1 Confidentiality. Any non-public or confidential information
disclosed by either party to the other pursuant to this Agreement or as a result
of the discussions and negotiations leading to this Agreement, or otherwise
disclosed, or to which any other party has acquired or may acquire access, and
indicated (either expressly, in writing or orally, or by the context of the
disclosure or access) by the disclosing party to be non-public or confidential,
or which by the content thereof reasonably appears to be non-public or
confidential, shall be kept strictly confidential and shall not be used in any
manner by the recipient except in connection with the transactions contemplated
by this Agreement. To that end, the parties hereto will each, to the maximum
extent practicable, restrict knowledge of and access to non-public or
confidential information of the other party to its officers, directors,
employees and professional advisors who are directly involved in the
transactions contemplated hereby and reasonably need to know such information.
Further to that end, all non-public or confidential documents (including all
copies thereof) obtained hereunder by any party shall be returned as soon as
practicable after any termination of this Agreement and all electronic data that
constitutes non-public confidential information
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which is not physically returned shall be destroyed. The obligation of the
parties to maintain the confidentiality of such information shall survive the
termination of this Agreement.
9. Post-Closing Transactions.
9.1 S Corporation Status. If applicable, the parties agree that upon
completion of the transfer of the stock, they shall file an election to close
books under Section 1377(a)(1) of the Internal Revenue Code effective as of the
date the shares are transferred to reflect that the Corporation's tax year shall
end, for the purposes of Sellers' tax treatment, on such date.
9.2 Audit. Subsequent to Closing, Sellers shall fully cooperate, and
secure the cooperation of Corporation's current CPA firm, in completing an
audited financial statement for the Corporation for the period extending from
June 30, 1996 through the Closing.
9.3 Taxes. If Sellers incur and pay any personal tax liability
resulting from income earned by the Corporation in its business operations due
to its status as an S Corporation between January 1, 1996 and Closing (the "Tax
Period") and the filing of any tax return by Sellers for the Tax Period,
Corporation shall reimburse Sellers for such payments (the "Tax Liability"). The
Tax Liability shall exclude any tax liability imposed on Sellers for any amount
received by Sellers pursuant to (section)1.6. The amount of reimbursement shall
be limited to the Tax Liability less the amount of all taxes imposed on Sellers
on the income paid to Sellers by the Corporation from January 1, 1996 through
the date of Closing. Sellers shall provide Corporation and Buyer with written
notice of the Tax Liability within ten (10) days of paying the Tax Liability,
including copies of any tax returns, assessments or related documents
demonstrating such liability. Buyer shall pay Sellers the amount calculated
pursuant to this section within thirty (30) days of receipt of such written
notice.
10. Indemnification; Remedies.
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10.1 Survival. All representations, warranties, covenants and
obligations in this Agreement and any certificate of document delivered pursuant
to this Agreement will survive the Closing. The right to indemnification and any
other remedy based on the representations, warranties, covenants and obligations
will not be affected by any investigation conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time, whether it be
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, recovery of damages, or other remedy based on such
representations, warranties, covenants and obligations.
10.2 Indemnification.
(a) Sellers agree to indemnify and hold harmless Buyer against any
and all losses, costs, expenses, claims, damages or liabilities (including the
amount of any settlement approved by such Sellers and expenses of enforcing this
Agreement), which Buyer may suffer, incur or become subject to, and to reimburse
Buyer for any legal or other expenses incurred by it in connection with
investigating any claims and defending any actions, insofar as such losses,
costs, expenses, claims, damages, liabilities or actions arise out of or are
based upon (i) any false, misleading or untrue representation, intentional or
unintentional, or the breach of any warranty made by either or both of the
Sellers, (ii) any breach or default in performance by the Sellers of any of its
covenants or agreements with Buyer contained herein, (iii) the assessment of any
claim for additional premium for any insurance policy not fully accrued on the
Corporate Financials; or (iv) any tax liability of Corporation or Sellers
imposed upon Buyer or Corporation based on a failure of Corporation or Sellers
to file all tax returns and pay all taxes due, or assessed after IRS audit,
based upon the operations of Corporation prior to the
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Closing or thereafter including any tax liability based upon this transaction
(transferee liability), but excluding the tax to be paid by Buyer pursuant to
(section)9.3. The indemnity and hold harmless obligations in this Section shall
not apply to the extent that said losses, costs, expenses, claims, damages or
liabilities arise from actions which constitute misrepresentation, malfeasance,
nonfeasance or a violation of law by Buyer which actions are the material cause
of Seller's obligation to indemnify or hold harmless Buyer under this Section.
(b) As a condition precedent to indemnification and set off, Buyer
agrees to promptly notify the Sellers in writing upon becoming aware of the
existence of any claim, demand, or other matter to which the Sellers'
indemnification obligation would apply and shall give Sellers a reasonable
opportunity to defend or remedy the same at Sellers' own expense and with
counsel of the Sellers' selection; provided, that Buyer shall be given the
option at all times to fully participate in the defense at Buyer's own expense.
If Sellers shall, within a reasonable time after notice, fail to defend, Buyer
shall have the right, but not the obligation, to undertake the defense of, and
to compromise or settle (exercising reasonable business judgment) the claim or
other matter on behalf of, for the account and at the risk of Sellers.
10.3 Related Agreements.
(a) Concurrent with the Closing, Sellers and Corporation are
executing an Employment Agreement for Xxxxx and an Employment Agreement for
XxXxxxxx (this Agreement and the Employment Agreements are collectively referred
to as the "Related Agreements"). Any obligation under one agreement shall be
considered to be an obligation under every other Related Agreement.
(b) In the event of a voluntary quit by either Seller under their
respective Employment Agreements (a "Breach Event"), Buyer shall not be
obligated to make any payments to either Seller under the promissory notes
delivered pursuant to (section)1.2(a)(ii) and (b)(i) (the "Contingent Notes").
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However, if (i) the Net Income goal set forth in Schedule 10.3(b) Column I is
achieved by the Corporation in both the year in which the Breach Event occurs
and all years remaining on Schedule 10.3(b); and (ii) the Sellers are not in
violation of the covenants contained in sections 6.1, 6.2 and 6.3 of their
respective Employment Agreements with the Corporation, then the Seller who is
not subject to the Breach Event shall receive payment under the Contingent Notes
pursuant to the terms of the Contingent Notes commencing upon the satisfaction
of the foregoing conditions. Payments shall be suspended until such
determination can be made. In the event (i) the Net Income goal set forth in
Schedule 10.3(b) Column II is achieved by the Corporation in both the year the
Breach Event occurs and all years remaining on Schedule 10.3(b); and (ii) the
Sellers are not in violation of the covenants contained in sections 6.1, 6.2 and
6.3 of their respective Employment Agreements with the Corporation, then both
Sellers shall receive payment under the Contingent Notes pursuant to the terms
of the Contingent Notes commencing upon the satisfaction of the foregoing
conditions. Payments shall be suspended until such determination can be made.
(c) Any default shall not automatically constitute a basis for Buyer
to recoup monies previously paid to Sellers, but Buyer shall still be entitled
to exercise its right of set-off on any prospective monies owed to Sellers, its
right of indemnification, and any remedies at law or equity.
(d) In the event Employer materially defaults on its payment
obligations under sections 1.2(a)(i), (a)(ii), 1.2(b)(i), (b)(ii) and 1.2(c) and
has not cured said default within ninety (90) days of the written notice of the
default, exclusive of any grace periods, and is not otherwise justified in
withholding such payments under the Agreement, then the negative Covenants set
forth in sections 6.1, 6.2 and 6.3 of the Employment Agreement(s) shall be void
ab initio. This provision shall not apply to any payments not made to Sellers
because Buyer is exercising any rights of set off indemnification,
-43-
common law right of off set or is otherwise justified in withholding any such
payments under the Related Agreements.
10.4 Set Off. Buyer and/or Corporation may set off any amount to
which it in good faith believes it is entitled under this Section or any of the
Related Agreements against amounts otherwise payable under Section 1.2 of this
Agreement or the Employment Agreements. Without limitation of the foregoing,
Buyer or Corporation may set off any amount which Corporation or Buyer is
obligated to pay as a fine, penalty, funding, or distribution from Profit
Sharing Plan (#001). The exercise of such right of set off by Buyer and/or
Corporation in good faith, whether or not ultimately determined to be justified,
will not constitute an Event of Default under the Promissory Notes executed
pursuant to this Agreement or the Related Agreements. Neither the exercise of
nor the failure to exercise such right of set off will constitute an election of
remedies or limit Buyer and/or Corporation in any manner in the enforcement of
any other remedies that may be available to either Buyer or Corporation.
10.5 Remedies. In the event any party shall default in its
obligations hereunder, any non-defaulting party may pursue any remedy available
at law or in equity to enforce its rights and shall be paid by the defaulting
party for all damages, costs and expenses, including legal and accounting
expenses, incurred or suffered by the non-defaulting party in connection
herewith or in the enforcement of its rights hereunder. Any negligent
misrepresentation or negligent omission of information which is not material to
this Agreement is not grounds for default or rescission of this Agreement.
11. Miscellaneous Provisions.
11.1 Entire Agreement. This Agreement, and all Exhibits and
Schedules attached hereto, as well as any other document if signed or initialed
by the parties hereto and specifically providing that it is an exception to the
limitations contained in this Section, embody the entire agreement between the
parties hereto with respect to the matters agreed to herein, and, except as
expressly provided
-44-
herein, this Agreement shall not be affected by reference to any other document
except for any such document signed or initialed by the duly authorized
representatives of the parties hereto and specifically providing that it is an
exception to the limitations contained in this Section. All prior negotiations,
discussions agreements by and between the parties hereto with respect of such
matters agreed to herein which are not reflected or set forth in this Agreement,
or in the Exhibits or Schedules, or in such other document, shall have no
further force or effect. Each representation, warranty, covenant or agreement
contained in this Agreement made by any of the parties hereto shall have
independent force and effect and shall not be affected by any other
representation except by specific reference.
11.2 Publicity. The content and timing of all publicity and
announcements concerning this Agreement, and all transactions contemplated by
this Agreement, shall be subject to joint consultation and approval of the
parties hereto, subject, however, to the legal obligations applicable to public
companies.
11.3 Amendment and Waiver. Neither this Agreement nor any term,
covenant, condition or other provision hereof may be amended, modified,
supplemented, waived, discharged or terminated except by an instrument in
writing signed by responsible officers duly authorized by the respective boards
of directors of the parties hereto.
11.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania except
to the extent that federal law may be applicable.
11.5 Communications. All notices, requests, demands, consents and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if hand delivered, sent by recognized overnight delivery
service, sent by certified or registered mail, postage prepaid, return receipt
requested, or by confirmed telecopy as follows:
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(a) If to Judge, to:
Xxx Xxxx Xxxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Judge, Jr.
With a copy to:
Wisler, Pearlstine, Xxxxxx, Xxxxx, Xxxxxxx & Potash, LLP
000 Xxxxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. X'Xxxxxxxx
(b) If to Corporation, to:
Xxx Xxxx Xxxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attention: Xxxxx Xxxxx
With a copy to:
Xxxxxx, Xxxxxxxx & Xxxxxxxxx
0000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
(c) If to Sellers, to:
Xxx Xxxx Xxxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attention: Xxxxx Xxxxx
With a copy to:
Xxxxxx, Xxxxxxxx & Xxxxxxxxx
0000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
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Attention: Xxxxxxx X. Xxxxxx
Any such notice or other communication so addressed shall be deemed to have been
received by the addressee (i) if hand-delivered or sent by overnight delivery,
on the next business day following the date so delivered or sent, (ii) if sent
by registered or certified mail, five (5) business days following the date sent,
or (iii) if sent by telecopy, upon verbal telephone confirmation of receipt
thereof by an individual authorized to accept telecopy communications at the
above-specified telecopy number as of the date of such receipt of confirmation.
11.6 Successors and Assigns. The rights and obligations of the
parties hereto shall inure to the benefit of and shall be binding upon the
successors, assigns and heirs of each of them; provided, however, that neither
this Agreement nor any of the rights, interest or obligations hereunder shall be
assigned by any party hereto without the prior written consent of the other
party.
11.7 Headings, Etc. The headings of the Sections and Subsections of
this Agreement have been inserted for convenience only and shall not be deemed
to be a part of this Agreement.
11.8 Severability. In the event that any one or more provisions of
this Agreement shall for any reason be held invalid, illegal or unenforceable in
any respect, by any court of competent jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Agreement and
the parties shall use their best efforts to substitute a valid, legal and
enforceable provision which, insofar as practicable, implements the purposes and
intents of this Agreement.
11.9 No Third Party Beneficiary. Except as expressly provided for
herein, nothing in this Agreement is intended to confer upon any person who is
not a party hereto any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
11.10 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf
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of, each party, or that the signatures of all persons required to bind any
party, appear on each counterpart; but it shall be sufficient that the signature
of, or on behalf of, each party, or that the signatures of the persons required
to bind any party, appear on one or more of the counterparts. All counterparts
shall collectively constitute a single agreement. It shall not be necessary in
making proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date set forth above.
[SIGNATURE PAGE FOLLOWS]
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JUDGE, INC.
By: /s/ Xxxxxx X. Judge, Jr.
------------------------------------------
Xxxxxx X. Judge, Jr., CEO
THE BERKELEY ASSOCIATES CORPORATION
By: /s/ Xxxxx Xxxxx
------------------------------------------
Xxxxx Xxxxx, President
/s/ Xxxxx Xxxxx
------------------------------------------
Xxxxx Xxxxx
/s/ Xxxxxxx X. XxXxxxxx
------------------------------------------
Xxxxxxx X. XxXxxxxx
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FIRST AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT being made effective this 10th day of December
1996, by and among THE JUDGE GROUP, INC. ("Judge"), THE BERKELEY ASSOCIATES
CORPORATION ("Berkeley") and XXXXXXX X. XxXXXXXX and XXXXXX XXXXX (collectively
"Sellers").
BACKGROUND
A. Judge, Berkeley and Sellers entered into a Stock Purchase Agreement
dated September 26, 1996 (the "Agreement") providing for the sale of all
outstanding shares of Berkeley to Judge pursuant to the terms and conditions set
forth in that Agreement;
B. Pursuant to Section 11.3 of the Agreement, the parties may amend the
Agreement by a writing signed by the parties;
C. The closing date of the Initial Public Offering, as defined in the
Agreement, originally anticipated to close prior to December 31, 1996 is now
anticipated to close on or before March 31, 1997;
D. Judge, Inc. has changed its corporate name effective September 23, 1996
to The Judge Group, Inc.;
E. The parties have agreed to amend the Agreement to take into
consideration the above.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties agree as follows:
TERMS
1. Section 1.2(a) of the Agreement shall be deleted in its entirety and
replaced by the following:
(a) Provided the Buyer successfully closes on an initial public
offering by March 31, 1997 (the "IPO"):
2. Section 1.2(a)(i) of the Agreement shall be deleted in its entirety
and replaced by the following:
(i) Upon Closing on this Agreement, each Seller shall receive
$87,500.00. Thereafter, on each monthly anniversary of the Closing
date, each Seller shall receive $25,000.00. Such payments shall be
made only through March, 1997 .
3. Section 1.2(2)(E) of the Agreement shall be deleted in its entirety
and replaced by the following:
(E) Promissory Notes. The promissory notes referred to in
subsections (A) and (B), if any, shall be delivered to each Seller
within thirty (30) days after the acceptance by both Buyer and Sellers
of the determination of Net Income as provided in
(section)1.2(a)(ii)(F), but in no event earlier than March 31, 1997.
Each promissory note shall be in the form attached hereto as Exhibit
"A", in the principal amount required by subsections (A) and (B) and
shall accrue interest at the rate of eight percent (8%) per annum. The
promissory notes shall provide for thirty-six (36) equal monthly
payments of principal and interest commencing the first of the month
following execution of the promissory note.
4. Section 1.2(a)(iii) of the Agreement shall be deleted in its
entirety and replaced by the following:
(iii) Subsequent to the Closing on the IPO (the "IPO Closing"),
on April 1, 1997, each Seller shall receive a number of unregistered
shares of Buyer
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equivalent to $150,000.00 divided by the offer price per share in the
IPO. The shares issued pursuant to this Section shall be subject to
the demand registration rights set forth in Schedule 1.2(a)(iii). No
fractional shares shall be issued and each Seller shall receive the
cash value of any fractional share they would have received pursuant
to this Section.
5. Section 1.2(a)(v) of the Agreement shall be deleted in its entirety
and replaced by the following:
(v) In addition, at the time of the IPO Closing, Buyer shall
deliver to each Seller an executed promissory note in the same form as
that attached as Exhibit "A" in the principal amount of $150,000.00
and shall accrue interest at the rate of eight percent (8%) per annum.
Equal payments of principal and accrued interest amortized from April
1, 1997 through November 1, 2000 shall commence April 1, 1997 and
shall be paid monthly thereafter until the notes are fully satisfied.
6. Section 1.2(b) of the Agreement shall be deleted in its entirety and
replaced by the following:
(b) Provided Buyer does not successfully close on an IPO by March
31, 1997:
7. (a) Section 1.2(b)(ii) of the Agreement shall be deleted in its
entirety and replaced by the following:
(ii) No later than December 31, 1996, Buyer shall deliver to
Wisler, Pearlstine, Xxxxxx, Xxxxx, Xxxxxxx & Potash, LLP as escrow
agent for the parties ("Escrow Agent") an executed promissory note,
distinct from those issued under (section)1.2(a)(ii)(E), for each
Seller in the form attached hereto as Exhibit "B". Each promissory
note shall be in the principal amount of $830,000.00 less any amounts
paid or scheduled to be paid to each Seller pursuant to Section
1.2(a)(i) and shall
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accrue interest at the rate of eight percent (8%) per annum commencing
as of the date of Closing. The note shall provide for equal monthly
payments of principal and interest commencing April 1, 1997 and
through March 1, 1998 in the amount of $10,524.00 per month;
commencing April 1, 1998 and through October 1, 2000 in the amount of
$14,774.00 per month; and a final payment in the amount of $8,218.00
plus any accrued but unpaid interest on November 1, 2000. On April 1,
1997, Escrow Agent shall deliver to each respective Seller the
promissory notes delivered by Buyer under this Subsection.
(b) Exhibit "B" to the Agreement shall be deleted in its entirety and
replaced with Exhibit "B" attached hereto and incorporated herein.
(c) The Promissory Notes which Escrow Agent had previously held
pursuant to Section 1.2(b)(ii) of the Agreement shall be marked cancelled and
returned to Judge.
8. Section 1.2(c) of the Agreement shall be deleted in its entirety and
replaced by the following:
(c) Provided The Judge Group, Inc. ("JGI") successfully closes on
an IPO subsequent to March 31, 1997, but before all obligations under
Section 1.2(b) (ii) are fully paid and satisfied, then the payment
obligations under the promissory notes delivered pursuant to Section
1.2(b)(ii), may be accelerated as then presently due and payable at
the option of Sellers. This option shall be exercised in a writing
delivered to Buyer by either or both Sellers within five (5) days
following written notification to Sellers by Buyer of the proposed
closing of the IPO, notwithstanding anything stated herein to the
contrary. The exercise of the foregoing option by the parties hereto
is subject to the successful closing of the IPO and to any limitation
or condition imposed by the underwriters of the IPO, including
complete cancellation of the option.
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9. Section 1.5 of the Agreement shall be deleted in its entirety and
replaced by the following:
1.5 Buyer agrees that Sellers shall be appointed to serve upon
the Board of Directors of the Corporation for a term of one year.
10. All references to Judge, Inc. in the Agreement, the Schedules and
Exhibits thereto, and all documents delivered thereunder, shall be amended to
refer to The Judge Group, Inc.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date set forth above.
THE JUDGE GROUP, INC.
By: /s/ Xxxxxx X. Judge, Jr.
-----------------------------------------
THE BERKELEY ASSOCIATES CORPORATION
By: /s/ Xxxxx Xxxxx
-----------------------------------------
/s/ Xxxxxxx X. XxXxxxxx
-----------------------------------------
Xxxxxxx X. XxXxxxxx
/s/ Xxxxx Xxxxx
-----------------------------------------
Xxxxx Xxxxx
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