EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and among
The Management Network Group, Inc.,
a Delaware corporation
as the "Purchaser"
CSMG Acquisition Sub, Inc.
a Delaware corporation as the "Sub"
Cambridge Strategic Management Group, Inc.,
a Delaware corporation
as the "Seller"
and
Xxxxxxx Xxxxxxx
as the "Stockholder"
Dated as of March 6, 2002
TABLE OF CONTENTS
1 THE ACQUISITION......................................................................2
1.1 Purchase of Assets and Assumption of Liabilities, Asset Purchase..............2
1.2 Excluded Assets...............................................................3
1.3 Assumption of Liabilities.....................................................4
1.4 Excluded Liabilities..........................................................4
1.5 Cessation of Seller Operations................................................4
1.6 Assignment of Contracts and Rights............................................5
1.7 Access to Books and Records...................................................5
2 THE CLOSING..........................................................................5
2.1 Closing.......................................................................5
2.2 Closing Deliveries............................................................5
3 ACQUISITION CONSIDERATION............................................................8
3.1 Payment of Acquisition Consideration..........................................8
3.2 Escrow of Consideration.......................................................9
3.3 Apportionment of Property Taxes, Rent, Utilities..............................9
3.4 Allocation of Acquisition Consideration.......................................9
3.5 Installment Sale Treatment...................................................11
3.6 Post Closing Adjustment......................................................11
4 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE STOCKHOLDER....................11
4.1 Organization, Existence and Good Standing....................................12
4.2 Subsidiaries.................................................................12
4.3 Seller Capital Stock.........................................................12
4.4 Power and Authority..........................................................13
4.5 Legal Proceedings............................................................13
4.6 Financial Statements.........................................................13
4.7 No Undisclosed Liabilities...................................................14
4.8 No Violation.................................................................14
4.9 Material Contracts...........................................................15
4.10 Compliance With Law; Consents and Authorizations.............................17
4.11 Insurance....................................................................17
4.12 Tax Matters..................................................................17
4.13 Employee Benefit Plans.......................................................21
4.14 Licenses; Accreditation and Regulatory Approvals.............................22
4.15 Absence of Certain Changes or Events.........................................22
4.16 Personal Property............................................................25
4.17 Real Property................................................................25
4.18 Customers....................................................................25
4.19 Receivables; Payables........................................................25
4.20 Transactions with Affiliates.................................................26
4.21 Ownership of Assets..........................................................26
4.22 Commissions and Fees.........................................................26
4.23 Environmental Matters........................................................26
4.24 Labor Matters................................................................27
4.25 Intellectual Property........................................................27
4.26 Investment Representations...................................................29
4.27 Disclosure...................................................................30
5 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB.................................30
5.1 Organization, Existence and Good Standing....................................30
5.2 Power and Authority..........................................................30
5.3 Legal Proceedings............................................................31
5.4 Consents and Approvals; No Violation.........................................31
5.5 Purchaser Common Stock.......................................................31
5.6 Sub Common Stock.............................................................32
5.7 Commissions and Fees.........................................................32
5.8 Financial Statements.........................................................32
5.9 Reports......................................................................32
5.10 Financing....................................................................33
5.11 Disclosure...................................................................33
6 ACCESS TO INFORMATION AND DOCUMENTS.................................................33
6.1 Access to Information and Documents..........................................33
7 COVENANTS OF THE SELLER AND THE STOCKHOLDER.........................................34
7.1 Affirmative Covenants........................................................34
7.2 Negative Covenants...........................................................35
7.3 No Solicitations.............................................................37
7.4 Approval of Acquisition......................................................38
7.5 Fees and Expenses............................................................38
8 COVENANTS OF PURCHASER..............................................................38
8.1 Purchaser Benefit Plan Eligibility...........................................38
9 COVENANTS OF THE SELLER, THE STOCKHOLDER, AND PURCHASER.............................39
9.1 Public Disclosures...........................................................39
9.2 Notification of Certain Matters..............................................39
9.3 Other Actions................................................................39
9.4 Regulatory and Other Authorizations: Consents...............................39
9.5 Certain Taxes................................................................40
9.6 Purchaser and Seller agree for all federal and state income Tax purposes.....40
10 TERMINATION, AMENDMENT AND WAIVER...................................................41
10.1 Termination..................................................................41
10.2 Effect of Termination........................................................41
11 CONDITIONS TO CLOSING...............................................................41
11.1 Mutual Conditions............................................................41
11.2 Conditions to Obligations of Purchaser and Sub...............................42
11.3 Conditions to Obligations of the Seller and the Stockholder..................43
12 ESCROW..............................................................................44
12.1 Establishment of Escrow......................................................44
12.2 Escrow for Indemnification...................................................45
12.3 Distribution of Escrowed Property............................................45
13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.........................45
13.1 Survival.....................................................................45
13.2 Indemnification..............................................................45
13.3 Limitations on Indemnity.....................................................48
13.4 Third Party Claims...........................................................48
14 MISCELLANEOUS.......................................................................49
14.1 Notices......................................................................49
14.2 Further Assurances...........................................................50
14.3 Governing Law................................................................50
14.4 "Material Adverse Effect" or "Material Adverse Change".......................50
14.5 Captions.....................................................................51
14.6 Integration of Schedule and Exhibits.........................................51
14.7 Entire Agreement: No Third-Party Beneficiaries..............................51
14.8 Counterparts.................................................................51
14.9 Binding Effect: No Assignment...............................................51
14.10 Severability.................................................................51
14.11 Waivers and Amendments.......................................................51
14.12 Specific Performance.........................................................52
LIST OF SCHEDULES
Schedule A - Disclosure Schedule
Schedule 1.2.4(i) - Over 90 Day Included Receivables
Schedule 1.2.4(ii) - Agreed Excluded Receivables
Schedule 2.2.1(e) - List of Principals
Schedule 3(ii) - Calculation of Tax Adjustment Amount
Schedule 3(iii) - Calculation of Working Capital Amount
LIST OF EXHIBITS
Exhibit A - Form of Amended Registration Rights Agreement
Exhibit B - Form of Stockholder Employment Agreement
Exhibit C - Form of Principal Employment Agreement
Exhibit D - Form of Escrow Agreement
Exhibit E - Form of Restricted Stock Agreement
Exhibit F - Form of Xxxx of Sale
Exhibit G - Form of Seller's Counsel's Opinion
Exhibit H - Form of Assumption Agreement
Exhibit I - Form of Purchaser's Counsel's Opinion
Exhibit J - List of Other Excluded Liabilities
Exhibit K - Additional Firm Profitability Bonus Plan
Exhibit L- Form of Verizon consent
Exhibit M - Form of Assignment and Assumption of Amended and Restated Lease
Exhibit N - Form of Amended and Restated One Boston Place Lease
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), is entered into as of
March 6, 2002, by and among The Management Network Group, Inc., a Delaware
corporation (the "Purchaser"), CSMG Acquisition Sub, Inc., a Delaware
corporation and wholly owned subsidiary of Purchaser (the "Sub"), Cambridge
Strategic Management Group, Inc., a Delaware corporation (the "Seller"), and
Xxxxxxx Xxxxxxx, an individual (the "Stockholder").
W I T N E S S E T H:
WHEREAS, each of the respective Boards of Directors of the Purchaser Sub
and the Seller has determined that it is in the best interests of its
stockholders for the Sub to purchase the operating assets and to assume certain
liabilities of the Seller upon the terms and subject to the conditions of this
Agreement (the "Acquisition"), and such Boards of Directors have approved such
Acquisition for the consideration set forth in Article 3 hereof;
WHEREAS, the Stockholder is the sole holder of all the shares of
beneficial interest of CSMG Holdings, a Massachusetts business trust
("Holdings") which is the sole stockholder of the Seller as of the date hereof
and, as an inducement for Purchaser and Sub to enter into this Agreement, the
Stockholder agrees to enter into this Agreement and, further, to cause Holdings
to vote all voting securities of the Seller beneficially owned by Holdings in
favor of approval and adoption of this Agreement and the transactions
contemplated hereby, and to take any further actions as may be required to
approve this Agreement and the transactions contemplated hereby;
WHEREAS, each of the Purchaser, the Sub, the Seller and the Stockholder
desires to make certain representations, warranties, covenants and agreements in
connection with the Acquisition and to prescribe various conditions to the
Acquisition; and
WHEREAS, simultaneously with the consummation of the Acquisition, (a)
the Stockholder shall become a party to that certain Registration Rights
Agreement dated as of February 12, 1998, by and among the Purchaser and the
Holders (as defined therein), pursuant to an amendment thereto in the form of
Exhibit A attached hereto (the "Amended Registration Rights Agreement") (b) the
Purchaser and the Stockholder shall enter into an Employment Agreement (the
"Stockholder Employment Agreement") in the form attached hereto as Exhibit B;
(c) the Sub and each of the Principals (as defined below) shall each enter into
an Employment Agreement (the "Principal Employment Agreements") in the form
attached hereto as Exhibit C; (d) the Purchaser, the Stockholder and the Seller
shall enter into an Escrow Agreement (the "Escrow Agreement") in the form
attached hereto as Exhibit D; (e) the Stockholder shall enter into a Restricted
Stock Agreement (the "Restricted Stock Agreement") in the form attached hereto
as Exhibit E; and (f) the Sub and the Seller shall enter into an Assignment and
Assumption of Amended and Restated Lease (the "Assignment and Assumption of
Amended and Restated Lease") in the form attached hereto as Exhibit M.
NOW, THEREFORE, in consideration of the foregoing, and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto do hereby agree as follows:
1 THE ACQUISITION
1.1 PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES, ASSET PURCHASE. At
the Closing, subject in all instances to each of the terms, conditions,
provisions and limitations set forth herein, the Seller shall sell to the Sub ,
and the Sub shall acquire from the Seller, except as specifically provided in
Section 1.2 hereof, all of the assets used in Seller's business operations,
including, without limitation, the following (collectively, the "Acquired
Assets");
1.1.1 Acquired Contracts. All right, title and interest of Seller
under and in connection with the contracts, agreements, leases, licenses
and other instruments between the Seller and third parties, including
without limitation the Material Contracts (as defined in Section 4.9.1).
1.1.2 Intangible Property. All intangible property rights,
including but not limited to Proprietary Rights (as defined herein), and
all licenses and goodwill associated therewith, sublicenses and other
agreements relating to any of the foregoing, all phone numbers, e-mail
addresses and websites (both content and addresses), names (including
"Cambridge Strategic Management Group") and directory listings and the
goodwill of the business.
1.1.3 Tangible Fixed Assets. All owned personal property and
other tangible property including without limitation, all equipment,
computer hardware and other equipment, tools, maintenance machinery and
equipment, furniture and fixtures, leasehold improvements and
construction in progress.
1.1.4 Accounts Receivable and Work in Process. Except for the
Excluded Receivables (as defined in Section 1.2.4. below), all accounts,
accounts receivable, notes receivable and work in process existing at
the Closing, including any security held for the payment thereof.
1.1.5 Books and Records. All books, records and accounts,
business correspondence, production records, technical, accounting,
manufacturing and procedural manuals, customer and supplier lists,
covenants not to compete, employment records, studies, and any
confidential information that has been reduced to documentary form
relating to the business of the Seller.
1.1.6 Prepaid Expenses, Cash, Etc. All prepaid expenses,
deposits, bank accounts, cash, short term investments, securities, cash
equivalents and other similar assets existing at the Closing.
1.1.7 Amended and Restated One Boston Place Lease. All right,
title and interest of Seller to and under that certain Amended and
Restated Office Lease, dated as of the date hereof, between Seller and
BRE/One Boston, L.L.C. (the "Amended and Restated One Boston Place
Lease") with respect to 21,884 square feet of office space on the 31st
and 32nd floors of Xxx Xxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx, in the form
attached hereto as Exhibit N.
1.2 EXCLUDED ASSETS.
Notwithstanding the provisions of Section 1.1. above, and subject to the
provisions of Section 3.6 below, the assets to be transferred to the Sub under
this Agreement shall not include the following (the "Excluded Assets");
1.2.1 Organization Documents. The organizational documents of
Holdings and the organizational documents of the Seller together with
any qualifications to conduct business as foreign entities, arrangements
with registered agents relating to foreign qualifications, taxpayer and
other identification numbers, corporate seals, minute books, stock
transfer books, blank stock certificates, and other documents relating
to the organization, maintenance and existence of Holdings and the
Seller.
1.2.2 Agreement Rights. Any of the rights of the Seller under
this Agreement or under any related agreements.
1.2.3 Tax Returns. All tax returns and tax records and all rights
to tax returns in respect of the period prior to the Closing Date.
1.2.4 Accounts Receivable. (i) The accounts receivable of Seller
as of Closing Date, which are over 90 days from the date of original
invoice (other than those accounts receivables listed on Schedule
1.2.4(i)), (ii) all accounts receivable of Seller which Seller has
written off in full as of the Closing Date and (iii) all accounts
receivable set forth on Schedule 1.2.4(ii) attached hereto, and all
records relating thereto (collectively, the "Excluded Receivables").
1.2.5 31st and 32nd Floor Leases. All right title and interest of
Seller to and under both (i) that certain office lease dated as of the
date hereof between Seller and BRE/One Boston, L.L.C. (the "31st Floor
Lease") with respect to approximately 9,517 square feet of office space
on the 31st floor of Xxx Xxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx, and (ii)
that certain office lease dated as of the date hereof between Seller and
BRE/One Boston, L.L.C. (the "32nd Floor Lease") with respect to
approximately 8,669 square feet of office space located on the 32nd
floor of Xxx Xxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx.
1.2.6 Cambridge Lease. All right, title and interest of Seller to
and under that certain office lease dated September 9, 1997 between
Seller and One Memorial Cornerstone LLC (the "Cambridge Lease") and that
certain Sublease dated April 6, 2001 between Seller
and Applied Metacomputing, Inc. (the "Cambridge Sublease"), each with
respect to Seller's former office space at Xxx Xxxxxxxx Xxxxx,
Xxxxxxxxx, Xxxxxxxxxxxxx.
1.2.7 Due From Related Parties. All amounts due from Subsidiaries
(including CSMG-UK) and employees, officers and shareholders of the
Seller.
1.3 ASSUMPTION OF LIABILITIES. At the Closing, subject in all instances
to each of the terms, conditions, provisions and limitations set forth herein,
the Sub shall assume and become responsible for only the following liabilities
and obligations (the "Assumed Liabilities");
1.3.1 Balance Sheet Liabilities. Other than Excluded Liabilities,
as defined below, all liabilities and obligations of the Seller
reflected in, or in the notes relating to, the unaudited balance sheet
of the Seller as of the Latest Statement Date (as defined below), and
all such liabilities and obligations of any nature, whether accrued,
absolute, fixed or contingent, of the Seller that have arisen since the
Latest Statement Date in the ordinary course of business and which are
of the same type as reflected on Seller's financial statements on the
Latest Statement Date.
1.3.2 Contract Liabilities. Other than Excluded Liabilities, as
defined below, all liabilities and obligations of the Seller under all
the contracts acquired under Section 1.1.1 with respect to periods from
and after the Closing.
1.3.3 One Boston Place Lease. The Amended and Restated One Boston
Place Lease with respect to the periods from and after the Closing.
1.4 EXCLUDED LIABILITIES. Neither the Sub nor the Purchaser will assume
or have any responsibility for any liability or obligation of the Seller not
included within the definition of Assumed Liabilities, including without
limitation, (i) all liabilities of the Seller, Holdings or Stockholder for
unpaid Taxes with respect to periods prior to the Closing; (ii) all liabilities
of the Seller, Holdings or Stockholder for income Taxes arising in connection
with the consummation of the transactions contemplated hereby; (iii) all
obligations of the Seller to indemnify any person by reason of the fact that
such person was a director, officer, employee, or agent of the Seller, (iv) all
liabilities arising from or relating to any employment, agency or independent
contractor relationship between Seller and any person, including without
limitation, all claims for wages, bonus, benefits or other compensation or other
claims or damages arising out of such relationship with respect to the period
prior to the Closing, and (v) those liabilities specifically listed in Exhibit
J, subject to the provisions of Section 3.6 below (collectively, the "Excluded
Liabilities").
1.5 CESSATION OF SELLER OPERATIONS. To protect the value of the Acquired
Assets, the Seller and the Stockholder agree that all ongoing business
operations of the Seller as a management consulting company and Cambridge
Strategic Management Group Limited ("CSMG-UK") shall cease immediately following
Closing, except as necessary to wind up operations and to perform its
obligations under this Agreement and any other agreement or arrangement to be
performed by it after
Closing as contemplated hereby, and that CSMG-UK shall liquidate fully within
ninety (90) days following the Closing Date unless prevented by operation of law
or court order. The Seller and Stockholder agree that from and after the Closing
Date, Seller shall not compete, either directly or indirectly, with the
Purchaser or Sub in any manner anywhere in the world. Stockholder agrees that
from and after the Closing Date, Stockholder will cause CSMG-UK not to compete,
either directly or indirectly, with the Purchaser or Sub in any manner anywhere
in the world and to cause CSMG-UK to subcontract with Sub on a pass-through
basis for any contracts or engagements of CSMG-UK as of the date of Closing. The
Seller and Stockholder agree that as soon as practicable following Closing, to
take such action as is necessary to change the name of the Seller and CSMG-UK so
as to remove all references to the word "Cambridge" and to agree to provide
written evidence of such change in name to the Purchaser.
1.6 ASSIGNMENT OF CONTRACTS AND RIGHTS. In the case of any contract that
is an Acquired Asset which is not by its terms assignable or transferable, the
Seller agrees to use its best efforts to obtain all consents or claim or right
or any benefit arising thereunder from the assignment thereof to the Sub as the
Sub may reasonably request. The Sub and the Seller shall cooperate to obtain
such consents. If such consent is not obtained, or if an attempted assignment
thereof would be ineffective or would adversely affect the rights of the Seller
thereunder so that the Sub would not in fact receive all such rights, the Seller
and the Sub will cooperate in a mutually agreeable arrangement under which the
Sub would obtain the benefits and assume the obligations thereunder in
accordance with this Agreement, including subcontracting, sub-licensing or
subleasing to the Sub, or under which the Seller would enforce for the benefit
of the Sub, with the Sub assuming the Seller's obligations thereunder relating
to the period following Closing, and any and all rights of the Seller against a
third party thereto. The Seller shall promptly pay to the Sub when received all
moneys received by the Seller under any such contract or claim or right or any
benefit arising thereunder, except to the extent the same represents an Excluded
Asset.
1.7 ACCESS TO BOOKS AND RECORDS. From and after Closing, the Purchaser
and the Sub agree to provide the Seller and the Stockholder with reasonable
access, upon reasonable notice during normal business hours, to the books and
records described in Section 1.1.5.
2 THE CLOSING
2.1 CLOSING. The closing for the Acquisition (the "Closing") shall take
place at the offices of Xxxxxxxx & Worcester LLP, Xxx Xxxx Xxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000 as soon as practicable on a day (the "Closing Date")
following the satisfaction or waiver of each of the conditions set forth in
Article 11 hereof, but no later than March 7, 2002, provided that, so long as a
party is not in default or breach of this Agreement, such party may extend the
Closing Date to not later than March 9, 2002, unless the parties hereto shall
agree on such other date, time and place. The transfer of the Acquired Assets to
and the assumption of the Assumed Liabilities by the Sub shall be deemed to
occur at 12:01 a.m., Boston time, on the Closing Date.
2.2 CLOSING DELIVERIES.
2.2.1 Deliveries By Seller and Stockholder. At the Closing, the
Seller and the Stockholder shall deliver or cause to be delivered to Sub
and Purchaser the following, which in the case of items (b) through (d),
(f), (i), (k), (n) and (o) below shall be duly executed by the Seller
and/or the Stockholder (as applicable):
(a) Resolutions. Copies of (i) resolutions of the Board of
Directors of the Seller certified by a Secretary, Assistant
Secretary or other appropriate officer of the Seller, duly
authorizing and approving the Acquisition, the execution,
delivery and performance of this Agreement, the other agreements
referred to herein to which it is a party and the transactions
contemplated hereby and thereby, and (ii) resolutions adopted by
Holdings duly approving the Acquisition, the execution, delivery
and performance of this Agreement, the other agreements referred
to herein to which it is a party and the transactions
contemplated hereby and thereby.
(b) Conveyances. A xxxx of sale (the "Xxxx of Sale") in
the form attached hereto as Exhibit F and such assignments,
certificates of title and other instruments or transfer documents
as shall be reasonably required by the Sub and Purchaser in order
to effectuate the sale and delivery by the Seller of the Acquired
Assets.
(c) Amended Registration Rights Agreement and Restricted
Stock Agreement. A counterpart signature page to the Amended
Registration Rights Agreement and the Restricted Stock Agreement.
(d) Stockholder Employment Agreement. The Stockholder
Employment Agreement.
(e) Principal Employment Agreements. Principal Employment
Agreements executed by the individuals listed on Schedule
2.2.1(e) (collectively, the "Principals").
(f) Escrow Agreement. The Escrow Agreement.
(g) Opinion of Counsel. An opinion of the Seller's counsel
substantially in the form attached hereto as Exhibit G.
(h) Certificates of Good Standing. A certificate of good
standing for the Seller from the State of Delaware, and a
certificate of good standing from each other state in which the
Seller is authorized to do business each dated not more than ten
(10) days prior to the Closing Date.
(i) Officer's Certificate. The officer's certificate of
Seller referred to in Section 11.2.9.
(j) Consents. A consent, executed by the counterparty
thereto, in substantially the form attached hereto as Exhibit L,
to the assignment and transfer to
Sub of the Consulting Agreement between Seller and Telesector
Resources Group, Inc. d/b/a Verizon Services Group dated July 30,
1998, as amended.
(k) Certification of Financial Statements. The Seller
Financial Statements from the Latest Statement Date certified by
Seller's CFO or CEO as meeting the requirements of the last two
(2) sentences of Section 4.6.
(l) Profit Sharing Plan. Documents reasonably acceptable
to Purchaser, terminating the Cambridge Strategic Management
Group, Inc. Profit Sharing Plan (the "CSMG Profit Sharing Plan")
effective on or before the Closing Date.
(m) Releases. Releases executed by each of the Principals
executing Principal Employment Agreements, releasing Seller,
Purchaser and Sub from any liability or claim arising from or
relating to their employment with CSMG, in form and content
acceptable to Purchaser and Sub.
(n) Assignment and Assumption of Amended and Restated
Lease. The Assignment and Assumption of Amended and Restated
Lease.
(o) Settlement Statement. A settlement statement (the
"Settlement Statement"), in a form reasonably satisfactory to
Purchaser and Seller, relating to payments made at Closing.
2.2.2 Purchaser and Sub Deliveries. At the Closing, Purchaser or
Sub shall deliver or cause to be delivered to the Seller and the
Stockholder the following, which in the case of items (b), (c), (f),
(h), (i), (j) and (k) shall be duly executed by Sub, and items (f), (h)
and (j) shall be executed by the Purchaser:
(a) Resolutions. Copies of resolutions of the Purchaser
and the Sub certified by the respective Secretary, Assistant
Secretary or other appropriate officer of the Purchaser or the
Sub, duly authorizing and approving the Acquisition, the
execution, delivery and performance of this Agreement, the other
agreements referred to herein and the transactions contemplated
hereby and thereby to which each is a party, including without
limitation the issuance of the Purchaser Common Stock as the
Share Consideration, and the election of the Stockholder to the
Purchaser's Board of Directors and the Sub's Board of Directors,
effective as of Closing.
(b) Assumption. An assumption agreement (the "Assumption
Agreement") in the form attached hereto as Exhibit H and such
other instruments or documents as shall be reasonably required by
the Seller in order to effectuate the assumption by the Sub of
the Assumed Liabilities.
(c) Escrow Agreement. The Escrow Agreement.
(d) Certificate of Good Standing. A certificate of good
standing for Purchaser and Sub, each from the Secretary of State
of the State of Delaware.
(e) Acquisition Consideration. The Acquisition
Consideration set forth in, and to be paid in accordance with
Section 3 hereof.
(f) Officer's Certificate. The officer's certificate of
Purchaser and Sub referred to in Section 11.3.8.
(g) Opinion of Counsel. An opinion of Purchaser's and
Sub's counsel substantially in the form attached hereto as
Exhibit I.
(h) Amended Registration Rights Agreement and Restricted
Stock Agreement. A counterpart signature page to the Amended
Registration Rights Agreement and the Restricted Stock Agreement.
(i) Principal Employment Agreements. Counterpart signature
pages to those Principal Employment Agreements specified in
Section 2.2.1(e).
(j) Assignment and Assumption of Amended and Restated
Lease. The Assignment and Assumption of Amended and Restated
Lease.
(k) Settlement Statement. The Settlement Statement.
3 ACQUISITION CONSIDERATION
The "Acquisition Consideration" to be paid to the Seller shall be equal
to the sum of (i) $40,000,000, plus (ii) the "Tax Adjustment Amount" (calculated
as set forth in Schedule 3(ii), attached hereto), plus (iii) the "Working
Capital Amount" (calculated as set forth in Schedule 3(iii), attached hereto).
3.1 PAYMENT OF ACQUISITION CONSIDERATION. The Acquisition Consideration
shall be paid to the Seller or its designee as follows:
3.1.1 Cash Consideration. Subject to Section 3.2 below, the Cash
Consideration shall be paid to the Seller at Closing. As used in this
Agreement, "Cash Consideration" shall mean a wire transfer of
immediately available funds in the amount of the sum of (i) Twenty Four
Million and no/100 Dollars ($24,000,000), plus (ii) the provisional Tax
Adjustment Amount of ($5,400,000), plus (iii) an amount equal to 60% of
the provisional Working Capital Amount of ($5,200,000) plus (iv) the
amount obtained by multiplying the Share Consideration by an amount (but
in no event less than zero or greater than $0.16) equal to $6.25 less
the Share Price (as defined below) (the "Additional Cash
Consideration").
3.1.2 Share Consideration. Subject to Section 3.2 below, the
Share Consideration shall be paid to the Seller at Closing, provided
that the Seller reserves the right to direct that
the Shares be issued in the name of and delivered to the Stockholder. As
used in this Agreement, "Share Consideration" shall mean the number of
shares of common stock, par value $.001 per share, of Purchaser
("Purchaser Common Stock") calculated by dividing Sixteen Million
Dollars ($16,000,000) plus 40% of the provisional Working Capital Amount
by $6.25 per share.
3.2 ESCROW OF CONSIDERATION.
Notwithstanding the provisions of Section 3.1, Four Million and no/100 Dollars
($4,000,000) of the Cash Consideration plus a number of shares of the Share
Consideration equal to $3,450,000 divided by the Share Price shall be placed in
escrow pursuant to the provisions of Section 12.1 hereof and the Escrow
Agreement. As used in this Agreement, the "Share Price" shall be $6.09.
3.3 APPORTIONMENT OF PROPERTY TAXES, RENT, UTILITIES.
3.3.1 At the Closing, appropriate prorations shall be made with
respect to the Acquired Assets and Assumed Liabilities on a per diem
basis as of 12:01 a.m. on the Closing Date with respect to property
taxes (real and personal), rental and lease payments, utilities, and all
other items of income and expense due or payable under any lease or
other agreement, in each case, of a nature ordinarily prorated as of
closing in asset purchase transactions (and not separately addressed
elsewhere in this Agreement). To the extent that any relevant bills or
other documentation necessary to effect such prorations are not
available at the Closing, the parties shall make such pro-rations at the
Closing based on reasonable estimates and shall adjust the relevant
prorations as soon as the relevant bills or other documentation becomes
available.
3.3.2 If the parties are unable to resolve any dispute with
respect to prorations within thirty (30) days after notice from the
Seller to the Purchaser or from the Purchaser to the Seller setting
forth in reasonable detail the nature of such dispute, such dispute
shall be resolved by an independent accounting firm mutually reasonably
acceptable to Purchaser and Seller, which firm shall not be the regular
accounting firm of the Purchaser or the Seller. The fees and other
expenses of retaining such independent public accounting firm shall be
borne by the Purchaser and the Seller equally. Promptly, but no later
than thirty (30) days after its acceptance of appointment hereunder,
such firm shall render a written report of its conclusions pursuant to
this Section, and such report shall be conclusive on all parties to this
Agreement and not subject to further dispute, review or appeal.
3.4 ALLOCATION OF ACQUISITION CONSIDERATION. In the event the Seller and
the Sub fail to agree to and deliver copies of IRS Form 8594 and any required
exhibits thereto (the "Asset Acquisition Statement") at or prior to Closing, the
following shall apply:
3.4.1 Promptly following Closing, Purchaser shall engage Ernst &
Young to appraise certain assets acquired from Seller. Following
submission of the final results of such appraisal, such appraised value
shall be utilized to establish the allocation to such appraised assets
unless either Seller or Purchaser objects to the results of such
appraisal
within ten (10) days of its delivery. If either party objects, an
independent valuation firm of national standing, other than an
accounting firm, shall be engaged promptly to appraise the same assets.
Following receipt of the second appraisal, the parties in good faith
shall agree on a value for each of the appraised assets within the range
established by the two appraisals, and if unable to agree, the value of
each such assets shall be the mid point between the two appraisals.
3.4.2 Within sixty (60) days after the Closing Date, the
Purchaser will provide to the Seller the Asset Acquisition Statement
with the Purchaser's proposed allocation of the Acquisition
Consideration (together with any assumed liabilities and other relevant
items) utilizing the values developed from the above appraisal(s).
Within fifteen (15) days after the receipt of such Asset Acquisition
Statement, the Seller will propose to the Purchaser any change to such
Asset Acquisition Statement (and in the event no such changes are
proposed in writing to the Purchaser within such time period, the Seller
will be deemed to have agreed to, and accepted, the Asset Acquisition
Statement. Seller agrees not to propose any change in the Asset
Allocation Statement derived from the appraisal(s) set forth in Section
3.4.1, above. The Purchaser and the Seller will endeavor in good faith
to resolve any differences with respect to the Asset Acquisition
Statement within fifteen (15) days after the Purchaser's receipt of
written notice of objection from the Seller.
Subject to the provisions of the following sentence of this
Section 3.4.3, the Acquisition Consideration (together with any assumed
liabilities and other relevant items) will be allocated in accordance
with the Asset Acquisition Statement provided by the Purchaser to the
Seller pursuant to Section 3.4.2 above, and subject to the requirements
of applicable tax law or election, all Tax Returns (as defined below)
and reports filed by the Purchaser and the Seller will be prepared
consistently with such allocation. If the Seller withholds its consent
to the allocation reflected in the Asset Acquisition Statement, and the
Purchaser and the Seller have acted in good faith to resolve any
differences with respect to items on the Asset Acquisition Statement and
thereafter are unable to resolve any differences that, in the aggregate,
are material in relation to the Acquisition Consideration, then any
remaining disputed matters will be finally and conclusively determined
by an independent accounting firm of recognized national standing (the
"Allocation Arbiter") selected by the Purchaser and the Seller, which
firm shall not be the regular accounting firm of the Purchaser or the
Seller. Promptly, but not later than thirty (30) days after its
acceptance of appointment hereunder, the Allocation Arbiter will
determine (based solely on presentations by the Seller and the Purchaser
and not by independent review) only those matters in dispute and will
render a written report as to the disputed matters and the resulting
allocation of Acquisition Consideration (together with any assumed
liabilities and other relevant items), which report shall be conclusive
and binding upon the parties and not subject to further dispute, review
or appeal. The Purchaser and the Seller shall, subject to the
requirements of any applicable Tax law or election, file all Tax Returns
and reports consistent with the allocations provided in the Asset
Acquisition Statement or, if applicable, the determination of the
Allocation Arbiter.
3.5 INSTALLMENT SALE TREATMENT. The transactions contemplated by this
Agreement will be reported as an installment sale under Section 453 of the Code
where applicable. Accordingly, pursuant to Rev. Rul. 68-13, 1968-1 C.B. 195, Sub
and Seller agree that the Acquisition Consideration paid to the Seller at
Closing shall be applied to the Acquired Assets in the following manner (to the
extent of fair market value); first to Accounts Receivable and Work in Process;
second to Tangible Fixed Assets; third to Books and Records; fourth to Prepaid
Expenses; fifth to Intangible Property and Contract Rights. The Acquisition
Consideration placed in escrow shall be applied to any residual assets not
previously accounted for provided that those assets qualify for installment sale
treatment under Section 453 of the Code.
3.6 POST CLOSING ADJUSTMENT. No later than ninety (90) days from the
date of Closing (the "Adjustment Date"), the Purchaser will calculate the Tax
Adjustment Amount and the Working Capital Amount utilizing the exact methodology
set forth in Schedules 3(ii) and 3(iii). Prior to the Adjustment Date the
Purchaser will provide Seller and Stockholder a detailed accounting of such
calculations and the calculation of the Acquisition Consideration utilizing the
newly calculated Tax Adjustment Amount and Working Capital Amount (the "Revised
Acquisition Consideration Amount"). In the event the Revised Acquisition
Consideration Amount shall exceed the Acquisition Consideration paid at Closing,
the Purchaser shall cause the Sub to pay such differential to the Seller in cash
within fifteen (15) days of the Adjustment Date, provided Seller has not
objected to such calculation. In the event the Revised Acquisition Consideration
Amount is less than the Acquisition Consideration paid at Closing , the Seller
and/or Stockholder shall cause such differential to be paid to the Sub within
fifteen (15) days of the Adjustment Date, provided Seller has not objected to
such calculation.
In the event Seller objects to the calculation of the Revised
Acquisition Consideration Amount, Seller shall so advise Purchaser in writing
not later than ten (10) days following the Adjustment Date. The Seller and
Purchaser shall in good faith attempt to resolve any dispute. If the Seller and
Purchaser are unable to resolve such dispute within thirty (30) days of the
Adjustment Date, then the dispute will be finally and conclusively determined by
an independent accounting firm of recognized national standing (the
"Consideration Arbiter") selected by Purchaser and Seller, which firm shall not
be the regular accounting firm of either Purchaser or Seller. Promptly, but not
later than thirty (30) days after acceptance of appointment hereunder, the
Consideration Arbiter will determine the calculations of the Revised Acquisition
Consideration Amount pursuant to the applicable Schedules, which determination
shall be in writing and conclusive and binding upon the parties and not subject
to further review, dispute or appeal. Any adjustment payable pursuant to this
provision shall be paid by the applicable party within ten (10) days of delivery
of the Consideration Arbiter's determination. The Seller and Purchaser shall
share evenly the fees of the Consideration Arbiter.
4 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE STOCKHOLDER. The
Seller and the Stockholder, jointly and severally, represent and warrant to
Purchaser and Sub as follows, subject to qualification by the specific
disclosures set forth in the disclosure schedule attached hereto as Schedule A
and incorporated herein by reference (the "Disclosure Schedule"), each of which
disclosures shall expressly reference the representations and
warranties so qualified:
4.1 ORGANIZATION, EXISTENCE AND GOOD STANDING. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has all necessary corporate power to own, operate or lease the
properties and assets owned, operated or leased by it and to carry on its
business as presently conducted, except where failure to so qualify or be in
good standing would not have a Material Adverse Effect (as defined in Section
14.4 hereof) on the Seller. The Seller is duly qualified as a foreign
corporation to do business and is in good standing, in each jurisdiction in
which the character of its properties and assets owned, operated or leased by it
or the nature of its activities makes such qualification necessary, except for
such failures which, when taken together with all other such failures, would not
have a Material Adverse Effect on the Seller. The Seller has heretofore made
available to Purchaser and Sub complete and correct copies of its Certificate of
Incorporation and Bylaws, each of the foregoing as amended to the date of this
Agreement.
4.2 SUBSIDIARIES. Except as set forth in Section 4.2 of the Disclosure
Schedule, the Seller has no Subsidiaries. As used in this Agreement,
"Subsidiary" shall mean (i) any corporation or other organization, whether
incorporated or unincorporated, in which the Seller is a general partner or of
which at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporations or other
organizations is directly or indirectly owned or controlled by the Seller and/or
by any one or more of its Subsidiaries and (ii) any corporations or other
organizations, whether incorporated or unincorporated engaged in substantially
the same business as Seller, in which the Stockholder is a general partner or of
which at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporations or other
organizations, is directly or indirectly owned or controlled by the Stockholder.
4.3 SELLER CAPITAL STOCK. The Seller's authorized capital stock consists
of One Hundred Thousand (100,000) shares of Common Stock, all of which hold
equal voting rights under the Certificate of Incorporation, and all of which are
issued and outstanding on the date hereof. The Common Stock constitutes all of
the issued and outstanding shares of capital stock of the Seller. All of the
issued and outstanding shares of Common Stock are held by Holdings and are duly
and validly issued, fully paid and nonassessable and were not issued in
violation of any preemptive rights. Except as set forth in Section 4.3 of the
Disclosure Schedule, no Person holds any Seller Equity Rights. As used herein,
"Seller Equity Rights" means any options, warrants, rights of conversion or
agreements, arrangements or commitments (whether or not in writing) obligating
the Seller (with or without consideration and whether or not presently
exercisable or convertible) to issue or sell shares of its capital stock. Except
as set forth in Section 4.3 of the Disclosure Schedule, there are no voting
trusts, stockholders agreements, proxies or other similar agreements in effect
with respect to the voting or transfer of the Common Stock. There is no
liability for dividends declared or accumulated but unpaid with respect to any
of the shares of Common Stock.
4.3.1 Control of CSMG-UK. All capital stock of CSMG-UK which is
issued and outstanding is owned directly or indirectly by Stockholder.
4.4 POWER AND AUTHORITY. The Seller has all necessary corporate power
and authority to execute, deliver and perform this Agreement and the agreements
attached as exhibits hereto to which it is a party and to consummate the
transactions contemplated hereby and thereby, and has taken all action required
by all applicable Laws (as defined in Section 4.8), its Certificate of
Incorporation, Bylaws or otherwise, to authorize the execution, delivery and
performance of this Agreement and the agreements attached as exhibits hereto and
the consummation of the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the agreements attached as exhibits
hereto by the Seller, performance of its obligations hereunder and thereunder
and consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of the Seller. As
of the date hereof, the Board of Directors of the Seller has duly approved this
Agreement, has determined that the Acquisition is in the best interests of the
Seller and its sole stockholder and has resolved to recommend the adoption of
this Agreement and the Acquisition by its sole stockholder. As of the date
hereof Stockholder has all requisite right, power and authority necessary, to
control CSMG-UK and cause CSMG-UK to take the actions required pursuant to
Section 1.2. This Agreement has been duly executed and delivered by the Seller
and the Stockholder and, assuming this Agreement constitutes a valid and binding
obligation of the Purchaser and Sub, constitutes a valid and binding obligation
of the Seller and the Stockholder, enforceable against the Seller and the
Stockholder in accordance with its terms except that the enforcement hereof may
be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
4.5 LEGAL PROCEEDINGS. Except as set forth in Section 4.5 of the
Disclosure Schedule, there is no claim, action, suit, arbitration, litigation,
governmental investigation or other proceeding (each, an "Action") pending
against the Seller or the Stockholder or their properties or business, or the
transactions contemplated by this Agreement. To the knowledge of the Seller and
the Stockholder, there is no Action threatened against the Seller or the
Stockholder or its or his properties or business, or the transactions
contemplated by this Agreement, which is reasonably likely to have a Material
Adverse Effect on the Seller. Except as set forth in Section 4.5 of the
Disclosure Schedule, neither the Seller nor its assets and properties is subject
to any material order, judgment, injunction, decree, stipulation or
determination entered by or with any government, governmental or regulatory
authority, board, agency or other entity, or any court, tribunal or judicial
body, whether federal, state or local (each, a "Governmental Authority") which
is likely to have a Material Adverse Effect on Seller. Section 4.5 of the
Disclosure Schedule sets forth all closed litigation matters to which the Seller
was a party during the five years preceding the Closing, the date such
litigation was commenced and concluded, and the nature of the resolution thereof
(including amounts paid in settlement or judgment).
4.6 FINANCIAL STATEMENTS. The Seller has heretofore furnished to the
Purchaser and Sub copies of the following financial statements: the audited
balance sheets of the Seller as of December
31, 1999 and 2000, and the unaudited balance sheets of the Seller as of December
31, 2001 (the "Latest Statement Date"), and the audited statements of earnings,
stockholders' equity, and cash flows for each of the years in the two (2) year
period ended December 31, 2000 and unaudited statements of earnings,
stockholder's equity and cash flows for the twelve-month period ended December
31, 2001, all prepared by the Seller's auditors and the Seller, respectively
(collectively, the "Seller Financial Statements"). The financial statements
provided with respect to the year ending December 31, 2001 have no footnotes.
The Seller Financial Statements are true and correct in all material respects
and fairly and accurately present the financial position, results of operations
and cash flows of the Seller as of the dates and for the periods ended. Each of
the Seller Financial Statements has been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis, except as
disclosed in the footnotes thereto, and except, in the case of interim
statements, for the absence of footnotes and subject to normal year end
adjustments.
4.7 NO UNDISCLOSED LIABILITIES. The Seller has no liabilities or
obligations of any nature, whether accrued, absolute, fixed or contingent,
except (a) to the extent reflected and accrued for or properly reserved against
in the Seller Financial Statements, (b) for liabilities disclosed in Section 4.7
of the Disclosure Schedule, or (c) for liabilities and obligations not exceeding
$50,000 individually or $200,000 in the aggregate which have arisen after the
Latest Statement Date in the ordinary course of business consistent with past
custom and practice, none of which is a liability resulting from breach of
contract, breach of warranty, tort, infringement claim or lawsuit known to
Seller.
4.8 NO VIOLATION. Except as disclosed in Section 4.8 of the Disclosure
Schedule, neither the execution and delivery of this Agreement, the agreements
attached as exhibits hereto, nor the consummation by the Seller of the
transactions contemplated hereby or thereby will (a) violate, conflict with or
result in any breach of any provision of the respective organizational documents
of the Seller, (b) violate any order, decree, injunction, judgment, ruling or
other determination of any Governmental Authority, or any law, statute,
regulation, rule (collectively, "Laws") applicable to, the Seller or the
Stockholder, (c) require the giving of notice to any party to a Material
Contract or accord any such party the right to modify or terminate a Material
Contract (as defined below), (d) require the making of any payment, other than
payments as expressly contemplated by this Agreement, to any employee of the
Seller, or any other Person, or (e) conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or give to others any rights
of termination, amendment, acceleration, suspension, revocation or cancellation
of, or result in any Encumbrance on the shares of Common Stock or the properties
or assets of the Seller pursuant to, (i) any Material Contract or (ii) any
material License (as defined in Section 4.14) held by the Seller. All shares of
the Seller's Common Stock are free and clear of any Encumbrances. As used in
this Agreement, "Person" means any individual, partnership, limited liability
company, limited liability partnership, trust, estate, joint venture,
corporation, unincorporated association, government bureau or agency or other
entity of any nature. As used in this Agreement, "Encumbrance" means any
security interests, pledges, mortgages, liens, charges, adverse claims of
ownership, voting restrictions, limitations on transfer or proxies or
use or other encumbrances of any kind.
4.9 MATERIAL CONTRACTS.
4.9.1 Description of Material Contracts. Section 4.9.1 of the
Disclosure Schedule sets forth the following written and oral contracts
(collectively, along with each Lease, "Material Contracts") in effect as
of the date of this Agreement to which the Seller is a party:
(a) any commitment, contract (excluding any customer
contract) or agreement that the Seller reasonably anticipates
will, in accordance with its terms, involve aggregate payments by
the Seller of more than $50,000 in 2001 or 2002;
(b) any commitment, contract, agreement, note or other
instrument with any customer of the Seller, which is currently in
force and effect and pursuant to which the Seller has received
within calendar year 2001, or expects to receive in calendar year
2002, at least $50,000;
(c) each contract or agreement between the Seller, or an
Affiliate, on the one hand, and an individual or entity rendering
professional consulting services as a contractor to a customer of
the Seller, on the other hand;
(d) any employment agreements (including without
limitation any arrangements or obligations with respect to
severance, change in control or termination pay) with any
officer, director or employee of the Seller;
(e) all partnership, joint venture or similar agreements
to which the Seller is a party;
(f) any note, loan, letter of credit, contract relating to
indebtedness for borrowed money or capitalized leases, or other
contract in respect of which the Seller is obligated in any way
to provide funds in respect of, or to guarantee or assume, any
debt, obligation or dividend of any person or entity, the amount
of which shall individually or in the aggregate exceed $50,000;
(g) any indemnity arrangement arising in connection with
any, sale or disposition of assets (other than sales of assets in
the ordinary course of business);
(h) any acquisition or disposition contracts of the Seller
involving aggregate payments of $50,000 or more under which a
party thereto remains obliged to pay moneys or perform;
(i) all contracts, agreements and commitments with any
Governmental Authority or with any labor union;
(j) agreements or commitments for capital expenditures in
excess of $25,000 for any single project;
(k) all patent, trademark, service xxxx, trade name,
copyright and franchise licenses, royalty agreements or similar
contracts;
(l) any material agreements relating to the licensure or
ownership of the hardware or software utilized in the Seller's
information systems; and
(m) each contract, agreement or commitment to which the
Seller is a party (i) limiting the right of the Seller prior to
or after the Closing Date, or the Purchaser or any of its
subsidiaries (including the Sub) or Affiliates at or after the
Closing Date (x) to engage in, or to compete with any Person in,
any business, including each contract or agreement containing
exclusivity provisions restricting the geographical area in
which, or the method by which, any business may be conducted by
the Seller prior to or after the Closing Date, or the Purchaser
or any of its subsidiaries (including the Sub)or affiliates after
the Closing Date or (y) to solicit any customer or client, or
(ii) containing "most favored nations" or similar provisions
affecting the pricing terms of contracts to which it is a party.
4.9.2 Enforceability of Material Contracts. Each Material
Contract, and each other material contract, agreement or commitment
entered into between the date hereof and the Closing Date which would
have been required to be disclosed in Section 4.9.1 of the Disclosure
Schedule had such contract, agreement or commitment been entered into
prior to the date of this Agreement, is in full force and effect and is
a legal, valid and binding obligation (except as the enforcement thereof
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights generally and (b) general principles of equity), and there is
not, nor has there been (i) any material default (or any event which,
with the giving of notice or lapse of time or both, would be a material
default) by the Seller or, to the knowledge of the Seller or the
Stockholder, any other party, in the timely performance of any
obligation to be performed or paid under any such Material Contract or
any such other material contract or agreement as described above, (ii)
to the knowledge of the Seller or the Stockholder, any threat of
cancellation or termination of any such Material Contract, (iii) any
contract, agreement or commitment that has been canceled or otherwise
terminated within the last 12 months which would have been such a
Material Contract had such contract or agreement not been canceled or
terminated (other than expiration in accordance with the terms thereof
upon completion of applicable engagement, as indicated in Section 4.9.1
of the Disclosure Schedule) or (iv) any modification or amendment to any
such Material Contract, subsequent to its delivery to Purchaser, except
as specifically described in Section 4.9.1 of the Disclosure Schedule.
The foregoing notwithstanding, with respect to any oral Material
Contract, Purchaser and Sub acknowledge that the counterparties thereto
may contend that such Material Contracts do not exist, are not
enforceable, and/or are not on the terms represented by Seller and
Stockholder, and the foregoing representations and warranties with
respect to oral Material Contracts are qualified to the best knowledge
and belief of Seller and Stockholder.
4.9.3 Delivery of Material Contracts. True and complete copies of
the final form of each written Material Contract and a list of the oral
Material Contracts have been delivered to the Purchaser by the Seller
describing the material terms and conditions of such oral Material
Contracts.
4.10 COMPLIANCE WITH LAW; CONSENTS AND AUTHORIZATIONS.
4.10.1 Compliance With Law. Except as set forth in Section 4.10
of the Disclosure Schedule, the Seller has, in all material respects,
operated its business in compliance with applicable Law in all material
respects and it and its business are not in violation of any Law
applicable to the Seller, which violation could reasonably be expected
to have a Material Adverse Effect.
4.10.2 Consents. No consent, authorization, license, approval,
order or permit of, or declaration, filing or registration with, or
notification to, any Governmental Authority or any third party is
required to be made or obtained by the Stockholder or the Seller in
connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby,
except as set forth in Section 4.10.2 of the Disclosure Schedule or as
expressly contemplated by the terms of this Agreement.
4.11 INSURANCE. Section 4.11 of the Disclosure Schedule lists all
material insurance policies or binders covering the assets, employees and
operations of the Seller as of the date hereof, showing the insurers, limits,
type of coverage, annual premiums, deductibles and expiration dates. All such
policies or binders are in full force and effect. Such policies and binders
insure against risks and liabilities, and in amounts and terms and conditions,
sufficient to comply with applicable Law and all Material Contracts. To the
Seller's knowledge, the Seller is not in default with respect to any provision
contained in any such policy or binder.
4.12 TAX MATTERS.
4.12.1 Filing Tax Returns. The Seller has timely filed with the
appropriate Tax (as defined below) authorities all Tax Returns (as
defined below) required to be filed by it or on its behalf on or prior
to the date hereof, and such Tax Returns are true, complete and correct.
Except as disclosed in Section 4.12 of the Disclosure Schedule, the
Seller currently is not the beneficiary of any extension of time within
which to file a Tax Return, nor has any such extension been requested by
the Seller. No claim has been made by an authority in a jurisdiction
where the Seller does not file Tax Returns that the Seller may be
subject to Taxation by the jurisdiction.
(a) For purposes of this Agreement, the term "Tax" or
"Taxes" shall mean any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties,
capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any
kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
(b) For purposes of this Agreement, the term "Tax Return"
shall mean any
return, report, information return or other document (including
any related or supporting information) with respect to Taxes.
(c) For purposes of this Agreement, the term "Code" shall
mean the U.S. Internal Revenue Code of 1986, as amended, or any
successor law.
4.12.2 Compliance Prior to Agreement. With respect to all amounts
in respect of Taxes imposed on the Seller or for which the Seller is
liable, whether to taxing authorities or to other persons or entities,
with respect to all taxable periods or portions of taxable periods
ending on or before the Closing, all applicable Tax laws and agreements
with respect to Taxes have been complied with in all material respects,
and all such amounts required to be paid by the Seller to taxing
authorities or others on or before the date hereof have been paid,
except for such Taxes as are being contested by appropriate proceedings
and for which adequate reserves have been taken in accordance with GAAP,
as more specifically set forth in Section 4.12.2 of the Disclosure
Schedule.
4.12.3 Withholding. The Seller has withheld and paid all Taxes
required to be withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or
other third party.
4.12.4 Disputes. No dispute or claim has been raised or claimed
by any taxing authority in connection with or relating to any Taxes of
the Seller, and neither the Seller nor the Stockholder have any
knowledge that such an issue will be raised. There are no outstanding
waivers of statute of limitations with respect to any Tax Return or
report of the Seller and no request for any such waiver is pending.
Section 4.12 of the Disclosure Schedule lists all federal, state, local,
and foreign income Tax Returns filed with respect to the Seller for any
taxable period ended on or after December 31, 1997, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of an audit. The Stockholder has delivered to
Purchaser and Sub correct and complete copies of all income Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by the Seller since December 31, 1997.
4.12.5 Encumbrances. Other than Encumbrances for Taxes
contemplated by Section 4.16(b) or disclosed pursuant to Section 4.16(d)
and Section 4.16 of the Disclosure Schedule, there are no Encumbrances
on any assets of the Seller that arose in connection with any failure
(or alleged failure) to pay any Tax.
4.12.6 Compensation Deductible. The Seller has not made any
payments, is not obligated to make any payments and is not a party to
any contract, agreement, plan or arrangement that under certain
circumstances could obligate it to make any payments, separately or in
the aggregate, that will be nondeductible under Section 280G of the Code
(or any corresponding provision of state, local, or foreign income Tax
law) or subject to excise Tax to the recipient under Section 4999 of the
Code (or any corresponding provision of state, local, or foreign income
Tax law).
4.12.7 No Affiliated Group. The Seller has never been a member of
an affiliated group of corporations, within the meaning of Section 1504
of the Code.
4.12.8 No Consent. The Seller has not filed a consent pursuant to
Section 341 (f) of the Code (or any corresponding provision of state,
local, or foreign income Tax law) or agreed to have Section 341(f)(2) of
the Code (or any corresponding provision of state, local, or foreign
income Tax law) apply to any disposition of any asset owned by it.
4.12.9 No Partnership. The Seller is not a party to any joint
venture, partnership or other arrangement that could be treated as a
partnership for federal and applicable state, local and foreign income
Tax purposes.
4.12.10 No Safe Harbor Lease. None of the assets of the Seller is
property that the Seller is required to treat as being owned by any
other person pursuant to the "safe harbor lease" provisions of former
Section 168(f)(8) of the Code.
4.12.11 No Tax-Exempt Financing. None of the assets of the Seller
directly or indirectly secures any debt, the interest on which is
tax-exempt under Section 103(a) of the Code (or any corresponding
provision of state, local, or foreign income Tax law).
4.12.12 No Tax-Exempt Use Property. None of the assets of the
Seller is "tax-exempt use property" within the meaning of Section 168(h)
of the Code (or any corresponding provision of state, local, or foreign
income tax law).
4.12.13 No Accounting Changes. The Seller has never agreed to
make, nor is required to make, any adjustment under Section 481(a) of
the Code (or any corresponding provision of state, local, or foreign
income Tax law) by reason of a change in accounting method or otherwise.
4.12.14 No International Boycotts. The Seller has never
participated in and is not now participating in, an international
boycott within the meaning of Section 999 of the Code (or any
corresponding provision of state, local, or foreign income tax law).
Except as disclosed in Section 4.12.14 of the Disclosure Schedule, the
Seller has no permanent establishment in any foreign country, as defined
in any applicable Tax treaty or convention between the United States and
the relevant foreign jurisdiction.
4.12.15 No Personal Holding Company. The Seller is not a personal
holding company within the meaning of Section 542 of the Code.
4.12.16 No Tax-Indemnity, Tax-Sharing or Tax-Allocation. The
Seller is not a party to nor is it bound by any Tax-indemnity,
Tax-sharing, or Tax-allocation agreement.
4.12.17 Accounting Reserves For Taxes. The Seller Financial
Statements include all reserves for matters concerning Taxes as are
required under GAAP. The unpaid Taxes of the Seller do not exceed the
reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect temporary differences between book and Tax bases
and carry forwards) set forth or included in the Seller Financial
Statements, as adjusted for the passage of time through the Closing, in
accordance with GAAP.
4.12.18 No Transfer Pricing. The Seller has not entered into
transfer pricing agreements or other like arrangements with respect to
the United States or any foreign jurisdiction.
4.12.19 S Corporation. The Seller is the successor by merger to a
Massachusetts corporation of the same name which at all times from its
incorporation to the August 1, 2001 effective date of such merger (the
"Merger Date") was a validly electing "S Corporation" within the meaning
of Sections 1361 and 1362 of the Code. At all times to and including the
Closing Date, Seller has been and will remain a Qualified Subchapter S
Subsidiary within the meaning of Section 1361(b)(3) of the Code.
4.13 EMPLOYEE BENEFIT PLANS.
4.13.1 Operation of Plans. Except as set forth in Section 4.13.1
of the Disclosure Schedule, the Seller has not established nor
maintained, is not obligated to make contributions to or under or
otherwise participate in, nor has any liability or obligations with
respect to (i) any bonus, stock option, stock purchase, stock
appreciation, phantom stock or other type of incentive compensation
plan, program, agreement, policy, commitment, contract or arrangement
(whether or not set forth in a written document), (ii) any pension,
profit-sharing, retirement or other plan, program or arrangement, or
(iii) any other employee benefit plan, fund or program, including, but
not limited to, those described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder ("ERISA"). All such plans
(individually, a "Plan" and, collectively, the "Plans") have been
operated and administered in accordance with, as applicable, ERISA, the
Code, Title VII of the Civil Rights Act of 1964, as amended, the Equal
Pay Act of 1967, as amended, the Age Discrimination in Employment Act of
1967, as amended, and the related rules and regulations adopted by those
federal agencies responsible for the administration of such laws. No act
or failure to act by the Seller has resulted in a "prohibited
transaction" (as defined in ERISA and in Section 4975 of the Code) with
respect to the Plans that is not subject to a statutory or regulatory
exception or in any breach of fiduciary duty under Title I of ERISA. The
Seller has not previously made, nor is it currently making, nor is it
obligated in any way to make, any contributions to, nor has any
liability or obligations with respect to, any multi-employer plan within
the meaning of Section 3(37) or Section 4001(a)(3) of ERISA or any
pension plan which is subject to Section 412 of the Code or Title IV of
ERISA. The Seller has no obligation, under any Plan or otherwise, to
provide any employee or former employee with any post-retirement,
medical, life or other welfare benefit, except as required by Section
4980B of the Code. The Internal Revenue Service has issued, with respect
to each Plan and each related trust agreement, annuity contract or other
funding instrument which is intended to be qualified and tax-exempt
under the provisions of Sections 401 (a) and 501 (a) of the Code,
respectively, a favorable determination letter with respect to such
qualification and tax-exempt status for all periods from the effective
date of each Plan to date. No events have occurred that would adversely
effect such qualification and tax-exempt status. All contributions
required to be made to any Plan by the Seller have been made when due on
a timely basis. Except as set forth in Section 4.13.1 of the Disclosure
Schedule, the Seller is not or at any time has not been a member of a
"controlled group of corporations" with or under "common control" with
any corporation or any trade or business.
4.13.2 Plan Documents. True and complete copies of each of the
following documents have been delivered by the Seller to Purchaser with
respect to each Plan: (i) each Plan document (and, if applicable,
related trust agreements) and all amendments thereto, all written
interpretations thereof and written descriptions thereof which have been
distributed to the employees of the Seller, (ii) for the three (3) most
recent Plan years, Annual Reports on Form 5500 Series filed with any
governmental agency for each Plan which is subject to such
filing requirement, and (iii) the most recent determination letter
issued by the Internal Revenue Service for each Plan which is intended
to be qualified under Section 401(a) of the Code.
4.14 LICENSES; ACCREDITATION AND REGULATORY APPROVALS. The Seller holds
all material licenses, permits, franchises, certificates of need and other
governmental or regulatory authorizations and approvals which are needed or
required by Law with respect to its businesses, operations and facilities as
they are currently or presently conducted (collectively, the "Licenses"). All
such Licenses are in full force and effect and the Seller is in material
compliance with all conditions and requirements of the Licenses and with all
rules and regulations relating thereto, except as set forth in Section 4.14 of
the Disclosure Schedule. No such License has been revoked, conditioned or
restricted except as for customary conditions or restrictions or as can be cured
by the Seller within the period allowed by the applicable Governmental Authority
for such cure without having a material and adverse effect upon the Seller or
its businesses, and no Action is pending, or to the Seller's or the
Stockholder's knowledge, threatened which in any way challenges the validity of,
or seeks to revoke, condition or restrict any such License.
4.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 4.15 of the Disclosure Schedule, since the Latest Statement Date to the
date of this Agreement there has not been:
4.15.1 any material damage, destruction or loss (whether or not
covered by insurance) with respect to any material assets of the Seller;
4.15.2 any change by the Seller in its accounting methods,
principles or practices, other than such changes required by GAAP or
except as may be disclosed in the footnotes to the Seller's Financial
Statements;
4.15.3 any (i) increase in the compensation payable or to become
payable to any director, officer or employee, except for increases in
salary or wages payable or to become payable in the ordinary course of
business and consistent with past practice to employees of the Seller
who are not directors or officers of the Seller; (ii) grant of any
severance or termination pay (other than pursuant to the normal
severance policy of the Seller as in effect on the date of this
Agreement) to, or entry into any employment or severance agreement with,
any director, officer or employee; or (iii) grant or promise of an
increase in the benefits under, or the establishment or amendment of,
any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without limitation,
the granting of stock options, stock appreciation rights, performance
awards or restricted stock awards), stock purchase or other employee
benefit plan (except as may be contractually required under Law or as
expressly contemplated by this Agreement), or (iv) grant or promise of
any other increase in the compensation payable or to become payable to
directors, officers or employees of the Seller, except for increases in
salaries or wages payable or to become payable in the ordinary course of
business and consistent with past practice to employees of the Seller
who are not directors or officers of the Seller and that in
the aggregate have not resulted in a material increase in the benefits
or compensation expense of the Seller or except as expressly
contemplated by this Agreement;
4.15.4 any transaction material to the Seller or any Material
Contract, or any commitment to enter into the same, entered into by the
Seller other than in the ordinary course of business and consistent with
past practice, or any material changes in the customary method of
operations of the Seller, including, without limitation, practices and
policies relating to marketing, selling and pricing.
4.15.5 any transfer, Encumbrance, lease, sublease, license or
other disposition by the Seller of any of its assets other than in the
ordinary course of business and consistent with past practice and not
material in the aggregate;
4.15.6 any writing down in a material amount, except in
accordance with GAAP and consistent with past practice, of the value of
any inventories or accounts receivable or any material revaluation
downward by the Seller of any of its assets or any cancellation or
writing off as worthless and uncollectible of any material debt, note or
account receivable by the Seller, or any waiver by the Seller of a right
of substantial value;
4.15.7 any cancellation, termination, material waiver, material
modification, release or relinquishment by the Seller of a Material
Contract (excluding customer contracts, agreements or arrangements), or
any notice that any Material Contract has been or will be canceled, or
that any material portion of the services provided or to be provided
thereunder will be discontinued;
4.15.8 any individual capital expenditure by the Seller or any
Subsidiary or commitment to make such capital expenditure in excess of
$50,000 or aggregate capital expenditures or commitment to make such
capital expenditures in excess of $100,000;
4.15.9 any payment or incurring of liability to pay any Taxes,
assessments, fees, penalties, interest or other governmental charges
other than those arising and discharged or to be discharged in the
ordinary course of business and consistent with past practice;
4.15.10 any loans, advances or capital contributions made by the
Seller to, or investments by the Seller in, any person or entity other
than the Seller as to which the uses of the transferred cash or property
are not subject to restrictions greater than or equal to those imposed
prior to such transfer, including, without limitation, to any employee,
officer or director of the Seller except for normal and customary
advances for travel and entertainment to employees of Seller;
4.15.11 any incurring or guarantee of indebtedness by the Seller
or commitment to incur or guarantee indebtedness, or of liabilities
(except in the ordinary course of business), by the Seller;
4.15.12 any failure to maintain the Seller's plant, property and
equipment in reasonably good repair and operating condition, ordinary
wear and tear excepted;
4.15.13 any failure to pay any creditor any material amount owed
to such creditor, or to discharge any material obligation, when such
payment or discharge is due or within 30 days of such date, except where
such obligation is contested in good faith by the Seller, in which case
it shall be disclosed in Section 4.15.13 of the Disclosure Schedule;
4.15.14 any declaration, setting aside or payment of dividends or
distributions in respect of any capital stock of the Seller or any
redemption, purchase or other acquisition of any capital stock or other
securities of the Seller;
4.15.15 any issuance by the Seller of any share of capital stock,
bond, note, option, warrant or other corporate security or instrument
convertible into a corporate security;
4.15.16 any acquisition of assets by the Seller of any
corporation, partnership or other business organization or division
thereof;
4.15.17 any (i) redemption, purchase or other acquisition of any
shares of capital stock or other equity interests or any securities or
obligations convertible or exchangeable for any shares of capital stock
or other equity interests, or any options, warrants or conversion or
other rights to acquire any shares of the capital stock, equity
interests or any such securities or obligations, of the Seller; (ii)
reorganization or recapitalization of the Seller; or (iii) split,
combination or reclassification of any of the capital stock or issuance
or authorization or proposal to issue any other securities in respect
of, in lieu of or in substitution for, shares of capital stock of the
Seller;
4.15.18 any proposal or adoption of any amendments to the
Certificate of Incorporation or Bylaws or equivalent organizational
documents of the Seller;
4.15.19 any (i) change in any of the methods of accounting in
effect at the Latest Statement Date, or (ii) making or rescinding of any
express or deemed election relating to Taxes, settlement or compromise
of any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or change in any
methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income
tax returns for the taxable year ending December 31, 2000, except as may
be required by applicable Law;
4.15.20 any action described in Section 7.2 hereof;
4.15.21 any Material Adverse Change;
4.15.22 other than with respect to the Amended and Restated One
Boston Place Lease, the 31st Floor Lease and the 32nd Floor Lease, any
authorization, approval, agreement or
commitment by the Seller to take any action described in Sections 4.15.1
through 4.15.20, above.
4.16 PERSONAL PROPERTY. The Seller owns, has a valid leasehold interest
in, or has legal right to use, all of the tangible personal property necessary
to carry on the business of the Seller as presently conducted, free and clear of
all Encumbrances except for (a) Encumbrances for inchoate mechanics' and
materialmen's liens for construction in progress and workmen's, repairmen's,
warehousemen's and carriers' liens arising in the ordinary course of business,
(b) Encumbrances for Taxes not yet due and payable or being contested in good
faith by appropriate proceedings, (c) Encumbrances arising out of, under, or in
connection with, this Agreement, and (d) Encumbrances set forth in Section 4.16
of the Disclosure Schedule (collectively, "Permitted Encumbrances").
4.17 REAL PROPERTY. Except as set forth in Section 4.17 of the
Disclosure Schedule, the Seller owns or leases no real property. Section 4.17 of
the Disclosure Schedule lists each parcel of real property leased by the Seller,
as tenant, together with a description of all buildings and other structures,
facilities or improvements currently located thereon (collectively, "Leased Real
Property"), and the approximate square footage of each parcel of Leased Real
Property and the initial and renewal terms under the applicable lease with
respect to each parcel of Leased Real Property. The Seller has, with respect to
its leases for the Leased Real Property (the "Leases") (a) a valid and
subsisting leasehold interest in each Lease, (b) not subleased or assigned any
interest in an such Lease, except as set forth in Section 4.17 of the Disclosure
Schedule, and (c) not received any written notice of material default under any
such Lease which is still in effect.
4.18 CUSTOMERS. Section 4.9.1(b) of the Disclosure Schedule contains (a)
a complete and accurate list, as of the date of this Agreement, of each contract
with each customer of the Seller which is currently in force and effect and
pursuant to which the Seller has received within calendar year 2001, or expects
to receive in calendar year 2002, at least $50,000 for services rendered in
connection with Seller's business and (b) the amount of revenue generated from
each such customer during the six (6)-month period ended December 31, 2001. The
Seller has not received to Stockholder's knowledge an express indication from
any customer that such customer has ceased, or will cease, to use the services
of the Seller, or has reduced, or will reduce, the use of such services at any
time or has threatened to do so. The Seller has not to Stockholder's knowledge
received notice from any existing customer of the Seller requesting, or has
knowledge of an intention by any existing customer to request, that the Seller
xxxxx xxxxx concessions, rebates or reductions on products or services provided
by the Seller, or any other modification of any contract, agreement or
arrangement with the Seller that has had, or could reasonably be expected to
have, a Material Adverse Effect upon the economic benefits of the relationship
with such customer (collectively, "Customer Modifications"). No material
Customer Modification has become effective in the past twelve (12) months or is
currently pending except as disclosed in Section 4.18 of the Disclosure
Schedule.
4.19 RECEIVABLES; PAYABLES. The accounts receivable of the Seller have
arisen, and are consistent with levels maintained, in the ordinary course of
business and represent bona fide claims of the Seller against debtors for sales
made, services performed or other charges arising on or before the date hereof,
are not subject, to the Seller's and the Stockholder's knowledge, to valid
claims of
set-off or other defenses or counterclaims, and, except as set forth in Section
4.19 of the Disclosure Schedule or subject to the reserves therefor set forth on
such balance sheet (which have been recorded on a consistent basis in a manner
consistent with GAAP), to the Seller's and the Stockholder's knowledge, are as
of the date of this Agreement and as of the Closing Date reasonably will be
expected to be collectible in the ordinary course of business, without resort to
litigation or extraordinary collection activity. The Seller has not relaxed its
customer credit policies at any time since December 31, 2001. All current work
in process is being conducted consistent with Seller's past practice and within
the scope of actual customer work orders and no such work is being conducted
without such order. The accounts payable of the Seller have arisen, and are
consistent with levels maintained, in the ordinary course of business and
represent bonafide payables of the Seller. All material items which are required
by GAAP to be reflected as accounts receivable or accounts payable on the Seller
Financial Statements and the books and records of the Seller are so reflected.
As of the Closing, the cash transferred to Sub shall be not less than
$1,800,000, of which $375,000 shall be retained in Seller's account to pay
Seller's costs and expenses in connection with the Acquisition as provided in
Section 7.5, and the remainder shall be wire transferred to Sub at Closing.
4.20 TRANSACTIONS WITH AFFILIATES. Except for usual and customary
employment and compensation arrangements, there have been no material
transactions, agreements or arrangements between the Seller, on the one hand,
and (a) the Stockholder, director or officer of the Seller or any of its
Affiliates, or (b) any member of the immediate family of any individual
described in clause (a) on the other, except as set forth in Section 4.20 of the
Disclosure Schedule or as clearly reflected in the Seller's Financial
Statements. As used in this Agreement, "Affiliate" means, when used with respect
to a specified party, another party that, either directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with the party specified.
4.21 OWNERSHIP OF ASSETS. The Seller has, except as set forth in
Sections 4.16 and 4.21 of the Disclosure Schedule, good and marketable and
insurable title, or valid, effective and continuing leasehold rights in the case
of leased property, to all real property and all personal property owned or
leased by it, free and clear of all liens, claims, Encumbrances and charges,
except for Permitted Encumbrances. There are no regulatory or contractual
restrictions on the ability of the Seller to freely transfer its cash and cash
equivalents.
4.22 COMMISSIONS AND FEES. The Seller has not employed any investment
banker, broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fees or commissions in
connection with this Agreement or the transactions contemplated hereby payable
by the Seller.
4.23 ENVIRONMENTAL MATTERS. The Seller is not currently Handling (as
defined below), and in the past has not Handled, any Hazardous Materials (as
defined below) in any material quantity at, on or from any property or facility
owned, leased, operated or occupied by the Seller, including any previously
owned, leased, operated or occupied property or facility. To the Seller's
knowledge, the Seller is not the subject of any federal, state, local or foreign
investigation, and the Seller has not
received any written notice or claim, or entered into any negotiations or
agreements with any third party, relating to any liability or remedial action or
potential liability or remedial action under Environmental Laws (as defined
below), and there are no pending or, to the Seller's knowledge, threatened
actions, suits or proceedings against or affecting the Seller, or its
properties, assets or operations, in connection with any such Environmental Laws
that if adversely determined, might result in any Material Adverse Change in the
Seller. To the Seller's knowledge, there are no past or present Environmental
Conditions (as defined below) that are likely to form the basis of any claim
under existing law against them which is reasonably likely to result in any
Material Adverse Effect on the Seller. The term "Handling" or "Handled" means
the production, use, generation, storage, treatment, recycling, disposal,
discharge, release, processing, distribution, transport or other handling or
disposition of any kind. The term "Environmental Laws" means all federal, state,
local or foreign statutes, ordinances, regulations, rules, judgments, orders,
notice requirements, court decisions, or agency guidelines, as they may be
hereinafter amended from time to time, that (a) regulate or relate to the
protection, investigation, remediation or clean-up of the environment, the use,
generation, treatment, storage, transportation, disposal, or other handling of
any Hazardous Material, the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural resource, or
the health and safety of persons or property (including without limitation
occupational safety and health), or (b) impose or create liability or
responsibility with respect to any of the foregoing. The term "Environmental
Condition" means any occurrence, fact or other condition at any location in, on,
about or beneath any property owned, leased, operated or otherwise occupied by
the Seller, including any previously owned, leased or occupied property,
resulting from, relating to or arising out of the presence, emission, exposure,
migration, dispersal or threatened release, spill, leak, escape into the
environment, or Handling of any Hazardous Material. The term "Hazardous
Material" means any substance that is regulated by or forms the basis for
liability under any applicable Environmental Laws.
4.24 LABOR MATTERS. The Seller is not a party to any labor agreement
with respect to its employees with any labor organization, group or association
nor, to the knowledge of the Seller, within the last year, have there been
attempts by Seller's employees to organize or affiliate with such labor
organization, group or association. Except as set forth in Section 4.24 of the
Disclosure Schedule, there is no complaint, charge or claim pending or, to the
knowledge of the Seller, threatened against the Seller by any Governmental
Authority, arising out of, in connection with, or otherwise relating to the
employment by the Seller of any individual.
4.25 INTELLECTUAL PROPERTY.
4.25.1 General. Section 4.25 of the Disclosure Schedule sets
forth with respect to the Proprietary Rights of the Seller: (i) for each
patent and patent application, as applicable, the number, normal
expiration date, title and priority information for each country in
which such patent has been issued, or, the application number, date of
filing, title and priority information for each country, (ii) for each
registered trademark, trade name or service xxxx, the date first used,
the application serial number or registration number, the class of goods
or services covered, the nature of the goods or services, the countries
in which the names or xxxx is used and the expiration date for each
country in which a trademark has been
registered, (iii) for each registered copyright, the number and date of
registration for each country in which a copyright application has been
registered, (iv) all such Proprietary Rights in the form of licenses,
except for standard licenses of commercially available intellectual
property such as software, hardware, reports, periodicals and such, and
(v) all such Proprietary Rights in the form of domain names or Internet
websites.
(a) As used in this Agreement, "Proprietary Rights" means
all (i) U.S. and foreign patents, patent applications, patent
disclosures and improvements thereto, including any applications
therefor, (ii) U.S. and foreign trademarks, service marks, trade
dress, logos, trade names and corporate names and the goodwill
associated therewith and registrations and applications for
registration thereof, (iii) U.S. and foreign copyrights and
registrations and applications for registration thereof, (iv) all
trade secrets and confidential business information (including
ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how,
research and development information, software, drawings,
specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing and business data,
pricing and cost information, business and marketing plans and
customer and supplier lists and information, (v) financial
modeling programs and methods, (vi) other proprietary rights,
(vii) copies and tangible embodiments thereof (in whatever form
or medium) and (viii) licenses granting any rights with respect
to any of the foregoing.
4.25.2 Adequacy. The Proprietary Rights of the Seller are
adequate for the normal conduct of the business as presently conducted
by the Seller.
4.25.3 Royalties and Licenses. The Seller has no obligation to
compensate any Person for the use of any of its Proprietary Rights nor
has the Seller granted to any Person any license, option or other rights
to use in any manner any of its Proprietary Rights, whether requiring
the payment of royalties or not, except as set forth in Section 4.25 of
the Disclosure Schedule.
4.25.4 Ownership. The Seller owns or has a valid right to use its
Proprietary Rights except to the extent that failure to do so would not
have a Material Adverse Effect on Seller, and such Proprietary Rights
will not cease to be valid rights of the Seller by reason of the
execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
4.25.5 Absence of Claims. Except as set forth in Section 4.25 of
the Disclosure Schedule, neither the Seller nor the Stockholder has
received any notice of (a) alleged invalidity with respect to any
Proprietary Rights of the Seller, or (b) alleged infringement of any
rights of others due to any activity by the Seller. To the knowledge of
the Seller and the Stockholder, the Seller's use of its Proprietary
Rights in its past, and current services do not infringe upon or
otherwise violate the valid rights of any third party in the United
States, the United Kingdom, or elsewhere in the world. No other Person
(c) has notified the Seller, or
the Stockholder that it is claiming any ownership of or right to use any
Proprietary Rights of the Seller, or (d) to the knowledge of the Seller
and the Stockholder, is infringing upon any such Proprietary Rights in
any way.
4.25.6 Protection of Proprietary Rights. The Seller has taken
reasonable steps necessary or appropriate as have been determined by the
Seller's Board of Directors in the exercise of its reasonable business
judgment (including, entering into appropriate confidentiality,
nondisclosure and non-competition agreements with officers, directors,
subcontractors, independent contractors and full-time and part-time
employees, in connection with the assets or the business of the Seller)
to safeguard and maintain the secrecy and confidentiality of, and the
proprietary rights in, the Proprietary Rights of the Seller.
4.26 INVESTMENT REPRESENTATIONS.
4.26.1 Purchaser Shares. In connection with the payment of a
portion of the Acquisition Consideration in shares of Purchaser Common
Stock, the Stockholder and the Seller hereby represent and warrant that
the purchases of Purchaser Common Stock are for investment purposes and
not for resale. The Stockholder and the Seller agree not to sell,
transfer or encumber any of such Purchaser shares in contravention of
the legends which will be placed on all such stock certificates or in
contravention of the terms of the Restricted Stock Agreement. Purchaser
has informed the Stockholder and the Seller that the shares of Purchaser
Common Stock will not be registered under the Securities Act of 1933 and
the applicable state securities or blue sky law or laws. The Stockholder
and the Seller represent and warrant to Purchaser that each is familiar
with the business of Purchaser and has the necessary knowledge and
experience in business and financial matters in order to be capable of
evaluating the merits and risks of purchasing unregistered shares of
Purchaser Common Stock and making an informed investment decision with
respect thereto. The Stockholder and the Seller each has had the
opportunity to ask questions, review publicly available information and
to inquire further of the Purchaser regarding the Purchaser Common Stock
to be received as a part of the Acquisition Consideration.
4.26.2 Restrictive Legends. The Stockholder and the Seller agrees
that the certificates representing the Purchaser Common Stock received
as Acquisition Consideration hereunder may have appropriate orders
restricting transfer placed against them on the records of the transfer
agent, and may have placed upon them the following legend:
"THE SHARES REPRESENTED HEREBY WERE ACQUIRED WITHOUT REGISTRATION UNDER
THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES LAW, BUT
PURSUANT TO EXEMPTIONS FROM SAID REGISTRATION. THESE SHARES ARE SUBJECT
TO A RESTRICTED STOCK AGREEMENT AND REGISTRATION RIGHTS AGREEMENT DATED
AS OF FEBRUARY 12, 1998, AS AMENDED. THESE SHARES MAY NOT BE OFFERED,
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SAID REGISTRATION, OR THE AVAILABILITY OF EXEMPTIONS
THEREFROM. FURTHERMORE, NO OFFER, SALE, PLEDGE, HYPOTHECATION OR
TRANSFER SHALL TAKE PLACE WITHOUT SUBMITTING TO THE COMPANY EVIDENCE
REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY TO THE EFFECT THAT SUCH
TRANSACTION DOES NOT VIOLATE THE RESTRICTIONS SET FORTH HEREIN. THE
COMPANY'S TRANSFER AGENT HAS BEEN INSTRUCTED TO EFFECT TRANSFERS OF
THESE SHARES ONLY IN ACCORDANCE WITH THESE RESTRICTIONS."
The Stockholder and the Seller agree not to attempt to transfer shares
of Purchaser Common Stock without first complying with (i) the substance of the
foregoing legend and (ii) the terms of the Restricted Stock Agreement.
4.27 DISCLOSURE. To the best of Seller's and Stockholder's knowledge,
the representations, warranties or statements by the Seller or the Stockholder
in this Agreement and the Disclosure Schedule, taken together, do not as of the
date of this Agreement and as of the Closing, will not contain any untrue
statement of a material fact, or omit to state any material fact necessary to
make the statements or facts contained therein not misleading. There is no fact
known to Seller or Stockholder in existence on the date hereof or at the
Closing, which would have, or is reasonably likely to have, a Material Adverse
Effect on the Seller or the due performance by the Seller of its obligations
hereunder, which has not been expressly set forth in this Agreement or the
Disclosure Schedule, or in the other documents described herein.
5 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB.
Purchaser and Sub represent and warrant to the Seller and the
Stockholder as follows:
5.1 ORGANIZATION, EXISTENCE AND GOOD STANDING. Purchaser and Sub are
each a corporation duly organized and validly existing and in good standing
under the laws of the State of Delaware. Purchaser and Sub each have all
necessary corporate power to own its properties and assets and to carry on its
business as presently conducted and is duly qualified to do business and is in
good standing in all jurisdictions in which the character of the property owned,
leased or operated or the nature of the business transacted by it makes
qualification necessary, except for such failures which, when taken together
with all other such failures, would not have a Material Adverse Effect on
Purchaser or Sub. Purchaser has heretofore made available to the Seller complete
and correct copies of Purchaser's and Sub's Certificate of Incorporation and
Bylaws, each of the foregoing as amended to the date of this Agreement.
5.2 POWER AND AUTHORITY. Purchaser and Sub each have all necessary
corporate power, and authority to execute, deliver and perform this Agreement
and the agreements attached as exhibits hereto to which each is a party and to
consummate the transactions contemplated hereby and thereby, including without
limitation the issuance of the Purchaser Common Stock as Share Consideration and
have taken all necessary corporate action required by all applicable Laws (as
defined in Section 4.8), its Certificate of Incorporation, Bylaws or otherwise,
to authorize the execution, delivery and
performance of this Agreement and the agreements attached as exhibits hereto to
which each is a party and the consummation of the transactions contemplated
hereby and thereby including without limitation of the issuance of the Purchaser
Common Stock as the Share Consideration. The execution and delivery of this
Agreement and the agreements attached as exhibits hereto by the Purchaser and/or
the Sub (as the case may be), performance of its obligations hereunder and
thereunder and consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action and no action on the
part of the shareholders of the Purchaser is required in connection therewith.
As of the date hereof, the Board of Directors of Purchaser and of Sub have duly
approved this Agreement, and have determined that the Acquisition is in the best
interests of Purchaser and Sub. This Agreement has been duly executed and
delivered by Purchaser and Sub and, assuming this Agreement constitutes a valid
and binding obligation of the Seller and the Stockholder, constitutes a valid
and binding obligation of Purchaser and Sub, enforceable against Purchaser and
Sub in accordance with its terms except that the enforcement hereof may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally,
and (b) general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
5.3 LEGAL PROCEEDINGS. Except as may be disclosed in the Purchaser
Reports (as defined below), on the date hereof, there are no Actions pending or,
to Purchaser's or Sub's knowledge, threatened against Purchaser or Sub, at law
or in equity, that would affect its ability to consummate the transactions
contemplated by this Agreement in a timely manner or that is likely to have a
Material Adverse Effect on Purchaser or Sub.
5.4 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement nor the consummation by Purchaser of the transactions
contemplated hereby, will (a) violate, conflict with or result in any breach of
any provision of the organizational documents of Purchaser or Sub, (b) violate
any Law applicable to Purchaser or Sub, (c) conflict with or result in a breach
of any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in any Encumbrance on the properties or assets of
Purchaser or Sub pursuant to, (i) any material agreement, contract or other
instrument binding upon Purchaser or Sub, (ii) any material license, franchise,
permit or other similar authorization held by Purchaser or Sub, or (d) require
any consent, approval or authorization of, or notice to, or declaration, filing
or registration with, any Governmental Authority or any other third party.
5.5 PURCHASER COMMON STOCK. Purchaser's authorized capital stock
consists of 100,000,000 shares of Common Stock, of which not more than
30,300,000 shares are as of the date of this Agreement and will be immediately
prior to the Closing issued and outstanding, and 10,000,000 shares of preferred
stock, of which none are as of the date of this Agreement and will be
immediately prior to the Closing issued and outstanding. All of the issued and
outstanding shares of Purchaser's Common Stock are duly and validly issued,
fully paid and nonassessable. Upon issuance in connection with the Acquisition,
all of the Common Stock comprising Share Consideration shall be duly and validly
issued, fully paid and non-assessable and will not be issued in violation of any
preemptive rights.
5.6 SUB COMMON STOCK. All of the issued and outstanding capital stock of
Sub is now and as of the Closing Date shall be, owned exclusively by the
Purchaser and there are not as of the date hereof and will not be as of the
Closing Date any outstanding options, warrants or other rights to acquire such
capital stock or any commitments to grant same.
5.7 COMMISSIONS AND FEES. Other than Xxxxxxx Xxxxx Xxxxxx ("Salomon"),
Purchaser has not employed any investment banker, broker, finder, consultant or
intermediary in connection with the transactions contemplated by this Agreement
which would be entitled to any investment banking, brokerage, finder's or
similar fees or commissions in connection with this Agreement or the
transactions contemplated hereby. Salomon has been retained to render a
"fairness opinion" with respect to the Acquisition, for which Purchaser has sole
liability.
5.8 FINANCIAL STATEMENTS. The Purchaser has made available to the Seller
copies of (a) the consolidated balance sheets of the Purchaser and its
subsidiaries as of December 31 for the fiscal years 1998 through 2000,
inclusive, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the fiscal years 1998 through 2000,
inclusive, as reported in the Purchaser's Annual Reports on Form 10-K for each
of the three fiscal years ended December 31, 1998 through December 31, 2000
filed with the Securities and Exchange Commission ("SEC") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in each case accompanied
by the audit report of Purchaser's independent accountants, and (b) the
unaudited consolidated balance sheets of Purchaser and its subsidiaries as of
September 30, 2001, the related unaudited consolidated statements of income and
changes in stockholders' equity for the nine months ended September 30, 2001 and
the related unaudited consolidated statements of cash flows for the nine months
ended September 30, 2001, all as reported in Purchaser's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2001 filed with the SEC under the
Exchange Act. The December 31, 2000 consolidated balance sheet of the Buyer (the
"Purchaser Balance Sheet") (including the related notes, where applicable) and
the other financial statements referred to herein (including the related notes,
where applicable) fairly present, the consolidated financial position and
results of the consolidated operations and cash flows and changes in
stockholders' equity of the Purchaser and its subsidiaries for the respective
fiscal periods or as of the respective dates therein set forth; and each of such
statements (including the related notes, where applicable) has been and will be
prepared in accordance with GAAP consistently applied during the periods
involved, except as otherwise set forth in the notes thereto (subject, in the
case of unaudited interim statements, to normal year-end adjustments). The books
and records of the Purchaser and its subsidiaries have been, and are being,
maintained in accordance with GAAP and applicable legal and regulatory
requirements and reflect only actual transactions.
5.9 REPORTS. Since January 1, 1999, the Purchaser and its subsidiaries
have timely filed, all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that were required to be
filed with the SEC, including, but not limited to, Forms 10-K, Forms 10-Q, Forms
8-K and proxy statements (and all such reports, registrations and statements
have been made available by the Purchaser to the Seller), and any applicable
state securities (except,
in the case of state securities authorities, no such representation is made as
to filings which are not material) (all such reports, registrations and
statements are collectively referred to herein as the "Purchaser Reports"). As
of their respective dates, the Purchaser Reports complied in all material
respects with all of the statutes, rules and regulations enforced or promulgated
by the regulatory authority with which they were filed. As of their respective
dates, the Purchaser Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. No current, nor to the best knowledge of
the Purchaser threatened, action exists to delist the Purchaser from the Nasdaq
National Market.
5.10 FINANCING. The Purchaser's or the Sub's ability to pay the total
amount of the Cash Consideration is not contingent upon raising additional
equity capital or obtaining specific financing from any third-party lender.
5.11 DISCLOSURE. To the best of Purchaser's and the Sub's knowledge, no
representation or warranty contained in this Agreement, and no statement
contained in any certificate, list or other writing furnished to the Seller
pursuant to the provisions hereof, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or therein not misleading. No information believed by Purchaser or the
Sub to be material to Seller's or the Stockholder's interests in the
transactions contemplated by this Agreement, which has not otherwise been
disclosed to the Seller and the Stockholder in connection with this Agreement,
has been intentionally withheld from Seller or the Stockholder.
6 ACCESS TO INFORMATION AND DOCUMENTS
6.1 ACCESS TO INFORMATION AND DOCUMENTS. Between the date hereof and the
Closing Date, the Seller, the Stockholder and each of their respective
Affiliates, subsidiaries, partners, directors, officers, stockholders,
employees, accountants, counsel, financial advisors, agents, and other
representatives (collectively, the "Seller Parties") will give to Purchaser and
its Affiliates, partners, officers, directors, employees, stockholders,
subsidiaries, counsel, accountants, financing sources, agents, financial
advisors and other representatives (collectively, the "Purchaser
Representatives") full access, upon reasonable notice during normal business
hours, to all the properties, documents, contracts, personnel files and other
relevant records of the Seller during normal business hours and shall furnish
the Purchaser Representatives with reasonable access to the employees,
Stockholder, Principals and independent contractors of such Seller Parties and
copies of such documents and with such information with respect to the affairs
of the Seller as the Purchaser Representatives may from time to time reasonably
request. Seller will disclose and make available to the Purchaser
Representatives all books, contracts, accounts, personnel records, letters of
intent, papers, records, communications with regulatory authorities and other
documents relating to the business and operations of the Seller. In addition to
the foregoing, the parties acknowledge that the Purchaser and Seller are parties
to a Nondisclosure Agreement dated May 17, 2001, and that such agreement remains
in full force and effect through Closing.
7 COVENANTS OF THE SELLER AND THE STOCKHOLDER.
7.1 AFFIRMATIVE COVENANTS. Unless otherwise expressly contemplated by
this Agreement, or consented to in writing by Purchaser, the Seller and the
Stockholder hereby covenant and agree to do each of the following between the
date hereof and the Closing Date:
7.1.1 operate the business of the Seller in the usual, regular
and ordinary course consistent with past practice;
7.1.2 use reasonable efforts to do each of the following:
preserve intact the business organization and assets, maintain the
rights and franchises, retain the services of the respective officers,
key employees and consultants, and maintain the relationships with the
respective customers and suppliers, of the business of the Seller;
7.1.3 maintain and keep the Acquired Assets in as good repair and
condition as at present in all material respects, ordinary wear and tear
excepted;
7.1.4 keep in full force and effect insurance and bonds
comparable in amount and scope of coverage to that currently maintained
by the Seller;
7.1.5 perform in all material respects all obligations required
to be performed under all Material Contracts and Licenses relating to or
affecting the Acquired Assets or Assumed Liabilities;
7.1.6 comply with and perform in all material respects all
obligations and duties imposed on the Seller by all applicable Laws
material to the Seller's business;
7.1.7 maintain the books, accounts and records of the Seller in
the usual, regular and ordinary manner on a basis consistent with past
practice;
7.1.8 notify Purchaser of any material Action commenced by or
against the Seller or any Actions commenced or threatened which relate
to the transactions contemplated by this Agreement or which may
reasonably be expected to cause a Material Adverse Effect;
7.1.9 consult with Purchaser as to additional expenditures with
respect to the Seller's and the Subsidiary's information systems
exceeding $50,000 in the aggregate;
7.1.10 for December 31, 2001 (if not provided before the date
hereof) and in the event the period between and including the date
hereof and the Closing Date includes the end of a calendar month,
deliver to Purchaser, within fifteen (15) days after the end of each
such calendar month, an unaudited balance sheet, statement of earnings,
statement of stockholders equity and cash flow statement for the Seller
for such month just ended and all ancillary management reports; and
7.1.11 use reasonable efforts to obtain from each counterparty
thereto, the written consent to the assignment and transfer of each
Material Contract to Sub which is set forth in Section 2.2.1(j) of this
Agreement.
7.2 NEGATIVE COVENANTS. Unless otherwise expressly contemplated by this
Agreement or consented to in writing by Purchaser, the Seller hereby covenants
and agrees not to, and the Stockholder hereby covenants and agrees to cause the
Seller not to, do any of the following between the date hereof and the Closing
Date:
7.2.1 except as disclosed in Section 4.15 of the Disclosure
Schedule, increase the compensation payable or to become payable to any
director, officer, employee or contractor, except for increases in
salary or wages payable or to become payable in the ordinary course of
business and consistent with past practice to employees or contractors
of Seller who are not directors or officers of the Seller;
7.2.2 except as disclosed in Section 4.15 of the Disclosure
Schedule, grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer, employee
or contractor (other than pursuant to the normal severance policy of the
Seller as in effect on the date of this Agreement) which policy has been
disclosed to Purchaser in Section 4.13.1 of the Disclosure Schedule;
7.2.3 except as disclosed in Section 4.15 of the Disclosure
Schedule, grant, promise an increase in benefits under, establish or
amend, or pay any bonus, insurance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without limitation,
the granting of stock options, stock appreciation rights, performance
awards or restricted stock awards), stock purchase or other similar
employee benefit plans or arrangements in respect of directors,
officers, employees or contractors of the Seller, except to the extent
that the Seller is, on the date hereof, contractually obligated or
required by Law to do so;
7.2.4 except as disclosed in Section 4.15 of the Disclosure
Schedule, declare, set aside or pay any dividend on, or make or incur
any obligation to make any other distribution in respect of, outstanding
equity interests of the Seller;
7.2.5 redeem, purchase or otherwise acquire any shares of capital
stock or other equity interests or any securities or obligations
convertible or exchangeable for any shares of capital stock or other
equity interests, or any options, warrants or conversion or other rights
to acquire any shares of the capital stock, equity interests or any such
securities or obligations, in each case of the Seller;
7.2.6 effect any reorganization or recapitalization;
7.2.7 split, combine or reclassify any of the capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of capital stock,
of the Seller;
7.2.8 issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale (including the
grant of any Encumbrances, limitations on voting rights or other
encumbrances) of, any shares of any class of capital stock or other
equity interests (including shares held in treasury), any securities
convertible into or exercisable or exchangeable for any such shares or
other equity interests, or any rights, warrants or options to acquire,
any such shares or other equity interests, of the Seller (except for the
issuance of shares of Common Stock upon exercise of options outstanding
on the date hereof) or amend or otherwise modify the terms of any such
rights, warrants or options, the effect of which shall be favorable to
the holders thereof;
7.2.9 acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in or a portion of the assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets of any other Person
(other than the purchase of assets from suppliers or vendors in the
ordinary course of business and consistent with past practice);
7.2.10 sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree (or solicit any inquiries or proposals or
enter into any discussions or negotiations) to sell, lease, exchange,
mortgage, pledge, transfer or otherwise dispose of, any of the Acquired
Assets or cancel, release or assign any indebtedness owed to or any
claims held by the Seller, except for the disposition of immaterial
assets in the ordinary course of business and consistent with past
practice;
7.2.11 propose or adopt any amendments to the Certificate of
Incorporation or Bylaws or equivalent organizational documents of the
Seller, except to change Seller's name as required by Section 1.2.1;
7.2.12 change any methods of accounting in effect at December 31,
2000 (except such changes as are reflected in the Seller Financial
Statements);
7.2.13 make or rescind any express or deemed election relating to
Taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
Taxes, or change any methods of reporting income or deductions for
federal income Tax purposes from those employed in the preparation of
the federal income Tax returns for the taxable year ending December 31,
2000, except as may be required by applicable Law;
7.2.14 incur any indebtedness for borrowed money or purchase
money indebtedness, or assume, guarantee, endorse or otherwise become
responsible for indebtedness of any other
person, or make any loans or advances to any person, except for amounts
less than $25,000 in the ordinary course of business unless incurred in
the ordinary course of business and billable to a client, not to exceed
$100,000;
7.2.15 enter into any transaction or contract or commitment for a
transaction material to the Seller, other than the Amended and Restated
One Boston Place Lease, the 31st Floor Lease and the 32nd Floor Lease
and contracts with customers and/or vendors in the ordinary course of
business;
7.2.16 other than the Amended and Restated One Boston Place
Lease, terminate, modify or amend any Material Contract or License,
except in the ordinary course of business and not involving a material
increase in liability or reduction in revenue, settle or otherwise
resolve any financial issue, claim or adjustment under any such Material
Contract or License, or make any payment or effect any modification to
any Material Contract or License in connection with obtaining any
consent or approval necessitated by the transactions contemplated hereby
(other than payments and modifications which, individually, and in the
aggregate, are immaterial);
7.2.17 enter into or make any payment or transfer in respect of
any material transactions, agreements, or arrangements between the
Seller, on the one hand, and (a) any director or officer of the Seller
or (b) any member of the immediate family of any individual described in
(a) on the other hand;
7.2.18 settle or compromise any Action;
7.2.19 take any action described in Section 4.15; or
7.2.20 agree, authorize, approve or commit in writing or
otherwise to do any of the foregoing.
7.3 NO SOLICITATIONS. From the date hereof until the earlier of the
Closing Date or the termination of this Agreement in accordance with its terms
(the "Acquisition Exclusivity Period"), neither the Stockholder nor the Seller
will, and neither of them will permit any of the Seller Parties to, directly or
indirectly, (a) solicit, encourage, initiate or entertain any inquiries, offers
or proposals or enter into or continue any discussions, negotiations or
agreements relating to the sale or other disposition of the Seller (whether
through a merger, acquisition, reorganization, recapitalization, stock purchase
or otherwise) or its assets, properties, business or operations (a "Proposed
Acquisition") to or with any person or entity other than Sub or Purchaser, or
(b) provide any assistance or any information to any person or entity other than
Sub or Purchaser relating to any Proposed Acquisition. The Seller and
Stockholder agree to immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties (other than Sub or
Purchaser) heretofore conducted, or the provision by Stockholder or the Seller
or the Seller Parties of information to any party (other than Sub or Purchaser)
to which information heretofore has been provided. If during the Acquisition
Exclusivity Period the Seller or the Stockholder receives any
such inquiry or proposal or request for information, or offer to discuss or
negotiate any Proposed Acquisition, the Seller or the Stockholder will
immediately provide notice thereof to Purchaser, indicating therein the name of
the person or entity initiating such activity and the terms and conditions of
any such offer. Purchaser and Sub hereby acknowledge that nothing in this
Agreement shall require the Seller or the Stockholder (either directly or
through their representatives) to request return of any information provided to
any other person prior to the date hereof in connection with or contemplation of
a Proposed Acquisition, or advise any such person of the existence of this
Agreement.
7.4 APPROVAL OF ACQUISITION. The Seller shall take all necessary or
appropriate action under the Delaware General Corporation Law and its
Certificate of Incorporation and Bylaws to call a meeting of its sole
stockholder (or to take such action by written consent), to be held at the
earliest practicable date, to consider and vote on a proposal to approve the
Acquisition, this Agreement and the transactions contemplated hereby.
Stockholder covenants and agrees (a) to cause Holdings to vote at such meeting
of the sole stockholder or by written consent, as the case may be, to approve
the Acquisition, this Agreement and the transactions contemplated hereby, and
(b) that Stockholder will cause Holdings to not exercise, and on behalf of
Holdings hereby waives, Holdings' dissenters rights arising from the Acquisition
under the Delaware General Corporation Law with respect to any of Holdings'
shares of capital stock of the Seller.
7.5 FEES AND EXPENSES. All fees and expenses of Purchaser and the Seller
relating to this Acquisition transaction including, without limitation, the fees
and expenses of counsel, accountants and consultants (limited as provided
below), shall be paid (a) by the Purchaser upon consummation of the transactions
contemplated hereby, or (b) by the party incurring such fees and expenses, in
the event the transactions hereunder are not consummated for any reason. The
above fees and expenses incurred by the Seller relating to the Acquisition shall
not exceed $500,000 in the aggregate, of which $375,000 shall be paid at Closing
pursuant to Section 4.19 by the Seller paying or reimbursing such costs and
expenses from $375,000 of the cash otherwise transferable to Sub at Closing. The
balance of the Seller's fees and expenses relating to the Acquisition which are
reasonably approved by Sub after reviewing the invoices for such fees and
expenses, shall be paid by Sub within 30 days from the Closing Date. Under no
circumstances shall fees, costs or expenses associated with the execution of the
Amended and Restated One Boston Place Lease, the 31st Floor Lease or the 32nd
Floor Lease be considered as relating to this Acquisition.
8 COVENANTS OF PURCHASER.
8.1 PURCHASER BENEFIT PLAN ELIGIBILITY. The Purchaser covenants and
agrees that for purposes of determining eligibility to participate in, and
vesting of benefits under, any employee plan maintained by the Purchaser, all
service of a person as an employee of the Seller shall be recognized, and that
welfare plans maintained by the Purchaser shall give any former employee of the
Seller who participates thereunder full credit for co-payment, deductible
amounts and out-of-pocket maximums paid by such employee prior to the Closing
Date, and shall not apply any preexisting condition, waiting period of similar
limitation to such employee, except to the extent the same is applicable to
employees of the Purchaser (treating service with the Seller as service with the
Purchaser).
9 COVENANTS OF THE SELLER, THE STOCKHOLDER, AND PURCHASER.
9.1 PUBLIC DISCLOSURES. Purchaser, the Seller and the Stockholder will
consult with each other before issuing any press release or otherwise making any
public statement with respect to the transactions contemplated by this
Agreement, and shall not issue any such press release or make any such public
statement prior to such consultation and without the approval of the other
parties hereto, provided however, if Purchaser determines that a public
disclosure of the fact or terms of this Agreement is required by applicable law,
the Purchaser shall have the authority to make such disclosures as Purchaser
deems necessary and proper.
9.2 NOTIFICATION OF CERTAIN MATTERS. The Seller and the Stockholder
shall give prompt notice to Purchaser, and Purchaser shall give prompt notice to
the Seller and the Stockholder, of (a) the occurrence, or failure to occur, of
any event which occurrence or failure to occur would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing Date, and (b) any material failure of the Seller, the Stockholder, or
Purchaser, as the case may be, or of any Affiliate thereof, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that no such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations to the parties hereunder.
9.3 OTHER ACTIONS. None of the Seller, the Stockholder, or Purchaser
shall knowingly or intentionally take any action, or omit to take any action, if
such action or omission would, or reasonably might be expected to, result in any
of its representations and warranties set forth herein being or becoming untrue
in any material respect, or in any of the conditions set forth in this Agreement
not being satisfied, or (unless such action or omission is required by
applicable law) which would materially and negatively affect the ability of the
Seller, the Stockholder, or Purchaser to obtain any consents or approvals
required for the consummation of the Acquisition or which would otherwise
materially impair the ability of the Seller, the Stockholder, or Purchaser to
consummate the Acquisition in accordance with the terms of this Agreement or
materially delay such consummation, in each case without consent of the other
parties hereto.
9.4 REGULATORY AND OTHER AUTHORIZATIONS: CONSENTS. Each party hereto
shall use its reasonable best efforts to (a) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper or
advisable under applicable Law or otherwise to promptly consummate and make
effective the transactions contemplated by this Agreement, and (b) obtain all
authorizations, consents, orders and approvals of, and to give all notices to
and make all filings with, all Governmental Authorities and other third parties
that may be or become necessary for its execution and delivery of, and the
performance of its obligations pursuant to this Agreement including, without
limitation, those consents set forth in Section 4.10.2 or 7.1.11 of the
Disclosure Schedule or otherwise contemplated by this Agreement. Each party will
cooperate fully with the
other party in promptly seeking to obtain all such authorizations, consents,
orders and approvals, giving such notices, and making such filings. In
connection with obtaining such consents from third parties, no party shall be
required to make payments, commence litigation or agree to modifications of the
terms thereof (other than payments and modifications which individually, and in
the aggregate, are immaterial), and no material modification shall be made to
any contract, agreement or other commitment of the Seller without the prior
written consent of the Purchaser. The parties hereto agree not to take any
action that will have the effect of unreasonably delaying, impairing or impeding
the receipt of any required authorizations, consents, orders or approvals. Prior
to making any application or filing with any Governmental Authority or other
person or entity in connection with this Agreement, the Seller and the Purchaser
shall provide the other with drafts thereof and afford the other a reasonable
opportunity to comment on such drafts. Without limiting the generality of the
preceding sentences, each of Purchaser, the Stockholder and the Seller agrees to
cooperate and use all commercially reasonable efforts to vigorously contest and
resist any action, suit, proceeding or claim, and to have vacated, lifted,
reversed or overturned any injunction, order, judgment or decree (whether
temporary, preliminary or permanent), that delays, prevents or otherwise
restricts the consummation of the Acquisition or any other transaction
contemplated by this Agreement, and to take any and all actions as may be
required by Governmental Authorities as a condition to the granting of any such
necessary approvals or as may be required to avoid, vacate, lift, reverse or
overturn any injunction, order, judgment, decree or regulatory action (provided,
however, that in no event shall any party hereto take, or be required to take,
any action that would have a Material Adverse Effect on Purchaser, the Seller,
or the Stockholder). Notwithstanding the foregoing, in no event shall Purchaser
or the Seller be required at any time from the date hereof through and following
the Closing Date to dispose of the assets, or divest the businesses, of
Purchaser, the Seller or any of their respective Affiliates.
9.5 CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any similar Tax
imposed in other states or subdivisions), shall be paid by the Purchaser when
due, and the Purchaser will, at its own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Purchaser will, and will cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation.
9.6 PURCHASER AND SELLER AGREE FOR ALL FEDERAL AND STATE INCOME TAX
PURPOSES.
9.6.1 that the fair market value of the Share Consideration shall
equal the total number of shares of Purchaser Common Stock paid to
Seller multiplied by the average of the high and low prices for
Purchaser Common Stock as reported on the NASDAQ National Market on the
following five (5 ) days: the two (2) trading days immediately preceding
the Closing Date, the Closing Date and the two (2) trading days
immediately following the Closing Date; and
9.6.2 to consistently report any federal and state income and
deductions resulting from interest or imputed interest under Section 483
and/or Sections 1271-1275 of the Code.
10 TERMINATION, AMENDMENT AND WAIVER.
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
10.1.1 Mutual Consent. By mutual written consent of Purchaser and
the Seller.
10.1.2 Failure to Close. By Purchaser or the Seller if the
Closing Date shall not have occurred by March 9, 2002, unless the
failure of the Closing Date to occur by such date shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth herein.
10.1.3 Breach. By Purchaser or the Seller if there shall have
been any material breach of any covenant, representation, warranty or
other obligation by the other and, if such breach is curable, such
default shall have not been remedied within fifteen (15) days after
receipt by the defaulting party of notice in writing from the other
party specifying such breach and requesting that it be remedied;
provided, that if the breach is not curable within such fifteen (15) day
period, such fifteen (15) day period shall be extended for so long as
the other party shall be making diligent attempts to cure such default,
but in any event not longer than forty-five (45) additional days.
10.1.4 Court Order. By Purchaser or the Seller, if any court of
competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting any of
the transactions contemplated hereby and such order, decree, ruling or
any other action shall have become final and non-appealable.
10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 10.1, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on the part of any
party, other than the provisions of the last sentence of Section 6.1 and
Sections 7.5, 9.1, 10.2, 14.3, 14.8 and 14.9, which shall survive such
termination, and except to the extent that such termination results from the
willful and material breach by a party of any of its representations,
warranties, covenants or other agreements set forth in this Agreement.
11 CONDITIONS TO CLOSING.
11.1 MUTUAL CONDITIONS. The respective obligations of each party to
effect the Acquisition shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions (any of which may be waived in writing
by Purchaser and the Seller):
11.1.1 No Order. No party hereto nor any of their respective
Affiliates shall be subject to any order, decree or injunction by a
Governmental Authority which prevents or materially delays the
consummation of the Acquisition.
11.1.2 Legal. No statute, rule, regulation, order, decree,
judgment, injunction, stipulation or determination shall have been
enacted by any Governmental Authority that makes the consummation of the
Acquisition and any other transaction contemplated hereby illegal.
11.1.3 Assignment and Assumption of Amended and Restated One
Boston Place Lease. The execution by BRE/One Boston, L.L.C. (or
designee) of the Assignment and Assumption of Amended and Restated
Lease.
11.2 CONDITIONS TO OBLIGATIONS OF PURCHASER AND SUB. The obligations of
the Purchaser and the Sub to consummate the Acquisition and the other
transactions contemplated hereby shall be subject to the satisfaction, at or
prior to the Closing Date, of the following conditions (any of which may be
waived in writing by Purchaser):
11.2.1 Performance By Seller and Stockholder. Each of the
agreements of the Seller and the Stockholder to be performed at or prior
to the Closing Date pursuant to the terms hereof shall have been duly
performed in all material respects, and the Seller and the Stockholder
shall have performed, in all material respects, all of the acts required
to be performed by them at or prior to the Closing Date by the terms
hereof.
11.2.2 Accurate Representations at Closing. The representations
and warranties of the Seller and the Stockholder set forth in Article 4
of this Agreement that are qualified as to materiality shall be true and
correct, and those that are not so qualified shall be true and correct
in all material respects, as of the date of this Agreement and as of the
Closing as though made at and as of such time, except to the extent such
representations and warranties expressly relate to an earlier date (in
which case such representations and warranties that are qualified as to
materiality shall be true and correct, and those that are not so
qualified shall be true and correct in all material respects, as of such
earlier date).
11.2.3 Consents Obtained. Receipt of all consents and approvals
of Governmental Authorities necessary for consummation of the
transactions contemplated hereby and all consents and approvals set
forth in Section 2.2.1(j) of this Agreement.
11.2.4 No Actions. Purchaser and/or Sub shall not be subject to
any (i) Action brought by any third party challenging the transactions
contemplated hereby or (ii) order, decree or injunction by a
Governmental Authority which would impose any material limitation on the
ability of Sub to effectively exercise full rights of ownership of, or
control over, the Acquired Assets.
11.2.5 Other Agreements in Force. The Amended Registration Rights
Agreement, the Restricted Stock Agreement, each Principal Employment
Agreement specified in Section 2.2.1(e), the Stockholder Employment
Agreement, the Escrow Agreement and the Assignment and Assumption of
Amended and Restated Lease shall have been executed and delivered by the
parties thereto other than the Purchaser or Sub.
11.2.6 No Material Adverse Change. From the date of this
Agreement until the Closing Date, there shall not have occurred any
Material Adverse Change in the Seller.
11.2.7 No Material Change in Customer Relations. From the date of
this Agreement until the Closing Date, to the Seller's or Stockholder's
knowledge, and except as set forth in Sections 4.9.1 or 4.18 of the
Disclosure Schedule, none of the relationships between the Seller and
its customers shall have, in any manner, been negatively impacted or
altered for any reason that would be reasonably likely to have a
Material Adverse Effect on the Seller.
11.2.8 Officer's Certificate. The Purchaser shall have been
furnished with a certificate, executed by the Chief Executive Officer of
the Seller, dated the Closing Date, certifying in such detail as the
Purchaser may reasonably request as to the fulfillment of the conditions
set forth in Sections 11.2.1, 11.2.2, and 11.2.6.
11.2.9 Amended and Restated One Boston Place Lease. The execution
by the Seller and BRE/One Boston, L.L.C. (or designee) of the Amended
and Restated One Boston Place Lease.
11.2.10 Receipt of Seller and Stockholder Deliveries. The
deliveries to be made by the Seller and the Stockholder under Section
2.2.1 shall have been received by Purchaser or Sub.
11.3 CONDITIONS TO OBLIGATIONS OF THE SELLER AND THE STOCKHOLDER. The
obligations of the Seller and the Stockholder to consummate the Acquisition and
the other transactions contemplated hereby shall be subject to the satisfaction,
at or prior to the Closing Date, of the following conditions (any of which maybe
waived in writing by the Seller):
11.3.1 Performance By Purchaser. Each of the agreements and
covenants of the Purchaser or Sub to be performed at or prior to the
Closing Date pursuant to the terms hereof shall have been duly
performed, in all material respects, and each of the Purchaser and Sub
shall have performed, in all material respects, all of the acts required
to be performed by it at or prior to the Closing Date by the terms
hereof.
11.3.2 Accurate Representations at Closing. The representations
and warranties of the Purchaser and Sub set forth in Article 5 of this
Agreement that are qualified as to materiality shall be true and
correct, and those that are not so qualified shall be true and correct
in all material respects, as of the date of this Agreement and as of the
Closing as though made at and as of such time, except to the extent such
representations and warranties expressly relate to an earlier date (in
which case such representations and warranties that are qualified as to
materiality shall be true and correct, and those that are not so
qualified shall be true and correct in all material respects, as of such
earlier date).
11.3.3 Other Agreements In Force. The Amended Registration Rights
Agreement (as amended to include the Stockholder), those Principal
Employment Agreements specified
in Section 2.2.1(e), the Stockholder Employment Agreement, the
Restricted Stock Agreement, the Escrow Agreement and the Assignment and
Assumption of Amended and Restated Lease shall have been executed and
delivered by the parties thereto other than the Principals, the Seller
and the Stockholder (as the case may be).
11.3.4 Receipt of Purchaser Deliveries. The deliveries to be made
or caused to be made by Sub and Purchaser under Section 2.2.2 (including
without limitation the Cash Consideration and the Share Consideration)
shall have been received by the Seller and the Stockholder (as
applicable).
11.3.5 No Actions. None of Seller, Stockholder nor any of their
respective Affiliates shall be subject to any (i) Action brought by any
third party challenging the transactions contemplated hereby or (ii)
order, decree or injunction by a Governmental Authority which would
impose any material limitation on the ability of Seller to effectively
exercise full rights of ownership of, or control over, the Share
Consideration.
11.3.6 No Material Adverse Change. From the date of this
Agreement until the Closing Date, there shall not have occurred any
Material Adverse Change in the Purchaser or Sub.
11.3.7 No Changes in Law. From the date of this Agreement until
the Closing Date, there shall not have occurred or been proposed any
material change in any Law, or any new Law proposed, that would have, or
would be reasonably like to have, a Material Adverse Effect on the
Purchaser or Sub.
11.3.8 Officer's Certificate. The Seller and the Stockholder
shall have been furnished with a certificate, executed by the Chief
Financial Officer of the Purchaser, dated the Closing Date, certifying
in such detail as the Seller and the Stockholder may reasonably request
as to the fulfillment of the conditions set forth in Sections 11.3.1,
11.3.2 and 11.3.6.
11.3.9 Bonus Plan. A bonus plan for the Principals, as described
in Exhibit K, shall be in effect.
11.3.10 Guaranty of Amended and Restated One Boston Place Lease.
The execution and delivery to BRE/One Boston, L.L.C. (or designee) by
the Purchaser of a guaranty of the Sub's obligations under the Amended
and Restated One Boston Place Lease.
12 ESCROW
12.1 ESTABLISHMENT OF ESCROW. Concurrently with the Closing, Purchaser,
the Seller and the Stockholder shall open an escrow account with UMB, N.A. (the
"Escrow Agent") by (a) all parties hereto depositing fully executed copies of
this Agreement and the Escrow Agreement with the Escrow Agent, (b) the Purchaser
or Sub depositing a portion of the Cash Consideration (the "Escrowed Cash") in
the amount of Four Million and No/100 Dollars ($4,000,000) in immediately
available funds, with the Escrow Agent and (c) the Purchaser or Sub depositing
that portion of the Share Consideration specified in Section 3.2 (the "Escrowed
Stock"), with the Escrow Agent. The Escrowed Cash and Escrowed Stock shall be
deposited by the Purchaser or Sub into an escrow account established for the
Seller (the "Escrow Account") subject to the terms and conditions of the Escrow
Agreement. The Escrowed Cash in the Escrow Account shall be invested in a
mixture of, bond, money market and cash instruments, reasonably acceptable to
Purchaser and the Stockholder, as provided in the Escrow Agreement.
12.2 ESCROW FOR INDEMNIFICATION. The Escrowed Cash and Escrowed Stock
(collectively, the "Escrowed Property") in the Escrow Account shall be used to
indemnify the Purchaser Indemnitees for Losses (as such terms are defined in
Section 13.2.1) incurred, relating to, or arising out of, the circumstances set
forth in Section 13.2.1 (the "Indemnification Claims").
12.3 DISTRIBUTION OF ESCROWED PROPERTY. Subject to satisfaction of all
Indemnification Claims, if any, made prior to the date of distribution, the
Escrow Agent shall distribute the Escrowed Property to the Seller in the manner
described in the Escrow Agreement.
13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
13.1 SURVIVAL.
13.1.1 Survival Periods. The representations and warranties of
the parties hereto contained herein shall survive beyond the Closing
Date as follows: (i) the representations and warranties of the Seller
and the Stockholder contained in Section 4.12 shall survive until the
expiration of the relevant statute of limitations applicable thereto
("Tax Claims"), and (ii) all other representations and warranties of the
Seller and the Stockholder set forth in Article 4 hereof shall survive
for twenty-four (24) months from the Closing Date, and all
representations and warranties of Purchaser set forth in Article 5
hereof shall survive for twenty four (24) months from the Closing Date.
13.1.2 Escrow Agreement Controls. All Losses (as defined below)
incurred by the Purchaser Indemnitees shall be first satisfied from any
remaining balance of the Escrowed Property which has not been paid to
satisfy such Losses or otherwise disbursed to any party. In such event,
the provisions of the Escrow Agreement shall govern regarding claims
procedures and resolutions of disputes and shall in such matters
supersede the provisions of this Agreement in the event of conflict
between the two documents. The Seller's and Stockholder's
indemnification obligations with respect to Losses shall not be limited
to the Escrowed Property, but rather shall accord to the provisions of
Section 13.3.
13.2 INDEMNIFICATION
13.2.1 Indemnification by the Seller and the Stockholder. After
the Closing Date, the Purchaser, the Sub, and each of their respective
partners, officers, directors, employees,
stockholders, agents, representatives and Affiliates (collectively, the
"Purchaser Indemnitees" and individually, a "Purchaser Indemnitee")
(subject to the terms and conditions below) will be entitled to be
indemnified and held harmless by the Seller and the Stockholder against
and in respect of any claims, damages, diminution in value, losses,
costs, expenses, liabilities (absolute, accrued, contingent or
otherwise) including, without limitation, interest, penalties,
reasonable attorneys' fees and expense of investigation, response action
or remedial action (collectively, "Losses") reasonably incurred or
suffered by the Purchaser Indemnitee, directly or indirectly, in
connection with, arising out of or related to (i) any breach of, any
representation, warranty or covenant of the Seller or the Stockholder
contained in this Agreement, (ii) any Excluded Liability or Excluded
Asset, (iii) any Acquired Asset, but only to the extent that it (x)
relates to periods ending at or prior to Closing, or (y) arose from or
was the result of any facts or circumstances, the existence of which
constitutes a breach of a representation or warranty made by the Seller
and the Stockholder in this Agreement, (iv) any Taxes of the Seller with
respect to any Tax period or portion thereof ending on, prior to or
after the Closing Date, and (v) any Assumed Liability, but only to the
extent that it arose from or was the result of any facts or
circumstances, the existence of which constitutes a breach of a
representation or warranty made by the Seller and the Stockholder in
this Agreement. Such indemnification shall be the Purchaser Indemnitee's
sole and exclusive remedy for any Loss arising out of this Agreement and
transactions contemplated hereby.
13.2.2 Indemnification by the Purchaser. After the Closing Date,
the Seller and each of its partners, officers, directors, employees,
stockholders, agents, representatives, and Affiliates (including the
Stockholder) (collectively, the "Seller Indemnitees" and individually, a
"Seller Indemnitee") (subject to the terms and conditions below) will be
entitled to be indemnified and held harmless by the Purchaser and the
Sub against and in respect of any Losses reasonably incurred or suffered
by the Seller Indemnitees, directly or indirectly, in connection with,
arising out of or related to (i) any breach of any representation,
warranty or covenant of the Purchaser or the Sub contained in this
Agreement, (ii) in respect of any Losses reasonably incurred or suffered
by the Seller Indemnitee directly or indirectly in connection with,
arising out of or related to any Acquired Asset, but only to the extent
that it relates to periods beginning immediately following Closing,
except to the extent it arose from or was the result of any facts or
circumstances, the existence of which constitutes a breach of a
representation or warranty made by the Seller and the Stockholder in
this Agreement, (iii) any Assumed Liability, except to the extent that
it arose from or was the result of any facts or circumstances, the
existence of which constitutes a breach of a representation or warranty
made by Seller and Stockholder in this Agreement. Such indemnification
shall be the Seller Indemnitee's sole and exclusive remedy for any Loss
arising out of this Agreement and the transactions contemplated hereby.
13.2.3 Insurance Coverage. Any Loss shall be limited to those
amounts for which the Purchaser Indemnitee or the Seller Indemnitee, as
the case may be, does not receive coverage under applicable insurance
policies, if any, and shall be net of any Tax benefit actually received
by the Purchaser Indemnitee or the Seller Indemnitee, as the case may
be,
as a result of such loss. The indemnities provided for in Section 13.2.1
shall not take into account any Taxes paid by the Purchaser Indemnitee
in connection with payments, if any, by the Seller or the Stockholder to
the Purchaser Indemnitee under Section 13.2.1; and the indemnities
provided for in Section 13.2.2 shall not take into account any Taxes
paid by the Seller Indemnitee in connection with payments, if any, by
the Purchaser or Sub to the Seller Indemnitee under Section 13.2.2.
13.2.4 Notice.
(a) If the Purchaser Indemnitee shall have any claim of
indemnification pursuant to Subsection 13.2.1, it shall promptly
request that the "Indemnitee's Agent" (as defined in the Escrow
Agreement) give written notice thereof to the Seller and the
Stockholder including a brief description of the facts upon which
such claim is based and, if then known, the amount thereof.
Notwithstanding the foregoing, the failure of the Purchaser
Indemnitee to give any written notice contemplated by this
subsection or the failure to give such notice promptly shall not
relieve the party obligated to provide indemnification to the
Purchaser Indemnitee of its obligations hereunder except to the
extent it shall have been prejudiced by such failure, provided,
however, that the Seller and the Stockholder shall have no
obligation to indemnify any Purchaser Indemnitee pursuant to
Section 13.2.1 or otherwise if the written notice of the
Indemnitee's Agent described in this Section 13.2.4(a) shall not
have been deemed delivered to the Seller and the Stockholder
within twenty-six (26) months following the Closing Date, or with
respect to a Tax Claim one (1) month of the expiration of the
relevant statute of limitations. In neither case shall such
notice period be construed as extending the survival periods set
forth in Section 13.1.1.
(b) If the Seller Indemnitee shall have any claim of
indemnification pursuant to Subsection 13.2.2, it or its agent
shall promptly give written notice thereof to the Purchaser and
the Sub including a brief description of the facts upon which
such claim is based and, if then known, the amount thereof.
Notwithstanding the foregoing, the failure of the Seller
Indemnitee to give any written notice contemplated by this
subsection or the failure to give such notice promptly shall not
relieve the party obligated to provide indemnification to the
Seller Indemnitee of its obligations hereunder except to the
extent it shall have been prejudiced by such failure; provided,
however, that the Purchaser and the Sub shall have no obligation
to indemnify any Seller Indemnitee pursuant to Section 13.2.2 or
otherwise if the written notice of the Seller Indemnitee's agent
described in this Section 13.2.4(b) shall not have been deemed
delivered to the Purchaser and the Sub within twenty-six (26)
months following the Closing Date. Such notice period shall not
be construed as extending the survival periods set forth in
Section 13.1.1.
13.2.5 Dispute Resolution Procedure. If any party seeking
indemnification hereunder, including any agent (an "Indemnitee") shall
notify the party from whom indemnification is sought (the "Indemnifying
Party"), in writing of a claim for indemnification, the Indemnifying
Party may object in writing to such claim within forty-five
(45) days of receipt of such notice. If the Indemnifying Party objects
to such claim (or the amount thereof) within such 45 days, then the
parties shall negotiate in a bona fide attempt to resolve the matter. If
the Indemnitee is not notified in writing of any objection within such
forty-five (45) day period, then the Indemnifying Party shall be deemed
to have agreed with such indemnification claim. If no such agreement has
been reached, any party in the dispute may, not earlier than forty-five
(45) days after the date of the initial claim notice, submit the dispute
to confidential, binding arbitration in New York, New York before a
panel of three arbitrators, one to be selected by the Indemnitee and one
by the Indemnifying Party, and the third to be selected by the two
arbitrators, pursuant to the procedures and rules for commercial
arbitration of the American Arbitration Association. The decision of the
arbitrators shall be the final and binding determination of the dispute
and shall be fully enforceable as an arbitration award in any court
having jurisdiction and venue over such parties. The party which does
not prevail in such arbitration shall pay the costs and expenses of the
other incurred in such arbitration.
13.3 LIMITATIONS ON INDEMNITY.
13.3.1 Purchaser's Damages. Notwithstanding the foregoing, no
indemnification shall be payable pursuant to Section 13.2.1 until the
aggregate amount of all Losses with respect to such claim exceeds
$100,000 (the "Threshold Amount"), whereupon, provided the other
requirements of this Article have been complied with, the entire amount
of such Losses shall become due and payable. Each time the entire amount
of such Losses is paid in full, the Threshold Amount shall again apply.
The maximum liability of the Seller and the Stockholder to indemnify
Purchaser Indemnitees under this Article shall not exceed the amount of
Twenty Million Dollars ($20,000,000).
13.3.2 Seller's and Stockholder's Damages. Notwithstanding the
foregoing, no indemnification shall be payable pursuant to Section
13.2.2 until the aggregate amount of all Losses with respect to such
claim exceeds the Threshold Amount, whereupon, provided the other
requirements of this Article have been complied with, the entire amount
of such Losses shall become due and payable. Each time the entire amount
of such Losses is paid in full, the Threshold Amount shall again apply.
Notwithstanding any other provision in this Agreement to the contrary,
the Seller Indemnitees shall not be entitled to seek recovery from the
Purchaser for amounts in excess of an amount equal to one-half (1/2) of
the value of the Share Consideration on the Closing Date based on the
Share Price.
13.4 THIRD PARTY CLAIMS. Subject to the procedures set forth in Section
13.2.4 and 13.2.5, in the event that, at any time or from time to time after the
Closing Date, a Person entitled to indemnification under this Article (an
"Indemnified Party") shall sustain a Loss against which such Indemnified Party
is entitled to indemnification under this Agreement, such Indemnified Party
shall notify the party hereto obligated to provide such indemnification (the
"Indemnitor") of any such Loss so sustained. Indemnitor shall pay to such
Indemnified Party the amount of such Loss so sustained, subject to the right to
contest any claim, as provided herein and under the Escrow Agreement. The
Indemnified Party shall promptly notify the Indemnitor of the existence of any
claim, demand, or
other matter involving liabilities to third parties to which the Indemnitor's
indemnification obligations would apply and shall give the Indemnitor a
reasonable opportunity to defend the same or prosecute such action to conclusion
or settlement satisfactory to the Indemnified Party at Indemnitor's own expense
and with counsel of Indemnitor's selection (who shall be approved by the
Indemnified Party, which approval shall not be unreasonably withheld); provided
that the Indemnified Party shall at all times also have the right to fully
participate in the defense at its own expense. If the Indemnitor shall, within a
reasonable time after said notice, fail to defend, the Indemnified Party 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, for the account, and at the risk and expense, of
Indemnitor. Except as provided in the preceding sentence, the Indemnified Party
shall not compromise or settle the claim or other matter without the prior
written consent of the Indemnitor, which consent shall not be unreasonably
withheld. If the claim is one that cannot by its nature be defended solely by
the Indemnitor, the Indemnified Party shall make available all information and
assistance that the Indemnitor may reasonably request; provided that any
associated expenses shall be paid by the Indemnitor.
14 MISCELLANEOUS
14.1 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery
or by facsimile and nationally recognized overnight courier, charges prepaid, to
the parties hereto at the following addresses, or at such other address as
either party may advise the other in writing from time to time:
If to the Purchaser:
The Management Network Group, Inc.
0000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx Thomson & Xxxxxx , P.C.
Twelve Wyandotte Plaza
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Xx., Esq.
Facsimile: (000) 000-0000
If to the Seller:
Cambridge Strategic Management Group, Inc.
Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx & Worcester, LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
If to Stockholder:
Xxxxxxx Xxxxxxx
000 Xxxxxxxxxxxxx Xxxxxx, Xxxxxxxxx 0
Xxxxxxxxx, XX 00000
Facsimile: None
with a copy to:
Xxxxxxxx & Worcester, LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications with the overnight courier.
14.2 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.3 GOVERNING LAW. The laws of the State of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law. Each party hereto hereby irrevocably waives any objections which it may now
or hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement brought in any state or federal
court of competent jurisdiction in the State of Delaware, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in any inconvenient forum.
14.4 "MATERIAL ADVERSE EFFECT" OR "MATERIAL ADVERSE CHANGE". "Material
Adverse Change" or "Material Adverse Effect" means, when used in connection with
a party, any change,
effect, event or occurrence that has, or is reasonably likely to have,
individually or in the aggregate, a material adverse impact on the business
prospects, operations, results of operations, assets or condition (financial or
otherwise) of such party.
14.5 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.6 INTEGRATION OF SCHEDULE AND EXHIBITS. The Disclosure Schedule and
all other schedules and exhibits attached to this Agreement are an integral part
of this Agreement as if fully set forth herein.
14.7 ENTIRE AGREEMENT: No Third-Party Beneficiaries. This instrument,
including the Disclosure Schedule and all exhibits and schedules attached
hereto, contains the entire agreement of the parties and supersedes any and all
prior or contemporaneous agreements between the parties, written or oral, with
respect to the transactions contemplated hereby. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns, and nothing herein,
express or implied, is intended to or shall confer upon any other person or
entity any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
14.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, and/or by facsimile signature, each of which, when so executed,
shall be deemed to be an original, and such counterparts shall, together,
constitute and be one and the same instrument.
14.9 BINDING EFFECT: NO ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties
hereto.
14.10 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule or law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.
14.11 WAIVERS AND AMENDMENTS. This Agreement may be amended or modified,
and the terms and conditions hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege hereunder, nor any single
or partial
exercise of any other right, power or privilege hereunder, preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.
14.12 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement required to be
performed prior to the Closing was not performed in accordance with the terms
hereof and that, prior to the Closing, the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at Law or in
equity.
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IN WITNESS WHEREOF, each of Purchaser, the Seller and the Stockholder
have caused this Agreement to be executed by their respective duly authorized
officers, all as of the day and year first above written.
THE PURCHASER: THE SELLER:
The Management Network Group, Inc., Cambridge Strategic Management Group,
a Delaware corporation Inc. a Delaware corporation
By:________________________________ By:__________________________________
Name: Xxxxxx Xxxxx Name: Xxxxxxx Xxxxxxx
Title: Chief Financial Officer Title: President
THE SUB: THE STOCKHOLDER:
CSMG Acquisition Sub, Inc.
By:________________________________
Name:______________________________
Title:_____________________________
_____________________________________
Xxxxxxx Xxxxxxx
