EXHIBIT 10.13
ASSET PURCHASE AGREEMENT
BY AND AMONG
DOCUCON, INCORPORATED,
XXXXX OF DALLAS, INC.
AND
XXXXX LITIGATION SOLUTIONS, L.P.
DATED AS OF NOVEMBER 26, 1997
PAGE
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..................................................2
1.01. Definitions..........................................2
1.02. Index of Other Defined Terms.........................7
ARTICLE II TRANSFER OF ASSETS...........................................9
2.01. Transfer of Assets by Seller.........................9
2.02. Excluded Assets.....................................11
2.03. Assumption of Liabilities...........................11
2.04. Excluded Liabilities................................12
2.05. Assignment of Contracts and Rights..................13
2.06. Closing.............................................14
2.07. Purchase Price Allocation...........................15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER....................15
3.01. Corporate Existence and Power.......................15
3.02. Authorization.......................................15
3.03. Subsidiaries........................................16
3.04. Governmental Authorization..........................16
3.05. Non-Contravention...................................16
3.06. Financial Statements................................16
3.07. Absence of Certain Changes..........................17
3.08. Real Property; Leases...............................18
3.09. Condition and Sufficiency of and Title to the
Transferred Assets..................................19
3.10. Accounts Receivable.................................20
3.11. Affiliates..........................................20
3.12. No Undisclosed Liabilities..........................21
3.13. Litigation..........................................21
3.14. Contracts; Customers; Suppliers.....................22
3.15. Permits; Required Consents..........................23
3.16. Compliance with Applicable Laws.....................24
3.17. Employment Agreements; Change in Control;
and Employee Benefits...............................24
3.18. Labor and Employment Matters........................26
3.19. Intellectual Property...............................27
3.20. Advisory Fees.......................................28
3.21. Environmental Compliance............................29
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3.22. Insurance...........................................30
3.23. Tax Matters.........................................30
3.24. Required SEC Filings................................31
3.25. Books and Records...................................31
3.26. Other Information...................................31
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER ................32
4.01. Existence and Power.................................32
4.02. Authorization.......................................32
4.03. Governmental Authority..............................32
4.04. Non-Contravention...................................32
4.05. Advisory Fees.......................................32
4.06. Litigation..........................................32
4.07. Purchase Price......................................33
ARTICLE V COVENANTS OF SELLER.........................................33
5.01. Conduct of the Business.............................33
5.02. Access to Information...............................36
5.03. Compliance with Terms of Required Governmental
Approvals and Required Contract Consents............36
5.04. Maintenance of Insurance Policies...................36
5.05. Confidentiality.....................................37
5.06. Taxes...............................................37
5.07. Interim Financial Statements........................38
5.08. Specific Performance................................38
ARTICLE VI COVENANTS OF THE BUYER......................................38
6.01. Access to Information...............................38
6.02. Compliance with Terms of Required Governmental
Approval and Required Contract Consents.............39
6.03. Confidentiality.....................................39
6.04. Specific Performance................................40
ARTICLE VII COVENANTS OF ALL PARTIES....................................40
7.01. Further Assurances..................................40
7.02. Certain Filings.....................................40
7.03. Public Announcements................................40
7.04. Administration of Accounts..........................40
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ARTICLE VIII CONDITIONS TO CLOSING.......................................41
8.01. Conditions to Obligation of the Buyer...............41
8.02. Conditions to Obligation of Seller..................44
ARTICLE IX EMPLOYMENT AND BENEFITS MATTERS.............................45
9.01. Hiring of Employees; No Prior Service Credit........45
9.02. Seller's Retention of Liability.....................45
9.03. Health Benefits.....................................46
9.04. No Third-Party Rights...............................46
9.05. Right to Terminate Employment and Terminate or
Modify Plans........................................46
ARTICLE X INDEMNIFICATION.............................................47
10.01. Agreement to Indemnify..............................47
10.02. Survival of Representation, Warranties and Covenants48
10.03. Claims for Indemnification..........................49
10.04. Defense of Claims...................................49
10.05. Nature of Payments..................................50
ARTICLE XI TERMINATION.................................................50
11.01. Grounds for Termination.............................50
11.02. Effect of Termination...............................52
ARTICLE XII AGREEMENT NOT TO COMPETE....................................52
12.01. Agreement not to Compete............................52
ARTICLE XIII MISCELLANEOUS...............................................53
13.01. Notices.............................................53
13.02. Amendments: No Waivers.............................54
13.03. Expenses............................................54
13.04. Successors and Assigns..............................54
13.05. Governing Law.......................................55
13.06. Counterparts; Effectiveness.........................55
13.07. Entire Agreement....................................55
13.08. Captions............................................55
13.09. Severability........................................55
13.10. Construction........................................55
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13.11. Arbitration of Claims...............................56
13.12. Cumulative Remedies.................................57
13.13. Third Party Beneficiaries...........................57
13.14. Jurisdiction........................................57
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of
November 26, 1997, is by and among DOCUCON, INCORPORATED, a Delaware corporation
("Seller"), XXXXX LITIGATION SOLUTIONS, L.P., a Delaware limited partnership
("Buyer"), and XXXXX OF DALLAS, INC., a Delaware corporation and the sole
stockholder of Buyer's general partner ("Xxxxx Entity").
W I T N E S S E T H:
WHEREAS, Seller is in the business of providing software products
and consulting services related to such software products to the legal and
corporate markets through the X. Xxxxxxxxxx Systems division, an unincorporated
division of the Seller (the "Division"); and
WHEREAS, Seller desires to sell, assign and transfer to Buyer, and
Buyer desires to purchase, substantially all of the assets relating to or used
or held for use in connection with the Division, all upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. The following terms, as used herein, have the
following meanings:
"ADVANTIS AGREEMENTS" means (i) the Application Provider Agreement
between the Division and Advantis, executed by the Division on January 24, 1997,
and (ii) the Customer Agreement between the Division and Advantis, effective May
21, 1996.
"AFFILIATE" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such other Person.
"APPLICABLE LAW" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, code, writ, injunction, directive, judgment,
decree or other requirement of, or agreement with, any Governmental Authority
(including any Environmental Law) applicable to such Person or any of its Plan
Affiliates or Affiliates or any of their respective properties, assets,
officers, directors, employees, consultants or agents (in connection with such
officer's, director's,
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employee's, consultant's or agent's activities on behalf of such Person or any
of its Plan Affiliates or controlled Affiliates).
"ASSOCIATE" or "ASSOCIATED WITH" means, when used to indicate a
relationship with any Person, (a) any other Person of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of equity securities issued by such other
Person, (b) any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a similar
fiduciary capacity, and (c) any relative or spouse of such Person, or any
relative of such spouse who has the same home as such Person or who is a
director or officer of such Person or any Affiliate thereof.
"BANK ONE DEBT" means all principal, interest, penalties, prepayment
fees and any other amounts owing under (i) the Promissory Notes dated September
30, 1996 with respective original principal amounts of $750,000 and $1,550,000,
each executed by the Seller in favor of Bank One, Texas, National Association,
and (ii) the related Bank One Loan Agreement.
"BANK ONE LOAN AGREEMENT" means the Loan Agreement, dated September
30, 1996, between the Seller and Bank One, Texas, National Association, as the
same may have been amended.
"BENEFIT ARRANGEMENT" means any material benefit arrangement that is
not an Employee Benefit Plan, including, without limitation, (i) each employment
or consulting agreement, (ii) each arrangement providing for insurance coverage
or workers' compensation benefits, (iii) each incentive bonus or deferred bonus
arrangement, (iv) each arrangement providing termination allowance, severance or
similar benefits, (v) each equity compensation plan, (vi) each deferred
compensation plan and (vii) each compensation policy and practice maintained by
Seller or any ERISA Affiliate of Seller covering the employees, former
employees, directors and former directors of Seller and the beneficiaries of any
of them.
"BENEFIT PLAN" means an Employee Benefit Plan or Employee Pension
Benefit Plan.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are authorized or required
by law to close.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, as set forth in Section 4980B of the Code and Part 6 of Title
I of ERISA.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DAMAGES" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement, including
without limitation, (i) interest on cash
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disbursements in respect of any of the foregoing at the Reference Rate in effect
from time to time, compounded quarterly, from the date each such cash
disbursement is made until the Person incurring the same shall have been
indemnified in respect thereof and (ii) reasonable costs, fees and expenses of
attorneys, accountants and other agents of such Person.
"DIVISION" has the meaning set forth in the recitals hereto.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan, as defined
in Section 3(3) of ERISA, that is sponsored or contributed to by Seller or any
ERISA Affiliate thereof covering employees or former employees of the Division.
"EMPLOYEE PENSION BENEFIT PLAN" means any employee pension benefit
plan, as defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA,
and that is sponsored or contributed to by Seller or any ERISA Affiliate
thereof, other than a Multiemployer Plan.
"ENVIRONMENT" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"ENVIRONMENTAL CLAIM" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal or civil, pursuant to or
relating to any applicable Environmental Law by any Person (including but not
limited to any Governmental Authority, private person and citizens' group) based
upon, alleging, asserting, or claiming any actual or potential (i) violation of
or liability under any Environmental Law, (ii) violation of any Environmental
Permit, or (iii) liability for investigatory costs, cleanup costs, removal
costs, remedial costs, response costs, natural resource damages, property
damage, personal injury, fines, or penalties arising out of, based on, resulting
from, or related to the presence, Release, or threatened Release into the
Environment, of any Hazardous Substance at any location, including but not
limited to any off-Site location to which Hazardous Substance or materials
containing Hazardous Substance were sent for handling, storage, treatment, or
disposal.
"ENVIRONMENTAL CLEAN-UP SITE" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding, or investigation
related to or arising from any alleged violation of any Environmental Law, or at
which there has been a Release, threatened or suspected Release of a Hazardous
Substance.
"ENVIRONMENTAL LAW" means any and all current and future, federal,
state, local, provincial and foreign, civil and criminal laws, statutes,
ordinances, orders, codes, rules, regulations, Environmental Permits, policies,
guidance documents, judgments, decrees, injunctions, or agreements with any
Governmental Authority, relating to the protection of health
3
and the Environment, worker health and safety, and/or governing the handling,
use, generation, treatment, storage, transportation, disposal, manufacture,
distribution, formulation, packaging, labeling, or Release of Hazardous
Substances, whether now existing or subsequently amended or enacted, including
but not limited to: the Clean Air Act, 42 U.S.C. ss. 7401 ET SEQ.; the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. ss. 9601 ET SEQ.; the Federal Water Pollution Control Act, 33 U.S.C. ss.
1251 ET SEQ.; the Hazardous Material Transportation Act 49 U.S.C. ss. 1801 ET
SEQ.; the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. ss. 136 ET
SEQ.; the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. ss.
6901 ET SEQ.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 ET SEQ.; the
Occupational Safety & Health Act of 1970, 29 U.S.C. ss. 651 ET SEQ.; the Oil
Pollution Act of 1990, 33 U.S.C. ss. 2701 ET SEQ.; and the state analogies
thereto, all as amended or superseded from time to time; and any common law
doctrine, including but not limited to, negligence, nuisance, trespass, personal
injury, or property damage related to or arising out of the presence, Release,
or exposure to a Hazardous Substance.
"ENVIRONMENTAL LIABILITY" means Liability of a Person that arises
under any Environmental Law.
"ENVIRONMENTAL PERMIT" means any federal, state, local, provincial,
or foreign permits, licenses, approvals, consents or authorizations required by
any Governmental Authority under or in connection with any Environmental Law and
includes any and all orders, consent orders or binding agreements issued or
entered into by a Governmental Authority under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended and, except where the context otherwise requires, the regulations
promulgated thereunder.
"ERISA AFFILIATE" of any Person means any other Person that,
together with such Person as of the relevant measuring date under ERISA, was or
is required to be treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code.
"GAAP" means United States generally accepted accounting principles
and practices.
"GOVERNMENTAL AUTHORITY" means any foreign, domestic, federal,
territorial, state, city or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"GROUP HEALTH PLAN" means any group health plan, as defined in
Section 5000(b)(1) of the Code.
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"HAZARDOUS SUBSTANCE" means petroleum, petroleum hydrocarbons or
petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls; and
any other chemicals, materials, substances or wastes in any amount or
concentration which are now or hereafter become defined as or included in the
definition of "HAZARDOUS SUBSTANCES," "HAZARDOUS MATERIALS," "HAZARDOUS WASTES,"
"EXTREMELY HAZARDOUS WASTES," "RESTRICTED HAZARDOUS WASTES," "TOXIC SUBSTANCES,"
"TOXIC POLLUTANTS," "POLLUTANTS," "REGULATED SUBSTANCES," "SOLID WASTES," or
"CONTAMINANTS" or words of similar import, under any Environmental Law.
"IBM AGREEMENTS" means (i) the OEM Distribution Agreement between
Seller and International Business Machines Corporation ("IBM"), dated September
30, 1997, and (ii) the Independent Software Vendor Assistance Agreement (No.
AUS970559) between Seller and IBM.
"INDEMNIFYING PARTY" means: (i) with respect to any Buyer Indemnitee
asserting claim under Sections 10.01(a) or 13.11, the Seller, and (ii) with
respect to any Seller Indemnitee asserting a claim under Sections 10.01(b) or
13.11, the Buyer.
"INDEMNITEE" means: (i) each of the Buyer and its respective
Affiliates and Associates with respect to any claim for which the Seller is an
Indemnifying Party under Sections 10.01(a) or 13.11; and (ii) the Seller and its
respective Affiliates and Associates with respect to claims for which the Buyer
is an Indemnifying Party under Sections 10.01 (b) or 13.11.
"INTERSOLV AGREEMENT" means the Intersolv Driver Distributor License
Agreement between Seller and Intersolv, Inc., dated August 7, 1996, as amended.
"IRS" means the Internal Revenue Service.
"LEASE" has the meaning set forth in Section 8.01(l) hereof.
"LEASED PREMISES" means the premises to be leased by Buyer pursuant
to the Lease.
"LIABILITY" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise and whether
or not the same is required to be accrued on the financial statements of such
Person.
"LIEN" means, with respect to any asset, any mortgage, title defect
or objection, lien, pledge, charge, security interest, hypothecation,
restriction, encumbrance or charge of any kind in respect of such asset.
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"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in
Section 3(37) and 4001(a)(3) of ERISA, that is subject to Title IV of ERISA.
"PERMITTED LIENS" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings; (ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons imposed by
Applicable Law and incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith; (iii) Liens relating to deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or to
secure the performance of leases, trade contracts or other similar agreements;
and (iv) Liens securing executory obligations under any Lease that constitutes
an "operating lease" under GAAP; PROVIDED, HOWEVER, that, with respect to each
of the foregoing clauses (i) through (v), to the extent that any such Lien arose
on or prior to the date of the Closing and relates to, or secures the payment
of, a Liability that is required to be accrued under GAAP, such Lien shall not
be a Permitted Lien unless adequate accruals for such Liability have been
established therefor on the Financial Statements in conformity with GAAP.
Notwithstanding the foregoing, no Lien arising under the Code or ERISA with
respect to the operation, termination, restoration or funding of any Benefit
Plan sponsored by, maintained by or contributed to by Seller or any of its ERISA
Affiliates or arising in connection with any excise tax or penalty tax with
respect to such Benefit Plan shall be a Permitted Lien.
"PERSON" means an individual, corporation, partnership, association,
trust, estate or other entity or organization, including a Governmental
Authority.
"PIXEL AGREEMENT" means the Software License Agreement by and
between Seller and Pixel Translations, Inc., dated March 1, 1995.
"PLAN AFFILIATE" means, with respect to any Person, any Benefit
Arrangement sponsored by, maintained by or contributed to by such Person, and
with respect to any Benefit Arrangement, any Person sponsoring, maintaining or
contributing to such plan or arrangement.
"PROHIBITED TRANSACTION" means a transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA, respectively.
"PURCHASE PRICE" means Six Million Five Hundred Thousand Dollars
($6,500,000), payable as described in Section 2.06(b).
"REFERENCE RATE" means the per annum rate of interest publicly
announced from time to time by Citibank, N.A. as its prime rate (or reference
rate). Any change in the Reference
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Rate shall take effect at the opening of business on the day specified in the
public announcement of such change.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Substance into the Environment.
"SEC" means the Securities and Exchange Commission.
"SITE" means any of the real properties currently or previously
owned, leased or operated by Seller, any predecessors of Seller or any entities
previously owned by Seller, including all soil, subsoil, surface waters and
groundwater thereat.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation
as to which more than 10% of the outstanding stock having ordinary voting rights
or power (and excluding stock having voting rights only upon the occurrence of a
contingency unless and until such contingency occurs and such rights may be
exercised) is owned or controlled, directly or indirectly, by such Person and/or
by one or more of such Person's Subsidiaries, and (ii) any partnership, joint
venture or other similar relationship between such Person (or any Subsidiary
thereof) and any other Person (whether pursuant to a written agreement or
otherwise) if such Person has a 10% or more equity interest therein.
"TAX" means all taxes, assessments, duties, fees, levies or other
governmental charges imposed of any nature, whether or not disputed, including,
without limitation, federal, state, local or foreign net income tax, alternative
or add-on minimum tax, profits or excess profits tax, franchise tax, gross
income, adjusted gross income or gross receipts tax, employment related tax
(including employee withholding or employer payroll tax, FICA or FUTA), real or
personal property tax or ad valorem tax, sales or use tax, excise tax, stamp tax
or duty, any withholding or back up withholding tax, value added tax, severance
tax, prohibited transaction tax, premiums tax or occupation tax, together with
any interest or any penalty, addition to tax or additional amount imposed by any
Governmental Authority responsible for the imposition of any such tax.
"TAX RETURN" means all returns, reports, forms or other information
required to be filed with respect to any Tax .
1.02. INDEX OF OTHER DEFINED TERMS. In addition to those terms
defined above, the following terms shall have the respective meanings given
thereto in the sections indicated below:
DEFINED TERM SECTION
"1996 Balance Sheet" 3.06
"AAA" 13.11(b)
"Accounts Receivable 2.01(a)(vi)
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"Action" 13.14
"Agreement" Preamble
"Allocation Statement" 2.08
"Annual Statements" 3.06
"Arbitration Notice" 13.11(c)
"Arbitrators' Report" 13.11(b)
"Assumed Liabilities" 2.03
"Xxxxx Entity" Preamble
"Buyer" Preamble
"Buyer Indemnitees" 10.01(a)
"Closing" 2.06(a)
"Closing Date" 2.06(a)
"Computer Equipment" 2.01(a)(i)
"Contracts" 2.01(a)(v)
"Disputes" 13.11(a)
"Employment Agreements" 3.17(a)
"Equipment" 2.01(a)(iii)
"Equity Securities" 6.01(b)(xii)
"Escrow Agent" 2.06(c)
"Escrow Agreement" 2.06(c)
"Exchange Act" 3.24
"Excluded Assets" 2.02
"Excluded Liabilities" 2.04(a)
"Financial Statements" 3.06
"Independent Accountants" 2.07
"Initiating Party" 13.11(c)
"Insurance Policies" 3.22
"Intellectual Property" 3.19(g)
"Interim Statements" 3.06
"ISRA" 3.21(f)
"Leases" 3.08(b)
"Leased Real Property" 3.08(b)
"Notice of Claim" 10.03
"Outside Date" 11.01(f)
"Permits" 3.15(a)
"Personal Property Leases" 3.08(b)
"Proceedings" 3.13
"Purchase Documents" 3.02
"Real Property Leases" 3.08(b)
"Required Consents" 3.15(b)
"Required Contract Consent" 3.15(b)
"Required Governmental Approval" 3.15(b)
"Scheduled Contracts" 3.14(a)
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"Securities Act" 3.24
"Seller" Preamble
"Seller Indemnitees" 10.01(b)
"Seller SEC Reports" 3.24
"Software" 2.01(a)(ii)
"Subsequent Material Contract" 5.01(b)(v)
"Trademark Assignment" 8.01(m)
"Transferred Assets" 2.01(a)
"Transferred Employees" 9.01
"WARN" 3.18(c)
ARTICLE II
TRANSFER OF ASSETS
2.01. TRANSFER OF ASSETS BY SELLER.
(a) Upon the terms and subject to the conditions set forth in
this Agreement and in reliance upon the representations, warranties, covenants
and agreements herein set forth, Buyer agrees to purchase from Seller and Seller
agrees to sell or cause to be sold to Buyer at the Closing, free and clear of
all Liens other than Permitted Liens, all of the assets, properties, rights,
licenses, permits, contracts, causes of action, claims, operations and
businesses of Seller of every kind and description as the same shall exist on
the Closing Date (other than the Excluded Assets), wherever located, whether
tangible or intangible, real, personal or mixed, that are used, useable or held
for use in the Division, whether or not reflected on the books and records of
Seller (the collective assets, properties, rights, licenses, permits, contracts,
causes of action, claims, operations and businesses to be transferred to Buyer
by Seller pursuant hereto are referred to collectively herein as the
"Transferred Assets"), including without limitation the following assets (to the
extent such assets are used, useable or held for use in the Division):
(i) all computer equipment, including processors,
monitors and keyboards, and all peripheral devices, including scanners,
printers, CD Rom devices, modems, output devices, servers, data storage
and retrieval systems, and all other related equipment of any kind
whatsoever and any and all instruction and operational manuals relating
thereto (the "Computer Equipment"), the principal items (which for the
purpose of this Agreement shall mean those having an original purchase
price in excess of $1,000 or more) of which are listed in SCHEDULE
2.01(a)(i);
(ii) all computer programs, computer software and all
available documentation and source codes, including without limitation,
all rights and licenses to any thereof owned by third parties (the
"Software"), which Software is listed on SCHEDULE 2.01(a)(ii);
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(iii) all machinery, equipment, furniture, office
equipment, facsimile machines, copying machines, communications equipment,
vehicles, storage tanks, spare and replacement parts, fuel and other
tangible property (and interests in any of the foregoing) (the
"Equipment"), the principal items (which for the purpose of this Agreement
shall mean those having an original purchase price of $1,000 or more) of
which are listed on SCHEDULE 2.01(a)(iii);
(iv) all items of inventory notwithstanding how
classified in the financial records of Seller, including all supplies,
paper and spare parts;
(v) all contracts, agreements, options, leases,
licenses, sales and purchase orders, commitments and other instruments of
any kind, whether written or oral, to which Seller is a party on the
Closing Date, including the Scheduled Contracts and the Subsequent
Material Contracts, in each case limited to those which Buyer has agreed
to assume on the Closing Date pursuant to Section 2.05 hereof (the
"Contracts");
(vi) all accounts, accounts receivable, notes receivable
and any other evidences of indebtedness and rights to receive payments
from any Person owing to the Seller, together with any unpaid interest or
fees accrued thereon or other amounts due with respect thereto, and any
security or collateral therefor, including recoverable advances and
deposits ("Accounts Receivable");
(vii) all prepaid charges and expenses of Seller,
including any such charges and expenses with respect to ad valorem taxes,
leases and rentals and utilities;
(viii)all rights of Seller under any insurance policy,
except any policy pertaining entirely to the Excluded Assets, including,
without limitation, all rights to any proceeds thereof;
(ix) all of Seller's rights, claims, credits, causes of
action or rights of set-off against third parties relating to the Division
or the Transferred Assets, whether liquidated or unliquidated, fixed or
contingent, including claims pursuant to all warranties, representations
and guarantees made by suppliers, manufacturers, contractors and other
third parties in connection with products or services purchased by or
furnished to Seller for use by the Division or affecting any of the
Transferred Assets;
(x) all of Seller's Intellectual Property;
(xi) all transferable franchises, licenses, permits or
other authorizations issued or granted by any Governmental Authority that
are owned by, granted to or held or used by Seller;
10
(xii) all books, records, files and papers of Seller,
whether in hard copy or computer format, including bank account records,
books of account, invoices, engineering information, sales and promotional
literature, manuals and data, sales and purchase correspondence, lists of
present and former suppliers, personnel and employment records of present
and former employees, and documentation developed or used for accounting,
marketing, engineering, manufacturing or any other purpose related to the
conduct of the business of the Division at any time prior to the Closing;
(xiii) all lists of present customers and lists of former
customers as the same may exist on the Closing Date;
(xiv) all goodwill associated with the Division or any
Transferred Assets; and
(xv) except as specifically provided in Section 2.02 and
SCHEDULE 2.02, all other assets and properties of Seller used, useable or
held for use in, the Division which exist on the Closing Date, whether
tangible or intangible, real or personal, whether or not specifically
referred to in this Agreement.
(b) On the Closing Date, Seller shall sell, convey, transfer
and deliver good, valid and marketable title to the Transferred Assets to Buyer
free and clear of all Liens except for Permitted Liens.
2.02. EXCLUDED ASSETS. Buyer expressly understands and agrees that
the assets and properties set forth on SCHEDULE 2.02 (the "Excluded Assets")
shall be excluded from the Transferred Assets.
2.03. ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations,
warranties, covenants and agreements herein set forth, Buyer agrees, effective
on the Closing Date, to assume, perform and in due course pay and discharge all
Contracts listed on SCHEDULE 2.05(A), but only to the extent that the Required
Contract Consents have been obtained with respect thereto and only to the extent
of obligations arising thereunder after the Closing Date and excluding any
obligations, breaches and defaults thereunder which arose, or which relate to
periods, prior to the Closing Date (whether or not known or asserted until after
the Closing Date) or which are Excluded Liabilities (such obligations assumed
under the Contracts being herein called the "Assumed Liabilities").
Notwithstanding the foregoing, and whether or not any item is listed on the
Disclosure Schedules hereto, Buyer will not assume, and shall not be deemed to
have assumed, (i) any Real Property Lease or any contract granting any party the
right to sell the Division's products or services if, in each case, such
contract or Real Property Lease contains any obligations which extend beyond the
date which is six (6) months following the Closing Date, or (ii) any contract
requiring
11
payments by Buyer after the Closing Date with respect to products or services
delivered to Seller or the Division prior to the Closing Date.
2.04. EXCLUDED LIABILITIES.
(a) Buyer does not assume, and shall not at any time hereafter
(including on or after the Closing Date) become liable for, any Liabilities of
Seller (whether or not asserted prior to the Closing Date), any of its
Associates, Affiliates, Plan Affiliates or ERISA Affiliates or any shareholder
of Seller, other than the Assumed Liabilities (such Liabilities not being
assumed being hereinafter referred to as the "Excluded Liabilities"). The
Excluded Liabilities shall include, but are not limited to, the following:
(i) any Liability whether presently in existence or
arising hereafter which is attributable to an Excluded Asset;
(ii) any Environmental Liability of Seller whether
presently in existence or arising hereafter and whether or not known or
asserted until after the Closing Date;
(iii) any Liability the existence of which constitutes a
breach of any representation or warranty of Seller hereunder;
(iv) any Liabilities for federal, state, local or
foreign income Taxes and any other Taxes of any kind whatsoever, including
interest or penalties with respect thereto, and any Tax sharing agreement
with respect thereto, including without limitation, any thereof which may
arise from the making of this Agreement or the consummation of the
transactions contemplated hereby;
(v) any indebtedness (principal or interest) or the
guaranty thereof;
(vi) any Liabilities in respect of pending or threatened
litigation, including without limitation, any Liabilities in respect of
any claims, actions, suits, Proceedings, arbitrations or investigations
arising out of events, occurrences or omissions prior to the Closing Date
(whether or not asserted prior to the Closing Date) in any court, before
any Governmental Authority or before any arbitration panel, whether or not
listed on any schedule to this agreement;
(vii) any Liabilities of Seller for expenses, including
without limitation legal and accounting fees and expenses incurred in
connection with the making of this Agreement or the consummation of the
transactions contemplated hereby;
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(viii) any obligations or Liabilities whatsoever under
any Benefit Plans or Benefit Arrangements;
(ix) any obligations or Liabilities under any contracts,
leases, commitments or understandings, written or oral;
(x) any Liabilities or claims arising out of
non-compliance with any law, rule or regulation of any Governmental
Authority;
(xi) any obligations or Liabilities of Seller for
severance pay of employees or consultants with respect to the transactions
contemplated by this Agreement;
(xii) any Liabilities or obligations of Seller in
respect of workers' compensation claims arising out of any injury
sustained or occupational disease contracted;
(xiii)any obligations or Liabilities of Seller of any
kind whatsoever to any of its shareholders, officers or directors,
including without limitation, any Liabilities for indemnification;
(xiv) any Liability whether currently in existence or
arising hereafter, relating to fees, commissions or expenses owed to any
broker, finder, investment banker, attorney or other intermediary or
advisor employed by Seller or any of its Affiliates, Associates or its
Plan Affiliates or ERISA Affiliates in connection with the transactions
contemplated hereby or otherwise; and
(xv) any contingent Liabilities of Seller related to any
transactions of Seller.
(b) Seller agrees to pay, perform and discharge all Excluded
Liabilities on or prior to the Closing Date; PROVIDED however that the
outstanding Excluded Liabilities of Seller identified on SCHEDULE 2.04(B) may be
paid, performed and discharged as and when they become due and payable.
2.05. ASSIGNMENT OF CONTRACTS AND RIGHTS.
(a) Subject to the terms and provisions hereof, Buyer shall
assume on the Closing Date all Contracts listed on SCHEDULE 2.05(A), and no
other contracts, agreements, leases, commitments, or understandings, but only to
the extent the Required Contract Consents have been obtained with respect
thereto, and, in any event, not including any obligations under such assumed
Contracts which are Excluded Liabilities or which relate to periods prior to the
Closing Date or with respect to any breach or default arising prior to the
Closing Date, in each
13
case even if not known or asserted until after the Closing Date. With respect to
any Contract and any claim, right or benefit arising thereunder or resulting
therefrom, promptly after the date hereof to the extent requested by Buyer,
Seller will use its best efforts to obtain the written consent of the other
parties to any such Contract for the assignment thereof to Buyer or written
confirmation from such parties confirming that such consent is not required, in
form and substance reasonably satisfactory to Buyer.
(b) If the Required Contract Consent or such confirmation is
not obtained with respect to any such Contract and if notwithstanding the
provisions of Section 8.01(c), Buyer shall elect to consummate the Closing, then
(i) this Agreement shall not constitute an assignment of transfer or attempted
assignment or transfer of such Contracts for which Required Contract Consents
have not been obtained, and (ii) Seller and Buyer shall cooperate in an
arrangement reasonably satisfactory to Buyer and Seller under which Buyer would
obtain, to the extent practicable, the claims, rights and benefits and assume
the corresponding obligations under such Contract in accordance with this
Agreement, including subcontracting, sub-licensing or sub-leasing to Buyer, or
under which Seller would enforce for the benefit of Buyer, with Buyer assuming
Seller's obligations, any and all claims, rights and benefits of Seller against
a third party thereto. Seller will promptly pay to Buyer when received all
monies received by Seller under any Transferred Asset or any claim, right or
benefit arising thereunder not transferred to Buyer pursuant to this Section
2.05.
2.06. CLOSING.
(a) The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Xxxxxx, Xxxxx
& Xxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx xx the third Business Day
following the date on which the last of the conditions to Closing set forth in
Sections 8.01 and 8.02 have been satisfied or waived by the party or parties
entitled to waive the same or such other date as to which Buyer and Seller may
agree (the date and time of Closing are herein referred to as the "Closing
Date").
(b) At the Closing, Buyer shall deliver (i) five million six
hundred thousand dollars ($5,600,000; representing $5,700,000 less $100,000
delivered to Seller on November 18, 1997) to Seller in immediately available
funds by wire transfer to a bank account designated by Seller in writing at
least three Business Days prior to the Closing and (ii) eight hundred thousand
dollars ($800,000) to Fleet Bank, as Escrow Agent (the "Escrow Agent"), to be
held as collateral security for any Liability of Seller to Buyer under this
Agreement, but without limitation as to the amount of any such Liability,
pursuant to the Escrow Agreement in the form attached hereto as EXHIBIT A (the
"Escrow Agreement"), which Escrow Agreement shall be executed and delivered on
the Closing Date by each of the Buyer, the Seller and the Escrow Agent.
(c) At the Closing, (i) Seller shall deliver to Buyer such
bills of sale, certificates of title, endorsements, consents, assignments,
powers of attorney and other good and
14
sufficient instruments of conveyance and assignment (which in the case of
Intellectual Property, shall be documents recordable in their delivered form in
the respective countries of origin) as the Buyer and its counsel shall deem
reasonably necessary or appropriate to vest in Buyer all of Seller's right,
title and interest in, to and under the Transferred Assets free and clear of all
Liens except Permitted Liens; (ii) Seller shall deliver the Transferred Assets
to the Leased Premises; and (iii) Buyer and Seller shall deliver to each other
the documents and agreements described in Sections 8.01 and 8.02 hereof.
2.07. PURCHASE PRICE ALLOCATION. Within sixty (60) days after the
Closing Date, Buyer and Seller, using the fair market value of the Transferred
Assets and the covenant contained in Section 12.01 as reasonably agreed to by
the parties, shall determine the allocation of the sum of the Purchase Price and
the Assumed Liabilities among the Transferred Assets and such covenant for
purposes of complying with Section 1060 of the Code and making any required
filings under state or local law and shall set forth such allocation on a
statement (the "Allocation Statement"). After the determination of the
Allocation Statement, from time to time, Buyer and Seller shall agree upon
revisions to the Allocation Statement for Tax purposes. Buyer and Seller shall
report the Tax consequences of the transactions contemplated by this Agreement
in a manner consistent with the Allocation Statement, as it may be revised from
time to time, and shall not take any position inconsistent therewith. Any
disputes as the Allocation Statement shall be submitted to an independent,
nationally recognized accounting firm (which shall not be an accounting firm
engaged for any purpose within the past five (5) years by either Buyer or
Seller) (the "Independent Accountants") for their prompt resolution, which shall
be binding on the parties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated herein, Seller represents and warrants
to, and covenants and agrees with, Buyer as follows:
3.01. CORPORATE EXISTENCE AND POWER. Seller is a corporation duly
organized and validly existing and in good standing under the laws of Delaware,
and has all corporate power and authority required to carry on the business of
the Division as now conducted and to own and operate the Transferred Assets as
now owned and operated. Seller is not required to qualify to conduct business in
any state other than the states set forth in SCHEDULE 3.01, in which states
Seller is duly qualified to do business and is in good standing.
3.02. AUTHORIZATION. The execution, delivery and performance by
Seller of this Agreement and the other documents contemplated herein to be
signed by Seller (the "Purchase Documents") and the consummation by Seller of
the transactions contemplated hereby and
15
thereby are within Seller's corporate powers and have been duly authorized by
all necessary corporate action on the part of Seller, including, without
limitation, any required approvals of its shareholders. This Agreement has been,
and the Purchase Documents shall be, duly and validly executed by Seller and
this Agreement constitutes, and the Purchase Documents when executed and
delivered shall constitute, the legal, valid and binding agreement of Seller,
enforceable against it in accordance with their respective terms, except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and subject to general
principles of equity.
3.03. SUBSIDIARIES. Seller has no Subsidiaries.
3.04. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Seller of this Agreement and the Purchase Documents require no
action by, consent or approval of, or filing with, any Governmental Authority.
3.05. NON-CONTRAVENTION. The execution, delivery and performance by
Seller of this Agreement and the Purchase Documents do not and will not (a)
contravene or conflict with the Articles of Incorporation or Bylaws of Seller,
true and correct copies of which have been delivered to Buyer by Seller, (b)
contravene or conflict with or constitute a violation of any provision of any
Applicable Law binding upon or applicable to Seller, the Division or any of the
Transferred Assets; (c) assuming receipt of the Required Consents and except as
set forth on SCHEDULE 3.05(C), constitute a default under or give rise to any
right of termination, cancellation or acceleration of, or to a loss of any
benefit to which Seller is entitled under, any Scheduled Contract, any
Subsequent Material Contract or any Permit or similar authorization relating to
the Division or included in any of the Transferred Assets or by which the
Division or any of the Transferred Assets may be bound; or (d) result in the
creation or imposition of any Lien on any Transferred Assets, other than
Permitted Liens.
3.06. FINANCIAL STATEMENTS. Attached hereto as EXHIBIT B are true
and complete copies of the balance sheet and related statement of operations and
retained earnings and of cash flows for the Seller for the years ended December
31, 1994, 1995 and 1996, in each case audited by Xxxxxx Xxxxxxxx, L.L.P., and
the unaudited balance sheet for the Division as at December 31, 1996 (the
"Annual Statements") and the Seller's unaudited balance sheet as at the end of
each month of calendar year 1997 ending prior to the date of this Agreement and
the Seller's statement of operations for each period then ended and the
Division's unaudited balance sheet as at September 30, 1997 and the Division's
statement of operations for the period then ended (collectively, the "Interim
Statements" and, together with the Annual Statements, the "Financial
Statements"). The unaudited December 31, 1996 balance sheet of the Division is
referred to herein as the "1996 Balance Sheet." Each of the Financial Statements
has been prepared based on the books and records of Seller in accordance with
GAAP and the Seller's normal accounting practices, consistent with past practice
throughout the periods covered thereby and with each other, and present fairly
the financial condition and results of operations of the Seller and the Division
as of the dates or for the periods indicated, except, with respect to the
Interim Financial
16
Statements only, (i) for the absence of notes required by GAAP which if
presented would not differ materially from those included in the 1996 Balance
Sheet, and (ii) that such statement is subject to year-end adjustments
consisting of normal recurring items the effect of which, individually or in the
aggregate, will not be materially adverse.
3.07. ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE
3.07(A), since the date of the 1996 Balance Sheet the business of the Division
has been conducted in the ordinary course, consistent with past practice, and
there has not been:
(a) any event, occurrence, development or state of
circumstances or facts or change in the Transferred Assets, the Division or the
business of the Division (including any damage, destruction or other casualty
loss, whether or not covered by insurance) affecting Seller, the Division or any
Transferred Assets that has had or that may be reasonably expected to have,
either alone or together with all such events, occurrences, developments, states
of circumstances or facts or changes, a material adverse effect on the
operations, affairs, prospects, financial condition, results of operations,
assets, Liabilities or reserves of Seller or any other aspect of the Division;
(b) (i) any incurrence, assumption or guarantee of any
indebtedness for borrowed money by Seller in connection with the Division or any
of the Transferred Assets, (ii) any incurrence of any Liability relating to a
documentary or standby letter of credit by Seller in connection with the
Division, any of the Transferred Assets or otherwise, (iii) any change in any
Liability other than in the ordinary course of business consistent with past
practice, or (iv) any incurrence of any other Liability by Seller in connection
with the Division or any of the Transferred Assets, other than in the ordinary
course of business consistent with past practice which, individually or on the
aggregate, were not material.
(c) any creation, assumption or sufferance of the existence of
any Lien on any Transferred Asset, other than Permitted Liens;
(d) any transaction or commitment made, or any contract,
agreement or understanding entered into, by Seller (including the acquisition or
disposition of any Transferred Assets), or any waiver, amendment, termination or
cancellation of any Contract by Seller or any relinquishment of any rights
thereunder by Seller, or of any other right or debt owed to Seller, in each case
relating to the Division or any of the Transferred Assets, other than in each
such case actions taken in the ordinary course of business consistent with past
practice;
(e) any (i) grant of any severance, continuation or
termination pay to any director, officer, stockholder or employee of the
Division, (ii) entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer, stockholder or employee of the Division, (iii) increase in
benefits payable or potentially payable under any severance, continuation or
termination pay policies or employment agreements with any director, officer,
stockholder or
17
employee of the Division, (iv) increase in compensation, bonus or other benefits
payable or potentially payable to directors, officers, stockholders or employees
of the Division, (v) change in the terms of any bonus, pension, insurance,
health or other Benefit Plan or Benefit Arrangement relating to any employee of
the Division, or (vi) representation by Seller to any employee or former
employee of Seller that Buyer would assume, continue to maintain or implement
any Benefit Plan or Benefit Arrangement after the Closing Date;
(f) any loan to or guarantee or assumption of any loan or
obligation on behalf of any stockholder, director, officer or employee of the
Division or to any Associate or Affiliate of any of the foregoing, except
business expense advances occurring in the ordinary course of business
consistent with past practice;
(g) any material change by Seller in its accounting
principles, methods or practices or in the manner it keeps its books and records
or any material change by Seller of its current practices with regards to
inventory, sales, receivables, payables or accrued expenses which would affect
the timing of collection of receivables or the payment of payables;
(h) any distribution, dividend, bonus or other payment by
Seller to any officer, director, stockholder or Affiliate of Seller or any of
their respective Affiliates or Associates, except as set forth in SCHEDULE
3.07(H);
(i) any capital expenditure or capital additions or
betterments relating to the Transferred Assets or the Division, which exceeded
$10,000 in any one case, or $25,000 in the aggregate;
(j) any entering into of any contract or other arrangement or
understanding between Seller and any officer, director, stockholder or Affiliate
of Seller or any of their respective Affiliates or Associates, except as set
forth in SCHEDULE 3.07(J); or
(k) any payment, discharge or satisfaction of any Liabilities
of Seller, other than payments, discharges or satisfactions in the ordinary
course of business consistent with past practice or as contemplated by Section
8.01(i) hereunder.
3.08. REAL PROPERTY; LEASES.
(a) Seller owns the real property listed on SCHEDULE 3.08(A)
(the "Real Property"). The Real Property is not used, and is not necessary, in
connection with the operation of the Division. None of the Transferred Assets
can be considered fixtures located on the Real Property.
(b) SCHEDULE 3.08(B) sets forth a true and complete list of
all material personal property leases to which the Seller is a party or by which
the Seller is bound and which relate to the Division or the Transferred Assets
(the "Personal Property Leases") and all leases of
18
real property which relate to the Division or the Transferred Assets (the "Real
Property Leases" and collectively with the Personal Property Leases, the
"Leases"), true copies of which have been delivered to Buyer. Such Schedule sets
forth the location of each parcel of real property subject to a Real Property
Lease (the "Leased Real Property"), the name of the landlord under each Real
Property Lease, and a brief description of the nature of the activities of
Seller conducted on such real property. Seller has a good and valid leasehold
interests in the property and assets subject to the Leases. Seller is in
possession of the premises demised by the Real Property Leases and has not
sublet any portion thereof. With respect to the Leases, except as set forth on
SCHEDULE 3.08(B), there exist no defaults by Seller, or, to the knowledge of
Seller, any default or threatened default by any lessor or third party
thereunder or any condition which, with notice or the passage of time or both,
would constitute a default, violation or breach on the part of any party to any
Lease. Assuming the Required Contract Consents are obtained, all Leases to which
a Seller is a party or by which it is bound may be assigned, transferred and
conveyed to Buyer without default, penalty or modification thereof.
(c) Except as disclosed in SCHEDULE 3.08(C), Seller has not
received notice of, nor is Seller aware of, any pending zoning or other land-use
regulation Proceedings or, to Seller's knowledge, any proposed change in any
Applicable Laws, which could reasonably be expected to detrimentally affect the
use or operation of any Leased Real Property, nor has Seller received notice of
any special assessment proceedings affecting the Leased Real Property, or
applied for any change to the zoning or land use status of the Leased Real
Property.
(d) Except as disclosed in SCHEDULE 3.08(D), Seller's current
use and operation of all Leased Real Property is in compliance with all
Applicable Laws (including without limitation all Environmental Laws and all
laws relating to zoning and land use) and public and private covenants,
restrictions and easements, and Seller has not received notice of noncompliance
with any Applicable Laws.
(e) Except as disclosed in SCHEDULE 3.08(E), and to Seller's
best knowledge after having made due inquiry, all water, sewer, gas, electric,
telephone and drainage facilities and all other utilities required by law or for
the normal use and operation of the Leased Real Property are (i) installed to
the property lines of each Leased Real Property and (ii) sufficient to service
the Leased Real Property as improved and to permit full compliance with all
Applicable Laws and normal usage of each Leased Real Property,
(f) Seller has obtained all licenses, permits, approvals,
easements and rights of way (and all such items are currently in full force and
effect) required from any Governmental Authority having jurisdiction over each
parcel of Leased Real Property or from private parties necessary for the current
use and operation of each such Leased Real Property
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3.09. CONDITION AND SUFFICIENCY OF AND TITLE TO THE TRANSFERRED
ASSETS.
(a) Seller has good, valid and marketable title to each of the
Transferred Assets free and clear of all Liens except Permitted Liens, including
all such assets (real, personal or mixed, tangible or intangible, including the
Intellectual Property) reflected in the 1996 Balance Sheet, except (i) those
assets disposed of in the ordinary course of business consistent with past
practice after the date thereof, (ii) any leased or licensed assets reflected in
the Schedules hereto, and (iii) the Excluded Assets. Upon consummation of the
transactions contemplated by this Agreement, Seller will have sold, assigned,
transferred and conveyed to Buyer good title to all of the Transferred Assets
free and clear of all Liens other than Permitted Liens, which assets constitute
all of the properties, assets, rights and services used, useable or held for use
in, or relating to, the Division (other than the Excluded Assets). The business
of the Division is a going concern and the transfer of the Transferred Assets to
Buyer pursuant to this Agreement will enable Buyer to operate the business of
the Division as a going concern with all operations of such business unimpaired
in any material respect immediately upon the Closing.
(b) All tangible properties and assets (other than inventory)
included in the Transferred Assets are in all material respects structurally
sound and are in good operating condition and repair and are adequate for the
uses to which they are put, and no properties or assets necessary for the
conduct of the business of the Division in substantially the same manner as it
has heretofore been conducted are in need of replacement, maintenance or repair
except for routine and not materially deferred replacement, maintenance and
repair.
(c) All Software owned by Seller, and, to Seller's knowledge
after due inquiry, all Computer Equipment owned by Seller, and, to Seller's
knowledge, all Computer Equipment and Software leased or licensed from third
parties, are free of any "Year 2000 Problem" and will function properly at the
turn of the century without requiring any modification or replacement thereof.
3.10. ACCOUNTS RECEIVABLE. The Accounts Receivable reflected on the
1996 Balance Sheet, or thereafter acquired through the Closing Date, have and
shall have risen only from bona fide transactions in the ordinary course of
business consistent with past practice. Such Accounts Receivable are payable on
trade terms consistent with the Seller's ordinary course of business of the
Division. The reserves for Accounts Receivable set forth on the 1996 Balance
Sheet were adequate as of the date thereof to reserve against all existing
accounts receivable as of said date which are or shall become uncollectible in
the ordinary course of business, and such reserves were calculated in accordance
with GAAP in a manner consistent with past practices of the business of the
Division. Except to the extent reserved against on the 1996 Balance Sheet, as
such reserves may have adjusted on the books of Seller for periods after the
date of the 1996 Balance Sheet in accordance with GAAP and consistent with past
practices, the Accounts Receivables as of the Closing Date are fully collectible
at the recorded amounts thereof within ninety (90) days and are not subject to
any counterclaim or set-off.
20
3.11. AFFILIATES. Except as set forth in SCHEDULE 3.11, to the
knowledge of Seller, no stockholder of Seller nor any officers or directors of
Seller (or any immediate family member of any such officer or director):
(a) now has or at any time subsequent to January 1, 1994, had,
directly or indirectly, an equity or debt interest in any Person which furnishes
or sells or during such period furnished or sold services or products to Seller
or purchases or during such period purchased from Seller any goods or services,
or otherwise does or during such period did business with Seller which in any
way related to the Division or the Transferred Assets; PROVIDED, HOWEVER, that
no stockholder of Seller nor any of Seller's officers, directors or other
Affiliates shall be deemed to have such an interest solely by virtue of the
ownership of less than five percent (5%) of the outstanding voting stock or debt
securities of any publicly held company, the stock of which is traded on a
national stock exchange or quoted on the National Association of Securities
Dealers Automated Quotation System; or
(b) now is or at any time subsequent to January 1, 1994 was,
directly or indirectly, a party to any contract, agreement, commitment or
understanding to which Seller is or during such period was a party or under
which it is or was obligated or bound or to which its properties may be or may
have been subject, which relate to the Division or the Transferred Assets.
3.12. NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE
3.12, there are no Liabilities related to the Division or the Transferred Assets
that would or reasonably could constitute Liabilities that could become the
obligation of Buyer subsequent to the Closing if not discharged prior to the
Closing Date, other than,
(a) any Liability accrued as a Liability of the Division on
the 1996 Balance Sheet;
(b) Liabilities of the Division specifically disclosed and
identified as such in the Schedules to this Agreement; and
(c) Liabilities of the Division incurred in the ordinary
course of business since the date of the 1996 Balance Sheet consistent with past
practices that are not individually or in the aggregate material in amount or
material to the Division or to the Transferred Assets.
3.13. LITIGATION. Except as disclosed in SCHEDULE 3.13, (i) there
are no actions, suits, hearings, arbitrations, proceedings (public or private)
or governmental investigations, that have been brought by or against any
Governmental Authority or by or against any other Person (collectively,
"Proceedings") pending or, to the knowledge of Seller, threatened, against or by
Seller, that relate to or that may affect the Division or any of the Transferred
Assets or which seek to enjoin or rescind the transactions contemplated by this
Agreement or otherwise seek to
21
prevent Seller, or may have the effect of preventing Seller, from complying with
the terms and provisions of this Agreement or any Purchase Document; and (ii)
there are no existing orders, judgments or decrees of any Governmental Authority
affecting any of the Transferred Assets, the Division or the transactions
contemplated by this Agreement or any Purchase Document.
3.14. CONTRACTS; CUSTOMERS; SUPPLIERS.
(a) SCHEDULE 3.14(A) sets forth a complete list of all
contracts, agreements, commitments or understandings (whether written or oral)
of Seller or the Division, relating to the Division or the Transferred Assets,
including without limitation the following (collectively with the Leases, and
the agreements, if any, referred to in SCHEDULES 3.11, 3.17(a), 3.18(a) and
3.19, the "Scheduled Contracts"):
(i) each contract, agreement, commitment or
understanding between Seller and (A) each present or former director,
officer or other member of management or other personnel of Seller, (B)
any supplier of services or products to the Division whose dollar volume
of sales to Seller exceeded in 1996, or is expected to exceed in 1997, Ten
Thousand Dollars ($10, 000), and (C) any Person where the aggregate
payments made to Seller under such contract, agreement, commitment or
understanding exceeded in 1996, or is expected to exceed in 1997, Ten
Thousand Dollars ($10,000);
(ii) each other contract, agreement, commitment or
understanding of Seller that requires the payment or incurrence of
Liabilities, or the rendering of services, by Seller, subsequent to the
date of this Agreement in an amount of more than Ten Thousand Dollars
($10,000);
(iii) all contracts, agreements, commitments or
understandings relating to, and evidences of or guarantees of, or
providing security for, indebtedness for borrowed money or the deferred
purchase price of property (whether incurred, assumed, guaranteed or
secured by any asset);
(iv) all partnership, joint venture or other similar
contracts, agreements, commitments or understandings;
(v) all license, sale, distribution, commission,
marketing, agent, franchise, technical assistance or similar contracts,
agreements, commitments or understandings relating to or providing for the
marketing and/or sale of products or services to which Seller is a party
or by which Seller is otherwise bound;
(vi) all contracts, agreements, commitments or
understandings restricting in any manner the right of Seller to compete
with any other Person or to engage in any line of business;
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(vii) all powers of attorney relating to the Division or
any of the Transferred Assets; and
(viii) any contract, agreement, commitment or
understanding which is out of the ordinary course of business or which is
material to Seller or the Division or the Transferred Assets.
(b) Except as disclosed in SCHEDULE 3.14(B), each Scheduled
Contract and each other contract, agreement, commitment or understanding
relating to the Division or any of the Transferred Assets is a legal, valid and
binding obligation of Seller and, to the knowledge of Seller, each other party
thereto, enforceable against Seller and, to the knowledge of Seller, each such
other party thereto, in accordance with its terms, and neither Seller nor, to
the knowledge of Seller, any other party thereto, is in material default (or
would be in material default on the giving of notice or the lapse of time or
both) or has failed to perform any material obligation thereunder. Complete and
correct copies of each Scheduled Contract (including all amendments thereto)
have been delivered to the Buyer.
(c) SCHEDULE 3.14(C) sets forth a list (by name, address and
persons to contact) of (i) the 10 largest customers of the Division and (ii) the
five primary suppliers of Computer Equipment and Software to the Division for
the 12-month periods ended December 31, 1995 and 1996 and the nine month period
ended September 30, 1997, together with the approximate dollar amount of sales
or expenses during such period and a summary description of the services
provided. The relationship with such customers and suppliers are good commercial
working relationships and no such customer or supplier has canceled or otherwise
terminated or threatened to cease or otherwise terminate its relationship with
the Division and no customer has during the past twelve months decreased
materially its usage of the Division's services except for normal cyclical
changes related to the customer's business.
3.15. PERMITS; REQUIRED CONSENTS.
(a) SCHEDULE 3.15(A) sets forth all material approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities (and all other Persons)
necessary for the operation of the Transferred Assets or the Division in
substantially the same manner as currently operated or affecting or relating in
any way to the Division or the Transferred Assets (the "Permits"). Except as set
forth in SCHEDULE 3.15(A), each Permit is valid and in full force and effect.
Assuming the Required Consents have been obtained prior to the Closing Date, the
Permits are or will be transferable by Seller, and none of the Permits will be
terminated or become terminable or impaired in any material respect as a result
of the transactions contemplated hereby.
(b) SCHEDULE 3.15(B) lists (i) each governmental or other
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver (each, a
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"Required Governmental Approval") required under Applicable Law to be obtained
by Seller by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, which, if not obtained,
would prevent Seller from consummating the transactions contemplated hereby or
transferring any Permit or other Transferred Asset to Buyer, and (ii) each
Scheduled Contract with respect to which the consent of the other party or
parties thereto must be obtained by Seller by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the invalidity of the transfer of such Scheduled Contract, the
termination thereof, a breach or default thereunder or any other change or
modification to the terms thereof (each, a "Required Contract Consent" and
collectively with the Required Governmental Approvals, the "Required Consents").
3.16. COMPLIANCE WITH APPLICABLE LAWS. Except as set forth in
SCHEDULE 3.16, the operation of the business of the Division and the condition
of the Transferred Assets have not violated or infringed, and do not violate or
infringe, any Applicable Law, or any order, writ, injunction or decree of any
Governmental Authority.
3.17. EMPLOYMENT AGREEMENTS; CHANGE IN CONTROL; AND EMPLOYEE
BENEFITS.
(a) Except as set forth on SCHEDULE 3.17(A), there are no
employment, consulting, severance pay, continuation pay, termination pay or
indemnification agreements or other similar agreements of any nature whatsoever
(collectively, "Employment Agreements") between Seller, on the one hand, and any
current or former stockholder, officer, director, employee or Affiliate of the
Division or any of their respective Associates or any consultant or agent of the
Division, on the other hand, that are currently in effect. Except as set forth
on SCHEDULE 3.17(A), there are no Employment Agreements or any other similar
agreements to which Seller is a party under which the transactions contemplated
by this Agreement (i) will require any payment by Seller or Buyer, or any
consent or waiver from any stockholder, officer, director, employee or Affiliate
of Seller or any of their respective Associates or any consultant or agent of
Seller, or Buyer or (ii) will result in any change in the nature of any rights
of any stockholder, officer, director, employee or Affiliate of Seller or any of
their respective Associates or any consultant or agent of Seller under any such
Employment Agreement or other similar agreement.
(b) SCHEDULE 3.17(B) sets forth all Benefit Plans and Benefit
Arrangements of Seller. Seller has made true and correct copies of all governing
instruments, filings and related agreements pertaining to such Benefit Plans and
Benefit Arrangements available to Buyer.
(c) Except as set forth in SCHEDULE 3.17(C), neither Seller
nor its Affiliates, Plan Affiliates or ERISA Affiliates sponsors or has ever
sponsored, maintained, contributed to, or incurred an obligation to contribute
to, any Employee Pension Benefit Plan.
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(d) Neither Seller nor its Affiliates, Plan Affiliates or
ERISA Affiliates sponsors or has ever sponsored, maintained, contributed to or
incurred an obligation to contribute to, any Multiemployer Plan.
(e) Each Benefit Plan and each Benefit Arrangement, and the
administration thereof complies, and has at all times complied, in all material
respects with the requirements of all Applicable Law, including ERISA and the
Code, and each Benefit Plan intended to qualify under section 401(a) of the Code
has at all times since its adoption been so qualified, and each trust which
forms a part of any such plan has at all times since its adoption been
tax-exempt under section 501(a) of the Code.
(f) No direct, contingent or secondary liability has been
incurred or is expected to be incurred by Seller, nor its Affiliates, Plan
Affiliates or ERISA Affiliates under Title IV of ERISA to any party with respect
to any Benefit Plan, or with respect to any other plan presently or heretofore
maintained or contributed to by any Plan Affiliate or ERISA Affiliate.
(g) The "amount of unfunded benefit liabilities" within the
meaning of section 4001(a)(18) of ERISA does not exceed zero with respect to any
Benefit Plan subject to Title IV of ERISA.
(h) No "reportable event" (within the meaning of section 4043
of ERISA) has occurred with respect to any Benefit Plan or Benefit Arrangement
or any plan maintained by an Affiliate, Plan Affiliate or ERISA Affiliate.
(i) Neither the Seller, any Affiliate, Plan Affiliate nor
ERISA Affiliate has incurred or been assessed any liability for any tax imposed
under section 4971 through 4980B of the Code or civil liability under section
502(i) or (l) of ERISA, and no circumstances exist whereby the imposition of
such tax or liability may be reasonably expected or anticipated.
(j) No benefit under any Benefit Plan or Benefit Arrangement,
including, without limitation, any severance or parachute payment plan or
agreement, will be established or become accelerated, vested or payable by
reason of any transaction contemplated under this Agreement.
(k) No Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by COBRA
or any state laws requiring continuation of benefits coverage following
termination of employment.
(l) No suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been brought
or, to the knowledge of Seller, the Company or any Subsidiary, threatened
against or with respect to any Benefit Plan and there are no facts or
circumstances known to Seller, the Company or any Subsidiary that could
reasonably be expected to give rise to any such suit, action or other
litigation;
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(m) All contributions to Benefit Plans and Benefit
Arrangements that were required to be made under such Plans and Arrangements
have been made, and all benefits accrued under any unfunded Benefit Plan or
Benefit Arrangement have been paid, accrued or otherwise adequately reserved in
accordance with GAAP.
(n) With respect to any Group Health Plans maintained by
Seller or its Affiliates, Plan Affiliates or ERISA Affiliates, whether or not
for the benefit of the employees of Seller, its Affiliates, Plan Affiliates or
its ERISA Affiliates, Seller, its Affiliates, Plan Affiliates and ERISA
Affiliates have complied in all material respects with the provisions of COBRA.
Neither Seller nor its Affiliates, Plan Affiliates or ERISA Affiliates is
obligated to provide health care benefits of any kind to its retired employees
pursuant to any Employee Benefit Plan, including without limitation any Group
Health Plan, or pursuant to any agreement or understanding, other than under
COBRA.
3.18. LABOR AND EMPLOYMENT MATTERS.
(a) Except as set forth on SCHEDULE 3.18(A), no collective
bargaining agreement exists that is binding on Seller with respect to employees
of the Division, and, except as described on SCHEDULE 3.18(A), no petition has
been filed or proceedings instituted by an employee or group of employees with
any labor relations board seeking recognition of a bargaining representative at
any time subsequent to January 1, 1994 with respect to employees of the
Division. SCHEDULE 3.18(A) describes any organizational effort currently being
made or threatened by or on behalf of any labor union to organize any employees
of the Division.
(b) Except as set forth on SCHEDULE 3.18(B), there is no labor
strike, dispute, slow down or stoppage pending or, to the knowledge of Seller,
threatened, against or directly affecting the Division, (ii) no material
grievance or arbitration proceeding arising out of or under any collective
bargaining agreement or otherwise relating to any employees of the Division is
pending, and no claims therefor exist; and (iii) neither the Division nor any of
its Affiliates has received any notice or has any knowledge of any threatened
labor or civil rights dispute, controversy or grievance or any other unfair
labor practice, proceeding or breach of contract claim or action with respect to
claims of, or obligations to, any employee or group of employees of the
Division.
(c) If required under the Workers Adjustment and Retraining
Notification Act ("WARN") or other applicable state laws regulating plant
closings or mass layoffs, Seller and its Affiliates have timely caused to be
filed or distributed, as appropriate, all required filings and notices with
respect to employment losses occurring through the Closing Date.
(d) Seller and its Affiliates have complied and are currently
complying, in all material respects, in respect of all employees of Seller and
its Affiliates, with
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all Applicable Laws respecting employment and employment practices and the
protection of the health and safety of employees, from whatever source such law
may be derived, including. without limitation, statutes, ordinances, laws,
rules, regulations, policies, standards, judicial or administrative precedents,
judgments, orders, decrees, awards, citations, licenses, official
interpretations and guidelines.
(e) All individuals who are performing or have performed
services for Seller or any Affiliate thereof and are or during 1996 or 1997 were
classified by Seller or any Affiliate as "independent contractors" qualify for
such classification under Section 530 of the Revenue Act of 1978 or Section 1706
of the Tax Reform Act of 1986 (and any other similar provision of federal, state
or local law), as applicable, except for such instances which are not, in the
aggregate, material.
3.19. INTELLECTUAL PROPERTY.
(a) SCHEDULE 3.19(A) sets forth a complete and correct list of
each item of Intellectual Property and each license or licensing agreement
relating to any of the foregoing, in each case relating to, or held for use in
connection with, the Division or the Transferred Assets. Except as set forth in
SCHEDULE 3.19(A), (i) Seller owns all right, title and interest in, or has the
exclusive right to use the foregoing items of Intellectual Property, and (ii)
all registrations with and applications to any Governmental Authority in respect
of the foregoing items are valid and in full force and effect.
(b) Except as set forth in SCHEDULE 3.19(B), Seller has no
knowledge that any Intellectual Property owned, used, or licensed by Seller is
being infringed by any other Person. Seller has not during the three years
preceding the date of this Agreement been a party to any Proceeding, nor to the
knowledge of Seller is any Proceeding threatened, as to which there is a
reasonable possibility of a determination adverse to Seller that involved or may
involve a claim that Seller is infringing any Intellectual Property of any
Person (including any Governmental Authority). Except as set forth in SCHEDULE
3.19(B), no Intellectual Property owned, used or licensed by Seller is subject
to any outstanding order, judgment, decree, stipulation or agreement restricting
the use thereof by Seller, or restricting the licensing thereof by Seller to any
Person. The use by Seller in the business of the Division of any Intellectual
Property does not conflict with, infringe upon or violate any Intellectual
Property rights of any Person.
(c) Except as set forth in SCHEDULE 3.19(C), Seller either
owns the entire right, title and interest in, to and under, has a valid and
binding license to use, or has acquired in connection with the acquisition of
Computer Equipment, Software or Equipment an implied license to use, free and
clear of any and all Liens, any and all Intellectual Property used for the
conduct of the business of the Division and for the use of the Transferred
Assets in the manner that such business has heretofore been conducted and such
Transferred Assets have heretofore been used. No other Intellectual Property is
necessary for the unimpaired continued
27
operation of the business of the Division after the Closing in the manner that
the business of the Division has heretofore been conducted.
(d) Except as set forth in SCHEDULE 3.19(D), there are no
restrictions on the direct or indirect transfer of any Intellectual Property or
license to use the Intellectual Property, or any interest therein, held by the
Seller in respect of such Intellectual Property.
(e) Except as set forth in SCHEDULE 3.19(E), (i) the Seller
has delivered to Buyer prior to the execution of this Agreement documentation
with respect to any invention, process, design, computer program or other
know-how or trade secret included in such Intellectual Property, which
documentation is accurate in all material respects and reasonably sufficient in
detail and content to identify and explain such invention, process, design,
computer program or other know-how or trade secret, and (ii) the Seller has
taken reasonable security measures to protect the secrecy, confidentiality and
value of its trade secrets.
(f) Except as set forth in SCHEDULE 3.19(F), the Seller is not
and has not received any notice that it is, in default (or with the giving of
notice or lapse of time or both, would be in default) under any license or other
agreement to use such Intellectual Property.
(g) As used in this SECTION 3.19, "Intellectual Property"
means (a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(f) all computer software (including source code, data and related
documentation), (g) all other proprietary rights, (h) all copies and tangible
embodiments thereof (in whatever form or medium) and (i) all licenses or
agreements in connection with the foregoing.
3.20. ADVISORY FEES. Except for Concord Partners (whose fees and
expenses will be paid by Seller), there is no investment banker, broker, finder
or other intermediary or advisor that has been retained by or is authorized to
act on behalf of Seller or the Shareholders who might be entitled to any fee,
commission or reimbursement of expenses from Buyer or any of its Affiliates or
any of their respective Associates upon consummation of the transactions
contemplated by this Agreement.
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3.21. ENVIRONMENTAL COMPLIANCE.
(a) Except as disclosed in SCHEDULE 3.21(A), Seller has
obtained and holds all Environmental Permits of all Governmental Authorities, or
from any other Person, that are required under any Environmental Law to conduct
the business of the Division and use the Transferred Assets in the manner
presently conducted or used. SCHEDULE 3.21(A) sets forth all Environmental
Permits issued under any Environmental Law to Seller relating to the Division or
the Transferred Assets.
(b) Except as disclosed in SCHEDULE 3.21(B), Seller is in
compliance in all material respects with all terms and conditions of all
Environmental Permits or other similar authorizations of all Governmental
Authorities (and all other Persons) required under all Environmental Laws and
used in the business of the Division or that relate to the Transferred Assets,
and is also in compliance in all material respects with all Environmental Laws.
(c) To the knowledge of Seller, after due inquiry, except as
disclosed in SCHEDULE 3.21(C), there are no past, pending, or threatened
Environmental Claims against Seller, and Seller is not aware of any facts or
circumstances which could reasonably be expected to form the basis for any
Environmental Claim against the Seller; and there are no past or present events,
conditions, circumstances, activities, practices, incidents, actions, omissions
or plans relating to or in any way affecting Seller, the Division or the
Transferred Assets that may interfere with or prevent continued compliance with
any Environmental Law by Buyer after the Closing.
(d) No Releases of Hazardous Substances have occurred at,
from, in, to, on, or under any Site and no Hazardous Substances are present in,
on, about or migrating to or from any Site that could give rise to an
Environmental Claim against Seller.
(e) Neither Seller, any predecessor of the Seller, nor any
entity previously owned by Seller, has transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Substance to any off-Site location which could result in an Environmental Claim
against Seller.
(f) No Site is a current or proposed Environmental Clean-up
Site. No site is subject to the New Jersey Industrial Site Recovery Act
("ISRA").
(g) There are no Liens (other than Permitted Liens) arising
under or pursuant to any Environmental Law on any Site and there are no facts,
circumstances, or conditions that could reasonably be expected to restrict,
encumber, or result in the imposition of special conditions under any
Environmental Law with respect to the ownership, occupancy, development, use, or
transferability of any Site.
29
(h) There are no (a) underground storage tanks, active or
abandoned, (b) polychlorinated biphenyl containing equipment, or (c) asbestos
containing material at any site.
(i) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, on behalf of, or which
are in the possession of the Seller with respect to any Site which have not been
delivered to Buyer prior to execution of this Agreement and prior to the
Closing.
3.22. INSURANCE. SCHEDULE 3.22 sets forth a complete and correct
list of all insurance policies of any kind or nature whatsoever currently in
force or in force at any time subsequent to January 1, 1994 with respect to the
Division (the "Insurance Policies"), including all "occurrence based" liability
policies regardless of the period to which they relate. For each Insurance
Policy, SCHEDULE 3.22 indicates the type of coverage, the name of the insureds,
the insurer, the premium, the expiration date, the period to which it relates,
the deductibles and loss retention amounts, the amounts of coverage and any
claim made under such Insurance Policy subsequent to January 1, 1994. To the
best of Seller's knowledge, after due inquiry, the Insurance Policies described
as currently in effect are in full force and effect and are valid, outstanding
and enforceable, and all premiums due thereon have been paid.
3.23. TAX MATTERS.Except as set forth on SCHEDULE 3.23:
(a) There are no Taxes of Seller, or deficiencies in Taxes or
claims for Taxes against Seller, for any taxable period that could become a
Liability of, or which could be assessed or collected against, Buyer or become a
Lien on any Transferred Assets, as a result of the transfer of assets
contemplated by this Agreement.
(b) Seller has filed all federal, state, local and foreign Tax
Returns and reports required by law in the legally prescribed time and manner,
and has paid, or made adequate provision for the payment of (or shall have done
so prior to the Closing Date), all Taxes due and payable through the Closing
Date, and will promptly pay when due any Taxes that may become due or be
assessed thereafter. True and correct copies all of Seller's Tax Returns for the
past five years had been provided to Buyer.
(c) There are no Liens for Taxes, other than for current Taxes
not yet due and payable, on the Transferred Assets. Buyer will not become liable
under any Tax law for any Taxes of Seller as a result of acquiring the
Transferred Assets.
(d) All amounts that are required to be collected or withheld
by Seller, or with respect to Taxes of Seller, have been duly collected or
withheld and all such amounts that are required to be remitted to any taxing
authority have been duly remitted.
30
(e) None of the Transferred Assets is property that is
required to be treated as owned by any other person pursuant to the "safe harbor
lease" provisions of former Section 168(f)(8) of the Internal Revenue Code of
1954 as amended and in effect immediately prior to the enactment of the Tax
Reform Act of 1986 and none of the Transferred Assets is "tax exempt use
property" within the meaning of Section 168(h) of the Code.
(f) None of the Transferred Assets secures any debt the
interest on which is tax exempt under Section 103 of the Code.
3.24. REQUIRED SEC FILINGS. Seller has filed all forms, reports and
documents required to be filed with the SEC and has made available to the Buyer
copies of (i) its Annual Report on Form 10-KSB for the fiscal years ended
December 31, 1995 and Xxxxxxxx 00, 0000, (xx) its Quarterly Reports on Form
10-QSB for the periods ended March 31, June 30 and September 30, 1997, (iii) all
proxy statements relating to Seller's meetings of stockholders (whether annual
or special) since December 31, 1996, (iv) all other reports or registration
statements filed by Seller with the SEC since December 31, 1996, and (v) all
amendments and supplements to all such reports and registration statements filed
by Seller with the SEC pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder (the "Exchange
Act") or the Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "Securities Act") ((i)-(v) collectively, the "Seller SEC
Reports"). Except as disclosed in SCHEDULE 3.24, the Seller SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a subsequent filing, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
3.25. BOOKS AND RECORDS. The books and records of Seller (including
without limitation, the books of account and minute books) which have been made
available to Buyer are accurate and correct, and such minute books contain
accurate and complete records of all meetings held, and corporate action taken
by, the shareholders, the Board of Directors and any committee thereof.
3.26. OTHER INFORMATION. None of the information and documents
furnished or to be furnished by Seller to Buyer in connection with the execution
and delivery of this Agreement and consummation of the transactions contemplated
hereby is or will be false or misleading or contains or will contain any
material misstatement of fact or omits or will omit to state any material fact
required to be stated in order to make the statements therein not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Xxxxx Entity and Buyer hereby
represent and warrant to Seller that:
4.01. EXISTENCE AND POWER. Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all partnership power and authority to enter into this
Agreement and consummate the transactions contemplated hereby.
4.02. AUTHORIZATION. The execution, delivery and performance by
Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated hereby are within the partnership powers of Buyer and have been
duly authorized by all necessary action on the part of Buyer. This Agreement
constitutes a legal, valid and binding agreement of Buyer, enforceable in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general principles of equity.
4.03. GOVERNMENTAL AUTHORITY. The execution, delivery and
performance by the Buyer of this Agreement require no action or consent or
approval of or filing with, any Governmental Authority other than (a) compliance
with the applicable disclosure requirements of the Exchange Act and the American
Stock Exchange, and (b) any actions, consents, approvals or filings which may
result from any fact or circumstance relating solely to Seller.
4.04. NON-CONTRAVENTION. The execution, delivery and performance by
the Buyer of this Agreement does not (a) contravene or conflict with the
Certificate of Limited Partnership or Agreement of Limited Partnership of Buyer,
or (b) assuming compliance with the matters referred to in Section 5.03,
contravene or conflict with or constitute a violation of any provision of any
Applicable Law binding upon or applicable to the Buyer.
4.05. ADVISORY FEES. There is no investment banker, broker, finder
or other intermediary or advisor that has been retained by or is authorized to
act on behalf of Buyer who might be entitled to any fee, commission or
reimbursement of expenses from Seller or its Affiliates upon consummation of the
transactions contemplated by this Agreement.
4.06. LITIGATION. There is no Proceeding pending against, or to the
knowledge of the Buyer, threatened against or affecting, Buyer before any court
or arbitrators or any Governmental Authority that challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement.
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4.07. PURCHASE PRICE. Buyer has, or will obtain on or before the
Closing Date, sufficient cash to pay the portion of the Purchase Price due on
the Closing Date pursuant to Section 2.06(b) hereof and to satisfy the Assumed
Liabilities in due course.
ARTICLE V
COVENANTS OF SELLER
The Seller hereby covenants and agrees with Buyer that:
5.01. CONDUCT OF THE BUSINESS. From the date hereof until the
Closing Date, Seller shall conduct its business in the ordinary course
consistent with past practice, and use its reasonable best efforts to preserve
intact the Transferred Assets, the Division and the business organization and
relationships and goodwill of Seller with third parties and to keep available
the services of those present officers, employees, agents and other personnel of
the Division designated by Buyer. Without limiting the generality of the
foregoing, from the date hereof until the Closing Date:
(a) Seller will:
(i) (A) maintain the Transferred Assets in the ordinary
course of business consistent with past practice and in good operating
order and condition, reasonable wear and tear, damage by fire and other
casualty excepted, (B) promptly repair, restore or replace any Transferred
Assets if required in the ordinary course of business consistent with past
practice and (C) upon any damage, destruction or loss to any of the
Transferred Assets, apply any and all insurance proceeds received with
respect thereto to the prompt repair, replacement and restoration thereof
to the condition of the Transferred Assets before such event;
(ii) comply with all Applicable Laws;
(iii) file all foreign, federal, state and local Tax
Returns required to be filed and make timely payment of all applicable
Taxes when due;
(iv) use its best efforts to obtain, prior to the
Closing Date, all Required Consents;
(v) take all reasonable actions necessary to be in
compliance with, and to maintain the effectiveness of, all material
Permits;
(vi) promptly notify Buyer in writing of any action,
event, condition or circumstance, or group of actions, events, conditions
or circumstances, that
33
results in, or could reasonably be expected to result in, a material
adverse effect on the Division, the Transferred Assets or the financial
condition or results of operations of Seller;
(vii) promptly notify Buyer in writing of the
commencement of any Proceeding by or against Seller, or Seller becoming
aware of any threat, claim, action, suit, inquiry, proceeding, notice of
violation, demand letter, subpoena, government audit or disallowance that
could reasonably be expected to result in a Proceeding related to or in
any way affecting the Division; and
(viii)promptly notify Buyer in writing of the occurrence
of any breach by Seller of any representation or warranty or any covenant
or agreement, contained in this Agreement.
(b) without the Buyer's prior written consent, Seller will not
and will not agree to:
(i) purchase or otherwise acquire assets for the
Division from any other Person, other than supplies in the ordinary course
of business consistent with past practice of the Division;
(ii) enter into any compromise or settle any litigation,
Proceeding or governmental investigation relating to the Transferred
Assets, the Division or the Contracts;
(iii) sell, assign, lease, license, transfer or
otherwise dispose of, or mortgage, pledge or encumber (other than with
Permitted Liens), any of its assets, which constitute Transferred Assets,
except the use or sale of inventory or supplies in the ordinary course of
business consistent with past practice of the Division;
(iv) enter any agreement or arrangement that requires
the rendering of services by the Division outside the ordinary course of
business consistent with past practice of the Division;
(v) amend or modify in any material respect or terminate
any Scheduled Contract or any other contract, agreement, commitment or
understanding entered into by Seller after the date hereof relating to the
Division and the Transferred Assets which, if in existence on the date
hereof, would be required to be set forth in the SCHEDULE 3.14(A) as a
Scheduled Contract (each, a "Subsequent Material Contract");
(vi) except in the ordinary course of business
consistent with past practice of the Division, waive, cancel or take any
other action materially impairing any of its rights relating to the
Division and the Transferred Assets;
34
(vii) make or commit to make any capital expenditure, or
group of related capital expenditures relating to the Division and the
Transferred Assets, in excess of Twenty-Five Thousand Dollars ($25,000)
other than (A) capital expenditures set forth on SCHEDULE 5.01(B) and (B)
capital expenditures expressly required under any Scheduled Contract;
(viii) enter into or commit or propose to enter into any
Subsequent Material Contract;
(ix) (A) create, incur, assume, or guarantee any
indebtedness for borrowed money or (B) incur any Liability relating to a
documentary or standby letter of credit, other than in each such case
referred to in this clause (ix) in the ordinary course of business
consistent with past practice where the aggregate dollar amount of all of
the foregoing by Seller does not exceed fifty thousand dollars ($50,000);
(x) (A) increase the rate or terms of compensation
payable or to become payable to its directors, officers or employees
employed by the Division, except increases to non-officer employees in the
ordinary course of business consistent with past practice, (B) pay or
agree to pay any pension, retirement allowance or other employee benefit
not provided for by any Benefit Plan or Arrangement or Employment
Agreement set forth in the Schedules hereto, (C) commit itself with
respect to Division employees or former employees to any additional
pension, profit sharing, bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance,
severance pay, continuation pay, termination pay, retirement or other
employee benefit plan, agreement or arrangement, or increase the rate or
terms of any Benefit Plan or Arrangement, (D) enter into any Employment
Agreement with or for the benefit of any Person employed by the Division,
or (E) increase the rate of compensation under or otherwise change the
terms of any Employment Agreement set forth in SCHEDULE 3.17(A);
(xi) make any change in its accounting methods or in the
manner of keeping its books and records or any change in its current
practices with respect to inventory, sales, receivables, payables or
accrued expenses;
(xii) declare or pay any dividend or make any
distribution in respect of any of its capital stock, options, warrants, or
other rights to purchase capital stock of Seller (collectively, "Equity
Securities") or, directly or indirectly, redeem purchase or otherwise
acquire any of its Equity Securities or the Equity Securities of any of
its Affiliates or make any other payments of any kind to the holders of
any of its Equity Securities in respect thereof or to the holders of any
Equity Securities of any of its Affiliates in respect thereof, or enter
into any commitment or agreement to do any of the foregoing, PROVIDED,
HOWEVER, that Buyer's consent shall not be required with respect to the
foregoing if the proposed action by Seller would not effect the ability of
Seller to
35
satisfy its obligations hereunder, including its obligation to satisfy all
Excluded Liabilities;
(xiii) solicit or encourage any customers or clients of
the Division to pay, prior to the time such amounts are due, any amounts
due to the Division; or
(xiv) take any action or course of action inconsistent
with compliance with the covenants and agreements of Seller hereunder or
which might result in any representations or warranties of Seller becoming
incorrect in any material respect or which might adversely affect the
interests of Buyer hereunder or diminish the value of the Transferred
Assets or of the Division or the business of the Division as a going
concern.
5.02. ACCESS TO INFORMATION. From the date hereof until the Closing
Date, Seller will promptly: (a) give Buyer and its counsel, financial advisors,
auditors and other authorized representatives reasonable access to the offices,
properties, books and records relating to the Division and the Transferred
Assets (and relating to Seller itself to the extent in the reasonable judgment
of Buyer such information relates to the transactions contemplated by this
Agreement) upon reasonable prior notice and during normal business hours, (b)
furnish to Buyer its counsel, financial advisors, auditors and other authorized
representatives such information relating to the Division or the Transferred
Assets (and relating to Seller itself to the extent in the reasonable judgment
of Buyer such information relates to the transactions contemplated by this
Agreement) as the Buyer may reasonably request and (c) instruct the directors,
officers, employees, counsel, auditors and financial advisors of Seller to
cooperate with Buyer and its counsel, financial advisors, auditors and other
authorized representatives in their investigation of the Division and the
Transferred Assets (and of Seller itself to the extent in the reasonable
judgment of Buyer such investigation relates to the transactions contemplated by
this Agreement). In addition, Buyer shall have the right, after consultation
with Seller (and in conjunction with Seller if requested) to meet with the
principal customers and suppliers of the Division, and Seller shall give Buyer
its full cooperation with respect thereto as reasonably requested. Nothing
contained in this Section 5.02 shall affect the survival of the representations,
warranties, covenants, agreements and indemnities of Seller as hereinafter
provided or the conditions to the obligations of Buyer under Section 8.01
hereof.
5.03. COMPLIANCE WITH TERMS OF REQUIRED GOVERNMENTAL APPROVALS AND
REQUIRED CONTRACT CONSENTS. On and after the Closing Date, Seller shall comply
at its own expense with all conditions and requirements set forth in (i) all
Required Governmental Approvals as necessary to keep the same in full force and
effect assuming continued compliance with the terms thereof by Buyer, and (ii)
all Required Contract Consents as necessary to keep the same effective and
enforceable against the Persons giving such Required Contract Consents assuming
continued compliance with the terms thereof by Buyer.
36
5.04. MAINTENANCE OF INSURANCE POLICIES. On and after the date
hereof, Seller shall not take or fail to take any action if such action or
inaction, as the case may be, would adversely affect the effectiveness,
applicability or enforceability of any Insurance Policies in effect on the date
hereof that covers all or any part of the Transferred Assets or the Division.
Notwithstanding the foregoing, Seller shall not have any obligation to make any
monetary payment to maintain the effectiveness of any such Insurance Policy
after the Closing Date.
5.05. CONFIDENTIALITY.
(a) Seller will, and will cause its representatives to, treat
any data and information obtained with respect to Buyer or any of its Affiliates
(or with respect to the Division, to the extent provided pursuant to Section
6.01 hereof or retained pursuant to Section 2.01(a)(xiii) hereof) from any
representative, officer, director, or employee of Buyer, or from any books or
records of Buyer in connection with this Agreement, confidentially and with
commercially reasonable care and discretion, and will not disclose any such
information to third parties; PROVIDED, HOWEVER, that the foregoing shall not
apply to (i) information in the public domain or that becomes public through
disclosure by any party other than Seller or its Affiliates or representatives,
so long as such other party is not in breach of a confidentiality obligation,
(ii) information that may be required to be disclosed by Applicable Law, (iii)
information required to be disclosed to obtain any Required Consents, or (iv)
information disclosed to Seller's legal, accounting or financial advisors.
(b) In the event that the Closing fails to take place and this
Agreement is terminated, Seller, upon the written request of Buyer, will, and
will cause its representatives to, promptly deliver to Buyer any and all
documents or other materials furnished by Buyer (or its counsel) or any of its
Affiliates to Seller in connection with this Agreement without retaining any
copy thereof. In the event of such a request, all other documents, whether
analyses, compilations or studies, that contain or otherwise reflect the
information furnished by Buyer to Seller, shall be destroyed by Seller or shall
be returned to Buyer, and Seller shall confirm to Buyer in writing that all such
materials have been returned or destroyed. No failure or delay by Buyer in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other
further exercise thereof or the exercise of any right, power or privilege
hereunder.
5.06. TAXES.
(a) For a period of three years after the Closing Date, at
Buyer's expense for reasonable documented out-of-pocket costs incurred at the
request of Buyer, Seller shall (i) provide Buyer with such assistance as may
reasonably be requested in connection with the preparation of any Tax Return and
the conduct of any audit or other examination by any taxing authority or in
connection with judicial or administrative proceedings relating to any liability
for Taxes, (ii) retain and provide Buyer with all records or other information
that may be relevant to the preparation of any Tax Returns, or the conduct of
any audit or examination or
37
other Tax Proceeding. For such three year period, Seller shall retain all
relevant documents, including prior year's Tax Returns, supporting work
schedules and other records or information that may be relevant to such returns
and shall not destroy or otherwise dispose of any such records without the prior
written consent of Buyer, and at the end of such three year period shall not
destroy or dispose of the same without allowing Buyer to take custody of such
records or to copy the same.
(b) All sales, value added, use, transfer, registration, stamp
and similar Taxes imposed in connection with the sale of the Transferred Assets
shall be borne by Seller.
(c) Pursuant to Section 1445(b)(2) of the Code, Seller shall
furnish Buyer an affidavit stating, under penalty of perjury, Seller's United
States taxpayer identification number and that Seller is not a foreign person.
5.07. INTERIM FINANCIAL STATEMENTS. Prior to the Closing Date,
Seller shall prepare and provide to Buyer within twenty (20) days of the end of
each calendar month and calendar quarter a balance sheet and income statement of
Seller and the Division as at the end of such month or quarter and for the
period then ended, and Seller shall provide Buyer promptly after they are
available any other financial statements or financial reports generated by
Seller.
5.08. SPECIFIC PERFORMANCE. The parties hereto recognize and agree
that in the event of a breach by the Seller of this Article V, money damages
would not be an adequate remedy to the Buyer or its Affiliates for such breach
and, even if money damages were adequate, it would be impossible to ascertain or
measure with any degree of accuracy the damages sustained by the Buyer or its
Affiliates therefrom. Accordingly, if there should be a breach or threatened
breach by the Seller of provisions of this Article V, Buyer and its Affiliates
shall be entitled to an injunction restraining Seller from any breach without
showing or proving actual damage sustained by Buyer or its Affiliates, as the
case may be. Nothing in the preceding sentence shall limit or otherwise affect
any remedies that Buyer may otherwise have under Applicable Law.
ARTICLE VI
COVENANTS OF THE BUYER
6.01. ACCESS TO INFORMATION. Subject to compliance with Applicable
Laws, and subject to the confidentiality provisions of Section 5.05, after the
Closing Date, Buyer will promptly: (i) give Seller and its financial advisors,
auditors and other authorized representatives reasonable access during regular
business hours to the offices, properties, books and records relating to the
Division and the Transferred Assets (in each case for any periods prior to the
Closing Date and for reasonable business purposes such as preparation of Tax
Returns or financial statements) upon reasonable prior notice, and Seller shall
have the right, at its own
38
expense, to make copies of any such records and filings, with such copies being
subject to the confidentiality provisions of Section 5.05, (ii) furnish to
Seller, its counsel, financial advisors, auditors and other authorized
representatives such information relating to the Division and the Transferred
Assets (in each case for any periods prior to the Closing Date and for
reasonable business purpose such as preparing Tax Returns or financial
statements) as the Buyer may reasonably request and (iii) instruct the
directors, officers, employees, counsel, auditors and financial advisors of
Buyer to cooperate with Seller and its counsel, financial advisors, auditors and
other authorized representatives in their preparation of all necessary
certificates or similar documents required to be prepared and delivered by
Seller to Buyer by this Agreement; provided, however, that all reasonable
out-of-pocket costs of Buyer in complying with the covenants set forth in this
Section 6.01 shall be paid by Seller.
6.02. COMPLIANCE WITH TERMS OF REQUIRED GOVERNMENTAL APPROVAL AND
REQUIRED CONTRACT CONSENTS. On and after the Closing Date, Buyer shall comply at
its own expense with all conditions and requirements set forth in (i) all
Required Governmental Approvals as necessary to keep the same in full force and
effect assuming continued compliance with the terms thereof by Seller and (ii)
all Required Contract Consents as necessary to keep the same effective and
enforceable against the Persons giving such Required Contract Consents assuming
continued compliance with the terms thereof by Seller; PROVIDED, HOWEVER, that
nothing herein shall require Buyer to agree to any particular condition or
requirement, or to make any payment, to obtain or maintain the effectiveness of
any Required Governmental Approval or Required Contract Consent or to make any
payments to comply with any such condition or requirements.
6.03. CONFIDENTIALITY.
(a) Buyer will, and will cause its representatives to, treat
any data and information obtained with respect to Seller from any
representative, officer, director or employee of Seller, or from any books or
records of Seller in connection with this Agreement, confidentially and with
commercially reasonable care and discretion, and will not disclose any such
information to third parties; PROVIDED, HOWEVER, that the foregoing shall not
apply to (i) information in the public domain or that becomes public through
disclosure by any party other than Buyer, or its Affiliates or representatives,
so long as such other party is not in breach of a confidentiality obligation,
(ii) information that may be acquired to be disclosed by Applicable Law, (iii)
information required to be disclosed to obtain any Required Consents; (iv) any
information that is disclosed by Buyer or its Affiliates to any of their actual
or prospective lenders in connection with financing the transactions
contemplated by this Agreement; or (v) any information that is disclosed to
Buyer's legal, accounting of financial advisors; PROVIDED, HOWEVER, that in the
event the Closing has occurred, this Section 6.03(a) shall cease to be effective
with respect to any data and information obtained with respect to the Division.
(b) In the event that the Closing fails to take place and this
Agreement is terminated, Buyer, upon the written request of Seller, will and
will cause its representatives to,
39
promptly deliver to Seller any and all documents or other materials furnished by
Seller to Buyer in connection with this Agreement without retaining any copy
thereof. In the event of such request, all other documents, whether analyses,
compilations or studies, that contain or otherwise reflect the information
furnished by Seller to Buyer, shall be returned to Seller, and Buyer shall
confirm to Seller in writing that all such materials have been returned. No
failure or delay by Seller in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
right, power or privilege hereunder.
6.04. SPECIFIC PERFORMANCE. The parties hereto recognize and agree
that in the event of a breach by Buyer of this Article VI, money damages would
not be an adequate remedy to Seller for such breach and, even if money damages
were adequate, it would be impossible to ascertain or measure with any degree of
accuracy the damages sustained by Seller therefrom. Accordingly, if there should
be a breach or threatened breach by Buyer of provisions of this Article VI,
Seller shall be entitled to an injunction restraining Buyer from any breach
without showing or proving actual damage sustained by Seller. Nothing in the
preceding sentence shall limit or otherwise affect any remedies that Seller may
otherwise have under Applicable Law.
ARTICLE VII
COVENANTS OF ALL PARTIES
7.01. FURTHER ASSURANCES. Subject to the terms and conditions of
this Agreement, each party will use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary or
reasonably desirable under Applicable Law to consummate the transactions
contemplated by this Agreement.
7.02. CERTAIN FILINGS. The parties hereto shall cooperate with one
another and shall use all reasonable efforts to obtain on a timely basis all
Required Consents, and in taking such actions or making any filings in
connection with such Required Consents, the parties hereto shall furnish such
information required in connection therewith.
7.03. PUBLIC ANNOUNCEMENTS. Up to (and including) the Closing Date,
each party agrees that, without the consent of the other party, it will not,
except as may be required by Applicable Law, issue any press release or make any
public statement with respect to this Agreement or the transactions contemplated
hereby. Notwithstanding the foregoing, the parties may, on a confidential basis,
advise and release information regarding the existence and content of this
Agreement or the transactions contemplated hereby to their respective
Affiliates, Associates or any of their agents, accountants, attorneys and
prospective lenders or investors or to any party to a Contract or to a
Governmental Authority as required in connection with obtaining any Required
Consent, in connection with or related to the transactions contemplated by this
Agreement, including without limitation the financing of such transactions.
40
7.04. ADMINISTRATION OF ACCOUNTS. All payments and reimbursements
made in the ordinary course by any third party in the name of or to Seller or
any Affiliate thereof in connection with or arising out of the Transferred
Assets, the Division or the Assumed Liabilities after the Closing Date shall be
held by Seller or such Affiliate in trust for the benefit of Buyer and,
immediately upon receipt by Seller or any such Affiliate of any such payment or
reimbursement, Seller shall pay, or cause to be paid, over to Buyer the amount
of such payment or reimbursement without right of set off.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. CONDITIONS TO OBLIGATION OF THE BUYER. The obligations of
Buyer to consummate the Closing are subject to the satisfaction of each of the
following conditions:
(a) (i) Seller shall have performed and satisfied in all
material respects each of its covenants, agreements and obligations hereunder
required to be performed and satisfied by it on or prior to the Closing Date,
(ii) each of the representations and warranties of Seller contained in this
Agreement which are qualified as to materiality shall be true and correct in all
respects, and those not so qualified shall be true and correct in all material
respects, when made and (without giving effect to any matter disclosed between
the date hereof and the Closing Date) at and as of the Closing Date with the
same force and effect as if made as of the Closing Date, and (iii) the Buyer
shall have received a certificate signed by a duly authorized executive officer
of Seller to the foregoing effect and to the effect that to the knowledge of
such officer the conditions specified within this Section 8.01 have been
satisfied.
(b) All Required Governmental Approvals for the transactions
contemplated by this Agreement, including any governmental permits or licenses
required to be obtained by Buyer to operate the business of the Division after
the Closing, shall have been obtained without the imposition of any conditions
that are or would become applicable to the Division, the Transferred Assets or
Buyer (or any of its Affiliates) after the Closing that Buyer reasonably
determines would be adverse to the Division, the Transferred Assets or Buyer (or
any of its Affiliates) or their respective businesses substantially as such
businesses have been conducted prior to the Closing Date or as such businesses,
as of the date hereof would be reasonably expected to be conducted after the
Closing Date. All such Required Governmental Approvals shall be in effect, and
no Proceedings shall have been instituted or threatened by any Governmental
Authority with respect thereto as to which, in Buyer's opinion, there is a
material risk of a determination that would terminate the effectiveness of or
otherwise adversely modify the terms of, any such Required Governmental
Approval; all applicable waiting periods with respect to such Required
Governmental Approvals shall have expired; and all conditions and requirements
prescribed by Applicable Law or by such Required Governmental Approvals to be
41
satisfied on or prior to the Closing Date shall have been satisfied allowing all
Required Governmental Approvals to be and to remain in full force and effect
assuming continued compliance with the terms thereof after the Closing.
(c) All Required Contract Consents, including without
limitation, the consents required pursuant to the IBM Agreements, the Advantis
Agreements, the Intersolv Agreement, the Pixel Agreement and any Real Property
Leases shall have been obtained without the imposition of any conditions that
are or would become applicable to the Division, the Transferred Assets, Buyer or
any of its Affiliates after the Closing that Buyer determines would be adverse
to the Division, the Transferred Assets or Buyer or any of its Affiliates or
their respective businesses substantially as such businesses have been conducted
prior to the Closing Date or as such businesses, as of the date hereof, would be
reasonably expected to be conducted after the Closing Date. All such Required
Consents (and with respect to the Subsequent Material Contracts, such other
consents as may be required) shall be in effect. All conditions and requirements
prescribed by any Required Contract Consent (or any such other consent) to be
satisfied on or prior to the Closing Date shall have been satisfied allowing all
such Required Contract Consents (and all such other consents) to be effective
and enforceable, and to remain effective and enforceable against the Persons
giving such Required Contract Consents (and such other consents) assuming
continued compliance with the terms thereof.
(d) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law. No temporary
restraining order, preliminary or permanent injunction, cease and desist order
or other order issued by any court of competent jurisdiction or any competent
Governmental Authority or any other legal restraint or prohibition preventing
the transfer contemplated hereby or the consummation of the Closing, or imposing
Damages in respect thereto, shall be in effect, and there shall be no pending or
threatened actions or proceedings by any Governmental Authority (or
determinations by any Governmental Authority) or by any other Person seeking
material damages from Buyer with respect to the transactions contemplated
hereby, or challenging or in any manner seeking to restrict or prohibit the
transfer contemplated hereby or the consummation of the Closing, or to impose
conditions that Buyer reasonably determines would be adverse to the Division,
the Transferred Assets, Buyer or any of its Affiliates or their respective
businesses substantially as such businesses have been conducted prior to the
Closing Date or as said businesses, as of the date hereof, would be reasonably
expected to be conducted after the Closing Date.
(e) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts or any change
in the Transferred Assets or the Division (including any damage, destruction or
other casualty loss, but excluding any event, occurrence, development or state
of circumstances or facts or change resulting from changes in general economic
conditions) that has had or that may be reasonably expected to have, either
alone or together with all such events, occurrences, developments, states of
circumstances or facts or changes, a material adverse effect on the Transferred
Assets or the prospects, financial condition or results of operation of the
Division.
42
(f) Xxx Xxxxxxxxxx shall have executed and delivered to Buyer
an Employment Agreement in the form attached hereto a EXHIBIT C (the "Xxxxxxxxxx
Employment Agreement").
(g) Buyer shall have received an opinion from Rosenberg,
Tuggey, Agather & Xxxxxxxxx, counsel for Seller, in the form attached hereto as
EXHIBIT D.
(h) Seller shall have (i) satisfied all Excluded Liabilities
other than those set forth on SCHEDULE 2.04(B) (which shall be satisfied
pursuant to Section 2.04(b)), and (ii) caused all Liens on the Transferred
Assets which are not Permitted Liens to have been satisfied, terminated and
discharged, including without limitation all Liens on the Transferred Assets
relating to Bank One Debt;
(i) Buyer shall have received a good standing certificate for
Seller from the Secretary of State of Delaware or other appropriate office of
the State of Delaware, dated as a date not earlier than 5 days prior to the
Closing Date.
(j) Buyer shall be reasonably satisfied that the major
customers and suppliers of the Division will continue their relationship with
Buyer subsequent to the Closing on a basis satisfactory to Buyer.
(k) All proceedings, corporate or otherwise, taken by Seller
in connection with the transactions contemplated hereby and all instruments and
documents incident thereto shall be reasonably satisfactory in form and
substance to Buyer and its counsel.
(l) Seller shall have executed and delivered to Buyer a Lease
Agreement in the form attached hereto as EXHIBIT E (the "Lease") relating to
suite 100 and suite 300 in the building located at 0000 Xxxxxxxxx Xxxx, Xxx
Xxxxxxx, Xxxxx.
(m) Seller shall have executed and delivered to Buyer a
Trademark Assignment in the form attached hereto as EXHIBIT F (the "Trademark
Assignment").
(n) Buyer shall have received a copy of (i) the Certificate or
Articles of Incorporation of Seller, accompanied by a certificate of the
Secretary or an Assistant Secretary of Seller, dated as of the Closing Date,
stating that no amendments have been made to such document since such date, and
(ii) the By-laws of Seller, certified by the Secretary or an Assistant Secretary
of Seller.
(o) Buyer shall have received a certificate of an officer of
Seller certifying the names and signatures of the officers of Seller authorized
to sign any document required to be delivered by Seller hereunder.
43
(p) Buyer shall have received from Seller evidence that any
agreements between the Seller or the Division and each of Xxxxxx Xxxxxxxx,
Xxxxxxxxx Miklazewski, Xxx Xxxxx and Xxxx Xxxxxx have been terminated.
8.02. CONDITIONS TO OBLIGATION OF SELLER. The obligations of Seller
to consummate the Closing are subject to the satisfaction of each of the
following conditions:
(a) (i) The Buyer shall have delivered the Purchase Price and
performed and satisfied in all material respects each of its other covenants,
agreements and obligations hereunder required to be performed and satisfied by
it on or prior to the Closing Date; (ii) each of the representations and
warranties of the Buyer contained in this Agreement which are qualified as to
materiality shall be true and correct in all respects, and those not so
qualified shall be true and correct in all material respects, when made and
(without giving effect to any matter disclosed between the date hereof and the
Closing Date) as of the Closing Date, with the same force and effect as if made
at and as of such date, and (iii) Seller shall have received a certificate
signed by a duly authorized executive officer of Buyer to the foregoing effect
and to the effect that to such officer's knowledge the conditions specified
within this Section 8.02 have been satisfied.
(b) All Required Governmental Approvals for the transactions
contemplated by this Agreement shall have been obtained. All such Required
Governmental Approvals shall be in effect, and no Proceedings shall have been
instituted or threatened by any Governmental Authority with respect thereto as
to which, in Seller's opinion, there is a material risk of a determination that
would terminate the effectiveness of, or otherwise adversely modify the terms
of, any such Required Governmental Approval. All applicable waiting periods with
respect to such Required Governmental Approvals shall have expired, and all
conditions and requirements prescribed by Applicable Law or by such Required
Governmental Approvals to be satisfied on or prior to the Closing Date shall
have been satisfied allowing all Required Governmental Approvals to be, and to
remain, in full force and effect assuming continued compliance with the terms
thereof after the Closing.
(c) The sale and transfer contemplated by this Agreement and
the consummation of the Closing hereunder shall not violate any Applicable Law.
No temporary restraining order, preliminary or permanent injunction, cease and
desist order or other order issued by any court of competent jurisdiction or any
competent Governmental Authority or any other legal restraint or prohibition
preventing the transfer contemplated hereby or the consummation of the Closing,
or imposing Damages in respect thereto, shall be in effect, and there shall be
no pending or threatened actions or proceedings by any Governmental Authority
(or determinations by any Governmental Authority) or by any other Person
challenging or in any manner seeking to restrict or prohibit the transfer
contemplated hereby or the consummation of the Closing.
44
(d) Seller shall have received an opinion from Xxxxxx, Xxxxx &
Bockius LLP, counsel to Buyer, in the form attached hereto as EXHIBIT G.
(e) Buyer shall have executed and delivered the Xxxxxxxxxx
Employment Agreement.
ARTICLE IX
EMPLOYMENT AND BENEFITS MATTERS
9.01. HIRING OF EMPLOYEES; NO PRIOR SERVICE CREDIT.
(a) Buyer may, in its complete and absolute discretion, offer
employment to any employee, officer or consultant of Seller engaged in the
conduct of the business of the Division (the "Employees"), on such terms and
conditions as shall be mutually agreeable to Buyer and such Employees. All
Employees who are offered and accept such employment with Buyer are hereinafter
referred to as the "TRANSFERRED EMPLOYEES." Seller shall use its best efforts to
assist Buyer in hiring such Employees as Buyer shall offer employment to
hereunder, and shall not offer employment (or arrange to have another Person or
firm offer employment) to any such Employee without the prior written consent of
Buyer. The Transferred Employees shall be deemed to have accrued no prior
service credit for any purpose (including but not limited to vesting and benefit
accrual under any plan, arrangement or program, and seniority, title or duties
with respect to employment) in respect of their period of service with Seller,
or any prior employer, in connection with their employment with Buyer and under
any employee benefit plan, program or policy which Buyer may, in its absolute
discretion, establish for the benefit of the Transferred Employees; PROVIDED
however that the Transferred Employees shall be deemed to have accrued prior
service credit only for purposes of eligibility to participate under each, or in
any, employee benefit plan, program or policy of Buyer in which the Transferred
Employees are entitled to participate after the Closing.
(b) Seller shall (i) continue to employ the individuals listed
on SCHEDULE 9.01(B) hereto following the Closing Date, (ii) make all such
individuals available for the exclusive use of Buyer to perform such services as
determined by Buyer in its sole discretion, and (iii) use its reasonable best
efforts to assist Buyer and such individuals in obtaining any and all approvals
from Governmental Authorities sought by Buyer in connection with any transfer to
Buyer of the H1 visa and any other related work permits and papers of each such
individual. Buyer shall reimburse Seller for reasonable and direct out of pocket
costs incurred, pursuant to this Section 9.01(b), for salaries and benefits
(consistent with past salaries and benefits) for such individuals. If, within
one hundred twenty (120) days after the Closing Date, Buyer is unable to obtain
any of the approvals described in subsection (ii) hereof, Buyer may notify
Seller that it will no longer require the services of any such employee with
respect to which such approval
45
was not obtained, and upon delivery of such notice, Buyer shall have no further
obligations to Seller (or to such individual) under this Section 9.01(b).
9.02. SELLER'S RETENTION OF LIABILITY. Effective as of the Closing,
Seller shall take all such action as may be necessary to cause all Transferred
Employees to cease to participate in all Benefit Plans and Benefit Arrangements,
and Buyer shall neither adopt nor become a sponsoring employer of, nor have any
obligations, duties or Liabilities under or with respect to such Benefit Plans
and/or Benefit Arrangements. Seller shall be solely responsible for any and all
Liabilities which have arisen or may arise in connection with any Benefit Plan
and/or Benefit Arrangements (including, but not limited to, (i) Liabilities
arising from income or excise tax assessments, participant benefit claims,
fiduciary conduct, or under ERISA or the Code, (ii) Liabilities under the
commission and bonus plans described in Schedule 3.17(a) hereof) and (iii) any
and all Liabilities which have arisen or may arise in any way from the
employment, compensation or benefits of any Employee or former employee of
Seller or any Affiliate, including but not limited to the Transferred Employees,
or the termination thereof, including, without limitation, any liability or
obligation arising out of or relating to any act or omission by Seller or any
Affiliate, any violation of or non-compliance with or obligation arising under
any applicable law respecting employment, compensation or benefits, and any and
all costs, Liabilities and obligations for severance pay (whether or not
triggered by virtue of the transactions contemplated by this Agreement), accrued
vacation pay, sick pay, health and medical claims and requests for
reimbursements, and similar and other benefits, relating to any period of
employment with Seller or any Affiliate, whether arising as a matter of
Contract, Law or otherwise. Seller agrees to comply with the Worker Adjustment
Notification and Retraining Act, 29 U.S.C. 2101 ET SEQ. to the extent required
with respect to the Employees.
9.03. HEALTH BENEFITS. If requested by Buyer, Seller shall cooperate
with Buyer in effecting an assignment to Buyer of any policies of insurance for
the provision of health or welfare benefits to Transferred Employees, and
administrative contracts relating thereto, provided, that the assignment of any
such policy shall not be construed as an assumption by Buyer of any plan of
Seller, or any liability thereunder. Without limiting the scope of Section 9.02
hereof, Seller shall be responsible for all claims regarding all expenses for
injuries or illnesses incurred prior to the Closing, and shall be responsible
for providing continuation health coverage as required under the provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1986, a amended, with
respect to any of Employees or Seller's former employees not employed by Buyer
as of the Closing or any Transferred Employee not covered under, or who may be
affected by any pre-existing condition clause contained in, any plan that may be
established by Buyer.
9.04. NO THIRD-PARTY RIGHTS. Nothing in this Article IX express or
implied shall confer upon any Transferred Employee or other Person or legal
representative thereof any rights or remedies, including any right to employment
or compensation or benefits of any nature or kind whatsoever.
46
9.05. RIGHT TO TERMINATE EMPLOYMENT AND TERMINATE OR MODIFY PLANS.
Nothing in this Article IX express or implied shall be construed to prevent
Buyer from (i) terminating or modifying to any extent the employment or the
employment relationship of any Transferred Employee at any time for any reason,
or (ii) terminating or modifying to any extent or in any respect any employee
benefit plan, program or arrangement that Buyer may contribute to, maintain, or
establish for the benefit of Transferred Employees or such other employees,
directors, consultants, contractors, or otherwise, at any time for any reason.
ARTICLE X
INDEMNIFICATION
10.01. AGREEMENT TO INDEMNIFY.
(a) Buyer, Xxxxx Entity and their respective Affiliates,
officers, directors, shareholders, partners and employees (collectively, the
"Buyer Indemnitees") shall each be indemnified and held harmless to the extent
set forth in this Article X by Seller in respect, and Seller shall pay the full
amount, of any and all Damages incurred by any Buyer Indemnitee (i) as a result
of any misrepresentation in or breach of or failure to perform any
representation, warranty, covenant, agreement made by the Seller in this
Agreement or in any document delivered in connection herewith; (ii) in
connection with the assertion of any Excluded Liability of any kind whatsoever,
whether or not described in this Agreement or any Exhibit or Schedule hereto;
(iii) as a result of the failure by Seller to comply with any applicable bulk
sales law; (iv) as a result of any violations or infringements of any material
Applicable Law, or any order, writ, injunction or decree of any Governmental
Authority, but only to the extent that such violations or infringements occurred
prior to the Closing Date, whether or not known or asserted before such date;
(v) as a result of Taxes of Seller applicable to the Division or the Transferred
Assets for any period or portion thereof ending on or prior to the Closing Date;
or (vi) the sum of (x) the amount by which $190,000 (which Seller represents and
warrants is the amount of the Accounts Receivable transferred to Buyer (as part
of the Transferred Assets) which are related to the items of Deferred Income
reflected on the books of the Division on November 26, 1997, which items Seller
represents and warrants do not exceed the $639,333 of Deferred Income items
reflected on the Division's September 30, 1997 balance sheet) exceeds the
amounts actually collected by Buyer within 90 days of the Closing Date with
respect to such Accounts Receivable, plus (y) the actual amount in excess of
$108,000 that it costs Buyer to satisfy all of its obligations to customers with
respect to such Deferred Income items; PROVIDED, HOWEVER, that Seller shall have
no obligation under clause (i) of this Section 10.01(a) unless and until the
aggregate amount of Damages so incurred exceeds fifty thousand dollars
($50,000), whereupon Seller shall be liable to indemnify all amounts over fifty
thousand dollars ($50,000); PROVIDED, FURTHER, that the immediately preceding
PROVISO shall not be applicable with respect to any amounts that may be payable
to Buyer by Seller in respect of any breach described in clauses (i), (ii),
(iii) or (iv) of Section 10.02(b). The Liability of Seller for the indemnity
obligations under
47
this Article X shall not exceed in the aggregate $6,500,000; PROVIDED, HOWEVER,
that there shall be no dollar limit to Seller's indemnity obligations with
respect to any of the matters covered by Sections 3.01, 3.02, 3.09(a), 3.19 and
3.21 or with respect to any claim based upon fraud or willful or criminal
misconduct.
(b) Seller and its Affiliates, officers, directors,
shareholders and employees (collectively, the "Seller Indemnitees") shall each
be indemnified and held harmless to the extent set forth in this Article X by
Buyer and Xxxxx Entity in respect of, and Buyer or Xxxxx Entity, as the case may
be, shall pay the full amount, of any and all Damages incurred by any Seller
Indemnitee (i) as a result of any misrepresentation in or breach of or failure
to perform any representation, warranty, covenant or agreement made by Buyer in
this Agreement or in any document delivered in connection herewith; or (ii) in
connection with any Assumed Liability; PROVIDED, HOWEVER, that Buyer shall have
no obligation under clause (i) of this Section 10.01(b) unless and until the
aggregate amount of Damages so incurred exceeds fifty thousand dollars
($50,000), whereupon Buyer shall be liable to indemnify all amounts over fifty
thousand dollars ($50,000); PROVIDED, FURTHER, that the immediately preceding
PROVISO shall not be applicable with respect to any amounts that may be payable
to Seller by Buyer in respect of any breach described in clauses (i), (ii) or
(iii) of Section 10.02(c). The Liability of Buyer and Xxxxx Entity for the
indemnity obligations under this Article X shall not exceed in the aggregate
$6,500,000; PROVIDED, HOWEVER, that there shall be no dollar limit to Buyer's
indemnity obligations with respect to any of the matters covered by Section 4.01
or with respect to any claims based upon fraud or willful or criminal
misconduct.
(c) The right to indemnification hereunder shall not be
affected by any investigation conducted with respect to, or any knowledge
acquired about, the Division or the Transferred Assets. The waiver of any
condition based on the accuracy of any representation or warranty, or the
performance of or the compliance with any covenant or obligation, will not
affect the right to indemnification or other remedy based on such
representation, warranty, covenant and obligation. Nothing set forth in this
Article X shall be deemed to prohibit or limit any Buyer Indemnitee's or Seller
Indemnitee's right at any time before, on or after the Closing Date, to seek
injunctive or other equitable relief for the failure of any Indemnifying Party
to perform any covenant or agreement contained herein.
10.02. SURVIVAL OF REPRESENTATION, WARRANTIES AND COVENANTS.
(a) Except as hereinafter provided in this Section 10.02, all
representations, warranties, covenants, agreements and obligations of each
Indemnifying Party contained herein and all claims of any Buyer Indemnitee or
Seller Indemnitee in respect of any breach of any representation, warranty,
covenant, agreement or obligation of any Indemnifying Party contained in this
Agreement, shall survive the Closing and shall expire on the third anniversary
of the Closing Date.
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(b) Notwithstanding Section 10.02(a), (i) the representations
and warranties made in Sections 3.01, 3.02, 3.09(a) and 3.21 and the agreement
of Seller to perform and timely pay and discharge all Excluded Liabilities shall
be unlimited in time, (ii) the representations and warranties made in Sections
3.08(a), 3.09(b), 3.09(c), 3.12, 3.13, 3.17, 3.19 and 3.20 shall survive until
sixty (60) days following the expiration of the applicable statute of
limitations or any extension thereof, by waiver or otherwise, (iii) the Seller's
breach of, or failure to perform, after the Closing Date any of the covenants,
agreements or obligations of Seller contained in this Agreement or in the
Exhibits attached hereto required to be performed after the Closing Date shall
survive until sixty (60) days following the expiration of the applicable statute
of limitations or any extension thereof, by waiver or otherwise, and (iv) the
representations and warranties in Section 3.23 respecting the Liability of
Seller for Taxes shall continue to survive until the later of (x) the time at
which all taxable periods to and including the Closing Date shall be closed to
any further assessment of Taxes or to any assessment of any penalties or
interest charges in respect of any such Taxes, by receipt of a final assessment,
in form and substance reasonably satisfactory to Buyer, from the appropriate tax
authorities, or (y) sixty (60) days following the expiration of the applicable
statute of limitations or any extension thereof, by waiver or otherwise.
(c) Notwithstanding Section 10.02(a), (i) the representations
and warranties made in Sections 4.01 and 4.02 and the agreement of Buyer to
perform and timely pay and discharge all Assumed Liabilities shall be unlimited
in time, (ii) the representations and warranties made in Section 4.05 shall
survive until sixty (60) days following the expiration of the applicable statute
of limitations or any extension thereof, by waiver or otherwise, and (iii) the
Buyer's breach of, or failure to perform, after the Closing Date any of the
covenants, agreements or obligations of Buyer contained in this Agreement or in
the Exhibits attached hereto required to be performed after the Closing Date
shall survive until sixty (60) days following the expiration of the applicable
statute of limitations or any extension thereof, by waiver or otherwise.
10.03. CLAIMS FOR INDEMNIFICATION. If any Indemnitee shall believe
that such Indemnitee is entitled to indemnification pursuant to this Article X
in respect of any Damages such Indemnitee shall give the appropriate
Indemnifying Party written notice thereof (a "Notice of Claim") (but such Notice
of Claim must be delivered within the time periods specified in Section
10.02(a), (b) and (c), and if so delivered shall be considered timely made even
if such claim is not resolved until after the expiration of the aforesaid
periods). Any such Notice of Claim shall set forth in reasonable detail and to
the extent then known the basis for such claim for indemnification. The failure
of such Indemnitee to give the Notice of Claim for indemnification promptly
shall not adversely affect such Indemnitee's right to indemnity hereunder except
to the extent that the defense of any claim is prejudiced by such failure.
49
10.04. DEFENSE OF CLAIMS.
(a) In connection with any claim under this Article X
resulting from or arising out of any claim or Proceeding against an Indemnitee
by a Person that is not a party hereto, the Indemnifying Party may (unless such
Indemnitee elects not to seek indemnity hereunder for such claim), upon written
notice to the relevant Indemnitee, assume the defense of any such claim or
Proceeding if all Indemnifying Parties with respect to such claim or Proceeding
jointly acknowledge to the Indemnitee its right to indemnity pursuant hereto in
respect of the entirety of such claim (as such claim may be subsequently
modified through written agreement of the parties or arbitration hereunder) and
provide assurances, reasonably satisfactory to such Indemnitee, that the
Indemnifying Parties will be financially able to satisfy such claim in full if
such claim or Proceeding is decided adversely. If the Indemnifying Parties
assume the defense of any such claim or Proceeding, the Indemnifying Parties
shall select counsel reasonably acceptable to such Indemnitee to conduct the
defense of such claim or Proceeding, shall take all steps necessary in the
defense or settlement thereof and shall at all times vigorously, diligently and
promptly pursue the resolution thereof and keep the Buyer and its attorneys
reasonably informed as to the progress of the defense and any proposed
settlement. If the Indemnifying Parties shall have assumed the defense of any
claim or Proceeding in accordance with this Section 10.04, the Indemnifying
Parties shall be authorized to consent to a settlement of, or the entry of any
judgment arising from any claim or Proceeding, with the prior written consent of
such Indemnitee; PROVIDED, HOWEVER, that no consent shall be required from such
Indemnitee if the Indemnifying Party shall pay or cause to be paid all amounts
arising out of such settlement or judgment concurrently with the effectiveness
thereof; PROVIDED, FURTHER, that the Indemnifying Parties shall not be
authorized to encumber any of the assets of any Indemnitee or to agree to any
restriction that would apply to any Indemnitee or to its conduct of business;
and PROVIDED FURTHER, that a condition to any such settlement shall be a
complete release of such Indemnitee and its Affiliates, officers, employees,
consultants and agents with respect to such claim. Such Indemnitee shall be
entitled to participate in the defense of any such action at its own cost and
expense. Each Indemnitee shall, and shall cause each of its Affiliates,
officers, employees, consultants and agents to, reasonably cooperate with the
Indemnifying Parties in the defense of any claim or Proceeding being defended by
the Indemnifying Parties pursuant to this Section 10.04.
(b) If the Indemnifying Parties do not assume the defense of
any claim or Proceeding resulting therefrom or do not satisfy the provisions of
Section 10.04(a) for controlling the defense of such claim or Proceeding, such
Indemnitee, at the cost and expense of the Indemnifying Party, may defend
against such claim or Proceeding in such manner as it may deem appropriate,
including settling such claim or Proceeding after giving notice of the same to
the Indemnifying Parties, on such terms as such Indemnitee may deem appropriate.
If the Indemnifying Parties seek to question the manner in which such Indemnitee
defended such claim or Proceeding or the amount of or nature of any such
settlement, the Indemnifying Parties shall
50
have the burden to prove by a preponderance of the evidence that such Indemnitee
did not defend such claim or Proceeding in a reasonably prudent manner.
10.05. NATURE OF PAYMENTS. Any payment under this Article X shall be
treated for tax purposes as an adjustment of the Purchase Price to the extent
such characterization is proper and permissible under relevant Tax authorities,
including court decisions, statutes, regulations and administrative
promulgations or, alternatively, by Buyer as an offset to a tax benefit item, if
such characterization is permissible under such Tax authorities.
ARTICLE XI
TERMINATION
11.01. GROUNDS FOR TERMINATION. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual written agreement of all the parties hereto;
(b) by Buyer by written notice to Seller if Buyer is not then
in material breach of any material provision of this Agreement and there has
been any one or more misrepresentations in or breaches of the representations or
warranties made by Seller contained herein that, if not cured on or prior to the
Closing Date, could be reasonably expected to give Buyer grounds not to close
under Section 8.01 when taken into account with all other uncured
misrepresentations in or breaches of such representation or warranties as to
which Buyer shall have given notice to Seller as provided in this clause (b); a
termination pursuant to this paragraph (b) shall become effective (i) fifteen
(15) days after such notice with respect to such a misrepresentation or breach
that is not capable of being cured on or prior to the Closing Date, or (ii)
immediately prior to the Closing with respect to such a misrepresentation or
breach that is capable of being cured, but is not cured, on or prior to the
Closing Date;
(c) by Buyer if Buyer is not then in material breach of any
material provision of this Agreement after written notice to Seller of the
failure by Seller to perform and satisfy in any material respect any of its
material obligations required to be performed and satisfied by Seller on or
prior to the Closing Date, if the aggregate of all such failures shall be
material; a termination pursuant to this paragraph (c) shall become effective
(i) fifteen (15) days after such notice with respect to such a failure that is
not capable of being cured on or prior to the Closing Date, or (ii) immediately
prior to the Closing with respect to such a failure that is capable of being
cured, but is not cured, on or prior to the Closing Date;
(d) by Seller after written notice to Buyer if Seller is not
then in material breach of any material provision of this Agreement and there
has been one or more material misrepresentations in or material breaches of the
representations or warranties made by
51
Buyer herein which, if not cured on or prior to the Closing Date, could be
reasonably expected to give Seller grounds not to close under Section 8.02 when
taken into account with all other uncured misrepresentations in or breaches of
such representations or warranties as to which the Seller shall have given
notice to the Buyer as provided in this paragraph (d); a termination pursuant to
this paragraph (d) shall become effective (i) fifteen (15) days after such
notice with respect to such a misrepresentation or breach that is not capable of
being cured on or prior to the Closing Date, or (ii) immediately prior to the
Closing with respect to such a misrepresentation or breach that is capable of
being cured, but is not cured, on or prior to the Closing Date;
(e) by Seller if Seller is not then in material breach of any
material provision of this Agreement after written notice to Buyer of Buyer's
failure to perform and satisfy in any material respect any of its material
obligations under this Agreement required to be performed and satisfied by Buyer
on or prior to the Closing Date, if the aggregate of all such failures shall be
material; a termination pursuant to this paragraph (e) shall become effective
(i) fifteen (15) days after such notice with respect to such a failure that is
not capable of being cured on or prior to the Closing Date, or (ii) immediately
prior to the Closing with respect to such a failure that is capable of being
cured, but is not cured, on or prior to the Closing Date;
(f) by Buyer, or by Seller, if the Closing shall not have been
consummated by November 26, 1997 (the "Outside Date"); PROVIDED, HOWEVER, that
neither Buyer nor Seller may terminate this Agreement pursuant to this paragraph
(f) if the Closing shall not have been consummated within such time period by
reason of the failure of such party or any of its Affiliates to perform in all
material respects any of its or their respective covenants or agreements
contained in this Agreement; and
(g) by any party hereto if any federal, state or foreign law
or any rule or regulation thereunder shall hereafter be enacted or become
applicable that makes the transaction contemplated hereby or the consummation of
the Closing illegal or otherwise prohibited, or if any judgment, injunction,
order or decree enjoining either party hereto from consummating the transactions
contemplated hereby is entered and such judgment, injunction, order or decree
shall become final and nonappealable.
The party desiring to terminate this Agreement pursuant to clauses
(b) through (g) shall give written notice of such termination to the other
party.
11.02. EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 11.01, such termination shall be without liability of any
party to any other party to this Agreement except as hereinafter expressly
provided in this Section 11.02. If such termination shall result from the breach
by any party of its representations, warranties or covenants contained in this
Agreement, such party shall be fully liable for any and all Damages incurred or
suffered by the other parties as a result of such failure or breach and such
termination shall not be deemed to be an election of remedies. In addition, the
provisions of Sections 5.05, 6.03, 13.01, 13.02, 13.03, 13.04, 13.05, 13.07,
13.10, 13.11, 13.12, 13.13 and 13.14 shall survive any termination of
52
this Agreement pursuant to this Article XI, and each party hereto shall be fully
responsible for any breach of Section 5.05, 6.03 or 13.03, whether or not such
breach occurs prior to the termination of this Agreement.
ARTICLE XII
AGREEMENT NOT TO COMPETE
12.01. AGREEMENT NOT TO COMPETE. Seller agrees that for a period of
two (2) years after the Closing Date, it will not compete, directly or
indirectly, or participate through agents or representatives, as director,
officer, employee, agent, representative or otherwise in any business competing,
directly or indirectly, with the present business of the Division in any
geographic area where Seller is on the Closing Date conducting such business of
the Division. If any provision of this Article XII shall, for any reason, be
adjudged by any court of competent jurisdiction to be invalid or unenforceable,
such judgment shall not affect, impair or invalidate the remainder of this
Article XII but shall be confirmed in its operation to the provision of this
Article XII directly involved in the controversy in which such judgment shall
have been rendered. In the event of a breach of this Article XII, Buyer, in
addition to any other rights and remedies they may have, shall be entitled to an
injunction restraining Seller from doing or continuing to do any such act in
violation of this Article XII.
ARTICLE XIII
MISCELLANEOUS
13.01. NOTICES. All notices, requests, demand, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so delivered, against written receipt, (ii) if mailed
by registered or certified mail, return receipt requested, postage prepaid and
addressed to the intended recipient as set forth below, five (5) Business Days
after being so mailed, (iii) if given by telecopier, once such notice or other
communication is transmitted to the telecopier number specified below and the
appropriate answer back or telephonic confirmation is received, provided that
such notice or other communication is promptly thereafter delivered in
accordance with the provisions of clauses (i), (ii) or (iv) hereof, or (iv) if
sent by a nationally recognized overnight delivery service which guarantees next
day delivery, one (1) Business Day after being so sent;
53
If to Seller:
Docucon, Incorporated
0000 Xxxxxxxxx Xxxx
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xx. Xxxxxx Xxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Rosenberg, Tuggey, Agather & Xxxxxxxxx
000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
If to Xxxxx Entity or Buyer:
Xxxxx Entity or Buyer, as the case may be
c/x Xxxxx & Co., Inc.
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxx Xxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
54
13.02. AMENDMENTS: NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the case
of an amendment, by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent occurrence. No failure or delay by a party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
13.03. EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
13.04. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. No party hereto may assign, in whole or in part, whether
by operation of law or otherwise, either this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of each
other party; PROVIDED, HOWEVER, that (i) Buyer may assign this Agreement to any
of its subsidiaries or to any subsidiary of Xxxxx & Co., Inc. as long as Buyer
remains fully liable hereunder and (ii) Seller may assign its rights under this
Agreement to any of its Affiliates created in any recapitalization of Seller as
long as Seller remains fully liable hereunder.
13.05. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the internal laws (without reference to choice
or conflict of laws) of the State of New York.
13.06. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto.
13.07. ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits referred to herein which are hereby incorporated by reference)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements
55
(including the Letter of Intent, dated September 4, 1997), understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement.
13.08. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
13.09. SEVERABILITY. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall not be effected thereby and remain in full force
and effect only if, after excluding the portion deemed to be unenforceable, the
remaining terms shall provide for the consummation of the transactions
contemplated hereby in substantially the same manner as originally set forth at
the later of the date this Agreement was executed or last amended.
13.10. CONSTRUCTION.
(a) The language used in this Agreement will be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against either party. Any reference
to any Applicable Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. Whenever required
by the context, any gender shall include any other gender, the singular shall
include the plural and the plural shall include the singular. The words
"herein," "hereof," "hereunder," and words of similar import refer to the
Agreement as a whole and not to a particular section. Whenever the word
"including" is used in this Agreement, it shall be deemed to mean "including,
without limitation," "including, but not limited to" or other words of similar
import such that the items following the word "including" shall be deemed to be
a list by way of illustration only and shall not be deemed to be an exhaustive
list of applicable items in the context thereof.
(b) The parties hereto intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
13.11. ARBITRATION OF CLAIMS.
(a) Except as provided in Sections 5.08, 6.04 and 12.01
hereof, any dispute, claim, controversy or difference between or among the
parties arising out of this Agreement or the transactions contemplated hereby (a
"Dispute"), including without limitation
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any dispute between an Indemnitee and any Indemnifying Party under Article X,
which the parties are unable to resolve themselves shall be submitted to and
resolved by arbitration as herein provided.
(b) Any Dispute subject to arbitration shall be arbitrated in
New York, New York under the commercial rules then in effect of the American
Arbitration Association (the "AAA"). The arbitrators shall be instructed to
deliver a written report of their determination (an "Arbitrators' Report") to
the Buyer and the Seller (or the Indemnitee and the Indemnifying Party, as the
case may be). Each party to such arbitration agrees that any award of the
arbitrators shall be final, conclusive and binding and that they will not
contest any action by any other party thereto in accordance with an award of the
arbitrators. It is specifically understood and agreed that any party may enforce
any award rendered pursuant to the arbitration provisions of this Section 13.11
by bringing suit in any court of competent jurisdiction.
(c) A party demanding arbitration under this Agreement (an
"Initiating Party") shall initiate such arbitration by delivering written notice
(the "Arbitration Notice") to the party with whom arbitration is sought (i) with
respect to any claim for indemnification under Article X hereof, within thirty
(30) days after the receipt of the relevant Notice of Claim by the Indemnifying
Party, and (ii) with respect to any other Disputes, within a reasonable time,
and in any event, not after the date when institution of legal or equitable
proceedings based on such Dispute would be barred by this Agreement or the
applicable statute of limitations. Any Arbitration Notice shall contain a
statement setting forth the nature of the Dispute, the amount involved, if any,
and the remedy sought.
(d) The arbitration panel shall consist of three (3)
arbitrators appointed within twenty (20) Business Days after receipt of notice
from an Initiating Party, one of whom shall be appointed by the Seller and one
of whom shall be appointed by the Buyer. The two arbitrators thus appointed
shall choose the third arbitrator; provided, however, that if the two
arbitrators are unable to agree on the appointment of the third arbitrator, such
arbitrator shall be designated by the President of the AAA. If any arbitrator
resigns or is unable to continue serving as such, the successor to such
arbitrator shall be appointed by the party or parties who appointed such
arbitrator or by the remaining arbitrators if they had appointed such
arbitrator, or by the then President of the AAA, as the case may be. A
stenographic record of the arbitration proceedings shall be made and in the
event a successor arbitrator must be appointed he or she may rely on such record
and no rehearing shall be required.
(e) All fees, costs and expenses (including reasonable
attorneys' fees and expenses) incurred by the party that prevails in any such
arbitration commenced pursuant to this Section 13.11 or any judicial action of
proceeding seeking to enforce the agreement to arbitrate disputes as set forth
in this Section 13.11 or seeking to enforce any order or award of any
arbitration commenced pursuant to this Section 13.11 may be assessed against the
party or parties that do not prevail in such arbitration in such manner as the
arbitrators or the court in such judicial action, as the case may be, may
determine to be appropriate under the circumstances. All
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costs and expenses attributable to the arbitrators shall be allocated among the
parties to the arbitration in such manner as the arbitrators shall determine to
be appropriate under the circumstances.
(f) Notwithstanding the foregoing, it is hereby agreed that no
arbitration panel shall have any power to add to, alter or modify the terms and
conditions of this Agreement or any other agreement executed and delivered in
connection herewith or to decide any issue which does not arise from the
interpretation or application of the provisions of this Agreement.
13.12. CUMULATIVE REMEDIES. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
13.13. THIRD PARTY BENEFICIARIES. Except as provided in Article X,
no provision of this Agreement shall create any third party beneficiary rights
in any Person, including any employee of Buyer or employee or former employee of
Seller or any Affiliate or Associate thereof (including any beneficiary or
dependent thereof).
13.14. JURISDICTION. Seller hereby (i) submits to the exclusive
jurisdiction of the state courts of the State of New York located in New York
County and the United States Federal District Court of the Southern District of
New York for the purpose of any suit, action or other proceeding arising out of
or based upon this Agreement or the subject matter hereof brought by Buyer, any
Indemnified Party or their respective heirs, legal representatives, successors
or assigns (an "Action") and (ii) waives, and agrees not to assert by way of
motion, a defense, or otherwise, in any such Action, any claim that it or he is
not subject personally to the jurisdiction of the above-named courts, that its
or his property is exempt or immune from attachment or execution, that the
Action is brought in an inconvenient forum, that the venue of the Action is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court. The Seller hereby irrevocably appoints CT
Corporation System as its authorized agent to receive service of process with
respect to any such Action on its behalf, which service may be made on such
agent in accordance with legal procedures prescribed by such courts and CT
Corporation system has delivered concurrently with the execution and delivery of
this Agreement a written acceptance of such appointment.
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IN WITNESS WHEREOF, the parties hereto have caused this Asset
Purchase Agreement to be duly executed as of the day and year first above
written.
DOCUCON, INCORPORATED
By:/s/ XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx
Title: CEO
XXXXX OF DALLAS, INC.
By:/s/ XXXXXX X. XXXXXXXX
Name: Xxxxxx X. Xxxxxxxx
Title: Treasurer
XXXXX LITIGATION SOLUTIONS, L.P.
BY XXXXX SOLUTIONS, INC., ITS GENERAL PARTNER
By:/s/ XXXXXX X. XXXXX
Name: Xxxxxx X. Xxxxx
Title: President
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