PURCHASE AGREEMENT
By and Among
Workflow Management, Inc.
DirectPro LLC
and
The Members Named Therein
made effective as of November 30, 1998
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 30th day of November, 1998, by and among Workflow Management, Inc., a
Delaware corporation ("Buyer"), DirectPro LLC, a New York limited liability
company (the "Company"), Xxxxxx Xxxxx ("RS") and TLG Realty LLC, a New York
limited liability company ("TLG"), the sole members of the Company (each a
"Member" and collectively, the "Members"), and Xxxxxxx Xxxxxxxxx and Xxxxxx
Xxxxxxxx, the sole members of TLG (each a "TLG Member" and collectively the "TLG
Members").
BACKGROUND
The Members in the aggregate own all of the membership interests of
the Company. This Agreement contemplates a transaction in which the Buyer will
purchase from the Members, and the Members will sell to the Buyer, all of the
membership interests of the Company (the "Membership Interests") for the cash
consideration set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. PURCHASE OF MEMBERSHIP INTERESTS.
1.1. Membership Interests. Subject to the terms
and conditions of this Agreement, at the Closing (as defined below), the Members
will sell to Buyer, and Buyer will purchase from the Members, the Membership
Interests for the Purchase Price (as defined below).
1.2. Purchase Price.
(a) For purposes of this Agreement, the
"Purchase Price" shall be the amounts payable to the Members by Buyer as set
forth below in this Section 1.2(a), which shall be payable in installments
pursuant to Section 453(b) of the Internal Revenue Code of 1986, as amended
("Code") in the following manner:
(i) $6,690,215 of the Purchase Price shall be payable
in cash ("Cash Purchase Price"), as adjusted pursuant to Section 1.3. The Cash
Purchase Price, as so adjusted, shall first be applied to satisfy the escrow
obligations set forth in Section 1.4 and the balance shall be paid at Closing as
set forth in Section 1.5(a).
(ii) Certain payments shall be made to the Members
based upon the "Adjusted EBITDA" of the Company, as specifically set forth in
Section 1.7 hereof. For purposes of the Code, 4.51% of such payments shall be
treated as interest for income tax purposes, which is equal to the Applicable
Federal Rate for Mid-Term Annual obligations as published by the Internal
Revenue Service for November 1998 in Revenue Ruling 98-52.
(b) The Purchase Price has been calculated
based upon the assumption that (i) the net worth of the Company, calculated in
accordance with generally accepted accounting principles ("GAAP") consistently
applied, is equal to or greater than $4,179 (the "Net Worth Target") as of the
Closing and (ii) the sum of the Company's cash, cash equivalents, marketable
securities, and accounts receivable less accounts payable, calculated in
accordance with GAAP consistently applied, is equal to or greater than
$1,037,218 as of the Closing ("Net Working Capital Target"); provided, however,
that notwithstanding anything in GAAP to the contrary the Net Worth Target and
Net Working Capital Target shall be calculated for purposes of this Agreement
after giving effect to any expenses incurred by the Company (or the Members and
paid by the Company) in connection with the transactions contemplated by this
Agreement, distributions made by the Company to any of the Members, and the
payments referred to in Section 1.2(d).
(c) In addition to the Purchase Price, at
the Closing the Buyer shall pay to TLG $700,000 in full satisfaction of all
amounts owed by the Company to TLG ("TLG Debt").
(d) Pursuant to the terms of a Settlement
Agreement between the Company and Adcom, Inc. ("Adcom") dated November 30, 1998
("Settlement Agreement"), on or before the Closing Date the Company and/or the
Members shall pay, discharge, and satisfy in full certain portions of the
liability of the Company reflected as the "Asset Purchase Obligation" on the
Company Financial Statements (as defined in Section 3.10) and as further
evidenced by the Consulting Agreement dated September 6, 1996, executed by the
Company and Adcom (the "Asset Purchase Obligation"), all as specifically
reflected in the Settlement Agreement; provided, however, that the Members (and
not the Company) shall pay such portions of the Asset Purchase Obligation
contemplated by the Settlement Agreement to the extent such payment by the
Company would cause the Actual Company Net Worth (as defined in Section 1.3.(b))
to be less than the Net Worth Target or the Actual Company Net Working Capital
(as defined in Section 1.3(b)) to be less than the Net Working Capital Target.
After the Closing Date, the Company shall be liable to perform the obligations
set forth in the Settlement Agreement (except for Section 1.B. of the Settlement
Agreement).
1.3. Post-Closing Adjustment.
(a) The Cash Purchase Price shall be subject to adjustment
after the Closing Date as specified in this Section 1.3.
(b) Within one hundred twenty (120) days following the
Closing Date, Buyer shall cause PriceWaterhouseCoopers ("Buyer's Accountant") to
audit the Company's books to determine whether the Net Worth Target and the Net
Working Capital Target have been met (the "Post-Closing Audit"). The parties
acknowledge and agree that for purposes of determining the net worth and net
working capital of the Company as of the Closing Date, the value of the assets
of the Company shall, except with the prior written consent of Buyer, be
calculated as provided in the last paragraph of Section 6.8 and shall be based
upon a balance sheet which is consistent with the Company's unaudited balance
sheet as of September 30, 1998 and income statement, statement of cash flows and
statement of changes in members' equity for the nine-month period then ended
(collectively, the "Interim Financials"). In the event that the Buyer's
Accountant determines that the actual Company net worth as of the Closing Date
or actual Company net working capital as of the Closing Date were less than the
Net Worth Target or Net Working Capital Target, respectively, Buyer shall
deliver a written notice (the "Financial Adjustment Notice") to the Members'
Representative (as defined in Section 1.6), setting forth the determination of
the actual Company net worth (the "Actual Company Net Worth") and actual Company
net working capital ("Actual Company Net Working Capital"). Subject to the
resolution of any dispute in connection with such determination as set forth in
Section 1.3(c), (i) if the Actual Company Net Worth or Actual Company Net
Working Capital is less than the Net Worth Target or Net Working Capital Target,
respectively, the Purchase Price, at the option of the Buyer, shall be adjusted
by the greater of (x) the difference between the Net Worth Target and the Actual
Closing Net Worth and (y) the difference between the Net Working Capital Target
and Actual Closing Net Working Capital (any such adjustment the "Purchase Price
Adjustment").
(c) The Members' Representative shall have thirty (30) days
from the receipt of a Financial Adjustment Notice to notify Buyer if the Members
dispute such Financial Adjustment Notice. If Buyer has not received a notice of
such dispute within such thirty (30) day period, Buyer shall be entitled to
receive from the Members (which may, at Buyer's sole discretion, be from the
Pledged Assets as defined in Section 1.4) the Purchase Price Adjustment. If,
however, the Members' Representative has delivered notice of such a dispute to
the Buyer within such thirty (30) day period, then Buyer's Accountant and an
accountant selected by the Members ("Members' Accountant") shall meet to discuss
resolution of such dispute and if within 10 business days thereafter the Buyer's
Accountant and Members' Accountant have not been able to resolve such dispute,
then Buyer's Accountant and Members' Accountant shall mutually agree upon and
select an independent accounting firm that has not represented any of the
parties hereto within the preceding two (2) years. If Buyer's Accountant and
Members' Accountant cannot agree upon such independent accounting firm, then the
selection shall be made by an appropriate officer of the New York State Society
of Certified Public Accountants. The independent accounting firm so selected
shall review the Company's books and the Financial Adjustment Notice (and
related information) to determine the amount, if any, of the Purchase Price
Adjustment. The independent accounting firm shall be directed to consider only
those agreements, contracts, commitments or other documents (or summaries
thereof) that were either (i) delivered or made available to Buyer's Accountant
in connection with the transactions contemplated hereby, or (ii) reviewed by
Buyer's Accountant and Members' Accountant during the course of the Post-Closing
Audit. The independent accounting firm shall make its determination of the
Purchase Price Adjustment, if any, within thirty (30) days of its selection. The
determination of the independent accounting firm shall be final and binding on
the parties hereto. If there is a determination of a Purchase Price Adjustment,
Buyer shall be entitled to receive from the Members (which may, at Buyer's sole
discretion, be from the Pledged Assets as defined in Section 1.4) the Purchase
Price Adjustment. The costs of the independent accounting firm shall be borne by
the party (either Buyer or the Members as a group) whose determination of the
Company's net worth at Closing was further from the determination of the
independent accounting firm, or equally by Buyer and the Members in the event
that the determination by the independent accounting firm is equidistant between
the Net Worth Target and the Actual Company Net Worth.
(d) Buyer acknowledges that, prior to Closing, the Company
has made distributions to the Members or other payments in an effort to ensure
that the Actual Company Net Worth and Actual Company Net Working Capital are
equal to, but not greater than, the Net Worth Target and Net Working Capital
Target. Except in the event of fraud, willful misconduct, or gross negligence by
the Members and the Company prior to Closing, the Buyer acknowledges that its
sole remedy is a Purchase Price Adjustment pursuant to this Section 1.3 in the
event that the Actual Company Net Worth or Actual Company Net Working Capital
are less than the Net Worth Target or Net Working Capital Target, respectively.
1.4. Pledged Assets.
(a) As collateral security for the payment of any
Post-Closing adjustment to the Cash Purchase Price under Section 1.3, or any
indemnification obligations of the Members or TLG Members pursuant to Article 8,
the Members shall, and by execution hereof do, transfer to Xxxxxxx & Xxxxxxx, a
Virginia professional corporation ("Escrow Agent"), $500,000 of the Cash
Purchase Price (the "Pledged Assets").
(b) The Pledged Assets shall be held by the Escrow Agent
pursuant to the terms and conditions set forth in the Escrow Agreement ("Escrow
Agreement") dated as of the date hereof by and among Buyer, the Members, the TLG
Members and the Escrow Agent.
(c) The Pledged Assets shall be available to satisfy any
Post-Closing adjustment to the Cash Purchase Price pursuant to Section 1.3 and
any indemnification obligations of the Members or TLG Members pursuant to
Article 8, until May 31, 1999, (the "Release Date"). Promptly following the
Release Date, subject to the specific terms and conditions of the Escrow
Agreement, the Escrow Agent shall return or cause to be returned to the Members
(in such proportions as directed by the Members' Representative) the Pledged
Assets, less Pledged Assets having an aggregate value equal to the amount of (i)
any Post-Closing adjustment to the Cash Purchase Price under Section 1.3
(including any Post-Closing adjustment to the Cash Purchase Price that is
subject to dispute under the terms and conditions of Section 1.3), (ii) any
pending claim for indemnification made by any Indemnified Party (as defined in
Article 8), and (iii) any indemnification obligations of the Members pursuant to
Article 8.
1.5. Payment of Cash; Ownership Rights in Membership Interests.
(a) Buyer to Provide Cash. In exchange for the Membership
Interests, Buyer shall cause to be paid to the Members by wire transfer in
immediately available federal funds the Cash Purchase Price and shall pay to TLG
the TLG Debt. Such payment of the Cash Purchase Price and TLG Debt shall be made
as follows:
(i) At the Closing $6,890,215 shall be
paid to Xxxxxxxxxx Xxxxx & Xxxxxxxx, LLP ("TD&R"), as attorneys for the Members,
which reflects payment of (a) the Cash Purchase Price less the Pledged Assets
and (b) the TLG Debt; and
(ii) At the Closing $500,000, which
represents the Pledged Assets, shall be delivered to the Escrow Agent in
accordance with Section 1.4.
In the event of any additional payments
pursuant to Sections 1.4 and 1.7 such payments shall also be made by wire
transfer in immediately available federal funds as directed by the Members'
Representative. Buyer shall have no liability of any nature whatsoever for any
acts or omissions by TD&R in connection with TD&R's distributions of (or failure
to distribute) the Cash Purchase Price or the payments of the TLG Debt to the
Members.
(b) No Further Ownership Rights in
Membership Interests of the Company. The payment of the Cash Purchase Price to
the Members shall be deemed to have been delivered in full satisfaction of all
rights pertaining to the Membership Interests, and following the Closing, the
Members shall have no further rights to, or ownership in, such Membership
Interests.
1.6. Members' Representative.
(a) Each Member, by signing this Agreement, designates
Xxxxxx X. Xxxxxxxx to be the Members' Representative for purposes of this
Agreement. The Members shall be bound by any and all actions taken by the
Members' Representative on their behalf. The Members (and not the Company or the
Buyer) shall pay all costs, fees and expenses charged by the Members'
Representative after the Closing Date in connection with the performance of his
duties and provision of his services under the terms of this Agreement.
(b) Buyer shall be entitled to rely upon any communication
or writings given or executed by the Members' Representative. All communications
or writings to be sent to the Members pursuant to this Agreement may be
addressed to the Members' Representative and any communication or writing so
sent shall be deemed notice to all of the Members hereunder. The Members hereby
consent and agree that the Members' Representative is authorized to accept
deliveries, including any notice, on behalf of the Members pursuant hereto.
(c) The Members' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Member, with full power
in his or its name and on his or its behalf to act according to the terms of
this Agreement in the absolute discretion of the Members' Representative; and in
general to do all things and to perform all acts including, without limitation,
executing and delivering all agreements, certificates, receipts, instructions
and other instruments contemplated by or deemed advisable in connection with
Article 8 of this Agreement. This power of attorney and all authority hereby
conferred is granted subject to the interest of the other Members hereunder and
in consideration of the mutual covenants and agreements made herein, and shall
be irrevocable and shall not be terminated by any act of any Member, by
operation of law, whether by such Member's death or any other event.
1.7. Post-Closing Earn-Out.
(a) For (i) the period commencing on December 1, 1998, and
ending December 31, 1998 ("Initial Fiscal Period"), (ii) for the full calendar
years 1999 and 2000, and (iii) the period commencing January 1, 2001, and ending
on November 30, 2001 (such periods individually an "Annual Earn-out Period"),
the Members shall be entitled to receive from the Buyer fifty percent (50%) of
the Adjusted EBITDA (as defined herein) of the Company for any Annual Earn-out
Period, subject to the Maximum Earn-out Obligation (as defined in Section
1.7(i)) and such other specific terms, conditions and limitations as are set
forth in this Section 1.7 (such payments the "Earn-out"). Any Earn-out due shall
be payable in cash by March 31 of the year following the Annual Earn-out Period
for which an Earn-out is due ("Earn-out Payment Date"), such that the first
Earn-out, if any, would be payable March 31, 1999, and the last Earn-out, if
any, would be payable March 31, 2002. Unless otherwise directed in writing by
the Members' Representative, Earn-outs shall be paid to TD&R, as attorneys for
the Members. Any payment of the Earn-out not paid on or before an Earn-out
Payment Date shall bear interest thereafter at the rate of 18% per annum, or the
highest legal rate chargeable under the laws of the State of Delaware, whichever
is less.
(b) "Adjusted EBITDA" for any Annual Earn-out Period shall
mean the Company's earnings before interest, taxes, depreciation and
amortization as adjusted to reflect add-backs of one time, non-recurring costs
incurred by the Company, as specifically agreed to by the Company and the
Members and reflected on the Earn-out Statements (as defined below) ("Add
Backs"). The Company specifically agrees that such Add-Backs shall include bonus
payments payable pursuant to Exhibit A of the Employment Agreement being entered
into on the date hereof by the Company and RS. Buyer shall prepare a statement
of Adjusted EBITDA for each Annual Earn-out Period (collectively, "Earn-out
Statements"). Each Earn-out Statement shall be delivered to the Members'
Representative no later than March 31 of each year following the Annual Earn-out
Period.
(c) The Members' Representative shall have sixty (60) days
from the receipt of any Earn-out Statement to notify the Buyer if it disputes
such Earn-out Statement. If the Members' Representative has delivered notice of
such a dispute to the Buyer within such sixty (60) day period, then Buyer's
Accountant and Members' Accountant shall meet to discuss resolution of such
dispute and if within 10 business days thereafter, the Buyer's Accountant and
Members' Accountant are not able to resolve such dispute, then Buyer's
Accountant and Members' Accountant shall mutually agree upon and select an
independent accounting firm that has not represented any of the parties hereto
within the preceding two (2) years. If the Buyer's Accountant and Members'
Accountant cannot agree upon such independent accounting firm, then the
selection shall be made by an appropriate officer of the New York State Society
of Certified Public Accountants. The independent accounting firm so selected
shall review the Company's books and the Earn-out Statements (and related
information) to determine the amount, if any, of the Earn-out. The independent
accounting firm shall be directed to consider all agreements, contracts,
commitments or other documents (or summaries thereof) that it determines should
be considered in accordance with GAAP and the terms of this Agreement to make
the determination of the Earn-out. The independent accounting firm shall make
its determination of the Earn-out, if any, within thirty (30) days of its
selection. The determination of the independent accounting firm shall be final
and binding on the parties hereto. If there is a determination that the Members
are owed an Earn-out in excess of that paid by Buyer for any particular Annual
Earn-out Period, Buyer shall immediately pay the difference between the Earn-out
previously paid and the Earn-out owed to the Members as directed by the Members'
Representative. If there is a determination that the Buyer has paid an Earn-out
in excess of that which is due to the Members for any particular Annual Earn-out
Period, then the Members shall immediately refund such excess to the Buyer. The
costs of the independent accounting firm shall be borne by the party (either
Buyer or the Members as a group) whose determination of the Earn-out was further
from the determination of the independent accounting firm, or equally by Buyer
and the Members as a group in the event that the determination by the
independent accounting firm is equidistant between the determination of the
Earn-out by the Buyer and Members, respectively.
(d) To the extent that the Company has a negative Adjusted
EBITDA during any Annual Earn-out Period (such amount an "Adjusted EBITDA
Loss"), the Adjusted EBITDA Loss shall be carried forward to the subsequent
Annual Earn-out Period(s) and aggregated with the Adjusted EBITDA (or Adjusted
EBITDA Loss) for such subsequent Annual Earn-out Period(s) for purposes of
determining the Earn-out, if any, due for such subsequent Annual Earn-out
Period(s). All Adjusted EBITDA Losses shall continue to be carried forward on an
annual basis until such time as Adjusted EBITDA profits are fully offset by the
total amount of the Adjusted EBITDA Losses. Any Adjusted EBITDA Losses will not
effect prior payments of Earn-outs for Annual Earn-out Periods in which the
Company had positive Adjusted EBITDA.
(e) In the event that, after the date of this Agreement,
the Company is merged (or otherwise consolidated) into Buyer or any direct or
indirect subsidiary of Buyer (any such entity a "Merger Affiliate") such that
the Company is not the surviving entity under applicable law, the Earn-out shall
only be payable with respect to the business and operations conducted by the
Company as of the date of this Agreement and without reference to the business
and operations of the Merger Affiliate. For purposes of calculating the Earn-out
payable under this Section 1.7 after a merger or other consolidation by the
Company and a Merger Affiliate, the Buyer shall cause such Merger Affiliate to
(i) conduct the Company's former business and operations as a division of the
Merger Affiliate ("Company Division") and (ii) maintain such financial reporting
systems as are necessary to accurately calculate the Adjusted EBITDA (or
Adjusted EBITDA Losses) of the Company Division.
(f) Except as otherwise expressly agreed to by Buyer, the
Earn-out shall only be payable with respect to the business and operations
currently conducted by the Company (or by the Company Division) and without
reference to any other entity hereafter merged into or otherwise consolidated
with the Company. In the event that the Buyer causes any entity to merge or
otherwise consolidate into the Company such that the Company is the surviving
entity under applicable law, the Company shall maintain such financial reporting
systems as are necessary to accurately calculate the Adjusted EBITDA (or
Adjusted EBITDA Losses) of the Company (or the Company Division) without taking
into account the results of any other operations of the Company or any such
other entity. In addition, no Earn-out shall be payable with respect to any
Adjusted EBITDA attributable to product lines offered by Buyer or their direct
or indirect subsidiaries that are not currently offered by the Company.
(g) Notwithstanding anything in this Section 1.7 to the
contrary, for purposes of determining Adjusted EBITDA under this Section 1.7, no
effect shall be given to (i) any corporate overhead expenses charged by Buyer to
the Company or (ii) any accounting or legal expenses charged or billed to the
Company in excess of $50,000 during any one Annual Earn-out Period (or as
appropriately pro-rated for any Annual Earn-out Period that is less than twelve
(12) months) other than legal expenses incurred by the Buyer or the Company in
connection with matters directly related to the business, assets or properties
of the Company.
(h) Notwithstanding anything in this Section 1.7 to the
contrary, Buyer shall have the right to reduce any amounts otherwise payable as
an Earn-out by the amount of any indemnification obligations of the Members or
TLG Members under Article 8.
(i) Notwithstanding anything in this Section 1.7 to the
contrary, in no event shall the aggregate Earn-outs paid to the Members under
this Section 1.7 exceed $2,070,058 ("Maximum Earn-out Obligation"). At such time
as Buyer has paid to the Members Earn-outs equal to the Maximum Earn-out
Obligation, no further amounts shall be owed by Buyer to the Members under this
Section 1.7. In the event that Buyer fails to (i) prepare an Earn-out Statement
for any Earn-out Period and (ii) pay an Earn-out to the Members (if due) within
thirty (30) days of an Earn-out Payment Date, Buyer shall pay the difference
between $2,070,058 and any payments previously made on account of the Earn-out
in equal annual installments on March 31, in each of 1999 (if applicable), 2000
(if applicable), 2001 (if applicable), and 2002, together with interest on the
declining balance from the Closing at 12% per annum.
1.8. Accounting Terms. Except as otherwise expressly provided
herein or in the Schedules, all accounting terms used in this Agreement shall be
interpreted, and all financial statements, Schedules, certificates and reports
as to financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
2. CLOSING.
The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place through the delivery of executed
originals or facsimile counterparts of all documents required hereunder on such
date that all conditions to Closing shall have been satisfied or waived, or at
such other time and date as Buyer, the Company and the Members may mutually
agree, which date shall be referred to as the "Closing Date."
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MEMBERS.
To induce Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each of the Company, the
Members and the TLG Members jointly and severally, represents and warrants to
Buyer as follows (for purposes of this Agreement, the phrases "knowledge of the
Company" or the "Company's knowledge," or words of similar import, mean the
knowledge of the Members, the TLG Members and the managers and officers of the
Company and its Subsidiary (as defined in Section 3.6(a)), including facts of
which the managers and officers, in the reasonably prudent exercise of their
duties, should be aware):
3.1. Due Organization. The Company and its Subsidiary are
limited liability companies duly organized, validly existing and in good
standing under the laws of the jurisdiction of their organization and are duly
authorized and qualified to do business under all applicable laws, regulations,
ordinances and orders of public authorities to own, operate and lease their
properties and to carry on their business in the places and in the manner as now
conducted. Schedule 3.l hereto contains a list of all jurisdictions in which the
Company and its Subsidiary are authorized or qualified to do business. The
Company and its Subsidiary are in good standing as foreign limited liability
companies in each jurisdiction in which the character of the property owned,
leased or operated by the Company and its Subsidiary or the nature of the
business or activities conducted by the Company and its Subsidiary makes such
qualification necessary. The Company and its Subsidiary have delivered to Buyer
true, complete and correct copies of the Articles of Organization and Operating
Agreements of the Company and its Subsidiary. Such Articles of Organization and
Operating Agreements are collectively referred to as the "Charter Documents."
The Company and its Subsidiary are not in violation of any Charter Documents.
There are no minute books for the Company or its Subsidiary.
3.2. Authorization; Validity. The Company has the full legal
right, power and authority to enter into this Agreement and the transactions
contemplated hereby and to perform its obligations pursuant to the terms of this
Agreement. Each Member and TLG Member has the full legal right and authority to
enter into this Agreement and the transactions contemplated hereby and to
perform its respective obligations pursuant to the terms of this Agreement. The
execution and delivery of this Agreement by the Company and the performance by
the Company of the transactions contemplated herein have been duly and validly
authorized by the Members and this Agreement has been duly and validly
authorized by all necessary action. This Agreement is a legal, valid and binding
obligation of the Company, each Member, and each TLG Member enforceable in
accordance with its terms.
3.3. No Conflicts. The execution, delivery and performance of
this Agreement, the consummation of the transactions contemplated hereby, and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of,
any of the Charter Documents;
(b) Except as set forth on Schedule 3.19(d), conflict with,
or result in a default (or would constitute a default but for any requirement of
notice or lapse of time or both) under, any document, agreement or other
instrument to which the Company or its Subsidiary or any Member or TLG Member is
a party or by which the Company or its Subsidiary or any Member or TLG Member is
bound, or result in the creation or imposition of any lien, charge or
encumbrance on any of the Company's or its Subsidiary's properties pursuant to
(i) any law or regulation to which the Company or its Subsidiary or any Member
or TLG Member or any of their respective property is subject, or (ii) any
judgment, order or decree to which the Company's or its Subsidiary or any Member
or TLG Member is bound or any of their respective property is subject;
(c) result in termination or any impairment of any permit,
license, franchise, contractual right or other authorization of the Company or
its Subsidiary; or
(d) violate any law, order, judgment, rule, regulation,
decree or ordinance to which the Company or its Subsidiary or any Member or TLG
Member is subject or by which the Company or its Subsidiary or any Member or TLG
Member is bound including, without limitation, the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX Xxx"), together with all rules and
regulations promulgated thereunder.
3.4. Matters Relating to Membership Interests. The Membership
Interests are owned of record and beneficially by the Members in the amounts set
forth in Schedule 3.4 free and clear of all Liens except for any Liens arising
pursuant to Charter Documents (defined below). No person other than the Members
owns any membership interest or other equitable interest in the Company. All of
the Membership Interests were offered, issued, sold and delivered by the Company
and its Subsidiary in compliance with all applicable state and federal laws
concerning the issuance of securities. Further, none of the Membership Interests
was issued in violation of any preemptive or similar rights. There are no voting
agreements or voting trusts with respect to the Membership Interests of the
Company or the membership interests of the Company's Subsidiary. For purposes of
this Agreement, "Lien" means any mortgage, security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise), charge, preference, priority or other security agreement, option,
warrant, attachment, right of first refusal, preemptive, conversion, put, call
or other claim or right, restriction on transfer (other than restrictions
imposed by federal and state securities laws), or preferential arrangement of
any kind or nature whatsoever (including any restriction on the transfer of any
assets, any conditional sale or other title retention agreement, any financing
lease involving substantially the same economic effect as any of the foregoing
and the filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
3.5. Options and Similar Rights with Respect to Membership
Interests. Except as set forth in the Charter Documents, no option, warrant,
call, subscription right, conversion right or other contract or commitment of
any kind exists of any character, written or oral, which may obligate the
Company or its Subsidiary to issue, sell or otherwise become outstanding any
membership interests or other equity securities. Neither the Company nor its
Subsidiary have any obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of their equity securities or any interests therein or to
pay or make any distribution in respect thereof. As a result of the transactions
contemplated by this Agreement, Buyer will be the record and beneficial owner of
all membership and equitable interests of the Company and rights to acquire
membership and equitable interests of the Company.
3.6. Subsidiary, Stock, and Notes.
(a) The Company has no Subsidiary other than DirectPro
West, LLC, an Ohio limited liability company. For purposes of this Agreement,
"Subsidiary" means any corporation, partnership, limited liability company,
association or other business entity of which a person (as defined in Section
10.14) owns, directly or indirectly, more than 50% of the voting securities
thereof.
(b) Except as set forth on Schedule 3.6(b), neither the
Company nor its Subsidiary presently own, of record or beneficially, or control,
directly or indirectly, any capital stock, securities convertible into capital
stock or any other equity interest in any corporation, limited liability
company, association or other business entity, nor are the Company or its
Subsidiary, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
(c) Except as set forth on Schedule 3.6(c), there are no
promissory notes that have been issued to, or are held by, the Company or its
Subsidiary.
3.7. Complete Copies of Materials. The Company has delivered to
Buyer true and complete copies of each agreement, contract, commitment unless
otherwise indicated in the Schedules or other document (or summaries thereof)
that is referred to in the Schedules unless otherwise indicated in the Schedules
or that has been requested by Buyer in writing.
3.8. Absence of Claims Against Company. No Member
or TLG Member has any claims against the Company or its
Subsidiary.
3.9. Company Financial Conditions.
(a) The Company's net worth (i) as of
December 31, 1997, was not less than $4,179, and (ii) as of the Closing will not
be less than the Net Worth Target subject to Section 1.3(d).
(b) The Company's sales for (i) its fiscal
year ending December 31, 1997 were not less than $4,760,001 and (ii) subject to
normal year end adjustment, the nine-month period ending September 30, 1998 were
not less than $4,026,544.
(c) The Company's Adjusted EBITDA (after the
addition of "add-backs" set forth on Schedule 3.9(c)) for (i) its fiscal year
ending December 31, 1997 was not less than $1,379,234 and (ii) the nine-month
period ended September 30, 1998, was not less than $1,076,211.
(d) The sum of the Company's cash, cash
equivalents, marketable securities, and accounts receivable less the Company's
accounts payable ("Company Net Working Capital") as of the Closing will be no
less than the Company Net Working Capital Target subject to Section 1.3(d).
(e) The sum of the Company's total
obligations under capital leases shall be no greater than $55,858 as of the
Closing. For purposes of Section 3.9(a) and (c), calculation of amounts as of
the Closing shall be made in accordance with the last paragraph of Section 6.8.
3.10. Financial Statements. Schedule 3.10 includes (a) true,
complete and correct copies of the Company's audited balance sheet as of
December 31, 1997 (the end of its most recent completed fiscal year), and
statement of income, statement of cash flows and statement of changes in
members' equity for the year ended December 31, 1997 (collectively the "Audited
Financials") and (b) true, complete and correct copies of the Interim
Financials, which includes the Company's consolidated, unaudited balance sheet
(the "Interim Balance Sheet") as of September 30, 1998 (the "Balance Sheet
Date") (the Interim Financials together with the Audited Financials, the
"Company Financial Statements"). Except as noted on the auditors' report
accompanying the Audited Financials, the Company Financial Statements have been
prepared in accordance with GAAP consistently applied, subject, in the case of
the Interim Financials, (i) to normal year-end audit adjustments, which
individually or in the aggregate will not be material and (ii) the exceptions
stated on Schedule 3.10. Each balance sheet included in the Company Financial
Statements presents fairly the financial condition of the Company and its
Subsidiary on a consolidated basis as of the date indicated thereon except that
the Subsidiary was not in existence in 1997, and each of the income statements,
statement of cash flows and statement of changes in members' equity included in
the Company Financial Statements presents fairly the results of operations of
the Company and its Subsidiary on a consolidated basis for the periods indicated
thereon except that the Subsidiary was not in existence in 1997. Since the dates
of the Company Financial Statements, there have been no material changes in the
Company's accounting policies.
3.11.Liabilities and Obligations.
(a) As of the Closing Date, the Company and its Subsidiary
are not liable for or subject to any liabilities except for: (i) those
liabilities reflected on the Interim Balance Sheet and not previously paid or
discharged;
(ii) those liabilities arising in the
ordinary course of their business consistent with past practice under any
contract, commitment or agreement specifically disclosed on any Schedule to this
Agreement or not required to be disclosed thereon because of the term or amount
involved or otherwise; and
(iii) those liabilities incurred since
the Balance Sheet Date in the ordinary course of business consistent with past
practice, which liabilities are not, individually or in the aggregate, material.
(b) Except for the Subsidiary and the creation of the
Techcom division, there are no plans or projects involving the opening of new
operations, expansion of any existing operations or the acquisition of any real
property or existing business, to which management of the Company or its
Subsidiary has made any material expenditure in the two-year period prior to the
date of this Agreement, which if pursued by the Company or its Subsidiary would
require additional material expenditures of capital.
(c) For purposes of this Section 3.11, the term
"liabilities" shall include without limitation any direct or indirect liability,
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, either accrued, absolute, contingent,
mature, unmature or otherwise and whether known or unknown, fixed or unfixed,
xxxxxx or inchoate, liquidated or unliquidated, secured or unsecured. Schedule
3.11(c) contains a complete list of all indebtedness of the Company and its
Subsidiary as of the Closing which is in excess of $5,000 to any one obligee.
3.12. Books and Records. The Company has made and kept books and
records and accounts, which, in reasonable detail, accurately and fairly reflect
the activities of the Company and its Subsidiary. Neither the Company nor its
Subsidiary has engaged in any transaction, maintained any bank account, or used
any corporate funds except for transactions, bank accounts, and funds which have
been and are reflected in their normally maintained books and records.
3.13. Bank Accounts; Powers of Attorney. Schedule 3.13 sets
forth a complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company or its Subsidiary has any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or
have access thereto; and
(e) the name of each person, corporation, firm or other
entity holding a general or special power of attorney from the Company or its
Subsidiary and a description of the terms of such power.
3.14. Accounts and Notes Receivable. Schedule 3.14 is a complete
and accurate list, as of November 23, 1998, of the accounts and notes receivable
of the Company and its Subsidiary (including without limitation receivables from
and advances to employees and the Members), which includes an aging of all
accounts and notes receivable showing amounts due in thirty (30) day aging
categories (collectively, the "Accounts Receivable"). All Accounts Receivable
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. The Accounts Receivable
are current and collectible net of any respective reserves shown on the
Company's books and records (which reserves are adequate and calculated
consistent with past practice). Subject to such reserves, each of the Accounts
Receivable will be collected in full, without any set-off, within 120 days after
the day on which it first became due and payable. There is no contest, claim, or
right of set-off, other than rebates and returns in the ordinary course of
business, under any contract with any obligor of an Account Receivable relating
to the amount or validity of such Account Receivable.
3.15. Permits. The Company and its Subsidiary own or hold all
licenses, franchises, permits and other governmental authorizations, including
without limitation permits, titles (including without limitation motor vehicle
titles and current registrations), fuel permits, licenses and franchises
necessary for the continued operation of their business as currently being
conducted (the "Permits"). The Permits are valid, and neither the Company nor
its Subsidiary have received any notice that any governmental authority intends
to modify, cancel, terminate or fail to renew any Permit. No present or former
officer, manager, member or employee of the Company or any Subsidiary or
affiliate thereof, or any other person, firm, corporation or other entity, owns
or has any proprietary, financial or other interest (direct or indirect) in any
Permits. The Company and its Subsidiary have conducted and are conducting their
business in compliance with the requirements, standards, criteria and conditions
set forth in the Permits and other applicable orders, approvals, variances,
rules and regulations and are not in violation of any of the foregoing. The
transactions contemplated by this Agreement will not result in a default under,
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company or its Subsidiary, by any Permit.
3.16. Real Property.
(a) For purposes of this Agreement, "Real Property" means
all interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses, rights to
access, and rights of way, and all buildings and other improvements thereon,
owned or used by the Company or its Subsidiary, together with any additions
thereto or replacements thereof. The representations set forth in this Section
3.16 are limited to the portion of the Real Property which is leased by the
Company or its Subsidiary.
(b) Schedule 3.16(b) contains a complete and accurate
description of all Real Property leased by the Company or its Subsidiary,
(including street address, legal description (where known), owner, and use
thereof) and, to the Company's knowledge, any claims, liabilities, security
interests, mortgages, liens, pledges, conditions, charges, covenants, easements,
restrictions, encroachments, leases, or encumbrances of any nature thereon
("Encumbrances"). Neither the Company nor its Subsidiary own any Real Property.
The Real Property listed on Schedule 3.16 includes all interests in real
property necessary to conduct the business and operations of the Company and its
Subsidiary.
(c) Except as set forth in Schedule 3.16(c):
(i) The Company and its Subsidiary have good and valid
rights of ingress and egress to and from all Real Property from and to the
public street systems for all usual street, road and utility purposes.
(ii) The Real Property and all present uses and
operations of the Real Property comply with all applicable statutes, rules,
regulations, ordinances, orders, writs, injunctions, judgments, decrees, awards
or restrictions of any government entity having jurisdiction over any portion of
the Real Property (including, without limitation, applicable statutes, rules,
regulations, orders and restrictions relating to zoning, land use, safety,
health, employment and employment practices and access by the handicapped)
(collectively, "Laws"), covenants, conditions, restrictions, easements,
disposition agreements and similar matters affecting the Real Property except
that the Company makes no representation with respect to Laws for which the
landlord has the sole obligation for compliance pursuant to such law or the
applicable lease. The Company and its Subsidiary have obtained all approvals of
governmental authorities (including certificates of use and occupancy, licenses
and permits) required in connection with the use, occupation, and operation of
the Real Property.
(iii) There are no pending or, to the Company's
knowledge, threatened condemnation, fire, health, safety, building, zoning or
other land use regulatory proceedings, lawsuits or administrative actions
relating to any portion of the Real Property or any other matters which do or
may adversely effect the current use, occupancy or value thereof, nor has the
Company, its Subsidiary or any of the Members received notice of any pending or
threatened special assessment proceedings affecting any portion of the Real
Property which is not in accordance with the leases for the Real Property.
(iv) No portion of the Real Property has suffered any
damage by fire or other casualty which has not heretofore been completely
repaired and restored to its original condition.
(vi) There are no parties other than the Company or
its Subsidiary in possession of any of the Real Property or any portion thereof,
and there are no leases, subleases, licenses, concessions or other agreements,
written or oral, granting to any party or parties the right of use or occupancy
of the Real Property or any portion thereof.
(vii) Neither the Company nor its Subsidiary are
parties to any outstanding options or rights of first refusal to purchase the
Real Property, or any portion thereof or interest therein. The Company and its
Subsidiary have not transferred any air rights or development rights relating to
the Real Property.
(viii) Neither the Company nor its Subsidiary are
parties to any service contracts or other agreements relating to the use or
operation of the Real Property.
(ix) To the Company's knowledge, no portion of the
Real Property is located in a wetlands area, as defined by Laws, or in a
designated or recognized flood plain, flood plain district, flood hazard area or
area of similar characterization. No commercial use of any portion of the Real
Property will violate any requirement of the United States Corps of Engineers or
Laws relating to wetlands areas.
(x) All real property taxes and assessments that have
become due and payable by the Company or its Subsidiary prior to the Closing and
which have been billed by the landlords with respect to the Real Property have
been paid or will be paid at or prior to Closing or will be accrued as an
account payable.
(xi) All oral or written leases, subleases, licenses,
concession agreements or other use or occupancy agreements pursuant to which the
Company or its Subsidiary lease from any other party any real property,
including all amendments, renewals, extensions, modifications or supplements to
any of the foregoing or substitutions for any of the foregoing (collectively,
the "Leases") are valid and in full force and effect. The Company has provided
Buyer with true and complete copies of all of the Leases, all amendments,
renewals, extensions, modifications or supplements thereto, and all
correspondence pursuant to which any party to any of the Leases declared a
default thereunder or provided notice of the exercise of any option granted to
such party under such Lease. The Leases and the Company's interests thereunder
are free of all Liens.
(xii) None of the Leases requires the consent or
approval of any party thereto in connection with the consummation of the
transactions contemplated hereby.
3.17.Personal Property.
(a) Schedule 3.17(a) sets forth a complete and accurate
list of all personal property included on the Interim Balance Sheet and all
other personal property owned or leased by the Company or its Subsidiary with a
current book value in excess of $2,500 both (i) as of the Balance Sheet Date and
(ii) acquired since the Balance Sheet Date, including in each case true,
complete and correct copies of leases for material equipment and an indication
as to which assets are currently owned, or were formerly owned, by any Member or
business or personal affiliates of any Member or of the Company or its
Subsidiary.
(b) The Company and its Subsidiary currently own or lease
all personal property necessary to conduct the business and operations of the
Company and its Subsidiary as they are currently being conducted.
(c) Except as set forth on Schedule 3.17, all of the trucks
and other material, machinery and equipment of the Company and its Subsidiary,
including those listed on Schedule 3.17(a), are in good working order and
condition, ordinary wear and tear excepted. All leases set forth on Schedule
3.17(a) are in full force and effect and constitute valid and binding
agreements, and the Company and its Subsidiary are not in breach of any of their
terms. All fixed assets used by the Company or its Subsidiary that are material
to the operation of their business are either owned by the Company or its
Subsidiary or leased under an agreement listed on Schedule 3.17(a).
3.18.Intellectual Property.
(a) The Company and its Subsidiary are the true and lawful
owners of, or are licensed or otherwise possess legally enforceable rights to
use the registered and unregistered Marks (as defined below) listed on Schedule
3.18(a). Such schedule lists (i) all of the Marks registered in the United
States Patent and Trademark Office ("PTO") or the equivalent thereof in any
state of the United States or in any foreign country, and (ii) all of the
unregistered Marks, that the Company or its Subsidiary now own or use in
connection with their business. Except with respect to those Marks shown as
licensed on Schedule 3.18(a), the Company and its Subsidiary own all of the
registered and unregistered trademarks, service marks, and trade names that they
use. The Marks listed on Schedule 3.18(a) will not cease to be valid rights of
the Company or its Subsidiary by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby. For purposes of this Section 3.18, the term "Xxxx" shall
mean all right, title and interest in and to any United States or foreign
trademarks, service marks and trade names now held by the Company or its
Subsidiary, including any registration or application for registration of any
trademarks and services marks in the PTO or the equivalent thereof in any state
of the United States or in any foreign country, as well as any unregistered
marks used by the Company or its Subsidiary, and any trade dress (including
logos, designs, company names, business names, fictitious names and other
business identifiers) used by the Company or its Subsidiary in the United States
or any foreign country.
(b) The Company and its Subsidiary are the true and lawful
owners of, or are licensed or otherwise possess legally enforceable rights to
use, all rights in the Patents (as defined below) listed on Schedule 3.18(b)(i)
and in the Copyright (as defined below) registrations listed on Schedule
3.18(b)(ii). Such Patents and Copyrights constitute all of the Patents and
Copyrights that the Company or its Subsidiary now own or are licensed to use.
The Company or its Subsidiary own or are licensed to practice under all patents
and copyright registrations that the Company or its Subsidiary now own or use in
connection with their business. For purposes of this Section 3.18, the term
"Patent" shall mean any United States or foreign patent to which the Company or
its Subsidiary has title as of the date of this Agreement, as well as any
application for a United States or foreign patent made by the Company or its
Subsidiary; the term "Copyright" shall mean any United States or foreign
copyright owned by the Company or its Subsidiary as of the date of this
Agreement, including any registration of copyrights, in the United States
Copyright Office or the equivalent thereof in any foreign county, as well as any
application for a United States or foreign copyright registration made by the
Company or its Subsidiary.
(c) The Company and its Subsidiary are the true and lawful
owners of, or are licensed or otherwise possess legally enforceable rights to
use, all rights in the trade secrets, franchises, or similar rights
(collectively, "Other Rights") listed on Schedule 3.18(c). Those Other Rights
constitute all of the Other Rights that the Company or its Subsidiary now own or
are licensed to use. The Company or its Subsidiary own or are licensed to
practice under all trade secrets, franchises or similar rights that they own,
use or practice under.
(d) The Marks, Patents, Copyrights, and Other Rights listed
on Schedules 3.18(a), 3.18(b)(i), 3.18(b)(ii), and 3.18(c) are referred to
collectively herein as the "Intellectual Property." The Intellectual Property
owned by the Company or its Subsidiary is referred to herein collectively as the
"Company Intellectual Property." All other Intellectual Property is referred to
herein collectively as the "Third Party Intellectual Property." Except as
indicated on Schedule 3.18(d), neither the Company nor its Subsidiary have any
obligation to compensate any person for the use of any Intellectual Property nor
has the Company or its Subsidiary granted to any person any license, option or
other rights to use in any manner any Intellectual Property, whether requiring
the payment of royalties or not.
(e) Neither the Company nor its Subsidiary are, nor will
they be as a result of the execution and delivery of this Agreement or the
performance of their obligations hereunder, in violation of any Third Party
Intellectual Property license, sublicense or agreement described in Schedule
3.18(a), (b), or (c). No claims with respect to the Company Intellectual
Property or Third Party Intellectual Property are currently pending or, to the
knowledge of the Company, are threatened by any person, nor, to the Company's
knowledge, do any grounds for any claims exist: (i) to the effect that the
manufacture, sale, licensing or use of any product as now used, sold or licensed
or proposed for use, sale or license by the Company or its Subsidiary infringes
on any copyright, patent, trademark, service xxxx or trade secret; (ii) against
the use by the Company or its Subsidiary of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software programs
and applications used in the Company's or its Subsidiary's business as currently
conducted by the Company or its Subsidiary; (iii) challenging the ownership,
validity or effectiveness of any of the Company Intellectual Property or other
trade secret material to the Company or its Subsidiary; or (iv) challenging the
Company's or its Subsidiary's license or legally enforceable right to use of the
Third Party Intellectual Property. To the Company's knowledge, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any third party. Neither the Company nor its Subsidiary
(x) has been sued or charged in writing as a defendant in any claim, suit,
action or proceeding which involves a claim or infringement of trade secrets,
any patents, trademarks, service marks, or copyrights and which has not been
finally terminated or been informed or notified by any third party that the
Company or its Subsidiary may be engaged in such infringement or (y) has
knowledge of any infringement liability with respect to, or infringement by, the
Company or its Subsidiary of any trade secret, patent, trademark, service xxxx,
or copyright of another.
3.19.Significant Customers; Material Contracts and
Commitments.
(a) Schedule 3.19(a) sets forth a complete and accurate
list of all Significant Customers and Significant Suppliers. For purposes of
this Agreement, "Significant Customers" are the twelve (12) customers that have
effected the most purchases, in dollar terms, from the Company and its
Subsidiary on a consolidated basis during each of the past four (4) fiscal
quarters, and "Significant Suppliers" are the twenty (20) suppliers who supplied
the largest amount by dollar volume of products or services to the Company and
its Subsidiary on a consolidated basis during the twelve (12) months ending on
the Balance Sheet Date.
(b) Schedule 3.19(b) contains a complete and accurate list
of all contracts, commitments, leases, instruments, agreements, licenses or
permits, written or oral, to which the Company or its Subsidiary are a party or
by which they or their properties are bound (including without limitation
contracts with Significant Customers, joint venture or partnership agreements,
contracts with any labor organizations, employment agreements, consulting
agreements, loan agreements, indemnity or guaranty agreements, bonds, mortgages,
options to purchase land, liens, pledges or other security agreements) (i) to
which the Company and any affiliate or Subsidiary of the Company or any officer,
manager or member of the Company or any Subsidiary are parties ("Related Party
Agreements"); (ii) that may give rise to obligations or liabilities exceeding,
during the current term thereof, $5,000, or (iii) that may generate revenues or
income exceeding, during the current term thereof, $5,000 (collectively with the
Related Party Agreements, the "Material Contracts"). The Company has delivered
to Buyer true, complete and correct copies of the Material Contracts.
(c) Except to the extent set forth on Schedule 3.19(c), (i)
none of the Significant Customers has canceled or substantially reduced or, to
the knowledge of the Company, is currently attempting or threatening to cancel
or substantially reduce, any purchases from the Company or its Subsidiary, (ii)
none of the Significant Suppliers has canceled or substantially reduced or, to
the knowledge of the Company, is currently attempting to cancel or substantially
reduce, the supply of products or services to the Company or its Subsidiary,
(iii) the Company and its Subsidiary have complied with all of their commitments
and obligations and are not in default under any of the Material Contracts, and
no notice of default has been received with respect to any thereof, and (iv)
there are no Material Contracts that were not negotiated at arm's length. The
Company and its Subsidiary have not received any material customer complaints
concerning their products and/or services, nor have they had any of their
products returned by a purchaser thereof except for normal warranty returns
consistent with past history and those returns that would not result in a
reversal of any material revenue.
(d) Each Material Contract, except those terminated
pursuant to Section 5.5, is valid and binding on the Company or its Subsidiary
and is in full force and effect and is not subject to any default thereunder by
any party obligated to the Company or its Subsidiary pursuant thereto. The
Company and its Subsidiary have obtained all necessary consents, waivers and
approvals of parties to any Material Contracts that are required in connection
with any of the transactions contemplated hereby, or are required by any
governmental agency or other third party or are advisable in order that any such
Material Contract remain in effect without modification after the transactions
contemplated by this Agreement and without giving rise to any right to
termination, cancellation or acceleration or loss of any right or benefit
("Third Party Consents"). All Third Party Consents are listed on Schedule
3.19(d).
(e) The Company is not a "women's business enterprise"
("WBE") or "woman-owned business concern" as defined in 48 C.F.R. ss. 52.204-5,
or a "minority business enterprise" ("MBE") or "minority-owned business concern"
as defined in 48 C.F.R. ss. 52.219- 8, nor has it held itself out to be such to
any of its customers.
(f) The outstanding balance on all loans or credit
agreements either (i) between the Company or its Subsidiary and any person in
which any of the Members owns a material interest, or (ii) guaranteed by the
Company or its Subsidiary for the benefit of any person in which any of the
Members owns a material interest, are set forth in Schedule 3.19(f).
(g) The pledge, hypothecation or mortgage of all or
substantially all of the Company's and its Subsidiary's assets (including,
without limitation, a pledge of the Company's and its Subsidiary's contract
rights under any Material Contract) will not, except as set forth on Schedule
3.19(g), (i) result in the breach or violation of, (ii)constitute a default
under, (iii) create a right of termination under, or (iv) result in the creation
or imposition of (or the obligation to create or impose) any lien upon any of
the assets of the Company or its Subsidiary (other than a lien created pursuant
to the pledge, hypothecation or mortgage described at the start of this Section
3.19(g)) pursuant to any of the terms and provisions of, any Material Contract
to which the Company or its Subsidiary is a party or by which the property of
the Company or its Subsidiary is bound.
3.20.Government Contracts.
(a) Except as set forth on Schedule 3.20, the Company and
its Subsidiary are not parties to any government contracts.
(b) The Company and its Subsidiary have not been suspended
or debarred from bidding on contracts or subcontracts for any agency or
instrumentality of the United States Government or any state or local
government, nor, to the knowledge of the Company, has any suspension or
debarment action been threatened or commenced. There is no valid basis for the
Company's or its Subsidiary's suspension or debarment from bidding on contracts
or subcontracts for any agency of the United States Government or any state or
local government.
(c) Except as set forth in Schedule 3.20, neither the
Company nor its Subsidiary have been, nor are they now being, audited or
investigated by any government agency, or the inspector general or auditor
general or similar functionary of any agency or instrumentality, nor, to the
knowledge of the Company, has such audit or investigation been threatened.
(d) The Company and its Subsidiary have no dispute pending
before a contracting office of, nor any current claim pending against, any
agency or instrumentality of the United States Government or any state or local
government, relating to a contract.
(e) The Company and its Subsidiary have not, with respect
to any government contract, received a cure notice advising the Company or its
Subsidiary that they are or were in default or would, if they failed to take
remedial action, be in default under such contract.
(f) The Company and its Subsidiary have not submitted any
inaccurate, untruthful, or misleading cost or pricing data, certification, bid,
proposal, report, claim, or any other information relating to a contract to any
agency or instrumentality of the United States Government or any state or local
government.
(g) No employee, agent, consultant, representative, or
affiliate of the Company or its Subsidiary are in receipt or possession of any
competitor or government proprietary or procurement sensitive information
related to the Company's or its Subsidiary's business under circumstances where
there is reason to believe that such receipt or possession is unlawful or
unauthorized.
(h) Each of the Company's and its Subsidiary's government
contracts has been issued, awarded or novated to the Company or its Subsidiary
in the Company's or its Subsidiary's name.
3.21. Insurance. Schedule 3.21 sets forth a complete and
accurate list, as of the Balance Sheet Date, of all insurance policies carried
by the Company or its Subsidiary and all insurance loss runs or workmen's
compensation claims received for the past two (2) policy years. The Company and
its Subsidiary have delivered to Buyer true, complete and correct copies of all
current insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and the Company and its
Subsidiary are otherwise in full compliance with the terms of such policies.
Such policies of insurance are of the type and in amounts customarily carried by
persons conducting businesses similar to that of the Company and its Subsidiary.
To the knowledge of the Company, there have been no threatened terminations of,
or material premium increases with respect to, any of such policies.
3.22.Environmental Matters.
(a) The Company and its Subsidiary and any other person or
entity for whose conduct the Company and its Subsidiary are or may be held
responsible, have no liability under, have never violated, and are presently in
compliance with any and all environmental, health or safety-related laws,
regulations, ordinances or by-laws at the federal, state and local level (the
"Environmental Laws") applicable to the Real Property and any facilities and
operations thereon, except as listed in Schedule 3.22(a).
(b) There exist no conditions with respect to the
environment on the Real Property, or off the Real Property caused by the Company
or its Subsidiary, whether or not yet discovered, that could or do result in any
damage, loss, cost, expense, claim, demand, order or liability to or against the
Company or its Subsidiary by any third party including, without limitation, any
condition resulting from the operation of the Company's and its Subsidiary's
business and/or the operation of the business of any other property owner or
operator in the vicinity of the Real Property and/or any activity or operation
formerly conducted by any person or entity on or off the Real Property, except
as set forth in Schedule 3.22(b).
(c) The Company and its Subsidiary, and any other person or
entity for whose conduct the Company or its Subsidiary are or may be held
responsible, have not generated, manufactured, refined, transported, treated,
stored, handled, disposed, transferred, produced, or processed any pollutant,
toxic substance, hazardous waste, hazardous material, hazardous substance, or
oil as defined in or pursuant to the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. ss. 6901 et seq., the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. ss. 9601 et seq., the
Federal Clean Water Act, as amended, 33 U.S.C. ss. 1251 et seq., or any other
federal, state, or local environmental law, regulation, ordinance, rule, or
bylaw, whether existing as of the date hereof, previously enforced, or
subsequently enacted ("Hazardous Material") or any solid waste at the Real
Property, or at any other location, except in compliance with all applicable
Environmental Laws and except as listed in Schedule 3.22(c).
(d) The Company has no knowledge of the releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping into the soil, surface waters, ground
waters, land, stream sediments, surface or subsurface strata, ambient air, sewer
system, or any environmental medium with respect to the Real Property
("Environmental Condition") except as listed in Schedule 3.22(d).
(e) To the Company's knowledge, no Lien has been imposed on
the Real Property by any governmental entity at the federal, state, or local
level in connection with the presence on or off the Real Property of any
Hazardous Material, except as listed in Schedule 3.22(e).
(f) The Company and its Subsidiary have not, and any other
person or entity for whose conduct the Company or its Subsidiary are or may be
held responsible have not, (i) entered into or been subject to any consent
decree, compliance order, or administrative order with respect to the Real
Property or any facilities or operations thereon; (ii) received notice under the
citizen suit provision of any of the Environmental Laws in connection with the
Real Property or any facilities or operations thereon; (iii) received any
request for information, notice, demand letter, administrative inquiry, or
formal or informal compliant or claim with respect to any Environmental
Condition relating to the Real Property or any facilities or operations thereon;
or (iv) been subject to or threatened with any governmental or citizen
enforcement action with respect to the Real Property or any facilities or
operations thereon, except as set forth in Schedule 3.22(f); and the Company and
its Subsidiary, and any other person or entity for whose conduct they are or may
be held responsible, have no knowledge that any of the above will be
forthcoming.
(g) The Company and its Subsidiary have all permits
necessary pursuant to Environmental Laws for their activities and operations at
the Real Property and for any past or ongoing alterations or improvements at the
Real Property, which permits are listed in Schedule 3.22(g).
(h) To the Company's knowledge, none of the following
exists at the Real Property: (1) underground storage tanks, (2)
asbestos-containing materials in any form or condition, (3) materials or
equipment containing polychlorinated biphenyls, (4) lead paint, pipes or solder,
or (5) landfills, surface impoundments or disposal areas, except as listed in
Schedule 3.22(h).
(i) The Company has provided to Buyer copies of all
documents, records and information in its possession or control or available to
the Company concerning Environmental Conditions relevant to the Real Property or
any facilities or operations thereon, whether generated by Company, its
Subsidiary or others, including, without limitation, environmental audits,
environmental risk assessments, or site assessments of the Real Property and/or
any adjacent property or other property in the vicinity of the Real Property
owned or operated by the Company, its Subsidiary or others, documentation
regarding off-site disposal of Hazardous Materials, spill control plans, and
environmental agency reports and correspondence. Furthermore, the Members shall
have an ongoing obligation to immediately provide to Buyer copies of any
additional such documents that come into the possession or control of or become
available to the Members subsequent to the date hereof.
(j) The Company has, at its sole cost and expense, taken or
caused to be taken all actions necessary to ensure that as of the Closing Date
the Real Property, all activities and operations thereon, and all alterations
and improvements thereto, comply with all applicable Environmental Laws and with
any and all agreements with governmental entities, court orders, and
administrative orders regarding Environmental Conditions.
3.23.Labor and Employment Matters. With respect to employees of
and service providers to the Company and its Subsidiary:
(a) the Company and its Subsidiary are and have been in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including without limitation any such laws respecting
employment discrimination, workers' compensation, family and medical leave, the
Immigration Reform and Control Act, and occupational safety and health
requirements, and have not and are not engaged in any unfair labor practice;
(b) there is not now, nor since the Company's or its
Subsidiary's respective inception has there been, any unfair labor practice
complaint against the Company or its Subsidiary pending or, to the Company's
knowledge, threatened, before the National Labor Relations Board or any other
comparable authority;
(c) there is not now, nor within the past three (3) years
has there been, any labor strike, slowdown or stoppage actually pending or, to
the Company's knowledge, threatened, against or directly affecting the Company
or its Subsidiary;
(d) to the Company's knowledge, no labor representation
organization effort exists nor has there been any such activity within the past
three (3) years;
(e) no grievance or arbitration proceeding arising out of
or under collective bargaining agreements is pending and, to the Company's
knowledge, no claims therefor exist or have been threatened;
(f) the employees of the Company and its Subsidiary are not
and have never been represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or its Subsidiary or
currently being negotiated by the Company or its Subsidiary; and
(g) all persons classified by the Company and its
Subsidiary as independent contractors do satisfy and have satisfied the
requirements of law to be so classified, and the Company and its Subsidiary have
fully and accurately reported their compensation on IRS Forms 1099 when required
to do so.
3.24. Employee Benefit Plans.
(a) Definitions.
(i) "Benefit Arrangement" means any
benefit arrangement, obligation, custom, or practice, whether or not legally
enforceable, to provide benefits, other than salary, as compensation for
services rendered, to present or former managers, directors, employees, agents,
or independent contractors, other than any obligation, arrangement, custom or
practice that is an Employee Benefit Plan, including, without limitation,
employment agreements, severance agreements, executive compensation
arrangements, incentive programs or arrangements, sick leave, vacation pay,
severance pay policies, plant closing benefits, salary continuation for
disability, consulting, or other compensation arrangements, workers'
compensation, retirement, deferred compensation, bonus, stock option or
purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, any plans subject to Section 125 of the
Code, and any plans providing benefits or payments in the event of a change of
control, change in ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees, directors, managers or
agents.
(ii) "Company Benefit Arrangement" means any Benefit
Arrangement sponsored or maintained by the Company or its Subsidiary or with
respect to which the Company or its Subsidiary has or may have any liability
(whether actual, contingent, with respect to any of assets or otherwise) as of
the Closing Date, in each case with respect to any present or former directors,
managers, employees, or agents of the Company or its Subsidiary.
(iii) "Company Plan" means, as of the Closing Date,
any Employee Benefit Plan for which the Company or its Subsidiary is the "plan
sponsor" (as defined in Section 3(16)(B) of ERISA) or any Employee Benefit Plan
maintained by the Company or its Subsidiary or to which the Company or its
Subsidiary is obligated to make payments, in each case with respect to any
present or former employees of the Company.
(iv) "Employee Benefit Plan" has the meaning given in
Section 3(3) of ERISA.
(v) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and all regulations and rules issued
thereunder, or any successor law.
(vi) "ERISA Affiliate" means any person that, together
with the Company or its Subsidiary, would be or was at any time treated as a
single employer under Section 414 of the Code or Section 4001 of ERISA and any
general partnership of which the Company or its Subsidiary is or has been a
general partner.
(vii) "Multiemployer Plan" means any Employee Benefit
Plan described in Section 3(37) of ERISA.
(viii) "Qualified Plan" means any Employee Benefit
Plan that meets, purports to meet, or is intended to meet the requirements of
Section 401(a) of the Code.
(ix) "Welfare Plan" means any Employee Benefit Plan
described in Section 3(1) of ERISA.
(b) Schedule 3.24(b) contains a complete and accurate list
of all Company Plans and Company Benefit Arrangements. Schedule 3.24(b)
specifically identifies all Company Plans (if any) that are Qualified Plans.
(c) With respect, as applicable, to Employee Benefit Plans
and Benefit Arrangements:
(i) true, correct, and complete copies of all the
following documents with respect to each Company Plan and Company Benefit
Arrangement, to the extent applicable, have been delivered to Buyer: (A) all
documents constituting the Company Plans and Company Benefit Arrangements,
including but not limited to, trust agreements, insurance policies, service
agreements, and formal and informal amendments thereto; (B) the most recent
Forms 5500 or 5500C/R and any financial statements attached thereto and those
for the prior three (3) years; (C) the last Internal Revenue Service
determination letter, the last IRS determination letter that covered the
qualification of the entire plan (if different), and the materials submitted by
the Company or its Subsidiary to obtain those letters; (D) the most recent
summary plan description; (E) the most recent written descriptions of all
non-written agreements relating to any such plan or arrangement; (F) all reports
submitted within the four (4) years preceding the date of this Agreement by
third-party administrators, actuaries, investment managers, consultants, or
other independent contractors; (G) all notices that were given within the three
(3) years preceding the date of this Agreement by the IRS, Department of Labor,
or any other governmental agency or entity with respect to any plan or
arrangement; and (H) employee manuals or handbooks containing personnel or
employee relations policies;
(ii) the DirectPro LLC Retirement Savings Plan (the
"Company 401(k) Plan") is the only Qualified Plan. Neither the Company nor its
Subsidiary have ever maintained or contributed to another Qualified Plan. The
Company 401(k) Plan qualifies under Section 401(a) of the Code, and any trusts
maintained pursuant thereto are exempt from federal income taxation under
Section 501 of the Code, and nothing has occurred with respect to the design or
operation of any Qualified Plans that could cause the loss of such qualification
or exemption or the imposition of any liability, lien, penalty, or tax under
ERISA or the Code;
(iii) the Company and its Subsidiary have never
sponsored or maintained, had any obligation to sponsor or maintain, or had any
liability (whether actual or contingent, with respect to any of its assets or
otherwise) with respect to any Employee Benefit Plan subject to Section 302 of
ERISA or Section 412 of the Code or Title IV of ERISA (including any
Multiemployer Plan);
(iv) each Company Plan and each Company Benefit
Arrangement has been maintained in accordance with its constituent documents and
with all applicable provisions of the Code, ERISA and other laws, including
federal and state securities laws;
(v) there are no pending claims or lawsuits by,
against, or relating to any Employee Benefit Plans or Benefit Arrangements that
are not Company Plans or Company Benefit Arrangements that would, if successful,
result in liability of the Company, its Subsidiary or any Member, and no claims
or lawsuits have been asserted, instituted or, to the knowledge of the Company,
threatened by, against, or relating to any Company Plan or Company Benefit
Arrangement, against the assets of any trust or other funding arrangement under
any such Company Plan, by or against the Company or its Subsidiary with respect
to any Company Plan or Company Benefit Arrangement, or by or against the plan
administrator or any fiduciary of any Company Plan or Company Benefit
Arrangement, and the Company does not have knowledge of any fact that could form
the basis for any such claim or lawsuit. The Company Plans and Company Benefit
Arrangements are not presently under audit or examination (nor has notice been
received of a potential audit or examination) by the IRS, the Department of
Labor, or any other governmental agency or entity, and no matters are pending
with respect to the Company 401(k) Plan under the IRS's Voluntary Compliance
Resolution program, its Closing Agreement Program, or other similar programs;
(vi) no Company Plan or Company Benefit
Arrangement contains any provision or is subject to any law that would prohibit
the transactions contemplated by this Agreement or that would give rise to any
vesting of benefits, severance, termination, or other payments or liabilities as
a result of the transactions contemplated by this Agreement;
(vii) with respect to each Company Plan,
there has occurred no non-exempt "prohibited transaction" (within the meaning of
Section 4975 of the Code) or transaction prohibited by Section 406 of ERISA or
breach of any fiduciary duty described in Section 404 of ERISA that would, if
successful, result in any liability for the Company or its Subsidiary or any
member, officer, manager, or employee of the Company or its Subsidiary;
(viii) all reporting, disclosure,
and notice requirements of ERISA and the Code have been fully and completely
satisfied with respect to each Company Plan and each Company Benefit
Arrangement;
(ix) all amendments and actions required to bring the
Company Benefit Plans into conformity with the applicable provisions of ERISA,
the Code, and other applicable laws have been made or taken except to the extent
such amendments or actions (A) are not required by law to be made or taken until
after the Closing Date and (B) are disclosed on Schedule 3.24(c);
(x) payment has been made of all amounts that the
Company and its Subsidiary are required to pay as contributions to the Company
Benefit Plans as of the last day of the most recent fiscal year of each of the
plans ended before the date of this Agreement; all benefits accrued under any
unfunded Company Plan or Company Benefit Arrangement will have been paid,
accrued, or otherwise adequately reserved in accordance with GAAP as of the
Balance Sheet Date; and all monies withheld from employee paychecks with respect
to Company Plans have been transferred to the appropriate plan within 30 days of
such withholding;
(xi) the Company and its Subsidiary have not prepaid
or prefunded any Welfare Plan through a trust, reserve, premium stabilization,
or similar account, nor do they provide benefits through a voluntary employee
beneficiary association as defined in Section 501(c)(9);
(xii) no statement, either written or oral, has been
made by the Company to any person with regard to any Company Plan or Company
Benefit Arrangement that was not in accordance with the Company Plan or Company
Benefit Arrangement and that could have an adverse economic consequence to the
Company or its Subsidiary;
(xiii) the Company and its Subsidiary have no
liability (whether actual, contingent, with respect to any of its assets or
otherwise) with respect to any Employee Benefit Plan or Benefit Arrangement that
is not a Company Benefit Arrangement or with respect to any Employee Benefit
Plan sponsored or maintained (or which has been or should have been sponsored or
maintained) by any ERISA Affiliate;
(xiv) all group health plans of the Company, its
Subsidiary and its affiliates have been operated in material compliance with the
requirements of Sections 4980B (and its predecessor) and 5000 of the Code, and
the Company has provided, or will have provided before the Closing Date, to
individuals entitled thereto all required notices and coverage pursuant to
Section 4980B with respect to any "qualifying event" (as defined therein)
occurring before or on the Closing Date;
(xv) no employee or former employee of the Company or
its Subsidiary or beneficiary of any such employee or former employee is, by
reason of such employee's or former employee's employment, entitled to receive
any benefits, including, without limitation, death or medical benefits (whether
or not insured) beyond retirement or other termination of employment as
described in Statement of Financial Accounting Standards No. 106, other than (i)
death or retirement benefits under a Qualified Plan, (ii) deferred compensation
benefits accrued as liabilities on the Interim Balance Sheet or (iii)
continuation coverage mandated under Section 4980B of the Code or other
applicable law.
(d) Schedule 3.24(d) hereto contains the
most recent quarterly listing of workers' compensation claims and a schedule of
workers' compensation claims of the Company and its Subsidiary for the last
three (3) fiscal years.
(e) Schedule 3.24(e) hereto sets forth an
accurate list, as of the date hereof, of all employees of the Company who may
earn more than $50,000 in 1998, all officers and all managers, and lists all
employment agreements with such employees, officers and managers and the rate of
compensation (and the portions thereof attributable to salary, bonus, and other
compensation respectively) of each such person as of (a) the Balance Sheet Date
and (b) the date hereof.
(f) Neither the Company nor its Subsidiary
have declared or paid any bonus compensation in contemplation of the
transactions contemplated by this Agreement.
3.25.Taxes.
(a) (i) The Company and its Subsidiary have
timely filed all Tax Returns which were required to be filed on or before the
Closing Date, and all such Tax Returns are true, correct, and complete in all
respects.
(ii) The Company and its Subsidiary have
paid in full on a timely basis all Taxes owed by them, whether or not shown on
any Tax Return.
(iii) The amount of the Company's and its
Subsidiary's liability for unpaid Taxes as of the Balance Sheet Date did not
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred Taxes) shown on the Interim Balance Sheet, and the amount
of the Company's and its Subsidiary's liability for unpaid Taxes for all periods
or portions thereof ending on or before the Closing Date will not exceed the
amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals are reflected on the books and records of the
Company on the Closing Date.
(iv) Except as set forth on Schedule
3.25, there are no ongoing examinations or claims against the Company or its
Subsidiary for Taxes, and no notice of any audit, examination, or claim for
Taxes, whether pending or threatened, has been received.
(v) The Company has a taxable year
ended on December 31, in each year commencing 1996.
(vi) The Company has always used the
accrual method of accounting for income Tax purposes. The Company has not agreed
to, and is not and will not be required to, make any adjustments under Code
Section 481(a) as a result of a change in accounting methods.
(vii) The Company and its
Subsidiary have withheld and paid over to the proper governmental authorities
all Taxes required to have been withheld and paid over, and complied with all
information reporting and backup withholding requirements, including maintenance
of required records with respect thereto, in connection with amounts paid to any
employee, independent contractor, creditor, or other third party.
(viii) There have been no Tax
examinations or extensions of statutory limitations for the collection or
assessment of Taxes. Copies of the Tax Returns of the Company and its Subsidiary
for the last fiscal year have been delivered to Buyer.
(ix) There are (and as of immediately
following the Closing there will be) no Liens on the assets of the Company or
its Subsidiary relating to or attributable to Taxes.
(x) To the Company's knowledge, there is no basis for
the assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or its
Subsidiary or otherwise have an adverse effect on the Company, its Subsidiary or
their business.
(xi) None of the Company's or its Subsidiary's assets
are treated as "tax exempt use property" within the meaning of Section 168(h) of
the Code.
(xii)There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company or its Subsidiary that,
individually or collectively, could give rise to the payment of any amount (or
portion thereof) that would not be deductible pursuant to Sections 280G, 404 or
162 of the Code.
(xiii) Intentionally Omitted.
(xiv) The Company and its Subsidiary are not, and have
not been at any time, a party to a tax sharing, tax indemnity or tax allocation
agreement, and the Company and its Subsidiary have not assumed the tax liability
of any other person under contract.
(xv) The Company and its Subsidiary are not, and have
not been at any time, a "United States real property holding corporation" within
the meaning of Section 897(c)(2) of the Code.
(xvi)The Company's and its Subsidiary's tax basis in
their assets for purposes of determining their future amortization, depreciation
and other federal income tax deductions are accurately reflected on the
Company's tax books and records.
(xvii) The Company and its Subsidiary have not been a
member of an affiliated group filing a consolidated federal income Tax Return
and do not have any liability for the Taxes of another person under Treas. Reg.
ss. 1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
(xviii) The Company has, since inception, been a
limited liability company taxed as a partnership under the Code.
(xix)The Company's "tax matters partner" "Tax Matters
Partner") under the Code has been RS since August 31, 1996.
(xx) Neither the Company nor the Tax
Matters Partner has ever received a Notice of Beginning of Administrative
Proceeding.
(xxi)The Company is registered for state
and local Tax purposes in the states and localities identified on Schedule
3.26(a). Such states and localities constitute all the states and localities
where the Company is required to be registered for state and local Tax purposes.
(b) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar
governmental charge, impost or levy (including without limitation income taxes,
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,
property taxes, withholding taxes, payroll taxes, minimum taxes or windfall
profit taxes) together with any related penalties, fines, additions to tax or
interest imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return
(including any information return), report, statement, schedule, notice, form,
estimate, or declaration of estimated tax relating to or required to be filed
with any governmental authority in connection with the determination,
assessment, collection or payment of any Tax.
3.26.Conformity with Law; Litigation.
(a) The Company and its Subsidiary have not
violated any law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it.
(b) No Member has, at any time: (i)
committed any criminal act (except for minor traffic violations); (ii) engaged
in acts of fraud, dishonesty, gross negligence or moral turpitude; (iii) filed
for personal bankruptcy; or (iv) been an officer, director, manager, trustee or
controlling shareholder of a company that filed for bankruptcy or Chapter 11
protection.
(c) Except as set forth on Schedule 3.26(c),
there are no claims, actions, suits or proceedings, pending or, to the knowledge
of the Company, threatened against or affecting the Company or its Subsidiary at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over them and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. There are no
judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against the
Company or its Subsidiary or against any of their properties or business.
3.27.Relations with Governments. The Company and its Subsidiary
have not made, offered or agreed to offer anything of value to any governmental
official, political party or candidate for government office, nor have they
otherwise taken any action that would cause the Company or its Subsidiary to be
in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any
law of similar effect.
3.28.Absence of Changes. Since the Balance Sheet Date, the
Company and its Subsidiary have conducted their business in the ordinary course
and, except as contemplated herein or as set forth on Schedule 3.28, there has
not been:
(a) any change, by itself or together with
other changes, that has affected adversely, or is likely to affect adversely,
the business, operations, affairs, prospects, properties, assets, profits or
condition (financial or otherwise) of the Company and its Subsidiary taken as a
whole;
(b) any damage, destruction or loss (whether
or not covered by insurance) adversely affecting the properties
or business of the Company and its Subsidiary taken as a whole;
(c) any change in the Company's ownership
interests or any grant of any options, warrants, calls,
conversion rights or commitments;
(d) any declaration or payment of any
distribution in respect of the Company's membership interests, or any direct or
indirect redemption, purchase or other acquisition of any of the membership
interests of the Company or its Subsidiary, except for such cash distributions
to the Members as have not resulted in the Company Net Working Capital being
less than the Company Net Working Capital Target (any such distribution a
"Permissible Distribution") subject to Section 1.3(d);
(e) any increase in the compensation, bonus, sales
commissions or fee arrangements payable or to become payable by the Company or
its Subsidiary to any of their officers, managers, members, employees,
consultants or agents, except for ordinary and customary bonuses and salary
increases for employees in accordance with past practice, nor has the Company or
its Subsidiary entered into or amended any Company Benefit Arrangement, Company
Plan, employment, severance or other agreement relating to compensation or
fringe benefits;
(f) any work interruptions, labor grievances or claims
filed, or any similar event or condition of any character, materially adversely
affecting the business or future prospects of the Company and its Subsidiary
taken as a whole;
(g) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company or its
Subsidiary to any person, including without limitation the Members and their
affiliates;
(h) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company or its Subsidiary,
including without limitation any indebtedness or obligation of the Members and
their affiliates, provided that the Company and its Subsidiary may negotiate and
adjust bills in the course of good faith disputes with customers in a manner
consistent with past practice;
(i) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the assets,
property or rights of the Company or its Subsidiary or requiring consent of any
party to the transfer and assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of business of the Company and its Subsidiary taken as a
whole;
(k) any waiver of any material rights or claims of the
Company or its Subsidiary;
(l) any breach, amendment or termination of any material
contract, agreement, license, permit or other right to which the Company or its
Subsidiary are a party;
(m) any transaction by the Company or its Subsidiary
outside the ordinary course of business;
(n) any capital expenditure by the Company or its
Subsidiary, either individually or in the aggregate, exceeding $5,000;
(o) any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by the
Company or the revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company or its
Subsidiary of any mortgage, pledge, security interest or lien or other
encumbrance on any asset (other than liens arising under existing lease
financing arrangements which are not material and liens for Taxes not yet due
and payable);
(q) any entry into, amendment of, relinquishment,
termination or non- renewal by the Company or its Subsidiary of any contract,
lease transaction, commitment or other right or obligation requiring aggregate
payments by the Company or its Subsidiary in excess of $5,000;
(r) any loan by the Company or its Subsidiary to any person
or entity, incurring by the Company or its Subsidiary of any indebtedness,
guaranteeing by the Company or its Subsidiary of any indebtedness, issuance or
sale of any debt securities of the Company or its Subsidiary or guaranteeing of
any debt securities of others;
(s) the commencement or notice or, to the knowledge of the
Company, threat of commencement, of any lawsuit or proceeding against, or
investigation of, the Company or its Subsidiary or any of their affairs; or
(t) negotiation or agreement by the Company or its
Subsidiary or any officer or employee thereof to do any of the things described
in the preceding clauses (a) through (s) (other than negotiations with Buyer and
its representatives regarding the transactions contemplated by this Agreement).
3.29. Disclosure. All written agreements, lists, schedules,
instruments, exhibits, documents, certificates, reports, statements and other
writings furnished to Buyer pursuant hereto or in connection with this Agreement
or the transactions contemplated hereby, are and will be complete and accurate
in all material respects. No representation or warranty by the Members, TLG
Members or the Company contained in this Agreement, in the Schedules attached
hereto or in any certificate furnished or to be furnished by the Members, TLG
Members or the Company to Buyer in connection herewith or pursuant hereto
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary in order to make any statement
contained herein or therein not misleading. There is no fact known to any Member
that has specific application to such Member or the Company (other than general
economic or industry conditions) and that materially adversely affects or, as
far as such Member can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of the
Company and its Subsidiary taken as a whole that has not been set forth in this
Agreement or any Schedule hereto. Certain matters regarding the Company are set
forth on Schedule 3.29.
3.30. Predecessor Status; Etc. Schedule 3.30 sets forth a
listing of all legal names, trade names, fictitious names or other names
(including, without limitation, any names of divisions or operations) of the
Company and its Subsidiary and all of their predecessor companies during the
five-year period immediately preceding the Closing, including without limitation
the names of any entities from whom the Company or its Subsidiary has acquired
material assets. During the five (5) year period immediately preceding the
Closing, the Company and its Subsidiary have operated only under the names set
forth on Schedule 3.30 in the jurisdiction or jurisdictions set forth on
Schedule 3.30 and have not been a subsidiary or division of another entity or a
part of an acquisition which was later rescinded.
3.31. Location of Chief Executive Offices. Schedule 3.31 sets
forth the location of the Company's chief executive offices.
3.32. Location of Equipment. All equipment held on the date
hereof by the Company or its Subsidiary is located at one of the locations shown
on Schedule 3.32. For purposes of this Agreement, the term "equipment" shall
mean any "equipment" of any nature owned by the Company or its Subsidiary as of
the date hereof, and, in any event, shall include, but shall not be limited to,
all machinery, equipment, furnishings, fixtures and vehicles owned by the
Company or its Subsidiary as of the date hereof, wherever located, together with
all attachments, components, parts, equipment and accessories installed thereon
or affixed thereto.
3.33. Year 2000 Compliance. To the extent the Company and its
Subsidiary may not be Year 2000 Compliant and Ready (as defined below) at any
time prior to January 1, 1999, the Company has no reason to believe that such
status will result in a material adverse affect on the Company's and its
Subsidiary's business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise). For purposes of this Agreement, the term "Year 2000 Compliant and
Ready," with respect to any person, means that the hardware and software systems
and components (including without limitation imbedded microchips) owned,
licensed or used by such person in connection with its business operations will
(without any additional cost or the need for human intervention) (i) accurately
process information involving any and all dates before, during and/or after
January 1, 2000, including without limitation recognizing and processing input,
providing output, storing information and performing date-related calculations,
all without creating any ambiguity as to the century and without any other error
or malfunction, (ii) operate accurately without material interruption or
malfunction on and in respect of any and all dates before, during and/or after
January 1, 2000, and (iii) where applicable, respond to and process two digit
year input without creating any ambiguity as to the century.
3.34. Inventory. The Company does not own or otherwise possess
any inventory.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
To induce the Company, the Members and the TLG
Members to enter into this Agreement and consummate the transactions
contemplated hereby, Buyer represents and warrants to the Company and the
Members as follows:
4.1. Due Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and is duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted and is qualified to do
business in each jurisdiction in which the character of the property owned,
leased or operated by Buyer or the nature of the business or activities
conducted by Buyer makes such qualification necessary.
4.2. Authorization; Validity of Obligations. The representative
of Buyer executing this Agreement has all requisite corporate power and
authority to enter into and bind Buyer to the terms of this Agreement. Buyer has
the full legal right, power and corporate authority to enter into this Agreement
and to perform its obligations pursuant to the terms of this Agreement. The
execution and delivery of this Agreement by Buyer and the performance by Buyer
of the transactions contemplated herein has been duly and validly authorized by
the Board of Directors of Buyer and this Agreement has been duly and validly
authorized by all necessary corporate action. This Agreement is a legal, valid
and binding obligation of Buyer enforceable in accordance with its terms.
4.3. No Conflicts. The execution, delivery and performance of
this Agreement, the consummation of the transactions herein contemplated hereby
and the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of
the Buyer's Certificate of Incorporation or Bylaws;
(b) conflict with, or result in a default (or would
constitute a default but for a requirement of notice or lapse of time or both)
under any document, agreement or other instrument to which Buyer is a party or
by which it is bound, or result in the creation or imposition of any lien,
charge or encumbrance on any of Buyer's properties pursuant to (i) any law or
regulation to which Buyer or any of its property is subject, or (ii) any
judgment, order or decree to which Buyer is bound or any of its property is
subject;
(c) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of Buyer;
or
(d) violate any law, order, judgment, rule, regulation,
decree or ordinance to which Buyer is subject, or by which Buyer is bound
(including, without limitation, the HSR Act, together with all rules and
regulations promulgated thereunder).
5. COVENANTS.
5.1. Tax Matters.
(a) The following provisions shall govern the allocation of
responsibility as between the Company, on the one hand, and the Members, on the
other, for certain tax matters following the Closing Date:
(i) Members shall prepare or cause to be prepared and
file or cause to be filed, within the time and in the manner provided by law,
all Tax Returns of the Company for all periods ending on or before the Closing
Date that are due after the Closing Date. The Members shall pay to the Company
on or before the due date of such Tax Returns the amount of all Taxes shown as
due on such Tax Returns to the extent that such Taxes are not reflected in the
current liability accruals for Taxes (excluding reserves for deferred Taxes)
shown on the Company's books and records as of the Closing Date. Such Tax
Returns shall be prepared and filed in accordance with applicable law and in a
manner consistent with past practices and shall be subject to review and
approval by Buyer. To the extent reasonably requested by the Members or required
by law, Buyer and the Company shall participate in the filing of any Tax Returns
filed pursuant to this paragraph.
(ii) Except as set forth in Section 5.1(a)(v) with
respect to income Tax Returns for the Company for the 1998 calendar year, the
Company shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns for Tax periods which begin before the Closing Date and end after
the Closing Date. The Members shall pay to the Company within fifteen (15) days
after the date on which Taxes are paid with respect to such periods an amount
equal to the portion of such Taxes which relates to the portion of such taxable
period ending on the Closing Date to the extent such Taxes are not reflected in
the current liability accruals for Taxes (excluding reserves for deferred Taxes)
shown on the Company's books and records as of the Closing Date. For purposes of
this Section 5.1, in the case of any Taxes that are imposed on a periodic basis
and are payable for a Taxable period that includes (but does not end on) the
Closing Date, the portion of such Tax which relates to the portion of such
Taxable period ending on the Closing Date shall (x) in the case of any Taxes
other than Taxes based upon or related to income or receipts, be deemed to be
the amount of such Tax for the entire Taxable period multiplied by a fraction
the numerator of which is the number of days in the Taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
Taxable period, and (y) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
Taxable period ended on the Closing Date. Any credits relating to a Taxable
period that begins before and ends after the Closing Date shall be taken into
account as though the relevant Taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of the Company.
(iii) Buyer and the Company on one hand and Members on
the other hand shall (A) cooperate fully, as reasonably requested, in connection
with the preparation and filing of Tax Returns pursuant to this Section 5.1 and
any audit, litigation or other proceeding with respect to Taxes; (B) make
available to the other, as reasonably requested, all information, records or
documents with respect to Tax matters pertinent to the Company for all periods
ending prior to or including the Closing Date; and (C) preserve information,
records or documents relating to Tax matters pertinent to the Company that are
in their possession or under their control until the expiration of any
applicable statute of limitations or extensions thereof.
(iv) The Members shall timely pay all
transfer, documentary, sales, use, stamp, registration and other Taxes and fees
arising from or relating to the transactions contemplated by this Agreement, and
the Members shall, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration, and other Taxes and fees. If required by applicable law,
Buyer and the Company will join in the execution of any such Tax Returns and
other documentation.
(v) The Members and Buyer agree that
the Buyer's purchase of the Membership Interests will cause a termination of the
partnership status of the Company for purposes of the Code. Pursuant to Section
706(c)(1) and (2) of the Code, the tax year of the Company taxed as a
partnership will close on the Closing Date and items of income, loss, deduction
or credit shall be assigned to that short taxable year in accordance with the
Company's normal method of accounting. The Members and the Company shall file
income Tax Returns for the 1998 calendar tax year in a manner consistent with
the foregoing.
(b) The Company shall, prior to Closing,
maintain its status as a limited liability company taxed as a partnership for
federal and state income tax purposes.
(c) On or after the Closing Date, the
Company and the Tax Matters Partner will cooperate and execute such documents as
are necessary to designate Buyer as the "tax matters partner" of the Company for
purposes of the Code.
5.2. Accounts Receivable. In the event that all Accounts
Receivable are not collected in full (net of reserves specified in Section 3.14)
within 120 days after the Closing then, at the request of the Company or Buyer,
the Members shall pay the Company an amount equal to the Accounts Receivable not
so collected, and upon receipt of such payment the Company shall assign to the
Members making the payment all rights with respect to the uncollected Accounts
Receivable giving rise to the payment and shall also thereafter promptly remit
any excess collections received by it with respect to such assigned Accounts
Receivable.
5.3. Notice to Bargaining Agents. Prior to the Closing Date, the
Company shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, if requested by Buyer, and shall provide Buyer with proof that any
required notice has been sent.
5.4. Employee Benefit Plans. If reasonably requested by Buyer,
the Company shall terminate any Company Plan or Company Benefit Arrangement
substantially contemporaneously with the Closing.
5.5. Related Party Agreements. The Company and/or the Members,
as the case may be, shall terminate any Related Party Agreements which Buyer
requests the Company or Members to terminate.
5.6. Cooperation.
(a) The Company, Members, and Buyer shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such instruments as the other may
reasonably request for the purpose of carrying out this Agreement including any
documentation reasonably required by Buyer's independent public accountants (in
connection with such accountant's audit of the Company) or the Nasdaq National
Market.
(b) The Members and the Company shall cooperate and use
their reasonable efforts to have the present officers, managers and employees of
the Company cooperate with Buyer on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
(c) Each party hereto shall cooperate in obtaining all
consents and approvals required under this Agreement to effect the transactions
contemplated hereby.
5.7. Access to Information; Confidentiality;
Public Disclosure.
(a) Prior to the Closing Date, the Company
has afforded to the officers and authorized representatives of Buyer access to
(i) all of the sites, properties, books and records of the Company and its
Subsidiary and (ii) such additional financial and operating data and other
information as to the business and properties of the Company and its Subsidiary
as Buyer has from time to time reasonably requested, including, without
limitation, access upon reasonable request to the Company's and its Subsidiary's
employees, customers, vendors, suppliers and creditors for due diligence
inquiry. No information or knowledge obtained in any investigation pursuant to
this Section 5.7 shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations of the
parties to consummate the transactions contemplated herein.
(b) Buyer recognizes and acknowledges that
it had in the past, currently has, and in the future may possibly have, access
to certain confidential information of the Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company's business. Buyer agrees that, unless there is
a Closing, it will not disclose confidential information with respect to the
Company or its Subsidiary to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except to authorized
representatives of the Company and to counsel and other advisers, provided that
such advisers (other than counsel) agree to the confidentiality provisions of
this Section 5.7(b), unless (i) such information becomes known to the public
generally through no fault of Buyer, (ii) disclosure is required by law or the
order of any governmental authority under color of law, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party, provided, that prior to
disclosing any information pursuant to clause (i), (ii) or (iii) above, Buyer
shall give prior written notice thereof to the Company and provide the Company
with the opportunity to contest such disclosure and shall cooperate with efforts
to prevent such disclosure.
(c) Prior to the Closing Date, neither the
Company nor any Member shall make any disclosure (whether or not in response to
an inquiry) of the subject matter of this Agreement unless previously approved
by Buyer in writing. Buyer agrees to keep the Company and the Members appraised
in advance of any disclosure of the subject matter of this Agreement by Buyer
prior to the Closing Date. Buyer agrees to consult with RS prior to release of
any press-release related to the subject matter of this Agreement.
5.8. Lease Letter of Credit. The Members have advised Buyer that
pursuant to the Company's lease for premises at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx the Company is required to maintain a security deposit in the
amount of $195,375, and that such security has been arranged by a Letter of
Credit issued on behalf of TLG and/or the TLG Members. Promptly following the
Closing Date, Buyer shall take all steps necessary to replace the security
deposit so that the entity on whose behalf such Letter of Credit was issued
shall have no future liability with respect to the security deposit for such
lease.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligation of Buyer to effect the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before the Closing
Date, of the following conditions and deliveries:
6.1. Representations and Warranties; Performance of Obligations.
All of the representations and warranties of the Members, TLG Members and the
Company contained in this Agreement shall be true, correct and complete on and
as of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date; all of the terms, covenants,
agreements and conditions of this Agreement to be complied with, performed or
satisfied by the Company and the Members on or before the Closing Date shall
have been duly complied with, performed or satisfied; and a certificate to the
foregoing effects dated the Closing Date and signed on behalf of the Company and
by each of the Members and TLG Members shall have been delivered to Buyer.
6.2. No Litigation. No temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
Buyer's proposed acquisition of the Company, or limiting or restricting Buyer's
conduct or operation of the business of the Company and its Subsidiary (or
Buyer's own business) following the transactions contemplated by this Agreement
shall be in effect, nor shall any proceeding brought by an administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending. There shall be no action,
suit, claim or proceeding of any nature pending or threatened against Buyer, the
Company or its Subsidiary, their respective properties or any of their officers
or managers, that could materially and adversely affect the business, assets,
liabilities, financial condition, results of operations or prospects of the
Company and its Subsidiary taken as a whole. A certificate to the foregoing
effects dated the Closing Date and signed on behalf of the Company and the
Members and TLG Members shall have been delivered to Buyer.
6.3. No Material Adverse Change. There shall have been no
material adverse changes in the business, operations, affairs, prospects,
properties, assets, existing and potential liabilities, obligations, profits or
condition (financial or otherwise) of the Company and its Subsidiary taken as a
whole, since the Balance Sheet Date; and Buyer shall have received a certificate
signed by each Member and TLG Member dated the Closing Date to such effect.
6.4. Consents and Approvals. All necessary consents of, and
filings with, any governmental authority or agency or third party, relating to
the consummation by the Company and the Members of the transactions contemplated
hereby, shall have been obtained and made. Any waiting period applicable to the
consummation of the transactions contemplated by this Agreement under the HSR
Act shall have expired or been terminated, and no action by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of the transactions contemplated hereby shall be pending.
6.5. Opinion of Counsel. Buyer shall have received an opinion
from counsel to the Company, the Members and TLG Members, dated the Closing
Date, in a form reasonably satisfactory to Buyer.
6.6. Charter Documents. Buyer shall have received (a) copies of
the Articles of Organization of the Company and its Subsidiary certified by an
appropriate authority in the state of their organization and (b) copies of the
Operating Agreements of the Company and its Subsidiary certified by the
Secretaries of the Company and its Subsidiary, and such documents shall be in
form and substance reasonably acceptable to Buyer.
6.7. Due Diligence Review. The Company shall have made such
deliveries as are called for by this Agreement. Buyer shall be fully satisfied
in its sole discretion with the results of its review of all of the Schedules,
whether delivered before or after the execution hereof, and such deliveries, and
its review of, and other due diligence investigations with respect to, the
business, operations, affairs, prospects, properties, assets, existing and
potential liabilities, obligations, profits and condition (financial or
otherwise) of the Company and its Subsidiary.
6.8. Delivery of Closing Financial Certificate. Buyer shall have
received a certificate (the "Closing Financial Certificate"), dated as of the
Closing Date, signed on behalf of the Company and by each of the Members and TLG
Members, setting forth:
(a) the net worth of the Company as of the
last day of its most recent fiscal year;
(b) the sales of the Company for the most
recent fiscal year preceding the Closing Date;
(c) the sales of the Company for the
nine-month period ending on September 30, 1998;
(d) the Company's Adjusted EBITDA (after the
addition of "add-backs" set forth on Schedule 3.9(c)) for the
most recent fiscal year preceding the Closing Date;
(e) the Company's Adjusted EBITDA (after the
addition of "add-backs" set forth on Schedule 3.9(c)) for the
nine-month period ending on September 30, 1998; and
(f) the Company's total obligations under
capital leases as of the Closing Date.
The parties acknowledge and agree that for purposes of determining the Actual
Closing Net Worth and Actual Closing Net Working Capital, the Company shall not
take account of any increase in intangible assets (including without limitation
goodwill, franchises and intellectual property) accounted for after December 31,
1997. In addition, the Actual Closing Net Worth shall be calculated after giving
effect to any expenses incurred by the Company (or the Members and paid by the
Company) in connection with the transactions contemplated by this Agreement.
6.9. FIRPTA Compliance. Each of the Members shall have delivered
to Buyer a properly executed statement in a form reasonably acceptable to Buyer
for purposes of satisfying Buyer's obligations under Treas. Reg. ss.
1.1445-2(b).
6.10.Employment Agreements. RS and BW (collectively,
"Employees") each shall have entered into an employment agreement with the Buyer
or the Company in a form reasonably satisfactory to Buyer.
6.11.DirectPro West, LLC. The Subsidiary shall have entered into
a binding agreement with Xxxxxx Xxxxxxxx ("Xxxxxxxx") (not subject to any
contingencies) to acquire all of the outstanding membership or other equitable
interests in the Subsidiary owned by Xxxxxxxx simultaneously with the Closing
("Xxxxxxxx Purchase Agreement"). The Company shall deliver to Buyer the Xxxxxxxx
Purchase Agreement and any other documentation entered into or to be entered
into in connection therewith.
6.12.Asset Purchase Obligation. The Company and/or the Members
shall have settled the Asset Purchase Obligation as further described in (and
subject to) Section 1.2(d).
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE MEMBERS AND THE
COMPANY.
The obligation of the Members and the Company to effect the
transactions contemplated by this Agreement are subject to the satisfaction or
waiver, at or before the Closing Date, of the following conditions and
deliveries:
7.1. Representations and Warranties; Performance of Obligations.
All of the representations and warranties of Buyer contained in this Agreement
shall be true, correct and complete on and as of the Closing Date with the same
effect as though such representations and warranties had been made as of such
date; all of the terms, covenants, agreements and conditions of this Agreement
to be complied with, performed or satisfied by Buyer on or before the Closing
Date shall have been duly complied with, performed or satisfied; and a
certificate to the foregoing effects dated the Closing Date and signed by the
President or any Vice President of Buyer shall have been delivered to the
Company and the Members.
7.2. No Litigation. No temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
Buyer's proposed acquisition of the Company, or limiting or restricting Buyer's
conduct or operation of the business of the Company following the transactions
contemplated by this Agreement shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit, claim or proceeding of any nature
pending or, to the knowledge of the Buyer threatened, against the Buyer or its
properties or any of its officers, that could materially and adversely affect
the business, assets, liabilities, financial condition, results of operations or
prospects of the Buyer taken as a whole. A certificate to the foregoing effects
dated the Closing Date and signed by the President or any Vice President of
Buyer shall have been delivered to the Company and the Member.
7.3. Consents and Approvals. All necessary consents of, and
filings with, any governmental authority or agency or third party relating to
the consummation by Buyer of the transactions contemplated herein, shall have
been obtained and made. Any waiting period applicable to the consummation of the
transactions contemplated by this Agreement under the HSR Act shall have expired
or been terminated, and no action by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of the transactions
contemplated hereby shall be pending.
7.4. Employment Agreements. The Employees each shall have
entered into an employment agreement with the Buyer or the Company in a form
reasonably satisfactory to the Employees.
8. INDEMNIFICATION.
8.1. General Indemnification by the Members. Each Member and TLG
Member, jointly and severally, covenants and agrees to indemnify, defend,
protect and hold harmless Buyer and the Company and their respective officers,
directors, employees, members, assigns, successors and affiliates (individually,
an "Indemnified Party" and collectively, "Indemnified Parties") from, against
and in respect of:
(a) all liabilities, losses, claims,
damages, punitive damages, causes of action, lawsuits, administrative
proceedings (including informal proceedings), investigations, audits, demands,
assessments, adjustments, judgments, settlement payments, deficiencies,
penalties, fines, interest (including interest from the date of such damages)
and costs and expenses (including without limitation reasonable attorneys' fees
and disbursements of every kind, nature and description) (collectively,
"Damages") suffered, sustained, incurred or paid by the Indemnified Parties in
connection with, resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or
warranty of the Members, TLG Members or the Company set forth in this Agreement
or any Schedule or certificate, delivered by or on behalf of any Member, TLG
Member or the Company in connection herewith; or
(ii) any nonfulfillment of any covenant
or agreement by the Members or TLG Members or, prior to the
Closing Date, the Company, under this Agreement; or
(iii) the business, operations or
assets of the Company or its Subsidiary prior to the Closing Date or the actions
or omissions of the Company's or its Subsidiary's managers, officers, members,
employees or agents prior to the Closing Date, other than Damages arising from
matters expressly disclosed in the Company Financial Statements, this Agreement
or the Schedules to this Agreement; or
(iv) the matters disclosed on Schedules
3.22 (environmental matters), 3.24 (employee benefit plans), and 3.25 (taxes),
and 3.26 (conformity with law; litigation); or
(v) (a) any failure by the Members to
pay or otherwise discharge that portion of the Asset Purchase Obligation to be
paid at or before the Closing pursuant to Section 1.B of the Settlement
Agreement or (b) any breach by Xxxxxxxx of the Xxxxxxxx Purchase Agreement; and
(b) any and all Damages incident to any of
the foregoing or to the enforcement of this Section 8.1.
8.2. Limitation and Expiration. Notwithstanding the above:
(a) there shall be no liability for
indemnification under Section 8.1 until and unless the aggregate amount of
Damages exceeds $70,000 (the "Indemnification Threshold", such that if there are
idemnifiable Damages in excess of the Indemnification Threshold, the Members and
TLG Members shall have liability only for that portion of Damages which exceeds
$70,000); provided, however, that the Indemnification Threshold shall not apply
to (i) adjustments to the Cash Purchase Price as set forth in Section 1.3; (ii)
Damages arising out of any breaches of the covenants of the Members or TLG
Members set forth in this Agreement or the representations and warranties made
in Sections 3.4 (matters relating to membership interests), 3.5 (options and
similar rights with respect to membership interests), 3.19 (significant
customers; material contracts and commitments), 3.22 (environmental matters),
3.24 (employee benefit plans), 3.25 (taxes), or 3.26 (conformity with law;
litigation) (other than the Directline Productions claim identified on Schedule
3.26 to which the Indemnification Threshold shall apply), or (iii) Damages
described in Section 8.1(a)(iv) or (v);
(b) the aggregate amount of the Members' and
TLG Members' liability under this Article 8 shall not exceed the Purchase Price;
provided, however, that the Members' and TLG Members' liability for Damages
arising out of any breaches of the representations made in Sections 3.22
(environmental matters), 3.24 (employee benefit plans) or 3.25 (taxes) or
Damages described in Section 8.1(a)(ii), (iv) or (v) shall not be subject to
such limitation and shall not count toward the limitation described in the first
clause of this Section 8.2(b);
(c) the indemnification obligations under
this Article 8, or under any certificate or writing furnished in connection
herewith, shall terminate at the date that is the later of clause (i) or (ii) of
this Section 8.2(c):
(i) (1) except as to representations,
warranties, and covenants specified in clause (i)(2) of this
Section 8.2(c), the third anniversary of the Closing Date, or
(2) with respect to representations
and warranties contained in Sections 3.22 (environmental matters), 3.24
(employee benefit plans), 3.25 (taxes), and the indemnification set forth in
Section 8.1(a)(ii), (iii), (iv) or (v), on (A) the date that is six (6) months
after the expiration of the longest applicable federal or state statute of
limitation (including extensions thereof), or (B) if there is no applicable
statute of limitation, (x) ten (10) years after the Closing Date if the Claim is
related to the cost of investigating, containing, removing, or remediating a
release of Hazardous Material into the environment, or (y) five (5) years after
the Closing Date for any other Claim covered by clause (i)(2)(B) of this Section
8.2(c); or
(ii) the final resolution of claims or demands pending
as of the relevant dates described in clause (i) of this Section 8.2(c) (such
claims referred to as "Pending Claims").
(d) The Company, the Members, and the TLG Members shall not
be liable for Damages arising due to the failure to obtain the consent of
Citicorp Credit Services, Inc. ("Citicorp") that would otherwise be required as
a result of the transactions contemplated by this Agreement pursuant to Section
8.2(e) and (f) of the Vendor Services Agreement dated July 1, 1998 between
Citicorp and the Company.
8.3. Indemnification Procedures All claims or demands for
indemnification under this Article 8 ("Claims") shall be asserted and resolved
as follows:
(a) In the event that any Indemnified Party has a Claim
against any party obligated to provide indemnification pursuant to Section 8.1
hereof (the "Indemnifying Party") which does not involve a Claim being asserted
against or sought to be collected by a third party, the Indemnified Party shall
with reasonable promptness notify the Members' Representative of such Claim,
specifying the nature of such Claim and the amount or the estimated amount
thereof to the extent then feasible (the "Claim Notice"). If the Members'
Representative does not notify the Indemnified Party within thirty (30) days
after the date of delivery of the Claim Notice that the Indemnifying Party
disputes such Claim, with a detailed statement of the basis of such position,
the amount of such Claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder. In case an objection is made in writing in
accordance with this Section 8.3(a), the Indemnified Party shall respond in a
written statement to the objection within thirty (30) days and, for sixty (60)
days thereafter, attempt in good faith to agree upon the rights of the
respective parties with respect to each of such Claims (and, if the parties
should so agree, a memorandum setting forth such agreement shall be prepared and
signed by both parties).
(b) (i) In the event that any Claim for which the
Indemnifying Party would be liable to an Indemnified Party hereunder is asserted
against an Indemnified Party by a third party (a "Third Party Claim"), the
Indemnified Party shall deliver a Claim Notice to the Members' Representative.
The Members' Representative shall have thirty (30) days from the date of
delivery of the Claim Notice to notify the Indemnified Party (A) whether the
Indemnifying Party disputes liability to the Indemnified Party hereunder with
respect to the Third Party Claim, and, if so, the basis for such a dispute, and
(B) if such party does not dispute liability, whether or not the Indemnifying
Party desires, at the sole cost and expense of the Indemnifying Party, to defend
against the Third Party Claim, provided that the Indemnified Party is hereby
authorized (but not obligated) to file any motion, answer or other pleading and
to take any other action which the Indemnified Party shall deem necessary or
appropriate to protect the Indemnified Party's interests.
(ii) In the event that Members' Representative timely
notifies the Indemnified Party that the Indemnifying Party does not dispute the
Indemnifying Party's obligation to indemnify with respect to the Third Party
Claim, the Indemnifying Party shall defend the Indemnified Party against such
Third Party Claim by appropriate proceedings, provided that, unless the
Indemnified Party otherwise agrees in writing, the Indemnifying Party may not
settle any Third Party Claim (in whole or in part) if such settlement does not
include a complete and unconditional release of the Indemnified Party. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement the Indemnified Party may do so at its sole cost and expense. If
the Indemnifying Party elects not to defend the Indemnified Party against a
Third Party Claim, whether by failure of such party to give the Indemnified
Party timely notice as provided herein or otherwise, then the Indemnified Party,
without waiving any rights against such party, may settle or defend against such
Third Party Claim in the Indemnified Party's sole discretion and the Indemnified
Party shall be entitled to recover from the Indemnifying Party the amount of any
settlement or judgment and, on an ongoing basis, all indemnifiable costs and
expenses of the Indemnified Party with respect thereto, including interest from
the date such costs and expenses were incurred.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the Members'
Representative, any Third Party Claim seeks material prospective relief which
could have an adverse effect on any Indemnified Party or the Company or any
Subsidiary, the Indemnified Party shall have the right to control or assume (as
the case may be) the defense of any such Third Party Claim and the amount of any
judgment or settlement and the reasonable costs and expenses of defense shall be
included as part of the indemnification obligations of the Indemnifying Party
hereunder. If the Indemnified Party elects to exercise such right, the
Indemnifying Party shall have the right to participate in, but not control, the
defense of such Third Party Claim at the sole cost and expense of the
Indemnifying Party.
(c) Nothing herein shall be deemed to
prevent the Indemnified Party from making a Claim, and an Indemnified Party may
make a Claim hereunder, for potential or contingent Damages provided the Claim
Notice sets forth the specific basis for any such potential or contingent claim
or demand to the extent then feasible and the Indemnified Party has reasonable
grounds to believe that such Claim may be made.
(d) Subject to the provisions of Section
8.2, the Indemnified Party's failure to give reasonably prompt notice as
required by this Section 8.3 of any actual, threatened or possible claim or
demand which may give rise to a right of indemnification hereunder shall not
relieve the Indemnifying Party of any liability which the Indemnifying Party may
have to the Indemnified Party unless the failure to give such notice materially
and adversely prejudiced the Indemnifying Party.
(e) The parties will make appropriate
adjustments for any Tax benefits, Tax detriments or insurance proceeds in
determining the amount of any indemnification obligation under this Article 8,
provided that no Indemnified Party shall be obligated to continue pursuing any
payment pursuant to the terms of any insurance policy.
8.4. Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by the Company, the Members, the
TLG Members, and Buyer in or pursuant to this Agreement or in any document
delivered pursuant hereto shall be deemed to have been made on the date of this
Agreement (except as otherwise provided herein) and, if a Closing occurs, as of
the Closing Date. The representations of the Company, the TLG Members, and the
Members will survive the Closing and will remain in effect until, and will
expire upon, the termination of the indemnification obligations as provided in
Section 8.2. The representations of Buyer will survive the Closing and will
remain in effect until, and will expire upon the third anniversary of the
Closing Date.
8.5. Remedies Cumulative. The remedies set forth in this Article
8 are cumulative and shall not be construed to restrict or otherwise affect any
other remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
8.6. Right to Set Off. Buyer shall have the right, but not the
obligation, to set off, in whole or in part, against the Pledged Assets or any
Earn-out, amounts finally determined under Section 8.3 to be owed to Buyer by
the Members or the TLG Members under Section 8.1 hereof.
9. NON-COMPETITION.
9.1. Prohibited Activities. Each Member and TLG Member
acknowledges that during the course of his or its direct or indirect ownership
of the Membership Interests, he or it developed relationships on behalf of and
acquired proprietary and confidential information about the Company and its
Subsidiary, including, but not limited to, its customers, vendors, prices, sales
strategies and other information, some of which may be regarded and treated by
the Company and its Subsidiary and Buyer as trade secrets. In order to protect
the Company's and/or Buyer's critical interest in these relationships and
information, the Members and TLG Members covenant that they will not, for a
period of four (4) years following the Closing Date, for any reason whatsoever,
directly or indirectly, for himself or itself or on behalf of or in conjunction
with any other person, persons, partnership, corporation, or business of
whatever nature:
(a) engage, as an officer, director,
manager, shareholder, owner, partner, member, joint venturer, or in a managerial
capacity, whether as an employee, independent contractor, consultant or adviser,
or as a sales representative, in any business selling any products or services
in direct competition with the Company or its Subsidiary, within 50 miles of any
locations where the Company or its Subsidiary both have an office and conduct
business ("Territory"). As used in this subsection, "competition" shall mean
engaging, directly or indirectly, for himself or any other person or entity, in
(i) any facet of the business of the Company or its Subsidiary in which such
Member or TLG Member was engaged in prior to the Closing Date or (ii) any facet
of the business of the Company or its Subsidiary about which such Member or TLG
Member acquired proprietary or confidential information during the course of his
or its direct or indirect ownership of the Membership Interests;
(b) hire or join with in a competitive
business capacity, any employee of the Company or its Subsidiary
within the Territory;
(c) solicit or accept business which
competes with the business of the Company or its Subsidiary from any person who
is, on the Closing Date, or that has been, within one (1) year prior to the
Closing Date, a customer of the Company or its Subsidiary; or
(d) acquire or enter into any agreement to
acquire any prospective acquisition candidate that was, to the knowledge of such
Member or TLG Member, either called upon by the Company or its Subsidiary as a
prospective acquisition candidate or was the subject of an acquisition analysis
by the Company or its Subsidiary within 3 years prior to the Closing Date. Each
Member and TLG Member, to the extent lacking the knowledge described in the
preceding sentence, shall immediately cease all contact with such prospective
acquisition candidate upon being informed that the Company or its Subsidiary had
called upon such candidate or made an acquisition analysis thereof.
Notwithstanding the above, the foregoing
covenant shall not be deemed to prohibit the Members or TLG Members from
acquiring as an investment not more than one percent (1%) of the capital stock
of a competing business whose stock is traded on a national securities exchange
or over- the-counter.
9.2. Confidentiality. Each Member recognizes that by reason of
his or its direct or indirect ownership of the Membership Interests and, if
applicable, his employment by the Company or its Subsidiary, he or it has
acquired confidential information and trade secrets concerning the operation of
the Company and its Subsidiary, the use or disclosure of which could cause the
Company or its affiliates or Subsidiary substantial loss and damages that could
not be readily calculated and for which no remedy at law would be adequate.
Accordingly, each Member and TLG Member covenants and agrees with the Company
and Buyer that he or it will not at any time, except in performance of
obligations to the Company or with the prior written consent of the Company
pursuant to authority granted by a resolution of the Board of Managers of the
Company, directly or indirectly, disclose any secret or confidential information
that he or it may learn or has learned by reason of his or its ownership of the
Membership Interest or his employment by the Company or its Subsidiary, or
affiliates, or use any such information in a manner detrimental to the interests
of the Company or Buyer, unless (i) such information becomes known to the public
generally through no fault of any Member, (ii) disclosure is required by law or
the order of any governmental authority under color of law, or (iii) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, provided,
that prior to disclosing any information pursuant to clause (i), (ii) or (iii)
above, the Member or TLG Member (as applicable) shall give prior written notice
thereof to Buyer and provide Buyer with the opportunity to contest such
disclosure and shall cooperate with efforts to prevent such disclosure. The term
"confidential information" includes, without limitation, information not
previously disclosed to the public or to the trade by the Company's or Buyer's
management with respect to the Company's or Buyer's, or any of their affiliates'
or Subsidiary's, products, facilities, and methods, trade secrets and other
intellectual property, software, source code, systems, procedures, manuals,
confidential reports, product price lists, customer lists, financial information
(including the revenues, costs, or profits associated with any of the Company's
or its Subsidiary's products), business plans, prospects, or opportunities but
shall exclude any information already in the public domain.
9.3. Damages. Because of the difficulty of measuring economic
losses to Buyer as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to Buyer for which
it would have no other adequate remedy, each Member and TLG Member agrees that
the foregoing covenant may be enforced by Buyer in the event of breach by such
Member or TLG Member, by injunctions and restraining orders.
9.4. Reasonable Restraint. The parties agree that the foregoing
covenants in this Article 9 impose a reasonable restraint on each Member and TLG
Member in light of the activities and business of Buyer on the date of the
execution of this Agreement, assuming the completion of the transactions
contemplated hereby.
9.5. Severability; Reformation. The covenants in this Article 9
are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
9.6. Independent Covenant. All of the covenants in this Article
9 shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Member or
TLG Member against Buyer, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Buyer of such covenants.
The parties expressly acknowledge that the terms and conditions of this Article
9 are independent of the terms and conditions of any other agreements including,
but not limited to, any employment agreements entered into in connection with
this Agreement. It is specifically agreed that the period of four (4) years
stated at the beginning of this Article 9 during which the agreements and
covenants of each Member and TLG Member made in this Article 9 shall be
effective, shall be computed by excluding from such computation any time during
which any Member or TLG Member is found by a court of competent jurisdiction to
have been in violation of any provision of this Article 9. The covenants
contained in Article 9 shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
9.7. Materiality. The Company and each Member and TLG Member
hereby agree that the covenants set forth in this Article 9 are a material and
substantial part of the transactions contemplated by this Agreement, supported
by adequate consideration.
10. GENERAL.
10.1. Intentionally Omitted.
10.2. Intentionally Omitted.
10.3. Successors and Assigns. This Agreement and the rights of
the parties hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the parties hereto, the
successors of Buyer, and the heirs and legal representatives of the Members and
TLG Members. Notwithstanding anything in the foregoing to the contrary, Buyer
may assign any of its rights or obligations under this Agreement to any direct
or indirect subsidiary of Buyer in its sole and absolute discretion and without
the consent of the Company, the Members or TLG Members; provided, however that
in the event of such assignment Buyer shall continue to be liable to the Members
for the payment of the Purchase Price.
10.4. Entire Agreement; Amendment; Waiver. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. Each of the Schedules to this Agreement is
incorporated herein by this reference and expressly made a part hereof. Any and
all previous agreements and understandings between or among the parties
regarding the subject matter hereof, whether written or oral, are superseded by
this Agreement. This Agreement shall not be amended or modified except by a
written instrument duly executed by each of the parties hereto, or in accordance
with Section 9.5. Any extension or waiver by any party of any provision hereto
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
10.5. Counterparts. This Agreement may be executed in any number
of counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
10.6. Brokers and Agents. Buyer and the Company and each Member
and TLG Member (as a group) each represents and warrants to the other that it
has not employed any broker or agent in connection with the transactions
contemplated by this Agreement and agrees to indemnify the other against all
losses, damages or expenses relating to or arising out of claims for fees or
commission of any broker or agent employed or alleged to have been employed by
such party.
10.7. Expenses. Buyer has and will pay the fees, expenses and
disbursements of Buyer and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement. The Members
(and not the Company) have and will pay the fees, expenses and disbursements of
the Members, the Company, and their agents, representatives, financial advisers,
accountants and counsel incurred in connection with the subject matter of this
Agreement ("Transaction Expenses"); provided, however, that the Company may pay
on behalf of the Members Transaction Expenses to the extent that such payment
does not cause the Company Net Working Capital to be less than the Company Net
Working Capital Target as of the Closing Date.
10.8. Specific Performance; Remedies. Each party hereto
acknowledges that the other parties will be irreparably harmed and that there
will be no adequate remedy at law for any violation by any of them of any of the
covenants or agreements contained in this Agreement, including without
limitation, the confidentiality obligations set forth in Section 5.7(b) and the
non-competition provisions set forth in Article 9. It is accordingly agreed
that, in addition to any other remedies which may be available upon the breach
of any such covenants or agreements, each party hereto shall have the right to
obtain injunctive relief to restrain a breach or threatened breach of, or
otherwise to obtain specific performance of, the other parties, covenants and
agreements contained in this Agreement.
10.9. Notices. Any notice, request, claim, demand, waiver,
consent, approval or other communication which is required or permitted
hereunder shall be in writing and shall be deemed given if delivered personally
or sent by telefax (with confirmation of receipt), by registered or certified
mail, postage prepaid, or by recognized courier service, as follows:
If to Buyer or the Company to:
Workflow Management, Inc.
000 Xxxxx Xxxx Xxx
Xxxx Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Vice President and General Counsel
(Telefax: (000) 000-0000)
with a required copy to:
Xxxxxxx & Xxxxxxx, P.C.
X.X. Xxx 0000
Xxxxxxx, XX 00000
Attn: Xxx X. Xxxxx, XX, Esq. and T. Xxxxxxx Xxxxxx,
Xx., Esq.
(Telefax: (000) 000-0000)
If to any Member to the Members' Representative:
Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxxxxxx Xxxxx & Xxxxxxxx, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
(Telefax: (000) 000-0000)
with a required copy to:
Xx. Xxxxxx Xxxxxxxx
Xx. Xxxxxxx X. Xxxxxxxxx
United Envelope Co., Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
(Telefax: (000) 000-0000)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
10.10. Governing Law, Arbitration, Jurisdiction, and Attorneys'
Fees. This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the laws of the State of Delaware. Except for final
determinations of the Actual Closing Net Worth and Actual Closing Net Working
Capital, any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration by one Arbitrator in New
York, New York, in accordance with the rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator may be
entered in any court having jurisdiction thereof. Each of the parties hereby
consents to the jurisdiction of the Supreme Court of the State of New York for
the County of New York and the United States District Court for the Southern
District of New York for all purposes in connection with the arbitration
referred to in this Section 10.10 and this Agreement, and further consents that
any process or notice of motion in connection therewith may be served as a
notice in accordance with the provisions of Section 10.9, within or without the
State of New York, provided a reasonable time for appearance is allowed. Each of
the parties hereto hereby irrevocably submits to the jurisdiction of such courts
for the purposes of any suit, civil action or other proceeding arising out of,
in connection with or with respect to this Agreement, the subject matter hereof,
the performance or non-performance of any obligation hereunder, or any of the
transactions contemplated hereby (collectively, "Suit"). Each of the parties
hereto hereby waives and agrees not to assert by way of motion, as a defense or
otherwise in any such Suit, any claim that it is not subject to the jurisdiction
of the above courts, that such Suit is brought in an inconvenient forum, or that
the venue of such Suit is improper. Whenever an attorney is used, to enforce
this Agreement or to enforce, declare, or adjudicate any other rights or
obligations under this Agreement, the costs and expenses thereof, including
reasonable attorneys' fees and expenses, shall be payable by the non-prevailing
party.
10.12. Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any other jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement shall
be severable. The preceding sentence is in addition to and not in place of the
severability provisions in Section 9.5.
10.13. Absence of Third Party Beneficiary Rights. No provision
of this Agreement is intended, nor will any provision be interpreted, to provide
or to create any third party beneficiary rights or any other rights of any kind
in any client, customer, affiliate, shareholder, employee or partner of any
party hereto or any other person or entity.
10.14. Mutual Drafting. This Agreement is the mutual product of
the parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not be
construed for or against any party hereto. As used in this Agreement, the term
"person" shall mean an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
10.15. Further Representations. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legalrights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
The remainder of this page has been left blank intentionally
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
WORKFLOW MANAGEMENT, INC.
By: /s/ Xxxxxxx Xxxxx
------------------------------
Name: Xxxxxxx Xxxxx
Title: Vice President
DIRECTPRO LLC
By: /s/ Xxxxxx Xxxxx
-------------------------
Xxxxxx Xxxxx, President
MEMBERS:
/s/ Xxxxxx Xxxxx
----------------------------------
Xxxxxx Xxxxx
TLG REALTY LLC
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------
Xxxxxx Xxxxxxxx, Member
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------------
Xxxxxxx Xxxxxxxxx, Member
TLG MEMBERS
/s/ Xxxxxx Xxxxxxxx
----------------------------------
Xxxxxx Xxxxxxxx, individually
/s/ Xxxxxxx Xxxxxxxxx
----------------------------------
Xxxxxxx Xxxxxxxxx, individually
By signing below, Xxxxxx X. Xxxxxxxx agrees to serve as Members' Representative
for purposes of this Agreement.
/s/ Xxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxx
