Exhibit 10.17
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STOCK PURCHASE AGREEMENT
by and among
EMPYREAN GROUP HOLDINGS, INC.
("Empyrean Holdings")
ICONIXGROUP, INC.
(the "Company")
THE INVISIONS GROUP, LTD.
("Invisions Group")
and
THE STOCKHOLDERS OF THE INVISIONS GROUP, LTD.
(the "Stockholders")
Dated October 29, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS..............................................................................2
1.1 Definitions...........................................................................2
ARTICLE II STOCK PURCHASE...........................................................................7
2.1 Stock Purchase........................................................................7
2.2 Payment of Purchase Price.............................................................7
2.3 Funded Indebtedness Adjustment.......................................................8
2.4 Exercise of Options and Purchase of Option Shares....................................8
2.5 Financial Condition...................................................................9
2.6 Closing...............................................................................9
2.7 Escrow Arrangements...................................................................9
2.8 Closing Audit.........................................................................10
2.9 Post-Closing Net Working Capital Adjustment...........................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY, INVISIONS GROUP AND STOCKHOLDERS.........11
3.1 Capitalization........................................................................11
3.2 No Liens on Shares....................................................................11
3.3 Subsidiaries..........................................................................12
3.4 Other Rights to Acquire Capital Stock.................................................12
3.5 Due Organization......................................................................12
3.6 Due Authorization.....................................................................12
3.7 Financial Statements..................................................................13
3.8 Certain Actions.......................................................................14
3.9 Properties............................................................................14
3.10 Licenses and Permits..................................................................15
3.11 Intellectual Property.................................................................15
3.12 Compliance with Laws..................................................................16
3.13 Insurance.............................................................................17
3.14 Employee Benefit Plans................................................................17
3.15 Contracts and Agreements..............................................................18
3.16 Claims and Proceedings................................................................19
3.17 Taxes.................................................................................19
3.18 Personnel.............................................................................20
3.19 Business Relations....................................................................21
3.20 Accounts Receivable; Accounts Payable; Customer Deposits, Customer Revenues
and Deferred Revenues.................................................................21
3.21 Bank Accounts; Investments............................................................22
3.22 Customer Claims.......................................................................22
3.23 Brokers...............................................................................22
3.24 Affiliated Transactions...............................................................22
3.25 Funded Indebtedness; Letters of Credit; Undisclosed Liabilities.......................23
3.26 Year 2000.............................................................................23
3.27 Information Furnished.................................................................23
ARTICLE IV EMPYREAN HOLDINGS' REPRESENTATIONS AND WARRANTIES.........................................24
4.1 Due Organization of Empyrean Holdings.................................................24
4.2 Due Authorization.....................................................................24
4.3 No Brokers............................................................................24
4.4 Investment............................................................................25
4.5 Information Furnished................................................................25
4.6 Capital Stock and Related Matters....................................................25
4.7 Subsidiaries; Investments.............................................................25
4.8 Authorization of the Stock...........................................................25
4.9 Financing.............................................................................26
4.10 Sprint Contract......................................................................26
4.11 Financial Statements..................................................................26
4.12 Compliance with Laws..................................................................26
4.13 Claims and Proceedings................................................................26
4.14 Taxes.................................................................................27
4.15 Information Furnished.................................................................27
ARTICLE V PRE-CLOSING COVENANTS OF THE COMPANY, INVISIONS GROUP, EMPYREAN HOLDINGS AND STOCKHOLDERS..27
5.1 Consents of Others....................................................................27
5.2 Stockholders' Efforts.................................................................28
5.3 Powers of Attorney....................................................................28
5.4 Conduct of Business Pending Closing...................................................28
5.5 Access Before Closing.................................................................28
ARTICLE VI POST-CLOSING COVENANTS...................................................................29
6.1 General...............................................................................29
6.2 Transition............................................................................29
6.3 Confidentiality.......................................................................29
6.4 [Intentionally Left Blank]............................................................30
6.5 Additional Matters....................................................................30
6.6 Litigation Support....................................................................32
6.7 Audits................................................................................32
6.8 Minimum Cash as of the Closing........................................................32
6.9 Stock Options.........................................................................32
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING.............................33
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7.1 Conditions to Empyrean Holdings' Obligations..........................................33
7.2 Conditions to Stockholders', Invisions Group's and the Company's Obligations..........36
ARTICLE VIII INDEMNIFICATION.......................................................................37
8.1 Indemnification by Stockholders.......................................................37
8.2 Defense of Claims.....................................................................38
8.3 Escrow Claim..........................................................................38
8.4 Tax Audits, Etc.......................................................................39
8.5 Indemnification of Stockholders.......................................................39
8.6 Limits on Indemnification.............................................................39
8.7 Arbitration of Claims.................................................................39
ARTICLE IX TERMINATION.............................................................................41
9.1 Termination...........................................................................41
9.2 Effect of Termination.................................................................42
ARTICLE X MISCELLANEOUS............................................................................42
10.1 Modifications.........................................................................42
10.2 Notices...............................................................................42
10.3 Counterparts; Facsimile Transmission..................................................44
10.4 Expenses..............................................................................44
10.5 Binding Effect; Assignment............................................................44
10.6 Entire and Sole Agreement.............................................................44
10.7 Governing Law.........................................................................44
10.8 Survival of Covenants.................................................................45
10.9 Invalid Provisions....................................................................45
10.10 Stockholder's Investment Representations..............................................45
10.10 Public Announcements..................................................................45
10.11 Remedies Cumulative...................................................................45
10.12 Third Parties.........................................................................45
10.13 No Strict Construction................................................................46
10.14 Disclosure Schedule...................................................................46
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LIST OF EXHIBITS
Exhibit A Form of Seller Note
Exhibit B Form of Escrow Agreement
Exhibit C Opinion of Stockholders' Counsel
Exhibit D Key Employees of the Company
Exhibit E Form of Stockholder Release
Exhibit F-1 Form of Xxx Xxxxxx Employment Agreement
Exhibit F-2 Form of Noncompete/Nonsolicitation Agreement
Exhibit G Stockholders Accounts and Wire Transfer Instructions((S) 2.4)
Exhibit H Ownership of Shares ((S) 3.1)
Exhibit I-1 Articles of Incorporation of Invisions Group ((S) 3.5)
Exhibit I-2 Bylaws of Invisions Group ((S) 3.5)
Exhibit I-3 Articles of Incorporation of the Company ((S) 3.5)
Exhibit I-4 Bylaws of the Company ((S) 3.5)
Exhibit J List of Properties ((S) 3.9)
Exhibit K List of Licenses and Permits ((S) 3.10)
Exhibit L List of Intellectual Property ((S) 3.11)
Exhibit M List of Insurance ((S) 3.13)
Exhibit N List of Contracts ((S) 3.15)
Exhibit O List of Personnel ((S) 3.18)
Exhibit P List of Deferred Revenues ((S) 3.20)
Exhibit Q List of Bank Accounts and Investments ((S) 3.21)
Exhibit R List of Letters of Credit ((S) 3.25(b))
Exhibit S List of Indebtedness ((S) 7.1(d))
Exhibit T Opinion of Empyrean Holdings' Counsel
Exhibit U Stockholder Subscription Agreement
Exhibit V List of Optionees and Cashless Exercise Amounts
Exhibit W Form of Option Share Purchase Agreement
Exhibit Y Empyrean Holdings' Certificate of Incorporation
LIST OF SCHEDULES
Disclosure Schedule
Financial Statements
Empyrean Capitalization Schedule
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered
into as of October 29, 1999, by and among EMPYREAN GROUP HOLDINGS, INC., a
Delaware corporation ("Empyrean Holdings"), ICONIXGROUP, INC., a Maryland
corporation (the "Company"); THE INVISIONS GROUP, LTD., a Maryland corporation
("Invisions Group"), and Xxx X. Xxxxxx, Xxxxxx Xxxxxxxxx, Xxxxxx X. Barcelona,
Xxxxxxxx Xxxxxxxxx and Xxxx X. Xxxxx (collectively, the "Stockholders").
Recitals
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Pursuant to this Agreement, the Company, which is engaged in
the business of providing information technology consulting, web-site design and
graphic and printing design services in the United States (the "Business"), will
be acquired by Empyrean Holdings pursuant to an acquisition of all of the
capital stock of Invisions Group owned by the Stockholders (the "Acquisition").
A. THE CURRENT CAPITALIZATION OF INVISIONS GROUP AND
THE COMPANY
On the date of this Agreement, the Company's capitalization
consists of 1,000 shares of common stock, $.01 par value per share. Invisions
Group is the owner of 100 shares of the common stock of the Company (the
"Company Shares"), which stock represents all of the issued and outstanding
capital stock of the Company. On the date of this Agreement, Invisions Group's
capitalization consists of 1,500,000 shares of common stock, $.01 par value per
share (the "Invisions Stock"). The Stockholders are the owners of 831,250 shares
of Invisions Stock, which stock represents all of the issued and outstanding
stock of Invisions Group (the "Existing Shares").
B. THE STOCK PURCHASE
Empyrean Holdings desires to purchase from the Stockholders
and the Stockholders desire to sell to Empyrean Holdings all of the Existing
Shares for a purchase price of $25,600,000, subject to adjustment as provided
herein.
Agreement
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NOW, THEREFORE, in consideration of the mutual premises and
covenants contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. In this Agreement, the following terms have
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the meanings specified or referred to in this Section 1.1 and shall be equally
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applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AA" shall mean Xxxxxx Xxxxxxxx, L.L.P. and its successors.
"Acquisition" has the meaning specified in the beginning of
the recitals of this Agreement.
"Affiliate" means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by or is under
common control with such Person.
"Audited Closing Financial Statements" has the meaning
specified in Section 2.8.
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"BSG" has the meaning specified in Section 4.10.
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"Business" has the meaning specified in the first recital of
the Agreement.
"Cash Purchase Price" shall have the meaning assigned to such
term in Section 2.2(a).
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"Closing" means the closing of the Acquisition.
"Closing Date" has the meaning specified in Section 2.6.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $.01 per
share, of Empyrean Holdings.
"Company" has the meaning specified in the first paragraph of
this Agreement.
"Company Shares" has the meaning specified in Recital A of the
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Agreement.
"Confidential Information" means (i) the terms and provisions
of this Agreement and the Acquisition and (ii) all confidential information (for
purposes of this Agreement, confidential information shall refer to all
information which is the subject of reasonable efforts by the Company to
maintain its non-public character or to otherwise prevent such information from
becoming widely known) and trade secrets of the Company or its Affiliates
including, without limitation, any of the same comprising the identity, lists or
descriptions of any customers, referral
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sources or organizations; financial statements, cost reports or other financial
information; contract proposals, or bidding information; business plans and
training and operations methods and manuals; personnel records; fee structure;
and management systems, policies or procedures, including related forms and
manuals. Confidential Information shall not include any information (a) which is
disclosed pursuant to subpoena or other legal process, (b) which has been
publicly disclosed, or (c) which is disclosed to any third party not in breach
of a confidentiality agreement.
"Contracts" has the meaning specified in Section 3.15.
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"Court Order" means any judgment, order, award or decree of
any foreign, federal, state, local or other court or tribunal and any award in
any arbitration proceeding.
"Disclosure Schedule" means the Disclosure Schedule attached
to this Agreement pursuant to which exceptions to Invisions Group's, the
Stockholders' and the Company's specific representations and warranties set
forth in Article III (and listed on a Section-by-Section basis) are disclosed to
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Empyrean Holdings pursuant to said Article III.
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"Employee Welfare Benefit Plan" means "employee welfare
benefit plan" as such term is defined in Section 3(1) of ERISA.
"Empyrean Holdings" has the meaning specified in the first
paragraph of this Agreement.
"Encumbrance" means any lien, claim, charge, security
interest, mortgage, pledge, easement, conditional sale or other title retention
agreement, defect in title or restrictive covenant.
"Environmental and OSHA Obligations" has the meaning specified
in Section 3.12.
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"Equitable Exceptions" shall have the meaning specified in
Section 3.6.
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"Equity Agreements" means (i) the Stockholders Agreement dated
August 12, 1999 between Empyrean Holdings and its stockholders and (ii) the
Registration Rights Agreement dated August 12, 1999 between Empyrean Holdings
and its stockholders.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" means First Union National Bank, N.A.
"Escrow Agreement" means the Escrow Agreement to be executed
by and among the Stockholders, Empyrean Holdings and the Escrow Agent in the
form of Exhibit B.
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"Escrow Period" has the meaning specified in Section 2.7.
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"Escrow Sum" has the meaning specified in Section 2.7.
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"Existing Shares" has the meaning specified in Recital A of
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the Agreement.
"Financial Statements" has the meaning specified in Section
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3.7.
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"Force Majeure" shall mean any failure or delay caused by acts
of god, flood, fire, war or terrorism or any failure or delay caused by a
governmental blockage of all currency transactions between a foreign
Governmental Body and the United States of America.
"Funded Indebtedness" means all (i) indebtedness of the
Company for borrowed money, including borrowings under the Company's revolving
credit facility with Xxxxx Bank, N.A; (ii) other interest-bearing indebtedness;
(iii) capital lease obligations of the Company; (iv) obligations of the Company
to pay the deferred purchase or acquisition price for goods or services, other
than trade accounts payable in the ordinary course of business; (v) indebtedness
of others guaranteed by the Company or secured by an Encumbrance on the
Company's property; and (vi) indebtedness of the Company under extended credit
terms of more than 60 days from vendors provided to the Company.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Governmental Body" means any foreign, federal, state, local
or other governmental authority or regulatory body having jurisdiction over the
Company, Invisions Group and/or the Stockholders.
"Governmental Permits" has the meaning specified in Section
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3.10.
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"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended and the rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"Indemnifiable Costs" has the meaning specified in Section
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8.1.
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"Indemnified Parties" has the meaning specified in Section
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8.1.
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"Invisions Group" has the meaning specified in the first
paragraph of this Agreement.
"Invisions Stock" has the meaning specified in Recital A of
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the Agreement.
"Intellectual Property" shall mean all of the following as
they are related primarily to the Business: (i) patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not
reduced to practice); (ii) trademarks, service marks, trade dress, trade names,
corporate names, logos, slogans and Internet domain names, together with all
goodwill associated with each of the foregoing; (iii) copyrights and
copyrightable works; (iv) registrations, applications and renewals for any of
the foregoing; (v) trade secrets, confidential information and know-how
(including but not limited to ideas,
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formulae, compositions, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs,
business and marketing plans, and customer and supplier lists and related
information); and (vi) computer software (including but not limited to data,
data bases and documentation).
"Knowledge of the Company" (whether or not capitalized) shall
mean actual knowledge, after reasonable inquiry within the Company to employees
with responsibility for the subject matter in question, of the Stockholders and
the officers and key employees of the Company. "Knowledge of the Stockholders"
(whether or not capitalized) shall mean actual knowledge of the Stockholders.
"Leases" shall mean the real property leases set forth on
Exhibit J.
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"Majority Sellers" or "Majority Stockholders" shall mean Xxx
Xxxxxx and Xxxxxx Xxxxxxxxx.
"Material" (whether or not capitalized) shall, where
appropriate in context of its use in making the representations and warranties
set forth in Article III, be deemed to mean an amount of money greater than
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$50,000 individually or $100,000 in the aggregate.
"Material Adverse Change" or "Material Adverse Effect" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities or financial condition of the Company and its
subsidiaries, taken as a whole. In determining whether a "Material Adverse
Change" or "Material Adverse Effect" has occurred in the context of the use of
such terms in the Company's, Invisions Group's and Stockholders' representations
and warranties set forth in Article III, such terms shall refer to the
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occurrence of any single event, or any series of related events, or set of
related circumstances, which results or likely will result in a loss to the
Company, in excess of $50,000 per occurrence or $100,000 in the aggregate.
"Minimum Cash Deficit" has the meaning specified in Section
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6.8.
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"Net Working Capital" shall equal the Company's total current
assets (including cash and cash equivalents) minus its total current liabilities
(other than liabilities associated with the lease and occupancy of new office
space by the Company in Bethesda, Maryland) including, without limitation,
borrowings under the Company's revolving credit facility with Xxxxx National
Bank, N.A., any cash to accrual liability borne by the Company and any change in
control payments due to employees, subcontractors, vendors or customers as a
result of the Acquisition contemplated hereby, each as calculated in accordance
with GAAP. For purposes of computing Net Working Capital, current liabilities
shall not include (i) liabilities associated with the lease, tenant improvements
and occupancy of new office space by the Company in Bethesda, Maryland, (ii)
liabilities incurred in connection with the Company's rebranding efforts on
behalf of Empyrean Holdings, (iii) employee income tax withholding amounts to
the extent reflected in the Company's accrued payroll liabilities; (iv) the
employees' share of employment taxes resulting from the exercise of Options
pursuant to Section 2.4 or (v) the employer's share of employment taxes
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resulting from the exercise of Options pursuant to Section 2.4 to the extent,
based on reasonable
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projections made as of the Closing Date of the compensation to be received from
the Company or its successor assuming continued employment by each optionee
through the end of calendar year 1999, the exercise of the Options results in an
acceleration of liability for the employer's share of employment taxes that the
Company would have incurred for calendar year 1999 even if such Option exercises
had not occurred. Current assets shall not include any offsetting current
receivables from the employees for such amounts of income and employment tax
withholding related to the exercise of Options.
"Net Working Capital Adjustment" has the meaning specified in
Section 2.9.
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"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
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thereunder.
"Option Plan" has the meaning specified in Section 2.4 of the
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Agreement.
"Option Shares" has the meaning specified in Section 2.4 of
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the Agreement.
"Options" has the meaning specified in Section 2.4 of the
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Agreement.
"Other Arrangement" means a benefit program or practice
providing for bonuses, incentive compensation, vacation pay, severance pay,
insurance, restricted stock, stock options, employee discounts, company cars,
tuition reimbursement or any other perquisite or benefit (including, without
limitation, any fringe benefit under Section 132 of the Code) to employees,
officers or independent contractors that is not an Employee Benefit Plan within
the meaning of Section 3(3) of ERISA.
"Permitted Exception" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) purchase money security interest liens solely
on the property acquired pursuant to such credit purchase, (d) leases for
personal property not reflected as owned on the Financial Statements or (e)
other liens or imperfections on property which are not material in amount or do
not materially detract from the value or the existing use of the property
affected by such lien or imperfection.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"Preferred Stock" means the Convertible Class A Preferred
Stock, par value $.01 per share of Empyrean Holdings.
"Projected Net Working Capital" means $1,000,000.
"Purchase Price" has the meaning specified in Section 2.1.
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"Recapitalization Agreement" means that certain
Recapitalization Agreement dated August 11, 1999 by and among BSG Holdings,
Inc., the stockholders of BSG Holdings, Inc., Xxxxxx Itech Holdings, LLC and
Empyrean Holdings.
"Requirements of Laws" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements).
"Seller Notes" has the meaning specified in Section 2.2(b).
"Stockholders" has the meaning set forth in the first
paragraph of this Agreement.
"Tax" or "Taxes" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance, property, production, sales, use, transfer, gains, license,
excise, employment, payroll, withholding or minimum tax, transfer, goods and
services, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amounts imposed thereon by any
Governmental Body.
"Tax Authority" means any Governmental Body for which any Tax
Returns are filed or any Taxes are paid.
"Tax Return" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
ARTICLE II
STOCK PURCHASE
2.1. Stock Purchase. On the Closing Date and subject to the
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terms and conditions set forth in this Agreement, the Stockholders shall sell
and deliver to Empyrean Holdings all of the Existing Shares, free and clear of
all Encumbrances, other than Permitted Exceptions and the restrictions imposed
by federal and state securities laws. The total purchase price for the Existing
Shares (the "Purchase Price") shall be equal to $25,600,000, subject to any
adjustment required to be made pursuant to Sections 2.3, 2.4, 2.5, 2.8 and 2.9
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below.
2.2. Payment of Purchase Price. On the Closing Date and
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subject to the terms and conditions set forth in this Agreement, Empyrean
Holdings shall pay the Purchase Price for the Existing Shares to the
Stockholders. The Purchase Price shall be payable as follows:
(a) an aggregate of $18,300,000 shall be paid at Closing
by wire transfer of immediately available funds to the Stockholders' accounts as
specified in Exhibit G
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hereto (the "Cash Purchase Price"), subject to adjustment as provided in
Sections 2.3, 2.4 and 2.5;
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(b) $2,650,000 shall be paid in the form of Seller Notes
to the Stockholders in the form of Exhibit A hereto (the "Seller Notes"), which
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shall be delivered by Empyrean Holdings to the Escrow Agent at Closing pursuant
to Section 2.7 below to serve as a portion of the Escrow Sum (as defined below);
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(c) $1,000,000 shall be paid in cash to the Escrow Agent
at Closing pursuant to Section 2.7 below to serve as a portion of the Escrow Sum
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(as defined below); and
(d) $3,650,000 shall be paid in the form of 1,825,000
shares of Common Stock and 3,467.5 shares of Preferred Stock to all Stockholders
who execute a Stockholder Subscription Agreement in form of Exhibit U hereto,
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with such Common Stock and Preferred Stock to be allocated among the
Stockholders in the amounts specified in Exhibit G hereto.
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2.3. Funded Indebtedness Adjustment. The Cash Purchase Price
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will be adjusted downward by the amount, if any, by which the Company's Funded
Indebtedness exceeds $425,000 as of the Closing Date.
2.4. Exercise of Options and Purchase of Option Shares.
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(a) Prior to the Closing, Invisions Group shall amend
The Invisions Group, Ltd. Stock Option Plan (the "Option Plan") and all options
that are outstanding under the Plan immediately prior to the Closing (the
"Options") to provide (i) that a "Change of Control" pursuant to the Option Plan
shall be deemed to occur immediately prior to the Closing and (ii) that upon the
occurrence of such a "Change of Control" (which shall have been designated by
Xxx Xxxxxx in a letter prior to Closing) the sole method of exercising an Option
is by means of withholding shares of Invisions Stock with an aggregate fair
market value equal to the aggregate exercise price of the Options exercised
(i.e., a "cashless" exercise), Invisions Group and the Stockholders shall use
commercially reasonable efforts to ensure that at or prior to the Closing all
holders of Options outstanding immediately prior to the Closing exercise all of
their Options by means of the "cashless" exercise feature. As of the date of
this Agreement, the holders of all Options, the number of Options held by each,
the strike price of each Option, and the number of Invisions Shares (the "Option
Shares") each holder of Options would receive upon the "cashless" exercise
thereof are set forth on Exhibit V.
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(b) On or prior to the Closing Date, Invisions Group, the
Stockholders and Empyrean Holdings shall use commercially reasonable efforts to
cause each holder of Options to enter into an Option Share Purchase Agreement
with Empyrean Holdings, in the form of Exhibit W, pursuant to which agreements
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Empyrean Holdings will purchase from the Option holders, at the Closing by wire
transfer to the Company, which will act as the holders' designated agent, which
will then pay the holders by check as specified in the respective Option Share
Purchase Agreements, all Option Shares held by such holders for a purchase price
of $27.07 per
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Option Share. The Option Share Purchase Agreements shall provide for the
remittance of a portion of the purchase price due to a former holder of Options
directly to the Company to pay any withholding taxes due by such former holder
upon the exercise of his or her Options.
(c) The Cash Purchase Price will be reduced by the sum of
(x) the aggregate amount of payments made by Empyrean Holdings pursuant to all
Option Share Purchase Agreements and (y) the aggregate amount that would have
been paid to all holders of Options who do not enter into Option Share Purchase
Agreements had all such persons entered into Option Share Purchase Agreements.
In addition, the Cash Purchase Price will be reduced, on a dollar-for-dollar
basis, by the amount, if any, by which the cost of the payments required by the
preceding sentence would be less than $2,000,000, but in no event shall such
adjustment exceed $600,000.
2.5. Financial Condition. The Company's Net Working Capital at
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the Closing (as determined based on the Company's preliminary closing balance
sheet prepared not more than five days prior to the Closing Date) shall not be
less than Projected Net Working Capital and the Company shall continue to have
at least $100,000 in cash and cash equivalents on hand at the Closing or the
Cash Purchase Price payable at Closing will be reduced by the amount of such
deficit(s).
2.6. Closing. The Closing of the Acquisition shall take place
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at 10:00 a.m., Eastern Time, at the offices of Xxxxx & Xxxxxxx L.L.P., 000 00xx
Xxxxxx, X.X. in Washington, D.C. on November 3, 1999, or on a date mutually
agreed to by the parties (which date shall be as soon as practicable following
the date on which all of the conditions to Closing set forth in Sections 7.1 and
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7.2 have been satisfied) (the "Closing Date").
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2.7. Escrow Arrangements. Pursuant to the Escrow Agreement to
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be entered into among Stockholders, Empyrean Holdings and the Escrow Agent, the
Seller Notes and $1,000,000 of the Purchase Price shall be delivered by Empyrean
Holdings to the Escrow Agent at Closing (such Seller Notes and the monies paid,
together with all interest accrued thereon, is hereinafter referred to as the
"Escrow Sum"). The Escrow Sum shall be held pursuant to the terms of the Escrow
Agreement for payment from such Escrow Sum of the amounts, if any, owing by
Stockholders to Empyrean Holdings or the Company pursuant to the provisions of
the Net Working Capital Adjustment or for indemnification claims pursuant to
Article VIII hereof. The Escrow Sum shall be reduced to an amount equal to the
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aggregate amount of the Seller Notes then outstanding (plus any good faith
indemnification or Net Working Capital Adjustment claims then pending against
the cash portion of the Escrow Sum) within five days after the 120th day
following the Closing Date. The payments made to the Stockholders to effect such
reduction shall be made in cash to the Stockholders at their accounts set forth
in Exhibit G as updated from time to time. To the extent claims against the
---------
Escrow Sum are determined in favor of the Stockholders, all amounts reserved
against the Escrow Sum in connection with such claims shall be remitted to the
Stockholders as soon as practicable following any such determination. On the
first anniversary of the Closing Date (such one-year period being referred to
herein as the "Escrow Period"), such remaining portion of the Escrow Sum not
theretofore claimed by or paid to Empyrean Holdings in accordance with the terms
of the Escrow Agreement and this
-9-
Agreement (together with any interest on such remaining portion of the Escrow
Sum) shall be disbursed to the Stockholders. All disbursements at the expiration
of the Escrow Period shall be paid in cash or pursuant to the Seller Notes, as
applicable, to the Stockholders at their accounts set forth in Exhibit G as
---------
updated from time to time. Stockholders and Empyrean Holdings agree that each
will execute and deliver such reasonable instruments and documents as are
furnished by any other party to enable such furnishing party to receive those
portions of the Escrow Sum to which the furnishing party is entitled under the
provisions of the Escrow Agreement and this Agreement.
2.8. Closing Audit. Within 120 days following the Closing
-------------
Date, there shall be delivered to Empyrean Holdings and to Stockholders an audit
of the Company's balance sheet as of the Closing Date (the "Audited Closing
Financial Statements"). The Audited Closing Financial Statements shall be
audited by AA in accordance with GAAP. The Majority Stockholders shall be
afforded a reasonable opportunity to review the audit results (including any
work papers prepared in connection therewith). The cost of preparing the Audited
Closing Financial Statements shall be paid by Empyrean Holdings. In the event
that the Majority Stockholders or Empyrean Holdings disputes an item in the
Audited Closing Financial Statements, the Company shall select and retain an
independent "Big Five" accounting firm (the "Independent Accountants") to review
the disputed matter(s) on the Audited Closing Financial Statements. In
conducting such review, AA shall provide the Independent Accountants with
customary access to the work papers of AA utilized in preparing the Audited
Closing Financial Statements. The final determination of such disputed matter(s)
by the Independent Accountants shall be utilized to determine all adjustments
described in Section 2.9 below and shall be final and binding on the parties
-----------
solely for such purposes. The cost of retaining the Independent Accountants
shall be borne equally by Persons disputing the Audited Closing Financial
Statements and the Company. If there is no such dispute, the Audited Closing
Financial Statements shall be utilized to determine all such adjustments and
shall be likewise final and binding.
2.9. Post-Closing Net Working Capital Adjustment. The Purchase
-------------------------------------------
Price will be adjusted upward or downward, on a dollar-for-dollar basis, to
reflect the increase or decrease, if any, in Net Working Capital as reflected on
the Audited Closing Financial Statements from the Projected Net Working Capital
(the "Net Working Capital Adjustment"). The Net Working Capital Adjustment shall
be determined by referring to the Audited Closing Financial Statements. In the
event that the Net Working Capital Adjustment results in an increase in the
Purchase Price, then Empyrean Holdings shall pay such amount to the Stockholders
in immediately available funds within 15 days of delivery of the Audited Closing
Financial Statements as finally determined in accordance with Section 2.8 above.
-----------
In the event that the Net Working Capital Adjustment results in a decrease in
the Purchase Price, then the amount of any such decrease shall be payable to
Empyrean Holdings (i) first, from the Escrow Sum in immediately available funds
within 15 days of the final determination of the Net Working Capital Adjustment
up to the aggregate cash portion of the Escrow Sum and (ii) second, the balance,
if any, by the Stockholders in immediately available funds within 15 days of the
final determination of the Net Working Capital Adjustment. All payments required
to be paid by
-10-
Stockholders or the Escrow Agent pursuant to this Section 2.9 shall be deemed to
-----------
be a downward adjustment to the Purchase Price and shall not be controlled or
limited by any provision contained in Article VIII hereof.
------------
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, INVISIONS GROUP AND STOCKHOLDERS
Except as set forth on the Disclosure Schedule attached hereto (which
Disclosure Schedule identifies the exception and references the applicable
representation so qualified), the Company, Invisions Group and Stockholders
jointly and severally represent and warrant to Empyrean Holdings that:
3.1. Capitalization. The authorized capital stock of Invisions
--------------
Group immediately prior to Closing consists of 1,500,000 shares of Invisions
Stock, 831,250 of which being the Existing Shares, are issued and outstanding,
and 97,992 of which, being the Option Shares, will be issued and outstanding
immediately prior to the Closing, assuming exercise of all Options pursuant to
Section 2.4. All of the Existing Shares are, and all of the Option Shares,
-----------
assuming exercise of all Options pursuant to Section 2.4 immediately prior to
-----------
the Closing, will be, duly authorized, validly issued, fully paid, and
nonassessable. All of the Existing Shares are owned of record and beneficially
by the Stockholders in the amounts set forth on Exhibit H hereto. All of the
---------
Option Shares, assuming exercise of all Options pursuant to Section 2.4
-----------
immediately prior to the Closing, will be owned of record and beneficially by
the persons and in the amounts set forth on Exhibit V. None of the Existing
---------
Shares was issued, and none of the Option Shares will be issued, in violation of
any preemptive, right of first offer or refusal or preferential rights of any
Person. The authorized capital stock of the Company consists of 1,000 shares of
common stock, 100 of which being the Company Shares are issued and outstanding.
All of the Company Shares are duly authorized, validly issued, fully paid, and
nonassessable. All of the Company Shares are owned of record and beneficially by
Invisions Group. None of the Company Shares was issued in violation of any
preemptive, right of first offer or refusal or preferential rights of any
Person.
3.2. No Liens on Shares. Invisions Group owns the Company
------------------
Shares and the Stockholders own all of the Existing Shares, free and clear of
any Encumbrances other than the rights and obligations arising under this
Agreement and Permitted Exceptions, and none of the Existing Shares or the
Company Shares is subject to any outstanding option, warrant, call, or similar
right of any other Person to acquire the same, and none of the Existing Shares
or the Company Shares is subject to any restriction on transfer thereof except
for restrictions imposed by applicable federal and state securities laws. At
Closing pursuant to the Acquisition, the Stockholders will each have full power
and authority to convey good and marketable title to the Existing Shares, free
and clear of any Encumbrances other than the restrictions imposed by federal and
state securities laws.
-11-
3.3. Subsidiaries. The Company does not own, directly or
------------
indirectly, any capital stock or ownership interests in any Person. The
Stockholders do not own any capital stock or ownership interests in any other
Person engaged in the Business other than Existing Shares in Invisions Group
(other than ownership of a publicly-held corporation of which the Stockholders,
or any of them, own, or has real or contingent rights to own, less than five
percent of any class of outstanding securities). Invisions Group does not own
any capital stock or ownership interests in any other Person other than the
Company.
3.4. Other Rights to Acquire Capital Stock. Except as set
-------------------------------------
forth in this Agreement in respect of Empyrean Holdings' rights to acquire the
Existing Shares and the Options, there are no authorized or outstanding
warrants, options, or rights of any kind to acquire from either Invisions Group
or the Company any equity or debt securities of the Invisions Group or the
Company, or securities convertible into or exchangeable for equity or debt
securities of Invisions Group or the Company, and there are no shares of capital
stock of Invisions Group or the Company reserved for issuance for any purpose
nor any contracts, commitments, understandings or arrangements which require
Invisions Group or the Company to issue, sell or deliver any additional shares
of its capital stock.
3.5. Due Organization. The Company is a corporation duly
----------------
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full corporate power and authority to own and lease its
properties and assets and to carry on the Business as now conducted. Invisions
Group is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Maryland and has full corporate power and
authority to own and lease its properties and assets and to carry on the
Business as now conducted. Complete and correct copies of the Articles of
Incorporation and Bylaws of the Company and the Articles of Incorporation and
Bylaws of Invisions Group, and all amendments thereto, have been delivered to
Empyrean Holdings and are attached hereto as Exhibits I-1, I-2, I-3 and I-4,
------------ --- --- ---
respectively. There is no other jurisdiction in which the nature of the Business
or the ownership of its properties requires qualification to do business except
where the failure to be so qualified does not and could not reasonably be
expected to have a Material Adverse Effect. The Company has a representative
office in Paris, France.
3.6. Due Authorization. The Company, Invisions Group and the
-----------------
Stockholders each have full power and authority to execute, deliver and perform
this Agreement and to carry out the Acquisition. The execution, delivery, and
performance of this Agreement and the Acquisition have been duly and validly
authorized by all necessary corporate action of the Company and Invisions Group.
This Agreement has been duly and validly executed and delivered by the Company,
Invisions Group and Stockholders and constitutes the valid and binding
obligations of the Company, Invisions Group and Stockholders, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by laws affecting creditors' rights and debtors' obligations generally,
and legal limitations relating to remedies of specific performance and
injunctive and other forms of equitable relief (the "Equitable Exceptions"). The
execution, delivery, and performance of this Agreement and the Acquisition (as
well as all other instruments, agreements, certificates, or other documents
contemplated hereby) by the Company, Invisions Group and Stockholders, do not
(a) violate any
-12-
Requirements of Laws or any Court Order of any Governmental Body applicable to
the Company, Invisions Group or Stockholders, or their respective property, (b)
violate or conflict with, or permit the cancellation of, or constitute a default
under, any Contract to which the Company, Invisions Group or Stockholders are a
party, or by which any of them or any of their respective property is bound, (c)
permit the acceleration of the maturity of any Material indebtedness of, or
indebtedness secured by the property of, the Company, Invisions Group or
Stockholders, (d) violate or conflict with any provision of the charter or
bylaws of the Company or Invisions Group, or (e) except for filings or approvals
under the HSR Act and such consents, approvals, or registrations as may be
required under applicable state securities laws, require any material consent,
approval or authorization of, or notice to, or declaration, filing or
registration with, any Governmental Body or other third party.
3.7. Financial Statements. The following financial statements
--------------------
of Invisions Group and the Company have been delivered to Empyrean Holdings by
the Company: a consolidated unaudited balance sheet of Invisions Group as of
September 30, 1999 and an audited consolidated balance sheet of Invisions Group
as of June 30, 1999; audited consolidated statements of operations and cash
flows of Invisions Group for the year ended June 30, 1999; and unaudited
consolidated statements of operations and cash flows of Invisions Group for the
three months ended September 30, 1999 (collectively, the "Financial
Statements"). Copies of the Financial Statements are included in the Disclosure
----------
Schedule hereto. Other than the Financial Statements as of and for the three
--------
months ended September 30, 1999 (the "Most Recent Financial Statements"), the
Financial Statements have been prepared in accordance with GAAP and the Most
Recent Financial Statements to the Company's Knowledge have been prepared in
accordance with GAAP except as set forth in Section 3.7 of the Disclosure
Schedule. The audited Financial Statements and the Most Recent Financial
Statements (including the notes thereto) have been prepared on a consistent
basis throughout the periods indicated and fairly present the financial
position, results of operations and changes in financial position of Invisions
Group and the Company as of the indicated dates and for the indicated periods
and are consistent with the books and records of Invisions Group and the Company
(which books and records are correct and complete in all material respects).
Since the date of the last of such Financial Statements, the Company has
incurred no Material liabilities required by GAAP to be reflected on the
Company's balance sheet or notes thereto nor any other obligations (whether
absolute, contingent, or otherwise) which are (individually or in the aggregate)
Material (in amount or to the conduct of the Business); and neither the Company
nor Stockholders have Knowledge of any basis for the assertion of any such
Material liability or obligation. Since June 30, 1999, the Company has not
experienced any Material Adverse Change.
3.8. Certain Actions. Since June 30, 1999, neither Invisions
---------------
Group nor the Company has, except as disclosed on any of the Financial
Statements or notes thereto: (a) paid or declared any dividends or
distributions, or purchased, redeemed, acquired, or retired any stock or
indebtedness of any Stockholder; (b) made or agreed to make any loans or
advances or guaranteed or agreed to guarantee any loans or advances to any party
whatsoever in excess of $10,000 in the aggregate; (c) suffered or permitted any
Encumbrance to arise or be granted or created against or upon any of its assets,
real or personal, tangible or intangible; (d) canceled,
-13-
waived, or released or agreed to cancel, waive, or release any of its debts,
rights, or claims against third parties in excess of $10,000 individually or
$50,000 in the aggregate; (e) sold, assigned, pledged, mortgaged, or otherwise
transferred, or suffered any Material damage, destruction, or loss (whether or
not covered by insurance) to, any assets (except in the ordinary course of the
Business); (f) amended its articles of incorporation or bylaws; (g) outside the
ordinary course of business, paid or made a commitment to pay any severance or
termination payment to any employee or consultant; (h) made any Material change
in its method of management operation, accounting or reporting of income or
deductions for tax purposes or any change outside the ordinary course of the
Business in the Company's working capital; (i) made any Material acquisitions,
made any Material capital expenditures, including, without limitation,
replacements of equipment in the ordinary course of the Business, or entered
into commitments therefor, except for capital expenditures or commitments
therefor which do not, in the aggregate, exceed $50,000; (j) made any investment
or commitment therefor in any Person; (k) made any payment or contracted for the
payment of any bonus or other compensation or personal expenses, other than (A)
wages and salaries and business expenses paid in the ordinary course of the
Business, and (B) wage and salary adjustments made in the ordinary course of the
Business for employees who are not officers, directors, or Stockholders of
Invisions Group or the Company; (l) made, amended or entered into any written
employment contract with any officers or key employees of the Company listed on
Exhibit D hereto or created or made any Material change in any bonus, stock
---------
option, pension, retirement, profit sharing or other employee benefit plan or
arrangement; (m) made or entered into any Contract greater than the smallest of
the Contracts scheduled in accordance with Section 3.15 of the Disclosure
Schedule; (n) made or entered into any agreement granting any Person any
registration or offer rights in respect of the Invisions Group or the Company's
capital stock; (o) entered into any non-competition agreement restricting the
Company from engaging in the Business; (p) made or entered into any employment
agreement or other agreement or other arrangement with any officer, director,
Stockholder or Affiliate of Invisions Group or the Company; or (q) amended,
experienced a termination or received notice of actual or threatened termination
or non-renewal of any Material contract, agreement, lease, franchise or license
to which the Company is a party that could reasonably be expected to have a
Material Adverse Effect.
3.9. Properties. Attached hereto as Exhibit J is a list
---------- ---------
containing a description of each interest in real property (including, without
limitation, leasehold interests) and each item of personal property utilized by
the Company in the conduct of the Business having a book or fair market value in
excess of $10,000 as of the date hereof. Except for Permitted Exceptions, such
real and personal properties are free and clear of Encumbrances. Stockholders
and the Company have delivered to Empyrean Holdings copies of all real property
leases and a lien search obtained from the counties where the Company conducts
business and the Maryland State Department of Assessments and Taxation of all
UCC liens of record against the Company's personal property in the State of
Maryland. All of the properties and assets necessary for continued operation of
the Business as currently conducted (including, without limitation, all books,
records, computers and computer software and data processing systems) are owned,
leased or licensed by the Company and are reasonably suitable for the purposes
for which they are currently being used. With the exception of used equipment
and inventory valued at no more
-14-
than $10,000 in the aggregate on the Company's Financial Statements, the
physical properties of the Company, including the real properties leased by the
Company, are in good operating condition. Except for Permitted Exceptions, the
Company has title to all such properties and assets that are owned by the
Company. The operation of the properties and Business of the Company in the
manner in which they are now and have been operated does not violate any zoning
ordinances, municipal regulations, or other Requirements of Laws, except for any
such violations which would not, individually or in the aggregate, have a
Material Adverse Effect. Except for Permitted Exceptions, no restrictive
covenants, easements, rights-of-way, or regulations of record impair the uses of
the properties of the Company for the purposes for which they are now operated.
All leases of real or personal property by the Company are legal, valid,
binding, enforceable and in full force and effect and will not be terminated on
or after the Closing Date as a result of the failure to obtain any consents to
the Acquisition contemplated hereby, except for the Equitable Exceptions. All
facilities leased by the Company have received all material approvals from any
Governmental Body (including Governmental Permits) required to be obtained by
the Company in connection with the operation of the Business and have been
operated and maintained in accordance with all material Requirements of Laws
applicable to the Company as a lessee thereof. The Company owns no real
property.
3.10. Licenses and Permits. Attached hereto as Exhibit K is a
-------------------- ---------
list of all material licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "Governmental Permits"). The
Company has complied in all material respects with the terms and conditions of
all such Governmental Permits, and the Company has not received notification
from any Governmental Body of violation of any such Governmental Permit or the
Requirements of Laws governing the issuance or continued validity thereof. All
of such Governmental Permits are valid and in full force and effect. No
additional Governmental Permits are required from any Governmental Body thereof
in connection with the conduct of the Business which Governmental Permits, if
not obtained, would individually or in the aggregate have a Material Adverse
Effect.
3.11. Intellectual Property. Attached hereto as Exhibit L is a
--------------------- ---------
list and a brief description of all material Intellectual Property owned or
utilized by the Company. The Company has furnished Empyrean Holdings with copies
of all material license agreements (including software licensing agreements) to
which the Company is a party, either as licensor or licensee, with respect to
any Intellectual Property. The Company has legal title to or the right to use
all the Intellectual Property and all inventions, processes, designs, formulae,
trade secrets and know-how utilized in the conduct of the Business as presently
conducted and as currently proposed to be conducted by the Company's current
management, without the payment of any royalty or similar payment, and the
Company is not infringing on any Intellectual Property right of others and
neither the Company nor Stockholders have Knowledge of any infringement by
others of any such rights owned by the Company. The Company has not received
notice of any charge, claim, demand, complaint, action, suit, hearing,
proceeding or investigation which challenges the Company's ownership or
licensing of any Intellectual Property, the Company's current uses or the
Company's compliance with the terms and conditions of any contracts,
-15-
licenses, agreements or Court Orders involving the Intellectual Property.
Exhibit L contains a complete list of filings made with any Governmental Bodies
---------
with regard to the Intellectual Property. All licenses set forth on Exhibit L
---------
are valid and binding obligations of the Company, and, to the Knowledge of the
Company, the other parties thereto, enforceable against the Company, and, to the
Knowledge of the Company, the other parties thereto, in accordance with their
respective terms, except for the Equitable Exceptions. The Company owns and
possesses all right, title and interest in and to, or has the right to use
pursuant to a valid license, all Intellectual Property necessary for the
operation of the Business of the Company as presently conducted. The Company's
use of each item of the Intellectual Property owned or licensed by Company (i)
will not be terminated as a result of the Acquisition contemplated hereby; (ii)
does not interfere with the rights of any other Person based on the Company's
current use of such items; (iii) are in compliance with the material terms and
conditions of all license or other agreements relating to such items; and (iv)
does not violate any material Requirements of Laws or Courts Orders applicable
to the Company or, to the Company's Knowledge, any other party to any material
license or other agreement relating to such Intellectual Property. The Company
is not in default (whether or not after the giving of notice or the lapse of
time or both) under any material license, contract or other agreement relating
to any Intellectual Property.
3.12. Compliance with Laws. The Company has (i) complied in
--------------------
all material respects with all Requirements of Laws, Governmental Permits and
Court Orders applicable to the Business and has filed with the proper
Governmental Bodies all material statements and reports required by all
Requirements of Laws, Governmental Permits and Court Orders to which the Company
or any of its employees (because of their activities on behalf of the Company)
are subject and (ii) conducted the Business and is in compliance in all material
respects with all federal, state and local energy, public utility, health,
safety and environmental Requirements of Laws, Governmental Permits and Court
Orders including the Clean Air Act, the Clean Water Act, the Solid Waste Act,
the Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Safe Drinking Water Act, OSHA, the
Toxic Substances Control Act and any similar state, local or foreign laws
(collectively "Environmental and OSHA Obligations") and all other Governmental
Body requirements, except where any such failure to comply or file would not, in
the aggregate, have a Material Adverse Effect. No claim has been made by any
Governmental Body (and, to the Knowledge of the Company and Stockholders, no
such claim is reasonably anticipated) to the effect that the Business fails to
comply, in any respect, with any Requirements of Laws, Governmental Permit or
Environmental and OSHA Obligation or that a Governmental Permit or Court Order
is necessary in respect thereto.
3.13. Insurance. Attached hereto as Exhibit M is a list of all
--------- ---------
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to Empyrean Holdings. The insurance
maintained by the Company is customary and reasonably adequate for companies
engaged in the Business. To the best of the Company's and Stockholders'
Knowledge, no event relating to the Company has occurred which will result in
(i) cancellation of any such insurance coverages; (ii) a retroactive upward
adjustment of premiums under any such insurance
-16-
coverages; or (iii) any prospective upward adjustment in such premiums. All of
such insurance coverages will not be terminated on or after the Closing Date as
a result of the failure to obtain any consents to the Acquisition contemplated
hereby. The Company is not in default under any such insurance policies.
3.14. Employee Benefit Plans.
----------------------
(a) Employee Welfare Benefit Plans and Other
----------------------------------------
Arrangements. Except as disclosed on Section 3.14(a) of the Disclosure
------------ ---------------
Schedule, the Company does not maintain or contribute to any Employee
Welfare Benefit Plan or Other Arrangement (each a "plan"). With respect to
each such plan: (i) the plan is in compliance with, and, except as set
forth on Schedule 3.14, the Company does not have any liability under
-------------
ERISA, the Code or any Requirements of Law; (ii) the plan has been
administered in accordance with its governing documents; (iii) neither the
plan, nor any fiduciary with respect to the plan, has engaged in any
"prohibited transaction" as defined in Section 406 of ERISA other than any
transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of
administration, there is no litigation, arbitration or disputed claim
outstanding; and (v) all premiums due on any insurance contract through
which the plan is funded have been paid. All Employee Welfare Benefit Plans
and the related trusts that are subject to Section 4980B(f) of the Code and
Sections 601 through 607 of ERISA comply with and have been administered in
compliance with the health care continuation-coverage requirements for
tax-favored status under Section 4980B(f) of the Code (formerly Section
162(k) of the Code), Sections 601 through 607 of ERISA. All Employee
Welfare Benefit Plans comply with and have been administered in compliance
with the requirements of the (i) Health Insurance Portability and
Accountability Act of 1996, to the extent applicable, and applicable
proposed or final regulations, and (ii) Mental Health Parity Act of 1996,
to the extent applicable.
(b) Employee Pension Benefit Plans. Except as set forth
------------------------------
in Section 3.14(b) of the Disclosure Schedule, the Company does not
---------------
maintain or contribute to any arrangement that is or may be an "employee
pension benefit plan" relating to employees, as such term is defined in
Section 3(2) of ERISA. With respect to each such plan: (i) the plan is
qualified under Section 401(a) of the Code, and any trust through which the
plan is funded meets the requirements to be exempt from federal income tax
under Section 501(a) of the Code; (ii) the plan is in compliance with ERISA
and all other applicable Requirements of Laws; (iii) the plan has been
administered in accordance with its governing documents as modified by
applicable law; (iv) the plan has not suffered an "accumulated funding
deficiency" as defined in Section 412(a) of the Code; (v) the plan has not
engaged in, nor has any fiduciary with respect to the plan engaged in, any
"prohibited transaction" as defined in Section 406 of ERISA or Section 4975
of the Code other than a transaction subject to statutory or administrative
exemption; (vi) the plan has not been subject to a "reportable event" (as
defined in Section 4043(b) of ERISA), the reporting of which has not been
waived by regulation of the Pension Benefit Guaranty Corporation; (vii) no
termination or partial termination of the plan has occurred within the
meaning of Section 411(d)(3) of the Code; (viii) all contributions required
to be made to the plan have been made to or on behalf of the
-17-
plan or accrued in accordance with GAAP; (ix) there is no litigation,
arbitration or disputed claim outstanding; (x) all applicable premiums due
to the Pension Benefit Guaranty Corporation for plan termination insurance
have been paid in full on a timely basis; and (xi) a favorable
determination letter from the IRS has been received by the Company with
respect to such plan stating that such plan is so qualified; and there are
no circumstances which would cause such plan to lose such qualified status.
(c) Employment and Non-Tax Qualified Deferred
-----------------------------------------
Compensation Arrangements. Except as set forth on Section 3.14(c) of the
------------------------- ---------------
Disclosure Schedule, the Company does not maintain or contribute to any
retirement or deferred or incentive compensation or stock purchase, stock
grant or stock option arrangement entered into between the Company and any
current or former officer, consultant, director or employee of the Company
that is not intended to be and that is not a tax qualified arrangement
under Section 401(a) of the Code.
3.15. Contracts and Agreements. Exhibit N hereto contains a
------------------------ ---------
list of all customer contracts that provide for payments to the Company in
excess of $100,000 in the aggregate during any 12 month period beginning July 1,
1998, all employment contracts involving annual salaries greater than $60,000
and all employment contracts with general managers or officers of the Company.
Exhibit N also contains a list of the 30 largest contracts (in terms of
---------
aggregate payments made or received with respect thereto since July 1, 1998) to
which the Company is a party or by which the Company or its properties are
bound, a list of any real estate or office building leases involving the Company
and a list of any contract or agreements, if any, prohibiting the Company from
freely engaging in the Business anywhere in the world (collectively, the
"Contracts"). The Company is not and, to the Knowledge of Stockholders and the
Company, no other party thereto is in default (and no event has occurred which,
with the passage of time or the giving of notice, or both, would constitute a
default by the Company) under any of the Contracts, and the Company has not
waived any Material right under any of the Contracts. All of the Contracts to
which the Company is a party are legal, valid, binding, enforceable and in full
force and effect and will not be terminated on or after the Closing Date as a
result of the failure to obtain any consents to the Acquisition contemplated
hereby, except for the Equitable Exceptions. The Company has not guaranteed any
obligations of any other Person. The Company has no present expectation or
intention of not fully performing all of its obligations under any Contract, the
Company has no Knowledge of any breach or anticipated breach by the other
parties to any Contract and the Company has not received notice of actual or
threatened termination or non-renewal of any Contract.
3.16. Claims and Proceedings. There are no claims, actions,
----------------------
suits, proceedings, or investigations pending or, to the Knowledge of the
Stockholders or the Company, threatened against or affecting the Company or any
of its properties or assets, at law or in equity, before or by any court,
municipality or other Governmental Body. To the extent any are disclosed on the
Disclosure Schedule, none of such claims, actions, suits, proceedings, or
investigations, if adversely determined, will individually or in the aggregate
result in any Material Adverse Effect to the Company. The Company has not been,
and the Company is not now, subject to any Court Order, stipulation, or consent
of or with any court or Governmental
-18-
Body. No inquiry, action or proceeding has been instituted or, to the Knowledge
of the Stockholders or the Company, threatened or asserted against the
Stockholders, Invisions Group or the Company to restrain or prohibit the
carrying out of the Acquisition or to challenge the validity of the Acquisition
or any part thereof or seeking damages on account thereof. To the Knowledge of
the Company and Stockholders there is no basis for any such valid claim or
action.
3.17. Taxes.
-----
(a) All Federal, foreign, state, county and local and other
Taxes due from Invisions Group or the Company on or before the Closing have been
paid and all Tax Returns which are required to be filed by Invisions Group or
the Company on or before the date hereof have been filed within the time and in
the manner provided by all Requirements of Laws or extensions were timely filed,
and all such Tax Returns are true and correct and accurately reflect the Tax
liabilities of Invisions Group and the Company in substantially all respects. No
Tax Returns of the Company or Invisions Group are presently subject to an
extension of the time to file. All Taxes, assessments, penalties, and interest
of Invisions Group or the Company which have become due pursuant to such Tax
Returns or any assessments received have been paid or adequately accrued on the
Financial Statements. The provisions for Taxes reflected on the balance sheets
contained in the Financial Statements are adequate to cover all of Invisions
Group and the Company's Tax liabilities for the respective periods then ended
and all prior periods. Neither Invisions Group or the Company has executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and, to the Knowledge of the Stockholders
or the Company, there are no pending or threatened claims, assessments, notices,
proposals to assess, deficiencies, or audits with respect to any such Taxes. For
Governmental Bodies with respect to which neither Invisions Group nor the
Company files Tax Returns, no such Governmental Body has given Invisions Group
or the Company written notification that such corporation is or may be subject
to taxation by that Governmental Body. Invisions Group and the Company have
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, Stockholder, creditor,
independent contractor or other party. Invisions Group and the Company have each
properly reflected for tax purposes in accordance with all Requirements of Laws
the status of all independent contractors, consultants and subcontractors. There
are no Tax liens on any of the property or assets of Invisions Group or the
Company.
(b) Neither the Company, Invisions Group nor any other
corporation has filed an election under Section 341(f) of the Code that is
applicable to Invisions Group, the Company or any assets held by the Company.
Neither Invisions Group nor the Company has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Code Sec. 280G. Neither Invisions Group nor the Company has been a United
States real property holding corporation within the meaning of Code Sec.
897(c)(2) during the applicable period specified in Code Sec. 897(c)(1)(A)(ii).
Neither Invisions Group or the Company is a party to any Tax allocation or
sharing agreement. During the past seven years, each of Invisions Group and the
Company has not and has never been (nor does Invisions Group or the Company
-19-
have any liability for unpaid Taxes because it once was) a member of an
affiliated group during any part of which return year any corporation other than
Invisions Group or the Company also was a member of the affiliated group.
(c) No transaction contemplated by this Agreement is subject
to withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the sale of the
Existing Shares pursuant to this Agreement.
(d) The Company and Invisions Group have each never made a
valid election under Section 1362 of the Code and any corresponding state or
local provisions to be an S corporation within the meaning of Section 1361 of
the Code for all taxable years (or portions thereof) since inception. Neither
Invisions Group nor the Company has, in the past ten (10) years, (i) acquired
assets from another corporation in a transaction in which the Company's Tax
basis for the acquired assets was determined in whole or in part by reference to
the Tax basis of the acquired assets (or any other property) in the hands of the
transferor or (ii) acquired the stock of any other corporation that is a
qualified subchapter S subsidiary.
(e) Neither Invisions Group nor the Company will be required
to include any amount in taxable income or exclude any item of deduction or loss
from taxable income for any taxable period (or portion thereof) ending after the
Closing Date (i) as a result of a change in method of accounting for a taxable
period ending on or prior to the Closing Date: (ii) as a result of the
Acquisition contemplated hereby, (iii) as a result of any "closing agreement,"
as described in Code (S) 7121 (or any corresponding provision of state, local or
foreign income Tax law) entered into on or prior to the Closing Date, (iv) as a
result of any sale reported on the installment method where such sale occurred
on or prior to the Closing Date, or (v) as a result of any prepaid amount
received on or prior to the Closing Date.
3.18. Personnel. Empyrean Holdings has been provided with a list
---------
of the names and annual rates of compensation of the directors and executive
officers of the Company, and of the employees of the Company whose annual base
salary as of October 15, 1999 exceeds $60,000 and the employment agreements, if
any, pertaining to such employees. Exhibit O also summarizes the bonus, profit
---------
sharing, percentage compensation, company automobile, club membership, and other
like benefits, if any, paid or payable to such directors, officers, and
employees during the Company's fiscal year ended June 30, 1999 and to the date
hereof. The employee relations of the Company are generally good, there has been
no unusual level of employee departures and there is no pending or, to the
Knowledge of Stockholders or the Company, threatened labor dispute or union
organization campaign. None of the employees of the Company is covered by a
collective bargaining agreement. The Company is in compliance in all material
respects with all Requirements of Laws respecting employment and employment
practices, including, without limitation, the Fair Labor Standards Act of 1938,
immigration hiring, terms and conditions of employment, and wages and hours, and
is not engaged in any unfair labor practices. Neither the Company or
Stockholders has Knowledge that any Person listed on Exhibit D hereto will not
---------
agree to remain employed by the Company after the consummation of the
Acquisition. There is no unfair labor practice claim against the Company before
the National Labor Relations Board, or any strike, dispute, slowdown, or
stoppage
-20-
pending or, to the Knowledge of the Company and Stockholders, threatened against
or involving the Company, and none has previously occurred.
3.19. Business Relations. Neither the Company nor Stockholders has
------------------
Knowledge that any customer, supplier or licensor engaged in doing business with
the Company will cease to do business with the Company after the consummation of
the Acquisition as previously conducted with the Company except for any
terminations which will not, in the aggregate, result in a Material Adverse
Change. Since June 30, 1999, neither the Stockholders nor the Company has
received any notice of cancellation of any Material business arrangement between
any Person and the Company nor do the Company or Stockholders have Knowledge
that the Business will be subject to cancellation of any such business
arrangement.
3.20. Accounts Receivable; Accounts Payable; Customer Deposits;
---------------------------------------------------------------
Customer Revenues and Deferred Revenues.
----------------------------------------
(a) Accounts Receivable. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Company in the Financial
Statements are bona fide and represent amounts validly due for goods sold or
services rendered and, except for amounts reserved for as doubtful accounts in
the Financial Statements, all such amounts that have been billed will be
collected in full prior to March 31, 2000. With respect to such accounts, notes,
and loans receivable: (i) all are free and clear of any Encumbrances; (ii) no
claims of offset have been asserted in writing against any of such accounts,
notes, or loans receivable; and (iii) none of the obligors thereto has given
written notice that it will or may refuse to pay the full amount or any portion
thereof. Lists of the Company's accounts receivable as of September 30, 1999
(including any reconciliation to the accounts receivable entry on the balance
sheet included in the Most Recent Financial Statements) have been attached to
the Disclosure Schedule. Since September 30, 1999, no Material Adverse Change
has occurred in the payment or collection of accounts receivable of the Company.
(b) Accounts Payable. The aggregate amount of accounts payable
----------------
reflected on the Most Recent Financial Statements are prepared in accordance
with GAAP and reflect the accounts payable of the Company as of September 30,
1999.
(c) Customer Revenues and Deferred Revenues. Exhibit P sets
--------------------------------------- ---------
forth, as of the date specified therein all deferred revenues as of such date on
an aggregate basis. For the period since June 30, 1999 through September 30,
1999, the Company's revenues from customer contracts are not less than the
Company's revenues from customer contracts for the period June 30, 1998 through
September 30, 1998.
3.21. Bank Accounts; Investments. Attached hereto as Exhibit Q is a
-------------------------- ---------
list of all banks or other financial institutions with which the Company has an
account or maintains a safe deposit box, showing the type and account number of
each such account and safe deposit box and the names of the persons authorized
as signatories thereon or to act or deal in connection therewith. Exhibit Q also
---------
contains a list of all Material investments by the Company in any funds,
accounts, securities, certificates of deposit or instruments of any Person. All
of such
-21-
investments are customary in form and amount for reasonably prudent treasury
investments of comparable businesses, none of which involve any type of
derivative, option, hedging or other speculative instrument.
3.22. Customer Claims. No written or oral claims for breach of
---------------
contract or otherwise by any customers (a "Customer Claim") has been made
against the Company since July 1, 1999 which could, individually or in the
aggregate, result in any Material Adverse Effect. The level of Customer Claims
for the period since June 30, 1999 through the date hereof is consistent (plus
or minus 5%) with past practices of the Company for the comparable period in the
fiscal year ended June 30, 1999.
3.23. Brokers. Except for Friedman, Billings, Xxxxxx & Co., Inc.,
-------
neither the Company, Invisions Group nor Stockholders have engaged, or caused to
be incurred any liability to any finder, broker, or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the Acquisition.
3.24. Affiliated Transactions. No officer, director, Stockholder
-----------------------
(including the Stockholders and Invisions Group) or Affiliate of the Company or
any individual related by blood or marriage to any such Person, or any entity in
which any such Person owns any beneficial interest, is a party to any agreement,
contract, arrangement or commitment with the Company or engaged in any
transaction with the Company or has any interest in any property used by the
Company. No officer, director, or Stockholder of the Company or Invisions Group
has any ownership interest in any competitor, supplier, or customer of the
Company (other than ownership of securities of a publicly-held corporation or
mutual fund of which such Person owns, or has real or contingent rights to own,
less than five percent of any class of outstanding securities) or any property
used in the operation of the Business.
3.25. Funded Indebtedness; Letters of Credit; Undisclosed
---------------------------------------------------
Liabilities.
-----------
(a) Funded Indebtedness. Other than any Funded Indebtedness
-------------------
which is to be repaid and discharged by Stockholders prior to Closing or will be
assumed or repaid by Empyrean Holdings at or subsequent to the Closing in
accordance with Section 7.1(d), the Company does not have any Funded
--------------
Indebtedness.
(b) Letters of Credit. Other than those listed on Exhibit R,
----------------- ---------
the Company has no letters of credit, performance bonds or similar instruments
issued on or for its account for the benefit of any of its vendors or otherwise.
(c) Undisclosed Liabilities. Except for normal accounts
-----------------------
payable and other accrued liabilities that are incurred in the ordinary course
of Business since September 30, 1999, consistent with past practice, the Company
does not have any Material liabilities in the aggregate (whether absolute,
accrued, contingent or otherwise) of a nature required by GAAP to be reflected
on a corporate balance sheet or in the notes thereto, except for such
liabilities which are accrued or reserved against in the Financial Statements or
disclosed in the notes thereto,
-22-
including without limitation any accounts payable or service liabilities of the
Company incurred prior to the Closing Date.
3.26. Year 2000. All of the Material computer software, computer
---------
firmware, computer hardware (whether general or special purpose), and other
similar or related items of automated, computerized, and/or software system(s)
that are used or relied on by the Company in the conduct of its business will
not malfunction, will not cease to function, will not generate incorrect data,
and will not produce incorrect results when processing, providing, and/or
receiving (i) date-related data into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries, except for any malfunctions or generations
of incorrect data or results that would not individually or in the aggregate
have a Material Adverse Effect. The Company has not been engaged in any year
2000 correction consulting work for customers pertaining to its work product and
has received no claim or notice from any customer regarding the failure of the
Company to install computer software that is year 2000 compliant.
3.27. Information Furnished. The Company and Stockholders have made
---------------------
available to Empyrean Holdings true and correct copies of all material corporate
records of the Company and all material agreements, documents, and other items
listed on the Exhibits and Disclosure Schedules to this Agreement or referred to
in Article III of this Agreement, and neither this Agreement, the Exhibits
hereto, the Disclosure Schedule, nor any written information, instrument, or
document delivered to Empyrean Holdings pursuant to this Agreement contains any
untrue statement of a Material fact or omits any Material fact necessary to make
the statements herein or therein, as the case may be, not misleading.
All references to the Company contained in Sections 3.8 through Section 3.28 of
------------ ------------
this Article III shall also be deemed to refer to Invisions Group.
-----------
ARTICLE IV
EMPYREAN HOLDINGS' REPRESENTATIONS AND WARRANTIES
Empyrean Holdings represents and warrants to Stockholders, Invisions
Group and the Company as follows:
4.1. Due Organization of Empyrean Holdings. Empyrean Holdings is a
-------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full corporate power and authority to
execute, deliver and perform this Agreement and to carry out the Acquisition.
4.2. Due Authorization. The execution, delivery and performance of
-----------------
this Agreement, the Escrow Agreement, the Seller Notes, the Stockholder
Subscription Agreement and the Equity Agreements (including the joinder of the
Stockholders thereto) has been duly authorized by all necessary corporate action
by Empyrean Holdings and the Agreement has been duly and validly executed and
delivered by Empyrean Holdings and this Agreement, and, upon execution
-23-
thereof, the Escrow Agreement, the Seller Notes, the Stockholder Subscription
Agreement and the Equity Agreements, each constitutes the valid and binding
obligation of Empyrean Holdings, enforceable in accordance with its terms,
except for the Equitable Exceptions. The execution, delivery, and performance of
this Agreement, the Seller Notes, the Stockholder Subscription Agreement and the
Escrow Agreement (as well as all other instruments, agreements, certificates or
other documents contemplated hereby) by Empyrean Holdings shall not (a) violate
any Requirements of Laws or Court Order of any Governmental Body applicable to
Empyrean Holdings or its property, (b) violate or conflict with, or permit the
cancellation of, or constitute a default under any agreement to which Empyrean
Holdings is a party or by which Empyrean Holdings or its property is bound, (c)
permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Empyrean Holdings, (d) violate or
conflict with any provision of the Certificate of Incorporation or Bylaws of
Empyrean Holdings, or (e) except for filings or approvals under the HSR Act and
such consents, approvals, or registrations as may be required under applicable
state securities laws, require any consent, approval or authorization of, or
notice to, or declaration, filing or registration with, any Governmental Body or
other third party.
4.3. No Brokers. Except for Xxxxx Xxxxxx, Empyrean Holdings has not
----------
engaged, or caused to be incurred any liability for which Stockholders or
Invisions Group may be liable to any finder, broker or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the Acquisition.
4.4. Investment. Empyrean Holdings will acquire the Existing Shares
----------
and Option Shares for investment and for its own account and not with a view to
the distribution thereof.
4.5. Information Furnished. No written information,. instrument or
---------------------
document delivered to the Stockholders, the Company or Invisions Group pursuant
to this agreement contains any untrue statement of a material fact or omits any
material fact necessary to make the statements appearing in the aforementioned
items, not misleading.
4.6. Capital Stock and Related Matters.
---------------------------------
(a) As of the Closing and immediately thereafter, the
authorized capital stock of Empyrean Holdings shall consist of 100,000,000
shares of stock, of which (i) 150,000 shares shall be designated as Preferred
and (ii) 99,850,000 shares shall be designated as Common Stock. The ownership of
the issued and outstanding Preferred Stock and the Common Stock are as set forth
on Empyrean Capitalization Schedule hereto. As of the Closing, Empyrean Holdings
--------------------------------
will not be subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any warrants,
options or other rights to acquire its capital stock, except pursuant to this
Agreement and the Management Agreement dated August 12, 1999 and pursuant to the
Empyrean Holdings' certificate of incorporation with respect to the Preferred
Stock. As of the Closing, all of the outstanding shares of Empyrean Holdings'
capital stock shall be validly issued, fully paid and nonassessable.
-24-
(b) Based in part on the investment representations of (i)
each subscribing Stockholder in Section 10.10 hereof and in the Stockholder
-------------
Subscription Agreement, Empyrean Holdings has not violated in any material
respect any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of the Common Stock and Preferred Stock, and the
offer, sale and issuance of the Common Stock and Preferred Stock hereunder and
pursuant to Section 2.3 hereof do not and will not require registration under
-----------
the Securities Act or any applicable state securities laws, except for any
notice filings required to be made with the State of Maryland, the Commonwealth
of Virginia or the United States Securities and Exchange Commission. As of the
Closing, all of the shares of Common Stock and Preferred Stock to be issued to
the Stockholders shall be validly issued, fully paid and nonassessable.
4.7. Subsidiaries; Investments. Except as set forth in the Empyrean
------------------------- --------
Capitalization Schedule, Empyrean Holdings does not own or hold any shares of
-----------------------
stock or any other security or interest in any other Person.
4.8. Authorization of the Stock and the Seller Notes. Empyrean
----------------------------------------------
Holdings has authorized the issuance and sale to the Stockholders of up to an
aggregate of 3,467.5 shares of Preferred Stock and an aggregate of 1,825,000
shares of Common Stock, each having the rights and preferences set forth in the
Empyrean Holdings' Certificate of Incorporation attached hereto as Exhibit Y.
---------
Empyrean Holdings has authorized the issuance and sale to the Stockholders of
the Seller Notes having the rights set forth in the form of Seller Note attached
as Exhibit A hereto.
---------
4.9. Financing. Empyrean Holdings has obtained the approval of its
---------
senior lenders, including without limitation, First Union Commercial
Corporation, Bank of America, N.A. and First Union National Bank, as agent, to
the Acquisition.
4.10. Sprint Contract. The services contract ("Sprint Contract")
---------------
between BSG Solutions, Inc., a wholly-owned subsidiary of Empyrean Holdings
("BSG"), and Sprint, Inc. ("Sprint") (which contract was attached as a schedule
to the Recapitalization Agreement) is in full force and effect. Empyrean
Holdings has no knowledge of any pending or anticipated termination of the
Sprint Contract by Sprint.
4.11. Financial Statements. The following financial statements of
--------------------
Empyrean Holdings have been delivered to the Stockholders by Empyrean Holdings:
an unaudited consolidating balance sheet of Empyrean Holdings as of September
30, 1999 and unaudited consolidating statement of operations of Empyrean
Holdings for the nine months ended September 30, 1999 (collectively, the
"Empyrean Financial Statements"). To the Knowledge of Empyrean Holdings, the
Empyrean Financial Statements have been prepared in accordance with GAAP except
for normal year-end adjustments and the absence of footnotes. The Empyrean
Financial Statements fairly present the financial position and results of
operations of Empyrean Holdings as of the indicated dates and for the indicated
periods and are consistent with the books and records of Empyrean Holdings
(which books and records are correct and complete in all material respects).
Since September 30, 1999, Empyrean Holdings has not experienced any Material
Adverse Change.
-25-
4.12. Compliance with Laws. Empyrean Holdings has (i) complied in
--------------------
all material respects with all Requirements of Laws, Governmental Permits and
Court Orders applicable to its business and has filed with the proper
Governmental Bodies all material statements and reports required by all
Requirements of Laws, Governmental Permits and Court Orders to which Empyrean
Holdings or any of its employees (because of their activities on behalf of
Empyrean Holdings) are subject and (ii) conducted its business and is in
compliance in all material respects with all federal, state and local energy,
public utility, health, safety and environmental Requirements of Laws,
Governmental Permits and Court Orders including the Environmental and OSHA
Obligations and all other Governmental Body requirements, except where any such
failure to comply or file would not, in the aggregate, have a material adverse
effect on Empyrean Holdings. No claim has been made by any Governmental Body
(and, to the knowledge of Empyrean Holdings, no such claim is reasonably
anticipated) to the effect that its business fails to comply, in any material
respect, with any Requirements of Laws, Governmental Permit or Environmental and
OSHA Obligation or that a Governmental Permit or Court Order is necessary in
respect thereto.
4.13. Claims and Proceedings. There are no material claims, actions,
----------------------
suits, proceedings, or investigations pending or, to the knowledge of Empyrean
Holdings, threatened against or affecting Empyrean Holdings or any of its
properties or assets, at law or in equity, before or by any court, municipality
or other Governmental Body. Empyrean Holdings is not currently subject to any
Court Order, stipulation, or consent of or with any court or Governmental Body.
No inquiry, action or proceeding has been instituted or, to the knowledge of the
Empyrean Holdings, threatened or asserted against BSG or Empyrean Holdings to
restrain or prohibit the carrying out of the Acquisition or to challenge the
validity of the Acquisition or any part thereof or seeking damages on account
thereof. To the knowledge of Empyrean Holdings there is no basis for any such
valid claim or action.
4.14. Taxes. All Federal, foreign, state, county and local and other
-----
Taxes due by Empyrean Holdings on or before the Closing have been paid and all
Tax Returns which are required to be filed by Empyrean Holdings on or before the
date hereof have been filed within the time and in the manner provided by all
Requirements of Laws or extensions were timely filed, and all such Tax Returns
are true and correct and accurately reflect the Tax liabilities of Empyrean
Holdings in substantially all respects. For Governmental Bodies with respect to
which neither BSG nor Empyrean Holdings files Tax Returns, no such Governmental
Body has given BSG or Empyrean Holdings written notification that such
corporation is or may be subject to taxation by that Governmental Body. There
are no Tax liens on any of the property or assets of BSG or Empyrean Holdings.
4.15. Information Furnished. Empyrean Holdings has made available to
---------------------
the Stockholders true and correct copies of all material corporate records of
Empyrean Holdings and all other items referred to in Article IV of this
----------
Agreement, and neither this Agreement, the Exhibits hereto, nor any written
information, instrument, or document delivered to the Stockholders pursuant to
this Agreement contains any untrue statement of a material fact or omits any
material fact necessary to make the statements herein or therein, as the case
may be, not misleading.
-26-
ARTICLE V
PRE-CLOSING COVENANTS OF THE COMPANY, INVISIONS GROUP, EMPYREAN
HOLDINGS AND STOCKHOLDERS
5.1. Consents of Others. Prior to the Closing, the Company,
------------------
Invisions Group and Stockholders shall use their commercially reasonable best
efforts to obtain and to cause the Company to obtain all material
authorizations, consents and permits required of the Company, Invisions Group
and Stockholders to permit them to consummate the Acquisition. To the extent
required to consummate the Acquisition or to ensure that the Contracts shall not
be terminated as a result of the Closing, Stockholders shall have obtained the
written consent or waiver of any "change of control" type termination rights of
any third party to any Contract. As promptly as practicable after the date
hereof, Empyrean Holdings, the Company and the Stockholders shall make, or shall
cause to be made, such filings as may be required pursuant to the HSR Act with
respect to the consummation of the Acquisition.
5.2. Stockholders' Efforts. The Company and Stockholders shall use
---------------------
all commercially reasonable best efforts to cause all conditions for the Closing
to be met.
5.3. Powers of Attorney. The Company and Stockholders shall cause
------------------
the Company to terminate at or prior to Closing all powers of attorney granted
by the Company, other than those relating to (i) service of process,
qualification or pursuant to governmental regulatory or licensing agreements, or
(ii) tax matters representation before the IRS or other Governmental Bodies.
5.4. Conduct of Business Pending Closing. From the date of this
-----------------------------------
Agreement to the Closing Date:
(a) Except as otherwise contemplated by this Agreement, or as
Empyrean Holdings may otherwise consent to in writing, the Company and
Stockholders shall conduct the Business only in the ordinary course and shall
not engage in any Material transactions or enter into any Material transaction
which would cause a breach of the representations and warranties contained in
Article III.
-----------
(b) Stockholders and the Company shall use their commercially
reasonable best efforts to cause the Business to preserve substantially intact
its current business organization and present relationships with its customers,
vendors, suppliers and employees and to maintain all of its insurance currently
in effect.
(c) Stockholders and the Company shall give prompt notice to
Empyrean Holdings of any notice of any Material default received by the Company
or the Business subsequent to the date of this Agreement under any Contract or
any Material Adverse Change occurring prior to the Closing Date in the operation
of the Company or the Business.
-27-
(d) Neither the Company, Invisions Group nor the Stockholders,
nor any of their representatives, shall solicit, encourage or discuss any
Acquisition Proposal (as hereinafter defined) or supply any non-public
information concerning the Company or the Business or the Company's assets to
any party other than Empyrean Holdings or its representatives. As used herein,
"Acquisition Proposal" means any proposal other than the Acquisition, for (i)
any merger or other business combination involving Invisions Group, the Company
or the Business, (ii) the acquisition of the Company or Invisions Group or a
material equity interest in the Company or Invisions Group or a material portion
of its assets, or (iii) the dissolution or liquidation of the Company or
Invisions Group.
5.5. Access Before Closing. Prior to the Closing Date, Stockholders
---------------------
and the Company agree that it will give, or cause to be given, to Empyrean
Holdings and its representatives, during normal business hours and at Empyrean
Holdings' expense, reasonable access to the Company's personnel, independent
accountants, officers, agents, employees, assets, properties, titles, contracts,
corporate minute and other books, records, files and documents of the Company
with respect to the Business (including financial, tax basis, budget
projections, accountants' work papers and other information as Empyrean Holdings
may reasonably request) upon 24 hours prior notice. The Stockholders and
Empyrean Holdings shall mutually agree on the timing and manner of contact with
all third parties, including, but not limited to, customers, vendors or
suppliers, which contact shall not be unreasonably withheld. Empyrean Holdings
shall not be given access to any information where the provision of such
information would violate a law or regulation applicable to the Company.
ARTICLE VI
POST-CLOSING COVENANTS
6.1. General. In case at any time after the Closing any further
-------
action is legally necessary or reasonably desirable (as determined by Empyrean
Holdings and Stockholders) to carry out the purposes of this Agreement, each of
the parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Article VIII
below). The Stockholders acknowledge and agree that from and after the Closing,
the Company will be entitled to possession of all documents, books, records,
agreements, and financial data of any sort relating to the Company, which shall
be maintained at the chief executive office of the Company; provided, however,
that Stockholders shall be entitled to reasonable access to and to make copies
of such books and records at their sole cost and expense and the Company will
maintain all of the same for a period of at least three (3) years after Closing.
Thereafter, the Company will offer such documentation to Stockholders before
disposal thereof. By execution of this Agreement, the Stockholders hereby convey
all of their rights to any Intellectual Property reasonably related to the
Business to the Company and such Stockholders will, upon reasonable request,
agree to execute and deliver any other documents or instruments necessary to
effect such conveyance to the Company.
-28-
6.2. Transition. For a period of four (4) years following Closing,
----------
the Majority Sellers will not take any action (or cause any such action to be
taken by another Person) that primarily has the effect of discouraging any
vendor, lessor, licensor, customer, contractor, subcontractor, supplier, or
other business associate of the Company from maintaining the same business
relations with the Company after the Closing as it maintained with the Company
prior to the Closing. For a period of four (4) years following Closing, the
Majority Sellers will refer all customer inquiries relating to the Business to
the Company.
6.3. Confidentiality. The Stockholders will treat and hold in
---------------
confidence and not disclose all Confidential Information and refrain from using
any of the Confidential Information except in connection with this Agreement or
otherwise for the benefit of the Company or Empyrean Holdings for a period of
four (4) years from the date of this Agreement, and deliver promptly to Empyrean
Holdings or destroy, at the written request and option of Empyrean Holdings, all
tangible embodiments (and all copies) of the Confidential Information which are
in their possession except as otherwise permitted herein. In the event that any
Stockholder is requested or required (by oral question or written request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar legal proceeding) to disclose any Confidential
Information, such Stockholder will notify the Company and Empyrean Holdings
promptly of the request or requirement.
6.4. [Intentionally Left Blank].
--------------------------
6.5. Additional Matters.
------------------
(a) Tax Returns for Periods Ending on or Before the Closing
-------------------------------------------------------
Date. The Company and Invisions Group, in consultation with and at the direction
----
of the Majority Sellers, shall cause AA to prepare and file with the appropriate
governmental authorities, in a manner consistent with governing law, all Tax
Returns required to be filed by the Company or Invisions Group for any taxable
period ending on or prior to the Closing Date and the Company and Invisions
Group shall remit to the appropriate governmental authorities any Taxes due with
respect to such periods (which Taxes, to the extent incurred on or prior to
September 30, 1999, shall have been provided for on the Financial Statements of
the Company and Invisions Group as set forth in Section 3.7 of this Agreement).
In addition, at any time and from time to time the Company and Invisions Group,
in consultation with and at the direction of the Majority Sellers, and in a
manner consistent with governing law, shall cause AA to prepare and file such
Tax Returns for the Company and/or Invisions Group, including without limitation
any amended return or claim for refund, with respect to any taxable period or
periods ending on or prior to the Closing Date. All refunds or payments due to
the Company and/or Invisions Group from such Tax Returns, including without
limitation any amended return or claim for refund, shall promptly be paid to the
Stockholders (in the proportions provided for in Exhibit G hereto) as additional
consideration for Empyrean Group's acquisition of the Existing Shares. The cost
of preparation for all such Tax Returns shall be paid by the Company. The
Majority Sellers shall provide drafts prepared by AA of the completed Tax
Returns for the Company and Invisions Group for the taxable periods ending on or
prior to the Closing Date to Empyrean Holdings for its review a reasonable time
prior to the filing of such Tax Returns, and shall permit Empyrean Holdings to
-29-
comment on such Tax Returns, and in consultation with AA shall make such
revisions as are reasonably requested by Empyrean Holdings prior to filing
(provided, with respect to such Tax Returns, that any revision requested by
Empyrean Holdings must be consistent with governing law). Empyrean Holdings, the
Company, Invisions Group and the Majority Sellers (a) have not made, and agree
not to make, any election under Section 172(b)(3) with respect to the Company
NOL (as defined below) and (b) agree to use commercially reasonable efforts,
consistent with governing law, to ensure that the Stockholders receive the
maximum possible refunds or other payments under this Section 6.5(a).
(b) Tax Benefits from Company NOL Used in Periods Ending After
----------------------------------------------------------
the Closing Date. The Majority Sellers and Empyrean Holdings shall direct AA to
----------------
determine any net operating loss carryforward or tax credit carryforward of the
Company and Invisions Group (a) from the issuance of the Option Shares or (b)
arising in the periods ending on or prior to the Closing Date (collectively, the
"Company NOL") that is not used by the Company or Invisions Group in any taxable
period ending on or prior to the Closing Date. Empyrean Holdings shall cause AA
to prepare and file with the appropriate governmental authorities, in a manner
consistent with governing law, all Tax Returns required to be filed by Empyrean
Holdings, the Company or Invisions Group for all taxable periods ending after
the Closing Date and Empyrean Holdings shall remit to the appropriate
governmental authorities any Taxes due with respect to such periods. To the
extent that all or any portion of the Company NOL is used by any of Empyrean
Holdings, the Company, Invisions Group, or any other member of the affiliated
group in which any of them is a member, to reduce taxable income for any taxable
period(s) ending after the Closing Date, Empyrean Holdings shall promptly pay to
the Stockholders (in the proportions provided for in Exhibit G hereto), as
---------
additional consideration for Empyrean Group's acquisition of the Existing
Shares, an amount equal to the Tax Benefit arising from or attributable to such
use of all or any portion (as the case may be) of the Company NOL for such
period(s). For so long as any portion of the Company NOL remains unused,
Empyrean Group shall provide drafts of the completed Tax Returns for the taxable
periods ending after the Closing Date to the Majority Sellers for their review a
reasonable time prior to the filing of such Tax Returns, and shall permit the
Majority Sellers to comment on such Tax Returns, and in consultation with AA
shall make such revisions as are reasonably requested by the Majority Sellers
prior to filing (provided, with respect to such Tax Returns, that any revision
requested by the Majority Sellers must be consistent with governing law). In the
event the Tax Benefit arising from or attributable to the use of the Company NOL
is subsequently reduced by virtue of the action of a Taxing Authority, so that
Empyrean Holdings, the Company or the Invisions Group is required to pay a
portion of said Tax Benefit to the Taxing Authority, the Stockholders (in the
proportions provided for in Exhibit G hereto) shall pay to Empyrean Holdings an
amount equal to the portion of said Tax Benefit paid to said Taxing Authority,
together with any interest thereon that was paid to said Taxing Authority. The
Stockholders shall make such payment to Empyrean Holdings within thirty (30)
days after Empyrean Holdings has notified them in writing of such payment to a
Taxing Authority.
"Tax Benefit" means, with respect to any taxable period ending after
the Closing Date, an amount equal to the actual reduction in state and federal
income taxes realized by
-30-
Empyrean Holdings, the Company or Invisions Group, or any Affiliates of Empyrean
Holdings, the Company or Invisions Group, by virtue of the use, in the
calculation of taxable income for such taxable period, of all or any portion of
the Company NOL.
(c) Access and Retention of Records. Empyrean Holdings and
-------------------------------
Stockholders recognize that each of them will need access, from time to time,
after the Closing Date, to certain accounting and Tax records and information
held by Empyrean Holdings and/or the Company to the extent such records and
information pertain to events occurring on or prior to the Closing Date;
therefore, Empyrean Holdings agrees to cause the Company to (A) use its
---------
commercially reasonable best efforts to properly retain and maintain such
records for a period of six (6) years from the date the Tax Returns for the year
in which the Closing occurs are filed or until the expiration of the statute of
limitations with respect to such year, whichever is later, and (B) allow each
Stockholder and his agents and representatives at times and dates mutually
acceptable to the parties, to inspect, review and make copies of such records as
such other party may deem necessary or appropriate from time to time, such
activities to be conducted during normal business hours and at the requesting
party's expense.
6.6. Litigation Support. In the event and for so long as any party
------------------
is actively contesting or defending against any claim, suit, action or charge,
complaint, or demand in connection with (i) any transaction contemplated under
this Agreement or (ii) any fact, circumstance, status, condition, activity,
practice, occurrence, event, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, each of the other parties will
cooperate and make reasonably available themselves or their personnel, as
applicable, and provide such reasonable testimony and access to their books and
records as shall be necessary in connection with the contest or defense.
6.7. Audits. Following the Closing, pursuant to Section 2.8, the
------ -----------
Company's balance sheet as of the Closing Date will be prepared by the Company
and audited by AA at Empyrean Holdings' expense. To the extent that audited
financial statements of the Company for the fiscal years ended June 30, 1997 and
June 30, 1998 do not exist as of the Closing Date, Empyrean Holdings may, at its
expense, engage AA or another reputable independent accounting firm to audit
such financial statements. Stockholders, in their capacities as officers and
directors of the Company during such periods, shall provide all management
letters, reports or representations reasonably requested by such auditors in
connection with such audits and shall use their reasonable best efforts to
provide all necessary records in their possession to AA.
6.8. Minimum Cash as of the Closing. At the Closing, the Company
------------------------------
shall maintain a level of cash and cash equivalents equal to at least $100,000.
The Purchase Price payable at Closing will be reduced by the amount by which the
Company's cash and cash equivalents are less than $100,000 at Closing (the
"Minimum Cash Deficit"). In determining the Net Working Capital Adjustment, the
amount of Minimum Cash Deficit shall be added to the aggregate amount of any
downward Net Working Capital Adjustment (i.e., Net Working Capital is less than
$1,000,000) at Closing for purposes of determining the final Net Working Capital
-31-
Adjustment; provided, however, that in no event will a Minimum Cash Deficit
result in any upward Net Working Capital Adjustment.
6.9. Empyrean Holdings' Stock Options. Not later than 30 days
--------------------------------
following the Closing Date, Empyrean Holdings will grant stock options to (i)
such persons who are employees of the Company as of the Closing Date and (ii)
persons to whom the Company has made (or makes within such 30-day period) an
offer of employment, as are mutually agreed upon by Empyrean Holdings and the
Majority Sellers. In the aggregate, all of such stock options will be
exercisable for an estimated 635,600 shares of Common Stock, with options for
approximately 600,000 shares reserved for employees of the Company as of the
Closing Date with the remainder to be granted to persons whose employment with
the Company commences following the Closing Date. The exercise price for such
stock options shall be at $.25 per share unless Majority Sellers and Buyer
mutually agree that such grants for such options shall be priced as incentive
stock options. The terms of such stock options shall generally be for ten years
from the date of grant, subject to customary four year annual vesting
requirements (i.e., 25% vesting per annum), and shall otherwise be on the same
terms and conditions applicable to all stock options granted to key executives
and employees of Empyrean Holdings and its subsidiaries.
6.10. Replacement of Majority Sellers' Guaranties. At or promptly
-------------------------------------------
following the Closing, Empyrean Holdings will use its reasonable best efforts to
cause the Majority Sellers to be released as guarantors under all indebtedness,
letters of credit and leases of Invisions Group or the Company. Empyrean
Holdings will indemnify and hold harmless the Majority Sellers from the payment
of any guaranties on any indebtedness, letters of credit, leases or other
contractual obligations that the Majority Sellers had incurred prior to the
Closing Date provided that such indebtedness or obligations are related to the
Business and have been disclosed to Empyrean Holdings in writing prior to the
date hereof.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING
7.1. Conditions to Empyrean Holdings' Obligations. The obligation of
--------------------------------------------
Empyrean Holdings under this Agreement to consummate the Closing is subject to
the conditions that:
(a) Covenants, Representations and Warranties. The Company,
-----------------------------------------
Invisions Group and Stockholders shall have performed in all material respects
all obligations and agreements and complied in all material respects with all
covenants contained in this Agreement to be performed and complied with by each
of them prior to or at the Closing Date. The representations and warranties of
the Company, Invisions Group and Stockholders set forth in this Agreement shall
be accurate in all material respects at and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date.
(b) Consents. All statutory requirements for the valid
--------
consummation by the Company, Invisions Group and Stockholders of the Acquisition
shall have been fulfilled
-32-
and all authorizations, consents and approvals, including expiration or early
termination of all waiting periods under the HSR Act and those of all federal,
state, local and foreign governmental agencies and regulatory authorities
required to be obtained in order to permit the consummation of the Acquisition
shall have been obtained in form and substance reasonably satisfactory to
Empyrean Holdings unless such failure could not reasonably be expected to have a
Material Adverse Effect. All approvals of the Boards of Directors and
Stockholders of the Company and Invisions Group necessary for the consummation
of this Agreement and the Acquisition shall have been obtained.
(c) Leases. Each of the Leases shall provide that the Company
------
or Invisions Group is the lessee and if required under the terms of a given
lease, any consent required in connection with the Acquisition contemplated by
this Agreement shall have been obtained, and copies of such Leases shall have
been provided to Empyrean Holdings.
(d) Discharge of Indebtedness and Liens; Stockholder Loans.
------------------------------------------------------
Stockholders and the Company shall have provided for the payment in full by the
Stockholders of all Funded Indebtedness of the Company at the Closing or the
Purchase Price will be reduced proportionately by the amount that such Funded
Indebtedness exceeds $425,000 as of the Closing Date. Such Funded Indebtedness,
if any, as of September 30, 1999, is listed on Exhibit S hereto. Stockholders
shall have also provided for the termination of all Encumbrances of record on
the properties of the Company, except for Permitted Exceptions. All non-purchase
money security interest or non-lease liens or UCC filings against Invisions
Group or the Company shall have been terminated as of the Closing. All
outstanding loans or other amounts owed by any Stockholder to Invisions Group or
the Company shall have been repaid in full on or prior to the Closing.
(e) Transfer Taxes. Stockholders shall be responsible for all
--------------
stock transfer or gains taxes imposed on Stockholders incurred in connection
with this Agreement.
(f) Documents to be Delivered by Stockholders, Invisions Group
----------------------------------------------------------
and the Company. The following documents shall be delivered at the Closing by
---------------
Stockholders, Invisions Group and the Company:
(i) Escrow Agreement. Stockholders shall have delivered
----------------
to Empyrean Holdings at the Closing the duly executed Escrow
Agreement in substantially the form attached hereto as Exhibit B.
---------
(ii) Opinion of Stockholders' Counsel. Empyrean Holdings
--------------------------------
shall have received an opinion of counsel to the Company, Invisions
Group and Stockholders, dated the Closing Date, in substantially the
same form as the form of opinion that is Exhibit C hereto.
---------
(iii) Certificates. Empyrean Holdings shall have
------------
received an officer's certificate and a secretary's certificate of
the Company and Invisions Group executed by officers of each of the
Company and Invisions Group, dated
-33-
the Closing Date, in a form mutually agreed upon by Empyrean
Holdings and Invisions Group.
(iv) Release. Stockholders shall have furnished the
-------
Company with a general release of liabilities, excluding
compensation and employee benefits as well as obligations pursuant
to this Agreement, in the form attached as Exhibit E hereto.
---------
(v) Employment Agreements. Xxx Xxxxxx shall have duly
---------------------
executed and delivered the Employment Agreement in substantially the
same form attached as Exhibit F-1 hereto, pursuant to which he will
-----------
be employed by the Company following the Closing. Xxxx X. Xxxxx
shall also have entered into an employment agreement with the
Company on terms reasonably acceptable to Empyrean Holdings. Xxxxxxx
Xxxxxxxx shall have executed a joinder to the Empyrean Holdings'
senior management agreement dated August 12, 1999 on terms
reasonably acceptable to Empyrean Holdings. In addition, Xxxxxx
Xxxxxxxxx, Xxxxxxxx Xxxxxxxxx and Xxxxxx Barcelona shall have
executed and delivered to the Company and Empyrean Holdings a
noncompete/nonsolicitation agreement in the form of Exhibit F-2
-----------
hereto; provided, however, that the term of the noncompete
agreements for Xxxxxxxxx and Barcelona shall be limited to a period
expiring on the first anniversary of the Closing Date.
(vi) Delivery of Existing Shares. At the Closing, the
---------------------------
Stockholders shall deliver to Empyrean Holdings the Existing Shares
duly endorsed for transfer to Empyrean Holdings and free and clear
of all Encumbrances, other than the restrictions imposed by federal
and state securities laws.
(vii) Delivery of Options Shares; Unexercised Options.
-----------------------------------------------
At the Closing, each of the Option holders who has entered into an
Option Share Purchase Agreement shall deliver to Empyrean Holdings
all of such person's Option Shares duly endorsed for transfer to
Empyrean Holdings and free and clear of all Encumbrances, other than
the restrictions imposed by federal and state securities laws. Upon
delivery to Empyrean Holdings at the Closing of the Existing Shares
and all Option Shares held by persons who have entered into Option
Share Purchase Agreements, Empyrean Holdings shall own more than
ninety-five percent (95%) of the shares of Invisions Stock on a
fully diluted basis, taking into account all Options that remain
unexercised as of the Closing.
(viii) Resignation of Directors. The Company shall
------------------------
deliver the written resignations of all directors of the Company and
Invisions Group effective as of the Closing.
(ix) Termination of Stockholder Agreements. The Company
-------------------------------------
shall have provided evidence satisfactory to Empyrean Holdings of
the complete
-34-
termination of all Stockholder agreements among the Stockholders,
Invisions Group and/or the Company with respect to the Company,
Invisions Group or the Existing Shares.
(g) Company Equity Arrangements. The Stockholder Subscription
---------------------------
Agreement and the Joinders to the Equity Agreements shall have been executed and
delivered by the Stockholders.
7.2. Conditions to Stockholders', Invisions Group's and the
------------------------------------------------------
Company's Obligations. The obligation of Stockholders, Invisions Group and the
---------------------
Company under this Agreement to consummate the Closing is subject to the
conditions that:
(a) Covenants, Representations and Warranties. Empyrean
-----------------------------------------
Holdings shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by Empyrean Holdings prior to
or at the Closing and the representations and warranties of Empyrean Holdings
set forth in Article IV hereof shall be accurate in all material respects, at
----------
and as of the Closing Date, with the same force and effect as though made on and
as of the Closing Date.
(b) Consents. All statutory requirements for the valid
--------
consummation by Empyrean Holdings of the Acquisition shall have been fulfilled
and all authorizations, consents and approvals, including expiration or early
termination of all waiting periods under the HSR Act and those of all federal,
state, local and foreign governmental agencies and regulatory authorities
required to be obtained in order to permit the consummation by Empyrean Holdings
of the Acquisition shall have been obtained unless such failure shall not have a
Material Adverse Effect on the Business.
(c) Documents to be Delivered by Empyrean Holdings. The
----------------------------------------------
following documents shall be delivered at the Closing by Empyrean Holdings:
(i) Escrow Agreement. Empyrean Holdings shall have
----------------
delivered to Stockholders at the Closing the duly executed Escrow
Agreement.
(ii) Employment Agreement. Empyrean Holdings shall have
--------------------
caused the Company to duly execute and deliver an Employment
Agreement with Xxx Xxxxxx in the same form attached as Exhibit F-1
-----------
hereto, pursuant to which Xx. Xxxxxx will be employed by the Company
following the Closing. The Employment Agreement with Xxx Xxxxxx will
provide that he will be a member of Empyrean Holdings' Chairman's
Advisory Board, will be a senior executive officer of Empyrean
Holdings and will be chair of the task force responsible for
providing branding strategy for Empyrean Holdings.
(iii) Certificates. Empyrean Holdings shall have
------------
delivered an officer's certificate and a secretary's certificate of
Empyrean Holdings executed
-35-
by officers of Empyrean Holdings, dated the Closing Date, in a form
mutually agreed upon by Empyrean Holdings and Invisions Group.
(iv) Legal Opinion. The Stockholders shall have received
-------------
an opinion of counsel to Empyrean Holdings in the Form of Exhibit T
hereto. ---------
(d) Company Equity Arrangements. The Stockholder Subscription
---------------------------
Agreement and the Joinders to the Equity Agreements shall have been executed and
delivered by the respective parties thereto.
(e) Payments to Stockholders. Each Stockholder shall have
------------------------
received its allocable portion of the Cash Purchase Price and Common Stock and
Preferred Stock, as provided in Sections 2.2(a) and (d), and Empyrean Holdings
--------------- ---
shall have delivered the Seller Notes and cash to the Escrow Agent, as provided
in Sections 2.2(b) and (c).
--------------- ---
(f) Payments to Option Holders. Each Option holder who enters
--------------------------
into an Option Share Purchase Agreement shall have received payment for its
Option Shares.
(g) Xxxxxx Letter. Xxxxxx Itech Holdings, LLC shall have
-------------
delivered a letter to the Company and the Stockholders at Closing as provided in
Section 8.5 hereof.
-----------
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification by Stockholders. Except as provided in Section
------------------------------- -------
8.6, Stockholders agree to jointly and severally indemnify and hold harmless
---
Empyrean Holdings and the Company and each officer, director, and Affiliate of
Empyrean Holdings and the Company, including without limitation any successor of
the Company that is an Affiliate of Empyrean Holdings and any of the Company's
or Emyrean Holdings' lenders as provided in Section 10.5 hereof (collectively,
------------
the "Indemnified Parties") from and against any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs and expenses (including
court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively, the
"Indemnifiable Costs"), which any of the Indemnified Parties may sustain, or to
which any of the Indemnified Parties may be subjected, arising out of (A) any
misrepresentation, breach or default by Stockholders (as such, but severally and
not jointly in any other role, e.g., as an employee under any employment
agreement after the date hereof), Invisions Group or the Company of or under any
of the representations, covenants, agreements or other provisions of this
Agreement or any agreement or document executed in connection herewith;
provided, however, that Indemnifiable Costs for covenants with respect to the
Company shall be with respect to pre-Closing periods only; (B) any downward Net
Working Capital Adjustment not paid to the Company pursuant to a reduction of
the Escrow Sum; (C) cost of any brokerage or other transaction fees liability,
if any, borne by the Company and Invisions Group and not by Stockholders except
as provided in Section 10.4 hereof; (D) any customer claims involving
------------
pre-Closing services or products of the Company for breach of
-36-
warranty, product liability or customer service remediation, including claims
for consequential damages, to the extent not reserved for in the Company's
Financial Statements and (E) any failure of the Company to obtain any landlord
consents to the Acquisition contemplated hereby required under the terms of any
leases of the Company's real property.
8.2. Defense of Claims. If any legal proceeding shall be instituted,
-----------------
or any claim or demand made by a third Person, against any Indemnified Party in
respect of which Stockholders or Invisions Group may be liable hereunder, such
Indemnified Party shall give prompt written notice thereof to Stockholders and,
except as otherwise provided in Section 8.4 below, Stockholders shall have the
right to defend any litigation, action, suit, demand, or claim for which an
Indemnified Party may seek indemnifications, and such Indemnified Party shall
extend reasonable cooperation in connection with such defense, which shall be at
Stockholders' expense. In the event Stockholders fail or refuse to defend the
same within a reasonable length of time, the Indemnified Parties shall be
entitled to assume the defense thereof, and Stockholders shall be jointly and
severally liable to repay the Indemnified Parties for all reasonably incurred
Indemnifiable Costs. If Stockholders shall not have the right to assume the
defense of any litigation, action, suit, demand, or claim in accordance with the
preceding sentence, the Indemnified Parties shall, at Stockholders' expense,
have the absolute right to control the defense of such litigation, action, suit,
demand, or claim, but Stockholders shall be entitled, at their own expense, to
participate in such litigation, action, suit, demand, or claim. The party
controlling any defense pursuant to this Section 8.2 shall deliver, or cause to
-----------
be delivered to the other party, copies of all correspondence, pleadings,
motions, briefs, appeals or other written statements relating to or submitted in
connection with the defense of any such litigation, action, suit, demand or
claim, and timely notice of any hearing or other court proceeding relating to
such litigation, action, suit, demand or claim. Notwithstanding the forgoing, in
no event will the party controlling any defense pursuant to this Section 8.2
-----------
settle any litigation, action, suit, demand or claim without the prior written
consent of the non-controlling party, unless such settlement provides for the
unqualified, absolute and complete release of all claims against the
non-controlling party and results in no monetary or equitable liability to the
non-controlling party.
8.3. Escrow Claim. If any claim for indemnification is made by an
------------
Indemnified Party pursuant to this Article VIII prior to the expiration of the
------------
Escrow Period, such Indemnified Party shall first apply to the Escrow Agent
provided in Section 2.7 of this Agreement for reimbursement of such claim in
accordance with the provisions of the Escrow Agreement provided, however, to the
extent set forth in Section 8.6, the Escrow Sum is not intended to be an
-----------
exclusive remedy in the event Empyrean Holdings or the Company has
indemnification claims hereunder which exceed such amount. Upon expiration of
the Escrow Period, all claims by Empyrean Holdings shall first be made against
the Seller Notes on a pro rata basis among all Stockholders. Empyrean Holdings,
in good faith, may elect to reduce the principal amount of the Seller Notes by
the amount of any Indemnifiable Costs or any other payments to which Empyrean
Holdings or such Indemnified Parties may become entitled by reason of the
provisions of this Agreement. In the event that such reductions by Empyrean
Holdings are greater than the amount of any Indemnifiable Costs (as finally
determined),
-37-
Empyrean Holdings shall be responsible to the Stockholders for such principal
amount that should not have been reduced, together with interest at the rate of
10% per annum.
8.4. Tax Audits, Etc. In the event of an audit of a Tax Return of
---------------
the Company or Invisions Group with respect to which an Indemnified Party might
be entitled to indemnification pursuant to this Article VIII, the Stockholders
------------
and the Company shall jointly control any and all such audits which may result
in the assessment of additional Taxes against the Company or Invisions Group and
any and all subsequent proceedings in connection therewith, including appeals.
Stockholders and Empyrean Holdings shall cooperate fully in all matters relating
to any such audit or other Tax proceeding (including according access to all
records pertaining thereto), and will execute and file any and all consents,
powers of attorney, and other documents as shall be reasonably necessary in
connection therewith. If additional Taxes are payable by the Company or
Invisions Group as a result of any such audit or other proceeding, Stockholders
shall be severally responsible for and shall promptly pay all Taxes, interest,
and penalties for which any of the Indemnified Parties shall be entitled to
indemnification.
8.5. Indemnification of Stockholders. Empyrean Holdings agrees to
-------------------------------
indemnify and hold harmless Stockholders, Invisions Group and the Company and
each officer, director, Stockholder or Affiliate of the Company, from and
against any Indemnifiable Costs arising out of any misrepresentation, breach or
default by Empyrean Holdings of or under any of the representations, covenants,
agreements or other provisions of this Agreement or any agreement or document
executed in connection herewith. Notwithstanding the foregoing, the liability of
Empyrean Holdings for any breaches of its representations and warranties
contained in Sections 4.10 through 4.15 of Article IV hereof shall be limited
------------- ---- ----------
to, in the case of breaches of such representations involving periods prior to
August 12, 1999, a proportionate share of any amounts paid to Xxxxxx Itech
Holdings, LLC as a result of any similar breach of a corresponding
representation or warranty of BSG Holdings, Inc. and its shareholders pursuant
to the Recapitalization Agreement (and Xxxxxx Itech Holdings, LLC shall have
provided a side letter to the Stockholders prior to the Closing that it will
assign a proportionate share of all such indemnification claim amounts to the
Stockholders). In addition, in determining the Indemnifiable Costs of
Stockholders for breaches by Empyrean Holdings for which indemnification is to
be provided by this Section 8.5, all losses shall be determined based on the
-----------
relative economic harm suffered by the Stockholders for such breach in
accordance with their relative economic ownership of Empyrean Holdings.
8.6. Limits on Indemnification. All Indemnifiable Costs sought by
-------------------------
any party hereunder shall be net of any insurance proceeds received by such
Person with respect to such claim. Except for any claims for breach of the
representations, warranties and covenants of the Company, Invisions Group and
the Stockholders under Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.12 (with respect to
------------ --- --- --- --- ----
Environmental and OSHA Obligations only), 3.17, Article VI, 8.1(B) or 8.1(C)
---- ---------- ------ ------
hereof (the indemnification for which shall expire on the expiration of the
applicable statute of limitations or, in the case of covenants in Article VI
----------
which have a specific expiration date, as of such date, and if so made, such
claims, and all Indemnifiable Costs incurred thereafter, shall continue after
such date until finally resolved), the right of any party to make claims for
-38-
indemnification provided under this Article VIII shall expire on June 30, 2001
------------
(except for any claims for Indemnifiable Costs made prior to such date which
claims shall continue after such date until finally resolved). Empyrean Holdings
shall not be obligated to pay any amounts for indemnification under this Article
-------
VIII until the aggregate indemnification obligation sought by Stockholders
----
hereunder exceeds $100,000, whereupon Empyrean Holdings shall be liable for all
amounts for which indemnification may be sought. Notwithstanding the foregoing,
in no event shall the aggregate liability of Empyrean Holdings to Stockholders
for breach of representations and warranties exceed $3,650,000. The Stockholders
shall not be obligated to pay any amounts for indemnification under this Article
-------
VIII until the aggregate indemnification obligation sought by Empyrean Holdings
----
hereunder exceeds $100,000, whereupon Stockholders shall be liable for all
amounts for which indemnification may be sought. Notwithstanding the foregoing,
in no event shall the aggregate liability of Stockholders to Empyrean Holdings
for breach of representations and warranties exceed $3,650,000; provided,
however, that the aggregate liability of Stockholders to Empyrean Holdings or
Empyrean Holdings to Stockholders for claims for (A) the breaching of the
representations and warranties of the Stockholders under Sections 3.1, 3.2, 3.3,
------------ --- ---
3.4, 3.12 (to the extent such claims are for Environmental and OSHA Obligations)
--- ----
and 3.17, or (B) any breach of Sections 8.1(B) or (C), or (C) any claim with
---- --------------- ---
respect to the fraudulent conduct of Stockholders or Empyrean Holdings with
respect to this Agreement in the event that Empyrean Holdings or Stockholders
successfully prove intentional fraud or intentional fraudulent conduct in
connection with this Agreement, shall not exceed the Purchase Price. In no event
shall any non-Majority Stockholder's liability for any individual
indemnification claim exceed an amount equal to the product of (i) the amount of
such indemnification claim and (ii) such Stockholder's pro rata share of the
Purchase Price paid to the Stockholders. The indemnification provided for in
this Article VIII is intended to be the exclusive monetary remedy of Empyrean
------------
Holdings or Stockholders with regard to the Acquisition contemplated by this
Agreement.
8.7. Arbitration of Claims. If any claim for indemnification is made
---------------------
by an Indemnified Party or Stockholders pursuant to this Article VIII prior to
------------
the expiration of the indemnification period as set forth in Section 8.6, the
-----------
parties hereto shall first meet in good faith in order to attempt to resolve
such claim. In the event that the parties are unable to resolve such
indemnification claim within 30 days after written notice of such claim, the
parties agree to submit to arbitration, in accordance with these provisions, any
disputed claim or controversy arising from or related to the alleged breach of
this Agreement or any disputed indemnification claim made pursuant to this
Section VIII. The parties further agree that the arbitration process agreed upon
------------
herein shall be the exclusive means for resolving all disputes made subject to
arbitration herein, but that no arbitrator shall have authority to expand the
scope of these arbitration provisions. Any arbitration hereunder shall be
conducted under the commercial arbitration rules of the American Arbitration
Association (AAA). Either party may invoke arbitration procedures herein by
written notice for arbitration containing a statement of the matter to be
arbitrated. The parties shall then have fourteen (14) days in which they may
identify a mutually agreeable, neutral arbitrator. After the fourteen (14) day
period has expired, the parties shall prepare and submit to the AAA a joint
submission, with each party to contribute half of the appropriate administrative
fee. In the event the parties
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cannot agree upon a neutral arbitrator within fourteen (14) days after written
notice for arbitration is received, their joint submission to the AAA shall
request arbitrators who are practicing attorneys with professional experience in
the field of corporate law, and the parties shall attempt to select an
arbitrator from the panel according to AAA procedures; provided, however, that
in the event the parties cannot agree, the AAA shall appoint an arbitrator.
Unless otherwise agreed by the parties, the arbitration hearing shall take place
in the Washington, D.C. metropolitan area, at a place designated by the AAA. All
arbitration procedures hereunder shall be confidential. Each party shall be
responsible for its costs incurred in any arbitration, and the arbitrator shall
not have authority to include all or any portion of said costs in an award
regardless of which party prevails. The arbitrator may include equitable relief.
The decision of the arbitrator shall be rendered not later than 30 days
following the hearing. Any arbitration awarded shall be accompanied by a written
statement containing a summary of the issues in controversy, a description of
the award, and an explanation of the reasons for the award. Any determination of
the arbitrator shall be binding upon the parties. Either party may apply to any
court having jurisdiction for judicial confirmation of any determination by the
arbitrator and for an order of enforcement of such decision.
ARTICLE IX
TERMINATION
9.1. Termination. This Agreement may be terminated at any time prior
-----------
to the Closing:
(a) by the mutual written consent of all parties hereto;
(b) in writing by Empyrean Holdings, if the Company, Invisions
Group or any of the Stockholders has breached in any material respect any
representation, warranty or covenant contained in this Agreement, and in each
case such breach has not been remedied within ten (10) business days after
receipt of written notice specifying such breach and demanding such breach to be
remedied; or
(c) in writing by the Stockholders, if Empyrean Holdings has
breached in any material respect any representation, warranty or covenant
contained in this Agreement, and in each case such breach has not been remedied
within ten (10) business days after receipt of written notice specifying such
breach and demanding such breach to be remedied; or
(d) in writing by the Stockholders, on the one hand, or
Empyrean Holdings, on the other hand, in the event the Closing has not occurred
on or before November 10, 1999, unless the failure of such consummation or the
failure to satisfy such condition, as applicable, shall be due to a breach of
any representation or warranty made by the party or parties seeking to terminate
this Agreement or the failure of such party or parties to
-40-
comply in all material respects with the agreements and covenants contained
herein to be performed by such party or parties.
9.2. Effect of Termination. If the Acquisition is terminated
---------------------
pursuant to Section 9.1 by notice in writing to the non-terminating party or
-----------
parties, this Agreement shall become void and of no further force and effect,
except that (a) such termination shall not relieve (i) any party from its
covenants in respect of confidentiality contained in Section 6.3 and (ii) any
-----------
party then in breach of any representation, warranty, covenant or agreement
contained in this Agreement from liability in respect of such breach and (b)
Sections 10.4 and 10.7 shall survive termination of this Agreement.
------------- ----
ARTICLE X
MISCELLANEOUS
10.1. Modifications. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
10.2. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited with a recognized overnight commercial
carrier, or by facsimile addressed to the respective parties hereto as follows:
Empyrean Holdings:
-----------------
Empyrean Group Holdings, Inc.
0000 Xxxxx Xxxx.
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Xxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
With a copy to:
--------------
Xxxxxx Equity Investors IV, L.P.
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
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Attention: Xxxxxx Xxxxxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
and to:
Xxxxx & Xxxxxxx L.L.P.
Columbia Square
000 Xxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
The Company, Invisions Group or Stockholders:
--------------------------------------------
c/o IconixGroup, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxx Xxxxxx
Xxxxxx Xxxxxxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
With copies to:
--------------
Xxxx Xxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
Xxxx Xxxxxxx
0000 Xxxxxxxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
-42-
10.3. Counterparts; Facsimile Transmission. This Agreement may be
------------------------------------
executed in several counterparts, each of which shall be deemed an original but
all of which counterparts collectively shall constitute one instrument, and in
making proof of this Agreement, it shall never be necessary to produce or
account for more than one such counterpart. Signatures of a party to this
Agreement or other documents executed in connection herewith which are sent to
the other parties by facsimile transmission shall be binding as evidence of
acceptance of the terms hereof or thereof by such signatory party, with
originals to be circulated to the other parties in due course.
10.4. Expenses. Each of the parties hereto will bear all costs,
--------
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the Acquisition, provided, however, that Stockholders
shall bear all costs and expenses of (i) any broker involved in this transaction
on behalf of Stockholders, Invisions Group or the Company and (ii) all legal and
other expenses of Stockholders, Invisions Group or the Company with respect to
this Agreement and the Acquisition. Notwithstanding the foregoing, in the event
that the Acquisition is consummated, Empyrean Holdings' will assume and pay up
to $250,000 of the Company's and Stockholders' transactions expenses and
brokerage fees, including without limitation reasonable legal, accounting and
financial advisory fees incurred in connection with the Acquisition.
10.5. Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the Company, Invisions Group, Empyrean Holdings
and Stockholders, their heirs, representatives, successors, and permitted
assigns, in accordance with the terms hereof. This Agreement shall not be
assignable by the Company, Invisions Group or Stockholders without the prior
written consent of Empyrean Holdings. This Agreement shall be assignable by
Empyrean Holdings and/or the Company to either (a) any lender providing
financing to Empyrean Holdings or the Company (but only with respect to Empyrean
Holdings' rights under Article II and Article VIII hereof) or (b) any Affiliate
---------- ------------
of Empyrean Holdings, provided Empyrean Holdings remain liable, in each case
without the prior written consent of Stockholders. In addition, following the
Closing, Empyrean Holdings or the Company may assign any or all of its rights
hereunder, without the consent of the Stockholders, in connection with any sale
of all or substantially all of the assets, capital stock, partnership interests
or business of the Company or Empyrean Holdings (whether effected by sale,
exchange, merger, consolidation or other transaction) and provided the acquiring
party shall assume all of Empyrean Holdings' or the Company's obligations
hereunder.
10.6. Entire and Sole Agreement. This Agreement and the other
-------------------------
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written, express or implied, with respect to the subject matter
hereof.
10.7. Governing Law. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of Delaware, without giving effect to the principles of conflicts of laws
thereof.
-43-
10.8. Survival of Covenants. Regardless of any investigation at any
---------------------
time made by or on behalf of any party hereto or of any information any party
may have in respect thereof, all covenants made hereunder or pursuant hereto or
in connection with the Acquisition shall survive the Closing for a period ending
on June 30, 2001, provided (a) all covenants in this Agreement which have an
expiration date contained therein shall expire as of such date and (b) the
covenants contained in Sections 6.1, 6.5, 6.6 and 6.7 hereof shall expire upon
------------ --- --- ---
the expiration of the applicable statutes of limitations.
10.9. Invalid Provisions. If any provision of this Agreement is
------------------
deemed or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this Agreement
ever be reformed or rewritten by any judicial body of competent jurisdiction,
such provision as so reformed or rewritten shall be binding upon all parties
hereto.
10.10. Stockholder's Investment Representations. Each Stockholder
----------------------------------------
(i) that is acquiring the Common Stock, Preferred Stock or Seller Notes
purchased hereunder or acquired pursuant hereto is doing so for its own account
with the present intention of holding such securities for purposes of investment
and (ii) has no intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws; provided that nothing contained herein shall prevent such Stockholders and
subsequent holders of Common Stock, Preferred Stock or Seller Notes from
transferring such securities in compliance with the provisions of the
Stockholder Subscription Agreement. Each certificate for Common Stock, Preferred
Stock or Seller Notes shall be imprinted with a customary securities legend in a
form provided by Empyrean Holdings' counsel.
10.11. Public Announcements. Neither Stockholders, Invisions Group
--------------------
nor the Company (pre-Closing) shall make any public announcement of the
Acquisition without the prior written consent of Empyrean Holdings, which
consent shall not be unreasonably withheld.
10.12. Remedies Cumulative. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
10.13. Third Parties. Except as specifically set forth or referred
--------------------
to herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any Person, other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.
10.14. No Strict Construction. The parties hereto have participated
----------------------
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto,
-44-
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.
10.15. Disclosure Schedule. An item disclosed in any part of the
-------------------
Disclosure Schedule attached hereto shall be deemed disclosed in response to any
other applicable part of the Disclosure Schedule but only to the extent that
such disclosure would, in the minds of a reasonable buyer, reasonably be
expected to relate to such other part of the Disclosure Schedule.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-45-
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
THE COMPANY:
-----------
ICONIXGROUP, INC.
By: /s/ Xxx X. Xxxxxx
---------------------------------
Xxx X. Xxxxxx
President
INVISIONS GROUP:
---------------
THE INVISIONS GROUP, LTD.
By: /s/ Xxx X. Xxxxxx
---------------------------------
Xxx X. Xxxxxx
President
STOCKHOLDERS:
/s/ Xxx X. Xxxxxx
------------------------------------------
Xxx X. Xxxxxx
/s/ Xxxxxx Xxxxxxxxx
------------------------------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxxxx X. Barcelona
------------------------------------------
Xxxxxx X. Barcelona
/s/ Xxxxxxxx Xxxxxxxxx
------------------------------------------
Xxxxxxxx Xxxxxxxxx
/s/ Xxxx X. Xxxxx
------------------------------------------
Xxxx X. Xxxxx
-46-
EMPYREAN HOLDINGS:
EMPYREAN GROUP HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman, President and CEO
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. The Registrant will provide these
Exhibits and Schedules upon the request of the Securities and Exchange
Commission.
