STOCK ACQUISITION AGREEMENT
March , 2000
The parties to this agreement are the parties listed on exhibit I
(collectively, the "Stockholders"), TISI Holdings, Inc., a Delaware corporation
("XXXX"), which is a wholly-owned subsidiary of TOIC (hereafter defined), and
The Official Information Company, a Delaware corporation ("TOIC").
The Stockholders own _________ shares of common stock (constituting all
of the issued and outstanding shares of capital stock) of
______________________, a ___________ corporation (the "Company"), which
operates the businesses of pre-employment investigation and screening (the
"Business"). The parties have agreed upon the transfer to XXXX of all of the
shares of the Company (the "Shares"). The stockholders of the affiliates of the
Company, and in certain instances the affiliates themselves, listed on exhibit
II (the "Affiliates") have entered into acquisition agreements with XXXX on the
date hereof (the "Affiliate Acquisition Agreements") whereby either the assets
or stock of each of the Affiliates will be transferred to XXXX on the terms set
forth in the respective Affiliate Acquisition Agreements.
TOIC owns all of the outstanding shares of capital stock of Total
Information Services, Inc., an Oklahoma corporation ("TISI"), which, among other
things, conducts a business similar to the Business. In connection with the
transactions contemplated by this agreement, TOIC is transferring and
contributing all of such shares of TISI to XXXX.
Accordingly, it is agreed as follows:
1. Transfer of Shares.
1.1 Transfer at Closing. At the closing referred to in section 3,
the Stockholders shall transfer to XXXX, and XXXX shall acquire from the
Stockholders, the Shares, free and clear of all Liens (as defined herein).
1.2 Pre-Closing Distribution. Immediately prior to the closing the
Company shall assign and transfer to the Stockholders and the Stockholders shall
accept from the Company all the shares of capital stock held by the Company in
United States Mutual Association, Inc. [and all the assets (the "Retained
Assets") and liabilities relating to the refund checking and civil recovery
databases of the Company, as set forth on schedule 1.2 (the "Excluded
Business").] The distribution[s] described in this section 1.2 shall be referred
to as the "Pre-Closing Distribution".
2. Purchase Price.
2.1 Amount of Consideration. As full consideration for the Shares:
(a) at the closing, XXXX shall pay to the Stockholders, by
wire transfer of immediately available funds, the sum of $______, subject to
adjustment as provided in section 2.3, which shall be payable as follows: (i)
$_______ to the Stockholders, (ii) $_____ into a trust account established by
the Stockholders and the Affiliates pursuant to an agreement of even date
herewith, as more fully described on exhibit III, and (iii) $_____ to the escrow
agent under an escrow agreement in the form of exhibit IV ("Escrow Agreement")
(b) at the closing, XXXX shall cause to be issued to the
Stockholders ____ shares of Class B Non-Voting Common Stock of XXXX and ___
shares of Class C Non-Voting Common Stock of XXXX, as more fully described on
exhibit V (collectively, the "XXXX Shares");
2.2 Distributions. The Stockholders acknowledge that they have
instructed XXXX to make the cash payments and to cause the XXXX Shares to be
issued in the manner provided in section 2.1 and XXXX bears no responsibility
with respect to the further distribution of such payments or XXXX Shares.
2.3 Working Capital Minimum.
(a) Within 90 days of the Closing Date, XXXX shall cause to
be delivered to the Stockholders a statement of assets and liabilities of the
Company (the "Closing Balance Sheet") prepared on an accrual basis in accordance
with generally accepted accounting principles as of the close of business on the
Closing Date. If the sum of the current liabilities of the Company shown on the
Closing Balance Sheet is greater than the sum of the current assets of the
Company shown on the Closing Balance Sheet, the Stockholders shall pay in cash
to XXXX the amount that the sum of the current liabilities exceeds the sum of
the current assets (the "Adjustment Amount"), with such payment to be made
within 30 days of the final determination of the Adjustment Amount. In the event
that the sum of the current assets of the Company shown on the Closing Balance
Sheet is greater than the sum of the current liabilities of the Company shown on
the Closing Balance Sheet, XXXX shall pay in cash to the Stockholders the amount
that the sum of the current assets exceeds the sum of the current liabilities
(the "Reverse Adjustment Amount") with such payment to be made within 30 days of
the final determination of the Reverse Adjustment Amount.
(b) Within 30 days after the Stockholders' receipt of the
Closing Balance Sheet, the Stockholders may deliver to XXXX a written statement
setting forth any disagreements of the Stockholders with any of the information
contained in the Closing Balance Sheet that affects the determination of the
Adjustment Amount (or the Reverse Adjustment Amount). If the Stockholders do not
submit such a statement within the 30-day period, then the Adjustment Amount (or
the Reverse Adjustment Amount), if any, as determined in accordance with the
Closing Balance Sheet, shall be final and binding on the parties. If XXXX
and the Stockholders do not resolve the disagreements within 15 days after
delivery of the written statement by the Stockholders, a firm of independent
certified public accountants, whose decisions on the matter shall be binding and
whose fees and expenses shall be borne 50% by the Stockholders and 50% by XXXX,
shall be designated by agreement between them; if they fail to agree on the firm
to decide the matter within an additional 10 days, the accountants shall be
selected by the president of the American Institute of Certified Public
Accountants. Each party shall allow the other party reasonable access to all
information reasonably requested by such other party to prepare the Closing
Balance Sheet or the Stockholders' statement hereunder, as the case may be.
3. Closing. The closing under this agreement shall take place at the
offices of Proskauer Rose LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on March
15, 2000. The date on which the closing is held is referred to in this agreement
as the "Closing Date." At the closing, the parties shall execute and deliver the
documents referred to in section 9. If the closing has not occurred on or prior
to June 30, 2000, either party may terminate this agreement by notice to the
other; upon such termination, neither party shall have any liability arising out
of this agreement other than any liability resulting from its breach of or
misrepresentation under this agreement prior to termination.
4. Satisfaction of Liabilities; Cancellation of Affiliate Payables and
Receivables.
(a) Prior to the closing, the Stockholders shall cause the
Company to satisfy all of its liabilities, contingent or otherwise, except those
disclosed on schedule 4 (the "Permitted Liabilities"). [Schedule 4 will define
Permitted Liabilities in the same manner as Assumed Liabilities are defined in
the Asset Acquisition Agreement.]
(b) Immediately prior to the closing, any payable or other
liability to, or receivable or other asset due from, a Stockholder, any
affiliate of a Stockholder, or any Affiliate will be canceled without any cost
or adverse consequence to the Company.
5. Representations and Warranties of the Stockholders. The Stockholders
jointly and severally represent and warrant to XXXX and TOIC that, as of the
date hereof:
5.1 Organization and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the law of the State of
________________ and has the full corporate power and authority to carry on its
business as it currently is being conducted. The Company is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
listed on schedule 5.1, which is each jurisdiction in which it owns, leases or
operates property or is otherwise required to be qualified, except where the
failure to be so qualified would not have a material adverse effect on the
Business. The Company does not have any equity or other similar interests in any
entity (other than United States Mutual Association, Inc.). The Stockholders
have the full legal right, power and authority to enter into and perform this
agreement and the Escrow Agreement, stockholders agreement and
employment agreements referred to in sections 2.1(a)(iii), 7.8 and 7.9 (the
"Closing Documents") and no spousal consent is required.
5.2 Authorization of Agreement. This agreement constitutes, and
the Closing Documents when executed at the closing will constitute, the valid
and binding obligation of each Stockholder and is enforceable against each
Stockholder in accordance with its respective terms, except as enforceability
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
5.3 Consents of Third Parties. Subject to receipt of the consents
and approvals referred to on schedule 5.3, the execution, delivery and
performance of this agreement and Closing Documents by each Stockholder will not
(i) conflict with the certificate of incorporation or bylaws of the Company;
(ii) conflict with, or result in the breach or termination of, or constitute a
default under, any agreement, lease, commitment, order or other instrument
(including, without limitation, those listed on schedule 5.10), or any order,
judgment or decree, to which any Stockholder is a party or by which any
Stockholder is bound; (iii) constitute a violation by any Stockholder of any law
or regulation applicable to him or her; or (iv) result in the creation of any
lien, charge, claim or encumbrance ("Lien") upon any of the capital stock to be
sold to XXXX under this agreement or any of the properties or assets of the
Company. Except as set forth on schedule 5.3, no consent, approval or
authorization of, or designation, declaration or filing with, any governmental
authority is required on the part of any Stockholder or the Company in
connection with the execution, delivery and performance of this agreement. In
this regard each Stockholder has executed and delivered to XXXX the affidavit
attached to this agreement as Exhibit VI.
5.4 Capitalization. The Company's authorized capitalization
consists of _____ shares of common stock, par value $____ per share, of which
____ shares are issued and outstanding as of the date of this agreement. All the
Company's outstanding shares were duly authorized for issuance, were validly
issued, and are fully paid and nonassessable and are owned by the Stockholders.
There are no outstanding options, warrants or rights of any kind to acquire any
shares or interests of any class of security, and there are no outstanding
securities convertible into any shares or interests of any class of security, of
the Company, nor are there any obligations to issue any such options, rights or
securities. There are no existing shareholders agreements, voting agreements or
any other existing arrangements that require or permit any shares or interests
of the Company to be voted by or at the discretion of anyone other than the
record owner and there are no restrictions of any kind on the transfer of any of
those shares or interests, except those imposed by applicable United States
federal and state securities laws.
5.5 Ownership of Shares. The Stockholders are the record and
beneficial owners of an aggregate of ___ shares of common stock of the Company,
as provided on schedule 5.5, free and clear of all Liens, and those shares
represent all of the outstanding capital stock of the Company. At the closing,
XXXX will receive valid title to all of the outstanding shares of the Company
free and clear of all Liens.
5.6 Title to Assets and Related Matters; Condition of Assets.
(a) The Company has valid title to all of the assets
(tangible and intangible) used in the Business or presently located on its
premises ([except for the Retained Assets,] the "Assets") free and clear of any
Lien, except for the lien, if any, of current taxes not yet due and payable and
any other lien disclosed on schedule 5.6(a). The Assets include all of the
assets reflected on the balance sheet as of December 31, 1999 referred to in
section 5.7, except for the [the Retained Assets and] items sold, transferred or
otherwise disposed of since that balance sheet date in the ordinary course of
business and substantially consistent with past practice.
(b) The Assets include all the assets (tangible and
intangible) necessary for, or used in, the conduct of the Business in the manner
in which it has been conducted by the Company [(except for the Retained Assets)]
and those assets (together with replacements for the excluded items) will be
sufficient to enable the Company to continue to conduct the Business after the
closing in the manner in which it has been conducted by the Company previously.
(c) Schedule 5.6(c) contains a list of all real properties
owned or leased by the Company with respect to the Business. The Company enjoys
peaceful and undisturbed possession under all real property leases covering
premises used in the conduct of the Business, and all such real property leases
are valid and subsisting and in full force and effect. Except as set forth on
schedule 5.6(c), all improvements on the real properties used by the Company in
connection with the Business are in accordance, in all material respects, with
all applicable laws, ordinances, regulations and orders, including, but not
limited to, those applicable to zoning, environment and the establishment and
maintenance of working conditions for labor. All of the buildings and structures
leased to or owned by the Company in connection with the Business are, in all
material respects, in good condition and are adequate and suitable for their
present uses and purposes, and, except as otherwise disclosed on schedule
5.6(c), the transactions contemplated by this agreement will not adversely
affect the right of XXXX to use those properties for the same purpose and to the
same extent after the Closing Date as they were being used by the Stockholders
prior to the date of this agreement. To the knowledge of the Stockholders or the
Company, there are no interior or exterior material structural defects or other
material defects in the improvements or any material defect in the plumbing,
electrical, mechanical, heating, ventilating or air-conditioning systems or
other systems. To the knowledge of the Stockholders or the Company, all such
systems are, in all material respects, in good working order, and all roofs and
basements are, in all material respects, in good condition and free of leaks.
With respect to the real property owned by the Company, (i) the
Stockholders have delivered to XXXX a copy of any title insurance policies and
surveys for such property in the Stockholders' possession and (ii) the Company
has good and marketable fee simple title thereto and owns all improvements
(including buildings and other structures) thereon, subject only Liens set forth
on schedule 5.6(c) and such other Liens as do not materially interfere with the
operation of the real property or adversely affect the marketability or value of
the real property. To the knowledge of the Stockholders or the Company, except
as disclosed on schedule 5.6(c), there are no: (A) pending or contemplated
annexation, condemnation or similar proceedings affecting, or which may affect,
the real property, (B) proposed or pending proceedings to change or redefine the
zoning of the real property, (C) proposed changes in roads which may adversely
affect ingress to or egress from the real property, or (D) proposed or pending
special assessments affecting the real property or any penalties or interest due
with respect to real estate taxes assessed against the real property that are
payable by the Company as all taxes applicable to the real property have been
paid in full, except taxes for the current year, which are not yet due and
payable.
(d) Schedule 5.6(d) contains a complete list of all equipment
(including computers and office equipment), furniture, vehicles, and other
tangible assets used in the Business that had an original cost for any
individual item of more than $1,000.
(e) To the knowledge of the Stockholders or the Company, all
of the Assets are, in all material respects, in good operating condition and in
good condition of maintenance and repair, subject to normal wear and tear, and
are suitable for continued use in the normal course of business.
5.7 Financial Statements. Schedule 5.7 contains financial
statements consisting of (i) balance sheets of the Company as of December 31,
1997 and December 31, 1998 and the related statements of income and cash flows
for the 12 month periods then ended, including all related notes thereto [with
the report of _______]; and (ii) a balance sheet of the Company as of December
31, 1999 and the related statements of income and cash flows for the 12 month
period then ended. Except as set forth on schedule 5.7, all such financial
statements have been prepared on an accrual basis or a cash basis, as indicated
in such financial statements, and fairly present the financial position (on a
cash or accrual basis, as applicable) of the Business as of the dates indicated
and the results of operations of the Business for the periods indicated. All
such financial statements have been prepared in accordance with the Company's
books and records and show all income and expenses attributable to the Business
during the respective periods covered by them. All of the Company's books of
account relating to the Business have been exhibited or made available to XXXX,
and those books of account accurately record all transactions of the Business
during the respective periods covered by them. All of the accounts receivable
reflected on the balance sheet as of December 31, 1999 arose from, and all of
the accounts receivable as of the Closing Date will have arisen from, bona fide
transactions in the ordinary course of business and, except as disclosed on
schedule 5.7, none of them is or will be subject to any defense, counterclaim or
setoff and all such accounts receivable shall be collectible within 90 days
after such obligations arose in their full recorded amounts, subject to any
reserves therefor reflected on the balance sheet as of December 31, 1999 or the
Closing Balance Sheet, respectively.
5.8 Undisclosed Liabilities. Except to the extent reflected on the
balance sheet as of December 31, 1999 referred to in section 5.7 or reflected in
the notes to that balance sheet, or otherwise disclosed on a schedule to this
agreement, the Company does not, and on the Closing Date will not, have any
liability or obligation of any kind relating to the Business,
whether accrued, absolute, contingent or otherwise, other than (a) liabilities
and obligations under orders, commitments, agreements and leases entered into in
the ordinary course of business (which, to the extent required by section 5.10,
are referred to on schedule 5.10), and (b) other liabilities and obligations
that arose in the ordinary course of the Business and are not material in
amount. Notwithstanding the foregoing, any liability resulting from a claim
asserted by any individual against XXXX after the closing with regard to a
negative report issued by the Company in the ordinary course of business prior
to the closing shall not be considered an undisclosed liability (but shall
instead be deemed a "Permitted Liability" for all purposes of this agreement),
so long as such assertion of a claim was not known by the Company to exist prior
to the closing ("Unknown Report Claim").
5.9 Absence of Certain Changes. Since December 31, 1999, the
Stockholders and the Company have operated the Business in the ordinary course
and consistent with past practices, and, except as set forth on schedule 5.9:
(a) the Company has not entered into any transaction or
incurred any liability or obligation with respect to the Business that was
unusual in nature or amount or was entered into or incurred other than in the
ordinary course of business;
(b) there has not been any material adverse change in the
condition (financial or otherwise) or prospects of the Business, or in the
Assets;
(c) [except for the Retained Assets,] the Company has not
sold or transferred any assets relating to or used in the Business other than in
the ordinary course of business and other than assets that have been replaced
with other assets of equal or greater value;
(d) the Company has not (i) granted or agreed to grant any
general increase in any rate or rates of salaries or compensation to employees
or agents of the Business or any specific increase in the salary or compensation
to any such employee or agent whose total salary and compensation after such
increase would be at an annual rate in excess of $30,000, (ii) increased or
amended any benefits of those employees or agents, (iii) amended, adopted or
terminated any Plan, or (iv) entered into any employment, bonus, deferred
compensation or any other agreement with any employee or agent;
(e) the Company has not made any material change in the
manner in which the Business has been operated or the accounting principles or
practices employed by the Company in connection with the Business, and no person
who performed substantial services with respect to the Business during the
twelve months preceding the date of this agreement is currently employed by or
performing substantial services for any affiliate of the Company or of the
Stockholders;
(f) the Company has not taken any action to accelerate
collection of accounts receivable or to defer payment of liabilities, except in
the ordinary course consistent with past practices; and
(g) to the Stockholders' and the Company's knowledge, the
Company has not amended, terminated, canceled or compromised any material claim
relating to the Business, or waived or allowed to lapse or terminate any other
rights of substantial value to the Business.
5.10 Lists of Agreements, etc. Schedule 5.10 contains, with
respect to the Business, a true and complete list of: (a) all commitments and
agreements for the purchase of materials or supplies or the receipt of services
that involve an expenditure by the Company of more than $10,000 for any one
commitment or two or more related commitments; (b) all agreements relating to
pre-employment investigation and screening services; (c) all leases or other
rental agreements under which the Company is lessee or lessor; (d) all license
agreements under which the Company is either licensee or licensor; (e) all
collective bargaining agreements and all employment and consulting agreements
and agreements with independent contractors that provide for compensation in
excess of $10,000 a year; (f) all agreements between the Company and any
affiliate of the Company (or any entity in which any of them has a material
interest); (g) all commitments and other agreements limiting the Company's
freedom to engage in any line of business or to compete with any other person;
and (h) all other agreements, commitments and orders to which the Company is a
party or by which it is bound that involve more than $10,000 or are otherwise
material to the Business or the Assets. True and complete copies of the
agreements, commitments and leases referred to on schedule 5.10 (if in written
form and summaries thereof if in oral form) have been delivered or made
available to XXXX.
5.11 Status of Agreements. Except as set forth on schedule 5.11,
all leases, commitments and other agreements of the Company were entered into in
connection with and in the ordinary course of the Business and on an arm's
length basis. Each of the agreements, commitments, orders and leases referred to
in section 5.10 is presently in full force and effect in accordance with its
terms and the Company is not in default, and, to the knowledge of the
Stockholders or the Company, no other party is in default, under any agreement,
commitment, order or lease referred to in section 5.10 and each of those
agreements, commitments, orders and leases is valid and binding upon and
enforceable against each of the parties thereto in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights in general. To the
knowledge of the Stockholders or the Company, no party to any of the agreements,
commitments, orders or leases referred to in section 5.10 has made, asserted in
writing or has any defense, setoff or counterclaim under any of those
agreements, commitments, orders or leases or has exercised any option granted to
it to cancel or terminate its agreement, to shorten the term of its agreement,
or to renew or extend the term of its agreement, and the Company has not
received any written notice to that effect.
5.12 Litigation; Compliance with Laws. Except as set forth on
schedule 5.12, within the past three years there has not been, and there is not
currently, any claim, litigation, proceeding or governmental investigation
pending or, to the knowledge of the Stockholders or the Company, threatened, or
any order, injunction or decree outstanding against or relating to the Company
with respect to the Business or any of the Assets. Subject to the last sentence
of section 5.8, the Stockholders do not know of any basis for future claims,
litigations,
proceedings or investigations against the Company with respect to the Business
or any of the Assets. The Company is not in violation, in any material respect,
of any law, regulation, ordinance, or any other requirement of any governmental
body or court, including the Fair Credit Reporting Act, arising out of the
operation of the Business (including, without limitation, the use of the
databases and any information contained therein and related software) and no
written notice has been received by the Company or any of its officers,
directors or stockholders alleging any such violation.
5.13 Intellectual Property. Schedule 5.13 contains a true and
complete list of the trademarks, trade names, copyrights, patents, trade
secrets, logos, computer software, databases, web sites, domain names and e-mail
addresses (collectively, "Intellectual Property"), used by the Company in the
Business. Schedule 5.13 also contains a true and complete list of all patent,
copyright, trademark, database and domain name registrations or registration
applications that have been obtained or filed by the Company anywhere in the
world. Except as set forth on schedule 5.13, the Company owns or possesses
adequate licenses or other rights to use, free and clear of any Lien, each of
the items of Intellectual Property listed on schedule 5.13 (including, without
limitation, any information contained in the databases), and they constitute all
the Intellectual Property necessary for the continued operation of the Business
in a manner consistent with past practices. Schedule 5.13 identifies which items
of Intellectual Property are owned by the Company and which items are used by
the Company under license. Except as set forth on schedule 5.13, (a) to the
knowledge of the Stockholders or the Company (i) there is no violation by others
of any right of the Company with respect to its Intellectual Property and (ii)
the Company is not, in connection with the Business, infringing upon any
Intellectual Property or other rights of any third party, including, without
limitation, by the Company's use of the Intellectual Property; (b) no
proceedings are pending or threatened, and no claim has been received by the
Company or the Stockholders alleging any such violation; (c) no royalty or
similar fee of any kind is payable by the Company for the use of any of the
Intellectual Property; and (d) the Stockholders have not granted any person or
entity any interest, as licensee or otherwise, in or to any one or more items of
the Intellectual Property.
5.14 Labor Matters. Except as set forth on schedule 5.14, with
respect to the Business (a) the Company is in compliance, in all material
respects, with all applicable laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, and is not
engaged in any unfair labor practice; (b) there is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board, any state labor relations board or any court or tribunal and,
to the knowledge of the Stockholders or the Company, none is or has been
threatened in writing; (c) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending against or affecting the
Company and, to the knowledge of the Stockholders or the Company, none is or has
been threatened in writing; (d) no grievance which might have a material adverse
effect on the conduct of the Business or any arbitration proceeding arising out
of or under any collective bargaining agreement is pending and, to the knowledge
of the Stockholders or the Company, none is or has been threatened in writing;
and (e) there is no xxxxxxx compensation or similar claim pending or threatened.
Except as set forth on schedule 5.14, to the knowledge of the Stockholders or
the Company, there has been no sexual harassment or similar claim against any
employee of the Business and no employee of the Business has at any time within
the three years preceding the date of this agreement asserted in writing against
the Company or any of its employees any claim of discrimination.
5.15 Environmental Matters. With respect to the ownership and
operation of the Business and any currently or formerly owned, operated or used
real property, to the knowledge of the Stockholders, except as set forth on
schedule 5.15:
(a) The Company and all of the real property owned, leased or
used by the Company (the "Real Property") is in compliance, in all material
respects, with all federal, state and local laws and regulations relating to
injury to or pollution or protection of human health or the environment (the
"Environmental Laws"), including the common law, environmental permits and laws
and regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, substances, petroleum
and petroleum products (collectively, "Materials of Environmental Concern"), or
otherwise relating to the manufacture, generation, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern;
(b) there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, but not limited to,
the release, emission, discharge or disposal or threatened release of any
Material of Environmental Concern, that could form the basis of any material
claim against the Company or the Real Property or could reasonably be expected
to constitute a material violation by the Company (or, after the closing, XXXX)
or is reasonably likely to require investigation, remediation or monitoring
under the Environmental Laws, and neither the Company nor any of the
Stockholders has received any written notice of actual or potential liability
under the Environmental Laws; and
(c) there are no underground storage tanks located on the
Real Property, there are no friable asbestos-containing materials in or on the
Real Property and no polychlorinated biphenyls (PCBs) are used or stored by the
Company at the Real Property.
5.16 ERISA.
(a) Schedule 5.16 contains a true and complete list of all
"employee benefit plans," within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and any other
bonus, profit sharing, pension, severance, savings, deferred compensation,
fringe benefit, insurance, welfare, post-retirement benefit, health, life, stock
option, stock purchase, restricted stock, tuition refund, service award, company
car, scholarship, relocation, disability, accident, sick, vacation, individual
employment, consulting, compensation, incentive, commission, payroll practices,
retention, change in control, noncompetition, or other plan, agreement, policy,
trust fund, or arrangement (whether written or unwritten, insured or
self-insured) established, maintained, sponsored, or contributed to (or with
respect to which any obligation has been undertaken) by the Company or any
entity that would be deemed a "single employer" with the Company under section
414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the
"Code") or
section 4001 of ERISA (an "ERISA Affiliate") on behalf of any employee,
consultant, director or shareholder of the Company (whether current, former or
retired) or their beneficiaries (each a "Plan" and, collectively, the "Plans").
With respect to each Plan, to the extent applicable, true and complete copies of
the plan and documents (including amendments) and summary plan description, IRS
Form 5500, if any, IRS determination letter and other material documents
relating to the Plan have been delivered to XXXX. None of the Company, any ERISA
Affiliate, or any of their respective predecessors has ever contributed to,
contributes to, has ever been required to contribute to, or otherwise
participated in or participates in or in any way, directly or indirectly, has or
could reasonably be expected to have any liability with respect to any plan
subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA,
including, without limitation any, "multiemployer plan" (within the meaning of
Sections (3)(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code), or any
single employer pension plan.
(b) Each Plan complies in all material respects and has been
maintained and operated in all material respects in compliance with its terms
and applicable law, including, without limitation, ERISA and the Code. With
respect to each of the Plans, except as set forth on schedule 5.16: (i) each
Plan intended to qualify under Section 401(a) of the Code is qualified and has
received a determination letter from the IRS to the effect that the Plan is
qualified under Section 401 of the Code and any trust maintained pursuant
thereto is exempt from federal income taxation under Section 501 of the Code and
nothing has occurred or is expected to occur through the Closing Date that
caused or could cause the loss of such qualification or exemption or the
imposition of any penalty or tax liability; (ii) all payments required by any
Plan, any collective bargaining agreement or other agreement, or by law with
respect to all periods through the closing shall have been made prior to the
Closing Date to the extent due and payable on the Closing Date (on a pro rata
basis where such payments are otherwise discretionary at year end) or provided
for by the Company as applicable, by full accruals as if all targets required by
such Plan had been or will be met at maximum levels) on its financial
statements; (iii) no claim, lawsuit, arbitration or other action has been
threatened, asserted or instituted against the Plans (other than non-material
routine claims for benefits, and appeals of such claims), any trustee or
fiduciaries thereof, the Company, any ERISA Affiliate, any director, officer, or
employee thereof, or any of the assets of any trust of the Plans and the Company
is unaware of any facts that could reasonably be expected to give rise to any
such claim, lawsuit, arbitration, or other action; (iv) no "prohibited
transaction," within the meaning of Section 4975 of the Code and Section 406 of
ERISA, has occurred or is expected to occur with respect to the Plan; (v) no
Plan is under audit or investigation by the IRS, U.S. Department of Labor, or
any other governmental authority and no such completed audit, if any, has
resulted in the imposition of any tax or penalty and (vi) with respect to each
Plan that is funded mostly or partially through an insurance policy, neither the
Company nor any ERISA Affiliate has any liability in the nature of retroactive
rate adjustment, loss sharing arrangement or other actual or contingent
liability arising wholly or partially out of events occurring on or before the
Closing Date.
(c) Except as provided in schedule 5.16(c), the consummation
of the transactions contemplated by this agreement will not give rise to any
liability including, without limitation, liability for severance pay,
unemployment compensation, termination pay, or
withdrawal liability, or accelerate the time of payment or vesting or increase
the amount of compensation or benefits due to any employee, director or
shareholder of the Company (whether current, former, or retired) or their
beneficiaries solely by reason of such transaction or by reason of a termination
of employment following such transaction. No amounts payable under any Plan will
fail to be deductible for federal income tax purposes by virtue of Sections 280G
or 162(m) of the Code.
(d) Neither the Company nor any ERISA Affiliate maintains,
contributes to, or in any way provides for any benefits of any kind whatsoever
(other than under Section 4980B of the Code, the Federal Social Security Act, or
a plan qualified under Section 401(a) of the Code) to any current or future
retiree or terminee. No event, condition, or circumstance exists that could
result in an increase of the benefits provided under any Plan based on the Plan
documents from the level of benefits for the most recent fiscal year ended
before the Closing Date; and none of the Company, any ERISA Affiliate or officer
or employee thereof, has made any legally binding promises or commitments to
create any additional plan, agreement or arrangement, or to modify or change any
existing Plan. Neither the Company nor any ERISA Affiliate has any unfunded
liabilities pursuant to any Plan that is not intended to be qualified under
Section 401(a) of the Code. No event, condition, or circumstance exists that
could reasonably be expected to prevent the amendment or termination of any
Plan.
5.17 Brokers and Finders. Neither the Stockholders nor the Company
has employed any broker or finder or incurred any liability (on its behalf or on
behalf of others, including XXXX) for any investment banking fees, brokerage
fees or commissions or finders fees in connection with the transactions
contemplated by this agreement.
5.18 Transactions with Affiliates. Except as set forth on schedule
5.18, the Company is not, and since December 31, 1998 has not, engaged, with
respect to the Business, in any transaction with any officer or director of the
Company, any of their family members, or any entity in which any of them has an
interest.
5.19 Permits and Licenses. The Company has, and is in compliance,
in all material respects, with, all permits, licences, franchises and other
authorizations ("Licenses") necessary for the conduct of the Business, and all
such Licenses are valid and in full force and effect. All Licenses held by the
Company that are material to the Business are listed on schedule 5.19.
5.20 Taxes. The Company has timely filed all federal, state and
other tax returns required by law to be filed by it, and each of those tax
returns is correct and complete in all respects. The Company has paid, or made
provision in its financial statements referred to in section 5.7 for payment of,
all of its taxes accrued through the date of those financial statements, except
that any accrued but unpaid taxes for 1999 and beyond are not reflected in
financial statements prepared on a cash basis. There are no claims pending or
threatened in writing against the Company for past due taxes. All taxes that are
or were required by law to be withheld or collected by the Company have been
duly withheld or collected and paid to the proper tax authority. Complete copies
of all federal, state and local income tax returns of the
Company for each of the taxable years ended ___________ have been delivered to
XXXX. There is no action, suit, proceeding, investigation, audit, claim or
assessment pending or proposed with respect to any tax liability of the Company;
no extension of time within which to file any tax return of the Company has been
requested and the return not yet filed; there are no waivers or extensions of
any applicable statute of limitations for the assessment or collection of any
tax with respect to the Company in effect; there are no tax rulings, requests
for rulings, closing agreements or changes of accounting method relating to the
Company that could affect its tax liability for any period after the Closing
Date; the Company has not filed a consent under section 341(f) of the Internal
Revenue Code; the Company will not be required to include in a taxable period
ending after the Closing Date taxable income attributable to, but not recognized
in, a prior taxable period. Neither the Company nor any predecessor has been
included in a consolidated or combined tax return.
5.21 Insurance.
(a) Schedule 5.21(a) contains a complete list of all
insurance policies relating to the Business under which the Company is currently
an insured, a named insured or otherwise the principal beneficiary of coverage.
True and complete copies of all of those policies have been delivered or made
available to XXXX. The Company has not received any notice that any of those
insurance policies are not in full force and effect. The Company is not in
breach or default (including any breach or default with respect to the payment
of premiums or the giving of notice), and no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default or permit
termination or modification, under any those insurance policies. The Company has
not received any written notice of cancellation or intent to cancel any of those
insurance policies. The Company has paid all premiums due and payable with
respect to those insurance policies.
(b) Schedule 5.21(b) sets forth a list of all claims of the
Company relating to the Business that are pending with any insurance company.
5.22 Employees.
(a) Schedule 5.22 is a true and complete list of all current
employees of the Company or any of its affiliates who perform, or who at any
time during the twelve months preceding the date of this agreement performed,
substantial services with respect to the Business, which list identifies the
name and position of each such employee, and the following compensation
information for fiscal years 1997, 1998 and 1999: (a) annual base salary, (b)
annual bonus, (c) commissions, (d) perquisites, (e) severance, (f) all other
items of compensation and (g) date of birth and date of hire.
(b) Except as set forth on schedule 5.16, the Company does
not have any severance policy and no employee of the Business is entitled to any
severance payment, either by law or by agreement, upon the termination of his or
her employment. No employee of the Business is represented by any union or other
collective bargaining agent and there are no collective bargaining or other
labor agreements with respect to those employees.
(c) Except as set forth on schedule 5.22, no employee has
threatened in writing, nor to the knowledge of the Stockholders or the Company,
intends to terminate his or her employment.
5.23 Year 2000 Compliance. Except as set forth on schedule 5.23,
the computer systems (including all work stations and other components) used in
the Business, both before and after the beginning of the year 2000, (i) are
capable of recognizing, processing, managing, representing, interpreting, and
manipulating correctly date related data for dates earlier and later than
January 1, 2000, including, but not limited to, calculating, comparing, sorting,
storing, tagging, and sequencing, without resulting in or causing logical or
mathematical errors or inconsistencies in any user-interface functionalities,
data storage, data fields, calculations, reports, processing, or any other input
or output, (ii) have the ability to provide date recognition for any data
element represented without a date, or whose year is represented by only two
digits and the ability to automatically function into and beyond the year 2000
without human intervention, (iii) correctly interpret data, dates and time into
and beyond the year 2000, (iv) have the ability not to produce non-compliance in
existing information, nor otherwise corrupt such data, and (v) have the ability
to successfully interface with internal and external applications or systems
that have not yet achieved year 2000 compliance during the time in which the
systems and such applications and systems co-exist.
5.24 Customers. Schedule 5.24 contains a complete list of the
twenty largest customers (measured by dollar volume in each case) of the Company
during each of the last three fiscal years and during the first month of the
current fiscal year, showing, with respect to each, the name and address, dollar
volume involved, and the percentage of each of the Company's lines of business
which each such customer represented. The Company is not required to provide any
bonding or other financial security arrangements in connection with any
transactions with any customers in the ordinary course of its business. Except
as set forth on schedule 5.24, the Company is not and within the last two years
has not been engaged in any material disputes with its customers. To the
knowledge of the Stockholders or the Company, except as set forth on schedule
5.24, there has been no loss or threatened loss of any material customer nor are
the Stockholders aware of any material customer which is considering
termination, nonrenewal or any adverse modification of its arrangements with the
Company before the closing or with XXXX after the closing.
5.25 No Misrepresentation. No representation or warranty by the
Stockholders in this agreement (including the schedules and exhibits to this
agreement) contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in this agreement
(including the schedules and exhibits to this agreement) not misleading.
6. Representations and Warranties by XXXX. XXXX and TOIC jointly and
severally represent and warrant to the Stockholders that, as of the date hereof:
6.1 TISH's Organization. XXXX is a corporation duly organized,
validly existing and in good standing under the law of the State of Delaware and
has full corporate
power and authority to enter into and to perform this agreement. XXXX is a
wholly owned subsidiary of TOIC and was formed for the purpose of consummating
the transactions contemplated under this agreement and the Affiliate Acquisition
Agreements and has conducted no other business prior to the date hereof. XXXX
has delivered to the Stockholders a true and correct copy of the certificate of
incorporation and bylaws of XXXX. The capitalization of XXXX immediately after
the closing is set forth on schedule 6.1.
6.2 Authorization of Agreement. The execution, delivery and
performance of this agreement and the Closing Documents by XXXX and TOIC have
been duly authorized by all requisite corporate action of XXXX and TOIC. This
agreement constitutes, and the Closing Documents when executed will constitute,
the valid and binding obligation of XXXX and TOIC enforceable against each of
them in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
6.3 Consents of Third Parties. The execution, delivery and
performance of this agreement by XXXX or TOIC will not (i) conflict with the
certificate of incorporation or by-laws of XXXX or TOIC, (ii) conflict with,
result in the breach or termination of, or constitute a default under, any
lease, agreement, commitment or other instrument, or any order, judgment or
decree, to which XXXX or TOIC is a party by which it is bound, or (iii)
constitute a violation by XXXX or TOIC of any law or regulation applicable to
it. No consent, approval or authorization of, or designation, declaration or
filing with, any governmental authority is required on the part of XXXX or TOIC
in connection with the execution, delivery and performance of this agreement.
6.4 Brokers and Finders. Neither XXXX nor TOIC has employed any
broker or finder or incurred any liability (on its behalf or on behalf of
others, including the Company) for any investment banking fees, brokerage fees
or commissions or finders fees in connection with the transactions contemplated
by this agreement, except for Veronis, Suhler & Associates, Inc. (the fees and
costs of which shall be paid by XXXX or TOIC).
6.5 TISI.
(a) Simultaneously with the closing, TOIC shall transfer to
XXXX all of the outstanding shares of capital stock of TISI.
(b) TISI is a corporation duly organized, validly existing
and in good standing under the law of the State of Oklahoma and has the full
corporate power and authority to carry on its business as it currently is being
conducted.
(c) Schedule 6.5(c) contains financial statements consisting
of (i) balance sheets of TISI as of December 31, 1997 and December 31, 1998, and
the related statements of income and cash flows for the 12 month periods then
ended, including all related notes thereto, and (ii) a proforma balance sheet of
TISI as of December 31, 1999 and the related
proforma statement of income and cash flow for the 12 month period then ended
(after giving effect to pending and completed acquisitions). Except as set forth
on schedule 6.5(c), all such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis and fairly present the financial position of TISI as of the dates
indicated and the results of operations of TISI for the periods indicated. All
such financial statements have been prepared in accordance with TISI's books and
records and show all income and expenses attributable to TISI's business during
the respective periods covered by them. Except as set forth on schedule 6.5(c),
as of December 31, 1999, TISI had not incurred any material liability other than
as disclosed or reserved for on its proforma financial statements as of December
31, 1999 or in connection with contracts and other commitments, obligations and
liabilities entered into or incurred in the ordinary course of business. Since
December 31, 1999, there has been no material adverse change in the financial
condition of TISI.
(d) Except as set forth on schedule 6.5(d), there is no
claim, litigation, proceeding or governmental investigation pending or, to the
best knowledge of XXXX, threatened, or any order, injunction or decree
outstanding against or relating to TISI or XXXX which will or is likely to have
a material adverse effect on XXXX, XXXX and their subsidiaries taken as a whole.
XXXX does not know of any basis for future claims, litigations, proceedings or
investigations against TISI or XXXX which is likely to have a material adverse
effect on XXXX, XXXX and their subsidiaries taken as a whole. Neither TISI nor
XXXX is in violation, in any material respect, of any law, regulation,
ordinance, or any other requirement of any governmental body or court, including
the Fair Credit Reporting Act, arising out of the operation of its business, and
no notice has been received by TISI or XXXX or any of their respective officers
or directors alleging any such violation, in any case where such violation or
alleged violation is likely to have a material adverse effect on XXXX, XXXX and
their subsidiaries taken as a whole.
(e) At the closing, the XXXX Shares to be issued will be duly
authorized and validly issued, fully paid and nonassessable and free and clear
of all Liens, and the percentage ownership of each of the Stockholders shall be
as provided on schedule 6.1.
6.6 Year 2000 Compliance. The computer systems (including all work
stations and other components) used in TISI's business, before and after the
beginning of the year 2000, (i) are capable of recognizing, processing,
managing, representing, interpreting, and manipulating correctly date related
data for dates earlier and later than January 1, 2000, including, but not
limited to, calculating, comparing, sorting, storing, tagging, and sequencing,
without resulting in or causing logical or mathematical errors or
inconsistencies in any user-interface functionalities, data storage, data
fields, calculations, reports, processing, or any other input or output, (ii)
have the ability to provide date recognition for any data element represented
without a date, or whose year is represented by only two digits and the ability
to automatically function into and beyond the year 2000 without human
intervention, (iii) correctly interpret data, dates and time into and beyond the
year 2000, (iv) have the ability not to produce non-compliance in existing
information, nor otherwise corrupt such data, and (v) have the ability to
successfully interface with internal and external applications or systems that
have not yet achieved year 2000 compliance during the time in which the systems
and such applications and systems co-exist.
6.7 No Misrepresentation. No representation or warranty by XXXX or
TOIC in this agreement (including the schedules and exhibits to this agreement)
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained in this agreement (including the
schedules and exhibits to this agreement) not misleading.
7. Further Agreements of the Parties; Nondisclosure and
Confidentiality.
7.1 Access to Information. Prior to the closing, XXXX and its
representatives may, upon reasonable request during normal business hours, make
such in vestigation of the Real Property, assets and operations of the Business
as it may desire, and the Stockholders shall give to XXXX and to its counsel,
accountants and other representatives, upon reasonable notice, full access
during normal business hours throughout the period prior to the closing to all
of the Real Property, assets, books, commitments, agreements, records and files
of the Company relating to the Business and the Real Property and the
Stockholders shall furnish to XXXX during that period all documents and copies
of documents and information concerning the Business and the Real Property as
XXXX reasonably may request. XXXX shall hold, and shall cause its
representatives to hold, all such information and documents and all other
information and documents delivered pursuant to this agreement confidential and,
if the transactions contemplated by this agreement are not consummated for any
reason, shall return to the Stockholders all such information and documents and
any copies as soon as practicable, and shall not disclose or use any such
information (that has not previously been disclosed by a party other than XXXX)
to any third party unless required to do so pursuant to a request or order under
applicable laws and regulations or pursuant to a subpoena or other legal
process. TISH's obliga tions under this section shall survive the termination of
this agreement.
7.2 Conduct of the Business Pending the Closing. Until the
closing, the Stockholders shall cause the Company to operate the Business in the
ordinary course in a manner consistent with past practices and:
(a) the Stockholders shall promptly notify XXXX in writing
of, and furnish any information that XXXX reasonably may request with respect
to, (i) any claim, litigation, proceeding or governmental investigation
threatened in writing by or against the Company relating to the Business or any
material development with respect to any such claim, litigation, proceeding or
governmental investigation, (ii) the occurrence of any event or the existence of
any state of facts that would result in any of the Stockholders' representations
and warranties not being true as of the Closing Date, and (iii) any other
occurrence of any kind materially adversely affecting the Business or the
Assets;
(b) the Company shall not (i) grant or agree to grant any
general increase in the rates of salaries or compensation of its employees, or
any specific increase to any such employee whose total salary or compensation
after the increase would be at an annual rate in excess of $30,000, or any
increase or amend any benefits of employees or agents of the Business
(including, without limitation, increase in the pension, retirement or other
employment benefits of the employees of the Business), (ii) amend, adopt or
terminate any Plans or (iii) enter
into any employment, bonus, deferred compensation or any other agreement with
any employee or agent;
(c) the Company shall use reasonable efforts, consistent with
its past practices, (i) to preserve the business organization of the Business
intact and to preserve the goodwill and business of those having business
relations with the Business, (ii) to retain the services of the employees of the
Business, and (iii) to preserve all trademarks, trade names, logos and
copyrights and related registrations of the Business;
(d) the Company shall not (i) enter into or renew any
agreement, commitment or lease which, if entered into prior to the date of this
agreement, would have been required to be included in schedule 5.10, (ii) cause
or take any action to allow any lease, agreement or commitment relating to the
Business to lapse (other than in accordance with its terms), to be modified in
any material adverse respect, or otherwise to become impaired in any manner,
(iii) amend, terminate, cancel or compromise any material claim relating to the
Business, or waive or allow to lapse or terminate any other rights of
substantial value to the Business or (iv) make or commit to make any capital
expenditures which, individually or in the aggregate, involve payments in excess
of $50,000;
(e) except in the ordinary course and substantially
consistent with past practice, the Company shall not (i) enter into any
transaction or voluntarily incur any liability or obligation that is material to
the Business or (ii) sell or transfer any of the assets used in the Business,
other than assets that have worn out or been replaced with other assets of equal
or greater value or assets that are no longer needed in the operation of the
Business;
(f) the Company shall not make any material change in the
manner in which the Business is operated or the accounting principles or
practices employed in connection with the Business;
(g) the Company shall duly comply, in all material respects,
with all laws, ordinances, orders, injunctions and decrees applicable to the
operation of the Business;
(h) the Company shall maintain all of the tangible assets
used in the Business in customary repair, maintenance and condition, except to
the extent of normal wear and tear, and the Company shall replace any items of
equipment at time intervals consistent with past practices;
(i) the Company shall maintain insurance on the tangible
assets used in the Business and on the Business in accordance with past
practices;
(j) the Company shall not take any action to accelerate
collection of accounts receivable or to defer payment of liabilities, except in
the ordinary course consistent with past practices; and
(k) the Company may make cash distributions to the
Stockholders provided such distributions do not result, as of the closing, in
current liabilities exceeding current assets.
7.3 Other Action. No party to this agreement shall take any action
that would result in any of its representations and warranties not being true as
of the Closing Date. Each of the parties to this agreement shall use its best
efforts to cause the fulfillment at the earliest practicable date of all of the
conditions to the obligations of the parties to consummate the transactions
under this agreement. The Stockholders shall cause the Company to fulfill any
obligations of the Company under this agreement.
7.4 Consents. The Stockholders shall use their best efforts to
obtain at the earliest practicable date, in form and substance reasonably
satisfactory to XXXX, all consents and approvals referred to on schedule 5.3
without any condition adverse to XXXX or the Company or the operation of the
Business after the Closing Date.
7.5 Expenses. XXXX and the Stockholders shall bear their own
respective expenses incurred in connection with this agreement and in connection
with all obligations required to be performed by each of them under this
agreement.
7.6 Transfer Taxes. The Stockholders shall pay any transfer taxes
payable in connection with the transfer of the Shares pursuant to this
agreement.
7.7 Covenants Against Competition, Solicitation and Disclosure.
(a) To accord to XXXX the full value of its acquisition,
during the Noncompete Term, as defined below, the Stockholders shall not,
directly or indirectly, engage, or be interested in (as owner, stockholder,
partner, member, manager, lender, agent or otherwise) or provide any services to
any business or entity that engages, anywhere in the United States, in the
operation of pre-employment investigation and screening services, except
pursuant to any employment, consulting or transition services agreements entered
into between the Stockholders and XXXX.
(b) During the Noncompete Term, the Stockholders shall not,
directly or indirectly, employ or solicit for employment or consulting, on its
own behalf or on behalf of any other person or entity, or otherwise encourage
the resignation of, any employee of the Company who provided substantial
services to the Business at any time during the one year period ending on the
Closing Date.
(c) The Stockholders shall not at any time hereafter disclose
to anyone, or use in competition with the Business, any information relating to
the Business, which is known or becomes known to the Stockholders, including,
without limitation, trade secrets, know-how, financial statements and data,
contracts (whether oral or written), customer and advertiser lists, rate
schedules, pricing policies, marketing plans and strategies, and business
acquisition plans ("Confidential Information")[and shall not provide to anyone
in competition
with the Business any information derived from the Stockholders' operation of
the Excluded Business]. Confidential Information shall not include information
which the Stockholders can demonstrate has become generally available to the
public other than as a result of a disclosure by the Stockholders.
(d) The Stockholders acknowledge that the remedy at law for
breach of the provisions of this section 7.7 will be inadequate and that, in
addition to any other remedy XXXX may have, it shall be entitled to an
injunction restraining any breach or threatened breach, without any bond or
other security being required and without the necessity of showing actual
damages. If any court construes any covenant in this section 7.7 to be
unenforceable in any respect, the court may reduce the duration or area to the
extent necessary so that the provision is enforceable, and the provision, as
reduced, shall then be enforceable.
(e) "Noncompete Term" shall mean the later of the three year
period after the Closing Date or, with respect to each Stockholder, the three
year period after the termination of such Stockholder's employment with XXXX
pursuant to an employment agreement referred to in section 7.9.
7.8 Stockholders' Agreement. At the closing, XXXX, TOIC and the
Stockholders shall execute and deliver a stockholders' agreement in the form of
exhibit VII.
7.9 Employment Agreements. At the closing, XXXX and the
Stockholders shall execute and deliver employment agreements in the form of
exhibit VIII.
7.10 Escrow Agreement. At the closing, XXXX and the Stockholders
shall execute and deliver the Escrow Agreement.
7.11 Transfer of TISI. Simultaneously or prior to the closing,
TOIC shall transfer all of the outstanding shares of TISI to XXXX and ensure the
completion of all the actions and transactions described in schedule 7.11.
[7.12 License. The Stockholders hereby agree to provide to XXXX
periodically (but in no event less frequently than monthly) all incident or
theft information arising in connection with the Retained Assets (the "Licensed
Data") and hereby grant to XXXX a perpetual, non-exclusive, royalty free,
worldwide license to use the Licensed Data in connection with the Business, but
only to the extent that the Stockholders have the right to so license all or a
portion of the Licensed Data. During the Noncompete Term, the Stockholders agree
not to use, or license to any other party to use, the Licensed Data to a third
party in connection with any business competitive with the Business. The
Stockholders will use commercially reasonable efforts to obtain the consent of
the owner of any Licensed Data (to the extent the Stockholders are not the
owner) to allow such data to be licensed to XXXX pursuant hereto.]
7.13 Interim Financial Statements. The Stockholders shall promptly
(but, in any event, not later than the date such statements customarily are
completed by the Company) deliver to XXXX copies of any monthly or quarterly
financial statements or other
reports relating to the Business that may be prepared by the Company during the
period from the date of this agreement to the Closing Date. All such financial
statements shall be prepared from the books and records of the Business and
shall show all income and expenses attributable to the Business and shall fairly
present the financial position and results of operations of the Business as of
and for the periods indicated. The Stockholders shall also furnish to XXXX any
other information concerning the financial and operating condition of the
Business as XXXX from time to time reasonably may request.
7.14 Further Assurances. At any time and from time to time after
the Closing Date each party shall, without further consideration, execute and
deliver to the other such other instruments of transfer and assumption and shall
take such other action as the other may reasonably request to carry out the
transfer of the operations, rights and assets and assumption of liabilities
contemplated by this agreement.
7.15 Post-Closing Services. For a period of [six] months after the
closing, each of the Stockholders who is not otherwise entering into employment
or consulting agreements with XXXX at the closing agrees to continue to work for
the Business on a basis and in a manner consistent with past practices with
respect to that Stockholder, in order to transfer the Business to XXXX (without
any obligation to incur expenses), subject to the supervision and instructions
of the officers of XXXX, and such Stockholders shall receive the same salary and
benefits as they had received immediately prior to the date of this agreement
[as described on schedule 7.15]. During such period, the Stockholders who are
entering into employment or consulting agreements with XXXX at the closing agree
to comply with the provisions of such employment and consulting agreements. At
TISH's option, the Stockholders' services under this agreement may be terminated
at any time on 5 business days' prior notice, subject, however, to the terms of
any employment or consulting agreements.
7.16 Payment of Taxes. The Stockholders shall pay all taxes of the
Company relating to periods through the Closing Date.
[Insert Stores Protective Association, Inc. Riders]
8. Conditions to Closing.
8.1 Conditions Precedent to Obligations of XXXX and TOIC. TISH's
and TOIC's obligation to consummate the transactions under this agreement is
subject to the fulfillment, prior to or at the closing, of each of the following
conditions (any or all of which may be waived by XXXX and TOIC):
(a) all representations and warranties of the Stockholders to
XXXX and TOIC shall be true and correct in every material respect as of the time
of the closing, with the same effect as though those representations and
warranties had been made again at and as of that time;
(b) the Stockholders shall have performed and complied with
all obligations and covenants required by this agreement to be performed or
complied with by them prior to or at the closing;
(c) XXXX and TOIC shall have been furnished with a
certificate (dated the Closing Date and in form and substance reasonably
satisfactory to XXXX) executed by the Stockholders, certifying to the
fulfillment of the conditions specified in sections 8.1(a) and 8.1(b);
(d) the transactions contemplated by each Affiliate
Acquisition Agreement shall be consummated at the closing;
(e) XXXX and TOIC shall have been furnished with an opinion
of Jenner & Block, counsel to the Stockholders in the form of exhibit IX;
(f) the Stockholders shall have duly received, without any
condition adverse to the Business, XXXX or TOIC, all consents and approvals
listed on schedule 5.3, each in form and substance reasonably satisfactory to
XXXX;
(g) there shall not be in effect any injunction or
restraining order issued by a court of competent jurisdiction in an action or
proceeding against the consummation of the transactions pursuant to this
agreement; and
(h) the Stockholders or the Company, as the case may be,
shall have duly executed and delivered to XXXX the agreements referred to in
sections 2.1(a) (Escrow Agreement), 7.8 (stockholders' agreement) and 7.9
(employment agreements), and such agreements shall be in full force and effect.
(i) Merchants Security Exchange ("MSE") shall have duly
authorized the sale by United States Mutual Association, Inc. contemplated by
the Affiliate Acquisition Agreement relating thereto;
(j) MSE and XXXX shall have entered into a services agreement
on terms acceptable to XXXX; and.
(k) the Company shall have made the Pre-Closing Distribution
to the Stockholders.
8.2 Conditions Precedent to Obligations of the Stockholders. The
Stockholders obligations to consummate the transactions under this agreement are
subject to the fulfillment, prior to or at the closing, of each of the following
conditions (any or all of which may be waived by the Stockholders):
(a) all representations and warranties of XXXX and TOIC shall
be true and correct in every material respect as of the time of the closing,
with the same effect as though those representations and warranties had been
made again at and as of that time;
(b) XXXX and TOIC shall have performed and complied with all
obligations and covenants required by this agreement to be performed or complied
with by them prior to or at the closing;
(c) the Stockholders shall have been furnished with a
certificate (dated the Closing Date and in form and substance reasonably
satisfactory to the Stockholders) executed by an officer of XXXX, certifying to
the fulfillment of the conditions specified in sections 8.2(a) and 8.2(b);
(d) the transactions contemplated by each Affiliate
Acquisition Agreement shall be consummated at the closing;
(e) the Stockholders shall have been furnished with an
opinion of Xxxxx X. Xxxxx, Esq., general counsel to XXXX, in the form of
exhibit X;
(f) there shall not be in effect any injunction or
restraining order issued by a court of competent jurisdiction in an action or
proceeding against the consummation of the transactions pursuant to this
agreement;
(g) XXXX or TISI shall have duly executed and delivered to
the Stockholders or the Company, as the case may be, the agreements referred to
in section 8.1(h);
(h) the conditions set forth in sections 8.1(i) and 8.1(j)
shall be fulfilled; and
(i) the other transactions set forth on schedule 7.11 have
been completed.
9. Documents to Be Delivered at Closing.
9.1 Documents to Be Delivered by the Stockholders. At the closing,
the Stockholders shall deliver to XXXX the following:
(a) stock certificates representing the Shares, duly endorsed
in blank or accompanied by stock transfer powers, [with all requisite stock
transfer tax stamps attached];
(b) the written resignations of the directors and officers of
the Company listed on schedule 9.1(b);
(c) the certificate referred to in section 8.1(c);
(d) the opinion referred to in section 8.1(e);
(e) the agreements referred to in sections 2.1(a), 7.8
and 7.9;
(f) the certifying statement issued by the Company pursuant
to Treasury Regulations section 1.897-2(h)(1), dated the Closing Date, in form
reasonably satisfactory to XXXX and its counsel.
9.2 Documents To Be Delivered by XXXX. At the closing, XXXX shall
deliver to the Stockholders the following:
(a) the wire transfer of funds referred to in section 2.1;
(b) certificates representing the number of shares of Class B
Non-Voting Common Stock and Class C Non-Voting Common Stock of XXXX referred to
in section 2.1.
(c) a copy of resolutions of the board of directors of XXXX
and TOIC authorizing the execution, delivery and performance of this agreement
by XXXX and TOIC, and a certificate of its secretary or assistant secretary,
dated the Closing Date, that such resolutions were duly adopted and are in full
force and effect;
(d) the certificate referred to in section 8.2(c);
(e) the opinion referred to in section 8.2(e); and
(f) the agreements referred to in section 2.1(a), 7.8
and 7.9.
9.3 Notice to Internal Revenue Service . Immediately prior to the
closing, the Stockholders shall cause the Company to provide to the Internal
Revenue Service the notice required by Treasury Regulations section
1.897-2(h)(2) (which shall include any supplemental statements required by
Treasury Regulations section 1.897-2(h)(5)) with regard to the certifying
statement referred to in section 9.1(f).
10. Survival of Representations and Warranties; Indemnification.
10.1 Survival.
(a) All representations, warranties and agreements by the
Stockholders shall survive the closing (but only for the respective periods set
forth in section 10.3 below) notwithstanding any investigation at any time by or
on behalf of XXXX or TOIC, and shall not be considered waived by TISH's or
TOIC's consummation of the acquisition
contemplated by this agreement with knowledge of any breach or misrepresentation
by the Stockholders.
(b) All representations, warranties and agreements by XXXX
and TOIC shall survive the closing (but only for the respective periods set
forth in section 10.3 below) notwithstanding any investigation at any time by or
on behalf of the Stockholders, and shall not be considered waived by the
Stockholders' consummation of the acquisition contemplated by this agreement
with knowledge of any breach or misrepresentation by XXXX or TOIC.
10.2 Indemnification; Exclusive Remedy.
(a) Subject to the other sections of this Article 10, the
Stockholders shall, jointly and severally, indemnify and hold harmless XXXX and
TOIC against all loss, liability, damage or expense (including reasonable fees
and expenses of counsel, whether involving a third party or between the parties
to this agreement) XXXX or TOIC may suffer, sustain or become subject to as a
result of (i) any breach of any warranty of the Stockholders contained in this
agreement, or any misrepresentation by the Stockholders (determined without
regard to any materiality, material adverse effect or knowledge qualifiers), or
any claim by a third party which, without regard to the merits of the claim,
would constitute such a breach or misrepresentation, (ii) any breach of any
covenant or other agreement of the Stockholders contained in this agreement or
any claim by a third party which, without regard to the merits of the claim,
would constitute such a breach, (iii) any obligations, liabilities, agreements
or commitments (whether accrued, absolute, contingent or otherwise) relating to
or arising out of the operation of the Business prior to the Closing Date
(including, but not limited to, any liability with respect to any claim,
litigation or proceeding arising out of such operation of the Business prior to
the Closing Date) that are not expressly Permitted Liabilities, (iv) any claims
made by MSE or any person claiming to have an interest in the capital stock or
assets of the Company arising out of the transactions contemplated by this
agreement (but not any claims relating to any business or other relationship
between MSE and XXXX or TOIC or any of their affiliates, which are unrelated to
the transactions contemplated by this agreement), or (v) any tax or other cost
or expense incurred by the Company in connection with making the Pre-Closing
Distribution [and any claims or liabilities with respect to the Excluded
Business.]
(b) Subject to the other sections of this Article 10, XXXX
and TOIC shall, joint and severally, indemnify and hold harmless the
Stockholders against all loss, liability, damage or expense (including
reasonable fees and expenses of counsel, whether involving a third party or
between the parties to this agreement) the Stockholders may suffer, sustain or
become subject to as a result of (i) any breach of any warranty contained in
this agreement or any misrepresentation by XXXX or TOIC, or any claim by a third
party which, without regard to the merits of the claim, would constitute such a
breach or misrepresentation or (ii) any breach of covenant or other agreement
contained in this agreement by XXXX or TOIC, or any claim by a third party
which, without regard to the merits of the claim, would constitute such a
breach.
(c) [Except for the ability to seek injunctive or similar
equitable relief to enforce affirmative covenants], the remedy of XXXX, TOIC and
their affiliates against the Stockholders pursuant to this agreement, any
documents or instruments pursuant to this agreement, or at law, equity or
otherwise, is limited solely to the indemnification provided in this section 10
and is the only remedy of any of them against the Stockholders, and XXXX and
TOIC, for themselves and their affiliates, hereby expressly waive all rights and
remedies whatsoever, whether by statute, rule, regulation, in tort or otherwise,
against the Stockholders except for the right of indemnification under this
section 10.2, provided that the foregoing shall not apply to (x) claims of
fraud, (y) the covenants set forth in sections 7.7, 7.12, 7.14 and 7.15 and (z)
the employment and consulting agreements. XXXX and TOIC, for themselves and
their affiliates, acknowledge that (i) the Stockholders have not made any
representations or warranties other than as expressly set forth in section 5
hereof, (ii) XXXX, TOIC and their affiliates have made their own independent
examination, investigation, analysis and evaluation of the Company and the
Stockholders and have undertaken such due diligence as they have deemed
adequate, which examination, investigation, analysis, evaluation and due
diligence shall not limit or diminish in any manner the representations and
warranties and obligations of the Stockholders under this agreement, and (iii)
damages of XXXX, TOIC and their affiliates, if any, may be greater than the
funds in escrow pursuant to the Escrow Agreement.
(d) The Stockholders acknowledge that (i) neither XXXX nor
TOIC have made any representations or warranties other than as expressly set
forth in section 6 hereof, and (ii) the Stockholders have made their own
independent examination, investigation, analysis and evaluation of XXXX and TOIC
and have undertaken such due diligence as they have deemed adequate, which
examination, investigation, analysis, evaluation and due diligence shall not
limit or diminish in any manner the representations and warranties and
obligations of XXXX and TOIC under this agreement.
10.3 Notices of Claims. No party shall be liable for
misrepresentation or breach of warranty except to the extent that notice of a
claim is given by another party in writing on or prior to April 30, 2001, except
that, (a) for misrepresentation or breach of warranty under sections 5.2, 5.5 or
5.17, notice of a claim must be given in writing to the Stockholders within ten
(10) years after the Closing Date, (b) with respect to misrepresentation or
breach of warranty relating to taxes and ERISA, notice of a claim must be given
in writing to the Stockholders no later than three months after the expiration
of the statute of limitation applicable to the tax involved, (c) with respect to
misrepresentation or breach of warranty under section 5.15, notice of a claim
must be given in writing to the Stockholders within six years after the Closing
Date, and (d) for misrepresentation or breach of warranty under sections 6.2,
6.4 and 6.5(e) notice of a claim must be given in writing to XXXX or TOIC within
ten (10) years after the Closing Date. Prompt written notice upon assertion of a
claim that may be indemnified must be given to the party liable for
misrepresentation or breach of warranty, but the failure to provide such notice
shall not relieve or otherwise affect the obligation of the party liable to
provide indemnification hereunder, except to the extent that any Losses (as
hereinafter defined) directly resulted from or were caused by such failure.
10.4 Basket. Neither the Stockholders nor XXXX shall be liable for
misrepresentation or breach of warranty under this agreement unless and until
the aggregate amount of losses, liabilities, damages and expenses incurred by an
indemnified party ("Losses") as a result of all misrepresentations and breaches
of warranty under this agreement, together with all such Losses incurred by such
party or its affiliates under the Affiliate Acquisition Agreements, exceeds
$75,000 in the aggregate (in which event it shall be liable for the full amount
of all Losses). No claim shall be asserted by a party against another party
unless such claim, when aggregated with other claims asserted under the
Affiliate Acquisition Agreements at the same time, involve at least $10,000 of
claimed Losses. This provision shall not apply to any misrepresentation or
breach of warranty under sections 5.5, 5.20 and 6.5(e), or to claims asserted
under sections 10.2(a)(ii), (iii), (iv) or (v) or 10.2(b)(ii). In calculating
the amount of the loss, liability, damage or exposure to XXXX or the
Stockholders for misrepresentation or breach of warranty by the other which is
indemnified under section 10.2, all materiality, material adverse effect and
knowledge qualifiers set forth in a representation or warranty that has been
misrepresented or breached shall be disregarded.
10.5 Cap on Liability. Notwithstanding anything to the contrary in
this agreement, the aggregate liability of the Stockholders and the Affiliates
to XXXX for misrepresentation or breach of warranty under this agreement and the
Affiliate Acquisition Agreements shall be limited to $3,000,000 ("Cap");
provided that such Cap shall not apply to breach of sections 5.2, 5.5, 5.20 nor
to any claim asserted under section 10.2(a)(ii), (iii), (iv) or (v) or to breach
of, or any claim asserted under, the comparable provisions of the Affiliate
Acquisition Agreements. All claims shall be first asserted against any amounts
held in escrow pursuant to the Escrow Agreement (the "Escrow"), and any claims
to which the Cap applies may only be asserted against funds held in the Escrow,
there being no recourse against the Stockholders directly for such claims,
except that in the event that any amounts held in the Escrow are reduced or
reserved against to pay Non-Cap Claims (as defined below), the Stockholders
shall be jointly and severally liable for claims to which the Cap applies up to
the amount that was paid or reserved against in connection with the Non-Cap
Claims. "Non-Cap Claims" shall mean claims for indemnification under this
agreement and the Affiliate Acquisition Agreements that are not subject to the
Cap.
10.6 Third Party Claims.
(a) If any party entitled to be indemnified pursuant to
section 10.2 (an "Indemnified Party") receives notice of the assertion by any
third party or any claim or of the commencement by any such third person of any
action (any such claim or action, an "Indemnifiable Claim") with respect to
which another party hereto (an "Indemnifying Party") is or may be obligated to
provide indemnification, the Indemnified Party shall promptly notify the
Indemnifying Party in writing (the "Claim Notice") of the Indemnifiable Claim;
provided, that the failure to provide such notice shall not relieve or otherwise
affect the obligation of the Indemnifying Party to provide indemnification
hereunder, except to the extent that any Losses directly resulted from or were
caused by such failure.
(b) The Indemnifying Party shall have thirty (30) days after
receipt of the Claim Notice to undertake, conduct and control, through counsel
of its own choosing, and at its expense, the settlement or defense thereof, and
the Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith; provided that (i) the Indemnifying Party shall permit the Indemnified
Party to participate in such settlement or defense through counsel chosen by the
Indemnified Party (subject to the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld), provided that the fees and expenses
of such counsel shall not be borne by the Indemnifying Party, and (ii) the
Indemnifying Party shall not settle any Indemnifiable Claim without the
Indemnified Party's consent (which consent shall not be unreasonably withheld).
So long as the Indemnifying Party is vigorously contesting any such
Indemnifiable Claim in good faith, the Indemnified Party shall not pay or settle
such claim without the Indemnifying Party's consent, which consent shall not be
unreasonably withheld.
(c) If the Indemnifying Party does not notify the Indemnified
Party within thirty (30) days after receipt of the Claim Notice that it elects
to undertake the defense of the Indemnifiable Claim described therein, the
Indemnified Party shall have the right to contest, settle or compromise the
Indemnifiable Claim in the exercise of its reasonable discretion; provided, that
the Indemnified Party shall notify the Indemnifying Party of any compromise or
settlement of any such Indemnifiable Claim.
11. Miscellaneous.
11.1 Entire Agreement. This agreement (including the exhibits and
schedules hereto, which shall be deemed an integral part of this agreement)
contains, and is intended as, a complete statement of all of the terms of the
arrangements between the parties with respect to the matters provided for,
supersedes any previous agreements and understandings between the parties with
respect to those matters (including, but not limited to, the letter of intent
dated August 9, 1999), and cannot be changed or terminated orally.
11.2 Governing Law. This agreement shall be governed by and
construed in accordance with the law of the State of New York applicable to
agreements made and to be performed entirely in New York.
11.3 Headings. The section headings of this agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this agreement.
11.4 Notices. All notices and other communications under this
agreement shall be in writing and shall be deemed given when delivered
personally or mailed by registered mail, return receipt requested or faxed to
the parties at the following addresses (or to such other address as a party may
have specified by notice given to the other party pursuant to this provision):
(a) If to the Stockholders, addressed to them at:
--------------------------------------
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Attention:
----------------------------
Fax Number:
---------------------------
with a copy to:
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Attention:
----------------------------
Fax Number:
---------------------------
(b) If to XXXX or TOIC, addressed to it at:
The Official Information Company
000 Xxxx 00xx Xxxxxx,
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention:
Fax Number:(000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxxxxx, Esq.
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax Number:(000) 000-0000
11.5 Separability. If any provision of this agreement is held to
be invalid or unenforceable, the balance of this agreement shall remain in
effect.
11.6 Waiver. Any party may waive compliance by another with any of
the provisions of this agreement. No waiver of any provision shall be construed
as a waiver of any other provision. Any waiver must be in writing and must be
signed by the party waiving the provision.
11.7 Assignment. XXXX may assign its rights under this agreement
simultaneously with or after the closing to any subsidiary or affiliate of XXXX
that has assumed (in a writing reasonably satisfactory in form and substance to
the Stockholders) TISH's obligations under this agreement, but no such
assignment shall relieve XXXX of its obligations under this agreement. In
addition, XXXX, or any subsidiary or affiliate of XXXX to whom this agreement
has been assigned in whole or in part, may assign its rights under this
agreement to its
lenders. This agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
11.8 Arbitration.
(a) Any dispute or controversy arising under or in connection
with this agreement other than under the provisions of section 2.3(b), shall be
settled exclusively by arbitration to be held in the City of Chicago in
accordance with the rules of the American Arbitration Association then in
effect; provided that any claim of breach with regard to section 7.7 may, at the
option of XXXX, be enforced in court. The arbitral tribunal shall be composed of
three arbitrators, one of which shall be appointed by XXXX, one of which shall
be appointed by the Stockholders and one of which shall be appointed by the
arbitrators appointed by XXXX and the Stockholders. As part of their award, the
arbitrators shall make a fair allocation between the parties of the fee and
expenses of the American Arbitration Association and the cost of any transcript,
taking into account the merits of their claims and defenses. Either party shall
be entitled to the pre-trial discovery it would have been entitled to if the
proceeding had been brought in a New York court under the Civil Practice Law and
Rules. Judgment may be entered on the arbitrators' award in any court having
jurisdiction, and the parties irrevocably consent to the jurisdiction of the
Chicago courts for that purpose. The parties waive personal service in
connection with any such arbitration; any process or other papers under this
provision may be served by registered mail, return receipt requested, or by
personal service, provided a reasonable time for appearance or response is
allowed. The arbitrators may grant injunctive or other relief.
(b) The courts of the State of Illinois in Xxxx County and
the United States District Court for the Northern District of Illinois shall
have jurisdiction over the parties with respect to any dispute or controversy
arising under or in connection with section 7.7 and, by execution and delivery
of this agreement, each of the parties to this agreement submits to the
jurisdiction of those courts, including but not limited to, the in personam and
subject matter jurisdiction of those courts, waives any objection to such
jurisdiction on the grounds of venue or forum non conveniens, the absence of in
personam or subject matter jurisdiction and any similar grounds, consents to
service of process by mail (in accordance with section 11.4) or any other manner
permitted by law, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with section 7.7. These consents to jurisdiction shall not
be deemed to confer rights on any person other than the parties to this
agreement.
11.9 No Third Party Beneficiaries. This agreement does not create,
and shall not be construed as creating, any rights in favor of any person not a
party to this agreement.
11.10 Publicity. Neither XXXX nor the Stockholders, nor their
respective affiliates, shall issue or cause the publication of any press release
or other public announcement with respect to the transactions contemplated by
this agreement without the consent of the other party, which consent shall not
be unreasonably withheld or delayed, except as may be required by law or the
regulations or policies of any securities exchange, in which case the party
required to make the release or statement shall allow the other party reasonable
time to comment on such release or statement in advance of such issuance.
11.11 Guarantee of TOIC. TOIC hereby guarantees the full and
timely performance of all covenants and obligations of XXXX hereunder.
11.12 Counterparts. This agreement may be executed in
counterparts, which together shall constitute the same instrument.
TISI HOLIDINGS, INC.
By:
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Name:
Title:
THE OFFICIAL INFORMATION COMPANY
By:
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Name:
Title:
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[Stockholder]
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[Stockholder]
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[Stockholder]
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[Stockholder]
