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EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
AMONG
SUPERIOR CONSULTANT COMPANY, INC.,
A MICHIGAN CORPORATION
AND
SUPERIOR CONSULTANT HOLDINGS CORPORATION,
A DELAWARE CORPORATION,
AND
THE XXXXXXX GROUP, INC.,
A CALIFORNIA CORPORATION,
AND
XXXXXX X. XXXXXXX,
AND
XXXXXX X. XXXXXX
DATED AS OF MARCH 12, 1997
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EXHIBITS
Exhibit A Form of Opinion of Counsel to the Company and Xxxxxxx
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Confidentiality, Non-Competition and
Non-Solicitation Agreement for Xxxxxx X. Xxxxxxx
Exhibit D Form of Opinion of Counsel to Superior and Holdings
Exhibit E Form of Xxxxxxx Employment Agreement
Exhibit 2.3 Contribution to Overhead Targets
Company Disclosure Schedule
---------------------------
Section 3.2(a) States where the Company is Qualified
Section 3.2(c) Required Consents
Section 3.2(d) Capitalization; Officers & Directors
Section 3.2(f) Financial Statements
Section 3.2(j) Leases
Section 3.2(k) Intellectual Property
Section 3.2(l) Contracts
Section 3.2(n) Litigation
Section 3.2(o) Employees
Section 3.2(p) Employee Benefits
Section 3.2(q) Permits
Section 3.2(t) Clients
Section 3.2(u) Insurance Policies
Section 3.2(v) Warranties
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of
March 12, 1997, by and among Superior Consultant Company, Inc., a Michigan
corporation ("SUPERIOR"), Superior Consultant Holdings Corporation, a Delaware
corporation ("HOLDINGS"), The Xxxxxxx Group, Inc., a California corporation
(the "COMPANY"), Xxxxxx X. Xxxxxxx ("XXXXXXX") and Xxxxxx X. Xxxxxx ("XXXXXX").
Xxxxxxx and Xxxxxx are sometimes referred to herein individually as a
"Stockholder" and collectively as the "Stockholders." Each of Superior,
Holdings, the Company, Xxxxxxx and Kumura are referred to herein individually
as a "PARTY" and collectively as the "PARTIES."
RECITALS
X. Xxxxxxx and Xxxxxx collectively own all of the issued and outstanding
capital stock of the Company and desire to sell such stock to Superior, and
Superior desires to acquire from Xxxxxxx and Kumura, all of such capital stock
upon the terms and subject to the conditions set forth in this Agreement.
B. Holdings owns all of the outstanding capital stock of Superior and
will derive substantial benefit from the transactions contemplated hereby.
C. The boards of directors of Superior and Holdings and the board of
directors and shareholders of the Company have approved this Agreement and the
transactions contemplated hereby.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties hereby agree as follows:
ARTICLE
1.
DEFINITIONS
In addition to the various other capitalized terms defined elsewhere
within this Agreement, the following terms have the following meanings:
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"AFFILIATE" means, with respect to any particular Person, any other Person
controlling, controlled by or under common control with such Person, whether by
ownership or control of voting securities, by contract or otherwise.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Section 1504 of the Code.
"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
costs of defense, amounts paid in settlement, Liabilities, Taxes, Security
Interests, losses, expenses, and fees, including all attorneys' fees and court
costs, net of any directly associated tax benefits actually realized by the
affected Party.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY COMMON" means the Common Stock, no par value per share, of the
Company.
"DEFERRED COMPENSATION AGREEMENTS" means those Deferred Compensation
Agreements, each dated as of March 10, 1997, between the Company and each of
Xxxxxxx, Xxxxxx and Xxxxx Xxxxxxx.
"EMPLOYMENT AGREEMENT" means that certain Employment Agreement of even
date herewith, between Superior and Xxxxxxx and in the form attached hereto as
Exhibit E.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any corporation or other business entity that is
included in a controlled group of corporations within which the Company is also
included, as provided in Section 414(b) of the Code; or which is a trade or
business under common control with the Company, as provided in Section 414(c)
of the Code; or which constitutes a member of an affiliated service group
within which the Company is also included, as provided in Section 414(m) of the
Code; or which is required to be aggregated with the Company pursuant to
regulations issued under Section 414(o) of the Code.
"GAAP" means generally accepted accounting principles, as in effect on the
date hereof.
"HOLDINGS COMMON" means the Common Stock, par value $0.01 per share, of
Holdings.
"INDEBTEDNESS" of any Person means all obligations of such Person which in
accordance with GAAP should be classified upon a balance sheet of such Person
as liabilities of such entity, and in any event, regardless of how classified
in accordance with GAAP, shall include (i) all
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obligations of such Person for borrowed money or any obligation owed for all or
any portion of the deferred purchase price which has been incurred in
connection with the acquisition of property or assets; which purchase price is
due more than six months from the date of incurrence of such obligation (ii)
obligations secured by any Security Interest upon property or assets owned by
such Person, even though such Person has not assumed or become liable for the
payment of such obligations; (iii) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default
are limited to repossession or sale of the property; and (iv) that portion of
capitalized lease obligations that is properly classified as a liability on a
balance sheet in conformity with GAAP.
"KNOWLEDGE" means, in the case of any individual, knowledge that a
reasonable person under similar circumstances would have after diligent
investigation and inquiry, and in the case of a corporation, the knowledge
(under the same standard as described immediately above) of the directors and
officers of the corporation and the employees having management responsibility
for the particular subject matter at issue.
"LIABILITY" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), obligation or Indebtedness, including, any liability for Taxes.
"MATERIAL ADVERSE EFFECT" means a material adverse effect or impact upon
the assets, financial condition, results of operations or business of the
Company or on the ability of the Parties to consummate the transactions
contemplated hereby.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business of the
Company or Superior, consistent with past custom and practice of the Company or
Superior, respectively, as the context herein may require (including with
respect to quantity and frequency).
"PERSON" means any individual, trust, corporation, partnership, limited
liability company or other business association or entity, court, governmental
body or governmental agency.
"PLANS" means: (i) all employee benefit plans as defined in Section 3(3)
of ERISA; (ii) all other severance pay, deferred compensation, excess or
supplemental benefit, vacation, stock, stock option, bonus and incentive plans,
contracts, schemes, programs, funds, commitments, or arrangements of any kind;
and (iii) all other plans, contracts, schemes, programs, funds, commitments, or
arrangements providing money, services, property, or other benefits, whether
written or oral, qualified or nonqualified, funded or unfunded, and including
any that have been frozen or terminated, which pertain to any employee, former
employee, director, officer, shareholder, consultant, or independent contractor
of the Company or any ERISA Affiliate of the Company and (a) to which the
Company or any ERISA Affiliate of the Company is or has been a party or by
which any of them is or has been bound or (b) with respect to which the Company
or any ERISA Affiliate of the Company has made any payments or contributions
since January 1, 1992 or (c) to which the Company or any ERISA Affiliate of the
Company may otherwise have any
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liability (including any such plan or arrangement formerly maintained by the
Company or any ERISA Affiliate of the Company).
"PRO RATA PERCENTAGE" means, with respect to each Stockholder, the
percentage equivalent of a fraction, the numerator of which is the number of
shares of Company Common conveyed by such Stockholder pursuant to this
Agreement and the denominator of which is 1,111.
"SECURITY INTEREST" means any mortgage, pledge, security interest, marital
property rights, charge, lien, claim or other encumbrance or right of any third
party.
"SUBSIDIARY" means any corporation, limited liability company,
partnership, trust or other entity with respect to which another specified
corporation, limited liability company, partnership, trust or other entity has
the power, directly or indirectly through one or more intermediaries, to vote
or direct the voting of sufficient securities or interests to elect a majority
of the directors or management committee or similar governing body.
"TAX" or "TAXES" means any Federal, state, local, or foreign income, gross
receipts, sales, licenses, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
ARTICLE
2.
THE PURCHASE AND SALE
2.1. Purchase and Sale. Subject to the provisions of this Agreement, on
the Closing Date Superior will purchase from Xxxxxxx and Xxxxxx, and Xxxxxxx
and Xxxxxx will sell, transfer and assign to Superior, 1,000 and 111 shares of
Company Common, respectively, free and clear of any Security Interests or
preemptive right or right of first refusal whatsoever, which shares constitute
100% of the issued and outstanding shares of capital stock of the Company, for
an aggregate purchase price (the "PURCHASE PRICE") equal to the sum of (a)
$6,277,000, plus (b) the aggregate Receivables Payments (as defined in Section
2.4). The Purchase Price for the Company Shares shall be paid by the Purchaser
as provided in this Article 2.
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2.2. Purchase Price. The Purchase Price shall be payable to the
Stockholders as follows:
(a) The aggregate amount of Three Million Two Hundred Twenty Seven
Thousand Dollars ($3,227,000) (the "CASH PORTION") shall be paid at Closing by
wire transfer of immediately available funds to Xxxxxxx and Kumura, pro rata,
in accordance with their Pro Rata Percentages.
(b) The aggregate amount of one million six hundred thousand dollars
($1,600,000) shall be paid at Closing by delivery of newly issued, fully-paid
and nonassessable shares of Holdings Common to Xxxxxxx and Xxxxxx in accordance
with this Section 2.2(b) ("PAYMENT SHARES"). The number of Payment Shares to
be issued shall be determined by calculating the average of the high and low
sale prices of Holdings Common as reported on the Nasdaq National Market for
each of the twenty (20) consecutive trading days immediately preceding the day
prior to the Closing Date (the "SHARE VALUE") dividing $1,600,000 by that Share
Value and rounding the result to the closest whole number. At Closing,
Holdings shall deliver the Payment Shares to Kumura and Xxxxxxx, pro rata in
accordance with their respective Pro Rata Percentages.
(c) The aggregate amount of one million four hundred fifty thousand
dollars ($1,450,000) shall be payable by Superior to Kumura and Xxxxxxx,
subject to and in accordance with Article 2.3, pro rata, in accordance with
their respective Pro Rata Percentages, in three annual cash installments of
$450,000, $500,000 and $500,000, respectively, on each of March 15, 1998, 1999
and 2000 (each, an "EARNOUT PAYMENT DATE") together with accrued interest,
calculated at a rate of 2.6% per annum, by wire transfer of immediately
available funds ("EARNOUT AMOUNT"). Interest shall accrue on any unpaid
Earnout Amount from the Closing Date through and including the date of final
payment, or cancellation in accordance with Section 2.3. Accrued and unpaid
interest shall be paid on each Earnout Payment Date, together with the Earnout
Amount installment due on that date. The Earnout Amount is a deferred portion
of the total Purchase Price due hereunder and shall not be deemed compensation
for employment from Superior to Kumura or Xxxxxxx.
(d) The aggregate Receivables Payments, if any, shall be paid to the
Stockholders in accordance with Section 2.4.
2.3. Earnout Amount Consideration; Right to Withhold.
(a) The Earnout Amount shall be payable to Kumura and Xxxxxxx in
accordance with Section 2.2(c), provided the obligation to pay each
Stockholder's respective pro rata percentage of the Earnout Amount to that
Stockholder shall be subject to the condition that, during the year preceding
each Earnout Payment Date, either (x) Xxxxxxx shall have (i) exerted full faith
effort and commitment on behalf of the Company at a level commensurate with the
effort and commitment which he has exerted on behalf of the Company prior to
Closing, (ii) used his best efforts to retain the current clients of the
Company, sell existing and new services of the Company and Superior to such
clients, add new clients to the current client base of the Company and grow the
business of the Company, and (iii) used his best efforts to retain (and
maintain the performance of) the employees and personnel of the Company in
quality and numbers at least commensurate with the current experience,
capabilities, reputation and size of the personnel of the Company prior
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to closing (collectively, "PERFORMANCE CRITERIA") or (y) the Company (which for
purposes of this Section 2.3 shall include the operating unit or division which
is the successor to the operations of the Company) shall have met or exceeded
the Contribution to Overhead ("CTO") target established with respect to such
year on the pro forma financial model prepared by Kumura and attached hereto as
Exhibit 2.3 (with respect to each year, the "CTO TARGET"). The Stockholders
shall be entitled to payment of the Earnout Amount with respect to a year if
either the CTO Target for such year is met or the Performance Criteria are
fulfilled with respect to such year, and failure to achieve the CTO Target
shall not in and of itself evidence or justify any inference that the
Performance Criteria have not been fulfilled. Superior acknowledges that the
success of Xxxxxxx'x efforts is dependent on the cooperation and assistance of
Superior and the independent actions of third parties over which or whom such
Xxxxxxx has no control, and the Earnout Amount and the Performance Criteria are
not intended to be a guarantee of the success of Xxxxxxx'x efforts.
(b) At any time that Superior makes a determination in its good faith
reasonable judgment that Xxxxxxx has failed to satisfy any of the Performance
Criteria in any material respect (a "PERFORMANCE DEFAULT"), Superior shall
deliver written notice to Xxxxxxx of its determination, which notice shall
specify in reasonable detail the relevant Performance Criteria so breached
("DEFAULT NOTICE"). Unless (i) Xxxxxxx has cured such Performance Default to
Superior's reasonable satisfaction within 45 days of Xxxxxxx'x receipt of the
Default Notice, or (ii) the CTO Target with respect to such year is achieved,
Superior may withhold payment of the Earnout Amount payable to the Stockholders
with respect to that year as provided in Section 2.3(c). Any such Default
Notice must be given to Xxxxxxx by Superior at least 60 days prior to the
applicable Earnout Payment Date.
(c) Superior may withhold an Earnout Amount payment (and interest thereon)
due and payable on any Earnout Payment Date to the Stockholders if as of such
Earnout Payment Date (i) a Performance Default by Xxxxxxx with respect to which
Superior has previously delivered a Default Notice has occurred and is
continuing and (ii) the CTO Target with respect to the immediately preceding
calendar year shall not have been achieved ("WITHHOLDING"). Whenever Superior
desires to make a Withholding, Superior shall deliver written notice to the
Stockholders of its intention to so withhold at least five (5) days prior to
the applicable Earnout Payment Date, which notice shall contain the amount to
be withheld and shall (i) reference the Default Notice issued during the
preceding year and specify in reasonable detail the relevant Performance
Criteria which it claims remain unsatisfied, and (ii) set forth the actual CTO
for the immediately preceding calendar year and the CTO Target with respect to
the immediately preceding calendar year ("WITHHOLDING NOTICE"). Xxxxxxx shall
have ten (10) business days from receipt of the Withholding Notice to object to
the Withholding by delivering to Superior a written statement setting forth the
amount of the Withholding to which Xxxxxxx objects and reasonable details of
the basis for Xxxxxxx'x objection. Notwithstanding any objection by Xxxxxxx,
Superior shall still be entitled to make the Withholding. If Superior and
Xxxxxxx cannot resolve any disputes regarding the Withholding within fifteen
(15) business days of Superior's receipt of Xxxxxxx'x written statement of
objections (a "DISPUTED WITHHOLDING") the matter shall be submitted to
arbitration pursuant to Section 4.4 below; provided, that if Superior has
terminated Xxxxxxx'x employment for Cause (as defined in the Employment
Agreement), then any dispute regarding such termination and any dispute under
this Section 2.3 shall be resolved before the same
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arbitrator in the same arbitration proceeding (except that the law governing
the interpretation and resolution of any issues arising out of this Section 2.3
shall be the law governing this Agreement as set forth in Section 4.6(f) and
the law governing the interpretation and resolution issues arising from the
Employment Agreement shall be California law). Superior shall be deemed to
have waived any claim that facts and circumstances justifying a Withholding
which exist at the time of such Withholding also constitute Cause under the
Employment Agreement, if Superior does not concurrently claim that such facts
constitute Cause under the Employment Agreement. If the final amount of the
Disputed Withholding is determined to be less than the amount of the Disputed
Withholding made by Superior ("CORRECTION PAYMENT"), Superior shall pay to the
defaulting Stockholder the amount of such Correction Payment, together with
interest (at a per annum rate equal to the "Prime Rate" as published from time
to time in the Wall Street Journal) from the original Earnout Payment Date to
the date of payment, in accordance with the terms set forth under Section
2.2(c) above.
(d) The parties acknowledge and agree that in the event of (i) termination
due to Xxxxxxx'x death or Permanent Disability (as defined in the Employment
Agreement), (ii) termination of Xxxxxxx'x employment by Superior without Cause
(as defined in the Employment Agreement) or (iii) voluntary termination by
Xxxxxxx of his employment for Good Reason (as defined in the Employment
Agreement), the entire unpaid balance of the Earnout Amount shall be
immediately due and payable to the Stockholders, in accordance with their
respective Pro Rata Percentages, without deduction, setoff or counterclaim of
any kind whatsoever, other than for claims under Section 4.2 for which Superior
has provided notice at or prior to the time of such event and subject to the
limitations of Sections 4.2(c) and 4.2(h). The amount due and payable shall
bear interest at the Prime Rate from the date of death, determination of
Permanent Disability or giving of notice of termination of employment for Good
Reason, as the case may be, until paid or, if a dispute has arisen with respect
to such payment or termination, determined not to be payable in a proceeding
under the Employment Agreement.
2.4. Accounting and Payment for Net Accounts Receivable.
(a) The Company (with Xxxxxxx'x direction and supervision in his
capacity as president of the Company, and with Superior's review and
assistance) shall collect the Billed Receivables (as defined below) after
the Closing Date in the Ordinary Course of Business and in accordance
with the provisions of this Section 2.4. The Company (at Xxxxxxx'x
direction and supervision, in his capacity as President of the Company
and with Superior's review and assistance) shall use amounts collected
upon the Billed Receivables to pay the Indemnified Current Liabilities
(as defined in Section 2.5) as and when due and payable by the Company.
Xxxxxxx shall be entitled to review and supervise the determination of
Indemnified Current Liabilities and their payment out of collections of
the Billed Receivables. The Company shall pay to each Stockholder in
accordance with their respective Pro Rata Percentages, from time to time
in accordance with Section 2.4(c), as additional Purchase Price, seventy
percent (70%) of the sum of (x) of all amounts collected upon the Billed
Receivables, plus (y) all prepaid expenses identified on Section 2.4 of
the Company Disclosure Schedule (as defined below), less (z)
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all Indemnified Current Liabilities (as defined in Section 2.5) paid by
the Company (the "RECEIVABLES PAYMENTS").
(b) For the purpose of determining the amount collected by the
Company with respect to the Billed Receivables, (i) all payments by a
client shall first be applied to the invoice to which the client has
directed such payment (or in the absence of direction, to the oldest
invoice) and (ii) all credits and discounts granted in the Ordinary
Course of Business shall be deemed to be collections of the Billed
Receivable to which they relate. The Company shall not be required to
retain a collection agency, bring any legal action or take any other
action outside of the Ordinary Course of Business to collect any of the
Billed Receivables. The Company and Xxxxxxx shall discuss in good faith
the client relationship implications of any client whose Billed
Receivables remain outstanding for more than 90 days after their original
invoice date ("DEFAULTING CLIENT"). Upon the mutual agreement of the
Company and Xxxxxxx and without additional consideration from the
Stockholders (except as otherwise expressly mutually agreed), the Company
shall assign to the Stockholders and Xxxxxxx, as tenants in common in
accordance with the percentages set forth in subparagraph (a) above and
in the Deferred Compensation Agreements, the uncollected Billed
Receivables of any Defaulting Client ("ASSIGNED RECEIVABLES").
(c) On May 1, 1997 (the "INITIAL ACCOUNTING DATE"), and on the first
business day of each month thereafter until all Billed Receivables have
either been paid or otherwise satisfied or have become Assigned
Receivables, Company shall prepare and deliver to Xxxxxxx and Superior
(i) a statement which Xxxxxxx (in his capacity as President of the
Company) shall direct and supervise the preparation of, with Superior's
review and assistance (the "STATEMENT"), showing the amounts collected
upon the Billed Receivables ("COLLECTIONS") and the amount of Indemnified
Current Liabilities paid by the Company ("PAYMENTS"), in each case since
the date of the most recent Statement (or since the Closing Date in the
case of the initial Statement) and (ii) to the extent the amount of
Collections shown on the Statement exceeds the Payments shown on the
Statement, a cash payment in the amount of such excess.
(d) For purposes hereof, "BILLED RECEIVABLES" means accounts
receivable of the Company for services rendered on or prior to the
Closing Date and costs and disbursements relating thereto that have been
incurred on or prior to the Closing Date, whether billed before or after
the Closing Date, for bona fide services rendered in the Ordinary Course
of Business in accordance with the terms of the underlying contracts or
engagement agreements; provided, that Billed Receivables shall not
include any advance xxxxxxxx, retainers, forward xxxxxxxx, retainers or
other pre-billed amounts with respect to which services have not been
rendered on or prior to Closing. Xxxxxxx shall use all commercially
reasonable efforts to ensure that all bills for Billed Receivables (and
the reporting of time by employees and independent contractors) shall be
distributed to clients (i) by no later than March 21, 1997, in the case
of work performed on or prior to February 28, 1997, and (ii) by no later
than March 31, 1997, in the case of work performed between March 1, 1997
and the Closing Date.
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(e) The Company and Xxxxxxx shall be entitled to review and, at such
Party's sole expense, audit, the books and records of the Company for the
purpose of determining the correct allocation of payments under this
Section 2.4. Xxxxxxx, the Company and Superior agree to cooperate in
billing, collecting and accounting for the Billed Receivables and any
adjustments to the Bonus Percentages under the Deferred Compensation
Agreements, and any dispute arising under this Section 2.4 shall be
resolved pursuant to the procedures specified in Sections 4.3 and 4.4.
2.5. Treatment of Certain Liabilities. Subject to and in accordance with
Section 4.2, Xxxxxxx and Xxxxxx, jointly and severally, hereby agree to
reimburse for, and indemnify and hold the Company, Superior and Holdings
harmless against, all of the following Liabilities of the Company,
whether or not disclosed in or pursuant to this Agreement (collectively,
the "INDEMNIFIED LIABILITIES"):
(a) all of the following (collectively, the "INDEMNIFIED CURRENT
LIABILITIES"):
(i) all of the unpaid accounts payable, wages, unearned
revenue and other unpaid Liabilities of the Company arising out of
the operation of the business of the Company through the Closing,
which would be properly classified as current liabilities on a
balance sheet of the Company as of immediately prior to the
Closing, prepared on an accrual basis in accordance with GAAP
(provided that to the extent such Liabilities include bills for
utilities and other similar services relating to periods of time
that overlap the Closing Date such Liabilities shall be prorated),
(ii) all legal and accounting fees and other Liabilities incurred
by the Company in connection with the negotiation, documentation
and consummation of the transactions contemplated hereby, (iii) all
time (at the rate of $300 per hour) and direct expenses (to the
extent not paid or reimbursed by the respective clients) incurred
by the Company after Closing in connection with the Valley Prime
and Santa Xxxxxx Cancer Treatment - Linear Accelerator sale
matters, (iv) all time (at the per hour rates established in the
applicable client engagement agreement) and direct expenses (to the
extent not paid or reimbursed by the respective clients) incurred
by the Company after the Closing in connection with any other
client engagement, to the extent of any Pre-Collected Revenue (as
defined in Section 3.2(l)) actually collected by the Company prior
to Closing with respect thereto, and (v) all Liabilities arising or
accruing through the Closing Date and not thereafter under the
Plans, agreements and policies identified on the Company Disclosure
Schedule; in each case, to the extent such Indemnified Current
Liabilities are not paid out of the collections upon the Billed
Receivables.
(b) all other Liabilities (other than Professional Liabilities, as
defined below, and Indemnified Current Liabilities) arising out of the
operation of the business of the Company through the Closing Date,
including, without limitation, all Liabilities of the Company for Taxes
for periods ending on or prior to the Closing Date and all Liabilities
for
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reimbursable medical expenses incurred prior to the Closing under the
Company's medical reimbursement plan;
(c) all Liabilities for errors and omissions arising out of the
services performed by the Company and its employees, consultants and
contractors through the Closing Date ("PROFESSIONAL LIABILITIES"),
subject to the provisions of Section 4.5(c), and only to the extent such
Professional Liabilities are not covered by the Liability Insurance (as
defined in Section 4.5(c)); and
(d) all Liabilities arising out of any claim (arising under any
agreement relating to employment existing prior to the Closing) brought
by any existing Company employee who is offered employment by Superior in
connection with the Closing, but who does not become an employee of
Superior.
2.6. Closing
(a) Closing Date. The Closing of the purchase and sale of the
transactions contemplated hereby (the "CLOSING") will take place commencing at
12:00 p.m., Central Standard Time, on March 12, 1997, or as soon as practicable
thereafter, at the offices of Xxxxxxxx & Xxxxxx, Ltd., 00 X. Xxxxxx Xxxxx,
Xxxxxxx, Xxxxxxxx, unless another time, date or place is agreed to by the
Parties. The date on which the Closing actually occurs is referred to herein
as the "CLOSING DATE." The Closing shall be effective immediately following
the close of normal business hours of the Company on the Closing Date.
(b) Closing Deliveries.
(i) At the Closing, Xxxxxxx, Xxxxxx and the Company, as
applicable, will deliver or cause to be delivered to Superior the
following items:
(A) certificates evidencing all of the shares of Company
Common being sold hereunder by such Person, together with an
assignment separate from certificate or duly endorsed in a
form sufficient to effect the transfer thereof to Superior;
(B) executed counterparts of each of the Registration
Agreement in the form set forth in Exhibit B attached hereto
("REGISTRATION AGREEMENT"), the Confidentiality,
Non-Competition and Non-Solicitation Agreement in the form
set forth in Exhibit C attached hereto (NON-COMPETITION
AGREEMENT") and the Employment Agreement;
(C) executed counterparts of employment agreements
between Superior and each of Kumura and Xxxxxxx (the "XXXXXX
AND XXXXXXX EMPLOYMENT AGREEMENTS");
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(D) all of the third party consents and approvals set
forth on Section 3.2(c) of the Company Disclosure Schedule,
in form and substance satisfactory to Superior, without
payment by or liability to the Company;
(E) (i) a copy of the director and stockholder
resolutions by which all corporate actions on the part of the
Company necessary to approve this Agreement were taken,
certified by the Secretary of the Company; (ii) an incumbency
certificate signed by an officer or officers of the Company
certifying the signature and office of each officer executing
this Agreement or any other agreement, certificate or other
instrument executed pursuant hereto; (iii) a copy of the
Company's Articles of Incorporation, as amended to date,
certified by the Secretary of State of California; and (iv)
good standing certificates for the Company, issued as of a
recent date, by the appropriate governmental agency for the
Company's state of incorporation and for each other
jurisdiction, if any, in which the Company is required to be
qualified to do business as a foreign corporation;
(F) executed counterparts of the Deferred Compensation
Agreements;
(G) an opinion with respect to the matters set forth in
Exhibit A attached hereto, from XxXxxxxxx, Will & Xxxxx,
counsel to the Company and Xxxxxxx, addressed to Superior and
dated as of the Closing Date;
(H) certificates, in form and substance reasonably
satisfactory to Superior, signed by the Company's Secretary,
dated as of the Closing Date, identifying the following
documents to be delivered therewith: (i) the minute books of
the Company, which shall contain minutes of all meetings (or
consents to action in lieu thereof) of the directors and
shareholders of the Company from their inception to the date
thereof; (ii) the corporate seal of the Company, if any;
(iii) certified copies of the By-Laws of the Company as in
effect on the date thereof; (iv) all stock certificate books
and stock ledgers of the Company; and (v) such other
documents or instruments as Superior may reasonably request
to carry out the intents and purposes of this Agreement, and
such minute books, stock certificate books and other
documents shall be complete, accurate and sufficient, to the
reasonable satisfaction of Superior and its counsel;
(I) executed documentation evidencing the termination of
(1) the Stock Trust Agreement, dated as of December 19, 1996,
by and among the Company, Xxxxxxx and Xxx Xxxxxx and (2) the
$50,000 promissory note dated January 1, 1992, from the
Company to Xxxxxxx (the "COMPANY NOTE");
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(J) such other certificates, documents and/or
instruments as Superior may reasonably request.
(ii) At the Closing, Superior or Holdings, as applicable, will
deliver or cause to be delivered to Xxxxxxx and Xxxxxx, where
applicable, the following items:
(A) wire transfer of immediately available funds to
respective accounts designated by Xxxxxxx and Kumura in the
amount of their respective Pro Rata Percentage of the Cash
Portion;
(B) executed counterparts of the Registration Agreement,
Non-Competition Agreement, Employment Agreement (and related
letter agreement) and the Kumura and Xxxxxxx Employment
Agreements;
(C) duly executed and authenticated certificates in the
name of Xxxxxxx and Kumura or their nominees evidencing their
respective Pro Rata Percentage of the Payment Shares;
(D) (i) a copy of the text of the resolutions by which
all corporate action on the part of Superior and Holdings
necessary to approve this Agreement were taken, certified by
their respective corporate secretaries, (ii) an incumbency
certificate signed by an officer of each of Superior and
Holdings certifying the signature and office of each officer
executing this Agreement or any other agreement, certificate
or other instrument executed pursuant hereto, (iii) Certified
Certificates of Incorporation of each of Superior and
Holdings issued by the secretary of State of the States of
Michigan and Delaware, respectively, and (iv) Good Standing
Certificates of each of Superior and Holdings issued by the
secretary of State of the States of Michigan and Delaware,
respectively;
(E) an opinion from Xxxxxxxx & Xxxxxx, Ltd., outside
counsel to Superior and Holdings, with respect to the matters
set forth in Exhibit D attached hereto addressed to the
Company and Xxxxxxx and dated as of the Closing Date; and
(F) such other certificates, documents and/or
instruments as Xxxxxxx may reasonably request.
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ARTICLE
3.
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Stockholders. As a material
inducement to Superior and Holdings to enter into this Agreement and consummate
the transactions contemplated hereby, each Stockholder hereby severally
represents and warrants to Superior and Holdings that all of the statements
contained in this Section 3.1 are correct and complete with respect to such
Stockholder as of the date of this Agreement, except as set forth in the
schedule attached to this Agreement disclosing exceptions to the
representations and warranties set forth herein (the "COMPANY DISCLOSURE
SCHEDULE"):
(a) Such Stockholder has good and marketable title to the shares of
Company Common which are to be sold, transferred and assigned by him pursuant
to this Agreement, free and clear of any and all Security Interests, rights of
first refusal, voting trusts or agreements, options or preemptive rights of any
nature. Section 3.2(d) of the Company Disclosure Schedule sets forth a true
and correct description of all shares of Company Common owned by such
Stockholder, and the terms of any agreement, commitment or understanding by
such Stockholder to make any payment of any portion of the Purchase Price to
any Person upon the consummation of the transactions contemplated hereby;
(b) Such Stockholder has the full right, power and authority to execute
and deliver this Agreement and all other agreements described herein or entered
into in connection herewith by him (the "RELATED AGREEMENTS"), and to perform
his obligations hereunder and thereunder. This Agreement and the Related
Agreements constitute the valid and legally binding obligations of such
Stockholder enforceable against him in accordance with their respective terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the
enforcement of creditors' rights generally, now or hereafter in effect and
subject to the application of equitable principles and the availability of
equitable remedies;
(c) Such Stockholder is not a party to, subject to or bound by any
agreement or any judgment, order, writ, prohibition, injunction or decree of
any court or other governmental body which would prevent the execution or
delivery of this Agreement by him or the consummation of the transactions
contemplated hereby;
(d) All existing agreements between such Stockholder and the Company have
been terminated and such Stockholder is not a party to, subject to or bound by
any agreement, commitment or understanding whatsoever between such Stockholder
and the Company;
(e) Such Stockholder understands and agrees that: (i) the Holdings Common
to be issued to him pursuant to this Agreement, if any, has not been, and as of
the Closing Date will not be, registered under the Securities Act or under any
state securities laws; (ii) the Holdings Common is being offered and issued in
reliance upon Federal and state exemptions for transactions not involving any
public offering; (iii) a "stop transfer" order will be placed against
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the certificates representing shares of Holdings Common issued pursuant to this
Agreement; and (iv) such certificates will (until such time as the Holdings
Common is registered under the Securities Act pursuant to the Registration
Agreement (as defined below) or otherwise eligible under Section 4.5(b)
hereunder), bear on their face the following legend:
"The shares evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, or any applicable
state securities laws. No transfer or sale of these shares or any
interest therein may be made without such registration and
qualification unless the issuer has received an opinion of counsel
satisfactory to it that a proposed transfer or sale does not require
registration or qualification under applicable law."
(f) Xxxxxxx and Kumura further represent that: (i) each is acquiring the
Holdings Common pursuant to this Agreement solely for his own account for
investment purposes and not with a view to the distribution thereof within the
meaning of the Securities Act; (ii) each is a sophisticated investor with
knowledge and experience in business and financial matters and is an
"accredited investor" within the meaning of Rule 501 under the Securities Act;
(iii) each has had access to all Superior SEC Reports (as hereinafter defined)
filed by Holdings, and has had the opportunity to obtain additional information
and ask questions and receive answers as desired in order to evaluate the
merits and risks inherent in holding the Holdings Common; (iv) each has not
been offered the Holdings Common by any form of general advertising or general
solicitation; (v) each is able to bear the economic risk and lack of liquidity
inherent in holding the Holdings Common, and (vi) each is a citizen of the
United States. Xxxxxxx has not transferred, assigned, hypothecated, pledged or
otherwise transferred the Company Note or any interest therein to any Person.
3.2. Representations and Warranties Concerning the Company. As a material
inducement to Superior and Holdings to enter into this Agreement and consummate
the transactions contemplated hereby, each of Xxxxxxx and Kumura hereby
represent and warrant, jointly and severally, subject to Section 4.2, to
Superior that all of the statements contained in this Section 3.2 are correct
and complete as of the date of this Agreement, except as set forth in the
Company Disclosure Schedule. The Company Disclosure Schedule will be arranged
in sections corresponding to the numbered and lettered sections contained in
this Section 3.2.
(a) Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California. The Company has all requisite corporate power
and authority to carry on the business in which it is engaged and to own and
use the properties owned and used by it. True and correct copies of the
Company's Articles of Incorporation and By-Laws, in each case as amended to
date, have been delivered to Superior. The Company is qualified to conduct
business and is in good standing under the laws of each jurisdiction wherein
the nature of its business or its ownership of property requires it to be so
qualified, except where the failure to be so qualified would not have a
Material Adverse Effect. Section 3.2(a) of the Company Disclosure Schedule
lists all jurisdictions in which the Company is qualified to do business.
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(b) Authorization of Transaction. The Company has all requisite corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the immediately
preceding sentence, the Board of Directors of the Company has duly authorized
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby by the Company. This Agreement
constitutes the valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting the enforcement of creditors' rights
generally, now or hereafter in effect and subject to the application of
equitable principles and the availability of equitable remedies.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will
(i) violate or conflict in any way with any applicable statute, regulation,
law, rule or common law doctrine; (ii) violate or conflict in any way with any
judgment, order, decree, stipulation, injunction, charge or other restriction
of any governmental body, governmental agency or court to which the Company is
subject or any provision of the Articles of Incorporation or By-Laws of the
Company or result in the creation of any Security Interest upon any of the
Company's assets pursuant to the terms thereof, or (iii) conflict with, result
in a breach of, constitute a default under (with or without notice or lapse of
time, or both), result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, require any notice under, or result in
the creation of any Security Interest upon any of the Company's assets pursuant
to the terms of, any contract, agreement, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement for borrowed money, instrument of
Indebtedness, Security Interest or other arrangement to which the Company is a
party or by which it is bound or to which any of its assets are subject.
Except as disclosed in Section 3.2(c) of the Company Disclosure Schedule, the
Company is not required to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government, governmental agency
or court, or any other Person in order for the parties to consummate and the
transactions contemplated by this Agreement and in order that such transactions
not constitute a breach or violation of, or result in a right of termination or
acceleration or any encumbrance on any of the Company's assets pursuant to the
provisions of, any agreement, arrangement or understanding or any license,
franchise or permit.
(d) Capitalization. The authorized capital stock of the Company consists
solely of 100,000 shares of Company Common, of which 1,111 shares are issued
and outstanding on the date hereof.. All of such shares are owned by the
Stockholders as set forth on Section 3.2(d) of the Company Disclosure Schedule.
Section 3.2(d) of the Company Disclosure Schedule sets forth the
capitalization of, and all of the current directors and officers of the
Company. The Company has never authorized, offered, sold or issued capital
stock other than Company Common. All offerings, sales and issuances by the
Company of any Company Common have been conducted in compliance with, in
accordance with or in reliance upon exemptions from all applicable Federal and
state securities laws and all applicable state corporation laws. All of the
issued and outstanding shares of Company Common have been duly authorized,
validly issued, fully paid, and nonassessable, and are not subject to any
preemptive rights. There are no currently outstanding or authorized options,
warrants, rights, contracts, rights of first refusal or first offer, calls,
puts, rights to subscribe,
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conversion rights, or other agreements or commitments to which the Company is a
party or which are binding upon the Company providing for the issuance,
disposition, or acquisition of any of its capital stock or securities
convertible into or exchangeable for its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, or similar rights
with respect to the Company, and there are no contractual or statutory
preemptive rights or similar restrictions with respect to the issuance or
transfer of any shares of capital stock of the Company. There are no voting
trusts, proxies, or any other agreements, restrictions or understandings with
respect to the voting of any of the capital stock of the Company, except for
those agreements expressly contemplated hereby.
(e) No Subsidiaries. The Company does not own or control any direct or
indirect equity interest or participation in any corporation, partnership,
limited liability company, trust, or other business association.
(f) Financial Statements; Books and Records.
(i) The Company has provided Superior with the following
financial statements, correct and complete copies of which are set
forth on Section 3.2(f) of the Company Disclosure Schedule
(collectively the "FINANCIAL STATEMENTS"): (A) a Statement of
Revenues and Expenses - Income Tax Basis for the Company for each
of the fiscal years ended December 31, 1994 and 1995, and a
Statement of Revenues and Expenses-Accrual Basis, for the Company
for the fiscal year ended December 31, 1996 (the "MOST RECENT
FISCAL YEAR END") and (B) the Latest Balance Sheet (as defined in
Section 3.2(g)). The Financial Statements are correct and
complete, have been compiled by the Company's independent public
accountants and fairly present the financial condition and results
of operations of the Company as of the times and for the periods
referred to therein.
(ii) The Company's books and records are and have been
properly prepared and maintained, and fairly and accurately reflect
all of the assets and liabilities of the Company and all contracts
and transactions to which the Company is or was a party or by which
the Company or any of its business or assets is or was affected.
The corporate minute books of the Company, copies of which have
heretofore been provided to Superior, correctly reflect all
resolutions adopted and all other material corporate actions taken
at all meetings or through consents of the directors (including
committees thereof) and the shareholders of the Company. The stock
transfer books and stock ledgers of the Company are complete and
correctly reflect all issuances and transfers of the capital stock
of the Company.
(g) Recent Events. Since the Most Recent Fiscal Year End, the Company has
not experienced or suffered any Material Adverse Effect. Without limiting the
generality of the foregoing, except as reflected on the balance sheet of the
Company as of December 31, 1996 (the "LATEST BALANCE SHEET"), since the Most
Recent Fiscal Year End or on Section 3.2(g) of the Company Disclosure Schedule,
the Company has not:
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(i) sold, leased, transferred or assigned any of its assets,
tangible or intangible, other than in the Ordinary Course of
Business;
(ii) accelerated, terminated, modified, canceled or committed
any breach of any contract, lease, sublease, license, or sublicense
(or series of related contracts, leases, subleases, licenses, and
sublicenses) either involving more than $10,000 or otherwise
outside the Ordinary Course of Business;
(iii) canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving
more than $10,000 or outside the Ordinary Course of Business;
(iv) experienced any damage, destruction, or loss to its
property in excess of $10,000 in the aggregate (whether or not
covered by insurance);
(v) created or suffered to exist any Security Interest upon
any of its assets, tangible or intangible, outside the Ordinary
Course of Business or securing any liability in the aggregate in
excess of $10,000;
(vi) issued, sold, or otherwise disposed of any of its capital
stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion or exercise) any of
its capital stock, or any securities convertible or exchangeable
into any of its capital stock;
(vii) declared, set aside, or paid any dividend or
distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(viii) entered into any transaction, arrangement or contract
with, or distributed or transferred any property or other assets
to, any officer, director, stockholder or other insider or
Affiliate of the Company (other than salaries and employee benefits
in the Ordinary Course of Business);
(ix) made or committed to make any capital expenditures or
entered into any other material transaction outside the Ordinary
Course of Business or involving an expenditure in the aggregate in
excess of $10,000;
(x) amended or modified in any respect (beyond any amendments
and modifications reflected in true and complete copies of such
Plans delivered to Superior) any Plan;
(xi) other than annual salary increases which are included in
the compensation reflected on Schedule 3.2(o), entered into any
employment agreement or collective bargaining agreement or granted
any increase in excess of $5,000 in the salary of any officer or
management level employee of the Company (or
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increase in excess of $1,000 in the case of any non-management
employee) or paid or committed to pay any bonus to any officer or
employee;
(xii) changed in any material manner its policies or practices
relating to sales, collection of accounts receivable, purchases of
goods and services and other Inventory or payment of accounts
payable;
(xiii) changed the accounting principles, methods or practices
or any change in the depreciation or amortization policies or
rates;
(xiv) changed the relationships with any client or supplier
which, in the aggregate, might reasonably be expected to result in
a Material Adverse Effect; or
(xv) committed (orally or in writing) to any of the foregoing.
(h) Undisclosed Liabilities. To the Company's and each Stockholder's
Knowledge, the Company has no Liabilities, except for (i) Liabilities set forth
on the face of the Latest Balance Sheet; (ii) Liabilities, in an amount less
than $100,000 in the aggregate which have arisen in the Ordinary Course of
Business (none of which relates to any breach of contract, breach of warranty,
tort, infringement, or violation of law or arose out of any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand); and (iii)
Liabilities otherwise expressly disclosed in this Agreement or the Company
Disclosure Schedule.
(i) Tax Matters.
(i) The Company has filed all Tax Returns that it was required
to file on or prior to the date hereof. All such Tax Returns were
(and the Tax Returns for the fiscal year ended December 31, 1996
and the fiscal period ended on the Closing Date when filed, will
be) correct and complete in all material respects and accurately
reflected all Liability for Taxes for the periods covered thereby.
The Company's Liability for unpaid Taxes, whether to any
governmental authority or to another Person such as under a tax
sharing agreement, for all periods ending on or before the Closing
Date do not exceed the amount of the Liability accruals for Taxes
(excluding reserves for deferred Tax assets or deferred Tax
Liabilities) on the Latest Balance Sheet or on Section 3.2(i) of
the Company Disclosure Schedule. Neither the Company nor the
Stockholders have received notice of any claim made by an authority
in a jurisdiction where the Company does not file Tax Returns that
the Company is or may be subject to taxation by that jurisdiction.
There are no Security Interests on any of the assets of the Company
that arose in connection with any failure (or alleged failure) to
pay any Tax when due. The Company's net operating loss (as defined
in Section 172 of the Code) available for carry-forward to the
Company's first three fiscal years following the Closing, subject
to the limitations under Section 382 of the Code, (the "NOL") shall
not be less than $500,000 (the "AVAILABLE AMOUNT").
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(ii) The Company has withheld and paid when due all Taxes
required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor, or
other third party.
(iii) Neither the Company nor the Stockholders has any
Knowledge of any Basis on which any taxing authority could assess
any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability
of the Company either (A) claimed or raised by any taxing authority
in writing or (B) as to which either of the Stockholders or the
Company has Knowledge. The Company has previously provided to
Superior correct copies of all Federal, state, local, and foreign
Tax Returns filed with respect to the Company for all taxable
periods ended for which the applicable statute of limitations has
not yet closed. None of such Tax Returns have been audited, and
none currently are the subject of audit, and there are no
examination reports or statements of deficiencies assessed against
or agreed to by the Company for such taxable periods.
(iv) The Company has disclosed on its Federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of Federal income Tax within the meaning
of Section 6662 of the Code. The Company has not filed a consent
under Section 341(f) of the Code concerning collapsible
corporations. The Company has not made any material payments, is
not obligated to make any material payments, and is not a party to
any agreement that would obligate it to make any material payments
that will not be deductible under Section 280G of the Code. The
Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Sec. 897(c)(A)(ii) of the
Code. The Company is not a party to any tax allocation or sharing
agreement. The Company has no Liability for unpaid taxes because
it once was a member of an Affiliated Group which filed one or more
consolidated Federal income tax returns. The Company has no
Liability for Taxes owed by any Person (other than the Company),
including, without limitation, (A) as a transferee, assignee or
other successor or (B) pursuant to a Tax sharing agreement or other
contract.
(v) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to
any Tax assessment or deficiency.
(j) Title and Condition of Properties.
(i) No Owned Real Property. The Company does not own any real
property.
(ii) Leased Real Property. The leases described in Section
3.2(j) of the Company Disclosure Schedule (the "PROPERTY LEASES")
cover all of the real estate
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leased, used or occupied by the Company. Each of the Property
Leases is in full force and effect and the Company holds a valid and
existing leasehold interest under each of such Property Leases. The
Company has delivered to Superior complete and accurate copies of
each of the Property Leases, and none of such Property Leases has
been modified in any respect, except to the extent that such
modifications are disclosed by the copies delivered to Superior.
The Company is not in default, and no circumstances exist which
would result in such default (including upon the giving of notice or
the passage of time, or both), under any of such Property Leases,
and no other party thereto has the right to terminate, accelerate
performance under or otherwise modify any of such leases. To the
Knowledge of the Company and the Stockholders, no lessor under any
such lease is in default under any of such leases in its duties to
the lessee. The Company has not assigned, transferred, conveyed,
subjected to a Security Interest, or otherwise encumbered any
interest in any of the Property Leases.
(iii) Title to Assets. The Company owns good and marketable
title, free and clear of all Security Interests, to all of the
personal property and assets reflected on the Latest Balance Sheet
or acquired after the Latest Balance Sheet Date, except for (1)
assets with an original purchase price of less than $10,000 in the
aggregate which have been disposed of to non-affiliated third
parties since the Most Recent Fiscal Year End, in the Ordinary
Course of Business, (2) Security Interests securing liabilities
reflected on the Latest Balance Sheet, and (3) Security Interests
for current Taxes not yet due and payable.
(iv) Condition and Sufficiency of Assets. All of the
Company's equipment and other tangible personal property and assets
are in good condition and repair, except for ordinary wear and tear
not caused by neglect, and are useable in the Ordinary Course of
Business. The personal property and assets shown on the Latest
Balance Sheet or acquired after the Most Recent Fiscal Year End,
the lease rights under the Property Leases and leases of personal
property and the Intellectual Property owned or used by the Company
under valid license, collectively include all assets necessary to
the conduct of the Company's business as presently conducted or
currently proposed to be conducted. No Stockholder or other
employees or independent contractors of the Company or their
respective Affiliates owns any rights in any assets, real or
personal, which are used by the Company in its business.
(k) Intellectual Property. Section 3.2(k) of the Company Disclosure
Schedule sets forth all of the Company's right, title and interest in and to
all patents, copyrights, trade secrets, trademarks, tradenames, service marks,
logos, secret processes, formulas, methods, information, know-how and other
intellectual properties and proprietary information and the tangible media on
which such items are embodied (collectively, the "PROPRIETARY RIGHTS"). There
are no claims or demands, and, to the Knowledge of the Company or either
Stockholder, no Basis for any such claim or demand, of any Person that any of
the Proprietary Rights or any processes or equipment used by the Company, or
other provision of the Company's services by it or others, and no software or
other Intellectual Property developed by the Company, infringes or conflicts in
any way with any
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copyright, patent, trademark, service xxxx, trade name, license, application or
other right of any other Person, or makes unauthorized use of any secret
process, formula, method, information, know-how or any other proprietary
information including, without limitation, any software or software
documentation, of any other Person. The Company owns all right, title and
interest in and to the Proprietary Rights, other than the computer software
listed on Schedule 3.2(k) hereto which is not expressly denominated "OWNED
SOFTWARE," as to which the Company has a valid license. All of the Company's
interests in the Proprietary Rights are free and clear of all liens and other
encumbrances, and are not currently being challenged or, to the Knowledge of
the Stockholders or the Company, infringed in any way or involved in any
pending legal or administrative proceedings before any court or governmental
agency. No current licenses for the use of any such rights have been granted
by the Company to any third parties, and none of the Proprietary Rights is
being used by any other Person.
(l) Contracts.
(i) Section 3.2(l) of the Company Disclosure Schedule lists
all of the following (the "DISCLOSED CONTRACTS"): (a) employee
benefit plans and collective bargaining agreements, if any; (b)
profit sharing, pension, deferred compensation and other employment
contract obligations, if any; (c) casualty, liability and other
insurance policies; (d) Active Client Contracts (as defined below);
(e) personal property leases and loan agreements; and (f) other
contracts, licenses, agreements and commitments of the Company,
whether written or, to the Company's or the Stockholders'
Knowledge, oral (except for the real property leases listed on
Section 3.2(j) of the Company Disclosure Schedule). True, correct
and complete copies of all Disclosed Contracts have been delivered
to Superior. All Disclosed Contracts are in full force and effect
according to the terms and conditions contained therein and
constitute legal, valid and binding obligations of the respective
parties thereto. The Company has paid in full or accrued all
material amounts currently owing under any Disclosed Contracts and
has satisfied in full or provided for all of its liabilities and
obligations currently owing by the Company thereunder. The Company
is not in material default under any Disclosed Contracts, and to
the Knowledge of the Stockholders and the Company, no other party
to any Disclosed Contracts is in material default thereunder and
there have been no events, occurrences or omissions which, with the
giving of notice or the passage of time, or otherwise, would result
in a material default by any party thereto, and none of the Company
or either of the Stockholders has received notice of the election
of any other party thereto to cancel, terminate or not to renew any
Disclosed Contracts, whether in accordance with the terms of such
agreement or otherwise. For purposes hereof, "ACTIVE CLIENT
CONTRACTS" mean those client service contracts and engagement
agreements of the Company which are reasonably anticipated to
either (x) produce at least $20,000 in gross revenue within six
months after the Closing and/or (y) require nonbillable client
service work to correct work performed prior to the Closing Date
that was improperly performed or otherwise deficient in excess of
$5,000.
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(ii) Except for those contracts, engagement arrangements,
bids, and proposals set forth on Section 3.2(1) of the Company
Disclosure Schedule, (the "FIXED RATE ENGAGEMENTS") the Company is
not a party to any fixed fee or capped price contracts or
engagement arrangements, nor does the Company have any outstanding
offers, bids or proposals to perform any services on a fixed fee or
capped basis. Section 3.2(1) of the Company Disclosure Schedule
identifies each Fixed Rate Engagement and sets forth the number of
hours remaining to complete the work required thereunder and the
amount of fees billed and uncollected with respect thereto.
Section 3.2(1) of the Company Disclosure Schedule also sets forth
the full amount, to the Company's and the Stockholders' knowledge,
of client payments to the Company through the date hereof with
respect to services not yet performed by the Company
("Pre-Collected Revenue")
(m) Powers of Attorney; Bank Accounts. There are no outstanding
powers of attorney executed by or on behalf of the Company.
Section 3.2(m) of the Company Disclosure Schedule lists each bank
account and credit arrangement maintained by the Company (together
with relevant account information, authorized signatories and
account users).
(n) Litigation. Section 3.2(n) of the Company Disclosure Schedule
sets forth each instance in which the Company (i) is (or within the
past three (3) years has been) subject to any unsatisfied
judgment, order, decree, stipulation, injunction or charge or (ii)
is (or within the past three (3) years has been) a party to or, to
the Knowledge of Xxxxxxx or the Company, is threatened to be made a
party to, any charge, complaint, action, suit, proceeding, hearing,
or investigation of or in any court or quasi-judicial or
administrative agency of any Federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and
investigations set forth in Section 3.2(n) of the Company
Disclosure Schedule could reasonably be expected to result in any
Material Adverse Effect. Neither the Stockholders nor the Company
has any reason to believe that there exists a Basis on which any
such charge, complaint, action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Company.
(o) Employees; Employment Matters.
(i) No key independent contractor, or group (three or more
employees acting together) of employees or independent contractors
has informed either of the Stockholders that he or she intends to
terminate his or her employment with the Company generally or as a
result of the transactions contemplated hereby or otherwise. The
Company is not a party to or bound by any collective bargaining
agreement, and the Company has not experienced any strikes,
grievances, other collective bargaining disputes or claims of
unfair labor practices. Neither the Company nor the Stockholders
have any Knowledge of any organizational effort presently being
made or threatened by or on behalf of any labor union with respect
to employees of the Company.
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(ii) Section 3.2(o) of the Company Disclosure Schedule
contains a true, correct and complete list setting forth the names
and current salaries or rates of compensation of all employees of
the Company and independent contractors who render services to the
Company on more than a single occasion.
(iii) To the Company's and the Stockholders' knowledge, all
Persons employed by the Company are employees at will or otherwise
employed such that the Company may lawfully terminate their
employment at any time with or without cause. Section 3.2(o) of
the Company Disclosure contains a list of each employment agreement
and at-will agreement executed by the current employees of the
Company and each agreement between the Company and each independent
contractor with whom the Company is currently doing business. The
Company has furnished Superior with true and correct copies of each
such agreement. Except as disclosed on Section 3.2(o) of the
Company Disclosure Schedule, the Company has no unsatisfied
Liability to any previously terminated employee or independent
contractor. Except as expressly provided to the Contrary in
written independent contractor agreements, all employees and
independent contractors of the Company are subject to a
noncompete/nonsolicitation covenant in favor of the Company. A
true and correct copy of the form of noncompete/nonsolicitation
agreement currently in force with each of the Company's employees
and any material variances therefrom have been delivered to
Superior. The Company has disclosed all written (and summarized
all oral) employee handbooks, policies, programs and arrangements
to Superior.
(iv) The Company has materially complied with all applicable
laws relating to labor, including, without limitation, any
provisions thereof relating to wages, termination pay, vacation
pay, fringe benefits, collective bargaining and the payment and/or
accrual of the same and all Taxes, insurance and all other costs
and expenses applicable thereto, and the Company is not liable for
any arrearage, or any Taxes, costs or penalties for failure to
comply with any of the foregoing. Persons whom the Company
currently retains as a consultant or previously retained as a
consultant qualify, or at all times while performing services for
the Company qualified, as an independent contractor and not as an
employee of the Company, under the Code and all applicable state
laws. Neither the execution of this Agreement nor the consummation
of the transactions contemplated hereby shall cause the Company to
be in breach of any agreement with any employee, contractor or
consultant or cause the Company to be liable to pay any severance
or other amount to any employee, contractor or consultant of the
Company.
(p) Employee Benefit Plans.
(i) All Plans are listed and briefly described in Section
3.2(p) of the Company Disclosure Schedule. Each Plan is in
compliance with its terms and with ERISA and other applicable laws
(including, without limitation, compliance with the health care
continuation requirements of Part 6 of Subtitle B of Title I of
ERISA
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("COBRA") or other applicable state insurance continuation law.
and any proposed regulations promulgated thereunder), and all
agreements and instruments applicable to any Plan. Section 3.2(p)
of the Company Disclosure Schedule sets forth each former employee
of the Company entitled to COBRA benefits and the remaining period
of such benefits. The Company and each applicable ERISA Affiliate
of the Company have received favorable determination letters as to
the qualification under the Code of each pension plan, as defined
in Section 3(2) of ERISA ("PENSION PLAN"), and there have been no
amendments or other developments since the date of such
determination letters which would cause the loss of such qualified
status. No material violation of ERISA has at any time occurred in
connection with the administration of any of the Plans, and there
are no actions, suits, or claims (other than routine, non-contested
claims for benefits) pending or to the Company's Knowledge,
threatened against the Plans, or any administrator or fiduciary
thereof, which could result in any Liability.
(ii) With respect to all present Plans, the Company and all
ERISA Affiliates of the Company have heretofore delivered to
Superior true and complete copies of each of the following
(including descriptions of vacation, severance pay, sickness, and
separation policies):
(A) the Plan documents (and any applicable trust
agreement or insurance contract);
(B) the most recent Internal Revenue Service
determination letter relating to each of the Pension Plans,
if any;
(C) the summary plan description (as currently in
effect) and any summary of material modification for each of
the Plans, if any;
(D) the most recent Annual Report (Form 5500 Series),
and accompanying schedules, filed for each of the Plans, if
any, and the most recent summary annual report furnished for
each of the Plans;
(E) the most recent actuarial valuations, if applicable,
and latest financial statements for each of the Plans; and
(F) all documents filed with the Internal Revenue
Service, Department of Labor or Pension Benefit Guaranty
Corporation since January 1, 1991, if any.
There is and has been no material violation of ERISA known to the Company or
any ERISA Affiliate of the Company with respect to the filing of applicable
reports, documents, and notices regarding such past or present Plans with the
Secretary of Labor or the Secretary of the Treasury or the furnishing of such
documents to the participants or beneficiaries of such Plans.
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(iii) Each Plan is maintained by the Company or any ERISA
Affiliate of the Company under a plan document which does not
provide for other participating employers except for the Company or
any ERISA Affiliate of the Company and no Plan provides or has
provided credit with respect to service other than with the Company
or any ERISA Affiliate of the Company.
(iv) Neither the Company nor any ERISA Affiliate of the
Company nor any of their employees, shareholders, or directors have
engaged in any transaction in connection with which any of them
would be subject either to a civil penalty assessed pursuant to
Section 502 of ERISA or a tax imposed by Section 4975 of the Code.
The execution and performance of this Agreement will not involve
any prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code.
(v) None of the assets of any of the Plans is or has been
invested in any property constituting employer real property or any
employer security within the meaning of Section 407(d) of ERISA.
(vi) No Pension Plan or trust created under any such Pension
Plan has, since September 2, 1974, been terminated in whole or in
part. Additionally, there is no reasonable Basis for the Company
or any ERISA Affiliate of the Company to anticipate material
Liability to the Pension Benefit Guaranty Corporation with respect
to a Pension Plan and there has been no reportable event (within
the meaning of Section 4043(c) of ERISA), or any event requiring
disclosure under Section 4063(a) or 4041(c) of ERISA with respect
to such a Pension Plan since September 2, 1974. There has been no
event or condition which presents a material risk of termination of
any Pension Plan by the Pension Benefit Guaranty Corporation, and
no circumstances exist that constitute grounds under Section 4042
of ERISA entitling the Pension Benefit Guaranty Corporation to
institute any such proceeding.
(vii) Full payment as of the Closing Date will have been made
of all amounts which the Company and any ERISA Affiliate of the
Company are required, under the terms of all Plans, to have paid as
contributions to such Plans as of the last day of the most recent
fiscal year prior to the Closing Date. Full payment or accrual on
the Closing Balance Sheet as of the Closing Date will have been
made of all pro rata amounts which the Company and any ERISA
Affiliate of the Company are required to pay as contributions to
each such Plan for the fiscal year that includes the Closing Date.
Further, no accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived,
exists with respect to any Plan, nor has there been any lien
imposed under Section 412(n) of the Code.
(viii) The execution and performance of this Agreement will
not constitute a stated triggering event under any Plan or
employment agreement that will result in
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any payment (whether of severance pay or otherwise) becoming due to
any employee of the Company or ERISA Affiliate of the Company.
(ix) Neither the Company nor any ERISA Affiliate of the
Company provides, nor have they at any time provided, coverage
under any welfare plan, (i) defined in Section 3(1) of ERISA
(including, but not limited to, life insurance, disability,
medical, dental, prescription drugs, or accidental death or
dismemberment) to any of their retirees, other than any
continuation or conversion coverage which any such retiree may have
purchased at his own expense, or a defined benefit plan, as defined
in Section 3(35) of ERISA.
(x) The financial statements of each Pension Plan as of the
end of the most recent plan year, and the list of the investments
of such Pension Plan as of the most recent plan year end,
accurately reflect the financial conditions of the Pension Plans,
and there have been no material changes in such investments between
such date and the Closing Date.
(xi) Neither the Company nor any ERISA Affiliate of the
Company currently contributes, or at any time in the past has
contributed, to a multiemployer plan, as defined in Section 3(37)
of ERISA, or a defined benefit Plan, as defined in Section 3(35) of
ERISA.
(q) Licenses, Permits and Approvals. Section 3.2(q) of the Company
Disclosure Schedule lists all governmental and regulatory licenses, permits and
approvals necessary to the conduct of the Company's business. All such
licenses, permits and approvals are in full force and effect. There are no
material violations by the Company of, or any claims or proceedings, pending or
to the Knowledge of the Stockholders or the Company, threatened, challenging
the validity of or seeking to discontinue, any such licenses, permits or
approvals.
(r) Unlawful Payments. No payments of either cash or other
consideration have been made to any Person by the Company or the Stockholders
or on behalf of the Company by any agent, employee, officer, director,
stockholder or other Person, that were unlawful under the laws of the United
States or any state or any other foreign or municipal government authority
having appropriate jurisdiction over the Company.
(s) Compliance with Laws. The Company and its facilities are in
material compliance with and have not in the past violated any applicable law,
rule or regulation of any Federal, state, local or foreign government or agency
thereof, including without limitation, environmental laws and laws relating to
labor and employment, and no notice, claim, charge, complaint, action, suit,
proceeding, investigation or hearing has been received by the Company or filed,
commenced or, to the Knowledge of the Company or of the Stockholders threatened
against the Company alleging any such violation.
(t) Suppliers and Clients. Section 3.2(t) of the Company Disclosure
Schedule lists all of the existing clients of the Company as of the Closing
Date and all clients with whom the
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Company has had engagements during the last three (3) years. The Company and
the Stockholders believe that their respective relationships with the clients
of the Company are good and, to the Knowledge of the Stockholders and the
Company, there are no disputes or problems with Clients of the Company that
could have a Material Adverse Effect.
(u) Insurance.
(i) Section 3.2(u) of the Company Disclosure Schedule sets
forth the following information with respect to each insurance
policy (including policies providing property, casualty, Liability,
and workers' compensation coverage and bond and surety
arrangements) to which the Company is or within the past three (3)
years has been a party, a named insured, or otherwise the
beneficiary of coverage at any time: (A) the name, address, and
telephone number of the agent; (B) the name of the insurer, the
name of the policyholder, and the name of each covered insured; (C)
the policy number and the period of coverage; and (D) the scope
(including an indication of whether the coverage was on a claims
made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and
operate) of coverage.
(ii) With respect to each such insurance policy: (A) the
policy is legal, valid, binding, enforceable, and in full force and
effect; (B) the policy will, until termination pursuant to Section
4.5, continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms immediately following the
consummation of the transactions contemplated hereby; (C) neither
the Company nor, to the Knowledge of the Company or the
Stockholders, any other party to the policy, is in breach or
default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or
the lapse of time, or both, would constitute such a breach or
default, or permit termination, modification, or acceleration,
under the policy; and (D) no party to the policy has repudiated any
provision thereof.
(v) Warranty. Except as set forth on Section 3.2(v) of the Company
Disclosure Schedule, the Company does not have any contracts with clients that
make express or implicit guarantees, warranties or indemnities or any reserve
for customer claims on its balance sheet. To the Company's and the
Stockholders' Knowledge, the amount of nonbillable client service obligations
to correct work performed prior to the Closing that was improperly performed or
otherwise deficient does not exceed $150,000 in the aggregate.
(w) Brokers' Fees. None of the Company or the Stockholders has any
Liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement.
(x) Potential Conflicts of Interest. Except as disclosed by Section
3.2(x) of the Company Disclosure Schedule, neither of the Stockholders (i)
owns, directly or indirectly, any interest in (excepting not more than 2% stock
holdings for investment purposes in securities of
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publicly held and traded companies) and is not an officer, director, employee
or consultant of any Person which is a competitor, lessor, lessee, customer or
supplier of the Company; (ii) owns, directly or indirectly, in whole or in
part, any interest in Intellectual Property which the Company is using or the
use of which is necessary for the business of the Company; (iii) has any loan
outstanding to or cause of action or other claim whatsoever against the
Company, except for claims in the Ordinary Course of Business, for accrued
salary, bonus, vacation pay, and benefits under Benefit Plans; (iv) has made,
on behalf of the Company, any payment or commitment to pay any commission, fee
or other amount to, or purchase or obtain or otherwise contract to purchase or
obtain any goods or services from, any corporation or other Person of which
such Stockholder is a partner or stockholder (except stock holdings solely for
investment purposes in securities of publicly held and traded companies).
3.3. Representations and Warranties of Superior and Holdings. Superior
and Holdings hereby represent and warrant to the Company and to the
Stockholders that the statements contained in this Section 3.3 are correct and
complete as of the date of this Agreement.
(a) Organization. Superior is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Michigan.
Holdings is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) Authorization of Transactions. Superior and Holdings each have all
requisite corporate power and authority to execute and deliver this Agreement
and the Related Agreements to which they are a party and to perform their
respective obligations hereunder. Each of Holdings and its subsidiaries has
all requisite corporate power and authority to own, lease and operate its
properties and carry on its business as now being conducted. Without limiting
the generality of the prior sentence, each of Superior and Holdings have taken
all requisite corporate action to duly authorize the execution, delivery and
performance of this Agreement by each of them and the Related Agreements and
the consummation of the transactions contemplated hereby. Each of Holdings and
Superior are in good standing as a foreign corporation in each jurisdiction
where the properties owned, leased or operated, or the business conducted, by
it require such qualification, except for such failure, which when taken
together with all other such failures, is not reasonably likely to have a
material adverse effect or impact upon the assets, financial condition,
business or results of operations of Holdings and its subsidiaries taken as a
whole (a "SUPERIOR ADVERSE EFFECT"). Holdings has made available to the
Stockholders a complete and correct copy of Holdings' and Superior's respective
Certificate or Articles of Incorporation and By-Laws, and each of Holdings' and
Superior's respective Certificate or Articles of Incorporation and By-Laws so
delivered are in full force and effect. This Agreement and the Related
Agreements constitute the valid and legally binding obligations of Superior and
Holdings, enforceable against each of them in accordance with their respective
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the
enforcement of creditors' rights generally, now or hereafter in effect and
subject to the application of equitable principle and the availability of
equitable remedies.
(c) Noncontravention. The execution, delivery and performance by each of
Superior and Holdings of this Agreement and the Related Agreements, and the
consummation of
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the transactions contemplated hereby and thereby, do not and will not (i)
violate or conflict in any way with any statute, regulation, law, rule or
common law doctrine, (ii) violate or conflict in any way with any judgment,
order, decree, stipulation, injunction, charge or other restriction of any
government, governmental agency or court to which Superior or Holdings is
subject or any provision of Superior's Articles of Incorporation or Bylaws or
Holdings' Certificate or Incorporation or By-Laws or result in the creation of
any Security Interest upon any of Superior's of Holdings' assets pursuant to
the terms thereof, or (iii) conflict with, result in a breach of, constitute a
default under (with or without notice or lapse of time, or both), result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under or result in the creation of any
Security Interest upon any of Superior's or Holdings' assets pursuant to the
terms of any contract, agreement, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement for borrowed money, instrument of
Indebtedness, Security Interest or other arrangement to which Superior or
Holdings is a party or by which either of them is bound or to which either of
their assets are subject, except where such violations, conflicts, breaches,
defaults or other events would not, individually or in the aggregate, result in
a Superior Adverse Effect or prevent or materially delay the consummation of
the transactions contemplated hereby. Neither Holdings nor Superior is
required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government, governmental agency or
court, or any other Person in order for the parties to consummate the
transactions contemplated by this Agreement, except for such notices, filings,
authorizations, consents or approvals which, if not obtained or made, would not
have a Superior Adverse Effect.
(d) Holdings Common. Holdings has taken all actions necessary to
authorize and approve the issuance of the Holdings Common, and as of the
Closing Date the Holdings Common will, when issued in accordance herewith, be
duly authorized, validly issued, fully paid and nonassessable. There are no
statutory or contractual stockholders' preemptive rights or rights of refusal
with respect to the issuance of the Holdings Common upon consummation of the
transactions contemplated hereunder.
(e) Commission Filings. Holdings has filed and made available to the
Company and the Stockholders all of the forms, reports and documents required
to be filed by Holdings with the commission under the Exchange Act and the
Securities Act of 1933, as amended, during the one year period ending on the
date hereof (collectively, the "HOLDINGS SEC REPORTS") which are listed on
Schedule 3.3(e). The Holdings SEC Reports (i) at the time filed, complied in
all material respects with the applicable requirements of the Exchange Act, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated in such Holdings SEC Reports or necessary in order
to make the statements in such Holdings SEC Reports, in the light of the
circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of Holdings included in the Holdings
SEC Reports (the "HOLDINGS FINANCIAL STATEMENTS") complied when filed as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, and were,
when filed, in accordance with the books and records of Holdings, complete and
accurate in all material respects, and presented fairly the consolidated
financial position and the consolidated results of operations, changes in
stockholders'
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equity and cash flows of Holdings and its Subsidiaries as of the dates and for
the periods indicated, in accordance with generally accepted accounting
principles, consistently applied, subject in the case of interim financial
statements to normal year-end adjustments and the absence of certain footnote
information.
(f) Capital Structure.
(i) The authorized capital stock of Holdings consists of
30,000,000 shares of Holdings Common and 1,000,000 shares of
preferred stock, par value $0.01 per share ("HOLDINGS
PREFERRED STOCK"). As of February 10, 1997, 7,559,735 shares
of Holdings Common and no shares of Holdings Preferred Stock
were issued and outstanding, and 900,000 aggregate shares of
Holdings Common were reserved for issuance under outstanding
options granted under, and options authorized to be hereafter
granted under, Holdings' Long Term Incentive Plan. All
outstanding shares of Holding's outstanding capital stock are
duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights.
(ii) Except as set forth above and except as
contemplated herein, there are no options, warrants, calls,
rights, commitments or agreements of any character to which
Holdings or any Subsidiary of Holdings is a party or by which
any of them is bound obligating Holdings or any Subsidiary of
Holdings or any securities or rights convertible into or
exchangeable for any such capital stock.
(g) Taxes. Except as disclosed in the Holdings SEC Reports, no unpaid
deficiencies in Taxes or other governmental charges for any period have been
proposed or assessed in writing against Holdings or any of its subsidiaries by
any government or taxing authority that, alone or in the aggregate, would
result in a Superior Adverse Effect.
(h) No Material Adverse Changes. Since the date of the most recent
Holdings SEC Report, except as described in the public press releases issued by
the Company since the date of the most recent Holdings SEC Report (copies of
which have been made available to the Stockholders and their counsel), Holdings
and its subsidiaries have in all material respects conducted their respective
businesses only in, and have not engaged in any transaction other than
according to the Ordinary Course of Business, (ii) there has not been any event
or occurrence which either individually or in the aggregate would have had a
Superior Adverse Effect and (iii) no action, suit, claim or proceeding has been
filed or threatened in writing against Holdings or Superior, which if adversely
determined, would result in a Superior Adverse Effect. Superior believes that
its relationships with its clients are good and, to the Knowledge of the
Superior there are no disputes or problems with clients of Superior that could
have a Material Adverse Effect
(i) Brokers' Fees. Neither Superior nor Holdings has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions
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contemplated by this Agreement for which any of the Stockholders is or could
become liable or obligated.
ARTICLE
4.
ADDITIONAL AGREEMENTS
4.1. Waiver and Release. Each of the Stockholders, on behalf of himself
and his heirs, executors, administrators, successors and assigns ("RELEASING
PARTIES"), irrevocably and unconditionally waives and releases any and all
rights with respect to, and releases, forever acquits and discharges each and
all of the Company, the Company's stockholders, directors, officers, employees,
agents and other representatives, and their respective heirs, executors,
administrators, successors and assigns ("RELEASED PARTIES") with respect to,
each and all claims, demands, charges, complaints, obligations, causes of
action, suits, liabilities, Indebtedness, sums of money, covenants, agreements,
instruments, contracts (written or oral, express or implied), controversies,
promises, fees, expenses (including attorneys' fees, costs and expenses),
damages and judgments, at law or in equity, in contract or tort, in federal,
state or other judicial, administrative, arbitration or other proceedings, of
any nature whatsoever, known or unknown, suspected or unsuspected, previously,
now or hereafter arising, in each case which arise out of, are based upon or
are connected with facts or events occurring or in existence on or prior to the
date of the Closing ("Released Claims"). Each of the Stockholders further
represents and warrants that he has not assigned or otherwise transferred any
right or interest in or to any of the Released Claims. This Section 4.1 shall
not apply to any of the following: (a) claims for salaries and benefits
accrued in the Ordinary Course of Business through the Closing Date (all of
which, (except for payments pursuant to the Deferred Compensation Agreements),
to the extent not paid by the Company prior to Closing, shall be Indemnified
Current Liabilities under Section 2.5), (b) the Stockholders' rights under this
Agreement, (c) rights and claims for benefits accrued through the Closing Date
under the Company's written employee benefits and health and welfare plans
which plans are disclosed on Section 3.2(p) of the Company Disclosure Schedule,
(all of which, to the extent not paid by the Company prior to Closing, shall be
Indemnified Current Liabilities), (d) rights and claims of each of Xxxxxxx,
Xxxxxx and Xxxxxxx under their respective Deferred Compensation Agreement.
4.2. Indemnification.
(a) Survival; Survival Periods Generally. All of the representations and
warranties of the Stockholders contained in Sections 3.1(a), 3.2(d) and 3.2(i)
(the "SPECIAL REPRESENTATIONS"), shall survive the Closing and shall continue
in full force and effect until the expiration of the applicable statute of
limitations for such matters. All representations and warranties of the
Stockholders in this Agreement other than the Special Representations
(collectively, the "THREE-YEAR REPRESENTATIONS") shall survive the Closing and
shall continue in full force and effect for a period of three (3) years
thereafter (the "GENERAL SURVIVAL PERIOD"), after which such representations
and warranties shall terminate and have no further force or effect. All of the
representations and warranties of Superior and Holdings contained in Section
3.3 (the
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"SUPERIOR REPRESENTATIONS") shall survive the Closing and shall continue in
full force and effect until the expiration of the General Survival Period.
(b) Indemnification by the Stockholders. Subject to Section 4.2(c),
Xxxxxxx and Kumura shall, jointly and severally (except as provided in the
final sentence of Section 4.2(c)), indemnify, defend and hold Superior,
Holdings and their respective officers, directors, shareholders, employees and
agents (the "SUPERIOR INDEMNITEES") harmless from and against the entirety of
any Adverse Consequences the Superior Indemnitees may suffer, sustain or become
subject to, through and after the date of the claim for indemnification,
including any Adverse Consequences the Superior Indemnitees may suffer after
the end of any applicable Survival Period, resulting from, arising out of,
relating to, in the nature of, or caused by: (i) any breach or inaccuracy of
any of the Special Representations, any Indemnified Liability for Taxes or any
disallowance or reduction of the NOL below the Available Amount; (ii) any
breach or inaccuracy of any of the Three-Year Representations; (iii) any
nonfulfillment or breach of any covenant or agreement on the part of the
Stockholders set forth in this Agreement; (iv) any claim by any Person
asserting any ownership interest in or rights to acquire any capital stock of
the Company, to the extent such ownership interest or rights are not set forth
on Section 3.2(d) of the Company Disclosure Schedule; (v) any of the
Indemnified Liabilities (other than Indemnified Liabilities for Taxes); and
(vi) subject to Section 4.2(f), the costs and expense of defending any action,
demand or claim by any third-party against or affecting the Superior
Indemnitees which, if true or successful, would give rise to a breach of
representations, warranties or covenants of the Company or the Stockholders,
even if such action, demand or claim ultimately proves to be untrue or
unfounded. All Adverse Consequences for which the Superior Indemnitees are
entitled to seek indemnification under this Agreement are referred to herein as
"SUPERIOR INDEMNIFIABLE LOSSES." The parties acknowledge and agree that if any
breach or inaccuracy of any representation or warranty or any nonfulfillment or
breach of any covenant results in an Indemnified Liability, which is
discharged, reimbursed or indemnified by the Stockholders, the Stockholders
shall have no other liability to Superior for such breach, inaccuracy or
nonfulfillment.
(c) Certain Limits On the Indemnification Obligation of Xxxxxxx and
Xxxxxx. Neither Xxxxxxx nor Kumura shall have any obligation to indemnify
Superior from and against any Superior Indemnifiable Losses under Sections
4.2(b)(ii), 4.2(b)(iii) or 4.2(b)(v), or under Section 4.2(b)(vi) with respect
to matters covered by Sections 4.2(b)(ii), 4.2(b)(iii) or 4.2(b)(v), unless
Superior makes a written claim within the General Survival Period with respect
to the facts or matters which give rise to such Superior Indemnifiable Losses.
Neither Xxxxxxx nor Xxxxxx shall have any obligation to indemnify Superior from
and against any Superior Indemnifiable Losses under any other provision of
Section 4.2(b) unless Superior makes a written claim with respect to the facts
or matters which give rise to such Superior Indemnifiable Losses, prior to the
expiration of the applicable statute of limitations relating thereto. Kumura's
aggregate liability hereunder with respect to all Superior Indemnifiable Losses
shall be limited to the product of (i) the Purchase Price and (ii) Kumura's Pro
Rata Percentage. Notwithstanding anything in this Agreement to the contrary,
Xxxxxxx'x and Xxxxxx'x liability to indemnify Superior against breaches of
their representations and warranties in Section 3.1 shall be several, not joint
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(d) Indemnification by Superior. Subject to Section 4.2(e), Superior and
Holdings shall jointly and severally indemnify, defend and hold the
Stockholders harmless from and against the entirety of any Adverse Consequences
the Stockholders may suffer, sustain or become subject to, through and after
the date of the claim for indemnification, including any Adverse Consequences
the Stockholders may suffer after the end of the General Survival Period,
resulting from, arising out of, relating to, in the nature of, or caused by:
(i) any breach or inaccuracy of any representation or warranty of Superior or
Holdings in this Agreement; (ii) any nonfulfillment or breach of any covenant
or agreement on the part of Superior or Holdings set forth in this Agreement;
(iii) any and all Liabilities arising out of the operation of the business of
the Company after the Closing Date, or (iv) subject to Section 4.2(f), the
costs and expense of defending any action, demand or claim by any third-party
against or affecting the Stockholders which, if true or successful, would give
rise to a breach of any of the representations, warranties or covenants of the
Stockholders or Holdings, even if such action, demand or claim ultimately
proves to be untrue or unfounded. All adverse consequences for which the
Stockholders may seek indemnification under this Agreement are referred to
herein as the "STOCKHOLDER INDEMNIFIABLE LOSSES."
(e) Limits on the Indemnification Obligations of Superior and Holdings.
Neither Superior nor Holdings shall have any obligation to indemnify the
Stockholders from and against any Stockholder Indemnifiable Losses under
Sections 4.2(d)(i) or 4.2(d)(ii), or under Section 4.2(d)(iv) with respect to
matters covered by Sections 4.2(d)(i) or 4.2(d)(ii), unless the Stockholders
makes a written claim within the General Survival Period with respect to the
facts or matters which give rise to such Stockholder Indemnifiable Losses.
Neither Superior nor Holdings shall have any obligation to indemnify the
Stockholders from and against any Stockholder Indemnifiable Losses under any
other provision of section 4.2(d) unless the Stockholders make a written claim
with respect to the facts or matters which give rise to such Stockholder
Indemnifiable Losses prior to the expiration of the applicable statute of
limitations relating thereto.
(f) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"INDEMNIFIED PARTY") with respect to any matter (a "THIRD PARTY
CLAIM") which may give rise to a claim by such Indemnified Party
for indemnification against any other Party (the "INDEMNIFYING
PARTY") under this Agreement, then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided, however,
that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any
liability or obligation hereunder unless (and then solely to the
extent that) the Indemnifying Party is damaged thereby.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of the
Indemnifying Party's choice, reasonably satisfactory to the
Indemnified Party, so long as (A) the Indemnifying Party notifies
the Indemnified Party, within 15 business days after the
Indemnified Party has given notice of the Third Party Claim to the
Indemnifying Party (or by such earlier date as may be necessary
under applicable procedural rules
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in order to file a timely appearance and response) that the
Indemnifying Party is assuming the defense of such Third Party
Claim and will indemnify the Indemnified Party against such Third
Party Claim in accordance with the terms and limitations of this
Section 4.2, and (B) the Indemnifying Party conducts the defense
of the Third Party Claim actively and diligently.
(iii) So long as the conditions set forth in Section
4.2(f)(ii) are and remain satisfied, then (A) the Indemnifying
Party may conduct the defense of the Third-Party Claim in
accordance with Section 4.2(f)(ii), (B) the Indemnified Party may
retain separate co-counsel at its sole cost and expense (except
that the Indemnifying Party will be responsible for the reasonable
fees and expenses of the separate co-counsel to the extent the
Indemnified Party reasonably concludes on the advice of counsel
that the counsel the Indemnifying Party has selected has an actual
or potential conflict of interest), (C) the Indemnified Party will
not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be unreasonably
withheld), (D) the Indemnifying Party will not consent to the entry
of any judgment with respect to the matter, or enter into any
settlement, which either imposes an injunction or other equitable
relief upon the Indemnified Party or does not include a provision
whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, and (E)
the Indemnified Party shall at the Indemnifying Party's reasonable
request cooperate in the defense of the matter. In the event that
the conditions in Section 4.2(f)(ii) are not satisfied in the case
of any Third Party Claim, then the Indemnified Party may assume
control of the defense of such claim.
(g) No Circular Recovery. Each of the Stockholders hereby agrees
that he will not make any claim for reimbursement, contribution or
indemnification with respect to his obligations under Section 4.2(b) or 4.2(f)
against either the Company, Superior or Holdings by reason of the fact that he
or any of his agents or other representatives was or is a controlling person,
director, officer, employee, agent or other representative of the Company;
provided that this provision shall not preclude or limit the Stockholder from
making any claim under any applicable insurance policy insuring the Company for
any claim other than a claim brought against the Stockholder by or in the name
of the Company, Superior or Holdings. Superior or Holdings or was or is
serving as such for another Person at the request of the Company, Superior or
Holdings (whether such claim is pursuant to any statute, certificate of
incorporation, By-Law, contractual obligation or otherwise) with respect to
any Indemnifiable Losses otherwise payable by him hereunder.
(h) Right of Offset. In addition to the Company's right to
satisfy due and payable Indemnified Current Liabilities and Retained
Liabilities out of collections upon the Billed Receivables in accordance with
Section 2.4, Superior shall have the right, upon not less than 30 days' prior
written notice, to offset against any amounts otherwise payable by Superior to
the Stockholders under Section 2.3 of this Agreement any Indemnifiable Losses
that are liquidated third party claims or actual out-of-pocket costs and
expenses at the time such payment is originally
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due under Section 2.3. In the event of any dispute between Superior and the
Stockholders in respect of any such offset claim, Superior may suspend payment
of an amount otherwise payable under Section 2.3 equal to the disputed amount
pending final resolution of such dispute; provided that if the resolution of
the dispute results in Superior being required to pay any portion of the
disputed amount to the Stockholders, the Stockholders shall be entitled to
interest (at a per annum rate equal to the "Prime Rate as published in the
Wall Street Journal from time to time) on the Correction Payment from and
including the original due date of such correction payment under Section 2.3 to
the date of payment. The parties agree that any such dispute shall be resolved
under the procedures for resolution of disputes set forth in Sections 4.3 and
4.4 of this Agreement.
4.3. Dispute Resolution Regarding Indemnification. In the event that any
dispute should arise among the Parties with respect to any claims under
this Agreement, the Parties shall first use their best efforts to resolve
such dispute among themselves. If the Parties are unable to resolve the
dispute within 30 calendar days after the commencement of efforts to
resolve the dispute, the dispute will be submitted to arbitration in
accordance with Section 4.4 hereof.
4.4. Arbitration of Disputes.
(a) All disputes arising under this Agreement shall be negotiated between
the Stockholders and such senior management representative of the Company who
is designated by the Company and is authorized to negotiate and act on behalf
of the Company, which parties shall conduct good faith discussions in order to
resolve such dispute within 10 days after each dispute arises. If the dispute
is still unresolved 10 days following the commencement of such good faith
discussions, the dispute may be submitted by any party to binding arbitration.
(b) Either party requesting arbitration shall serve a written demand for
arbitration on the other party by registered or certified mail. The demand
shall set forth a statement of the nature of the dispute, the amount involved
and the remedies sought. Each party shall have the right to be represented by
counsel and shall have the right to full discovery. Except as specifically
provided herein, the arbitration shall be conducted by and in accordance with
the commercial rules of the American Arbitration Association; provided, that
the arbitrator shall have the sole discretion with regard to the scope of
discovery, depositions and the admissibility of evidence; and the arbitrator's
ruling shall be in accordance with law and the terms of this Agreement. The
arbitrator shall not have the power to amend this Agreement in any respect.
(c) No later than 20 calendar days after a demand for arbitration is
served, the parties shall jointly select and appoint a disinterested person to
act as the arbitrator. In the event that the parties do not agree on the
selection of an arbitrator, each party shall select an arbitrator within 10
days after the date on which the parties do not agree on the selection of a
sole arbitrator and the two arbitrators so selected shall select a third
arbitrator within 10 days after the parties select their arbitrators; the
provisions set forth herein regarding the single arbitrator shall apply to the
three arbitrators so selected. Any arbitrator designated hereunder shall not
now or in the three years preceding such arbitration be an employee,
consultant, officer, director or stockholder of any party hereto or any
Affiliate of any Party to this Agreement or have now or in the three
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years preceding such arbitration any business relationship with any party
hereto or any Affiliate of any party hereto.
(d) No later than 10 calendar days after the arbitrator is appointed, the
arbitrator shall schedule the arbitration for a hearing to commence on a
mutually convenient date. The hearing shall commence no later than 30 calendar
days after the arbitrator is appointed and shall continue from day to day until
completed. The arbitrator shall issue his award in writing no later than 20
calendar days after the conclusion of the hearing.
(e) Such award shall be binding upon the parties and shall not be
reviewable except for gross errors of law.
(f) All discovery shall be completed no later than the commencement of the
arbitration hearing or 60 calendar days after the date that a proper demand for
arbitration is served, whichever occurs earlier, unless upon a showing of good
cause the arbitrator extends or shortens that period.
(g) The prevailing party in any arbitration shall be entitled to an award
of reasonable attorneys' fees incurred in connection with the arbitration and
the disputed issues with respect thereto. The non-prevailing party shall pay
such fees, together with the fees of the arbitrator and the costs and expenses
of the arbitration.
(h) Any arbitration pursuant to this Section 4.4 shall be conducted in Las
Vegas, Nevada. Any arbitration award may be entered in and enforced by any
court having jurisdiction thereof.
4.5. Termination of Company Plans and Insurance Policies. Xxxxxxx shall
cause each insurance policy set forth in Section 3.2(u) of the Company
Disclosure Schedule and each Plan set forth on the Company Disclosure Schedule
to be terminated as of the Closing Date (except that the Company's 401k Plan
shall be terminated as of the day immediately prior to the Closing Date).
Subject to Section 4.7(c) with regard to Professional Liability claims, Xxxxxxx
shall be liable for any and all Liabilities of the Company accrued under such
Plans and policies through the Closing Date.
4.6. Participation in Benefit Plans.
(a) With respect to the post-Closing participation of each employee of the
Company in any of Superior's Plans that are health, accident, sickness, or
short-term or long-term disability plans or programs (collectively, the "H&D
Plan"), Superior will (i) waive all restrictions and limitations for
pre-existing conditions under its H&D Plan, (ii) recognize, in accordance with
the terms of its H&D Plan, all health expenses (including, without limitation,
expenses for medical, dental, and vision care) that were incurred during 1997
(but prior to the Closing) for purposes of satisfying any deductibles and
co-payment limitations under its H&D Plan for the 1997 calendar year; and (iii)
credit each employee of the Company with his period of service with the Company
for the purpose of determining his eligibility for benefits under its H&D Plan.
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(b) With respect to the post-Closing participation of each employee of the
Company in the pension plan currently offered by Superior, for purposes of
crediting periods of service for eligibility and vesting under such plan, each
employee of the Company shall be given credit for prior service with the
Company. In addition, each employee of the Company who has satisfied the
eligibility requirements under such pension plan shall be entitled to
participate therein on the first day of the calendar month following the
Closing; provided, however, that, for purposes of determining the appropriate
contribution of such employee to the Superior pension plan, the employee's
compensation, as defined under the Superior pension plan, shall be based only
upon compensation earned by that employee after the Closing.
4.7. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing Date.
(a) General. In case at any time after the Closing Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification with respect to
such matter under Section 4.2).
(b) Transfer of Holdings Common.
(i) Each of the Stockholders hereby acknowledges and agrees that the
Holdings Common may not be transferred except pursuant to (a) a
registered offering under the Securities Act, (b) Rule 144 of the
Securities and Exchange Commission (or any similar rule or rules then in
force) if available, or (c) subject to the conditions specified in
subparagraph (ii) below, any other legally available means of transfer.
(ii) In connection with the transfer of any Holdings Common (other
than a transfer pursuant to a registered public offering), the holder
thereof shall deliver written notice to Holdings describing in reasonable
detail the transfer or proposed transfer, together with an opinion of
securities counsel (with such opinion and such counsel being reasonably
satisfactory to Holdings) to the effect that such transfer of Holdings
Common may be effected without registration of such Holdings Common under
the Securities Act or any applicable state securities law. In addition,
if the holder of Holdings Common delivers to Holdings such an opinion
that concludes that no subsequent transfer of such Holdings Common will
require registration under the Securities Act or any applicable state
securities law, Holdings shall promptly upon such contemplated transfer
deliver new certificates for such Holdings Common which do not bear the
restrictive legend set forth in Section 3.1(e). If Holdings is not
required to deliver new certificates for such Holdings Common not bearing
such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to Holdings in writing its agreement
to be bound by the conditions contained in this Section 4.7(b).
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(c) Professional Liability Insurance. From and after the Closing Date,
through and including the third anniversary thereof, Superior shall maintain
liability insurance providing coverage for errors and omissions arising out of
the services performed by the Company, including, without limitation,
continuation of coverage with respect to claims relating to periods prior to
the Closing that would have been covered by the Company's liability insurance
as in effect on the Closing Date but for the termination of such policies
pursuant to this Agreement ("LIABILITY INSURANCE"). Such Liability Insurance
shall be similar in scope and coverage to the insurance policy in effect and
maintained by the Company as of the Closing Date, which is identified and
summarized on Schedule 4.7(c) attached hereto (documentation of which shall
have been provided to Superior by the Company prior to the Closing Date). The
failure of Superior to maintain Liability Insurance in accordance with this
Section 4.7(c) shall release the Stockholders from their obligations under
Section 4.2 with respect to Professional Liabilities, but only to the extent
that, at the time of any claims made with respect to Professional Liabilities
("CLAIM"), the Stockholders are able to demonstrate that such Professional
Liability: (i) would have been covered by the Liability Insurance, and (ii) is
not, at the time of the Claim, covered by any other insurance policy then
maintained or previously in force by the Company.
(d) Tax Matters. The Stockholders shall prepare or cause to be prepared
and timely file or cause to be timely filed all Tax Returns for the Company for
all periods ending on or prior to the Closing Date (including the return for
fiscal 1996, which shall be filed by no later than April 30, 1997, and the
return for the short period between January 1, 1997 and the Closing Date, which
shall be filed by no later than March 15, 1998) which are required to be filed
after the Closing Date. The Stockholders shall permit Superior to review and
reasonably comment on each such Tax Return described in the prior sentence
(including any amended return) prior to the filing thereof. All Tax Returns to
be prepared and filed under this Section 4.7 shall be prepared on a basis
consistent with the Company's past practices to the extent such past practices
are consistent with applicable Tax laws, rules and regulations and the
provisions, purposes and intent of this Agreement. The Stockholders shall
reimburse Superior for Taxes of the Company with respect to such periods within
fifteen (15) days after receipt of written notice of payment by Superior or the
Company of such Taxes.
(e) Tax Proceedings. Superior shall notify the Stockholders in writing
promptly upon learning of any governmental inquiry, examination or proceeding
(a "TAX PROCEEDING") that could result in a determination with respect to Taxes
due or payable by Superior or the Company for which the Stockholders may be
required to reimburse or indemnify Superior or the Company pursuant to this
Agreement ("TAX CLAIMS"); provided, however, that no delay on the part of
Superior in notifying any Indemnifying Party shall relieve the Stockholders
from any liability or obligation hereunder unless (and then solely to the
extent) that the Stockholders are damaged thereby. The Stockholders shall have
the right (subject to complying with the requirements of Section 4.2(f)(ii)
with respect to such Tax Claim, which provisions are incorporated herein
mutatis, mutandis) to conduct the handling, disposition, and settlement of any
such Tax Proceeding, insofar as such Tax Proceeding relates to a Tax Claim for
which the Stockholders may so be required to reimburse or indemnify Superior or
the Company, subject to and in accordance with the terms of this Section
4.6(e). So long as the requirements for Stockholder control set forth above
are and remain satisfied, then (i) the Stockholders may conduct the defense
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of the Tax Claim in accordance with such requirements, (ii) Superior may retain
separate co-counsel and accounting advisors at its sole cost and expense, (iii)
neither the Company nor Superior shall consent to the entry of any judgment or
enter into any settlement with respect to the Tax Claim without the prior
written consent of the Stockholders (not to be unreasonably withheld), (iv) the
Stockholders will not consent to the entry of any judgment with respect to the
Tax Claim, or enter into any settlement of the Tax Claim, which either imposes
an injunction or other equitable relief upon Superior or the Company or
otherwise results in an adverse economic impact on future tax reporting
periods, or does not include a full and complete release of the Company and
Superior from all Liability with respect to such Tax Claim, and (v) the Company
and Superior shall, at the Stockholder's reasonable request and expense,
cooperate in the defense of the matter (including without limitation providing
the Stockholders with such powers of attorney as may be reasonably necessary or
appropriate). In the event that the requirements for Stockholder control are
not satisfied in the case of any Tax Claim, then the Company and Superior may
reassume control of the defense of such Tax Claim.
(f) Tax Refund. Any refunds or credits of federal, state or local Taxes
of the Company received by Superior or the Company for Taxes paid by the
Company for periods ending on or prior to Closing (including refunds arising
from the carryback of net operating losses from periods ending on or prior to
the Closing Date) shall be for the account of the Stockholders and shall be
payable by Superior or the Company to the Stockholders (in accordance with
their respective Pro Rata Percentages) promptly after the receipt thereof.
(g) Personal Financials. Xxxxxxx shall, within thirty (30) days of the
date of the Closing and on each of the first through third anniversaries of the
Closing, provide Superior with a personal balance sheet showing all of his
assets and liabilities.
(h) Allocation. Each of the Parties agree that all sums paid under
Sections 2.2, 2.3 and 2.4 of this Agreement shall be treated as purchase price
for the Company Common and each of the Parties shall make all elections and
file all tax returns in a manner consistent with this Section 4.7(h).
(i) Bank Accounts. The Company shall maintain its currently existing bank
accounts for a period of time after the Closing sufficient to allow for the
clearing of all deposits and payments made and checks drawn through the Closing
Date. The Company shall not make any deposits to or payments from such bank
accounts after the Closing, except for final payments out of such accounts at
the direction of Xxxxxxx, in his capacity as President of the Company, if
necessary, to honor checks drawn against such accounts through the Closing Date
and to reduce the balances of such accounts to zero at the time the accounts
are closed.
4.8. Miscellaneous.
(a) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
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(b) Entire Agreement. This Agreement (including the other documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof. Without limiting the generality of the foregoing, this
Agreement supersedes the letter of intent between Superior, the Company and
Xxxxxxx dated December 31, 1996.
(c) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign this Agreement or any of
such Party's rights, interests, or obligations hereunder without the prior
written approval of the other Parties.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) three
(3) business days after it is sent by registered or certified mail, return
receipt requested, postage prepaid; (ii) one day after receipt is
electronically confirmed, if sent by fax (provided that a hard copy shall be
promptly sent by first class mail); or (iii) one (1) business day following
deposit with a recognized national overnight courier service for next day
delivery, charges prepaid, and, in each case, addressed to the intended
recipient as set forth below:
If to Superior: With a Copy to:
Superior Consultant Company, Inc. Xxxxxxxx & Xxxxxx, Ltd.
4000 Town Center 00 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000 Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Xx. Attn: Xxxxxxx X. Xxxxx
Fax: 810/000-0000 Fax: 312/000-0000
If to the Company: With a Copy to:
The Xxxxxxx Group
00000 X. Xxxxxxxx Xx. XxXxxxxxx, Will & Xxxxx
Suite 240 0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000 Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx Attn:Xxxx X. Xxxxxx
Fax: 619/000-0000 Xax: 310/000-0000
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If to Xxxxxxx: With a Copy to:
00000 X. Xxxxxxxx Xxxxx XxXxxxxxx, Will & Xxxxx
Suite 240 0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000 Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxx
Fax: 619/000-0000 Xax: 310/000-0000
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is delivered to
the individual for whom it is intended. Any Party may change the address to
which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other Parties notice in the manner herein set
forth.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Michigan, without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of Michigan or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Michigan.
(g) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by each
of the Parties affected by such amendment . No waiver by any Party of any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
occurrence of such kind.
(h) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the invalid or unenforceable term or provision in
any other situation or in any other jurisdiction. If a final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term or provision,
and this Agreement shall be enforceable as so modified after the expiration of
the time within which the judgment may be appealed.
(i) Expenses. Except as otherwise explicitly provided in this Agreement,
each of Superior on the one hand, and the Stockholders, on the other hand, will
bear his or its own direct and indirect costs and expenses (including fees and
expenses of legal counsel, investment bankers, brokers or other representatives
or consultants) incurred in connection with the negotiation,
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preparation and execution of this Agreement and the transactions contemplated
hereby, whether or not such transactions are consummated. All expenses paid or
accrued by the Company in connection with this Agreement shall be paid by
Stockholders and shall not be paid or accrued by the Company or become
post-Closing obligations of the Company.
(j) Construction. The Parties have jointly participated in the
negotiation and drafting of this Agreement. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumptions or burdens of proof
shall arise favoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any Federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Each defined term used in this Agreement has a comparable meaning when used in
its plural or singular form. Each gender-specific term used herein has a
comparable meaning whether used in a masculine, feminine or gender-neutral
form. The term "INCLUDE" and its derivatives shall have the same construction
as the phrase "INCLUDE, WITHOUT LIMITATION," and its derivatives. The section
headings contained in this Agreement are inserted for convenience or reference
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(k) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(l) Directly or Indirectly. Where any provision in this Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether the action in question is
taken by such Person, directly or indirectly, through one or more
intermediaries.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Stock Purchase
Agreement as of the date first above written.
SUPERIOR CONSULTANT HOLDINGS
CORPORATION:
____________________________
By:_________________________
Name:_______________________
Title:______________________
SUPERIOR CONSULTANT COMPANY, INC.
By:_________________________
Name:_______________________
Title:______________________
THE COMPANY:
The Xxxxxxx Group
By:_________________________
Name: Xxxxxx X. Xxxxxxx
Title: President
____________________________
XXXXXX X. XXXXXXX
____________________________
XXXXXX X. XXXXXX
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