EXHIBIT 10.40
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of the 11th day of August, 1997 by and between Xxxxxx Telecom, Inc., a Delaware
corporation ("Buyer"), and Xxxx X. Xxxxxxxxx ("Seller").
R E C I T A L S
- - - - - - - -
WHEREAS, Seller owns all of the issued and outstanding shares of capital stock
of Corporate Information Systems, Inc., an Illinois corporation ("CIS"); and
WHEREAS, CIS is engaged in the business of selling and providing contract
technical labor, payroll, and information technology services (the "Business");
and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, all of the issued and outstanding shares of stock of CIS, on the terms
and conditions set forth herein;
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, for and in consideration of the mutual promises herein made,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
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2.1 Purchase and Sale. Subject to the terms and conditions set forth in
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this Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell,
assign, transfer and deliver to Buyer, all of the issued and outstanding shares
of stock of CIS, consisting of 100 shares of common stock, no par value (the
"Shares").
2.2 Purchase Price. Buyer shall pay to the Seller, in full payment for
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the Shares, an aggregate purchase price of $2,000,000 (the "Unadjusted Purchase
Price") in immediately available funds. Subject to adjustment as set forth in
Section 1.3, the Unadjusted Purchase Price shall be payable as follows:
(a) $950,000 on the Closing Date (as defined in Section 7.1);
(b) $250,000 one year from the date hereof, and an additional
$100,000 sixty days following the end of the period defined as
the one year period beginning on the first day of Buyer's
September accounting period and ending one year following such
date (the "Year 1 Period");
(c) $250,000 two years from the date hereof, and an additional
$100,000 sixty days following the end of the period defined as
the one year period beginning at the end of the Year 1 Period and
ending one year after the end of the Year 1 Period (the "Year 2
Period"); and
(d) $250,000 three years from the date hereof, and an additional
$100,000 sixty days following the end of the period defined as
the one year period beginning at the end of the Year 2 Period and
ending one year after the end of the Year 2 Period (the "Year 3
Period").
1.3 Adjustments to Purchase Price. The payments set forth in Section 1.2
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shall be subject to the net worth adjustment set forth in paragraph (a), and the
earnings adjustment set forth in paragraph (b).
(a) Net Worth Adjustment.
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The payment set forth in paragraph (a) of Section 1.2 shall be
adjusted as follows: No later than forty-five (45) days after
the Closing, Buyer shall prepare and deliver to Seller a balance
sheet as of 12:01 a.m. on the Closing Date (the "Closing Date
Balance Sheet"), setting forth the Net Worth of CIS (defined as
assets minus liabilities of CIS, but excluding both Excluded
Assets and Excluded Liabilities, as defined in Section 8.3) The
Closing Date Balance Sheet shall be prepared in accordance with
generally accepted accounting principles. The parties agree that
the Closing Date Balance Sheet shall be prepared using the same
methodology as used in preparing the adjustments to generally
accepted accounting principles as set forth in Schedule 2.6. To
the extent the Net Worth shown on the Closing Date Balance Sheet
is less than $500,000, the Seller shall pay to the Buyer the
difference between such Net Worth and $500,000, in immediately
available funds, within ten (10) days following final
determination of such amount. In the event a dispute arises
concerning the Closing Date Balance Sheet, Seller shall be
required to pay the amount not
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in dispute but shall not be required to pay the amount in dispute
under this paragraph (a) of Section 1.3 until 10 days after such
dispute has been resolved as hereinafter provided.
(b) Earnings Adjustment.
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(i) The payment set forth in paragraph (b) of Section 1.2 shall
be increased by 200% of any positive amount equal to the sum
of: (x) CIS Operating Profits (as defined) earned during the
Year 1 Period minus $500,000, up to $400,000, and (y) 12
1/2% of any positive amount equal to CIS Operating Profits
earned during the Year 1 Period minus $900,000. The payment
set forth in paragraph (b) of Section 1.2 shall be decreased
by 200% of any negative amount equal to CIS Operating
Profits earned during the Year 1 Period minus $500,000,
provided, however, that no adjustment set forth in this
paragraph (b)(i) of Section 1.3 shall result in a payment of
less than $250,000. The resultant payment provided for in
this clause (i) shall be referred to as the "Year 1 Period
Adjusted Payment Amount".
(ii) The payment set forth in paragraph (c) of Section 1.2 shall
be increased by 100% of any positive amount equal to the sum
of: (x) CIS Operating Profits earned during the Year 2
Period minus $500,000, up to $400,000, and (y) 25% of any
positive amount equal to CIS Operating Profits earned during
the Year 2 Period minus $900,000. The payment set forth in
paragraph (c) of Section 1.2 shall be decreased by 100% of
any negative amount equal to CIS Operating Profits earned
during the Year 2 Period minus $500,000, provided, however,
that no adjustment set forth in this paragraph (b)(ii) of
Section 1.3 shall result in a payment of less than $250,000.
The resultant payment provided for in this clause (ii) shall
be referred to as the "Year 2 Period Adjusted Payment
Amount".
(iii)The payment set forth in paragraph (d) of Section 1.2
shall be increased by 100% of any positive amount equal to
the sum of: (x) CIS Operating Profits earned during the Year
3 Period minus $500,000, up to $400,000, and (y) 25% of any
positive amount equal to CIS Operating Profits earned during
the Year 3 Period minus $900,000. The payment set forth in
paragraph (d) of Section 1.2 shall be decreased by 100% of
any negative amount equal to CIS Operating Profits earned
during the Year 3 Period minus
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$500,000, provided, however, that no adjustment set forth in
this paragraph (b)(iii) of Section 1.3 shall result in a
payment of less than $250,000. The resultant payment
provided for in this clause (iii) shall be referred to as
the "Year 3 Period Adjusted Payment Amount".
(iv) Buyer's obligation to pay $250,000 of the respective Year 1
Period Adjusted Payment Amount, Year 2 Period Adjusted
Payment Amount, and Year 3 Period Adjusted Payment Amount
shall be evidenced by a certain Promissory Note, dated the
date hereof, in the original principal amount of $668,252.96
(the "Promissory Note") from Buyer as Maker to Seller as
Payee.
(v) Xxxxxx International, Inc., a Maryland corporation ("BI"),
shall issue a certain guaranty (the "Guaranty")with respect
to buyer's payment obligation set forth in Section 1.2 and
in this paragraph (b) of Section 1.3.
(vi) In the event a dispute arises concerning the Year 1 Period
Adjusted Payment Amount, the Year 2 Period Adjusted Payment
Amount, or the Year 3 Period Adjusted Payment Amount, Buyer
shall be required to pay the amount not in dispute but shall
not be required to pay the amount in dispute under this
paragraph (b) of Section 1.3 until 10 days after such
dispute has been resolved as hereinafter provided.
(vii)Definition of Operating Profits.
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For purposes of this Section 1.3, "CIS Operating Profits"
shall mean all revenues earned from the Business (excluding
the Business conducted in Arizona) before allocation of
interest expense (except interest expense on receivables
outstanding for more than 60 days), income taxes, and
amortization of intangible assets, but after deduction of
Operating Expenses (as defined below). Operating Profits
shall be calculated on the accrual basis of accounting in
accordance with generally accepted accounting principles.
The term "Operating Expenses" shall include the following:
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(a) All direct expenses related to the operations of the
Business (excluding the Business conducted in Arizona) such
as employee compensation, employee fringes, independent
contractor cost, recruitment costs, office expense directly
related to the Business, advertising, telephone, travel,
postage, lease expense, and depreciation on tangible assets;
(b) Any direct expenses requested or agreed to by
Xxxxxxxxx, incurred by Buyer on behalf of the Business
(excluding the Business conducted in Arizona), and
(c) Governmental penalties, litigation settlements,
workers' compensation, and other similar governmental costs
and expenses (including reasonable attorney's fees) specific
to the operation of the Business (excluding the Business
conducted in Arizona).
General corporate allocations for corporate staff,
corporate advertising, payroll processing, accounting, legal
or other corporate support functions will not be deducted as
an expense in computing Operating Profits.
(vi) Statements. Within sixty (60) days after the end of the
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Year 1 Period, the Year 2 Period, and the Year 3 Period,
respectively, Buyer shall prepare and deliver to Seller an
itemized statement of all income and expenses for such
respective period, a computation of CIS Operating Profits
for such respective period, and a disbursement of the actual
payment due at that time.
(c) Resolution of Disputes. In the event Seller is not satisfied
----------------------
with the Closing Date Balance Sheet or any statement of CIS
Operating Profits submitted by Buyer, Seller shall attempt in
good faith to resolve any disputed item with Buyer. In the event
the parties are irreconcilable, then Seller shall have the right
to have its auditors make a special audit of the item or items in
question. The Closing Date Balance Sheet or any statement of CIS
Operating Profit which is not contested in writing to Buyer by
Seller within 30 (thirty) days of the statement's receipt is
deemed final and correct by Seller.
If upon Seller's submission of audit results to Buyer, Buyer
agrees (or in the event of arbitration under paragraph (d) below,
the arbitrator finds) that additional monies are due Seller
hereunder and said monies exceed
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$10,000, then Buyer will contribute the lesser of $2,500 or the
actual costs of said audit to Seller.
(d) Arbitration of Disputes. If a dispute arises out of this
-----------------------
Agreement as to the computation of the Closing Date Balance Sheet
or any statement of CIS Operating Profit and the parties have not
been successful in resolving such dispute through negotiation,
the parties agree to resolve the dispute through arbitration, to
be conducted in Illinois, by submitting the dispute to a sole
arbitrator selected by the parties or, at any time at the option
of a party, to arbitration by the American Arbitration
Association ("AAA"). Each party shall bear its own expenses and
an equal share of the expenses of the arbitrator and the fees of
the AAA. The parties, or their representatives, other
participants and the arbitrator shall hold the existence, content
and result of the arbitration in confidence. The results of such
arbitration shall be final and binding upon the parties and shall
not be subject to judicial review.
(e) Further Adjustment.
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All amounts required to be paid pursuant to Section 1.2 are
subject to further adjustment as provided in Section 6.4.
(f) On the 120th day following the closing there shall be a
determination of the amount received as of such date with respect
to all accounts receivable existing as of the date of Closing
("Open Items"). Seller shall immediately pay Buyer the
difference between such amounts. If proceeds are subsequently
received with respect to such Open Items Buyer shall promptly,
from time to time, pay such proceeds to Seller. During the 120
period, Buyer shall send Seller monthly statements of outstanding
receivables to Seller.
1.4 Stock Free of Liens. The Shares to be transferred hereunder shall be
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transferred free and clear of all liens, claims, encumbrances, restrictions or
rights of others of every kind and description, including, without limitation,
tax liens.
1.5 Purchase price Allocation. Ten Thousand and no/100 Dollars ($10,000)
-------------------------
of the purchase price hereunder shall be allocated to Seller's covenant not to
compete contained in Section 8.2 of this Agreement.
ARTICLE II
6
REPRESENTATIONS AND WARRANTIES OF SELLER
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In order to induce Buyer to enter into this Agreement, the Seller represents
and warrants to the Buyer that the statements contained in this Article II are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Article
II).
2.3 Authority Relative to this Agreement. The Seller has the full power and
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authority to execute, deliver and perform this Agreement and any agreement or
document contemplated hereby, and to consummate the transactions contemplated
hereby or thereby. The obligations imposed on Seller by this Agreement, or by
any agreement or document contemplated hereby, constitute the valid and binding
obligations and agreements of Seller, enforceable against him in accordance with
their respective terms except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights; and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
2.4 Compliance of Transaction With Laws and Other Instruments. Except as set
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forth in Section 2.2 of the disclosure schedules attached hereto (the
"Disclosure Schedules"), the execution, delivery and performance by Seller and
CIS of this Agreement and any agreement or document contemplated hereby, and the
performance and consummation of the transactions contemplated hereby or thereby
by Seller and CIS (i) do not require on behalf of Seller or CIS any approval,
consent or waiver of, or filing with, any governmental agency, court or other
authority which has not been obtained and which is not in full force and effect
as of the date hereof; (ii) will not conflict with or constitute a breach or
violation of the charter or bylaws of CIS; (iii) will not result in a violation
of any law, regulation, judgment, writ, injunction, order or decree of any court
or governmental or regulatory authority (federal, local or otherwise) to which
Seller or CIS is subject; and (iv) will not require the approval, consent or
waiver of, or filing with any party to, violate or conflict with or result in a
breach of, or constitute a default or acceleration of or give rise to a right of
termination (or an event which with notice or lapse of time or both would become
a default) under, any provision of any contract, indenture, mortgage, lease,
agreement or other instrument to which Seller or CIS is a party or to which any
of his or its assets are subject.
2.5 Shares. The Seller holds of record and owns beneficially the number of
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Shares set forth in Section 1.1, free and clear of any restrictions on transfer
(other than any restrictions under federal or state securities laws), taxes,
security interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. The Seller is not a party to any option,
warrant, purchase right, or other contract or commitment that could require the
Seller to sell, transfer, or otherwise dispose of any capital stock of CIS
(other than this Agreement). The
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Seller is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of CIS.
2.6 Organization and Qualification. CIS is a corporation duly organized,
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validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own, lease
and operate its assets and properties and to conduct the Business in the manner
and in the places where such assets and properties are owned, leased or operated
or the Business is conducted by it. CIS has no subsidiaries and does not own,
directly or indirectly, any equity investment in any corporation, partnership,
joint venture or other business entity. The Seller has delivered to the Buyer
correct and complete copies of the charter and bylaws of CIS (as amended to
date). The minute book (containing the records of meetings of the stockholders,
the board of directors, and any committees of the board of directors) is correct
and complete as to the subject matter contained therein. The stock certificate
book and the stock record book of CIS are correct and complete. CIS is not in
default under or in violation of any provision of its charter or bylaws.
2.7 Capitalization. The entire authorized capital stock of CIS consists of
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1,000 shares of common stock, no par value ("Common Shares"), of which 100
Common Shares are issued and outstanding . All of the issued and outstanding
Common Shares have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by the Seller as set forth in Section 1.1.
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There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require CIS to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to CIS. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of CIS. No debt
instrument issued by CIS has or could have voting rights.
2.8 Financial Statements. Section 2.6 of the Disclosure Schedules contains
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true and complete copies of CIS's financial statements and the notes thereto for
the year ended February 28, 1997 (the "Financial Statements") which have been
compiled by Business Advisory Ltd. of Crystal Lake, Illinois. Except as set
forth in the Disclosure Schedules, the Financial Statements (i) have been
prepared in accordance with generally accepted accounting principles on a
consistent basis and (ii) fairly present in all material respects, based on the
accounting methods used by CIS, the financial position and results of operation
of CIS as of the indicated dates and for the period indicated therein.
2.7 Title to Properties; Liens; Condition of Properties. CIS has good and
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marketable title to or a valid leasehold in, the properties and assets used by
it, located on its premises, or shown in the Financial Statements or acquired
after the date thereof (the "Assets", which shall exclude the "Excluded Assets"
as defined in Section 8.3). Except as noted in Section 2.7 of the Disclosure
Schedules, none of such assets are subject to any mortgage, pledge, lien,
conditional
8
sale agreement, security interest, encumbrance, title defect or other charge,
except for liens for taxes not yet due and payable. Section 2.7 of the
Disclosure Schedules sets forth the addresses or locations of all facilities
(whether leased or owned) of CIS and the addresses or locations of all places
where CIS operates the Business.
2.8 No Undisclosed Liabilities. There are no obligations, debts or
--------------------------
liabilities ("Liabilities") of any nature of CIS which should be properly
included under its Financial Statements, which are not otherwise included
therein. CIS has not incurred any Liabilities since February 28, 1997, except
for those Liabilities incurred in the ordinary course of CIS's business. CIS is
not directly or indirectly (i) liable, by guaranty, surety or otherwise, upon or
with respect to, or (ii) obligated in any way to provide funds in respect of, or
(iii) obligated to guaranty or assume any debt, dividend or other obligation of
any person, corporation, association, partnership or other entity.
2.9 Tax Matters. Except as set forth on Schedule 2.9 of the Disclosure
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Schedules, CIS has filed all federal, state, municipal and local tax returns
(whether relating to income, sales, franchise, withholding, real or personal
property, employment or otherwise) ("tax returns") required to be filed; (ii)
all federal, state, municipal and local tax returns (whether relating to income,
sales, franchise, withholding, real or personal property, employment or
otherwise) ("taxes") which are due, pursuant to such returns, or claimed to be
due by any taxing authority, or otherwise due and owing, and any penalties or
other charges due with respect to the late filing of any such return have been
fully paid, and shall be fully paid at the time of closing; (iii) each such tax
return heretofore filed by CIS correctly and accurately reflects the amount of
its tax liability thereunder; (iv) CIS currently is not the beneficiary of any
extension of time within which to file any tax return; (v) no claim has ever
been made by an authority in a jurisdiction where CIS does not file tax returns
that it is or may be subject to taxation by that jurisdiction; (vi) there are no
security interests, mortgages, pledges, encumbrances, charges or other liens on
any of the assets of CIS that arose in connection with any failure (or alleged
failure) to pay any tax; (vii) CIS has withheld and paid 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 and all such
taxes shall be withheld or paid by Closing ; (viii) Seller does not expect any
authority to assess any additional taxes for any period for which tax returns
have been filed; (ix) There is no dispute or claim concerning any tax liability
of CIS claimed or raised by any authority or as to which Seller has knowledge
based upon personal contact with any agent of such authority.
2.10 Absence of Certain Changes. Since February 28, 1997, there has not been
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except as otherwise herein provided:
(a) any material adverse change in the financial condition, properties,
assets, liabilities, personnel or operations of the Business or of
CIS;
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(b) any obligation or liability incurred by CIS, other than
obligations and liabilities incurred in the ordinary course of
business;
(c) any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of
any of the services, properties or assets of the Business, except
in the ordinary course of business;
(d) any damage, destruction or loss, whether or not covered by
insurance, affecting the Business, except for lightning damage to
the computer equipment and other office equipment owned by CIS in
the amount of approximately $2,200;
(e) any loss or threatened loss of any permit, license, qualification
or certificate of authority held or enjoyed by CIS ;
(f) any pending or threatened labor disputes or strikes, labor union
organizational activity, claim or threatened claim of unfair
labor practices, or any adverse change in relations with CIS's
employees generally;
(g) any action taken by CIS outside of the ordinary course of
business;
(h) any written notice of termination of, or default under, any
contract,except for those contract which have terminated in due
course;
(i) any loan or advance to, receivable from, or any investment in any
person, firm or corporation, except for normal business advances
to employees consistent with past practice;
(j) any increase in the compensation payable or to become payable to
any of its officers or employees (other than non-material
increases in the ordinary course of business) and there has been
no establishment, adoption, entering into, or making or any new
grants or awards under, acceleration of payment or vesting, any
obligation to grant any awards under, or any amendment to any
collective bargaining, bonus, profit sharing, thrift,
compensation, stock option or other equity, pension, retirement,
incentive or deferred compensation, employment, retention,
termination, severance, health, life or other welfare, fringe,
Employee Benefit Plan, or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any current or former
directors, officers or employees, or any granting or paying of
any benefit not required by any existing CIS Benefit Plan or
other plan or arrangement.
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(k) any commitment for any addition to property, plant or equipment
not in the ordinary course of business;
(l) any payment, loan or advance of any amount to, or sale, transfer
or lease of Assets to, or any agreements or arrangements with,
any of CIS's officers, directors or any other persons or entities
which, directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common
control with CIS or Xxxxxxxxx ("Affiliate"), except for
compensation to officers permitted by subparagraph (j) above;
(m) any charitable or other capital contribution, except for those
capital contributions necessary to pay off certain of the
Excluded Liabilities;
(n) except as provided with respect to the transaction set forth in
Section 4.9 and 4.10, any declaration, set aside or payment of
any dividend, any distribution with respect to its capital stock,
or any redemption, repurchase, or other acquisition of any of its
capital stock;
(o) any failure to pay current liabilities, including accounts
payable and accrued expenses in the ordinary course of business
and otherwise in accordance with their terms; or
(p) any agreement or understanding by CIS to do any of the foregoing.
2.11 Patents, Trademarks, Trade Names and Similar Rights. CIS owns no
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trademarks, logos, service marks, trade names, copyrights or other similar
proprietary rights (the "Intangibles") used in the Business, has no obligation
to any third party with respect thereto, and has not sold, licensed, sublicensed
or otherwise granted to any third party the right to use any Intangibles.
2.12 Trade Secrets and Customer Lists. To the best of Seller's knowledge,
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CIS has the right to use, without liability to others, all trade secrets and
customer lists, if any, required and used in the Business within the last five
years and has not disclosed, sold, licensed, sublicensed or otherwise granted to
any third party the right to use such trade secrets and information. To the
best of Seller's knowledge, CIS is not using or in any way making use of any
confidential information or trade secrets of any third party, including, without
limitation, a former employer of any present or past employee of CIS.
2.13 Lease Agreements; Client Agreements. With respect to the Lease
-----------------------------------
Agreements and Client Agreements set forth in Schedule 2.13 of the Disclosure
Schedules: (i) all such agreements are legal, valid, binding, enforceable, in
full force and effect, and subject to customer
11
consent, are fully transferable to Buyer subject to no governmental or
regulatory requirement or impediment; (ii) all such agreements will be legal,
valid, binding and enforceable and in full force and effect on the same terms
and conditions on the Closing; (iii) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification or acceleration, under said
agreements; (iv) no party has repudiated any provision of said agreements; (v)
the list of Client Agreements set forth in Section 2.13 of the Disclosure
Schedules is a complete and accurate list of all agreements between CIS and its
customers; (vi) Seller knows of no set of facts, and has not received any notice
or information from any of the listed customers indicating an intention to
decrease the number of employees placed with CIS's customers ("Field
Personnel"), or to decrease the quantity of services CIS provides to any such
customer, or to reduce the rates at which CIS is being compensated for any and
all services provided by CIS including without limitation the placement of any
Field Personnel with said customers (except with respect to Allstate as
hereinafter provided), and no illegal or other payment or consideration has been
given by CIS to secure or maintain any business with its customers; and (vii)
none of such Client Agreement were awarded or are in any way based upon or
related to the status of CIS or its principals as a socially and economically
disadvantaged small business enterprise, women-owned business and/or small
business enterprise, minority business enterprise or individual. Notwithstanding
the foregoing representations in this paragraph 2.13, Seller specifically
represents that Allstate has advised CIS that CIS is no longer a "preferred
vendor" of Allstate, and accordingly, Seller's representations with respect to
Allstate are limited consistent with this notification and change in status.
Seller represents, however, that it is still undertaking work with Allstate, has
received no notice of termination from Allstate, and expects to continue to be
able to perform services for, and place personnel with, Allstate.
2.14 Employee Agreements and Plans.
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(a) Except as set forth in Section 2.14 of the Disclosure Schedules,
CIS nor any ERISA Affiliate presently maintains, contributes to,
or has (or may have) any liability under any Employee Benefit
Plan with respect to employees (including both Field Personnel
and all other employees other than Field Personnel, hereinafter
referred to as "Administrative Employees"), former employees,
directors or independent contractors of CIS or their dependents
or beneficiaries. For purposes of this Section 2.14 and the
Agreement:
(i) "CIS Benefit Plans" mean the plans, programs and
arrangements set forth in Section 2.14 of the Disclosure
Schedules;
(ii) "Employee Benefit Plan" means (a) any bonus, incentive
compensation, profit sharing, retirement, pension, group
insurance, death benefit, group health, medical expense
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reimbursement, dependent care, legal services, flexible
benefits or cafeteria, stock option, stock purchase, stock
appreciation rights, phantom stock, savings, deferred
compensation, consulting, severance pay or termination pay,
vacation pay, leave of absence, layoff, life insurance,
accident, disability, workers' compensation, welfare or
other employee benefit or fringe benefit plan, program,
arrangement practice or policy which is an "employee pension
benefit plan" as such term is defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA") or an "employee welfare benefit plan" as defined
in Section 3(1) of ERISA, whether written or unwritten; and
(iii)"ERISA Affiliate" means each person (as defined in Section
3(9) of ERISA) that, together with CIS (or any person whose
liabilities CIS has assumed or is otherwise subject to,
whether directly or indirectly, including as a result of
indemnification) would be or has been treated as a single
employer under Section 4001(b) of ERISA or Section 414 of
the Internal Revenue Code of 1986, as amended ("Code").
Except with respect to CIS Benefit Plans, CIS does not have (nor
may have) any liability under any Employee Benefit Plan which an
ERISA Affiliate presently maintains, contributes to or has (or
may have) liability under.
(b) With respect to all employees and former employees of CIS, CIS
nor any ERISA Affiliate presently maintains, contributes to or
has or may have any liability under any funded or unfunded
medical, health or life insurance plan or arrangement or other
employee welfare benefit plan as defined in Section 3(1) of ERISA
for present or future retirees or present or future terminated
employees, except as required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") or state
continuation coverage laws.
(c) Favorable determination letters have been received from the
Internal Revenue Service with respect to each CIS Benefit Plan
which is intended to comply with the provisions of Section 401(a)
of the Code, evidencing compliance with the relevant provisions
of the Tax Equity and Fiscal Responsibility Act of 1982, the Tax
Reform Act of 1984, the Retirement Equity Act of 1984, the Tax
Reform Act of 1986 and other applicable laws and governmental
regulations for which amendment is required by the Closing. Each
such CIS Benefit Plan complies in form and in operation
13
with the requirements of the Code and meets the requirements of a
"qualified plan" under Section 401(a) of the Code and each
related trust is exempt from federal income tax under Code
Section 501(a). No event has occurred or circumstance exists that
will or could give rise to disqualification or loss of tax-exempt
status of any such CIS Benefit Plan or trust.
(d) CIS, the ERISA Affiliates and all of their respective directors,
officers, employees and any other "fiduciary" (as such term is
defined in Section 3(21) of ERISA) have complied with and
performed all of their contractual obligations and all
obligations under the Code, ERISA and all applicable federal,
state and local laws, rules and regulations (domestic and
foreign) required to be performed by them under or with respect
to all of the CIS Benefit Plans and any related agreements and
there has been no "prohibited transaction" as defined by Section
4975 of the Code or Section 406 of ERISA with respect to any CIS
Benefit Plan. Any bonding required by ERISA with respect to the
CIS Benefit Plans has been obtained and is in full force and
effect.
(e) No CIS Benefit Plan has any unfunded liability and all accruals
with respect to the CIS Benefit Plans have been made. No CIS
Benefit Plan is subject to Section 412 of the Code, Section 302
of ERISA or Title IV of ERISA. All applicable contributions and
premium payments for all periods ending prior to the Closing
(including periods from the first day of the then current plan
year to the Closing) shall be made prior to the Closing Date in
accordance with past practice. No event has occurred or
circumstance exists that could result in a material increase in
premium costs of the CIS Benefit Plans that are insured or a
material increase in the benefit costs of such CIS Benefit Plans
that are self-insured.
(f) CIS nor any ERISA Affiliate maintains, contributes to or has or
may have any liability (including current or potential withdrawal
liability) with respect to any "multiemployer plan" as such term
is defined in Section 3(37) or 4001(a)(3) of ERISA.
(g) CIS nor any ERISA Affiliate has maintained an "employee pension
benefit plan", as such term is defined in Section 3(2) of ERISA,
that has been the subject of a "reportable event", as such term
is defined in Section 4043 of ERISA, as to which notices would be
required to be filed with the Pension Benefit Guaranty
Corporation ("PBGC"), or any event requiring disclosure under
Section 4063(a) of ERISA. CIS nor any ERISA Affiliate has
incurred any outstanding liability under Section 4062 of ERISA to
the
14
PBGC or engaged in any transaction described in Section 4069 of
ERISA and all premiums or other amounts due and payable to the
PBGC have been paid. CIS nor any ERISA Affiliate has terminated
any employee pension benefit plan subject to Title IV of ERISA
and no proceeding by the PBGC to terminated any employee pension
benefit plan pursuant to Title IV of ERISA has ever been
instituted or threatened, no notice of any such termination has
been received and no condition exists which presents a material
risk of termination of a CIS Benefit Plan.
(h) There is no pending, threatened or anticipated legal action,
proceeding, investigation, dispute, grievance, charge, complaint,
restraining or injunctive order or claim against or involving any
CIS Benefit Plan maintained by CIS or any ERISA Affiliate (other
than routine claims for benefits) or the assets of any such CIS
Benefit Plan and to the best of Seller's knowledge and belief
there is no basis for or any facts which could give rise to any
such legal action, proceeding, investigation, dispute, grievance,
charge, complaint, restraining or injunctive order or claim. No
CIS Benefit Plan is presently under audit or examination (nor has
notice been received of a potential audit) by the Internal
Revenue Service, Department of Labor or the PBGC, nor are there
any matters pending with respect to any CIS Benefit Plan with the
Internal Revenue Service under its Voluntary Compliance
Resolution program, its Closing Agreement Program or similar
programs.
(i) There has been no act or acts which would result in a
disallowance of a deduction or the imposition of a tax pursuant
to Code Section 4980B or any predecessor provision of the Code,
or any related regulations. No event has occurred with respect
to which CIS or any of its affiliates could be liable for a tax
imposed by any of Code Sections 4972, 4976, 4977, 4979 or 4980,
or for a civil penalty under Section 502(c) of ERISA.
(j) With respect to each of the CIS Benefit Plans, to the extent
applicable, CIS has delivered to Buyer true and complete copies
of: (i) the plan documents (or, if there is none, a written
summary of the plan's terms and conditions), including any
amendments, related trust agreements, insurance contracts and
other funding arrangements; (ii) the most recent determination
letter received from the Internal Revenue Service; (iii) the
three most recent IRS Form 5500 annual reports, including all
schedules and attachments thereto; (iv) the three most recent
actuarial valuations; (v) the most recent financial statement;
(vi) all correspondence with the Internal Revenue Service, the
Department of Labor and the PBGC with respect to the past three
plan years, other than IRS Form 5500 filings and
15
PBGC premium payments; and (vii) the most recent summary plan
description and any summaries of material modifications not
reflected therein (or other summaries and descriptions furnished
to participants and beneficiaries, if a summary plan description
is not required). Each CIS Benefit Plan can be unilaterally
amended, terminated or otherwise discontinued, in whole or part,
by CIS at any time without liability to CIS. CIS nor any ERISA
Affiliate has any formal plan or commitment, or has communicated
to any current or former employee any intention, whether legally
binding or not, to increase any benefits or create new benefits
under any CIS Benefit Plan or to create any additional Employee
Benefit Plan. CIS nor any ERISA Affiliate maintains or
contributes to a trust, organization or association described in
any of Sections 501(c)(9), 501 (c)(17) or 501 (c)(20) of the
Code.
(k) CIS nor any of its affiliates is a party to any employment
agreement, whether written or oral, or agreement with change in
control or similar provisions, or collective bargaining agreement
or contract with any labor union relating to any employees or
former employees of CIS. Except as set forth in Section 2.14 of
the Disclosure Schedules, the execution, delivery or performance
of this Agreement or the consummation of the transactions
contemplated by this Agreement will not entitle any individual to
severance pay or accelerate the time of payment or vesting, or
increase the amount of any compensation or benefits due to any
individual nor result in the imposition of any federal excise tax
with respect to any CIS Benefit Plan. All contributions and
payments made or accrued with respect to all CIS Benefit Plans
are deductible currently under Code Section 162 or 404 and no
amount payable to an employee or former employee of CIS will be
an "excess parachute payment" which is non-deductible or subject
to tax under Section 280G or 4999 of the Code. CIS nor any of
its affiliates has currently outstanding any loan or loans to any
current or former employees of CIS, nor have CIS or any of its
affiliates guaranteed such loans, except for a loan from the
Corporate Information Systems, Inc. 401(k) Salary Reduction Plan
(the "CIS 401(k) Plan") to Xxxxxxx Xxxxxxxxxx, in the amount of
$_________, which loan is currently outstanding.
(l) Section 2.14 of the Disclosure Schedules sets forth, with respect
to each employee employed by CIS, his or her name, position,
salary or hourly wage, his or her date of employment and any
applicable significant employee benefits or entitlements not
available generally to CIS's employees.
16
(m) CIS has complied with all applicable laws relating to the
employment of labor, including without limitation those relating
to wages, hours, collective bargaining, unemployment insurance,
workers' compensation, equal employment opportunity and the
payment and withholding of taxes, provided, however, that with
respect to overtime pay, Seller represents only that CIS's
current practices are in compliance with applicable laws.
(n) CIS is not a party to any contract with any labor organization,
nor has CIS agreed to recognize any union or other collective
bargaining unit, nor has any union or other collective bargaining
unit been certified as representing any Employees. CIS has not
experienced any strikes, work stoppages, significant grievance
proceedings or claims of unfair labor practices filed or, to
Seller's knowledge, threatened to be filed with respect to the
operation of the Business.
2.15 Litigation, Proceedings, Etc. Except for matters described in Section
----------------------------
2.15 of the Disclosure Schedules, (i) there is no pending claim, action,
litigation, suit or proceeding against, or investigation of, CIS; (ii) CIS has
not received any notice of any claim, action, litigation, suit or proceeding
against it or investigation of it, and no such claim, action, suit, proceeding
or investigation is pending or, to Seller's knowledge, threatened against CIS,
and there are, to the best of Seller's knowledge and belief, no facts existing
which would be a proper basis for any such claim, action, litigation, suit
proceeding or investigation; and (iii) there are no outstanding court,
arbitration or agency orders, decrees or stipulations to which CIS is a party or
which are directed to CIS.
2.16 Compliance with Law and Other Instruments; Permits. CIS is in full
--------------------------------------------------
compliance and is not in violation of, or default under: (i) any term or
provision of its charter or by-laws; (ii) any term or provision of any financial
covenant or any indenture, mortgage, contract, commitment or other agreement or
instrument to which it is a party, or by which it or any of its properties or
business is or may be bound or affected, or (iii) any existing applicable law
(including, without limitation, the Fair Labor Standards Act and all other
federal and state wage and hour laws), rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over it or any of its properties or business; CIS owns, possesses,
or has obtained all governmental and other licenses, permits, certifications,
registrations, approvals or consents and other authorizations necessary to own,
operate or lease, as the case may be, its business or operations as presently
conducted and all such governmental and other licenses, permits, certifications,
registrations, approvals, consents and other authorizations are in good
standing, and there are no proceedings pending or, to the best knowledge of
Seller, threatened, or any basis therefore existing, seeking to cancel,
terminate or limit such licenses, permits, certifications, registrations,
approvals, or consents or authorizations, or related to the breach or failure to
comply with any law, rule, regulation, judgment or decree.
17
2.17 Transactions with Affiliates. Except as provided with respect to the
----------------------------
transaction set forth in Section 4.9 and 4.10, there is no lease, sublease,
indebtedness, contract, agreement, commitment, understanding or other
arrangement of any kind whatsoever entered into by CIS with Seller or any of its
other stockholders, officers or directors or any Affiliate of any of them. At
Closing, Seller and CIS shall cancel all arrangements with any Affiliate,
without any liability to CIS or Buyer.
2.18 Insurance. Set forth in Schedule 2.18 of the Disclosure Schedules is a
---------
list of insurance in force with respect to the Business, which list is true,
complete and accurate in all material respects. CIS has paid all premiums due
under such policies and such policies are each outstanding and in full force and
effect on the date hereof. CIS will continue to maintain said insurance in
effect until and including the Closing Date. No insurance carrier has refused
any application for insurance by CIS.
2.19 Books and Records. All books and records pertaining to the Business
-----------------
have been, or prior to the Closing shall have been, made available for review by
Buyer and its representatives and, to the extent supplied or made available by
Seller or his agents (excluding document prepared by Benchmark Equity Group
and/or Xxxxx Xxxxx), are correct and complete in all material respects
consistent with past business practices of CIS, and fairly reflect the basis
for the financial condition and results of operations of CIS based on the
accounting methods used by CIS.
2.20 Powers of Attorney; Bank Accounts. There are no outstanding powers of
---------------------------------
attorney executed on behalf of CIS. Set forth in Schedule 2.20 of the
Disclosure Schedules is an accurate and complete list of the name and address of
each bank or other institution where CIS has an account or safe deposit box, the
number of such account, and the names of all persons authorized to draw thereon
or have access thereto.
2.21 Minority-Owned Enterprise, etc. CIS is not doing business as a
------------------------------
socially and economically disadvantaged small business enterprise, minority
owned enterprise, or women owned business, nor has it filed any applications or
documents to qualify as an economically disadvantaged small business enterprise,
minority owned enterprise, or women owned business. CIS has not received a
preference, preferred status, contract and/or award based upon in whole or in
part CIS doing business as a socially and economically disadvantaged small
business enterprise, women-owned business and/or small business enterprise,
minority business enterprise or individual.
2.22 Minimum Work Hours; Independent Contractor Status; Visas. CIS has not
--------------------------------------------------------
entered into any employment agreement and/or arrangement with non-exempt
personnel guaranteeing a minimum number of work hours during a predetermined
time period. All Field Personnel who are classified as "independent
contractors" with respect to the business for which they perform services are,
to the best of Seller's knowledge and belief, correctly classified as
18
such in accordance with all applicable law. All Field Personnel who are non-U.S.
citizens have visas which are valid, legal, and current.
2.23 Employment Eligibility Verification Forms. The information on, and the
-----------------------------------------
contents of all Employment Eligibility Verification Forms (Form I-9) is, to the
best of Seller's knowledge and belief, true and accurate.
2.24 Broker's Fees. Neither CIS nor Seller has any obligation or liability
-------------
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement, except an obligation to pay a
commission to Benchmark Equity Group. Seller shall pay such commission at
Closing without any liability to CIS or Buyer.
2.25 Disclosure. The statements contained in this Agreement, and in any
----------
written documents or Schedules attached hereto prepared and delivered by or on
behalf of CIS pursuant to the terms hereof are (except for documents prepared by
Benchmark Equity Group and/or Xxxxx Xxxxx) true and correct in all material
respects, and such statements, documents or Schedules do not omit any material
fact required by the terms hereof or thereof to be stated herein or therein or
necessary to make the statements contained herein or therein not misleading.
There is no fact known to CIS which would have a material adverse effect on the
Business, other than those which have been set forth in this Agreement or in the
Disclosure Schedules attached hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
In order to induce Seller to enter into this Agreement, the Buyer represents
and warrants to the Seller that the statements contained in this Article III are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement through this Article III).
2.9 Authority Relative to this Agreement. The Buyer has the full corporate
------------------------------------
power and authority, and has taken all necessary and proper action, corporate
and otherwise, to execute, deliver and perform this Agreement and any other
agreement or document contemplated hereby, and to consummate the transactions
contemplated hereby or thereby. All action on the part of Buyer necessary for
the authorization, execution, delivery and performance of this Agreement and any
other agreement or document contemplated hereby, and the consummation of the
transactions contemplated hereby or thereby, has been taken. The obligations
imposed on Buyer by this Agreement, or by any agreement or document contemplated
hereby, constitute the valid and binding obligations and agreements of Buyer,
enforceable against it in accordance with their
19
respective terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights; and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
2.10 Compliance of Transaction with Laws and Other Instruments. The
---------------------------------------------------------
execution, delivery and performance by Buyer of this Agreement and any agreement
or document contemplated hereby, and the performance and consummation of the
transactions contemplated hereby or thereby by Buyer (i) do not require on
behalf of Buyer any approval, consent or waiver of, or filing with, any
governmental agency, court or other authority which has not been obtained and
which is not in full force and effect as of the date hereof; (ii) will not
result in a violation of any law, regulation, judgment, writ, injunction, order
or decree of any court or governmental or regulatory authority (federal, local
or otherwise) to which Buyer is subject; (iii) will not conflict with or
constitute a breach or violation of the charter or bylaws of Buyer; and (iv)
will not require the approval, consent or waiver of, or filing with any party
to, violate or conflict with or result in a breach of, or constitute a default
or acceleration of or give rise to a right of termination (or an event which
with notice or lapse of time or both would become a default) under, any
provision of any contract, indenture, mortgage, lease, agreement or other
instrument to which Buyer is a party or to which any of its assets are subject.
2.11 Organization and Qualification. Buyer is a corporation duly organized,
------------------------------
validly existing and in good standing under the laws of its state of
incorporation.
2.12 Consents. Buyer is not subject to any law, ordinance, regulation, rule,
--------
order, judgment, injunction, decree, contract, commitment, lease, agreement,
instrument or other restriction of any kind, which by its provisions would
prevent the consummation of this Agreement or any of the transactions
contemplated hereby, without the consent, filing with or notification of any
third party which has not already been obtained or made or will not be obtained
prior to the Closing.
2.13 Broker's Fees. Buyer has no liability or obligation to pay any fees or
-------------
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
3.6 Securities Law. Buyer is purchasing the Shares for its own account for
--------------
investment and not with a view for resale or distribution thereof; and Buyer
will not sell, transfer or otherwise dispose of the Shares in violation of any
applicable Federal or state securities laws or any rules or regulations
promulgated thereunder or in such a manner as to cause the sale of their Shares
by Seller pursuant to this Agreement to be in violation of any applicable
Federal or state securities laws or any rules or regulations promulgated
thereunder.
20
3.7 Waiver by Buyer. Buyer acknowledges that Benchmark Equity Group of
---------------
Houston, Texas ("Benchmark") by and through Xx. Xxxxx Xxxxx ("Xxxxx") has
assisted in connection with the sale of Shares by the Seller. Buyer further
acknowledges that, although unknown by Seller until recently, neither Benchmark
or Xxxxx are registered as brokers, dealers, agents or sales persons under
Federal or state securities laws. Specifically in view of the foregoing, Buyer
hereby waives any and all rights or remedies, if any, it may now or hereafter
have against the Seller, including but not limited to any post-closing right of
rescission, arising by reason of or in any way related to the fact that
Benchmark and/or Xxxxx are not registered as brokers, dealers, agents or sales
persons under Federal or state securities laws.
ARTICLE IV
BUYER'S CONDITIONS TO CLOSING
-----------------------------
The obligations of Buyer to purchase the Shares and to consummate the
transactions contemplated hereby, are subject to the fulfillment in all material
respects on or prior to the Closing Date of each of the following conditions:
2.14 Representations and Warranties. The representations and warranties made
------------------------------
by Seller in Article II hereof shall be true and correct when made, and shall be
----------
true and correct in all material respects on the Closing Date with the same
force and effect as if they had been made on and as of the Closing Date, except
for changes permitted or contemplated by this Agreement and except that
representations which are specifically made as of a specified date shall be true
and correct as of such earlier date.
2.15 Performance. All covenants, agreements and conditions contained in this
-----------
Agreement to be performed or complied with by Seller on or prior to the Closing
Date shall have been performed or complied with in all material respects.
2.16 Closing Deliveries. Buyer shall have received all documents and
------------------
instruments required pursuant to Section 7.2 hereof.
-----------
2.17 Absence of Litigation. No action, claim suit or proceeding before any
---------------------
court or any governmental body or authority shall be pending against either
Seller, CIS or Buyer which seeks to impose substantial damages in connection
with, or to restrain or invalidate the transactions contemplated by, this
Agreement, and no preliminary or permanent injunction or order that would
prohibit or restrain such transactions shall be in effect.
2.18 Absence of Certain Changes. There shall not have occurred prior to the
--------------------------
Closing Date (a) any material adverse change in the Business or CIS, or any
event or condition which, with the passage of time or the filing of notice, may
cause or create any such material adverse
21
change, or (b) the legal inability of Seller to convey, assign and transfer to
Buyer the Business, or to convey, assign and transfer to Buyer the Shares.
2.19 Further Assurances. All actions to be taken by the Seller in connection
------------------
with consummation of the transactions contemplated hereby and all certificates,
opinion, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer. The Buyer may waive any condition specified in this Article IV if it
executes a writing so stating at or prior to the Closing Date.
4.7 Certificates. CIS shall deliver to Buyer, from or with respect to the
------------
state of Arizona, a good standing certificate, a broad form general liability
certificate, and a workmen's compensation certificate, and from or with respect
to the State of Illinois, a good standing certificate, a broad form general
liability certificate, a letter of clearance from the Illinois Department of
Employment Security, a workmen's compensation certificate, and a tax clearance
certificate.
4.8 Field Employees. At Closing the number of full time Field Personnel that
---------------
will be billed by Buyer must equal or exceed 48 (excluding Field Personnel
employed at the Phoenix location).
4.9 Excluded Liabilities. Seller shall have provided Buyer with evidence of
--------------------
payment or satisfaction of all Excluded Liabilities.
4.10 Excluded Assets. Seller shall have provided Buyer with evidence of
---------------
transfer of all Excluded Assets out of CIS.
4.11 401(k) Plans. Prior to closing, Seller shall have taken or have caused
------------
to be taken all steps necessary to terminate the CIS 401(k) Plan, including:
(i) causing the board of directors of CIS to adopt a resolution
terminating the CIS 401(k) Plan and forwarding a copy of the same
to Lincoln National Life Insurance Co., a unit of Lincoln
National Corporation ("Lincoln National");
(ii) causing the appropriate officer of CIS to execute any
documentation necessary to terminate the CIS 401(k) Plan; and
(iii)giving any required notice of termination of the CIS 401(k)
Plan to (or obtaining legally effective waivers of receipt of
such advance notice or any other required notice of the
termination of the CIS 401(k) Plan from):
(a) The Plan Administrator;
22
(b) The Plan Trustee; and
(c) The Plan Insurers.
4.12 Post-Closing Procedures Regarding CIS 401(k) Plan. Pursuant to
-------------------------------------------------
Paragraph 4.11, Seller has caused the CIS 401(k) Plan to have been terminated
effective as of August 8, 1997. The Seller and Buyer do hereby agree that the
following provisions shall be applicable to the CIS 401(k) Plan subsequent to
the Closing Date:
(a) Buyer shall within one hundred twenty (120) days after the
Closing Date, cause to be filed with the Internal Revenue Service
an application seeking a favorable determination relative to the
termination of the Plan and distribution of its assets. Seller
and Buyer shall cooperate in the preparation of such an
application and Buyer agrees to keep Seller informed regarding
the status of the application and its processing.
(b) If Buyer shall receive a favorable determination letter with
respect to the termination of the CIS 401(k) Plan and
distribution of its assets, the Buyer shall, as soon as
reasonably practical after the receipt of such determination
letter, cause the assets of the CIS 401(k) Plan to be distributed
to the plan participants in accordance with the provisions of the
plan and applicable law.
(c) If Buyer shall be unable to receive a favorable determination
letter from the Internal Revenue Service relative to the
termination of the CIS 401(k) Plan and distribution of its
assets, then within one hundred twenty (120) days after the
Internal Revenue Service notifies Buyer that it is unwilling to
issue such a favorable determination letter, Buyer must implement
one of the two following procedures relative to the plan:
(i) Merge the CIS 401(k) Plan into a qualified employee benefit
plan of Buyer all in accordance with the requirements of
each plan and applicable law; or
(ii) Maintain the CIS 401(k) Plan as a "frozen plan and wasting
trust" designating Seller as one of the Plan trustees. If
the CIS 401(k) Plan is to be maintained as a frozen plan,
Buyer shall consult with Seller regarding the administration
of the plan and any amendments thereto.
ARTICLE V
23
SELLER'S CONDITIONS TO CLOSING
------------------------------
The obligations of Seller to sell the Shares at the Closing, and the
obligation of Seller to consummate the transactions contemplated hereby are
subject to the fulfillment in all material respects on or prior to the Closing
of each of the following conditions:
2.20 Representations and Warranties. The representations and warranties made
------------------------------
by Buyer in Article III hereof shall be true and correct when made, and shall be
-----------
true and correct in all material respects on the Closing with the same force and
effect as if they had been made on and as of the Closing, except for changes
permitted or contemplated by this Agreement and except that representations
which are specifically made as of a specified date shall be true and correct as
of such earlier date.
2.21 Performance. All covenants, agreements and conditions contained in this
-----------
Agreement to be performed or complied with by Buyer on or prior to the Closing
shall have been performed or complied with in all material respects.
2.22 Closing Deliveries. Seller shall have received all documents and
------------------
instruments required pursuant to Section 7.2 hereof.
-----------
2.23 Absence of Litigation. No action, claim, suit or proceeding before any
---------------------
court or any governmental body or authority shall be pending against either
Seller, CIS, or Buyer which seeks to impose substantial damages in connection
with, or to restrain or invalidate the transactions contemplated by this
Agreement and no preliminary or permanent injunction or order that would
prohibit or restrain such transactions shall be in effect.
2.24 Further Assurances. All actions to be taken by the Buyer in connection
------------------
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller. The Seller may waive any condition specified in this Article V if it
---------
executes a writing so stating at or prior to the Closing.
ARTICLE VI
FURTHER AGREEMENTS
------------------
2.25 Expenses. Seller shall pay its costs incurred in connection with the
--------
preparation, negotiation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby including, without
limitation, the fees of the attorneys and accountants of Seller. Buyer shall
pay its costs incurred in connection with the preparation, negotiation,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby including, without limitation, the fees of its
attorneys and accountants.
24
2.26 News Releases. Except as required by law, Seller shall not issue any
-------------
news release or other public announcement concerning this Agreement prior to the
Closing. Seller will cooperate with Buyer in Buyer's preparation and issuance
of any press release regarding the transaction contemplated hereby .
2.27 Survival of Representations. The representations and warranties
---------------------------
contained herein are and will be deemed and construed to be continuing
representations and warranties and will survive the Closing and (other than the
representations and warranties set forth in Section 2.9 above and other than
fraudulent misrepresentations made by Seller) continue in full force and effect
for a period of three years thereafter. The representations and warranties set
forth in Section 2.9 above and all fraudulent misrepresentations made by Seller
shall continue in full force and effect at all times thereafter.
2.28 Indemnification.
---------------
(a) From and after the Closing, Seller shall defend, indemnify and hold
harmless Buyer from and against any and all claims, actions, causes
of action, lawsuits, losses, costs, damages, liabilities and
expenses, including reasonable attorneys' fees and expenses, of
whatever nature, kind or description incurred by Buyer to the
extent not covered by relevant insurance coverages of CIS or Buyer
then in effect or required to be in effect hereunder (it being
agreed that (i) insurance claims which are denied after a good
faith pursuit of recovery by Buyer, or (ii) that portion of a
covered claim which is in excess of coverage limits, shall be
deemed "not covered" for purposes hereof) (collectively, "Damages")
that arise out of or relate to:
(i) a breach of the representations, warranties, covenants and
agreements given or made by Seller in this Agreement, any of
the Disclosure Schedules or under or pursuant to any
document, certificate, schedule or instrument delivered by
or on behalf of Seller in connection herewith;
(ii) all matters arising solely out of or solely in connection
with the operation of the Business or of CIS on or before
the Closing;
(iii) the matter referred to in Schedule 2.15 of the Disclosure
Schedules; and
(iv) all Excluded Liabilities and Excluded Assets (as defined in
Section 8.3).
25
(b) From and after the Closing Date, Buyer shall defend, indemnify and
hold harmless Seller from and against any and all Damages incurred
by Seller arising out of or relate to a breach of the
representations, warranties, covenants and agreements given or made
by Buyer in this Agreement, any of the Disclosure Schedules, or
under or pursuant to any document, certificate, schedule or
instrument delivered by or on behalf of Buyer in connection
herewith; and
(ii) all matters arising solely out of or solely in connection
with the operation of the Business from and after the
Closing unless arising out of
1) Seller's breach of any provision of Buyer's employment
agreement with Seller.
2) Seller's breach of fiduciary duty to Buyer.
3) Any intentional act of dishonesty, illegality or
falsification of reports, records or information submitted to Buyer by Seller.
(c) Any out-of-pocket expenditures actually paid by Buyer pursuant to
the provisions contained in this Article VI as a result of a
liability to, claim against or obligation of Buyer (collectively a
"Claim"), along with court costs and attorneys fees and expenses
arising as a result of such liability, claim or obligation, may (in
lieu of seeking any indemnification of such set-off amount to which
Buyer is entitled pursuant to Section 6.5 hereunder) be set-off
against amounts due Seller pursuant to this Agreement and the
Promissory Note of Buyer executed in connection herewith.
Notwithstanding the preceding sentence, prior to paying any of the
aforesaid out-of-pocket expenditures Buyer shall give written
notice to Seller of the Claim and Seller shall have the
opportunity, for a thirty (30) day period commencing on the receipt
of said notice, to cure such Claim. If Seller has failed to cure
such Claim within the said thirty (30) day period, Buyer shall be
entitled to pay such claim directly and assert its set-off rights
under this Paragraph 6.4(c).
(d) Buyer hereby releases Seller from any and all liability or
responsibility from any of the indemnification obligations set
forth in this Paragraph 6.4 which are covered by or which are
required under this Agreement to be covered by, valid and
collectible insurance coverage, to the extent of the proceeds
collected.
26
2.29 Procedures; Third Party Claims. If a claim to which the indemnification
------------------------------
provisions of Section 6.4 apply arises out of any suit, claim or other assertion
-----------
of liability by a third party (hereinafter collectively, the "Claims" and
individually, a "Claim"), the indemnified party agrees to give written notice
within a reasonable time to the indemnifying party of the existence of such
Claim, it being understood that the failure to give such notice shall not affect
the indemnified party's right to indemnification and the indemnifying party's
obligation to indemnify as set forth in this Agreement, unless the indemnifying
party's ability to contest, defend or settle with respect to such Claim is
thereby demonstrated and materially prejudiced.
The obligations and liabilities of the parties hereto with respect to their
respective indemnities pursuant to Section 6.4 resulting from any Claim, shall
-----------
be subject to the following additional terms and conditions:
(a) The indemnifying party shall have the right to undertake, by
counsel or other representatives of its own choosing, the defense
or opposition to such Claim, subject to the right of approval by
indemnified party, which right shall not be unreasonably withheld.
(b) In the event that the indemnifying party shall elect not to
undertake such defense or opposition, or within 30 days after
notice of any such Claim from the indemnified party shall fail to
defend or oppose, the indemnified party (upon further written
notice to the indemnifying party) shall have the right to undertake
the defense, opposition, compromise or settlement of such Claim, by
counsel or other representatives of its own choosing, on behalf of
and for the account and risk of the indemnifying party (subject to
the right of the indemnifying party to assume the defense of or
opposition to such Claim at any time prior to settlement,
compromise or final determination thereof).
(c) Anything in this Section 6.5 to the contrary notwithstanding, (i)
-----------
if there is a reasonable probability that a Claim may materially
and adversely affect the indemnified party, the indemnified party
shall have the right, at its own cost and expense, to participate
in the defense, opposition, compromise or settlement of the Claim,
(ii) the indemnifying party shall not, without the indemnified
party's written consent, settle or compromise any Claim or consent
to entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of
such Claim, and (iii) in the event that the indemnifying party
undertakes defense of or opposition to any Claim, the indemnified
party, by counsel or other representative of its own choosing and
at its sole cost and expense, shall
27
have the right to consult with the indemnifying party and its
counsel or other representatives concerning such Claim and the
indemnifying party and the indemnified party and their respective
counsel or other representatives shall cooperate in good faith with
respect to such Claim.
(d) No undertaking of defense or opposition to a Claim shall be
construed as an acknowledgement by such party that it is liable to
the party claiming indemnification with respect to the Claim at
issue or other similar Claims.
2.30 Conduct of Business Pending Closing.
-----------------------------------
(a) Except as set forth in the Disclosure Schedules, and except as set
forth in Sections 4.9 and 4.10, during the period from the date of
this Agreement to the date of Closing (the "Closing Date"), Seller
shall and Seller shall cause CIS to conduct the Business according
to its ordinary and usual course of business, consistent with past
practice. Without limiting the generality of the foregoing, prior
to the Closing Date, Seller shall not, and shall cause CIS not to,
without the prior written consent of Buyer, engage in any of the
following transactions with respect to the Business:
(i) entering into any new employment agreement between CIS and
Seller or any other officers, directors or employees of CIS
except pursuant to the Employment Agreement set forth in
Exhibit A-1 and A-2.
(ii) granting any increase in the compensation payable or to become
payable to any of CIS' officers or employees (other than non-
material increases in the ordinary course of business not to
exceed $5,000) or establishing, adopting, entering into,
making any new grants or awards under, accelerating payment or
vesting, being obligated to grant any awards under, or
amending any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option or other equity, pension,
retirement, incentive or deferred compensation, employment,
retention, termination, severance, health, life or other
welfare, fringe, Employee Benefit Plan, or other plan,
agreement, trust, fund, policy or arrangement for the benefit
of any current or former directors, officers or employees, or
granting or paying any benefit not required by an existing CIS
Benefit Plan or other plan or arrangement.
(iii) making a commitment for any significant investment of a
capital nature;
28
(iv) entering into any waiver, release or relinquishment of any
material contract rights, except, in each case, in the
ordinary course of business and consistent with past
practice;
(v) entering into any new leases for property except in the
ordinary course of business, or terminating any of the
Client Agreements;
(vi) acquiring the assets of any business or any corporation,
partnership or other business organization or otherwise
acquiring any assets which are material in the aggregate to
CIS or the Business;
(vii) selling, leasing or otherwise disposing of any assets
or properties of the Business, whether owned or leased, and
whether or not reflected on the books and records of CIS
(the "Assets") except in the ordinary course of business
consistent with past practice, and except for the conveyance
described in paragraph 8.3(a);
(viii)creating, assuming or incurring any encumbrance on any of
the Assets;
(ix) amending, terminating or waiving any right of substantial
value arising under any of the Client Agreements or
otherwise relating to the Business;
(x) failing to pay current liabilities, including accounts
payable and accrued expenses, in the ordinary course of
business and otherwise in accordance with their terms;
(xi) collecting any accounts receivable outside of the ordinary
course and in advance of their due dates;
(xii) taking or performing any action which would or might
cause any representation or warranty made by CIS or Seller
herein to be rendered inaccurate, in whole or in part,
and/or which would prevent, inhibit or preclude the
satisfaction, in whole or in part, of any covenant required
to be performed or satisfied by CIS or Seller at or prior to
the Closing and/or the implementation of the within
transaction;
29
(xiii) agreeing in writing or otherwise taking any of the
foregoing actions or any action which would make any
representation or warranty in this Agreement to be untrue or
incorrect; or
(xiv) otherwise engaging in any practice, taking any action,
or entering into any transaction of the sort described in
Section 2.10 above.
------------
(b) During the period from the date of this Agreement to the Closing
Date, CIS and Seller will:
(i) take and perform any and all actions necessary to render
accurate and/or maintain the accuracy of, all of the
representations and warranties of CIS and Seller herein
contained and satisfy each covenant or condition required to
be performed or satisfied by CIS and Seller prior to the
Closing and/or cause or permit the implementation of the
within transaction;
(ii) carry on and maintain the Business in substantially the same
form, style and manner as operated by CIS prior to this
Agreement and use its best efforts to preserve its business
organization and its relationships with its customers, all
employees and others having business relations with CIS, and
not voluntarily engage in any material transaction not in the
ordinary course of business without the prior consent of
Buyer;
(iii) Seller shall use his best efforts to cause each of its
employees to continue employment with CIS (or Buyer, as the
case may be) following the Closing Date.
2.31 Continued Disclosure. If any event or state of facts occurs or arises
--------------------
between the date hereof (or the date as of which disclosure has been made with
respect to such type of event or state of facts) and the Closing Date that, had
it occurred or arisen prior to or on such date, would have been required by the
terms hereof to be disclosed herein, Seller shall give notice thereof in writing
to Buyer within five days of the happening of such event or state of facts. The
giving of such notice and the disclosure of such event or state of facts shall
in no way change the conditions precedent to the obligations of Buyer as set
forth in Article IV.
----------
2.32 Full Access. Seller will permit, and will cause CIS to permit,
-----------
representatives of the Buyer to have full access to all premises, properties,
personnel, books, records, contracts and documents of or pertaining to CIS.
Buyer shall conduct such inspections in such a manner as to not unreasonably
interfere with the business of CIS.
30
2.33 Notices and Consents. The Seller will cause CIS to give any notices to
--------------------
third parties, and will cause CIS to use its best efforts to obtain any third
party consents with respect to the matters referred to in Sections 2.2.
2.34 Exclusivity. From the date of this Agreement until the termination
-----------
hereunder, the Seller will not (and the Seller will not cause or permit CIS to)
(i) solicit, initiate, or encourage the submission of any proposal or offer from
any person or entity relating to the acquisition of any capital stock or other
voting securities, or any substantial portion of the assets of, CIS (including
any acquisition structured as a merger, consolidation, or share exchange) or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person or entity to do or seek any of
the foregoing. The Seller will not vote the Shares in favor of any such
acquisition structured as a merger, consolidation, or share exchange. The
Seller will notify the Buyer immediately if any person or entity makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
6.11 Insurance. Beginning at Closing, Buyer will maintain for a period until
---------
at least December 31, 2000 the following types and amounts of insurance with
respect to the Business:
. Workers Compensation as required by law and Employers Liability
insurance with a limit of $500,000 per occurrence;
. General Liability Insurance with a limit of $1,000,000 per
occurrence, and an aggregate of $2,000,000; and
. Electronic Data Processors Errors & Omissions Insurance on a
claims made basis with a limit of $500,000, and an aggregate of
$500,000, inclusive of defense costs, charges and expenses.
ARTICLE VII
CLOSING DELIVERIES
------------------
2.35 Closing. The closing of the transactions contemplated by this Agreement
-------
(the "Closing") shall be held on the 11th day of August, 1997, to be effective
at 12:01 a.m. on the day of Closing (the "Closing Date") at the offices of
XxXxxxx, XxXxxxx & Xxxxx in Chicago, Illinois.
2.36 Deliveries.
----------
(a) At the Closing, Buyer shall deliver to Seller:
31
(i) The Purchase Price pursuant to Section 1.2 hereof;
-----------
(ii) The duly executed Promissory Note;
(iii) The duly executed Guaranty;
(iv) Certified copies of the resolutions of the Board of Director
of Buyer authorizing Buyer to execute and deliver this
Agreement, any agreement or document contemplated hereby,
and to consummate the transactions contemplated hereby and
thereby;
(v) A certificate of an executive officer of Buyer, dated the
Closing Date, certifying that: (i) all representations and
warranties made by Buyer in Article III hereof were true and
-----------
correct when made, and are true and correct on the Closing
Date, except for changes permitted or contemplated by this
Agreement and except that representations which are
specifically made as of a specified date shall be true and
correct as of such earlier date; and (ii) all covenants,
agreements and conditions contained in this Agreement to be
performed or complied with by Buyer on or prior to the
Closing Date have been performed or complied with;
(vi) Duly executed Employment Agreements, in substantially the
forms attached as Exhibits A-1 and A-2 hereto;
(vii) An opinion of Buyer's counsel, in a form to be mutually
agreed by the parties; and
(viii) Any other documents required by this Agreement.
(b) At the Closing, Seller shall deliver to Buyer:
(i) Stock certificates representing the Shares, endorsed in
blank or accompanied by duly exercised assignment documents;
(ii) Possession of all Assets used in the Business, except for
Excluded Assets;
(iii) All contracts, leases, agreements or other documents, books,
financial and accounting records of CIS not previously
delivered or not located on the premises of CIS, to the
extent such items are
32
used in the Business, and are not Excluded Assets or items
related to Excluded Assets;
(iv) Duly executed Employment Agreements, in substantially the
forms attached as Exhibits A-1 and A-2 hereto;
(v) The notices and consents pursuant to Section 6.9;
(vi) A certificate of the Seller, dated the Closing Date,
certifying that: (i) all representations and warranties made
by Seller in Article II hereof were true and correct when
----------
made, and are true and correct on the Closing Date except
for changes permitted or contemplated by this Agreement and
except that representations which are specifically made as
of a specified date shall be true and correct as of such
earlier date; and (ii) all covenants, agreements and
conditions contained in this Agreement to be performed or
complied with by CIS on or prior to the Closing Date have
been performed or complied with;
(vii) An opinion of Seller's counsel, in a form to be mutually
agreed by the parties; and
(viii) Letters of resignation of all directors and officers of CIS;
and
(ix) Any other documents required by this Agreement.
ARTICLE VIII
POST-CLOSING COVENANTS AND AGREEMENTS
-------------------------------------
2.37 Further Assurances. If at any time and from time to time after the
------------------
Closing, any party reasonably determines that any further conveyance,
assignment, consent to assignment or other document or any other further action
is necessary or desirable to carry out the purposes of and to make effective the
transactions contemplated by this Agreement, the parties agree to execute and
deliver all such instruments and to take such actions as may be reasonably
necessary or advisable for such purpose.
8.2 Covenant Not to Compete.
-----------------------
(a) During Seller's employment with Buyer and for a period of two years
thereafter, or five (5) years following closing of this transaction,
33
whichever is longer (except with respect to competing in locations
other than Illinois and within 150 miles of downtown Chicago
pursuant to clauses (i) or (ii), in which event the time limitation
shall extend only to the duration of Seller's employment with Buyer
and for a period of one year thereafter), Seller shall not directly
or indirectly through representatives, agents or otherwise (i)
engage in competition with the technology staffing or technology
services business as currently performed by CIS or Xxxxxx Technology
Solutions, a division of Xxxxxx Telecom, Inc. ("BTS"), their
successors or assigns in the Territory; (ii) provide information,
solicit or sell for, own, or organize any interest in, either
directly or through any affiliate or subsidiary corporation,
partnership or other entity, or become engaged by, act as agent for,
or in any manner assist, any person, corporation or other entity
that is in competition with the technology staffing or technology
services business currently performed by CIS or BTS , or their
successors or assigns in the Territory (iii) solicit any "customers"
(as defined in this paragraph) for any corporation, partnership or
other entity that is in the business of providing technology
staffing or technology services as currently performed by CIS or
BTS; or (iv) contact or approach either directly or indirectly for
his own individual purposes or those of another, any employee of
Buyer, CIS, or BTS, without regard to his/her location, for the
purposes of attempting to or actually soliciting or hiring that
employee on his own account or on the account of another. Seller
further agrees that within the restrictive period, Seller will not
in any way divert or attempt to divert from Buyer, BTS or CIS any
business whatsoever and Seller further agrees that during said
restrictive period he will not influence or attempt to influence any
of the customers of Buyer, BTS, or CIS not to do business with
Buyer, BTS, or CIS, and Seller further agrees that he will not make
or permit the making of any public announcement or statement of any
kind that Seller was formerly employed or connected with Buyer or
CIS, which announcement has as its purpose directly or indirectly
the intent to violate the provision of this Agreement. The term
"customer", as used herein, shall mean any person or entity to which
Seller employees under his direct or indirect control has contact
with and does business with for Buyer, BTS, or CIS at any time while
employed by BTS, CIS or Buyer. The term "Territory" as used herein
shall mean the states of Illinois (including areas that are not in
Illinois but are within 150 miles of downtown Chicago) Arizona and
any other area within fifty miles of any location where Seller
performs on-going services pursuant to Seller's employment agreement
with Buyer.
(b) During the term set forth in paragraph (a) and thereafter, Seller
shall not divulge any of Buyer's, BTS's or CIS's business contacts,
customers,
34
suppliers, technology, know-how, trade secrets, marketing
techniques, books and records, computer programs or any other
confidential or proprietary information or make available to any
other persons any documents, files or other papers concerning the
foregoing or the Business or financial affairs of CIS, BTS or
Buyer. During the term set forth in paragraph (a) and thereafter,
Seller shall not solicit the employment of, or hire any employee
or consultant currently or provisionally employed or retained by
Buyer, BTS or CIS.
In the event that any part of the aforesaid confidential
information ("Confidential Information"); (i) becomes generally
known to the public through a legitimate origin (other than by
breach of this agreement by Seller), (ii) becomes available to
Seller on a non-confidential basis, (iii) has been independently
developed by Seller or Seller's representatives, (iv) has been
disclosed by operation of law, or (v) has been disclosed by
Seller with the prior written consent of Buyer, then those parts
of the said Confidential Information shall no longer be deemed
Confidential Information for purposes of this Agreement, but
Seller shall continue to be bound by the terms of this Agreement
as to all other Confidential Information. Further, in the event
that Seller is requested in any proceeding to disclose any
Confidential Information, Seller shall give Buyer prompt notice
of such request so that Buyer may seek an appropriate protective
order. If, in the absence of a protective order, Seller is
nonetheless compelled to disclose such Confidential Information,
Seller, or Seller's Representatives, as the case may be, may
disclose such information to the extent compelled to do so in
such proceeding, without liability hereunder; provided, however
that Seller shall give Buyer written notice of the information to
be disclosed as far in advance of its disclosure as is
practicable and, upon Buyer's request and at Buyer's expense,
Seller shall use its best efforts to obtain assurances that
confidential treatment will be accorded to such information.
(c) Seller has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred upon
Buyer under this Agreement and hereby acknowledges and agrees
that the same are reasonable in time and territory.
8.3 Excluded Assets and Excluded Liabilities
----------------------------------------
35
(a) Prior to the Closing, Seller shall convey the Excluded Assets out
of CIS. At the Closing, Seller shall pay or otherwise satisfy
the obligation of CIS to pay the Excluded Liabilities.
(b) For purposes of this Section 8.3,
(i) "Excluded Assets" shall mean all automobiles (except for the
Mercedes lease, with a monthly payment of approximately
$940, which shall not be an "Excluded Asset"), salary
continuation plans and life insurance policies owned or
leased by CIS as of the date of Closing.
(ii) "Excluded Liabilities" shall mean all bank debt, automobile
loans, and other financings.
8.4 Inspection of Books and Records. After the Closing, Seller and his
-------------------------------
representatives shall have the right of access, for a "Legitimate Business
Purpose", to the books and records of CIS relating to any period ending on or
prior to the Closing Date, at all reasonable times during business hours and to
make copies thereof at his expense. In the event that Buyer, within a period of
five (5) years after the Closing Date, desires to dispose of any of the said
books and records of CIS, Buyer shall give Seller at least thirty (30) days
prior written notice thereof and Seller shall have the right to take possession
of any of said books and records that Buyer desires to dispose of within the
said thirty (30) day period. With respect to he inspection and/or copying of
the books and records of CIS pursuant to this Paragraph 8.4, Seller shall be
bound by his covenant concerning confidential information set forth in Paragraph
8.2(b) hereunder. For purposes of this Paragraph 8.4 each of the following
should be deemed a "Legitimate Business Purpose":
A. Independent verification of any of Seller's rights or obligations
under this Agreement.
B. Substantiation or clarification of any tax position taken by Seller
with respect to his individual tax returns.
C. Any other business purpose which reasonably requires the inspection
rights of Seller hereunder.
ARTICLE IX
TERMINATION; WAIVER
-------------------
2.38 Termination. This Agreement may be terminated at any time prior to the
-----------
Closing as follows:
36
(a) the Buyer and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written notice
to the Seller at any time prior to the Closing (i) in the event
the Seller has breached any representation, warranty, or covenant
contained in this Agreement in any material respect, the Buyer
has notified the Seller of breach, and the breach has continued
without cure for a period of 10 days after the notice of breach
or (ii) if the Closing shall not have occurred on or before
August 11, 1997, by reason of Seller being unable or unwilling to
effect a Closing on or before August 11, 1997, or by reason of
the failure of any condition precedent under Article IV hereof
----------
(unless the failure results primarily from the Buyer itself
materially breaching any material representation, warranty, or
covenant contained in this Agreement), (iii) if the Closing shall
not have occurred on or before August 11, 1997, by reason of the
failure to obtain all third party consents required to be
obtained by Section 6.9; or (iv) if Buyer in its sole discretion
-----------
is not satisfied with the results of its continuing legal,
business and accounting due diligence regarding CIS; and
(c) the Seller may terminate this Agreement by giving written notice
to the Buyer at any time prior to the Closing (i) in the event
the Buyer has materially breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Seller has notified the Buyer of the breach, and the
breach has continued without cure for a period of 10 days after
the notice of breach, or (ii) if the Closing shall not have
occurred on or before August 11, 1997, by reason of Buyer being
unable or unwilling to effect a Closing on or before August 11,
1997, or by reason of the failure of any condition precedent
under Article V hereof (unless the failure results primarily from
---------
the Seller itself breaching any representation, warranty, or
covenant contained in this Agreement).
2.39 Effect of Termination; Specific Performance.
-------------------------------------------
(a) In the event of the termination of this Agreement pursuant to
Section 9.1 hereof, notice thereof shall be promptly given by
-----------
the terminating party to the other party and thereafter this
Agreement shall forthwith become void and have no effect, without
any liability on the part of any party or its directors, officers
or stockholders, except that (i) the provisions of Section 6.1
-----------
hereof shall remain in effect and (ii) nothing in this Section
-------
9.2 shall relieve any party to this Agreement from liability
---
for breach of this
37
Agreement or any misrepresentation hereof, including pursuant to
paragraph (b) hereof.
(b) In the event of a breach or threatened breach by Seller or Buyer
of any of the agreements and obligations set forth herein,
monetary damages or the other remedies at law that may be
available to the non-breaching party for such breach or
threatened breach will be inadequate and, without prejudice to
the non-breaching party's right to pursue any remedies at law or
in equity available to it for such breach or threatened breach,
including without limitation the recovery of damages, the non-
breaching party will be entitled to injunctive relief as a means
of having the breaching party comply with the provisions herein.
2.40 Extension; Waiver. At any time prior to the Closing, the parties hereto
-----------------
may (i) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein by the other party or in any
document, certificate or writing delivered pursuant hereto by the other party or
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of either party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. No waiver of any breach of a provision of this Agreement
shall constitute or be deemed a waiver of any other breach of the same or any
other provision of this Agreement, and no delay or failure to take action with
respect to any breach or provision of this Agreement shall constitute or be
deemed a waiver of the right to enforce this Agreement and to take action
against such breach or any subsequent breach of the same or any other provision.
ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
2.41 Entire Agreement; Amendment. Except with respect to those documents
---------------------------
signed in connection with the Closing of the transactions contemplated by this
Agreement and those documents that, by their terms, modify or supersede this
Agreement, this Agreement, (including the Disclosure Schedules), contains the
entire agreement between the parties hereto and supersedes all prior oral or
written agreements, promises, representations, commitments or understandings
with respect to the matters provided for herein. This Agreement may be modified
or amended only by a writing duly executed by Buyer and Seller, which
modification or amendment shall be binding upon all of the parties hereto.
2.42 Assignment and Binding Effect. This Agreement and the rights and
-----------------------------
obligations of any party hereunder may not be assigned by any party without the
prior written consent of the
38
other party hereto. All covenants, agreements, statements, representations,
warranties and indemnities in this Agreement by and on behalf of either of the
parties hereto shall bind and inure to the benefit of their respective heirs,
successors and permitted assigns of the parties hereto.
2.43 Waivers. No waiver of any of the provisions of this Agreement shall be
-------
deemed or shall constitute a continuing waiver, and no waiver shall be binding
unless executed in writing by the party making the waiver.
2.44 Notices. All notices, demands or other communications which may be or
-------
are required to be given by any party to any other party pursuant to this
Agreement, shall be in writing and shall be mailed by certified mail, return
receipt requested, postage prepaid, or transmitted by hand delivery, national
overnight express, telegram or facsimile transmission, addressed as follows:
(a) If to Buyer:
Xxxxxx International, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
XxXxxxx, XxXxxxx & Xxxxx
00 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
(b) If to Seller:
Xx. Xxxx X. Xxxxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxx Xxxx, Xxxxxxxx 00000
until such time as either party notifies the other of a change of address. Each
notice or other communication which shall be mailed, delivered or transmitted in
the manner described above shall be deemed sufficiently given and received for
all purposes at such time as it is delivered to the addressee (with the return
receipt, the delivery receipt, or the affidavit of messenger or
39
telefax transmission log being deemed conclusive evidence of such delivery) or
at such time as delivery is refused by the addressee upon presentation.
2.45 Governing Law; Jurisdiction and Venue. This Agreement shall be governed
-------------------------------------
by and construed in accordance with the laws of the State of Illinois, without
giving effect to the principles of conflicts of laws thereof.
2.46 Counterparts; Execution. To facilitate execution, this Agreement may be
-----------------------
executed in as many counterparts as may be required, and each such counterpart
hereof shall be deemed to be an original instrument, but all such counterparts
together shall constitute but a single agreement.
2.47 Effective Time of Closing. Notwithstanding the time at which Closing
-------------------------
takes place, the Closing shall be deemed to be effective as of 12:01 a.m. on the
Closing Date.
2.48 Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
2.49 No Third Parties Benefitted. This Agreement is made and entered into
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for the sole protection and benefit of the parties hereto, and no other person
or persons shall have any right or action under this Agreement; This agreement
is made and entered into for the sole protection and benefit of the parties
hereto, their successors and assigns, and no other person or persons shall have
any right of action under this Agreement; provided, however, the payment
obligations of Buyer set forth in this Agreement may be assigned by Seller to a
trust in connection with the estate planning of Seller.
2.50 Recitals, Schedules and Exhibits. The recitals, schedules, and exhibits
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to this Agreement are incorporated herein and, by this reference, made a part
hereof as if fully set forth at length herein.
2.51 Section Headings. The section headings used herein are inserted for
----------------
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or
caused this Agreement to be executed on its behalf, as of the date first above
written.
BUYER:
XXXXXX TELECOM, INC.
By: _______________________________
Its: ______________________________
SELLER:
____________________________________
XXXX X. XXXXXXXXX
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