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EXHIBIT 2.1
ASSETS PURCHASE AGREEMENT
BY AND AMONG
NEW ARTS ACQUISITION, INC.
(A DELAWARE CORPORATION),
NATIONAL INSURANCE GROUP
(A CALIFORNIA CORPORATION),
AMERICAN REALTY TAX SERVICES, INC.
(A VIRGINIA CORPORATION),
AMERICAN REALTY TAX SERVICES OF NEW YORK, INC.
(A VIRGINIA CORPORATION),
AND
EACH OF THE STOCKHOLDERS NAMED HEREIN
AUGUST 15, 1997
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ASSETS PURCHASE AGREEMENT
THIS ASSETS PURCHASE AGREEMENT (together with the appendices and
schedules and exhibits hereto and thereto, the "Agreement") is made and entered
into this 15th day of August, 1997, by and among (i) New Arts Acquisition, Inc.,
a Delaware corporation ("Purchaser"), (ii) National Insurance Group, a
California corporation ("XXXX"), (iii) American Realty Tax Services, Inc., a
Virginia corporation ("ARTS"), (iv) American Realty Tax Services of New York,
Inc. (together with ARTS, "Seller"), and (v) Xxxxxx X. Xxxxxxxx, Xxxxxxx X.
Xxxxxxxx and Xxxxx X. Xxxxxxxx (individually, a "Stockholder" and collectively,
the "Stockholders"). Certain terms are used herein as defined below in Section 1
or elsewhere in this Agreement.
RECITALS
WHEREAS, Seller is engaged in business activities that include,
among other things, providing life of loan and annual real estate tax service
contracts and other tax services to its customers (collectively, "realty tax
services");
WHEREAS, such business has been carried on by American Realty Tax
Services, Inc. and American Realty Tax Services of New York, Inc.;
WHEREAS, Seller desires to sell, and Purchaser desires to purchase,
substantially all of the assets, including, without limitation, all of the
hardware, software and information used in connection with Seller providing
realty tax services to its customers, assignment of each of the agreements
pursuant to which such realty tax services are provided, and, as part of such
sale and purchase, Purchaser is willing to assume certain of the specified
liabilities of Seller pursuant to this Agreement; and
WHEREAS, Stockholders own all of the issued and outstanding capital
stock of Seller and desire to cause Seller to sell its assets pursuant to this
Agreement and have approved of and consented to such sale from Seller to
Purchaser.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1.
DEFINITIONS
For convenience, certain terms used in more than one part of this
Agreement are listed in alphabetical order and defined or referred to below
(such terms as well as any other terms defined elsewhere in this Agreement shall
be equally applicable to both the singular and plural forms of the terms
defined).
"Accounts Receivable" is defined in Section A.11 of Appendix A
hereto.
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"Affiliates" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934.
"Agreement" means this Agreement and the appendices and schedules
and exhibits hereto and thereto.
"Assumed Liabilities" is defined in Section 2.1(c).
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Claim Notice" is defined in Section 9.4(b).
"Closing" means the Closing on the Transactions.
"Closing Date" is defined in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Regulations promulgated thereunder.
"Confidential Information" is defined in Section 10.2.
"Contract" means any written or, in the case of Seller, oral
contract, agreement, lease, instrument or other commitment that is binding on
any Person or its property under applicable law.
"Court Order" means any judgment, decree, injunction, order or
ruling of any federal, state, local or foreign court or governmental or
regulatory body or authority that is binding on any Person or its property under
applicable law.
"Consulting Agreements" means the Consulting Agreements to be
entered into as of the Closing Date between Purchaser and each of Xxxxxx X.
Xxxxxxxx and Xxxxxxx X. Xxxxxxxx, in substantially the form of Exhibit E hereto.
"Default" means a breach, default or violation.
"Disclosure Schedule" means the schedules to be prepared by Seller
and the Stockholders in accordance with this Agreement (including without
limitation the schedules specified in Appendix A).
"Employee Benefit Plan" is defined in Section A.19(a)(iv) of
Appendix A hereto.
"Environmental Liabilities" is defined in Section A.13(c) of
Appendix A hereto.
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"Escrow Agent" means Xxxxxx, Flyer & Xxxxx, a professional
corporation, or another escrow agent acceptable to both Purchaser and Seller.
"Escrow Agreement" means the Escrow Agreement among the Escrow
Agent, Seller and Purchaser.
"Excluded Assets" is defined in Section 2.1(b).
"Excluded Liabilities" is defined in Section 2.1(d).
"GAAP" means United States generally accepted accounting principles.
"Hazardous Materials" is defined in Section A.13(a) of Appendix A
hereto.
"HSR Act" is defined in Section 6.6.
"Indemnified Party" and "Indemnified Parties" is defined in Section
9.4.
"Indemnifying Party" is defined in Section 9.4.
"Intellectual Property" is defined in Section A.28(a) of Appendix A
hereto.
"IRS" means the Internal Revenue Service.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, demand, assessment, judgment, loss, damage, punitive
damages, deficiency, penalty, fine, interest (including, without limitation,
penalties, fines or interest incurred as a result of a breach of a Contract with
a customer or borrower of a customer), guaranty or endorsement of or by any
Person (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), arising out of or related to
any occurrence or occurrences prior to, at or after the date hereof.
"Lien" means any mortgage, security interest, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge, preference, priority or other security agreement, option, warrant,
attachment, right of first refusal, preemptive, conversion, put, call or other
claim or right, restriction on transfer (other than restrictions imposed by
federal and state securities laws) or preferential arrangement of any kind or
nature whatsoever (including but not limited to any restriction on the transfer
of any assets, any conditional sale or other title retention agreement, any
financing lease involving substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction) or Seller Third Party Consents.
"Litigation" means any lawsuit, action, arbitration, administrative
or other proceeding, criminal prosecution or governmental or regulatory
investigation or inquiry.
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"Material Adverse Effect" means a material adverse effect on the
Seller Assets or the financial condition, revenues, cash flows, results of
operations, liquidity, products, competitive position, customers and customer
relations of Seller.
"Material Contracts" is defined in Section A.15(b) of Appendix A
hereto.
"Notice Period" is defined in Section 9.4(b).
"Ordinary Course" or "ordinary course of business" means the
ordinary course of business that is consistent with past practices.
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Purchased Assets" means all of the Seller Assets other than the
Excluded Assets.
"Purchaser Indemnified Party" and "Purchaser Indemnified Parties" is
defined in Section 9.1.
"Purchaser Note" is defined in Section 2.2(c).
"Regulation" means any statute, law, ordinance, regulation, order or
rule of any federal, state, local, foreign or other governmental agency or body
or of any other type of regulatory body, including but not limited to those
covering environmental, energy, safety, health, transportation, bribery,
recordkeeping, zoning, antidiscrimination, antitrust, wage and hour, and price
and wage control matters.
"Related Party Contracts" is defined in Section 7.11.
"Seller Assets" means all of the assets, properties, claims,
Contracts, goodwill and rights of every kind and description, real and personal,
tangible and intangible, wherever situated, whether or not reflected in the most
recent financial statements, that Seller has a right, title or interest to or in
and whether or not used by Seller in the Seller Business.
"Seller Balance Sheet" is defined in Section A.9 of Appendix A
hereto.
"Seller Balance Sheet Date" means June 30, 1997.
"Seller Benefit Arrangement" is defined in Section A.19(a)(ii) of
Appendix A hereto.
"Seller Business" means the entire business, operations and
facilities of Seller unless otherwise specified.
"Seller Financial Statements" is defined in Section A.9 of Appendix
A hereto.
"Seller Indemnified Party" and "Seller Indemnified Parties" is
defined in Section 9.2.
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"Seller's knowledge" means the actual knowledge of any Stockholder
or Seller's directors or officers or the key employees set forth on Exhibit C
hereto, and such knowledge as any Stockholder and/or Xxxxx Xxxxxxxxx should have
obtained upon reasonable inquiry.
"Seller Plan" is defined in Section A.19(a)(iii) of Appendix A
hereto.
"Seller Third Party Consents" is defined in Section A.15(d) of
Appendix A hereto.
"Stockholders' Release" means the releases executed by each of the
Stockholders in favor of Seller and Purchaser in the form of Exhibit F hereto.
"Stockholders' Representative" means Xxxxxx X. Xxxxxxxx or such
other person as may be designated by the Stockholders.
"Tax" is defined in Section A.21 of Appendix A hereto.
"Tax Returns" is defined in Section A.21(a) of Appendix A hereto.
"Transaction Documents" means this Agreement, the Consulting
Agreements, the Escrow Agreement, the Stockholders' Release and the other
agreements and documents contemplated hereby and thereby.
"Transactions" means the transactions contemplated by the
Transaction Documents.
SECTION 2.
ASSETS PURCHASE AND RELATED MATTERS
2.1 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES.
(a) Transfer of Assets. Subject to the terms and conditions of
this Agreement, at the Closing, Seller shall sell, transfer, convey, assign and
deliver to Purchaser, and Purchaser shall purchase, acquire and accept from
Seller, all of the Purchased Assets, free and clear of all Liens. Such Purchased
Assets, include, without limitation, those set forth in Exhibit A. Prior to
Closing, Purchaser may elect to assign to its Affiliates the right to receive
all or any portion of the Purchased Assets, provided that such Affiliate agrees
to be bound by the terms of this Agreement as if it were the Purchaser
hereunder. Upon notice of such election prior to Closing, Seller shall sell,
transfer, convey, assign and deliver to any such Affiliate or Purchaser those
Purchased Assets as are specified by Purchaser in the form(s) of Indenture and
Xxxx of Sale attached hereto as Exhibit D. Subject to the provisions of Section
2.2(e) below, Seller agrees that Purchaser may allocate the Purchase Price among
Purchaser and its Affiliates in any manner Purchaser shall determine.
(b) Excluded Assets. Seller shall not sell, transfer, convey,
assign or deliver any of the following Seller Assets (the "Excluded Assets"):
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(i) the originals of corporate seals, certificates of
incorporation, minute books, stock books, tax returns, books of account or other
records having to do with the corporate organization of Seller;
(ii) the rights which accrue or will accrue to Seller under
this Agreement;
(iii) cash (except such amounts held by Seller or the
Stockholders in trust for the benefit of any third party and, in the case of
Stockholders, only if such amounts relate to Seller's business) and any other
assets specifically described on Schedule 2.1(b) of the Disclosure Schedule ;
(iv) any Seller Assets which Purchaser, in its sole
discretion, s not to purchase by providing written notice to Seller at or prior
to the Closing.
(c) Assumption of Liabilities. Subject to the terms and
conditions hereof, at the Closing, Purchaser shall assume and be liable and
responsible only for those Liabilities of Seller, the Stockholders and their
Affiliates that are specified on Schedule 2.1(c) of the Disclosure Schedule (the
"Assumed Liabilities").
(d) Excluded Liabilities. Notwithstanding any other provision of
this Agreement, except for the Assumed Liabilities, neither Purchaser nor any
Affiliate of Purchaser shall assume, or otherwise be liable or responsible for,
any Liabilities of Seller or the Stockholders, whether arising out of
occurrences prior to, at or after the date hereof ("Excluded Liabilities").
Without in any way limiting the generality of the foregoing, Excluded
Liabilities shall include any and all Liabilities, other than Assumed
Liabilities, relating to (i) any federal, state or local Tax Liabilities
(including, without limitation, Tax Liabilities incurred by the parties in
connection with this Transaction), (ii) any Liabilities arising out of the
breach by Seller or Stockholders of any Contract, (iii) any Environmental
Liabilities, (iv) any product liability or similar claim or (v) any Liability
arising prior to or accruing upon or resulting solely from Closing relating to
any employees, agents or independent contractors of Seller, whether or not
employed by Purchaser after Closing, or under any Seller Benefit Arrangement or
Seller Plan. Seller will continue to operate as an ongoing corporate entity
following the Closing Date and Seller or the Stockholders, as the case may be,
shall be liable and responsible for any and all Excluded Liabilities
2.2 PURCHASE PRICE. Subject to the terms and conditions of this
Agreement and, in the case of Sections 2.2(a) and (b), the Escrow Agreement,
Purchaser shall pay the Purchase Price in an aggregate amount not to exceed
Thirteen Million Two Hundred and Sixty Seven Thousand Nine Hundred and Forty Two
Dollars ($13,267,942), in accordance with the following schedule:
(a) Purchaser shall pay by check to Escrow Agent in trust the
sum of One Million Dollars ($1,000,000), at the time of execution of this
Agreement;
(b) Purchaser shall pay by check to Escrow Agent in trust the
additional sum of One Million Dollars ($1,000,000), on the day which is thirty
(30) days after the date of
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execution of this Agreement, or, if such day is not a business day, the first
business day thereafter, provided that Seller has complied with the terms of
this Agreement and that Purchaser has not terminated this Agreement pursuant to
Section 11.1 hereof;
(c) On the Closing Date, the amounts deposited with Escrow Agent
under Sections 2.2(a) and (b) above shall be paid to Seller and Purchaser shall
pay to Seller the sum of Seven Million Two Hundred Sixty Seven Thousand Nine
Hundred and Forty Two Dollars ($7,267,942), in immediately available funds (the
"Cash Purchase Price"), provided that Purchaser has not terminated this
Agreement pursuant to Section 11.1 hereof;
(d) (1) On April 25, 1998, Purchaser shall pay to Seller (fifty
percent in cash and fifty percent by promissory note in the form of the
Purchaser Note attached hereto as Exhibit B) $2.29 for every dollar of revenue
received from Designated Agreements (as defined below) in excess of Seven
Million Ninety Two Thousand Dollars ($7,092,000) for the twelve (12) month
period beginning April 1, 1997, and ending on and including March 31, 1998 (the
"Measurement Period"), if any, up to a maximum aggregate payment of cash and
Purchaser Note pursuant to this subsection of Four Million Dollars ($4,000,000).
"Designated Agreements" are those contracts (i) in full force and effect on the
Closing Date pursuant to which Seller has agreed to provide realty tax services
to its customers and (ii) set forth on Schedule 2.2(d).
(2) On April 25, 1998, Purchaser shall pay unpaid interest
and principal then due and owing for the period from the Closing Date through
and including March 31, 1998, pursuant to the terms of the Purchaser Note which
shall provide for a simple interest rate of Eight (8%) per annum.
(3) By way of example, if revenues from Designated
Agreements are Ten Million Ninety Two Thousand Dollars ($10,092,000), Purchaser
shall, on April 25, 1998, (i) pay by wire transfer to Seller Two Million Dollars
($2,000,000) (representing the 50% cash portion of the payment due under this
subsection) plus an amount equal to unpaid interest and principal then due and
owing on the Purchaser Note for the period beginning on the Closing Date and
ending on March 31, 1998, and (ii) issue to Seller a Purchaser Note in the face
amount of $2,000,000.
(4) By way of further example, if revenues from Designated
Agreements are Eight Million Ninety Two Thousand Dollars ($8,092,000), Purchaser
shall, on April 25, 1998, (i) pay by wire transfer to Seller One Million One
Hundred Forty Five Thousand Dollars ($1,145,000) (representing the 50% cash
portion of the payment due under this subsection) plus an amount equal to the
unpaid interest and principal then due and owing for the period beginning on the
Closing Date and ending on March 31, 1998, and (ii) issue to Seller a Purchaser
Note in the face amount of $1,145,000.
(5) By way of further example, if revenues from Designated
Agreements are $6,000,000, Purchaser shall not owe any payment, by way of wire
transfer or Purchaser Note, to Seller pursuant to this Section 2.2(d).
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(6) In the event that any Designated Agreement is terminated
during the Measurement Period, then, for purposes of the computation in Section
2.2(d)(1) above, revenues generated during the Measurement Period from contracts
entered into after Closing between Seller and any of the parties listed as
"Pipeline Parties" on Schedule 2.2(d)-1 shall be included, not to exceed the
revenues of the terminated Designated Agreement for the balance of the
Measurement Period (annualized based on revenues received from such terminated
Designated Agreement for the Measurement Period).
(7) Purchaser may, to the extent permitted under Section 9.7
below, set-off against any payments otherwise payable to Seller under this
Agreement, including, without limitation pursuant to this Section 2.2(d), any
claims Purchaser may have with respect to Seller or Stockholders, including any
indemnification claim arising under Section 9.
(e) The Purchase Price (and all other capitalizable costs) shall
be allocated among the Purchased Assets for all purposes (including but not
limited to financial accounting and tax purposes) in accordance with an
allocation schedule to be negotiated between Seller and Purchaser in good faith.
In the event that Seller and Purchaser are able to agree upon such an allocation
schedule, each of the parties hereto hereby covenants and agrees with the other
that it will not take a position on any income tax return, before any
governmental agency charged with collection of any income tax or in any judicial
proceeding that is any way inconsistent with such agreed upon allocation.
2.3 GUARANTEE. Subject to the rights and defenses available to
Purchaser under this Agreement, XXXX hereby unconditionally guarantees to Seller
and the Stockholders the prompt payments by Purchaser of (i) the Two Million
Dollars ($2,000,000) to Escrow Agent pursuant to Section 2.2(a) and (b), (ii)
the Cash Purchase Price and (iii) amounts due and owing to Seller pursuant to
the Section 2.2(d), each in accordance with and subject to the terms of this
Agreement. This is a guaranty of performance and not merely ultimate collection.
Upon a default by Purchaser on any of the foregoing payments, Seller and the
Stockholders shall be free to assert their rights and remedies against XXXX
without first pursuing Purchaser.
SECTION 3.
CLOSING
3.1 CLOSING. Unless this Agreement shall have been terminated and
the Transactions abandoned pursuant to Section 11.2, the consummation of the
Transactions shall take place in the Commonwealth of Virginia, on October 1,
1997, providing that all conditions to Closing shall have been satisfied or
waived, or at such other place, time or date as the parties may mutually agree,
which date shall be referred to as the "Closing Date"; provided, if Closing
shall not occur on or before October 1, 1997, because the Closing conditions to
Purchaser's obligations have not been satisfied, then Purchaser can extend the
time of Closing until such date as Seller and Stockholders shall have fulfilled
the Closing conditions, but in all events, not later than November 30, 1997;
provided, further, that Purchaser may, at its sole election, specify an earlier
Closing Date if all the Closing conditions have been satisfied or waived.
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3.2 DELIVERIES.
(a) Seller Deliveries. Seller will deliver to Purchaser the
following at Closing:
(i) a duly executed Xxxx of Sale in the form annexed hereto
as Exhibit D or in such other form as is reasonably acceptable to Purchaser;
(ii) executed copies of all consents (including each of the
Seller Third Party Consents referred to in Schedule A.15 of the Disclosure
Schedule);
(iii) assignments of all leases described in Schedule A.14
of the Disclosure Schedule;
(iv) assignments of all Intellectual Property as set forth
in Schedule A.28 of the Disclosure Schedule;
(v) all documents or data (whether in written, printed or
computer form) containing or relating in any way to the Purchased Assets;
(vi) all such other endorsements, assignments and other
instruments as, in the reasonable opinion of Purchaser or Purchaser's counsel,
are necessary to transfer to or vest in Purchaser good and marketable title to
the assets to be transferred to Purchaser pursuant to this Agreement;
(vii) all other previously undelivered documents required to
be delivered by Seller to Purchaser at or prior to the Closing in connection
with the Transactions, including but not limited to those contemplated by
Section 6; and
(viii) Seller's and Stockholders' compliance certificates
required by Section 7.13 hereof.
(b) Purchaser Deliveries. Upon the terms and subject to the
conditions contained herein, Purchaser shall deliver to Seller:
(i) the Purchase Price in accordance with Section 2.2
hereof; and
(ii) at Closing, an instrument of assumption in a form
reasonably acceptable to counsel for Seller, evidencing Purchaser's assumption,
pursuant to Section 2.1(c), of the Assumed Liabilities.
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SECTION 4.
REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS
To induce Purchaser to enter into this Agreement and to consummate
the Transactions, Seller and each of the Stockholders, jointly and severally,
represent and warrant to Purchaser as set forth in Appendix A hereto, which
representations and warranties are incorporated in this Section 4 by reference
and made a part of this Agreement. These representations and warranties are an
integral part of this Agreement.
SECTION 5.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
To induce Seller and Stockholders to enter into this Agreement and
to consummate the Transactions, Purchaser represents and warrants to Seller and
to the Stockholders as set forth in Appendix B hereto, which representations and
warranties are incorporated in this Section 5 by reference and made a part of
this Agreement. These representations and warranties are an integral part of
this Agreement.
SECTION 6.
COVENANTS OF SELLER
6.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Between the date of this Agreement and the Closing Date,
from 7:00 a.m. until 10:00 p.m. each and every day of the week, Seller will
afford to the officers and designated agents and representatives of Purchaser
access to (i) all of the sites, properties, books and records of Seller and (ii)
such additional financial and operating data and other information as to the
business and properties of Seller as Purchaser may from time to time reasonably
request, including without limitation, access upon reasonable request to
Seller's employees (including its managers and executive staff at Seller's
headquarters), customers (provided that Seller and Purchaser shall mutually
designate customers to be contacted and the content of any such communications
shall be mutually agreed), vendors, suppliers and creditors for due diligence
inquiry. The Stockholders and Seller will cooperate with Purchaser, its
representatives, agents, auditors and counsel in the preparation of any
documents or other material which may be required in connection with this
Agreement. No information or knowledge obtained in any investigation pursuant to
this Section 6.1 shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations of the
parties to consummate the Transactions, unless Purchaser, in its sole
discretion, consents in writing to such modification. Purchaser will promptly
notify Seller if Purchaser becomes aware that any representation or warranty of
Seller or the Stockholders is untrue or inaccurate in any material respect or if
Seller or the Stockholders are in breach of this Agreement. Seller and the
Stockholders shall have a reasonable opportunity, not to exceed ten (10)
business days, to cure any such untruth, inaccuracy or breach so long as (i) the
result of such cure does not materially and adversely affect Seller's business
or, in Purchaser's sole judgement, the value thereof, and (ii) such untruth,
inaccuracy or breach was committed
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innocently and unknowingly by Seller and the Stockholders. The delivery of, or
the failure to deliver, any notice pursuant to this Section 6.1(a) shall not,
without the express written consent of Purchaser, be deemed to (x) modify the
representations or warranties hereunder of Seller or the Stockholders, (y)
modify the conditions set forth in Section 7 or (z) limit or otherwise affect
the remedies available hereunder to Purchaser.
(b) Seller and each of the Stockholders (on behalf of themselves
and their Affiliates) recognizes and acknowledges that he, she or it has in the
past, currently has, and in the future may possibly have, access to certain
Confidential Information relating to the Purchased Assets, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Purchased Assets. If the Transactions
are consummated and Closing occurs, Seller and each of the Stockholders agrees
that he, she or it will not disclose Confidential Information with respect to
the Purchased Assets to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except to authorized
representatives of Purchaser and to counsel and other advisers, provided that
such advisers (other than counsel) agree to the confidentiality provisions of
this Section 6.1(b), unless (i) such information becomes known to the public
generally through no fault of Seller or any Stockholder, (ii) disclosure is
required by law or the order of any governmental authority under color of law,
or (iii) the disclosing party upon advice of counsel reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party, provided, that prior to disclosing any information
pursuant to clause (ii) or (iii) above, Seller or the Stockholder (as
applicable) shall give prior written notice thereof to Purchaser and provide
Purchaser with the reasonable opportunity to contest such disclosure and shall
reasonably cooperate with efforts to prevent such disclosure. The existence of
this Agreement, as well as the subject matter and contents hereof, shall be
deemed to be Confidential Information until Purchaser notifies Seller and
Stockholders to the contrary.
(c) Purchaser and XXXX (on behalf of themselves and their
Affiliates) recognizes and acknowledges that it had in the past, currently has,
and in the future may possibly have, access to certain Confidential Information
of Seller, such as lists of customers, operational policies, and pricing and
cost policies that are valuable, special and unique assets of Seller's business.
Purchaser agrees that, unless there is a Closing, they will not use for their
own or any other Person's benefit, nor will they disclose Confidential
Information with respect to Seller to any person, firm, corporation, association
or other entity for any purpose or reason whatsoever, except to authorized
representatives of Seller and to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 6.1(c), unless (i) such information becomes known to the public
generally through no fault of Purchaser, (ii) disclosure is required by law or
the order of any governmental authority under color of law, or (iii) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, provided,
that prior to disclosing any information pursuant to clause (ii) or (iii) above,
Purchaser shall give prior written notice thereof to Seller and provide Seller
with the opportunity to contest such disclosure and shall cooperate with efforts
to prevent such disclosure.
6.2 CONDUCT OF BUSINESS PENDING CLOSING. Except as requested or
agreed to in writing by Purchaser (which consent shall not be unreasonably
withheld), between the date hereof
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and the Closing Date, Seller will, and the Stockholders in their capacity as
directors will cause Seller to:
(a) except as provided in Schedule 6.2(a) of the Disclosure
Schedule, carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including, but not
limited to, those held under leases, in as good working order and condition as
at present, ordinary wear and tear excepted;
(c) perform all of its obligations under agreements relating to
or affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and
preserve its business organization intact, retain its present officers and key
employees and maintain its relationships with suppliers, vendors, customers,
creditors and others having business relations with it;
(f) maintain compliance with all material permits, laws, rules
and regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(g) except as provided in Schedule 6.2(g) of the Disclosure
Schedule, maintain present debt and lease instruments under which Seller is
obligated and not enter into new or amended debt or lease instruments; and
6.3 PROHIBITED ACTIVITIES. Except with the prior written consent of
Purchaser (which consent shall not be unreasonably withheld), between the date
hereof and the Closing Date, Seller will not:
(a) make any change in its Articles of Incorporation or Bylaws,
or authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind, or authorize or propose
any change in its equity capitalization, or issue or authorize the issuance of
any debt securities;
(c) declare, promise or pay any dividend, or make any
distribution (whether in cash, stock or property) in respect of its stock
whether now or hereafter outstanding, other than Tax payments or distributions
permitted by Section 6.3(d), or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or
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in substitution for shares of its capital stock, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock;
(d) enter into any Contract or incur or agree to incur any
liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business and consistent with past practice, in
an amount in excess of $25,000, including without limitation contracts to
provide services to customers, or enter into any series of contracts or
commitments or incur or agree to incur any liabilities or make any capital
expenditure or guarantee any indebtedness in an aggregate amount in excess of
$100,000; provided, however, Seller may make Tax payments on behalf of the
Stockholders or make distributions to Stockholders to enable them to pay their
Taxes in an aggregate amount not to exceed $250,000;
(e) increase the compensation payable or to become payable or
make any other payment to any officer, director, Stockholder, employee, agent,
representative or independent contractor; make any bonus or management fee
payment to any such person; make any loans or advances; adopt or amend any
Seller Plan or Seller Benefit Arrangement; or grant any severance or termination
pay;
(f) employ, or agree to employ, or otherwise retain as a
consultant or independent contractor, any Person for more than $30,000 per year,
or any two or more such Persons for more than an aggregate amount of $60,000 per
year, in each case on a gross basis; provided, however, Seller may employ a
Person to replace each employee who resigned or was otherwise terminated after
the date of this Agreement at the same or less salary level; provided, further,
that any such Person shall be employed pursuant to an agreement which may be
terminated by Purchaser by giving not more than one month notice to such Person
and without any liability to Purchaser or Seller other than the obligation to
pay salary for one month;
(g) create or assume any Lien upon any assets or properties
whether now owned or hereafter acquired;
(h) sell, assign, lease, rent, hypothecate, pledge or otherwise
transfer or dispose of any property or equipment except in the ordinary course
of business;
(i) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to
Seller;
(j) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(k) waive any material rights or claims of Seller, provided that
Seller may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
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(l) commit a material breach of or amend or terminate any
Contract, permit, license or other right;
(m) enter into any Contract with a Stockholder or an Affiliate
of Seller;
(n) enter into any other transaction (i) that is not negotiated
or entered into at arm's length with a third party that is not a Stockholder or
an Affiliate of Seller or (ii) outside the ordinary course of business or (iii)
prohibited hereunder;
(o) commence a lawsuit other than for routine collection of
bills;
(p) revalue any of its assets, including without limitation,
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business consistent with past practice;
(q) take any action that is designed or intended to have the
effect of discouraging any employee, customer, lessor or other Person from
maintaining the same business relationship with Purchaser after the Closing as
it maintained with Seller and its Affiliates prior to Closing; or
(r) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 6.3(a) through (q) above, or any action which
would make any of the representations and warranties of Seller and the
Stockholders contained in this Agreement untrue or result in any of the
conditions set forth in Sections 7 and 8 not being satisfied.
6.4 EXCLUSIVITY. None of the Stockholders, Seller, or any of their
Affiliates, agents, officers, directors or any representatives will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing or the termination of this Agreement in accordance with its
terms, directly or indirectly: (a) solicit, encourage, initiate or assist the
submission of proposals or offers from any Person for, (b) participate in any
discussions pertaining to, or (c) furnish any information to any Person other
than Purchaser or its designated representatives and agents relating to, any
acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, Seller or a merger, consolidation or business combination of
Seller. In addition to the foregoing, if Seller or any Stockholder receives any
unsolicited offer, proposal or indication of interest, or has actual knowledge
of any unsolicited offer, proposal or indication of interest, relating to any of
the above, Seller or such Stockholder shall immediately notify Purchaser in
writing thereof, including the identity of the party making such offer or
proposal and the specific terms of such offer or proposal, and provide Purchaser
with a copy of all writings relating to such offer, proposal or indication of
interest.
6.5 [Intentionally omitted.]
6.6 COOPERATION IN OBTAINING REQUIRED CONSENTS AND APPROVALS. Each
party hereto shall cooperate in obtaining all consents and approvals required by
Section 7.5 (which shall nonetheless continue to be the responsibility of the
Stockholders and Seller), including without limitation Seller Third Party
Consents set forth on Schedule A.15 of the Disclosure Schedule. In
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connection therewith, if required, Purchaser shall file all notices and other
information and documents required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX Xxx") as promptly as practicable after the
date hereof.
6.7 FULFILLMENT OF CONDITIONS. Seller shall use commercially
reasonable efforts to fulfill the conditions specified in Section 6 to the
extent that the fulfillment of such conditions is within its control. The
foregoing obligation includes, without limitation, (a) the execution and
delivery of the Transaction Documents, (b) taking or refraining from such
actions as may be necessary to fulfill such conditions (including but not
limited to conducting the Seller Business in such manner that on the Closing
Date the representations and warranties of Seller contained herein shall be
accurate as though then made, except as contemplated by the terms hereof), (c)
terminating the Related Party Contracts and (d) executing the Stockholders'
Release.
6.8 DISCLOSURE OF CERTAIN MATTERS. During the period from the date
hereof through the Closing Date, Seller shall give Purchaser prompt written
notice of any event or development that occurs that (a) had it existed or been
known on the date hereof would have been required to be disclosed under this
Agreement, (b) would cause any of the representations and warranties of Seller
contained herein to be inaccurate or otherwise misleading, (c) gives Seller any
reason to believe that any of the conditions set forth in Section 9 will not be
satisfied prior to the termination of this Agreement, or (d) is of a nature that
is or may have a Materially Adverse Effect on the operations, customer prospects
or condition (financial or otherwise) of Seller. The delivery of any notice
pursuant to this Section 6.8 shall not, without the express written consent of
Purchaser, be deemed to (x) modify the representations or warranties hereunder
of Seller or the Stockholders, (y) modify the conditions set forth in Sections
7, or (z) limit or otherwise affect the remedies available hereunder to
Purchaser.
6.9 SATISFACTION OF LIABILITIES. Prior to and after the Closing,
Seller will perform all of its obligations, contractual or otherwise, and
discharge all of the Excluded Liabilities generally in accordance with the terms
thereof.
6.10 LICENSES AND PERMITS. Seller shall pay all fees necessary to
continue all licenses and permits in effect, or required to be in effect, as of
the date hereof, and will cooperate with Purchaser in applying for or renewing
any license or permit and/or any renewal thereof that Purchaser reasonably
determines is necessary or advisable in connection with the Seller Assets or the
operation of the Seller Business.
6.11 FURTHER ASSURANCE. After the Closing, Seller shall from time to
time, at the request of Purchaser and without further cost or expense to
Purchaser, execute and deliver such other instruments of conveyance and transfer
and take such other actions as Purchaser may reasonably request, in order to
more effectively consummate the Transactions and to vest in Purchaser good and
marketable title to the Seller Assets being transferred hereunder (including,
without limitation, assistance in the collection or reduction to possession of
any of such Seller Assets).
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6.12 CHANGE OF NAME. Seller will effectuate on or within three (3)
business days after Closing a change in its name to a new name bearing no
resemblance to its present name and not using the words "realty" or "tax" or any
combination of such words.
6.13 MONTHLY FINANCIAL STATEMENTS. Seller and the Stockholders will
provide Purchaser, within twenty (20) days of the end of each calendar month
beginning July, 1997, the following unaudited financial statements, prepared in
accordance with past accounting practices (unless Purchaser agrees to
modifications of such accounting practices): (i) Statement of Assets,
Liabilities and Equity for the month then-ended; (ii) Statement of Revenue,
Expenses and Earnings for the month then-ended; and (iii) a Statement of Cash
Flows for the month then-ended.
6.14 INTELLECTUAL PROPERTY. At Closing, Sellers and Stockholders
will provide Purchaser with all copies (if any), and shall not retain any
copies, of any documents or electronic data reflecting or containing
Intellectual Property, and shall disclose to Purchaser the identity of any
Person that has copies of such Intellectual Property of which they are aware.
6.15 TRUST FUNDS. Neither Seller nor the Stockholders shall
distribute any Trust Funds except in accordance with the instrument pursuant to
which such funds are held.
SECTION 7.
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to effect the Transactions is subject to
the satisfaction or waiver, at or before the Closing Date, of the following
conditions:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
of the representations and warranties of the Stockholders and Seller contained
in this Agreement shall be true, correct and complete on and as of the Closing
Date in all material respects, with the same effect as though such
representations and warranties had been made on and as of such date; all of the
terms, covenants, agreements and conditions of this Agreement to be complied
with, performed or satisfied by Seller and the Stockholders shall have been duly
complied with, performed or satisfied on or before the time specified for
performance; and a certificate to the foregoing effects dated as of the Closing
Date and signed on behalf of Seller and by each of the Stockholders shall have
been delivered to Purchaser.
7.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
Purchaser's proposed acquisition of Seller, or limiting or restricting
Purchaser's conduct or operation of the business of Seller (or its own business)
following the Closing shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit claim or proceeding of any nature pending or
threatened against Purchaser or Seller, their respective properties or any of
their officers or directors, that could materially and adversely affect the
business, assets, liabilities, financial condition, results of operations or
customer prospects of Seller.
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7.3 CONSULTING AGREEMENTS. Each of Xxxxxx X. Xxxxxxxx and Xxxxxxx X.
Xxxxxxxx shall have entered into Consulting Agreements, which shall set forth
all of the terms and conditions regarding the consulting services to be rendered
by each of Xxxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxxxxx to Purchaser, as well as
the remuneration and benefits to be provided by Purchaser to them, in
consideration for such services.
7.4 OPINION OF COUNSEL. Purchaser shall have received an opinion
from counsel to Seller and the Stockholders, dated as of the Closing Date, in a
form reasonably satisfactory to counsel for Purchaser.
7.5 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency or third party (with respect to
Material Contracts, including without limitation, any Seller Third Party
Consents), relating to the consummation by Seller of the Transactions shall have
been obtained and made.
7.6 CHARTER DOCUMENTS. Seller shall have delivered to Purchaser (a)
a copy of the Articles of Incorporation of Seller certified by an appropriate
authority in the state of its incorporation and (b) a copy of the Bylaws of
Seller certified by the Secretary of Seller.
7.7 DISCLOSURE SCHEDULE; DUE DILIGENCE REVIEW. Seller shall have
made such deliveries as are called for by this Agreement or from time to time
reasonably requested by Purchaser or its representatives. Seller shall use its
commercially reasonable efforts to prepare and submit, in orderly, accurate and
complete form and substance, all of the exhibits and schedules (including
without limitation the Disclosure Schedule), whether delivered before or after
the execution hereof. Such deliveries, and other due diligence investigations
with respect thereto, shall include any and all documents reasonably requested
by Purchaser, with respect to, and not in limitation of, the business,
operations, affairs, customer prospects, properties, assets, liabilities,
obligations, profits (losses) and conditions (financial and otherwise) of
Seller. Any request by Purchaser to amend the Disclosure Schedule shall not,
without the express written consent of Purchaser be deemed to (x) modify the
representations or warranties hereunder of Seller or the Stockholders, (y)
modify the conditions set forth in Section 7, or (z) limit or otherwise affect
the remedies available hereunder to Purchaser.
7.8 EMPLOYEE BENEFIT PLANS. As soon as administratively feasible,
Seller will take all necessary steps to terminate the American Realty Tax
Services, Inc. Profit Sharing Plan. If reasonably requested by Purchaser and
permissible under all applicable federal, state and local laws, Seller will
terminate any other Employee Benefit Plan, Seller Plan or Seller Benefit
Arrangement substantially contemporaneously with the Closing or cooperate in
transferring the assets and liabilities of any Seller Plan to any Employee
Benefit Plan or Benefit Arrangement maintained by Purchaser which benefits each
of the "Transferred Employees" (as such term is defined in Section 8.4 hereof).
7.9 NO MATERIAL ADVERSE CHANGE. There have been no Material Adverse
Effects or no material adverse changes in the business, operations, affairs,
customer prospects, properties, assets, liabilities, obligations, profits or
condition (financial or otherwise) of Seller shall have
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occurred since the Seller Balance Sheet Date; and Purchaser shall have received
a certificate signed on behalf of Seller and by the Stockholders dated the
Closing Date to such effect.
7.10 HSR. Any waiting period applicable to the consummation of this
Agreement under the HSR Act shall have expired or been terminated, and no action
shall have been instituted by the Department of Justice or Federal Trade
Commission and not withdrawn or terminated that challenges or seeks to enjoin
the consummation of the Transactions.
7.11 RELATED PARTY AGREEMENTS. Purchaser shall have received
sufficient evidence that any Contracts to which a Stockholder or any of Seller's
other Affiliates, officers or directors is a party, including but not limited to
loans and employment arrangements (collectively, "Related Party Contracts"),
which Purchaser reasonably requests Seller or Stockholders to terminate, have in
fact been terminated at no cost or expense to Seller or Purchaser.
7.12 ESCROW AGREEMENT. The Escrow Agreement shall have been executed
by each of the parties thereto.
7.13 SELLER'S AND STOCKHOLDERS' CLOSING CERTIFICATES. Seller and
Stockholders shall have furnished Purchaser with a certificate, dated the
Closing, certifying compliance as of the Closing with the conditions set forth
in this Section 7.
7.14 ALLOCATION. The Purchase Price shall be allocated among the
Purchased Assets for all purposes (including but not limited to financial
accounting and tax purposes) in accordance with an allocation schedule to be
agreed to among the parties.
7.15 STOCKHOLDERS' RELEASE. Each of the Stockholders shall have
executed the Stockholders' Release.
7.16 INTELLECTUAL PROPERTY. Seller and Stockholder shall have
provided Purchaser with all copies (if any), and shall not have retained any
copies, of any documents or electronic data reflecting or containing
Intellectual Property, and Seller and Stockholders shall disclose the identity
of any Person who has copies of such Intellectual Property of which they are
aware.
7.17 ACCESS TO CUSTOMERS. Seller and Purchaser shall have mutually
designated customers to be contacted by Purchaser and the content of any such
communications shall have been mutually agreed.
SECTION 8.
CONDITIONS PRECEDENT TO OBLIGATIONS
OF SELLER AND THE STOCKHOLDERS
The obligation of Seller and the Stockholders to effect the
Transactions are subject to the satisfaction or waiver, at or before the Closing
Date, of the following conditions:
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8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
of the representations and warranties of Purchaser contained in this Agreement
shall be true, correct and complete on and as of the Closing Date in all
material respects, with the same effect as though such representations and
warranties had been made as of such date; all of the terms, covenants,
agreements and conditions of this Agreement to be complied with, performed or
satisfied by Purchaser on or before the Closing Date shall have been duly
complied with, performed or satisfied; and a certificate to the foregoing
effects dated as of the Closing Date and signed by the President or any Vice
President of Purchaser shall have been delivered to Seller and the Stockholders.
8.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
Purchaser's proposed acquisition of Seller, or limiting or restricting
Purchaser's conduct or operation of the business of Seller (or its own business)
following the Closing shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit, claim or proceeding of any nature pending or
threatened, against Purchaser or Seller, their respective properties or any of
their officers or directors, that could materially and adversely affect the
business, assets, liabilities, financial condition, results of operations or
customer prospects of Purchaser and its subsidiaries taken as a whole.
8.3 HSR. Any waiting period applicable to the consummation of this
Agreement under the HSR Act shall have expired or been terminated, and no action
shall have been instituted by the Department of Justice or Federal Trade
Commission and not withdrawn or terminated that challenges or seeks to enjoin
the consummation of the Transactions.
8.4 EMPLOYEES.
(a) As of the Closing Date, each of the individuals who is
employed by Seller (other than the Stockholders) shall, without further action
by any of the parties hereto, become employed by Purchaser (the "Transferred
Employees"). From and after the Closing Date, Purchaser shall have the option to
continue or terminate the employment of any Transferred Employee.
(b) Purchaser shall take steps which are reasonable, in
Purchaser's discretion, to make its Employee Benefit Plans and Benefit
Arrangements available to the Transferred Employees, so that, from and after the
Closing Date, the Transferred Employees can participate under such plans and
arrangements to the same extent, and on the same terms and subject to the same
restrictions and limitations, as other employees of Purchaser of comparable
positions. Such Transferred Employees will receive credit for seniority and
services performed on behalf of Seller.
(c) Purchaser shall take all steps necessary in order for its
tax qualified Section 401(k) plan to accept a transfer all assets and
liabilities from the American Realty Tax Services, Inc. 401(k) Plan.
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(d) Each Employee Benefit Plan and Benefit Arrangement of
Purchaser, as applicable, shall be amended or otherwise modified so that no
preexisting condition limitations or exclusions apply to any Transferred
Employee or his or her family and so that each Transferred Employee receives
full credit for any deductibles, copayments or annual or lifetime out-of-pocket
expenditures that he or she has made under any of Seller's Plans or Seller's
Benefit Arrangements prior to the Closing Date.
(e) Each of the provisions in this Section 8.4 shall constitute
a covenant of Purchaser that survives Closing.
8.5 OPINION OF COUNSEL. Seller and the Stockholders shall have
received an opinion from counsel to Purchaser, dated the as of the Closing Date,
in a form reasonably satisfactory to counsel for Seller and the Stockholders.
8.6 PAYMENT OF PURCHASE PRICE. Seller and the Stockholders shall
have received the Purchase Price and the Purchaser Note, dated as of the Closing
Date, signed by Purchaser.
SECTION 9.
REMEDIES AND INDEMNIFICATION
9.1 GENERAL INDEMNIFICATION BY SELLER AND THE STOCKHOLDERS. Seller
and each Stockholder, jointly and severally, covenant and agree to indemnify,
defend, protect and hold harmless Purchaser and its officers, directors,
employees, stockholders, assigns, successors and Affiliates (individually, a
"Purchaser Indemnified Party" and collectively, "Purchaser Indemnified Parties")
from, against and in respect of:
(a) all liabilities, losses, claims, punitive damages, causes of
action, lawsuits, administrative proceedings (including but not limited to
informal proceedings), investigations, audits, demands, assessments,
adjustments, judgments, settlement payments, deficiencies penalties, fines,
interest and costs and expenses (including without limitation reasonable
attorneys' fees and disbursements of every kind, nature and description)
(collectively, "Damages") suffered, sustained, incurred or paid by the Purchaser
Indemnified Parties in connection with, resulting from or arising out of:
(i) any breach of any representation or warranty of the
Stockholders or Seller set forth in this Agreement or any certificate, delivered
by or on behalf of any Stockholder or Seller in connection herewith; or
(ii) any nonfulfillment of any covenant or agreement on the
part of the Stockholders or, prior to the Closing Date, Seller, in this
Agreement; or
(iii) any Excluded Liability; or
(b) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 9.1.
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9.2 GENERAL INDEMNIFICATION BY PURCHASER. Purchaser covenants and
agrees to indemnify, defend, protect and hold harmless the Stockholders, Seller
and its officers, directors, employees, assigns, successors and Affiliates
(individually, a "Seller Indemnified Party" and collectively, "Seller
Indemnified Parties") from, against and in respect of:
(a) all Damages suffered, sustained, incurred or paid by the
Seller Indemnified Parties in connection with, resulting from or arising out of:
(i) any breach of any representation or warranty of
Purchaser set forth in this Agreement or any certificate, delivered by or on
behalf of Purchaser in connection herewith; or
(ii) any nonfulfillment of any covenant or agreement on the
part of Purchaser, prior to the Closing Date, in this Agreement; or
(iii) any termination of employment of Transferred Employees
after Closing (provided, however, there shall be no indemnification by Purchaser
for any Damages arising out of or relating to acts of Seller or the
Stockholders, whether prior to or after Closing).
(b) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 9.2.
9.3 LIMITATION ON INDEMNIFICATION OBLIGATION. Notwithstanding the
foregoing, for purposes of determining the amount, nature and extent of
indemnity of any Indemnified Party under this Agreement, the following
provisions shall apply:
(a) Purchaser Indemnified Parties or Seller Indemnified Parties,
as the case may be, shall not be entitled to indemnification under this Section
9 until and only to the extent that the aggregate amount of all Damages of such
parties subject to indemnification exceeds One Hundred Thousand Dollars
($100,000).
(b) Purchaser Indemnified Parties or Seller Indemnified Parties,
as the case may be, shall only be liable and responsible for fifty percent (50%)
of the aggregate amount of all Damages subject to indemnification under this
Section 9 that are between One Hundred Thousand One Dollars ($100,001) and Three
Hundred and Fifty Thousand Dollars ($350,000).
(c) Subject to the limitation in Section 9.3(d), Purchaser
Indemnifying Parties or Seller Indemnifying Parties, as the case may be, are
liable and responsible for one hundred percent (100%) of Damages subject to
indemnification under this Section 9 and that exceed Three Hundred Fifty
Thousand Dollars ($350,000).
(d) The aggregate liability of Purchaser Indemnifying Parties or
Seller Indemnifying Parties, as the case may be, shall not exceed at any time
Seventy-Five percent (75%) of the sum of (i) the Purchase Price actually paid to
Seller plus (ii) $732,058.
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(e) In calculating the amount of any Damages for which
indemnification is sought, such amount of any Damages shall be reduced by any
proceeds under any insurance policy covering such claim or loss; provided,
however, that such reduction of Damages will be offset in an amount equal to the
increase in insurance premiums to any Indemnified Party to the extent (i) such
increase can reasonably be identified as attributable to such claim or loss and
(ii) such increase in premiums is paid, or estimated to be paid, within one (1)
year after the date of such claim.
9.4 INDEMNIFICATION PROCEDURES. All claims for indemnification under
this Section 9 shall be asserted and resolved as follows:
(a) In the event that any Purchaser Indemnified Party or Seller
Indemnified Party (hereinafter sometimes each referred to as an "Indemnified
Party") has a claim against any party obligated to provide indemnification
pursuant to Sections 9.1 and 9.2 hereof (the "Indemnifying Party") which does
not involve a claim being asserted against or sought to be collected by a third
party, the Indemnified Party shall with reasonable promptness send a Claim
Notice with respect to such claim to the Stockholders' Representative or to
Purchaser, as the case may be. If the Stockholders' Representative or the
Purchaser, as the case may be, does not notify the Indemnified Party within
thirty (30) days that the Indemnifying Party disputes such claim, the amount of
such claim shall be conclusively deemed a liability of the Indemnifying Party
hereunder. In case an objection is made in writing in accordance with this
Section 9.4(a), the Indemnified Party shall have thirty (30) days to respond in
a written statement to the objection. If after such thirty (30) day period there
remains a dispute as to any claims, the parties shall attempt in good faith for
sixty (60) days to agree upon the rights of the respective parties with respect
to each of such claims. If the parties should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties. The actions
and decisions of the Stockholders' Representative shall be binding upon all
Stockholders and Seller and the actions of XXXX shall be binding upon all of the
Purchaser Indemnified Parties.
(b) In the event that any claim for which an Indemnifying Party
may be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a non-Affiliated third party, the Indemnified Party shall
with reasonable promptness notify the Stockholders' Representative or the
Purchaser, as the case may be, of such claim, specifying the nature of such
claim and the amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such claim) (the
"Claim Notice"). In the event of such a claim, the Indemnifying Party will be
entitled to participate in (which, in such case, would be subject to the
ultimate control of the defense by the Indemnified Party), or, to the extent
that the Indemnifying Party wishes, jointly with any other Indemnifying Party,
to assume the defense of such claim, with counsel selected by the Indemnified
Party and approved by the Indemnifying Parties, at the sole cost and expense of
the Indemnifying Party. The Stockholders' Representative or the Purchaser, as
the case may be, shall have thirty (30) days from the receipt of the Claim
Notice (the "Notice Period") to notify the Indemnified Party whether or not it
will assume the defense in accordance with the preceding sentence. If the
Stockholders' Representative or the Purchaser, as the case may be, elects not to
defend the Indemnified Party against such claim, whether by failure of such
party to give the Indemnified Party timely notice as provided above or
otherwise, then the Indemnified Party, without waiving any rights against such
party, may settle or
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defend against any such claim in the Indemnified Party's sole discretion and the
Indemnified Party shall be entitled to recover from the Indemnifying Party the
amount of any Damages. The actions and decisions of the Stockholders'
Representative shall be binding upon all Stockholders and Seller and the actions
of XXXX shall be binding upon all of the Purchaser Indemnified Parties.
(c) Nothing herein shall be deemed to prevent the Indemnified
Party from making a claim, and an Indemnified Party may make a claim hereunder,
for potential or contingent claims or demands; provided, however, each such
potential or contingent claim shall be (i) overtly threatened or pending
litigation or a possible or asserted claim or assessment in which a potential
claimant has manifested an awareness of and present intention to assert a
possible claim or assessment, (ii) the period in which the underlying cause
(i.e., the cause of action or basis of claim) of the pending or threatened
litigation or the actual or the actual or possible claim or assessment occurred
prior to the Closing Date, (iii) the amount of the loss or claim can be
reasonably estimated. For purposes of the foregoing, it is understood that the
parties intend that any such potential or contingent claim be interpreted in
light of Statement of Financial Accounting Standards No. 5, Accounting for
Contingencies of the Financial Accounting Standards Board ("FASB 5 Standards").
(d) The Indemnified Party's failure to give reasonably prompt
notice as required by this Section 9.4 of any actual, threatened or possible
claim or demand which may give rise to a right of indemnification hereunder
shall not relieve the Indemnifying Party of any liability which the Indemnifying
Party may have to the Indemnified Party unless, and only to the extent, that it
shall be finally judicially determined by a court of competent jurisdiction that
the failure to give such notice materially xxxxx the Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under Section 9, provided that no Indemnifying Party
shall be obligated to seek any payment pursuant to the terms of any insurance
policy.
9.5 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties and covenants made by Seller, the Stockholders or
Purchaser in or pursuant to this Agreement or in any document delivered pursuant
hereto shall be deemed to have been made on the date of this Agreement (except
as otherwise provided herein) and, if a Closing occurs, as of the Closing Date.
Except as otherwise provided below in this Section 9.5, the representations,
warranties and covenants of Seller, the Stockholders and Purchaser will survive
the Closing and will remain in effect for a period of two (2) years thereafter.
Notwithstanding the foregoing sentence, (i) the obligations of Seller and the
Stockholders under Section 9.1(a)(iii) (dealing with indemnification for
Excluded Liabilities) shall survive for three (3) years following the Closing
Date and (ii) the covenants and obligations of Seller and the Stockholders
pursuant to Section 10 (dealing with noncompetition) shall survive for five (5)
years following the Closing Date, and (iii) the obligations of Purchaser, if
any, for the payments described in Section 2.2(d) above (additional Purchase
Price) shall survive indefinitely after Closing and (iv) the obligations of
Purchaser under Section 9.2(a)(iii) shall survive for three (3) years following
the Closing Date and (v) any indemnification obligation for Damages for which
notice was given by an Indemnified Party
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pursuant to Section 9.4 made prior to the end of an applicable survival period
shall continue to be the obligation of the Indemnifying Parties after the
survival period.
9.6 REMEDIES CUMULATIVE. The remedies set forth in this Section 9
are cumulative and shall not be construed to restrict or otherwise affect any
other remedies that may be available to the Indemnified Parties under any other
agreement herein or pursuant to statutory or common law; provided, however,
except in the case of fraud, the provisions of Section 9.3 determining the
amount, nature and extent of indemnity, including but not limited to the
$100,000 basket and the $10,000,000 cap, apply to any action or claim for
monetary Damages, whether for indemnity, breach of contract or any other cause
of action against Purchaser Indemnified Parties or Seller Indemnified Parties,
as the case may be.
9.7 RIGHT TO SET OFF. Purchaser shall have the right, but not the
obligation, to set off, in whole or in part, amounts finally determined by a
court or arbitrator to be owed to Purchaser by Seller or the Stockholders under
Section 9 hereof, against the Purchaser Note and the Consulting Agreements. Such
right of set off shall be in addition to and not in substitution of any other
rights Purchaser shall be entitled to under the provisions of this Agreement. In
addition, if, on the date a payment under the Purchaser Note (inclusive of
principal and interest) is otherwise due and owing to Seller, Purchaser believes
in good faith and consistent with FASB 5 that Seller Indemnified Parties will be
liable and responsible to Purchaser Indemnified Parties for Damages under this
Section 9, and Purchaser's claim thereafter satisfies the criteria for
disclosure of FASB 5, then Purchaser may, in lieu of making a payment to the
Seller, pay that payment to the Escrow Holder pursuant to the terms of the
Escrow Agreement until there is a final determination by a court or arbitrator
that such amounts are owed to Purchaser by Seller or the Stockholders.
Notwithstanding anything to the contrary in this Section 9.7, Purchaser shall
only be entitled to set off or make payments to the Escrow Holder to the extent
Damages for which Purchaser Indemnified Parties that made indemnification claims
exceeds in the aggregate One Hundred Thousand Dollars ($100,000).
9.8 BULK TRANSFER LAW. Seller shall comply with all applicable bulk
sale laws of the Commonwealth of Virginia or, if not applicable, provide an
opinion of counsel stating that such bulk sale laws are not applicable to the
Transactions.
SECTION 10.
NONCOMPETITION
10.1 PROHIBITED ACTIVITIES.
(a) Neither Seller nor any Stockholder will, for a period of
five (5) years following the Closing Date, for any reason whatsoever, directly
or indirectly, for itself, himself, herself or on behalf of or in conjunction
with any other person, persons, company, partnership, corporation or business of
whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, member, joint venturer, or in a managerial capacity, whether as an
employee, independent
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contractor, consultant or adviser, or as a sales representative, in any business
selling any products or services in competition with Seller's business currently
existing on the Closing Date;
(ii) call upon any Person who is, at that time, an employee
of Purchaser in a managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of Purchaser;
(iii) call upon any Person who or which is, at that time, or
who or which has been, within one (1) year prior to that time, a customer of
Purchaser for the purpose of soliciting or selling products or services in
competition with Seller's business currently existing on the Closing Date; or
(iv) call upon any prospective acquisition candidate that
was, to the actual knowledge of such Stockholder, either called upon by
Purchaser as a prospective acquisition candidate or was the subject of an
acquisition analysis by Purchaser. Each Stockholder, to the extent lacking the
knowledge described in the preceding sentence, shall immediately cease all
contact with such prospective acquisition candidate upon being informed that
Purchaser had called upon such candidate or made an acquisition analysis
thereof.
(b) Notwithstanding the above, the foregoing covenants shall not
be deemed to prohibit any Stockholder from acquiring as an investment not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange or over-the-counter. For purposes of
this Section 10, the term "Purchaser" includes all subsidiaries of Purchaser
(including, without limitation, Seller and any companies Purchaser has resolved
to acquire) and any Affiliate of Purchaser.
10.2 CONFIDENTIALITY. Seller and each Stockholder recognize that, in
the case of the Stockholders, by reason of his or her ownership of Seller,
and/or his or her employment by Seller, he, she, or it has acquired Confidential
Information and trade secrets concerning the operation of Seller's business, the
use or disclosure of which could cause Purchaser or its Affiliates or
subsidiaries substantial loss and damages that could not be readily calculated
and for which no remedy at law would be adequate. Accordingly, Seller and each
Stockholder covenant and agree with Purchaser that he, she or it will not at any
time, except in performance of his, her or its obligations to Purchaser or with
the prior written consent of Purchaser pursuant to authority granted by a
resolution of the Board, directly or indirectly, disclose any secret or
Confidential Information that he, she or it may learn or has learned, in the
case of the Stockholders, by reason of his or her ownership of Seller or his or
her employment by Seller, or any of its Affiliates or subsidiaries, or use any
such information in a manner detrimental to the interests of Purchaser. The term
"Confidential Information" includes, without limitation, information not
previously disclosed to the public or to the trade by Seller's management with
respect to Seller's, or any of its Affiliates' or subsidiaries', products,
facilities, and methods, trade secrets and other Intellectual Property,
software, source code, systems, procedures, manuals, confidential reports,
product price lists, customer lists, financial information (including the
revenues, costs, or profits associated with any of Seller's products), business
plans, customer prospects, or opportunities but shall exclude any information
already in the public domain,
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10.3 DAMAGES. Because of the difficulty of measuring economic losses
to Purchaser as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to Purchaser for which
it would have no other adequate remedy, Seller and each Stockholder agree that
the foregoing covenant may be enforced by Purchaser, in the event of breach by
Seller or such Stockholder, by injunctions and restraining orders.
10.4 REASONABLE RESTRAINT. The parties agree that the foregoing
covenants in this Section 10 impose a reasonable restraint on each Stockholder
in light of Seller's business on the date of the execution of this Agreement.
Seller and Stockholders acknowledge and agree that Seller is currently
conducting business in the following states: California; Florida; Michigan; New
York; Pennsylvania; Rhode Island; Texas; Virginia; Washington and Wisconsin.
10.5 SEVERABILITY; REFORMATION. The covenants in this Section 10 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
10.6 INDEPENDENT COVENANT. All of the covenants in this Section 10
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against Purchaser, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Purchaser of such covenants. The
parties expressly acknowledge that the terms and conditions of this Section 10
are independent of the terms and conditions of any other agreements including,
but not limited to, any consulting agreements entered into in connection with
this Agreement. It is specifically agreed that the period of five (5) years
stated at the beginning of Section 10.1(a) during which the agreements and
covenants of the Stockholder made in this Section 10 shall be effective, shall
be computed by excluding from such computation any time during which the
Stockholder is found by a court of competent jurisdiction to have been in
violation of any provision of this Section 10. The covenants contained in
Section 10 shall not be affected by any breach of any other provision hereof by
any party hereto and shall have no effect if the transactions contemplated by
this Agreement are not consummated.
10.7 MATERIALITY. Seller and each Stockholder hereby agree that the
covenants set forth in this Section 10 are a material and substantial part of
the Transactions supported by adequate consideration.
SECTION 11.
GENERAL
11.1 ACCOUNTS RECEIVABLE. In the event that all accounts and notes
receivable of Seller as of the Closing Date are not collected in full within 120
days after the Closing then, at the request of Purchaser, Seller shall pay
Purchaser an amount equal to the receivables not so collected, less an allowance
for doubtful accounts equal to the reserve described in Section A.11
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of Appendix A, and upon receipt of such payment Purchaser shall assign to Seller
all of its rights with respect to the uncollected accounts and notes receivable
giving rise to the payment and shall also thereafter promptly remit any excess
collections received by it with respect to such assigned receivables. If and
when the amount subsequently collected by Seller with respect to the assigned
receivables equals (a) the payment made therefor plus (b) the costs and expenses
reasonably incurred by Seller in the collection of such assigned receivables,
Seller shall reassign to Purchaser all of such assigned receivables as have not
been collected in full by Seller and shall also thereafter promptly remit any
excess collections received by it. Upon the written request of Purchaser, Seller
shall provide it with a status report concerning the collection of assigned
receivables.
11.2 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date solely:
(a) by mutual consent of the board of directors of Purchaser and
the Stockholders' Representative;
(b) by the Stockholders' Representative, on the one hand, or by
Purchaser, on the other hand, if the Closing shall not have occurred on or
before October 1, 1997, unless extended as set forth in Section 3.1, provided
that the right to terminate this Agreement under this Section 11.1(b) shall not
be available to either party (with the Stockholders and the Stockholders'
Representative deemed to be a single party for this purpose) whose material
misrepresentation, breach of warranty or failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of the Closing
to occur on or before such date; or
(c) by the Stockholders' Representative, on the one hand, or by
Purchaser, on the other hand, if there is or has been a material breach, failure
to fulfill or default on the part of the other party (with the Stockholders and
the Stockholders' Representative deemed to be a single party for this purpose)
of any of the representations and warranties contained herein or in the due and
timely performance and satisfaction of any of the covenants, agreements or
conditions contained herein, and the curing of such default shall not have been
made or shall not reasonably be expected to occur before the Closing Date; or
(d) by the Stockholders' Representative, on the one hand, or by
Purchaser, on the other hand, if there shall be a final nonappealable order of a
federal or state court in effect preventing consummation of this Agreement; or
there shall be any action taken, or any statute, rule regulation or order
enacted, promulgated or issued or deemed applicable to the Transactions by any
governmental entity which would make the consummation of this Agreement illegal;
or
(e) by Purchaser, if Purchaser determines, in its sole
discretion, not to proceed with the Transactions for any reason whatsoever.
11.3 EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement pursuant
to Section 11.2(a) through (d), any amounts deposited in trust to the Escrow
Agent shall immediately be returned to Purchaser and this Agreement shall
forthwith become void, and there shall be no
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liability or obligation on the part of any party hereto or its officers,
directors or shareholders; provided, however, that, if such termination is by
Stockholders' Representative pursuant to Section 11.2(c), such amounts deposited
in trust with the Escrow Agent shall not be released to Purchaser and, instead,
shall be paid over by the Escrow Agent to Seller and the Stockholders according
to the terms of this Agreement, and such amounts paid to Seller and the
Stockholders is agreed to by the parties to be liquidated damages for any and
all harm or other Damages suffered by Seller and the Stockholders (it being
understood that, except for this amount, neither the Purchaser nor any of its
Affiliates, shall have any liability to Seller or the Stockholders).
Notwithstanding the foregoing sentence, (i) the provisions of this Section 11.3
and Section 9 (remedies and indemnification), Section 6.1(b) and (c)
(confidentiality) and the other provisions of Section 11 (including without
limitation brokers and expenses), shall remain in full force and effect and
survive any termination of this Agreement; and (ii) in the event of termination
of this Agreement by Purchaser pursuant to Section 11.2(c) above, then
notwithstanding the provisions of Section 11.10 below, Stockholders and Seller
shall be liable to Purchaser to the extent of the expenses incurred by it in
connection with this Agreement and the Transactions, as well as any other actual
damages in accordance with applicable law.
(b) In the event of the termination of this Agreement by
Purchaser pursuant to Section 11.2(e), the parties agree that any amounts
deposited in trust with the Escrow Agent shall not be released to Purchaser and,
instead, shall be paid over by the Escrow Agent to Seller and the Stockholders
according to the terms of this Agreement, and such amounts paid to Seller and
the Stockholders are agreed to by the parties to be liquidated damages for any
and all harm or other Damages suffered by Seller and the Stockholders. Except
for this amount, neither Purchaser nor any of its Affiliates shall have any
liability to Seller or the Stockholders.
11.4 COOPERATION. Seller, the Stockholders and Purchaser shall each
deliver or cause to be delivered to the other parties on the Closing Date, and
at such other times and places as shall be reasonably agreed to, such additional
instruments as the other parties may reasonably request for the purpose of
carrying out this Agreement. In connection therewith, if required, the president
or chief financial officer of Seller will execute any documentation reasonably
required by Purchaser's independent certified public accountants (in connection
with such accountant's audit of Seller) or the Nasdaq National Market. The
Stockholders and Seller will also reasonably cooperate, at no cost or expense to
the Stockholders and Seller, and use their reasonable efforts to have the
present officers, directors and employees of Seller cooperate with Purchaser on
and after the Closing Date in furnishing information, evidence, testimony and
other assistance in connection with any Tax Return filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date; provided, however, nothing
contained in this section shall in any way affect the obligations of the
Stockholders to pay any of their respective Tax obligations under this
Agreement.
11.5 SUCCESSORS AND ASSIGNS. Except as provided in the next
sentence, this Agreement and the rights, duties, privileges and obligations of
the parties hereunder may not be assigned or otherwise transferred (except by
operation of law) and shall be binding upon and shall inure to the benefit of
the parties hereto, the successors of Purchaser, and the heirs and legal
representatives of the Stockholders. Purchaser may assign this Agreement and its
rights and obligations hereunder to any Affiliate of Purchaser so long as
Purchaser irrevocably and unconditionally
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guarantees the timely, full and complete payment and performance of all
obligations, liabilities and responsibilities of such Affiliate under this
Agreement.
11.6 ENTIRE AGREEMENT. This Agreement (which includes the appendices
and schedules and exhibits hereto and thereto, including without limitation the
Disclosure Schedule) sets forth the entire understanding of the parties hereto
with respect to the Transactions. It shall not be amended or modified except by
a written instrument duly executed by each of the parties hereto. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof are superseded and made void by this Agreement. The
parties hereby acknowledge and agree that there are no oral agreements between
or among any of the parties. Each of the appendices (together with its
schedules), schedules and exhibits to this Agreement is incorporated herein by
this reference and expressly made a part hereof. No agreement shall be binding
on any party hereto except and to the extent set forth in a writing executed by
each of the parties hereto.
11.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one (1) or more
counterparts taken together shall have been executed and delivered (which
deliveries may be by telefax) by the parties.
11.8 BROKERS AND AGENTS. Purchaser, Seller and the Stockholders each
represents and warrants to the others that it has not employed any broker or
agent in connection with the Transactions and agrees to indemnify the other
against all loss, damages or expense relating to or arising out of claims for
fees or commission of any broker or agent employed or alleged to have been
employed by such indemnifying party.
11.9 EXPENSES. Purchaser has paid and will pay the fees, expenses
and disbursements of Purchaser and its agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement. The
Stockholders and/or Seller have paid and will pay the fees, expenses and
disbursements of the Stockholders, Seller, and their agents, representatives,
financial advisers, accountants and counsel incurred in connection with the
subject matter of this Agreement.
11.10 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges
that the other parties will be irreparably harmed and that there will be no
adequate remedy at law for any violation by any of them of any of the covenants
or agreements contained in this Agreement, including without limitation, the
confidentiality obligations set forth in Section 6.1(b) and (c) and the
noncompetition provisions set forth in Section 10. It is accordingly agreed
that, in addition to any other remedies which may be available upon the breach
of any such covenants or agreements, each party hereto shall have the right to
obtain injunctive relief to restrain a breach or threatened breach of, or
otherwise to obtain specific performance of, the other parties' covenants and
agreements contained in this Agreement.
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11.11 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally, by registered
or certified mail, postage prepaid, return receipt requested, or by recognized
courier service, as follows:
If to Purchaser to:
New Arts Acquisition, Inc.
000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
X. Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
Chairman of the Board and Chief Executive Officer
Fax: 000-000-0000
with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Fax: 000-000-0000
If to XXXX to:
National Insurance Group
000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
X. Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
Chairman of the Board and Chief Executive Officer
Fax: 000-000-0000
with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Fax: 000-000-0000
If to any Stockholder or to Stockholders' Representative (prior to
Closing):
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Xxxxxx X. Xxxxxxxx
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Fax: 000-000-0000
Xxxxxxx X. Xxxxxxxx
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Fax: 000-000-0000
Xxxxx X. Xxxxxxxx
c/o Xxxxxx X. Xxxxxxxx
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Fax: 000-000-0000
with a copy to:
Xxxxxx, Flyer & Xxxxx, a Professional Corporation
0000 X Xxxxxx XX
Xxxxx 000
Xxxxxxxxxx XX 00000
Attn: Xxxxxxx X. Xxxxxxxxxxx, Esquire
Fax: 000-000-0000
If to Seller (prior to Closing) to:
PERSONAL AND CONFIDENTIAL
American Realty Tax Services, Inc.
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Fax: 000-000-0000
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with a copy to:
Xxxxxx, Flyer & Xxxxx, a Professional Corporation
0000 X Xxxxxx XX
Xxxxx 000
Xxxxxxxxxx XX 00000
Attn: Xxxxxxx X. Xxxxxxxxxxx, Esquire
Fax: 000-000-0000
If to any Stockholder or to Stockholders' Representative (after
Closing):
Xxxxxx X. Xxxxxxxx
0000 Xxxxxxx Xxx
XxXxxx, Xxxxxxxx 00000
Xxxxxxx X. Xxxxxxxx
0000 Xxxxxxx Xxx
XxXxxx, Xxxxxxxx 00000
Xxxxx X. Xxxxxxxx
0000 Xxxxxxx Xxx
XxXxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxx, Flyer & Xxxxx, a Professional Corporation
0000 X Xxxxxx XX
Xxxxx 000
Xxxxxxxxxx XX 00000
Attn: Xxxxxxx X. Xxxxxxxxxxx, Esquire
Fax: 000-000-0000
If to Seller (after Closing) to:
PERSONAL AND CONFIDENTIAL
American Realty Tax Services, Inc.
0000 Xxxxxxx Xxx
XxXxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
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with a copy to:
Xxxxxx, Flyer & Xxxxx, a Professional Corporation
0000 X Xxxxxx XX
Xxxxx 000
Xxxxxxxxxx XX 00000
Attn: Xxxxxxx X. Xxxxxxxxxxx, Esquire
Fax: 000-000-0000
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, or three (3) business
days after it has been mailed or dispatched and, if given by any other means,
shall be deemed given only when actually received by the addressees.
11.12 GOVERNING LAW. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the
Commonwealth of Virginia. Any disputes arising out of, in connection with or
with respect to this Agreement, the subject matter hereof, the performance or
non-performance of any obligation hereunder, or the Transactions shall be
adjudicated in the United States District Court for the Eastern District of
Virginia, Alexandria Division, and nowhere else. Each of the parties hereto
hereby irrevocably submits to the jurisdiction of such court for the purposes of
any suit, civil action or other proceeding arising out of, in connection with or
with respect to this Agreement, the subject matter hereof, the performance or
non-performance of any obligation hereunder, or the Transactions (collectively,
"Suit"). Each of the parties hereto hereby waives and agrees not to assert by
way of motion, as a defense or otherwise in any such Suit, any claim that it is
not subject to the jurisdiction of the above courts, that such Suit is brought
in an inconvenient forum, or that the venue of such Suit is improper.
11.13 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any other jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement shall
be severable. The preceding sentence is in addition to and not in place of the
severability provisions in Section 10.5.
11.14 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. Other than
provisions affording rights to Indemnified Parties, no provision of this
Agreement is intended, nor will be interpreted, to provide or to create any
third party beneficiary rights or any other rights of any kind in any client,
customer, Affiliate, shareholder, employee, partner of any party hereto or any
other person or entity; provided, however, nothing in this Section 11.14 shall
in any way restrict or prevent Purchaser from exercising its right to assign
this Agreement and the rights, obligations, duties and responsibilities
hereunder to an Affiliate of Purchaser as provided in Section 11.5.
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11.15 MUTUAL DRAFTING. This Agreement is the mutual product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not be
construed for or against any party hereto.
11.16 FURTHER REPRESENTATIONS. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the Transactions, with the opportunity to seek advice
as to its legal rights from such counsel. Each party further represents that it
is being independently advised as to the tax consequences of the Transactions
and is not relying on any representation or statements made by the other party
as to such tax consequences.
11.17 AMENDMENT; WAIVER. This Agreement may be amended by the
parties hereto at any time prior to the Closing by execution of an instrument in
writing signed on behalf of each of the parties hereto. Any extension or waiver
by any party of any provision hereto shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
11.18 PUBLIC DISCLOSURE. Neither Seller nor any Stockholder shall
make any disclosure (whether or not in response to an inquiry) of the subject
matter of this Agreement unless previously approved by Purchaser in writing or
as may be required by legal process or in connection with reporting obligations
to any governmental authority. Purchaser shall not make any disclosure (whether
or not in response to an inquiry) of the subject matter of this Agreement unless
previously approved by Seller and the Stockholders in writing, except as such
disclosure is required by any federal or state securities laws or as may be
required by legal process or in connection with reporting obligations to any
governmental authority.
11.19 HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
* * *
SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, Seller and Purchaser have caused their duly
authorized representatives to have, and the Stockholders each have, executed
this Agreement as of the day and year first above written.
SELLER:
AMERICAN REALTY TAX SERVICES, INC., a
Virginia corporation
/s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
By: Xxxxxx X. Xxxxxxxx
Its: President
AMERICAN REALTY TAX SERVICES OF
NEW YORK, INC.,
a Virginia corporation
/s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
By: Xxxxxx X. Xxxxxxxx
Its: President
STOCKHOLDERS:
XXXXXX X. XXXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
XXXXXXX X. XXXXXXXX
/s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
XXXXX X. XXXXXXXX
/s/ Xxxxx X. Xxxxxxxx
-------------------------------------
PURCHASER:
NEW ARTS ACQUISITION, INC., a Delaware
corporation
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------
Its: Chief Executive Officer
-------------------------------------
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NATIONAL INSURANCE GROUP, a California
corporation
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------
Its: Chief Executive Officer
-------------------------------------
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Exhibits:
---------
A: Purchased Assets
B: Purchaser Note
C: Key Employees
D: Indenture, Xxxx of Sale & Assignment
E: Consulting Agreement
F: Stockholders' Release
39
APPENDIX A
A. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDERS
A.1 DUE ORGANIZATION. Seller is a corporation duly organized,
validly existing and is in good standing under the laws of the jurisdiction of
its incorporation and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to own
its properties and to carry on its business in the places and in the manner as
now conducted except where the failure to be so authorized or qualified would
not have a Material Adverse Effect. Schedule A.l hereto contains a list of all
jurisdictions in which Seller is authorized or qualified to do business. Seller
is in good standing as a foreign corporation in each jurisdiction in which it
has an office for the conduct of its business. Seller will promptly after the
date hereof deliver to Purchaser true, complete and correct copies of its
Charter Documents and Bylaws. Seller is not in violation of its Charter
Documents or Bylaws. The minute books of Seller will be made available promptly
after the date hereof to Purchaser (and shall be available to Purchaser at
Closing) and are correct and complete in all material respects.
A.2 AUTHORIZATION; VALIDITY. Seller has all requisite corporate
power and authority to enter into and perform its obligations pursuant to the
terms of this Agreement. Seller has the full legal right, corporate power and
authority to enter into this Agreement and the transactions contemplated hereby.
Each Stockholder has the full legal right and authority to enter into this
Agreement and the transactions contemplated hereby. The execution and delivery
of this Agreement by Seller and the performance by Seller of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors of Seller and the Stockholders, and this Agreement has been duly and
validly authorized by all necessary corporate action. This Agreement is a legal,
valid and binding obligation of Seller and each Stockholder, enforceable in
accordance with its terms.
A.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a Default under Seller's Charter
Documents or Bylaws;
(b) other than such as would not, individually or in the
aggregate, have a Material Adverse Effect, conflict with, or result in a Default
under any Contract to which Seller or any Stockholder is a party or by which
Seller or any Stockholder is bound, or result in the creation or imposition of
any Lien on any of Seller's or Stockholder's properties, pursuant to (i) any law
or regulation to which Seller or any Stockholder or any of their respective
property is subject, or (ii) any judgment, order or decree to which Seller or
any Stockholder is bound or any of their respective property is subject;
Appendix A-1
40
(c) result in termination or any impairment of any permit,
license, franchise, contractual right or other authorization of Seller,
constituting a Material Adverse Effect; or
(d) violate any Regulation or Court Order to which Seller or any
Stockholder is subject or by which Seller or any Stockholder is bound.
A.4 CAPITAL STOCK OF SELLER. The authorized capital stock of Seller
consists of ______ shares of common stock, ____ par value, of which ______
shares are issued and outstanding and ___ shares of preferred stock, none of
which are issued or outstanding. All of the issued and outstanding shares of the
capital stock of Seller have been duly authorized and validly issued, are fully
paid and nonassessable and are owned of record and beneficially by the
Stockholders in the amounts set forth in Schedule A.4 free and clear of all
Liens. All of the issued and outstanding shares of the capital stock of Seller
were offered, issued, sold and delivered by Seller in compliance with all
applicable Regulations. Further, none of such shares was issued in violation of
any preemptive rights. There are no voting agreements or voting trusts with
respect to any of the outstanding shares of the capital stock of Seller.
A.5 OPTIONS. Neither Seller nor any of its Stockholders, officers or
Affiliates has any commitment or legal obligation, absolute or contingent, to
any other Person or firm other than Purchaser to sell, assign, transfer or
effect a sale of any of its assets (other than inventory in the ordinary course
of business), to sell or effect a sale of the capital stock of Seller, to effect
any merger, consolidation, liquidation, dissolution or other reorganization of
Seller, or to enter into any agreement or cause the entering into of an
agreement with respect to any of the foregoing.
A.6 SUBSIDIARIES; RELATED INVESTMENTS. Seller has no subsidiaries
and Seller and the Stockholders do not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or business entity (other than five percent (5%) or less of the capital stock of
any company whose stock is traded on a national securities exchange or
over-the-counter), or, directly or indirectly, participate in any joint venture,
partnership or other noncorporate entity that competes in any way with Seller.
A.7 COMPLETE COPIES OF MATERIALS. Seller will promptly after the
date hereof provide access to Purchaser, at Seller's headquarters, to true and
complete copies of each Contract that is referred to in Seller's disclosure
schedules or that has been requested by Purchaser or its counsel.
A.8 SELLER FINANCIAL CONDITIONS.
(a) Seller's gross revenues on a tax basis for the fiscal year
ended December 31, 1996 are not less than $7,039,749;
(b) Seller's earnings before interest and taxes on a tax basis
for each of (i) the fiscal year ended December 31, 1996 and (ii) the
twelve-month period ended December 31, 1995, are $777,822 and $371,652,
respectively;
Appendix A-2
41
(c) Seller has no long-term debt (including the current portion)
as of the Closing Date.
A.9 FINANCIAL STATEMENTS. Schedule A.9 includes true, complete and
correct copies of (i) Seller's unaudited Statement of Assets, Liabilities and
Equity as of December 31, 1996, (ii) Seller's unaudited Statement of Revenue,
Expense and Earnings for the Year Ended December 31, 1996 (the "Income
Statement"), and (iii) Seller's Statement of Cash Flows for the Year Ended
December 31, 1996 (the "Cash Flow Statement" and, together with the Seller
Balance Sheet and Income Statement, the "Seller Financial Statements"). The
Seller Balance Sheet presents fairly in all material respects the financial
condition of Seller as of the date indicated thereon, and the Income Statement
and Cash Flow Statement presents fairly in all material respects the results of
its operations for the periods indicated thereon, in each case consistent with
Seller's past practice for financial statement disclosure. Since the dates of
Seller Financial Statements, there have been no material changes in Seller's
accounting policies. Schedule A.9 also includes true, complete and correct
copies of Seller's unaudited (i) Statement of Assets, Liabilities and Equity as
of December 31, 1995, 1994 and 1993, (ii) Statement of Revenue, Expense and
Earnings for the Years Ended December 31, 1995, 1994 and 1993, (iii) Statement
of Cash Flows for the Year Ended December 31, 1995, (iv) Statement of Assets,
Liabilities and Equity for the six (6) months ended June 30, 1997 (the "Seller
Balance Sheet"), (v) Statement of Revenue, Expense and Earnings for the six (6)
months ended as of the Seller Balance Sheet Date, and (vi) Statement of Cash
Flows for the six (6) months ended as of the Seller Balance Sheet Date.
A.10 LIABILITIES AND OBLIGATIONS.
(a) Except as set forth on Schedule A.10, Seller is not liable
for or subject to any Liabilities except for:
(i) those liabilities reflected on the Seller Balance Sheet
and not previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any Contract specifically disclosed
on a Schedule to this Agreement or not required to be disclosed thereon because
of the term or amount involved or otherwise; and
(iii) those liabilities incurred since the Seller Balance
Sheet Date in the ordinary course of business consistent with past practice.
Schedule A.10 contains a list of all trade payables and
third-party indebtedness of Seller. Seller is not indebted to any Stockholder.
(b) Seller will promptly after the date hereof deliver to
Purchaser, in the case of those Liabilities known to Seller which are not fixed
or contested, a good-faith estimate of the maximum amount which may be payable.
Appendix A-3
42
A.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule A.11 contains an
accurate list, dated as of a date not more than two (2) business days prior to
the date hereof, of the accounts and notes receivable of Seller (including
without limitation receivables from and advances to employees and the
Stockholders), which includes an aging of all accounts and notes receivable
showing amounts due in thirty (30)-day aging categories. On the Closing Date,
Seller will deliver to Purchaser an accurate list, dated as of a date not more
than two (2) business days prior to the Closing Date, of the accounts and notes
receivable of Seller, which includes an aging of all accounts and notes
receivable showing amounts due in thirty (30)-day aging categories. To the best
of Seller's knowledge, all accounts receivable of Seller that are reflected on
its books and records as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of any respective reserves shown
on Seller's books and records as of the Closing Date (which reserves are
adequate and calculated consistent with past practice). Subject to such
reserves, each of the Accounts Receivable either has been or will be collected
in full, without any set-off, within one hundred twenty (120) days after the day
on which it first becomes due and payable. Except as disclosed, there is no
contest, claim, or right of set-off, other than rebates and returns in the
ordinary course of business, under any contract with any maker of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable that
would have a Material Adverse Effect.
A.12 PERMITS. To the best of Seller's knowledge, Seller owns or
holds all licenses, franchises, permits and other governmental authorizations,
including without limitation permits, titles (including without limitation motor
vehicle titles and current registrations), fuel permits, licenses, franchises,
the absence of any of which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect (the "Material Permits"). To the
best of Seller's knowledge, the Material Permits are valid, and Seller has not
received any notice that any governmental authority intends to modify, cancel,
terminate or not renew any Material Permit. No present or former stockholder,
officer, manager, member or employee of Seller or any Affiliate thereof, or any
other person, firm, corporation or other entity, owns or has any proprietary,
financial or other interest (direct or indirect) in any Material Permits which
Seller owns, holds or uses. To the best of Seller's knowledge, Seller has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the Material Permits and other
applicable orders, approvals, variances, rules and regulations and is not in
violation of any of the foregoing except where such non-compliance or violation
would not have a Material Adverse Effect. To the best of Seller's knowledge, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or materially and adversely affect the rights and
benefits afforded to Seller by any Material Permit.
A.13 ENVIRONMENTAL MATTERS.
(a) Hazardous Material. Other than as set forth on Schedule
A.13(a), to the best of Seller's knowledge, no underground storage tanks and no
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state, local or other applicable law to be radioactive,
toxic, hazardous or otherwise a danger to health or the
Appendix A-4
43
environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies
properly and safely maintained (a "Hazardous Material"), are present in, on or
under any property, including the land and the improvements, ground water and
surface water thereof, that Seller has at any time owned, operated, occupied or
leased. To the best of Seller's knowledge, Schedule A.13(a) identifies all
underground and aboveground storage tanks, and the capacity, age, and contents
of such tanks, located on property owned or leased by Seller.
(b) Hazardous Materials Activities. Seller has not knowingly
transported, stored, used, manufactured, disposed of or released, or exposed its
employees or others to, Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has Seller disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (collectively,
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any governmental entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
best of Seller's knowledge, threatened concerning any Environmental Permit,
Hazardous Material or any Seller Hazardous Materials Activity ("Environmental
Liabilities") with respect to Seller. To the best of Seller's knowledge, there
are no past or present actions, activities, circumstances, conditions, events,
or incidents that are reasonably likely to materially adversely affect Seller
(or any person or entity whose liability Seller has retained or assumed, either
by contract or operation of law) in any environmental litigation, or impose upon
Seller (or any person or entity whose liability Seller has retained or assumed,
either by contract or operation of law) any material environmental liability
including, without limitation, common law tort liability.
A.14 REAL AND PERSONAL PROPERTY. Seller does not own any real
property, and Stockholders do not own any real property used in connection with
Seller's business or operations. Schedule A.14 sets forth an accurate list of
all leased real property, all personal property owned or leased by Seller as of
the Seller Balance Sheet Date and acquired since the Seller Balance Sheet Date.
Seller has provided to Purchaser true, complete and correct copies of leases for
material equipment and all real properties on which are situated buildings,
warehouses, workshops, garages and other structures used in the operation of the
business of Seller and also including an indication as to which assets are
currently owned, or were formerly owned, by any Stockholder or Affiliates of
Seller. All property of Seller listed on Schedule A.14 is in good working order
and condition, ordinary wear and tear excepted, except where such condition
would not have a Material Adverse Effect. All leases set forth on Schedule A.14
are in full force and effect and constitute valid and binding agreements of
Seller, and, to the best of Seller's knowledge, neither Seller nor lessor is in
breach of any of their respective terms. All fixed assets used by Seller that
are material to the operation of its business are either owned by Seller or
leased under an agreement listed on Schedule A.14. Seller, and not the
Stockholders, has good
Appendix A-5
44
and marketable title to, or valid leasehold interests in, all of Seller's
Assets, free from any Liens. Other than the Excluded Assets, none of the
Stockholders have any rights, title or interest to any asset, tangible or
intangible, which is used in the Seller's Business.
A.15 CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) Schedule A.15 is a complete and accurate list of all of
Seller's customers.
(b) Schedule A.15 contains an accurate list of all Contracts,
licenses or permits, written or oral, to which Seller is a party or by which it
or its properties are bound (including, without limitation, Contracts with
customers, joint venture or partnership agreements, contracts with any labor
organizations, employment agreements, consulting agreements, loan agreements,
indemnity or guaranty agreements, bonds, mortgages, options to purchase land,
liens, pledges or other security agreements) (i) that may give rise to
obligations or liabilities exceeding, during the current term thereof, Five
Thousand Dollars ($5,000), (ii) that generate revenues or income exceeding,
during the current term thereof, Five Thousand Dollars ($5,000), (iii) to which
any Affiliate of Seller is a party or any officer or director of Seller or
Stockholder is a party, or (iv) under which customers of Seller have contracted
for Seller to provide realty tax services for five thousand (5,000) loans or
more for such customer (collectively, the "Material Contracts") as of the Seller
Balance Sheet Date and entered into since the Seller Balance Sheet Date. Seller
will promptly after the date hereof deliver to Purchaser true, complete and
correct copies of the Material Contracts. The Material Contracts described in
subparagraph (iv) in this section constitute more than Seventy percent (70%) of
the total amount of loans for which Seller is obligated under Contracts to
provide realty tax services.
(c) Except to the extent set forth on Schedule A.15, (i) none of
Seller's customers has canceled or substantially reduced, or, to the best of
Seller's knowledge, is currently attempting or, to the best of Seller's
knowledge, threatening to cancel or substantially reduce, any revenues under any
of the Material Contracts, (ii) Seller has complied with all of its commitments
and obligations and is not in default under any of the Material Contracts, and
no notice of default has been received with respect to any thereof, and (iii)
there are no Material Contracts that were not negotiated at arm's length with
third parties not affiliated with Seller or any Affiliate of Seller, any officer
or director of Seller, or Stockholder. Except as described on Schedule A.15,
Seller has received no material customer complaints concerning its products
and/or services, nor has it had any of its products returned or services
unaccepted, rejected or not paid for by a purchaser or customer thereof except
for those returns that would not result in a reversal of any material revenue by
Seller or are inconsistent with past practice and, to the best of Seller's
knowledge, Seller does not know of any facts which may give rise to a customer
complaint regarding the performance of Seller's services.
(d) Each Material Contract, except those terminated pursuant to
Section 7.11, is valid and binding on Seller and is in full force and effect and
is not subject to any Default thereunder by any party obligated to Seller
pursuant thereto. Seller will use commercially reasonable efforts to obtain
prior to the Closing Date, all necessary consents, waivers and approvals of
parties to any Material Contracts that are required in connection with any of
the
Appendix A-6
45
transactions contemplated hereby, or as are required by any governmental agency
or other third party or are advisable or necessary in order that any such
Material Contract remain in effect without modification after the transactions
contemplated hereby and without giving rise to any right to termination,
cancellation or acceleration or loss of any right or benefit ("Seller Third
Party Consents"). All Seller Third Party Consents are listed on Schedule A.15.
(e) Except as described on Schedule A.15(e), Seller has not
received any notices of delinquencies, and neither Seller nor the Stockholders
are aware of any delinquencies, with respect to the tax and other services
Seller provides to any of its customers. Except as described on Schedule
A.15(e), Seller is not liable for any penalties, fines, base-erroneous payments
or refunds in connection with the tax and other services it provides to its
customers.
A.16 INVENTORY. Seller does not own any inventory consisting of raw
materials or supplies, manufactured or purchased parts, or goods in process or
finished goods.
A.17 INSURANCE. Schedule A.17 sets forth an accurate list, as of the
Seller Balance Sheet Date, of all insurance policies carried by Seller and, to
the best of Seller's knowledge, all insurance loss runs or workmen's
compensation claims received for the past two (2) policy years. Seller promptly
after the date hereof and no later than two (2) business days prior to the
Closing will deliver to Purchaser true, complete and correct copies of all
current insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and Seller is, to the
best of Seller's knowledge, otherwise in full compliance with the terms of such
policies (or other policies providing substantially similar insurance coverage).
Such policies of insurance are of the type and in amounts customarily carried by
persons conducting businesses similar to that of Seller. To the best of Seller's
knowledge, there have been no threatened terminations of, or material premium
increases with respect to, any of such policies.
A.18 LABOR AND EMPLOYMENT MATTERS. With respect to employees of and
service providers to Seller:
(a) Schedule A.18 hereto sets forth an accurate list, as of the
date hereof, of all officers, directors, and employees of Seller and lists all
employment agreements with such officers, directors, and employees, the rate of
compensation and the bonus compensation of each such person as of the date
hereof or the date upon which the most recent bonus was paid. In addition to all
written employment, agency or independent contractor agreements, Seller will
provide Purchaser with written descriptions of the terms of any oral agreement
between Seller or the Stockholders, on the one hand, and employees, agents or
independent contractors, on the other hand, and Seller will endeavor in good
faith to have such oral agreements confirmed in writing by the employee, agent
or independent contractor.
(b) Seller is and has been in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Immigration
Appendix A-7
46
Reform and Control Act, and occupational safety and health requirements, and has
not and is not engaged in any unfair labor practice;
(c) there is not now, nor within the past three (3) years has
there been, any unfair labor practice complaint against Seller pending or, to
the best of Seller's knowledge, threatened before the National Labor Relations
Board or any other comparable authority;
(d) there is not now, nor within the past three (3) years has
there been, any labor strike, slowdown or stoppage actually pending or, to the
best of Seller's knowledge, threatened against or directly affecting Seller;
(e) to the best of Seller's knowledge, no labor representation
organization effort exists nor has there been any such activity within the past
three (3) years;
(f) no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending and, to the best of Seller's
knowledge, no claims therefor exist or have been threatened;
(g) the employees of Seller are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against Seller or currently being negotiated by Seller; and
(h) all persons classified by Seller as independent contractors
do satisfy and have satisfied the requirements of law to be so classified, and
Seller has fully and accurately reported their compensation on IRS Forms 1099
when required to do so.
A.19 EMPLOYEE BENEFIT PLANS.
(a) Definitions.
(i) "Benefit Arrangement" means any benefit arrangement,
obligation, custom, or practice, whether or not legally enforceable, to provide
benefits, other than salary, as compensation for services rendered, to present
or former directors, employees, or independent contractors, other than any
obligation, arrangement, custom or practice that is an Employee Benefit Plan,
including, without limitation, employment agreements, severance agreements,
executive compensation arrangements, incentive programs or arrangements, sick
leave, vacation pay, severance pay policies, plant closing benefits, salary
continuation for disability, consulting, or other compensation arrangements,
workers' compensation, retirement, deferred compensation, bonus, stock option or
purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, any plans subject to Section 125 of the
Code, and any plans providing benefits or payments in the event of a change of
control, change in ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees, independent contractors or
directors.
Appendix A-8
47
(ii) "Seller Benefit Arrangement" means any Benefit
Arrangement sponsored or maintained by Seller or with respect to which Seller
has or may have any liability (whether actual, contingent, with respect to any
of its assets or otherwise), in each case with respect to any present or former
directors, employees or independent contractors of Seller as of the Closing
Date.
(iii) "Seller Plan" means any Employee Benefit Plan for
which Seller is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or
any Employee Benefit Plan maintained by Seller or to which Seller is obligated
to make payments, in each case with respect to any present or former employees
of Seller as of the Closing Date.
(iv) "Employee Benefit Plan" means all employee benefit
plans of a party within the meaning of Section 3(3) of ERISA and any related or
separate Contracts, plans, trusts, programs, policies, arrangements, practices,
customs and understandings, in each case whether formal or informal, that
provide benefits of economic value to any present or former employee of a party,
or present or former beneficiary, dependent or assignee of any such employee or
former employee.
(v) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and all regulations and rules issued thereunder, or any
successor law.
(vi) "ERISA Affiliate" means any person that, together with
Seller, would be or was at any time treated as a single employer under Section
414 of the Code and any general partnership of which Seller is or has been a
general partner.
(vii) "Multiemployer Plan" means any Employee Benefit Plan
described in Section 3(37) of ERISA.
(viii) "Qualified Plan" means any Employee Benefit Plan that
meets, purports to meet, or is intended to meet the requirements of Section
401(a) of the Code.
(ix) "Welfare Plan" means any Employee Benefit Plan
described in Section 3(1) of ERISA.
(b) Schedule A.19(b) contains a complete and accurate list of
all Seller Plans and Seller Benefit Arrangements. Schedule A.19(b) specifically
identifies all Seller Plans (if any) that are Qualified Plans.
(c) With respect, as applicable, to Employee Benefit Plans and
Benefit Arrangements:
(i) true, correct, and complete copies of all the following
documents with respect to each Seller Plan and Seller Benefit Arrangement, to
the extent applicable, will be delivered to Purchaser after the date hereof: (A)
all documents constituting Seller Plans and Seller Benefit Arrangements,
including but not limited to, trust agreements, insurance policies,
Appendix A-9
48
service agreements, and formal and informal amendments thereto; (B) the most
recent Forms 5500 or 5500C/R and any financial statements attached thereto; (c)
the last IRS determination letter; (D) the most recent summary plan description;
(E) all notices that were given within the three (3) years preceding the date of
this Agreement by the IRS, Department of Labor, or any other governmental agency
or entity with respect to any plan or arrangement; and (F) employee manuals or
handbooks containing personnel or employee relations policies;
(ii) The American Realty Services, Inc. Profit Sharing Plan
and The American Realty Services, Inc. 401(k) Plan (the "Seller Qualified
Plans") are the only Qualified Plans maintained by Seller. Seller has never
maintained or contributed to another Qualified Plan. Each of Seller's Qualified
Plans has been determined by the IRS to qualify under Section 401(a) of the
Code, and any trusts maintained pursuant thereto have been determined by the IRS
to be exempt from federal income taxation under Section 501 of the Code, and, to
the best of Seller's knowledge, nothing has occurred with respect to the design
or operation of the Seller Qualified Plans since the date of such determination
that could cause the loss of such qualification or exemption or the imposition
of any liability, lien, penalty, or tax under ERISA or the Code;
(iii) Seller has never sponsored or maintained, had any
obligation to sponsor or maintain, or had any liability (whether actual or
contingent, with respect to any of its assets or otherwise) with respect to any
Employee Benefit Plan subject to Section 302 of ERISA or Section 412 of the Code
or Title IV of ERISA (including any Multiemployer Plan);
(iv) each Seller Plan and each Seller Benefit Arrangement
has been maintained in material compliance with its constituent documents and
the provisions of the Code and ERISA;
(v) other than routine claims for benefits, there are no
pending claims or lawsuits by, against, or relating to any Employee Benefit
Plans or Benefit Arrangements that are not Seller Plans or Seller Benefit
Arrangements that would, if successful, result in liability of Seller or any
Stockholder, and no claims or lawsuits have been asserted, instituted or, to the
best of Seller's knowledge and the knowledge of the Stockholders, threatened by,
against, or relating to any Seller Plan or Seller Benefit Arrangement, against
the assets of any trust or other funding arrangement under any such Seller Plan,
by or against Seller with respect to any Seller Plan or Seller Benefit
Arrangement, or by or against the plan administrator or any fiduciary of any
Seller Plan or Seller Benefit Arrangement, and Seller does not have knowledge of
any fact that could form the basis for any such claim or lawsuit. Seller Plans
and Seller Benefit Arrangements are not presently under audit or examination
(nor has notice been received of a potential audit or examination) by the IRS,
the Department of Labor, or any other governmental agency or entity, and no
matters are pending with respect to the Seller Qualified Plans under the IRS's
Voluntary Compliance Resolution program, its Closing Agreement Program, or other
similar programs;
(vi) other than accelerated vesting that will occur under
the American Realty Tax Services, Inc. Profit Sharing Plan due to its
termination, no Seller Plan or Seller Benefit Arrangement contains any provision
or is subject to any law that would prohibit the transactions contemplated by
this Agreement or that would give rise to any vesting of benefits,
Appendix A-10
49
severance, termination, or other payments or liabilities as a result of the
transactions contemplated by this Agreement;
(vii) with respect to each Seller Plan, there has occurred
no non-exempt "prohibited transaction" (within the meaning of Section 4975 of
the Code) or transaction prohibited by Section 406 of ERISA or breach of any
fiduciary duty described in Section 404 of ERISA that would, if successful,
result in any liability for Seller or any Stockholder, officer, director, or
employee of Seller;
(viii) all reporting, disclosure, and notice requirements of
ERISA and the Code have been materially complied with regarding each Seller Plan
and each Seller Benefit Arrangement;
(ix) all amendments and actions required to bring Seller
Benefit Plans into conformity with the applicable provisions of ERISA, the Code,
and other applicable laws have been made or taken except to the extent such
amendments or actions (A) are not required by law to be made or taken until
after the Effective Date, or (B) are disclosed on Schedule A.19(c);
(x) payment has been made of all amounts that Seller is
required to pay as contributions to Seller Benefit Plans as of the last day of
the most recent fiscal year of each of the plans ended before the date of this
Agreement; all benefits accrued under any unfunded Seller Plan or Seller Benefit
Arrangement will have been paid, accrued, or otherwise adequately reserved or
reflected in accordance with GAAP as of the Seller Balance Sheet Date; and all
monies withheld from employee paychecks with respect to Seller Plans have been
transferred to the appropriate plan within thirty (30) days of such withholding;
(xi) Seller has not prepaid or prefunded any Welfare Plan
through a trust, reserve, premium stabilization, or similar account, nor does it
provide benefits through a voluntary employee beneficiary association as defined
in Section 501(c)(9);
(xii) no statement, either written or oral, has been made by
Seller to any person with regard to any Seller Plan or Seller Benefit
Arrangement that was not in accordance with Seller Plan or Seller Benefit
Arrangement and that could have a material adverse economic consequence to
Seller;
(xiii) Seller has no liability (whether actual, contingent,
with respect to any of its assets or otherwise) with respect to any Employee
Benefit Plan or Benefit Arrangement that is not a Seller Benefit Arrangement or
with respect to any Employee Benefit Plan sponsored or maintained (or which has
been or should have been sponsored or maintained) by any ERISA Affiliate;
(xiv) all group health plans of Seller and its Affiliates
have been operated in material compliance with the requirements of Sections
4980B (and its predecessor) of the Code;
Appendix A-11
50
(xv) except as disclosed on Schedule A.19(c), no employee or
former employee of Seller or beneficiary of any such employee or former employee
is, by reason of such employee's or former employee's employment, entitled to
receive any benefits, including, without limitation, death or medical benefits
(whether or not insured) beyond retirement or other termination of employment as
described in Statement of Financial Accounting Standards No. 106, other than (i)
death or retirement benefits under a Qualified Plan, (ii) deferred compensation
benefits accrued as liabilities on the Closing Statement or (iii) continuation
coverage mandated under Section 4980B of the Code with respect to employees
actively employed by Seller as of the Closing Date.
(d) Schedule A.19(d) hereto contains the most recent quarterly
listing of workers' compensation claims and a schedule of workers' compensation
claims of Seller for the last three (3) fiscal years.
A.20 CONFORMITY WITH LAW; LITIGATION. To the best of Seller's
knowledge, Seller has not violated any law or regulation or any order of any
court or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it which would
have a Material Adverse Effect. Except as set forth on Schedule A.20, there are
no claims, actions, suits or proceedings, pending or, to the best of Seller's
knowledge, threatened against or affecting Seller at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over it
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. There are no judgments, orders, injunctions,
decrees, stipulations or awards (whether rendered by a court or administrative
agency or by arbitration) against Seller or against any of its properties or
business.
A.21 TAXES.
(a) (i) Seller has timely filed or will timely file all
requisite federal, state and other Tax (as defined below) returns, reports and
forms ("Tax Returns") for all periods ended on or before the Closing Date, and
all such Tax Returns are true, correct and complete in all respects. Seller has
provided true and correct copies of Tax Returns for the years 1993, 1994, 1995
and 1996, and all Tax schedules provided to Stockholders by Seller.
(ii) The amounts shown as accruals for Taxes on the Seller
Balance Sheet are sufficient for the payment of all applicable Taxes, whenever
determined, for all fiscal periods or portions thereof ended on or before that
date, and such accruals as adjusted through the Closing Date in accordance with
past custom and practice of Seller will be sufficient for the payment of all
applicable Taxes, whenever determined, for all fiscal periods or portions
thereof ending on or before the Closing Date.
(iii) Seller does not have any knowledge of any basis for
the assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of Seller or otherwise have
an Material Adverse Effect on Seller.
Appendix A-12
51
(b) Seller has, since October 1, 1985, been an S Corporation
within the meaning of Section 1361 of the Code.
(c) For purposes of this Agreement, the term "Tax" shall include
any tax or similar governmental charge, impost or levy (including without
limitation income taxes, franchise taxes, transfer taxes or fees, sales taxes,
use taxes, gross receipts taxes, value added taxes, employment taxes, excise
taxes, ad valorem taxes, property taxes, withholding taxes, payroll taxes,
minimum taxes or windfall profit taxes) together with any related penalties,
fines, additions to tax or interest imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof.
A.22 GOVERNMENT CONTRACTS.
(a) Except as set forth on Schedule A.22, to the best of
Seller's knowledge, it is not a party to any governmental contracts.
(b) Seller has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any governmental agency or authority, nor, to the best of Seller's
knowledge, has any suspension or debarment action been threatened or commenced.
To the best of Seller's knowledge, there is no valid basis for Seller's
suspension or debarment from bidding on contracts or subcontracts for any agency
of the United States Government or any governmental agency or authority.
(c) Except as set forth in Schedule A.22, Seller has not been,
nor is it now being, audited, or, to the best of Seller's knowledge,
investigated by any government agency, or the inspector general or auditor
general or similar functionary of any agency or instrumentality, nor, to the
best of Seller's knowledge, has such audit or investigation been threatened.
(d) Seller has no dispute pending before a contracting office
of, nor any current claim (other than the Accounts Receivable) pending against,
any agency or instrumentality of the United States Government or any
governmental agency or authority, relating to a contract.
(e) To the best of Seller's knowledge, it has not, with respect
to any contract, received a cure notice advising Seller that it is or was in
default or would, if it failed to take remedial action, be in default under such
contract.
(f) To the best of Seller's knowledge, Seller has not submitted
any inaccurate, untruthful, or misleading cost or pricing data, certification,
bid, proposal, report, claim, or any other information relating to a contract to
any agency or instrumentality of the United States Government or any
governmental agency or authority.
(g) To the best of Seller's knowledge, no employee, agent,
consultant, representative, or Affiliate of Seller is in receipt or possession
of any competitor or government proprietary or procurement sensitive information
related to Seller's business under circumstances where there is reason to
believe that such receipt or possession is unlawful or unauthorized.
Appendix A-13
52
(h) Each of Seller's contracts has been issued, awarded or
novated to Seller in Seller's name.
A.23 ABSENCE OF CHANGES. Since the Seller Balance Sheet Date, Seller
has conducted its business in the ordinary course and, except as contemplated
herein or as set forth on Schedule A.23, there has not been:
(a) any change that by itself or together with other changes,
has had or is likely to have a Material Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of Seller;
(c) any change in the authorized capital of Seller or in its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(d) other than distributions to enable Stockholders to pay taxes
as permitted under Section 6.3(d) of the Agreement, any declaration, promise of
or payment of any dividend or distribution in respect of the capital stock, or
any direct or indirect redemption, purchase or other acquisition of any of the
capital stock of Seller;
(e) any increase, or promise of an increase, in the
compensation, bonus, sales commissions or fee arrangements payable or to become
payable by Seller to any of its officers directors, Stockholders, employees,
consultants or agents, except for ordinary and customary bonuses and salary
increases for employees in accordance with past practice;
(f) any work interruptions, labor grievances or claims filed, or
any similar event or condition of any character, materially adversely affecting
the business or future customer prospects of Seller;
(g) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of Seller to any person, including
without limitation the Stockholders and their Affiliates;
(h) any cancellation, or agreement to cancel, any substantial
indebtedness or other obligation owing to Seller, including without limitation
any indebtedness or obligation of any Stockholders or any Affiliate thereof,
provided that Seller may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of Seller or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
Appendix A-14
53
(j) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of business of Seller;
(k) any waiver of any material rights or claims of Seller;
(l) any breach, amendment or termination of any Material
Contract or Material Permit;
(m) any breach of any Contract that may give rise to a lawsuit
against Seller, its officers, directors or agents or the Stockholders, that
could result in a Material Adverse Effect on the Seller or the Seller Assets or
the Seller Business.
(n) any transaction by Seller outside the ordinary course of
business;
(o) any capital expenditure or commitment by Seller, either
individually exceeding $25,000, or in the aggregate exceeding $100,000;
(p) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by Seller or the
revaluation by Seller of any of its assets;
(q) any creation or assumption by Seller of any mortgage,
pledge, security interest or lien or other encumbrance on any asset (other than
liens arising under existing lease financing arrangements which are not material
and liens for taxes not yet due and payable);
(r) any entry into, amendment of, relinquishment, termination or
non-renewal by Seller of any Contract requiring aggregate payments by Seller in
excess of $25,000;
(s) any loan by Seller to any person or entity, incurring by
Seller, of any indebtedness, guaranteeing by Seller of any indebtedness,
issuance or sale of any debt securities of Seller or guaranteeing of any debt
securities of others;
(t) the commencement or notice or, to the best of Seller's
knowledge, threat of commencement of any lawsuit or proceeding against or
investigation of Seller or any of its affairs; or
(u) negotiation or agreement by Seller or any officer or
employee thereof to do any of the things described in the preceding clauses (a)
through (t) (other than negotiations with Purchaser and its representatives
regarding the transactions contemplated by this Agreement).
A.24 BANK ACCOUNTS; POWERS OF ATTORNEY. Schedule A.24 sets forth an
accurate list as of the date of this Agreement, of:
Appendix A-15
54
(a) the name of each financial institution in which Seller has
any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each person authorized to draw thereon or have
access thereto.
Schedule A.24 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from Seller
or Stockholders and a description of the terms of such power.
A.25 RELATIONS WITH GOVERNMENTS. Seller has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has it otherwise taken any action that
would cause Seller to be in violation of the Foreign Corrupt Practices Act of
1977, as amended, or any law of similar effect.
A.26 DISCLOSURE. All written agreements, lists, schedules,
instruments, exhibits, documents, certificates, reports, statements and other
writings furnished to Purchaser pursuant hereto or in connection with this
Agreement or the transactions contemplated hereby, are and will be complete and
accurate in all material respects. No representation or warranty by the
Stockholders and Seller contained in this Agreement, in the schedules attached
hereto or in any certificate furnished or to be furnished by the Stockholders or
Seller to Purchaser in connection herewith or pursuant hereto contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary in order to make any statement contained herein or
therein not misleading. There is no fact known to Seller that has specific
application to any Stockholder or Seller (other than general economic or
industry conditions) and that materially adversely affects or, as far as Seller
can reasonably foresee, materially threatens, the assets, business, financial
condition, or results of operations of Seller that has not been set forth in
this Agreement or any Schedule hereto.
A.27 ABSENCE OF CLAIMS AGAINST SELLER. Except as disclosed on
Schedule A.27, no Stockholder, director, employee, agent or Affiliate of any
such Person has any claims against Seller.
A.28 INTELLECTUAL PROPERTY.
(a) Intellectual Property shall include all of Seller's,
Stockholders' and their Affiliates' right, title, benefit, and interest in and
to (1) all United States and foreign patents, service marks, trade names,
trademarks, trademark and service xxxx registrations, trademark and service xxxx
applications, logos, copyrights, copyright registrations and copyright
applications, (2) the goodwill associated with the trademarks, service marks,
and trade names, (3) all formulae, technology, methods, databases, designs,
processes, inventions, know-how, and trade secrets,
Appendix A-16
55
(4) all computer software, including proprietary applications software,
documentation and related object and source codes, (5) any and all licenses or
interest therein to use the intellectual property or proprietary information of
any other person or entity, and (6) all other intellectual property or
proprietary rights owned or used by Seller in connection with the operation of
Seller's business as presently being conducted. All of the foregoing shall be
collectively referred to as the Intellectual Property and shall be set forth on
Schedule A.28(a).
(b) Other than as set forth on Schedule A.28(b), Seller owns or
possesses adequate, enforceable and transferable long-term licenses or other
rights to use, without payment, all copyrights, patents, trade names, trade
secrets, trademarks, franchises and similar rights now used or employed in
Seller's business, the absence of which would have a Material Adverse Effect
(the "Intellectual Property"), and such rights will not cease to be valid rights
of Seller by reason of the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby.
(c) Seller owns the entire right, title and interest in and to
the Intellectual Property, which includes but is not limited to the items listed
on Schedule A.28(a). Except to the extent set forth on Schedule A.28(c),
Seller's rights, title and interest in and to the Intellectual Property are
valid and in good standing, enforceable, freely assignable, and not subject to
material liens, charges, contractual rights or, to the best of Seller's or
Stockholder's knowledge, direct or indirect claims or other interests of any
other person, including any right to royalties or other compensation in
connection therewith, and are adequate and sufficient to permit Seller to
conduct its business as presently being conducted.
(d) Schedule A.28(d) sets forth all of the following: (i)
Seller's valid and subsisting trademark and service xxxx registrations and
patents issued by the United States Patent and Trademark Office ("PTO"); (ii)
Seller's patent applications and applications for trademark or service xxxx
registration pending before the PTO as of the Closing; (iii) Seller's copyright
registrations issued by the United States Register of Copyrights; (iv) Seller's
valid and subsisting patents, trademark or service xxxx registrations, and
copyright registrations issued by governmental or regulatory authorities in any
other country or state, and all applications therefor as of the Closing. All
patents, trademark or service xxxx registrations, copyright registrations, and
applications therefor set forth on Schedule A.28(d) have been properly
maintained and, if applicable, renewed in accordance with the laws and
regulations of the relevant countries and states. To the best of Seller's
knowledge, no trademark or service xxxx has been or is now involved in any
opposition, invalidation or cancellation, and no such action is threatened.
(e) Except as set forth on Schedule A.28(e), (i) Seller is not
obligated to pay any amount, whether as a royalty, license fee or other payment,
to any person or entity to use any of the Intellectual Property; (ii) no action
is presently planned or pending against any person or entity to protect or
enforce any right or interest of Seller in and to the Intellectual Property; and
(iii) none of the Intellectual Property has been assigned, licensed,
sublicensed, encumbered, made subject to a lien or security interest or
transferred, in whole or in part, to or by any person or entity.
Appendix A-17
56
(f) Except as otherwise disclosed on Schedule A.28(f), Seller
has no knowledge of any need for any license to any intellectual property or
proprietary right of any third party to operate the business as presently being
conducted.
(g) (i) Except as disclosed on Schedule A.28(g), to the best of
Seller's knowledge, no other person or entity has infringed or is infringing
upon, or is engaged in any activity which would constitute a misappropriation
of, any of Seller rights or interest in and to any of the Intellectual Property;
(ii) Seller's rendering of its services and use of the Intellectual Property
does not infringe upon the patent, copyright, trademark, service xxxx, trade
secret, trade name, or other intellectual property or proprietary right of any
third party; (iii) except as disclosed on Schedule A.28(g), Seller has received
no notice nor any threat of claim that the Intellectual Property infringes any
proprietary right of any other person or entity; and (iv) to the best of
Seller's knowledge, Purchaser's use of the Intellectual Property, including,
without limitation, Purchaser's rendering of services offered by Seller as of
the Closing, will not infringe upon the intellectual or proprietary right of any
other person or entity.
(h) To the best of Seller's knowledge, all trade secrets owned
or used by Seller are owned free of any adverse claims, rights or encumbrances
as to its exclusive rights thereto.
(i) To the best of Seller's knowledge, (i) none of the
Intellectual Property has been used, divulged, disclosed or appropriated to the
detriment of Seller for the benefit of any other person or entity other than
Seller; (ii) no employee, independent contractor or agent of Seller has
misappropriated any trade secrets of any other person or entity in the course of
the performance of his or her duties as an employee, independent contractor or
agent of Seller; and (iii) other than as set forth on Schedule A.28(i), no
employee, independent contractor or agent of Seller is in default or breach of
any term of any employment agreement, non-disclosure agreement, assignment of
inventions agreement or similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of the Intellectual
Property.
(j) To the best of Seller's knowledge, Seller has not at any
time engaged in any conduct or omitted to perform any necessary act, the result
of which could invalidate or adversely affect the validity or enforceability of
any of the Intellectual Property.
A.29 PREDECESSOR STATUS; ETC. Schedule A.29 sets forth a listing of
all names of all predecessor companies or subsidiaries of Seller and its
Affiliates, including without limitation the names of any entities from whom
Seller has acquired material assets. Seller has not at any time been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
A.30 BOOKS AND RECORDS. Seller has made and kept (and given or will
give Purchaser access to) books and records and accounts, which, in reasonable
detail, accurately and fairly reflect the activities of Seller. Seller has not
engaged in any material transaction, maintained any bank account or used any
corporate funds in any material respect except for transactions, bank accounts
and funds which have been and are reflected in its normally maintained books and
records.
Appendix A-18
57
A.31 BROKER'S FEES. No Person retained by Seller or the Stockholders
is or will be entitled to any commission or finder's or similar fee in
connection with the Transactions.
A.32 ACCURACY OF INFORMATION. No representation or warranty by
Seller or the Stockholders in a Transaction Document, and no information
contained therein or otherwise delivered to Purchaser in connection with the
Transactions, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to Seller (other than general
economic or industry conditions) that may materially adversely affect Seller
Assets or Seller Business that has not been set forth in this Agreement or the
other documents furnished to Purchaser on or prior to the date hereof in
connection with the Transactions.
A.33 INVESTMENT. Seller (i) understands that the Purchaser Note has
not been, and will not be, registered under the Securities Act, or under any
state securities laws, and is being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering, (ii) is
acquiring the Purchaser Note solely for its own account for investment purposes,
and not with a view to the distribution thereof, other than possible
distributions to the Stockholders, (iii) is a sophisticated investor with
knowledge and experience in business and financial matters, (iv) has received
certain information concerning the Purchaser and has had the opportunity to
obtain additional information as desired in the Purchaser Note, (v) is able to
bear the economic risk and lack of liquidity inherent in holding the Purchaser
Note, and (vi) is an Accredited Investor as defined in Regulation D.
A.34 TRUST FUNDS. Except for retirement plan funds held in trust for
Seller Plan, employee contributions to a 401(k) Plan held pending transit to the
Plan trustee, and funds deposited with Seller by a financial institution for
payment to a taxing authority, neither Seller nor the Stockholders (in
connection with the Seller's business) hold any funds under any fiduciary
undertaking or obligation or in trust for any Person.
Appendix X-00
00
XXXXXXXX X
B. REPRESENTATIONS OF PURCHASER
B.1 DUE ORGANIZATION. XXXX is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, and is
duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted except for where the
failure to be so authorized or qualified would not have a Material Adverse
Effect. Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly authorized and
qualified to do business under all applicable laws, regulations, ordinances and
orders of public authorities to carry on its business in the places and in the
manner as now conducted except for where the failure to be so authorized or
qualified would not have a Material Adverse Effect.
B.2 AUTHORIZATION; VALIDITY OF OBLIGATIONS. The representatives of
Purchaser and XXXX executing this Agreement have all requisite corporate power
and authority to enter into and bind Purchaser to the terms of this Agreement,
Purchaser has the full legal right, power and corporate authority to enter into
this Agreement and the transactions contemplated hereby. The execution and
delivery of this Agreement by Purchaser and XXXX and the performance by
Purchaser and XXXX of the transactions contemplated herein have been duly and
validly authorized by the respective Boards of Directors of Purchaser and XXXX,
and this Agreement has been duly and validly authorized by all necessary
corporate action. This Agreement is a legal, valid and binding obligation of
Purchaser and XXXX, enforceable in accordance with its terms.
B.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a Default under Purchaser's or
XXXX'x Charter Documents or Bylaws;
(b) other than such as would not, individually or in the
aggregate have a Material Adverse Effect, conflict with, or result in a Default
under any Contract to which Purchaser or XXXX is a party;
(c) violate any Regulation or Court Order to which Purchaser or
XXXX is subject, or by which Purchaser or XXXX is bound, (including, without
limitation, the HSR Act, together with all rules and regulations promulgated
thereunder).
B.4 FINDER'S FEES. No Person retained by Purchaser or XXXX is or
will be entitled to any commission or finder's or similar fee in connection with
the Transactions.
Appendix B-1
59
B.5 SEC FILINGS. XXXX has complied in all material respects with all
SEC reporting requirements and has provided Seller and the Stockholders with
accurate, true and complete copies of all SEC filings made by Purchaser during
1997 (and, if not filed by Purchaser during 1997, a complete copy of Purchaser's
most recently-filed Form 10-K).
Appendix B-2
