Exhibit 2
ASSET PURCHASE AGREEMENT
AMONG
NATIONAL RESEARCH CORPORATION,
HEALTHCARE RESEARCH SYSTEMS, LTD.
AND
THE MEMBERS OF HEALTHCARE RESEARCH SYSTEMS, LTD.
DATED AS OF JUNE 11, 1998
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
1. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . 1
1.1. Assets to be Transferred . . . . . . . . . . . . . . . . 1
1.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . 3
1.3. Nonassignable Contracts and Rights . . . . . . . . . . . 3
2. ASSUMPTION OF CERTAIN SPECIFIC LIABILITIES . . . . . . . . . . 4
2.1. Certain Specific Liabilities to be Assumed . . . . . . . 4
2.2. Liabilities Not to be Assumed . . . . . . . . . . . . . 5
3. PURCHASE PRICE - PAYMENT . . . . . . . . . . . . . . . . . . . 6
3.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . 6
3.2. Payment of Purchase Price . . . . . . . . . . . . . . . 7
3.3. Determination of Fixed Purchase Price . . . . . . . . . 7
3.4. Prorations . . . . . . . . . . . . . . . . . . . . . . . 10
3.5. Allocation of Purchase Price . . . . . . . . . . . . . . 10
3.6. Additional Payments . . . . . . . . . . . . . . . . . . 10
4. REPRESENTATIONS AND WARRANTIES OF COMPANY AND XXXXXXXX . . . . 12
4.1. Company . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2. Authority . . . . . . . . . . . . . . . . . . . . . . . 13
4.3. No Violation . . . . . . . . . . . . . . . . . . . . . . 13
4.4. Financial Statements . . . . . . . . . . . . . . . . . . 13
4.5. Tax Matters . . . . . . . . . . . . . . . . . . . . . . 14
4.6. Inventory . . . . . . . . . . . . . . . . . . . . . . . 14
4.7. Absence of Certain Material Changes . . . . . . . . . . 14
4.8. Absence of Undisclosed Liabilities . . . . . . . . . . . 16
4.9. No Litigation . . . . . . . . . . . . . . . . . . . . . 16
4.10. Compliance With Laws and Orders . . . . . . . . . . . . 16
4.11. Title to and Condition of Properties . . . . . . . . . . 17
4.12. Insurance . . . . . . . . . . . . . . . . . . . . . . . 18
4.13. Contracts and Commitments . . . . . . . . . . . . . . . 19
4.14. Employee Benefit Plans . . . . . . . . . . . . . . . . . 20
4.15. Trade Rights . . . . . . . . . . . . . . . . . . . . . . 22
4.16. Major Customers and Suppliers . . . . . . . . . . . . . 23
4.17. Warranty . . . . . . . . . . . . . . . . . . . . . . . . 23
4.18. Affiliates' Relationships to Company . . . . . . . . . . 23
4.19. Accounts Receivable; Costs in Excess of Xxxxxxxx . . . . 23
4.20. Labor Matters . . . . . . . . . . . . . . . . . . . . . 24
4.21. Member List . . . . . . . . . . . . . . . . . . . . . . 24
4.22. Employment Compensation . . . . . . . . . . . . . . . . 24
4.23. No Brokers or Finders . . . . . . . . . . . . . . . . . 24
4.24. Disclosure . . . . . . . . . . . . . . . . . . . . . . . 24
4.25. Data Merger . . . . . . . . . . . . . . . . . . . . . . 25
5. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . 25
5.1. Corporate . . . . . . . . . . . . . . . . . . . . . . . 25
5.2. Authority . . . . . . . . . . . . . . . . . . . . . . . 25
5.3. No Violation . . . . . . . . . . . . . . . . . . . . . . 25
5.4. No Brokers or Finders . . . . . . . . . . . . . . . . . 26
5.5. Disclosure . . . . . . . . . . . . . . . . . . . . . . . 26
5.6. SEC Reports . . . . . . . . . . . . . . . . . . . . . . 26
6. RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . 26
6.1. Noncompetition; Confidentiality . . . . . . . . . . . . 26
6.2. Employment and Noncompetition Agreements . . . . . . . . 28
6.3. Use of Name . . . . . . . . . . . . . . . . . . . . . . 28
6.4. Access to Information and Records . . . . . . . . . . . 28
6.5. Change of Name . . . . . . . . . . . . . . . . . . . . . 29
6.6. Employees . . . . . . . . . . . . . . . . . . . . . . . 29
6.7. No Dissolution of Company . . . . . . . . . . . . . . . 30
6.8. Further Actions . . . . . . . . . . . . . . . . . . . . 30
6.9. Accounts Receivable; Costs in Excess of Xxxxxxxx . . . . 30
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS . . . . . . . . . 31
7.1. Representations and Warranties True on the Closing
Date . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2. Compliance With Agreement . . . . . . . . . . . . . . . 31
7.3. Absence of Litigation . . . . . . . . . . . . . . . . . 31
7.4. Consents and Approvals . . . . . . . . . . . . . . . . . 31
7.5. Due Diligence Investigation; No Material Adverse
Change . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6. General Release . . . . . . . . . . . . . . . . . . . . 32
8. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS . . . . . . . . 32
8.1. Representations and Warranties True on the Closing
Date . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2. Compliance With Agreement . . . . . . . . . . . . . . . 32
8.3. Absence of Litigation . . . . . . . . . . . . . . . . . 32
9. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 32
9.1. By Company and Xxxxxxxx . . . . . . . . . . . . . . . . 32
9.2. By Buyer . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3. Indemnification of Third-Party Claims . . . . . . . . . 33
9.4. Payment . . . . . . . . . . . . . . . . . . . . . . . . 34
9.5. Limitations on Indemnification . . . . . . . . . . . . . 35
9.6. Exclusive Remedy . . . . . . . . . . . . . . . . . . . . 36
10. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1. Documents to be Delivered by Company and Members . . . 37
10.2. Documents to be Delivered by Buyer . . . . . . . . . . 38
11. RESOLUTION OF DISPUTES . . . . . . . . . . . . . . . . . . . . 38
11.1. Arbitration . . . . . . . . . . . . . . . . . . . . . . 39
11.2. Arbitrators . . . . . . . . . . . . . . . . . . . . . . 39
11.3. Procedures; No Appeal . . . . . . . . . . . . . . . . . 39
11.4. Authority . . . . . . . . . . . . . . . . . . . . . . . 39
11.5. Entry of Judgment . . . . . . . . . . . . . . . . . . . 39
11.6. Confidentiality . . . . . . . . . . . . . . . . . . . . 39
11.7. Continued Performance . . . . . . . . . . . . . . . . . 39
11.8. Tolling . . . . . . . . . . . . . . . . . . . . . . . . 40
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 40
12.1. Disclosure Schedule . . . . . . . . . . . . . . . . . . 40
12.2. Further Assurance . . . . . . . . . . . . . . . . . . . 40
12.3. Disclosures and Announcements . . . . . . . . . . . . . 40
12.4. Assignment; Parties in Interest . . . . . . . . . . . . 40
12.5. Law Governing Agreement . . . . . . . . . . . . . . . . 41
12.6. Amendment and Modification . . . . . . . . . . . . . . 41
12.7. Notice . . . . . . . . . . . . . . . . . . . . . . . . 41
12.8. Expenses . . . . . . . . . . . . . . . . . . . . . . . 42
12.9. Entire Agreement . . . . . . . . . . . . . . . . . . . 43
12.10. Counterparts . . . . . . . . . . . . . . . . . . . . . 43
12.11. Headings . . . . . . . . . . . . . . . . . . . . . . . 43
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement"), dated as of June 11,
1998, by and among National Research Corporation, a Wisconsin corporation
("Buyer"), Healthcare Research Systems, Ltd., an Ohio limited liability
company ("Company"), and all the members of Company (individually "Member"
and together "Members").
W I T N E S S E T H:
WHEREAS, Company is engaged in the design, production,
marketing, distribution and sale of survey-based performance measurement,
analysis and tracking services and products for the healthcare industry
(the "Business").
WHEREAS, Buyer desires to purchase from Company, Company
desires to sell to Buyer, and Members desire to cause Company to sell to
Buyer, the Business and substantially all the property and assets of
Company.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and
conditions hereinafter set forth, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1. Assets to be Transferred. Subject to the terms and
conditions of this Agreement, on the Closing Date (as hereinafter
defined), Company shall, and Members shall cause Company to, sell,
transfer, convey, assign and deliver to Buyer (or upon Buyer's request, to
one or more wholly owned subsidiaries of Buyer as designated by Buyer),
and Buyer shall purchase and accept, all of the business, rights, claims
and assets (of every kind, nature, character and description, whether
personal, tangible or intangible, accrued, contingent or otherwise, and
wherever situated) of Company, together with all rights and privileges
associated with such assets and with the Business, other than the Excluded
Assets (as hereinafter defined) (collectively, the "Purchased Assets").
The Purchased Assets shall include, but not be limited to, the following:
1.1.(a) Leased Real Property. All of the leases of real
property with respect to real property leased by Company, including
the leases (the "Real Property Leases") described on Schedule
1.1.(a) with respect to the real property described thereon (the
"Leased Real Property").
1.1.(b) Personal Property. All equipment, apparatus, tools,
kits, supplies, spare parts, furniture, removable fixtures and all
other personal property not included in inventory (other than
personal property leased pursuant to Personal Property Leases, as
hereinafter defined), including, without limitation, all tangible
assets of Company, which are described on Schedule 1.1.(b).
1.1.(c) Personal Property Leases. All leases of machinery,
equipment, furniture and other personal property leased by Company
(the "Personal Property Leases") and described in Schedule 1.1.(c).
1.1.(d) Trade Rights. All Company's interest in any Trade
Rights. As used herein, the term "Trade Rights" shall mean and
include: (i) all trademark rights, business identifiers, trade
dress, service marks, trade names, and brand names; (ii) all
copyrights and all other rights associated therewith and the
underlying works of authorship; (iii) all patents and all
proprietary rights associated therewith; (iv) all contracts or
agreements granting any right, title, license or privilege under
the intellectual property rights of any third party; (v) all
inventions, mask works and mask work registrations, know-how,
discoveries, improvements, designs, trade secrets, shop and royalty
rights, employee covenants and agreements respecting intellectual
property and noncompetition and all other types of intellectual
property; and (vi) all common law rights therein, all
registrations, renewals, reissues, extensions, applications and
continuing applications therefor, all goodwill associated with any
of the foregoing, and all claims for infringement or breach
thereof.
1.1.(e) Contracts. All Company's rights in, to and under all
contracts, purchase orders and sales orders (hereinafter
"Contracts") of Company described in Schedules 1.1.(a), 1.1.(c) and
2.1.(a).
1.1.(f) Computer Software and Hardware. All computer
databases, questionnaire instruments, scoring algorithms, reporting
formats, source codes, programs and other computer software and
hardware, including all machine readable code, printed listings of
code, documentation and related property and information of
Company.
1.1.(g) Literature. All sales literature, promotional
literature, catalogs and similar materials of Company.
1.1.(h) Records and Files. All records and files of Company
of every kind including, without limitation, invoices, customer and
vendor lists, blueprints, specifications, designs, drawings,
operating and marketing plans, accounting records, business
records, operating data, and all other documents, tapes, discs,
programs or other embodiments of information of Company.
1.1.(i) Inventory. All inventories of supplies (including
all such in transit) on the Closing Date (collectively,
"Inventory").
1.1.(j) Notes and Accounts Receivable. All notes, drafts and
accounts receivable of Company, except for those described in
Section 1.2.(d) hereof.
1.1.(k) Licenses, Permits and Registrations. All licenses,
permits, registrations, certifications and approvals of Company to
the extent transferable.
1.1.(l) Business Name. The name "Healthcare Research
Systems" or the letters "HRS" and derivatives therefrom and names
similar thereto, and all rights to use or allow others to use such
names.
1.1.(m) General Intangibles. All prepaid expenses and items,
all causes of action, claims, demands and rights against third
parties arising out of occurrences after the Closing, and other
intangible rights and assets, including all goodwill associated
with the Business and the Purchased Assets.
1.2. Excluded Assets. The provisions of Section 1.1
notwithstanding, Company shall not sell, transfer, assign, convey or
deliver to Buyer, and Buyer will not purchase or accept, the following
assets of Company (collectively, the "Excluded Assets"):
1.2.(a) Cash and Cash Equivalents. All cash and cash
equivalents, other than xxxxx cash balances at Company's places of
business.
1.2.(b) Consideration. The consideration delivered by Buyer
to Company pursuant to this Agreement.
1.2.(c) Tax Credits and Records. Federal, state and local
income and franchise tax credits and tax refund claims and
associated returns and records. Buyer shall have reasonable access
to such returns and records and may make excerpts therefrom and
copies thereof.
1.2.(d) Obligations of Affiliates. Notes, drafts, accounts
receivable or other obligations for the payment of money, made or
owed by any Affiliate of Company. For purposes of this Agreement,
the term "Affiliate" shall mean and include all Members, managers
and officers of Company; the spouse of any such person; any person
who would be the heir or descendant of any such person if he or she
were not living; and any entity in which any of the foregoing has a
direct or indirect interest (except through ownership of less than
5% of the outstanding shares of any entity whose securities are
listed on a national securities exchange or traded in the national
over-the-counter market).
1.2.(e) Limited Liability Company Franchise. Company's
franchise to be a limited liability company, its articles of
organization, its operating agreement and other records having to
do exclusively with the organization and capitalization of Company.
1.3. Nonassignable Contracts and Rights. Notwithstanding anything
to the contrary in this Agreement, no Contracts, properties, rights or
other assets of Company shall be deemed sold, transferred or assigned to
Buyer pursuant to this Agreement if the attempted sale, transfer or
assignment thereof to Buyer without the consent or approval of another
party or a governmental entity would be ineffective or would constitute a
breach of contract or a violation of any Law (as hereinafter defined) or
would in any other way adversely affect the rights of Company (or Buyer as
transferee or assignee), and such consent or approval is not obtained on
or prior to the Closing Date. In such case, to the extent possible, (i)
the beneficial interest in or to such Contracts, properties, rights or
assets (collectively, the "Beneficial Rights") shall in any event pass as
of the Closing to Buyer under this Agreement; and (ii) pending such
consent or approval, Buyer shall assume or discharge the obligations of
Company under such Beneficial Rights (to the extent such obligations are
Assumed Liabilities) as agent for Company, and Company shall act as
Buyer's agent in the receipt of any benefits, rights or interest received
from the Beneficial Rights. Buyer and Company shall use all reasonable
efforts (and bear their respective costs of such efforts) to obtain and
secure any and all consents and approvals that may be necessary to effect
the legal and valid sale, transfer or assignment of the Contracts,
properties, rights or assets underlying the Beneficial Rights to Buyer
without material change in any of the material terms or conditions of such
Contracts, properties, rights or assets, including without limitation
their formal assignment or novation, if advisable. Buyer and Company will
make or complete such transfers as soon as reasonably possible and
cooperate with each other in any other reasonable arrangement designed to
provide for Buyer the benefits of such Contracts, properties, rights and
assets including enforcement at the cost and for the account of Buyer of
any and all rights of Company against the other party thereto arising out
of the breach or cancellation thereof by such other party or otherwise,
and to provide for the discharge of any liability or obligation under such
Contracts, properties, rights or assets, to the extent such liability or
obligation constitutes an Assumed Liability. Notwithstanding anything in
this Section 1.3 to the contrary, it is the responsibility of Company to
obtain any necessary consents to assignment. Company will indemnify,
defend and hold Buyer harmless, in accordance with and subject to the
provisions of Article 9, in respect of any loss, damage, cost or expense
(including without limitation attorneys' fees but excluding consequential
damages) suffered or incurred by Buyer as a result of any breach or
violation effectuated by the attempted sale, transfer of assignment of any
properties, rights or assets without the necessary consent or approval.
If and to the extent that an arrangement acceptable to Buyer with respect
to Beneficial Rights cannot be made, Buyer, upon notice of Company, shall
have no obligation pursuant to Section 2.1 or otherwise with respect to
any such Contract, property, right or other asset and any such Contract,
property, right or other asset shall not be deemed to be a Purchased
Asset, and the related Liability shall not be deemed an Assumed Liability,
hereunder.
2. ASSUMPTION OF CERTAIN SPECIFIC LIABILITIES
2.1. Certain Specific Liabilities to be Assumed. As used in this
Agreement, the term "Liability" shall mean and include any direct or
indirect indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or unfixed,
known or unknown, asserted or unasserted, liquidated or unliquidated,
secured or unsecured. Subject to the terms and conditions of this
Agreement, on the Closing Date, Buyer shall assume and agree to perform
and discharge the following, and only the following, Liabilities of
Company (collectively, the "Assumed Liabilities"):
2.1.(a) Contractual Liabilities. Company's Liabilities
arising from and after the Closing under and pursuant to the
Contracts described in Schedules 1.1.(a), 1.1.(c) or 2.1.(a). The
foregoing Contracts are hereinafter collectively described as the
"Assumed Contracts."
2.1.(b) Liabilities Under Certain Permits and Licenses.
Company's Liabilities arising from and after the Closing under
those certain permits and licenses listed in Schedule 4.10.(b),
which have been assigned to Buyer at the Closing.
2.1.(c) Accounts Payable. The accounts payable specified on
Schedule 2.1.(c), all of which are reflected or reserved against on
the Closing Balance Sheet (as hereinafter defined), but only in the
amounts so reflected or reserved.
2.1.(d) Warranty and Rework. All product or service
warranty, rework or return Liabilities of Company or the Business
on products produced, or services rendered, by Company prior to the
Closing Date.
2.1.(e) KPMG Audit Fees. Company's Liabilities for the fees
and expenses of KPMG Peat Marwick LLP in conducting the audits of
the financial statements of Company for the years and periods
specified in Section 4.4.
2.1.(f) Other Assumed Liabilities. Company's Liabilities
specifically set forth in Schedule 2.1.(f).
2.2. Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.1, Buyer is not assuming any
Liabilities of Company and all such Liabilities which are not Assumed
Liabilities shall be and remain the responsibility of Company.
Notwithstanding the provisions of Section 2.1, Buyer is not assuming, and
Company shall not be deemed to have transferred to Buyer, the following
Liabilities of Company:
2.2.(a) Taxes Arising from Transaction. Any Federal,
foreign, state or other taxes applicable to, imposed upon or
arising out of the sale or transfer of the Purchased Assets to
Buyer and the other transactions contemplated by this Agreement,
including but not limited to any income, transfer, sales, use,
gross receipts or documentary stamp taxes.
2.2.(b) Income, Sales and Franchise Taxes. Any Liability of
Company for Federal income taxes and any state or local income,
profit, sales or franchise taxes (and any penalties or interest due
on account thereof).
2.2.(c) Insured Claims. Any Liability of Company which
Company is insured against, to the extent such Liability is or will
be paid by an insurer.
2.2.(d) Litigation Matters. Any Liability with respect to
any action, suit, proceeding, arbitration, investigation or
inquiry, whether civil, criminal or administrative ("Litigation")
whether or not described in Schedule 4.9.
2.2.(e) Infringements. Any Liability to a third party for
infringement of such third party's Trade Rights.
2.2.(f) Transaction Expenses. All Liabilities incurred by
Company in connection with this Agreement and the transactions
contemplated herein.
2.2.(g) Liability For Breach. Liabilities of Company for any
breach or failure to perform any of Company's covenants and
agreements contained in, or made pursuant to, this Agreement, or,
prior to the Closing Date, any other contract, whether or not
assumed hereunder, including breach arising from assignment of
contracts hereunder without consent of third parties.
2.2.(h) Liabilities to Affiliates. Liabilities of Company to
its present or former Affiliates.
2.2.(i) Violation of Laws or Orders. Liabilities of Company
for any violation of or failure to comply with any statute, law,
ordinance, rule or regulation (collectively, "Laws") or any order,
writ, injunction, judgment, plan or decree (collectively, "Orders")
of any court, arbitrator, department, commission, board, bureau,
agency, authority, instrumentality or other body, whether federal,
state, municipal, foreign or other (collectively, "Government
Entities").
2.2.(j) Employees. Any Liability of Company relating to
employees of Company, including, without limitation, any Liability
of Company under or with respect to (i) any employee benefit plan,
program, contract or arrangement of Company covering past or
present employees of Company and their beneficiaries, (ii) the
"guaranteed payments" identified in Schedule 4.22 and any salary
guarantee of Company or Xxxxxxxx (as hereinafter defined) to Xxxxx
Xxxxxx or Xxxxxx Xxxxxxx or (iii) imposed by law as a result of the
transactions contemplated hereby.
2.2.(k) The Ohio State University Obligation. Any and all
Liabilities of Company to The Ohio State University pursuant to
that certain Asset Purchase Agreement, dated as of November 13,
1995, between The Ohio State University, Company and Xxxxxxx
Xxxxxxxx (the "Ohio State Agreement").
3. PURCHASE PRICE - PAYMENT
3.1. Purchase Price. The purchase price (the "Purchase Price")
for the Purchased Assets shall be (i) the assumption of the Assumed
Liabilities, and (ii) the sum of the Fixed Purchase Price (as hereinafter
defined) plus the Additional Payments, if any, as defined and set forth in
Section 3.6.
3.2. Payment of Purchase Price. The Purchase Price shall be paid
by Buyer as follows:
3.2.(a) Assumption of Liabilities. On the Closing Date,
Buyer shall deliver to Company such documents and instruments as
are reasonably required to evidence the assumption of the Assumed
Liabilities.
3.2.(b) Cash to Company. Buyer shall deliver, or cause to be
delivered, to Company the following:
(i) the Fixed Purchase Price (with the Net
Current Asset Value Difference (as hereinafter defined)
component thereof as reflected on the Closing Statement (as
hereinafter defined)) on the Closing Date; and
(ii) the Additional Payments in accordance with
Section 3.6.
3.2.(c) Adjustment of Fixed Purchase Price. On or before the
fifth (5th) business day following the final determination of the
Closing Balance Sheet (as hereinafter defined) (such date being
hereinafter referred to as the "Settlement Date"), either (i)
Company shall pay to Buyer the amount, if any, by which the Fixed
Purchase Price (with the Net Current Asset Value Difference
component thereof as reflected on the Closing Statement) exceeds
the Fixed Purchase Price (with the Net Current Asset Value
Difference component thereof as reflected on the Closing Balance
Sheet) or (ii) Buyer shall pay to Company the amount, if any, by
which the Fixed Purchase Price (with the Net Current Asset Value
Difference component thereof as reflected on the Closing Balance
Sheet) exceeds the Fixed Purchased Price (with the Net Current
Asset Value Difference component thereof as reflected on the
Closing Statement).
3.2.(d) Method of Payment. All payments under this Section
3.2 and under Section 3.6 shall be made in the form of certified or
bank cashier's check payable to the order of Company or, at
Company's option, by wire transfer of immediately available funds
to an account designated by Company not less than 48 hours prior to
the time for payment specified herein.
3.3. Determination of Fixed Purchase Price.
3.3.(a) Definitions. For purposes of this Agreement, the
term "Fixed Purchase Price" shall mean $5,100,000 minus fifty
percent (50%) of the fees and expenses of KPMG Peat Marwick LLP as
assumed by Buyer pursuant to Section 2.1.(e) and plus or minus, as
the case may be, the Net Current Asset Value Difference. "Net
Current Asset Value Difference" means the dollar amount, if any, by
which the net current assets of Company (cash, accounts receivable
(net of reserves) and scheduled prepaids less any items thereof
which are Excluded Assets) exceeds or are less than the Assumed
Liabilities, both as reflected in the Closing Balance Sheet or
Closing Statement, as applicable.
3.3.(b) Closing Statement. For purposes of determining the
Net Current Asset Value Difference and the portion of the Fixed
Purchase Price payable by Buyer on the Closing Date, not less than
two (2) business days prior to the Closing Date, Company shall, in
consultation with Buyer, prepare and deliver to Buyer detailed
schedules of the net current assets of Company and the Assumed
Liabilities as of the close of business on May 31, 1998
(hereinafter the "Effective Time"), which shall represent Company's
reasonable estimate of these line items as they will appear in the
Closing Balance Sheet and which shall be consistent in their
accounting principles and policies in every respect with the Recent
Balance Sheet (as defined in Section 4.4). Such schedules shall
contain sufficient detail of the net current assets of Company and
Assumed Liabilities for the determination of the Net Current Asset
Value Difference. In the event Buyer shall object to any of the
information set forth on the schedules as presented by Company, the
parties shall negotiate in good faith and agree on appropriate
adjustments to the end that such reflect a reasonable estimate of
these line items as they will appear in the Closing Balance Sheet
and Net Current Asset Value Difference (the schedules as finally
determined by the parties pursuant to this subsection are herein
collectively referred to as the "Closing Statement"). In
connection with the determination of the Closing Statement, Company
shall provide to Buyer such information and detail as Buyer shall
reasonably request.
3.3.(c) Closing Balance Sheet. The balance sheet of Company
prepared as of the Effective Time shall be prepared as follows:
(i) Within 45 days after the Closing Date, Buyer
shall deliver to Company a balance sheet of Company as of the
Effective Time, prepared in accordance with generally accepted
accounting principles from the books and records of Company,
on a basis consistent with the generally accepted accounting
principles theretofore followed by Company in the preparation
of the Recent Balance Sheet and in accordance with this
Section 3.3 and fairly presenting the financial position of
Company as of the Effective Time. The balance sheet shall be
accompanied by detailed schedules of the net current assets of
Company and Assumed Liabilities and by a report (1) setting
forth the amount of Net Current Asset Value Difference
reflected in the balance sheet, (2) stating that (a) the
examination of the balance sheet has been made in accordance
with generally accepted auditing standards and (b) the balance
sheet has been prepared in accordance with generally accepted
accounting principles, on a basis consistent with the
accounting principles theretofore followed by Company, except
as otherwise provided in this Section 3.3, and (3) setting
forth the amount of any adjustment to the Fixed Purchase Price
to be paid and by whom pursuant to Section 3.2(c).
(ii) Within 20 days following the delivery of the
balance sheet referred to in (i) above, Company or its
independent accountants ("Company's Accountants") may object
to any of the information contained in said balance sheet or
accompanying schedules which could affect the necessity or
amount of any payment by Buyer or Company pursuant to Section
3.2(c). Any such objection shall be made in writing and shall
state Company's determination of the amount of the Net Current
Asset Value Difference.
(iii) In the event of a dispute or disagreement
relating to the balance sheet or schedules which Buyer and
Company are unable to resolve, either party may elect to have
all such disputes or disagreements resolved by an accounting
firm of nationally recognized standing (the "Third Accounting
Firm") to be mutually selected by Company and Buyer or, if no
agreement is reached, by Company's Accountants and Buyer's
Accountants. The Third Accounting Firm shall make a
resolution of the balance sheet of Company as of the Effective
Time and the calculation of Net Current Asset Value
Difference, which shall be final and binding for purposes of
this Article 3. The Third Accounting Firm shall be instructed
to use every reasonable effort to perform its services within
15 days of submission of the balance sheet to it and, in any
case, as soon as practicable after such submission. The fees
and expenses for the services of the Third Accounting Firm
shall be shared by Buyer and Company as follows:
Company shall pay a percentage of such fees and
expenses equal to A/(A+B) and Buyer shall pay a percentage of
such fees and expenses equal to B/(A+B), where A is equal to
the absolute value of the difference (in dollars) between Net
Current Asset Value Difference as finally determined by the
Third Accounting Firm and Net Current Asset Value Difference
as reflected in the objection prepared and delivered by
Company in accordance with Section 3.3.(c)(ii), and B is equal
to the absolute value of the difference (in dollars) between
Net Current Asset Value Difference as finally determined by
the Third Accounting Firm and Net Current Asset Value
Difference as reflected in the report prepared and delivered
by Buyer in accordance with Section 3.3.(c)(i). As used in
this Agreement, the term "Closing Balance Sheet" shall mean
the balance sheet of Company as of the Effective Time as
finally determined for purposes of this Article 3, whether by
acquiescence of Company in the figures supplied by Buyer in
accordance with Section 3.3.(c)(i), by negotiation and
agreement of the parties or by the Third Accounting Firm in
accordance with Section 3.3.(c)(iii).
(iv) Buyer agrees to permit Company, Company's
Accountants, and their respective representatives, during
normal business hours, to have reasonable access to, and to
examine and make copies of, all books and records of Company,
including but not limited to the books, records, schedules,
work papers and audit programs of Buyer and Buyer's
Accountants and access to representatives of Buyer's
Accountants, which documents and access are necessary to
review the balance sheet delivered by Buyer in accordance with
Section 3.3.(c)(i). Company similarly agrees to permit
Buyer's Accountants and their respective representatives,
during normal business hours, to have reasonable access to any
books and records of Company which do not constitute Purchased
Assets, in order to enable them to prepare such balance sheet.
3.4. Prorations. Personal property taxes, real property taxes and
other taxes, if any, on or with respect to the Purchased Assets shall be
prorated as of the Closing Date on the basis of net taxes for the calendar
year 1997. All other items normally prorated in transactions of this kind
(i.e., rents, utility xxxx, etc.) will also be prorated as of the Closing
Date. With respect to all such prorations, Company is liable to the
extent such items relate to any time period up to and including the
Effective Time if not already taken into account on the Closing Balance
Sheet and Buyer will be liable to the extent such items relate to periods
on or subsequent to the Effective Time.
3.5. Allocation of Purchase Price. The aggregate Purchase Price
(including the assumption by Buyer of the Assumed Liabilities but
excluding any Additional Payments) shall be allocated among the Purchased
Assets for tax purposes in accordance with the principles of Section 1060
of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder, which allocation shall be determined by Buyer
following the Closing Date on a basis consistent with the allocation set
forth on Schedule 3.5 and be subject to Company's consent (which consent
shall not be unreasonably withheld). Company and Buyer covenant and agree
that they will follow and use such allocation in all tax returns, filings
or other related reports made by them to any governmental agencies and
will not take any position for tax purposes or otherwise that is
inconsistent with such allocation. Buyer and Company will disclose their
respective Internal Revenue Service ("IRS") Forms 8594 to the other ten
(10) days prior to filing with the IRS. Furthermore, Company and Buyer
shall cooperate in supplementing their respective Forms 8594 on a timely
basis to reflect any Additional Payments.
3.6. Additional Payments. In addition to the Fixed Purchase
Price, but subject to Section 9.4.(a), Buyer shall also make the Revenues
Payment and the Anniversary Payment (both as hereinafter defined)
(collectively, the "Additional Payments") to Company if and to the extent
the conditions requiring such Additional Payments are satisfied:
3.6.(a) Revenues Report. Not later than March 31, 1999,
Buyer or KPMG Peat Marwick LLP ("Buyer's Accountants") shall
prepare and deliver to Company a report ("Report") setting forth
(i) the Company Revenues (as hereinafter defined) earned during the
year ending December 31, 1998 and (ii) the amount of the Revenues
Payment, if any, required pursuant to Section 3.6.(b). The Report
shall be prepared from the statement of income of Buyer for the
year ended December 31, 1998 and the statement of income of Company
for the period from January 1, 1998 through May 31, 1998, which
statements will be prepared in accordance with generally accepted
accounting principles applied on a consistent basis in accordance
with the books and records of Buyer or Company, as the case may be,
and fairly present, in accordance with generally accepted
accounting principles, the results of operations of Buyer or
Company, as the case may be, for such year or period.
3.6.(b) Payment of Revenues Payment. On the tenth business
day after the Report is delivered to Company (or, if there is a
dispute regarding any aspect of the Report, immediately after such
dispute is finally resolved), Buyer shall deliver to Company an
aggregate sum equal to $1,500,000 less the Company Revenues
Difference (as hereinafter defined) and less the dollar amount, if
any, of all accounts receivable and costs in excess of xxxxxxxx of
Company as reflected on the Closing Balance Sheet (net of the
reserve shown on the Closing Balance Sheet for doubtful accounts)
that have not been collected by Buyer pursuant to the provisions of
Section 6.9 on or prior to December 31, 1998, without interest (the
"Revenues Payment"). Such amount, if any, shall be paid by
delivery to Company of a certified or bank cashier's check payable
to the order of Company or, at Company's option, by wire transfer
of immediately available funds to an account designated by Company
not less than 48 hours prior to the time for payment specified
herein.
3.6.(c) Company Revenues. As used herein, "Company Revenues"
shall mean the aggregate value of gross revenues recognized in
accordance with generally accepted accounting principles by (i)
Buyer attributable to the accounts of Company listed on
Schedule 3.6.(c) for the seven-month period ended December 31, 1998
(less the dollar amount of any rework, warranty work, refunds or
disputed invoices on such revenues) and (ii) Company attributable
to the accounts of Company listed on Schedule 3.6.(c) for the five-
month period ended May 31, 1998. Notwithstanding the foregoing,
CIP's listed on Schedule 3.6.(c) shall not be treated as an account
of Company listed on such Schedule unless a written contract with
respect thereto shall have been executed by the client on or prior
to September 30, 1998. As used herein, "Company Revenues
Difference" shall mean the dollar amount, if any, by which the
Company Revenues are less than $7,600,000. Within five (5) days of
the date hereof, Company shall provide Buyer with a copy of each
contract or proposal listed on Schedule 3.6.(c), each of which
shall be marked to clearly indicate the corresponding number on
such Schedule.
3.6.(d) Dispute Resolution. In the event of a dispute or
disagreement relating to the Report, the Company Revenues or the
amount of the Revenues Payment that Buyer and Company are unable to
mutually resolve within 15 days after written objections to such
Report are delivered to Buyer, either party may elect to have all
such disputes or disagreements resolved by a Third Accounting Firm
to be mutually selected by Buyer and Company or, if no agreement is
reached on such Third Accounting Firm, then by Buyer's Accountants
and Company's independent accountants. The Third Accounting Firm
shall make a final and binding resolution of the Company Revenues
earned during fiscal year 1998 and the amount of the Revenues
Payment required pursuant to Section 3.6.(b); provided, however,
that in resolving such dispute, the Third Accounting Firm shall
choose between the positions and amounts advocated by either Buyer
or Company and shall not provide a third or independent resolution
of such dispute. The Third Accounting Firm shall be instructed to
use every reasonable effort to perform its services within 15 days
of submission of the Report to it and, in any case, as soon as
practicable after such submission. The fees and expenses for the
services of the Third Accounting Firm shall be shared equally by
Buyer and Company.
3.6.(e) Anniversary Payment. On the first anniversary of the
Closing Date, Buyer shall deliver to Company the sum equal to
$1,500,000 less the amount, if any, by which the Company Revenues
Difference is greater than $1,500,000, without interest (the
"Anniversary Payment").
4. REPRESENTATIONS AND WARRANTIES OF COMPANY AND XXXXXXXX
Company and Xxxxxxx Xxxxxxxx ("Xxxxxxxx"), jointly and severally,
make the following representations and warranties to Buyer, each of which
is true and correct on the Closing Date, shall be unaffected by any
investigation heretofore or hereafter made by Buyer, or any knowledge of
Buyer other than as specifically disclosed in the Disclosure Schedule (as
hereinafter defined) delivered to Buyer at the time of the execution of
this Agreement, and shall survive the Closing of the transactions provided
for herein.
4.1. Company.
4.1.(a) Organization. Company is a limited liability company
duly organized, validly existing and in good standing under the
laws of the State of Ohio.
4.1.(b) Power. Company has all requisite power and authority
to own, operate and lease its properties, to carry on its business
as and where such is now being conducted, to enter into this
Agreement and the other documents and instruments to be executed
and delivered by Company pursuant hereto and to carry out the
transactions contemplated hereby and thereby.
4.1.(c) Qualification. Company is duly licensed or qualified
to do business as a foreign limited liability company, and is in
good standing, in each jurisdiction wherein the character of its
properties which are Purchased Assets or the nature of the Business
makes such licensing or qualification necessary; such jurisdictions
are listed in Schedule 4.1.(c).
4.1.(d) No Subsidiaries. No portion of the Business is
conducted by Company by means of any subsidiary or any other
interest in any corporation, partnership or other entity.
4.2. Authority. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by
Company pursuant hereto and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the manager
of Company. No other or further act or proceeding on the part of Company,
the Members or the manager of Company is necessary to authorize this
Agreement or the other documents and instruments to be executed and
delivered by Company pursuant hereto or the consummation of the
transactions contemplated hereby and thereby. This Agreement constitutes,
and when executed and delivered, the other documents and instruments to be
executed and delivered by Company pursuant hereto will constitute, valid
binding agreements of Company, enforceable in accordance with their
respective terms, except insofar as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally, and by general equitable
principles.
4.3. No Violation. Except as set forth on Schedule 4.3, neither
the execution and delivery of this Agreement or the other documents and
instruments to be executed and delivered by Company pursuant hereto, nor
the consummation by Company of the transactions contemplated hereby and
thereby (a) will violate any Law or Order applicable to Company, (b) will
require any authorization, consent, approval, exemption or other action by
or notice to any Government Entity (including, without limitation, under
any "plant-closing" or similar law), or (c) subject to obtaining the
consents referred to in Schedule 4.3, will violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or will result in the termination
of, or accelerate the performance required by, or result in the creation
of any Lien (as hereinafter defined), upon any of the assets of Company
under, any term or provision of (i) the articles of organization or
operating agreement of Company or (ii) any material contract, commitment,
understanding, arrangement, agreement or restriction of any kind or
character to which Company is a party or by which Company or any of its
assets or properties may be bound or affected.
4.4. Financial Statements. Included as Schedule 4.4 are true and
complete copies of the financial statements of Company (the "Financial
Statements") consisting of a balance sheet of Company as of December 31,
1997 (the "Recent Balance Sheet"), and the related statements of
operations and cash flows for the fiscal year then ended (including the
notes contained therein or annexed thereto), which Financial Statements
have been reported on, and are accompanied by, the signed, unqualified
opinion of KPMG Peat Marwick LLP. All of such Financial Statements
(including all notes and schedules contained therein or annexed thereto)
are complete and accurate in all material respects, have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis, have been prepared in accordance with the books and
records of Company, and fairly present in all material respects, in
accordance with generally accepted accounting principles ("GAAP"), the
assets, liabilities and financial position, the results of operations and
cash flows of Company as of the dates and for the fiscal years and periods
indicated.
4.5. Tax Matters.
4.5.(a) Provision for Taxes. No provision (other than the
accrual for distributions to be made to Members as a result of the
Members' status as members of Company to allow such Members to pay
their personal federal and state income taxes (using a combined tax
rate not in excess of 50%) on the net income of Company for the
period between January 1, 1998 and the Closing Date (the "LLC
Distributions")) for income taxes has been made on the Recent
Balance Sheet because Company is a limited liability company and
Company has never paid or been subject to any income tax and does
not owe and is not otherwise liable for any income tax for any
period prior to the Closing Date. Since the date of the Recent
Balance Sheet, Company has not incurred any taxes other than non-
income taxes incurred in the ordinary course of business consistent
with past practices of Company and other than as set forth in
schedule 4.5.(a).
4.5.(b) Tax Returns. Except as set forth on Schedule
4.5.(b): (i) all state, foreign, county, local and other tax
returns required to be filed by or on behalf of Company in any
jurisdiction required to be listed in Schedule 4.1.(c) or any
political subdivision thereof, have been timely filed and the taxes
paid or adequately accrued; (ii) Company has duly withheld and paid
all taxes which it is required to withhold and pay relating to
salaries and other compensation heretofore paid to the employees of
Company; and (iii) Company has not received any notice of
underpayment of taxes or other deficiency which has not been paid
and there are outstanding no agreements or waivers extending the
statutory period of limitations applicable to any tax return or
report required to have been filed by Company in any jurisdiction
required to be listed in Schedule 4.1.(c) or any political
subdivision thereof.
4.6. Inventory. All work-in-process contained in Inventory
constitutes items in process of production pursuant to contracts or open
orders taken in the ordinary course of business, from regular customers of
Company with, to Company's knowledge, no recent history of credit problems
with respect to Company; neither Company nor, to Company's knowledge, any
such customer is in material breach of the terms of any obligation to the
other, and, to Company's knowledge, no valid grounds exist for any set-off
of amounts billable to such customers on the completion of orders to which
work-in-process relates. All work-in-process contained in Inventory is of
a quality ordinarily produced in accordance with the requirements of the
orders to which such work-in-process is identified and such work-in-
process meets all deliverable requirements in all material respects and
satisfies in all material respects the percentage of completion method of
revenue recognition (in accordance with GAAP) and all contractual time and
scope standards.
4.7. Absence of Certain Material Changes. Except as and to the
extent set forth in Schedule 4.7, since the date of the Recent Balance
Sheet there has not been:
4.7.(a) No Material Adverse Change. Any material adverse
change in the financial condition, assets, Liabilities, business or
operations of Company;
4.7.(b) No Material Damage. Any loss, damage or destruction,
whether covered by insurance or not, having, or reasonably expected
to have, a material adverse effect upon the Business or the
Purchased Assets;
4.7.(c) No Nonordinary Commitments. Any commitment or
transaction by Company (including, without limitation, any
borrowing or capital expenditure) other than in the ordinary course
of business;
4.7.(d) No Nonordinary Disposition of Property. Any sale,
lease or other transfer or disposition of any properties or assets
of Company, except for the sale of inventory items in the ordinary
course of business;
4.7.(e) No Indebtedness. Any indebtedness for borrowed money
incurred, assumed or guaranteed by Company;
4.7.(f) No Liens. Any Lien made on any of the properties or
assets of Company other than mechanics' and materialmen's liens
arising in the ordinary course of business;
4.7.(g) Loans and Advances. Any loan or advance by Company
(other than advances to employees in the ordinary course of
business for travel, entertainment or other business expenses in
accordance with past practice);
4.7.(h) Credit and Price Concessions. Any grant of credit or
price concessions to any customer on terms or in amounts more
favorable than those which have been extended to such customer in
the past, any other change in the terms of any credit or price
concessions heretofore extended, or any other change of Company's
policies or practices with respect to the granting of credit or
price concessions;
4.7.(i) No Labor Disputes. Any labor dispute or disturbance,
other than routine individual grievances which are not material to
the financial condition or results of operations of Company;
4.7.(j) No Increase in Compensation. Any increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of Company (including, without limitation, any
increase or change pursuant to any bonus, pension, profit sharing,
retirement or other plan or commitment), or any bonus or other
employee benefit granted, made or accrued;
4.7.(k) No Distributions. Any declaration, setting aside, or
payment of any dividend or any other distribution in respect of
Company's equity interests, except for the LLC Distributions; any
redemption, purchase or other acquisition by Company of any equity
interest of Company, or any security relating thereto; or any other
payment to any member of Company as such a member;
4.7.(l) No Accounting Change. Any change in accounting
methods or practices affecting any of the properties or assets of
Company;
4.7.(m) No Unusual Events. Any other event or condition not
in the ordinary course of business of Company; or
4.7.(n) Agreements. Any agreements entered into to do any of
the foregoing.
4.8. Absence of Undisclosed Liabilities. Except as and to the
extent specifically disclosed in the Recent Balance Sheet or in Schedule
4.8 and except for Liabilities not being assumed by Buyer under this
Agreement, Company does not have any Liabilities, other than commercial
liabilities and obligations incurred since the date of the Recent Balance
Sheet in the ordinary course of business and consistent in amount and
nature with past practice and none of which has or will have a material
adverse effect on the financial condition or results of operations of
Company. Except as and to the extent described in the Recent Balance
Sheet or in Schedule 4.8 and except for Liabilities not being assumed by
Buyer under this Agreement, Company has no knowledge of any basis for the
assertion against Company of any Liability, and there are no
circumstances, conditions, happenings, events or arrangements, contractual
or otherwise, which may give rise to such Liabilities, except commercial
liabilities and obligations incurred in the ordinary course of the
Business and consistent in amount and nature with past practice.
4.9. No Litigation. Except as set forth in Schedule 4.9, there is
no Litigation pending or, to Company's knowledge, threatened against
Company or its manager (in such capacity), the Business or the Purchased
Assets, nor does Company or Xxxxxxxx know of any basis for any Litigation.
Schedule 4.9 also identifies all Litigation to which Company or its
manager have been parties since November 13, 1995, including current
status thereof. Except as set forth in Schedule 4.9, neither Company, nor
the Purchased Assets or the Assumed Liabilities is subject to any Order of
any Government Entity.
4.10. Compliance With Laws and Orders.
4.10.(a) Compliance. Except as set forth in Schedule
4.10.(a), Company (including each and all of its operations,
practices, properties and assets) is in compliance in all material
respects with all applicable Laws and Orders, including, without
limitation, those applicable to discrimination in employment,
occupational safety and health, trade practices, competition and
pricing, product warranties, employment, retirement and labor
relations, product advertising, and, to Company's knowledge,
storage, use and handling of toxic and chemical substances and
pollution, discharge, handling, disposal and emission of wastes,
materials and gases into the environment, other than Laws which, if
violated by Company would not have a material adverse effect on the
Business. Except as set forth in Schedule 4.10.(a), Company has
not received notice of any violation or alleged violation of, and
is subject to no Liability for past or continuing violation of, any
Laws or Orders with respect to the operations of the Business. All
reports, registrations and returns required to be filed by Company
with any Government Entity have been filed, and were accurate and
complete when filed. Company has delivered to Buyer copies of all
reports of Company since November 13, 1995 required under the
federal Occupational Safety and Health Act of 1970, as amended, and
under all other applicable health and safety laws and regulations,
with respect to the operations of the Business. The deficiencies,
if any, noted on such reports have been corrected.
4.10.(b) Licenses, Permits and Registrations. Company has
all licenses, permits, registrations, approvals, authorizations and
consents of all Government Entities required by applicable Laws to
be obtained by Company and of all certification organizations
required for the conduct of the Business and the operation of
Company's facilities. All such licenses, permits, approvals,
authorizations and consents are described in Schedule 4.10.(b), are
in full force and effect and, to the extent assignable, are
assignable to Buyer in accordance with the terms hereof. Except as
set forth in Schedule 4.10.(b), Company (including its operations,
properties and assets) is and has been in compliance in all
material respects with all such permits, registrations, licenses,
approvals, authorizations and consents.
4.11. Title to and Condition of Properties.
4.11.(a) Merchantable Title. Company has good and
merchantable title to all the Purchased Assets, free and clear of
all mortgages, liens (statutory or otherwise), security interests,
claims, pledges, licenses, equities, options, conditional sales
contracts, assessments, levies, covenants, reservations,
restrictions, exceptions, limitations, charges or encumbrances of
any nature whatsoever (collectively, "Liens") except those
described in Schedule 4.11.(a). Subject to obtaining the consents
referred to in Schedule 4.3, none of the Purchased Assets are
subject to any restrictions with respect to the transferability
thereof and Company's title thereto will not be affected in any way
by the transactions contemplated by this Agreement. Subject to
obtaining the consents referred to in Schedule 4.3, Company has
complete and unrestricted power and right to sell, assign, convey
and deliver the Purchased Assets to Buyer as contemplated hereby.
At Closing, Buyer will receive good and merchantable title to all
the Purchased Assets, free and clear of all Liens of any nature
whatsoever except the Lien described in Schedule 4.11.(a).
4.11.(b) Condition. Except as set forth in Schedule
4.11.(b), all tangible property and assets constituting Purchased
Assets hereunder are in good operating condition and repair,
ordinary wear and tear excepted, free from any defects (except such
minor defects as do not interfere with the use thereof in the
conduct of the normal operations of Company), have been maintained
consistent with the standards generally followed in the industry
and are sufficient to carry on the business of Company as conducted
during the preceding 12 months. Except as set forth in Schedule
4.11.(b), to Company's knowledge, all buildings and other
structures utilized by Company are in good condition and repair and
have no structural defects or defects affecting the plumbing,
electrical, sewerage, or heating, ventilating or air conditioning
systems.
4.11.(c) Real Property. Schedule 1.1.(a) sets forth all real
property used or occupied by Company (the "Real Property"), and
Company has delivered copies of all leases thereof (and all
amendments thereto currently in effect) to Buyer. Company owns no
Real Property. There is no claim of adverse possession or
prescriptive rights involving any of the Real Property. Neither
Company nor Xxxxxxxx has notice or knowledge of any underground
storage tanks, or any structural, mechanical, or other defects of
material significance affecting any Real Property or the systems or
improvements thereat.
4.11.(d) Year 2000 Compliance. Except as identified on
Schedule 4.11.(d), none of the personal property, equipment or
assets owned or utilized by Company, including but not limited to
computer software, databases, hardware, controls and peripherals,
has characteristics or qualities that may cause it to fail to (i)
operate and produce data on and after January 1, 2000 (including
taking into effect that such year is a leap year), or use data
based on time periods on and after January 1, 2000 (including
taking into effect that such year is a leap year), accurately and
without delay, interruption or error relating to the fact that the
time at which and the date on which such software is operating is
on or after 12:00 a.m. on January 1, 2000 (including taking into
effect that such year is a leap year) and (ii) accept, calculate,
process, maintain, store and output, accurately and without delay,
interruption or error, all times or dates, or both, whether before,
on or after 12:00 a.m. January 1, 2000 (including taking into
effect that such year is a leap year), and any time periods
determined or to be determined based on such times or date or both
(a "Year 2000 Defect"). Except as identified on Schedule 4.11.(d),
none of the property or assets owned or utilized by Company will
fail to perform in any material respect or require any repair,
rewrite, conversion or other adaptation because of, or due in any
way to, a Year 2000 Defect. No products sold by Company contain a
Year 2000 Defect. Company has no obligations under warranty
agreements, service agreements or otherwise to rectify a Year 2000
defect of any customer of Company or to indemnify any customer of
Company in the event Company experiences a Year 2000 Defect.
Company has no knowledge that a vendor or supplier of Company may
experience a Year 2000 Defect that would have a material adverse
effect on the Business. Schedule 4.11.(d) sets forth the measures
Company has taken to identify potential Year 2000 Defects of
Company and of customers, suppliers and vendors of Company.
4.12. Insurance. Set forth in Schedule 4.12 is a complete and
accurate list and description of all policies of fire, liability, product
liability, and other forms of property or liability insurance presently in
effect with respect to the Business or the Purchased Assets, true and
correct copies of which have heretofore been delivered to Buyer. All such
policies are valid, outstanding and enforceable policies and provide
insurance coverage for the properties, assets and operations of Company,
of the kinds, in the amounts and against the risks customarily maintained
by organizations similarly situated. No notice of cancellation or
termination has been received with respect to any such policy, and Company
has no knowledge of any act or omission of Company which could result in
cancellation of any such policy prior to its scheduled expiration date.
Company has duly and timely made all claims it has been entitled to make
under each policy of insurance. There is no claim by Company pending
under any such policies as to which coverage has been questioned, denied
or disputed by the underwriters of such policies, and Company knows of no
basis for denial of any claim under any such policy. Company has not
received any written notice from or on behalf of any insurance carrier
issuing any such policy that insurance rates therefor will hereafter be
substantially increased (except to the extent that insurance rates may be
increased for all similarly situated risks) or that there will hereafter
be a cancellation or an increase in a deductible (or an increase in
premiums in order to maintain an existing deductible) or nonrenewal of any
such policy. Such policies are sufficient in all material respects for
compliance by Company with all material requirements of Law and with the
requirements of all material contracts to which Company is a party.
4.13. Contracts and Commitments.
4.13.(a) Real Property Leases. Except as set forth in
Schedule 1.1.(a), Company has no leases of Real Property.
4.13.(b) Personal Property Leases. Except as set forth in
Schedule 1.1.(c), Company has no leases of personal property
involving consideration or other expenditure in excess of $5,000 or
involving performance over a period of more than three months.
4.13.(c) Purchase Commitments. Company has no purchase
commitments for inventory items or supplies in excess of three
months normal usage.
4.13.(d) Sales Commitments. Except as set forth in Schedule
4.13.(d), Company has no sales contracts or commitments to
customers which aggregate in excess of $5,000 to any one customer
(or group of affiliated customers). Company has no sales contracts
or commitments except those made in the ordinary course of
business, at arm's length, and, except as specifically identified
in Schedule 4.13.(d), no such contracts or commitments are for a
sales price which would reasonably be expected to result in a loss
to Company.
4.13.(e) Contracts With Affiliates and Certain Others.
Company has no agreement, understanding, contract or commitment
(written or oral) with any Affiliate or any other officer,
employee, agent or consultant that is not cancelable by Company on
notice of not longer than 30 days without liability, penalty or
premium of any nature or kind whatsoever.
4.13.(f) Powers of Attorney. Company has not given a power
of attorney, which is currently in effect, to any person, firm or
corporation for any purpose whatsoever.
4.13.(g) Loan Agreements. Except as set forth in Schedule
4.13.(g), Company is not obligated under any loan agreement,
promissory note, letter of credit or other evidence of indebtedness
as a signatory, guarantor or otherwise, which obligation
constitutes or gives rise or could by its terms, through the giving
of notice or any other events short of judgment by a court, give
rise to a lien against any Purchased Asset.
4.13.(h) Guarantees. Except as disclosed on Schedule
4.13.(h), Company has not guaranteed the payment or performance of
any other person, firm or corporation.
4.13.(i) Contracts Subject to Renegotiation. Except as
disclosed on Schedule 4.13(i), Company is not a party to any
contract with any governmental body which is subject to
renegotiation.
4.13.(j) Restrictive Agreements. Except as set forth on
Schedule 4.13.(j), Company is not a party to nor is it bound by any
agreement prohibiting or restricting Company in its operation of
the Business from competing in any business or geographical area or
soliciting customers or otherwise restricting it from carrying on
the Business anywhere in the world.
4.13.(k) Other Material Contracts. Company has no lease,
license, contract or commitment of any nature involving
consideration or other expenditure in excess $5,000, or involving
performance over a period of more than three months, or which is
otherwise individually material to the operations of Company,
except as explicitly described in Schedule 4.13.(k) or in any other
Schedule.
4.13.(l) No Default. Company is not in default under any
lease, license, contract or commitment, nor has any event or
omission occurred which through the passage of time or the giving
of notice, or both, would constitute a default thereunder or cause
the acceleration of any of Company's obligations or result in the
creation of any Lien on any Purchased Asset. To Company's
knowledge, no third party is in default under any such lease,
contract or commitment to which Company is a party, nor has any
event or omission occurred which, through the passage of time or
the giving of notice, or both, would constitute a default
thereunder, or give rise to an automatic termination, or the right
of discretionary termination thereof.
4.14. Employee Benefit Plans.
4.14.(a) Terminations, Proceedings, Penalties, etc. With
respect to each employee benefit plan (including, without
limitation, all pension, thrift, savings, profit sharing,
retirement, incentive bonus or other bonus, medical, dental, life,
accident insurance, benefit, employee welfare, disability, group
insurance, stock purchase, stock option, stock appreciation, stock
bonus, executive or deferred compensation, hospitalization and
other similar fringe or employee benefit plans, programs and
arrangements, and any employment or consulting contracts, "golden
parachutes," collective bargaining agreements, severance agreements
or plans, vacation and sick leave plans, programs, arrangements and
policies, including, without limitation, all "employee benefit
plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee
manuals, and all written or binding oral statements of policies,
practices or understandings relating to employment, which are
provided to, for the benefit of, or relate to, any persons employed
by Company in its operation of the Business (hereinafter sometimes
referred to collectively as "Employee Plans/Agreements," and each
individually as an "Employee Plan/Agreement") that is subject to
the provisions of Title IV of ERISA and with respect to which
Company or any of its assets may, directly or indirectly, be
subject to any Liability, contingent or otherwise, or the
imposition of any Lien (whether by reason of the complete or
partial termination of any such plan, the funded status of any such
plan, any "complete withdrawal" (as defined in Section 4203 of
ERISA) or "partial withdrawal" (as defined in Section 4205 of
ERISA) by any person from any such plan, or otherwise):
(i) no such plan has been terminated so as to
subject, directly or indirectly, any Purchased Assets to any
Liability or the imposition of any Lien under Title IV of
ERISA;
(ii) no proceeding has been initiated or threatened
by any person (including the Pension Benefit Guaranty
Corporation ("PBGC")) to terminate any such plan;
(iii) no condition or event currently exists or
currently is expected to occur that could subject, directly or
indirectly, any Purchased Assets to any Liability or the
imposition of any Lien under Title IV of ERISA, whether to the
PBGC or to any other person or otherwise on account of the
termination of any such plan;
(iv) if any such plan were to be terminated as of the
Closing Date, no Purchased Assets would be subject, directly
or indirectly, to any Liability or the imposition of any Lien
under Title IV of ERISA;
(v) no "reportable event" (as defined in Section
4043 of ERISA) has occurred with respect to any such plan;
(vi) no such plan which is subject to Section 302 of
ERISA or Section 412 of the Code has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code, respectively), whether or not waived;
and
(vii) no such plan is a multiemployer plan or a plan
described in Section 4064 of ERISA.
4.14.(b) Prohibited Transactions, etc. There have been no
"prohibited transactions" within the meaning of Section 406 or 407
of ERISA or Section 4975 of the Code for which a statutory or
administrative exemption does not exist with respect to any
Employee Plan/Agreement, and no event or omission has occurred in
connection with which the Business or any of the Purchased Assets
or any Employee Plan/Agreement, directly or indirectly, could be
subject to any liability under ERISA, the Code or any other Law or
Order applicable to any Employee Plan/Agreement, or under any
agreement, instrument, statute, Law or Order pursuant to which
Company has agreed to indemnify or is required to indemnify any
person against liability incurred under any such Law or Order. The
consummation of the transactions contemplated by this Agreement,
will not result in any prohibited transaction described in Section
406 of ERISA or Section 4975 of the Code for which an exemption is
not available.
4.14.(c) Controlled Group; Affiliated Service Group; Leased
Employees. Company is not and never has been a member of a
controlled group of corporations as defined in Section 414(b) of
the Code or in common control with any unincorporated trade or
business as determined under Section 414(c) of the Code. Company
is not and never has been a member of an "affiliated service group"
within the meaning of Section 414(m) of the Code. There are not
and never have been any leased employees within the meaning of
Section 414(n) of the Code who perform services for the Business,
and no individuals are expected to become leased employees with the
passage of time.
4.15. Trade Rights. Schedule 4.15 lists all Trade Rights of the
type described in clauses (i), (ii), (iii) or (iv) of Section 1.1.(d) in
which Company has any interest, specifying whether such Trade Rights are
owned, controlled, used or held (under license or otherwise) by Company,
and also indicating which of such Trade Rights are registered. All Trade
Rights shown as registered in Schedule 4.15 have been properly registered,
all pending registrations and applications have been properly made and
filed and all annuity, maintenance, renewal and other fees relating to
registrations or applications are current. In order to conduct the
Business, as such is currently being conducted or proposed to be
conducted, Company does not require any Trade Rights that it does not
already have. Company is not infringing and has not infringed any Trade
Rights of another in the operation of the Business, nor, to Company's
knowledge, is any other person infringing the Trade Rights of Company.
Except as set forth on Schedule 4.15, Company has not granted any license
or made any assignment of any Trade Right listed on Schedule 4.15, and no
other person has any right to use any such Trade Right. Except as set
forth on Schedule 4.15, Company does not pay any royalties or other
consideration for the right to use any Trade Rights of others. There is
no Litigation pending or, to Company's knowledge, threatened to challenge
Company's right, title and interest with respect to its continued use and
right to preclude others from using any Trade Rights of Company. All
registered Trade Rights of Company are valid, enforceable and in good
standing and all other Trade Rights of Company are valid, enforceable and
in good standing to the extent of common law rights with respect thereto
and, to the knowledge of Company, there are no equitable defenses to
enforcement based on any act or omission of Company. The consummation of
the transactions contemplated by this Agreement will not alter or impair
any Trade Rights of Company.
4.16. Major Customers and Suppliers.
4.16.(a) Major Customers. Company has previously delivered
to Buyer a list of all customers of Company which accounted for
$5,000 or more of net sales during the two (2) most recent fiscal
years. Neither Company nor Xxxxxxxx has any knowledge or
information of any facts indicating, nor any other reason to
believe, that any of such listed customers will not in the future
contract for services.
4.16.(b) Major Suppliers. Schedule 4.16.(b) contains a list
of the 20 largest suppliers to Company for each of the last two
fiscal years (determined on the basis of the total dollar amount of
purchases) showing the total dollar amount of purchases from each
such supplier during each such year. Neither Company nor any
Member has any knowledge or information of any facts indicating,
nor any other reason to believe, that any of the suppliers listed
on Schedule 4.16.(b) will not continue to be suppliers to the
Business after the Closing.
4.17. Warranty. Schedule 4.17 contains a true, correct and
complete copy of Company's standard warranty or warranties for sales of
products of Company and services rendered by Company and, except as stated
in Schedule 4.17, there are no warranties, commitments or obligations with
respect to the return, repair, rework or replacement of products or
services of Company. Schedule 4.17 sets forth the estimated aggregate
annual cost to Company of performing warranty obligations for customers of
Company for each of the three (3) preceding fiscal years and the current
fiscal year to the date of the Recent Balance Sheet.
4.18. Affiliates' Relationships to Company.
4.18.(a) Contracts With Affiliates. All leases, contracts,
agreements or other arrangements between Company and any Affiliate
are described on Schedule 4.18.(a).
4.18.(b) No Adverse Interests. Except as set forth in
Schedule 4.18.(b), no Affiliate has any direct or indirect interest
in (i) any entity which does business with Company in connection
with the operation of, or is competitive with, the Business, or
(ii) any property, asset or right which is used by Company in the
conduct of the Business.
4.19. Accounts Receivable; Costs in Excess of Xxxxxxxx. All
accounts receivable and costs in excess of xxxxxxxx of Company reflected
on the Recent Balance Sheet, and as incurred in the normal course of
business since the date thereof, represent arm's length sales actually
made in the ordinary course of business; to Company's knowledge, are
collectible (net of the reserves shown on the Recent Balance Sheet for
doubtful accounts) in the ordinary course of business without the
necessity of commencing legal proceedings; to Company's knowledge, are
subject to no counterclaim or setoff; and except as set forth on Schedule
4.19, are not in dispute. Schedule 4.19 contains an aged schedule of
accounts receivable included in the Recent Balance Sheet. All accounts
receivable and costs in excess of xxxxxxxx of Company reflected on the
Closing Balance Sheet will represent arm's length sales actually made in
the ordinary course of business.
4.20. Labor Matters. Except as set forth in Schedule 4.20, since
November 13, 1995 Company has not experienced any labor disputes, union
organization attempts or any work stoppage due to labor disagreements in
connection with its business. Except to the extent set forth in Schedule
4.20, (a) Company is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and is not engaged in any
unfair labor practice; (b) there is no unfair labor practice charge or
complaint against Company pending or, to Company's knowledge, threatened;
(c) there is no labor strike, dispute, request for representation,
slowdown or stoppage actually pending or, to Company's knowledge,
threatened against or affecting Company nor, to Company's knowledge, any
secondary boycott with respect to products of Company; (d) no question
concerning representation has been raised or is, to Company's knowledge,
threatened respecting the employees of Company; (e) no grievance which
might have a material adverse effect on Company, nor any arbitration
proceeding arising out of or under collective bargaining agreements, is
pending and, to Company's knowledge, no such claim therefor exists; and
(f) there are no administrative charges or court complaints against
Company concerning alleged employment discrimination or other employment
related matters pending or, to Company's knowledge, threatened before the
U.S. Equal Employment Opportunity Commission or any Government Entity.
4.21. Member List. Schedule 4.21 sets forth a complete list of
all the holders of equity interests of Company issued and outstanding on
the date hereof, together with the number of such interests held by each
member.
4.22. Employment Compensation. Schedule 4.22 contains a true and
correct list of all salaried or commission based employees who are listed
on Schedule 6.7 to whom Company is paying compensation, including bonuses
and incentives; and in the case of salaried employees such list identifies
the current annual rate of compensation for each such employee and in the
case of commission employees identifies certain reasonable ranges of rates
and the number of such employees falling within each such range.
4.23. No Brokers or Finders. Except as set forth on Schedule
4.24, neither Company nor any of its Members, managers, employees or
agents have retained, employed or used any broker or finder in connection
with the transaction provided for herein or in connection with the
negotiation thereof.
4.24. Disclosure. No representation or warranty by Company in
this Agreement, nor any statement, certificate, schedule or exhibit hereto
furnished or to be furnished by or on behalf of Company pursuant to this
Agreement or in connection with transactions contemplated hereby, contains
or shall contain any untrue statement of material fact or omits or shall
omit a material fact necessary to make the statements contained therein
not misleading. All statements and information contained in any
certificate, instrument, Disclosure Schedule or document delivered by or
on behalf of Company shall be deemed representations and warranties by
Company.
4.25. Data Merger. Anything contained herein to the contrary
notwithstanding, Company makes no representation and warranty with respect
to whether Company's data and response scales can be merged with and into
Buyer's source data, and neither Company nor Xxxxxxxx shall have any
liability to Buyer in the event that such merger or any part thereof shall
not occur or be able to occur.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Company
and Members, each of which is true and correct on the Closing Date, shall
be unaffected by any investigation heretofore or hereafter made by Company
or any notice to Company, and shall survive the Closing of the
transactions provided for herein.
5.1. Corporate.
5.1.(a) Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Wisconsin.
5.1.(b) Corporate Power. Buyer has all requisite corporate
power to enter into this Agreement and the other documents and
instruments to be executed and delivered by Buyer and to carry out
the transactions contemplated hereby and thereby.
5.2. Authority. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by Buyer
pursuant hereto and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of
Buyer. No other corporate act or proceeding on the part of Buyer or its
shareholders is necessary to authorize this Agreement or the other
documents and instruments to be executed and delivered by Buyer pursuant
hereto or the consummation of the transactions contemplated hereby and
thereby. This Agreement constitutes, and when executed and delivered, the
other documents and instruments to be executed and delivered by Buyer
pursuant hereto will constitute, valid and binding agreements of Buyer,
enforceable in accordance with their respective terms, except insofar as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights
generally, and by general equitable principles.
5.3. No Violation. Neither the execution and delivery of this
Agreement or the other documents and instruments to be executed and
delivered by Buyer pursuant hereto, nor the consummation by Buyer of the
transactions contemplated hereby and thereby (a) will violate any Law or
Order applicable to Buyer or (b) will require any authorization, consent,
approval, exemption or other action by or notice to any Government Entity
(including, without limitation, under any "plant-closing" or similar law).
5.4. No Brokers or Finders. Neither Buyer nor any of its
directors, officers, employees or agents have retained, employed or used
any broker or finder in connection with the transaction provided for
herein or in connection with the negotiation thereof.
5.5. Disclosure. No representation or warranty by Buyer in this
Agreement, nor any statement, certificate, schedule, document or exhibit
hereto furnished or to be furnished by or on behalf of Buyer pursuant to
this Agreement or in connection with transactions contemplated hereby,
contains or shall contain any untrue statement of material fact or omits
or shall omit a material fact necessary to make the statements contained
therein not misleading.
5.6. SEC Reports. Buyer has timely filed with the Securities and
Exchange Commission (the "SEC") all forms, reports and definitive proxy
statements required to be filed by Buyer with the SEC under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), from October 10,
1997 until the date hereof (the "SEC Reports"). As of their respective
dates, the SEC Reports complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Reports, and none of the SEC
Reports contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading.
6. RELATED MATTERS
6.1. Noncompetition; Confidentiality. Subject to the Closing, and
as an inducement to Buyer to execute this Agreement and complete the
transactions contemplated hereby, and in order to preserve the goodwill
associated with the Business being acquired pursuant to this Agreement,
and in addition to and not in limitation of any covenants contained in any
agreement executed and delivered pursuant to Section 6.2, Company, and,
with respect to Section 6.1.(b), each Member, hereby covenant and agree as
follows:
6.1.(a) Covenant Not to Compete. For a period of two (2)
years from the later of the Closing Date or the termination of the
employment of Xxxxxxxx by Buyer, Company and Xxxxxxxx will not,
directly or indirectly:
(i) engage in, continue in or carry on any business
which competes with the Business, or is substantially similar
thereto, including owning or controlling any financial
interest in any corporation, partnership, firm or other form
of business organization which is so engaged;
(ii) consult with, advise or assist in any way,
whether or not for consideration, any corporation,
partnership, firm or other business organization which is now
or becomes a competitor of Buyer in any aspect with respect to
the Business, including, but not limited to, advertising or
otherwise endorsing the products of any such competitor;
soliciting customers or otherwise serving as an intermediary
for any such competitor; loaning money or rendering any other
form of financial assistance to or engaging in any form of
business transaction on other than an arms' length basis with
any such competitor;
(iii) solicit for employment any Affected Employee (as
hereinafter defined) or person who is or was employed by Buyer
during the then immediately preceding twelve (12) months, or
actively induce or otherwise assist any other person or entity
in soliciting for employment any Affected Employee or person
who is or was employed by Buyer during the then immediately
preceding twelve (12) months, without the prior written
consent of Buyer;
(iv) solicit, request or seek any business from any
then current client, customer or vendor of the Business or
Buyer or from any client, customer or vendor of the Business
or Buyer during the two-year period prior to the Closing Date
(with respect to Company) or the two-year period prior to
Xxxxxxxx'x termination of employment by Buyer (with respect to
Xxxxxxxx), or request, induce or advise any such clients,
customers and vendors to withdraw, curtail or cancel their
business with the Business or Buyer; or
(v) engage in any practice the purpose of which is to
evade the provisions of this covenant not to compete;
provided, however, that the foregoing shall not prohibit the
ownership of securities of corporations which are listed on a
national securities exchange or traded in the national
over-the-counter market in an amount which shall not exceed 5% of
the outstanding shares of any such corporation. The parties agree
that, since the scope of the Business and the business of Buyer is
being, and will continue to be, carried on throughout the United
States, the geographic scope of this covenant not to compete shall
extend throughout each state in the United States where the
Business or the business of Buyer (i) is being conducted as of the
Closing Date (with respect to Company) or at the date of
termination of Xxxxxxxx'x employment by Buyer (with respect to
Xxxxxxxx) or (ii) was conducted by the Business or Buyer during the
twelve (12) months immediately preceding the Closing Date (with
respect to Company) or the date of termination of Xxxxxxxx'x
employment by Buyer (with respect to Xxxxxxxx). The parties agree
that Buyer may sell, assign or otherwise transfer this covenant not
to compete, in whole or in part, to any person, corporation, firm
or entity that purchases all or part of the Business or the
Purchased Assets. In the event a court of competent jurisdiction
determines that the provisions of this covenant not to compete are
excessively broad as to duration, geographical scope or activity,
it is expressly agreed that this covenant not to compete shall be
construed so that the remaining provisions shall not be affected,
but shall remain in full force and effect, and any such over broad
provisions shall be deemed, without further action on the part of
any person, to be modified, amended and/or limited, but only to the
extent necessary to render the same valid and enforceable in such
jurisdiction.
6.1.(b) Covenant of Confidentiality. Company and each Member
shall not at any time subsequent to the Closing Date, except as
explicitly requested by Buyer, (i) use for any purpose, (ii)
disclose to any person, or (iii) keep or make copies of documents,
tapes, discs or programs containing, any confidential information
concerning the Business, the Purchased Assets or the Assumed
Liabilities, except those described in Sections 1.2.(c) and 1.2.(e)
or those reasonably required to perform obligations under this
Agreement or relating to Liabilities not Assumed Liabilities
hereunder. For purposes hereof, "confidential information" shall
mean and include, without limitation, all Trade Rights which are
Purchased Assets, all client or customer lists and client or
customer information of the Business, and all formulas, patterns,
compilations, programs, devices, methods, techniques, processes,
computer databases, questionnaire instruments, scoring algorithms,
reporting formats, source codes, computer codes, designs, programs
and other computer software, technical information, sales and
marketing methods and ideas and other materials and information
relating to the products, services and business of Company or the
clients or prospective clients thereof, not previously disclosed to
the public directly by Company.
6.1.(c) Equitable Relief for Violations. Company and each
Member agree that the provisions and restrictions contained in this
Section 6.1 are necessary to protect the legitimate continuing
interests of Buyer in acquiring the Business through the purchase
of the Purchased Assets and the assumption of the Assumed
Liabilities, and that any violation or breach of these provisions
will result in irreparable injury to Buyer for which a remedy at
law would be inadequate and that, in addition to any relief at law
which may be available to Buyer for such violation or breach and
regardless of any other provision contained in this Agreement,
Buyer shall be entitled to injunctive and other equitable relief as
a court may grant after considering the intent of this Section 6.1.
6.2. Employment and Noncompetition Agreements. On the Closing
Date, Company shall cause to be delivered to Buyer an Employment
Agreement, substantially in the form of Exhibit A hereto, duly executed by
Xxxxxxxx and within ten days following the Closing Date, Company and
Xxxxxxxx shall use their best efforts to cause to be delivered to Buyer a
Noncompetition and Confidentiality Agreement, substantially in the form of
Exhibit B hereto, duly executed by Xxxxx Xxxxxx.
6.3. Use of Name. Following the Closing Date, neither Company nor
any Affiliate shall, without the prior written consent of Buyer, make any
use of the name "Healthcare Research Systems," the letters "HRS" or any
other names confusingly similar thereto, except as may be necessary for
Company to pay its liabilities, prepare tax returns and other reports, and
to otherwise wind up and conclude its business.
6.4. Access to Information and Records. After the Closing Date,
each party will afford the other party, its counsel, accountants and other
representatives, during normal business hours, reasonable access to the
books, records and other data in such party's possession relating directly
or indirectly to the properties, liabilities or operations of the
Business, with respect to periods prior to the Closing, and the right to
make copies and extracts therefrom, to the extent that such access may be
reasonably required by the requesting party for any proper business
purpose. Each party agrees for a period extending six (6) years after the
Closing not to destroy or otherwise dispose of any such records without
first offering in writing to surrender such records to the other party,
which party shall have ten (10) days after receipt of such offer to agree
in writing to take possession thereof.
6.5. Change of Name. Concurrently with the Closing Date, Company
shall change its name to a new name bearing no resemblance to its present
name so as to permit the use of its present name by Buyer.
6.6. Employees.
6.6.(a) Affected Employees. Buyer will offer employment to
the employees of Company set forth on Schedule 6.6. "Affected
Employees" shall mean employees of Company set forth on such
Schedule 6.6 who accept Buyer's offer and become employed by Buyer
immediately after the Closing Date. Buyer will honor the Affected
Employees length of service with Company for purposes of
eligibility and vesting in Buyer's retirement and vacation plans
and their accrued paid time off.
6.6.(b) Retained Responsibilities. Company agrees to
satisfy, or cause its insurance carriers to satisfy, all claims for
benefits, whether insured or otherwise (including, but not limited
to, workers' compensation, life insurance, medical and disability
programs), under Company's employee benefit programs brought by, or
in respect of, Affected Employees and other employees and former
employees of Company, which claims arise out of events occurring on
or prior to the Closing Date, in accordance with the terms and
conditions of such programs or applicable workers' compensation
statutes without interruption as a result of the employment by
Buyer of any such employees after the Closing Date.
6.6.(c) Payroll Tax. Company agrees to make a clean cut-off
of payroll and payroll tax reporting with respect to the Affected
Employees paying over to the federal, state and city governments
those amounts respectively withheld or required to be withheld for
periods ending on or prior to the Closing Date. Company also
agrees to issue, by the date prescribed in IRS Regulations, Forms
W-2 for wages paid through the Closing Date for all Company
employees other than Affected Employees. Except as set forth in
this Agreement, Buyer shall be responsible for all payroll and
payroll tax obligations on and after the Closing Date for Affected
Employees. Company and Buyer agree to fully cooperate, supply all
required information and documents in the form requested by the
requesting party, timely file all appropriate forms and documents
and take all action reasonably required under Section 5 ("Alternate
Procedure") of IRS Rev. Proc. 96-60, 1996-2 C.B. 399, for the 1998
calendar year (pursuant to which, among other things, Buyer will
file Forms W-2 for the Affected Employees for the entire 1998
calendar year).
6.6.(d) Termination Benefits. Except for any guarantees
identified in Section 2.2.(j), Buyer shall be solely responsible
for, and shall pay or cause to be paid, severance payments and
other termination benefits, if any, to Affected Employees who may
become entitled to such benefits by reason of any events occurring
after the Closing Date. If any action on the part of Company prior
to the Closing, or if the sale to Buyer of the business and assets
of Company pursuant to this Agreement or the transactions
contemplated hereby, or if the failure by Buyer to hire as a
permanent employee of Buyer any employee of Company, shall directly
or indirectly result in any Liability (i) for severance payments or
termination benefits or (ii) by virtue of any state, federal or
local "plant-closing" or similar law, such Liability shall be the
sole responsibility of Company, and Company and Xxxxxxxx shall,
jointly and severally, indemnify and hold harmless Buyer against
such Liability.
6.7. No Dissolution of Company. On or before the 90th day after
the Closing, the Members shall, and Company shall cause the Members to,
amend the Operating Agreement of Company dated November 9, 1995, as
amended (the "Operating Agreement"), to delete clause (b) of Section 2.7
thereof in its entirety. Notwithstanding the remaining provisions of
Section 2.7 of the Operating Agreement, the Members shall, and Company
shall cause the Members to, take all actions necessary so as to not
dissolve Company for a period of eighteen (18) months after the Closing
Date.
6.8. Further Actions. Subject to the terms and conditions hereof,
Company and Buyer shall use their commercially reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, and to
cooperate fully with each other with respect to, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement, including using all commercially
reasonable efforts to obtain after the Closing Date all licenses, permits,
consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to Contracts with Company that are
necessary for the consummation of the transactions contemplated by this
Agreement; provided, however, that none of the Company, its Affiliates,
Buyer or Buyer's affiliates (as defined in Section 9.1) shall be required
to (i) make any material payments or (ii) enter into or amend any
contractual arrangements in connection with any obligations of any of them
contained in this Section 6.8 in a manner that is materially
disadvantageous to the Business. With regard to consents from third
parties to the Contracts described in Schedule 4.3, Company shall initiate
contact to obtain such consents only in conjunction and cooperation with
Buyer.
6.9. Accounts Receivable; Costs in Excess of Xxxxxxxx. Following
the Closing Date, Buyer shall exercise commercially reasonable efforts to
collect the accounts receivable and costs in excess of xxxxxxxx of Company
reflected on the Closing Balance Sheet that are included in the Purchased
Assets. Notwithstanding anything contained in this Section 6.9 to the
contrary, Buyer shall undertake collection efforts in substantially the
same manner following the Closing Date as is customary in the collection
of accounts receivable and costs in excess of xxxxxxxx arising in Buyer's
own business prior to the Closing Date, provided that Buyer shall not be
required to file suit, employ the services of a collection agency or
commence any other official proceeding in order to collect any delinquent
accounts included in the accounts receivable and/or costs in excess of
xxxxxxxx. Amounts collected from a client shall be applied first to the
specific invoices with respect to which they are submitted as payment if
correlation of specific invoices with payments is possible, but in all
instances where there is reasonable uncertainty regarding the invoice to
which a payment relates, amounts collected from a client shall be applied
to the oldest accounts first, unless Buyer or Company shall have received
notice of a bona fide dispute with respect to such accounts. If any of
such accounts receivable and costs in excess of xxxxxxxx have not been
collected by Buyer on or prior to December 31, 1998 and the amount of the
Additional Payment is reduced pursuant to Section 3.6.(b) as result
thereof, then Buyer shall assign to the Company for collection the
uncollected accounts receivable and costs in excess of xxxxxxxx used to
reduce the amount of the Additional Payment. If Buyer subsequently
receives a payment with respect to any accounts receivable and/or costs in
excess of xxxxxxxx that have been assigned to Company pursuant to this
Section, then Buyer shall promptly remit such payment to Company.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing
Date shall be subject to the satisfaction (or waiver by Buyer) prior to or
on the Closing Date of each of the following conditions:
7.1. Representations and Warranties True on the Closing Date.
Each of the representations and warranties made by Company in this
Agreement, and the statements contained in the Disclosure Schedule or in
any instrument, list, certificate or writing delivered by Company pursuant
to this Agreement, shall be true and correct at and as of the Closing
Date.
7.2. Compliance With Agreement. Company and Members shall have
performed and complied in all material respects with all of their
agreements and obligations under this Agreement which are to be performed
or complied with by them prior to or on the Closing Date, including the
delivery of the closing documents specified in Section 10.1.
7.3. Absence of Litigation. No Litigation shall have been
commenced or threatened, and no investigation by any Government Entity
shall have been commenced, against Buyer, Company or any of the
affiliates, officers or directors of any of them, with respect to the
transactions contemplated hereby.
7.4. Consents and Approvals. All approvals, consents and waivers
that are required to effect the transactions contemplated hereby shall
have been received, and executed counterparts thereof shall have been
delivered to Buyer prior to the Closing Date. Notwithstanding the
foregoing, receipt of the consent of any third party to the assignment of
an Assumed Contract which is not (and is not required to be) disclosed in
the Disclosure Schedule shall not be a condition to Buyer's obligation to
close hereunder, provided that the aggregate of all such Contracts does
not represent, in the reasonable opinion of Buyer, a material portion of
the sales or expenditures of the Business.
7.5. Due Diligence Investigation; No Material Adverse Change.
Buyer's due diligence investigation of Company and the Financial
Statements shall not have disclosed any material misstatement or omission
with respect to the Financial Statements or any condition, event or
occurrence which, in the reasonable opinion of Buyer, materially adversely
affects, or is reasonably likely to materially adversely affect, the
financial condition, assets, liabilities, business, prospects or
operations of Company. There shall have been no material adverse change,
in the reasonable opinion of Buyer, in the financial condition, assets,
liabilities, business, prospects or operation of Company since the Recent
Balance Sheet.
7.6. General Release. On the Closing Date, The Ohio State
University shall deliver, and Company and Members shall cause The Ohio
State University to deliver, a general release to Buyer, in form and
substance satisfactory to Buyer and its counsel, releasing Buyer, Company
and their directors, officers, members, managers, agents and employees
from all claims to any Purchased Assets and from all Liabilities to the
Closing Date, except for the payment by Company or Xxxxxxxx of the
"Seller's Share" pursuant to and in accordance with the Ohio State
Agreement.
8. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS
Each and every obligation of Company and Members to be performed on
the Closing Date shall be subject to the satisfaction (or waiver by
Company and Xxxxxxxx) prior to or on the Closing Date of the following
conditions:
8.1. Representations and Warranties True on the Closing Date.
Each of the representations and warranties made by Buyer in this Agreement
shall be true and correct at and as of the Closing Date.
8.2. Compliance With Agreement. Buyer shall have performed and
complied in all material respects with all of its agreements and
obligations under this Agreement which are to be performed or complied
with by Buyer prior to or on the Closing Date, including the delivery of
the closing documents specified in Section 10.2.
8.3. Absence of Litigation. No Litigation shall have been
commenced or threatened, and no investigation by any Government Entity
shall have been commenced, against Buyer, Company or any of the
affiliates, officers or directors of any of them, with respect to the
transactions contemplated hereby; provided that the obligations of Company
shall not be affected unless there is a reasonable likelihood that as a
result of such action, suit, proceeding or investigation Company will be
unable to retain substantially all the consideration to which it is
entitled under this Agreement.
9. INDEMNIFICATION
9.1. By Company and Xxxxxxxx. Subject to the terms and conditions
of this Article 9, Company and Xxxxxxxx, jointly and severally, hereby
agree to indemnify, defend and hold harmless Buyer, and its directors,
officers, employees, agents and controlled and controlling persons
(hereinafter "Buyer's affiliates"), from and against all Claims (as
hereinafter defined) asserted against, resulting to, imposed upon, or
incurred by Buyer, Buyer's affiliates, the Business or the Purchased
Assets, directly or indirectly, by reason of, arising out of or resulting
from (a) the inaccuracy or breach of any representation or warranty of
Company or Xxxxxxxx contained in or made pursuant to this Agreement
(regardless of whether such breach is deemed "material"); (b) the breach
of any covenant of Company or any Member contained in this Agreement
(regardless of whether such breach is deemed "material"); (c) any Claim
against Buyer or the Purchased Assets relating to any product or service
warranty, rework, return or refund Liabilities of Company or the Business
on products produced, or services rendered, by Company prior to the
Closing Date; or (d) any Claim of or against Buyer, the Purchased Assets
or Company not specifically assumed by Buyer pursuant hereto. As used in
this Article 9, the term "Claim" shall include (i) all Liabilities; (ii)
all losses, damages (including, without limitation, consequential
damages), judgments, awards, settlements, costs and expenses (including,
without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and attorneys fees and
expenses); and (iii) all demands, claims, actions, costs of investigation,
causes of action, proceedings and assessments, whether or not ultimately
determined to be valid.
9.2. By Buyer. Subject to the terms and conditions of this
Article 9, Buyer hereby agrees to indemnify, defend and hold harmless
Company and Members, their managers, officers, employees, agents and
controlling persons, from and against all Claims asserted against,
resulting to, imposed upon or incurred by any such person, directly or
indirectly, by reason of or resulting from (a) the inaccuracy or breach of
any representation or warranty of Buyer contained in or made pursuant to
this Agreement (regardless of whether such breach is deemed "material");
(b) the breach of any covenant of Buyer contained in this Agreement
(regardless of whether such breach is deemed "material"); (c) all Claims
of or against Company specifically assumed by Buyer pursuant hereto; or
(d) the obligations of Company or Xxxxxxxx to Xxxxx Xxxxxx and Xxxxxx
Xxxxxxx with respect to their base salary guarantee for a period of 15
months following the Closing less any base salary paid by Buyer to such
individuals following the Closing; provided that if such individuals
terminate their employment with Buyer during such 15 month period, then
Buyer shall have no indemnification obligation under this clause (d).
9.3. Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other under this Article 9 with
respect to Claims relating to third parties shall be subject to the
following terms and conditions:
9.3.(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will
give the party from whom indemnification is sought (the
"Indemnifying Party") prompt written notice of any such Claim, and
the Indemnifying Party will undertake the defense thereof by
representatives chosen by it upon written notice to the Indemnified
Party. Failure of the Indemnified Party to give such notice shall
not affect the Indemnifying Party's duty or obligations under this
Article 9, except to the extent the Indemnifying Party is
prejudiced thereby. If the Indemnifying Party undertakes the
defense of any such Claim, then the Indemnifying Party shall be
deemed to accept that it has an indemnification obligation to the
Indemnified Party under this Article 9 with respect to such Claim.
So long as the Indemnifying Party is defending any such Claim
actively and in good faith, the Indemnified Party shall not settle
such Claim. The Indemnified Party shall make available to the
Indemnifying Party or its representatives all records and other
materials required by them and in the possession or under the
control of the Indemnified Party, for the use of the Indemnifying
Party and its representatives in defending any such Claim, and
shall in other respects give reasonable cooperation in such
defense.
9.3.(b) Failure to Defend. If the Indemnifying Party, within
10 days after receipt by the Indemnifying Party of notice of any
such Claim (or sooner if the nature of the Claim so requires),
fails to defend such Claim actively and in good faith, the
Indemnified Party will (upon further notice to the Indemnifying
Party) have the right to undertake the defense, compromise or
settlement of such Claim, or consent to the entry of a judgment
with respect to such Claim, on behalf of and for the account and
risk of the Indemnifying Party, and the Indemnifying Party shall
thereafter have no right to challenge the Indemnified Party's
defense, compromise, settlement or consent to judgment.
9.3.(c) Indemnified Party's Rights. Anything in this Section
9.3 to the contrary notwithstanding, (i) if there is a reasonable
probability that a Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other
money payments, the Indemnified Party shall have the right to
defend, compromise or settle such Claim, and (ii) the Indemnifying
Party shall not, without the written consent of the Indemnified
Party, settle or compromise any Claim or consent to the entry of
any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all Liability in respect of
such Claim.
9.4. Payment. The Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this Article 9. The right to
pursue Claims under any one or more provisions of this Article 9 shall not
be exclusive of any other rights or remedies at law or equity which the
Indemnified Party may have against the Indemnifying Party under this
Article 9.
9.4.(a) Set-Off. At the option of the Indemnified Party,
such Claim may be satisfied (or partially satisfied) by the
Indemnified Party setting off any Claim amount against other
amounts owed to the Indemnifying Party by the Indemnified Party,
including, without limitation, the portion of the Fixed Purchase
Price paid on the first anniversary of the Closing Date and/or any
Additional Payment pursuant to Section 3.4. Prior to any such set-
off, the Indemnified Party shall provide the Indemnifying Party
with at least 10 days advance notice of such intention to exercise
such set-off rights. Such notice shall include a description of
the Claim, including the amount thereof, and the method by which
the Indemnified Party intends to exercise such set-off rights. If,
during such 10-day period, the Indemnifying Party objects to the
exercise of such set-off rights, the Indemnifying Party shall
notify the Indemnified Party of such objection in writing, and
shall describe the basis for such objection and the amount of the
Claim as to which the Indemnifying Party does not believe should be
subject to such set-off rights. Upon receipt of such notice of
objection, both the Indemnified Party and the Indemnifying Party
shall use all reasonable efforts to cooperate and arrive at a
mutually acceptable resolution of such dispute within the next 30
days. If a mutually acceptable resolution cannot be reached
between the Indemnified Party and the Indemnifying Party within
such 30-day period, either party may submit the dispute for
resolution by arbitration as provided for in Article 11. During
the pendency of any dispute under this Section 9.4.(a), the Claim
amounts owed to the Indemnifying Party by the Indemnified Party
which are the subject of the disputed set-off shall be withheld
from payment until the dispute is finally resolved. If it is
finally determined that all or a portion of such withheld amount
was not owed to the Indemnified Party, the Indemnified Party shall
promptly pay the Indemnifying Party such amount not owed, together
with the interest from the date that payment should have been made
until the date of actual payment, at an annual rate equal to the
prime interest rate as set forth in The Wall Street Journal in
effect on the date that payment should have been made.
9.4.(b) Payment of Third Party Claim. Upon judgment,
determination, settlement or compromise of any third party Claim,
the Indemnifying Party shall pay promptly on behalf of the
Indemnified Party, and/or to the Indemnified Party in reimbursement
of any amount theretofore required to be paid by it, the amount so
determined by judgment, determination, settlement or compromise and
all other Claims of the Indemnified Party with respect thereto,
unless in the case of a judgment an appeal is made from the
judgment. If the Indemnifying Party desires to appeal from an
adverse judgment, then the Indemnifying Party shall post and pay
the cost of the security or bond to stay execution of the judgment
pending appeal. Upon the payment in full by the Indemnifying Party
of such amounts, the Indemnifying Party shall succeed to the rights
of such Indemnified Party, to the extent not waived in settlement,
against the third party who made such third party Claim.
9.5. Limitations on Indemnification. Except with respect to
Claims for any fraudulent breach or misrepresentation, as to which Claims
may be brought without limitation as to time or amount:
9.5.(a) Time Limitation. No Claim shall be brought under
this Article 9 for breach of a representation or warranty after the
lapse of eighteen (18) months following the Closing Date.
Notwithstanding the foregoing or any other provision of this
Agreement:
(i) There shall be no time limitation on Claims
brought for breach of any representation or warranty made in
or pursuant to Section 4.11.(a), and Company and Xxxxxxxx
hereby waive all applicable statutory limitation periods with
respect thereto.
(ii) Any Claim brought for breach of any
representation or warranty made in or pursuant to Section 4.5,
Section 4.11.(d) or Section 4.13.(l) may be brought at any
time until the underlying obligation is barred by the
applicable period of limitation under the federal and state
laws relating thereto (as such period may be extended by
waiver).
(iii) Any Claim made by a party hereunder by a
demand for arbitration in accordance with Article 11 for
breach of a representation or warranty prior to the
termination of the survival period for such Claim shall be
preserved despite the subsequent termination of such survival
period.
(iv) If any act, omission, disclosure or failure
to disclosure shall form the basis for a Claim for breach of
more than one representation or warranty, and such Claims have
different periods of survival hereunder, the termination of
the survival period of one Claim shall not affect a party's
right to make a Claim based on the breach of representation or
warranty still surviving.
9.5.(b) Amount Limitations.
(i) An Indemnified Party shall not be entitled to
indemnification under this Article 9 for a breach of a
representation or warranty unless (and then only to the
extent) the aggregate of the Indemnifying Party's
indemnification obligations to the Indemnified Party pursuant
to this Article 9 (but for this Section 9.5.(b)) exceeds
$75,000.
(ii) An Indemnifying Party shall not have any
liability for indemnification obligations under this Article 9
for a breach of a representation or warranty to the extent
(but only to the extent) the aggregate of the Indemnifying
Party's obligations to the Indemnified Party pursuant to this
Article 9 (but for this Section 9.5.(b)) exceeds $3,000,000.
9.6. Exclusive Remedy. Except with respect to Claims for any
fraudulent breach or misrepresentation and except as set forth in Section
6.1.(c), the indemnification provided in this Article 9 shall be the
exclusive remedy and recourse available to any party to this Agreement
with respect to the inaccuracy or breach of any representation or warranty
contained in or made pursuant to this Agreement, the breach of any
covenant contained in or made pursuant to this Agreement, or any other
claim or cause of action arising under, by virtue of or pursuant to this
Agreement.
10. CLOSING
The closing of this transaction ("xxx Xxxxxxx") shall take place at
the offices of Xxxxx & Lardner, 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxx 00000, at 3:00 P.M., Central Time, on June 11, 1998, or at such
other time and place as the parties hereto shall agree upon. Such date is
referred to in this Agreement as the "Closing Date". The Closing shall be
deemed to be effective for all business and accounting purposes as of the
close of business on May 31, 1998. Upon the Closing, the gross revenues
after the close of business on May 31, 1998, all costs incurred in
connection therewith (including any accounts payable, commissions and
income and franchise taxes), and all proceeds of such revenue (including
accounts receivable and cash) will be deemed for the account of Buyer.
Any and all income and franchise taxes incurred or required to be paid by
Company and/or any Member with respect to the operations or conduct of the
Business on and after June 1, 1998 through the Closing Date shall be
reimbursed to Company and/or such Member by Buyer. At the Closing,
Company will assign all accounts receivable and proceeds other than cash,
and will pay over all cash proceeds, arising from such sales to Buyer. It
is the intention of the parties that upon Closing, the business will be
deemed for all business and accounting purposes as having been operated
for the period from the close of business on May 31, 1998 to the Closing
Date by Company for the benefit and account of Buyer.
10.1. Documents to be Delivered by Company and Members. On the
Closing Date, Company and Members shall deliver, or caused to be
delivered, to Buyer the following documents, in each case duly executed or
otherwise in proper form:
10.1.(a) Bills of Sale. Bills of sale and such other
instruments of assignment, transfer, conveyance and endorsement as
will be sufficient in the opinion of Buyer and its counsel to
transfer, assign, convey and deliver to Buyer the Purchased Assets
free and clear of all Liens, except the Lien described in Schedule
4.11.(a).
10.1.(b) Compliance Certificate. A certificate signed by
Xxxxxxxx, the Manager and President of Company, that each of the
representations and warranties made by Company in this Agreement is
true and correct on and as of the Closing Date, and that Company
has performed and complied in all material respects with all of
Company's obligations under this Agreement which are to be
performed or complied with on or prior to the Closing Date. Such
certificate shall constitute a representation and warranty of
Company as to the matters set forth therein.
10.1.(c) Opinion of Counsel. A written opinion of Vorys,
Xxxxx, Xxxxxxx and Xxxxx LLP, counsel to Company, dated as of the
Closing Date, addressed to Buyer, substantially in the form of
Exhibit C hereto.
10.1.(d) Employment and Noncompetition Agreement. The
Employment Agreement and the Noncompetition Agreement referred to
in Section 6.2, duly executed by the persons referred to in such
Section.
10.1.(e) Articles; Operating Agreement. A copy of the
operating agreement of Company certified by the Manager of Company,
and a copy of the Articles of Organization of Company certified by
the Secretary of State of the state of organization of Company.
10.1.(f) Other Documents. All other documents, instruments
or writings required to be delivered to Buyer at or prior to the
Closing Date pursuant to this Agreement and such other certificates
of authority and documents as Buyer may reasonably request.
10.2. Documents to be Delivered by Buyer. On the Closing Date,
Buyer shall deliver to Company the following documents, in each case duly
executed or otherwise in proper form:
10.2.(a) Fixed Purchase Price. To Company, a certified or
bank cashier's check (or wire transfer) as required by Section
3.2.(b)(i).
10.2.(b) Assumption of Liabilities. Such undertakings and
instruments of assumption as will be reasonably sufficient in the
opinion of Company and its counsel to evidence the assumption by
Buyer of the Assumed Liabilities.
10.2.(c) Compliance Certificate. A certificate signed by
Xxxxxxx X. Beans, the Vice President, Treasurer, Chief Financial
Officer and Secretary of Buyer that the representations and
warranties made by Buyer in this Agreement are true and correct on
and as of the Closing Date, and that Buyer has performed and
complied in all material respects with all of Buyer's obligations
under this Agreement which are to be performed or complied with on
or prior to the Closing Date. Such certificate shall constitute a
representation and warranty of Buyer as to the matters set forth
therein.
10.2.(d) Opinion of Counsel. A written opinion of Xxxxx &
Lardner, counsel to Buyer, dated as of the Closing Date, addressed
to Company, in substantially the form of Exhibit D hereto.
10.2.(e) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Buyer authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
10.2.(f) Other Documents. All other documents, instruments
or writings required to be delivered to Company at or prior to the
Closing Date pursuant to this Agreement and such other certificates
of authority and documents as Company may reasonably request.
11. RESOLUTION OF DISPUTES
11.1. Arbitration. Any dispute, controversy or claim arising out
of or relating to this Agreement or any contract or agreement entered into
pursuant hereto or the performance by the parties of its or their terms
shall be settled by binding arbitration held in Chicago, Illinois in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect, except as specifically otherwise
provided in this Article 11. Notwithstanding the foregoing, Buyer may, in
its discretion, apply to a court of competent jurisdiction for equitable
relief from any violation or threatened violation of the covenant not to
compete and/or the confidentiality provisions contained Section 6.1
hereof.
11.2. Arbitrators. If the matter in controversy (exclusive of
attorney fees and expenses) shall appear, as at the time of the demand for
arbitration, to exceed $200,000, then the panel to be jointly appointed by
the parties shall consist of three mutually acceptable neutral
arbitrators; otherwise, one mutually acceptable neutral arbitrator.
11.3. Procedures; No Appeal. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the
circumstances and shall resolve the dispute as expeditiously as
practicable, and if reasonably practicable, within 120 days after the
selection of the arbitrator(s). The arbitrator(s) shall give the parties
written notice of the decision, with the reasons therefor set out, and
shall have 30 days thereafter to reconsider and modify such decision if
any party so requests within 10 days after the decision. Thereafter, the
decision of the arbitrator(s) shall be final, binding, and nonappealable
with respect to all persons, including (without limitation) persons who
have failed or refused to participate in the arbitration process.
11.4. Authority. The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or
preliminary relief, and to allocate responsibility for the costs of the
arbitration and to award recovery of attorneys fees and expenses in such
manner as is determined to be appropriate by the arbitrator(s).
11.5. Entry of Judgment. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject
matter jurisdiction. Company and Buyer hereby submit to the in personam
jurisdiction of the Federal and State courts in Illinois, for the purpose
of confirming any such award and entering judgment thereon.
11.6. Confidentiality. All proceedings under this Article 11, and
all evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties.
11.7. Continued Performance. The fact that the dispute resolution
procedures specified in this Article 11 shall have been or may be invoked
shall not excuse any party from performing its obligations under this
Agreement and during the pendency of any such procedure all parties shall
continue to perform their respective obligations in good faith, subject to
any rights to terminate this Agreement that may be available to any party
and to the right of setoff provided in Section 9.4 hereof.
11.8. Tolling. All applicable statutes of limitation shall be
tolled while the procedures specified in this Article 11 are pending. The
parties will take such action, if any, required to effectuate such
tolling.
12. MISCELLANEOUS
12.1. Disclosure Schedule. The Schedules to this Agreement have
been compiled in a bound volume ("Disclosure Schedule"), executed by
Company and dated and delivered to Buyer on the date of this Agreement
(with a substantially complete preliminary copy thereof delivered by or on
behalf of Company to Buyer at least three business days prior to the date
hereof). Information set forth in the Disclosure Schedule specifically
refers to the article and section of this Agreement to which such
information is responsive and such information shall not be deemed to have
been disclosed with respect to any other article or section of this
Agreement or for any other purpose.
12.2. Further Assurance. From time to time, at Buyer's request
and without further consideration, Company and Members will execute and
deliver to Buyer such documents and take such other action as Buyer may
reasonably request in order to consummate more effectively the
transactions contemplated hereby and to vest in Buyer good, valid and
marketable title to the Business and the Purchased Assets being
transferred hereunder.
12.3. Disclosures and Announcements. Both the timing and the
content of all disclosure to third parties and public announcements
concerning the transactions provided for in this Agreement by either
Company or Buyer shall be subject to the approval of the other in all
essential respects, except that Company's approval shall not be required
(although Company will be given the opportunity to review) as to any
statements and other information which Buyer may make pursuant to offers
or sales of securities to employees or others, disclosures by Buyer deemed
necessary or advisable as a result of Securities and Exchange Commission
or Nasdaq Stock Market requirements, or as otherwise required by law.
12.4. Assignment; Parties in Interest.
12.4.(a) Assignment. Except as expressly provided herein,
the rights and obligations of a party hereunder may not be
assigned, transferred or encumbered without the prior written
consent of the other party. Notwithstanding the foregoing, Buyer
may, without consent of Company, cause one or more subsidiaries of
Buyer to carry out all or part of the transactions contemplated
hereby but the same shall not relieve Buyer of liability for such
subsidiaries' failure to so perform.
12.4.(b) Parties in Interest. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the
respective successors and permitted assigns of the parties hereto.
Nothing contained herein shall be deemed to confer upon any other
person any right or remedy under or by reason of this Agreement.
12.5. Law Governing Agreement. This Agreement may not be modified
or terminated orally, and shall be construed and interpreted according to
the internal laws of the State of Wisconsin, excluding any choice of law
rules that may direct the application of the laws of another jurisdiction.
12.6. Amendment and Modification. Buyer, Company and Members may
amend, modify and supplement this Agreement in such manner as may be
agreed upon by them in writing.
12.7. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a)
personally delivered; (b) sent by telecopier, facsimile transmission or
other electronic means of transmitting written documents; or (c) sent to
the parties at their respective addresses indicated herein by registered
or certified U.S. mail, return receipt requested and postage prepaid, or
by private overnight mail courier service. The respective addresses to be
used for all such notices, demands or requests are as follows:
(a) If to Buyer, to:
National Research Corporation
0000 "X" Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: President and Chief Executive Officer
Facsimile: (000) 000-0000
(with a copy to)
Xxxxxxxx X. Xxxxxx, III
Xxxxxxx X. Xxxx
Xxxxx & Xxxxxxx
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
or to such other person or address as Buyer shall furnish to Company in
writing.
(b) If to Company or Members, to:
Healthcare Research Systems, Ltd.
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxx 00000-0000
Attention: Manager and President
Facsimile: (000) 000-0000
(with a copy to)
Xxxxxxx X. Xxxxxxxxxx
Xxxxx X. Xxxxx
Vorys, Xxxxx, Xxxxxxx and Xxxxx LLP
00 Xxxx Xxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Facsimile: (000) 000-0000
or to such other person or address as Company shall furnish to Buyer in
writing.
If personally delivered, such communication shall be deemed
delivered upon actual receipt; if electronically transmitted pursuant to
this paragraph, such communication shall be deemed delivered the next
business day after transmission (and sender shall bear the burden of proof
of delivery); if sent by overnight courier pursuant to this paragraph,
such communication shall be deemed delivered upon receipt; and if sent by
U.S. mail pursuant to this paragraph, such communication shall be deemed
delivered as of the date of delivery indicated on the receipt issued by
the relevant postal service, or, if the addressee fails or refuses to
accept delivery, as of the date of such failure or refusal. Any party to
this Agreement may change its address for the purposes of this Agreement
by giving notice thereof in accordance with this Section.
12.8. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
12.8.(a) Brokerage. Buyer agrees to indemnify, defend and
hold harmless Company from and against all claims for brokerage
commissions or finder's fees incurred through any act of Buyer in
connection with the execution of this Agreement or the transactions
provided for herein. Company agrees to indemnify, defend and hold
harmless Buyer from and against all claims for brokerage
commissions or finder's fees incurred through any act of Company in
connection with the execution of this Agreement or the transactions
provided for herein.
12.8.(b) Expenses to be Paid by Company. Company shall pay,
and shall indemnify, defend and hold harmless Buyer from and
against, all fees and expenses of Company's legal, accounting,
investment banking and other professional counsel in connection
with the transactions contemplated hereby (except as otherwise
provided herein with respect to the fees and expenses of KPMG Peat
Marwick LLP).
12.8.(c) Other. Except as otherwise provided herein, each of
the parties shall bear its own expenses and the expenses of its
counsel and other agents in connection with the transactions
contemplated hereby.
12.8.(d) Costs of Litigation or Arbitration. The parties
agree that the prevailing party in any action or arbitration
brought with respect to or to enforce any right or remedy under
this Agreement shall be entitled to recover from the other party or
parties all reasonable costs and expenses of any nature whatsoever
incurred by the prevailing party in connection with such action or
arbitration, including without limitation attorneys' fees and
prejudgment interest.
12.9. Entire Agreement. This Agreement, along with the other
documents and instruments to be executed and delivered by either party
pursuant hereto, embody the entire agreement between the parties hereto
with respect to the transactions contemplated herein, and there have been
and are no agreements, representations or warranties between the parties
other than those set forth or provided for herein.
12.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.11. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
NATIONAL RESEARCH CORPORATION
("Buyer")
By: /s/ Xxxxxxx X. Xxxx
Name: Xxxxxxx X. Xxxx
Title: President and Chief Executive Officer
HEALTHCARE RESEARCH SYSTEMS, LTD.
("Company")
By: /s/ Xxxxxxx Xxxxxxxx
Name:
Title:
MEMBERS:
/s/ Xxxxxxx Xxxxxxxx
Xxxxxxx Xxxxxxxx
/s/ Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxxxxx
Xxxxx Xxxxxxxx
/s/ Xxxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxxx
/s/ Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxxx, as trustee of the Xxxxx Xxxxxxxx
1995 Trust, as established under an agreement dated
August 21, 1995
