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EXHIBIT 2.6
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STOCK PURCHASE AGREEMENT
by and among
METAMOR WORLDWIDE, INC. ("BUYER"),
ADVANCED INFORMATION SOLUTIONS, INC.
and
Sellers listed on the Signature page hereto
("SELLERS")
Dated as of July 16, 1998
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METAMOR WORLDWIDE, INC.
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
PAGE
1. Definitions.........................................................1
2. Purchase and Sale of Shares.........................................5
(a) Basic Transaction..........................................5
(b) Purchase Price.............................................5
(c) Purchase Price Adjustment..................................6
(d) The Closing................................................6
(e) Deliveries at the Closing..................................6
3. Representations and Warranties Concerning the Transaction...........6
(a) Representations and Warranties of the Sellers..............6
(i) Authorization of Transaction...............................6
(ii) Noncontravention...........................................7
(iii) Broker's Fees..............................................7
(iv) Shares.....................................................7
(b) Representations and Warranties of Buyer....................8
(i) Organization of Buyer......................................8
(ii) Authorization of Transaction...............................8
(iii) Noncontravention...........................................8
(iv) Brokers' Fees..............................................8
(v) Investment.................................................8
4. Representations and Warranties Concerning Target....................8
(a) Organization, Qualification, and Corporate Power...........9
(b) Capitalization............................................10
(c) Noncontravention..........................................10
(d) Subsidiaries..............................................10
(e) Financial Statements......................................10
(f) Events Subsequent to Most Recent Fiscal Year End..........11
(g) Undisclosed Liabilities...................................13
(h) Tax Matters...............................................13
(i) Tangible Assets...........................................15
(j) Real Property.............................................15
(k) Real Property Leases......................................15
(l) Intellectual Property.....................................16
(m) Contracts.................................................19
(n) Notes and Accounts Receivable.............................21
(o) Powers of Attorney........................................21
(p) Insurance.................................................21
(q) Litigation................................................22
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(r) Employees.................................................22
(s) Employee Benefits.........................................22
(t) Guaranties................................................25
(u) Environment, Health, and Safety...........................25
(v) Legal Compliance..........................................27
(w) Certain Business Relationships with Target................28
(x) Brokers' Fees.............................................28
(y) Disclosure................................................28
(z) Books and Records.........................................28
(aa) Compliance with the Letter of Intent......................28
(bb) Payments to Officials.....................................28
5. Pre-Closing Covenants..............................................29
(a) General...................................................29
(b) Notices and Consents......................................29
(c) Operation of Business.....................................29
(d) Preservation of Business..................................29
(e) Full Access...............................................29
(f) Notice of Developments....................................30
(g) Exclusivity...............................................30
(h) Preparation of Financial Statements; Delivery of
Financial Information.....................................30
(i) Delivery of Schedules; Acceptance.........................30
6. Additional Covenants...............................................31
(a) General...................................................31
(b) Litigation Support........................................31
(c) Transition................................................31
(d) Confidentiality...........................................31
(e) Monitoring Information....................................32
(f) Leases....................................................32
(g) Section 338(h)(10) Election...............................32
(h) Additional Tax Matters....................................33
(i) Covenant Not to Compete...................................34
(j) Access to Previous Acquisitions...........................35
7. Conditions to Obligations to Close.................................35
(a) Conditions to Obligation of Buyer.........................35
(b) Conditions to Obligations of the Sellers..................37
8. Remedies for Breaches of This Agreement............................38
(a) Survival..................................................38
(b) Indemnification Provisions for Benefit of Buyer...........38
(c) Indemnification Provisions for Benefit of the Sellers.....40
(d) Matters Involving Third Parties...........................40
(e) Determination of Loss.....................................41
(f) Exclusive Remedy..........................................41
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(g) Payment...................................................41
(h) Tax Disputes..............................................42
9. Termination........................................................42
(a) Termination of Agreement..................................42
(b) Effect of Termination.....................................43
10. Miscellaneous......................................................43
(a) The Sellers...............................................43
(b) Press Releases and Announcements..........................43
(c) No Third-Party Beneficiaries..............................44
(d) Entire Agreement..........................................44
(e) Succession and Assignment.................................44
(f) Facsimile/Counterparts....................................44
(g) Headings..................................................44
(h) Notices...................................................44
(i) Governing Law.............................................45
(j) Amendments and Waivers....................................45
(k) Severability..............................................46
(l) Expenses..................................................46
(m) Construction..............................................46
(n) Incorporation of Exhibits, Annexes, and Schedules.........46
(o) Specific Performance......................................46
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LIST OF EXHIBITS, ANNEXES AND SCHEDULES
EXHIBITS
Exhibit A Financial Statements
Exhibit B Form of Employment Agreement
Exhibit C Form of Employee Non-Competition Agreement
Exhibit D Form of Opinion of the Sellers' Legal Counsel
Exhibit E Form of Opinion of Buyer's Legal Counsel
Exhibit 4(1) Form of Nondisclosure Agreement
Exhibit 4(1)(xii)(1) Standard License Agreement
Exhibit 4(1)(xii)(2) Standard Trial Agreement
ANNEXES
Annex I Determination of Adjusted EBIT
SCHEDULES
Disclosure Schedule
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("AGREEMENT") is entered into as of the
16th day of July, 1998, by and among METAMOR WORLDWIDE, INC., a Delaware
corporation ("BUYER"), ADVANCED INFORMATION SOLUTIONS, INC., an Illinois
corporation ("TARGET"), and the individuals listed on the signature page hereto
(each individually referred to as "SELLER" and collectively, the "SELLERS").
Buyer and the Sellers are referred to collectively herein as the "PARTIES."
The Sellers in the aggregate own all of the outstanding capital stock
of Target.
This Agreement contemplates a transaction in which Buyer will purchase
from the Sellers, and the Sellers will sell to Buyer, all of the outstanding
capital stock of Target.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ADJUSTED EBIT" means earnings before interest and taxes
(prepared on an accrual basis of accounting and in accordance with GAAP,
consistently applied), plus mutually agreed upon "ADJUSTMENTS" and "ADDBACKS"
as determined by Annex I attached hereto.
"ADVERSE CONSEQUENCES" means all charges, complaints,
actions, suits, proceedings, hearings, investigations, claims, demands,
judgments, orders, decrees, stipulations, injunctions, damages, dues,
penalties, fines, costs, amounts paid in settlement, liabilities, obligations,
taxes, liens, losses, expenses, and fees, including all reasonable attorneys'
fees and court costs.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"AFFILIATED GROUP" means any affiliated group within the
meaning of Code Sec. 1504 (or any similar group defined under a similar
provision of state, local or foreign law).
"BASIS" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could reasonably
form the basis for any specified consequence.
"BUYER" has the meaning set forth in the preface above.
"CLOSING" has the meaning set forth in Section 2(d) below.
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"CLOSING DATE" has the meaning set forth in Section 2(d)
below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means all confidential information
and trade secrets of Target including, without limitation, the identity, lists
or descriptions of any customers, referral sources or organizations; financial
statements, cost reports or other financial information; contract proposals, or
bidding information; business plans and training operations methods and
manuals; personnel records; fee structure; and management systems, policies or
procedures, including related forms and manuals.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth
in Code Sec. 1563.
"CURRENT EMPLOYEE BENEFIT PLAN" means each Employee Benefit
Plan, which is sponsored, maintained, or contributed to by Target for the
benefit of the employees of Target, or has been so sponsored, maintained, or
contributed to at any time within six years prior to the Closing Date.
"CUSTOMER CONTRACT OR AGREEMENT" means any contract or
agreement of Target related to (a) information technology or computer support
services, training, education and change management services; (b) maintenance
contracts for application software; (c) maintenance support arrangements, (d)
reengineering and refurbishment arrangements; (e) consulting arrangements; (f)
any other contract computer support services arrangement; and (g) agreements
related to any other services provided by Target.
"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth
in Treas. Reg. Section 1.1502-13.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4
below.
"DOCUMENTATION" has the meaning set forth in Section 4(l)
below.
"EMPLOYEE BENEFIT PLAN" means each (a) Employee Pension
Benefit Plan, (b) Employee Welfare Benefit Plan , and (c) personnel policy,
stock option plan, worker's compensation, collective bargaining agreement,
bonus plan or arrangement, incentive award plan or arrangement, vacation
policy, severance pay plan, policy, or agreement, deferred compensation
agreement or arrangement, executive compensation or supplemental income
arrangement, consulting agreement, employment agreement, and other employee
benefit plan, agreement, arrangement, program, practice, or understanding,
which is sponsored, maintained, or contributed to by Target for the benefit of
the employees, former employees, independent contractors, or agents of Target,
or has been so sponsored, maintained, or contributed to at any time since 1974.
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"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in
ERISA Sec. 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in
ERISA Sec. 3(1).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCESS LOSS ACCOUNT" has the meaning set forth in Treas.
Reg. Section 1.1502-19.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in
Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).
"FINANCIAL STATEMENTS" has the meaning set forth in Section
4(e) below.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any governmental,
quasi-governmental, state, county, city or other political subdivision of the
United States or any other country, or any agency, court or instrumentality,
foreign or domestic, or statutory or regulatory body thereof.
"GROSS PROFIT MARGIN" means the gross profit of the Target as
customarily set forth on the Financial Statements.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(d)
below.
"INDEMNIFYING PARTY" has the meaning set forth in Section
8(d) below.
"INTELLECTUAL PROPERTY" means all (a) trademarks, service
marks, trade dress, logos, trade names, and corporate names and registrations
and applications for registration thereof, (b) patents, patent applications,
and provisional applications, including all continuations, divisionals and
related applications, (c) copyrights and registrations and applications for
registration thereof, (d) computer software, data, and documentation, (e) to
the extent legally protectable, trade secrets and confidential business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing, and business data, pricing and
cost information, business and marketing plans, and customer and supplier lists
and information), (f) to the extent legally protectable, other proprietary
rights, and (g) copies and tangible embodiments thereof (in whatever form or
medium).
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"KEY EMPLOYEES" means Xxxxxxx Xxxxxxx and Xxxxxx Xxxxx.
"KNOWLEDGE" means that which is known or understood or should
have been known or understood after reasonable investigation and inquiry, which
inquiry shall include an inquiry of the employees of Target with responsibility
for the matters in question.
"LIABILITY" means any liability (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated, and whether
due or to become due), including any liability for Taxes.
"LICENSES" has the meaning set forth in Section 4(l) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in
Section 4(e) below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec.
3(37).
"NET WORKING CAPITAL" means total current assets less total
current liabilities of Target (including but not limited to all deferred
taxes), further reduced by any long-term debt of Target, as determined in
accordance with GAAP, consistently applied.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"PURCHASE PRICE" has the meaning set forth in Section 2(b)
below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec.
4043.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien, other than (a) mechanic's,
materialmen's and similar liens, (b) liens for Taxes not yet due and payable
(or for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings), (c) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation, (d) liens
arising in connection with sales of foreign receivables, (e) liens on goods in
transit incurred pursuant to documentary letters of credit,
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(f) purchase money liens and liens securing rental payments under capital lease
arrangements, and (g) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SELLERS" has the meaning set forth in the preface above.
"SEVERAL" has the meaning set forth in Section 10(a) below.
"SHARES" means the shares of common stock, par value $2.00
per share, of Target.
"SOFTWARE PROGRAMS" has the meaning set forth in Section 4(l)
below.
"SUBSIDIARY" means any corporation with respect to which
another specified corporation has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"TARGET" has the meaning set forth in the preface above.
"TAX" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
2. PURCHASE AND SALE OF SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from each of the
Sellers, and each of the Sellers agrees to sell to Buyer, all of his Shares for
the consideration specified below in this Section 2.
(b) PURCHASE PRICE. The purchase price (the "PURCHASE PRICE")
for the Shares to be purchased by Buyer from the Sellers pursuant to the terms
hereof shall equal $7,500,000, payable in cash at the Closing. The Purchase
Price shall be paid by Buyer to the Sellers at the Closing by wire transfer to
an account or accounts designated by the Sellers.
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(c) PURCHASE PRICE ADJUSTMENT. The Net Working Capital of
Target as of the Closing Date will be estimated in accordance with the
provisions hereof, by the Parties on or before ten (10) days before the time of
Closing. A final determination of the Net Working Capital of Target as of the
Closing Date shall be made within ten (10) days after the Closing Date and
shall be based on Target's financial statements as of the Closing Date, which
will have been prepared in accordance with GAAP and provided to Buyer. In the
event there is a dispute between Buyer and the Sellers regarding the Net
Working Capital of Target as of the Closing Date, Ernst & Young, LLP shall
prepare the calculation of the Net Working Capital of Target (at the joint
expense of Buyer and the Sellers), which calculation shall be submitted to
Buyer and the Sellers not later than forty-five (45) days after the Closing
Date. The Net Working Capital derived from such calculation shall be final,
conclusive and binding on the Parties. In the event that the Net Working
Capital as of the Closing Date is less than $700,000, the Sellers shall remit
the shortfall to Buyer within ten (10) days after the final determination of
Net Working Capital. In the event that the Net Working Capital as of the
Closing Date is greater than $700,000, Buyer shall pay the excess to the
Sellers within (10) days after the final determination of Net Working Capital.
(d) THE CLOSING. The closing of the transactions contemplated
by this Agreement (the "CLOSING") shall take place at the offices of Buyer in
Houston, Texas and X'Xxxxxx & Xxxxxx, Chicago, Illinois commencing at 9:00 a.m.
local time on the second business day following the satisfaction or waiver of
all conditions to the obligations of the Parties to consummate the transactions
contemplated hereby or such other date as Buyer and the Sellers may mutually
determine (the "CLOSING DATE"); provided, however, that the Closing Date shall
be no later than July 31, 1998 which date may be extended with the mutual
consent of Buyer and the Sellers.
(e) DELIVERIES AT THE CLOSING. At the Closing, (i) the
Sellers will deliver to Buyer the various certificates, instruments, and
documents referred to in Section 7(a) below, (ii) Buyer will deliver to the
Sellers the various certificates, instruments, and documents referred to in
Section 7(b) below, (iii) each Seller will deliver to Buyer stock certificates
representing all of his Shares, endorsed in blank or accompanied by duly
executed assignment documents, and (iv) Buyer will deliver to the Sellers the
consideration specified in Section 2(b) above.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of
the Sellers, represents and warrants to Buyer that the statements contained in
this Section 3(a) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)) with respect to himself except as set forth in
Annex II attached hereto.
(i) AUTHORIZATION OF TRANSACTION. Seller has full
power and authority to execute and deliver this Agreement and to
perform his obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of Seller, enforceable in
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accordance with its terms and conditions, except that (A) such
enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium or other laws, decisions or equitable
principles now or hereafter in effect relating to or affecting the
enforcement of creditors' rights or debtors' obligations generally,
and to general equity principles, and (B) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court
before which any proceeding therefore may be brought. Seller need not
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
to consummate the transactions contemplated by this Agreement.
(ii) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which
Seller is subject or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or
other arrangement to which Seller is a party or by which he is bound
or to which any of his assets is subject.
(iii) BROKER'S FEES. Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which Buyer could become liable or obligated.
(iv) SHARES. Seller holds of record and owns
beneficially the number of Shares set forth next to his name in
Section 4(b) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), claims, Taxes, Security
Interests, options, warrants, rights, contracts, calls, commitments,
equities, and demands. The Sellers hold all of the issued and
outstanding shares of Target and upon the consummation of the
transaction contemplated hereby, Buyer will hold all of the issued and
outstanding shares of Target. Seller is not a party to any option,
warrant, right, contract, call, put, or other agreement or commitment
providing for the disposition or acquisition of any capital stock of
Target (other than this Agreement). Seller is not a party to any
voting trust, proxy, or other agreement or understanding with respect
to the voting of any capital stock of Target. Seller hereby further
represents and warrants that (i) all other Shares or options, rights,
warrants or other interests in the equity of Target, if any, have been
fully repurchased by Target prior to the Closing Date and (ii) there
are no pending or threatened suits, claims or actions by any former
holders of Shares or options, rights, warrants or other interests in
the equity of Target with respect to the repurchase of their equity
interest in Target.
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(b) REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to the Sellers that the statements contained in this Section 3(b)
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 3(b)), except as set forth in Annex III attached hereto.
(i) ORGANIZATION OF BUYER. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws
of the State of Delaware.
(ii) AUTHORIZATION OF TRANSACTION. Buyer has full
power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly authorized by
all necessary action on the part of the Board of Directors of Buyer.
This Agreement constitutes the valid and legally binding obligation of
Buyer, enforceable in accordance with its terms and conditions. Buyer
need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement.
(iii) NONCONTRAVENTION. Neither the execution and
the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency,
or court to which Buyer is subject or any provision of its charter or
bylaws or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other
arrangement to which Buyer is a party or by which it is bound or to
which any of its assets is subject.
(iv) BROKERS' FEES. Buyer has no Liability or
Obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which any Seller could become liable or obligated.
(v) INVESTMENT. Buyer is not acquiring the Shares
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES CONCERNING TARGET. The Sellers,
represent and warrant to Buyer that the statements contained in this Section 4
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 4), except as set forth in the disclosure schedule delivered by the
Sellers to Buyer on the date
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hereof (the "DISCLOSURE SCHEDULE"). An event or matter will be deemed to be
"MATERIAL," to have a "MATERIAL" change in or in respect of, to have a
"MATERIAL ADVERSE EFFECT" or to be "MATERIALLY" affected; provided that in the
opinion of Buyer, acting reasonably, such loss is material or the loss may
reasonably be expected to occur to Target or Buyer with respect to such event
or matter, when taken together with all other related losses that may
reasonably be expected to occur to Target or Buyer as a result of any such
events or matters, would exceed $20,000 in the aggregate or unless such event
or matter constitutes a criminal violation of law. For purposes of this
paragraph, the word "LOSS" shall mean any and all direct or indirect payments,
obligations, assessments, losses, losses of income, liabilities, costs and
expenses paid or incurred, or reasonably likely to be paid or incurred, or that
are reasonably expected to occur, including without limitation, penalties,
interest on any amount payable to a third party as a result of the foregoing,
and any legal or other expenses reasonably expected to be incurred in
connection with defending any demands, claims, actions or causes of action
that, if adversely determined, could reasonably be expected to result in
losses, and all amounts paid in settlement of claims or actions; provided,
however, that losses shall be net of any insurance proceeds entitled to be
received from a nonaffiliated insurance company on account of such loss (after
taking into account any cost incurred in obtaining such proceeds). A Customer
Contract or Agreement is "MATERIAL" if during the twelve months ended December
31, 1997 or during the current fiscal year such Customer Contract or Agreement
produced or may reasonably be expected to produce, as the case may be, $20,000
of Gross Profit Margin less any bad debt specifically related to such Customer
Contract or Agreement. Any item intended to be disclosed must be identified
with the particular representation or warranty it is intended to limit and
shall not be deemed to limit any other representation, warranty or covenant in
the Agreement. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein, unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail to the satisfaction of Buyer.
Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other items itself). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
4.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Target
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Illinois. Target is not qualified to conduct business
as a foreign corporation in any jurisdiction, and is not required to be so
qualified. Target has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and
used by it. Section 4(a) of the Disclosure Schedule lists the directors and
officers of Target. The Sellers have delivered to Buyer correct and complete
copies of the charter and bylaws of Target (as amended to date). The minute
books containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors, and the stock record
books of Target are correct and complete. Target is not in default under or in
violation of any provision of its charter or bylaws. The execution and delivery
of this Agreement and the effectuation of the transactions contemplated hereby
have
ADVANCED INFORMATION SOLUTIONS, INC.
STOCK PURCHASE AGREEMENT
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been duly authorized by all of the directors and shareholders of Target, and
Target will deliver to Buyer on the date hereof and at the Closing complete and
correct copies, certified by its secretary, of the resolutions duly and validly
adopted by its directors and shareholders evidencing such authorization (which
resolutions will not have been modified, revoked or rescinded in any respect
prior to, and will be in full force and effect at, the Closing). No other
corporate act or proceeding on the part of Target or the Sellers is necessary
for the due and valid authorization of this Agreement or the transactions
contemplated hereby.
(b) CAPITALIZATION. The entire authorized capital stock of
Target consists of 20,000 shares of common stock, no par value per share (the
"SHARES"), of which 10,000 shares are classified as Class A Voting Common Stock
and 10,000 shares are classified as Class B Non-Voting Common Stock. Of the
Shares, 2,000 shares of Class A Common Stock and no shares of Class B
Non-Voting Common Stock are issued and outstanding and no Shares are held in
treasury. All of the issued and outstanding Shares have been duly authorized,
are validly issued, fully paid, and nonassessable, and are held of record by
the respective Sellers as set forth in Section 4(b) of the Disclosure Schedule.
There are no outstanding or authorized options, warrants, rights, contracts,
calls, puts, rights to subscribe, conversion rights, or other agreements or
commitments to which Target is a party or which are binding upon Target
providing for the issuance, disposition, or acquisition of any of their capital
stock. There are no outstanding or authorized stock appreciation, phantom
stock, deferred stock bonus programs, or similar rights with respect to Target.
There are no voting trusts, proxies, or any other agreements or understandings
with respect to the voting of the capital stock of Target.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge, or other restriction of any
government, governmental agency, or court to which Target is subject or any
provision of the charter or bylaws of Target or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any part the right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which Target is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets).
Target does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency,
which it has not already obtained, in order for the Parties to consummate the
transactions contemplated by this Agreement.
(d) SUBSIDIARIES. Target has no Subsidiaries.
(e) FINANCIAL STATEMENTS. Attached hereto as Exhibit A are
the financial statements (collectively the "FINANCIAL STATEMENTS"), including
balance sheets, income statements, and cash flow statements, for Target
prepared in accordance with GAAP for each of the (i) fiscal
ADVANCED INFORMATION SOLUTIONS, INC.
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years ended December 31, 1996 and 1997 (the fiscal year ended December 31, 1997
being referred to herein as the "MOST RECENT FISCAL YEAR END") and (ii) the
twelve (12) month period ended June 30, 1998. The Financial Statements for the
Most Recent Fiscal Year End have been audited by Reicin, Xxxxxxx & Co., Ltd.
(f) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Except
as set forth in Section 4(f) of the Disclosure Schedule, since December 31,
1997, there has not been any Material adverse change in the assets,
Liabilities, business, financial condition, operations, results of operations,
or future prospects of Target. Without limiting the generality of the
foregoing, except as set forth in Section 4(f) of the Disclosure Schedule since
that date:
(i) Target has not sold, leased, transferred,
conveyed, assigned or disposed of any of its Material assets, tangible
or intangible, other than for a fair consideration in the Ordinary
Course of Business;
(ii) Target has not entered into any contract,
lease, sublease, license or sublicense (or series of related
contracts, leases, subleases, licenses and sublicenses) either
involving more than $20,000 or outside the Ordinary Course of
Business;
(iii) No party (including Target) has accelerated,
terminated, modified, or canceled any contract, lease, sublease,
license or sublicense (or series of related contracts, leases,
subleases, licenses and sublicenses) or notified Target of such
involving more than $20,000 to which Target is a party or by which it
is bound;
(iv) Target has not imposed any Security Interest
upon any of its assets, tangible or intangible;
(v) Target has not made any capital expenditure (or
series of related capital expenditures) either involving more than
$30,000 singly or $150,000 in the aggregate, or outside the Ordinary
Course of Business;
(vi) Target has not made any capital investment in,
any loan to, or any acquisition of the securities or assets of any
other person (or series of related capital investments, loans, and
acquisitions) either involving more than $30,000 individually or
$150,000 in the aggregate or outside the Ordinary Course of Business;
(vii) Target has not created, incurred, assumed, or
guaranteed any indebtedness (including capitalized lease obligations)
either involving more than $20,000 singly or $50,000 in the aggregate
or outside the Ordinary Course of Business;
(viii) Target has not delayed or postponed (beyond
its normal practice) the payment of accounts payable and other
Liabilities;
ADVANCED INFORMATION SOLUTIONS, INC.
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(ix) Target has not settled, canceled, compromised,
waived, or released any right, claim action or proceeding (or series
of related rights, claims, actions or proceedings) either involving
more than $20,000 or outside the Ordinary Course of Business;
(x) Target has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property
except to customers in the Ordinary Course of Business;
(xi) There has been no change made or authorized in
the charter or bylaws of Target;
(xii) Target has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon
conversion or exercise) any of its capital stock;
(xiii) Target has not declared, set aside, or paid
any dividend or distribution with respect to its capital stock or
redeemed, purchased, or otherwise acquired any of its capital stock
except as contemplated by Section 4(f)(xxi);
(xiv) Target has not experienced any damage,
destruction or loss (whether or not covered by insurance) to its
property;
(xv) Target has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and
employees outside the Ordinary Course of Business giving rise to any
claim or right on its part against the person or on the part of the
person against it;
(xvi) Target has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(xvii) Target has not granted an increase outside
the Ordinary Course of Business in the base compensation of any of its
directors, officers, and employees;
(xviii) Target has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E)
retirement, (F) medical, hospitalization, life, or other insurance,
(G) severance, or (H) other plan, contract or commitment for any of
its directors, officers, and employees, or modified or terminated any
existing such plan, contract or commitment;
ADVANCED INFORMATION SOLUTIONS, INC.
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(xix) Target has not made any other change in
employment terms for any of its directors or officers, nor any
Material change in employment terms for other full-time staff
employees;
(xx) Target has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course
of Business;
(xxi) Target has not made any dividend, consulting
or other payment to the Sellers, except for (A) normal payments to the
Sellers necessary to cover their federal and state income tax
obligations as calculated on a cash basis of accounting and in
accordance with GAAP for income tax purposes not in excess of the
accrued earnings generated for the period from January 1, 1998 through
the Closing Date, (B) employment salaries (not to exceed current
compensation levels) to the Sellers, (C) payments or distributions to
the Sellers which, individually or in the aggregate, do not reduce the
Net Working Capital of Target below $700,000 and (D) payments set
forth in Section 4(f)(xxi) of the Disclosure Schedule;
(xxii) There has not been any other Material
occurrence, event, incident, action, failure to act, or transaction
outside the Ordinary Course of Business involving Target (other than
occurrences, events or transactions contemplated by this Agreement) ;
and
(xxiii) Target has not committed to do any of the
foregoing.
(g) UNDISCLOSED LIABILITIES. Target does not have any
Liability (and, to the Knowledge of the Sellers, there is no Basis for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against it giving rise to any Liability) which
is individually in excess of $5,000, except for (i) Liabilities set forth on
the face of the Financial Statements (rather than in any notes thereto), and
(ii) Liabilities which have arisen after the Most Recent Fiscal Year End in the
Ordinary Course of Business (none of which relates to any breach of contract,
breach of warranty, tort, infringement, or violation of law or arose out of any
charge, complaint, action, suit, proceedings, hearing, investigation, claim, or
demand).
(h) TAX MATTERS.
(i) Target has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by Target (whether or not shown on any
Tax Return) have been paid. Target currently is not the beneficiary of
any extension of time within which to file any Tax Return. No claim
has ever been made by an authority in a jurisdiction where Target does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of
Target that arose in connection with any failure (or alleged failure)
to pay any Tax.
ADVANCED INFORMATION SOLUTIONS, INC.
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(ii) Target has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other
third party.
(iii) No Seller or director or officer (or employee
responsible for Tax matters) of Target expects any authority to assess
any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
Target either (A) claimed or raised by any authority in writing or (B)
as to which any of the Sellers and the directors and officers (and
employees responsible for Tax matters) of Target has Knowledge based
upon personal contact with any agent of such authority. Section 4(h)
of the Disclosure Schedule lists all Tax Returns filed with any
Governmental Authority with respect to Target for taxable periods
ended on or after December 31, 1992, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently are
the subject of audit. The Sellers have delivered to Buyer correct and
complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to
by Target since December 31, 1990.
(iv) Target has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(v) Target has not filed a consent under Code Sec.
341(f) concerning collapsible corporations. Target has not made any
payments, is not obligated to make any payments, or is not a party to
any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code Sec. 280G.
Target has not been a United States real property holding corporation
within the meaning of Code Sec. 897(c)(2) during the applicable period
specified in Code Sec. 897(c)(1)(A)(ii). Target has disclosed on its
federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the
meaning of Code Sec. 6661. Target is not a party to any Tax allocation
or sharing agreement. Target has never been (or has any Liability for
unpaid Taxes because it once was) a member of an Affiliated Group
during any part of any consolidated return year within any part of
which consolidated return year any corporation other than Target also
was a member of the Affiliated Group.
(vi) To the extent that the Section 338(h)(10)
election does not apply, Section 4(h) of the Disclosure Schedule sets
forth the following information with respect to Target as of the most
recent practicable date (as well as on an estimated pro forma basis as
of the Closing giving effect to the consummation of the transactions
contemplated hereby): (A) the basis of Target in its assets; (B) the
amount of any net operating loss, net capital loss, unused investment
or other credit, unused foreign tax, or excess charitable contribution
allocable to Target; and (C) the amount of any deferred gain or loss
allocable to Target arising out of any Deferred Intercompany
Transaction.
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(vii) The unpaid Taxes of Target do not exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income)
set forth on the face of the Financial Statements (rather than in any
notes thereto) or as set forth in the Net Working Capital as of the
Closing Date determined in accordance with Section 2(c) of this
Agreement, as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of Target in
filing their Tax Returns.
(viii) To the extent that any act or omission of any
Seller with respect to Taxes or Tax Returns creates or could create
Tax Liability for Target, Seller shall be included in each reference
to "TARGET" in this Section 4(h).
(i) TANGIBLE ASSETS. Target owns or leases all tangible
assets necessary for the conduct of its business as presently conducted. To the
Seller's knowledge, each such tangible asset is free from defects (patent and
latent), is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
(j) REAL PROPERTY. Target does not own any real property.
(k) REAL PROPERTY LEASES. Section 4(k) of the Disclosure
Schedule lists and describes briefly all real property leased or subleased to
Target. The Sellers have delivered to Buyer correct and complete copies of the
leases and subleases listed in Section 4(k) of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in Section
4(k) of the Disclosure Schedule:
(i) The lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) The Sellers shall use their best efforts to
ensure that the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the Closing;
(iii) No party to the lease or sublease is in breach
or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) No party to the lease or sublease has repudiated
any provision thereof;
(v) There are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
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(vi) Target has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(vii) To the Knowledge of the Sellers, all
facilities leased or subleased thereunder have received all approvals
of governmental authorities (including licenses and permits) required
in connection with the operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and regulations;
and
(viii) The real property listed in Section 4(k) of
the Disclosure Schedule represents all of the real property necessary
to operate the business in the manner that it is currently being
operated.
(l) INTELLECTUAL PROPERTY.
(i) The following terms used in this paragraph will
have the meanings assigned below:
(A) "DOCUMENTATION" means, with respect to
a software program, the source code (with comments), as well
as any pertinent commentary or explanation prepared to render
such materials understandable and usable by a trained
computer programmer, any programs (including compilers),
"workbenches," tools and higher level (or "proprietary")
language necessary for the development, maintenance and
implementation of the software program, and any and all
prepared and deliverable materials relating to the software
program, including without limitation all notes, flow charts,
programmer's or user' manuals.
(B) "CLIENT SOFTWARE PROGRAM" means any
software program developed by Target for a client on a work
for hire basis pursuant to which the client has acquired and
retains all intellectual property rights in such developed
software.
(C) "NON-SOFTWARE INTELLECTUAL PROPERTY"
means Intellectual Property exclusive of software programs
and their related Documentation.
(D) "TARGET SOFTWARE PROGRAM" means any
software program owned by Target or, excluding Client
Software Programs, developed by Target for sale or licensing
to the end-user.
(E) "THIRD PARTY SOFTWARE PROGRAM" means
any software program developed by a third party and used by
Target in developing either a Target Software Program or a
Client Software Program, or used by Target in conducting its
internal business.
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(ii) Target is the sole and exclusive owner of all
right, title and interest in and has good, valid and marketable title
to, or, as to third party rights identified in Section 4(l)(ii) of the
Disclosure Schedule, has obtained a license to use all Non-Software
Intellectual Property necessary for the operation of the business of
Target as presently conducted, free and clear of all mortgages,
pledges, liens, security interests, conditional sales agreements,
encumbrances or charges of any kind. Each item of Non-Software
Intellectual Property will be owned or available for use by Target on
identical terms and conditions immediately subsequent to the Closing
hereunder.
(iii) Target is the sole and exclusive owner of all
right, title and interest in and has good, valid and marketable title
to all Target Software Programs listed in Section 4(l)(iii) of the
Disclosure Schedule (representing all Target Software Programs owned
or developed by Target), free and clear of all mortgages, pledges,
liens, security interests, conditional sales agreements, encumbrances
or charges of any kind.
(iv) Section 4(l)(iv) of the Disclosure Schedule
sets forth all Third Party Software Programs licensed by Target.
Target has obtained a license to use all Third Party Software used in
connection with, and incorporated into, the Target Software Programs
or the Client Software Programs or used by Target in conducting its
own business and all use of each of such licensed Third Party Software
Programs by Target has been in full compliance with the respective
license agreements or other rights of use.
(v) Target has no registered trademarks, service
marks, trade names, copyrights or patents, nor does Target have any
pending or applications with respect to any of the aforementioned.
(vi) Section 4(l)(vi) of the Disclosure Schedule
sets forth the form and placement of the proprietary legends and
copyright notices displayed in or on the Non-Software Intellectual
Property and Target Software Programs. In no instance has the
eligibility of the Non-Software Intellectual Property and Target
Software Programs for protection under applicable copyright law been
forfeited to the public domain by omission of any required notice or
any other action.
(vii) Target has enforced the trade secret
protection program set forth in Section 4(l)(vii) of the Disclosure
Schedule as it relates to the Non-Software Intellectual Property and
the Target Software Programs, and, to the Knowledge of any of the
Sellers, there has been no violation of such program by any person or
entity. The Documentation relating to the Target Software Programs
(except for end user manuals and other items generally delivered to
end users), (i) has at all times been maintained in strict confidence,
(ii) has been disclosed by Target only to employees having a "need to
know" the contents thereof in connection with the performance of their
duties to Target and (iii) has not been disclosed to any third party.
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(viii) All personnel, including employees, agents,
consultants, and contractors, who have contributed to or participated
in the conception and development of Target Software Programs have
executed nondisclosure agreements, in substance the form set forth in
Section 4(l)(vii) of the Disclosure Schedule, and either (l) have been
party to a written agreement with Target that has accorded Target
full, effective, exclusive and original ownership of all Target
Software Programs, or (2) have executed appropriate instruments of
assignment in favor of Target as assignee that have conveyed to Target
full, effective, and exclusive ownership of all Target Software
Programs.
(ix) Section 4(l)(ix) of the Disclosure Schedule
contains a complete list of all software libraries, compilers and
other third-party software used in the development of the Target
Software Programs.
(x) The Target Software Programs and the Client
Software Programs will perform in accordance with the warranties set
forth in Target's licenses to the end users.
(xi) The use of the Target Software Programs, and
the license, sale or lease of the Target Software Programs, or of any
part thereof, or of any copy, or of any part thereof, do not and will
not infringe on, or contribute to the infringement of, any copyright,
trade secret, patents or any other exclusionary right, of any third
party in either the United States or any foreign country. No person or
entity has asserted against Target a claim that the use, license, sale
or lease of any Target Software Program, or any part thereof,
infringes or contributes to the infringement of any patent claim,
copyright or trade secret right of any third party in either the
United States or any foreign country, and the Sellers are not aware of
any basis for any such claim.
(xii) Except with respect to demonstration or trial
copies, no portion of the Target Software Programs contains or will
contain any "back door," "time bomb," "Trojan horse," "worm," "drop
dead device," "virus" or other software routines or hardware
components designed to permit unauthorized access; to disable or erase
software, hardware, or data; or to perform any other such similar
actions.
(xiii) Except as set forth in Section 4(l)(xiii) of
the Disclosure Schedule, the Sellers have made available to Buyer
correct and complete copies of all third party licenses, sublicenses,
agreements, and permissions (as amended to the date hereof) as to
Non-Software Intellectual Property and Third Party Software Programs
licensed or sublicensed to Target (collectively, the "LICENSES").
Except as set forth in Section 4(l)(xiii) of the Disclosure Schedule,
with respect to each such License:
(A) the License is legal, valid, binding,
enforceable and in full force and effect;
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(B) the License will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the Closing;
(C) no party to the License is in breach or
default and no event has occurred which with notice or lapse
or time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) to the Knowledge of the Sellers, no
underlying item of the property covered by the License is
subject to any outstanding judgment, order, decree,
stipulation, injunction, or charge;
(E) to the Knowledge of the Sellers, no
charge, complaint, action, suit, proceedings, hearing,
investigation, claim, or demand is pending or is threatened
which challenges the legality, validity, or enforceability of
any underlying item of the property covered by the License;
and
(F) except as may have been necessary in
preparing and delivering a Client Software Program, in
accordance with the terms of the applicable client
engagement, Target has not granted any sublicense or similar
right with respect to any License.
(xiv) The Target Software Programs (i) are year 2000
compatible, which shall include, but is not limited to, date data
century recognition, and calculations that accommodate same century
and multi-century formulas and date values; (ii) operate or will
operate in accordance with their specifications prior to, during and
after the calendar year 2000; and (iii) shall not end abnormally or
provide invalid or incorrect results as a result of date data,
specifically including date data which represents or references
different centuries or more than one century.
(m) CONTRACTS. Section 4(m) of the Disclosure Schedule lists
the following contracts, agreements, and other written arrangements to which
Target is a party:
(i) any written arrangement (or group of related
written arrangements) for the lease of personal property from or to
third parties providing for lease payments in excess of $20,000 per
annum;
(ii) any written arrangement (or group of related
written arrangements) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property or for the
furnishing or receipt of services which either calls for performance
over a period of more than one year or involves more than the sum of
$20,000 other than Customer Contracts or Agreements that are set forth
on Section 4(m)(x) of the Disclosure Schedule.
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(iii) any written arrangement concerning a
partnership or joint venture;
(iv) any written arrangement (or group of related
written arrangements) under which it has created, incurred, assumed,
or guaranteed (or may create, incur, assume, or guarantee)
indebtedness (including capitalized lease obligations) involving more
than $20,000 or under which it has imposed (or may impose) a Security
Interest on any of its assets, tangible or intangible;
(v) any written arrangement concerning
confidentiality or noncompetition;
(vi) any written arrangement involving any of the
Sellers and their Affiliates;
(vii) any written arrangement with any of its
directors, officers, and employees in the nature of a collective
bargaining agreement, employment agreement, or severance agreement;
(viii) any written arrangement other than Customer
Contracts or Agreements that are set forth on Section 4(m)(x) of the
Disclosure Schedule under which the consequences of a default or
termination could have a Material adverse effect on the assets,
Liabilities, business, financial condition, operations or results of
operations, or future prospects of Target;
(ix) any written arrangement involving a governmental
entity or quasi-governmental agency;
(x) any written Customer Contract or Agreement; or
(xi) any other written arrangement (or group of
related written arrangements) either involving more than $20,000 or
not entered into in the Ordinary Course of Business.
The Sellers have delivered to Buyer a correct and complete copy of
each written arrangement listed in Section 4(m) of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed: (A) the
written arrangement is legal, valid, binding, enforceable, and in full force
and effect; (B) the written arrangement will continue to be legal, valid,
binding, enforceable and in full force and effect on the same or substantially
similar terms following the Closing; (C) no party is in Material breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration, under the written arrangement; and (D) no party has repudiated
any provision of the written arrangement. Target is not a party to any oral
contract, agreement, or other arrangement which, if reduced to
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written form, would be required to be listed in Section 4(m) of the Disclosure
Schedule under the terms of this Section 4(m). No unfilled Material Customer
Contract or Agreement obligating Target to perform services will result in a
loss to Target upon completion of performance. Target is not a party to any
contract, agreement or other arrangement which was entered into on terms which
would not be considered market standard if such arrangement was entered into in
an arms-length transaction. None of Target's twenty-five (25) highest grossing
revenue customers in the year ended December 31, 1997 has Materially curtailed
or terminated its relationship with it or has indicated that it will stop, or
Materially decrease the rate of, buying services from it.
(n) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable of Target are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are presently current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Financial Statements (rather than in any notes thereto) as adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practice of Target.
(o) POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of Target.
(p) INSURANCE. Section 4(p) of the Disclosure Schedule sets
forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which Target has
been a party, a named insured, or otherwise the beneficiary of coverage at any
time within the past three (3) years:
(i) The name, address, and telephone number of the
agent;
(ii) The name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) The policy number and the period of coverage;
(iv) The scope (including an indication of whether
the coverage was on a claims made, occurrence, or other basis) and
amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) A description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, and enforceable and in full force and effect; (B) the policy
will continue to be legal, valid, binding, and enforceable and in full force
and effect on identical terms following the Closing Date; (C) Target is
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not in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. Target has been covered during the past
three (3) years by insurance in scope and amount customary and reasonable for
the businesses in which it has engaged during the aforementioned period.
Section 4(p) of the Disclosure Schedule describes any self-insurance
arrangements affecting Target.
(q) LITIGATION. Section 4(q) of the Disclosure Schedule sets
forth each instance in which Target (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge or (ii) is a party or, to the
Knowledge of any of the Sellers, is threatened to be made a party to any
charge, complaint, action, suit, proceeding, hearing, or investigation of or in
any court or quasi-judicial or administrative agency of any Governmental
Authority or before any arbitrator. None of the Sellers and the directors and
officers (and employees with responsibility for litigation matters) of Target
has received notice of any third party's intent to bring any such charge,
complaint, action, suit, proceeding, hearing, or investigation may be brought
or threatened against Target.
(r) EMPLOYEES. Section 4(r) of the Disclosure Schedule lists
the employees employed by Target and the annual compensation or rate of pay
(including bonus) for each as of the date of this Agreement, with each such
employee identified as (i) salaried or hourly, (ii) exempt or nonexempt, (iii)
union or nonunion, (iv) full-time or part-time, (v) temporary, permanent, or
leased, and (vi) active or nonactive (e.g., leave of absence, FMLA, disability,
layoff, etc.). To the Knowledge of the Sellers, no key employee or group of
full-time employees has any plans to terminate employment with Target. Target
is not a party to or bound by any collective bargaining agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. Target has not committed any unfair labor
practice. None of the Sellers has any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of Target.
(s) EMPLOYEE BENEFITS.
(i) Section 4(s)(i) of the Disclosure Schedule
provides a list of each Current Employee Benefit Plan.
(ii) True, correct, and complete copies of each
Current Employee Benefit Plan, and related trusts, if applicable,
including all amendments thereto, have been furnished to Buyer. There
have also been made available for inspection by Buyer, with respect to
each Current Employee Benefit Plan required to file such report or
description, the most recent report on Form 5500 and the most recent
summary plan description.
(iii) With respect to the Employee Benefit Plans:
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1. Neither Target nor any corporation,
trade, business, or entity under common control with Target,
within the meaning of Section 414(b), (c), (m), or (o) of the
Code, or Section 4001 of ERISA, ("COMMONLY CONTROLLED
ENTITY") contributes to or has an obligation to contribute
to, nor has Target or any Commonly Controlled Entity at any
time contributed to or had an obligation to contribute to,
either a Multiemployer Plan or a plan subject to Title IV of
ERISA.
2. Target and each Fiduciary have performed
all obligations, whether arising by operation of law or by
contract, required to be performed by each of them in
connection with the Employee Benefit Plans, and there have
been no defaults or violations by any party with respect to
the Employee Benefit Plans.
3. All reports and disclosures relating to
the Employee Benefit Plans required to be filed with or
furnished to Governmental Authorities, participants, or
beneficiaries have been filed or furnished in accordance with
applicable law in a timely manner, and each Employee Benefit
Plan has been administered in compliance with its governing
documents and all applicable law.
4. Each of the Employee Benefit Plans
intended to be qualified under Section 401(a) of the Code (A)
satisfies in form the requirements of such Section, except to
the extent amendments are not required by law to be made
until a date after the Closing Date, (B) unless it is a
standardized prototype plan that has received a formal
opinion letter from the Internal Revenue Service and does not
require a favorable determination letter, has received a
favorable determination letter from the Internal Revenue
Service regarding such qualified status, which covers all
amendments to the Employee Benefit Plans, and (C) has not
been operated in a way that would adversely affect its
qualified status.
5. There are no actions, suits, or claims
pending (other than routine claims for benefits) or, to the
Knowledge of the Sellers, threatened against, or with respect
to, any of the Employee Benefit Plans or their assets.
6. All contributions required to be made to
the Employee Benefit Plans pursuant to their terms and the
provisions of ERISA, the Code, or any other applicable law
have been timely made.
7. As to any Employee Benefit Plan intended
to be qualified under Section 401(a) of the Code, there has
been no termination or partial termination of the plan within
the meaning of Section 411(d)(3) of the Code.
8. There has been no Prohibited Transaction
with respect to any Employee Benefit Plan or Fiduciary, and
no act, omission, or transaction has
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occurred that would result in imposition (directly or
indirectly) of (A) breach of fiduciary duty liability under
Section 409 of ERISA, (B) a civil penalty assessed pursuant
to subsections (c), (i), or (l) of Section 502 of ERISA, or
(C) a tax imposed pursuant to Chapter 43 of Subtitle D of
the Code.
9. There is no matter pending (other than
routine qualification determination filings) with respect to
any of the Employee Benefit Plans before the Internal Revenue
Service, the Department of Labor, the PBGC, or other
Governmental Authority.
10. Each trust funding an Employee Benefit
Plan, which trust is intended to be exempt from federal
income taxation pursuant to Section 501(c)(9) of the Code,
satisfies the requirements of such section and has received a
favorable determination letter from the Internal Revenue
Service regarding such exempt status and has not, since
receipt of the most recent favorable determination letter,
been amended or operated in a way that would adversely affect
such exempt status.
11. With respect to any employee benefit
plan, within the meaning of Section 3(3) of ERISA, which is
sponsored, maintained, or contributed to, or has been
sponsored, maintained, or contributed to within six years
prior to the Closing Date, by any Commonly Controlled Entity,
(A) no withdrawal liability, within the meaning of Section
4201 of ERISA, has been incurred, which withdrawal liability
has not been satisfied, (B) no liability to the PBGC has been
incurred by any Commonly Controlled Entity, which liability
has not been satisfied, (C) no accumulated funding
deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code has been
incurred, and (D) all contributions (including installments)
to such plan required by Section 302 of ERISA and Section 412
of the Code have been timely made.
12. Neither the execution and delivery of
this Agreement nor the consummation of the transactions
contemplated hereby will by the terms of Target's Employee
Benefit Plans or by law (A) require Target or Buyer to make a
larger contribution to, or pay greater benefits or provide
other rights under, any Employee Benefit Plan than it
otherwise would, whether or not some other subsequent action
or event would be required to cause such payment or provision
to be triggered, or (B) conflict with the terms of any
Employee Benefit Plan.
13. All continuation of coverage
obligations set forth in Section 4980B of the Code and
Section 601 through 609 of ERISA have been performed.
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(iv) Target is not a party to any agreement, nor has
it established any policy or practice, requiring it to make a payment
or provide any other form of compensation or benefit to any person
performing services for Target upon termination of such services that
would not be payable or provided in the absence of the consummation of
the transactions contemplated by this Agreement.
(v) In connection with the consummation of the
transactions contemplated by this Agreement, no payments of money or
other property, acceleration of benefits, or provisions of other
rights have or will be made under the Employee Benefit Plans that
would result in imposition of the sanctions imposed under Section 280G
or 4999 of the Code, whether or not some other subsequent action or
event would be required to cause such payment, acceleration, or
provision to be triggered.
(vi) Each Employee Welfare Benefit Plan may be
unilaterally amended or terminated in its entirety without liability
to Target except as to benefits vested and accrued thereunder prior to
such amendment or termination.
(t) GUARANTIES. Target is not a guarantor or otherwise liable
for any Liability or obligation (including indebtedness) of any other person.
(u) ENVIRONMENT, HEALTH, AND SAFETY.
(i) Target and, to the Knowledge of the Sellers, its
predecessors and Affiliates has complied with all laws (including
rules and regulations thereunder) of any Governmental Authority
concerning the environment, public health and safety, and employee
health and safety, and no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand, or notice has been filed or
commenced against any of them alleging any failure to comply with any
such law or regulation, the violation of which would have a Material
adverse effect.
(ii) Target does not have any Liability (and, to the
Knowledge of the Sellers, there is no Basis related to the past or
present operations, properties, or facilities of Target and its
predecessors and Affiliates for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or
demand against Target giving rise to any Liability) under the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, the Resource Conservation and Recovery Act of 1976, the
Federal Water Pollution Control Act of 1972, the Clean Air Act of
1970, the Safe Drinking Water Act of 1974, the Toxic Substances
Control Act of 1976, the Refuse Act of 1989, or the Emergency Planning
and Community Right-to-Know Act of 1986 (each as amended), any other
law (or rule or regulation thereunder) of any Governmental Authority
or common law remedy concerning release or threatened release of
hazardous substances, public health and safety, or pollution or
protection of the environment.
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(iii) Target does not have any Liability (and none
of Target and, to the Knowledge of the Sellers, its predecessors and
Affiliates has handled or disposed of any substance, arranged for the
disposal of any substance, or owned or operated any property or
facility in any manner that could form the Basis for any present or
future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand (under the common law or pursuant to
any statute) against Target giving rise to any Liability) for damage
to any site, location, or body of water (surface or subsurface) or for
illness or personal injury.
(iv) Target does not have any Liability (and, to the
Knowledge of the Sellers, there is no Basis for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against Target giving rise to any Liability) under
the Occupational Safety and Health Act, as amended, or any other law
(or rule or regulation thereunder) of any Governmental Authority
concerning employee health and safety.
(v) Target does not have any Liability (and, to the
Knowledge of the Sellers, Target has not exposed any employee to any
substance or condition that could form the Basis for any present or
future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand (under the common law or pursuant to
statute) against Target giving rise to any Liability) for any illness
of or personal injury to any employee.
(vi) Target has obtained and been in compliance with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all laws of any Governmental Authority (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and
safety, worker health and safety, and pollution or protection of the
environment, including laws relating to emissions, discharge,
releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes into
ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or wastes, the
violation of which would have a Material adverse effect on Target.
(vii) To the Knowledge of the Sellers, all
properties and equipment used in the business of Target have been free
of asbestos, PCB's, methylene chloride, trichloroethylene, 1,2
trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
(viii) To the Knowledge of the Sellers, no
pollutant, contaminant, or chemical, industrial, hazardous, or toxic
material or waste ever has been buried, stored,
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spilled, leaked, discharged, emitted, or released on any real
property that Target owns or ever has owned or that Target leases or
ever has leased and except for normal office supplies stored in
amounts reasonable for the conduct of Target's business which will
not result in any liability to Target.
(v) LEGAL COMPLIANCE.
(i) To the Knowledge of the Sellers Target has
complied with all laws (including rules and regulations thereunder) of
all Governmental Authorities, and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced against Target alleging any failure to comply with
any such law or regulation.
(ii) Target has complied with all applicable laws
(including rules and regulations thereunder) relating to the
employment of labor, employee civil rights, and equal employment
opportunities.
(iii) Target has not violated in any respect or
received a notice or charge asserting any violation of the Xxxxxxx
Act, the Xxxxxxx Act, the Xxxxxxxx-Xxxxxx Act, or the Federal Trade
Act, each as amended.
(iv) Target has complied with all applicable laws
(including rules and regulations thereunder) relating to the residency
status of foreign individuals which are employees of Target and
obtaining the requisite visas, permits and other documentation to
permit such individuals to work in the United States.
(v) Target has not:
(A) made or agreed to make any
contribution, payment, or gift of funds or property to any
governmental official, employee, or agent where either the
contribution, payment, or gift or the purpose thereof was
illegal under the laws of any Governmental Authority;
(B) established or maintained any
unrecorded fund or asset for any purpose, or made any false
entries on any books or records for any reason; or
(C) made or agreed to make any
contribution, or reimbursed any political gift or
contribution made by any other person, to any candidate for
public office with regards to any Governmental Authority.
(vi) To the Knowledge of the Sellers Target has
filed in a timely manner all reports, documents, and other materials
it was required to file (and the information
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contained therein was correct and complete in all respects) under all
applicable laws (including rules and regulations thereunder.
(vii) To the Knowledge of the Sellers Target has
possession of all records and documents it was required to retain
under all applicable laws (including rules and regulations
thereunder).
(w) CERTAIN BUSINESS RELATIONSHIPS WITH TARGET. Except as set
forth in Section 4(w) of the Disclosure Schedule, none of the Sellers and their
Affiliates has been involved in any business arrangement or relationship with
Target within the past twelve (12) months, and none of the Sellers and their
Affiliates owns any property or right, tangible or intangible, which is used in
the business of Target.
(x) BROKERS' FEES. Target does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(y) DISCLOSURE. The representations and warranties contained
in this Section 4 along with the Disclosure Schedule and any other information,
statement or certificate provided by the Sellers does not contain any untrue
statement of fact or omit to state any fact necessary in order to make the
statements and information contained in this Section 4 not misleading.
(z) BOOKS AND RECORDS. The Sellers have furnished Buyer with
true and complete copies of the books and records relating to the ownership and
operation of Target. The books and records reflect all minutes and written
consents adopted by the Boards of Directors of Target. The books and records
have been maintained in accordance with applicable legal requirements, comprise
all of the books and records relating to the ownership and operation of Target,
reflect all proceedings and transactions customarily contained in corporate
books and records.
(aa) COMPLIANCE WITH THE LETTER OF INTENT. The Sellers have
complied in all respects with the terms of the Letter of Intent dated June 22,
1998 by and among the Sellers, Target and Buyer.
(bb) PAYMENTS TO OFFICIALS. During the three year period
prior to the date hereof, neither Target nor any of the Sellers on behalf of
Target has paid or given or has authorized or committed to the payment or gift
of money or anything of value to any official or employee of any government
entity or instrumentality or any political party or candidate for political
office for the purpose of influencing any governmental action or decision in
order to obtain or retain business or to direct business to any other party.
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5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use his or its
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable to consummate and make effective the transactions
contemplated by this Agreement (including satisfying the closing conditions set
forth in Section 7 below).
(b) NOTICES AND CONSENTS. The Sellers will or will cause
Target to give any notices to third parties required by this Agreement or the
transactions contemplated hereby, and will or will cause Target to obtain all
third-party consents required by this Agreement or the transactions
contemplated hereby or in connection with the matters pertaining to Target
disclosed or required to be disclosed in the Disclosure Schedule. The Sellers
will take additional actions (and the Sellers will cause Target to take all
additional actions) that may be deemed necessary, proper, or advisable by Buyer
in connection with any other notices to, filings with, and authorizations,
consents, and approvals of governments, governmental agencies, and third
parties that he, she, it or Target may be required to give, make, or obtain as
reasonably required by this Agreement or the transactions contemplated hereby
in order that Buyer is able to conduct the business of Target in the same
manner as it is currently being conducted.
(c) OPERATION OF BUSINESS. The Sellers will not cause or
permit Target to engage in any practice, take any action, embark on any course
of inaction, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, the Sellers will
not cause or permit Target to engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in Section 4(f) above.
(d) PRESERVATION OF BUSINESS. The Sellers will cause Target
to keep its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(e) FULL ACCESS.
(i) Each of the Sellers will permit, and the Sellers
will cause Target to permit, representatives of Buyer to have
reasonable access during normal business hours, and in a manner so as
not to interfere with the normal business operations of Target, to the
headquarters office of Target and all books, records, contracts, Tax
records, and documents of or pertaining to Target. Buyer's on-site
investigation of Target shall be limited to ten (10) business days,
unless otherwise agreed to by Buyer and the Sellers in writing;
provided, however, that such limitation of time shall not otherwise
limit Buyer's investigation of Target off-site. During Buyer's on-site
investigation, Buyer shall not discuss any aspects of the operation of
Target with any employee of Target, and Buyer shall direct all
requests for
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information and material only through the Key Employees, unless
otherwise agreed to by Buyer and the Sellers in writing. Buyer shall
not contact or speak or correspond with any lender, customer,
employee or other person associated in business with Target without
the written consent of Target.
(ii) Upon completion of the accounting review and
business, legal and accounting due diligence by Buyer and so long as
this agreement has not been terminated, Buyer shall arrange with the
Sellers a mutually agreeable time and place at which Buyer may conduct
interviews with designated key employees and/or customers of Target
mutually agreed to by Buyer and the Sellers. Such interviews shall be
in strict conformity with a format mutually agreed to by Buyer and the
Sellers and shall take place and be completed wholly within the last
ten (10) days prior to Closing.
(f) NOTICE OF DEVELOPMENTS. The Sellers will give prompt
written notice to Buyer of any material development affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
or future prospects of Target. Each Party will give prompt written notice to
the others of any material development affecting the ability of the Parties to
consummate the transactions contemplated by this Agreement. No disclosure by
any Party pursuant to this Section 5(f) however, shall be deemed to amend or
supplement Annex II, Annex III, or the Disclosure Schedule or to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. None of the Sellers will (and the Sellers
will not cause or permit Target to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving Target or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
person to do or seek any of the foregoing. The Sellers will notify Buyer
immediately if any person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
(h) PREPARATION OF FINANCIAL STATEMENTS; DELIVERY OF
FINANCIAL INFORMATION. Target will prepare and deliver to Buyer, on a bi-weekly
basis until the Closing Date, the financial and other information listed on
Exhibit E hereto.
(i) DELIVERY OF SCHEDULES; ACCEPTANCE. Buyer acknowledges
that the preparation and delivery of the Schedules to the Agreement may not be
prepared and/or final at the time of the execution and delivery of the
Agreement. As such, the parties agree as follows:
(i) The Sellers shall have the right to deliver the
Schedules to the Agreement and/or to amend, restate and update the
Schedules to the Agreement up to the date which is five (5) days prior
to the Closing Date.
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(ii) at least five (5) days prior to the Closing,
Seller shall deliver to Buyer a complete copy of the proposed final
Schedules to the Agreement noting all changes from the Schedules
provided upon execution of the Agreement; and
(iii) Buyer shall notify Sellers at or prior to the
Closing that either (i) Buyer accepts such revised Schedules, in which
case they shall become part of this Agreement as if in existence on
the date of this Agreement and all such disclosures made in such
amended Schedules shall be deemed disclosed as if they had been
disclosed in the Schedules as of the date of this Agreement or (ii)
that Buyer in its sole discretion does not accept such Schedules and
elects to terminate this Agreement.
6. ADDITIONAL COVENANTS. The Parties further agree as follows:
(a) GENERAL. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under Section 8 below). The Sellers acknowledge and agree that from
and after the Closing Buyer will be entitled to possession of all documents,
books, records, agreements, and financial data of any sort relating to Target.
(b) LITIGATION SUPPORT. In the event and for so long as any
Party actively is contesting or defending against any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Target, each of the other Parties will cooperate
with him or it and his or its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 8 below).
(c) TRANSITION. None of the Sellers will take any action that
primarily is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of Target
from maintaining the same business relationships with Target after the Closing
for a period of twenty-four (24) months thereafter as it maintained with Target
prior to the Closing. Each of the Sellers will refer all customer inquiries
relating to the lines of businesses of Target to Target from and after the
Closing for a period of twenty-four (24) months thereafter.
(d) CONFIDENTIALITY. Each of the Sellers will treat and hold
as such all of the Confidential Information, refrain from using any of the
Confidential Information except in
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connection with this Agreement for a period of three (3) years from the
Closing, and deliver promptly to Buyer or destroy, at the request and option of
Buyer, all tangible embodiments (and all copies) of the Confidential
Information which are in his or its possession. In the event that any of the
Sellers is requested or required (by oral question or request for information
or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that the Seller will notify Buyer promptly of the request or
requirement so that Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, any of the Sellers is,
on the advice of counsel, compelled to disclose any Confidential Information to
any tribunal or else stand liable for contempt, that Seller may disclose the
Confidential Information to the tribunal; provided, however, that the
disclosing Seller shall use his reasonable best efforts to obtain, at the
reasonable request of Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as Buyer shall designate. The foregoing provisions
shall not apply to any Confidential Information which is generally available to
the public immediately prior to the time of disclosure.
(e) MONITORING INFORMATION. Prior to the Closing, the Sellers
shall cause Target to deliver such information as may reasonably be requested
by Buyer.
(f) LEASES. The Sellers shall cause prior to the Closing
Date, Target to obtain from its landlords (to the extent required under the
pertinent premises lease) written consent to the assignment of all leases being
indirectly assumed by Buyer, which assignments are deemed to have resulted from
the transactions contemplated by this Agreement.
(g) SECTION 338(h)(10) ELECTION. The Sellers and Buyer shall
join in making a timely election (but in no event later than sixty (60) days
following the Closing) under Section 338(h)(10) of the Code (including the
prerequisite election under Section 338 of the Code) and any similar state law
provisions in all applicable states, with respect to the sale and purchase of
the Shares pursuant to this Agreement, and each party shall provide to the
others all necessary information to permit such elections to be made. Buyer and
the Sellers shall, as promptly as practicable following the Closing Date, take
all actions necessary and appropriate (including filing such forms, returns,
schedules and other documents as may be required) to effect and preserve timely
elections. All Taxes attributable to the elections made pursuant to this
Section 6(g) shall be the liability of the Sellers. In connection with such
elections, within sixty (60) days following the Closing Date, Buyer and the
Sellers shall act together in good faith to determine and agree upon the
"deemed sale price" to be allocated to each asset of Target in accordance with
Treasury Regulation Section 1.338(h)(10)-1(f) and the other regulations under
Section 338 of the Code. Notwithstanding the generality of the immediately
preceding sentence, Buyer and the Sellers agree that the "DEEMED SALE PRICE"
shall be allocated to the fixed assets and the monetary assets of Target at
their fair market value as of the Closing Date as determined in accordance with
GAAP, consistently applied, and the balance of the "deemed sale price" shall be
allocated to goodwill and other intangible assets of Target, but in no event
shall (A) the "deemed sale price" allocated to the non-competition
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covenant exceed $50,000, and (B) the "deemed sale price" allocated to the fixed
assets exceed their depreciated book value. Both Buyer and the Sellers shall
report the tax consequences of the transactions contemplated by this Agreement
consistently with such allocations and shall not take any position inconsistent
with such allocations in any Tax Return or otherwise. The Sellers shall be
liable for, and shall indemnify and hold Buyer and Target harmless against, any
Taxes or other costs attributable to (i) a failure on the part of the Sellers
to take all actions required of them under this Section 6(g); or (ii) a failure
on the part of Target to qualify as an "S CORPORATION" for which the Section
338(h)(10) election may be made.
(h) ADDITIONAL TAX MATTERS.
(i) The Sellers shall cause Target to file with the
appropriate Governmental Authorities all Tax Returns required to be
filed by it for any taxable period ending on or prior to the Closing
Date and Target shall remit any Taxes due in respect of such Tax
Returns. Buyer shall cause Target to file with the appropriate
Governmental Authorities all Tax Returns required to be filed by it
for any taxable period ending after the Closing Date.
(ii) Buyer and the Sellers recognize that each of
them will need access, from time to time, after the Closing Date, to
certain accounting and Tax records and information held by Buyer
and/or Target to the extent such records and information pertain to
events occurring on or prior to the Closing Date; therefore, Buyer
agrees to cause Target to (A) use its best efforts to properly retain
and maintain such records for a period of six (6) years from the date
the Tax Returns for the year in which the Closing occurs are filed or
until the expiration of the statute of limitations with respect to
such year, whichever is later, and (B) allow the Sellers and their
agents and representatives at times and dates mutually acceptable to
the Parties, to inspect, review and make copies of such records as
such other party may deem necessary or appropriate from time to time,
such activities to be conducted during normal business hours and at
the other Party's expense.
(iii) The Sellers shall reimburse Buyer for the
Taxes relating to periods prior to the Closing Date, but which are
payable in respect of Tax Returns to be filed by Buyer pursuant to
Section 6(h)(i) hereof within ten (10) business days after receipt by
the Sellers of signed copies of such Tax Returns as filed; however,
Sellers shall reimburse only to the extent such Taxes are in excess of
the reserve for such Tax Liability used to determine the Net Working
Capital of Target as of the Closing Date.
(iv) Neither Buyer nor Target shall be liable for
any taxes created solely from the conversion by Target to the accrual
basis of tax accounting from the cash basis of tax accounting
immediately prior to Closing in contemplation of Closing. The Sellers
shall reimburse Buyer for any Taxes for which either Buyer or Target
become liable due solely to such conversion.
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(i) COVENANT NOT TO COMPETE.
(i) For a period of four (4) years from and after
the Closing Date or two (2) years beyond the term of his employment
with Target, which ever is longer, none of the Key Employees will (i)
engage directly or indirectly in any business that is substantially
similar to that conducted by Target within a one hundred (100) mile
radius of any office of Target; (ii) service or solicit any current or
future customer of Target and/or Buyer relating to any business that
is substantially similar to that conducted by Target; or (iii) offer
employment to or attempt to induce any director, officer, employee,
agent, or customer of Target to terminate such relationship with
Target; provided, however, that no owner of less than 1% of the
outstanding stock of any publicly traded corporation shall be deemed
to engage solely by reason of such ownership in Target's business;
provided, further, that nothing in this Section 5(i)(i) shall prohibit
the Sellers from serving as a full time employee of a business not a
present or identified potential customer of Buyer and not engaged in a
business that is substantially similar to that conducted Buyer for
which such Seller's duties involve information technology services or
similar duties;
(ii) If any Seller commits a breach, or overtly
threatens to commit a breach, of any of the provisions of Section
6(i)(i) above, Buyer shall have the right and remedy to seek to have
the provisions of Section 6(i)(i) specifically enforced by any court
having jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable injury and
continuing damage to Buyer, Target and their affiliates, and that the
exact amount of which would be difficult to ascertain and that in any
event money damages will not provide adequate remedy and Buyer shall
be entitled to seek to obtain injunctive relief restraining any
violation of Section 6(i)(i);
(iii) It is expressly understood and agreed that
Buyer and the Sellers consider the restrictions contained in Section
6(i)(i) above to be reasonable and necessary for the purposes of
preserving and protecting the business of Target and goodwill
purchased by Buyer; and
(iv) If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 6(i)
is invalid or unenforceable, the Parties agree that the court making
the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of term or provision, to
delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid
and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time
within which the judgment may be appealed.
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(j) ACCESS TO PREVIOUS ACQUISITIONS. Buyer shall provide to
the Sellers three (3) contacts relating to Buyer's prior acquisitions. The
Sellers may contact these parties upon reasonable notice to Buyer.
7. CONDITIONS TO OBLIGATIONS TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) The representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and correct in all
material respects at and as of the Closing Date;
(ii) The Sellers shall have performed and complied
with all of their covenants hereunder in all Material respects through
the Closing;
(iii) Target shall have procured all of the
governmental or third party consents and approvals specified in
Section 5(b) including any landlord consents related to any rental
property.
(iv) No action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative
agency within the jurisdiction of any Governmental Authority wherein
an unfavorable judgment, order, decree, stipulation, injunction, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation,
or (C) affect adversely the right of Buyer to own, operate, or control
the Shares or Target (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
(v) The Sellers shall have delivered to Buyer a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above
in Section 7(a)(i)-(iv) is satisfied in all respects;
(vi) Buyer shall have received from the Key
Employees executed employment agreements in the form and substance
attached hereto as Exhibit B;
(vii) Buyer shall have received from each Key
Employee mutually agreed to by the Parties an executed non-competition
agreement in the form and substance attached hereto as Exhibit C;
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(viii) Buyer shall have received from counsel to the
Sellers an opinion with respect to the matters set forth in Exhibit D
attached hereto, addressed to Buyer and dated as of the Closing Date;
(ix) Buyer shall have received the resignations,
effective as of the Closing, of each director of Target designated by
Buyer prior to the Closing;
(x) All officers and directors of Target and each
Seller shall have repaid in full all debts or other obligations, if
any, owed to Target;
(xi) No Material adverse change shall have occurred
before the Closing in Target's business or its future business
prospects;
(xii) All appropriate corporate and shareholder
authorizations of Target shall have been obtained;
(xiii) Buyer shall be satisfied that at Closing all
facilities of Target are under legal, valid and binding leases or
subleases, each of which have received all approvals of governmental
authorities;
(xiv) The Sellers shall have delivered to Buyer
stock certificates evidencing all of the stock of Target in good
delivery form and duly endorsed for transfer or accompanied by duly
executed stock powers or other appropriate assignment documents;
(xv) The Sellers shall have caused and Target shall
have cancelled any stock options, deferred bonus programs, and phantom
equity plans outstanding as of the Closing Date, at no cost or
liability to Buyer and/or Target. The payments made by the Sellers and
due pursuant to the cancellation of such programs will vest and be
payable to the recipients in accordance with terms and conditions
mutually agreed upon by the Sellers and Buyer. In conjunction with the
cancellation of such programs, all eligible employees shall have
signed releases and cancellation agreements which include provisions
that each employee will not, for a period of one (1) year from the
Closing Date or one (1) year from the termination of his or her
employment with Target whichever period is longer: (a) service or
solicit any customers of Target and/or Buyer, or (b) solicit for
employment any employee of Target;
(xvi) All liens and security interests securing
debts of Target which have been paid in full prior to or at the
Closing shall have been fully released of record to the reasonable
satisfaction of Buyer and all Uniform Commercial Code financing
statements or other filings of any kind whatsoever, covering or
evidencing such debts, liens and/or security interests shall have been
terminated;
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(xvii) All obligations of Target which are not being
retired or satisfied by the Sellers prior to or at the Closing, shall
have been modified in such a manner that their covenants, repayment
schedules, and other provisions will be upon terms reasonably
satisfactory to Buyer;
(xviii) No unsatisfied liens for the failure to pay
Taxes of any nature whatsoever shall exist against Target, or against
or in any way affecting any of the Shares;
(xix) The Adjusted EBIT of Target for the twelve (12)
month period ending June 30, 1998 shall be no less than $1,200,000;
(xx) All deferred taxes of Target and all other tax
related issues of Target shall have been assumed and/or discharged by
the Sellers to the extent the same have not been accrued for and
reflected in the calculation of Net Working Capital as of the Closing
Date;
(xxi) Buyer shall be satisfied in its sole
discretion with the results of its legal, financial and business due
diligence investigations; and
(xxii) Buyer shall have received a certificate of
the Secretary of Target accompanied with Target's certified
certificate of incorporation and bylaws and certificates of good
standing in each jurisdiction in which Target is required to be
qualified to do business.
Buyer may waive any condition specified in this Section 7(a)
if it executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligations
of the Sellers to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in
Section 3(b) above shall be true and correct in all material respects
at and as of the Closing Date;
(ii) Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) no action, suit or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative
agency within the jurisdiction of any Governmental Authority wherein
an unfavorable judgment, order, decree, stipulation, injunction, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded
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following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
(iv) Buyer shall have delivered to the Sellers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above
in Section 7(b)(i)-(iii) is satisfied in all respects; and
(v) The Sellers shall have received from counsel to
Buyer an opinion with respect to the matters set forth in Exhibit E
attached hereto, addressed to the Sellers and dated as of the Closing
Date.
The Sellers may waive any condition specified in this Section
7(b) if they execute a writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL. Except as otherwise specifically provided in
this Agreement, all of the representations and warranties of the Sellers (other
than the representations and warranties of the Sellers contained in Section 3,
Section 4(h) or Section 4(s) above), shall survive the Closing hereunder (even
if Buyer knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect for a
period of two (2) years thereafter. All of the representations and warranties
of the Sellers contained in Section 3, Section 4(h) and Section 4(s) of this
Agreement and the representations and warranties of Buyer shall survive the
Closing (even if the other party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for the statute of limitations. The covenants of Buyer
and the Sellers shall survive the Closing and continue in full force and effect
indefinitely unless expressly provided otherwise in this Agreement.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER.
(i) In the event the Sellers (or in the event any
third party alleges facts that, if true, would mean any of the Sellers
has breached) breach any of their representations, warranties, and
covenants contained herein during the period such representations,
warranties and covenants survive, and provided that Buyer makes a
written claim for indemnification against any of the Sellers pursuant
to Section 10(h) below within the applicable survival period, then
each of the Sellers agrees to indemnify Buyer from and against the
entirety of any Adverse Consequences Buyer may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences Buyer may suffer after the end of the applicable survival
period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach) provided, however,
that the Sellers shall not have any obligation to indemnify Buyer from
and against any Adverse Consequences resulting from, arising out of,
relating to, in the nature of, or caused by the breach of any
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representation or warranty of the Sellers contained in Section 4 above
(i) until Buyer has suffered aggregate losses by reason of all such
breaches in excess of a $25,000 threshold (at which point the Sellers
will be obligated to indemnify Buyer from and against all such
aggregate losses including losses relating back to the first dollar);
and (ii) in excess of the Purchase Price (after which point the
Sellers shall have no obligation to indemnify Buyer from and against
further such Adverse Consequences) provided further, however, that the
limitations set forth in (i) and (ii) above specifically shall not
apply to the liability of any Seller with respect to Adverse
Consequences resulting from or attributable to intentional fraud or
any willful misconduct by the Sellers nor to the liability of any
Seller with respect to breaches of the representations and warranties
contained in Sections 4(b), 4(h), and 4(n) hereof and the limitations
set forth in (ii) above specifically shall not apply to the liability
of any Seller with respect to Adverse Consequences resulting from or
attributable to the liability of any Seller with respect to breaches
of the representations and warranties contained in Section 4(s)
hereof.
(ii) In the event any of the Sellers breaches (or in
the event any third party alleges facts that, if true, would mean any
of the Sellers has breached) any of his Several representations,
warranties, and covenants contained herein, and provided that the
particular representation, warranty, or covenant survives the Closing
and that Buyer makes a written claim for indemnification against the
Seller pursuant to Section 10(h) below within the applicable survival
period as set forth in Section 8(a), then the Seller agrees to
indemnify Buyer from and against the entirety of any Adverse
Consequences Buyer may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences Buyer may
suffer after the end of the applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach).
(iii) Each of the Sellers agrees to indemnify Buyer
from and against the entirety of any Adverse Consequences Buyer may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by any Liability of Target arising under United States
Treasury Reg. Section 1.1502-6 (because Target once was a member of an
Affiliated Group during any part of any consolidated return year
within any part of which consolidated return year any corporation
other than Target also was a member of the Affiliated Group).
(iv) Each of the Sellers agree to indemnify Buyer
from and against the entirety of any transfer, stamp or similar Taxes
that which may become due and owing to any Governmental Authority by
reason of the sale of Target to Buyer.
(v) Each of the Sellers shall be liable for, and
hereby indemnifies, Buyer for all income Taxes imposed on Target with
respect to any taxable year or period ending on or before the Closing
Date or beginning before and ending after the Closing Date
("PRE-CLOSING TAXES"); provided, however, that such indemnity shall be
made only to the extent Pre-Closing Taxes are in excess of the
reserve; if any, for such Tax Liability as reflected in
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the Financial Statements or in the computation of the Net Working
Capital. In order to apportion appropriately any income Taxes
relating to any taxable year or period that begins before and ends
after the Closing Date, the Parties hereto shall, to the extent
permitted or not prohibited by applicable law, elect with the
relevant taxing authority, if required or necessary, to terminate the
taxable year of Target as of the Closing Date. In any case where
applicable law does not permit Target to treat such date as the end
of a taxable year or period, then whenever it is necessary to
determine the liability for income Taxes of Target, for a portion of
a taxable year or period, such determination shall (unless otherwise
agree to in writing by Buyer and the Sellers) be determined by a
closing of Target' books, except that exemptions, allowances or
deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a time basis. In
no event shall such apportionment of income Taxes be greater than the
income Taxes which would have been allocated to Target if such income
Taxes had been based upon a time period in proportion to the number
of days during such taxable year or period the Sellers and Buyer
owned the stock in Target.
(vi) Each of the Sellers agrees to indemnify Buyer
from and against the entirety of any Liability of Target relating to
claims incurred but not submitted prior to Closing relating to
Target's self insured vision employee benefit plan to the extent that
such Liability is in excess of the reserve relating to any such
Liability accrued on the financial statements of Target as of June 30,
1998 and used in the determination of Net Working Capital of Target as
of June 30, 1998 as provided in Section 2(c) of this Agreement.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS. In
the event Buyer breaches any of its representations, warranties, and covenants
contained herein, and provided that any of the Sellers makes a written claim
for indemnification against Buyer pursuant to Section 10(h) below within the
applicable survival period as set forth in Section 8(a), then Buyer agrees to
indemnify each of the Sellers from and against the entirety of any Adverse
Consequences Seller may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences Seller may suffer after the
end of the applicable survival period) resulting from, arising out of, relating
to, in the nature of, or caused by the breach.
(d) MATTERS INVOLVING THIRD PARTIES. If any third party shall
notify any Party (the "INDEMNIFIED PARTY") with respect to any matter which may
give rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Section 8, then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party thereby is
damaged. In the event any Indemnifying Party notifies the Indemnified Party
within thirty (30) days after the Indemnified Party has given notice of the
matter that the Indemnifying party is assuming the defense thereof, (A) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the
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Xxxxxxxxxxx Xxxxx, (X) the Indemnified Party may retain separate co-counsel at
its sole cost and expense (except that the Indemnifying Party will be
responsible for the fees and expenses of the separate co-counsel to the extent
the Indemnified Party reasonably concludes that the counsel the Indemnifying
Party has selected has a conflict of interest), (C) the Indemnified Party will
not consent to the entry of any judgment or enter into any settlement with
respect to the matter without the written consent of the Indemnifying Party
(not to be withheld unreasonably), and (D) the Indemnifying Party will not
consent to the entry of any judgment with respect to the matter, or enter into
any settlement which does not include a provision whereby the plaintiff or
claimant in the matter releases the Indemnified Party from all Liability with
respect thereto, without the written consent of the Indemnified Party (not to
be withheld unreasonably). In the event no Indemnifying Party notifies the
Indemnified Party within thirty (30) days after the Indemnified Party has given
notice of the matter that the Indemnifying Party is assuming the defense
thereof, however, the Indemnified Party may defend against, or enter into any
settlement with respect to, the matter in any manner it reasonably may deem
appropriate. At any time after commencement of any such action, any
Indemnifying Party may request an Indemnified Party to accept a bona fide offer
from the other Parties to the action for a monetary settlement payable solely
by such Indemnifying Party (which does not burden or restrict the Indemnified
Party nor otherwise prejudice him or her) whereupon such action shall be taken
unless the Indemnified Party determines that the dispute should be continued,
the Indemnifying Party shall be liable for indemnity hereunder only to the
extent of the lesser of (i) the amount of the settlement offer or (ii) the
amount for which the Indemnified Party may be liable with respect to such
action. In addition, the Party controlling the defense of any third party claim
shall deliver, or cause to be delivered, to the other Party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of the third party
claim, and timely notices of, and the right to participate in (as an observer)
any hearing or other court proceeding relating to the third party claim.
(e) DETERMINATION OF LOSS. The amount of indemnification to
be paid by any Party to another Party hereto shall be reduced by (i) any
insurance proceeds received, including both defense and indemnification costs,
with respect to any insurance policy maintained by Target providing coverage
with respect to any of the Adverse Consequences; and (ii) any Tax benefits
received by Buyer as a result of any of the Adverse Consequences (utilizing the
Applicable Rate as the discount rate). All indemnification payments under this
Section 8 shall be deemed adjustments to the Purchase Price.
(f) EXCLUSIVE REMEDY. Buyer and Seller acknowledge and agree
that the foregoing indemnification provisions in this Section 8 shall be the
exclusive remedy of both Buyer and the Sellers for any breach of the
representations and warranties of either Party.
(g) PAYMENT. The Indemnifying Parties shall promptly pay to
Buyer or such other Indemnified Party as may be entitled to indemnity hereunder
in cash the amount of any Adverse Consequences to which Buyer or such
Indemnified Party may become entitled to by reason of the provisions of this
Agreement.
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(h) TAX DISPUTES. In the event that any dispute arises
between Target and the Internal Revenue Service or any state tax authority
relating to an issue in which the Sellers have agreed to indemnify Buyer, the
Sellers shall have the right to associate with Buyer in the defense or
settlement of any such claims. Moreover, Buyer at all times shall act in good
faith in order to minimize the tax liability as to issues in which the Sellers
have agreed to indemnify Buyer (so long as it does not adversely affect Target)
and shall not settle or compromise any claims without the consent of the
Sellers, which consent shall not be unreasonably withheld.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of the Parties may
terminate this Agreement at any time prior to the Closing as provided below:
(i) Buyer and the Sellers may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving
written notice to the Sellers at any time prior to the Closing in the
event any of the Sellers is in breach, and the Sellers may terminate
this Agreement by giving written notice to Buyer at any time prior to
the Closing in the event Buyer is in breach of any material
representation, warranty, or covenant contained in this Agreement in
any material respect;
(iii) [Reserved.];
(iv) Buyer may terminate this Agreement at any time
prior to the Closing by giving written notice to the Sellers within
twenty (20) days of the date of this Agreement if Buyer is not
reasonably satisfied with the results of its continuing business,
legal and accounting due diligence to that date, including but not
limited to each and every item set forth on each Disclosure Schedule
delivered by the Sellers to Buyer.
(v) No later than five (5) days from the date which
Buyer is notified by the Sellers that it may contact key employees and
customers of Target, Buyer may terminate this Agreement by giving
written notice to the Sellers if Buyer is not reasonably satisfied
with the results of its interviews with the key employees and/or
customers of Target as provided for in Section 5(e)(ii) hereof.
(vi) Buyer may terminate this Agreement by giving
written notice to the Sellers at any time prior to the Closing if the
Closing shall not have occurred on or before July 30, 1998 by reason
of the failure of any condition precedent under Section 7(a) hereof
(unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); or
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(vii) The Sellers may terminate this Agreement by
giving written notice to Buyer at any time prior to the Closing if the
Closing shall not have occurred on or before July 30, 1998 by reason
of the failure of any condition precedent under Section 7(b) hereof
(unless the failure results primarily from any of the Sellers
themselves breaching any representation, warranty, or covenant
contained in this Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to Section 9(a) above, all obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party. Upon termination, Buyer shall return or destroy all confidential
documents, notes or other written memoranda regarding Target delivered in
connection with the transactions contemplated hereby within five (5) business
days thereafter.
10. MISCELLANEOUS.
(a) THE SELLERS.
(i) When any particular Seller (as opposed to the
Sellers as a group) makes a representation, warranty, or covenant
herein, then that representation, warranty, or covenant will be
referred to herein as the "SEVERAL" obligation of such Sellers. This
means that the particular Seller making the representation, warranty,
or covenant will be solely responsible for any Adverse Consequences
Buyer may suffer resulting from, arising out of, relating to, in the
nature of, or caused by any breach thereof. The covenants of each of
Sellers in Section 2(a) above concerning the sale of his Shares to
Buyer and the representations and warranties of each of Sellers in
Section 3(a) above concerning the transaction are the Several
obligations of Sellers.
(ii) When the Sellers as a group make a
representation, warranty, or covenant herein, then that
representation, warranty, or covenant will be referred to herein as
the "JOINT AND SEVERAL" obligation of Sellers. This means that each
Seller will be responsible for the entirety of any Adverse
Consequences Buyer may suffer resulting from, arising out of, relating
to, in the nature of, or caused by any breach thereof. The
representations and warranties of Sellers in Section 4 above
concerning Target are examples of Joint and Several obligations.
(b) PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue
any press release or announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of Buyer and
the Sellers; provided, however, that any Party may make any public disclosure
it believes in good faith is required by law or regulation (in which case the
disclosing Party will advise the other Parties prior to making the disclosure).
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(c) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(d) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, that may have related in any way to the subject
matter hereof.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of his or its rights, interests, or obligations hereunder
without the prior written approval of Buyer and the Sellers; provided, however,
that Buyer may (i) assign any or all of its rights and interests hereunder to a
wholly-owned subsidiary of Buyer (in any or all of which cases Buyer
nonetheless shall remain liable and responsible for the performance of all of
its obligations hereunder).
(f) FACSIMILE/COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. A facsimile,
telecopy or other reproduction of this Agreement may be executed by one or more
parties hereto, and an executed copy of this Agreement may be delivered by one
or more parties hereto by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be considered valid,
binding and effective for all purposes. At the request of any party hereto, all
parties hereto agree to execute an original of this Agreement and provide such
requesting party with a full set of original signature pages for each of the
parties hereto other than the requesting party within two (2) days of the
original execution date hereof.
(g) HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to a Seller:
at the address shown for such Seller on Section 4(b)
of the Disclosure Schedule.
ADVANCED INFORMATION SOLUTIONS, INC.
STOCK PURCHASE AGREEMENT
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with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
X'Xxxxxx & Xxxxxx
00 X. XxXxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: 312/000-0000
Facsimile: 312/580-0923
If to Buyer:
Metamor Worldwide, Inc.
0000 Xxxx Xxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxxx X. Xxxx, Esq.
Metamor Worldwide, Inc.
0000 Xxxx Xxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts)
of the State of Texas.
(j) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Buyer and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant
ADVANCED INFORMATION SOLUTIONS, INC.
STOCK PURCHASE AGREEMENT
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51
hereunder, whether intentional or not, shall be deemed to extend to any prior
or subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgement of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(l) EXPENSES. Each of Buyer and the Sellers will bear his or
its own costs and expenses (including legal and investment banking fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(m) CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any Party. Any
reference to any statute or law of any Governmental Authority shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of specificity)
which the Party has not breached shall not detract from or mitigate the fact
that the Party is in breach of the first representation, warranty, or covenant.
(n) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
(o) SPECIFIC PERFORMANCE. Each of the Parties acknowledges
and agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 10(p) below), in addition to any other remedy to which they
may be entitled, at law or in equity.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER:
METAMOR WORLDWIDE, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President
and Secretary
TARGET:
ADVANCED INFORMATION SOLUTIONS, INC.
By: /s/ Xxxxxx X. Xxxxx, Xx.
---------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: President and Assistant
Secretary
SELLERS:
/s/ Xxxxxx X. Xxxxx, Xx.
-------------------------------------
Xxxxxx X. Xxxxx, Xx.
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxxx
ADVANCED INFORMATION SOLUTIONS, INC.
STOCK PURCHASE AGREEMENT
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