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EXHIBIT 10.42
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered
into as of March 1, 2000, by and among Xxxxx Systems Corporation, a Delaware
corporation ("PSC"), PSSC Acquisition Corporation, a Delaware corporation and
wholly owned subsidiary of PSC ("Acquisition Sub"), Solutions Consulting Inc., a
Pennsylvania corporation (the "Company"), Xxxx X. Xxxxxx (the "Principal
Shareholder"), and Xxxxxxx X. Xxxxxxxx ("SBF").
BACKGROUND
The Company and the Principal Shareholder are referred to collectively
as the "Sellers," and PSC and Acquisition Sub are referred to collectively as
the "Buyers."
The Company desires to sell substantially all of the assets used in the
business of the Company to Acquisition Sub, and Acquisition Sub desires to
purchase such assets from the Company, on the terms and subject to the
conditions set forth in this Agreement.
The Principal Shareholder will receive substantial direct and indirect
benefits from the transactions contemplated by this Agreement, and Buyers have
required that the Principal Shareholder enter into this Agreement as a condition
to PSC's and Acquisition Sub's execution of this Agreement.
THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
PURCHASE OF ASSETS
1.1 Purchase of Assets. At the Closing (as defined in Section 1.6), the
Company agrees to sell, transfer, assign, and deliver to Acquisition Sub the
Assets (as defined below), and Acquisition Sub agrees to purchase and take the
Assets, on the terms and subject to the conditions set forth in this Agreement.
Subject to the provisions of Section 1.2, the term "Assets" means all tangible
and intangible assets used in the business of the Company, including without
limitation, all cash, accounts receivable, inventory, materials, equipment, real
property, fixtures, furnishings, leasehold rights, leasehold improvements,
vehicles, prepaid assets, contract rights (including, without limitation,
insurance policies other than builder's risk insurance, directors and officers
insurance, roll-off policies), licenses, permits, customer, prospect and
marketing lists, sales data, records, computer software and software licenses,
proprietary information, intellectual property, trade secrets, trademarks and
trade names (including all rights to the name "Solutions Consulting"),
copyrights, goodwill associated with the business and assets of the Company,
material and manufacturing specifications, drawings and designs
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owned by the Company or acquired by the Company after the date of this Agreement
and prior to the Closing, and specifically including (without limitation):
(a) all assets listed on Schedule 2.4(a) as being owned by the
Company;
(b) all assets reflected on the Latest Balance Sheet (as
defined in Section 2.8) or acquired by the Company after the date of
the Latest Balance Sheet, except those sold for full value to
unaffiliated Persons (as defined in Section 2.12) in the ordinary
course of business of the Company after the date of the Latest Balance
Sheet and the Headquarters Building (as defined in Section 4.21) if
sold pursuant to Section 4.21;
(c) the Registered Intellectual Property (as defined in
Section 2.21); and
(d) all rights of the Company under non-competition,
confidentiality, and similar agreements.
1.2 Excluded Assets. Notwithstanding the provisions of Section 1.1, the
Assets will exclude the following (the "Excluded Assets"):
(a) $150,000 of cash to be retained by the Company at the
Closing (the "Reserve");
(b) the Company's rights under this Agreement and the other
Seller Documents (as defined in Section 2.2), including, without
limitation, the consideration to be paid to the Company hereunder;
(c) the Company's 401(k) Profit Sharing Plan (the "401(k)
Plan") and the Company's Employee Stock Ownership Plan (the "ESOP");
and
(d) the minute books, corporate seal, and stock records of the
Company.
1.3 Assumed Liabilities. Acquisition Sub will assume the direct or
indirect debts, obligations, and liabilities of the Company of any nature,
whether absolute, accrued, contingent, liquidated, or otherwise, and whether due
or to become due, asserted, or unasserted, known or unknown, incurred through
the Closing Date (as defined in Section 1.6) (collectively, "Liabilities") that
are described below (the "Assumed Liabilities"):
(a) Liabilities as shown on the Latest Balance Sheet Date (as
defined in Section 2.8) that remain at Closing;
(b) Liabilities incurred by the Company under (i) agreements
entered into in the ordinary course of business of the Company prior to
the Closing and (ii) the Material Agreements identified in Schedule
2.19(a)(i);
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(c) Liabilities arising from or related to the formation,
qualification or operation of the 401(k) Plan or the ESOP (i) prior to
the date hereof or (ii) incurred in the ordinary course of business of
the Company from the date hereof through the Closing;
(d) Liabilities arising from the obligation of the Company to
indemnify the Principal Shareholder in his capacity as a director and
officer of the Company under the articles of incorporation and the
bylaws of the Company as in effect on February 1, 2000 incurred as a
director or officer other than Liability as a director or officer with
respect to actions taken or omitted in connection with this Agreement
and the other Seller Documents; and
(e) All Liabilities set forth on the Sellers' Disclosure
Schedules (other than Liabilities relating to the Headquarters Building
(as defined in Section 4.21)).
1.4 Excluded Liabilities. Notwithstanding the terms of Section 1.3 or
the other terms of this Agreement, the Assumed Liabilities will not include the
following specifically identified Liabilities (collectively, the "Excluded
Liabilities"):
(a) Liabilities associated with the operation of the 401(k)
Plan and the ESOP other than those set forth in Section 1.3(c) above;
(b) any Liability arising out of or attributable to the
operations of the Company after the Closing or the use of the Excluded
Assets;
(c) any Liability associated with the Headquarters Building;
and
(d) any other Liability that is not an Assumed Liability.
1.5 Consideration. As consideration in full for the acquisition of the
Assets from the Company, Acquisition Sub will assume the Assumed Liabilities and
pay the Company the consideration referred to below, (collectively, the
"Purchase Price"). The Purchase Price will be payable as follows:
(a) $72,100,000 of the Purchase Price will be paid at the
Closing by wire transfer of immediately available funds (to accounts
specified in writing by the Company to Acquisition Sub at least two
days prior to the Closing); and
(b) 1,965,602 (the "Shares") of PSC's Class A common stock,
$.01 par value per share (the "Common Stock"). The sale of the Shares
will be subject to the Registration Statement (as defined in Section
4.16). The Shares will be listed on The New York Stock Exchange (the
"NYSE"), and will be subject to transfer and trading restrictions
contained in a lock-up agreement or otherwise set forth on the
certificates representing the Shares, as contemplated by Section 4.22.
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1.6 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement will take place at the offices of Xxxxxx & Xxxx,
L.L.P., 0000 Xxxx Xx., Xxxxx 0000, Xxxxxx, Xxxxx (or such other place as the
parties may agree) at 10:00 a.m. local time on March 31, 2000, or at such other
date, time, and place as is mutually agreed among the parties or, if all of the
conditions to the obligations of the parties set forth in Article V have not
been satisfied or waived by March 31, 2000 and there is no agreement among the
parties, on the day that is two Business Days (as defined below) following the
date on which all such conditions have been satisfied or waived (such date and
time of closing being called the "Closing Date"). As used herein, the term
"Business Day" means any day other than a Saturday, Sunday or Federal holiday.
1.7 Closing Deliveries. At the Closing,
(a) PSC will cause the Acquisition Sub to pay the cash portion
of the Purchase Price specified in Section 1.5(a) to the Company;
(b) PSC will cause the Acquisition Sub to deliver the Shares
specified in Section 1.5(b) to the Company;
(c) the Company will execute and deliver to Acquisition Sub a
Xxxx of Sale conveying the Assets to Acquisition Sub substantially in
the form agreed by the parties on the date of this Agreement;
(d) the Company will execute and deliver to Acquisition Sub an
Assignment of Intellectual Property conveying all registered patents,
copyrights, trademarks, trade names, and service marks included within
the Assets, substantially in the form of agreed by the parties on the
date of this Agreement;
(e) Acquisition Sub and the Company will execute and deliver
to one another an Assumption Agreement, substantially in the form
agreed by the parties on the date of this Agreement;
(f) the Company will execute and deliver to Acquisition Sub
any certificates of title necessary to effect or record the transfer of
any vehicles or other Assets for which ownership is evidenced by a
certificate of title;
(g) the Company will deliver to Acquisition Sub or otherwise
make available the originals or copies of all of the Company's books,
records, ledgers, disks, proprietary information, and other data and
all other written or electronic depositories of information relating to
the Assets; and
(h) Sellers and Buyers, as applicable, will execute and
deliver the other Seller Documents (as defined in Section 2.2) and the
other Buyer Documents (as defined in Section 3.2).
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyers as follows:
2.1 Organization. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of Pennsylvania and has full power
to own its properties and to conduct its business as presently conducted. The
Company is duly authorized, qualified, or licensed to do business and is in good
standing in each state or other jurisdiction in which its assets are located or
in which its business or operations as presently conducted make such
authorization, qualification, or licensing necessary except in those
jurisdictions where failure to qualify would not have a material adverse effect
on the Company or the Assets (a "Material Adverse Effect"). The Company is
qualified to do business as a foreign corporation only in the jurisdictions set
forth on Schedule 2.1. Set forth on Schedule 2.1 is a list of all assumed names
under which the Company operates and all jurisdictions in which any of the
assumed names are registered.
2.2 Authority. Each of Sellers has all requisite power and authority,
corporate or otherwise, to execute, deliver, and perform under this Agreement
and the other agreements, certificates, and instruments to be executed by any of
them in connection with or pursuant to this Agreement (collectively, the "Seller
Documents"). The execution, delivery, and performance by each of Sellers of each
Seller Document to which any of them is a party has been duly authorized by all
necessary action, corporate or otherwise, on the part of each such Seller and
any security or equity holders of the Company. This Agreement has been, and at
the Closing the other Seller Documents will be, duly executed and delivered by
each Seller (to the extent each is a party thereto). This Agreement is, and each
of the other Seller Documents will be, a legal, valid, and binding agreement of
each Seller, enforceable against each Seller in accordance with their respective
terms.
2.3 Organic Documents. The Company has provided Buyers a true, correct,
and complete copy of the Company's articles of incorporation, bylaws, minute
books and stock record books.
2.4 Title to Assets.
(a) Set forth in Schedule 2.4(a) is a complete list (including
the street address, where applicable) of (i) all real property owned by
the Company; (ii) all real property leased by the Company; and (iii)
each vehicle owned or leased by the Company. The Company has provided
Buyers with a true and materially correct copy of the detailed asset
list of the Company.
(b) The Company has good and marketable title to all of the
Assets (including Registered Intellectual Property (as defined in
Section 2.21), but excluding the other Intellectual Property (as
defined in Section 2.21)) and owns all of the Assets free and clear of
any obligation, lien, claim, pledge, security interest, liability,
charge, contingency, or other encumbrance or claim of any nature,
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other than (i) statutory liens securing current taxes and other
obligations that are not yet delinquent; (ii) minor imperfections of
title and encumbrances that do not materially detract from or interfere
with the present use and value of the Assets; and (iii) other matters
described in Schedule 2.4(b) (collectively, "Liens"). The execution and
delivery of the Seller Documents by the parties thereto at the Closing
will convey to and vest in Acquisition Sub good and marketable title to
the Assets, free and clear of any Liens except those described in
Schedule 2.4(b). The Company holds a valid leasehold interest in all
leased assets that are included within the Assets.
(c) The real property owned by the Company (the "Real
Property") is zoned for a classification that permits the continued use
of the Real Property in the manner currently used by the Company.
Improvements included in the Assets were constructed in full compliance
with, and remain in compliance with, all applicable laws, statutes,
regulations, codes, covenants, conditions, and restrictions affecting
the Real Property in all material respects. Except as disclosed on
Schedule 2.4(c), final certificates of occupancy have been issued for
the improvements on the Real Property permitting the existing use of
such improvements. There are no actions pending or, to the Company's
Knowledge (as defined in Section 7.10), threatened that would alter the
current zoning classification of the Real Property or alter any
applicable Laws, codes, covenants, conditions, or restrictions that
would adversely affect the use of the Real Property in the Company's
business. Sellers have not received notice from any insurance company
or Governmental Body (as defined in Section 2.7) of any defects or
inadequacies in the Real Property or the improvements thereon that
would adversely affect the insurability or usability of the Real
Property or such improvements or prevent the issuance of new insurance
policies thereon at rates not materially higher than present rates. To
the Company's Knowledge, no fact or condition exists that would result
in the discontinuation of necessary utilities or services to the Real
Property or the termination of current access to and from the Real
Property. The Principal Shareholder is not a "foreign person" as that
term is defined in Section 1445 of the Internal Revenue Code of 1986,
as amended (the "Code"), and applicable regulations.
2.5 Sufficiency of Assets. The Assets, other than the Excluded Assets,
constitute all assets material to the conduct of the business of the Company.
The Assets will be sufficient to carry on the business of the Company after
Closing without material interruption or disruption.
2.6 No Violation. Except for the approval of the shareholders of the
Company, and except as described in Schedule 2.6, neither the execution or
delivery of the Seller Documents nor the consummation of the transactions
contemplated by the Seller Documents, including without limitation the sale of
the Assets to Acquisition Sub, will conflict with or result in the breach of any
term or provision of, or violate or constitute a default under (or an event that
with notice or lapse of time or both would constitute a breach or default), or
result in the creation of any Lien on the Assets, or relieve any third
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party of any obligation to the Company, or give any third party the right to
terminate or accelerate any obligation under, any charter provision, bylaw,
Material Agreement (as defined in Section 2.19), Permit (as defined in Section
2.14), Law to which the Company is a party or by which the Company or the Assets
is in any way bound or obligated. Except as described in Schedule 2.6, by
closing the transactions contemplated hereby, the Company represents and
warrants that all consents and approvals of its shareholders and its security or
equity holders have been obtained. Except as described in Schedule 2.6, and
except for any agreement, arrangement or understanding that is terminable
without cause upon ninety (90) days or less notice, neither the Principal
Shareholder, the Company, nor any other person having colorable authority to
bind the Company or to enter into any obligation with respect to the Assets has
entered into any agreement, arrangement or understanding that purports to grant
to any Person any right to approve of, or consent to any transaction
contemplated by this Agreement or that alters or accelerates any obligation of
the Company or affecting the Assets upon the consummation of the transactions
contemplated by this Agreement, except where the failure to obtain such approval
or consent, or where any such alteration, acceleration of affect would not have
a material adverse effect on the business of the Company.
2.7 Governmental Consents. Except as set forth in Schedule 2.7, and
except as required in connection with the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), no consent, approval,
order, or authorization of, or registration, qualification, designation,
declaration, or filing with, any governmental or quasi-governmental agency,
authority, commission, board, or other body (collectively, a "Governmental
Body") is required on the part of Sellers in connection with the transfer of any
Permits or other Assets to Acquisition Sub or any of the other transactions
contemplated by the Seller Documents.
2.8 Financial Statements.
(a) The Company has previously delivered to Buyers a true and
complete copy of (i) the audited balance sheet of the Company (the
"Latest Balance Sheet") as of December 31, 1999 (the "Latest Balance
Sheet Date") and the related audited statements of operations and cash
flow for the year then ended (collectively, the "1999 Financial
Statements"), and (ii) the audited balance sheets of the Company as
December 31, 1998 and 1997 and the related audited statements of
operations and cash flow for the years then ended ((i) and (ii)
collectively, the "Financial Statements"). Except as set forth on
Schedule 2.8(a), the Financial Statements present fairly the financial
condition of the Company at the dates specified and the results of its
operations for the periods specified and have been prepared in
accordance with generally accepted accounting principles, consistently
applied ("GAAP"). Except as set forth on Schedule 2.8(a), the Financial
Statements do not contain any items of a special or nonrecurring
nature, except as expressly stated in the Financial Statements. The
Financial Statements have been prepared from the books and records of
the Company, which accurately and fairly reflect the transactions of,
acquisitions, and dispositions of assets by, and incurrence of
liabilities by the Company.
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(b) The Company has no Liabilities except for (i) Liabilities
reflected on the Latest Balance Sheet, (ii) current liabilities
incurred in the ordinary course of business of the Company after the
Latest Balance Sheet Date, and (iii) obligations incurred in the
ordinary course of business of the Company under the Material
Agreements and under other agreements entered into by the Company in
the ordinary course of business of the Company that are not included
within the definition of Material Agreements set forth in Section 2.19,
which Liabilities are not required by GAAP to be reflected in the
Latest Balance Sheet.
(c) All accounts receivable reflected in the Latest Balance
Sheet or included in the Assets arose in the ordinary course of
business of the Company and are due and owing in the face amount
thereof less any reserves reflected on the Latest Balance Sheet, and
the Company has no reason to believe that such amounts are not
substantially collectible in full in the ordinary course of business of
the Company.
(d) Prior to the Latest Balance Sheet Date, the Company did
not enter into any agreement in the ordinary course of its business
that resulted in a Liability that is materially disadvantageous to the
Company that is not reflected in the Latest Balance Sheet.
2.9 Subsidiaries and Investments. Except as reflected on the Latest
Balance Sheet, the Company does not own or hold any direct or indirect equity or
debt interest or any form of proprietary interest in any other Person or option
to acquire any such interest.
2.10 Absence of Material Adverse Change. Since the Latest Balance Sheet
Date, except as specifically contemplated by this Agreement and as disclosed in
Schedule 2.10, there has not been (a) any material adverse change in the
condition (financial or otherwise), results of operations, business, assets, or
Liabilities of the Company or with respect to the manner in which the Company
conducts its business or operations; (b) any declaration, setting aside, or
payment of any dividends or distributions in respect of any equity capital of
the Company or any redemption, purchase, or other acquisition by the Company of
any of its equity capital; (c) any payment or transfer of assets (including
without limitation any distribution or any repayment of indebtedness) to or for
the benefit of any security holder of the Company, other than compensation and
expense reimbursements paid in the ordinary course of business of the Company;
(d) any revaluation by the Company of any of its assets, including, without
limitation, the writing down or off of notes or accounts receivable, other than
in the ordinary course of business of the Company; (e) any entry by the Company
into any commitment or transaction outside of the ordinary course of business of
the Company including, without limitation, incurring or agreeing to incur
capital expenditures in excess of $100,000, individually or in the aggregate;
(f) any increase in indebtedness for borrowed money; (g) any breach or default
(or event that with notice or lapse of time would constitute a breach or
default), termination, or threatened termination under any Material Agreement by
the Company, or, to the Company's Knowledge, by any third party; (h) any change
by the Company in its
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accounting methods, principles, or practices; (i) any increase in the benefits
under, or the establishment or amendment of, any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, or other employee
benefit plan, or any increase in the compensation payable or to become payable
to directors, officers, employees, or consultants of the Company, except for
annual merit increases in salaries or wages; (j) the termination of employment
(whether voluntary or involuntary) of any officer or key employee of the Company
or the termination of employment (whether voluntary or involuntary) of employees
of the Company materially in excess of historical attrition in personnel; (k)
any theft, condemnation, or eminent domain proceeding or any material damage,
destruction, or casualty loss affecting any asset used in the business of the
Company, whether or not covered by insurance; (l) any sale, assignment, or
transfer of any asset used in the business of the Company, except sales of
services in the ordinary course of business of the Company; (m) any waiver by
the Company or the shareholders of the Company of any material rights related to
the Company's business, operations, or assets; (n) any other transaction,
agreement or commitment entered into or affecting the Company's business,
operations, or assets, except in the ordinary course of business of the Company;
or (o) any agreement or understanding to do or resulting in any of the
foregoing.
2.11 Taxes.
(a) Except as set forth in Schedule 2.11(a), all required
federal, state, local, and other Tax (as defined in Section 2.11(b))
returns, notices, and reports (including without limitation income,
property, sales, use, franchise, withholding, social security, and
unemployment Tax returns) relating to or involving transactions with
the Company have been accurately prepared and duly and timely filed,
and all Taxes required to be paid by the Company with respect to the
periods covered by any such returns have been timely paid or reserved
for in the Financial Statements. No Tax deficiency has been proposed or
assessed against the Company, and the Company has not executed any
waiver of any statute of limitations on the assessment or collection of
any Tax. No Tax audit, action, suit, proceeding, investigation, or
claim is now pending or, to the Company's Knowledge, threatened against
the Company, and no issue or question has been raised (and is currently
pending) by any taxing authority in connection with the Company's Tax
returns or reports. Except as set forth in Schedule 2.11(a), the
Company has withheld or collected from each payment made to each of its
employees or contractors the full amount of all Taxes required to be
withheld or collected therefrom and has paid the same to the proper Tax
receiving officers or authorized depositaries. The Company is, and has
been since October 1, 1994, a validly electing "S corporation" for
purposes of the Internal Revenue Code of 1986, as amended (and its
predecessor statutes) (the "Code"). The Company does not own any assets
the sale of which would impose tax on the Company pursuant to section
1374 of the Code, and no taxes have ever been, or will be for periods
through the Closing Date, imposed on the Company pursuant to section
1375 of the Code.
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(b) "Tax" or "Taxes" means any and all taxes, charges, fees,
levies, assessments, duties, or other amounts payable to any federal,
state, local, or foreign taxing authority or agency, including, without
limitation, (i) income, franchise, profits, gross receipts, minimum,
alternative minimum, estimated, ad valorem, value added, sales, use,
service, real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers
compensation, unemployment compensation, utility, severance, excise,
stamp, windfall profits, transfer, gift and gains taxes; (ii) customs,
duties, imposts, charges, levies, or other similar assessments of any
kind; and (iii) interest, penalties, and additions to Tax imposed with
respect thereto.
2.12 Litigation. Except as described in Schedule 2.12, there are no
pending or, to the Company's Knowledge, threatened, lawsuits, administrative
proceedings, or reviews, or formal or informal complaints or investigations by
any individual, corporation, partnership, Governmental Body, or other entity (a
"Person") against or that could result in any Liability of the Company or any of
its directors, officers, employees, agents, or affiliates (in their capacities
as such) or to which any of the Assets are subject or relating to the
transactions contemplated by this Agreement or the consummation thereof. The
Company is not subject to or bound by any currently existing judgment, order,
writ, injunction, or decree.
2.13 Compliance with Laws. Except as set forth in Schedule 2.13, the
Company is currently complying with and has at all times complied with each
applicable statute, law, ordinance, decree, order, rule, or regulation of any
Governmental Body, including without limitation all federal, state, and local
laws relating to zoning and land use, occupational health and safety, product
quality and safety, and employment and labor matters (collectively, "Laws").
2.14 Permits. The Company owns or possesses from each appropriate
Governmental Body all right, title, and interest in and to all material permits,
licenses, authorizations, approvals, quality certifications, franchises, or
rights (collectively, "Permits") issued by any Governmental Body necessary to
conduct the business of the Company, including without limitation, Permits
associated with the construction of the Headquarters Building. Each of such
Permits is described in Schedule 2.14 and is included within the Assets. No loss
or expiration of any such Permit is, on account of the transactions contemplated
by this Agreement or otherwise, pending or, to the Company's Knowledge,
threatened other than expiration in accordance with the terms thereof of Permits
that may be renewed in the ordinary course of business of the Company without
lapsing.
2.15 Environmental Matters.
(a) Without limiting the generality of the other
representations and warranties set forth in this Article II, (i) the
Company has conducted its business in compliance with all applicable
Environmental Laws, including without limitation by having all Permits
required under any Environmental Laws for the operation of the
Company's business; (ii) none of the Real Property contains any
Hazardous
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Substance in amounts exceeding the levels permitted by applicable
Environmental Laws; (iii) Sellers have not received any notices, demand
letters, or requests for information from any Governmental Body or
other Person indicating that the Company is or may be in violation of,
or liable under, any Environmental Law or relating to any of the Assets
or former assets of the Company; (iv) no reports have been filed, or
are required to be filed, by (or relating to) the Company concerning
the release or threatened release of any Hazardous Substance or the
threatened or actual violation of any Environmental Law; (v) no
Hazardous Substance has been disposed of, released or transported in
violation of any applicable Environmental Law to or from any Real
Property or as a result of any activity of Sellers; (vi) there have
been no environmental investigations, studies, audits, tests, reviews,
or other analyses regarding compliance or noncompliance with any
Environmental Law conducted by or for or which are in the possession of
Sellers relating to the activities of the Company or any of the Real
Property that have not been delivered or disclosed to Buyer; (vii)
there are no underground storage tanks on, in, or under any of the Real
Property, and no underground storage tanks have been closed or removed
from any of the Real Property; (viii) there is no asbestos present in
any of the Real Property, and no asbestos has been removed from any of
the Real Property; (ix) neither the Company nor any of the Assets are
subject to any Liabilities or expenditures relating to any suit,
settlement, court order, administrative order, regulatory requirement,
judgment, or claim asserted or arising under any Environmental Law; and
(x) to the Company's Knowledge, no Hazardous Substance is present and
there are no violations of any Environmental Laws involving property
adjacent to the Real Property.
(b) As used in this Agreement, "Environmental Law" means any
federal, state, local or foreign law, statute, ordinance, rule,
regulation, Permit, order, judgment, decree, requirement, or agreement
with any Governmental Body relating to (i) the protection, preservation
or restoration of the environment, (ii) the use, storage, generation,
transportation, processing, production, release, or disposal of
Hazardous Substances, or (iii) the protection or preservation of public
health, in each case as amended and in effect on the date of the
Closing.
(c) As used in this Agreement, "Hazardous Substance" means any
substance presently or hereafter listed, defined, designated, or
classified as hazardous, toxic, radioactive, or dangerous under any
Environmental Law. Hazardous Substance includes any substance to which
exposure is regulated by any Governmental Body or any Environmental
Law, including without limitation any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste,
special waste, industrial substance, or petroleum or any derivative or
by-product thereof, radon, radioactive material, asbestos, or asbestos
containing material, urea formaldehyde, foam insulation, lead, or
polychlorinated biphenyls.
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2.16 Employee Matters. The Company has delivered to Buyers as of the
date of this Agreement a complete list of all current employees of the Company,
including date of employment, and compensation. The Company has no collective
bargaining, union, or labor agreements, contracts, or other arrangements with
any group of employees, labor union, or employee representative and to the
Company's Knowledge there is no organization effort currently being made or, to
the Company's Knowledge, threatened by or on behalf of any labor union with
respect to employees of the Company.
2.17 Employee Benefit Plans.
(a) Set forth in Schedule 2.17(a) is a complete and correct
list of all "employee benefit plans" (as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), copies
of which have been delivered to Buyers as of the date hereof, all plans
or policies providing for "fringe benefits" (including but not limited
to vacation, paid holidays, personal leave, employee discount,
educational benefit, or similar programs), and all other bonus,
incentive, compensation, profit-sharing, stock, severance, retirement,
health, life, disability, group insurance, employment, fringe benefit,
or any other similar plan, agreement, policy, or understanding (whether
written or oral, qualified or nonqualified, currently effective or
terminated), and any trust, escrow, or other agreement related thereto,
which (a) is maintained or contributed to by the Company, or with
respect to which the Company has or may have any liability or (b)
provides benefits, or describes policies or procedures applicable, to
any director, former director, consultant, former consultant, officer,
employee, former officer, or former employee of the Company, or the
dependents of any thereof, regardless of whether funded (the "Employee
Plans"). Except as set forth in the Latest Balance Sheet, the Company
does not have any liability for accrued employee leave used for
vacation, sick leave, urgent business, or other reasons. No written or
oral representations have been made to any employee or former employee
of the Company promising or guaranteeing any employer payment or
funding for the continuation of medical, dental, life, or disability
coverage for any period of time beyond the end of the current plan year
(except to the extent of coverage required under Code Section 4980B).
Except as set forth in Schedule 2.17(a), the consummation of the
transactions contemplated by this Agreement will not accelerate the
time of payment or vesting, or increase the amount of compensation due
to any director, former director, consultant, former consultant,
employee, officer, former employee, or former officer of the Company.
(b) With respect to each "employee benefit plan" (as defined
in ERISA) maintained or contributed to, currently or in the past by
Company or any ERISA Affiliate (as defined below), or with respect to
which the Company or any ERISA Affiliate has liability (the "Controlled
Group Plans"):
(i) there are no unfunded liabilities existing under
any Controlled Group Plan, and each Controlled Group Plan
could be
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terminated as of the Closing Date with no liability to Buyer,
the Company, or any ERISA Affiliate;
(ii) there is no Controlled Group Plan that is a
defined benefit plan (as defined in Section 3(35) of ERISA) or
a multiemployer plan (as defined in Section 3(37) of ERISA);
and
(iii) each such Controlled Group Plan has been
operated in compliance with ERISA, applicable tax
qualification requirements, and all other applicable laws.
(c) With respect to each Employee Plan, the Company has
furnished to Buyers a true, correct, and complete copy of (i) the plan
documents and summary plan description; (ii) the most recent
determination letter received from the Internal Revenue Service (if
any); (iii) the annual reports required to be filed for the three most
recent plan years of each such Employee Plan, or such shorter period as
such Employee Plan has been in existence; (iv) all related trust
agreements, insurance contracts, or other funding agreements that
implement such Employee Plan; and (v) all other documents, records, or
other materials related thereto requested by Buyers
(d) Neither the Company, any ERISA Affiliate, nor any plan
fiduciary of any Employee Plan has engaged in any transaction in
violation of Section 406(a) or (b) of ERISA or any "prohibited
transaction" (as defined in Code Section 4975(c)(1)) that would subject
the Company or PSC or Acquisition Sub to any taxes, penalties, or other
liabilities resulting from such transaction.
(e) Except as set forth in Schedule 2.17(e), other than
routine claims for benefits, there are no actions, suits, claims,
audits, or investigations pending or threatened against, or with
respect to, any of the Employee Plans or their assets; and all
contributions required to be made to the Employee Plans have been made
timely.
"ERISA Affiliate" means the Company, the Principal Shareholder
and each corporation, partnership, or other trade or business, whether
or not incorporated, which is or has been treated as a single employer
or controlled group member with the Company pursuant to Section 414 of
the Code or Section 4001 of ERISA.
2.18 Ownership of the Company. The Company has provided to Buyers, in a
writing that refers to this Section 2.18 and that is acknowledged by Buyers, a
description of all ownership interests in the Company and indicates the record
(and if beneficial ownership is, to the Company's Knowledge, different from
record ownership, the beneficial ownership) of each such interest. Except as
disclosed to Buyers in the writing referred to above, the Company has not issued
or become obligated in any manner to issue options, warrants, convertible, or
exchangeable securities or other rights, agreements, arrangements, or
commitments obligating the Company, directly or indirectly,
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to issue, sell, purchase, acquire or otherwise transfer, or deliver any shares
of capital stock of or other equity interest in the Company, or any agreement,
document, instrument, or obligation convertible or exchangeable therefore that
remain outstanding.
2.19 Material Agreements.
(a) Schedule 2.19(a)(i) lists each agreement, arrangement and
understanding (whether written or oral and including all amendments
thereto) relating to the business of the Company to which the Company
is a party or by which the Company or any of the Assets is bound that
is material to the Company or the Assets (collectively, the "Material
Agreements"), including without limitation the following: (i)
agreements pursuant to which the Company sells or distributes any
products or services and received revenues during the calendar year
1999; (ii) real estate leases; (iii) agreements evidencing, securing or
otherwise relating to any indebtedness for borrowed money for which the
Company is, directly or indirectly, liable; (iv) capital or operating
leases or conditional sales agreements relating to vehicles, equipment,
or other Assets having an aggregate value in excess of $50,000; (v)
agreements pursuant to which the Company is entitled or obligated to
acquire any assets from a third party; (vi) insurance policies; (vii)
employment, consulting, noncompetition, separation, collective
bargaining, union, or labor agreements or arrangements; (viii)
agreements with or for the benefit of any shareholder, director,
officer, employee, or consultant (or any Person that, to the Company
Knowledge, claims or has any basis to claim any rights as such) of
Sellers or any affiliate or immediate family member thereof; (ix)
licenses of computer software; (x) supply agreements or arrangements
pursuant to which the Company is entitled or obligated to acquire any
assets from a third party having an aggregate value in excess of
$50,000; (xi) any partnership, joint venture, consortium, or other
similar arrangements or agreements; and (xii) any other agreement
pursuant to which the Company could be required to make or entitled to
receive aggregate payments or other aggregate value in excess of
$50,000. Except as set forth in Schedule 2.19(a) and except for those
Material Agreements that are terminable without cause upon ninety (90)
days or less notice, the entering of the Seller Documents and the
consummation of the transactions contemplated by the Seller Documents,
without notice to or consent or approval of any Person, will not
constitute a breach of, violation of, or default under any provision of
any Material Agreement, except for any breach, violation or default as
would not have a material adverse effect on the business of the
Company.
(b) Schedule 2.19(b) identifies any Material Agreements that
will be terminated at or prior to, or retained by the Company following
the Closing.
(c) Sellers have provided to Buyers a copy of each written
Material Agreement and a written summary of each oral Material
Agreement. Except as described in Schedule 2.19(c), (i) each Material
Agreement is valid, binding, and in full force and effect and
enforceable against the Company and, to the Company's Knowledge, the
other parties thereto in accordance with its terms; (ii) the Company
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has performed, in all material respects, all of its obligations under
each Material Agreement, and there exists no breach or default (or
event that with notice or lapse of time would constitute a breach or
default) on the part of the Company or, to the Company's Knowledge, on
the part of any other party under any Material Agreement; (iii) there
has been no termination or notice of default or, to the Company's
Knowledge, any threatened termination under any Material Agreement; and
(iv) to the Company's Knowledge, no party to a Material Agreement
intends to alter its relationship with the Company as a result of or in
connection with the acquisition contemplated by the Seller Documents or
has been threatened with bankruptcy or insolvency.
2.20 Customers. Set forth in Schedule 2.20 is a complete list of each
customer of the Company during the year ended December 31, 1999, and indicating
the amount of revenues attributable to each customer during such year. Except as
set forth in Schedule 2.20, none of the customers that accounted for more than
$500,000 in revenues for the year ended December 31, 1999 (each a "Material
Customer") has threatened to, or notified the Company of any intention to,
terminate, or materially alter its relationship with the Company, and there has
been no material dispute with a Material Customer since January 1, 1998. Except
as set forth in Schedule 2.20, to the Company's Knowledge, there is no basis for
any termination of the Company's contract with any Material Customer other than
expiration of the stated term thereof.
2.21 Intellectual Property Rights. Set forth in Schedule 2.21 is a
complete list of all registered patents, trademarks, service marks, trade names,
and copyrights owned by the Company (collectively, "Registered Intellectual
Property"). The Company has used all Registered Intellectual Property and the
other computer software and software licenses, intellectual property,
proprietary information, trade secrets, trademarks, trade names, brand names,
inventions, processes, know-how, formulas, customer lists, technology, data,
works of authorship and copyrights (collectively, "Intellectual Property") used
by the Company without infringing on the rights of any Person. There is no
pending or, to the Company's Knowledge, threatened infringement, interference,
opposition, or similar action, suit, or proceeding by or against the Company or
the Assets relating to the Registered Intellectual Property, nor, to the
Company's Knowledge, except as set forth in Schedule 2.21, is there any basis
therefor. Except as set forth in Schedule 2.21, no other Person is infringing
the rights of the Company in any of its Registered Intellectual Property.
2.22 Competing Interests. Except for investment in publicly-held
entities (which investment does not exceed 5% of the issued and outstanding
equity capital of such entities), neither the Principal Shareholder, nor to the
Company's Knowledge, any immediate family member of the Principal Shareholder
(a) owns, directly or indirectly, an interest in any Person that is a
competitor, customer, or supplier of the Company or that otherwise has material
business dealings with the Company or (b) is a party to, or otherwise has any
direct or indirect interest opposed to the Company under, any Material Agreement
or other business relationship or arrangement.
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2.23 Illegal Payments. Neither the Company nor the Principal
Shareholder, nor, to the Company's Knowledge, any immediate family member of the
Principal Shareholder has (a) used any funds of the Company for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity, or (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended.
2.24 Brokers. Neither Seller has incurred nor will it incur any
liability for brokers' or finders' fees or agents' commissions in connection
with this Agreement or the transactions contemplated by this Agreement.
2.25 No Misrepresentations. In connection with the acquisition of the
Assets, the Company has not knowingly or recklessly made any untrue statement of
a material fact in this Article II or knowingly or recklessly omitted to state
any material fact set forth in this Article II necessary to make any such
representation, warranty, or statement, under the circumstances in which it is
made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUISITION SUB
Acquisition Sub represents and warrants to Sellers as follows:
3.1 Organization. Each of PSC and Acquisition Sub is a corporation duly
organized, validly existing, and in good standing under the laws of Delaware.
3.2 Authority. Each of PSC and Acquisition Sub has all requisite power
and authority to execute, deliver, and perform under this Agreement and the
other agreements, certificates, and instruments to be executed by Buyers in
connection with or pursuant to this Agreement (collectively, the "Buyer
Documents"). The execution, delivery, and performance by each of PSC and
Acquisition Sub of each Buyer Document to which it is a party have been duly
authorized by all necessary action, corporate or otherwise, on the part of PSC
and Acquisition Sub. This Agreement has been, and at the Closing the other Buyer
Documents will be, duly executed and delivered by PSC and Acquisition Sub (to
the extent each is a party thereto). This Agreement is, and each of the other
Buyer Documents will be, a legal, valid, and binding agreement of PSC and
Acquisition Sub, as the case may be, enforceable against PSC and Acquisition Sub
in accordance with their respective terms.
3.3 Stock Validity. The Shares are duly authorized shares of Class A
Common Stock, $.01 par value per share of PSC, have been duly authorized for
issuance under this Agreement, and when issued as contemplated by this Agreement
will be validly issued, fully paid and nonassessable and free of statutory
preemptive rights with respect thereto. Upon issuance in accordance with this
Agreement, Sellers will receive good and valid title to the Shares free and
clear of any Liens, except for those referred to in this Agreement. All issued
and outstanding shares of capital stock of Acquisition Sub are owned by PSC.
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3.4 No Violation. The execution, delivery, and performance of the Buyer
Documents by PSC and Acquisition Sub will not conflict with or result in the
breach of any term or provision of, or violate, or constitute a default under
any charter provision or bylaw or under any material agreement, instrument,
order, law, or regulation to which either of them is a party or by which either
of them is in any way bound or obligated.
3.5 Governmental Consents. Except as required in connection with the
HSR Act, the registration of the Shares with the Securities and Exchange
Commission (the "SEC") and the listing of the Shares on the NYSE, no consent,
approval, order, or authorization of, or registration, qualification,
designation, declaration, or filing with, any Governmental Body is required on
the part of either Buyer in connection with the transactions contemplated by the
Seller Documents.
3.6 SEC Reports. There is available on the SEC's XXXXX database a copy
of each report, proxy statement or information statement filed by it since
January 1, 1999, each in the form (including exhibits and any amendments thereto
and all documents incorporated by reference therein) (collectively, the "SEC
Documents") filed with the SEC under the U.S. Securities Exchange Act of 1934,
as amended (the "Exchange Act"). As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act, and the applicable rules and regulations of the SEC thereunder,
and none of the SEC Documents knowingly and recklessly contained any untrue
statement of a material fact or knowingly or recklessly omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, under the circumstances in which they were made, not misleading,
except to the extent corrected by a document subsequently filed with the SEC
prior to the date hereof. PSC is current in its filings with the SEC.
3.7 Plan. Acquisition Sub has delivered to Sellers a true, correct and
complete copy of the Xxxxx Systems Corporation 1991 Stock Option Plan Amended
and Restated as of February 25, 1999 (the "Plan"). The Plan is in full force and
effect and has not been amended subsequent to such date. The shares of Common
Stock to be granted pursuant to the exercise of the Options to be granted
pursuant to Section 4.13 (collectively, the "Options") have been duly authorized
and reserved for issuance, and such shares, when issued in accordance with the
terms of the Option, will be legally and validly issued, fully-paid and
non-assessable, and registered under the Securities Act of 1933, as amended (the
"Securities Act"), qualified for issuance under all applicable state securities
laws and listed for trading with the NYSE.
3.8 Litigation. There are no pending or, to the knowledge of Buyers,
threatened, lawsuits, administrative proceedings, or reviews, or formal or
informal complaints or investigations by any Person that in any manner
challenges or seeks to prevent, enjoin, alter or materially delay any of the
transactions contemplated by this Agreement.
3.9 Right to Conduct Business. Except as disclosed on Schedule 3.9,
neither PSC nor any affiliate thereof has entered into any contract, agreement,
commitment or
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understanding (whether written or oral) restricting the manner in which
Acquisition Sub can operate its business.
3.10 Brokers. Neither Buyer has incurred nor will it incur any
liability for brokers' or finders' fees or agents' commissions in connection
with this Agreement or the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 Conduct of Business. During the period commencing on the date of
this Agreement and ending on the earlier to occur of the Closing or the
termination of this Agreement in accordance with its terms (the "Interim
Period"), unless Buyers otherwise consent in writing, and except as otherwise
specifically contemplated by this Agreement, the Company will (a) operate in the
ordinary course of business of the Company and use its best efforts to preserve
the goodwill of the Company and of its employees, customers, suppliers,
Governmental Bodies, and others having business dealings with the Company; (b)
not engage in any transaction outside the ordinary course of business of the
Company, including without limitation by making any material expenditure,
investment, or commitment or entering into any material agreement or arrangement
of any kind; (c) except in the ordinary course of business of the Company, not
increase the compensation level of any employee (other than the officers of the
Company), or make any bonus payments or other distributions to any such
employee; (d) not increase the compensation level of any officer of the Company
or make any bonus payments or distributions to any such officer; (e) maintain
all insurance policies and all Permits that are required for the Company to
carry on its business; (f) maintain books of account and records in the usual,
regular, and ordinary manner and consistent with past practices; and (g) use its
best efforts not to take any action that would result in, or otherwise allow, a
breach (as of the Closing) of the representations and warranties set forth in
Section 2.10.
4.2 Access and Information. During the Interim Period, the Company will
permit Buyers and their representatives to have reasonable access to the
Company's directors, officers, employees, agents, assets, and properties and all
relevant books, records, and documents of or relating to the business and assets
of the Company during normal business hours upon reasonable advance notice and
will furnish to Buyers such information, financial records, and other documents
relating to the Company and its operations and businesses as Buyers may
reasonably request. The Company will permit Buyers and their representatives
reasonable access to the Company's accountants, auditors, customers, and
suppliers for consultation or verification of any information obtained by Buyers
and will use their best efforts to cause such Persons to cooperate with Buyers
and their representatives in such consultations and in verifying such
information. The Company will have the right to participate in any contact with
such Persons.
4.3 Supplemental Disclosure. During the Interim Period, the Company
will promptly supplement or amend each of the Schedules to this Agreement with
respect to any matter of which the Company or the Principal Shareholder becomes
aware that arises
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or is discovered after the date of this Agreement that, if existing or known at
the date of this Agreement, would have been required to be set forth or listed
in the Schedules to this Agreement; provided that, for purposes of determining
whether a breach exists with respect to any of the representations and
warranties set forth in this Agreement, any such supplemental or amended
disclosure will be deemed not to have been disclosed to Buyers unless Buyers
otherwise expressly consents in writing.
4.4 Assistance with Permits and Filings. During the Interim Period,
Sellers will furnish Buyers with all information concerning Sellers that is
required for inclusion in any application or filing made by Buyers to any
Governmental Body in connection with the transactions contemplated by this
Agreement, including, without limitation, the Registration Statement, and Buyers
will furnish Sellers with all information concerning Buyers that is required for
inclusion in any application or filing made by Sellers to any Governmental Body
in connection with the transactions contemplated by this Agreement. Sellers and
Buyers will fully cooperate to file the Notification and Report Form required by
the HSR Act with the Federal Trade Commission and the Anti-Trust Division of the
Department of Justice. Sellers will use commercially reasonable efforts to
assist Buyers in obtaining any Permits, or any consents to assignment related
thereto, that Buyers will require in connection with the continued operation of
the Assets after the Closing.
4.5 Fulfillment of Conditions by Sellers. Sellers will use their best
efforts not to take any action that would cause the conditions on the
obligations of the parties to effect the transactions contemplated by this
Agreement and the Seller Documents not to be fulfilled, including without
limitation by taking or causing to be taken any action that would cause the
representations and warranties made by Sellers in this Agreement not to be true
and correct as of the Closing. Sellers will take all reasonable steps within
their power to cause to be fulfilled the conditions precedent to Buyers'
obligations to consummate the transactions contemplated by this Agreement that
are dependent on the actions of Sellers.
4.6 Fulfillment of Conditions by Buyers. Buyers will use their best
efforts not to take any action that would cause the conditions on the
obligations of the parties to effect the transactions contemplated by this
Agreement not to be fulfilled, including without limitation by taking or causing
to be taken any action that would cause the representations and warranties made
by Buyers in this Agreement not to be true and correct as of the Closing. Buyers
will take all reasonable steps within their power to cause to be fulfilled the
conditions precedent to the obligations of Sellers to consummate the
transactions contemplated by this Agreement that are dependent on the actions of
Buyers.
4.7 Publicity. During the Interim Period, Buyers and Sellers will
cooperate with each other in the development and distribution of all news
releases and other public disclosures relating to the transactions contemplated
by this Agreement. During the Interim Period, neither Buyers nor Sellers will
issue or make, or allow to have issued or made, any press release or public
announcement concerning the transactions contemplated by this Agreement without
giving the other party a reasonable opportunity
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to comment on such release or announcement in advance, consistent with
applicable legal and stock market requirements.
4.8 Transaction Costs. Buyers will pay all transaction costs and
expenses (including legal, accounting, and other professional fees) that they
incur in connection with the negotiation, execution, and performance of this
Agreement and the transactions contemplated by this Agreement, including the
filing fees required to be paid by Buyers under the HSR Act and the costs of any
mortgagee policies of title insurance. Prior to the Closing, the Company will
pay (a) all transaction costs and expenses (including legal, accounting, and
other professional fees) incurred by Sellers in connection with the negotiation,
execution, and performance of this Agreement and the transactions contemplated
by this Agreement, including the filing fees required to be paid by the
Principal Shareholder under the HSR Act; and (b) any transfer taxes (including
sales, use, and deed taxes) associated with the transfer of the Assets to
Acquisition Sub. Sellers will timely file a request for sales tax exemption
under Pa. Stat. Xxx. 72 Sec. 7240 on the bulk transfer of the Assets to Buyer.
4.9 No-Shop Provisions. Each of Sellers hereby covenants and agrees
that during the Interim Period (a) it will not, and will not permit any of its
affiliates to, initiate, solicit, or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal relating to, or that may reasonably be
expected to lead to, any Competing Transaction (as defined below), or enter into
discussions or negotiate with any Person in furtherance of such inquiries or to
obtain a Competing Transaction, or endorse or agree to endorse any Competing
Transaction, or authorize or permit any of the officers, directors, or employees
of Sellers or any investment banker, financial advisor, attorney, accountant, or
other representative retained by Sellers, or any of their affiliates to take any
such action, and (b) Sellers will promptly notify PSC of all relevant terms of
any such inquiries and proposals that the Company reasonably and in good faith
determines to merit serious attention received by it relating to any of such
matters, and if such proposal is in writing, Sellers will promptly deliver or
cause to be delivered to PSC a copy of such proposal. For purposes of this
Agreement, "Competing Transaction" means any of the following (other than the
transactions contemplated by this Agreement) involving the Company: (a) any
merger, consolidation, share exchange, business combination, or similar
transaction; (b) any sale, lease, exchange, mortgage, pledge, transfer, or other
disposition of 5% or more of the assets used in the business of the Company; or
(c) any offer for 5% or more of the outstanding shares of capital stock of the
Company.
4.10 Nondisclosure. Sellers acknowledge and agree that all customer,
prospect, and marketing lists, sales data, intellectual property, proprietary
information, trade secrets, and other confidential information of the Company
(collectively, "Confidential Information") are valuable assets constituting part
of the Assets and, following the Closing, will be transferred to Acquisition
Sub. Sellers agree to, and agree to use reasonable efforts to cause its
representatives to, treat the Confidential Information, together with any other
confidential information furnished to it by Buyers, as confidential and not to
make use of such information for its own purposes or for the benefit of any
other Person (other than the
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Company prior to the Closing or Buyers after the Closing). Prior to the Closing,
Buyers agree to, and agree to use reasonable efforts to cause their
representatives to, treat the Confidential Information as confidential and not
to make use of such information for their own purposes or for the benefit of any
other Person except in connection with the transactions contemplated by this
Agreement. If this Agreement is terminated prior to the Closing, each party
agrees that it will not thereafter use any Confidential Information furnished to
it by the other party for any purposes whatsoever or permit any such information
to be made available publicly, except to the extent required by law, and that it
will return any such written information to the other party upon request.
4.11 Discharge of Retained Liabilities. Following the Closing, the
Company will fully pay or otherwise discharge in full, prior to the due date
therefor and otherwise in accordance with the terms thereof, all Liabilities of
the Company except the Assumed Liabilities. This Section 4.11 will survive the
Closing.
4.12 Name Change. On the Closing Date, Sellers will file all documents
necessary to change the Company's name to a name bearing no similarity to
"Solutions Consulting," and Acquisition Sub will change its name to "Solutions
Consulting."
4.13 Employees.
(a) On the Closing Date, Acquisition Sub will offer full-time
employment, subject to PSC's standard employment procedures, including
without limitation satisfactory completion of background checks and
execution of PSC's Associates Employment Agreement in the form agreed
upon (the "Associates Agreement"), to the employees of the Company on
the date of this Agreement (the "Transferred Employees"). The terms of
employment for the Transferred Employees will be on substantially the
same terms, with the same compensation and benefits, as are currently
provided by the Company. The Associates Agreement for the President of
the Company (the "President") will provide the same severance
arrangement and permit the same outside activities as are set forth in
the President's letter of agreement with the Company, a copy of which
has been delivered to Buyers. With respect to any benefit plan
providing health coverage, Acquisition Sub will provide substantially
the same health coverage to the Transferred Employees commencing as of
the Closing Date for covered expenses incurred on or after the Closing
Date. To the extent allowed by Law, Acquisition Sub will waive any
participation requirement, waiting period or pre-existing condition
exclusion with respect to the Transferred Employees and will provide
all Transferred Employees credit for all of their employment service
with the Company for purposes of both participation and vesting
requirements under all of Acquisition Sub's benefit plans (except under
any option, stock or similar compensatory benefit plan), and, to the
extent allowed by Law, any covered expenses incurred in calendar year
2000 prior to the Closing Date by such employees or their covered
dependents shall be taken into account for purposes of satisfying any
applicable deductible or co-insurance or maximum out-of-pocket
contribution under Acquisition Sub's health plan. Nothing in this
Agreement will
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be construed to require Acquisition Sub or PSC to continue the
employment of the Transferred Employees for any particular time period
nor to interfere with Acquisition Sub's or PSC's rights to discipline
or terminate any Transferred Employee, to change the terms and
conditions of any Transferred Employee's employment at any time, and to
modify, amend, suspend, or terminate benefit plans at any time. This
Section 4.13(a) will survive the Closing.
(b) PSC has granted to the Transferred Employees (or will
grant before the Closing Date), under the Plan and subject to the
execution of individual stock option agreements, options to purchase an
aggregate of 5,900,000 shares of Common Stock, with an exercise price
equal to the closing price for the Common Stock on the NYSE on the date
of grant (the "Grant Date") and in substantially the form agreed by the
parties on the date of this Agreement ("Standard Options"), in
individual amounts specified by PSC to the Sellers (after consultation
with Sellers)(with 20,000 Standard Options issued to each of the three
(3) outside directors of the Company). Except as set forth in Section
4.13(d), any remaining Standard Options not granted by the Closing Date
will be terminated, and will not be available for future grants.
(c) PSC has granted to the Transferred Employees (or will
grant before the Closing Date), under the Plan and subject to the
execution of individual stock option agreements, options to purchase an
aggregate of 9,250,000 shares of Common Stock, with an exercise price
equal to the closing price for the Common Stock on the NYSE on the
Grant Date and in substantially the form agreed by the parties on the
date of this Agreement ("Performance Options") (the Standard Options
and the Performance Options collectively, the ("Employee
Compensation")), in individual amounts specified by PSC to the Sellers
(after consultation with Sellers)(with 30,000 Performance Options
issued to each of the three (3) outside directors of the Company).
Except as set forth in Section 4.13(d), any remaining Performance
Options not granted by the Closing Date will be terminated, and will
not be available for future grants.
(d) Simultaneously with the Closing, PSC will reserve
3,900,000 (plus an amount equal to the number of Standard Options and
Performance Options that have not been granted by the Closing Date, if
any; provided that the number of Performance Options cancelled under
Section 4.13(c) will retain their characterization as such) shares of
Common Stock under the Plan for new employees (the "Reserved Options").
Up to an agreed upon number of Reserved Options for a given position
will be granted at the request of the management of Acquisition Sub at
fair market value on the date of grant and containing a five-year
vesting schedule, in accordance with Schedule 4.13(d). While no legal
commitment of any nature is made hereby, additional options may be made
available for grant by Acquisition Sub depending on Acquisition Sub's
performance. This Section 4.13(d) will survive the Closing, but shall
expire and be of no force and effect as of and following the Autonomy
Termination Date (as defined in the Performance Options).
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4.14 Special Meeting. Sellers will take all action necessary in
accordance with the Pennsylvania law and the articles of incorporation and
bylaws of the Company, to call, as soon as is practicable, a meeting of its
shareholders and such other security or equity holders of the Company having the
right to vote on the transactions contemplated by this Agreement (the "Special
Meeting") at which the shareholders and such other security or equity holders of
the Company will consider and vote upon this Agreement and the transactions
contemplated herein. The Principal Shareholder will vote his shares of capital
stock of the Company in favor of this Agreement and the transactions
contemplated herein.
4.15 Filing and Authorizations. As promptly as practicable, Buyers and
Sellers will make, or cause to be made, such filings and submissions under laws,
rules and regulations applicable to it, including the HSR Act, as may be
required by it to consummate the transactions contemplated herein, and will use
their best efforts to obtain, or cause to be obtained, all authorizations,
approvals, consents and waivers from all Governmental Bodies necessary to be
obtained by Buyers and Sellers, respectively.
4.16 Registration Statement.
(a) PSC has prepared pursuant to all applicable Laws a
registration statement on Form S-4 (the "Registration Statement") that
it has filed with the SEC in connection with the issuance of shares of
its Common Stock in transactions such as those contemplated by this
Agreement, which Registration Statement has been declared effective
under the Securities Act. PSC also agrees to use all reasonable efforts
to obtain, prior to the effective date of the Registration Statement,
all necessary state securities law or "Blue Sky" permits and approvals
required to issue the Shares. The Company agrees to furnish to PSC all
information concerning the Company, officers, directors and
stockholders as may be necessary in connection with the foregoing.
(b) During the Interim Period, PSC will advise the Company
promptly after any supplement or amendment to the Registration
Statement has become effective or any supplement or amendment has been
filed, of the issuance of any stop order or the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threat known to PSC of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement
of the Registration Statement or for additional information.
(c) At or prior to the Closing, PSC will cause the Shares to
be listed on the NYSE.
4.17 Non-Competition.
(a) The Company will use its best efforts to obtain:
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(i) from each individual entitled to receive in
excess of $1,500,000 in aggregate Consideration (as defined
below) (each such person, who is identified in a list provided
to Buyers prior to the Closing, a "Significant Personnel") a
non-competition agreement, which non-competition agreement
will, among other things, cover the period commencing on the
Closing Date and ending on the later to occur of (i) five (5)
years after the Closing Date or (ii) two (2) years after such
Significant Personnel ceases to be employed by Acquisition
Sub, each such agreement to be in substantially the form
agreed by the parties on the date of this Agreement
(collectively, the "Five-Year Non-Competition Agreements")
where "Consideration" means the portion of the Purchase Price
such individual is scheduled to receive (with the Common Stock
valued in the same manner as the value in Section 1.5(b)
above); and
(ii) from each individual other than a Significant
Personnel entitled to receive in excess of $250,000 in
aggregate Consideration (each such person, who is identified
in a list provided to Buyers prior to the Closing, a "Key
Personnel") a non-competition agreement, which non-competition
agreement will, among other things, cover a period commencing
on the Closing Date and ending two (2) years after the Closing
Date, each such agreement to be in substantially the form of
agreed by the parties on the date of this Agreement
(collectively, the "Two-Year Non-Competition Agreements").
(b) The Principal Shareholder will execute and deliver a
Five-Year Non-Competition Agreement.
4.19 Adoption of Plan of Liquidation. Prior to the Closing Date, the
Board of Directors of the Company will adopt a plan of liquidation in accordance
with the laws of the state of its incorporation and submit such plan to the
Shareholders.
4.20 Distributions. Prior to the Closing, the Company will distribute
$10,000,000 to its Shareholders.
4.21 Headquarters Building. Prior to the Closing, the Company will sell
to the Principal Shareholder or his designee the real estate and improvements
owned by the Company and located in Cannonsburg, Pennsylvania (the "Headquarters
Building") under the terms set forth in Schedule 4.21, and the Company will
lease space in the Headquarters Building to serve as the primary office of
Acquisition Sub in accordance with the terms set forth in Schedule 4.21.
4.22 Distribution of Shares. The Company will promptly distribute the
Shares to the Persons and in the respective share amounts set forth in a writing
that refers to this Section 4.22 and acknowledged by Buyers prior to the
Closing. Principal Shareholder will receive in excess of 50% of the Shares.
Except as otherwise expressly contemplated in this Section 4.22, the Company
will distribute the Shares only to Persons that sign a
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lock-up agreement in the forms agreed by the parties on the date of this
Agreement, except that shares to be distributed to the ESOP and the Principal
Shareholder's Grantor Retained Annuity Trust will only bear a restrictive legend
that is substantively the same as set forth in the lock-up agreements. The
Company will sign a lock-up agreement covering the period of time after its
receipt of the Shares through its distribution of the Shares in accordance with
this Section 4.22.
4.23 Operations of Acquisition Sub.
(a) At the Closing, Acquisition Sub will adopt the policies and
procedures of the Company.
(b) Without prejudice to the rights of any Person under the Performance
Options, it is PSC's current intention to permit Acquisition Sub, during the
period commencing on the Closing Date and ending on the Autonomy Termination
Date, to be operated in substantially the same manner as the Company has
operated prior to the Closing unless otherwise agreed by the Principal
Shareholder or the President, except with respect to the issuance of securities
(including debt securities), the consummation of any merger, consolidation,
reorganization, disposition of material assets other than in the ordinary course
of business of the Company, or similar transaction capital expenditures in
excess of $300,000 in any fiscal year, or the amendment of its articles of
incorporation or bylaws. Nothing contained in this provision shall serve to
limit or restrict the legal rights of PSC with respect to Acquisition Sub.
4.24 Exclusive Recourse. Notwithstanding any other provision of this
Agreement, including, without limitation, Article VI, the sole and exclusive
remedy, at law or equity, for any violation of any provision that could be
construed to constrain or otherwise affect the sole and absolute right of Buyers
or their affiliates to control and operate the Assets or the Acquisition Sub
after the Closing (including, without limitation, the provisions of Sections
3.9, 4.13, and 4.23) will be the potential acceleration of Performance Options
as contemplated by Section 2(f) of Exhibit A to the Performance Options and a
potential "Change in Condition" pursuant to and as set forth in the Retention
Agreement. No other rights, duties, liabilities, remedies, recourse, or
obligations arise with respect to any party pursuant to any such provision under
any theory, legal or equitable, including, without limitation, contract, tort,
unjust enrichment, and strict liability. Notwithstanding the foregoing, the
provisions of this Section 4.24 shall not apply to the covenant in Section 4.28.
4.25 Allocation of Purchase Price. Buyers and Sellers will promptly
appoint an accounting or appraisal firm reasonably acceptable to each party (the
"Appraiser") to determine an allocation of the Purchase Price among the Assets.
The Appraiser will be engaged to deliver a draft allocation within seven (7)
business days prior to the Closing Date. Buyers and Sellers will act reasonably
to agree to a final allocation which will be attached to the Agreement at
Closing as Schedule 4.25. Buyers and Sellers will report the transactions
contemplated hereby on all Tax Returns (including information returns and
supplements thereto required to be filed by Buyers and Sellers under the Code)
in a
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manner consistent with such final allocation, as may be adjusted in accordance
with GAAP after the Closing, with the reasonable consent of the Representative
(as defined in the Performance Options). This Section 4.25 will survive the
Closing.
4.26 Indemnification of Principal Shareholder. PSC will provide the
Principal Shareholder with the full indemnification provided by applicable law
in his capacity as an officer or director of Acquisition Sub (and, in the event
that the Principal Shareholder fails to be an officer or director but remains an
employee of Acquisition Sub, such indemnification as an employee to the same
extent that the Principal Shareholder would be entitled to indemnification if he
were an officer or director).
4.27 Certain Costs. Principal Shareholder, on the one hand, and Buyers,
on the other hand, will share equally any Losses (as defined in Section 6.1)
arising from or relating to any Person with respect to whom Buyers waive the
condition to Closing set forth in Section 5.1(m) (including, without limitation,
any claims by any such Person).
4.28 Ownership. Buyers covenant and agree that, notwithstanding any
other provision of this Agreement, prior to an Autonomy Termination Date, Buyers
shall not without the prior written consent of the Representative (as defined in
the Performance Options) (a) take or permit to be taken any action that would
result in Acquisitions Sub not being beneficially owned 100% by PSC or (b) allow
or cause Acquisition Sub (i) to be merged or consolidated with any Person; (ii)
to sell or otherwise dispose of all or substantially all of its assets; or (iii)
to dissolve, liquidate, or cease to do business as a single entity unless
Acquisition Sub is placed in a bankruptcy or insolvency proceeding.
ARTICLE V
CLOSING CONDITIONS
5.1 Conditions to Obligations of Buyers. The obligations of Buyers
under this Agreement are subject to the satisfaction at or prior to the Closing
of the following conditions, but compliance with any such conditions may be
waived by Buyers in writing:
(a) All representations and warranties of the Company
contained in this Agreement will be true and correct in all material
respects (if not qualified by materiality) or in all respects (if
qualified by materiality) at and as of the Closing with the same effect
as though such representations and warranties were made at and as of
the Closing, and Buyers will have received a certificate to such effect
in form and substance satisfactory to Buyers executed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer
of the Company.
(b) Sellers will have performed and complied with all the
covenants and agreements required by this Agreement to be performed or
complied with by them at or prior to the Closing, including without
limitation the delivery of all items required to be delivered by them
pursuant to Section 1.7, and Buyers will have received a certificate to
such effect in form and substance satisfactory to Buyers
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executed on behalf of the Company by the Chief Executive Officer and
the Chief Financial Officer of the Company and by Principal
Shareholder.
(c) All necessary contractual and governmental consents,
approvals, orders, or authorizations must have been obtained and all
necessary contractual or governmental notices have been given (except
with respect to Material Agreements that are terminable without cause
upon ninety (90) days or less notice, and with respect to other
agreements where to failure to obtain such consents, approvals, orders,
or authorizations or to give such notice would not have a material
adverse effect on the Assets). Without limiting the generality of the
foregoing, (i) all filings pursuant to the HSR Act will have been made
by Sellers, and their respective affiliates and the required waiting
period under the HSR Act will have expired or been terminated without
any threat or commencement of antitrust proceedings with respect to the
transactions contemplated by this Agreement and (ii) the Registration
Statement must have been declared effective by the SEC for at least 20
Business Days prior to the Closing.
(d) There will be no pending or threatened litigation in any
court or any proceeding before or by any Governmental Body to restrain
or prohibit or obtain damages or other relief with respect to this
Agreement or the other Seller Documents or the consummation of the
transactions contemplated by this Agreement or as a result of which
Buyers could be required to dispose of any assets or operations of the
Buyers (including any material assets or operations acquired or to be
acquired from the Company) or their affiliates or to comply with any
material restriction on the manner in which the Buyers or their
affiliates conduct their operations (including any operations acquired
or to be acquired from the Company).
(e) The Company will have delivered to Buyers Associates
Agreements executed by nine (9) of the top (10) individuals (to be
mutually determined) who are to received the highest aggregate amount
of Consideration pursuant to this Agreement, and at least 90% of the
remaining Persons who are to receive consideration pursuant to this
Agreement.
(f) The Company will have delivered to Buyers Five-Year
Non-Competition Agreement executed by six (6) of the seven (7)
Significant Personnel (to be mutually determined upon execution of this
Agreement).
(g) The Company will have delivered to Buyers Two-Year
Non-Competition Agreements, as applicable, executed by 90% of the Key
Personnel.
(h) The Company will have delivered to Buyers a statement
setting forth the total shareholder's equity of the Company as of
February 29, 2000 (the "Shareholders Equity Statement"), as determined
in accordance with GAAP in good faith by the Chief Financial Officer of
the Company, which amount will not be less than $21,250,000 (the
"Shareholders Equity Benchmark").
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(i) The Company will have delivered to Buyers a statement
setting forth the net working capital of the Company as of February 29,
2000 (the "Working Capital Statement"), as determined in accordance
with GAAP in good faith by the Chief Financial Officer of the Company,
which amount will not be less than $7,250,000 (the "Working Capital
Benchmark").
(j) Principal Shareholder will have executed and delivered to
Buyers a lock-up agreement in the agreed form.
(k) The Company will have delivered lock-up agreements
executed by the Company and by each Person to whom Shares are to be
distributed, as contemplated in Section 4.22, in the agreed form.
(l) Principal Shareholder will have executed and delivered a
retention agreement in the form agreed by the parties on the date of
this Agreement.
(m) The Company will have delivered to Buyers an irrevocable
release, waiver and joinder agreement executed by each Person who is to
receive consideration (Purchase Price or Employee Compensation) in the
form agreed by the parties on the date of this Agreement (the
"Joinder").
(n) The Company will have assigned to Acquisition Sub all
in-force insurance policies, except builder's risk, directors and
officers insurance and roll-off coverage. The in-force insurance
policies will include commercial general liability, umbrella liability,
automobile liability and physical damage, crime, property and workers
compensation and employers liability.
(o) The Company must have delivered to Buyers a certificate of
the secretary of the Company as to the items covered by Section 2.3.
(p) The Company must have delivered to Buyer a legal opinion
of Sellers' counsel covering such legal matters as may be reasonably
requested by Buyers.
(q) The Sellers will have executed and delivered to Buyers the
other Seller Documents.
(r) The Buyers will have completed their due diligence
investigation of the ESOP, the results of which indicate, to the
satisfaction of Buyers in their reasonable discretion, that the Buyers
will incur no more than $500,000 in Liabilities as a result of the
provisions of Section 1.3(c).
(s) Prior to the Closing, each Person that has theretofore
executed an Associates Agreement will confirm in writing that the
reference therein to the "Company" includes the business of the Company
under this Agreement.
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5.2 Conditions to Obligations of Sellers. The obligations of Sellers
under this Agreement are subject to the satisfaction at or prior to the Closing
of the following conditions, but compliance with any such conditions may be
waived by Sellers in writing:
(a) All representations and warranties of Buyers contained in
this Agreement will be true and correct in all material respects (if
not qualified by materiality) or in all respects (if qualified by
materiality) at and as of the Closing with the same effect as though
such representations and warranties were made at and as of the Closing,
and Sellers will have received a certificate to such effect in form and
substance satisfactory to Sellers executed on behalf of each Buyer by
officers of each Buyer reasonably acceptable to Sellers.
(b) Buyers will have performed and complied with all the
covenants and agreements required by this Agreement to be performed or
complied with by them at or prior to the Closing, including without
limitation the delivery of all items required to be delivered by them
pursuant to Section 1.7, and Sellers will have received a certificate
to such effect in form and substance satisfactory to Sellers executed
on behalf of each Buyer by officers of each Buyer reasonably acceptable
to Sellers
(c) All necessary governmental consents, approvals, orders, or
authorizations must have been obtained and all necessary governmental
notices must have been given. Without limiting the generality of the
foregoing, all filings pursuant to the HSR Act will have been made by
Buyers and their respective affiliates and the required waiting period
under the HSR Act will have expired or been terminated without any
threat or commencement of antitrust proceedings with respect to the
transactions contemplated by this Agreement.
(d) Buyers will have delivered to Sellers a legal opinion of
the Buyers' counsel covering such legal matters as may be reasonably
requested by Sellers.
(e) Buyers will have executed and delivered to Sellers each
other Buyer Document.
(f) The Shares will have been authorized for listing on the
NYSE, the Registration Statement shall have been declared effective and
shall have remained effective for at least twenty (20) Business Days
and no stop order will be in effect with respect thereto and no
proceeding for that purpose will have been initiated or, to the
Knowledge of the Buyers, threatened by the SEC.
(g) Buyers will have delivered to Sellers a copy of the
articles of incorporation and bylaws of Acquisition Sub.
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(h) Buyers shall not have terminated the employment of any
Transferred Employee prior to the Closing Date without the consent of
the Company.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification of Seller Parties.
(a) Subject to the limitations set forth in Section 6.1(b)
below, Buyers shall jointly and severally indemnify and hold harmless
the Principal Shareholder, the Company, and the shareholders of the
Company other than the Principal Shareholder (the "Other Shareholders")
(the Principal Shareholder, the Company and the Other Shareholders
collectively, the "Seller Parties") against the following liabilities,
obligations, claims, losses, contingencies, damages (including enhanced
damages with respect to intellectual property matters), costs, and
expenses, including all court costs and reasonable attorneys' fees
(exclusive of the Seller Parties' or the Buyers', as applicable,
incidental and consequential damages) (together, "Losses").
(i) any Losses incurred by the Seller Parties
resulting from a breach of the representations and warranties
of the Acquisition Sub set forth in Article III;
(ii) any Losses incurred by the Seller Parties
resulting from the operations of Acquisition Sub and/or use of
the Assets subsequent to the Closing;
(iii) any Losses incurred by the Seller Parties
resulting from the Assumed Liabilities (except that with
respect to an indemnification event which requires Buyers to
make payment directly to Seller Parties, Buyers shall be
entitled to exercise a right of setoff against amounts which
the Seller Parties owe to Buyers pursuant to the provisions of
Section 6.3, regardless of the time limitations set forth in
Section 6.4);
(iv) all Indemnifiable Income Taxes (as hereafter
defined) with respect to the portion of the year 2000
commencing on January 1, 2000 and ending on the day
immediately prior to the Closing Date (the "2000 Stub Year")
and for calendar years 1999 and prior. As used herein, the
term "Indemnifiable Income Taxes" means 80% of the income
Taxes payable by such Seller Party (assuming a 43% combined
Federal and state tax rate) solely as a result of any error by
the Company that does not constitute a knowing and willful
error (including any adjustment resulting from an audit) in
computing its taxable income for the period in question.
Without limiting the foregoing, "Indemnifiable Income Taxes"
(A) will not include failures by the Company to distribute
sufficient cash to pay taxes; (B) will not include
misallocation of taxable income among the
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shareholders of the Company; and (C) will be offset and
reduced by any income Tax benefit (any refund or reduction of
Taxes payable) of such Seller Party as a result of an error by
the Company or as a result of increased basis in such Seller
Party's capital stock of the Company resulting solely from any
error that gives rise to an Indemnifiable Income Tax; and
(v) any Losses incurred by the Seller Parties arising
from the Company's or Buyers' licensing, sale, offers to sell
or license, or any other use or exploitation of, the
Intellectual Property, together with all improvements,
enhancements, modifications or other derivative works based in
whole or in part thereon, whether such uses occurred prior to
the Closing or subsequent to the Closing (except that with
respect to an indemnification event which requires Buyers to
make payment directly to Seller Parties, Buyers shall be
entitled to exercise a right of setoff against amounts which
the Seller Parties owe to Buyers pursuant to the provisions of
Section 6.3 below, regardless of the time limitations set
forth in Section 6.4 below).
(b) Limitations.
(i) The amount of Assumed Liabilities for which PSC
shall be liable under Subsection 6.1(a)(iii) above shall not
exceed the sum of (A) all distributions and dividends (whether
in cash or property) from Acquisition Sub to PSC or any
affiliate of PSC (other than Acquisition Sub) and the
difference between the tangible, monetary benefit received by
PSC (or any affiliate of PSC)(other than Acquisition Sub) from
any transactions between PSC (or any affiliate of PSC) (other
than Acquisition Sub) and Acquisition Sub and the fair market
value of any such transaction and (B) any other assets
transferred from the Company to PSC (other than as
contemplated in this Agreement) upon consummation of the
transactions contemplated hereunder (the foregoing to have no
effect on Acquisition Sub's obligations under Section 6.1).
(ii) In no event will the obligation of the Buyers to
indemnify the Principal Shareholder for the Assumed
Liabilities set forth in Section 1.3(d) exceed $5,000,000.
(iii) In no event shall the aggregate amount for
which the Buyers are liable under Section 6.1(a)(iv) for the
years 1999 and prior exceed $2,000,000, nor shall Buyers have
any indemnification obligation under Section 6.1(a)(iv) if,
and to the extent that, the Company had Knowledge of such
Indemnifiable Income Taxes prior to the Closing (as such
knowledge as defined in Section 7.10 hereof).
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(iv) In no event will Buyers have any obligation to
indemnify Seller Parties for any Losses which are covered, to
the extent covered, by insurance (excluding special purpose
insurance purchased by Seller Parties (other than the Company
prior to the Closing) for the express purpose of insuring
risks related to this Agreement) or for which the Sellers
collect claims against third parties (including, without
limitation, rights of contribution or indemnification). Buyers
will have no obligation to indemnify for any Loss under more
than one subsection of Section 6.1(a). Notwithstanding the
foregoing, the Seller Parties will not be entitled to
indemnification with respect to any Claim (as defined in
Section 6.6) in excess of the amount of the Loss, net of
insurance recoveries or recoveries from third parties, if any,
actually incurred by Seller Parties with respect to such
Claim.
(v) Buyers will not assert in any manner whatsoever
adverse to a claim for indemnification by a Seller Party under
the terms of this Article VI the breach or alleged breach of
any representation or warranty in Article II, except that the
foregoing will not limit the right of Buyers to indemnity
under this Article VI or the right of Buyers to set off under
Section 6.1(a)(iii) or 6.1(a)(v).
6.2 Indemnification for Excluded Liabilities. The Company shall
indemnify and hold harmless Acquisition Sub for any Losses Acquisition Sub may
suffer or incur as a result of or relating to the Excluded Liabilities set forth
in Section 1.4(a).
6.3 Indemnification of Acquisition Sub.
(a) Subject to the limitations set forth in Sections 6.3(b)
and 6.3(c) below, the Shareholders and the persons holding options as
of the date hereof to purchase capital stock of the Company (the
"Optionholders") (collectively, the "Obligors") shall indemnify and
hold harmless Acquisition Sub against the following Losses
(collectively, the "Acquisition Subs' Indemnifiable Sum"):
(i) any Losses incurred by Acquisition Sub resulting
from a breach of the representations and warranties of the
Company set forth in Article II;
(ii) any shortfall in the actual shareholders equity
of the Company as of February 29, 2000 (as determined in a
manner consistent with the Company's past accounting
practices) (the "Actual Shareholders Equity") below the
Applicable Shareholders Equity (as hereinafter defined) (the
"Shareholders Equity Shortfall"); provided, that Acquisition
Sub will not be entitled to indemnification unless the amount
of the Shareholders Equity Shortfall is at least $100,000, in
which event the amount to be indemnified will equal the sum of
$50,000 plus the amount of the Shareholders Equity Shortfall
in excess of $100,000, where "Applicable Shareholders Equity"
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means the Shareholders Equity Benchmark (as defined in Section
5.1(h)) (unless the shareholders equity shown on the
Shareholders Equity Statement is less than the Shareholders
Equity Benchmark, in which event the "Applicable Shareholders
Equity" shall equal the shareholders equity shown on the
Shareholders Equity Statement); and
(iii) any shortfall in the actual working capital of
the Company as of February 29, 2000 (as determined in a manner
consistent with the Company's past accounting practices) (the
"Actual Working Capital") below the Applicable Working Capital
(as herein defined) (the "Working Capital Shortfall");
provided, that Acquisition Sub will not be entitled to
indemnification unless the amount of the Working Capital
Shortfall is at least $500,000, in which event the amount to
be indemnified will equal $250,000 plus the amount of the
Working Capital Shortfall in excess of $500,000, where
"Applicable Working Capital" means the Working Capital
Benchmark (as defined in Section 5.1(i) below) (unless the
working capital shown on the Working Capital Statement is less
than the Working Capital Benchmark, in which event the
"Applicable Working Capital" shall equal the working capital
shown on the Working Capital Statement).
The Acquisition Subs' Indemnifiable Sum will not include any
Losses to the extent covered, by insurance (excluding special
purpose insurance purchased by Buyers for the express purpose
of insuring risks related to this Agreement) or for which the
Buyers collect claims against third parties (including,
without limitation, rights of contribution or
indemnification). The Obligors will have no obligation to
indemnify for any Loss under more than one subsection of this
Section 6.3(a). Notwithstanding the foregoing, the Acquisition
Sub will not be entitled to indemnification with respect to
any Claim in excess of the amount of the Loss, net of
insurance recoveries or recoveries from third parties if any,
actually incurred by Acquisition Sub with respect to such
Claim.
(b) Several Obligations. The obligations of the Obligors under
this Section 6.3 shall be several (and not joint) as follows:
Principal Shareholder 32.5%
SBF 32.5%
Other Shareholders 18.0%
SCI Optionholders 17.0%
The obligations of each Obligor within each classification set forth
above shall also be several (and not joint). The allocation of
liability among the Other Shareholders shall be based upon the number
of shares of common stock of the Company owned by each Other
Shareholder as of the Closing; and the allocation of liability among
the SCI Optionholders shall be based upon the Consideration paid to
each such SCI Optionholder in such SCI Optionholder's capacity as such.
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(c) Limitation on Amount.
(i) The Obligors shall have no obligation to pay any
Acquisition Subs' Indemnifiable Sum unless and until the
aggregate Acquisition Subs' Indemnifiable Sum exceeds
$2,000,000 (the "Threshold Indemnifiable Amount"), and then
only to the extent that the Acquisition Subs' Indemnifiable
Sum exceeds the Threshold Indemnifiable Amount.
(ii) In no event shall the maximum liability of the
Obligors collectively under this Article VI exceed Five
Million Dollars ($5,000,000) (the "Collective Maximum
Liability"). Accordingly, the maximum liability of each
Obligor under this Article VI (the "Individual Maximum
Liability") shall not exceed the Obligor's proportionate share
of liability as determined in accordance with Section 6.3(b)
multiplied by the Collective Maximum Liability (e.g., the
Principal Shareholder's maximum liability under this Article
VI shall not exceed $1,625,000 (32.5% of $5,000,000)).
(iii) Notwithstanding the foregoing:
(A) the Principal Shareholder shall be
liable on a first dollar basis, and without regard to
the Threshold Indemnifiable Amount or the Individual
Maximum Liability, for Acquisition Subs'
Indemnifiable Amounts arising under Section 6.3(a)(i)
if and to the extent that the Principal Shareholder
or WRM (as defined in Section 7.10) had actual
knowledge (with no duty to investigate) of the
inaccuracy of the applicable representation or
warranty and, with fraudulent intent, allowed the
Company to make such inaccurate representation or
warranty. Principal Shareholder acknowledges that for
the purposes of this Section 6.3(c)(iii)(A) an
inaccuracy of any applicable representation and
warranty is material and in an action based on this
Section 6.3(c)(iii)(A), reliance on an applicable
representation or warranty is justified and Principal
Shareholder will not assert to the contrary as a
defense.
(B) SBF (as defined in Section 7.10) shall
be liable on a first dollar basis, and without regard
to the Threshold Indemnifiable Amount or the
Individual Maximum Liability, for Acquisition Subs'
Indemnifiable Amounts arising under Section 6.3(a)(i)
if and to the extent that SBF had actual knowledge
(with no duty to investigate) of the inaccuracy of
the applicable representation or warranty and, with
fraudulent intent, allowed the Company to make such
inaccurate representation or warranty. SBF
acknowledges that for the purposes of this Section
6.3(c)(iii)(B) an inaccuracy of any applicable
representation and warranty is material and in an
action based on this Section 6.3(c)(iii)(B) reliance
on an applicable
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representation or warranty is justified and SBF will
not assert to the contrary as a defense.
6.4 Survival. The representations and warranties of the Company and
Acquisition Sub made in or pursuant to this Agreement will survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement until March 31, 2001 ("Survival Deadline");
provided that any representation or warranty the violation of which is made the
basis of a claim for indemnification pursuant to Section 6.1(a)(i) or Section
6.3(a)(i) will survive until such claim is finally resolved if the party to be
indemnified notifies the indemnifying party of such claim in reasonable detail
prior to the date on which such representation or warranty would otherwise
expire under this Agreement. No claim for indemnification pursuant to Section
6.1(a)(i) or Section 6.3(a)(i) may be asserted by a party after the Survival
Deadline. No claim under Section 6.3(a)(ii) or 6.3(a)(iii) may be made later
than ninety (90) days after the Closing. Subject to the foregoing, all rights
and obligations of all parties referenced in this Article VI will survive
without limitation.
6.5 Exclusivity.
(a) The representations and warranties (and the related
Schedules thereto) set forth herein and in the closing certificates
referenced in Sections 5.1(a) and 5.2(a) (the "Closing Certificates")
are the sole and exclusive representations and warranties made by the
Buyers and Sellers in connection with the transactions contemplated by
this Agreement. Neither Buyers nor Sellers shall be deemed to have made
any representation or warranty other than as expressly made herein or
in the Closing Certificates, as applicable. Without limiting the
foregoing, and notwithstanding any otherwise express representations
and warranties made herein or in the Closing Certificates, as
applicable, neither Buyers nor Sellers make any representation or
warranty with respect to any other information or documents (financial
or otherwise) made available to the other party or its counsel,
accountants, advisors, or representatives.
(b) Except as otherwise expressly referred to in Section 4.24,
the rights under this Article VI are the sole and exclusive remedies of
the parties under this Agreement for any breach of any representation
or warranty under this Agreement or for any misstatement of fact or
omission to state any fact in connection with this Agreement and the
transactions contemplated by this Agreement.
6.6 Notice. Any party entitled to receive indemnification under this
Article VI (the "Indemnified Party") agrees to give prompt written notice to the
party or parties required to provide such indemnification (the "Indemnifying
Parties") upon the occurrence of any indemnifiable Loss or the assertion of any
claim or the commencement of any action or proceeding in respect of which such a
Loss may reasonably be expected to occur (a "Claim"), but the Indemnified
Party's failure to give such notice will not affect the obligations of the
Indemnifying Party under this Article VI except to the extent that the
Indemnifying Party is materially prejudiced thereby. Such
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written notice will include a reference to the event or events forming the basis
of such Loss or Claim and the amount involved, unless such amount is uncertain
or contingent, in which event the Indemnified Party will give a later written
notice when the amount becomes fixed.
6.7 Defense of Claims. Buyers shall assume and control the defense of
any Claims, including the employment of counsel reasonably satisfactory to the
Obligors and the payment of expenses relating to such Claim, pending
indemnification as provided herein, if applicable. No Buyer shall settle any
Claim for which it will seek indemnification under Section 6.3(a) without the
Principal Shareholder's consent (which consent shall not be unreasonably
withheld) (and SBF's approval, if Acquisition Sub asserts or intends to assert
that the Maximum Liability with respect to SBF is inapplicable), and the
Obligors may employ separate counsel and participate in the defense of such
Claim (but Buyers will not be responsible for the fees and expenses of such
counsel).
6.8 Miscellaneous. Except as expressly set forth in this Article VI, no
third party shall have any rights under this Article VI or be subrogated to any
party's rights hereunder.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement and the transactions contemplated by
this Agreement may be terminated and abandoned (a) at any time prior to the
Closing by mutual written consent of Buyers and Sellers; or (b) by either Buyer,
on the one hand, or Sellers, on the other hand, if a condition to performance by
the terminating party under this Agreement has not been satisfied or waived
prior to April 30, 2000; or (c) by Buyers, on the one hand, or Sellers, on the
other hand, at any time, if there is pending or threatened litigation in any
court or any proceeding before or by any Governmental Body to restrain or
prohibit or obtain damages or other relief with respect to this Agreement or the
consummation of the transactions contemplated by this Agreement or as a result
of which Buyers could be required to dispose of any assets or operations of
Buyers (including any assets or operations acquired or to be acquired from the
Company) or their affiliates or to comply with any restriction on the manner in
which Buyers or their affiliates conduct their operations (including any
operations acquired or to be acquired from the Company); provided that (i)
Buyers may not terminate this Agreement if the Closing has not occurred because
of Buyers' failure to perform or observe any of its covenants or agreements set
forth in this Agreement or if Buyers are, at such time, in breach of this
Agreement, and (ii) Sellers may not terminate this Agreement if the Closing has
not occurred because of Sellers' failure to perform or observe any of their
respective covenants or agreements set forth in this Agreement or if any of
Sellers is, at such time, in breach of this Agreement.
7.2 Notices. All notices that are required or may be given pursuant to
this Agreement must be in writing and delivered personally, by a recognized
courier service, by
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a recognized overnight delivery service, by telecopy or by registered or
certified mail, postage prepaid, to the parties at the following addresses (or
to the attention of such other person or such other address as any party may
provide to the other parties by notice in accordance with this Section 7.2):
if to Buyers: with copies to:
------------ --------------
PSSC Acquisition Corporation Xxxxxx & Xxxx, L.L.P.
00000 Xxxx Xxxxxxx Xxxxx 0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000 Suite 2800
Attn: Xxxx Xxxxxx Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000 Attention: Xxxx X. Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
Xxxxx Systems Corporation Xxxxxx & Xxxx, L.L.P.
00000 Xxxx Xxxxxxx Xxxxx 0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000 Suite 2800
Attn: Xxxxx Xxxxxxx Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000 Attention: Xxxx X. Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
if to Sellers: with copies to:
------------- --------------
Solutions Consulting, Inc. Solution Consulting, Inc.
000 Xxxxxxxxxxx Xxxx. 000 Xxxxxxxxxxx Xxxx.
Xxxxxxxxxx, Xxxxxxxxxxxx 00000 Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx Attn: Xxxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
and
Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxx.
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
7.3 Attorneys' Fees and Costs. If attorneys' fees or other costs are
incurred to secure performance of any obligations under this Agreement, or to
establish damages for
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the breach thereof or to obtain any other appropriate relief, whether by way of
prosecution or defense, the prevailing party will be entitled to recover
reasonable attorneys' fees and costs incurred in connection therewith.
7.4 Further Assurances. Each party agrees to execute any and all
documents and to perform such other acts as may be necessary or expedient to
further the purposes of this Agreement and the transactions contemplated by this
Agreement. Without limiting the foregoing, the Company will execute and deliver
to Acquisition Sub such further instruments of conveyance and transfer as
Acquisition Sub may reasonably request in order more effectively to convey and
transfer the Assets to Acquisition Sub and to put Acquisition Sub in operational
control of the business of the Company, or for aiding, assisting, collecting,
and reducing to possession any of the Assets and exercising rights with respect
to the Assets.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the parties, all of which together will
constitute one and the same instrument.
7.6 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and will not in any way affect the meaning or interpretation of
this Agreement. References in this Agreement to Articles, Sections, Exhibits,
and Schedules are to the Articles, Sections, Exhibits, and Schedules of this
Agreement unless the context requires otherwise. Any matter referred to in a
Schedule in Article II will be deemed to be incorporated into all other
Schedules to Article II and to have been disclosed to Buyers.
7.7 Successors and Assigns; Assignment. This Agreement will bind and
inure to the benefit of the parties named in this Agreement and their respective
successors and assigns. Neither this Agreement nor any of the rights, interests,
or obligations under this Agreement may be assigned or delegated by any of
Sellers or Buyers without the prior written consent of the other parties and any
purported assignment or delegation will be null and void; except that Buyers may
assign its rights under this Agreement to any direct or indirect wholly-owned
subsidiary of PSC. This Agreement is not intended to confer any rights or
benefits on any Person other than the parties to this Agreement, and to the
extent provided in Article VI, the Buyer Parties and the Seller Parties;
provided, that parties to the Joinder will be deemed to be third party
beneficiaries to the covenant set forth in Section 4.28.
7.8 Entire Agreement.
(a) This Agreement, the Buyer Documents, the Seller Documents,
and the related documents contained as Schedules to this Agreement or
expressly contemplated by this Agreement contain the entire
understanding of the parties relating to the subject matter of this
Agreement and supersede all prior written or oral and all
contemporaneous oral agreements and understandings relating to the
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subject matter of this Agreement. This Agreement may not be modified or
amended except in writing signed by the party against whom enforcement
is sought. The Schedules to this Agreement are hereby incorporated by
reference into and made a part of this Agreement for all purposes.
(b) Each Seller acknowledges that:
(i) it has had the opportunity to visit with the
Buyers and meet with the officers and other representatives of
the Buyers to discuss the business and the financial condition
and operations of the Buyers, and
(ii) all materials and information requested by each
Seller have been provided to each Sellers' reasonable
satisfaction.
(c) Each Seller acknowledges that it has made its own
independent examination, investigation, analysis and evaluation of the
Buyers.
(d) Each Seller acknowledges that it has undertaken such due
diligence concerning the Buyers, including, without limitation, a
review of the financial statements and other information available from
the public filings of PSC with the SEC.
7.9 Specific Performance. The parties hereby acknowledge and agree that
the failure of any party to perform its agreements and covenants under this
Agreement, including its failure to take all required actions on its part
necessary to consummate the transactions contemplated by this Agreement, will
cause irreparable injury to the other parties for which damages, even if
available, will not be an adequate remedy. Accordingly, each party hereby
consents to the issuance of injunctive relief by any court of competent
jurisdiction to compel performance of such party's obligations and to the
granting by any court of the remedy of specific performance of its obligations
under this Agreement.
7.10 Knowledge. As used in this Agreement, "Company's Knowledge" means
within the actual knowledge (without any duty to investigate) of the Principal
Shareholder, SBF, Xxxxxxx X. Xxxxxx ("WRM"), Xxxxxxxx Xxxx, P. --- Xxxxxx
Xxxxxx, and Xxxxxx Xxxxxxxxx.
7.11 Governing Law. This Agreement will be governed by and construed
and interpreted in accordance with the substantive laws of the State of
Delaware, without giving effect to any conflicts of law rule or principle that
might require the application of the laws of another jurisdiction.
7.12 Drafting. Neither this Agreement nor any provision contained in
this Agreement will be interpreted in favor of or against any party hereto
because such party or its legal counsel drafted this Agreement or such
provision.
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7.13 Usage. Whenever the plural form of a word is used in this
Agreement, that word will include the singular form of that word. Whenever the
singular form of a word is used in this Agreement, that word will include the
plural form of that word. The term "or" will not be interpreted as excluding any
of the items described. The term "include" or any derivative of such term does
not mean that the items following such term are the only types of such items.
7.14 Arbitration. Any controversy, dispute, or claim arising under this
Agreement will be finally settled by arbitration conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association in
effect on the date of this Agreement. Notwithstanding any provision of the
American Arbitration Association Commercial Arbitration Rules, any such
arbitration will be conducted before and decided by three (3) arbitrators. The
parties to the arbitration will request that the American Arbitration
Association provide the parties with a list of seven (7) potential arbitrators
composed of individuals that are former judges of the Chancery Court for the
State of Delaware or the federal courts of such state. Each party will then
strike from the list (taking turns, beginning with PSC) two (2) names. After the
rights to strike are exercised, the individuals remaining on the list will be
the arbitrators. Any such arbitration will take place in the City of Wilmington,
Delaware. The arbitrators in any such arbitration will apply the laws of the
State of Delaware and the United States of America. In any arbitration under
this Agreement, this Agreement will be deemed to have been made in, and will be
governed by and construed under the laws of, the State of Delaware and the
United States of America. Any decision rendered by the arbitrators will be final
and binding and judgment thereon may be entered in any court having jurisdiction
or application may be made to such court for an order of enforcement as the case
may require. The parties intend that this agreement to arbitrate be irrevocable
and the exclusive means of settling all disputes under this Agreement, whether
for money damages or equitable relief. If arbitration is invoked in accordance
with the provisions of this Agreement, the prevailing party in the arbitration
will be entitled to recover from the other all costs, fees, and expenses
pertaining or attributable to such arbitration, including reasonable attorneys'
fees.
7.15 Partial Invalidity. Wherever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained in this
Agreement will, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such provision will be ineffective to the extent, but only to
the extent, of such invalidity, illegality, or unenforceability without
invalidating the remainder of such invalid, illegal, or unenforceable provision
or provisions or any other provisions of this Agreement, unless such a
construction would be unreasonable.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
XXXXX SYSTEMS CORPORATION
By: /s/ XXXXX XXXXXXX
-----------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President and General Counsel
PSSC ACQUISITION CORPORATION
By: /s/ XXXX X. XXXXXX
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President and Treasurer
SOLUTIONS CONSULTING, INC.
By: /s/ XXXX X. XXXXXX
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer
/s/ XXXX X. XXXXXX
--------------------------------------------
XXXX X. XXXXXX
/s/ XXXXXXX X. XXXXXXXX
--------------------------------------------
XXXXXXX X. XXXXXXXX
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