Exhibit 10(ii)25
STOCK PURCHASE AGREEMENT
by and among
THE IT GROUP, INC.,
EVERGREEN ACQUISITION SUB I, INC.
W & H PACIFIC, INC.,
XXXXXXX X. XXXXXXX,
XXXXXXX X. XXXX,
and
ALL OTHER SHAREHOLDERS OF W & H PACIFIC, INC.
April 3, 2000
TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE AND SALE OF THE SHARES.................................. 1
1.1 Purchase and Sale............................................... 1
1.2 Purchase Price.................................................. 2
1.3 Closing Date Audit.............................................. 4
ARTICLE II THE CLOSING..................................................... 4
2.1 Date and Place of Closing....................................... 4
2.2 Deliveries at Closing........................................... 5
2.3 Appointment of Shareholder Representatives...................... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS............. 5
3.1 Title to the Shares............................................. 6
3.2 Authority to Execute and Perform Agreements..................... 6
3.3 No Conflict..................................................... 6
3.4 Actions and Proceedings......................................... 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL
SHAREHOLDERS REGARDING THE COMPANY....................................... 7
4.1 Organization and Existence...................................... 7
4.2 Authorization................................................... 7
4.3 Capitalization; Voting Rights................................... 7
4.4 Title to and Condition of Assets................................ 8
4.5 Real Property................................................... 8
4.6 Intellectual Property........................................... 9
4.7 Financial Statements............................................ 9
4.8 No Conflict..................................................... 9
4.9 Conduct of Business............................................. 10
4.10 Labor Matters................................................... 10
4.11 Employee Benefits............................................... 11
4.12 Contracts; Clients.............................................. 12
4.13 Compliance with Applicable Laws................................. 13
4.14 Environmental Compliance........................................ 13
4.15 No Undisclosed Liabilities...................................... 15
4.16 Litigation...................................................... 15
4.17 Consents of Third Parties....................................... 16
4.18 Insurance....................................................... 16
4.19 Taxes........................................................... 16
4.20 Certain Affiliate Transactions.................................. 18
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4.21 Absence of Certain Business Practices........................... 18
4.22 Brokers......................................................... 18
4.23 Government Contracts............................................ 18
4.24 Permits......................................................... 19
4.25 Subsidiaries.................................................... 19
4.26 Accounts Receivable............................................. 19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................. 19
5.1 Organization and Existence...................................... 20
5.2 Corporate Authorization......................................... 20
5.3 Non-Contravention............................................... 20
5.4 Consent of Lender............................................... 20
5.5 Financial Sophistication........................................ 20
ARTICLE VI COVENANTS OF THE COMPANY AND THE PRINCIPAL SHAREHOLDERS........ 21
6.1 Conduct of the Business; Distributions.......................... 21
6.2 Access to Information........................................... 22
6.3 Maintenance of Insurance Policies............................... 23
6.4 Exclusivity..................................................... 23
6.5 ESOP............................................................ 23
6.6 Delivery of Schedules........................................... 23
ARTICLE VII CONDITIONS TO CLOSING.......................................... 24
7.1 Conditions to the Purchaser's Obligations....................... 24
7.2 Conditions to the Obligations of the Company and the
Shareholders.................................................... 26
ARTICLE VIII INDEMNIFICATION AND OTHER CONTINUING COVENANTS................ 27
8.1 Indeminification by the Shareholders............................ 27
8.2 Indemnification by the Purchaser................................ 28
8.3 Indemnification with Respect to Third Party Claims.............. 29
8.4 Taxes........................................................... 31
8.5 Survival of Representation and Warranties....................... 32
8.6 ESOP Loan....................................................... 32
ARTICLE IX POST-CLOSING COVENANTS.......................................... 33
9.1 ITG Benefit Programs............................................ 33
9.2 Employee Compensation........................................... 33
9.3 Tax Matters..................................................... 33
9.4 Further Assurances.............................................. 34
9.5 Appointment of Registered Agent................................. 34
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9.6 Errors and Omissions Insurance.................................. 35
ARTICLE X TERMINATION; DEFAULT............................................. 35
10.1 Termination..................................................... 35
10.2 Failure of Condition............................................ 36
10.3 Effect of Termination........................................... 37
10.4 Default by Purchaser............................................ 38
ARTICLE XI MISCELLANEOUS................................................... 39
11.1 Notices......................................................... 39
11.2 Amendments; No Waivers.......................................... 40
11.3 Expenses........................................................ 40
11.4 Successors and Assigns.......................................... 40
11.5 Governing Law................................................... 41
11.6 Counterparts; Effectiveness..................................... 41
11.7 Entire Agreement................................................ 41
11.8 Captions........................................................ 41
11.9 Severability.................................................... 41
11.10 Attorneys' Fees................................................. 41
11.11 Definition of Knowledge......................................... 42
11.12 Publicity....................................................... 42
11.13 Arbitration..................................................... 42
EXHIBITS
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Exhibit A Schedule of Shareholders
Exhibit B Form of Non-Competition Agreement
Exhibit C Senior Management Subject to Non-Solicitation and Confidentiality
Agreements
Exhibit D Form of Non-Solicitation and Confidentiality Agreement
Exhibit E Persons Charged with Knowledge
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DEFINITIONS
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1999 Balance Sheet.......................... Section 4.7
Acquisition Proposal........................ Section 6.5
Acquisition Sub............................. Preamble
Agreement................................... Preamble
Applicable Law.............................. Section 4.13
Book Value Adjustment....................... Section 1.2(d)
Break-Up Fee................................ Recitals
Business.................................... Recitals
Closing..................................... Section 2.1
Closing Balance Sheet....................... Section 1.3
Closing Book Value.......................... Section 1.2(d)
Closing Date................................ Section 2.1
Code........................................ Section 4.11
Collected Accounts Receivable............... Section 1.2(d)
Common Stock................................ Section 4.3
Company..................................... Preamble
Compensation and Benefit Programs........... Section 4.11
Deductible.................................. Section 8.1(b)
Disposition Notice.......................... Section 8.4(b)
Drop-Dead Date.............................. Section 10.2
Encumbrances................................ Section 4.5(c)
Environmental Condition..................... Section 4.14(a)
Environmental Laws.......................... Section 4.14(a)
Environmental Permits....................... Section 4.14(a)
ERISA....................................... Section 4.11
ERISA Affiliate............................. Section 4.11
Escrow Agreement............................ Recitals
ESOP........................................ Section 1.2(a)
ESOP Shares................................. Section 1.2(a)
Facility.................................... Section 4.14(a)
Financial Statements........................ Section 4.7
First Anniversary Payment................... Section 1.2(b)
First Year Deficit.......................... Section 1.2(b)
First Year Deficit Adjustment............... Section 1.2(b)
First Year Revenue.......................... Section 1.2(b)
First Year Target........................... Section 1.2(b)
GAAP........................................ Section 1.3
Government Contract......................... Section 4.24
Governmental Authority...................... Section 4.13
Hazardous Substance......................... Section 4.14(a)
Indemnification Offset...................... Section 8.1(c)
Initial Payment............................. Section 1.2(a)
Insiders.................................... Section 4.21
ITG......................................... Preamble
Labor Laws.................................. Section 4.10(b)
Leased Real Property........................ Section 4.5(b)
Leases...................................... Section 4.5(b)
Losses...................................... Section 8.1(a)
Market Value................................ Section 1.3
Material Adverse Effect..................... Section 3.4
Material Contracts.......................... Section 4.12(b)
Other Agreements............................ Section 3.2
Owned Real Property......................... Section 4.5(a)
Payment Ratio............................... Section 1.2(a)
Permits..................................... Section 4.25
Person...................................... Section 3.2
Principal Shareholders...................... Preamble
Pro Rata Adjustment......................... Section 1.2(e)
Purchase Price.............................. Section 1.2
Purchaser................................... Preamble
Purchaser Indemnitees....................... Section 8.1(a)
Real Property............................... Section 4.5(b)
Representatives............................. Section 6.4
Required Consents........................... Section 4.17
Second Anniversary Payment.................. Section 1.2(c)
Second Year Deficit......................... Section 1.2(c)
Second Year Deficit Adjustment.............. Section 1.2(c)
Second Year Revenue......................... Section 1.2(c)
Second Year Target.......................... Section 1.2(c)
Shareholders................................ Preamble
Shareholder Representatives................. Section 2.3
Shares...................................... Recitals
Subsidiary.................................. Section 4.26
Subsidiaries................................ Section 4.26
Tail Insurance.............................. Section 9.6
Target Book Value........................... Section 1.2(d)
Tax Claim................................... Section 8.4(a)
Taxes....................................... Section 4.19(a)
Tax Returns................................. Section 4.19(a)
Third Party Claim........................... Section 8.3(a)
Transaction Documents....................... Section 3.2
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of April 3,
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2000 is entered into by and among The IT Group, Inc., a Delaware corporation
("ITG"), Evergreen Acquisition Sub I, Inc., a Delaware corporation ("Acquisition
--- -----------
Sub" and collectively with ITG, the "Purchaser"), W & H Pacific, Inc., a
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Washington corporation (the "Company"), Xxxxxxx X. Xxxxxxx and Xxxxxxx X. Xxxx
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(collectively, the "Principal Shareholders"), and the other shareholders of the
----------------------
Company listed on Exhibit A hereto (collectively with the Principal
---------
Shareholders, the "Shareholders").
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R E C I T A L S
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WHEREAS, the Company is engaged in the business of providing
professional engineering and design services to the transportation, energy,
telecommunications and land development markets (the "Business"); and
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WHEREAS, the Shareholders own all of the issued and outstanding shares
of capital stock of the Company, including any shares issued upon exercise of
outstanding options between the date hereof and the Closing Date (the "Shares");
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and
WHEREAS, the Purchaser desires to acquire all of the Shares owned by
the Shareholders, and the Shareholders desire to sell such Shares to Purchaser,
upon the terms and conditions and subject to the conditions hereinafter set
forth; and
WHEREAS, pursuant to that certain Escrow Agreement (the "Escrow
------
Agreement") dated March 24, 2000 by and among the Purchaser, the Company and the
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Trust Company of Washington, a Washington corporation, the Purchaser has
deposited Seven Hundred Fifty Thousand Dollars ($750,000) into an escrow account
as a break-up fee (the "Break-Up Fee") which shall be paid in accordance with
------------
the terms and conditions in the Escrow Agreement.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties to this
Agreement hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
1.1 Purchase and Sale.
Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing (as hereinafter defined) each of the Shareholders
shall sell to the Purchaser, and the Purchaser shall purchase from each of the
Shareholders, all of the Shares owned by each such Shareholder, as set forth
opposite each such Shareholder's name on Exhibit A attached hereto.
1.2 Purchase Price.
The total consideration (the "Purchase Price") for the Shares shall
--------------
consist of the components described in paragraphs (a), (b) and (c) below, as
adjusted under paragraph (d) below:
(a) An initial payment equal to Ten Million Dollars ($10,000,000),
less:
----
(i) the amount of the Break-Up Fee,
(ii) the amounts outstanding as of the Closing Date, if any,
under (A) the Company's operating line of credit (including any bank
overdrafts), (B) the Company's term loan, (C) all Company loans to the
Company's Employee Stock Ownership Plan (the "ESOP"), (D) all
----
promissory notes issued by the Company, (E) all capital leases to
which the Company is a party and (F) any debt incurred by or other
obligation of the Company in connection with the repurchase of all of
the Company's capital stock owned by the ESOP prior to Closing (the
"ESOP Shares") pursuant to Section 6.5 hereof, and
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(iii) any unpaid fees or expenses of any broker or finder, if
any, for which the Company or any Shareholder is obligated to pay in
connection with the transactions contemplated hereby,
(such payment, the "Initial Payment"), subject to a Pro Rata Adjustment, if any,
---------------
to be paid in cash at the Closing. The Initial Payment shall be paid to such
single account as described in Section 2.2 hereof and held and disbursed pro
rata to or for the benefit of each Shareholder according to the ratio that the
number of Shares held by such Shareholder bears to the total number of Shares
owned by all Shareholders (the "Payment Ratio") in accordance with Section 2.2
-------------
hereof.
(b) A payment equal to Four Million Dollars ($4,000,000) (such
payment, the "First Anniversary Payment"), subject to the Book Value Adjustment
-------------------------
(as hereinafter defined), if any, and the Pro Rata Adjustment (as hereinafter
defined), if any, and less any Indemnification Offset (as hereinafter defined),
----
to be paid in cash on the first anniversary of the Closing Date; provided, that
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the Company's total revenue generated during the period commencing on the
Closing Date and ending on the first anniversary of the Closing Date (the "First
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Year Revenue") meets or exceeds Thirty Million Dollars ($30,000,000) (the "First
------------ -----
Year Target"). In the event the First Year Revenue does not meet or exceed the
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First Year Target, then the First Anniversary Payment shall be adjusted:
(i) downward in an amount equal to twenty percent (20%) of the
first Five Million Dollars ($5,000,000) of the difference between the
First Year Target and the First Year Revenue (such difference, the
"First Year Deficit"), and
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(ii) downward, dollar-for-dollar, for the amount of the First
Year Deficit, if any, in excess of Five Million Dollars ($5,000,000),
2
(such adjustment, the "First Year Deficit Adjustment"), in addition to any Book
-----------------------------
Value Adjustment, Pro Rata Adjustment and Indemnification Offset. The First
Anniversary Payment shall be paid to such single account as described in Section
2.2 hereof and held and disbursed pro rata to or for the benefit of each
Shareholder according to the Payment Ratio.
(c) A payment equal to Four Million Dollars ($4,000,000) (such
payment, the "Second Anniversary Payment"), subject to the Book Value
--------------------------
Adjustment, if any, and the Pro Rata Adjustment, if any, and less any
----
Indemnification Offset, to be paid in cash on the second anniversary of the
Closing Date; provided, that the Company's total revenue generated during the
--------
period commencing on the first anniversary of the Closing Date and ending on the
second anniversary of the Closing Date plus the amount, if any, by which the
----
First Year Revenue exceeded the First Year Target (the "Second Year Revenue")
-------------------
meets or exceeds Thirty Two Million Dollars ($32,000,000) (the "Second Year
-----------
Target"). In the event the Second Year Revenue does not meet or exceed the
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Second Year Target, then the Second Anniversary Payment shall be adjusted:
(i) downward in an amount equal to twenty percent (20%) of the
first Five Million Dollars ($5,000,000) of the difference between the
Second Year Target and the Second Year Revenue (such difference, the
"Second Year Deficit"), and
--------------------
(ii) downward, dollar-for-dollar, for the amount of the Second
Year Deficit, if any, in excess of Five Million Dollars ($5,000,000),
(such adjustment, the "Second Year Deficit Adjustment"), in addition to any Book
------------------------------
Value Adjustment, Pro Rata Adjustment and Indemnification Offset. In the event
the First Anniversary Payment was adjusted pursuant to paragraph (b) above on
account of a First Year Deficit Adjustment and the First Year Revenue and the
Second Year Revenue exceed Sixty Two Million Dollars ($62,000,000) in the
aggregate, the Second Anniversary Payment shall be adjusted upward in an amount
equal to the First Year Deficit Adjustment. The Second Anniversary Payment
shall be paid to such single account as described in Section 2.2 hereof and held
and disbursed pro rata to or for the benefit of each Shareholder according to
the Payment Ratio.
(d) The Purchase Price shall be adjusted based on a comparison of the
Company's shareholders' equity as shown on the Closing Balance Sheet (as
hereinafter defined) plus the amount of any debt incurred by or other obligation
----
of the Company in connection with the repurchase of all of the Shares (the
"Closing Book Value") to an amount equal to Four Million Four Hundred Sixty-
-------------------
Three Thousand Dollars ($4,463,000) (the "Target Book Value"), which is the
-----------------
shareholders' equity as shown on the Company's September 30, 1999 balance sheet.
The Purchase Price shall be adjusted as follows:
(i) downward, dollar-for-dollar, if the Closing Book Value is
less than the Target Book Value, and
(ii) upward, dollar-for-dollar, if the Closing Book Value is
greater than the Target Book Value,
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(any such adjustment, the "Book Value Adjustment"). The Book Value Adjustment
---------------------
shall be applied to the First Anniversary Payment; provided, however, that in
-------- -------
the event the parties shall have been unable to agree on or otherwise resolve
any dispute pursuant to Section 1.3 hereof regarding the amount of the Closing
Book Value by the date of the first anniversary of this Agreement, the Book
Value Adjustment shall be applied to the Second Anniversary Payment.
(e) In the event the Purchaser does not acquire one hundred percent
(100%) of the Shares at the Closing, each of the Initial Payment, the First
Anniversary Payment and the Second Anniversary Payment shall be prorated
downward according to the percentage of the Shares actually acquired by the
Purchaser at the Closing (such prorated adjustment, the "Pro Rata Adjustment").
-------------------
(f) Notwithstanding anything to the contrary in this Section 1.2, the
entire Purchase Price shall be immediately due and payable in full in the event
that the Company is wholly or substantially acquired by, or merged into, any
corporation or other entity other than an affiliate of ITG.
1.3 Closing Date Audit.
Within sixty (60) days after the Closing Date, the Principal
Shareholders will prepare (with the cooperation of the Purchaser) and deliver to
the Purchaser an audited balance sheet of the Company as of the close of
business on the Closing Date, together with the footnotes thereto and the
reports thereon of Xxxxxx Xxxxxxxx LLP (the "Closing Balance Sheet") which shall
---------------------
be accompanied by an unqualified opinion of Xxxxxx Xxxxxxxx LLP. The Closing
Balance Sheet shall be prepared in accordance with, and consistent with, the
Company's historical application of generally accepted accounting principles
("GAAP"). The Purchaser shall have thirty (30) days to review and comment on
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the Closing Balance Sheet. In the event the Purchaser disputes the Closing Book
Value as shown on the Closing Balance Sheet, the Purchaser will notify the
Principal Shareholders within such thirty (30) day period and Xxxxxxx X. Xxxxxxx
(or his successor chosen by the remaining Shareholders or any designee thereof)
and Xxxxxxx X. XxXxxx (or his successor as chief executive officer of ITG or any
designee thereof) shall attempt to resolve the dispute. If they are unable to
resolve such dispute within thirty (30) days, such dispute shall be submitted to
binding arbitration as provided in Section 11.13 hereof, unless the parties
agree to an alternative means of dispute resolution.
ARTICLE II
THE CLOSING
2.1 Date and Place of Closing.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Xxxx XxXxxxx, Two Union Square,
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000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx at 9:00 a.m. on May 15, 2000,
or such other date as the parties hereto may otherwise mutually agree (the
"Closing Date").
-------------
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2.2 Deliveries at Closing.
At the Closing,
(a) the Purchaser shall pay the Initial Payment by wire transfer of
immediately available United States funds to such single account designated by
the Shareholder Representatives (as hereinafter defined) by written notice
delivered to the Purchaser at least five (5) business days before the Closing
Date, and
(b) the Shareholders shall deliver to the Purchaser any and all
certificates evidencing the Shares duly endorsed in blank or accompanied by duly
executed stock powers.
The Shareholder Representatives shall be responsible for establishing such
account and for disbursing the appropriate portion of the Initial Payment to
each Shareholder. In addition, the Shareholder Representatives shall jointly
and severally indemnify and hold harmless the Purchaser Indemnitees (as
hereinafter defined) from any Losses (as hereinafter defined) incurred by the
Purchaser Indemnitees in connection with the administration of such account and
the disbursement of funds therefrom to the Shareholders.
2.3 Appointment of Shareholder Representatives.
The Shareholders hereby appoint the Principal Shareholders as their
representatives and agents (the "Shareholder Representatives") for all purposes
---------------------------
related to the collection, receipt and disbursement of the Initial Payment, the
First Anniversary Payment, and the Second Anniversary Payment. The Shareholder
Representatives are hereby authorized and directed to reserve, retain and pay
such portion of the proceeds of sale of the Shares as they, in their sole
discretion, determine is appropriate and necessary in order to satisfy the
obligations of the Shareholders for the fees, costs and expenses of the
Transaction, including, without limitation, (a) professional legal, accounting,
bookkeeping, escrow, valuation, finders, and other fees, and other expenses of
whatever type and nature which is the obligation of the Shareholders or a pre-
closing obligation of the Company not paid prior to Closing; or (b) any fees or
costs of enforcement or collection of amounts due pursuant to this Agreement.
The Shareholder Representatives are hereby authorized to open bank accounts and
to retain accounting, tax, legal or trust services for the purpose of investing,
preserving, collecting and disbursing the proceeds of sale of the Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders severally represents and warrants to the
Purchaser as of the date hereof and as of the Closing Date as follows:
5
3.1 Title to the Shares.
(a) Each Shareholder is and shall be at the Closing the record and
beneficial owner of the Shares set forth opposite such Shareholder's name on
Exhibit A attached hereto, free and clear of any lien, claim, charge,
---------
encumbrance, mortgage, pledge, security interest, restriction, voting trust
arrangement, adverse claim, or right of any kind.
(b) Each Shareholder shall transfer and deliver to the Purchaser or
its designee at the Closing good and marketable title to all of the Shares set
forth opposite such Shareholder's name on Exhibit A attached hereto, free and
---------
clear of any lien, claim, charge, encumbrance, mortgage, pledge, security
interest, restriction, voting trust arrangement, adverse claim, or right of any
kind.
3.2 Authority to Execute and Perform Agreements.
Each Shareholder has full legal right and power to execute and deliver
this Agreement and to perform in full such Shareholder's obligations hereunder.
Except as set forth on Schedule 3.2, the execution, delivery and performance of
------------
this Agreement and any other agreements or instruments required to be delivered
hereunder (the "Other Agreements" and together with the Agreement, the
----------------
"Transaction Documents") by each Shareholder requires no consent, approval,
----------------------
waiver or other action by or in respect of, or filing with, any Governmental
Authority (as hereinafter defined) or other Person (as hereinafter defined), all
of which actions, approvals and filings shall have been taken, obtained or made
on or before the Closing Date. Each of this Agreement and any of the Other
Agreements (where applicable) has been duly executed and delivered by each
Shareholder and constitutes the legal, valid and binding obligation of each
Shareholder, enforceable against each Shareholder in accordance with its terms.
"Person" as used in this Agreement means any individual, partnership,
------
corporation, association, joint stock company, trust, joint venture,
unincorporated organization or governmental entity (or any department, agency or
political subdivision thereof).
3.3 No Conflict.
The execution, delivery and performance of this Agreement and the
Other Agreements and the consummation of the transactions contemplated hereby
and thereby shall not violate, conflict with, or contravene any order, judgment,
injunction, award or decree or other requirement of any court, arbitrator or
governmental or regulatory body against, or binding upon, each Shareholder or
such Shareholder's Shares, or violate, contravene or conflict with any statute,
law, ordinance or regulation of any jurisdiction binding upon or applicable to
each Shareholder or such Shareholder's Shares.
3.4 Actions and Proceedings.
Except as set forth on Schedule 4.16, there are no actions,
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investigations, proceedings, suits or claims or legal, administrative or
arbitration proceedings pending against or, to the knowledge of each
Shareholder, threatened against or affecting such Shareholder or such
Shareholder's Shares (or to the knowledge of any Shareholder, any basis
therefor) that have or
6
may have (a) the effect of restraining, modifying or preventing the consummation
of the transactions contemplated by this Agreement or (b) a material adverse
effect on the assets, properties, business, operations, prospects or condition,
financial or otherwise, of the Company in an amount not less than Fifty Thousand
Dollars ($50,000) (a "Material Adverse Effect").
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL
SHAREHOLDERS REGARDING THE COMPANY
Each of the Principal Shareholders hereby represents and warrants to
the Purchaser, except as otherwise disclosed on the Schedule, as of the date
hereof and as of the Closing Date as follows:
4.1 Organization and Existence.
The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Washington and has all corporate
power and authority to enter into this Agreement and consummate the transactions
contemplated hereby. The Company is duly qualified to do business as a foreign
corporation in each jurisdiction set forth on Schedule 4.1, which schedule sets
------------
forth each jurisdiction where the character of the property owned or leased by
the Company or the nature of its activities makes such qualification necessary
to carry on the Business as now conducted, except for those jurisdictions where
the failure to be so qualified has not had, and may not reasonably be expected
to have, a Material Adverse Effect.
4.2 Authorization.
The execution, delivery and performance of this Agreement and the
Other Agreements by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby are within the corporate powers of
the Company and have been duly authorized by all necessary corporate action on
the part of the Company. This Agreement and the Other Agreements constitute
legal, valid and binding obligations of the Company, enforceable in accordance
with their terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and subject to general principles of equity.
4.3 Capitalization; Voting Rights.
The authorized capital of the Company consists of 1,000,000 shares of
common stock, no par value (the "Common Stock"). As of the date hereof, 215,141
------------
shares of Common Stock are issued and outstanding, have been validly subscribed
and issued, are fully paid, or at Closing will be fully paid, and non-assessable
as of the date hereof, and represent all of the issued and outstanding shares of
capital stock of the Company, as set forth on Exhibit A attached hereto.
---------
Simultaneous with the Closing, the holders of the options to purchase 28,688
shares of Common Stock described in paragraph (b) below shall exercise all such
options and the Company shall repurchase the 62,344 ESOP Shares pursuant to
Section 6.5 hereof, with result being that, upon
7
the Closing, the issued and outstanding capital stock of the Company shall
consist of 181,485 shares of Common Stock, fully paid and non-assessable and
which shall represent all of the issued and outstanding shares of capital stock
of the Company. The Shareholders listed on Exhibit A constitute all of the
---------
record and beneficial owners of the Shares as of the date hereof. Except as set
forth on Schedule 4.3:
------------
(a) there is no outstanding security of the Company convertible into
or exchangeable for any share or shares of the capital stock of the Company;
(b) there is no outstanding subscription, option, warrant, call,
commitment, agreement or understanding (oral or written or otherwise) obligating
the Company to issue any share or shares of its capital stock or any security or
securities of any class or kind which in any way relate to the authorized or
issued capital stock of the Company or any interest therein:
(c) except for this Agreement, there is no agreement or understanding
(oral or written or otherwise) which grants to any Person the right to purchase
or otherwise acquire any share or shares of the issued and outstanding capital
stock of the Company or any interest therein, including, without limitation, any
preemptive right, right of first refusal or co-sale right;
(d) there is no voting trust or voting agreement or pooling agreement
or proxy (oral or written or otherwise) with respect to any issued and
outstanding shares of the capital stock of the Company; or
(e) there is no obligation of the Company (oral or written or
otherwise) to purchase, redeem, or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or distribution with
respect thereto.
4.4 Title to and Condition of Assets.
Except as set forth on Schedule 4.4, the Company is the owner of and,
------------
at the Closing shall have good and marketable title to, each and all of the
assets of the Company free and clear of any lien, claim, charge, encumbrance,
mortgage, pledge, security interest, restriction, voting trust arrangement,
adverse claim, or right of any kind, and, to the knowledge of the Company and
the Principal Shareholders, all of such assets are in good operating condition,
subject only to ordinary wear and tear which is not such as to adversely affect
the Company's operations.
4.5 Real Property.
(a) Schedule 4.5(a) sets forth a true and complete legal description
---------------
of all real property in fee by the Company (the "Owned Real Property").
-------------------
(b) Schedule 4.5(b) sets forth a true and complete list of all leases
or licenses of real property (the "Leases") entered into by the Company. The
Company does not have a leasehold interest in any real property used in the
conduct of the Business other than the real property subject to the Leases (the
"Leased Real Property"), which together with the Owned Real Property constitutes
all of the real property used in the Business (the "Real Property").
-------------
8
(c) Except as set forth on Schedule 4.5(c), (i) the Company has good
---------------
and marketable fee title to all of the Owned Real Property and a good, valid and
enforceable leasehold interest in the Leased Real Property and as of the
Closing, the Purchaser shall succeed to such interests, and (ii) the Company
holds its title or its interest in the Real Property free and clear of all
liens, claims, charges, encumbrances, mortgages, pledges, security interests,
restrictions, voting trust arrangements, adverse claims, easements, rights of
way, servitudes, zoning or building restrictions, or any other rights of others
or other adverse interests of any kind, including chattel mortgages, conditional
sales contracts, collateral security arrangements and other title or interest
retention arrangements (collectively, the "Encumbrances"). With respect to the
------------
Leased Real Property, there exist no material defaults by the Company, or, to
the knowledge of the Company and the Principal Shareholders, no material default
or threatened default by any lessor or third party thereunder, that has affected
or could reasonably be expected to affect the rights and privileges thereunder
of the Company, and there has not been any material failure to perform any
covenant or agreement which constitutes an event of default (with the giving of
notice or passage of time or otherwise) pursuant to any Lease.
4.6 Intellectual Property.
Schedule 4.6 sets forth a true and complete list of all of the
------------
copyrights, patents, patent rights, trademarks, service marks, trade names,
licenses, trade secrets, proprietary information and processes or other
intellectual property rights owned by the Company or which the Company uses in
the conduct of the Business. To the knowledge of the Company and the Principal
Shareholders, the Company has not infringed, and is not infringing, upon any
copyrights, patents, patent rights, trademarks, service marks, trade names,
licenses, trade secrets, proprietary information and processes or other
intellectual property rights owned by any Person, and there is no such claim or
action pending, or to the knowledge of the Company and the Principal
Shareholders, threatened with respect thereto.
4.7 Financial Statements.
Attached hereto as Schedule 4.7 are true and complete copies of the
------------
audited balance sheets and related statements of income, shareholders' equity
and cash flows for the Company for the years ended December 31, 1997 and 1998,
together with the notes thereto and the reports thereon of Xxxxxx Xxxxxxxx LLP,
certified public accountants, and together with the Company's internally
prepared financial statements for the year ended December 31, 1999 (such
documents, the "Financial Statements"). The December 31, 1999 balance sheet is
--------------------
referred to herein as the "1999 Balance Sheet." Each of the Financial
------------------
Statements has been prepared based on the books and records of the Company in
accordance with the Company's historical application of GAAP and the Company's
normal accounting practices, consistent with past practice and with each other,
and present fairly the financial condition, results of operations and statements
of cash flow of the Company as of the dates indicated or for the periods
indicated.
4.8 No Conflict.
Except as set forth on Schedule 4.8, the execution, delivery and
------------
performance by the Company and the Shareholders of this Agreement do not and
shall not (a) contravene or
9
conflict with the Articles of Incorporation or Bylaws of the Company, true and
correct copies of which have been delivered to the Purchaser by the Company,
(b) to the knowledge of the Principal Shareholders and assuming receipt of any
Required Consents (as hereinafter defined), contravene or conflict with or
constitute a violation of any provision of any applicable law binding upon or
applicable to the Company, the Shareholders or the Business, (c) assuming
receipt of any Required Consents (as hereinafter defined), constitute a default
under or give rise to any right of termination, cancellation or acceleration of,
or to a loss of any benefit to which the Company or the Shareholders is entitled
under, any Material Contract (as hereinafter defined) or any material approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities and all other persons
necessary for the operation of the Business in substantially the same manner as
currently operated or affecting or relating in any way to the Business, or (d)
result in the creation or imposition of any lien, claim, charge, encumbrance,
mortgage, pledge, security interest, restriction, voting trust arrangement,
adverse claim, or right of any kind on any of the Company's assets.
4.9 Conduct of Business.
Except as set forth on Schedule 4.9, from September 30, 1999, the
------------
Company has conducted the Business only in the ordinary course and has not: (a)
incurred any material obligation or material liability (absolute, accrued,
contingent or otherwise, whether due or to become due) in excess of Fifty
Thousand Dollars ($50,000), except current liabilities for trade or business
obligations incurred in the ordinary course of the Business and consistent with
its prior practice; (b) suffered any damage, destruction or loss of its property
(whether or not covered by insurance, which has had or would have a Material
Adverse Effect); (c) other than in the ordinary course of the Business, made any
change in the rate of compensation, commission, bonus or other direct or
indirect remuneration payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus, extra compensation, pension or severance
or vacation pay to any employees of the Company; (d) instituted, settled or
agreed to settle any litigation, action or proceeding, before any court or
governmental body relating to the Business or the assets of the Company
involving a payment in excess of Fifty Thousand Dollars ($50,000); (e) made any
purchase commitment which is in excess of the normal, ordinary and usual
requirements of the Business; (f) entered into any agreements other than in the
ordinary course of the Business; (g) other than in the ordinary course of the
Business, modified, amended or terminated any Material Contract; or (h)
experienced any change in the Business which would have a Material Adverse
Effect.
4.10 Labor Matters.
(a) Schedule 4.10(a) sets forth a true and complete list of (i) each
----------------
employee of the Company and (ii) the amount of annual salary and accrued bonuses
payable to each such employee as of the Closing Date, including any additional
compensation payable in the event that any of such employees are terminated
following the consummation of the transactions contemplated hereby.
(b) Except as set forth in Schedule 4.10(b): (i) the Company is not
----------------
engaged and has not engaged in any unfair labor practice or unlawful or
discriminatory act or course of
10
conduct; (ii) there has been no labor strike, dispute, slowdown or stoppage
against the Company or by the Company's employees; (iii) no union representation
question or union or other organizational activities subject to the National
Labor Relations Act exist respecting any employees; (iv) no collective
bargaining agreement exists that is binding on the Company; (v) the Company has
not experienced any other labor difficulties which individually or in the
aggregate has resulted in or could reasonably be expected to result in a
Material Adverse Effect; (vi) the Company is not delinquent in any material
respect in payments to any of its current or former officers, directors,
employees, consultants or agents for any wages, salaries, commissions or other
direct compensation for any services performed by them or amounts required to be
reimbursed to such officers, directors, employees, consultants or agents; (vii)
in the event of termination of the employment of service of any such officers,
directors, employees, consultants or agents, neither the Company nor the
Purchaser shall be liable to any such Person for severance or continuation pay
arising from any policies or practices of the Company in effect prior to Closing
or any other facts or circumstances existing prior to Closing; (viii) since
January 1, 1997, there has not been any involuntary termination of employment of
any officer, director or employee of the Company receiving an annual base salary
in excess of Fifty Thousand Dollars ($50,000); (ix) the Company has complied and
is currently complying in all material respects, in respect of all its
employees, with all applicable laws respecting employment and employment
practices, including, without limitation, payment of wages, discrimination,
workplace safety and equal employment opportunity (the "Labor Laws"); (x) there
----------
is no charge or complaint by or against the Company which is pending or, to the
knowledge of the Principal Shareholders, threatened, before the National Labor
Relations Board, the Equal Employment Opportunity Commission, the U.S.
Department of Labor, or any other federal, state or local governmental authority
or court relating to labor or employment matters or any Labor Laws; (xi) all
individuals who are performing or have performed services since January 1, 1997
for the Company and are or were classified by the Company as "independent
contractors" qualify for such classification under applicable law relating to
Taxes (as hereinafter defined) and benefits; and (xii) all individuals who are
treated as exempt from the payment of overtime pay qualify and are properly
classified for such exemption under applicable law.
(c) Except as set forth on Schedule 4.10(c), to the knowledge of the
----------------
Principal Shareholders, no officer or key employee or any group of key employees
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing,
nor are any of the foregoing subject to disciplinary action based on
unacceptable performance or behavior.
4.11 Employee Benefits.
Except as set forth on Schedule 4.11, Company does not maintain and is
-------------
not a party to any compensation or employee benefit plans, programs or contracts
within the meaning of Section 3(3) of ERISA (the "Compensation and Benefit
------------------------
Programs") for employees or former employees or their dependents. The Company
--------
has provided the Purchaser with all documents and government filings relating to
the Compensation and Benefit Programs and has provided a written summary of any
unwritten Compensation and Benefit Programs. The Compensation and Benefit
Programs have been maintained, to the knowledge of the Principal Shareholders,
in all material respects, in compliance with all applicable laws, and there are
no material liabilities associated
11
with the Compensation and Benefit Programs (statutory, contractual or otherwise)
which have not been fully funded by the Company and with respect to any such
plan intended to be qualified under Section 401 of the Internal Revenue Code of
1986, as amended (the "Code"), a favorable determination letter as to such
----
plan's qualification has been received and nothing has occurred since the date
of such letter to affect adversely its qualification. Neither the Company nor
any ERISA Affiliate of the Company has sponsored, maintained or contributed to,
or has had any obligation to constitute, any pension plan regulated under Title
IV of ERISA within the last six (6) years. No Compensation or Benefit Program
provides benefits described in Section 3(1) of ERISA to any former employees or
retirees of the Company or any ERISA Affiliate except as required under Part 6
Title I of ERISA. "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended. "ERISA Affiliate" of the Company means any other person that,
---------------
together with the Company as of the relevant measuring date under ERISA, was or
is required to be treated as a single employer under Section 414 of the Code.
4.12 Contracts; Clients.
(a) Schedule 4.12 sets forth with respect to the Business a list of
-------------
(i) all client contracts (including, without limitation, oral contracts) for the
Company's fiscal year ending December 31, 1999 which account for not less than
eighty percent (80%) of the Company's revenue for such fiscal year; (ii) all
contracts with consultants or subcontractors involving payments of One Hundred
Thousand Dollars ($100,000) or more in any twelve (12) month period, with
respect to which the Company has any remaining obligation; (iii) with the
exception of standard confidentiality or conflict of interest provisions in the
Company's contracts with its clients, any contracts entered into within the last
five (5) years containing a covenant by the Company not to compete or
restricting the ability of the Company to conduct any business, with respect to
which the Company has any remaining obligation; (iv) any contract with a current
employee providing for a basis of employment other than "at will;" and (v) any
other current contracts involving payments of One Hundred Thousand Dollars
($100,000) or more in any twelve (12) month period material to the assets,
properties, liabilities, financial condition, results of operations, business or
prospects of the Company (collectively, the "Material Contracts"). A true and
------------------
complete copy of each written Material Contract has been made available to the
Purchaser. A description of the material terms of each oral Material Contract
is set forth on Schedule 4.12. The Material Contracts were entered into in the
-------------
ordinary course of the Business and the Company (i) has not received any notice
of default with respect to such Material Contracts, and (ii) to the knowledge of
the Principal Shareholders, there is no material default, or existing
circumstances which, with notice or the passage of time, would be a material
default with respect to such Material Contracts.
(b) Except as set forth on Schedule 4.12, neither the Company, nor, to
-------------
the knowledge of the Company and the Principal Shareholders, any other party to
any contract has committed a breach thereof or a default thereunder or intends
to cancel or withdraw such Material Contract.
(c) Schedule 4.12(c) sets forth the names of all of the Company's
----------------
clients for each of the twelve (12) month periods ended December 31, 1998 and
1999 which account for not less than eighty percent (80%) of the Company's
revenue for each such twelve (12) month period,
12
together with the approximate dollar amount of revenues generated by the
Company's services to each such client during such periods. Except as disclosed
on Schedule 4.12(c), no current client of the Company has informed the Company
----------------
of any material deficiency in the Company's performance of services for such
client or of its intention to terminate, or substantially to reduce the scope
of, its current business relationship with the Company.
4.13 Compliance with Applicable Laws.
To the knowledge of the Principal Shareholders, the operation of the
Business by the Company has not violated or infringed, and does not violate or
infringe, any statute, law, ordinance, rule, regulation or engineering or
contracting licensing law ("Applicable Law") of the United States, any state or
--------------
municipality, the government of any foreign country, any subdivision of any of
the foregoing, or any authority, department, commission, board, bureau, agency,
court or instrumentality of any of the foregoing (a "Governmental Authority").
----------------------
4.14 Environmental Compliance.
(a) For purposes of this Section 4.14,
(i) "Company" shall include (A) the Company, (B) the Business,
-------
(C) all partnerships, joint ventures, limited liability companies and
other entities or organizations in which the Company or the Business
was at any time or is a partner, joint venturer, member or
participant, and (D) all predecessor or former corporations,
partnerships, joint ventures, organizations, businesses or other
entities, whether in existence as of the date hereof or at any time
prior to the date hereof, the assets or obligations of which have been
acquired or assumed by the Company or the Business or to which the
Company or the Business has succeeded.
(ii) "Hazardous Substance" means any substance or material: (A)
-------------------
the presence of which requires investigation or remediation under any
applicable law; (B) the generation, storage, treatment,
transportation, disposal, remediation, removal, handling or management
of which is regulated by any environmental law; (C) that is defined as
a "hazardous waste" or "hazardous substance" under any applicable law;
(D) that is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, teratogenic or mutagenic or otherwise
hazardous and is regulated by any governmental authority having or
asserting jurisdiction over the Business or the Company; (E) the
presence of which poses a hazard to the health or safety of persons;
(F) the presence of which constitutes a nuisance, trespass or other
tortious condition for which the Company could be or is alleged to be
liable; or (G) without limitation, that contains gasoline, diesel fuel
or other petroleum hydrocarbons, polychlorinated biphenols (PCBs),
radon, formaldehyde, asbestos or radionuclides.
(iii) "Environmental Laws" means any and all foreign, federal,
------------------
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, legally binding decrees or other requirements of
any Governmental Authority
13
(including, without limitation, common law) regulating, relating to or
imposing liability or standards of conduct, as have been, are now or
may at any time hereafter be in effect, relating to: (A) the
protection, investigation or restoration of the environment, health
and safety, or natural resources, (B) the handling, use, presence,
disposal, release or threatened release of any Hazardous Substance, or
(C) noise, odor, wetlands, pollution, contamination or any injury or
threat of injury to persons or property.
(iv) "Environmental Permits" means any and all permits, licenses,
---------------------
registrations, notifications, exemptions and any other authorizations
required under any Environmental Law.
(v) "Environmental Condition" means the release or threatened
-----------------------
release of any Hazardous Substance (whether or not upon a Facility (as
hereinafter defined) or any former Facility or other property and
whether or not such release constituted at the time thereof a
violation of any Environmental Law) as a result of which the Company
has or would reasonably be expected to become liable to any Person
(other than the Company or any Subsidiary) or by reason of which any
Facility, any former Facility or any of the assets of the Company
would reasonably be expected to suffer or be subjected to any claim,
lien, pledge, option, charge, easement, security interest, right-of-
way, encumbrance or other right of third parties.
(vi) "Facility" means one or more of the offices and buildings
--------
and all other real property and related facilities which are owned,
leased or operated by the Company or any Subsidiary (as hereinafter
defined).
(b) To the knowledge of the Principal Shareholders, the Company and
its Subsidiaries: (i) are, and within the period of all applicable statutes of
limitation have been, in compliance in all material respects with all applicable
Environmental Laws, (ii) hold all Environmental Permits (each of which is in
full force and effect) required for any of their current or intended operations
or for any property owned, leased or otherwise operated by any of them; (iii)
are, and within the period of all applicable statutes of limitation have been,
in compliance with all of their Environmental Permits; and (iv) reasonably
believe that each of their Environmental Permits currently in effect will be
renewed effective prior to the expiration of such Environmental Permit.
(c) The Company and its Subsidiaries have not received any notice of
alleged, actual or potential responsibility for, or any inquiry or investigation
regarding, any Environmental Condition. Neither the Company nor any Subsidiary
has received any notice of any other claim, demand or action by any individual
or entity alleging any actual or threatened injury or damage to any person,
property, natural resource or the environment arising from or relating to any
release or threatened release of any Hazardous Substances at, on, under, in, to
or from any Facility or any former Facilities, or in connection with any
operations or activities of the Company or any of its Subsidiaries.
14
(d) Except with respect to such matters as have been fully and finally
resolved and as to which there are no remaining obligations, neither the Company
nor any of its Subsidiaries has entered into or agreed to or is subject to any
consent decree, order or settlement or other agreement in any judicial,
administrative, arbitral or other similar forum relating to compliance with or
liability under any Environmental Law.
(e) Hazardous Substances have not been transported, disposed of,
emitted, discharged or otherwise released or threatened to be released to or at
any real property presently or formerly owned or leased by the Company or any of
its Subsidiaries or at any other property, which Hazardous Substances are
reasonably expected to (i) give rise to liability of the Company or any
Subsidiary under any applicable Environmental Law, (ii) interfere with the
Company's or any Subsidiary's continued operations or (iii) materially impair
the fair salable value of any real property owned or leased by the Company or
any Subsidiary.
(f) Neither the Company nor any of its Subsidiaries has assumed or
retained by contract any material liabilities of any kind, fixed or contingent,
known or unknown, under any applicable Environmental Law. To the knowledge of
the Principal Shareholders, neither the Company nor any of its Subsidiaries is
required to make any material capital or other expenditures to comply with any
Environmental Law nor is there any reasonable basis on which any Governmental
Authority could take any action that would require any such capital
expenditures.
(g) True, complete and correct copies of the written reports, and all
parts thereof, of all environmental audits or assessments which have been
conducted in respect of any Facility or any former Facility within the past five
(5) years, either by the Company, any Subsidiary, or any attorney, environmental
consultant or engineer or other Person engaged by the Company or any of its
Subsidiaries for such purpose, have been delivered to the Purchasers and a list
of all such reports, audits and assessments and any other similar report, audit
or assessment of which either of the Principal Shareholders has knowledge is
included on Schedule 4.14.
-------------
4.15 No Undisclosed Liabilities.
Except for (a) liabilities set forth on the 1999 Balance Sheet, (b)
liabilities incurred in the ordinary course of the Business since December 31,
1999 and (c) liabilities set forth on Schedule 4.15, the Company has no debts,
-------------
liabilities or obligations of any nature whatsoever, whether absolute, accrued,
contingent, known or unknown or otherwise. The reserves set forth on the 1999
Balance Sheet and the Company's insurance policies in effect on Closing date are
sufficient to cover any liabilities of the Company attributable to events and
occurrences prior to the Closing which may arise prior to, on or after the
Closing.
4.16 Litigation.
Except as set forth on Schedule 4.16:
-------------
(a) the Company is not subject to any order, judgment, or decree of,
or written agreement or memorandum of understanding with, any Governmental
Authority; and
15
(b) there are no actions, suits, claims, investigations or proceedings
pending at law or in equity or before or by any Governmental Authority, or, to
the knowledge of the Principal Shareholders, threatened, against the Company or
adversely affecting the Company or any of its assets or properties or the
transactions contemplated by this Agreement, and, to the knowledge of the
Principal Shareholders, there exist no facts or circumstances which reasonably
could be anticipated to result in any such action, suit, claim, investigation or
proceeding.
4.17 Consents of Third Parties.
Except as set forth on Schedule 4.17, no approvals or consents of any
-------------
Person or Governmental Authority (including, without limitation, consents of
lessors, lenders, financial institutions and suppliers but excluding clients of
the Company) are required to be obtained by the Company to consummate the
transactions contemplated by this Agreement (any such consents, the "Required
--------
Consents").
--------
4.18 Insurance.
The Company has maintained and now maintains (a) insurance on all of
its assets and business of a type customarily insured, covering property damage
and loss of income by fire or other casualty and (b) adequate insurance
protection against all liabilities, claims and risks against which it is
customary and appropriate to insure. Schedule 4.18 sets forth a list of the
-------------
insurance policies held by the Company. The Company has made available to the
Purchaser a complete and correct copy of each of such policies. The Company has
paid all premiums due on such policies in a timely manner, there were no
misrepresentations in the applications for such policies and the Company is in
compliance with each of such policies.
4.19 Taxes.
(a) For the purposes of this Section 4.19, the following terms shall
have the following meanings:
(i) "Taxes" means any federal, state, county, local or foreign
-----
taxes, charges, fees, levies, or other assessments, including all net
income, gross income, sales and use, ad valorem, transfer, gains,
profits, excise, franchise, real and personal property, gross receipt,
capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties,
severance or withholding taxes or charges imposed by any governmental
entity, including any interest and penalties (civil or criminal) on or
additions to any such taxes and any expenses incurred in connection
with the determination, settlement or litigation of any liability for
Taxes; and
(ii) "Tax Return" means a report, return or other information
----------
required to be supplied to a governmental entity with respect to
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
(b) Except as set forth on Schedule 4.19, the Company (i) has filed or
-------------
caused to be filed, or shall file or shall cause to be filed, all Tax Returns
required to be filed under
16
applicable law; (ii) shall file all other Tax Returns required to be filed prior
to the Closing Date when due (taking into account any extension of a required
filing date); (iii) has paid within the time and in the manner prescribed by law
(and until the Closing Date shall pay within the time and in the manner
prescribed by law) all Taxes that are due and payable (whether or not shown on
any Tax Return); (iv) has not been a member of an affiliated, consolidated,
combined or unitary group other than one of which the Company was the common
parent; (v) is not a party to any Tax allocation or sharing agreement and does
not have any Liability for the Taxes of any Person (other than the Company and
its Subsidiaries as disclosed pursuant hereto under Reg. 1-1502-6 (or any
similar provision of state, local or foreign law) as a transferee or successor,
by contract or otherwise; (vi) all such Tax Returns filed were correct and
complete in all respects; and (vii) the Company has disclosed on its federal
income Tax Returns all positions taken therein which are required to be
disclosed therein and which, if disclosed, could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
(c) Except as set forth on Schedule 4.19, (i) the Company has
-------------
established (and until the Closing shall maintain) on its books and records
reserves adequate to pay all Taxes not yet due and payable; (ii) there are no
Tax liens upon any property or asset of the Company except liens for Taxes not
yet due; (iii) no examination of any Tax Return of the Company is currently in
progress and there is no material action, suit, proceeding, investigation, audit
or claim pending or, to the knowledge of the Company, threatened against or with
respect to the Company in respect of any Tax; (iv) no waivers of statutes of
limitation in respect of any Tax Returns have been given by or requested of the
Company, nor has the Company agreed to any extension of time with respect to a
Tax assessment or deficiency; and (v) there is no material claim pending by any
authority in a jurisdiction where the Company does not currently file a Tax
Return to the effect that the Company is or may be subject to taxation by that
jurisdiction. No representation or warranty has been or is made with respect to
the effect on the Company's Taxes of any election(s) made by the Purchaser at or
subsequent to the Closing, even if such election(s) may give rise to additional
Tax liability for the Company and in the event that the Purchaser makes any such
election or files any amended Tax Returns for periods ending on or prior to the
Closing Date, notwithstanding anything to the contrary contained in this
Agreement, the Purchaser shall be solely liable for any Tax liabilities
resulting therefrom.
(d) There are no outstanding agreements entered into with any taxing
authority that would have a continuing adverse effect on the Company after the
Closing Date. The Company has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes (including the withholding and reporting requirements under Sections
1441 through 1464, 3401 through 3406, 6041 and 6049 of the Code) and has, within
the time and in the manner prescribed by law, paid over to the proper
governmental authorities all material amounts required. The Company is not
required to include in income any adjustment pursuant to Section 481(a) of the
Code by reason of a change in accounting method and the Company has no knowledge
that the Internal Revenue Service has proposed any such adjustment or change in
accounting method. The Company is not obligated to make any payments, and is
not a party to any agreement that could obligate it to make any payments, that
shall not be deductible under Section 280G of the Code. The Company is not a
United States real property holding corporation with the meaning of Section
897(c)(2) of the Code.
17
4.20 Certain Affiliate Transactions.
Except as set forth on Schedule 4.20, neither the Company nor any
-------------
Shareholder, officer or director of the Company (or any immediate family member
of any such Shareholder, officer or director) (collectively, the "Insiders") now
--------
has or at any time subsequent to January 1, 1997, had, either directly or
indirectly, an equity or debt interest in any Person (excluding an equity
interest of not greater than five percent (5%) in any publicly-held entity)
which furnishes or sells or during such period furnished or sold services or
products to the Company or purchases or during such period purchased from the
Company any goods or services, or otherwise does or during such period did
business with the Company of a material nature or amount. None of the Insiders
now is, or was at any time subsequent to January 1, 1997, a party to any
contract, commitment or agreement to which the Company is, or during such period
was, a party or under which the Company is or was obligated or bound or to which
any of its properties may be or may have been subject. Except as set forth in
Schedule 4.20 or in the Financial Statements and except as expressly
-------------
contemplated by or disclosed in this Agreement, the Other Agreements and the
exhibits or schedules attached hereto and thereto, the Company is not indebted
to any Insiders, in any amount whatsoever, other than for compensation for
services rendered, retirement contributions and reasonable expenses, and none of
the Insiders are indebted to the Company.
4.21 Absence of Certain Business Practices.
To the knowledge of the Principal Shareholders, neither the Company
nor any employee, agent or other person acting on the Company's behalf, has,
directly or indirectly, given or agreed to give any gift or similar benefit to
any customer, supplier, competitor or governmental employee or official
(domestic or foreign) (a) that would subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or proceeding or (b)
that, if not given in the past, would have had a material adverse effect on the
condition (financial or other), results of operations or prospects of the
Company or the Business.
4.22 Brokers.
Except as disclosed on Schedule 4.22, neither the Company nor any
-------------
Shareholder is obligated for the payment of fees or expenses of any broker or
finder in connection with the origin, negotiation or execution of this Agreement
or in connection with any transaction contemplated hereby.
4.23 Government Contracts.
To the knowledge of the Principal Shareholders, with respect to each
agreement, arrangement or other commitment of any kind between the Company and
any Governmental Authority or any contractor having a contract with any
Governmental Authority (a "Government Contract"): (a) within the past five (5)
-------------------
years, the Company has received no written notice that the Company or any of its
current employees is the subject or target of any criminal investigation or
indictment or any civil investigation or proceedings under the False Claims Act
by any Governmental Authority with respect to any alleged irregularity,
misstatement or omission or other matter with respect to the Business; and (b)
neither the Company nor, to the Company's
18
knowledge, any of the Company's directors, officers or employees is suspended or
debarred from doing business with a Governmental Authority, and there exists no
cause for any such suspension or debarment.
4.24 Permits.
Except as disclosed on Schedule 4.24, the Company has, and at all
-------------
times has held, all permits, licenses, orders, authorizations, registrations,
qualifications, approvals and other analogous instruments (collectively, the
"Permits") (and each is in full force and effect) as required by Applicable Law
--------
for the purpose of conducting the Business and owning its assets, in each
jurisdiction in which it does business or owns assets or in which such Permits
are otherwise required. The Company is in material compliance with all such
Permits. There are no proceedings pending or, to the knowledge of the Principal
Shareholders, threatened to revoke or terminate any such presently existing
Permits and the Company knows of no reason why any such Permit would not be
renewed in the ordinary course or why any modifications to such Permits would
not be approved or granted. The Company has made all filings and registrations
and the like necessary or required by law to conduct the Business.
4.25 Subsidiaries.
Except for the entities listed on Schedule 4.25 (individually, a
-------------
"Subsidiary" and collectively, the "Subsidiaries"), as to which the Company owns
----------- ------------
all of the issued and outstanding capital stock, the Company does not own or
control any equity interest, directly or indirectly, in any other Person or
business enterprise, has never owned such equity interest, has never operated as
a subsidiary or a division of any other Person and is not a participant in any
joint venture, partnership, strategic relationship or similar arrangement with
any Person as to which there are any current obligations or liabilities on the
part of the Company. All references in Articles III and IV to the Company shall
include each of the Subsidiaries and all representations and warranties
contained in Articles III and IV shall be deemed to have been made with respect
to each of the Subsidiaries.
4.26 Accounts Receivable.
The accounts receivable of the Company reflected on the Closing
Balance Sheet are valid, are not subject to any counterclaim and are collectible
within one hundred eighty (180) days after the Closing Date, net of any reserves
for doubtful accounts, except for such accounts receivable that include
contractually required retentions so long as such retentions are ultimately
collectible.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Each of ITG and Acquisition Sub hereby represents and warrants to the
Shareholders as of the date hereof and as of the Closing Date as follows:
19
5.1 Organization and Existence.
Each of ITG and Acquisition Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has all corporate power and authority to enter into this Agreement and
consummate the transactions contemplated hereby. Each of ITG and Acquisition
Sub is duly qualified to do business as a foreign corporation in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary to carry on its
business as now conducted, except for those jurisdictions where the failure to
be so qualified has not been, and may not reasonably be expected to be,
material.
5.2 Corporate Authorization.
The execution, delivery and performance by the Purchaser of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby are within the corporate powers of the Purchaser and have been duly
authorized by all necessary corporate action on the part of the Purchaser. This
Agreement constitutes a legal, valid and binding agreement of the Purchaser,
enforceable in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and subject to general principles of equity.
5.3 Non-Contravention.
The execution, delivery and performance by the Purchaser of this
Agreement does not (a) contravene or conflict with the Purchaser's Certificate
of Incorporation or Bylaws, or (b) contravene or conflict with or constitute a
violation of any provision of any Applicable Law binding upon the Purchaser.
Except for any applicable waiting periods under the Xxxx-Xxxxx-Xxxxxx Act, the
consent of the Purchaser's lenders, no approvals or consents of any person,
entity or Governmental Authority are necessary on the Purchaser's part to
consummate the transactions contemplated by this Agreement.
5.4 Consent of Lender.
As of the Closing Date, the Purchaser shall have obtained the consent
of any and all of its lenders to treat the transactions contemplated hereby as a
"permitted acquisition" under any then-current lending agreements.
5.5 Financial Sophistication.
The Purchaser has been advised that the Shares have not been and will
not be registered under the Securities Act of 1933, or applicable state
securities laws, but are or will be, as the case may be, transferred pursuant to
exemptions from such laws, and that the Company's reliance upon such exemptions
is predicated in part on the Purchaser's representations contained herein. The
Purchaser has been solely responsible for its own due diligence investigation of
the Company and the Business, and its analysis of the merits and risks of the
investment made pursuant to this Agreement, and is not relying on any analysis
or investigation of the Company, its business or the merits and risks of the
Shares not specifically referenced in this Agreement or
20
prepared by the Company or the Shareholders. The Shareholders represent that the
Purchaser has been given access to full and complete information regarding the
Company, including, in particular, the current financial condition of the
Company. No such investigation, however, shall qualify in any respect the
representations and warranties of the Company in this Agreement. Without
prejudice to the Purchaser's rights and remedies under this Agreement, the
Purchaser is a financially sophisticated accredited investor within the meaning
of Regulation D under the Securities Act of 1933 and is able to bear the
economic risk and withstand a complete loss of its investment in the Shares.
ARTICLE VI
COVENANTS OF THE COMPANY AND
THE PRINCIPAL SHAREHOLDERS
The Company and the Principal Shareholders hereby covenant and agree
to the following:
6.1 Conduct of the Business; Distributions.
From the date hereof until the Closing Date, the Company shall conduct
the Business in the ordinary course and in substantially the same manner as it
has prior to the date of this Agreement and, with respect to the Business and
other than in the ordinary course of the Business, shall not enter into any
material agreements or take any other significant actions without the prior
written consent of the Purchaser, which consent shall not be unreasonably
withheld. The Company shall use its best efforts to preserve intact the
Company's assets, the Business and the business organizations and relationships
and goodwill of the Company with third parties with respect to the Business and
keep available the services of the present employees, agents and other personnel
of the Company. Without limiting the generality of the preceding sentence and
except as otherwise expressly provided in this Agreement, from the date hereof
until the Closing Date:
(a) The Company shall promptly notify the Purchaser in writing of (i)
any action, event, condition or circumstance, or group of actions, events,
conditions or circumstances, that results in, or could reasonably be expected to
result in, a Material Adverse Effect, (ii) the commencement of any legal
proceeding by or against the Company or any Shareholder, or the Company or any
Shareholder becoming aware of any threat, claim, action, suit, inquiry,
proceeding, notice of violation, demand letter, subpoena, government audit or
disallowance that could reasonably be expected to result in a legal proceeding,
and (iii) the occurrence of any breach by the Company or any Shareholder of any
representation or warranty, or any covenant or agreement, contained in this
Agreement;
(b) Without the Purchaser's prior written consent, the Company shall
not and shall not agree to, and the Principal Shareholders shall cause the
Company not to: (i) purchase or otherwise acquire assets from any other Person
other than in the ordinary course of the Business; (ii) sell, assign, lease,
license, transfer or otherwise dispose of, or mortgage, pledge or encumber, any
of the Company's assets, except in the ordinary course of the Business; (iii)
enter any
21
agreement or arrangement that requires or allows payment (discount or
otherwise), acceleration of payment or incurrence of liabilities, or the
rendering of services by the Company outside the ordinary course of the
Business; (iv) amend or modify in any material respect or terminate any Material
Contracts resulting in a Material Adverse Effect on the Business; (v) except in
the ordinary course of the Company's business, waive, cancel or take any other
action materially impairing any of its rights relating to the Business; (vi)
enter into or commit or propose to enter into any material agreement or
contract, except contracts in the ordinary course of the Business specifically
relating to engineering and design projects with clients and subcontractors in
the transportation, energy, telecommunications and land development markets;
(vii) make any distribution, dividend, bonus or other payment to any officer,
director, stockholder or affiliate of the Company or any of their respective
affiliates or associates except for dividend, compensation, benefit or lease
payments in the ordinary course and due or to become due under arrangements in
existence prior to the Closing Date, and except for certain employee bonuses
approved and paid before the Closing Date by the Company's board of directors,
whether in the ordinary course of the Business or otherwise, not to exceed the
levels of such bonuses reflected in the 1999 Balance Sheet; (viii) increase the
level of compensation or other employment benefits of any employee of the
Company; or (ix), except for debt incurred by or other obligation of the Company
in connection with the repurchase of the ESOP Shares, (A) create, incur, assume,
or guarantee any indebtedness for borrowed money or (B) incur any liability
relating to a documentary or standby letter of credit, other than in each such
case referred to in this clause (ix) in the ordinary course of the Business
where the aggregate dollar amount of all of the foregoing by the Company does
not exceed Fifty Thousand Dollars ($50,000).
(c) The Company shall pay in the ordinary course of the Business, and
in no event later than set forth in the terms of any applicable contract or
agreement or as historically paid, all rents, insurance premiums, accounts
payable (including, but not limited to, accounts payable to subcontractors,
professional service providers and material suppliers), capital expenditures,
taxes, general employment compensation and fringe benefits, interest on borrowed
money and other amounts historically paid by the Company in the ordinary course
of the Business.
6.2 Access to Information.
Subject to compliance with Applicable Laws, from the date hereof until
the Closing Date, the Company and the Principal Shareholders shall promptly: (a)
give the Purchaser and its counsel, auditors and other authorized
representatives reasonable access to the offices, properties, books and records
relating to the Business upon reasonable prior notice; (b) furnish to the
Purchaser and its counsel, auditors and other authorized representatives such
information relating to the Business as the Purchaser may reasonably request;
and (c) instruct the directors, officers, employees, counsel and auditors of the
Company to cooperate with the Purchaser and its counsel, financial advisors,
auditors and other authorized representatives in their investigation of the
Business, provided that any meeting with the Company's personnel must be
conducted during normal business hours and in the presence of a designated
representative of the Company. Any information furnished by the Company or the
Principal Shareholders pursuant to this Section 6.2 shall be governed by the
continuing obligations of the parties under that certain Confidentiality
Agreement dated July 31, 1999 between ITG and the Company, as amended, which
agreement
22
shall survive until the earlier of the Closing Date or the Drop-Dead Date under
Section 10.2 hereof.
6.3 Maintenance of Insurance Policies.
On and after the date hereof (including after the Closing Date),
neither the Company nor the Principal Shareholders shall take or fail to take
any action if such action or inaction, as the case may be, would adversely
affect the applicability of any insurance in effect on the date hereof that
covers all or any part of the Business with respect to the period of time ending
on the Closing Date.
6.4 Exclusivity.
Neither the Company (nor any of its directors nor any advisors or
representatives retained by the Company (collectively, the "Representatives"))
---------------
nor any of the Principal Shareholders shall directly or indirectly solicit,
initiate or encourage the submission of any proposal or offer from any Person
with respect to the Company relating to any (a) merger or consolidation, (b)
acquisition or purchase of all, substantially all or a material amount of the
capital stock, securities or assets of the Company, or (c) similar transaction
or business combination involving the Company. The Company and the Principal
Shareholders shall immediately cease, and shall instruct its Representatives to
immediately cease, any and all existing activities, discussions or negotiations
with any Persons conducted heretofore with respect to any such transactions. In
addition, the Company and each of the Principal Shareholders shall use its or
his best efforts to prevent any officer, employee or other Shareholder of the
Company from engaging in any and all activities, discussions and negotiations
with respect to any such transactions.
6.5 ESOP.
Prior to the Closing Date, the Company and the Shareholders shall
cause Xxxxxxx X. Xxxxxxx to be removed as the trustee of the ESOP and be
replaced by a competent individual or institution whose service as trustee would
not entail any conflict of interest or otherwise violate Part 4 of Title I of
the ERISA. Such new trustee shall cause the United States Department of Labor
official currently in charge of such Department's audit of the ESOP to be
notified of this Agreement and the transactions contemplated hereby, including,
in particular and without limitation, the disposition of the ESOP. In addition,
on or prior to the Closing Date, the Company shall repurchase from the ESOP all
of the ESOP Shares, and such purchase shall satisfy the conditions of Section
408(e) of ERISA.
6.6 Delivery of Schedules.
From time to time prior to the Closing but in no event later than ten
(10) business days before the Closing, the Company and the Shareholders may
deliver or cause to be delivered to the Purchaser additional, supplemental or
revised schedules to this Agreement; provided, that no information set forth on
--------
any such schedule constitutes a material change or supplementation to any
schedules previously furnished to the Purchaser.
23
ARTICLE VII
CONDITIONS TO CLOSING
7.1. Conditions to the Purchaser's Obligations.
The obligations of the Purchaser to consummate the transactions
contemplated on the Closing Date are subject to the reasonable satisfaction, on
or before the Closing Date, of all the following conditions:
(a) The Company and the Shareholders shall have performed and complied
in all material respects with all covenants, conditions and obligations required
by this Agreement to be performed or complied with by the Company and the
Shareholders on or before the Closing Date. All representations and warranties
of the Company and the Shareholders contained in this Agreement, the schedules
attached hereto, or in any agreement, document, instrument or certificate that
shall be delivered by the Company and the Shareholders to the Purchaser under
this Agreement shall be true, correct and complete in all material respects at
and as of the Closing Date as though made on such date.
(b) There shall not have occurred any Material Adverse Effect, in this
case exceeding One Hundred Thousand Dollars ($100,000), on the condition
(financial or other), results of operations or prospects of the Business. The
Company shall not have sustained any material loss or damage to its assets
exceeding One Hundred Thousand Dollars ($100,000), whether or not insured, that
materially affects the ability of the Company to conduct the Business
substantially as it presently is and has been conducted. All of the Principal
Shareholders and all material members of the Company's senior management in the
sole judgment of the Purchaser shall still be employed by the Company.
(c) All Required Consents shall have been obtained.
(d) No action or proceeding shall be completed or pending against the
Company that has or is likely to result in a judgment, decree or order that
would prevent or make unlawful the consummation of the transactions contemplated
by this Agreement and there shall be in effect no order restraining or
prohibiting the consummation of the transactions contemplated by this Agreement
nor any proceedings pending with respect thereto.
(e) There shall not exist any pending or threatened litigation, claim,
assessment or other loss contingency against the Company or the Business seeking
damages in excess of One Hundred Thousand Dollars ($100,000), or relief which,
if granted, would have a Material Adverse Effect on the Business.
(f) There shall not exist any material defaults under any of the
Material Contracts.
(g) The Company shall deliver to the Purchaser a certificate, dated on
the date of Closing, executed in its corporate name by its Chairman, Chief
Executive Officer or President
24
certifying, in such detail as the Purchaser may reasonably request, to the
fulfillment of the conditions specified in paragraphs (a) through (f) above.
(h) Each of the Principal Shareholders shall have executed a Non-
Competition Agreement in the form attached hereto as Exhibit B and each of
---------
certain members of the Company's senior management indicated on Exhibit C hereto
---------
shall have executed a Non-Solicitation and Confidentiality Agreement in the form
attached hereto as Exhibit D.
---------
(i) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law.
(j) The required approval by the Shareholders for the sale and
purchase of the Shares contemplated by this Agreement set forth in paragraph (4)
of Article III, Section 6.A. of the Bylaws of the Company, as heretofore
amended, shall either have been obtained or eliminated altogether by a duly
authorized amendment of such Bylaws.
(k) The Principal Shareholders shall have delivered to the Purchaser:
(i) any and all certificates evidencing the Shares duly endorsed
in blank or accompanied by duly executed stock powers;
(ii) evidence reasonably satisfactory to the Purchaser in its
sole discretion that all Encumbrances securing outstanding debts and
obligations of the Company have been released and terminated,
including, without limitation, UCC-3 financing statements; and
(iii) a true and complete copy of the audited balance sheets and
related statements of income, shareholders' equity and cash flows for
the Company for the year ended December 31, 1999, together with the
notes thereto and the reports thereon of Xxxxxx Xxxxxxxx LLP,
certified public accountants.
(l) Any waiting period applicable to the consummation of the
transactions contemplated by this Agreement under the Xxxx-Xxxxx-Xxxxxx Act
shall have expired or been terminated.
(m) All of the directors of the Company shall have resigned as of the
Closing Date and the Principal Shareholders shall have delivered to the
Purchaser written instruments evidencing each such resignation.
(n) The Company and the Shareholders shall cause the ESOP to be
amended on or prior to the Closing Date to provide that, upon receipt of any
cash to purchase all of the ESOP Shares:
(i) any cash in respect of allocated ESOP Shares shall be
immediately allocated to the accounts of their respective ESOP
participants, any cash in respect of any ESOP Shares allocated to any
suspense account shall be paid to the ESOP's creditor(s) to discharge
the ESOP's indebtedness and any remaining cash shall
25
thereupon be allocated to the accounts of the ESOP participants and
treated as earnings of the ESOP, not as annual additions under Section
415 of the Code, and
(ii) following receipt of any such cash and discharge of its
indebtedness, the ESOP shall (A) immediately constitute a profit
sharing plan, (B) cease to constitute an "employee stock ownership
plan" within the meaning of Section 4975(e)(7) of the Code and (C) be
terminated effective as of the Closing Date.
In addition, on or prior to the Closing Date, the trustee of the ESOP (or other
fiduciary reasonably acceptable to the Purchaser) shall have received from a
reputable, independent valuation firm reasonably satisfactory to the Purchaser
an opinion that the transactions contemplated hereby are fair to the ESOP from a
financial point of view and that the ESOP is receiving for the ESOP Shares an
amount which is not less than "adequate consideration" within the meaning of
Section 3(18) of ERISA. A copy of such opinion shall have been delivered to the
Purchaser on or prior to the Closing Date.
(o) The Company and the Shareholders shall have caused the Company's
401(k) plan to be terminated not later than one (1) day prior to the Closing
Date by appropriate action, including, without limitation, one or more duly
authorized resolutions of the Company's board of directors and amendment of such
401(k) plan.
(p) Upon the Closing, the Purchaser will acquire not less than eighty
percent (80%) of the Shares; provided, however, in the event that the Purchaser
-------- -------
does not acquire at least eighty percent (80%) of the Shares at the Closing, the
Closing Date shall be automatically extended not more than once by forty-five
(45) days, subject to Section 10.2 hereof; provided, further, that in the event
-------- -------
the Purchaser acquires at least eighty percent (80%) but less than ninety
percent (90%) of the Shares at the Closing, each Shareholder signatory hereto
shall be deemed to have given the Purchaser an irrevocable proxy to be used in
any subsequent meeting of the Shareholders duly called to consider and vote on
the adoption and approval of a definitive agreement or plan of merger between
the Company and either ITG or Acquisition Sub.
7.2 Conditions to the Obligations of the Company and the
Shareholders.
The obligations of the Company and the Shareholders to consummate the
transactions contemplated on the Closing Date are subject to the reasonable
satisfaction, on or before the Closing Date, of all the following conditions:
(a) the Purchaser shall have performed and complied in all material
respects with all covenants, conditions and obligations required by this
Agreement to be performed or complied with by the Purchaser on or before the
Closing Date. All representations and warranties of the Purchaser contained in
this Agreement, or in any agreement, document, instrument or certificate that
shall be delivered by the Purchaser to the Company under this Agreement, shall
be true, correct and complete in all material respects at and as of the Closing
Date as though made on such date.
26
(b) All consents and approvals required to be obtained by the
Purchaser for the consummation of the transactions contemplated by this
Agreement shall have been received.
(c) The Purchaser shall deliver to the Company and the Shareholders
its certificate, dated the Closing Date, executed in its corporate name by its
President, Vice President or Treasurer, certifying, in such detail as the
Company may reasonably request, to the fulfillment of the conditions specified
in paragraphs (a) and (b) above.
(d) The Purchaser shall deliver to the Company and the Principal
Shareholders an integration plan that will be developed consistent with the
Purchaser's past practices (the "Principles of Integration" dated April 3,
2000). Such Principles of Integration shall address the Purchaser's current
intentions with respect to, among other things, the organizational structure of
the Company's business after the Closing, the transition and integration of
employee compensation and benefits after the Closing, the specific roles of the
Principal Shareholders in management of the Company's business after the Closing
and the guidelines with respect to revenue recognition and the implementation of
integration tasks. Such Principles of Integration shall be reasonably
satisfactory to the Principal Shareholders.
ARTICLE VIII
INDEMNIFICATION AND OTHER CONTINUING COVENANTS
8.1 Indemnification by the Shareholders.
(a) Subject to the limitations provided herein and, with respect to
the representations and warranties, for so long as the representations and
warranties contained in Articles III and IV hereof survive pursuant to Section
8.5, the Purchaser and its directors, officers, employees, agents,
representatives and affiliates (collectively, the "Purchaser Indemnitees") shall
---------------------
be indemnified and held harmless to the extent set forth in this Article VIII by
each of the Shareholders, severally with respect to the representations and
warranties contained in Article III hereof and jointly and severally with
respect to the representations and warranties contained in Article IV hereof, in
respect of any demands, claims, losses, liabilities, damages, costs and expenses
whatsoever (including, without limitation, any fines, penalties and reasonable
fees and disbursements of counsel in investigating or defending any of the
foregoing) (collectively, the "Losses") incurred by the Purchaser Indemnitees as
------
a result of any inaccuracy or misrepresentation in or breach of any
representation or warranty of the Company or the Shareholders in this Agreement
or the Other Agreements; provided, however, that any claim for indemnification
-------- -------
that would otherwise terminate pursuant to this paragraph (a) shall continue to
survive if a notice of claim is filed in good faith by the Purchaser on or
before such termination date based on facts reasonably expected to establish a
valid claim under this Article VIII.
(b) Subject to the limitations provided herein and, with respect to
the covenants, agreements or obligations of the Company or the Shareholders in
this Agreement, until the second anniversary of the Closing Date, the Purchaser
Indemnitees shall be indemnified and held harmless to the extent set forth in
this Article VIII by each of the Principal Shareholders,
27
jointly and severally, in respect of any Losses incurred by the Purchaser
Indemnitees as a result of any breach of or failure to perform any covenant,
agreement or obligation of the Company or the Shareholders in this Agreement or
the Other Agreements; provided, however, that any claim for indemnification that
-------- -------
would otherwise terminate pursuant to this paragraph (a) shall continue to
survive if a notice of claim is filed in good faith by the Purchaser on or
before such termination date based on facts reasonably expected to establish a
valid claim under this Article VIII.
(c) Subject to the limitations provided herein, the Purchaser
Indemnitees shall be indemnified and held harmless to the extent set forth in
this Article VIII by each of the Shareholders, jointly and severally, in respect
of any Losses incurred by the Purchaser Indemnitees as a result of any liability
resulting from any pending audit of the ESOP conducted by the United States
Department of Labor.
(d) No Shareholder shall be required to pay any indemnification to the
Purchaser Indemnitees in accordance with paragraphs (a), (b) and (c) above
exceeding such portion of the Purchase Price as to which each such Shareholder
is entitled under Section 1.2 hereof.
(e) The Shareholders shall not be required to pay any indemnification
to the Purchaser Indemnitees on account of Losses as a result of any inaccuracy
or misrepresentation in or breach of or failure to perform any representation or
warranty contained in Article IV hereof or any covenant, agreement or obligation
of the Company or the Shareholders in this Agreement or the Other Agreements
until, and then only to the extent, the total of all such Losses exceeds One
Hundred Thousand Dollars ($100,000) in the aggregate (the "Deductible");
----------
provided, however, that in no event shall the maximum aggregate liability of the
-------- -------
Shareholders with respect to obligations to indemnify the Purchaser Indemnitees
for Losses exceed Ten Million Dollars ($10,000,000).
(f) In lieu of payment to the Purchaser Indemnitees by the
Shareholders under paragraph (a), (b) or (c) above, on the date on which the
First Anniversary Payment or the Second Anniversary Payment is paid to the
Shareholders, the Purchaser shall offset, to the extent possible, all
outstanding amounts of any indemnification which the Shareholders are required
to pay under paragraph (a), (b) or (c) above against the First Anniversary
Payment or the Second Anniversary Payment, as the case may be (any such amounts,
an "Indemnification Offset"), upon written notice to the Shareholders at least
----------------------
thirty (30) days in advance of such Indemnification Offset describing with
specificity the basis and calculations for the Indemnification Offset; provided,
--------
that the Shareholders shall remain responsible for paying to the Purchaser
Indemnitees any amounts of indemnification which the Shareholders are required
to pay under paragraph (a), (b) or (c) above and which remain unpaid after such
Indemnification Offset.
8.2 Indemnification by the Purchaser.
(a) Subject to the limitations provided herein, the Shareholders shall
each be indemnified and held harmless to the extent set forth in this Section
8.2 by the Purchaser for so long as the representations and warranties set forth
in Article V hereof survive in respect of any Losses reasonably incurred by the
Shareholders as a result of any inaccuracy or misrepresentation
28
in or breach of or failure to perform any representation, warranty, covenant,
agreement or obligation of the Purchaser in this Agreement or the Other
Agreements.
(b) The Purchaser shall not be required to pay any indemnification to
the Shareholders until, and then only to the extent, the total of all such
Losses referred to in paragraph (a) above exceeds the Deductible.
8.3 Indemnification with Respect to Third Party Claims.
(a) As used herein, "Third Party Claim" means a Loss or potential Loss
-----------------
for which indemnification is claimed by the Purchaser under the provisions of
this Article VIII and which is consequent to a claim against the Purchaser by a
Person by commencement against the Purchaser of a legal action or proceeding or
receipt by the Purchaser of an assertion of a claim for which indemnification is
provided pursuant to this Article VIII, other than a Tax Claim (as hereinafter
defined).
(b) Within ten (10) days after its receipt of a Third Party Claim, the
Purchaser shall give notice of such Third Party Claim to the Shareholders
stating the nature thereof and enclosing copies of any complaint, summons,
written assertion of such Third Party Claim or similar document. No claim for
indemnification on account of a Third Party Claim shall be made and no
indemnification therefore shall be available under this Article VIII until the
Purchaser shall have given initial written notice of such claim to the
Shareholders.
(c) Except as hereinafter provided (including, but not limited to,
Section 8.3(d)(ii) hereof), the Shareholders shall have the right to engage
counsel (which counsel shall be reasonably acceptable to the indemnified party)
and to defend a Third Party Claim, provided, that the Shareholders shall have
provided notice to the Purchaser of their election to defend not later than
thirty (30) days following their receipt of a notice of a Third Party Claim.
The indemnified party shall cooperate with such counsel. The Shareholders shall
cause such counsel to consult with and inform the Purchaser as appropriate as to
the defense of such claim, and the Purchaser may, at its own expense,
participate in such defense, but the Shareholders shall, subject to Section
8.3(d)(ii) hereof, control such defense.
(d) Notwithstanding anything to the contrary in Section 8.3(c) hereof:
(i) The Purchaser shall have the right to engage counsel and to
control the defense of a Third Party Claim if the Shareholders shall
not have notified the Purchaser of their appointment of counsel and
control of the defense of a Third Party Claim within the thirty (30)
day period specified in Section 8.3(c).
(ii) The Purchaser shall have the right, at its own expense, to
engage counsel to participate jointly with the Shareholders in, and to
control jointly with the Shareholders, the defense of a Third Party
Claim if (A) the Third Party Claim involves remedies other than
monetary damages and such remedies, in the Purchaser's reasonable
judgment, could have an effect on the conduct of the Purchaser's
business or (B) the Third Party Claim relates to acts, omissions,
conditions, events or other matters occurring after the Closing Date
as well as to acts, omissions,
29
conditions, events or other matters occurring prior to the Closing
Date.
(iii) If the Purchaser chooses to exercise its right to appoint
counsel under this Section 8.3(d), the Purchaser shall deliver notice
thereof to the Shareholders. The Purchaser may deliver such notice at
any time that the conditions to the exercise of such right appear to
be fulfilled, it being recognized that in the course of litigation,
the scope of litigation and the amount at stake may change. The
Purchaser shall thereupon have the right to appoint such counsel.
(iv) The reasonable fees and expenses of counsel and any
accountants, experts or consultants engaged by the Purchaser in
accordance with the provisions of Section 8.3(d)(i) in connection with
defending a Third Party Claim shall be paid by the Shareholders in
accordance with the provisions of this Article VIII.
(e) With respect to settlement of Third Party Claims:
(i) The Shareholders may settle any Third Party Claim solely
involving monetary damages only if the amount of such settlement is to
be paid entirely by the Shareholders pursuant to this Article VIII.
(ii) The Shareholders shall not enter into a settlement of a
Third Party Claim which involves a non-monetary remedy or which shall
not be paid entirely by the Shareholders pursuant to this Article VIII
without the prior written consent of the Purchaser.
(iii) If the Purchaser defends a Third Party Claim pursuant to
Section 8.3(d)(i), the Purchaser shall be free to compromise, defend
and settle Third Party Claims without prejudice to any of its rights
hereunder or under applicable law; provided, however, that if a claim
-------- -------
is settled without concurrence of the Shareholders, any dispute
regarding the liability of the Shareholders to the Purchaser, if any,
shall be resolved by arbitration in accordance with Section 11.13
hereof.
(iv) As to any Third Party Claim of the type described in clause
(B) of Section 8.3(d)(ii), the Purchaser and the Shareholders shall
consult as to any proposed settlement. If either party notifies the
other party that it desires to accept a proposed settlement and such
other party is unwilling to do so, if the amount for which the Third
Party Claim is ultimately resolved is greater than the amount for
which the notifying party desired to settle, then the notifying party
shall be liable only for the amount, if any, which it would have paid
had the Third Party Claim been settled as proposed by such notifying
party.
(f) Notwithstanding anything to the contrary in this Section 8.3, in
the event of any settlement of, or final judgment with respect to, a Third Party
Claim which relates to acts,
30
omissions, conditions, events or other matters occurring both before and after
the Closing Date, (i) the Purchaser shall bear responsibility only for such
portion of such Third Party Claim attributable to such acts, omissions,
conditions, events or other matters occurring after the Closing Date and giving
rise (in part) to such Third Party Claim, and (ii) the Shareholders shall bear
responsibility only for such portion of such Third Party Claim attributable to
such acts, omissions, conditions, events or other matters occurring before the
Closing Date and giving rise (in part) to such Third Party Claim. Any dispute
arising therefrom shall be resolved by arbitration in accordance with Section
11.13 hereof.
(g) The Purchaser and the Shareholders shall cooperate with one
another in good faith in connection with the defense, compromise or settlement
of any Third Party Claim or action. Without limiting the generality of the
foregoing, the party controlling the defense or settlement of any matter shall
take steps reasonably designed to ensure that the other party and its counsel
are informed at all times of the status of such matter. Neither party shall
dispose of, compromise or settle any claim or action in a manner that is not
reasonable under the circumstances and in good faith. The Shareholders shall
enter into such confidentiality and other non-disclosure agreements as the
Purchaser shall reasonably request in order to protect trade secrets and other
confidential or proprietary information of the Company and the Purchaser. The
Purchaser shall make available to the Shareholders, upon request, all
information reasonably necessary for the Shareholders to evaluate or respond to
any claim, investigation or action relating to the period prior to the Closing
or to a claim for indemnification.
8.4 Taxes.
(a) The Principal Shareholders and the Purchaser shall cooperate with
each other in the conduct of any audit or other proceedings involving the
Company which relate to Taxes. In the event a written notice of tax audit or
written claim relating to Taxes (a "Tax Claim") shall be made by any
---------
Governmental Authority which, if successful, would result in an obligation on
the part of the Principal Shareholders to indemnify the Purchaser pursuant to
this Article VIII, the Purchaser shall notify the Principal Shareholders within
thirty (30) days of its receipt of such Tax Claim, and the Principal
Shareholders shall have the right to engage counsel to represent the Company in
connection with such audit or other proceedings pertaining to such Tax Claim,
notwithstanding that other issues may be involved with the audit or other
proceedings at such time, but only insofar as such matters relate to periods
ending on or before the Closing Date. The Principal Shareholders' right to
defend such Tax Claim and the Purchaser's right to engage counsel shall be in
accordance with the provisions pertaining to a Third Party Claim pursuant to
Sections 8.3(c) and 8.3(d), respectively. The Principal Shareholders shall
defend such Tax Claim at their expense, and shall have reasonable discretion to
settle or compromise such Tax Claim with any taxing authority or take a position
in any administrative or judicial proceedings. The Principal Shareholders and
their representatives shall meet and confer with the Purchaser and its
representatives during the pendency of any audit or similar proceedings and the
Purchaser shall provide documents relating to such proceeding on a timely basis.
The Purchaser shall have the right to participate in the audit or defense of any
Tax Claim if the disposition thereof would have any impact on Taxes for periods
ending after the Closing Date.
31
(b) The Principal Shareholders shall promptly notify the Purchaser of
the proposed disposition of any Tax Claim (a "Disposition Notice"), and if the
------------------
Tax Claim is payable entirely by the Principal Shareholders pursuant to this
Article VIII, no specific consent shall be required of the Purchaser, and
Principal Shareholders shall be free to compromise, settle, or otherwise dispose
of the Tax Claim described in the Disposition Notice. In all other cases, no
compromise, settlement, or other disposition of the Tax Claim shall be
authorized without the prior written consent of the Purchaser, and if the
proposed disposition is disputed by the Purchaser, or if the Purchaser fails to
give written consent within thirty (30) days of the receipt of the Disposition
Notice, Xxxxxxx X. Xxxxxxx and Xxxxxxx X. XxXxxx, or their respective successors
or designees as provided in Section 1.3 hereof, shall attempt to resolve such
dispute. If they are unable to resolve such dispute within thirty (30) days,
such dispute shall be submitted to binding arbitration as provided in Section
11.13 hereof, unless the parties agree to an alternative means of dispute
resolution.
8.5 Survival of Representation and Warranties.
(a) Except as hereinafter provided in this Section 8.5, all
representations and warranties of each party contained herein (including the
Schedules) shall (i) be deemed to have been remade at the Closing, (ii) survive
the Closing and (iii) expire on the second anniversary of the Closing Date;
provided, that the representations and warranties contained in Sections 3.1,
--------
3.2, 4.1 and 4.3 shall survive indefinitely; and the representations and
warranties contained in Sections 4.14 and 4.19 and any other representation and
warranty, the breach of which is based on fraud or willful misconduct, shall
survive until the expiration of the applicable statute of limitation, including
any extensions thereof. The liability of the Principal Shareholders with
respect to such representations and warranties shall be subject to the same
Deductible and exceptions thereto as that set forth in Section 8.1.
(b) Any representation or warranty that would otherwise terminate
pursuant to paragraph (a) above shall continue to survive if a notice of claim
is filed in good faith by an indemnified party on or before such termination
date based on facts reasonably expected to establish a valid claim under this
Article VIII.
8.6 ESOP Loan.
Immediately prior to the Closing, the Purchaser shall loan the Company
an amount in cash sufficient for the Company to repurchase all of the ESOP
Shares pursuant to Section 6.5 hereof; provided, that a number of Shareholders
--------
holding in the aggregate not less than eighty percent (80%) of the Shares (after
giving effect to such repurchase of the ESOP Shares by the Company) shall each
have signed a signature page hereto.
32
ARTICLE IX
POST-CLOSING COVENANTS
The Purchaser and the Principal Shareholders covenant and agree with
such covenants and agreements to survive the Closing:
9.1 ITG Benefit Programs.
Subject to the terms and conditions of this Agreement, each employee
of the Company shall participate in ITG's Compensation and Benefit Programs;
provided, that each such employee of the Company shall receive credit for his or
--------
her years of service with the Company for purposes of determining eligibility
for and vesting of benefits under such programs to the same extent as provided
to ITG employees under ITG's then-current policies, except that the Company's
severance or continuation pay policies or practices shall remain in effect for
each such employee for a period of six (6) months after the Closing Date.
9.2 Employee Compensation.
Subject to the terms and conditions of this Agreement, each employee
of the Company shall receive initial annual compensation after the Closing (a)
at levels currently provided by the Company or (b) at levels currently provided
to similarly situated employees of ITG, at ITG's discretion. The Company's
employees shall be given credit for service performed for the Company for the
purposes of ITG's Compensation and Benefit Programs, including, but not limited
to, accrued vacation and sick leave time.
9.3 Tax Matters.
The following provisions shall govern the allocation of responsibility
as between the Purchaser and the Principal Shareholders for certain tax matters
following the Closing Date:
(a) The Principal Shareholders shall prepare or cause to be prepared
and file or cause to be filed all Tax Returns for the Company and its
Subsidiaries for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. The Principal Shareholders shall permit the
Purchaser to review and comment on each such Tax Return described in the
preceding sentence prior to filing.
(b) The Purchaser shall prepare and file all Tax Returns of the
Company and its Subsidiaries for Tax periods which begin before the Closing Date
and end after the Closing Date. The Principal Shareholders shall pay to the
Purchaser within fifteen (15) days after the date on which Taxes are paid with
respect to such periods an amount equal to their respective allocable portion of
such Taxes that are not reflected in the reserve for Tax liability included in
the Closing Balance Sheet. For purposes of this Section 9.4, in the case of any
Taxes that are imposed on a periodic basis, other than Taxes based upon or
related to income or receipts, that includes (but does not end on) the Closing
Date, the Principal Shareholders shall only be liable for their pro rata portion
of such Tax liability determined based on days up to and including the Closing
Date over total days in the taxable period. In the case of any Tax based upon
or related to income or receipts, the allocation shall be determined as if the
relevant taxable period ended on the
33
Closing Date. The Principal Shareholders shall have the right of contribution
against any of the other Shareholders for each such Shareholder's pro rata
portion of any payments made by the Principal Shareholders to the Purchaser, or
as to any Tax liability of the Principal Shareholders to the Purchaser, pursuant
to this Section 9.3.
(c) Xxxxxxx X. Xxxxxxx, so long as he is an officer of the Company,
shall be authorized to execute after consultation with the other Principal
Shareholder, but after consulting with the Purchaser, any Tax Returns or other
tax reports filed after the Closing Date pursuant to paragraph (a) above on
behalf of the Company but only as to periods ending before the Closing Date. If
he is no longer an officer of the Company and Xxxxxxx X. Xxxx continues to be an
officer of the Company, then Xxxxxxx X. Xxxx shall be authorized to execute
after consultation with the other Principal Shareholders any such tax returns or
reports filed after the Closing Date on behalf of Company. The Purchaser and the
Principal Shareholders shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns
pursuant to this Section 9.4 and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided thereunder. The Company and
its Subsidiaries and the Principal Shareholders agree (i) to retain all books
and records with respect to Tax matters pertinent to the Company and its
Subsidiaries relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent notified
by the Purchaser or the Principal Shareholders, any extensions thereof) of the
respective taxable periods, and (ii) to abide by all record retention agreements
entered into with any taxing authority.
9.4 Further Assurances.
From time to time, as and when requested by either the Purchaser or
the Principal Shareholders, the other party shall execute and deliver, or cause
to be executed and delivered, all such documents and instruments and shall take,
or cause to be taken, all such further or other actions as such other party may
reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
9.5 Appointment of Registered Agent.
On or prior to the Closing Date, the Shareholders shall appoint a
single registered agent for service of process with respect to any controversy
or claim arising out of or relating to the Transaction Documents and shall
prepay such registered agent's fees in an amount sufficient to cover such
registered agent's services for a period of two years from the Closing Date.
The Shareholders shall promptly notify the Purchaser in writing of the identity,
business address and telephone number of such registered agent (or any
replacement thereof). In addition, each Shareholder shall promptly notify the
Purchaser and such registered agent (or any replacement thereof) in writing of
any change in such Shareholder's residential address.
34
9.6 Errors and Omissions Insurance.
On or prior to the Closing Date, the Shareholders shall obtain from
financially sound and reputable insurers, and maintain for a period of not less
than two (2) years from the Closing Date, insurance against all claims,
casualties and contingencies relating to errors and omissions by the Company in
its performance of professional engineering and design services prior to and
including the Closing Date (the "Tail Insurance"); provided, that the Purchaser
-------------- --------
shall reimburse the Shareholders for an amount equal to thirty percent (30%) of
the applicable premium for such Tail Insurance, such amount not to exceed One
Hundred Five Thousand Dollars ($105,000). Such Tail Insurance policy shall
specify:
(a) a coverage period of not less than two (2) years;
(b) a deductible of not more than Two Hundred Fifty Thousand Dollars
($250,000);
(c) policy limits of not less than Five Million Dollars per occurrence
and Ten Million Dollars ($10,000,000) in the aggregate; and
(d) ITG and Acquisition Sub as additional named insureds.
The Shareholders shall pay the amount of the deductible with respect to any
claim made under such Tail Insurance policy; provided, that the Purchaser shall
--------
reimburse the Shareholders for an amount equal to thirty percent (30%) of the
deductible paid by the Shareholders for each such claim.
ARTICLE X
TERMINATION; DEFAULT
10.1 Termination.
(a) This Agreement may be terminated and the transactions described
herein abandoned in their entirety at any time prior to Closing by mutual
written consent of the Purchaser and the Shareholders.
(b) The Purchaser may terminate this Agreement upon written notice to
the Company and the Shareholders in the event of:
(i) a material breach of this Agreement by the Company and/or the
Shareholders, which breach remains uncured by the Company and/or the
Shareholders within fifteen (15) days after written notice thereof
from the Purchaser,
35
(ii) the non-occurrence of a condition to closing set forth in
this Agreement on the Closing Date, which non-occurrence shall not
have been attributable to the Purchaser or within the Purchaser's
control,
(iii) material differences between the information furnished or
represented by the Company or any of the Principal Shareholders to the
Purchaser and the results of the Purchaser's due diligence review
(including, without limitation, the results of the Purchaser's second
stage of due diligence and interviews with the Company's management
and clients) in an aggregate amount of not less than One Hundred
Thousand Dollars ($100,000),
(iv) evidence of fraud on the part of the Company or any of the
Principal Shareholders in furnishing information to the Purchaser for
due diligence purposes, and
(v) after the date hereof, any material change or supplementation
to any of the schedules hereto furnished by the Company and/or the
Shareholders to the Purchaser on or prior to the date hereof.
(c) The Company and the Shareholders may terminate this Agreement upon
written notice to the Purchaser in the event of:
(i) a material breach of this Agreement by the Purchaser, which
breach remains uncured by the Purchaser within fifteen (15) days after
written notice thereof from the Company or any of the Shareholders,
(ii) the non-occurrence of a condition to closing set forth in
this Agreement on the Closing Date, which non-occurrence shall not
have been attributable to the Company or the Shareholders or within
the control of the Company or the Shareholders,
(iii) material differences between the information furnished by
the Purchaser to the Company and the results of the Company's due
diligence review in an aggregate amount of not less than One Hundred
Thousand Dollars ($100,000), and
(iv) evidence of fraud on the part of the Purchaser in furnishing
information to the Company for due diligence purposes.
10.2 Failure of Condition.
If any of the conditions precedent to the Company's, the Shareholders'
or the Purchaser's obligations hereunder are not satisfied and are not waived on
or prior to the Closing Date, or if the Closing Date shall not have occurred on
or before July 15, 2000 (the "Drop-Dead Date"), the Shareholders or the
--------------
Purchaser, as the case may be, may, at their option, and without prejudice to
any rights they may have to damages for breach, terminate this Agreement by
delivering written notice of termination to the other party.
36
10.3 Effect of Termination.
(a) Subject to Section 10.1 hereof, if this Agreement is terminated by
the Purchaser prior to Closing for any reason other than:
(i) a material breach of this Agreement by the Company and/or the
Shareholders,
(ii) the non-occurrence of a condition to closing set forth in
this Agreement on the Closing Date, which non-occurrence shall not
have been attributable to the Purchaser or within the Purchaser's
control,
(iii) material differences between the information furnished or
represented by the Company or any of the Principal Shareholders to the
Purchaser and the results of the Purchaser's due diligence review
(including, without limitation, the results of the Purchaser's second
stage of due diligence and interviews with the Company's management
and clients) in an aggregate amount of not less than One Hundred
Thousand Dollars ($100,000), and
(iv) evidence of fraud on the part of the Company or any of the
Principal Shareholders in furnishing information to the Purchaser for
due diligence purposes, and
(v) after the date hereof, any material change or supplementation
to any of the schedules hereto furnished by the Company and/or the
Shareholders to the Purchaser on or prior to the date hereof.
the Break-Up Fee shall be paid to the Company in accordance with the Escrow
Agreement and such payment of the Break-Up Fee shall constitute the sole and
exclusive remedy of the Company and the Shareholders as a result of such
termination of this Agreement by the Purchaser, as the case may be; provided,
--------
that for the purposes of clause (ii) above, any change in the business of the
Purchaser or its affiliates, including any change of control or change in the
value of the Purchaser's capital stock, shall be considered "attributable to the
Purchaser" or "within the Purchaser's control"; provided, further, that for the
-------- -------
purposes of clause (ii) above, any failure of the Company to obtain the Required
Consents shall be considered "not attributable to the Purchaser" or "not within
the Purchaser's control" unless the Purchaser intentionally or unreasonably
fails to cooperate with the Company to obtain the Required Consents.
(b) Subject to Section 10.1 hereof, if this Agreement is terminated by
the Company or any of the Shareholders prior to Closing for any reason other
than:
(i) a material breach of this Agreement by the Purchaser,
(ii) the non-occurrence of a condition to closing set forth in
this Agreement on the Closing Date, which non-occurrence shall not
have been attributable to the Company or the Shareholders or within
the control of the Company or the Shareholders,
37
(iii) material differences between the information furnished by
the Purchaser to the Company and the results of the Company's due
diligence review in an aggregate amount of not less than One Hundred
Thousand Dollars ($100,000), and
(iv) evidence of fraud on the part of the Purchaser in furnishing
information to the Company for due diligence purposes,
the Break-Up Fee shall be paid to ITG in accordance with the Escrow Agreement
and such payment of the Break-Up Fee shall constitute the sole and exclusive
remedy of ITG and the Purchaser as a result of such termination of this
Agreement by the Company or any of the Shareholders, as the case may be.
(c) If this Agreement is terminated pursuant to Section 10.1 hereof
prior to Closing, (i) this Agreement shall forthwith become void and have no
effect without any liability on the part of any party hereto, (ii) each and
every representation and warranty in this Agreement shall expire, and none of
the parties hereto shall be under any liability whatsoever with respect to any
such representation or warranty, and (iii) the Break-Up Fee shall be paid to
ITG.
10.4 Default by Purchaser.
(a) In the event of any failure by the Purchaser to pay the First
Anniversary Payment within ten (10) days after the first anniversary of the
Closing Date (except in good faith adherence to the provisions herein with
respect to the Book Value Adjustment, the Pro Rata Adjustment, the
Indemnification Offset and the First Year Deficit Adjustment), in addition to
the First Anniversary Payment, the Purchaser shall pay to the Shareholders an
amount equal to the interest which would have accrued on account of the First
Anniversary Payment (as adjusted for any Book Value Adjustment or Pro Rata
Adjustment and less any Indemnification Offset or First Year Deficit Adjustment
as of the first anniversary of the Closing Date) at a rate of eighteen percent
(18%) per annum from the Closing Date through the date of payment of the First
Anniversary Payment.
(b) In the event of any failure by the Purchaser to pay the Second
Anniversary Payment within ten (10) days after the second anniversary of the
Closing Date (except in good faith adherence to the provisions herein with
respect to the Book Value Adjustment, the Pro Rata Adjustment, the
Indemnification Offset and the Second Year Deficit Adjustment), in addition to
the Second Anniversary Payment, the Purchaser shall pay to the Shareholders an
amount equal to the interest which would have accrued on account of the Second
Anniversary Payment (as adjusted for any Book Value Adjustment or Pro Rata
Adjustment and less any Indemnification Offset or Second Year Deficit Adjustment
as of the second anniversary of the Closing Date) at a rate of eighteen percent
(18%) per annum from the Closing Date up to the date of payment of the Second
Anniversary Payment.
38
ARTICLE XI
MISCELLANEOUS
11.1 Notices.
All notices, requests, demands, claims and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given (a) if personally delivered,
when so delivered, (b) if mailed, two business days after having been sent by
registered or certified mail, return receipt requested, postage prepaid and
addressed to the intended recipient as set forth below, (c) if given by telex or
telecopier, once such notice or other communication is transmitted to the telex
or telecopier number specified below and the appropriate answer back or
telephonic confirmation is received, provided that such notice or other
communication is promptly thereafter mailed in accordance with the provisions of
clause (b) above, or (d) if sent through an overnight delivery service in
circumstances to which such service guarantees next day delivery, the day
following being so sent:
If to the Company or the Shareholders:
W & H Pacific, Inc.
0000 Xxxxx Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Telecopier: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
Xxxx XxXxxxx
Two Union Square
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Telecopier: (000) 000-0000
If to the Purchaser:
Evergreen Acquisition Sub I, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attn: Xxxxxxx X. XxXxxx
Telecopier: (412) __________
39
with a copy to each of:
The IT Group, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxx, Esq.
Telecopier: (000) 000-0000
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
individual for whom it is intended. Any party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
11.2 Amendments; No Waivers.
Any provision of this Agreement may be amended or waived if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective. No waiver by a party of any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent occurrence.
No failure or delay by a party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
11.3 Expenses.
All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
cost or expense.
11.4 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. No party
hereto may assign either this Agreement or any of its rights, interests or
obligations hereunder without the prior written consent of each other party,
which consent shall not be unreasonably withheld.
40
11.5 Governing Law.
This Agreement shall be construed in accordance with and governed by
the internal laws (without reference to choice or conflict of laws) of the State
of Washington.
11.6 Counterparts; Effectiveness.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof signed by the
other parties hereto.
11.7 Entire Agreement.
This Agreement (including the schedules, exhibits referred to herein
which are hereby incorporated by reference) constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written and oral,
between the parties with respect to the subject matter of this Agreement.
Neither this Agreement nor any provision hereof is intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
11.8 Captions.
The captions herein are included for convenience of reference only and
shall be ignored in the construction or interpretation hereof. All references
to an Article or Section include all subparts thereof.
11.9 Severability.
If any provision of this Agreement, or the application thereof to any
Person, place or circumstance, shall be held by a court of competent
jurisdiction to be invalid, unenforceable or void, the remainder of this
Agreement and such provisions as applied to other Persons, places and
circumstances shall remain in full force and effect only if, after excluding the
portion deemed to be unenforceable, the remaining terms shall provide for the
consummation of the transactions contemplated hereby in substantially the same
manner as originally set forth at the later of the date this Agreement was
executed or last amended.
11.10 Attorneys' Fees.
Should any action or proceeding be brought to construe or enforce the
terms and conditions of this Agreement or the rights of the parties hereunder,
the losing party shall pay to the prevailing party all court costs and
reasonable attorneys' fees and costs (at the prevailing party's attorney's then-
prevailing rates) incurred in such action or proceeding. A party that
voluntarily dismisses an action or proceeding shall be considered a losing party
for purposes of this Section 11.10. Subject to the individual and aggregate
limits on the liability of the Shareholders as set forth in Article VIII hereof,
attorneys' fees incurred in enforcing any judgment in respect of this Agreement
are recoverable as a separate item. The preceding sentence
41
is intended to be severable from the other provisions of this Agreement and to
survive any judgment and, to the maximum extent permitted by law, shall not be
deemed merged into any such judgment.
11.11 Definition of Knowledge.
Whenever any fact or matter is stated to be to the knowledge of the
Company, to the knowledge of the Principal Shareholders, to the knowledge of the
Company and the Principal Shareholders, or any similar reference, such reference
shall mean that the Company and the Principal Shareholders knew or should have
known of the existence or non-existence of such fact or matter after having
undertaken inquiry that is reasonable under the circumstances. For the purposes
of this Agreement, "inquiry that is reasonable under the circumstances" shall
mean inquiry of or by the Principal Shareholders and all of the individuals
indicated on Exhibit E hereto; provided, that no inquiry shall be required in
--------- --------
the event neither of the Principal Shareholders nor any of the individuals
indicated on Exhibit E hereto reasonably believes and concludes, after due
---------
consideration of the totality of the circumstances, that any inquiry is
necessary or appropriate.
11.12 Publicity.
No public release or announcement concerning this Agreement or the
transactions contemplated hereby shall be made by any party hereto without prior
written consent thereto by the Principal Shareholders and the Purchasers. No
party shall disclose any term or terms of this Agreement to any third party
without prior written consent thereto by the other party except (a) with respect
to obtaining the consent of third parties pursuant to Section 4.17, (b) as
necessary or desirable for either party to enforce its rights hereunder, or (c)
as otherwise required by law.
11.13 Arbitration.
Any controversy or claim arising out of or relating to the Transaction
Documents shall first be discussed in a friendly and reasonable manner between
the parties using their best efforts to resolve the matter. In the event that
such dispute or controversy cannot be so resolved within thirty (30) days after
receipt of the first written notice concerning such matter, the parties shall
attempt expedited mediation of such dispute or controversy in accordance with
the rules of the American Arbitration Association. In the event that such
dispute or controversy is not resolved by mediation within thirty (30) days
after receipt of the first written request for mediation, such dispute or
controversy (other than the matters specified in the Non-Competition Agreement)
shall be settled by binding arbitration conducted in the Seattle, Washington
area by three (3) arbitrators in accordance with the rules of the American
Arbitration Association in effect at the time, and judgment upon the award
rendered pursuant thereto may be entered in any court having jurisdiction
thereof, and all rights or remedies of the parties hereto, or any of them, to
the contrary are hereby expressly waived. Arbitration pursuant to the
provisions of this Section 11.13 and an award pursuant thereto shall be a
condition precedent to the bringing of any action, suit, or proceeding by any
party to this Agreement, for any form of relief against any party hereto.
42
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
PURCHASER:
---------
Evergreen Acquisition Sub I, Inc., a Delaware
corporation
/s/ Xxxxx Xxxxxxx
--------------------------------------------------
By: Xxxxx Xxxxxxx
President
The IT Group, Inc., a Delaware corporation
/s/ Xxxxx Xxxxxxx
--------------------------------------------------
By: Xxxxx Xxxxxxx
Senior Corporate Counsel
COMPANY:
-------
W & H Pacific, Inc., a Washington corporation
/s/ Xxxxxxx X. Xxxxxxx
--------------------------------------------------
By: Xxxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
PRINCIPAL SHAREHOLDERS:
----------------------
/s/ Xxxxxxx X. Xxxxxxx
--------------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxx
--------------------------------------------------
Xxxxxxx X. Xxxx
43
OTHER SHAREHOLDERS:
------------------
--------------------------------------------------
Print Name:
--------------------------------------
Number of Shares:
--------------------------------
44
