EXHIBIT 10b
PURCHASE AND SUBSCRIPTION AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of the 21st day of
November, 1996, by and among American Information Systems, Inc., a Delaware
corporation ("Company"), AIS Investors, Inc., a Nebraska corporation ("AISI")
(Company and AISI collectively, "Purchaser"), Business Records Corporation, a
Delaware corporation ("Seller") and BRC Holdings, Inc., a Delaware corporation
and parent corporation of Seller ("Seller's Shareholder").
W I T N E S S E T H :
WHEREAS, among other businesses, Seller is engaged in the business (the
"Election Business") of selling products and services to governmental election
jurisdictions for use in conducting elections for public office;
WHEREAS, AISI desires to acquire certain assets of the Election Business
subject to no Liabilities and Seller desires to transfer such assets to AISI for
the consideration described herein;
WHEREAS, Company desires to acquire substantially all of the assets of the
Election Business, subject only to certain Liabilities of Seller to be assumed
by Company, and Seller and AISI desire to transfer such assets to Company in
return for capital stock of Company and other consideration on the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS, Company, AISI and Seller desire the transfer described in the
immediately preceding recital to qualify as a Section 351 Transaction (as
defined herein).
NOW, THEREFORE, in consideration of the premises and mutual promises herein
made and the representations, warranties and covenants herein contained, and
intending to be legally bound, the parties hereto agree as follows.
ARTICLE 1.
DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings ascribed to them in this Section:
(a) "Accounts Receivable" means all account receivables of the
Election Business other than those constituting Excluded Assets.
(b) "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, claims, injunctions, judgments, orders,
decrees, damages, penalties, costs, amounts paid in settlement and fees,
including court costs and reasonable attorneys' fees and expenses.
(c) "Affiliate" of any Person means any Person, directly or indirectly
controlling, controlled by or under common control with such Person.
(d) "AISI" has the meaning specified in the initial paragraph of this
Agreement.
(e) "AISI Note" has the meaning specified in Section 2.8(a).
(f) "AISI Stock" has the meaning specified in Section 2.8(b).
(g) "Assigned Contracts" has the meaning specified in Section 2.4.
(h) "Assumed Liabilities" has the meaning specified in Section 2.6.
(i) "Auditors" means Price Waterhouse, LLP, (Dallas, Texas office) in
the case of the audit of the Election Business and Coopers & Xxxxxxx
(Omaha, Nebraska office) in the case of the audit of Company, or any firm
of independent public accountants hereinafter designated by Seller and
Company for purposes of this Agreement .
(j) "Authority" means any U.S. federal, state, local or foreign court
or governmental or regulatory agency or authority.
(k) "Book Value of Election Business" has the meaning specified in
Section 2.10(a).
(l) "Book Value of Company" has the meaning specified in Section
2.10(a).
(m) "Cash" has the meaning specified in Section 2.8(b).
(n) "Closing" has the meaning specified in Section 2.9(a).
(o) "Closing Date" has the meaning specified in Section 2.9(a).
(p) "COBRA" means the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
(q) "Code" means the Internal Revenue Code of 1986, as amended.
(r) "Collateral Agreements" has the meaning specified in Section
2.8(c).
(s) "Company" has the meaning specified in the initial paragraph of
this Agreement.
(t) "Company Equity Amount" has the meaning specified in Section
2.10(a).
(u) "Company Financial Statements" has the meaning specified in
Section 4.7.
(v) "Company Note" has the meaning specified in Section 2.8(b).
(w) "Confidential Information" has the meaning specified in Section
10.1.
(x) "Contracts" has the meaning specified in Section 2.2(h).
(y) "Contributed Assets" has the meaning specified in Section 2.2.
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(z) "Draft Effective Date Balance Sheets" has the meaning specified in
Section 2.10(b).
(aa) "Effective Date" has the meaning specified in Section 2.9(a).
(bb) "Effective Date Balance Sheets" has the meaning specified in
Section 2.10(c).
(cc) "Election Business" has the meaning specified in the first
recital of this Agreement.
(dd) "Election Business Equity Amount" has the meaning specified in
Section 2.10(a).
(ee) "Election Business Financial Statements" has the meaning
specified in Section 3.6.
(ff) "Employee" means any employee of Seller or any Affiliate of
Seller that performs services for the Election Business.
(gg) "Employee Benefit Plan" means any (i) nonqualified pension,
profit sharing, deferred compensation, stock purchase, stock option,
incentive, bonus, severance, retirement or any other type of employee
benefit plan, program or arrangement which is an Employee Pension Benefit
Plan; (ii) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan; (iii) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan); or (iv) Employee Welfare Benefit Plan
or material fringe benefit plan or program.
(hh) "Employee Pension Benefit Plan" has the meaning set forth in
Section 3(2) of ERISA.
(ii) "Employee Welfare Benefit Plan" has the meaning set forth in
Section 3(1) of ERISA.
(jj) "Environmental Laws" means all of the following as in effect on
the Closing Date: the Comprehensive Environmental Response Compensation and
Liability Act of 1980 and the Resource Conservation Recovery Act of 1976,
each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings
and charges of any Authority thereunder) concerning pollution or protection
of the environment, including, but not limited to, laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants or chemical, industrial, hazardous or toxic materials or
wastes into ambient air, surface water, ground water or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants or
chemical, industrial, hazardous or toxic materials or wastes.
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(kk) "Equipment" has the meaning specified in Section 2.2(a).
(ll) "Equipment Leases" has the meaning specified in Section 2.2(e).
(mm) "Excluded Assets" has the meaning specified in Section 2.3.
(nn) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(oo) "First Closing" has the meaning specified in Section 2.9(a).
(pp) "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
(qq) "Hardware Payment Component" has the meaning specified in Section
2.2(h).
(rr) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
(ss) "Indemnified Party" has the meaning specified in Section 8.3(a).
(tt) "Indemnifying Party" has the meaning specified in section 8.3(a).
(uu) "Intellectual Property" means with regard to a Person all
intellectual property of that Person including, without limitation, (i) all
U.S. and foreign patents, patent applications, copyrights and copyright
applications, (ii) all U.S. and foreign registered and unregistered
trademarks and service marks, trademark and service xxxx registrations, and
trademark and service xxxx applications for registration, (iii) all patent,
trademark, service xxxx, trade name, computer software, know how rights
granted to Seller or Purchaser, as the case may be, under licensing or
other agreements (the "Intellectual Property Agreements"); and (iv) all
know how, proprietary information, production methods, trade and business
secrets and computer software including exclusive rights to source code and
election day programming services.
(vv) "Inventory" means all inventory of the Election Business,
wherever located, including, without limitation, finished goods, work-in-
process, supplies, raw materials, manufactured and purchased parts, scrap,
containers, packaging materials and spares but excluding any items
constituting Excluded Assets.
(ww) "Knowledge of Company" means within the actual knowledge of any
one or more of Xxxxxxx Xxxxx, Xxxxxxx XxXxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxx, Xxxx Xxxx and Xxxxxx Xxxxxxxxx.
(xx) "Knowledge of Seller" means within the actual knowledge of any
one or more of X. X. Xxxxxx, Xxxxxx Xxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxxxx
Xxxx, Xxx XxXxxxxx, Xxxxxxx Xxxxxx, Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxxx and
Xxxxxx Xxxxxxx.
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(yy) "Leased Real Property" has the meaning specified in Section
2.2(g).
(zz) "Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated and/or whether due
or to become due), including any liability for Taxes.
(aaa) "Lien" means any lien, charge, claim, security interest,
conditional sale agreement, mortgage, deed of trust, security agreement,
pledge, hypothecation, option or other encumbrance of any kind or nature.
(bbb) "License Agreement" has the meaning specified in Section 6.9.
(ccc) "Majority Stockholders" means XxXxxxxx Group, Inc. and World
Diversified, Inc., collectively.
(ddd) "Material Adverse Effect" means a material adverse effect upon
the business, financial condition or results of operations of the Election
Business or the Company, as the case may be.
(eee) "Material Contract Consents" has the meaning specified in
Section 2.5(c).
(fff) "Material Contracts of Company" has the meaning specified in
Section 4.18.
(ggg) "Material Contracts of Election Business" has the meaning
specified in Section 3.20.
(hhh) "Mediator" means either a party agreed upon by the parties or
the Managing Partner, or his designee, of the Kansas City Office of Xxxxxx
Xxxxxxxx & Co.
(iii) "Most Recent Balance Sheet" means the balance sheet of the
Election Business or Company, as the case may be, as of September 30, 1996.
(jjj) "Most Recent Balance Sheet Date" means September 30, 1996.
(kkk) "Multiemployer Plan" has the meaning set forth in Section 3(37)
of ERISA.
(lll) "Noncompetition, Noninterference and Confidentiality Agreement"
has the meaning set forth in Section 6.6.
(mmm) "Owned Real Property" has the meaning specified in Section
2.2(f).
(nnn) "Person" means an individual, a corporation, a partnership, a
limited liability company or partnership, an association, an Authority, a
trust or other entity or organization.
(ooo) "Products" means the products and services of the Election
Business substantially all of which are as listed on Schedule 1.1(ooo).
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(ppp) "Purchase Price" has the meaning specified in Section 2.8(a).
(qqq) "Purchaser" has the meaning specified in the initial paragraph
of this Agreement.
(rrr) "Registration Rights Agreement" has the meaning specified in
Section 6.8.
(sss) "Restricted Interests" has the meaning specified in Section
2.5(a).
(ttt) "Retained Liabilities" has the meaning specified in Section
2.7.
(uuu) "Second Closing" has the meaning specified in Section 2.9(a).
(vvv) "Section 351 Transaction" shall mean a transaction as defined
in Section 351 of the Code.
(www) "Seller" has the meaning specified in the initial paragraph of
this Agreement.
(xxx) "Seller Stock" has the meaning specified in Section 2.8(b).
(yyy) "Seller's Shareholder" has the meaning specified in the initial
paragraph of this Agreement.
(zzz) "Stockholders Agreement" has the meaning specified in Section
6.7.
(aaaa) "Taxes" means all U.S. federal, state, and local and all
foreign income, payroll, withholding, excise, sales, use, personal
property, use and occupancy, business and occupation, mercantile, real
estate, capital stock and franchise and other tax, including interest and
penalties thereon and estimated taxes.
(bbbb) "Total Consideration" has the meaning specified in Section
2.8(b).
(cccc) "Trade Names" has the meaning specified in Section 2.2(c).
(dddd) "WARN Act" means the Workers Adjustment and Retraining
Notification Act of 1988, as amended.
1.2 RULES OF CONSTRUCTION. The use in this Agreement of the term
"including" means "including, without limitation." The words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the schedules and exhibits, as the same may from time to time
be amended, modified, supplemented or restated, and not to any particular
section, subsection, paragraph, subparagraph or clause contained in this
Agreement. All references to sections, schedules and exhibits mean the sections
of this Agreement and the schedules and exhibits attached to this Agreement,
except where otherwise stated. The title of and the section and paragraph
headings in this Agreement are for convenience of reference only and shall not
govern or affect the interpretation of any of the terms or provisions of this
Agreement. The use herein of the masculine, feminine or neuter forms shall also
denote the other forms, as in each
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case the context may require where specific language is used to clarify by
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates. The language used in this Agreement has
been chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
ARTICLE 2.
THE TRANSACTIONS
2.1 SALE AND PURCHASE OF ASSETS. At the First Closing, Seller shall sell,
assign, transfer and convey to AISI, free and clear of all Liens, restrictions
and conditions and AISI shall purchase from Seller the Accounts Receivable and
Inventory upon the terms, conditions and provisions set forth herein and in
reliance upon the covenants, agreements, representations, warranties and
indemnities of Seller (in the case of AISI) and AISI (in the case of Seller) set
forth in this Agreement.
2.2 SUBSCRIPTIONS AND CONTRIBUTIONS OF ASSETS. At the Second Closing, to
the extent owned by each, Seller and AISI shall sell, assign, transfer, convey
and deliver to Company, free and clear of all Liens, restrictions and
conditions, and Company shall acquire from Seller and AISI, all of the assets,
properties and rights of Seller currently utilized in connection with the
conduct of the Election Business (except for the Excluded Assets specified in
Section 2.3) (the "Contributed Assets") upon the terms, conditions and
provisions set forth herein and in reliance upon the covenants, agreements,
representations, warranties and indemnities of Company (in the case of Seller
and AISI) and Seller, Seller's Shareholder and AISI (in the case of Company) set
forth in this Agreement. If the Book Value of Company as shown on the Draft
Effective Date Balance Sheet is less than the Company Equity Amount, at the
Second Closing AISI shall also contribute cash to Company in an amount equal to
such deficiency in return for common stock of Company. For income tax purposes
(federal and state), Company, Seller and AISI intend the foregoing transactions
to qualify as a Section 351 Transaction. The Contributed Assets shall include,
but are not limited to, all items specifically listed on the schedules described
in this Section 2.2 (except for the Excluded Assets described in Schedule
2.2(h)) and all other items more generally described in this Section 2.2 to the
extent utilized exclusively in connection with the conduct of the Election
Business, and to the extent such more generally described items are not utilized
exclusively in the conduct of the Election Business included to the extent
required under Section 6.2(c):
(a) All machinery, equipment, fixtures, furniture, supplies, tools,
dies, jigs, molds, vehicles, patterns, drawings and other tangible personal
property wherever located, including, without limitation, any such property
more particularly described in Schedule 2.2(a) (collectively, the
"Equipment");
(b) The Inventory;
(c) All rights to the name(s) and marks set forth on Schedule 2.2(c)
and any combinations, abbreviations or derivations thereof (collectively,
the "Trade Names", whether one or more);
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(d) All Intellectual Property including, without limitation, the items
more particularly described on Schedule 3.13 (collectively, the
"Intellectual Property");
(e) Subject to Sections 2.4 and 2.5, all leases, subleases and
assignments (whether Seller is lessee, sublessee or assignee) relating to
the Equipment, including, without limitation, all such leases, subleases or
assignments and related agreements disclosed on Schedule 2.2(e)
(collectively, the "Equipment Leases");
(f) All owned real property, leaseholds and subleaseholds therein,
improvements, fixtures and fittings thereon, and easements, rights-of-way
and appurtenants thereto (such as appurtenant rights in and to public
streets) disclosed on Schedule 2.2(f) hereto (collectively, the "Owned Real
Property");
(g) Subject to Sections 2.4 and 2.5, all rights under leases and
subleases of real property disclosed on Schedule 2.2(g) (collectively, the
"Leased Real Property");
(h) Subject to the provisions of Sections 2.4 and 2.5, (i) all
contracts and agreements of Seller relating to the sale of any Products by
the Election Business, including, without limitation, the agreements listed
on Schedule 2.2(h) except the Hardware Payment Component under such
agreements as shown on such Schedule (the "Hardware Payment Component"),
(ii) all orders, contracts and agreements of Seller relating to the
purchase of Products, materials or services used in connection with the
Election Business, and (iii) all other contracts and agreements entered
into by Seller in the conduct of the Election Business including, without
limitation, in each case (A) all contracts and agreements evidenced solely
by purchase orders or order acknowledgments and (B) all such orders,
contracts and agreements listed in Schedule 3.20 hereto (collectively, the
"Contracts");
(i) The customer lists and other customer-based data relating to the
Election Business;
(j) Cash to the extent necessary for the Book Value of the Election
Business to satisfy the requirements of Section 2.10;
(k) All the assets of Seller relating to the Election Business
representing prepaid items or expenses of the Election Business;
(l) The Accounts Receivable;
(m) All claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set-off, rights of
recoupment and assignable third party warranties and guarantees with
respect to any of the Contributed Assets;
(n) To the extent same are transferable, all franchises, approvals,
permits, licenses, orders, registrations, certificates, variances and
similar rights obtained from Authorities by Seller and necessary to the
conduct of the Election Business;
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(o) All books and other documents pertaining to the Contributed
Assets, and the Assumed Liabilities, including, without limitation, fixed
asset records, sales and advertising materials (including price lists),
sales and purchase correspondence, technical and research data, books of
account and records, ledgers, files, correspondence, plats, architectural
plans, drawings and specifications, creative materials, studies, reports
and other printed or written materials relating to the Election Business;
(p) To the extent not otherwise specifically included or excluded by
this Section 2.2 or Section 2.3 below, as applicable, all assets, rights,
claims, contracts, agreements, causes of action and properties of Seller
used in connection with the Election Business, as of the Effective Date, of
every kind, character and description, whether tangible or intangible,
xxxxxx or inchoate, corporeal or incorporeal, matured or unmatured, known
or unknown, contingent or fixed, and wherever located; and
(q) All loan receivables to Employees set forth on Schedule 2.2(q).
2.3 EXCLUDED ASSETS. Notwithstanding anything herein to the contrary, the
parties recognize and agree that Seller is engaged in a variety of businesses
other than the Election Business and that the Contributed Assets will not
include the assets, properties and rights of Seller utilized in connection with
such businesses (except as otherwise provided pursuant to Section 6.2(c)) or
otherwise described in this Section 2.3 (collectively, the "Excluded Assets").
Subject to Section 6.2(c), the Excluded Assets shall include, but not be limited
to, the following:
(a) All of the assets, properties and rights relating to or associated
with Seller's government records management business, its information
systems business, its technology outsourcing business, its binders and
bindery business, its title records business and other businesses not
related to the sale of products or services to governments for use in
connection with the conduct of public elections;
(b) All of the assets, properties and rights associated with the
Seller's corporate and divisional general and administration operations
including assets, properties and rights located at 0000 Xxxx Xxxxxxxxxxx,
00xx Xxxxx, Xxxxxx, Xxxxx 00000, its offices at 0000 Xxxxx Xxxxxx Xxxxx,
Xxxxx Xxxx, Xxxxxxxxx 00000 (f/k/a 0000 Xxxxx Xxxxxx Xxxxx, Xx. Xxxxx,
Xxxxxxxxx 56302) and 0000 Xxx Xxxx, Xxxx Xxxxxxxx, Xxx Xxxx 00000;
(c) All assets, properties and rights associated with Seller's
accounting systems and related computer hardware, software and networks
other than those exclusively used in connection with the Election Business
and located at Seller's Berkeley, California, Addison, Texas, Birmingham,
Alabama, Chicago, Illinois, Rockford, Illinois or West Palm Beach, Florida
locations;
(d) All of the Hardware Payment Component, all of the notes receivable
and installment obligations due from third parties of the Election Business
including those described on Schedule 2.3(d) and any Accounts Receivable
retained pursuant to Section 2.8(e);
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(e) The franchise to be a corporation, certificate of incorporation,
corporate seal, minute books, stock books and any other corporate records
relating to the corporate organization or capitalization of Seller;
(f) Books and records that Seller is required to retain pursuant to
any statute, rule, regulation or ordinance, provided that Seller permits
Company access to such books and records as provided in Section 6.2 below;
(g) General books of account and books of original entry that comprise
Seller's permanent accounting or Tax records, provided that Seller permits
Company access to such books as provided in Section 6.2 below;
(h) All cash, cash deposits, bank accounts, certificates of deposit,
savings and other similar cash equivalents in excess of the amount
necessary for the Book Value of the Election Business to satisfy the
requirements of Section 2.10;
(i) All defenses, rights of set-off and counterclaims arising out of
or relating to any of the Retained Liabilities;
(j) Any assets, contracts, properties or rights, including telephone
systems, accounting systems, computer hardware, computer networks, computer
software, books and records, correspondence, goodwill, Intellectual
Property, accounts receivable, investment securities, furniture and
fixtures and the like utilized in connection with more than one of the
business activities of Seller or utilized by Seller in connection with its
business activities generally (except to the extent that any such use by a
business other than the Election Business is incidental);
(k) Seller's corporate name and derivations thereof and the xxxx "BRC"
and derivatives thereof; and
(l) The excluded property described on Schedule 2.3(l) hereto.
2.4 OBLIGATIONS UNDER ASSIGNED CONTRACTS. Subject to the provisions of
Section 2.5 below, at the Closing, Seller shall assign, transfer, or sublet the
leases and subleases for the Leased Real Property, Equipment Leases,
Intellectual Property Agreements and Contracts (the "Assigned Contracts") to
Company, and Company shall assume all the Assumed Liabilities with respect to
the Assigned Contracts.
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2.5 THIRD PARTY CONSENTS TO ASSIGNMENT.
(a) In the case of any interest in any Contributed Asset, including,
without limitation, any interest in any Contract, instrument, permit or
other arrangement or any claim, right or benefit arising thereunder or
resulting therefrom, that is not assignable without the consent of a third
party (collectively, the "Restricted Interests"), Seller and Seller's
Shareholder shall use their reasonable best efforts to obtain written
consents to the assignment of such Restricted Interests prior to the
Closing Date, it being understood that such reasonable best efforts shall
not include any requirement to offer or grant financial accommodations to
any third party but shall include Seller's agreement to remain secondarily
liable with respect to any such Restricted Interest, subject to Company's
obligations with respect to Assumed Liabilities.
(b) This Agreement shall not constitute an agreement to assign any
Restricted Interest if: (i) an assignment without the consent of a third
party would constitute a breach or violation thereof or would adversely
affect the rights of Company or Seller thereunder; (ii) such consent has
not been obtained by the Closing Date; and (iii) such Restricted Interest,
individually or in the aggregate, is not material to the Election Business.
This Section 2.5(b) shall not relieve Company of its obligations to perform
or assume any Assumed Liability or to comply with this Section 2.5,
provided that Company gets the benefit of the Restricted Interest.
(c) Notwithstanding anything to the contrary contained herein, it is
understood and agreed to by the parties that Seller and Seller's
Shareholder shall obtain written consents to the Restricted Interests
designated in Schedule 2.5(c) hereto (collectively, the "Material Contract
Consents"), such Material Contract Consents being a condition precedent to
Company's obligation to consummate the transactions contemplated by this
Agreement pursuant to Section 7.1(e) below.
(d) If a consent of a third party which is required in order to assign
any Restricted Interest (and in the case of a Material Contract Consent,
the condition precedent contained at Section 7.1(e) below has been waived
by Company) is not obtained prior to the Closing Date, or if an attempted
assignment would be ineffective or would adversely affect Seller's ability
to convey its interest to Company, Seller and/or Seller's Shareholder
shall, at the request and expense of Company on or after the Closing Date
and in such manner as Company shall reasonably specify and as shall be
permitted by law, take all such reasonable action (including the
appointment of Company as agent-in-fact for Seller and/or Seller's
Shareholder) and do or cause to be done such things as shall be reasonable
or proper to (i) assure that the rights and obligations of Seller
thereunder shall be preserved for the benefit of Company, and (ii)
facilitate receipt of the consideration to be received thereunder, which
consideration Seller and/or Seller's Shareholder shall hold for the benefit
of, and upon the request of Company, shall deliver to Company.
(e) If a consent of a third party which is required in order to assign
any Restricted Interest (and in the case of a Material Contract Consent,
the condition precedent contained at Section 7.1(e) below has been waived
by Company) is not obtained prior to the Closing Date, or if an attempted
assignment would be ineffective or would adversely
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affect Seller's ability to convey its interest to Company, Company shall,
at the request of Seller and at the expense of Company on or after the
Closing Date in such manner as Seller shall reasonably specify and as shall
be permitted by law, take all such reasonable action (including the
acceptance by Company of an appointment as agent-in-fact, subcontractor,
joint venturer or assignee for Seller and/or Seller's Shareholder) and do
or cause to be done such things as shall be reasonable or proper to assure
that Company shall assume, be responsible for and indemnify and hold Seller
harmless with regard to all of obligations and liabilities associated with
such Restricted Interest which would have been Assumed Liabilities if the
Restricted Interest had been an Assigned Contract and any additional
expenses or liabilities incurred by Seller performing its obligations under
this Section 2.5(e).
2.6 ASSUMPTION OF LIABILITIES. At the Closing, Company shall assume (a)
all Liabilities first arising on or after the Effective Date relating to
Company's ownership or operation of the Election Business or the Contributed
Assets; (b) all accounts payable of the Election Business; (c) all accrued
liabilities of the Election Business including, but not limited to, accrued
liability for xxxxxxxx in excess of the amount earned according to percentage of
completion accounting on all Assigned Contracts; (d) all Liabilities and costs,
including accrued liabilities for vacation pay, accrued but unpaid salary,
bonuses, commissions and the like, of Seller to or with respect to Seller's
Employees, other than costs, liabilities or expenses of Seller associated with
Seller's Employee Benefit Plans or any of Seller's Liabilities to Employees
governed by any workers compensation or similar laws; and (e) subject to Section
2.5, all Liabilities relating to the Assigned Contracts and the Restricted
Interests (collectively, the "Assumed Liabilities"); provided, however, the
Assumed Liabilities shall not include any Retained Liabilities.
2.7 RETAINED LIABILITIES. Except as otherwise specifically set forth in
this Agreement or Schedule 2.6, Company shall not assume: (a) any Liability
resulting from, arising out of, relating to, in the nature of, or caused by any
breach of contract, breach of warranty, tort, infringement or violation of law
(other than warranty claims on products or services sold); (b) except as
provided in Section 6.5, any Liability of the Seller for unpaid Taxes (with
respect to the Election Business or otherwise) for periods prior to the
Effective Date; (c) any Liability of Seller for costs and expenses incurred in
connection with this Agreement and the transactions contemplated herein; (d) any
Liability of Seller under this Agreement or under any side agreement between
Seller on one hand and Company on the other hand entered into on or after the
date of this Agreement; (e) any Liabilities to third parties resulting from
personal injury or property damage (other than damage to Products) arising from
defects in the design or manufacture of products which were manufactured, sold
or distributed by Seller or from services provided by Seller prior to the
Effective Date; (f) any Liabilities in connection with the matters disclosed on
or which should have been disclosed on Schedule 3.9 before execution hereof and
prior to Closing; (g) any Liabilities of Seller arising from or related to the
conduct of Seller's businesses other than the Election Business; or (h) any of
the contracts, claims, liabilities or expenses described on Schedule 2.7
(collectively, the "Retained Liabilities").
2.8 CONSIDERATION FOR TRANSACTIONS.
(a) The purchase price to be paid by AISI to Seller for the purchase
of the Accounts Receivable and Inventory shall be an amount equal to the
amount of the
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Accounts Receivable and Inventory as shown on the Effective Date Balance
Sheet of the Election Business plus $700,000.00 (the "Purchase Price"). At
the First Closing, AISI shall make payment of an estimate of the Purchase
Price determined and paid as follows: (i) the sum $7,500,000.00 shall be
paid by wire transfer or delivery of other immediately available United
States funds; and (ii) an amount equal to the combined total of the
Accounts Receivable and Inventory on the Draft Effective Date Balance Sheet
of the Election Business minus $6,800,000.00 shall be paid through the
issuance by AISI of a promissory note in the form of Exhibit 2.8(a) in such
amount (the "AISI Note"). In the event that the combined total of the
Accounts Receivable and Inventory as shown on the Effective Date Balance
Sheet of the Election Business is greater or less than the combined total
of such items as shown on the Draft Effective Date Balance Sheet of the
Election Business, AISI shall be obligated to make a cash payment to Seller
in the amount of any such excess and Seller shall be obligated to make a
cash payment to AISI in the amount of any deficit. Any such payment shall
be due and payable within ten days of finalization of the Effective Date
Balance Sheet of the Election Business. The final net amount paid by AISI
to Seller after any such adjustment shall be deemed to be the final
Purchase Price.
(b) In addition to assuming the Assumed Liabilities pursuant to
Section 2.5 above, the consideration to be paid by Company to Seller for
the purchase of the Contributed Assets shall be (i) the issuance by Company
to Seller of shares of common stock of Company which after such issuance
shall constitute 19.9% of the sum of all issued and outstanding shares of
common stock of Company as shown on Schedule 4.2 plus the number of shares
of common stock issued to AISI pursuant to this Section (the "Seller
Stock"); (ii) the payment of the sum (the "Cash") of (A) $35,000,000.00
plus (B) if applicable, the amount by which the Book Value of the Election
Business as shown on the Draft Effective Date Balance Sheet of the Election
Business exceeds the Election Business Equity Amount minus (C) the sum of
(I) $700,000.00 plus (II) the combined total of the Accounts Receivable and
Inventory as shown on the Effective Date Balance Sheet of the Election
Business; and (iii) the issuance of a promissory note of Company in the
principal sum of $17,500,000.00 in the form of Exhibit 2.8(b) hereto (the
"Company Note") (the Seller Stock, the Cash and the Company Note
collectively, the "Total Consideration"). The Cash shall be paid by Company
to Seller on the Closing Date by wire transfer or delivery of other
immediately available United States funds. For purposes of determining the
amount of Cash payable at the Closing, the combined total of the Accounts
Receivable and Inventory as shown on the Draft Effective Date Balance Sheet
of the Election Business shall be used. In addition to any adjusting
payments which may be made under Section 2.10, upon receipt of the
Effective Date Balance Sheet of the Election Business, Seller shall be
entitled to a payment from Company if and to the extent the combined total
of the Accounts Receivable and Inventory on such Balance Sheet is less than
the combined total of such items on the Draft Effective Date Balance Sheet
of the Election Division and Company shall be entitled to a payment from
Seller if and to the extent the combined total of the Accounts Receivable
and Inventory on such Balance Sheet is greater than the combined total of
such items on the Draft Effective Date Balance Sheet of the Election
Division. Any such payment shall be due and payable within ten (10) days of
delivery of the Effective Date Balance Sheet of the Election Business. The
Seller Stock and the Company Note shall be issued by Company and delivered
to Seller on the Closing Date. Company further agrees that in the event
that Company issues additional common stock after Closing in order that the
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Company Equity Amount requirement shall be met as provided under Section
2.10(d)(iii), upon issuance of such additional common stock, Company shall
issue to Seller additional shares of common stock equal to the product of
(i) the quotient of (A) the number of additional shares issued divided by
(B) 0.801 multiplied by (ii) 0.199.
In addition to assuming the AISI Note, the consideration to be paid by
Company to AISI for the Accounts Receivable and Inventory and for the
contribution of cash to Company by AISI as provided in the second sentence
of Section 2.2 shall be issuance of common stock by Company to AISI (the
"AISI Stock").
(c) As a part of the Total Consideration, Company and the Majority
Stockholders shall also execute and deliver and agree to be bound by the
pledge agreements, stock powers and other agreements and instruments
described on Exhibit 2.8(c) hereto (collectively, the "Collateral
Agreements").
(d) (i) The Purchase Price paid by AISI to Seller pursuant to
Section 2.8(a) above hereunder shall be allocated among the Accounts
Receivable and Inventory in the manner shown on Schedule 2.8(d)(i).
AISI and Seller shall report and file their U.S. federal income tax
returns in accordance with such allocations.
(ii) The consideration for the assets transferred by Seller and
AISI shall be allocated among the Contributed Assets in the manner
shown on Schedule 2.8(d)(ii). Seller, AISI and Company shall report
and file their respective U.S. federal income tax returns in
accordance with such allocations.
(e) Notwithstanding anything else herein to the contrary, in the
event that the Book Value of the Election Business exceeds $18,000,000.00
on either the Draft Effective Date Balance Sheet of the Election Business
or the Effective Balance Sheet of the Election Business, as the case may
be, then Seller shall be entitled and required to retain an amount of
Accounts Receivables of the Election Business sufficient to lower the Book
Value of the Election Business to an amount less than $18,000,000.00,
Seller shall select such retained Accounts Receivable, however, such
selected Accounts Receivable shall be reflective of the kind and character
of the Accounts Receivable of the Election Business as a whole. Seller
shall have all rights, title and interest to such retained Accounts
Receivable.
(f) Notwithstanding anything else herein to the contrary, in the
event the combined total of the Accounts Receivable and Inventory as shown
on the Draft Effective Date Balance Sheet of the Election Business is less
than $6,800,000.00 there shall be no AISI Note and the cash payment under
Section 2.8(a) shall be reduced accordingly.
2.9 CLOSING.
(a) The closing of the sale and purchase of the Inventory and the
Accounts Receivable described in Section 2.8(a) (the "First Closing") shall
take place at 10:00 a.m., Central Standard Time, on January 15, 1997 (the
"Closing Date"), but effective at 12:01 a.m. on January 1, 1997 (the
"Effective Date") or at such other time, on such other date and at such
place as may be mutually agreed upon by the parties hereto. The closing of
the
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subscriptions and contributions of the Contributed Assets described in
Section 2.8(b) (the "Second Closing") shall take place simultaneously, at
the same location on the Closing Date immediately after the First Closing.
The First Closing and the Second Closing shall hereinafter be collectively
referred to as the "Closing."
(b) At the First Closing, Seller shall deliver to AISI a xxxx of sale
and assignment conveying the Inventory and Accounts Receivable to AISI and
AISI shall make a cash payment to Seller in the amount of $7,500,000.00 and
shall issue and deliver the AISI Note to Seller.
(c) At the Second Closing, (i) AISI shall execute and deliver to
Company a general xxxx of sale and assignment conveying the Accounts
Receivable and Inventory to Company and, if applicable, will contribute
cash as provided in the second sentence of Section 2.2, and Company shall
issue AISI the AISI Stock and shall execute and deliver to AISI an
assumption agreement covering the AISI Note; and (ii) Seller shall deliver
to Company a general xxxx of sale and assignment conveying the Contributed
Assets (except the Accounts Receivable and Inventory), Seller and Seller's
Shareholder shall deliver all agreements, certificates, instruments and
other documents and items required by Section 7.1 below which have not
already been delivered by Seller and/or Seller's Shareholder to Purchaser
prior to the Closing and Company shall pay Seller the Cash and shall issue
and deliver to Seller the Seller Stock, the Company Note, the Collateral
Agreements and an assumption agreement covering the Assumed Liabilities,
and Company shall deliver all agreements, certificates, instruments and
other documents and items required by Section 7.2 below which have not
already been delivered by Company to Seller prior to Closing. The bills of
sale and assignment and assumption agreements called for under this Section
2.9 shall all be dated as of the Effective Date and shall be in form and
substance reasonably satisfactory to each party thereto.
(d) All agreements, documents and instruments executed and delivered
at the Closing shall be dated and for all purposes the transaction shall be
deemed to be consummated as of the Effective Date. During the period
between the Effective Date and the Closing Date, Seller shall retain
possession of the Contributed Assets and shall operate the Election
Business for the benefit of Company. Promptly following Closing, Seller
shall account to Company for all receipts and disbursements of the Election
Business during the period between the Effective Date and the Closing Date.
From and after Closing, the parties shall cooperate in the timely
settlement and respective payment of all accounts and transactions
occurring between the Effective Date and the Closing Date.
2.10 POST-CLOSING ADJUSTMENTS.
(a) The parties acknowledge and agree that the Purchase Price and
Total Consideration have been determined and based on the agreement of the
parties that the Book Value of the Election Business shall be
$15,000,000.00 (the "Election Business Equity Amount") and the Book Value
of Company shall be $5,000,000.00 (the "Company Equity Amount") as of the
Effective Date. To accomplish the foregoing, certain adjusting transactions
shall be made pursuant to this Section 2.10. For purposes hereof, "Book
Value of the Election Business" shall mean the excess of the book value of
the Contributed
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Assets over the Assumed Liabilities as of the Effective Date (but without
giving effect to any of the transactions contemplated herein) as reflected
on the Effective Date Balance Sheet of the Election Business and the "Book
Value of Company" means the stockholder's equity of Company as of the
Effective Date (but without giving effect to the transactions contemplated
herein other than any contribution of cash by AISI as contemplated in the
second sentence of Section 2.2) as reflected on the Effective Date Balance
Sheet of Company.
(b) Seller and Company shall prepare estimated balance sheets of the
Election Business (including only the Contributed Assets and Assumed
Liabilities for purposes hereof) and Company, respectively, as of the close
of business on the day prior to the Effective Date, using all available
financial data (the "Draft Effective Date Balance Sheets"). Copies of each
party's Draft Effective Date Balance Sheet shall be delivered to the other
party at the Closing.
The Draft Effective Date Balance Sheet of the Election Business shall
show the Book Value of the Election Business to be not less than the
Election Business Equity Amount and if such requirement otherwise would not
be met, Seller shall include as part of the Contributed Assets sufficient
cash so that the Book Value of the Election Business as shown on such Draft
Effective Date Balance Sheet will satisfy such requirement. In lieu of
including cash as part of the Contributed Assets, at the option of Seller,
the Cash payable by Company at Closing shall be decreased by an amount
equal to the shortfall between the Election Business Equity Amount and the
Book Value of the Election Business as shown on the Draft Effective Date
Balance Sheet of the Election Business and such reduction in cash shall be
deemed to be cash of the Election Business.
The Draft Effective Date Balance Sheet of Company shall show that the
Book Value of Company is not less than the Company Equity Amount (minus, if
applicable, any cash contributed to Company by AISI pursuant to the second
sentence of Section 2.2).
(c) Within ninety (90) days after the Closing Date, Seller and
Company shall prepare and deliver to each other balance sheets of the
Election Business (including only the Contributed Assets and Assumed
Liabilities for purposes hereof) and Company, respectively, as of the
Effective Date prepared in accordance with GAAP applied consistently with
the prior audited balance sheets of Seller and Company together with
unqualified audit opinions of the Auditors stating that the Effective Date
Balance Sheets have been so prepared. Such audited balance sheets shall
hereinafter be referred to as the "Effective Date Balance Sheets". The
Effective Date Balance Sheets shall not reflect the transactions
contemplated herein (other than, if applicable, any contribution of cash to
Company by AISI pursuant to the second sentence of Section 2.2). Seller and
Company shall also cause their respective Auditors to make the work papers
and back-up materials used in preparing the Effective Date Balance Sheets
available to the other party and its accountants and other representatives
at reasonable times and upon reasonable notice following delivery of the
Effective Date Balance Sheets.
(d) Based on the Effective Date Balance Sheets, the following
adjusting transactions shall occur: (i) if the Book Value of the Election
Business as shown on its
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Effective Date Balance Sheet is less than the Book Value of the Election
Business as shown on its Draft Effective Date Balance Sheet, Seller shall
make a cash payment to Company in the amount of such deficiency; (ii) if
the Book Value of the Election Business as shown on its Effective Date
Balance Sheet is greater than the Book Value of the Election Business as
shown on its Draft Effective Date Balance Sheet, Company shall make a cash
payment to Seller in the amount of such excess; (iii) if the Book Value of
Company as shown on its Effective Date Balance Sheet is less than the
Company Equity Amount, the Majority Stockholders shall purchase common
stock of Company in the amount of such deficiency in accordance with the
terms of Section 6.11 and Seller shall be issued additional shares of
common stock of Company as provided in Section 2.8(b); and (iv) if the Book
Value of Company as shown on its Effective Date Balance Sheet is greater
than Company Equity Amount, Seller shall make a payment to Company in the
amount of the product of 0.2484 multiplied by such excess. Any adjusting
payment required under this Section 2.10(d) shall be made within ten (10)
days of delivery of the applicable Effective Date Balance Sheet. Any
adjusting payment made pursuant to this Section 2.10(d) shall be deemed to
be a purchase price adjustment with respect to the issuance and sale of
common stock of Company to Seller.
(e) If as a result of Seller's or Company's review of the Effective
Date Balance Sheets and related materials, either party has any objections
to either of the Effective Date Balance Sheets on the grounds that they
were not prepared in accordance with the requirements set forth in Section
2.10(c), it will deliver a detailed statement describing its objections to
the other party within sixty (60) days after receiving the Effective Date
Balance Sheets. Company and Seller will use reasonable efforts to resolve
any such objections themselves. If the parties do not reach a final
resolution within thirty (30) days after the last date on which objections
may be delivered, Company and Seller will submit the unresolved objections
to the Mediator for resolution, whose decision shall be rendered forty-five
(45) days after submittal to him. The determination of the Mediator will be
set forth in writing and will be conclusive and binding upon the parties.
In the event the parties submit any unresolved objections to the Mediator
for resolution as provided herein, Company and Seller will share
responsibility for the fees and expenses of the Mediator as follows: (i) if
the Mediator resolves all of the remaining objections in favor of Company,
the Seller will be responsible for all the fees and expenses of the
Mediator; (ii) if the Mediator resolves all the remaining objections in
favor of the Seller, Company will be responsible for all the fees and
expenses of the Mediator; and (iii) if the Mediator resolves some of the
remaining objections in favor of Company and the rest of the remaining
objections in favor of the Seller, the Seller and Company each will be
responsible for a proportionate amount of the fees and expenses of the
Mediator based on the dollar amount of the objections resolved against it,
compared to the total dollar amount of all objections submitted to the
Mediator. Within ten (10) days of the written decision of the Mediator, the
parties shall make adjusting payments and/or take such other action as
contemplated under Section 2.10(d) as if the Effective Date Balance Sheets
were revised to reflect the Mediator's resolution of the objections of the
parties. Any adjusting payment made pursuant to this Section 2.10(e) shall
be deemed to be a purchase price adjustment with respect to the issuance
and sale of common stock of Company to Seller.
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2.11 EMPLOYEES. Prior to the Closing Date, Company shall offer to employ
substantially all of the current Employees in the Election Business following
the Closing Date in their current position and at base salary, but not
necessarily at benefit or incentive compensation and commission levels, equal to
those in existence immediately prior to the Closing Date. For the purposes
hereof, Company's obligations to employ substantially all of Seller's Employees
shall be deemed satisfied notwithstanding Company's failure to offer employment
to up to five (5) of such Employees. Any employment of Employees by Company
shall be on an "at will" basis and in no event shall any Employee be a third
party beneficiary of Company's agreement hereunder. Each of the Employees, upon
accepting employment with Company, shall receive prior service credit in
Company's qualified retirement plan and future determination of severance
benefits equal to the credit accorded such person under Seller's equivalent
plans or severance policies. With regard to such retirement plan, such credit
shall be limited to credit for purposes of eligibility and vesting but not for
purposes of benefits attributable to such prior service. From the date of this
Agreement until Closing or termination of this Agreement, Seller and Seller's
Shareholder shall not terminate any Employee or transfer or otherwise materially
change the job responsibilities of any Employee without first consulting with
Company and obtaining Company's consent, which consent will not be unreasonably
withheld. For a period of two (2) years after the Effective Date, Seller,
Seller's Shareholder and their Affiliates shall refrain from any and all
employment discussions and will not offer employment to any Employee during such
person's employment with Company. For a period of two (2) years following the
Effective Date, Company and its Affiliates shall refrain from any and all
employment discussions and will not offer employment to any employee of Seller,
other than the Employees. From the date of this Agreement until Closing, Seller
and Seller's Shareholder shall cooperate fully with Company to provide access to
the persons whom Company has a right to interview and solicit for employment as
provided above, including, without limitation, allowing reasonable interruption
of the duties of such persons for purposes of interviews and recruiting and
providing Company access to and copies of personnel records relating to such
persons. Seller shall be solely responsible for any and all wages, benefits and
other obligations relating to Employees employed by Seller prior to the
Effective Date other than wages and other Liabilities reflected on the Effective
Date Balance Sheet. As to Employees hired by Company as contemplated above,
Company shall assume and agree to honor any accrued and unused vacation days to
which such Employees are entitled as of the Effective Date. Company will credit
such Employees with unused vacation time accrued with Seller (including vacation
contingently earned in the current employment year) for use as vacation time
during the employment of such persons by Company or, if required by applicable
law or by agreement of Company and the applicable Employee, Company shall make
payment to such Employees with respect to such unused vacation time. On or
immediately prior to the Closing Date, Seller shall deliver to Company a
Schedule showing, with respect to each Employee which Company has a right to
solicit for employment as contemplated by this Section 2.11, the number of
unused vacation days to which such Employee is entitled as of the Effective
Date. The schedule shall include a calculation, together with reasonable
supporting details and documentation, of the value of the unused vacation days
of each such Employee. For purposes of such calculation, the value shall reflect
an appropriate hourly rate of compensation including, without limitation, the
employer's share of all payroll taxes attributable to the unused vacation days.
The value as of the Effective Date of the unused vacation days of all Employees
of the Election Business, except those Employees that Company has already
determined that it will not hire, as evidenced by written notice to Seller to
that effect, shall tentatively be treated as the accrued liability for vacations
in the Draft Effective Date Balance Sheet of the Election Business. At the time
the Effective Date Balance Sheet is finalized, appropriate
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adjustments shall be made to reflect the value of unused vacation days as of the
Effective Date of the Employees actually employed by Company.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF SELLER AND SELLER'S SHAREHOLDER
Seller and Seller's Shareholder, jointly and severally, hereby represent
and warrant to Purchaser (which representations and warranties shall be true and
correct on the date hereof and as of the Effective Date) as follows:
3.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and is duly
organized to carry on the business presently being conducted by it,
including, but not limited to the Election Business. Seller's Shareholder
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly organized to carry on
the business presently conducted by it.
(b) Seller and Seller's Shareholder are duly authorized to conduct
business and are in good standing under the laws of each jurisdiction where
qualification of the Election Business is required. Schedule 3.1 hereto
lists the jurisdictions in which qualification of the Election Business is
required.
(c) Seller has full corporate power and authority to carry on the
Election Business and to own and use the Contributed Assets.
3.2 AUTHORITY AND ENFORCEABILITY. Seller and Seller's Shareholder have
full power and authority to make, execute, deliver and perform this Agreement
and the execution, delivery and performance of this Agreement by Seller and
Seller's Shareholder have been duly authorized by all necessary corporate action
on the part of Seller and Seller's Shareholder. This Agreement has been duly
executed and delivered by Seller and Seller's Shareholder and constitutes the
valid and legally binding obligation of Seller and Seller's Shareholder,
enforceable in accordance with its terms and conditions. Except as disclosed
in Schedule 3.2 hereto, neither Seller nor Seller's Shareholder are required to
give any notice to, make any filing with or obtain any authorization, consent or
approval of any Authority or Person in order for the parties to consummate the
transactions contemplated by this Agreement.
3.3 NONCONTRAVENTION. Neither the execution or delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, or any material statute, regulation, rule, or any
injunction, judgment, order, decree, ruling, charge or other material
restriction of any Authority to which Seller or Seller's Shareholder are subject
or any provision of the certificate of incorporation or bylaws, as amended, of
Seller or Seller's Shareholder; or (b) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any material agreement, contract, lease, license, instrument or other
arrangement to which Seller
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and/or Seller's Shareholder is a party or by which they are bound or which any
of the Contributed Assets are subject (or result in the imposition of any Lien,
restriction and/or condition upon any of the Contributed Assets).
3.4 SUBSIDIARIES. The business of the Election Business is conducted
entirely by the Seller and all assets and properties used in connection with
such business are owned or leased by the Seller. Seller has no subsidiaries
which are involved in any way with the conduct of the Election Business.
3.5 TITLE TO ASSETS. Seller has good and marketable title to, or a valid
leasehold interest or license interest in, as applicable, the Contributed
Assets, free and clear of all Liens, restrictions and/or conditions, except for
Contributed Assets disposed of in the ordinary course of business consistent
with past practice since the date of the Most Recent Balance Sheet of the
Election Business.
3.6 FINANCIAL STATEMENTS. The books of account and related records of the
Election Business correctly, accurately and completely reflect all of its
assets, Liabilities and transactions. Seller has delivered to Purchaser the
unaudited statements of income for the Election Business for the fiscal years
ended December 31, 1994, and December 31, 1995, and the unaudited balance sheet
and statement of income as of and for the nine (9) months ended September 30,
1996 (collectively the "Election Business Financial Statements"). The Election
Business Financial Statements are attached hereto as Schedule 3.6 and (a) are in
accordance with the books and records of Seller, (b) have been prepared in
accordance with GAAP consistently applied, and (c) fairly present the financial
condition, assets and Liabilities of the Election Business as at their
respective dates and the results of its operations for such fiscal year and
period, except that the Election Business Financial Statements lack footnotes
and other presentation items and have been prepared based upon certain
assumptions as to the allocation of costs, assets and liabilities among Seller's
various businesses, which assumptions Seller believes to be reasonable.
3.7 ABSENCE OF CHANGE. Since the Most Recent Balance Sheet Date, there
has not been any change in the Election Business which has had or could
reasonably be expected to have a Material Adverse Effect on the Election
Business. Without limiting the generality of the foregoing sentence, since the
Most Recent Balance Sheet Date, except as disclosed in Schedule 3.7 hereto,
there has not been:
(a) Any sale, lease, transfer or assignment by the Election Business
of any of its material assets, tangible or intangible, other than for fair
consideration in the ordinary course of business consistent with past
practice;
(b) Any agreement, contract, lease or license (or series of related
agreements, contracts, leases and/or licenses) entered into by the Election
Business involving more than $100,000.00 or $10,000.00 outside the ordinary
course of business consistent with past practice;
(c) Any acceleration, termination, modification or cancellation by
any Person (including Seller) of any agreement, contract, lease or license
(or series of related
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agreements, contracts, leases and/or licenses) involving more than
$100,000.00 to which the Election Business is a party or by which its is
bound;
(d) Any material Lien, restriction or condition imposed by Seller
upon any of the assets of the Election Business, tangible or intangible;
(e) Any capital expenditure (or series of related capital
expenditures) made or committed by the Election Business involving more
than $100,000.00 or $10,000.00 outside the ordinary course of business
consistent with past practice;
(f) Any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person (or series of related capital
investments, loans and/or acquisitions) by the Election Business involving
more than $100,000.00 or $10,000.00 outside the ordinary course of business
consistent with past practice;
(g) Any note, bond or other debt security issued or any indebtedness
for borrowed money or capitalized lease obligation created, incurred,
assumed or guaranteed by the Election Business involving more than
$100,000.00 or $10,000.00 outside the ordinary course of business
consistent with past practice;
(h) Any delay or postponement in the payment of accounts payable or
other Liabilities of the Election Business outside the ordinary course of
business consistent with past practice;
(i) Any cancellation, compromise, waiver or release of any right or
claim (or series of related rights and/or claims) by the Election Business
involving more than $100,000.00 or $10,000.00 outside the ordinary course
of business consistent with past practice other than rights or claims
relating to Excluded Assets or Retained Liabilities;
(j) Any material disposition by the Election Business of or failure
to keep in effect any rights in, to or for the use of any Intellectual
Property;
(k) Any damage, destruction or loss (whether or not covered by
insurance) experienced by Seller with respect to any assets or property of
the Election Business;
(l) Any loan or other transaction outside of the ordinary course of
business between Seller and any of the Employees involving in excess of
$10,000.00;
(m) Any employment contract or collective bargaining agreement,
written or oral, entered into by Seller involving any Employee, or material
modification of the terms of any such existing contract or agreement;
(n) Any increase in the base compensation or any payment of bonus
compensation to any Employee except in the ordinary course of business
consistent with past practice;
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(o) Any adoption of, material amendment or modification to or
termination of any Employee Benefit Plan or other plan, contract,
commitment or arrangement for the benefit of any Employees;
(p) Any other change by Seller in the employment terms for any
Employees outside of the ordinary course of business consistent with past
practice;
(q) Any charitable pledge or contribution or any other capital
contribution by the Election Business outside of the ordinary course of
business consistent with past practice; or
(r) Any other material occurrence, event, incident, action, failure
to take action or transaction involving the Election Business outside of
the ordinary course of business consistent with past practice.
3.8 UNDISCLOSED LIABILITIES. Seller does not have any Liability (and
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against it giving rise to any
Liability) relating to the Election Business or relating to Seller which could
have a Material Adverse Effect on the Election Business, except for (a)
Liabilities set forth on the face of or provided for in the Most Recent Balance
Sheet; and (b) Liabilities which have arisen after the Most Recent Balance Sheet
Date in the ordinary course of business consistent with past practice (none of
which results from, arises out of, relates to, is in the nature of or was caused
by any breach of contract, breach of warranty, tort, infringement or violation
of law).
3.9 LITIGATION AND CLAIMS. Schedule 3.9 hereto sets forth each instance
in which the Election Business (a) is subject to any outstanding injunction,
judgment, order, decree, ruling or charge or (b) is a party or is threatened to
be made a party or has been a party within the past three years to any action,
suit, proceeding, hearing or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings and investigations set forth in Schedule 3.9 which are pending or
threatened can reasonably be expected to result in a Material Adverse Effect on
the Election Business. Seller's Shareholder and Seller do not have any reason to
believe that any such action, suit, proceeding, hearing or investigation may be
brought or threatened against the Election Business.
3.10 LEGAL COMPLIANCE. Except as disclosed in Schedule 3.10 hereto and
as to environmental matters which shall be governed by Section 3.12 below, the
Election Business has complied in all material respects with all applicable
laws, ordinances, rules, regulations and orders of all Authorities, and no
notice, citation, summons, charge or order has been issued, no complaint has
been filed, no penalty has been assessed and no action, suit, proceeding,
hearing, investigation or review is pending or threatened by any Authority
against Seller alleging any failure to so comply. Seller has obtained all
material licenses, permits, certificates, approvals, authorizations and
registrations required to conduct the business of the Election Business, a
listing of which is set forth on Schedule 3.10 and copies of which shall be
delivered by Seller to Purchaser prior to Closing, and such material licenses,
permits, certificates, approvals, authorizations and registrations are current
and have not been revoked, suspended, canceled or terminated.
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3.11 REAL PROPERTY; LEASES.
(a) The Contributed Assets do not consist of any Owned Real Property.
(b) Seller has delivered to Company correct and complete copies of
the leases and subleases, as amended to date, listed in Schedule 2.2(g)
hereto. With respect to each lease or sublease for Leased Real Property:
(i) The lease or sublease is legal, valid, binding, enforceable
and in full force and effect;
(ii) Except as set forth on Schedule 3.11(b), the lease or
sublease will continue to be legal, valid, binding, enforceable and in
full force and effect on identical terms following the consummation of
the transactions contemplated hereby;
(iii) No party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification or
acceleration thereunder;
(iv) No party to the lease or sublease has repudiated any
provision thereof;
(v) There are no material disputes, oral agreements or
forbearance programs in effect as to the lease or sublease;
(vi) With respect to each sublease, the representations and
warranties set forth in Sections 3.11(b)(i) through 3.11(b)(v) above
are true and correct with respect to the underlying lease;
(vii) Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, imposed a Lien on or encumbered any interest in the
leasehold or subleasehold;
(viii) All facilities leased or subleased thereunder have received
all material approvals of Authorities (including licenses, permits,
certificates, authorizations and registrations) required in connection
with the operation thereof and have been operated and maintained in
all material respects in accordance with applicable laws, ordinances,
rules and regulations; and
(ix) All facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
3.12 ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 3.12
hereto, the Election Business (a) has complied with the Environmental Laws in
all respects (and no notice, citation, summons, charge or order has been issued,
no complaint has been filed, no penalty has been assessed and no action, suit,
proceeding, hearing, investigation or review is pending or
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threatened by any Authority against Seller alleging any such failure to comply),
(b) has obtained and been in compliance with all of the terms and conditions of
all licenses, permits, certificates, approvals, authorizations and registrations
which are required under the Environmental Laws; and (c) has complied in all
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables which are
contained in the Environmental Laws.
3.13 INTELLECTUAL PROPERTY. Schedule 3.13 hereto sets forth all of the
Election Business material Intellectual Property and material Intellectual
Property Agreements. Except for the items described on Schedule 3.13 hereto,
no other material Intellectual Property is required for the operation of the
Election Business in the ordinary course consistent with past practice. All of
the registered Intellectual Property is valid and in good standing, and Seller
has taken all steps necessary to perfect its ownership of the same and no other
Person has or claims any interest with respect thereto. Seller has the valid
right to use all of the unregistered Intellectual Property. To the Knowledge of
Seller, no third party has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any of the material Intellectual Property.
Seller has not materially interfered with or infringed upon, or misappropriated
or otherwise come into conflict with any Intellectual Property rights of third
parties in connection with the operation of the Election Business. To the
Knowledge of Seller, Seller has not ever received any charge, complaint, claim,
demand or notice alleging any such interference, infringement, misappropriation
or violation (including any claim that the Election Business must license or
refrain from using any intellectual property rights of any third party) which
could reasonably be expected to have a Material Adverse Effect on the Election
Business.
3.14 ALL ASSETS; CONDITION OF CONTRIBUTED ASSETS. The Contributed Assets
include all material assets, properties and contracts which are necessary for
the operation of the Election Business as presently conducted, other than assets
associated with general corporate operations, accounting, telecommunications and
Employee Benefit Plans. Each of the Contributed Assets with a material book
value and constituting tangible assets has been maintained in accordance with
normal industry practice.
3.15 INVENTORY.
(a) Except to the extent reserved against in the Most Recent Balance
Sheet of the Election Business, all of the Inventory is merchantable and
fit for the purpose for which it was procured or manufactured, and none of
the Inventory is slow-moving, obsolete, damaged or defective, subject only
to the reserve for inventory write down set forth on the face of such Most
Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Effective Date in accordance with the past
custom and practice of Seller.
(b) All of the Inventory is the property of Seller, except for sales
made in the ordinary course of business consistent with past practice since
the Most Recent Balance Sheet Date of the Election Business, and for each
of these sales either the purchaser has made full payment or the
purchaser's liability or obligation to make payment is fully reflected in
the books of Seller. Except as set forth on Schedule 3.15 hereto, no part
of the Inventory has been pledged as collateral or is held by Seller on
consignment from others. The
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amount of inventory shown on the Effective Date Balance Sheet will be based
on quantities determined by physical count or measurement.
3.16 EMPLOYEES.
(a) Schedule 3.16 hereto sets forth a complete and accurate list of
the following information for each of the Employees, including each
Employee on leave of absence or layoff status: name, job title and current
base salary.
(b) Except as disclosed in Schedule 3.16 hereto, to the Knowledge of
Seller, no executive, officer or key Employee or group of Employees has any
plans to terminate employment with Seller (other than in connection with
the transactions contemplated herein). The Election Business is not a party
to or bound by any collective bargaining agreement, nor has it experienced
any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes during the preceding five (5) years. The
Election Business has not committed any unfair labor practice. No
organizational effort is presently being made or threatened by or on behalf
of any labor union with respect to the Employees.
(c) The commission plans attached hereto as part of Schedule 3.16
reflect in all material respects all commission plans of the Election
Business and no Employee or other person will be entitled to any commission
on future sales of the Election Business materially inconsistent with what
is provided for under such plans.
3.17 EMPLOYEE BENEFITS. With respect to each Employee Benefit Plan
maintained by Seller, except as set forth in Schedule 3.17 or except as will not
have a Material Adverse Effect on the operation of the Election Business by
Company; (a) each of the Employee Benefit Plans is being administered in all
material respects in accordance with the documents and instruments governing
such plan, such documents and instruments are consistent with the provisions of
ERISA, and none of the Employee Benefit Plans or the trustees or administrators
of the Employee Benefit Plans has breached any fiduciary duty with respect to
the Employee Benefit Plans imposed by ERISA, (b) none of Seller, Seller's
Shareholder, the Employee Benefit Plans or the trustees or administrators of the
Employee Benefit Plans has engaged in any "prohibited transactions" as such term
is defined in (S) 4975 of the Code (or in Part 4, of Subtitle B of Title I of
ERISA) which could subject Seller, any of the Employee Benefit Plans or any
trust thereunder or any such trustees or administrators to the tax on or any
penalty or sanction with respect to prohibited transactions imposed by (S) 4975
of the Code or any other section of ERISA, (c) each of the Employee Benefit
Plans which is a "pension plan" as defined in ERISA has been determined by an
appropriate district director of the Internal Revenue Service to be "qualified"
within the meaning of (S) 401(a) of the Code and none of the principal officers
of Seller knows of any facts which would adversely affect the qualified status
of any such plans, (d) with respect to each of the Employee Benefit Plans there
has been compliance in all material respects with the reporting and disclosure
requirements of ERISA, and (e) no representations have been made to participants
or beneficiaries with respect to benefits under the Employee Benefit Plans that
would entitle them to benefits greater than or in addition to the benefits
provided by the actual terms of said plans. Schedule 3.17 lists all Employee
Benefit Plans of Seller in which any of the Employees participate.
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3.18 CUSTOMERS AND SUPPLIERS. Except as indicated in Schedule 3.18
hereto, Seller has no information, nor is it aware of any facts, indicating
that any of its customers or suppliers intend to cease doing business with, or
materially alter the amount of business that they are doing with Seller and the
Election Business in a manner which has caused or could reasonably be expected
to cause a Material Adverse Effect on the Election Business.
3.19 SALES REPRESENTATIVES, DEALERS AND DISTRIBUTORS. Except as set forth
in Schedule 3.19 hereto, Seller is not a party to any contract or agreement with
any Person under which such other Person is a sales agent, representative,
dealer or distributor of any of the Election Business's products and which by
its terms cannot be terminated at will or on not more than thirty (30) days'
prior notice.
3.20 MATERIAL CONTRACTS. Schedule 3.20 hereto contains a list of each
Assigned Contract (other than those set forth on Schedule 2.2(g)) which involves
the payment of future consideration in excess of $100,000.00 or the delivery in
the future of goods or services having a value in excess of $100,000.00, by the
Election Business ("Material Contracts of Election Business"). Seller has
delivered or made available to Purchaser a correct and complete copy of each
written Material Contract of Election Business, as amended to date, listed in
Schedule 3.20 hereto. With respect to each such Material Contract of Election
Business: (a) the Material Contract of Election Business is legal, valid,
binding and enforceable and in full force and effect; (b) except as provided for
on Schedule 3.20, the Material Contracts of Election Business will continue to
be legal, valid, binding, enforceable and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (c) no
party is in material breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification or acceleration, under such agreement; and (d) no
Person has repudiated any provision of such agreement.
3.21 INSURANCE. Schedule 3.21 hereto sets forth a complete and correct
list of all policies of insurance of Seller relating to the Election Business,
specifying for each policy the carrier, the risks insured, the amounts of
coverage. All such policies are outstanding and in full force and effect and
will remain so until the Closing.
3.22 PRODUCTS LIABILITY / WARRANTY. Except as disclosed in Schedule 3.22
and as accrued for on the Most Recent Balance Sheet of the Election Business,
there are no (a) material Liabilities of the Election Business with respect to
any product liability or any similar claim that relates to any products
manufactured and/or sold by Seller to others, including, but not limited to, the
Products; or (b) material Liabilities of the Election Business with respect to
any claim for the breach of any express or implied product warranty or any other
similar claim with respect to any products manufactured or sold by Seller other
than standard warranty obligations (to replace, repair or refund) made by Seller
in the ordinary course of business to purchasers of the Products of Seller.
3.23 NOTES AND ACCOUNTS RECEIVABLE. Except as set forth on Schedule 3.23,
all note and accounts receivable of the Election Business constituting
Contributed Assets are and will at the Effective Date be properly reflected on
its books and records and will constitute valid receivables subject to no set
offs or counterclaims.
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3.24 TAXES. Seller and/or Seller's Shareholder have and shall have,
with respect to the Election Business and the Contributed Assets, through the
Closing Date, (a) timely filed all returns and reports of or for Taxes,
including information returns; (b) paid all Taxes which are shown to have come
due pursuant to such returns or reports; and (c) paid all other Taxes for which
a notice of or assessment or demand for payment has been received other than
Taxes being contested in good faith. All such returns or reports have been
prepared in all material respects in accordance with all applicable laws and
rules and regulations of Authorities and accurately reflect the taxable income
(or other measure of Tax) of Seller and/or Seller's Shareholder.
3.25 FULL DISCLOSURE. No representation, warranty, covenant or agreement
made by Seller in this Agreement or any certificate, instrument or other
document delivered at Closing pursuant hereto will contain any false or
misleading statement of a material fact, or omit any material fact required to
be stated therein or necessary in order to make the statements therein when
viewed as a whole in the context made not false or misleading.
3.26 INVESTMENT REPRESENTATIONS. Seller (a) acknowledges and understands
that the Seller Stock and the Company Note have not been, and will not be,
registered under the Securities Act of 1933, as amended or any state securities
law, and are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering; (b) is acquiring
such Stock and Note solely for its own account for investment purposes, and not
with a view to distribution thereof; (c) is a sophisticated investor with
knowledge and experience in business and financial matters; (d) has received
information concerning Company and has had the opportunity to obtain additional
information as necessary in order to evaluate the merits and risks inherent in
holding such Stock and such Note; and (e) is able to bear the economic risk and
lack of liquidity inherent in holding such Stock and such Note.
3.27 EFFECTIVE DATE BALANCE SHEET OF ELECTION DIVISION. The Effective
Date Balance Sheet of the Election Division shall be true, complete and correct
in all material respects.
3.28 CERTAIN TAX MATTERS. It is the intent of the Seller and Seller's
Shareholder that the transactions described in Sections 2.2 through 2.7, 2.8(b),
2.9(c) and 2.10 shall be treated as a Section 351 Transaction.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Company represents and warrants to Seller with respect to all matters
regarding Company or AISI and AISI represents and warrants to Seller with
respect to all matters regarding AISI (which representations and warranties
shall be true and correct on the date hereof and as of the Effective Date) as
follows:
4.1 ORGANIZATION; QUALIFICATION AND CORPORATE POWER. Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and is duly organized to carry on the business
presently being conducted by it. Company is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where qualification
is required. Schedule 4.1 hereto lists the jurisdictions in which qualification
of Company is required.
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AISI is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nebraska and is duly authorized to carry
on the business presently conducted by it. AISI is not authorized to conduct
business in any State other than the State of Nebraska.
4.2 CAPITALIZATION. The authorized capital stock of Company consists of
1,500,000 shares of common stock of which 697,505 shares are issued and
outstanding and no shares of common stock are held in treasury. All of the
issued and outstanding shares of common stock have been duly authorized and are
validly issued, fully paid and nonassessable. Except as set forth on Schedule
4.2 there are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments that could require Company to issue, sell or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation or similar
rights with respect to Company. A listing of the shareholders of Company is
also set forth on Schedule 4.2. AISI owns the stock of the Company shown to be
owned by it on Schedule 4.2 free and clear of all Liens. Upon issuance to the
Seller, the Seller Stock will be validly issued, fully paid and nonassessable
and free and clear of any Liens, other than Liens created by Seller.
4.3 AUTHORITY AND ENFORCEABILITY. Each of Company and AISI has full
corporate power and authority to make, execute, deliver and perform this
Agreement and the execution, delivery and performance of this Agreement by it
have been duly authorized by all necessary corporate action on their respective
parts. This Agreement has been duly executed and delivered by each of Company
and AISI and constitutes the valid and legally binding obligation of each of
Company and AISI enforceable in accordance with its terms and conditions.
Except as disclosed in Schedule 4.3 hereto, neither Company nor AISI is required
to give any notice to, make any filing with or obtain any authorization, consent
or approval of any Authority or Person in order for the parties to consummate
the transactions contemplated by this Agreement.
4.4 NONCONTRAVENTION. Neither the execution or delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any Authority to which
Company or AISI is subject or any provision of the certificate of incorporation
or bylaws, as amended, of Company or AISI; or (b) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel or require any
notice under any agreement, contract, lease, license, instrument or other
arrangement to which Company or AISI is a party or by which it is bound or to
which any of its assets are subject (or result in the imposition of a Lien,
restriction and/or condition upon any of their respective assets).
4.5 SUBSIDIARIES. Set forth on Schedule 4.5 hereto is a list of each
subsidiary of Company and each business entity over which the Company has,
directly or indirectly, the authority to elect a majority of the Board of
Directors or other governing body. Company has no plans to assign any of the
Contributed Assets to any other business entity, excluding any subsidiary of
Company.
4.6 ASSETS. Company has good and marketable title to, or a valid
leasehold interest or license in, as applicable, all of its assets, free and
clear of all Liens, restrictions and/or conditions, other than those properly
reflected in the Most Recent Balance Sheet of Company.
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4.7 FINANCIAL STATEMENTS. The books of account and related records of
Company correctly, accurately and completely reflect all of its assets,
Liabilities and transactions in accordance with GAAP consistently applied.
Company has delivered to Seller the audited (except as otherwise noted) balance
sheets and statements of income, changes in stockholders' equity and cash flow
for Company as of and for the fiscal years ended September 30, 1995, September
30, 1994, and September 30, 1993 and for the twelve (12) months ending September
30, 1996 (unaudited) (collectively the "Company Financial Statements"). The
Company Financial Statements (including the notes thereto) (a) are in accordance
with the books and records of Company; (b) have been prepared in accordance with
GAAP consistently applied; and (c) fairly present the financial condition,
assets and Liabilities of Company at their respective dates and the results of
its operations and changes in stockholders' equity and cash flow for such fiscal
year and period, except that the unaudited financial statements lack footnotes
and other presentation items.
4.8 ABSENCE OF CHANGE. Since the Most Recent Balance Sheet Date, there
has not been any change in Company which could reasonably be expected to have a
Material Adverse Effect on Company. Without limiting the generality of the
foregoing sentence, since the Most Recent Balance Sheet Date, except for
transactions contemplated in this Agreement or as disclosed in Schedule 4.8,
there has not been:
(a) Any sale, lease, transfer or assignment by Company of any of its
material assets, tangible or intangible, other than for fair consideration
in the ordinary course of business consistent with past practice;
(b) Any agreement, contract, lease or license (or series of related
agreements, contracts, leases and/or licenses) entered into by Company
either involving more than $50,000.00 or $5,000.00 outside the ordinary
course of business consistent with past practice;
(c) Any acceleration, termination, modification or cancellation by any
Person (including Company) of any agreement, contract, lease or license (or
series of related agreements, contracts, leases and/or licenses) involving
more than $50,000.00 to which Company is a party or by which it is bound;
(d) Any material Lien, restriction or condition imposed by Company
upon any of the assets of Company, tangible or intangible;
(e) Any capital expenditure (or series of related capital
expenditures) made by Company involving more than $25,000.00 or $2,500.00
outside the ordinary course of business consistent with past practice;
(f) Any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person (or series of related capital
investments, loans and/or acquisitions) by Company involving more than
$25,000.00 or $2,500.00 outside the ordinary course of business consistent
with past practice;
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(g) Any note, bond or other debt security issued or any indebtedness
for borrowed money or capitalized lease obligation created, incurred,
assumed or guaranteed by Company involving more than $25,000.00 or
$2,500.00 outside the ordinary course of business consistent with past
practice;
(h) Any delay or postponement in the payment of accounts payable or
other Liabilities of Company outside the ordinary course of business
consistent with past practice;
(i) Any cancellation, compromise, waiver or release of any right or
claim (or series of related rights and/or claims) by Company involving more
than $50,000.00 or $5,000.00 outside the ordinary course of business
consistent with past practice;
(j) Any material disposition by Company of any Intellectual Property;
(k) Any damage, destruction or loss (whether or not covered by
insurance) experienced by Company with respect to any assets or property of
Company;
(l) Any loan or other transaction outside of the ordinary course of
business between Company and any of its employees or Affiliates;
(m) Any employment contract or collective bargaining agreement,
written or oral, entered into by Company involving any of its employees, or
any material modification of the terms of any such existing contract or
agreement;
(n) Any increase in the base compensation or any payment of bonus
compensation to any of Company's employees except in the ordinary course of
business consistent with past practice;
(o) Any adoption of any material amendment or modification to or
termination of any Employee Benefit Plan or other plan, contract,
commitment or arrangement for the benefit of any of Company's employees;
(p) Any other change by Company in the employment terms for any of its
employees outside of the ordinary course of business consistent with past
practice;
(q) Any charitable pledge or contribution or any other capital
contribution by Purchaser outside of the ordinary course of business
consistent with past practice;
(r) Any transaction involving any note or other instrument convertible
into the capital stock of Company, or any entering into or modification of
any agreement involving any note or instrument convertible thereto;
(s) Any change in the executive officers or other management of
Company, or any event which could reasonably be expected to give rise to
same; or
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(t) Any other material occurrence, event, incident, action, failure to
take action or transaction involving Company outside of the ordinary course
of business consistent with past practice.
4.9 UNDISCLOSED LIABILITIES. Company does not have any Liability (and
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against it giving rise to any
Liability), except for (a) Liabilities set forth on the face of or provided for
in the Most Recent Balance Sheet of Company (rather than in any notes thereto);
and (b) Liabilities which have arisen after the Most Recent Balance Sheet Date
in the ordinary course of business consistent with past practice (none of which
results from, arises out of, relates to, is in the nature of or was caused by
any breach of contract, breach of warranty, tort, infringement or violation of
law).
4.10 LITIGATION AND CLAIMS. Schedule 4.10 hereto sets forth each
instance in which Company (a) is subject to any outstanding injunction,
judgment, order, decree, ruling or charge or (b) is a party or is threatened to
be made a party or has been a party within the past three (3) years to any
action, suit, proceeding, hearing or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator. None of the actions, suits,
proceedings, hearings and investigations set forth in Schedule 4.10 which are
pending or threatened could reasonably be expected to result in any Material
Adverse Effect on Company. Company does not have any reason to believe that any
such action, suit, proceeding, hearing or investigation may be brought or
threatened against Company.
4.11 LEGAL COMPLIANCE. Except as disclosed in Schedule 4.11 hereto and
as to environmental matters which shall be governed by Section 4.12 below,
Company has complied in all material respects with all applicable laws,
ordinances, rules, regulations and orders of all Authorities, and no notice,
citation, summons, charge or order has been issued, no complaint has been filed,
no penalty has been assessed and no action, suit, proceeding, hearing,
investigation or review is pending or threatened by any Authority against
Company alleging any failure to so comply. Company has obtained all licenses,
permits, certificates, approvals, authorizations and registrations required to
conduct the business of Company, a listing of which is set forth on Schedule
4.11, and such licenses, permits, certificates, approvals, authorizations and
registrations are current and have not been revoked, suspended, canceled or
terminated.
4.12 ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 4.12
hereto, Company (a) has complied with the Environmental Laws in all respects
(and no notice, citation, summons, charge or order has been issued, no complaint
has been filed, no penalty has been assessed and no action, suit, proceeding,
hearing, investigation or review is pending or threatened by any Authority
against Company alleging any such failure to comply), (b) has obtained and been
in compliance with all of the terms and conditions of all licenses, permits,
certificates, approvals, authorizations and registrations which are required
under the Environmental Laws; and (c) has complied in all respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables which are contained in the
Environmental Laws.
4.13 INTELLECTUAL PROPERTY. Company has the valid right to use all of
the Intellectual Property utilized by Company in the conduct of its business and
no third party has interfered with,
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infringed upon, misappropriated or otherwise come into contact with any of such
Intellectual Property, to the knowledge of Company. Company has not interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of third parties.
4.14 ALL ASSETS; CONDITION OF ASSETS. Company possesses all of the
assets, services, properties and contracts which are necessary for the operation
of its business as presently conducted. Company's tangible assets have been
maintained in accordance with normal industry practice.
4.15 INVENTORY.
(a) Except to the extent reserved against in the Most Recent Balance
Sheet of Company, all of the inventory held by Company is merchantable and
fit for the purpose for which it was procured or manufactured, and none of
such Inventory is slow moving, obsolete, damaged or defective.
(b) All of the inventory of Company is the property of Company, except
for sales made in the ordinary course of business consistent with past
practice since the Most Recent Balance Sheet Date, and for each of these
sales either the purchaser has made full payment or the purchaser's
liability or obligation to make payment is fully reflected on the books of
Company. Except as set forth on Schedule 4.15 hereto, no part of Company's
inventory has been pledged as collateral or is held by Company on
consignment from others. The amount of inventory shown on the Most Recent
Balance Sheet of Company is based on quantities determined by physical
count or measurement.
4.16 EMPLOYEES. Except as disclosed on Schedule 4.16 hereto, to the
Knowledge of Company, no executive, officer or key employee or group of
employees of Company has any plans to terminate employment with Company. No
part of Company's business is a party to or bound by any collective bargaining
agreement, nor has it experienced any strikes, grievances, claims or unfair
labor practices or other collective bargaining disputes during the preceding
three (3) years. Company has not committed any unfair labor practice. No
organizational effort is presently being made or threatened by or on behalf of
any labor union with respect to Company's employees.
4.17 EMPLOYEE BENEFIT PLANS. With respect to each Employee Benefit Plan
of Company maintained by Company except as set forth in Schedule 4.17: (a) each
of the Employee Benefit Plans of Company is being administered in all material
respects in accordance with the documents and instruments governing such plan,
such documents and instruments are consistent with the provisions of ERISA, and
none of the Employee Benefit Plans of Company or the trustees or administrators
of the Employee Benefit Plans has breached any fiduciary duty with respect to
the Employee Benefit Plans of Company imposed by ERISA, (b) none of Company, the
Employee Benefit Plans of Company or the trustees or administrators of the
Employee Benefit Plans of Company has engaged in any "prohibited transactions"
as such term is defined in (S) 4975 of the Code (or in Part 4, of Subtitle B of
Title I of ERISA) which could subject Company, any of the Employee Benefit Plans
of Company or any trust thereunder or any such trustees or administrators to the
tax on or any penalty or sanction with respect to prohibited transactions
imposed by (S) 4975 of the Code or any other section of ERISA, (c) each of the
Employee Benefit Plans of Company which is a "pension plan" as defined in ERISA
has been determined by an appropriate district
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director of the Internal Revenue Service to be "qualified" within the meaning of
(S) 401(a) of the Code and none of the principal officers of Company knows of
any facts which would adversely affect the qualified status of any such plans,
(d) with respect to each of the Employee Benefit Plans of Company there has been
compliance in all material respects with the reporting and disclosure
requirements of ERISA, and (e) no representations have been made to participants
or beneficiaries with respect to benefits under the Employee Benefit Plans of
Company that would entitle them to benefits greater than or in addition to the
benefits provided by the actual terms of said plans. Schedule 4.17 lists all
Employee Benefit Plans of Company.
4.18 MATERIAL CONTRACTS. Schedule 4.18 hereto contains a list of all
contracts, agreements or arrangements of Company which involve the payment of
future consideration in excess of $50,000.00 or the delivery in the future of
goods or services having a value in excess of $50,000.00 ("Material Contracts of
Company"). With respect to each such Material Contract: (a) such Material
Contract is legal, valid, binding and enforceable and in full force and effect;
(b) such Material Contract will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (c) no party is in
material breach or default, and no event has occurred which with notice or lapse
of time would constitute a breach or default, or permit termination,
modification or acceleration, under such Material Contract; and (d) no Person
has repudiated any provision of such Material Contract.
4.19 TAXES. Company has and shall have through the Closing Date, (a)
timely filed all returns and reports of or for Taxes, including information
returns; (b) paid all Taxes which are shown to have come due pursuant to such
returns or reports; and (c) paid all other Taxes for which a notice of or
assessment or demand for payment has been received. All such returns or reports
have been prepared in all material respects in accordance with all applicable
laws and rules and regulations of Authorities and accurately reflect the taxable
income (or other measure of Tax) of Company.
4.20 FULL DISCLOSURE. No representation, warranty, covenant or agreement
made by Company in this Agreement or any certificate, instrument or other
document delivered at Closing pursuant hereto will contain any false or
misleading statement of a material fact, or omit any material fact required to
be stated therein or necessary in order to make the statements therein when
viewed as a whole in the context made not false or misleading.
4.21 EFFECTIVE DATE BALANCE SHEET OF COMPANY. The Effective Date Balance
Sheet of Company shall be true, complete and correct in all material respects.
4.22 CERTAIN TAX MATTERS. It is the intent of the Purchaser that the
transactions described in Sections 2.2 through 2.7, 2.8(b), 2.9(c) and 2.10
shall be treated as a Section 351 Transaction.
ARTICLE 5.
PRE-CLOSING COVENANTS
The parties hereto agree as follows with respect to the period between the
execution of this Agreement and the Closing:
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5.1 GENERAL. Each of the parties shall use its reasonable best efforts
to take all actions and do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the Closing conditions set forth in
Article 7 below).
5.2 NOTICES AND CONSENTS. Each of the parties shall give any notices to,
make filings with and use their reasonable best efforts to obtain any
authorizations, consents and approvals of Authorities or Persons in connection
with the matters referred to in Sections [2.5(C)], 3.2 and 4.3. above. Without
limiting the generality of the foregoing, each of the parties shall file or
cause to be filed any notification and report forms and related material that
may be required to be filed with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the HSR Act, and shall
make any further filings pursuant thereto that may be necessary in connection
therewith.
5.3 OPERATION OF BUSINESS OF ELECTION BUSINESS; ACCESS TO INFORMATION;
NOTICE OF DEVELOPMENTS. From the date of this Agreement to the Closing, Seller
shall:
(a) Conduct, carry on, maintain and preserve the business of the
Election Business, keep available the services of the Employees, agents and
representatives of the Election Business, preserve the goodwill of
suppliers, customers and others having business relations with it, and
maintain the Contributed Assets, as well as its books of account, records
and files, all in the ordinary course of business consistent with past
practice;
(b) Not, without the prior written consent of Company except as
required under this Agreement, (i) enter into any contract or commitment,
waive any right or enter into any other transactions which could cause a
Material Adverse Effect on the Election Business and, in the case of any
contract or commitment to sell Products or services, which does not provide
for a profit margin consistent with past practices other than as proposed
or bid to customers prior to the date hereof; (ii) sell, dispose of,
mortgage, pledge or subject to any Lien, restriction or condition any of
the Contributed Assets other than in the ordinary course of business
consistent with past practice; (iii) acquire or agree to acquire by
purchase or otherwise any material amount of assets for the Election
Business which would be included as part of the Contributed Assets other
than in the ordinary course of business; (iv) increase the compensation
payable to the Employees (except for increases consistent with past
practices); (v) grant any severance or termination pay to, or enter into
any employment or severance agreement with any Employee other than in the
ordinary course of business consistent with past practice; (vi) commit a
breach of or default under any Assigned Contract; (vii) violate any
applicable law, regulation, ordinance, order, injunction or decree of any
Authority; (viii) fail to file required reports and returns with any
Authority; or (ix) fail to promptly pay all taxes, assessments, penalties
or tax payments lawfully levied or assessed against it or assessed against
it or any of the Contributed Assets;
(c) Not take or omit to take any action, which action or omission
would, or is reasonably likely to, result in (i) any of the representations
and warranties of Seller and Seller's Shareholder set forth in this
Agreement becoming untrue; or (ii) any of the conditions to Closing set
forth in Article 7 not being satisfied;
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(d) Furnish or deliver to Company and Company's representatives all
documents, records and information concerning the affairs of the Election
Business and the Contributed Assets as Company may reasonably request in
connection with Company's due diligence investigation of the Election
Business; and
(e) Give prompt written notice to Company of any event or occurrence
of which either Seller or Seller's Shareholder is aware and which is
causing or may cause a breach of any of the representations and warranties
in Article 3 above, or of any other event or occurrence that has or is
reasonably likely to have a Material Adverse Effect on the Election
Business. No disclosure by Seller pursuant to this Section 5.3, however,
shall be deemed to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
5.4 OPERATION OF BUSINESS OF COMPANY; CHANGES IN STOCK; ACCESS TO
INFORMATION; NOTICE OF DEVELOPMENTS. From the date of this Agreement to the
Closing, Company shall:
(a) Conduct, carry on, maintain and preserve the business of Company,
keep available the services of its employees, agents and representatives,
preserve the good will of suppliers, customers and others having business
relations with it, and maintain its assets and properties, as well as its
books of account, records and files, all in the ordinary course of business
consistent with past practice;
(b) Not and shall not propose to, without the prior written consent of
Seller, (i) buy, split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of capital stock of Company; (ii)
repurchase or otherwise acquire any shares of its capital stock; (iii)
issue, deliver or sell or authorize, propose or commit to the issuance,
delivery or sale of any shares of its capital stock or any securities
convertible into or any rights, warrants or options to acquire any shares
and such shares that are convertible securities except as provided in
Section 6.11;
(c) Not take or omit to take any action, which action or omission
would, or is reasonably likely to, result in (i) any of the representations
and warranties of Company set forth in this Agreement becoming untrue; or
(ii) any of the conditions to Closing set forth in Article 7 not being
satisfied;
(d) Furnish or deliver to Seller and Seller's representatives all
documents, records and information concerning the affairs of the Company as
Seller may reasonably request in connection with Seller's due diligence
investigation of Company; and
(e) Give prompt written notice to Seller of any event or occurrence of
which Company is aware and which is causing or may cause a breach of any of
the representations and warranties in Article 4 above, or of any other
event or occurrence that has or is reasonably likely to have a Material
Adverse Effect on Company. No disclosure by Company pursuant to this
Section 5.4, however, shall be deemed to prevent or cure any
misrepresentation, breach of warranty or breach of covenant.
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5.5 SUBSEQUENT ACQUISITION PROPOSALS. Neither Seller nor Seller's
Shareholder shall, nor shall they permit any Affiliate of, or director, officer
or employee of, or any investment banker, attorney, accountant or other
representative or agent retained by, or acting with the authority of, either of
them to solicit, initiate, encourage (including by way of furnishing
information), endorse or enter into any agreement with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may be reasonably expected to lead to, any Acquisition Proposal
(as defined below). Without limiting the generality of the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any such director, officer or employee of Seller, Seller's
Shareholder or any of their Affiliates, or any investment banker, attorney,
accountant or other representative or agent, whether or not such Person is
purporting to act on behalf of Seller and/or Seller's Shareholder, shall be
deemed to be a breach and violation of this Section 5.5 by Seller and Seller's
Shareholder. Notwithstanding the foregoing, prior to the Closing, Seller may,
directly or indirectly, furnish information and access, in each case in response
to unsolicited requests therefor, to any Person pursuant to appropriate
confidentiality agreements and may participate in discussions and negotiate with
such Person concerning any Acquisition Proposal, if Seller's board of directors
determines in its good faith judgment that such action is appropriate in
furtherance of the best interests of the shareholders of Seller's Shareholder.
In addition, Seller may direct its officers and other appropriate personnel to
cooperate with and be reasonably available to consult with any such Person. In
no event will Seller, Seller's Shareholder or any of their Affiliates, enter
into any agreement with any Person with respect to any Acquisition Proposal
while this Agreement is in effect. Except for the sole purpose of implementing
the termination of this Agreement as permitted under Section 9.1(d) below,
Seller's and Seller's Shareholder's boards of directors will not approve or
recommend any Acquisition Proposal or any other acquisition of the Election
Business or any of the Contributed Assets other than the transactions
contemplated by this Agreement. Seller will promptly communicate to Purchaser
the terms of any proposal, discussion or negotiation (no matter how preliminary)
and the identity of the Person making such proposal which they, or any one of
them, may receive in respect to any actual or potential Acquisition Proposal.
For purposes of this Agreement, "Acquisition Proposal" shall mean any proposal,
other than a proposal by Purchaser or any of its Affiliates, for a merger,
exchange of capital stock or other business combination involving Seller or any
proposal or offer to acquire in any manner substantial equity interests in
Seller or a substantial portion of its assets, including, but not limited to,
the Contributed Assets.
5.6 WARN ACT. Seller shall take all actions, including, but not limited
to, the provision of timely and appropriate notice, consistent with and in full
compliance with the requirements of the WARN Act and any other applicable state,
local or foreign law, to the Employees with respect to any Employee termination
and/or plant closing event(s) triggering such requirements as a result of the
transactions contemplated hereby. Seller shall provide Company with a copy of
such notice(s) at least seven (7) days prior to their distribution to Employees.
Seller shall be solely responsible for any Liability resulting from violation of
the WARN Act or any other applicable state, local or foreign law as a result of
any termination of Employees and/or plant closing and for any obligation to
provide notice to such Employees.
5.7 UPDATED SELLER SCHEDULES. Not later than the Closing, Seller shall
deliver to the Company proposed amendments to the Schedules called for in
Article 3 necessary to cause the representations and warranties provided for
therein, as modified by such schedules, to be true and correct. Notwithstanding
the delivery of proposed amendments to the schedules provided for
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herein, no such proposed amendment shall actually amend any schedule to this
Agreement without the written consent of the Company, and no such proposed
amendment shall constitute an admission of liability by Seller or Seller's
Shareholder or be admissible for any purpose in connection with any legal or
other proceeding seeking to enforce any remedy of Company or AISI hereunder. The
fact that the Company proceeds with Closing after receipt of such proposed
amendments to any schedule shall not be construed as a consent of the Company to
such proposed amendments or as a waiver of any claim which the Company may have
with respect thereto.
5.8 UPDATED COMPANY SCHEDULES. Not later than the Closing, Company shall
deliver to Seller proposed amendments to the Schedules called for in Article 4
necessary to cause the representations and warranties provided for therein, as
modified by such schedules, to be true and correct. Notwithstanding the
delivery of proposed amendments to the schedules provided for herein, no such
proposed amendment shall actually amend any schedule to this Agreement without
the written consent of Seller, and no such proposed amendment shall constitute
an admission of liability by Company or be admissible for any purpose in
connection with any legal or other proceeding seeking to enforce any remedy of
Seller hereunder. The fact that Seller proceeds with Closing after receipt of
such proposed amendments to any schedule shall not be construed as a consent of
Seller to such proposed amendments or as a waiver of any claim which Seller may
have with respect thereto.
ARTICLE 6.
CLOSING AND POST-CLOSING COVENANTS
The parties hereto agree as follows with respect to the period as of and
following the Closing:
6.1 GENERAL. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the parties shall take such further action (including the execution and delivery
of such further instruments and documents) as any other party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Article 8 below).
Seller acknowledges and agrees that from and after the Closing, Company shall be
entitled to possession of all documents, books, records (including Tax records),
agreements and financial data of any sort relating to the Contributed Assets
except to the extent that any such documents, books, records (including Tax
records), agreements and financial data shall constitute Excluded Assets.
6.2 POST-CLOSING COOPERATION, ACCESS TO INFORMATION AND RETENTION OF
RECORDS.
(a) Without limiting the generality of Section 6.1 above, Seller and
Seller's Shareholder, Company and AISI shall cooperate fully with each
other after the Closing so that each party has access to the business
records, contracts and other information existing at the Closing Date and
relating in any manner to the Contributed Assets, the Assumed Liabilities
or the conduct of the Election Business (whether in the possession of
Seller, Seller's Shareholder or Purchaser). No files, books or records
existing at the Closing Date and relating in any manner to the Contributed
Assets, the Assumed Liabilities or the conduct of the Election Business
shall be destroyed by any party for a period of six (6)
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years after the Closing Date without giving the other party at least thirty
(30) days prior written notice, during which time such other party shall
have the right (subject to the provisions of the next succeeding paragraph)
to examine and to remove any such files, books and records prior to their
destruction.
(b) The access to files, books and records contemplated by Section
6.2(a) above shall be during normal business hours and upon not less than
two (2) days prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information contained therein as
contemplated in Section 10.1 below, and shall not extend to material
subject to a claim of privilege unless expressly waived by the party
entitled to claim the same.
(c) To the extent that any asset, contract, property or right would be
a Contributed Asset but for the application of Sections 2.3(a) or (j) and
such asset, contract, property or right is material to the conduct of the
Election Business consistent with past practice, the parties agree to
divide such items in proportion to their business use, or to exchange
proportionate value, or to otherwise offer reasonable accommodation such
that they will be able to operate their respective businesses following the
Effective Date.
6.3 TRANSITION. Neither Seller nor Seller's Shareholder shall take any
action that is intended to have the effect of discouraging any lessor, licensor,
customer, supplier, sales representative, dealer, distributor or other business
associate of Seller with respect to the Election Business from maintaining the
same business relationships with Purchaser as it maintained with Seller prior to
the Closing. Seller and Seller's Shareholder shall refer all customer inquiries
relating to the Election Business and/or the Contributed Assets to Company from
and after the Closing.
6.4 EMPLOYEE MATTERS. Seller and Seller's Shareholder shall take all
action required to assure that Company experiences no Liability with respect to
Seller's Employee Benefit Plans. Without limiting the generality of the
foregoing, Seller agrees to take all actions as required by applicable law to
offer continuation of insurance coverage to any terminated Employees under COBRA
rules.
6.5 CERTAIN TAXES. Seller and Company shall share equally all state and
local sales, use, transfer, recording and other similar taxes and fees with
respect to the sale and purchase of the Contributed Assets.
6.6 NONCOMPETITION, NONINTERFERENCE AND CONFIDENTIALITY AGREEMENT. At the
Closing, Seller and Seller's Shareholder on the one hand and Company, AISI and
XxXxxxxx Group, Inc., on the other, shall enter into a mutual Noncompetition,
Noninterference and Confidentiality Agreement, substantially in the form of
Exhibit 6.6 hereto (the "Noncompetition, Noninterference and Confidentiality
Agreement").
6.7 STOCKHOLDERS AGREEMENT. At the Closing, Company, Seller and Majority
Stockholders shall enter into a Stockholders Agreement in the form of Exhibit
6.7 hereto (the "Stockholders Agreement").
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6.8 REGISTRATION RIGHTS AGREEMENT. At the Closing, Company and Seller
shall enter into a Registration Rights Agreement in the form of Exhibit 6.8
hereto (the "Registration Rights Agreement").
6.9 LICENSE AGREEMENT. At the Closing, Seller's Shareholder, Seller and
Company shall enter into a License Agreement in the form of Exhibit 6.9 hereto
(the "License Agreement").
6.10 CREDIT ARRANGEMENTS. Prior to the Closing, Company and Majority
Stockholders shall arrange for Company to obtain financing sufficient to permit
Company to make the cash payments to Seller contemplated hereunder and Seller
shall have been provided evidence, reasonably satisfactory to Seller, thereof.
Prior to the Closing, Company and Majority Stockholders shall arrange for each
condition precedent to any lender advancing funds under the agreement
contemplated by the foregoing sentence, to have been satisfied or waived and
Company shall either have available to it the funds necessary to consummate the
transactions contemplated by it hereunder or such funds shall be available,
without restriction, subject only to the occurrence of the Closing.
6.11 CONCURRENT PURCHASE OF STOCK. Majority Stockholders shall subscribe
for and shall purchase and AISI shall issue and sell additional shares of common
stock of AISI so that AISI will have sufficient cash on hand to satisfy its
obligations under Section 2.8(a). Majority Stockholders further agree that in
the event the Effective Date Balance Sheet of Company shows that the Book Value
of Company is less than the Company Equity Amount, the Majority Stockholders
will purchase and the Company shall issue additional shares of common stock of
Company resulting in proceeds to Company in an amount equal to such deficiency.
6.12 ADDITIONAL FINANCIAL STATEMENTS. After Closing, Seller shall
cooperate with Company preparing the necessary financial statements with respect
to the Election Business as may be necessary in order for Company to consummate
a public offering of its common stock which shall include, without limitation,
providing audited financial statements for the Election Business.
6.13 COMMISSION. The parties acknowledge that Seller has incurred expense
for research and development in connection with a proposal to provide election
hardware to the Chicago Board of Elections and to Xxxx County, Illinois (the
"Illinois Customers"). The parties further anticipate that a contract from one
or more of the Illinois Customers may be awarded prior to the Effective Date,
but in all events, all performance under any such contract, regardless if it is
awarded before or after the Effective Date, will be rendered by Company. Seller
agrees to provide Company general consultation with respect to the election
hardware equipment proposed to be delivered to the Illinois Customers. In
consideration of such consultation, Company agrees that in the event that
Company receives any such contract prior to the second anniversary of the
Effective Date (either through award to it or through assuming it as an Assigned
Contract), Company shall pay Seller a commission equal to the product of (a) the
sum of (i) the revenue collected minus (ii) the direct production costs
associated with producing goods provided under such contracts and minus (iii)
any commission payable to Persons other than Employees multiplied by (b) 50%,
but not to exceed a total commission amount of $2,000,000.00, provided, however,
no more than $1,000,000.00 of said total commission amount may be earned on any
contract awarded in the second year after the Effective Date. For purposes
hereof, direct production costs shall not
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include amortization of intangible assets or selling, general or administrative
expenses and shall be determined in accordance with GAAP. Any commission
becoming due under this Section 6.13 from Company to Seller shall be due and
payable within ten (10) days of receipt by Company of the proceeds under such
contract from either of the Illinois Customers.
6.14 LIMITATION ON DEBT. While the Company Note remains outstanding,
Company agrees not to incur term debt in the aggregate in excess of
$27,500,000.00 plus working capital debt extended by Purchaser's primary lender
from time to time and shall not reborrow under such term debt. Seller shall
execute and deliver a subordination agreement with Company's primary lender
subordinating the indebtedness under the Company Note and the security interest
in the assets of Company and providing, in addition to other terms reasonably
deemed appropriate by such primary lender, that Seller will be entitled to
receive interest payments on the Company Note currently if both before and after
the payment Company is not in default under the Company's credit arrangement
with the primary lender. No provision of any subordination agreement between
Seller and the Company's primary lender shall require that the Seller waive any
rights it may have with respect to any collateral pledged to it by any
shareholder of the Company or of AISI or that Seller permit any such collateral
to become subject of any lien in favor of the Company's primary lender.
Notwithstanding the foregoing, the Company shall use reasonable efforts to
secure for the Seller the right to exercise as many of the rights of Seller set
forth in the Collateral Agreements, notwithstanding the continuing existence of
any indebtedness to the Company's primary lender as shall be possible. In
addition, the Company shall use reasonable efforts to obtain for the Seller and
Seller's Shareholder, the right to purchase, at par and without penalty, any
indebtedness or other obligations to such primary lender and to receive an
assignment from such lender, without recourse, of such lender's rights under any
loan agreement and all guarantees, pledge agreement and the like, at any time
that the Company shall be in default thereunder. Seller covenants with Company
that Seller will perform its obligations under any subordination agreement
entered into with Company's primary lender. Seller agrees that the Majority
Shareholders shall have the right to make payments to Seller on the Company
Note.
6.15 HARDWARE PAYMENT COMPONENT. Company specifically acknowledges and
agrees that the Contributed Assets do not include the Hardware Payment Component
and that the Company, or, if requested by Seller, a mutually agreed upon third
party trustee, shall serve as the trustee for purposes of initial receipt of all
payments relating to the underlying customer contracts and shall divide and
distribute such payments based on Schedule 2.3(d), and that Company will
otherwise be liable to Seller for collection of the Hardware Purchase Component
and performance of the related service commitments of the underlying customer
contracts. All payments of the Hardware Payment Component shall be remitted to
Seller within ten (10) days of the end of the month of receipt of such payment.
The same timing of remittance shall be true in the case of amounts due the
Company in the case of administration of payment receipts by a third party
trustee.
ARTICLE 7.
CONDITIONS PRECEDENT TO CLOSING
7.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION. The obligation of
Purchaser to purchase the Contributed Assets, assume the Assumed Liabilities and
otherwise consummate the transactions to be performed by it in connection with
the Closing is subject to the satisfaction,
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at or prior to the Closing, of all of the conditions set forth in this Section
7.1. Purchaser may waive any or all of these conditions in whole or in part
without prior notice provided no such waiver shall constitute a waiver by
Purchaser of any of its other rights or remedies, at law or in equity, for
breach or default by Seller and/or Seller's Shareholder of any of their
representations, warranties or covenants in this Agreement.
(a) The representations and warranties by Seller and Seller's
Shareholder contained in Sections 3.1(a) and (c), 3.2 and 3.3(a) shall be
true and correct when made and on and as of the Closing Date in all
respects and the representations and warranties by Seller and Seller's
Shareholder in the remaining sections of Article 3 shall be true and
correct when made and on and as of the Effective Date to the extent that
violations thereof could not reasonably be expected to result in claims for
indemnification by Company under Section 8.2(a) in excess of $15,000,000.00
in the aggregate.
(b) Seller and/or Seller's Shareholder has performed and complied with
in all material respects with its covenants, agreements and obligations
specifically set forth in Sections 2.8, 2.9 and 5.7, provided Seller and/or
Seller's Shareholder's actions under Section 5.7 shall not constitute a
condition precedent to the Purchaser's obligation to consummate the
transactions herein on the account of the actual content, or changes, which
are made by Seller to such Schedules. Notwithstanding the foregoing,
failure of Seller and/or Seller's Shareholder to perform, comply with or
satisfy any of its covenants, agreements and obligations specifically set
forth in any other Section of this Agreement shall be deemed to be a
condition to Closing if such failure to perform, comply with or satisfy
such covenant, agreement or obligation could reasonably be expected to
result in claims for indemnification by Company under Section 8.2(a) in
excess of $15,000,000.00 in the aggregate.
(c) No action, suit or proceeding shall be pending or threatened
before any Authority wherein an unfavorable injunction, judgment, order,
decree, ruling or charge would (i) prevent the consummation of any of the
transactions contemplated by this Agreement; (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation; (iii) materially and adversely affect the right of Purchaser
to own the Contributed Assets as a whole or operate the Election Business.
(d) Purchaser shall have received a certificate or certificates from
Seller and Seller's Shareholder, dated as of the Closing Date, certifying
that the conditions specified in Sections 7.1(a) - (c) above have been
satisfied in all respects.
(e) Seller and/or Seller's Shareholder shall have taken all action
required of Seller and/or Seller's Shareholder and shall have procured and
delivered to Purchaser all Material Contract Consents contemplated by
Section 2.5(c) above and all applicable waiting periods (including any
extensions thereof) under the HSR Act shall have expired or otherwise been
terminated.
(f) Seller shall have fully complied with the provisions of Section
5.6 above, if applicable.
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(g) Seller and Seller's Shareholder shall have each entered into the
Noncompetition, Noninterference and Confidentiality Agreement dated as of
the Effective Date.
(h) Seller shall have entered into the Stockholder Agreement dated as
of the Effective Date.
(i) Seller shall have entered into the Registration Rights Agreement
dated as of the Effective Date.
(j) Seller and Seller's Shareholder shall have entered into the
License Agreement dated as of the Effective Date.
(k) Purchaser shall have received from counsel to Seller an opinion in
form and substance as set forth in Exhibit 7.1(k) hereto addressed to
Purchaser and dated as of the Effective Date.
(l) Purchaser shall have received a certificate of good standing or
existence, as applicable, of the Seller, dated not more than seven (7) days
prior to the Effective Date.
7.2 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. The obligations of
Seller to sell the Contributed Assets and otherwise consummate the transactions
to be performed by it in connection with the Closing is subject to the
satisfaction, at or prior to the Closing, of all of the conditions set forth in
this Section 7.2. Seller may waive any or all of these conditions in whole or
in part without prior notice.
(a) The representations and warranties by Company and AISI contained
in Sections 4.1(a), 4.2 and 4.3(a) shall be true and correct when made and
on and as of the Closing Date in all respects, and the representations and
warranties by Company and AISI in the remaining sections of Article 4 shall
be true and correct when made and on and as of the Closing Date to the
extent that violations thereof could not reasonably be expected to result
in claims for indemnification by Seller or Seller's Shareholder under
Section 8.2(b) in excess of $5,000,000.00 in the aggregate.
(b) Company, AISI and the Majority Stockholders have performed and
complied in all material respects its covenants, agreements and obligations
specifically set forth in Sections 2.8, 2.9 and 5.8, provided Company's
actions under Section 5.8 shall not constitute a condition precedent to the
Seller's or Seller's Shareholder's obligation to consummate the
transactions herein on the account of the actual content, or changes, which
are made by Company to such schedules. Notwithstanding the foregoing,
failure of Company, AISI or the Majority Shareholders to perform, comply
with or satisfy any of its covenants, agreements and obligations
specifically set forth in any other Section of this Agreement shall be
deemed to be a condition to Closing if such failure to perform, comply with
or satisfy such covenant, agreement or obligation could reasonably be
expected to result in claims for indemnification by Seller or Seller's
Shareholder under Section 8.2(b) in excess of $5,000,000.00 in the
aggregate.
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(c) No action, suit or proceeding shall be pending or threatened
before any Authority wherein an unfavorable injunction, judgment, order,
decree, ruling or charge would (i) prevent the consummation of any of the
transactions contemplated by this Agreement; or (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation.
(d) Seller shall have received a certificate from Purchaser, dated as
of the Closing Date, certifying that the conditions specified in Sections
7.2(a) -(c) above have been satisfied.
(e) Company shall have taken all actions required under, and shall
have procured all third party consents contemplated by, Section 4.2 above,
and all applicable waiting periods (including any extensions thereof) under
the HSR Act shall have expired or otherwise been terminated.
(f) Company and the Majority Stockholders shall have entered into the
Stockholder Agreement dated as of the Closing Date.
(g) Company shall have entered into the Registration Rights Agreement
dated as of the Closing Date.
(h) The Majority Stockholders shall have completed the purchase of
additional Common Stock of AISI as contemplated in Section 6.11.
(i) Company's primary lender shall have entered into a subordination
agreement with Seller containing the material terms contemplated in Section
6.14 above.
(j) Seller shall have received from counsel to Purchaser an opinion in
form and substance as set forth in Exhibit 7.2(j) hereto addressed to
Seller and dated as of the Effective Date.
(k) Seller shall have received a Certificate of good standing or
existence, as applicable, of the Purchaser, dated not more than seven (7)
days prior to the Closing Date.
ARTICLE 8.
INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Sections 3.1 through 3.5, 3.12 and 3.24 shall survive
the Closing until expiration of any applicable limitations periods and the
remaining representations and warranties in Article 3 shall survive the Closing
until the second anniversary of the Effective Date. The representations and
warranties contained in Sections 4.1 through 4.4, 4.9 and 4.10 hereof shall
survive the Closing until expiration of any applicable limitations period and
the remaining representations and warranties in Article 4 shall survive the
Closing until the second anniversary of the Effective Date.
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8.2 INDEMNIFICATION OBLIGATIONS.
(a) Seller and Seller's Shareholder shall jointly and severally
indemnify Purchaser and hold Purchaser harmless from and against any and
all Adverse Consequences arising out of, resulting from, relating to, in
the nature of or caused by:
(i) Any breach or inaccuracy of any representation, warranty,
covenant or agreement made by Seller and/or Seller's Shareholder in
this Agreement or in any agreement, certificate, instrument or other
document delivered by Seller and/or Seller's Shareholder in connection
with the Closing;
(ii) The ownership or operation of the Contributed Assets or the
Election Business prior to the Effective Date (except to the extent
included in the Assumed Liabilities);
(iii) The Retained Liabilities;
(iv) Any and all Taxes with respect to all past fiscal years of
Seller and the period ending on the Effective Date and all
deficiencies, interest or penalties in connection therewith that may
at any time be asserted or assessed against Seller or Purchaser as
transferee or otherwise, by or to any Authority.
(v) Any Liability or other obligation to the Employees of
Seller with respect to any of the Employee Benefit Plan of Seller or
Seller's Shareholder;
(vi) Any (A) investigation and clean-up arising from a release
or threatened release of hazardous substances on, in or about the
Owned Real Property or Leased Real Property by or on behalf of Seller
or any third party prior to the Effective Date, (B) investigation,
preparing, prosecuting or defending any litigation or proceeding,
commenced or threatened, relating to violations (and remediation and
the abatement of violation) of any Environmental Law by Seller or any
third party prior to the Effective Date; and (C) the correction of any
condition which constitutes a violation of any Environmental Law by
Seller or any third party occurring prior to the Effective Date.
(vii) All matters disclosed or which should be disclosed on
Schedule 3.9.
(viii) Subject to Section 8.3(e), the failure to obtain any
consent to assignment by Seller to Company of any Contract (other than
the leases listed in Schedule 2.2(g); provided, that the Company shall
not be entitled to indemnification under this Section 8.2(a)(viii)
with respect to any Contract if the Adverse Consequences suffered by
Company with respect to such Contract do not exceed $100,000.00 unless
and then only to the extent the aggregated Adverse Consequences with
respect to all such Contracts having Adverse Consequences that are
less than $100,000.00 exceeds $100,000.00 in total; provided further,
that the Liability of Seller and Seller's Shareholder under this
Section 8.2(a)(viii) shall be limited to two-thirds of any Adverse
Consequences to which this Section applies.
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(ix) The failure to obtain any consent to assignment by Seller
to Company of the leases for the production facilities located in
Berkeley, California, Addison, Texas and Birmingham, Alabama as
described on Schedule 2.2(g); provided that the Liability of Seller
and Seller's Shareholder under this Section 8.2(a)(ix) shall be
limited to eighty percent (80%) of any Adverse Consequences to which
this Section applies.
(b) Company shall indemnify Seller and Seller's Shareholder and hold
each harmless from and against any and all Adverse Consequences arising out
of, resulting from, relating to, in the nature of or caused by:
(i) Any breach or inaccuracy of any representation, warranty,
covenant or agreement made by Purchaser in this Agreement or in any
agreement, certificate, instrument or other document delivered by
Purchaser in connection with the Closing;
(ii) The ownership or operation of the Contributed Assets, the
Election Business and Seller's business on or after the Effective Date
(except to the extent included in the Retained Liabilities);
(iii) The Assumed Liabilities;
(iv) Any and all Taxes of Company and Company's business and all
deficiencies, interest or penalties in connection therewith that may
at any time be asserted or assessed against Company by or to any
Authority (except to the extent included in the Retained Liabilities);
(v) Any Liabilities associated with the Restricted Interests or
any transaction contemplated between Company and Seller in connection
therewith as provided in Section 2.5(e);
(vi) All Liabilities of Company arising from or related to any
transaction between Company and any of the Employees, or any matter
relating to any offer of employment by Company to any of the
Employees; and
(vii) Any (A) investigation and clean-up arising from a release
or threatened release of hazardous substances on, in or about any real
property owned or leased by or on behalf of Company prior to the
Effective Date, (B) investigation, preparing, prosecuting or defending
any litigation or proceeding, commenced or threatened, relating to
violations (and remediation and the abatement of violation) of any
Environmental Law by Company or any third party prior to the Effective
Date; and (C) the correction of any condition which constitutes a
violation of any Environmental Law by Company or any third party
occurring prior to the Effective Date.
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8.3 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other party (the
"Indemnifying Party") under this Section 8.3, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying
any Indemnifying Party shall relieve the Indemnifying party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within fifteen
(15) days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will defend the Indemnified Party form
and against the entirety of any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim, (ii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable
relief, and (iii) the Indemnifying Party conducts the defense of the Third
Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 8.3(b), (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld or delayed
unreasonably), and (iii) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld or delayed unreasonably).
(d) In the event any of the conditions in Section 8.3(b) above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses) except under Section
8.3(b)(ii), in which case the Indemnifying Party shall only be required to
reimburse the Indemnified Party for one-half of the costs of defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses), and (iii) the Indemnifying Parties will remain responsible for
any Adverse Consequences of the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this Section 8.3.
(e) Notwithstanding Section 8.2(a)(viii), Seller and Seller's
Shareholder shall not have any Liability to Seller to the extent that (i)
Company has not given reasonable notice
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to Seller that circumstances likely to give rise to Adverse Consequences
exist and permitted Seller to attempt to mitigate its Liability with regard
thereto, (ii) any Adverse Consequences related to any failure by Company to
perform the obligations of Seller under such Contract consistent with the
terms thereof except in the case where the other party to the Contract did
not permit Company to perform such obligations by reason of the failure to
obtain consent to the assignment of such Contract to Company, or (iii) the
Contract in question is not assigned because it terminates in accordance
with its terms, including any provision permitting termination for
convenience or lack of funding.
8.4 GENERAL INDEMNIFICATION PROCEDURES.
(a) A party seeking indemnification pursuant to this Article 8 (an
"Indemnified Party") shall give prompt notice to the party from whom such
indemnification is sought (the "Indemnifying Party") of the assertion of
any claim, or the commencement of any action, suit or proceeding, in
respect of which indemnity may be sought pursuant to this Article 8 and
will give the Indemnifying Party such information with respect thereto as
the Indemnifying Party may reasonably request, but failure to give such
notice shall not relieve the Indemnifying Party of any Liability hereunder
(except to the extent that the Indemnifying Party has suffered actual
prejudice thereby). Any time limitation specified in Section 8.1 above
shall not apply to claims which have been the subject of notice from the
Indemnified Party to the Indemnifying Party given in good faith prior to
the expiration of such period, which notice specifies in reasonable detail
the nature and basis of such claim.
(b) For purposes of this Article 8, any and all references to a
"Material Adverse Effect" in Seller's and Seller's Shareholder's
representations and warranties shall be disregarded. For purposes of
calculating the monetary amount of Adverse Consequences for which any claim
may be made, a credit will be given to the extent of any insurance or other
recovery received by Purchaser or Seller and Seller's Shareholder, as the
case may be, resulting from such Adverse Consequences or from the subject
matter giving rise to such Adverse Consequences.
(c) Neither Seller and/or Seller's Shareholder shall be required to
indemnify Purchaser pursuant to this Article 8 unless or until the
aggregate monetary amount of Adverse Consequences suffered by Purchaser
exceeds $300,000.00, and in such event, Purchaser shall be entitled to
indemnification for all Adverse Consequences including the initial
$300,000.00.
(d) Company shall not be required to indemnify Seller or Seller's
Shareholder pursuant to this Article 8 unless or until the aggregate
monetary amount of Adverse Consequences suffered by Seller or Seller's
Shareholder exceeds $100,000.00 and in such event, Seller or Seller's
Shareholder shall be entitled to indemnification for all adverse
consequences including the initial $100,000.00.
8.5 SET OFF. Company retains the right to set off any amounts due to
Company from Seller or Seller's Shareholder pursuant to this Article 8 against
the Company Note; provided, however, there shall be no set off rights unless and
until the aggregate amounts due to Company
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pursuant to this Article 8 exceed $500,000.00 and then only to the extent such
amounts exceed $500,000.00 up to a maximum set off right of $5,000,000.00.
ARTICLE 9.
TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any time prior to
Closing:
(a) By mutual written consent of Company and Seller;
(b) By Company or Seller if the Closing shall not have occurred by
March 1, 1997, if all conditions precedent to the terminating party's
obligation to proceed with the transactions contemplated by this Agreement
have not been satisfied and such terminating party does not desire to waive
such condition(s); provided, however, that this right to terminate the
Agreement shall not be available to any party whose intentional failure to
fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before such date; or
(c) [INTENTIONALLY LEFT BLANK.]
(d) (i) By Company if, prior to the Closing and pursuant to Section
5.5 above, Seller's board of directors or a committee thereof shall
have withdrawn or modified in any manner adverse to Company its
approval or recommendation of this Agreement and the transactions
contemplated hereunder or shall have recommended another merger,
consolidation, business combination with or acquisition of Seller or
its assets, or a tender offer for the capital stock of Sellers, with
or by another Person, other than Company or any of its Affiliates, or
shall have resolved to do any of the foregoing.
(ii) By Seller if, prior to the Closing and pursuant to Section
5.5 above, its board of directors or a committee thereof by resolution
determines that a bona fide proposal or offer by another Person, other
than Purchaser or its Affiliates, to consummate a transaction with
Seller is more favorable to Seller's Shareholder than the transactions
contemplated under this Agreement including, without limitation, if
the board of directors of Seller accepts an Acquisition Proposal from
another Person of a nature permitted by Section 5.5.
9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Purchaser or Seller as provided in Section 9.1 above, all
obligations of the parties under this Agreement shall terminate without
Liability of any party to any other party, except (a) that the obligations set
forth in Sections 10.1 through 10.5 below shall survive any such termination;
and (b) for Liability for any willful breach of this Agreement; and (c) Seller
shall immediately pay $3,750,000.00 in cash or in certified funds to Company
upon termination of this Agreement pursuant to Section 9.1(d) above.
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ARTICLE 10.
MISCELLANEOUS
10.1 CONFIDENTIALITY. Purchaser and Seller and Seller's Shareholder
and their respective representatives agree to keep and maintain the terms of the
transaction contemplated by this Agreement confidential. Purchaser and Seller
and Seller's Shareholder and their respective representatives will treat and
hold as confidential any and all information, materials, data and documents in
all forms (whether written or otherwise) relating to the Excluded Assets and the
businesses associated therewith and/or the Election Business and the Contributed
Assets ("Confidential Information"). Purchaser and Seller and Seller's
Shareholder and their respective representatives shall refrain from using any
such Confidential Information in any manner or for any purpose not in connection
with this Agreement or in any manner or for any purpose detrimental to the
business of the other party or any party's interest, and shall upon consummation
of the transactions contemplated by this Agreement deliver promptly to the
applicable party or destroy, at the request and option of such party, all
tangible embodiments (including computer records) of such Confidential
Information which are in its possession (except that Confidential Information
regarding the Election Business and the Contributed Assets shall become the
Confidential Information relating to Purchaser as of the Closing). In the event
that any party hereto is requested or required (by oral question or request for
information for documents in any legal proceeding, interrogatories, subpoena,
civil investigative demand or similar process) to disclose any Confidential
Information, said party shall notify the other party hereto promptly of the
request or requirement so that the nondisclosing party may seek an appropriate
protective order or waive compliance with the provisions of this Section 10.1.
If, in the absence of a protective order or the receipt of a waiver hereunder,
any party hereto is, on the advice of counsel, compelled to disclose any
Confidential Information to any Authority or else stand liable for contempt,
that said party may disclose the Confidential Information to the Authority;
provided, however, that the disclosing party shall use its reasonable efforts to
obtain, at the reasonable request of the nondisclosing party, an order or such
assurance that confidential treatment shall be accorded to such portion of the
Confidential Information required to be disclosed as the nondisclosing party
shall designate. The foregoing provisions of this Section 10.1 shall not apply
to any information which (a) was already known to any party hereto when such
information was received from the other; (b) was already available to the
general public at the time of such receipt; (c) subsequently becomes known to
the general public through no fault or admission by any party hereto; (d) is
subsequently disclosed by a third party which has the bona fide right to make
such disclosure; or (e) is required to be disclosed by law, or by any Authority
or for which disclosure to an Authority is appropriate in the conduct of
business.
10.2 PUBLICITY. No publicity release or announcement or other
disclosure to third parties other than the parties' respective legal, financial,
and accounting advisors and consultants, shareholders, directors and officers,
concerning this Agreement or the transactions contemplated hereby shall be
issued by any party hereto without prior consent to the form and substance
thereof by Company (in the case of any proposed release or announcement by
Seller and/or Seller's Shareholder) or Seller (in the case of any proposed
release or announcement by Company). Notwithstanding the foregoing, in the event
any such press release or announcement is required by law to be made by the
party proposing to issue the same, such party shall use its best efforts to
consult in good faith with the other party prior to the issuance of any such
press release or announcement but shall otherwise be entitled to perform its
obligations under applicable law.
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10.3 EXPENSES. Each of the parties hereto shall pay all costs and
expenses incurred or to be incurred by them in the negotiation and preparation
of this Agreement and in closing and carrying out the transactions contemplated
by this Agreement. Anything herein to the contrary notwithstanding, Seller
acknowledges that Company intends to pay such expenses as and when billed prior
to Closing and agrees that such payment shall not result in a breach of this
Agreement as long as the Book Value of Company as shown on the Effective Date
Balance Sheet of Company equals or exceeds the Company Equity Amount.
10.4 BROKERS. Except for the engagement of XxXxxxxx & Co. by Company,
each of the parties hereto represent and warrant that there are no brokers or
finders known to them to be involved with this transaction and none of them has
made any agreement or taken any other action which might cause any Person to
become entitled to a broker's or finder's fee or commission as a result of this
transaction. Company's liability to XxXxxxxx & Co. will be fully reflected in
the Book Value of Company as of a time prior to the Closing, such that the Book
Value of Company will not be reduced following the Closing as a result of any
payment to XxXxxxxx & Co., provided, however, for the purposes of calculating
the Book Value of Company, Company may capitalize such fees to the extent that
such capitalized fees plus other intangible assets do not exceed $750,000.00 in
the aggregate.
10.5 COSTS. If any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party or parties shall be entitled
to recover reasonable attorneys' fees and other costs incurred in such action or
proceeding, in addition to any other relief to which it or they may be entitled.
10.6 OTHER PROSPECTIVE PURCHASERS. Company shall not incur any Liability
in connection with the transactions contemplated by this Agreement to any other
Person with whom Seller and/or Seller's Shareholder, or their agents or
representatives, have had negotiations or discussions regarding any potential
merger, exchange of capital stock or other business combination involving Seller
or any proposal or offer to acquire in any manner a substantial equity interest
in Seller or a substantial portion of the assets of Seller, including, but not
limited to, any of the Contributed Assets.
10.7 BULK SALES. Notwithstanding anything to the contrary contained
herein, Seller need not take any action under Article 6 or Article 6A of the
Uniform Commercial Code (Bulk Transfers) as in effect in any jurisdiction, or
any other applicable bulk sales law. Seller and Seller's Shareholder shall
jointly and severally indemnify and hold Purchaser harmless from all claims of
creditors resulting from such noncompliance.
10.8 NOTICES. All notices, consents, requests, instructions, approvals,
demands and other communications provided for herein shall be validly given,
made or served if in writing and delivered personally by hand or by prepaid
overnight courier service. Each such notice, consent, request, instruction,
approval, demand or other communication shall be effective if delivered
personally by hand or by overnight courier service, when delivered at the
address specified in this Section 10.8 against receipt.
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Addresses for notices (unless and until written notice is given of any
other address):
If to AISI or Company:
American Information Systems, Inc.
00000 Xxxx Xxxx Xxxx.
Xxxxx, XX 00000
Attention: President
with a copy to:
Koley, Jessen, Xxxxxxx & Xxxxxxx, P.C.
Xxx Xxxxxxx Xxxxx, Xxxxx 000
1125 South 000 Xxxxxx
Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
If to Seller or Seller's Shareholder:
BRC Holdings, Inc.
0000 Xxxx Xxxxxxxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxx & Xxxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
10.9 HEADINGS. The headings preceding the text of the sections hereof are
inserted solely for convenience of reference, and shall not constitute a part of
this Agreement nor shall they affect its meaning, construction or effect.
10.10 ENTIRE AGREEMENT. This Agreement, together with the schedules and
exhibits attached hereto, each of which are made a part of this Agreement by
this reference, constitutes the entire understanding of the parties, supersedes
any prior agreements or understandings, written or oral, between the parties
with respect to the subject matter hereof. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by all
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
10.11 RIGHTS OF PARTIES. Nothing in this Agreement, whether express
implied, is intended to confer any benefit, right or remedy under or by
reason of this Agreement on any
-51-
Persons other than the parties to this Agreement and their respective successors
and permitted assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or Liability of any other Persons to any party to this
Agreement, nor shall any provision give any other Persons any right of
subrogation or action over or against any party to this Agreement.
10.12 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective
representatives, successors and permitted assigns. None of the parties hereto
may assign either this Agreement or any of the rights, interests or obligations
hereunder without the prior written approval of the other parties; provided,
however, that Purchaser may assign any or all of its rights and interests
hereunder to one or more of its Affiliates to perform its obligations hereunder
(in any or all of which cases Purchaser nonetheless shall remain responsible for
the performance of all of its obligations hereunder).
10.13 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
10.14 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
AMERICAN INFORMATION SYSTEMS, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Its: President
BUSINESS RECORDS CORPORATION,
a Delaware corporation
By: /s/ X. X. Xxxxxx
--------------------------------------------
Its: Chairman & CEO
BRC HOLDINGS, INC.,
a Delaware corporation
By: /s/ X. X. Xxxxxx
--------------------------------------------
Its: Chairman & CEO
AIS INVESTORS, INC., a Nebraska corporation
By: /s/ Xxxxxxx X. XxXxxxxx
--------------------------------------------
Its: Chairman
XxXXXXXX GROUP, INC., a Nebraska
corporation
(With regard to the specific covenants of the
Majority Stockholders set forth herein)
By: /s/ Xxxxxxx X. XxXxxxxx
--------------------------------------------
Its: Chairman
WORLD DIVERSIFIED, INC., a Nebraska
corporation
(With regard to the specific covenants of the
Majority Stockholders set forth herein)
By: /s/ Xxxx Xxxxxxxxxx
--------------------------------------------
Its: Chairman
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.1(ooo) Products
Schedule 2.2(a) Equipment
Schedule 2.2(c) Trade Names
Schedule 2.2(e) Equipment Leases
Schedule 2.2(f) Owned Real Property
Schedule 2.2(g) Leased Real Property
Schedule 2.2(h) Contracts With Hardware Payment Component
Schedule 2.2(q) Loan Receivables to Employees
Schedule 2.3(d) Notes Receivable
Schedule 2.3(l) Excluded Property
Schedule 2.5(c) Material Contract Consents
Schedule 2.8(d)(i) Allocation of Accounts Receivable and Inventory
Schedule 2.8(d)(ii) Allocation of Contributed Assets
Schedule 3.1 Qualification Jurisdictions of Election Division
Schedule 3.2 Seller's and Seller's Shareholder's Authority and
Enforceability
Schedule 3.7 Changes in the Election Division
Schedule 3.9 Seller's and Seller's Shareholder's Litigation and
Claims
Schedule 3.10 Seller's and Seller's Shareholder's Legal Compliance
Schedule 3.11(b) Exceptions to Leased Real Property
Schedule 3.12 Seller's and Seller's Shareholder's Environmental
Matters
Schedule 3.13 Seller's and Seller's Shareholder's Intellectual
Property
Schedule 3.15 Seller's and Seller's Shareholder's Pledged Inventory
Schedule 3.16 Seller's and Seller's Shareholder's Employees
Schedule 3.17 Seller's and Seller's Shareholder's Employee Benefits
Schedule 3.18 Seller's and Seller's Shareholder's Customers and
Suppliers
Schedule 3.19 Sales Representatives, Dealers and Distributors
Schedule 3.20 Material Contracts of Election Division
Schedule 3.21 Seller's and Seller's Shareholder's Insurance Policies
Schedule 3.22 Seller's and Seller's Shareholder's Products
Liability/Warranty
Schedule 3.23 Note and Accounts Receivable of the Election Business
Schedule 4.1 Qualified Jurisdictions of Company
Schedule 4.2 Company's Outstanding Capital and List of Shareholders
Schedule 4.3 Company's Authority and Enforceability
Schedule 4.5 Company's Subsidiaries
Schedule 4.8 Changes in Company
Schedule 4.10 Company's Litigation and Claims
Schedule 4.11 Company's Legal Compliance
Schedule 4.12 Company's Environmental Matters
Schedule 4.15 Company's Pledged Inventory
Schedule 4.16 Company's Employees
Schedule 4.17 Company's Employee Benefit Plans
Schedule 4.18 Material Contracts of Company
Exhibit 2.8(a) AISI Promissory Note
Exhibit 2.8(b) Company Note
Exhibit 2.8(c) Collateral Agreements
Exhibit 6.6 Noncompetition, Noninterference and Confidentiality
Agreement
Exhibit 6.7 Stockholders Agreement
Exhibit 6.8 Registration Rights Agreement
Exhibit 6.9 License Agreement
Exhibit 7.1(k) Opinion of Seller's Counsel
Exhibit 7.2(j) Opinion of Purchaser's Counsel
