EXHIBIT 2
ASSET PURCHASE AGREEMENT
By and Among
THE XXXXX GROUP
("Seller")
and
XXXXXXXX XXXXX
("Owner")
and
METRO INFORMATION SERVICES OF NORTHERN CALIFORNIA, INC.
("Buyer")
Dated as of November 30, 1998
TABLE OF CONTENTS
Page
ARTICLE 1 PURCHASE AND SALE OF PROPERTIES AND ASSETS..........................................................1
1.1 Assets..............................................................................................1
1.1.1 Tangible Personal Property...............................................................2
1.1.2 Real Property............................................................................2
1.1.3 Contracts................................................................................2
1.1.4 Accounts Receivable......................................................................2
1.1.5 Intangible Property......................................................................2
1.1.5 Files and Records........................................................................2
1.1.7 Claims .................................................................................3
1.1.8 Prepaid Items............................................................................3
1.1.9 Goodwill.................................................................................3
1.1.10 Bids - Requests for Proposals............................................................3
1.1.11 Franchises, Permits......................................................................3
1.2 Excluded Assets.....................................................................................3
1.2.1 Excess Personal Property.................................................................3
1.2.2 Insurance................................................................................3
1.2.3 Certain Assets...........................................................................3
1.2.4 Duplicate Records........................................................................3
1.2.5 Corporate Records........................................................................4
1.2.6 Employee Personal Property...............................................................4
1.2.7 Cash and Investments.....................................................................4
1.2.8 Accounts Receivable......................................................................4
1.2.9 Lease and Sublease.......................................................................4
1.3 Liabilities.........................................................................................4
1.3.1 Security Interests.......................................................................4
1.3.2 Assumed Liabilities......................................................................4
1.3.3 Excluded Liabilities.....................................................................5
1.3.4 Retained Obligations of the Seller.......................................................6
1.4 Purchase Price, Payment, and Allocation.............................................................6
1.4.1 Purchase Price...........................................................................6
1.4.2 Method of Payment........................................................................8
1.4.3 Allocation of Purchase Price.............................................................8
1.4.4 Computation of Earnout...................................................................8
1.5 Closing............................................................................................13
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE OWNER.........................................13
2.1 Corporate Status...................................................................................13
2.2 No Options.........................................................................................14
2.3 Corporate Action...................................................................................14
2.4 No Defaults........................................................................................14
2.5 Contracts, Leases, Agreements and Other Commitments................................................14
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TABLE OF CONTENTS (CONTINUED)
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2.6 Breach..............................................................................................15
2.7 Financial Information...............................................................................15
2.7.1 Financial Statements.....................................................................15
2.7.2 Accounts Receivables.....................................................................15
2.8 Liabilities.........................................................................................15
2.9 Taxes...............................................................................................16
2.10 Licenses............................................................................................16
2.11 Business Operations.................................................................................16
2.12 Approvals and Consents..............................................................................17
2.13 Condition of Assets.................................................................................17
2.13.1 All Assets...............................................................................17
2.13.2 Tangible Personal Property...............................................................17
2.13.3 Good Title...............................................................................17
2.14 Leased Real Property................................................................................17
2.14.1 Leases ..................................................................................17
2.14.2 Interests................................................................................17
2.14.3 All Leases...............................................................................18
2.14.4 Good Title...............................................................................18
2.15 Environmental Matters...............................................................................18
2.15.1 Environmental Studies....................................................................19
2.16 Compliance with Law and Regulations.................................................................19
2.17 Insurance...........................................................................................19
2.18 Labor, Employment Contracts and Benefit Programs....................................................19
2.18.1 No Collective Bargaining Agreements......................................................19
2.18.2 Employee Manuals.........................................................................20
2.18.3 Compliance...............................................................................20
2.18.4 Employee Plans...........................................................................20
2.18.5 ERISA Compliance.........................................................................20
2.18.6 No Multi-employer Plans..................................................................21
2.18.7 Employees................................................................................21
2.18.8 Independent Contractors..................................................................21
2.19 Litigation..........................................................................................21
2.20 Intangible Property.................................................................................22
2.21 Bulk Sales..........................................................................................22
2.22 Brokers.............................................................................................22
2.23 Conflicting Interests...............................................................................22
2.24 Matters Arising After the Interim Balance Sheet Date................................................22
2.25 Year 2000 Compliance................................................................................23
2.26 Disclosure..........................................................................................23
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BUYER AND METRO...............................................23
3.1 Status..............................................................................................23
3.2 No Defaults.........................................................................................23
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TABLE OF CONTENTS (CONTINUED)
Page
3.3 Corporate Action....................................................................................24
3.4 Brokers.............................................................................................24
3.5 Litigation..........................................................................................24
3.6 Consents............................................................................................24
3.7 Compliance with Laws................................................................................24
3.8 Full Disclosure.....................................................................................24
3.9 Financial Capability................................................................................25
ARTICLE 4 COVENANTS OF THE SELLER AND THE OWNER PENDING THE CLOSING...........................................25
4.1 Operations of the Business..........................................................................25
4.1.1 Best Efforts.............................................................................25
4.1.2 Current Statements.......................................................................25
4.1.3 Preserve Business........................................................................25
4.1.4 Assets in Good Repair....................................................................26
4.2 Prohibited Actions..................................................................................26
4.3 No Distributions or Payments........................................................................26
4.4 Access to Facilities, Files and Records.............................................................26
4.5 Representations and Warranties......................................................................27
4.6 Consents............................................................................................27
4.7 Notice of Proceedings...............................................................................27
4.8 Consummation of Agreement...........................................................................28
ARTICLE 5 COVENANTS OF THE BUYER AND METRO PENDING THE CLOSING................................................28
5.1 Representations and Warranties......................................................................28
5.2 Consummation of Agreement...........................................................................28
5.3 Notice of Proceedings...............................................................................28
5.4 Contracts Not to be Assumed.........................................................................28
ARTICLE 6 CONDITIONS TO THE OBLIGATIONS OF THE SELLER AND THE OWNER...........................................29
6.1 Representations, Warranties and Covenants...........................................................29
6.1.1 Representations True.....................................................................29
6.1.2 Buyer Compliance.........................................................................29
6.1.3 Certificate of the Buyer.................................................................29
6.1.4 Other Documents..........................................................................29
6.2 Proceedings.........................................................................................29
6.2.1 No Injunction............................................................................29
6.2.2 Postponement.............................................................................29
6.3 Deliveries..........................................................................................30
6.4 Other Consents......................................................................................30
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TABLE OF CONTENTS (CONTINUED)
Page
ARTICLE 7 CONDITIONS TO THE OBLIGATIONS OF THE BUYER..........................................................30
7.1 Representations, Warranties and Covenants...........................................................30
7.1.1 Representations True.....................................................................30
7.1.2 Seller's Performance.....................................................................30
7.1.3 Seller's Certificates....................................................................30
7.1.4 Other Documents..........................................................................30
7.2 Proceedings.........................................................................................30
7.2.1 No Injunction............................................................................30
7.2.2 Postponement.............................................................................31
7.3 Liens Released......................................................................................31
7.4 Deliveries..........................................................................................31
7.5 Other Consents......................................................................................31
7.6 Revised Schedules...................................................................................31
7.7 No Material Change in Business or Assets............................................................31
7.8 Preliminary Closing Balance Sheet...................................................................31
7.9 Xxxx Xxxxxx' Employment Agreement...................................................................31
ARTICLE 8 ITEMS TO BE DELIVERED AT THE CLOSING................................................................32
8.1 Deliveries by the Seller............................................................................32
8.1.1 Bills of Sale............................................................................32
8.1.2 Board Resolutions........................................................................32
8.1.3 Officer's Certificate....................................................................32
8.1.4 Noncompetition Agreement.................................................................32
8.1.5 Management Employment Agreements.........................................................32
8.1.6 Assumed Liabilities Schedule.............................................................32
8.1.7 Accounts Receivable......................................................................32
8.2 Deliveries by the Buyer.............................................................................32
8.2.1 Purchase Price...........................................................................33
8.2.2 Assumption Agreements....................................................................33
8.2.3 Resolutions..............................................................................33
8.2.4 Officers' Certificate....................................................................33
8.2.5 Noncompetition Agreement.................................................................33
8.2.6 Management Agreements....................................................................33
8.2.7 Stock Option Plan........................................................................33
ARTICLE 9 SURVIVAL; INDEMNIFICATION; EMPLOYEES................................................................33
9.1 Survival............................................................................................33
9.2 Basic Provision.....................................................................................34
9.2.1 Buyer Indemnitees........................................................................34
9.2.2 Seller Indemnitees.......................................................................34
9.3 Definition of Deficiencies..........................................................................34
9.3.1 Deficiencies for the Buyer...............................................................34
9.3.2 Deficiencies for the Seller..............................................................35
9.4 Procedures for Establishment of Deficiencies........................................................35
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TABLE OF CONTENTS (CONTINUED)
Page
9.4.1 Claim Asserted...........................................................................35
9.4.2 Notice...................................................................................36
9.4.3 Agreement................................................................................36
9.5 Payment of Deficiencies.............................................................................36
9.6 Limitation on Deficiencies..........................................................................36
9.7 Legal Expenses......................................................................................36
ARTICLE 10 MISCELLANEOUS.......................................................................................37
10.1 Termination of Agreement............................................................................37
10.2 Liabilities on Termination or Breach................................................................37
10.3 Expenses............................................................................................37
10.4 Remedies Cumulative.................................................................................37
10.5 Preservation of Records.............................................................................38
10.6 Non-Assignable Contracts............................................................................38
10.7 Further Assurances..................................................................................38
10.8 Risk of Loss........................................................................................38
10.9 Employees...........................................................................................39
ARTICLE 11 GENERAL PROVISIONS..................................................................................39
11.1 Successors and Assigns..............................................................................39
11.2 Amendments; Waivers.................................................................................40
11.3 Notices.............................................................................................40
11.4 Captions............................................................................................41
11.5 GOVERNING LAW.......................................................................................41
11.6 Entire Agreement....................................................................................41
11.7 Execution: Counterparts and Facsimile..............................................................41
11.8 Gender and Number...................................................................................42
11.9 Third-Party Beneficiaries...........................................................................42
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is entered
into as of November 30, 1998, by and among THE XXXXX GROUP, a California
corporation (the "Seller"), XXXXXXXX XXXXX also known as XXXXXXXX XXXXX XXXXX,
of Menlo Park, California (the "Owner"), METRO INFORMATION SERVICES OF NORTHERN
CALIFORNIA, INC., a Virginia corporation (the "Buyer") and METRO INFORMATION
SERVICES, INC., a Virginia corporation ("Metro"). The Owner and the Seller shall
be collectively referred to as the "Seller Group."
RECITALS
A. The Seller owns and operates an information
technology consulting and personnel staffing business (the "Business") located
in Menlo Park, California;
B. The Seller owns certain assets used or held for use
in connection with the operation of the Business;
C. The Owner owns all of the issued and outstanding
shares of capital stock of the Seller;
D. Metro owns all of the issued and outstanding shares
of capital stock of the Buyer; and
E. The Seller desires to sell, assign and transfer to
the Buyer the Business and all of the assets used therein, the Buyer desires to
purchase from the Seller the Business and all of the assets used therein and
Metro desires to guarantee the performance of the Buyer's obligations hereunder,
all under the terms and conditions described herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises, representations, warranties and covenants herein contained, the
parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF PROPERTIES AND ASSETS
1.1 ASSETS. The Seller agrees to sell to the Buyer and the
Buyer agrees to purchase all properties and assets, real, personal and mixed,
tangible and intangible, of every type and description, wherever located (except
for Excluded Assets as defined in Section 1.2) that are owned or leased by the
Seller and used or held for use in the Business, including, without limitation,
the property and assets which are acquired by the Seller between the date hereof
and the Closing Date (collectively, the "Assets"). Without limiting the
foregoing, the Assets shall include the following, except to the extent that any
of the following are included within the Excluded Assets:
Page 1
1.1.1 TANGIBLE PERSONAL PROPERTY. All equipment,
electrical devices, computers and computer equipment, furniture, fixtures,
office materials and supplies, hardware, tools, spare parts and other tangible
personal property owned or leased by the Seller, including, without limitation
the tangible personal property described on SCHEDULE 1.1.1 attached
(collectively, the "Tangible Personal Property").
1.1.2 REAL PROPERTY. All the Seller's interests in the
leaseholds, licenses, rights-of-way and other interests of every kind and
description in and to real property, buildings thereon and improvements thereto,
including, without limitation, the real estate interests listed and described on
SCHEDULE 1.1.2 attached (collectively, the "Leased Real Property").
1.1.3 CONTRACTS. All Contracts (as defined below) with
clients or customers of the Business and its operations or pursuant to which the
Seller may generate revenue are listed and described on SCHEDULE 1.1.3-1
attached (the "Client Contracts") and are Material Contracts (as defined below),
all Contracts with third-party vendors or other persons from which the Seller
receives goods or services that are Material Contracts are listed and described
on SCHEDULE 1.1.3-2 attached (the "Vendor Contracts") and all other Contracts to
which the Seller is a party (other than employment contracts with employees of
the Seller and contracts with independent contractors of the Seller pursuant to
which the Seller obtains the services of information technology consultants
which are described in Section 1.3.2 below) that are Material Contracts are
listed and described on SCHEDULE 1.1.3-3 attached (the "Other Contracts"). As
used in this Agreement, the term "Material Contract" means any unexpired
agreement, arrangement, commitment or understanding, written or oral, to which
the Seller is a party or by which the Seller is bound and which (i) is a Client
Contract, (ii) is not terminable without penalty on thirty (30) days' notice or
less or (iii) involves aggregate payments after Closing to or by the Seller in
excess of $2,500. All other contracts are "Non-Material Contracts" and shall be
included in the Assets, provided the aggregate liability to the Buyer under all
such Contracts shall not exceed $25,000. Except as disclosed on SCHEDULE
1.1.3-1, SCHEDULE 1.1.3-2 or SCHEDULE 1.1.3-3 (collectively the "Contract
Schedules"), each Contract may be assigned by the Seller to the Buyer without
the consent of any party.
1.1.4 ACCOUNTS RECEIVABLE. All accounts and notes
receivable, billed and unbilled notes receivable, other receivables, uninvoiced
contract fees and work in progress (collectively the "Accounts Receivable").
1.1.5 INTANGIBLE PROPERTY. The name "The Xxxxx Group" and
all trademarks, trade names, service marks, copyrights, franchises, patents,
jingles, slogans, logotypes and other intangible rights, data bases, electronic
information, software (whether purchased or developed by the Seller), software
licenses, owned or licensed and used or held for use by the Seller as of the
date of this Agreement, including, without limitation, all of those listed and
described on SCHEDULE 1.1.5 attached (collectively, the "Intangible Property").
1.1.6 FILES AND RECORDS. All files and other records of
the Seller relating to the Business (other than duplicate copies of such files,
hereinafter "Duplicate Records") including,
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without limitation, all books, files, correspondence, studies, reports,
projections, schematics, blueprints, engineering data, customer, client,
consultant and candidate lists, reports, specifications, projections,
statistics, creative materials, mats, plates, negatives and other advertising,
marketing or related materials, and all other business, technical and financial
information regardless of the media on which stored.
1.1.7 CLAIMS. Any and all of the Seller's claims and
rights against third parties relating to the Business, including, without
limitation, all rights under manufacturers' and vendors' warranties, and all
deposits, refunds, rights to recovery and rights of setoff and recoupment
(collectively, the "Claims").
1.1.8 PREPAID ITEMS. All prepaid expenses and prepaid AD
VALOREM taxes (which shall be prorated, if applicable, as provided in Section
1.4.1.4) and rent and utility deposits.
1.1.9 GOODWILL. All of the Seller's and the Owner's
goodwill in, and going concern value of, the Business.
1.1.10 BIDS - REQUESTS FOR PROPOSALS. All rights of the
Seller under any bids, requests for proposals or similar rights ("Proposals"),
whether such Proposals are made by or to the Seller; provided, however, the
Buyer is under no obligation to accept or assume any Proposal made to the Seller
and not accepted by the Seller, as of the Closing. SCHEDULE 1.1.10 contains a
list of all Proposals as of the date of this Agreement. The Seller shall not
accept any Proposal other than in the ordinary course of the Business on a time
and materials basis after the date of this Agreement without the written consent
of the Buyer.
1.1.11 FRANCHISES, PERMITS. All franchises, approvals,
licenses, orders, registrations, certificates, variances and similar rights
obtained from governments and governmental agencies.
1.2 EXCLUDED ASSETS. The following assets of the Company, to
the extent in existence on the Closing Date (collectively, the "Excluded
Assets"), shall be retained by the Seller or transferred to the Owner:
1.2.1 EXCESS PERSONAL PROPERTY. The vehicle described on
SCHEDULE 1.2.1 attached (the "Excess Personal Property").
1.2.2 INSURANCE. All contracts of life insurance on the
life of the Owner, including any cash surrender value or prepaid premiums with
respect thereto; provided, however, the Owner shall remain liable for any loans
against any insurance policies.
1.2.3 CERTAIN ASSETS. Pension, 401(k), profit sharing and
savings plans and trusts and any assets thereof.
1.2.4 DUPLICATE RECORDS. All Duplicate Records.
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1.2.5 CORPORATE RECORDS. The minute books, stock books,
shareholder lists and similar corporate records of the Seller.
1.2.6 EMPLOYEE PERSONAL PROPERTY. Any personal property
which is listed on SCHEDULE 1.2.6 attached which is located at the Seller's
office but is owned by any employee of the Seller.
1.2.7 CASH AND INVESTMENTS. All of the Seller's cash on
hand or in bank accounts and any other cash equivalents including, without
limitation, certificates of deposit, commercial paper, treasury bills, or money
market accounts, except as necessary to attain a Closing Book Value of not less
than Nine Hundred Thousand Dollars ($900,000).
1.2.8 ACCOUNTS RECEIVABLE. All receivables of the Seller
due from the Owner or any current or former officer, employee or director of the
Seller and any notes or written obligations reflecting any obligation of any
such related party to the Seller as of the Closing Date (the "Related Party
Receivables").
1.2.9 LEASE AND SUBLEASE. The Seller's Lease and Sublease
for 000 Xxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx and the Lease Deposit of $14,248
and Sublease Deposit of [$33,780] ("Xxxxxx Avenue Lease and Sublease").
1.3 LIABILITIES.
1.3.1 SECURITY INTERESTS. The Assets shall be sold and
conveyed to the Buyer free and clear of all mortgages, liens, deeds of trust,
security interests, pledges, restrictions, prior assignments, charges, claims,
defects in title and encumbrances of any kind or type whatsoever (collectively,
the "Security Interests") except for: (i) the Security Interests disclosed on
SCHEDULE 1.3.1, all of which will be paid in full by Seller and released at or
before Closing unless otherwise indicated on SCHEDULE 1.3.1; (ii) liens for
taxes, other than state, federal or local income taxes and other taxes of the
Seller that do not relate to the Assets, not yet due and payable, accruing
before the Closing Date, (iii) the obligations of the Seller arising after
Closing which the Buyer has agreed to assume under the Contracts described in
Section 1.1.3; and (iv) the Assumed Liabilities described in Section 1.3.2. The
Security Interests referred to in the foregoing clauses (i)-(iv) are
collectively referred to herein as "Permitted Encumbrances."
1.3.2 ASSUMED LIABILITIES. Except as otherwise provided
herein and subject to the terms and conditions of this Agreement, simultaneously
with the sale, transfer, conveyance and assignment to the Buyer of the Assets,
the Buyer shall assume, and hereby agrees to perform and discharge when due:
1.3.2.1 except liabilities on notes payable to
Cupertino National Bank & Trust and Silicon Valley Credit Union ("Bank Debt"),
which will be paid in full at or before Closing, and for the security deposit
under the Xxxxxx Avenue Sublease, all liabilities and obligations of the Seller
which are accrued or reserved against on the Interim Balance Sheet
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(defined below) and which remain unpaid as of the Closing to the extent of any
remaining reserve or accrual on the Closing Balance Sheet;
1.3.2.2 all liabilities and obligations of the
Seller which are incurred in the ordinary course of the Business, consistent
with past practice, subsequent to the Interim Balance Sheet Date and through the
Closing Date, which remain unpaid as of the Closing and are accrued or reserved
against in the Closing Balance Sheet, but only to the extent of such reserve or
accrual;
1.3.2.3 the liabilities for accrued and unused paid
vacation and sick days of the Assumed Employees defined in Section 10.9 below,
to the extent such costs are accrued or reserved against on the Closing Balance
Sheet, but only to the extent of such exercise or accrual;
1.3.2.4 all liabilities and obligations arising or
to be performed after the Closing under the Contracts that are effectively
assigned and transferred to the Buyer including any Contracts the benefits and
burdens of which are assigned to the Buyer under Section 10.6 (collectively the
"Assumed Liabilities").
1.3.3 EXCLUDED LIABILITES. Except for the Assumed
Liabilities, the Buyer shall not assume or be liable for, and does not undertake
or attempt to assume or discharge:
1.3.3.1 any liability or obligation of the Owner or
the Seller arising out of or relating to the Xxxxxx Avenue Lease and Sublease
and the Bank Debt and any Contract not included in the Contract Schedules or
assumed by the Buyer under Sections 2.5 or 5.4 and any liability arising under
Contracts before Closing except to the extent of any reserve therefor in the
Closing Date Balance Sheet;
1.3.3.2 any liability or obligation of the Owner or
the Seller arising out of or relating to any pension, 401(k), retirement or
profit sharing plan or trust, except to the extent shown as a liability on the
Closing Balance Sheet;
1.3.3.3 any liability or obligation of the Owner or
the Seller arising out of or relating to any consulting agreement with an
information technology consultant or employment agreement, written or oral, any
severance pay or other liability relating to any employee or information
technology consultant of the Seller not specifically accepted by the Buyer;
1.3.3.4 any liability or obligation of the Owner or
the Seller arising out of or relating to any litigation, proceeding or claim by
any person or entity relating to the Owner, the Seller, the Business or the
Assets before the Closing Date, whether such litigation, proceeding or claim is
pending, threatened or asserted before, on or after the Closing Date; and
1.3.3.5 other than the Assumed Liabilities, any and
all other liabilities, obligations, debts or commitments of the Owner or the
Seller whatsoever, whether accrued now or hereafter, whether fixed or
contingent, whether known or unknown, or any claims
Page 5
asserted against the Owner, the Seller, any employee of the Seller, the Business
or any of the Assets or other items owned by the Seller at the Closing relating
to any event (whether act or omission) before the Closing Date, including,
without limitation, the payment of all taxes, including, without limitation, any
corporate income, franchise, sales, use, business and occupation taxes.
1.3.4 RETAINED OBLIGATIONS OF THE SELLER. The Seller
retains and shall hereafter pay, satisfy, discharge, perform and fulfill all
such obligations and liabilities not expressly assumed by Buyer hereunder,
including, without limitation those described in Section 1.3.3 above (the
"Excluded Liabilities"), as they become due, without any charge or cost to the
Buyer. The Seller and the Owner, jointly and severally, agree to indemnify and
hold the Buyer and its successors and assigns harmless from and against any and
all such liabilities in accordance with the terms of Article 9 below.
1.4 PURCHASE PRICE, PAYMENT, AND ALLOCATION.
1.4.1 PURCHASE PRICE.
1.4.1.1 AMOUNT. The "Purchase Price" for the Assets
and Business shall be Eleven Million Dollars ($11,000,000) plus or minus, as the
case may be, the Net Worth Adjustment (defined below). At the Closing, Ten
Million Four Hundred Seventy Five Thousand Dollars ($10,475,000) (the "Closing
Amount") will be paid to the Seller, as provided in Section 1.4.2 below, and the
balance, Five Hundred Twenty Five Thousand Dollars ($525,000) (the "Escrow
Amount") will be held and distributed pursuant to the Escrow Agreement in the
form of attached EXHIBIT A (the "Escrow Agreement").
1.4.1.2 NET WORTH ADJUSTMENT. The "Net Worth
Adjustment" means the amount by which the Closing Book Value (defined below) is
greater than (which shall be a positive number) One Million One Hundred Thousand
Dollars ($1,100,000) or less than (which shall be a negative number) One Million
One Hundred Thousand Dollars ($1,100,000).
1.4.1.3 CLOSING BOOK VALUE. "Closing Book Value"
means (i) the net book value of the Assets, excluding the Excluded Assets, minus
the Assumed Liabilities at the Closing (whether or not positive), as determined
in accordance with generally accepted accounting principles, applied on a
consistent basis ("GAAP"), MINUS (ii) the recorded value of any goodwill or
other intangible asset, MINUS (iii) a reserve for Accounts Receivable of the
Company which are not collected by the Buyer by the date the Closing Date
Balance Sheet is prepared and are not deemed by KPMG (defined below) as
collectable by the Buyer within one hundred eighty days (180) after the Closing
Date, MINUS (iv) the amount which the Buyer is required to pay after the Closing
for any liability or obligation of the Seller paid by the Buyer except the
Assumed Liabilities. In determining Closing Book Value, the operation of the
Business and the income and normal operating expenses attributable thereto
through 11:59 p.m. on November 30, 1998 (the "Adjustment Date") shall be
reflected in the Closing Book Value. Expenses for goods or services received
both before and after the Adjustment Date, power and utilities charges,
frequency discounts, prepaid cash sales, bonuses, wages, payroll taxes and rents
and similar prepaid and deferred items shall be
Page 6
prorated as of the Adjustment Date and so reflected in the Closing Book Value.
All special assessments and similar charges or liens imposed against any of the
Assets on or before the Adjustment Date, whether payable in installments or
otherwise, shall be reflected in Closing Book Value. If KPMG writes off any
specific Account Receivable of the Seller in preparing the Closing Balance
Sheet, which is (i) in addition to the Seller's reserve for bad debts set forth
in the Preliminary Balance Sheet; (ii) not reversed in whole or in part pursuant
to the dispute resolution provisions of SECTION 1.4.1.4; and (iii) subsequently
collected by the Buyer, then the amount of such collection shall be paid by the
Buyer to the Seller upon receipt.
1.4.1.4 CLOSING BALANCE SHEET. Not later than
December 28, 1998, the Seller Group will prepare and deliver to the Buyer a
balance sheet of the Company (the "Preliminary Closing Balance Sheet")
reflecting the Seller Group's best estimate of the Closing Book Value as of the
Adjustment Date. Based on the foregoing, the Seller shall prepare and deliver a
certificate (the "Seller's Adjustment Certificate") to the Buyer certifying that
the Preliminary Closing Balance Sheet fairly represents the Closing Book Value
in accordance with GAAP, as modified in accordance with Section 1.4.1.3. If
Seller's Adjustment Certificate shows a Closing Book Value of less than One
Million One Hundred Thousand Dollars ($1,100,000), Seller shall credit Buyer a
dollar amount against the principal balance of the Note (defined below) and the
Purchase Price shall decrease, by an amount equal to One Million One Hundred
Thousand Dollars ($1,100,000) minus the Closing Book Value ("Deficit"). If the
amount of the Deficit exceeds the remaining principal balance of the Note, the
Seller shall pay the Buyer the excess deficiency with interest at five percent
(5%) per annum from the Closing Date. If Seller's Adjustment Certificate shows a
Closing Book Value of more than One Million One Hundred Thousand Dollars
($1,100,000), the Purchase Price and the amount of the Note shall increase by
the excess of the Closing Book Value over One Million One Hundred Thousand
Dollars ($1,100,000). Any such increase or credit shall be deemed made as of the
Closing Date so that no interest shall accrue on any credited amount and
interest shall accrue on any increased amount from the Closing Date. Within
ninety (90) days after the Closing, the Buyer will cause KPMG Peat Marwick LLP
("KPMG") to review, at the Buyer's Expense, the Preliminary Closing Balance
Sheet in accordance with generally accepted auditing standards to determine that
the Preliminary Closing Balance Sheet was prepared in accordance with GAAP as
modified in accordance with Section 1.4.1.3 and make any appropriate adjustments
thereto. Within ninety (90) days after the Closing Date, KPMG shall deliver to
the Buyer and the Seller Group: the "Closing Balance Sheet," notes thereto and
KPMG's report thereon. Within thirty (30) days of receipt of the Closing Balance
Sheet, the Seller Group will either accept the Closing Balance Sheet or provide
the Buyer with written objections to the accounting treatment of items included
in or omitted from the Closing Balance Sheet. If the Seller Group accepts the
Closing Balance Sheet as presented or fails to object within the thirty-
(30-)day period, then the Closing Balance Sheet will be deemed final and binding
on the parties and shall be subject only to the Indemnification provisions of
Article 9 below and the Buyer or the Seller Group, as the case may be, shall,
within five (5) business days thereafter, pay by wire transfer to the other any
amounts needed to reflect the changes made from the Seller's Adjustment
Certificate caused by the Closing Balance Sheet as so audited by KPMG. Any
disagreement between the Buyer and the Seller Group that cannot be resolved by
the parties within thirty (30) days after receipt of the Seller
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Group's written objections, will be resolved by the Seller Group and Buyer
selecting an independent firm of certified public accountants of national
reputation ("Second Accountants") to resolve the dispute. If the Seller Group
and Buyer are unable to agree on the choice of Second Accountants, they will
select a "Big 5" accounting firm by lot (after excluding KPMG and their
respective regular outside accounting firms) as Second Accountants. The parties
shall have an opportunity to present their position to the Second Accountants
and shall cooperate with the Second Accountants in making available to them any
records or work papers requested by the Second Accountants. The decision of the
Second Accountants shall be set forth in writing and will be conclusive and
binding on the parties and subject to judicial enforcement and the Buyer or the
Seller, as the case may be, shall, within five (5) business days thereafter, pay
by wire transfer to the other any amounts needed to reflect any increases or
decreases from the Closing Book Value made from the Seller's Adjustment
Certificate caused by the Closing Balance Sheet as so determined. Each party
shall bear one-half (1/2) of the cost of the Second Accountants.
1.4.2 METHOD OF PAYMENT.
1.4.2.1 The Closing Amount shall be paid by the
Buyer to the Seller as follows: (i) the Buyer shall pay Five Million Dollars
($5,000,000) by wire transfer (pursuant to the instructions of the Seller
delivered to the Buyer at least two (2) days before Closing); and (ii) the
balance of the Closing Amount ("Balance") shall be paid by the Buyer's execution
and delivery of a negotiable promissory note made payable to the order of the
Seller in the principal amount of the Balance, bearing interest at five percent
(5%) per annum and due and payable as provided in attached EXHIBIT B (the
"Note").
1.4.2.2 The Escrow Amount shall be paid by the Buyer
to the Escrow Agent by wire transfer pursuant to the instructions of the Escrow
Agent at the Closing and will be held and paid to the Seller or the Buyer as
provided in the Escrow Agreement.
1.4.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price
will be allocated as provided in SCHEDULE 1.4.3 in accordance with the
requirements of Section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code").
1.4.4 COMPUTATION OF EARNOUT. In addition to the Purchase
Price of $11,000,000, the Buyer shall pay to the Seller an earnout amount (the
"Earnout Payment"), which payment shall be treated as additional purchase price
paid to the Seller for the Assets and shall be calculated in accordance with the
terms of this Section. The Buyer and the Seller agree that the Earnout Payment
that is required pursuant to this Section shall be payable to the Seller as
provided below.
1.4.4.1 EARNOUT PERIOD. The period for which the
Earnout Payment shall be calculated is the twelve-month period commencing on
January 1, 1999 and ending December 31, 1999 (the "Earnout Period").
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1.4.4.2 EARNOUT PAYMENT. The Earnout Payment shall
be calculated as six times the amount obtained by subtracting $1,600,000 from
the EBIT of the Buyer during the Earnout Period (but in no case can the amount
of the Earnout Payment be less than zero). For example, if the EBIT is
$2,500,000, then the Earnout Payment will be six times $900,000 (the EBIT of
$2,500,000 less $1,600,000) or $5,400,000.
1.4.4.2.1 ADJUSTMENT OF EARNOUT MULTIPLE
BASED ON GROSS PROFIT.
(i) If the Buyer's Gross Profit
during the Earnout Period is less than twenty-five percent (25%) of the Buyer's
revenues during such period, then the Earnout multiple of six ("Earnout
Multiple") shall be multiplied by the ratio of the Gross Profit percentage to
twenty-five percent (25%). For example, if the actual Gross Profit is
twenty-four percent (24%) of revenues, the Earnout Multiple will be reduced to
5.76 (24/25 x 6). "Gross Profit" means gross revenues less discounts and direct
costs similar to those costs utilized in computing Gross Profit as shown in the
Interim Income Statement ("Direct Costs") and determined in accordance with GAAP
applied in a manner consistent with the Seller's prior practices for the
twelve-month period preceding the Closing Date. In order to expand the Business
and increase clients and revenues, the Buyer and the Seller contemplate that it
may be necessary for the Buyer to contract to provide services for new clients
at rates which will produce a Gross Profit of less than twenty-five percent
(25%). To the extent Metro consents in writing in advance to any such contract
for which the Gross Profit is projected to be less than twenty-five percent
(25%), the revenues, discounts and Direct Costs from any such contract shall be
excluded in computing Gross Profit for purposes of this Section 1.4.4.2.1(i).
(ii) If (1) the Buyer's Gross
Profit during the Earnout Period is greater than twenty-five percent (25%) of
the Buyer's revenues during the Earnout Period (the amount of the excess Gross
Profit percentage over twenty-five percent (25%) is the "Excess Gross Profit
Percentage"), and (2) the Buyer's EBIT is greater than eleven percent (11%) of
the Buyer's revenues during the Earnout Period by a percentage of the Buyer's
revenues that equals or exceeds the Excess Gross Profit Percentage, then the
Earnout Multiple shall be multiplied by the ratio of the sum of twenty-five
percent (25%) plus the Excess Gross Profit Percentage to twenty-five percent
(25%). For example, if Buyer's Gross Profit is twenty-six percent (26%) of
Buyer's revenues during the Earnout Period and Buyer's EBIT is twelve point two
percent (12.2%) of Buyer's revenues during the Earnout Period, the Earnout
Multiple shall be 6.24 (26/25 x 6). As another example, if Buyer's Gross Profit
is twenty-six percent (26%) of Buyer's revenues during the Earnout Period and
Buyer's EBIT is eleven point five percent (11.5%) of Buyer's revenues during the
Earnout Period, the Earnout Multiple shall be 6.
1.4.4.2.2 COMPUTATION OF EBIT. "EBIT" means
earnings of the Buyer during the Earnout Period before interest, income taxes
and amortization of goodwill as determined in accordance with GAAP applied in a
manner consistent with the Seller's prior practices for the twelve-month period
preceding the Closing Date and employing proper prorations
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at the beginning and end of the Earnout Period similar to those required in
preparing the Closing Balance Sheet under Section 1.4.1.3. In computing the
earnings of the Buyer, there shall not be taken into account:
(i) any revenues for placement
fees to the extent such revenues exceed one and three-quarters percent (1.75%)
of the Buyer's gross revenues for the period in question and any commissions
paid to obtain such excess revenues;
(ii) the dollar amount of any
items of expense for which the Buyer receives payment from the Seller or the
Owner as a result of their indemnification obligations under Article 9 and the
payment from the Seller or the Owner will likewise not constitute revenue;
(iii) any fees, costs and other
expenses paid or incurred by the Seller subsequent to Closing, including bonuses
paid to former key employees of the Seller;
(iv) the depreciation and
amortization expenses of the Buyer relating to the step-up in basis from the
basis on the Closing Date Balance Sheet of goodwill and other Assets of the
Buyer purchased from the Seller as required by purchase accounting;
(v) the costs to install,
implement and maintain the necessary equipment and telecommunications connection
to allow the Buyer to benefit from the Metro Staff Sourcing Network of Metro
other than the monthly operational cost of the Network, which shall not exceed
$15,600 in the aggregate and shall only be taken into account if the Buyer
places at least one consultant as a result of the utilization of the Network
during the Earnout Period;
(vi) the costs for the
installation, implementation and the overhead costs of the operation of Metro
financial, payroll, human resources, time billing and other proprietary systems
services and personnel costs related thereto in excess of the costs currently
incurred by the Seller for similar systems services and personnel costs;
(vii) any costs of the Buyer in
excess of $500 individually not to exceed $10,000 in the aggregate which are of
the type and amount not reasonably consistent with the costs of the Seller in
calculating EBIT of the Seller from the Income Statements for the twelve-month
period immediately preceding the Closing Date, unless such expenses are approved
by the Seller or are reasonably necessary (1) to increase revenues by thirty
percent (30%) per year, (2) to respond to competitive challenges in the
marketplace in the reasonable exercise of the President's fiduciary duty to the
Company and its shareholders, (3) to fund losses suffered from fire or other
casualty not covered by insurance (deductible, excess liability, uninsured loss,
etc.) or (4) to comply with the Letter (as defined in Section 1.4.4.6.4) or laws
or the Seller's obligations under the Contracts; provided, however, that any
routine, normal or recurring operating expenses of the Buyer that occur during
the Earnout Period shall be included as
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an expense of the Buyer, whether or not any amounts or funds were expended for
such purposes by the Seller during the twelve-month period immediately preceding
the Closing Date. For example, if the Seller did not incur any expenditures for
computer maintenance or repair during the twelve-month period immediately
preceding the Closing Date, but the Buyer does incur an expenditure for computer
maintenance or repair during the Earnout Period, the cost of such maintenance or
repair shall be an expense of the Buyer for the purposes of determining the EBIT
of the Buyer; and
(viii) general corporate overhead
charged by any Affiliate except for direct general and administrative costs paid
by Metro and charged to the Buyer at cost, such as insurance and accounting
costs for the controller function.
1.4.4.3 TIME AND MANNER OF EARNOUT PAYMENT. The
Earnout Payment, or any undisputed portion thereof, shall be paid by the Buyer
to the Seller within ten (10) days from the date on which the Seller receives
the notice described in Section 1.4.4.5, but in no event shall such payment of
the undisputed portion of the Earnout Payment be made to the Seller later than
March 10, 2000. All payments due and payable pursuant to this Section shall be
made by wire transfer of immediately available funds to an account designated by
the Seller. With respect to any disputed portion of the Earnout Payment, such
amount, to the extent determined to be due under the provisions of Section
1.4.4.5 below, shall be paid by the Buyer to the Seller within five (5) business
days following the final determination of the amount due.
1.4.4.4 DELIVERY OF EARNOUT REPORT. On or before
February 10, 2000, the Buyer shall deliver to the Seller a report (the "Earnout
Report") which computes the amount of the Earnout Payment, which shall be
accompanied by (i) a copy of the financial statement for 1999 from which the
computations were derived; and (ii) a signed statement of the Buyer stating that
the computations have been prepared in accordance with the definition of EBIT in
this Agreement (subject only to such exceptions thereto as agreed upon by the
Buyer and the Seller). The Buyer will make the work papers and back-up materials
used in computing the Earnout payment available to the Seller and its
accountants and other representatives at reasonable times and upon reasonable
notice at any time during: (i) the review by the Seller of the Earnout Report;
and (ii) the resolution by the parties of any objections thereto.
1.4.4.5 OBJECTION PROCEDURES. Within thirty (30) days
after the Buyer delivers the Earnout Report to the Seller, the Seller shall
notify the Buyer that either it accepts such Report, or it disputes one or more
items set forth in the computation of the Earnout Payment or the financial
statements on which the computation of the Earnout Payment was based, describing
in reasonable detail the amount or item disputed and the basis for the dispute.
If the Seller does not accept the Report, the Buyer and the Seller shall attempt
in good faith to resolve the dispute. If the parties do not obtain a final
resolution within ten (10) business days after the Buyer has received the
statement of objections, the parties will select an accounting firm mutually
ACCEPTABLE to them to resolve any remaining objections (the "Referee"). If the
parties are unable to agree on the choice of a Referee, they will select a "Big
5" accounting firm by lot (after excluding their respective regular outside
accounting firms) as the Referee. The determination of any Referee
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so selected will be set forth in writing and will be conclusive and binding upon
the parties. The parties shall have an opportunity to present their position to
the Referee and shall cooperate with the Referee in making available to the
Referee any records or work papers requested by the Referee.
1.4.4.6 CONDUCT OF BUSINESS DURING EARNOUT PERIOD.
From the date of this Agreement until December 31, 1999, the Buyer will conduct
its operations as follows:
1.4.4.6.1 INDEPENDENT ORGANIZATION. The
Buyer shall be operated by its own management and its books, records and
financial statements shall be maintained on an unconsolidated basis, for
purposes of this Agreement, consistent with past practices. The Buyer will not
change any of the accounting principles utilized by the Seller, PROVIDED, that,
such accounting principles of the Seller are in compliance with GAAP and the
requirements of the Securities and Exchange Commission. The Buyer shall not
acquire, commence or operate any business other than the Business before or
during the Earnout Period.
1.4.4.6.2 BOARD OF DIRECTORS. The Board of
Directors will include three to six people, one of which shall be the Owner
through December 31, 1999 or, in the event of her death or disability, Xxxxxx
Xxxxx ("Xxxxx"). A quorum for any meeting of the Board of Directors shall
include the presence in person or by proxy or conference telephone call at such
meeting of the Owner or Xxxxx, while either is serving as a Director, provided,
however, if the Owner or Xxxxx, as the case may be, shall fail or refuse to
attend in person or by conference telephone call or proxy a meeting after two
adjournments thereof of at least three (3) days each with at least two (2) days
notice of the date and time of the adjourned meeting to each Director (with
reasonable efforts to reschedule the meeting at a time when the Owner or Xxxxx,
as the case may be, is available), the meeting may proceed and all proper
actions in accordance with the notice of the meeting may be taken by the Board.
In such event, the Owner or Xxxxx, as the case may be, shall be deemed to have
consented to the action of the majority.
1.4.4.6.3 OFFICERS. The Owner shall serve
as President of the Buyer through December 31, 1999. In the event of Owner's
death or disability before December 31, 1999, Xxxx Xxxxxx ("Xxxxxx") shall serve
as Vice President of the Buyer through December 31, 1999 (provided Xxxxxx is
employed by the Buyer).
1.4.4.6.4 MATTERS RESERVED FOR JOINT
DECISION. The day-to-day management of the Buyer shall be the responsibility of
its President, who shall operate the Buyer consistent with the normal duties of
the President of a similar sized corporation and discretion reasonably afforded
to her by the Board; provided, however, the President must exercise this
discretion in good faith to incur such expenses on behalf of the Buyer as are
reasonably necessary, including, without limitation, those which are due to the
Buyer's twin goals of increasing revenues of the Business by thirty percent
(30%) per year and enhancing profits in accord once with sound business
practices. The President shall, as appropriate and customary, report to the
Board of Directors of the Company; and the Buyer's obligations to perform under
the Contracts and any new contracts with clients and to maintain and improve the
goodwill of the Business, during the Earnout Period. The President shall act in
accordance with that certain letter dated from Xxxx Xxxx, attached
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as Exhibit C (the "Letter"). The President shall consult as appropriate with the
Chairman of the board in managing the business, and with other Metro Senior
Executives to facilitate a smooth transition of the Business. The President
shall act reasonably and in good faith in hiring and firing consultants and
employees and shall act promptly in accordance with sound business practices to
replace any employee or consultant whose employment or consultancy terminates
during the Earnout Period. The President shall not terminate the employment of
Xxxx Xxxxxx or reduce her own compensation or the compensation or commission
formula of Xxxx Xxxxxx without the written consent of the President of Metro.
Any action taken by President that is not in the ordinary course of business
shall first be approved by the Board; PROVIDED, HOWEVER, that during the Earnout
Period, without the unanimous consent of the Board, the Board may not liquidate
or dissolve the Buyer or transfer any assets of the Buyer outside the ordinary
course of business, or take any action outside the ordinary course of business
as to which the Owner, or in the event of her death or disability, Xxxxx
notifies the Buyer in advance is likely to have a material adverse impact on the
Earnout Payment.
1.5 CLOSING. The consummation of the transactions provided for
in this Agreement (the "Closing") shall take place at (a) the offices of Wise
and Xxxxxxx, 0000 Xxxxxx Xxx, Xxxxx 000, Xxxx Xxxx, Xxxxxxxxxx, on December 2,
1998 or (b) such other place, time or date as the parties may agree on in
writing. The date on which the Closing is to occur is referred to herein as the
"Closing Date."
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE OWNER
The Seller and the Owner, jointly and severally, represent and
warrant to the Buyer as follows:
2.1 CORPORATE STATUS. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and is duly qualified to transact business in every state in which
the failure to be qualified would have a material adverse effect on the
Business. The Seller has the requisite corporate power to carry on its business
as it is now being conducted and to own and operate the Business, and each of
the Seller and the Owner has the requisite power (corporate and other) to enter
into and complete the transactions contemplated by this Agreement. The Seller
has no business other than the operation of the Business. The Owner owns, free
and clear of all pledges, liens, hypothecations and encumbrances, all of the
issued and outstanding shares of the Seller and no person has any right to
acquire from the Seller or the Owner any shares or other equity of the Seller.
The Owner serves as the President and is the only member of the Board of
Directors of the Seller. Attached as SCHEDULE 2.1 are the Articles of
Incorporation and Bylaws and all amendments thereto of the Seller.
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2.2 NO OPTIONS. No Affiliate of the Seller Group or any other
Person has an interest in, or option to acquire, any of the Assets or any
property used in the operation of the Business. For purposes of this Agreement,
an "Affiliate" of any person (as defined in Section 11.8) means (i) any person
that owns or controls, is owned or controlled by, or under common control with,
such person, (ii) any person that is an officer, director, general partner or
trustee of, or serves in a similar capacity with the specified person, or for
which the specified person is an officer, director, general partner or trustee,
or serves in a similar capacity or (iii) any member of the immediate family of
the specified person.
2.3 CORPORATE ACTION. All corporate and other actions and
proceedings necessary to be taken by or on the part of the Seller or the Owner
in connection with the performance, execution and delivery of this Agreement
have been duly and validly taken and this Agreement has been duly and validly
authorized, executed, and delivered by the Seller and the Owner and constitutes
the legal, valid and binding obligation of the Seller and the Owner enforceable
against each in accordance with and subject to its terms.
2.4 NO DEFAULTS. Neither the execution, delivery and
performance by the Seller and the Owner of this Agreement nor the consummation
by the Seller and the Owner of the transactions contemplated hereby is an event
that, of itself or with the giving of notice or the passage of time or both,
will: (a) violate or conflict with any provision of the Articles of
Incorporation or Bylaws of the Seller; (b) assuming that the consents: (x)
referred to in Section 4.6, (y) required in connection with any assignment to
the Buyer of the Contracts or (z) otherwise contemplated by this Agreement are
obtained, constitute a violation of, conflict with or result in any breach of or
any default under, result in any termination or modification of, or cause any
acceleration of any obligation of the Seller or the Owner under any contract,
mortgage, indenture, agreement, lease or other instrument to which either the
Seller or the Owner or both are party or by which either or both are bound or
result in the creation of any Security Interest on the Assets which violation,
conflict, breach or default would have a material adverse effect on the Seller,
the Business, the Assets or the ability of the Seller or the Owner or both to
enter into this Agreement or consummate the transactions contemplated hereby;
(c) violate any judgment, decree, order, statute, law, rule or regulation of any
court, arbitrator or government or regulatory body applicable to the Seller, the
Owner, the Business or the Assets which violation would have a material adverse
effect on the Seller, the Owner, the Business, the Assets or the ability of the
Seller or the Owner to enter into this Agreement or consummate the transactions
contemplated hereby; or (d) result in the creation or imposition of any lien,
charge or encumbrance against the Business or the Assets.
2.5 CONTRACTS, LEASES, AGREEMENTS AND OTHER COMMITMENTS. The
Seller is not a party to nor is it bound by any written or oral contract,
agreement, lease, power of attorney, guaranty, surety arrangement or other
commitment, including, but not limited to, any contract or agreement for the
purchase or sale of merchandise or for programming or software of the Seller or
for the rendition of services, except for the Material Contracts listed on the
Contract Schedules and the Non-Material Contracts (subject to the $25,000
limitation provided in Section 1.1.3) and the Seller has provided to the Buyer
or its representatives complete and correct copies of all written
Page 14
Material Contracts and all amendments, modifications, extensions and renewals
thereof and written summaries of all oral Material Contracts. No change in any
term or provision of any Contract will occur as a result of the acquisition of
the Assets by the Buyer or the assignment by the Seller of such Contract to the
Buyer.
2.6 BREACH. Except as set forth on SCHEDULE 2.6, the Seller is
not in violation or breach of any of the terms, conditions or provisions of the
Seller's Articles of Incorporation or Bylaws, any Contracts or any indenture,
mortgage or deed of trust or other instrument, court order, judgment,
arbitration award or decree relating to or affecting the Business or the Assets
to which the Seller is a party or by which it is bound. All accrued and
currently payable amounts due from the Seller under the Contracts have been
paid. To the best of the Seller's and the Owner's knowledge, no other party
thereto is in material default or breach under any of the Contracts.
2.7 FINANCIAL INFORMATION.
2.7.1 FINANCIAL STATEMENTS. Attached to this Agreement as
SCHEDULE 2.7.1 are true and correct copies (collectively, the "Financial
Statements") of the unaudited balance sheets of the Seller at December 31, 1997
(the "Balance Sheet Date") and December 31, 1996 and the unaudited statements of
operations of the Seller for each of the years then ended (the "Income
Statements"), together with the unaudited consolidated balance sheet (the
"Interim Balance Sheet") of the Seller at October 31, 1998 (the "Interim Balance
Sheet Date") and the unaudited statement of operations of the Seller for the ten
months then ended (the "Interim Income Statement," collectively, the Interim
Balance Sheet and Income Statement are the "Interim Financial Statements"). The
Financial Statements: (a) have been prepared in accordance with GAAP (except for
the absence of footnotes and as set forth on SCHEDULE 2.7.1) and (b) present
fairly the financial position of the Seller as of their respective dates and the
results of operations for the periods indicated in accordance with GAAP.
SCHEDULE 2.7.1 includes information and disclosures as of October 31, 1998
normally included in footnotes to audited financial statements.
2.7.2 ACCOUNTS RECEIVABLES. Attached to this Agreement as
SCHEDULE 2.7.2 is a true and correct copy of the Seller's accounts receivable
aging report, dated as of October 31, 1998, showing, among other things, a
complete aging of the Accounts Receivables and any reserve for non-collectible
Accounts Receivables. Except to the extent of the reserve for non-collectible
Accounts Receivables shown on the Interim Balance Sheet, all Accounts
Receivables are collectible in cash in the ordinary course of business and in
all events, the Accounts Receivables, net of the reserve for non-collectible
Accounts Receivables on the Closing Date Balance Sheet will be collectible
within six (6) months of the Closing Date. The Seller has no knowledge that any
Accounts Receivable listed on SCHEDULE 2.7.2 will not be paid before or after
the Closing. The identity of any client entitled to a volume or other similar
discount and the terms of such discount are set forth on SCHEDULE 2.7.2.
2.8 LIABILITIES. There are no liabilities or obligations of
the Seller accruing or arising before the date of this Agreement, whether
arising under Contracts, related to tax or non-tax matters, known or unknown as
of the date of this Agreement due or not yet due, liquidated or
Page 15
unliquidated, fixed, contingent or otherwise, including penalty, acceleration or
forfeiture clauses in any Contract, that should be reflected in the Interim
Balance Sheet in accordance with GAAP that are not so reflected, except as
otherwise listed and described on SCHEDULE 2.8 hereto, and except liabilities
that arise in the ordinary course of business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract or warranty, tort, infringement or violation of law) between the date
hereof and Closing Date, which liabilities will be reflected in the Closing
Balance Sheet.
2.9 TAXES.
2.9.1 All federal, state and local returns, reports,
estimates and other statements ("Returns") required to have been filed with any
jurisdiction with respect to the Seller and the operation of its business with
respect to any income, franchise, property, sales, value-added, payroll,
withholding, excise, assessment, levy, capital and all other taxes, duties,
penalties, assessments or deficiencies of every nature and description
(collectively, "Taxes") have been duly and timely filed by the Seller. Except as
set forth in SCHEDULE 2.9 attached, each such Return correctly reflects the
amount of Taxes required to be reported and/or paid. The Seller has paid all
Taxes due and payable which it is required to pay, incurred or accrued before
the date hereof, except to the extent that such amounts are reserved for in the
Interim Balance Sheet. There are no Taxes which are past due. No consent
extending the applicable statute of limitations has been filed by or with
respect to the Seller with respect to any of such Taxes for any years. The
Seller has been an electing S corporation since January 1, 1988.
2.9.2 The Seller has withheld amounts from its employees
working in its business in accordance with applicable law. With respect to such
employees, the Seller has filed all Returns required to be filed and paid all
required Taxes with respect to employee income tax withholding, social security,
Medicare and unemployment taxes and other similar taxes and charges, in
compliance with the tax withholding provisions of the Code and other applicable
federal, state and local laws.
2.10 LICENSES. As of the date of this Agreement, the Seller is
the holder of the licenses, permits or authorizations of any governmental or
quasi-governmental authority required for the operation of the Business and all
of such licenses, permits and authorizations are listed on SCHEDULE 2.10.
2.11 BUSINES OPERATIONS. Except as set forth on SCHEDULE 2.11,
the only business the Seller has conducted since its formation is the Business.
The Seller has never engaged in the business of selling goods from inventory, of
leasing tangible personal property or of developing, selling, licensing or
sublicensing software, software licenses or any other Intangible Property.
SCHEDULE 2.11 lists all business addresses, trade names and names of predecessor
entities used by the Seller since January 1, 1992. Except as set forth on
SCHEDULE 2.11, the Seller has not been a party to a merger, consolidation,
liquidation, recapitalization or other business combination since January 1,
1992.
Page 16
2.12 APPROVALS AND CONSENTS. The only material approvals or
consents of persons or entities not a party to this Agreement that are legally
or contractually required to be obtained by the Seller in connection with the
consummation of the transactions contemplated by this Agreement are those which
are contemplated by Section 4.6 ("Consents"). Any approvals under the Material
Contracts or with any governmental division, regulatory authority or agency are
material for purposes of this Section. Because of the size of the Seller and its
ultimate parent as defined by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1978 ("HSR"), no pre-Closing filing by the parties under HSR is required. No
permit, license, consent, approval or authorization of, or filing with, any
governmental regulatory authority or agency is required of the Seller or the
Owner in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby.
2.13 CONDITION OF ASSETS.
2.13.1 ALL ASSETS. The Assets constitute all of the
assets used or necessary to conduct the present operations of the Business.
2.13.2 TANGIBLE PERSONAL PROPERTY. SCHEDULE 1.1.1 contains
a true and complete list as of the date hereof of all items of Tangible Personal
Property of every kind or description owned by the Seller, except office
materials and supplies (which office supplies or any replacements thereof shall
be part of the Assets). Any Tangible Personal Property that is leased by the
Seller, whether as lessor or lessee, is separately designated on SCHEDULE 1.1.1
and all related lease agreements are described on SCHEDULE 1.1.3-3.
2.13.3 GOOD TITLE. Except as listed and described on
SCHEDULE 2.13.3: (i) the Seller has and, at the Closing will have, good, valid
and marketable title to or the unrestricted right to use all of the Assets
owned, leased or licensed by it, in each case, free and clear of all Security
Interests of every kind or character (other than Permitted Encumbrances); (ii)
the Seller is the owner, lessee or licensee of all of the Tangible Personal
Property listed on the Schedules to this Agreement and of all Tangible Personal
Property not listed on the Schedules to this Agreement which is of a material
nature to the Business; and (iii) all Tangible Personal Property, including
equipment and electrical devices, is in good operating condition and repair,
reasonable wear and tear excepted, and has been maintained in accordance with
industry standards.
2.14 LEASED REAL PROPERTY.
2.14.1 LEASES. Attached to SCHEDULE 1.1.3-3 are true and
complete copies of all real property lease agreements, including all amendments
and modifications thereto, and all other leases or licenses or other rights to
possession of any real property used or held by the Seller (the "Real Property
Leases"). The Buyer is not assuming the Xxxxxx Avenue Lease and Sublease and
such property is not used by the Seller in the Business,
2.14.2 INTERESTS. The Seller's interest in the Leased Real
Property is as follows: the Seller leases, as a tenant, the premises at 000
Xxxxxxx Xxxxxx, Xxxxx Xxxx, Xxxxxxxxxx.
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Except as listed on SCHEDULE 1.1.3-3, the Leased Real Property and all of the
fixtures and improvements thereon owned by the Seller (collectively, the "Owned
Improvements") are in good operating condition and repair, reasonable wear and
tear excepted, and have been maintained in accordance with industry standards.
The Seller has not received any notice in writing alleging that the Leased Real
Property or the Owned Improvements fail to comply with applicable zoning laws or
the building, health, fire and environmental protection codes of applicable
governmental jurisdictions.
2.14.3 ALL LEASES. The Real Property Leases constitute all
the real property leases to which the Seller is lessee and the Leased Real
Property is the only real property now used by the Seller in the conduct of the
Business as it is presently being conducted.
2.14.4 GOOD TITLE. With respect to the Real Property
Leases, on the Closing Date, the Seller will have good title to its leasehold
interest in such real property and the Owned Improvements, in each case, free
and clear of all liens, claims and encumbrances, except for the liens, claims
and encumbrances identified in such leases or as specifically stated on SCHEDULE
1.1.3-3. With respect to each such lease, except as otherwise disclosed on
SCHEDULE 1.1.3-3, (i) the leases are in full force and effect, (ii) all accrued
and currently payable rents and other payments required by such leases to be
paid by the Seller have been paid, (iii) the Seller entered into such leases in
the ordinary course of business and the Seller has been in peaceable possession
since the beginning of the original term of any such lease, (iv) the Seller or,
to the best of the Seller's and the Owner's knowledge, any other party thereto
is not in material default under any such lease, (v) the Seller has neither
given nor received any notice of default or termination, and, to the best of the
Seller's and the Owner's knowledge, no condition exists and no event has
occurred that, with the giving of notice, the lapse of time or the happening of
any further event would become a default or permit early termination under any
such lease and (vi) subject to obtaining the Consents described on SCHEDULE 4.6,
the validity or enforceability of any such lease will in no way be affected by
the sale of the Assets or the other transactions contemplated herein. Except as
set forth on SCHEDULE 4.6, no third-party consent or approval is required for
the assignment of the Real Property Leases to the Buyer or for the consummation
of the transactions contemplated herein.
2.15 ENVIRONMENTAL MATTERS. Except as provided in SCHEDULE
2.15, with respect to the ownership and operation of the Business, to the best
knowledge of the Seller: (i) the Seller is in compliance in all material
respects with all federal, state and local laws and regulations relating to
pollution and the discharge of materials into the environment ("Environmental
Laws"); (ii) the Seller holds all the material permits, licenses and approvals
of governmental authorities necessary for the current use, occupancy or
operation of the Business under applicable Environmental Laws ("Environmental
Permits"); (iii) the Seller is in compliance with such Environmental Permits;
(iv) such Environmental Permits are transferable to the Buyer without the
consent of any governmental authority; and (v) there are no underground or
aboveground storage tanks on any of the Real Property. Hazardous or toxic
substances have not, during the Seller's ownership of the Business, been
released, discharged or disposed of on any of the Leased Real Property in
Regulated Quantities (as defined below) by the Seller, with the Seller's
permission, or to the Seller's and the Owner's
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knowledge. No litigation or proceeding relating to Environmental Laws,
Environmental Permits or any release, discharge or disposal of hazardous or
toxic substances is pending or, to the knowledge of the Seller and the Owner,
threatened, against the Business or the Seller in connection with the Business.
For purposes hereof, "Regulated Quantity" shall mean that quantity which is
sufficient to serve as a basis for a requirement for cleanup, removal or
remedial action or the imposition of penalties or fines under Environmental
Laws.
2.15.1 ENVIRONMENTAL STUDIES. The Seller has given the
Buyer all environmental reports, studies or analyses in the possession of the
Seller or the Business relating to the Leased Real Property or the operation of
the Business concerning hazardous or toxic substances or compliance with
applicable Environmental Laws or Environmental Permits, if any.
2.16 COMPLIANCE WITH LAW AND REGULATIONS. The Business, the
Assets and the Seller are, in all material respects, in compliance with all
requirements of federal and state law and all material requirements of local law
and all requirements of all federal and state governmental bodies or agencies
and the material requirements of all local governmental bodies or agencies
having jurisdiction over any of them, the operations of the Business, the use of
the Seller's properties and assets (including the Assets) and the Leased Real
Property. Without limiting the foregoing, the Seller has paid all monies and
obtained all material licenses, permits, certificates and authorizations needed
or required for its operations and the use of the Leased Real Property. The
Seller has properly filed all reports and other documents required to be filed
with any federal, state or local government or subdivision or agency thereof.
The Seller has not received any notice from any federal, state or municipal
authority or any insurance or inspection body that any of its properties,
facilities, equipment or business procedures or practices fails to comply with
any applicable law, ordinance, regulation, building or zoning law or requirement
of any public authority or body.
2.17 INSURANCE. A summary of current insurance coverage of the
Seller is attached hereto as SCHEDULE 2.17. The Seller maintains and will
continue to maintain in full force and effect through the Closing Date insurance
policies covering it and the Assets in amounts and insuring against hazards in
the amounts set forth on SCHEDULE 2.17. All of such policies are in full force
and effect and the Seller is not in default of any material provision thereof.
The Seller has not received notice from any issuer of any such policies of its
intention to cancel, terminate or refuse to renew any policy issued by it.
2.18 LABOR, EMPLOYMENT CONTRACTS AND BENEFIT PROGRAMS.
2.18.1 NO COLLECTIVE BARGAINING AGREEMENTS. There are no
collective bargaining agreements or written or oral agreements relating to the
terms and conditions of employment or termination of employment covering any
employees, consultants or agents of the Seller, except as listed and described
on SCHEDULE 2.18.1 (THE "WORK AGREEMENTS"). The Xxxxxx Agreement, defined in
Section 7.9, and the Work Agreements, as listed on SCHEDULE 2.18.1, will be
assigned to Buyer at Closing. Except as listed and described on SCHEDULE 2.18.1,
all employees of the Seller are employees-at-will. The Seller is not engaged in
any unfair labor practice or other
Page 19
unlawful employment practice and there are no unfair labor practice charges or
other employee-related complaints, grievances or arbitrations against the Seller
pending or, to the best of the Seller's or the Owner's knowledge, threatened
before the National Labor Relations Board, the Equal Employment Opportunity
Commission, the Occupational Safety and Health Administration, the Department of
Labor, any arbitration tribunal or any other federal, state, local or other
governmental authority. There is no strike, picketing, slowdown or work stoppage
by or concerning such employees pending against or involving the Seller. No
representation question is pending or, to the best of the Seller's or the
Owner's knowledge, threatened respecting any of the Business's employees.
2.18.2 EMPLOYEE MANUALS. All handbooks and material
written policies and procedures relating to employment by the Seller, including,
but not limited to, compensation, benefits, equal employment opportunity and
safety are listed and described on SCHEDULE 2.18.2 attached and the Seller has
delivered true and complete copies thereof to the Buyer.
2.18.3 COMPLIANCE. The Seller has complied with in the
past, and is now in compliance with, all labor and employment laws including,
without limitation, federal, state, local and other applicable laws, rules,
regulations, ordinances, orders and decrees concerning collective bargaining,
unfair labor practices, payments of employment taxes, occupational safety and
health, worker's compensation, the payment of wages and overtime, equal
employment opportunity and discrimination (collectively, "Employment Laws"). The
Seller is not liable for any arrears for wages, benefits, taxes, damages or
penalties for failing to comply with any law, rule, regulation, ordinance, order
or decree relating in any way to labor or employment. The Seller has not
received any notice from any federal, state or municipal authority that the
Seller or any independent contractor of the Seller or any practice or procedure
of the Seller fails to comply with any of the Employment Laws.
2.18.4 EMPLOYEE PLANS. Except as listed and described on
SCHEDULE 2.18.4, the Seller has no pension plan, profit sharing plan, deferred
compensation plan, stock option or stock bonus plan, savings plan, welfare plan
or other benefit plan or arrangement, policy, practice, procedure or contract
concerning employee benefits or fringe benefits of any kind, whether or not
governed by the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), relating to or covering any employees of the Seller (a "Benefit
Plan"). Except as listed on SCHEDULE 2.18.4, the Seller does not maintain,
sponsor or contribute to any "employee benefit plan" (within the meaning of
Section 3(3) of ERISA) or any other plan, program, practice, agreement or
arrangement covering the Business, whether written or oral, of employee
compensation, deferred compensation, severance pay, retiree benefit or fringe
benefit. The Seller has furnished the Buyer with true, complete and accurate
copies of all summary plan descriptions of the Seller's current Benefit Plans.
2.18.5 ERISA COMPLIANCE. Each of the Benefit Plans is in
compliance in all material respects with all applicable requirements of ERISA,
the Code and other applicable law. Each of the Benefit Plans has been
administered in all material respects in accordance with its terms
Page 20
and with applicable legal requirements. All "employee pension plans" (within the
meaning of Section 3(2) of ERISA) have been determined by the Internal Revenue
Service (the "IRS") to be qualified under Section 401(a) of the Code and no
action or proceeding has been instituted or, to the best of the Seller's or the
Owner's knowledge, threatened which would affect the qualification of any
pension plan of the Business or of the Seller. No unfunded liabilities, based on
the Pension Benefit Guarantee Corporation (the "PBGC") rates currently in effect
for plan terminations, exist with respect to any Benefit Plan which is a
"defined benefit plan" (within the meaning of Section 3(35) of ERISA). There has
not been any reportable event with respect to any pension plan of the Business
or of the Seller. The Seller has not engaged in a "prohibited transaction" or
breach of fiduciary responsibility with respect to any Benefit Plan.
2.18.6 NO MULTIEMPLOYER PLANS. The Seller (i) has never
contributed to a multi-employer pension plan; and (ii) has never incurred any
liability under Title IV of ERISA to the PBGC or to a multi-employer pension
plan.
2.18.7 EMPLOYEES. SCHEDULE 2.18.7 lists the names and job
titles of all employees of the Seller as of September 30, 1998, the current
salary, compensation, pay rate or hourly rate for each, per diem and other
allowances and vacation, sick days for each (or paid days off in lieu thereof)
assuming no vacation has been taken and the actual days off taken by each
employee through September 30, 1998 and all anticipated increases in any of the
foregoing. Each employee's length of service, employment commencement date and
all relevant terms of their employment, including, without limitation, whether
the employee is full or part time, salaried or hourly and the benefits received
by such employee is set forth on SCHEDULE 2.18.7.
2.18.8 INDEPENDENT CONTRACTORS. Except as described in
SCHEDULE 2.18.8, since January 1, 1996, the Seller has not engaged or hired any
individual or entity to perform information technology services or custom
software development services as an independent contractor and all individuals
performing such services have been employees of the Seller.
2.19 LITIGATION. Except as set forth on SCHEDULE 2.19, there
are no suits, arbitrations, administrative charges or other legal proceedings,
claims or governmental investigations pending against the Seller. To the
Seller's and the Owner's best knowledge, except as set forth on SCHEDULE 2.19,
there are no suits, arbitrations, administrative charges or other legal
proceedings, claims or governmental investigations threatened against the Seller
with respect to the Business or Assets nor, to the best of the knowledge of the
Seller or the Owner, is there any basis for any such suit, arbitration,
administrative charge or other legal proceedings, claim or governmental
investigation which would have a material adverse effect on the condition of the
Business or any of the Assets or on the ability of the Seller to enter into this
Agreement or consummate the transactions contemplated hereby. The Seller has not
been operating under or subject to, or in default with respect to, any order,
writ, injunction or decree relating to the Business or the Assets of any court
or federal, state, municipal or other governmental department, commission,
board, agency or instrumentality which would have an adverse effect on the
condition
Page 21
of the Business or any of the Assets or on the ability of the Seller to enter
into this Agreement or consummate the transactions contemplated hereby.
2.20 INTANGIBLE PROPERTY. The Seller has all right, title and
interest in and to valid, fully paid licenses of all Intangible Property used in
the conduct of the Business as presently operated. The Seller has not received
notice of any claim against it involving any conflict or claim of conflict of
any of the items listed on SCHEDULE 2.20, and, to the best of the knowledge of
the Seller and the Owner, there is no basis for any such claim of conflict. No
service provided by the Seller or any program, software or other material used
or disseminated by it or the Business infringes on any copyright, patent or
trademark of any other party. The Seller has not received any notice of any
claim of infringement of any third-party's copyright, patent, trademark, service
xxxx, logotype, license or other proprietary right. The Seller owns or possesses
adequate licenses or other rights to use all programs, software copyrights,
patents, trademarks, service marks, trade names, logotypes and other intangible
rights used to operate the Business.
2.21 BULK SALES. Neither the sale and transfer of the Assets
pursuant to this Agreement, nor the Buyer's possession and use of the Assets
from and after Closing because of such sale and transfer, will be subject to any
law pertaining to bulk sales or transfers or to the effectiveness of bulk sales
or transfers as against creditors of the Seller.
2.22 BROKERS. Except for DeBellas & Co., there is no broker
or finder or other person who would have any valid claim through the Seller or
the Owner against any of the parties to this Agreement for a commission or
brokerage fee or payment in connection with this Agreement or the transactions
contemplated hereby as a result of any agreement of, or action taken by, the
Seller or the Owner. The Seller will pay all fees and expenses of DeBellas & Co.
at the Closing or when due.
2.23 CONFLICTING INTERESTS. Except as disclosed on SCHEDULE
2.23, none of the Seller, the Owner nor any Affiliate of any of the foregoing,
has any financial interest in any supplier, lessor, advertiser or customer of
the Seller or in any other business enterprise with which the Business or the
Seller engages in business or with which the Business or the Seller is in
competition. The ownership of less than one percent of the outstanding capital
stock of a publicly-held corporation shall not be deemed to be a violation of
this representation and warranty.
2.24 MATTERS ARISING AFTER THE INTERIM BALANCE SHEET DATE.
Between the Interim Balance Sheet Date and the date of this Agreement:
2.24.1 There has not been any material adverse change in
the financial condition or business of the Seller, uncured default by the Seller
under the terms of the leases for the Leased Real Property or any Contract or
any material physical damage or loss to any of the Assets, whether leased or
owned by the Seller (except where such damage or loss was covered by insurance
and repair or replacement of the damaged or lost assets has been completed);
Page 22
2.24.2 The Seller has not taken any action outside of the
ordinary and usual course of business, except as related to the transactions
contemplated hereby;
2.24.3 The Seller has maintained its books, accounts and
records in the usual, customary and ordinary manner and has not changed any of
its accounting practices; and
2.24.4 The Seller has preserved its business organization
intact and has used its best efforts to keep available the services of its
employees and to preserve relationships with its clients, customers, suppliers
and others with whom it deals.
2.25 YEAR 2000 COMPLIANCE. Except as provided in attached
SCHEDULE 2.25, to the Seller's and Owner's best knowledge, the Seller's
Information Technology (defined below) is designed to be used prior to, during,
and after the calendar year 2000, and such Information Technology used during
such time period will accurately receive, provide and process date/time data
(including calculating, comparing and sequencing) from, into and between the
20th and 21st centuries, including the years 1999 and 2000, and leap year
calculations and will not malfunction, cease to function, or provide invalid or
incorrect results as a result of date/time data, to the extent that other
Information Technology, used in combination with the Seller's Information
Technology, properly exchanges date/time data with it. "Information Technology"
means computer software, computer firmware, computer hardware (whether general
or specific purpose) and other similar or related items of automated,
computerized and/or software systems.
2.26 DISCLOSURE. No material provision of this Agreement
relating to the Seller, the Business or the Assets or any other document,
Schedule, Exhibit or other information furnished by the Seller to the Buyer in
connection with the execution, delivery and performance of this Agreement, or
the consummation of the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated to make the statement, in light of the
circumstances in which it is made, not materially misleading. All Schedules
attached hereto are accurate and complete as of the date hereof or the date
specified on the Schedule.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND METRO
3.1 STATUS. The Buyer and Metro, jointly and severally,
represent and warrant to the Seller as follows: The Buyer and Metro are
corporations duly organized, validly existing and in good standing under the
laws of the Commonwealth of Virginia and by Closing, Buyer will be qualified to
do business in the State of California. Each of Metro and the Buyer has the
requisite power to enter into and complete the transactions contemplated by this
Agreement.
3.2 NO DEFAULTS. Neither the execution, delivery and
performance by the Buyer or Metro of this Agreement nor the consummation by the
Buyer or Metro of the transactions
Page 23
contemplated hereby is an event that, of itself or with the giving of notice or
the passage of time or both, will: (a) violate or conflict with any provision of
the Articles of Incorporation or Bylaws of the Buyer or Metro, (b) constitute a
violation of, conflict with or result in any breach of or any default under,
result in any termination or modification of, or cause any acceleration of any
obligation under any contract, mortgage, indenture, agreement, lease or other
instrument to which the Buyer is a party or by which it is bound or its assets
are bound, or by which it may be affected, (d) violate any judgment, decree,
order, statute, law, rule or regulation of any court, arbitrator or government
or regulatory body applicable to the Buyer or the assets of the Buyer or (e)
result in the creation or imposition of any lien, charge or encumbrance against
the Business or the Assets, except for liens, charges or encumbrances relating
to the financing of the transactions contemplated by this Agreement.
3.3 CORPORATE ACTION. All actions and proceedings necessary to
be taken by or on the part of the Buyer and Metro or their directors in
connection with the performance, execution and delivery of this Agreement have
been duly and validly taken, and this Agreement has been duly and validly
authorized, executed and delivered by the Buyer and Metro and constitutes the
legal, valid and binding obligation of the Buyer, enforceable against the Buyer
and Metro in accordance with and subject to its terms.
3.4 BROKERS. There is no broker or finder or other person who
would have any valid claim through the Buyer against any of the parties to this
Agreement for a commission or brokerage fee or payment in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
of or action taken by the Buyer.
3.5 LITIGATION. There are no suits, arbitrations,
administrative charges or other legal proceedings, claims or governmental
investigations of any nature pending or, to the knowledge of the Buyer,
threatened against or affecting it that would affect its ability to enter into
this Agreement or carry out the transactions contemplated by this Agreement, nor
to the best knowledge of the Buyer, is there any basis for any such suit,
arbitration, administrative charge, or other legal proceeding, claim or
governmental investigation.
3.6 CONSENTS. There are no approvals or consents of persons or
entities not a party to this Agreement that are legally or contractually
required to be obtained by the Buyer in connection with the consummation of the
transactions contemplated by this Agreement.
3.7 COMPLIANCE WITH LAWS. The Buyer is not in violation of any
federal, state or local law, ordinance, requirement, regulation or any judgment,
order, injunction or decree, which violation would, in the aggregate with other
such violations, have a material adverse effect on the ability of the Buyer to
enter into this Agreement or to consummate the transactions contemplated hereby.
3.8 FULL DISCLOSURE. No material provision of this Agreement
relating to the Buyer or any other document, Schedule, Exhibit or other
information furnished by the Buyer to the Seller in connection with the
execution, delivery and performance of this Agreement, or the
Page 24
consummation of the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated to make the statement, in light of the
circumstances in which it is made, not materially misleading.
3.9 FINANCIAL CAPABILITY. The Buyer has adequate financial
resources available to it to fulfill its financial obligations under this
Agreement.
ARTICLE 4
COVENANTS OF THE SELLER AND THE OWNER PENDING THE CLOSING
The Seller and the Owner covenant and agree that, from the
date hereof until the completion of the Closing:
4.1 OPERATIONS OF THE BUSINESS.
4.1.1 BEST EFFORTS. The Seller will use its best efforts
to carry on the Business and keep its books and accounts, records and files in
the usual and ordinary manner in which the Business has been conducted in the
past, including, but not limited to, spending amounts on advertising, promotions
and marketing of the Business between the date of this Agreement and the Closing
Date comparable to the amounts the Seller spent for the comparable period in
1997. The Seller shall operate the Business in compliance in all material
respects with all applicable laws, rules and regulations.
4.1.2 CURRENT STATEMENTS. The Seller shall provide the
Buyer with copies of its monthly internal balance sheets and related statements
of operations for the monthly accounting periods between the Interim Balance
Sheet Date and the Closing Date by the 15th day of each month for the preceding
calendar month, which shall present fairly the financial position of the Seller
and the results of operations for the period indicated in accordance with GAAP,
except for the absence of footnotes. Such monthly statements shall show: (i) the
current month's and prior year's actual results for such month and the current
month's budget, each by line item, (ii) items of non-recurring income and
expense separately, and (iii) 1998 year-to-date information for each of the
foregoing, all of which shall be presented fairly and in accordance with GAAP,
except for the absence of footnotes. In addition, the Seller shall provide to
the Buyer simultaneously with the delivery of these monthly financial
statements, financial information to permit the Buyer to compute readily the
income from operations of the Business for such month and the year-to-date.
4.1.3 PRESERVE BUSINESS. The Seller shall use its best
efforts to preserve (i) its business organization intact, retaining
substantially as at present the Seller's employees, consultants and agents and
(ii) the goodwill of the Seller's Clients, suppliers, advertisers, customers and
others having business relations with it. The Seller will continue to have at
least one hundred (100) full-time consultants working on client projects on
billable assignments.
Page 25
4.1.4 ASSETS IN GOOD REPAIR. The Seller shall keep all
Tangible Personal Property and Leased Real Property in good operating condition
and repair, reasonable wear and tear excepted, and maintain adequate and usual
supplies of office supplies, spare parts and other materials as have been
customarily maintained in the past. The Seller shall use its best efforts to
preserve intact the Assets and shall maintain in effect the casualty and
liability insurance on the Assets heretofore in force.
4.2 PROHIBITED ACTIONS. Before the Closing Date, the Seller
shall not, without the prior written consent of the Buyer:
4.2.1 Sell, lease or transfer or agree to sell, lease or
transfer, any Assets except for incidental sales or leases, in the ordinary
course of business, of Assets which are being replaced by assets of comparable
or superior kind, condition and value;
4.2.2 Except as may be required by applicable law or
existing written plans or agreements (which written plans and agreements are
included in the Schedules hereto or have otherwise been provided to the Buyer),
grant any raises to any of its employees or consultants, establish or modify any
severance plan, pay any substantial bonuses, enter into any contract of
employment with any employee or employees of the Seller, change any benefits to
employees or consultants or enter into any independent contractor agreement for
the performances of information technology services;
4.2.3 Renew, renegotiate, modify, amend or terminate any
existing Contracts, except in the ordinary course of business;
4.2.4 Enter into, renew or amend any other Contract,
except as provided in Section 5.4 in the ordinary course of business;
4.2.5 Make any change in the Business's buildings,
leasehold improvements or fixtures except in the ordinary course of business;
4.2.6 Enter into any Contracts with Affiliates of the
Seller with respect to the Business or the Assets; or
4.2.7 Accelerate in any way collections of the accounts
receivable or provide any incentive of any kind for early payment thereof, other
than consistent with past practice.
4.3 NO DISTRIBUTIONS OR PAYMENTS. The Seller shall make no
distributions to its shareholder with respect to her stock in the Seller of any
kind or nature, except it may distribute the Excluded Assets.
4.4 ACCESS TO FACILITIES, FILES AND RECORDS. At the reasonable
request of the Buyer and on reasonable advance notice, the Seller shall, from
time to time, promptly give or cause to be given to the officers, employees,
accountants, counsel, agents, consultants and representatives
Page 26
of the Buyer full access during normal business hours to: (a) all facilities,
properties, accounts, books, deeds, title papers, insurance policies,
agreements, contracts, commitments, records and files of every character,
including, without limitation, the Seller's minute book, equipment, machinery,
fixtures, furniture, vehicles, notes and accounts payable and receivable of the
Seller relating to the Business; and (b) all such other information concerning
the Business as the Buyer may reasonably request. Any investigation or
examination by the Buyer in connection with the foregoing shall not in any way
diminish or obviate any representations or warranties of the Seller made in this
Agreement, the Exhibits, Schedules and documents delivered pursuant to this
Agreement. Any and all information, disclosures, knowledge or facts regarding
the Seller, the Business and its operations and properties derived from or
resulting from the Buyer's acts or conduct (including, without limitation, acts
or conduct of the Buyer's officers, employees, accountants, counsel, agents,
consultants or representatives, or any of them (collectively, the
"Representatives")) under the provisions of this Section or otherwise obtained
by the Buyer (or its Representatives) pursuant to or in connection with this
Agreement shall be confidential and shall not be divulged, disclosed or
communicated to any other person, firm, corporation or entity, except as
required by law and to the Buyer's directors, officers, attorneys, accountants,
investment bankers, investors and lenders, and their respective attorneys for
the purpose of consummating the transactions contemplated by this Agreement and
the Buyer shall be responsible for any breach of confidentiality by any such
person. The Seller shall cause its accountants and any agent of the Seller in
possession of the Seller's books and records to cooperate with the Buyer's
requests for information pursuant to this Agreement and shall request its
accountants to provide the Buyer access to all of the accountants' audit and tax
work papers with respect to the Seller. If this Agreement terminates before
Closing, the Buyer shall return promptly any information obtained regarding the
Seller, the Business or the Assets and the Buyer shall instruct its
Representatives also to return any such information regarding the Seller, the
Business or the Assets.
4.5 REPRESENTATIONS AND WARRANTIES. The Seller shall give
detailed written notice to the Buyer promptly on learning of the occurrence of
any event that would cause or constitute a breach, or that would have caused a
breach had such event occurred or been known to the Seller on or before the date
of this Agreement, of any of the Seller's representations or warranties
contained in this Agreement or in any Schedule attached hereto.
4.6 CONSENTS. The Seller shall use its best efforts to obtain
the consent or approval of any third person required under any Contract listed
on the Contract Schedules to assign any such contract from the Seller to the
Buyer. The Buyer has designated certain of these consents as material to the
operations of the Business as noted in Section 2.12 or by making a notation to
the effect on the applicable schedule (a "Material Consent"). The Buyer shall
not be obligated to accept the assignment of any Contract or any liability under
such Contract for which a Material Consent is not obtained and, if such consent
is obtained after the Closing, the Buyer will not be required to assume any
liability under such Contract until such consent is obtained.
4.7 NOTICE OF PROCEEDINGS. The Seller will promptly notify the
Buyer in writing on: (a) receiving notice of any order or decree or any
complaint praying for an order or decree
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restraining or enjoining the consummation of this Agreement or the transactions
contemplated hereunder; or (b) receiving any notice from any governmental
department, court, agency or commission of its intention (i) to institute an
investigation into, or institute a suit or proceeding to restrain or enjoin, the
consummation of this Agreement or such transactions, or (ii) to nullify or
render ineffective this Agreement or such transactions if consummated.
4.8 CONSUMMATION OF AGREEMENT. The Seller shall, and the Owner
shall cause the Seller to, fulfill and perform all conditions and obligations on
its part to be fulfilled and performed under this Agreement and use its best
efforts to cause the transactions contemplated by this Agreement to be fully
carried out.
ARTICLE 5
COVENANTS OF THE BUYER AND METRO PENDING THE CLOSING
The Buyer and Metro covenant and agree that from the date of
this Agreement until the completion of the Closing:
5.1 REPRESENTATIONS AND WARRANTIES. The Buyer shall give
detailed written notice to the Seller promptly on learning of the occurrence of
any event that would cause or constitute a breach, or would have caused a breach
had such event occurred or been known to the Buyer before the date of this
Agreement, of any of the representations and warranties of the Buyer contained
in this Agreement.
5.2 CONSUMMATION OF AGREEMENT. Subject to the provisions of
Section 10.1 of this Agreement, the Buyer shall fulfill and perform all
conditions and obligations on its part to be fulfilled and performed under this
Agreement and to cause the transactions contemplated by this Agreement to be
fully carried out.
5.3 NOTICE OF PROCEEDINGS. The Buyer will promptly notify the
Seller in writing on: (a) becoming aware of any order or decree or any complaint
praying for an order or decree restraining or enjoining the consummation of this
Agreement or the transactions contemplated hereunder; or (b) receiving any
notice from any governmental department, court, agency or commission of its
intention (i) to institute an investigation into, or institute a suit or
proceeding to restrain or enjoin, the consummation of this Agreement or such
transactions, or (ii) to nullify or render ineffective this Agreement or such
transactions if consummated.
5.4 CONTRACTS NOT TO BE ASSUMED. From time to time following
the date of this Agreement, the Seller may request that the Buyer permit
additional Contracts to be added to the Schedules to this Agreement and to be
assigned to and assumed by the Buyer at the Closing. These Contracts may be
accepted or rejected by the Buyer (except for those entered into in the ordinary
course of business pursuant to Section 2.5, subject to the limitations set forth
in Section 2.5) at the Buyer's sole discretion. The Buyer must provide the
Seller with written notice within five (5)
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business days after receipt of a written notice from the Seller regarding
additional Contracts which are proposed to be added to the Schedules of its
election to either accept or reject such Contracts. If the Buyer fails to timely
notify the Seller in writing of its election, the Buyer shall be deemed to have
made the election to accept the Contract.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF THE SELLER AND THE OWNER
The obligations of the Seller and the Owner under this
Agreement are, at their option, subject to the fulfillment of the following
conditions before or on the Closing Date:
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1.1 REPRESENTATIONS TRUE. Each of the representations
and warranties of the Buyer and Metro contained in this Agreement shall have
been true and correct as of the date when made and shall be deemed to be made
again on and as of the Closing Date and shall then be true and correct in all
material respects except to the extent changes are permitted or contemplated
pursuant to this Agreement;
6.1.2 BUYER COMPLIANCE. The Buyer and Metro shall have
performed and complied in all material respects with each and every covenant and
agreement required by this Agreement to be performed or complied with by it
before or on the Closing Date;
6.1.3 CERTIFICATE OF THE BUYER. The Seller shall be
furnished with a certificate, dated the Closing Date and duly executed by the
President or a Vice President of the Buyer to the effect that, to the best
knowledge of the Buyer, the conditions set forth in Sections 6.1.1 and 6.1.2
have been satisfied; and
6.1.4 OTHER DOCUMENTS. The Seller shall be furnished with
such certified resolutions, certificates, documents or instruments with respect
to the Buyer as the Seller may have reasonably requested before the Closing to
carry out the intent and purposes of this Agreement.
6.2 PROCEEDINGS.
6.2.1 NO INJUNCTION. No party shall be subject to any
restraining order or injunction restraining or prohibiting the consummation of
the transactions contemplated hereby.
6.2.2 POSTPONEMENT. In the event such a restraining order
or injunction is in effect, this Agreement may not be terminated by the Seller
pursuant to this Section 6.2 before the Final Closing Date (as described in
Section 10.1 hereof) but the Closing shall be delayed during such period. This
Agreement may be terminated after such date if such restraining order or
injunction remains in effect.
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6.3 DELIVERIES. The Buyer shall have complied with each and
every one of its obligations set forth in Section 8.2.
6.4 OTHER CONSENTS. The Buyer shall have obtained all
consents, approvals and waivers of other persons or parties as may be required
for the consummation of the transactions contemplated by this Agreement.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement are, at its
option, subject to the fulfillment of the following conditions before or on the
Closing Date:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
7.1.1 REPRESENTATIONS TRUE. Each of the representations
and warranties of the Seller and the Owner contained in this Agreement shall
have been true and correct as of the date when made; and each of such
representations and warranties shall be deemed to be made again on and as of the
Closing Date and shall then be true and correct in all material respects except
to the extent changes are permitted or contemplated pursuant to this Agreement.
7.1.2 SELLER'S PERFORMANCE. The Seller and the Owner shall
have performed and complied in all material respects with each and every
covenant and agreement required by this Agreement to be performed or complied
with by them before or on the Closing Date;
7.1.3 SELLER'S CERTIFICATES. The Seller shall have
furnished the Buyer with certificates, dated the Closing Date and duly executed
by the President of the Seller, to the effect that, to the best knowledge of the
Seller, the conditions set forth in Sections 7.1.1 and 7.1.12 have been
satisfied; and
7.1.4 OTHER DOCUMENTS. The Buyer shall be furnished with
such certified resolutions, certificates, documents or instruments with respect
to the Seller and the Owner as the Buyer may have reasonably requested before
the Closing to carry out the intent and purposes of this Agreement.
7.2 PROCEEDINGS.
7.2.1 NO INJUNCTION. No party shall be subject to any
restraining order or injunction restraining or prohibiting the consummation of
the transactions contemplated hereby.
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7.2.2 POSTPONEMENT. In the event such a restraining order
or injunction is in effect, this Agreement may not be terminated by the Buyer
pursuant to this Section 7.1.4 before the Final Closing Date (as described in
Section 10.1 hereof), but the Closing shall be delayed during such period. This
Agreement may be terminated after such date if such restraining order or
injunction remains in effect.
7.3 LIENS RELEASED. All Security Interests pertaining to the
Assets shall be released of record and there shall be no liens in respect of the
Assets, except Permitted Encumbrances, those which will arise as a result of the
Buyer's actions in the consummation of the Closing and those in favor of the
Buyer.
7.4 DELIVERIES. The Seller and the Owner shall have complied
with each and every one of their respective obligations set forth in Section
8.1.
7.5 OTHER CONSENTS. The Seller's Contract to provide
information technology services to Manpower Temporary Services/Hewlett Packard
shall be renewed at a rate and on terms and conditions satisfactory to the Buyer
and the Seller shall have obtained all Material Consents, including, without
limitation, all approvals and waivers of governmental agencies as are required
for the consummation of the transactions contemplated by this Agreement.
7.6 REVISED SCHEDULES. The Seller shall have delivered to the
Buyer such revised forms of each of the Schedules or updated information for
addition to or inclusion in the Schedules as are necessary to reflect changes in
such Schedules as of the Closing Date; provided, however, that, except for
changes that are permitted by the terms of this Agreement, no change in any
Schedule will be binding on the Buyer without its prior written consent, which
consent may be withheld by the Buyer for any or no reason. The Buyer agrees to
use its best efforts to notify the Seller of the acceptance of any revised
Schedule and all supporting documentation within five (5) business days of
delivery to the Buyer of a revised Schedule. The failure of the Buyer to notify
the Seller of its refusal to consent to a revised Schedule shall be deemed to be
an acceptance by the Buyer of such revised Schedule. Notwithstanding the Buyer's
failure to accept a revised Schedule, such a revised Schedule shall be deemed
accepted by the Buyer if Closing occurs.
7.7 NO MATERIAL CHANGE IN BUSINESS OR ASSETS. There shall not
have been a material adverse change in Business or Assets nor shall there have
been a uncured or continuing default by the Seller under any Contract, including
any reductions in the one hundred (100) full-time billable consultants with an
average rate of $83 per hour and average pay rate (including any per diem) of
$55 per hour for employees and $73 per hour for consultants.
7.8 PRELIMINARY CLOSING BALANCE SHEET NO MATERIAL CHANGE IN
CERTAIN ASSETS. The Preliminary Closing Balance Sheet to be delivered by the
Seller under Section 1.4.1.4 shall reflect a Closing Book Value of at least Nine
Hundred Thousand Dollars ($900,000).
7.9 XXXX XXXXXX' EMPLOYMENT AGREEMENT. That certain Employment
Agreement dated December 1, 1998 between the Seller and Xxxx Xxxxxx attached as
Exhibit F ("Xxxxxx
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Agreement") shall be in full force and effect, shall not be modified or amended
in any manner and shall be assigned to the Buyer at Closing.
ARTICLE 8
ITEMS TO BE DELIVERED AT THE CLOSING
8.1 DELIVERIES BY THE SELLER. At the Closing, the Seller and
the Owner shall deliver to the Buyer, duly executed by the Seller, the Owner or
such other signatory as may be required by the nature of the document:
8.1.1 XXXX OF SALE. Bills of sale, certificates of title,
endorsements, assignments and other good and sufficient instruments of sale,
conveyance, transfer and assignment, in form and substance satisfactory to the
Buyer, sufficient to sell, convey, transfer and assign to the Buyer all right,
title and interest of the Seller in and to the Assets and to quiet the Buyer's
title thereto.
8.1.2 BOARD RESOLUTIONS. Certified copies of resolutions,
duly adopted by the Board of Directors of the Seller, and if required by
applicable law, the sole shareholder of the Seller, which shall be in full force
and effect at the time of the Closing, authorizing the execution, delivery and
performance by the Seller of this Agreement and the consummation of the
transactions contemplated hereby;
8.1.3 OFFICER'S CERTIFICATE. The certificate referred to
in Section 7.1.2;
8.1.4 NONCOMPETITION AGREEMENT. The Noncompetition,
Nonsolicitation and Confidentiality Agreements between the Owner and the Buyer
and Xxxxx and the Buyer in the forms of EXHIBITS D AND E attached (the
"Noncompetition Agreement");
8.1.5 MANAGEMENT EMPLOYMENT AGREEMENT. Employment
Agreement with the Owner in the form of EXHIBITS G attached (the "Management
Agreement") and an assignment of the Xxxxxx Agreement and the Work Agreements,
in form and substance satisfactory to the Buyer;
8.1.6 ASSUMED LIABILITIES SCHEDULE. A schedule of the
Assumed Liabilities as of two (2) days before the Closing Date; and
8.1.7 ACCOUNTS RECEIVABLE. Within ten (10) days after the
Closing Date, Schedules identifying each Receivable of the Seller as of the
Closing Date, certified by the Seller as being true, correct and representing
monies due from customers of the Business arising from the ordinary course of
business occurring before the Closing Date.
8.2 DELIVERIES BY THE BUYER. At the Closing, the Buyer shall
deliver to the Seller, duly executed by the Buyer:
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8.2.1 PURCHASE PRICE. The Purchase Price, which shall be
paid in the manner specified in Section 1.4;
8.2.2 ASSUMPTION AGREEMENTS. An instrument or instruments
of assumption of the Xxxxxx Agreement, the Work Agreements, the Contracts and
Real Property Leases to be assumed by the Buyer pursuant to this Agreement, in
form and substance satisfactory to the Seller;
8.2.3 RESOLUTIONS. Certified copies of resolutions, duly
adopted by the Board of Directors of the Buyer, which shall be in full force and
effect at the time of the Closing, authorizing the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Buyer;
8.2.4 OFFICERS' CERTIFICATE. The certificates referred to
in Section 6.1.3;
8.2.5 NONCOMPETITION AGREEMENT. The Noncompetition
Agreements;
8.2.6 MANAGEMENT AGREEMENT. The Management Agreement; and
8.2.7 STOCK OPTION PLAN. The grant of stock options for
25,000 shares of Metro common stock to be allocated among the Management Group
as set forth on SCHEDULE 8.2.7 attached pursuant to Metro's 1997 Incentive Stock
Option Plan ("Metro Plan") previously delivered to the Seller. The Metro Plan
provides a five-year vesting schedule (20% per year). The Buyer and the Seller
agree that the option price of the options granted pursuant to this Section
shall be based upon the market value of Metro's stock at the end of the day on
the Closing Date.
ARTICLE 9
SURVIVAL; INDEMNIFICATION; EMPLOYEES
9.1 SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement, or in any Exhibit, Schedule,
certificate, agreement or statement delivered pursuant hereto, shall survive the
Closing, any investigation conducted by any party hereto and any information
which any party may receive, until eighteen (18) months after the Closing Date
whereupon all such representations, warranties, covenants and agreements shall
expire and terminate and shall be of no further force or effect; provided,
however, any Deficiency with respect to a Tax matter may be asserted at any time
on or before the expiration of the limitations period under applicable law and
if a Deficiency (as defined in Section 9.3) is asserted by either party, before
the expiration of the survival or limitations period, such asserted Deficiency
shall survive until the existence of such Deficiency has been finally
established and the Deficiency is resolved as provided below.
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9.2 BASIC PROVISION.
9.2.1 BUYER INDEMNITEES. The Seller and the Owner (each an
"Indemnifying Party") hereby, jointly and severally, agree to indemnify and hold
harmless the Buyer, its shareholders, directors, officers, agents and employees
and all persons which directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with the
Buyer, and its respective successors and assigns (collectively, the "Buyer
Indemnitees") from, against and in respect of, and to reimburse the Buyer
Indemnitees for the amount of any and all Deficiencies (as defined in Section
9.3.1) and the costs not to exceed $50,000 in the aggregate reasonably incurred
by the Buyer to make Seller's Information Technology Year 2000 compliant in the
reasonable opinion of the Buyer.
9.2.2 SELLER INDEMNITEES. The Buyer and Metro, jointly and
severally (each an "Indemnifying Party"), hereby agrees to indemnify and hold
harmless the Seller and its shareholders, directors, officers, agents, employees
and all persons which directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with the
Seller, and its successors and assigns (collectively, the "Seller Indemnitees")
from, against and in respect of, and to reimburse the Seller Indemnitees for the
amount of any and all Deficiencies (as defined in Section 9.3.2).
9.3 DEFINITION OF "DEFICIENCIES".
9.3.1 DEFICIENCIES FOR THE BUYER. As used in this Article
9, the term "Deficiencies" when asserted by the Buyer Indemnitees or arising out
of a third party claim against the Buyer Indemnitees shall mean any and all
losses, fines, damages, liabilities and claims sustained by the Buyer
Indemnitees and arising out of, based on or resulting from:
9.3.1.1 Any misrepresentation, breach of warranty or
any non-fulfillment of any representation, warranty, covenant, obligation or
agreement on the part of the Seller or the Owner contained in or made in this
Agreement or in an Exhibit, Schedule, certificate, agreement or statement
delivered pursuant to this Agreement;
9.3.1.2 Any failure by the Seller to pay or
discharge any Excluded Liability or any other liability of the Seller and the
Seller Indemnitees, direct or contingent, that is not expressly assumed by the
Buyer pursuant to the provisions of this Agreement;
9.3.1.3 Any litigation, proceeding or claim by any
third party to the extent relating to the business or operations of the Seller,
the Business before the Closing Date, other than with respect to the Assumed
Liabilities;
9.3.1.4 Any severance pay or other payment required
to be paid by the Seller with respect to any employee or information technology
consultant of the Seller terminated by the Seller on or before the Closing Date,
which is not part of the Assumed Liabilities; and
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9.3.1.5 Any and all acts, suits, proceedings,
demands, assessments and judgments and all reasonable fees, costs and expenses
of any kind, related or incident to any of the foregoing (including, without
limitation, any and all Legal Expenses (as defined below)).
9.3.2 DEFICIENCIES FOR THE SELLER. As used in this Article
9, the term "Deficiencies" when asserted by the Seller Indemnitees or arising
out of a third party claim against the Seller Indemnitees shall mean any and all
losses, damages, liabilities and claims sustained by the Seller Indemnitees and
arising out of, based on or resulting from:
9.3.2.1 Any misrepresentation, breach of warranty or
any non-fulfillment of any representation, warranty, covenant, obligation or
agreement on the part of the Buyer contained in or made in this Agreement or in
an Exhibit, Schedule, certificate, statement or agreement delivered pursuant to
this Agreement;
9.3.2.2 Any failure by the Buyer to pay or discharge
any Assumed Liability or any other liability arising after Closing that is
expressly assumed by the Buyer pursuant to the provisions of this Agreement;
9.3.2.3 Any litigation, proceeding or claim by any
third party to the extent relating to the business or operations of the Buyer or
the Business after the Closing Date; and
9.3.2.4 Any and all acts, suits, proceedings,
demands, assessments and judgments and all fees, costs and expenses of any kind,
related or incident to any of the foregoing (including, without limitation, any
and all Legal Expenses (as defined below)).
9.4 PROCEDURES FOR ESTABLISHMENT OF DEFICIENCIES.
9.4.1 CLAIM ASSERTED. In the event that any claim shall be
asserted by any third party against the Buyer Indemnitees or the Seller
Indemnitees (the Buyer Indemnitees or the Seller Indemnitees, as the case may
be, hereinafter, the "Indemnitees"), which, if sustained, would result in a
Deficiency, then the Indemnitees, promptly and in all events within fifteen (15)
days after learning of such claim, shall notify the Indemnifying Party of such
claim and Indemnitees shall permit the Indemnifying Party to defend against such
claim, at the Indemnifying Party's sole expense and through legal counsel
reasonably acceptable to the Indemnitees, provided that the Indemnifying Party
proceeds in good faith, expeditiously and diligently. The Indemnitees shall, at
their option and expense, have the right to participate in any defense
undertaken by the Indemnifying Party with legal counsel of their own selection
and at their expense. The parties will cooperate fully in any such action and
shall make available to each other any books or records useful for the defense
of such claim. No settlement or compromise of any claim which may result in a
Deficiency may be made by the Indemnifying Party without the prior written
consent of the Indemnitees unless: (i) before such settlement or compromise, the
Indemnifying Party acknowledges in writing its obligation to pay in full the
amount of the settlement or compromise and all associated expenses and (ii) the
Indemnitees are furnished with security reasonably satisfactory to the
Indemnitees that the Indemnifying Party will in fact pay such amount and
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expenses or the Indemnifying Party obtains a release of the Indemnitees from all
liability in respect of such claim.
9.4.2 NOTICE. In the event that the Indemnitees assert
the existence of any Deficiency against the Indemnifying Party, such Indemnitee
shall give written notice to the Indemnifying Party of the nature and amount of
the Deficiency asserted. If the Indemnifying Party within a period of thirty
(30) days after the giving of the Indemnitees' notice, shall not give written
notice to the Indemnitees announcing its intent to contest such assertion of the
Indemnitees (such notice by the Indemnifying Party being hereinafter referred to
as the "Contest Notice"), such assertion of the Indemnitees shall be deemed
accepted and the amount of the Deficiency shall be deemed established. In the
event, however, that a Contest Notice is given to the Indemnitees within such
30-day period, then the contested assertion of a Deficiency shall be judicially
resolved.
9.4.3 AGREEMENT. The Indemnitees and the Indemnifying
Party may agree in writing, at any time, as to the existence and amount of a
Deficiency, and, on the execution of such agreement such Deficiency shall be
deemed established.
9.5 PAYMENT OF DEFICIENCIES. The Indemnifying Party hereby
agrees to pay the amount of established Deficiencies within thirty (30) days
after the establishment thereof. The amount of established Deficiencies shall be
paid in cash. Any amounts not paid by the INDEMNIFYING Party when due under this
Section shall bear interest from and after the due date thereof until the date
paid at a rate equal to the lesser of: (a) twelve percent (12%) per annum and
(b) the highest legal rate permitted by applicable law. At the option of the
Indemnitees, the Indemnitees may offset any Deficiency or any portion thereof
that has not been paid by the Indemnifying Party to the Indemnitees against any
obligation the Indemnitees, or any other Party to the Indemnitees against any
obligation the Indemnitees, or any of them, may have to the Indemnifying Party
arising out of a Deficiency established pursuant to Section 9.4 hereof.
9.6 LIMITATION ON DEFICIENCIES. Notwithstanding any other
provision of this Agreement, an Indemnifying Party shall not be required to pay
any established Deficiency resulting from the breach of any warranty or
representation until the aggregate of all established Deficiencies owed by that
Indemnifying Party exceeds Fifty Thousand Dollars ($50,000) and then the
Indemnifying Party shall be required to pay established Deficiencies in excess
of Fifty Thousand Dollars ($50,000) up to a limit of liability or any party's
aggregate liability for Deficiencies resulting from the breach of any warranties
or representations of One Million Dollars ($1,000,000), except that the $50,000
basket and maximum shall not apply to a claim for any breach of the Seller's and
the Owner's representations and warranty under Section 2.9 and the $50,000
basket shall not apply to any claims for the costs incurred by the Buyer to make
Seller's Information Technology Year 2000 compliant.
9.7 LEGAL EXPENSES. As used in this Article 9, the terms
"Legal Expenses" shall mean any and all fees (whether of attorneys, accountants
or other professionals), costs and expenses of any kind reasonably incurred by
any person identified herein and its counsel in investigating,
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preparing for, defending against, or providing evidence, producing documents or
taking other action with respect to any threatened or asserted claim.
ARTICLE 10
MISCELLANEOUS
10.1 TERMINATION OF AGREEMENT. This Agreement may be
terminated at any time on or before the Closing Date: (a) by the mutual consent
of the Seller and the Buyer; (b) by the Buyer as provided in Section 10.8; (c)
by the Buyer if, on or before the Final Closing Date, the Seller has not
fulfilled the conditions set forth in Section 7.4; (d) by either party hereto if
the Closing has not taken place by December 31, 1998 (the "Final Closing Date");
(e) by the Buyer on or after December 15, 1998 if the Seller has not satisfied
the conditions set forth in Article 7 and the Buyer has satisfied or is prepared
and able (but for Seller's defaults) to satisfy the conditions of Article 6; or
(f) by the Seller on or after December 15, 1998 if the Buyer has not satisfied
the conditions set forth in Article 6 and the Seller has satisfied or is
prepared and able (but for Buyer's defaults) to satisfy the conditions of
Article 7. A termination pursuant to this Section 10.1 shall not relieve any
party of any liability it would otherwise have for a willful breach of this
Agreement. In the event this Agreement is terminated rightfully pursuant to this
Section 10.1, all further obligations of the parties hereunder shall terminate,
except that all obligations for confidentiality under Section 4.4 shall survive
such termination for a period of three years.
10.2 LIABILITIES ON TERMINATION OR BREACH. The parties
acknowledge that the Business is of a special, unique and extraordinary
character. In the event of a material breach by the Seller and the Owner of
their representations, warranties, covenants and agreements under this
Agreement, the Buyer shall be entitled to an injunction restraining any such
breach or threatened breach or to enforcement of this Agreement by a decree
or decrees of specific performance requiring the Seller and the Owner to
fulfill their obligations under this Agreement. In the event of a material
breach by the Buyer of its representations, warranties, covenants and
agreements under this Agreement, the Seller shall be entitled to an
injunction restraining any such breach or threatened breach or to endorsement
of this Agreement by a decree or decrees of specific performance requiring
the Buyer to fulfill its obligation under this Agreement.
10.3 EXPENSES. Each party hereto shall bear all of its
expenses incurred in connection with the transactions contemplated by this
Agreement including, without limitation, accounting and legal fees incurred in
connection herewith; provided, however, the Seller shall be responsible for one
hundred percent (100%) of any sales or transfer taxes arising from the transfer
of the Assets to the Buyer.
10.4 REMEDIES CUMULATIVE. The remedies provided in this
Agreement shall be cumulative and shall not preclude the assertion by any
party hereto of any other rights or the seeking of any other remedies against
the other party hereto.
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10.5 PRESERVATION OF RECORDS. The Buyer will preserve and make
available (including the right to inspect and copy) to the Seller and the Owner,
their attorneys and accountants, for three (3) years after the Closing Date and
during normal business hours, such of the books, records, files, correspondence,
memoranda and other documents transferred pursuant to this Agreement as the
Seller or the Owner may reasonably require in connection with any legitimate
purpose, including, but not limited to, the preparation of tax reports and
returns and the preparation of financial statements. During the three-year
period, the Buyer will not dispose of or destroy any such books, records, files,
correspondence, memoranda or other documents without giving thirty (30) days'
prior written notice to the Seller and the Owner, to permit the Seller and the
Owner, at its expense, to examine, duplicate or take possession of all or part
thereof.
10.6 NON-ASSIGNABLE CONTRACTS. Nothing contained in this
Agreement shall be construed as an assignment or an attempted assignment of any
Contract which is by law non-assignable without the consent of the other party
or parties thereto, unless such consent shall be given. The Seller and the Owner
shall use their best efforts (and the Buyer shall assist the Seller and the
Owner) both after and prior to the Closing to obtain such consents to the
assignment or transfer of Contracts to vest in the Buyer all of the Seller's
right, title and interest in such Contracts, in all cases in which such consent
is required for assignment or transfer. If such consent is not obtained, the
Seller and the Owner shall cooperate with the Buyer in any arrangements
necessary or desirable, on commercially reasonable terms, to provide for the
Buyer and benefits and to have the Buyer assume the burdens arising after the
closing thereunder, including, without limitation, enforcement for the benefit
of the Buyer, and assumption by the Buyer of the costs of enforcing, any and all
rights of the Seller thereunder against the other party thereto arising out of
the cancellation thereof by such other party or otherwise.
10.7 FURTHER ASSURANCES. From time to time before, on and
after the Closing Date, each party hereto will execute all such instruments and
take all such actions as any other party, being advised by counsel, shall
reasonably request, without payment of further consideration, in connection with
carrying out and effectuating the intent and purpose hereof and all transactions
and things contemplated by this Agreement including, without limitation, the
execution and delivery of any and all confirmatory and other instruments in
addition to those to be delivered on the Closing Date, and any and all actions
which may reasonably be necessary or desirable to complete the transactions
contemplated hereby. The parties shall cooperate fully with each other and with
their respective counsel and accountants in connection with any steps required
to be taken as part of their respective obligations under this Agreement.
10.8 RISK OF LOSS. The risk of loss, damage or destruction to
any of the Assets from fire or other casualty or cause shall be borne by the
Seller at all times prior to the Closing. In the event of any such loss, damage
or destruction, the proceeds of any claim for any loss, payable under any
insurance policy with respect thereto, shall be used to repair, replace or
restore any such property to its former condition, subject to the conditions
stated below. It is expressly understood and agreed that, in the event of any
loss or damage to any of the Assets from fire, casualty or other causes before
the Closing, the Seller shall notify the Buyer of same in writing immediately.
Such
Page 38
notice shall specify with particularity the loss or damage incurred, the
cause thereof (if known or reasonably ascertainable) and the insurance coverage.
In the event that the damaged property is not completely repaired, replaced or
restored on or before the Closing Date, the Buyer at its sole option: (a) may
elect to postpone Closing until such time as the property has been completely
repaired, replaced or restored to the reasonable satisfaction of the Buyer if
the repair, replacement or restoration can be accomplished within one (1) month
following the date of the loss or damage or the Final Closing Date, whichever is
the earlier and (b) may elect to consummate the Closing and accept the property
in its then condition, in which event the Seller shall pay to the Buyer all
proceeds of insurance and assign to the Buyer the right to any unpaid proceeds;
or (c) terminate this Agreement without liability to the Seller.
10.9 EMPLOYEES. Except as provided otherwise in this Section
10.9, the Seller shall terminate all of its employees and information technology
consultants on the Closing Date and pay all termination and severance costs in
connection with such termination, except to the extent any such cost is
reflected as a liability on the Closing Date Balance Sheet and constitutes an
Assumed Liability. The Buyer presently intends to offer employment to all of the
employees and information technology consultants of the Seller that are so
designated on SCHEDULE 2.18.7 ("ASSUMED EMPLOYEES") on the Closing Date as
employees or information technology consultants, as the case may be, to be
offered employment by the Seller. The Seller acknowledges and agrees that the
foregoing representation by the Buyer does not require the Buyer to continue to
employ any such Assumed Employee for any specific periods of time after the
Closing Date other than as specifically provided otherwise in the Management
Agreements with respect to the Management Group. The Buyer will give the
Seller's employees who are employed by the Buyer credit for accrued vacation and
sick leave to the extent such costs are reserved as a liability in the Closing
Date Balance Sheet or treated by the parties as a reduction to the Closing Book
Value under Section 1.4.1.3(iv). The Buyer shall furnish 1999 W-2s to the
Seller's employees who are employed by the Buyer for the combined 1998 earnings
from the Seller (paid before the Closing Date) and the Buyer, provided that the
Seller shall provide the Buyer with accurate payroll and withholding records.
Further, the Seller shall withhold all amounts required by law from its
employees and pay all required payroll taxes (FICA, FUTA, Medicare, income tax
and the like) for the compensation it pays such employees during 1998 and file
all returns due for any period before the Closing Date with respect to employee
income tax withholding, social security, Medicare, unemployment taxes and other
similar taxes and charges, in compliance with the tax withholding provisions of
the Code and other applicable federal, state and local laws.
ARTICLE 11
GENERAL PROVISIONS
11.1 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, this Agreement shall be binding on and inure to the benefit of
the parties hereto, and their respective representatives, successors and
assigns. Neither the Seller nor the Owner may assign any of their
Page 39
rights or delegate any of their duties hereunder without the prior written
consent of the Buyer. The Buyer may freely assign some or all of its rights and
obligations hereunder to any entity controlled by or under common control with
the Buyer, as long as the Buyer remains fully obligated hereunder.
11.2 AMENDMENT; WAIVERS. The terms, covenants,
representations, warranties and conditions of this Agreement may be changed,
amended, modified, waived, discharged or terminated only by a written instrument
executed by the party waiving compliance. The failure of any party at any time
or times to require performance of any provision of this Agreement shall in no
manner affect the right of such party at a later date to enforce the same. No
waiver by any party of any condition or the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or of the
breach of any other provision, term, covenant, representation or warranty of
this Agreement.
11.3 NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
(which shall include notice by telex or facsimile transmission) and shall be
deemed to have been duly made and received when personally served, or when
delivered by Federal Express or a similar overnight courier service, expenses
prepaid, or, if sent by telex, graphic scanning or other facsimile
communications equipment, delivered by such equipment, addressed as set forth
below:
(a) If to the Seller or the Owner, then to:
Xx. Xxxxxxxx Xxxxx
000 Xxxxxxxxx Xxx
Xxxxx Xxxx, XX 00000
Telecopy Number:
with a copy, given in the manner
prescribed above, to:
Xxxxxxxxx Traurig
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, XX 00000
Telecopy Number: (000) 000-0000
Attn: Xxx X. Xxxxx, Esquire and Xxxxxxx
Xxxxxxx, Esquire
Page 40
(b) If to the Buyer then to:
Metro Information Services of Northern
California, Inc.
Reflections II, Third Floor
000 Xxxxxx Xxx Xxxxx
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Telecopy Number: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxx, Vice
President
with a copy, given in the manner
prescribed above, to:
Xxxxx & Stant, P.C.
Suite 900
One Columbus Center
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Telecopy Number: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esquire
Any party may alter the address to which communications are to be sent by giving
notice of such change of address in conformity with the provisions of this
Section providing for the giving of notice.
11.4 CAPTIONS. The captions of Articles and Sections of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any of the provisions of this Agreement.
11.5 GOVERNING LAW. THIS AGREEMENT AND ALL QUESTIONS RELATING
TO ITS VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.
11.6 ENTIRE AGREEMENT. This Agreement and the Schedules hereto
and thereto and the other documents delivered hereunder constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and supersede all prior agreements, understandings,
inducements or conditions, express or implied, oral or written, relating to the
subject matter hereof. The express terms hereof control and supersede any course
of performance and/or usage of trade inconsistent with any of the terms hereof.
11.7 EXECUTION: COUNTERPARTS AND FACSIMILE. This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original as against any party
Page 41
whose signature appears thereon, and all of which shall together constitute one
and the same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as the signatories. Delivery of an
executed counterpart of a signature page to this Agreement by facsimile shall be
as effective as delivery of a manually executed counterpart of this Agreement.
11.8 GENDER AND NUMBER. Where appropriate to the context,
pronouns of other terms expressed in one number or gender will be deemed to
include all other numbers or genders. The word "person" will include one or more
individuals, corporations, firms, partnerships, entities or associations. The
use of a word in one tense will include the other tenses, where appropriate to
the context.
11.9 THIRD-PARTY BENEFICIARIES. This Agreement is intended to
benefit only the parties to this Agreement, their successors and permitted
assigns. No other person, entity, enterprise or association is an intended or
incidental beneficiary of this Agreement.
11.10 SELLER'S NAME. Immediately after the Closing, Seller
shall adopt and file with the California Secretary of State an Amendment to its
Articles of Incorporation changing its name from The Xxxxx Group to another name
approved by the Buyer, which approval will not be unreasonably withheld.
Page 42
IN WITNESS WHEREOF, the parties have caused this Stock
Purchase Agreement to be duly executed by their duly authorized signatories, all
as of the day and year first above written.
SELLER:
THE XXXXX GROUP, a California
corporation
By: /s/ Xxxxxxxx Xxxxx
---------------------------------
Its: President
---------------------------
OWNER:
/s/ Xxxxxxxx Xxxxx
------------------------------------
XXXXXXXX XXXXX
BUYER:
METRO INFORMATION SERVICES
OF NORTHERN CALIFORNIA, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Its: President
---------------------------
METRO:
METRO INFORMATION SERVICES, INC.
By: /s/ Xxxx X. Xxxx
---------------------------------
Its: President
---------------------------
Page 43
LIST OF SCHEDULES AND EXHIBITS
TO ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 30, 1998
BY AND BETWEEN
THE XXXXX GROUP
("SELLER")
AND
XXXXXXXX XXXXX
("OWNER")
AND
METRO INFORMATION SERVICES
OF NORTHERN CALIFORNIA, INC.
("BUYER")
LIST OF SCHEDULES
1. Schedule 1.1.1 Tangible Personal Property
2. Schedule 1.1.2 Real Property
3. Schedule 1.1.3-1 Client Contracts
4. Schedule 1.1.3-2 Vendor Contracts
5. Schedule 1.1.3-3 Other Contracts
6. Schedule 1.1.5 Intangible Property
7. Schedule 1.1.10 Proposals
8. Schedule 1.2.1 Excess Personal Property
9. Schedule 1.2.6 Employee Personal Property
10. Schedule 1.3.1 Security Interests
11. Schedule 1.4.3 Allocation of Purchase Price
12. Schedule 2.1 Articles of Incorporation and Bylaws
13. Schedule 2.6 Breach
14. Schedule 2.7.1 Financial Statements
15. Schedule 2.7.2 Accounts Receivable
16. Schedule 2.8 Liabilities
17. Schedule 2.9 Taxes
18. Schedule 2.10 Licenses
19. Schedule 2.11 Business Operations
20. Schedule 2.13.3 Exceptions to Assets
21. Schedule 2.15 Environmental Matters
22. Schedule 2.17 Insurance
23. Schedule 2.18.1 Work Agreements
24. Schedule 2.18.2 Employee Manuals
25. Schedule 2.18.4 Employee Plans
26. Schedule 2.18.7 Employee List
27. Schedule 2.18.8 Independent Contractors
28. Schedule 2.19 Litigation
29. Schedule 2.20 Intangible Property Exceptions
30. Schedule 2.23 Conflicting Interests
31. Schedule 2.25 Year 2000 Compliance
32. Schedule 4.6 Consents
33. Schedule 8.1.5 Management Group
34. Schedule 8.1.6 Assumed Liabilities
35. Schedule 8.1.7 Closing Accounts Receivable
36. Schedule 8.2.7 Allocation of Stock Options
LIST OF EXHIBITS
1. Exhibit A Escrow Agreement
2. Exhibit B Note
3. Exhibit C Letter dated Nov. 23, 1998 from
Xx. Xxxx
4. Exhibit D Noncompetition Agreement of
Xxxxxxxx Xxxxx
5. Exhibit E Noncompetition Agreement of
Xxxxxx Xxxxx
6. Exhibit F Employment Agreement of Xxxx Xxxxxx
7. Exhibit G Employment Agreement of
Xxxxxxxx Xxxxx
