PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "AGREEMENT") is entered into, by and
among Diversified Corporate Resources, Inc., a Texas corporation ("DCRI"),
MAGIC Northeast, Inc., a Delaware corporation ("Buyer"), Xxxxxx X. Xxxxxx, an
individual ("Xxxxxx"), and Xxxxxx Xxxxxx, an individual (Xxxxxx Xxxxxx and
Xxxxxx are sometimes individually referred to herein as the "Shareholder" and
are sometimes collectively referred herein to as the "Shareholders").
WHEREAS, Shareholders own all of the issued and outstanding shares
of capital stock of Mountain, Ltd., a Maine corporation ("Mountain"); and
WHEREAS, Mountain is engaged in the business of providing staffing
services (the "BUSINESS"); and
WHEREAS, DCRI is engaged in the business of providing staffing
services and has formed Buyer as a wholly-owned subsidiary to acquire the
Business; and
WHEREAS, the Shareholders desire to sell to Buyer, and Buyer desires
to purchase from the Shareholders, on the terms and conditions hereinafter
set forth, all of the issued shares of the capital stock of Mountain (the
"TRANSACTION"); and
WHEREAS, DCRI has agreed to guarantee all obligations of Buyer
hereunder; and
WHEREAS, the Shareholders have agreed to indemnify DCRI and Buyer
against certain Losses (as hereinafter defined), and to execute certain
related agreements in connection herewith.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, DCRI, Buyer, and the Shareholders hereby agree
as follows:
ARTICLE 1
PURCHASE AND SALE OF STOCK
1.1 AGREEMENT TO PURCHASE AND SELL. On the terms and subject to the
conditions of this Agreement, Shareholders agree to sell, convey, transfer,
assign and deliver to Buyer, free and clear of all liens, claims and
encumbrances, and Buyer agrees to purchase from Shareholders, all of the
issued and outstanding shares of capital stock of Mountain (the "Mountain
Stock").
1.2 ASSETS. Subject to SECTION 1.3, the assets of Mountain (herein
collectively referred to as the "Assets" or the "Assets of Mountain") shall
consist of all assets owned by Mountain as of the Closing (as defined below)
and used in connection with the Business and that are described as follows:
(a) The real estate leasehold interests of Mountain
(collectively, the "LEASED PROPERTIES"), copies of which leases are attached
hereto as SCHEDULE 1.2(a) (the "REAL PROPERTY LEASES").
(b) All of the furniture, fixtures, equipment (including but
not by way of limitation, computers, printers, telephones, facsimile machines
and copiers) machinery, apparatus, appliances, vehicles, implements and all
other tangible personal property of every kind and description (the
"EQUIPMENT") of Mountain, including without limitation the assets listed in
SCHEDULE 1.2(b).
(c) All right, title and interest of Mountain in, to and
under the contracts and agreements described on SCHEDULE 1.2(c) attached
hereto (the "ASSUMED CONTRACTS") and all of the rights (including rights of
refund and offset), privileges, claims, causes of action and options of
Mountain relating or pertaining to the Assumed Contracts or any thereof.
(d) All right, title and interest of Mountain in, to and
under all permits and licenses relating to the Business or all or any of the
Assets.
(e) All of the books, records, papers and instruments of
whatever nature and wherever located, whether stored in or readable or
accessible by computer or otherwise of Mountain, relating to the Business and
the Assets, including, without limitation, accounting and financial records,
sales records, customer data, supplier data, sales literature and other sales
aids, salary records, contract forms, technical data, graphic materials,
pricing and information manuals and customer files.
(f) All right, title and interest of Mountain in and to all
prepaid rentals and other prepaid expenses, bonds, deposits and financial
assurance requirements relating to any of the Assets or the Business.
(g) All insurance proceeds and insurance claims of Mountain
relating to all or any part of the Assets or the Business.
(h) The benefit of and the right to enforce the covenants
and warranties, if any, that Mountain is entitled to enforce with respect to
the Assets.
(i) All of the rights, if any, of Mountain, in computer
programs and computer software, along with license rights pertaining thereto,
to the extent relating or pertaining to the Business and or the Assets.
(j) All of the rights, title and interest of Mountain in and
to the name "Mountain, Ltd.", and each of the names listed in Schedule
1.2(j), and all names derived from or bearing a resemblance to such names;
and all related logos and trade names including, without limitation, all of
the corporate, copyright, trademark and service xxxx rights and interests in
such names, logos and trade names, and goodwill associated therewith.
(k) All customer lists, patents, trademarks, trade names,
service marks, copyrights, processes, formulas, trade secrets, proprietary
and technical information, know-how, other trade rights and other intangible
assets, together with all rights to, and applications, licenses and
franchises for, any of the foregoing, relating to the Business, including,
but not limited to, those listed in SCHEDULE 1.2(k).
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(l) All right, title and interest of Mountain in, to and
under all rights, privileges, claims, causes of action and options relating
or pertaining to the Business and the Assets.
(m) All of Mountain's accounts receivable from customers and
others and in and to any income and payment due to Mountain arising out of
the Business, all as more particularly described in SCHEDULE 1.2(m);
provided, that from the date of SCHEDULE 1.2(m) through the Closing such
accounts receivable may be reasonably increased or decreased in the ordinary
course of business.
(n) All of Mountain 's cash on hand and in its bank
accounts, marketable securities, cash equivalents and short-term investments.
(o) All other assets owned by Mountain and used in
connection with the Business other than Excluded Assets.
1.3 ASSETS NOT TO BE CONVEYED. Notwithstanding anything to the
contrary contained herein, the Assets shall not include (and the following
shall be transferred to the Shareholders): (a) the assets listed on SCHEDULE
1.3 attached hereto, (b) if and to the extent Mountain's net working capital
(current assets of Mountain less current and other monetary obligations of
Mountain) exceeds $1,000,000.00 (the "Minimum Amount of Working Capital") on
the Closing Date (as herein defined), the Shareholders shall be entitled to
retain cash equal to the net working capital (as defined) in excess of the
Minimum Working Capital, (c) all claims of Mountain for refunds of any income
taxes (whether federal, state, local, foreign or other) applicable to periods
prior to the and Closing Date (as herein defined), and (d) any rights
accruing as a result of, or any proceeds paid or payable in accordance with,
this Agreement (collectively, the "EXCLUDED ASSETS").
The parties hereto acknowledge and agree that the amount payable to
Shareholders pursuant Section 1.3 shall be paid to Shareholders within the
later of forty-five (45) days of the Closing Date (as herein defined), or the
date received by Mountain.
1.4 WORKERS COMPENSATION MATTERS. The parties hereto acknowledge and
agree that (a) in the state of Maine workers compensation insurance is
estimated and paid in advance with subsequent obligations to pay, or rights
to receive refunds, once a final determination is made as to actual premiums
owed, (b) if Mountain owes additional premiums for workers compensation
insurance for any period of time prior to the Closing Date, such obligations
shall be the responsibility of the Shareholders, and (c) if Mountain is
entitled to a refund, due to overpayment of workers compensation insurance
during the period of time prior to the Closing Date, upon receipt such refund
shall be paid to the Shareholders.
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ARTICLE 2
PURCHASE PRICE
2.1 PURCHASE PRICE.
(a) The total purchase price (the "PURCHASE PRICE") shall be
the sum of the following: (i) cash payment at the Closing in the amount of
$2,428,769 million, (ii) three (3) installment payments (the "Installment
Payments") each in the amount of $1,178,490 on October 1 of each of the years
2000, 2001, and 2002, subject to adjustment as provided in SECTIONS 2.1(b)
and 2.1(c) hereof, (iii) 75,000 shares (the "DCRI Stock") of Common Stock,
$.10 par value, of DCRI (the "Common Stock") and (iv) the payment by Buyer of
those liabilities and obligations of Mountain listed on SCHEDULES 1.2(c) AND
2.1(A) (the liabilities and obligations listed on SCHEDULES 1.2(c) AND 2.1(a)
being referenced to as the "ASSUMED LIABILITIES").
(b) During any year of the three year period (the
"Installment Period"), from October 1, 1999, to September 30, 2002 (each year
for purposes of this SECTION 2.1(b) shall begin on October 1 and end
September 30), the Installment Payment for that Installment Period shall be
reduced (to the extent and in the manner herein provided) if Mountain's
EBITDA for the Installment Period involved (the "Applicable EBITDA"), is not
equal to at least $1,094,040 ("1998 EBITDA") as below provided. Except as
otherwise provided herein, the amount of the reduction each year (i) shall be
a maximum of twenty-five percent (25%) of the amount of the Installment
Payment payable, and (ii) and if the Applicable EBITDA is less than
$1,094,000, the amount of Installment Payment involved to be payable shall be
determined by multiplying the Installment Payment payable by a percentage
determined by dividing the Applicable EBITDA by the 1998 EBITDA. Provided,
however, if Mountain's contract with Xxxx Atlantic (the "Xxxx Atlantic
Contract"), a copy of which is attached hereto as SCHEDULE 2.1(b), is not
renewed by December 31, 1999, or within a reasonable period of time
thereafter, or if Mountain's revenues from services provided to Xxxx
Atlantic, during any year of the Installment Period, decline by fifty percent
(50%) or more in comparison to the level of Mountain's revenues from services
provided to Xxxx Atlantic during 1998, the aforesaid maximum amount of
reduction of each Installment Payment shall be increased from twenty-five
percent (25%) to fifty percent (50%).
(c) Recognizing that determination of Applicable EBITDA will
extend beyond the dates each Installment Payment is due and payable, DCRI
shall make a reasonable estimate of Mountain's Applicable EBITDA and make an
Installment Payment based upon such estimate; once the actual amount of the
Applicable EBITDA of Mountain is determined, (i) DCRI shall make an
additional payment to the Shareholders if the Installment Payment made was
less than what should have been paid, or (ii) the Shareholders shall pay to
Buyer, within thirty (30) days from the date that Buyer provides the
Shareholders with written notice as to the determined of, and the amount of,
Applicable EBITDA, if and to the extent that any Installment Payment made
exceeds what should have been paid based upon the actual amount of the
Mountain's Applicable EBITDA.
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(d) For purposes of this Agreement, EBITDA shall mean
earnings before interest, taxes, depreciation and amortization as determined
by DCRI in accordance with generally accepted accounting principles as
consistently applied. For purposes of calculating Mountain's EBITDA, such
calculation shall exclude (i) the revenues and profits from any business
operations other than those of Mountain unless and to the extent that DCRI
and Shareholders mutually agree that the revenues and profits from any other
business operations are to be included in determining EBITDA, and (ii) any
corporate overhead allocation from DCRI.
(e) The parties agree that (i) DCRI shall not be deemed to
be in default under the terms of this Agreement if (A) the estimate of
Applicable EBITDA of Mountain is not unreasonable, and (B) if the actual
amount of Applicable EBITDA of Buyer is determined within forty-five (45)
days from the date an Installment Payment is initially due and payable, (ii)
DCRI shall thereafter have the right to make adjustments with respect to the
Applicable EBITDA of Mountain if such adjustments are determined to be
appropriate by DCRI in connection with its annual audit by a firm of
independent public accountants, (iii) DCRI is obligated to provide to the
Shareholders a detailed schedule of information and extraordinary
adjustments, if any, each time (A) DCRI makes an Installment Payment to the
Shareholders, (B) makes a final determination of actual Applicable EBITDA of
Mountain, or (C) makes any adjustments to Applicable EBITDA of Mountain, (iv)
the Shareholders and their designated representatives shall have the right to
review and audit each determination of actual Applicable EBITDA of Mountain
and any subsequent adjustments to actual Applicable EBITDA of Mountain,
provided however, that such review and or audit must be initiated within
sixty (60) days from the date of DCRI providing to the Shareholders a
determination of Applicable EBITDA of Mountain, and must be completed within
a reasonable period of time thereafter, (v) DCRI and Buyer shall cooperate
with the Shareholders and their designated representatives in the connection
with the process of the Shareholders reviewing or auditing a determination by
DCRI related to Applicable EBITDA of Mountain, and (vi) if DCRI and Mountain
are unable to resolve within thirty (30) days any disputes as to actual
Applicable EBITDA of Mountain or adjustments thereto, such disputes shall be
resolved by arbitration pursuant to the arbitration provisions of this
Agreement.
(f) Notwithstanding anything herein to the contrary, up to
fifty percent (50%) of each Installment Payment may be paid, at the exclusive
option of Buyer, in shares of Common Stock (which shall be valued at the
market value of such shares, as herein defined) and the balance of each
Installment Payment shall be in cash. For purposes of determining the portion
of an Installment Payment paid for with shares of Common Stock, the market
value of each share of Common Stock shall be the average closing price of
such stock on the Amex (or the NASDAQ if not then listed on the Amex) during
the first fifteen (15) business days of the month preceding the month in
which the Installment Payment is due and payable.
In the event that Buyer elects to issue to Buyer shares of Common
Stock, one of the following must be applicable: (i) Buyer shall have
delivered to Shareholders an opinion of Buyer's counsel that the holding
period under Rule 144 for such shares of Common Stock, under the applicable
Federal and State securities laws, commenced as of the Closing Date, or (ii)
DCRI shall have agreed to register to resale of such shares registered by
DCRI under the Securities Act of 1933, as amended.
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2.2 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Shareholders and/or the Assets in the manner set forth in
SCHEDULE 2.2; provided that part of the Purchase Price shall be allocated in
the manner set forth in SCHEDULE 2.2 to Xxxxxx and Xxxxxx Xxxxxx as
compensation paid to such individuals in consideration of their respective
covenants regarding noncompetition. The parties agree (a) that the
Transaction may be treated by Buyer as a purchase of the Assets pursuant to
Section 338 of the Internal Revenue Code of 1986, as amended (the "CODE"),
(b) Shareholders and Mountain agree to make the Code Section 338 (h)(10)
election, and (c) if the Transaction is treated by Buyer as a purchase of the
Assets, (i) the parties hereto agree to comply with all of the requirements
of Section 1060 of the Code, and (ii) that, without the consent of all
parties, no party will make any representation to any other party as to the
allocation of the Purchase Price to the Assets set forth in SCHEDULE 2.2 that
is at variance with the allocation set forth on such schedule or take any
position on their income tax returns or any other document that is
inconsistent with such allocation.
In the event there is an unfavorable determination by the Internal
Revenue Service ("IRS") that this Transaction cannot be treated by
Shareholders as an installment sale, upon the written request of
Shareholders, Buyer shall advance to Shareholders from the next Installment
Payment(s) payable, an amount equal to the federal income taxes payable by
Shareholders as a result of the transaction not qualifying as an installment
sale. In such event, the amount payable to the Shareholders shall be reduced
by an amount equal to eight percent (8%) of the advance payment requested by
the Shareholders. Buyer shall not be obligated to make any advance pursuant
hereto unless Buyer and DCRI agree in writing to the Shareholders agreeing to
compromise or resolve any tax dispute with the IRS on the installment tax
issue, or agreeing to treat the Transaction other than as an installment sale.
ARTICLE 3
CLOSING
3.1 TIME AND PLACE OF CLOSING. The sale and purchase of the Mountain
Stock pursuant to this Agreement (the "CLOSING") shall take place on August
6, 1999, at the offices of Van Meer & Xxxxxxxx, located at 00 Xxxx Xxxxx Xx.,
Xxxxx Xxxxxxxx, XX. 00000, or at such other time and place as the parties may
agree; but in no event later than September 15, 1999. The date of Closing is
referred to in this Agreement as the "CLOSING DATE." The parties agree that
time is of the essence with respect to the foregoing and all other time
periods set forth herein.
3.2 ACTIONS TO BE TAKEN AT CLOSING BY SHAREHOLDERS. At the Closing
and subject to the terms and conditions hereof, the Shareholders agree to
take the following actions, all of which shall constitute conditions
precedent to DCRI's and Buyer's obligations to close hereunder:
(a) Execute and deliver to Buyer the following:
1. Bills of sale or stock power assignments
executed by the Shareholders conveying to Buyer all of the Mountain Stock
(the "BILLS OF SALE").
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2. Such other agreements, documents and/or
instruments, including such specific assignments, bills of sale and other
instruments of conveyance and transfer, in form and substance acceptable to
Buyer and to vest in Buyer title thereto free and clear of all liens, claims
and encumbrances.
(b) Deliver to Buyer the following:
1. Certificate of the Secretary of the State
of Maine, dated as of a recent date, duly certifying as to the existence
and good standing of Mountain as a corporation under the laws of the State of
Maine.
2. Certificates duly executed by the Secretary or
Assistant Secretary of Mountain pursuant to which such officer shall certify
(i) the incumbency and true signatures of those officers of Mountain duly
authorized to act on its behalf in connection with the Transaction and this
Agreement and to execute and deliver the other agreements and documents
contemplated hereby on behalf of Mountain, and (ii) that the copy of the
Articles of Incorporation and Bylaws of Mountain attached to such certificate
are true and correct and such Articles of Incorporation and Bylaws have not
been amended except as reflected in such copy.
3. Original copies of all Assumed Contracts and all
amendments, supplements or modifications thereto.
4. All of Mountain's books and records constituting
a part of the Assets.
5. The certificates of Shareholders referred to in
SECTION 9.1 and SECTION 9.2.
6. Possession or constructive possession of the
Assets and access to and keys for any properties related to the Business.
7. Such documents necessary to release the Assets
from those liens, claims and encumbrances, which the parties agree are to be
released; such documents shall be in form and substance satisfactory to Buyer
and to Buyer's counsel.
8. To the extent agreed to by the parties, UCC-3
Termination Statements with respect to all recorded UCC-1 Financing
Statements affecting the Assets.
9. The legal opinion referred to in SECTION 9.5.
10. Cause Xxxxxx to enter into an employment
agreement with Buyer (the "XXXXXX EMPLOYMENT AGREEMENT"), substantially in
the form of SCHEDULE 3.2(a)(10) hereto.
11. A document pursuant to SECTION 9.10 of this
Agreement.
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12. All other documents required to be executed and
delivered by the Shareholders pursuant to this Agreement.
(c) Perform all other obligations required to be performed
at Closing by the Shareholders pursuant to this Agreement.
3.3 ACTIONS TO BE TAKEN AT CLOSING BY XXXXXX. At the Closing,
subject to the terms and conditions hereof, Xxxxxx shall execute and deliver
to Buyer the Xxxxxx Employment Agreement, which shall constitute conditions
precedent to DCRI's and Buyer's obligations to close hereunder.
3.4 ACTIONS TO BE TAKEN AT CLOSING BY BUYER. At the Closing, subject
to the terms and conditions hereof, DCRI or Buyer shall take the following
actions, all of which shall constitute conditions precedent to the
obligations of each Shareholder to close hereunder:
(a) Deliver to Shareholders the following:
1. A certificate duly executed by the Secretary or Assistant
Secretary of each of DCRI and Buyer pursuant to which such officer shall
certify (i) the due adoption by the Board of Directors of DCRI and Buyer of
corporate resolutions attached to such certificate authorizing the execution
and delivery of this Agreement and the other agreements and documents
contemplated hereby and the taking of all actions contemplated hereby and
thereby, and (ii) the incumbency and true signatures of those officers of
DCRI and Buyer duly authorized to act on their respective behalf, in
connection with the Transaction and this Agreement and to execute and deliver
this Agreement and the other agreements and documents contemplated hereby on
behalf of DCRI and Buyer.
2. The certificate of Buyer referred to in SECTION
10.1 and SECTION 10.2.
3. The legal opinion referred to in SECTION 10.4.
4. To enter into the Xxxxxx Employment Agreement.
5. All other documents required to be executed and
delivered by DCRI or Buyer pursuant to this Agreement.
(b) Perform all other obligations required to be performed
at Closing by DCRI or Buyer pursuant to this Agreement.
3.5 SCHEDULES. Each of the parties hereto acknowledge that (a) one
or more of the schedules to be attached to this Agreement (collectively
referred to as the "Schedules") have not been completed at the time of
execution of this Agreement, and (b) each of the parties shall use their best
efforts to complete all of the Schedules and to satisfy any of the objections
thereto of any party to this Agreement.
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3.6 AUDIT. Prior to the Closing Date, the Shareholders shall allow
the auditing firm designated by Buyer to perform an audit of the financial
statements of Mountain for the years 1996, 1997 and 1998. The cost of such
audit shall be the responsibility of (a) Buyer if this Agreement is closed
(by Shareholders selling the Mountain Stock to Buyer) as anticipated by the
terms of this Agreement, and (b) the Shareholders and Buyer, in equal amounts
subject to the understanding that the maximum amount to be paid by the
Shareholders shall be $25,000.00, if this Agreement is not closed (by the
Shareholders selling the Mountain Stock to Buyer) on or before September 15,
1999.
ARTICLE 4
PERSONNEL AND EMPLOYEE BENEFITS
4.1 PERSONNEL. Buyer shall, after the Closing, cause Mountain to
continue employment on a temporary or permanent basis certain of the
employees of Mountain (collectively, the "EMPLOYEES"). Shareholders shall
encourage the Employees to continue in the employment of Mountain, and
Shareholders shall not, directly or indirectly, solicit the employment of, or
seek to retain the services of, any such Employees without the prior written
consent of Buyer.
4.2 EMPLOYEE BENEFITS. Buyer expressly is not required to maintain
any other employee benefit plan, contract, practice, program, policy or
arrangement of any kind of Mountain, including, without limitation, any stock
option, bonus, compensation, retirement, profit sharing, vacation, medical,
disability benefit, life insurance or severance pay plan, contract, practice,
program, policy or arrangement and shall have no liability whatsoever under
any such employee benefit plan, contract, practice, program, policy or
arrangement. It is contemplated that those employees who continue to be
employees of Mountain shall be allowed to participate in the 401(k) Plan of
DCRI, and to roll into such plan the contributions previously made by such
employees to the 401 (k) Plan of Mountain.
Notwithstanding the foregoing, Buyer agrees to (a) maintain a cash
bonus plan for the employees of Mountain, (b) assume responsibility for the
accrued vacation time of all employees of Mountain other than the
Shareholders, which is set forth in SCHEDULE 4.2(c) to this Agreement, and
(c) continue in place, until at least December 31, 1999, the group health
plan of Mountain which is described in SCHEDULE 4.2 to this Agreement. Unless
Buyer and Xxxxxx hereafter agree to the contrary in writing, all bonus
compensation payable by Buyer to Xxxxxx is as set forth in the Xxxxxx
Employment Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each Shareholder, jointly and severally, represents and warrants to
DCRI and Buyer as follows:
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5.1 ORGANIZATION AND STANDING. Mountain is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Maine, and of each jurisdiction where Mountain owns property or is
required to be authorized to do business.
5.2 AUTHORITY. Mountain has full power and authority to own and
lease its Assets and to conduct the Business as it is now being conducted.
Shareholders have the full power and authority to execute and deliver this
Agreement and the other agreements and documents contemplated hereby and to
carry out the terms and obligations hereof and thereof. Shareholders have
taken all action necessary to authorize the execution, delivery and
performance of this Agreement and the other agreements and documents
contemplated hereby.
5.3 EXECUTION AND DELIVERY. This Agreement has been, and the other
agreements and documents contemplated hereby to be executed by Shareholders
have been, or at Closing will be, duly executed by the Shareholders, and each
constitutes the valid and binding obligation of Shareholders, enforceable in
accordance with their respective terms and conditions.
5.4 CAPITALIZATION. The Shareholders own all of the issued and
outstanding capital stock of Mountain, free and clear of all liens, claims,
encumbrances, equities and proxies. Each outstanding share of capital stock
of Mountain has been legally and validly issued and is fully paid and
nonassessable. There exist no options, warrants, subscriptions or other
rights to purchase, or securities convertible into or exchangeable for, any
of the authorized or outstanding securities of Mountain. No shares of capital
stock of Mountain are owned by Mountain in treasury or otherwise have been
issued or disposed of in violation of the preemptive rights of any of the
Shareholders. SCHEDULE 5.4 reflects the ownership by the Shareholders of the
Mountain Stock.
5.5 CORPORATE RECORDS. The copies of the Articles of Incorporation
and all amendments thereto and the Bylaws of Mountain that have been
delivered to DCRI are true, correct and complete copies thereof. The minute
books of Mountain, copies of which have been delivered to DCRI, contain
accurate minutes of all meetings of, and accurate consents to all actions
taken without a meeting by, the Boards of Directors (and any committees
thereof) and the stockholders of Mountain since the incorporation of Mountain.
5.6 COMPLIANCE WITH LAWS, PERMITS AND INSTRUMENTS. Neither
Shareholders nor Mountain are in violation of or default under, and the
execution and delivery of this Agreement and the other agreements and
documents contemplated hereby by Shareholders and Mountain will not violate
or be in conflict with or result in the creation or imposition of any lien,
charge or encumbrance under (a) any material provision of any Assumed
Contract or any other contract or agreement to which Shareholders or Mountain
is a party or by which any of the Assets are bound, (b) any provision of the
charter or Bylaws of Mountain, (c) any federal, state, foreign or local law,
statute, regulation or ordinance applicable to the Business or any of the
Assets, (d) any provision of the permits or licenses affecting or relating to
the Assets or the Business, or (e) any of the software license agreements
which Mountain have with any third party providers. To the knowledge of the
Shareholders, Mountain is in compliance
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in all material respects with all federal, state or local laws, statutes,
regulations or ordinances governing or applicable to the Business or the
Assets.
5.7 CONSENTS. Except for the consents specified in SCHEDULE 5.7
hereto (all of which have been obtained or will have been obtained prior to
Closing), no approval, consent, authorization or action of or filing with any
governmental body or other third party is required on the part of the
Shareholders in connection with (a) the execution, delivery or performance by
the Shareholders of this Agreement or the other agreements and documents
contemplated hereby, or (b) the consummation by the Shareholders of the
Transaction.
5.8 ASSETS; TITLE TO ASSETS; LIENS. Except for the Excluded Assets
described in SECTION 1.3, the Assets described SECTION 1.2 hereof are the
only assets, properties, rights and interests used by the Mountain in
connection with the Business. The Assets constitute all of the assets,
properties, rights and interests necessary to conduct the Business in
substantially the same manner as conducted by Mountain prior to the Closing
Date. Except with respect to the Excluded Assets described in SECTION 1.3, no
officer, director, shareholder or employee of Mountain have retained any
material interest in any property, real or personal, tangible or intangible,
used or pertaining to Business. Mountain has good and marketable title to all
of the Assets, free and clear of any mortgages, liens, security interests,
pledges, claims and other encumbrances of any kind or nature whatsoever
(collectively, the "LIENS"), except for those permitted encumbrances
described on SCHEDULE 5.8 hereto. Except as described in SCHEDULE 5.8 hereto,
no mortgage, financing statement or similar document that names Mountain as
debtor and that covers any of the Assets is on file in any jurisdiction and
Mountain has not signed any presently effective security agreement
authorizing any secured party thereunder to file any such financing
statement. The execution, delivery and performance of this Agreement by
Mountain will not result in the creation or imposition of any Lien on any of
the Assets.
At the time of Closing, Mountain shall have at least the Minimum
Amount of Working Capital.
5.9 CONDITION OF ASSETS. The Equipment (other than obsolete
equipment that is neither being used in the Business nor necessary for the
conduct of the Business consistent with past practices): (a) has been
properly maintained and is in good operating condition (except for ordinary
wear and tear, which in the aggregate will not have a material adverse effect
on the Business), (b) to the best of the Shareholders' knowledge, is capable
of being used in the Business as presently being conducted without present
need for repair or replacement except in the ordinary course of the Business,
(c) conforms in all material respects with all applicable legal requirements,
and (d) to the knowledge of the Shareholders, is year 2000 compliant (meaning
that, with respect to Mountain's information technology ("IT"), the IT is
designated to be used prior to , during, and after 2000A.D., and the IT used
during each such period will accurately receive, provide and process
date/time data including the calculating, comparing and sequencing from, into
and between the years 1999 and 2000, and will not malfunction, cease to
function or provide invalid or incorrect data).
5.10 PERMITS. To the knowledge of the Shareholders, Mountain possess
all the permits and licenses necessary to own, operate, use and maintain the
Assets in the manner in which they are now
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being maintained and operated and to conduct the Business as now being
conducted. Such permits and licenses are either (a) assignable to DCRI or
Buyer without the consent or approval of any governmental body or third party
or (b) of such a ministerial nature that suitable replacements will be
readily obtainable by Buyer in due course upon proper application therefor
without Buyer incurring any material cost or expense. Mountain is in
compliance in all material respects with the terms of such permits and
licenses.
5.11 Changes. Except as described in SCHEDULE 5.11 hereto, since
December 31, 1998, (a) there has been no material adverse change nor any
event or condition that has had, or has a reasonable possibility of having in
the future, a material adverse change with respect to the financial
condition, assets, liabilities, business or prospects of Mountain, (b) the
Business has been conducted only in the ordinary course and, except as
previously disclosed to Buyer in writing, in substantially the same manner in
which it had been previously conducted, (c) Mountain has not entered into any
transactions whatsoever (except this Agreement) with respect to the Assets or
the conduct of the Business other than in the ordinary course of the
Business, (d) Mountain has not sold, leased, mortgaged, pledged or subjected
to any lien, security interest or other charge or otherwise encumbered or
disposed of any of the Assets other than in the ordinary course of the
Business, (e) the Assets have been maintained and repaired in the usual and
ordinary course and operated in a good and workmanlike and prudent manner
consistent with past practices, (f) Mountain has not waived any material
rights or forgiven any material claims constituting or which would constitute
an Asset, (g) Mountain has not lost or terminated employees, customers or
suppliers that could or does materially and adversely affect its business or
assets, and (h) Mountain has not entered into any commitment or transaction
or experienced any other event that is material to the Assets, the Business
or this Agreement or to any of the other agreements and documents executed or
to be executed pursuant to this Agreement or to the transaction contemplated
hereby or thereby.
5.12 ASSUMED CONTRACTS. Mountain has previously delivered or made
available to Buyer true, correct and complete copies of all of the Assumed
Contracts described in SCHEDULE 1.2(c). SCHEDULE 1.2(c) contains a complete
and accurate list of all contracts to which Mountain is a party and that in
any way relate to the operations or properties of the Business or that are or
will be binding upon the Business or the Assets. All of the Assumed Contracts
are valid and in full force and effect and neither Mountain nor, to the best
of the knowledge of the Shareholders, any other party to the Assumed
Contracts has breached any material provision of, is in violation or in
default in any material respect under the terms of, and no event has occurred
that, with the lapse of time or action by a third party or both, would result
in a violation or a default in any material respect under the terms of, or in
acceleration of any payments due under, any Assumed Contract.
5.13 REAL PROPERTY LEASES. Mountain has heretofore delivered to
Buyer correct and complete copies of the Real Property Leases and all
amendments thereto; a copy of such Real Property Leases and all amendments
are attached hereto as SCHEDULE 1.2(a). To the knowledge of the Shareholders,
neither Mountain nor the landlord under any such lease has breached any
material provision of or is in violation or in default in any material
respect under the terms of such lease. Mountain enjoys peaceful and
undisturbed possession under each of the Real Property Leases, and each such
lease is valid and
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subsisting and in full force and effect. Mountain has not received any
written notice from the landlord under any of the Real Property Leases that
there exists an event or condition that has not since been cured or waived
and that, with or without the passage of time or the giving of notice or
both, would constitute after the date hereof a default under such lease.
5.14 TAXES.
(a) Mountain has filed all federal, state, foreign and other
tax reports or returns required by applicable legal requirements to be filed
by it in connection with the Assets or the Business and has either discharged
or caused to be discharged, as the same have become due, all taxes
attributable or relating to the Assets or the Business for any period or
periods ending on or before the Closing Date.
(b) All such tax reports or returns fairly reflect the taxes
of Mountain for the periods covered thereby. Mountain is not delinquent in
the payment of any tax, assessment or governmental charge, there is no tax
deficiency or delinquency asserted against Mountain, and there is no unpaid
assessment, proposal for additional taxes, deficiency or delinquency in the
payment of any of the taxes of Mountain that could be asserted by any taxing
authority. No Internal Revenue Service audit of Mountain is pending or, to
the knowledge of the Shareholders, threatened, and the results of any
completed audits are properly reflected in the Financial Statements (as
defined in SECTION 5.18). Mountain has not granted any extension to any
taxing authority of the limitation period during which any tax liability may
be asserted. Mountain has not committed any violation of any federal, state,
local or foreign tax laws. All monies required to be withheld by Mountain
from Employees or collected from customers for income taxes, social security
and unemployment insurance taxes and sales, excise and use taxes, and the
portion of any such taxes to be paid by Mountain to governmental agencies or
set aside in accounts for such purpose have been so paid or set aside, or
such monies have been approved, reserved against and entered upon the books
of Mountain.
(c) Mountain is and has been an "S corporation," as that
term is defined in Code Section 1361, from the dates of its incorporation
through and including the taxable year ending on the date immediately prior
to the Closing. Shareholders have always treated the Mountain as an S
corporation for federal income tax purposes.
5.15 LITIGATION. Except as disclosed on SCHEDULE 5.15 hereto, no
legal action, suit or proceeding, judicial or administrative, or governmental
investigation is pending or, to the knowledge of the Shareholders, threatened
against Mountain, or any of the Assets that (a) if adversely determined, has
a reasonable possibility of causing in the future a material adverse effect
on the Business or the Assets or (b) questions or might question the validity
of this Agreement or any actions taken or to be taken by Mountain pursuant
hereto or seeks to enjoin or otherwise restrain the Transaction. The
Shareholders do not know of any basis for any such action, suit, proceeding
or investigation. Except as disclosed on SCHEDULE 5.15 hereto, there are no
orders, decrees or judgments of any court or governmental body against
Mountain (i) that remain undischarged or otherwise are in effect and that
interfere in any respect with, or impose a burden on, the Business or the
operation or use of the Assets in the ordinary conduct of the Business, or
(ii) with respect to which Mountain is in default.
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5.16 EMPLOYEE BENEFIT PLANS AND ERISA. Except as listed on SCHEDULE
5.16 hereto, Mountain does not maintain or sponsor and has not made and is
not required to make contributions to any pension, profit-sharing, stock
bonus, stock option, thrift or other retirement plan, medical,
hospitalization, vision, dental, life, disability, vacation or other
insurance or benefit plan, employee stock ownership plan, deferred
compensation, stock ownership, stock purchase, performance share, bonus,
benefit or other incentive plan, severance plan or other similar plan,
agreement, arrangement or understanding relating to Mountain or respective
employees (the "Employee Benefit Plans"), whether or not such plan is or is
intended to be qualified under Section 401(a), 404A or any other section of
the Code, including without limitation, all employee benefit plans (within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), whether or not subject to the provisions of
ERISA. Except as set forth in SCHEDULE 5.16, each Employee Benefit Plan
maintained or sponsored by Mountain or to which Mountain makes or is required
to make employer contributions (collectively, the "Plans") is in full force
and effect in accordance with its terms and is, and each plan administrator
and fiduciary of each Plan is, in compliance with all applicable requirements
of ERISA and other applicable laws, regulations and rulings. The only Plans
that are "pension benefit plans" (within the meaning of Section 3(2) of
ERISA), other than any such plans that are described in Section 401(a)(1) of
ERISA, maintained or sponsored by Mountain or to which Mountain makes or is
required to make employer contributions, are identified on SCHEDULE 5.16 as
such (the "Pension Benefit Plans"). No Pension Benefit Plan or any trust
created under one of the Pension Benefit Plans or any trustee, administrator
or sponsor thereof, has engaged in a "prohibited transaction" as that term is
defined in Section 4975(c)(1) of the Code, that could subject the Pension
Benefit Plan, trust, trustee, administrator or sponsor thereof, or any party
dealing with the Pension Benefit Plan or any such trust to the tax or penalty
on prohibited transactions imposed by said Section 4975, nor is the fiduciary
(as defined in Section 3 of ERISA) of the Pension Benefit Plan or any
employee benefit plan (as defined in Section 3 of ERISA) maintained by
Mountain acting in a manner that constitutes a breach of its fiduciary duty,
as set forth in ERISA. Except as set forth in SCHEDULE 5.16, the Pension
Benefit Plans have not been terminated, nor have contributions thereto been
discontinued, nor have there been any "reportable events," as that term is
defined in Section 4043 of ERISA, since the effective date of Section 4043 of
ERISA. The Pension Benefit Plans have not incurred any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA (whether or not
waived), since the effective date of Section 302 of ERISA, or prior thereto,
and all contributions required to be made have been made. Mountain does not
have an existing defined benefit pension plan covering its employees. None of
the Pension Benefit Plans identified on SCHEDULE 5.16 are multiemployer plans
as defined in Section 3(37) of ERISA. All appropriate administrative actions
and required compliance with appropriate administrative actions and required
compliance with appropriate Internal Revenue Service and Department of Labor
rules and regulations have been taken or are in process in a timely manner.
No contributions pursuant to the Pension Benefit Plans have been made in such
amounts as would violate Section 404 of the Code so as to disqualify the
accompanying trust. Mountain has in force sufficient bonding for every
fiduciary who is required to be bonded with respect to the Pension Benefit
Plans pursuant to Section 412 of ERISA. There does not exist any pending or,
to the best of the knowledge the Shareholders, threatened litigation against
any fiduciary of any Pension Benefit Plan, nor has any bonding company been
called on to defend any such fiduciary. A true and complete copy of each
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existing Plan has been furnished to DCRI along with the most recent favorable
determination letter issued by the Internal Revenue Service with respect
thereto and the two most recent annual reports (on form 5500 series) required
to be filed with respect thereto.
5.17 GROUP HEALTH PLANS. With respect to the "group health plan(s)"
of Mountain, as defined in Section 4980B(g)(2) of the Code, if any, except as
set forth in SCHEDULE 5.17:
(a) Mountain has complied in all material respects with the
continuation health care coverage requirements of Section 4980B of the Code,
as such requirements apply with respect to any Employee (or prior employee of
Mountain) or any "qualified beneficiary" of such employee (as defined in
Section 4980B(g)(1) of the Code) on or prior to the Closing Date.
(b) Except as has been previously disclosed to Buyer,
Mountain does not have any present intention of terminating any group health
plan(s) that Mountain currently maintains.
(c) Mountain is solely responsible for complying with the
requirements of Section 4980B of the Code with respect to each Employee (and
any qualified beneficiary of such Employee), who does not become an employee
of the Buyer effective immediately after the Closing Date, it being the
intention of the parties that any group health plan(s) maintained by Buyer
shall not constitute a successor plan(s) to Mountain's group health plan(s),
and that Buyer is not a successor employer with respect to Mountain's group
health plan(s), nor is Mountain a predecessor employer with respect to
Buyer's group health plan(s).
5.18 FINANCIAL INFORMATION. The financial statements of Mountain set
forth in SCHEDULE 5.18 hereto (the "FINANCIAL STATEMENTS") were prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP") and are true, correct and complete, and present fairly the financial
position of Mountain as of the dates indicated and the results of their
operations for the periods specified. The Financial Statements consist of (a)
the balance sheet as of December 31, 1998 (audited) of Mountain and June 30,
1999 (unaudited) of Mountain, and (b) the income statement of Mountain for
the twelve (12) month period ended on December 31, 1998 (audited) and the six
month period ended on June 30, 1999 (unaudited). The balance sheets contained
in the Financial Statements are sometimes referred to herein as the "BALANCE
SHEETS." Except as otherwise disclosed in this Agreement or SCHEDULE 5.18
hereto, the Financial Statements reflect all liabilities of Mountain accrued,
contingent, or otherwise (known or unknown, asserted or unasserted), arising
out of transactions effected or events occurring on or prior to the Closing.
Except as set forth in the Financial Statements or as otherwise disclosed in
this Agreement or SCHEDULE 5.18 hereto, Mountain is not liable upon or with
respect to, or obligated in any other way to provide funds in respect of or
to guarantee or assume in any manner, any debt, obligation or dividend of any
person, corporation, association, partnership, joint venture, trust or other
entity, and Shareholders know of no basis for the assertion of any other
claims or liabilities of any nature or in any amount.
5.19 ACCOUNTS PAYABLE. Attached hereto as SCHEDULE 5.19(a) is a
complete and accurate list of all accounts and notes payable of Mountain as
of June 30, 1999, showing the name of each creditor and
15
the amount due to each by invoice number and date. To the knowledge of the
Shareholders, (a) SCHEDULE 5.19(a) reflects the accounts payable of Mountain
except those incurred in the ordinary course of business after to June 30,
1999, and (b) the accounts payable and other obligations were incurred by
Mountain in the ordinary course of business after to June 30, 1999 and are
not unreasonable in amount or extraordinary in nature (both in relationship
to the normal business practices of Mountain).
5.20 BOOKS OF ACCOUNT. The books of account of Mountain have been
kept accurately in the ordinary course of the Business, the transactions
entered therein represent bona fide transactions and the revenues, expenses,
assets and liabilities of Mountain have been properly recorded in such books.
5.21 ENVIRONMENTAL MATTERS; OSHA COMPLIANCE.
(a) Except as described on SCHEDULE 5.21 attached hereto and
except where all of the matters referred to in any of the clauses (i) through
(iv) below in the aggregate could not reasonably be expected to have a
material adverse effect on Mountain, the Business or the Assets:
10 Mountain and all of its properties, assets and
operations are in full compliance with all federal, state and local laws,
regulations and requirements pertaining to health, safety or the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Occupational Safety and Health Act, the Clean Air
Act, the Clean Water Act, the Toxic Substances Control Act, and all
amendments thereto, and all similar laws, regulations and requirements of any
governmental authority or agency having jurisdiction over Mountain or any of
its properties or assets (collectively, "ENVIRONMENTAL LAWS"). Neither
Mountain nor either Shareholder is aware of and has not received any notice
of any past, present or future conditions, events, activities, practices or
incidents that may interfere with or prevent the compliance or continued
compliance of Mountain with any or all Environmental Laws.
20 Mountain has obtained all permits, licenses
and authorizations that are required under Environmental Laws.
30 No Hazardous Substances (as defined below) exist
on, about or within, or have been used, generated, stored or disposed of on,
or released from any of the properties or assets of Mountain other than in
compliance with Environmental Laws, or transported from any of such
properties or assets unless by a duly authorized or licensed disposal firm,
and Mountain has retained all documentation required by Environmental Laws
relating to such disposal. For the purposes of this Agreement, the term
"HAZARDOUS SUBSTANCES" shall include any substance, product, waste,
pollutant, material, chemical, contaminant, constituent or other material
that is listed, regulated or addressed under any Environmental Law,
including, without limitation, asbestos, petroleum and polychlorinated
biphenyls. The use that Mountain makes of its properties and assets will not
result in the use, generation, storage, transportation, accumulation,
disposal or release of any Hazardous Substance on, in or from any such
properties or assets other than in compliance with Environmental Laws.
16
40 There is no action, suit, proceeding,
investigation or inquiry before any court, administrative agency or other
governmental authority pending or, to the knowledge of any Shareholder,
threatened, against Mountain relating in any way to any Environmental Law.
Mountain (i) does not have any liability for remedial action under any
Environmental Law, (ii) has not received any request for information by any
governmental or regulatory authority with respect to the condition, use or
operation of any of its properties or assets, and (iii) has not received any
notice from any governmental or regulatory authority or other person or
entity with respect to any violation of or liability under any Environmental
Law.
(b) No lien or encumbrance arising under any Environmental
Law has attached to any of the properties or assets of Mountain.
5.22 PATENTS, TRADEMARKS AND COPYRIGHTS.
(a) To the knowledge of the Shareholders, Mountain owns all
patents, trademarks, service marks and copyrights, if any, necessary to
conduct its business, or possesses adequate licenses or other rights, if any,
therefor, without conflict with the rights of others. Subsequent to Closing,
Shareholders will execute such documentation as Buyer shall reasonable
request to effectuate the assignment and conveyance of Mountain's Proprietary
Rights (as herein defined) to Buyer. Set forth on SCHEDULE 5.22 hereto is a
true and correct description of the following ("Proprietary Rights"):
10 All trademarks, trade names, service marks and
other trade designations, including common-law rights, registrations and
applications therefor, and all patents, copyrights and applications currently
owned, in whole or in part, by Mountain, and all licenses, royalties,
assignments and other similar agreements relating to the foregoing to which
Mountain is a party (including expiration dates if applicable); and
20 All agreements relating to technology,
know-how or processes that Mountain is licensed or authorized to use by
others, or which it licenses or authorizes others to use.
(b) To the knowledge of the Shareholders, Mountain has the
sole and exclusive right to use the Proprietary Rights identified in SCHEDULE
5.22 without infringing or violating the rights of any third parties. No
consent of third parties will be required for the use thereof by Buyer upon
consummation of the transactions contemplated by this Agreement. No claim has
been asserted by any person to the ownership of or right to use any
Proprietary Right or challenging or questioning the validity or effectiveness
of any such license or agreement, and the Shareholders do not know of any
valid basis for any such claim. Each of the Proprietary Rights is valid and
subsisting, has not been canceled, abandoned or otherwise terminated and, if
applicable, has been duly issued or filed.
(c) The Shareholders do not have any knowledge of any claim
that, or inquiry as to whether, any product, activity or operation of
Mountain infringes upon or involves, or has resulted in the infringement of,
any Proprietary Right of any other person, corporation or other entity; and
no proceedings have been instituted, are pending or, to the best of the
knowledge of the Shareholders, are
17
threatened that challenge the rights of Mountain with respect thereto.
Mountain has not given nor is Mountain bound by any agreement of
indemnification for any Proprietary Right as to any property manufactured,
used or sold by Mountain.
5.23 XXXX ATLANTIC CONTRACT. To the knowledge of the Shareholders,
it is reasonable to assume that the Xxxx Atlantic Contract will be renewed or
extended for at least one year effective as of January 1, 2000.
5.24 DISCLOSURE. To the knowledge of the Shareholders, no
representation or warranty by the Shareholders in this Agreement, and no
statement respecting Mountain, or any Shareholder contained in any other
agreement or document contemplated hereby, contains or will contain any
untrue statement of material fact or omits or will omit to state any material
fact necessary to make the statements herein or therein, in light of the
circumstances under which it was or will be made, not misleading. Except as
disclosed herein, there is no matter that materially adversely affects or
will in the future materially adversely affect the Business or the Assets
other than general economic conditions.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF DCRI AND BUYER
DCRI and Buyer, jointly and severally, represent and warrant to the
Shareholders as follows:
6.1 ORGANIZATION AND STANDING. DCRI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
6.2 AUTHORITY. Each of DCRI and Buyer has full power and authority
(corporate and otherwise) to conduct its business as now being conducted and
to execute and deliver this Agreement and all of the other agreements and
documents contemplated hereby and to carry out the terms and obligations
hereof and thereof. Each of DCRI and Buyer has taken all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement and all of the other agreements and documents contemplated hereby.
6.3 EXECUTION AND DELIVERY. This Agreement has been, and the other
agreements and documents contemplated hereby at Closing will be, duly
executed by DCRI and Buyer and each constitutes the valid and binding
obligation of DCRI and Buyer, enforceable in accordance with their respective
terms and conditions.
6.4 SEC REPORTS AND FINANCIAL STATEMENTS. DCRI has filed with the
SEC and has made available to the Shareholders true and complete copies of
all forms, reports, schedules, statements, and other documents, including all
exhibits thereto, required to be filed by it since January 1, 1998, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act of 1933, as amended (the "Securities Act") (as such documents
have been amended since the time of their filing, collectively, the "SEC
Documents").
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6.5 COMPLIANCE WITH LAWS, PERMITS AND INSTRUMENTS. The execution,
delivery and performance of this Agreement by DCRI or Buyer will not violate
or be in conflict with (a) any material provision of any contract or other
agreement to which DCRI or Buyer is a party or by which any of their
respective assets are bound that is material to DCRI and its subsidiaries
taken as a whole; (b) any provision of the Articles of Incorporation or
Bylaws of Buyer; (c) any federal, state or local law, statute, regulation or
ordinance applicable to the business or any of the assets of DCRI or Buyer;
or (d) any of DCRI's or Buyer's permits or licenses affecting or relating to
its assets or business.
6.6 CONSENTS. Except as set forth on SCHEDULE 6.6, no approval,
consent, authorization or action of or filing with, any governmental body or
other third party is required on the part of Buyer in connection with (a) the
execution, delivery or performance by DCRI or Buyer of this Agreement and the
other agreements and documents contemplated hereby or (b) the consummation by
DCRI or Buyer of the Transaction, including, without limitation, the
assumption by Buyer of the Assumed Contracts.
6.7 LITIGATION. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any federal, state or other court or
governmental or administrative agency, or to Buyer's knowledge threatened
against Buyer or Buyer's assets, operations or businesses that might prevent
or delay the consummation of the transactions contemplated hereby or have a
reasonable possibility of causing in the future a material adverse effect on
the business or assets of Buyer except as disclosed on SCHEDULE 6.7.
ARTICLE 7
COVENANTS OF DCRI AND BUYER
DCRI and Buyer, jointly and severally, agree that, subsequent to the
execution of this Agreement, on or prior to the Closing:
7.1 CONSUMMATION OF TRANSACTION. DCRI and Buyer agree to use all
reasonable efforts to cause the consummation of the Transaction in accordance
with the terms and conditions of this Agreement.
ARTICLE 8
COVENANTS OF SHAREHOLDERS
The Shareholders, jointly and severally, agree that, subsequent to
the execution of this Agreement, on or prior to the Closing:
8.1 CONSUMMATION OF TRANSACTION. The Shareholders agree to use all
reasonable efforts to cause the consummation of the Transaction in accordance
with the terms and conditions of this Agreement.
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8.2 BUSINESS OPERATIONS. Mountain shall operate the Business only in
the ordinary course and will not, without the prior written consent of DCRI,
introduce any new method of management of operation and Mountain shall use
all reasonable efforts to preserve the Business intact and to retain their
respective present customers and suppliers. Mountain shall not take any
action that might reasonably be expected to have a material adverse effect on
the Business or the Assets without the prior written consent of DCRI or take
or fail to take any action that would cause or permit the representations
made in ARTICLE 5 hereof to be inaccurate at the time of Closing or preclude
Mountain from making such representations and warranties at the Closing.
Notwithstanding the foregoing, it is agreed and understood by the parties
hereto that, subsequent to June 30, 1999 and prior to the time of Closing,
Mountain shall (a) distribute to the Shareholders, in the form of a
distribution to Shareholders or as bonus compensation, the amount of
Mountain's net working capital, as of the Closing Date, in excess of the
Minimum Amount of Net Working Capital, and (b) distribute to Shareholders an
amount required to pay estimated taxes incurred prior to the Closing Date
(such distribution shall be a factor in determining the amount of the Minimum
Amount of Working Capital).
8.3 ACCESS. Upon reasonable prior notice, Mountain shall permit DCRI
and its authorized representatives reasonable access during normal business
hours to, and make available for inspection, all of the Assets and Business,
and furnish Buyer all documents, records and information, including, but not
limited to, financial statements, projections and customer lists, solely with
respect to the Business and Assets as DCRI and its representatives may
reasonably request, all for the sole purpose of permitting DCRI to become
familiar with the Business and Assets.
8.4 MATERIAL CHANGE. Prior to the Closing, the Shareholders shall
promptly inform DCRI in writing of any material adverse change to the
Business or the Assets, including, without limitation, the updating of any
schedules hereto. Notwithstanding the disclosure to DCRI of any such material
adverse change, the Shareholders shall not be relieved of any liability to
DCRI pursuant to this Agreement for, nor shall the providing of such
information by the Shareholders to DCRI be deemed a waiver by DCRI or Buyer
of, the breach of any representation or warranty of the Shareholders
contained in this Agreement.
8.5 CONTRACTS. Except with DCRI's prior written consent, Mountain
shall not waive any material right or cancel any material contract, debt or
claim that constitutes an Asset or that would constitute an Asset.
8.6 LIENS. Except with DCRI's prior written consent, Mountain shall
not permit any new Lien to attach to any of the Assets, whether now owned or
hereafter acquired.
8.7 MATERIAL CONTRACTS. Mountain shall not, without the consent of
DCRI, incur any obligation outside of the ordinary course of business; make
any purchases outside of the ordinary course of business in the aggregate;
increase the compensation paid or payable to any officer, director, employee
or agent of Mountain; or otherwise take any action outside the ordinary
course of business.
8.8 NO DISCLOSURE OR NEGOTIATION WITH OTHERS.
20
(a) Neither Mountain nor Shareholders shall disclose to the
public or any third party (other than Mountain's advisors) any of the terms
or conditions hereof without the prior written consent of DCRI (except as
otherwise required by applicable law).
(b) The Shareholders will use their best efforts to cause
the officers, directors, employees, and agents of Mountain not to, solicit or
encourage, directly or indirectly, in any manner, any discussions with, or
furnish or cause to be furnished any information to, any third party in
connection with, or negotiate for or otherwise pursue, the sale of the common
stock of Mountain, all or substantially all of the assets of Mountain, or any
portion or all of the Business, or any business, or any business combination
or merger of Mountain with any other third party. Mountain will promptly
inform DCRI of any inquiries or proposals with respect to any of the matters
set forth in this SECTION 8.9.
8.9 INVESTMENT INTENT. Shareholders are acquiring the shares of DCRI
Stock to be issued pursuant to this Agreement for investment and not with a
view to or resale in connection with any distribution or public offering
thereof, within the meaning of any applicable securities laws and
regulations. Shareholders acknowledge that such shares (and any additional
shares to be issued pursuant to the terms of the Asset Purchase Agreement)
are or, will be, in the case of shares to be issued, "restricted securities"
as that term is defined in Rule 144 promulgated by the Securities and
Exchange Commission and, therefore, the resale of any shares is restricted by
federal and state securities laws and the certificates evidencing such shares
shall bear a legend reflecting these securities law restrictions.
8.10 LOCK-UP LETTER. Shareholders acknowledge that, pursuant to the
terms of the Lock-up Letter Agreement referred to herein, there are certain
restrictions on any conveyance of the DCRI Stock.
ARTICLE 9
CONDITIONS PRECEDENT OF DCRI AND BUYER
Except as may be waived in writing by DCRI and Buyer, the
obligations of DCRI and Buyer hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Shareholders contained herein shall be true and correct as of
the Closing Date with the same force and effect as if such representations
and warranties had made on and as of the Closing Date, and at Closing,
Shareholders shall certify to that effect.
9.2 COVENANTS. Shareholders shall have performed and complied in all
material respects with all covenants or conditions required by this Agreement
to be performed and complied with by it prior to the Closing, and at Closing,
Shareholders shall certify to that effect.
21
9.3 ACTIONS AT CLOSING. The Shareholders shall have taken all
actions required of them pursuant to this Agreement.
9.4 AMEX LISTING. The DCRI Shares shall have been authorized for
listing on AMEX upon official notice of issuance.
9.5 LEGAL OPINION. DCRI and Buyer shall have received the opinion of
Van Meer & Xxxxxxxx, PA, counsel to the Shareholders, substantially in the
form of SCHEDULE 9.5.
9.6 PROCEEDINGS. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing or
otherwise, asserted, instituted or entered to restrain or prohibit the
carrying out of the Transaction.
9.7 NO MATERIAL ADVERSE CHANGE. No material adverse changes to the
Business or the Assets shall have occurred, or an event which with the
passage of time might result in such material adverse change, after the date
hereof and prior to the Closing.
9.8 INVESTMENT LETTER. With respect to the DCRI Shares, each of the
Shareholders shall have executed an Investment Letter, in form reasonably
acceptable to Buyer and DCRI.
9.9 LOCK-UP LETTER. With respect to the DCRI Shares, each of the
Shareholders shall have executed a Lock-up Letter Agreement, in form
reasonably satisfactory to Buyer and DCRI, pursuant to which the Shareholders
are restricted in connection with the pledge, sale transfer, conveyance or
other hypothecation of the DCRI Shares.
9.10 RELEASE AGREEMENT. Shareholders shall execute and deliver to
Buyer and DCRI a document, inform reasonably acceptable to Buyer and DCRI,
wherein Shareholders release any and all claims they may have against
Mountain except to the extent otherwise provided in this Agreement.
ARTICLE 10
CONDITIONS PRECEDENT OF SHAREHOLDERS
Except as may be waived in writing by the Shareholders, the
obligations of the Shareholders hereunder are subject to fulfillment at or
prior to the Closing of each of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of DCRI and Buyer contained herein shall be true and correct as of
the Closing Date with the same force and effect as if such representations
and warranties had been made on and as of the Closing Date, except (a) with
respect to those representations and warranties specifically made as of an
earlier date (in which case such representations and warranties shall be true
as of such earlier date), and (b) for changes that occur after the date
hereof that are expressly permitted by the terms of this Agreement or by
Mountain, and at Closing, DCRI and Buyer will certify to that effect.
22
10.2 COVENANTS. DCRI and Buyer shall have performed and complied in
all material respects with all covenants or conditions required by this
Agreement to be performed and complied with by it prior to the Closing, and
at Closing, Buyer shall certify to that effect.
10.3 ACTIONS AT CLOSING. Buyer shall have taken all actions
required of it pursuant to SECTION 3.3 of this Agreement.
10.4 LEGAL OPINION. Shareholders shall have received the opinion of
Xxxxxx & Xxxxxx, P.C., counsel to DCRI and Buyer, substantially in the form
of SCHEDULE 10.4.
10.5 PROCEEDINGS. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
Transactions.
10.6 LISTING. The DCRI Shares shall have been registered for listing
with the American Stock Exchange ("AMEX").
ARTICLE 11
ASSUMED OBLIGATIONS AND DCRI
GUARANTY OF BUYER'S OBLIGATIONS
11.1 ASSUMED OBLIGATIONS. At Closing, DCRI and Buyer agree to assume
obligations of Mountain (a) under the Assumed Contracts listed on SCHEDULE
1.2(c), (b) under the Real Property Leases, as provided in the Lease
Assignments, (c) under the Assumed Liabilities listed on SCHEDULE 2.1, (d)
the accounts payable of Mountain which are not unreasonable in amount or as
to purpose, and which have been incurred by Mountain in the ordinary cause of
business and which are consistent with past practices and policies of
Mountain, and (e) all other unsecured obligations of Mountain which arise in
the ordinary course of business (none of which will be unreasonable in amount
or as to purpose) and which if paid would be consistent with the past
practices and policies of Mountain (an example would be refund of a placement
fee because a candidate terminates during the time period in which the
Mountain is obligated to refund such placement fee).The parties acknowledge
that neither Buyer nor DCRI are assuming any obligations of Mountain except
those hereinbefore set forth, and that the obligations of Mountain not be
assumed include those obligations which should have been disclosed to Buyer
pursuant to the terms of this Agreement. Anything in this Agreement or
elsewhere to the contrary notwithstanding, in no event shall DCRI and Buyer
be required to assume or in any way become responsible or liable for, or be
deemed to have assumed or become liable or responsible for, any duty,
obligation, debt or liability of Mountain, whether or not related to the
Business or the Assets, except as specifically provided herein and in the
Lease Assignments, or otherwise expressly assumed in writing by DCRI and
Buyer; it being expressly acknowledged that it is the intention of the
parties hereto that all duties, obligations, debts and liabilities of
Mountain (other than obligations expressly assumed by DCRI or Buyer herein,
in the Assumption, or in the Lease Assignments) shall be and remain solely
the duties, obligations, debts and liabilities of Mountain. Specifically, and
without implied limitation of the foregoing, DCRI or Buyer shall not assume
or agree to pay, perform or
23
discharge any liabilities or obligations of Mountain, whether accrued,
absolute, contingent or otherwise, based on or arising out of or in
connection with (i) any defects in products sold, rented or distributed by
Mountain prior to the Closing, (ii) any implied or express warranties
relating to such products, or (iii) any bulk sales or bulk transfer laws (it
being the intent of the parties that Mountain shall be liable for all such
liabilities and obligations regardless of whether such liabilities and
obligations are initially the liabilities and obligations of Mountain or
Buyer).
11.2 DCRI GUARANTY. DCRI hereby guarantees to the Shareholders all
obligations of Buyer pursuant to this Agreement and other agreements and
documents contemplated hereby (including but not limited to the obligations
under SECTION 1.3).
ARTICLE 12
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
AGREEMENTS AND OBLIGATIONS; INDEMNIFICATION
12.1 SURVIVAL. Except for the covenants contained in Article 11 of
this Agreement and the payments required to be made to Shareholders pursuant
to the terms of this Agreement, which covenants and obligations shall survive
until satisfied, the representations, warranties, obligations, covenants,
indemnities and agreements of the Shareholders, DCRI and Buyer contained in
this Agreement shall survive the Closing Date for a period of two (2) years;
all representations, warranties, obligations, covenants, indemnities and
agreements of Shareholders related to tax matters of any nature involving
Mountain or Shareholders shall survive the Closing Date for a period of five
(5) years. Said representations, warranties, obligations, covenants,
indemnities and agreements shall not be affected by, and shall remain in full
force and effect notwithstanding, any investigation during such time periods
made by or on behalf of any party hereto or any information any party may
have with respect thereto. If written notice of a claim has been given in
good faith prior to the expiration of the applicable representations and
warranties by a party in whose favor such representations and warranties have
been made to the party that made such representations and warranties, the
relevant representations and warranties shall survive as to such claim until
the claim has been finally resolved.
12.2 INDEMNIFICATION BY SHAREHOLDERS. The Shareholders, jointly and
severally, hereby agree, effective as of the Closing, to pay, and to
indemnify, save and hold harmless DCRI and Buyer, their affiliates, and their
respective officers, directors, stockholders and employees from and against,
any and all damages, liabilities, losses, claims, deficiencies, penalties,
interest, expenses, clean-up costs, fines, assessments, charges and costs
(including, without limitation, reasonable attorneys' fees, costs of
investigation and court costs) (collectively, "LOSSES") imposed on, incurred
by or asserted against such person or entity (or any of them) in any way
relating to or arising from or out of (a) any liability, obligation,
contract, debt, lien, litigation, dispute or commitment of the Shareholders,
including, without limitation, any product liability or breach of warranty
claims relating to services or products provided by Mountain any liability
arising from any bulk sale or bulk transfer law, other than obligations
expressly assumed by DCRI or Buyer herein or in the Lease Assignments, the
Assumed Liabilities or the Assumed Contracts, (b) any act or omission of the
Shareholders prior to or at the Closing, (c) the
24
use, ownership or operation of the Assets or the conduct of the Business
prior to or at the Closing, (d) the breach of any covenant of the
Shareholders or the failure of the Shareholders to perform any obligation of
the Shareholders contained in this Agreement or in the other agreements and
documents contemplated hereby, (e) any inaccuracy in or breach of any
representation or warranty of the Shareholders, contained in this Agreement
or any other agreement or document contemplated hereby, (f) all tax
liabilities of Mountain, or Shareholders, other than (i) all real property
taxes for the Leased Properties that are attributable to periods subsequent
to the Closing and for which the tenant is responsible under the Real
Property Leases, and (ii) all personal property taxes of Mountain that are
attributable to periods subsequent to the Closing; (g) any failure to comply
with applicable bulk sales laws in connection with the Transaction, and (h)
except for those obligations assumed by Buyer pursuant to SECTION 4.2 of this
Agreement, any liability to Employees or former employees of Mountain or its
beneficiaries arising prior to or at the Closing Date from the employment or
severance of such Employees or former employees by Mountain, or their rights
to benefits under the Mountain 's group health or other employee benefit
plans.
Notwithstanding anything herein to the contrary, Shareholders shall
not have any responsibility for liabilities or obligations of Mountain which
are incurred subsequent to the Closing Date.
12.3 INDEMNIFICATION BY BUYER. DCRI and Buyer, jointly and
severally, hereby agree, effective as of the Closing, to pay, and to
indemnify, save and hold harmless the Shareholders from and against, any
Losses imposed, incurred by or asserted against such person or entity (or any
of them) in any way relating to or arising from or out of (a) the obligations
expressly assumed by DCRI or Buyer hereunder or under the Assumed Contracts,
(b) the breach of any covenant of DCRI or Buyer or the failure of DCRI or
Buyer to perform any of their obligations contained herein or in any other
agreement or document contemplated hereby, and (c) any inaccuracy in or
breach of any representation or warranty of DCRI or Buyer under this
Agreement or any other agreement or document contemplated hereby.
12.4 NOTICE; DEFENSE OF CLAIMS. Promptly after receipt by an
indemnified party of notice of any claim, liability or expense to which the
indemnification obligations in this Agreement would apply, the indemnified
party shall give notice thereof in writing to the indemnifying party, but the
omission to so notify the indemnifying party promptly will not relieve the
indemnifying party from any liability except to the extent that the
indemnifying party shall have been prejudiced as a result of the failure or
delay in giving such notice. Such notice shall state the information then
available regarding the amount and nature of such claim, liability or expense
and shall specify the provision or provisions of this Agreement under which
the liability or obligation is asserted. If within twenty (20) days after
receiving such notice the indemnifying party gives written notice to the
indemnified party stating that: (a) it would be liable under the provisions
hereof for indemnity in the amount of such claim if such claim were
successful, and (b) that it disputes and intends to defend against such
claim, liability or expense at its own cost and expense, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent
of the indemnified party which consent shall not be unreasonably withheld)
and the indemnifying party shall assume the defense with respect to such
claim, liability or expense at the indemnifying party's expense as long as
the indemnifying party is conducting a good faith and diligent defense at its
own expense; provided, however, that the assumption of defense of any such
matters by
25
the indemnifying party shall relate solely to the claim, liability or expense
that is subject or potentially subject to indemnification. The indemnifying
party shall have the right, with the consent of the indemnified party, which
consent shall not be unreasonably withheld, to settle all indemnifiable
matters related to the claims by third parties that are susceptible to being
settled provided its obligation to indemnify the indemnifying party therefor
will be fully satisfied. As reasonably requested by the indemnified party,
the indemnifying party shall keep the indemnified party apprized of the
status of the claim, liability or expense and any resulting suit, proceeding
or enforcement action, shall furnish the indemnified party with all documents
and information that the indemnified party shall reasonably request and shall
consult with the indemnified party prior to acting on major matters,
including settlement discussions. Notwithstanding anything herein stated to
the contrary, the indemnified party shall at all times have the right to
fully participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate
under applicable standards of professional conduct, the expense of separate
counsel for the indemnified party shall be paid by the indemnifying party,
provided, however, that the separate counsel selected by the indemnified
party shall be approved by the indemnifying party, which approval shall not
be unreasonably withheld. If no such notice of intent to dispute and defend
is given by the indemnifying party, or if such diligent good faith defense is
not being or ceases to be conducted, the indemnified party shall, at the
expense of the indemnifying party, undertake the defense of (with counsel
selected by the indemnified party), and shall have the right to compromise or
settle (exercising reasonable business judgment), such claim, liability or
expense. Provided however, before settling the indemnified party shall first
use reasonable efforts to obtain the consent to that settlement from the
indemnifying party, which consent shall not be unreasonably withheld. After
using reasonable efforts without success the indemnified party may settle
without the consent of the indemnifying party without any prejudice to its
claim for indemnity. If such claim, liability or expense is one that by its
nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available all information and assistance that
the indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
12.5 SET-OFF. DCRI and Buyer shall have the right to set-off, upon
written notice to the Shareholders, any undisputed amounts payable by the
Shareholders to DCRI or Buyer pursuant to claims for indemnification
hereunder against any amount at any time payable by DCRI or Buyer or any
assignee to any Shareholder under or pursuant to this Agreement and/or any
other agreements now or hereafter entered into between a Shareholder and DCRI
or Buyer or any assignee of DCRI or Buyer. Notwithstanding anything herein to
the contrary, no right of set-off shall exist with respect to any
compensation payable to Xxxxxx in connection with his employment by any
entity affiliated with DCRI.
ARTICLE 13
TERMINATION
26
13.1 TERMINATION. This Agreement may be terminated prior to the
consummation of the Transaction:
(a) By written consent of DCRI and Shareholders.
(b) By DCRI or the Shareholders if either (i) the Closing
shall not have occurred on or before September 15, 1999; however, the right
to terminate this Agreement under this SECTION 13.1(b)(i) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing
to occur on or before such date, or (ii) there shall be any statute, law,
ordinance, rule, or regulation that makes consummation of the Transaction
illegal or otherwise prohibited or if any court of competent jurisdiction or
governmental entity shall have issued an order, decree, or ruling or taken
any other action restraining, enjoining, or otherwise prohibiting the
Transaction and such order, decree, ruling, or other action shall have become
final and nonappealable;
(c) By DCRI, upon a material breach of any representation,
warranty, or agreement set forth in this Agreement by any of the
Shareholders, such that the condition set forth in SECTION 9.1 or 9.2 would
not be satisfied.
(d) By the Shareholders, upon a material breach of any
representation, warranty, or agreement set forth in this Agreement by DCRI or
Buyer such that the condition set forth in SECTION 10.1 or 10.2 would be not
satisfied.
(e) By DCRI if there has been a materially adverse change in
the business, assets, condition, financial or otherwise, or prospect of
Mountain.
(f) By Shareholders or Buyer pursuant to SECTION 3.6 of this
Agreement.
13.2 NOTICE AND EFFECTS OF TERMINATION. In the event there is a
basis for termination of this Agreement by either DCRI or the Shareholders,
as provided in SECTION 13.1, and such party desires to terminate this
Agreement, it may do so by giving written notice to the other party pursuant
to SECTION 14.1, whereupon this Agreement shall forthwith terminate, and
there shall be no liability or obligation on the party of any part hereto
except (i) with respect to SECTIONS 8.9, 11.2, 12.3, 12.4, AND ALL OF ARTICLE
14, and (ii) to the extent that such termination results from the breach by a
party hereto of any of its representations, warranties, covenants, or
agreements set forth in this Agreement.
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ARTICLE 14
MISCELLANEOUS
14.1 NOTICES. Any and all notices, requests, instructions and other
communications required or permitted to be given under this Agreement after
the date hereof by any party hereto to any other party may be delivered
personally or by nationally recognized overnight courier service or sent by
mail or facsimile transmission, at the respective addresses or transmission
numbers set forth below and shall be effective (a) in the use of personal
delivery or facsimile transmission, when received; (b) in the case of mail,
upon the earlier of actual receipt or three (3) business days after deposit
in the United States Postal Service, first class certified or registered
mail, postage prepaid, return receipt requested; and (c) in the case of
nationally recognized overnight courier service, one (1) business day after
delivery to such courier service together with all appropriate fees or
charges for such delivery. The parties may change their respective addresses
and transmission numbers by written notice to all other parties, sent as
provided in this SECTION 14.1. All communications must be in writing and
addressed as follows:
SHAREHOLDERS: Xxxxxx X. Xxxxxx
0000 Xxxxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Xxxxxx Xxxxxx
0000 Xxxxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
WITH A COPY TO: Van Meer & Xxxxxxxx, P.A.
00 Xxxx Xxxxx Xx.
Xxxxx Xxxxxxxx, XX. 04106
Attention: Xxxxxx X. Xxxxxxxx, Esq.
DCRI: Diversified Corporate Resources, Inc.
00000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: M. Xxx Xxxxxxx, President
BUYER: MAGIC Northeast, Inc.
00000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: M. Xxx Xxxxxxx, Secretary
WITH A COPY TO: Xxxxxx & Xxxxxx P.C.,
0000 X. Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
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14.2 FURTHER COOPERATION. The parties agree that they will, at any
time and from time to time after the Closing, upon request by the other and
without further consideration, do, perform, execute, acknowledge and deliver
all such further acts, deeds, assignments, assumptions, transfers,
conveyances, powers of attorney, certificates and assurances as may be
reasonably required in order to fully consummate the Transaction in
accordance with this Agreement or to carry out and perform any undertaking
made by the parties hereunder.
14.3 AMENDMENT. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by the party against
which enforcement of the amendment, modification or supplement is sought.
14.4 ASSIGNABILITY; BINDING EFFECT. The Shareholders shall not
assign this Agreement, by operation of law or otherwise, in whole or in part,
without the prior written consent of the other parties. Buyer and DCRI shall
have the right to assign this Agreement to any third party including a
subsidiary of DCRI, without the prior written consent of the Shareholders;
provided, however, notwithstanding any such assignment DCRI shall remain
liable with respect to its obligations hereunder. Any assignment made or
attempted in violation of this SECTION 14.4 shall be void and of no effect.
This Agreement shall be binding upon, and shall inure to the benefit of the
Shareholders, DCRI and Buyer and their respective successors and permitted
assigns. Except as expressly provided herein, this Agreement shall not be
deemed to create or confer any rights, benefits or interests in any other
persons, except through the parties hereto, nor shall anything in this
Agreement act to relieve or discharge the obligation or liability of any
third party to any party to this Agreement, nor shall any provision give any
third party any right of subrogation or action over or against any party to
this Agreement.
14.5 EXHIBITS AND SCHEDULES. The exhibits and schedules to this
Agreement (and any appendices thereto) referred to in this Agreement and
attached hereto are and shall be incorporated herein and made a part hereof
for all purposes as though set forth herein verbatim.
14.6 SECTIONS AND ARTICLES. All sections and articles referred to
herein are sections and articles of this Agreement. Descriptive headings as
to the contents of particular articles and sections are for convenience only
and shall not control or affect the meaning or construction of any provision
of this Agreement.
14.7 ENTIRE AGREEMENT. Except as otherwise expressly provided in
SECTION 14.17 hereof, this Agreement and the other agreements, documents and
instruments executed and delivered by the parties to each other at the
Closing constitute the full understanding of the parties, a complete
allocation of risks between them and a complete and exclusive statement of
the terms and conditions of their agreement relating to the subject matter
hereof and supersedes any and all prior agreements, whether written or oral,
that may exist between the parties with respect thereto. Except as otherwise
specifically provided in this Agreement, no conditions, usage of trade,
course of dealing or performance, understanding or agreement purporting to
modify, vary, explain or supplement the terms or conditions of this Agreement
shall be binding unless hereafter or contemporaneously herewith made in
writing and signed by the party to be bound, and no modification shall be
effected by the acknowledgment or
29
acceptance of documents containing terms or conditions at variance with or in
addition to those set forth in this Agreement.
14.8 GENDER; PLURALS. Each use herein of the masculine, neuter or
feminine gender shall be deemed to include the other genders and each use
herein of the plural shall include the singular and vice versa, in each case
as the context requires or as it is otherwise appropriate.
14.9 EXPENSES. Except as otherwise provided in and this Agreement,
the Shareholders shall pay all of the expenses and costs related to the
Transaction (including, without limitation, all counsel fees and expenses),
and DCRI and Buyer shall pay all of their expenses and costs (including,
without limitation, all counsel fees and expenses), in connection with this
Agreement and the consummation of the Transaction.
14.10 BROKERAGE FEES AND COMMISSIONS. Neither Shareholder (and
Mountain), on one hand, nor DCRI or Buyer, on the other, shall have any
responsibility or liability for any fees, expenses or commissions payable to
any agent, representative or broker of the other.
14.11 WAIVER. Any of the terms or conditions of this Agreement may
be waived at any time by the party that is entitled to the benefit thereof.
Such action shall be evidenced by a signed written notice given in the manner
provided in SECTION 14.1 hereof. No party to this Agreement shall by any act
(except by a written instrument given pursuant to SECTION 14.1 hereof) be
deemed to have waived any right or remedy hereunder or to have acquiesced in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising any right, power or privilege hereunder by any
party hereto shall operate as a waiver thereof. No single or partial exercise
of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. A waiver by any party of any right or remedy on any one occasion
shall not be construed as a bar to any right or remedy that such party would
otherwise have on any future occasion or to any right or remedy that any
other party may have hereunder.
14.12 MULTIPLE COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all
counterparts hereof so executed by the parties hereto, whether or not such
counterpart shall bear the execution of each of the parties hereto, shall be
deemed to be, and shall be construed as, one and the same Agreement. A
telecopy or facsimile transmission of a signed counterpart of this Agreement
shall be sufficient to bind the party or parties whose signature(s) appear
thereon.
14.13 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS, WITHOUT REGARD
FOR THE PROVISIONS THEREOF REGARDING CHOICE OF LAW.
14.14 SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges
that the other parties would be irreparably damaged and would not have an
adequate remedy at law for money damages in the event that any of the
covenants contained in this Agreement were not performed in accordance with
30
its terms or otherwise were materially breached. Each of the parties hereto
therefore agrees that, without the necessity of proving actual damages or
posting bond or other security, the other parties shall be entitled to
temporary and/or permanent injunction or injunctions to prevent breaches of
such performance and to specific enforcement of such covenants in addition to
any other remedy to which it may be entitled, at law or in equity.
14.15 ATTORNEYS' FEES AND COSTS. In the event attorneys' fees or
other costs are incurred to enforce, through legal action, any of the
obligations herein provided for, or to establish damages for the breach
thereof, or to obtain any other appropriate relief, whether by way of
prosecution or defense, the prevailing party shall be entitled to recover
reasonable attorneys' fees and costs incurred therein.
14.16 SEVERABILITY. In the event that any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws, then (a) such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision were not a part hereof, (b) the remaining provisions
of this Agreement shall remain in full force and effect and shall not be
affected by such illegal, invalid or unenforceable provision or by its
severance from this Agreement, and (c) there shall be added automatically as
a part of this Agreement a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and still be legal,
valid and enforceable.
14.17 CONFIDENTIALITY.
(a0 Except as may be required by law or court order,
Shareholders hereby agree that neither Mountain nor the Shareholders shall
disclose or divulge any DCRI Confidential Information (as defined below), or
any part thereof, to any third party, and shall not use the DCRI Confidential
Information, or any part thereof, in any manner or for any purpose.
(b0 As used in this Agreement, "DCRI Confidential
Information" means any and all information and compilations of data (in any
form whatsoever, tangible or intangible) relating in any way to DCRI
(including its subsidiaries) and its business, assets and customers,
including, without limitation, all accounting, financial and business
information, employment and personnel information, contracts, marketing
plans, price lists and information, customer lists and information, and all
other data and records that are or may be used by or useful to DCRI;
PROVIDED, HOWEVER, that DCRI Confidential Information does not include
information that (i) is or becomes generally available to the public other
than by the Shareholders; (ii) is lawfully obtained by the Shareholders from
a third party; provided that the third party is not, to the Shareholders
knowledge, bound by a nondisclosure agreement with respect to the
information; or (iii) is subsequently developed by the Shareholders from
independent sources.
14.18 ADVICE OF COUNSEL. Each of the undersigned has read this
Agreement, has had the opportunity to consult with legal counsel concerning
the matters contained herein, and has either obtained legal counsel with
respect to such matters and the execution of this Agreement, or has
voluntarily waived such right.
14.19 EVENT OF DEFAULT.
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(a) In the event that Buyer shall fail to make any payment
to the Shareholders within fifteen (15) days from the date due pursuant to
the provisions of this Agreement, and such failure to pay shall remain
unremedied for a period of thirty (30) days after receipt of written notice
thereof by Buyer (an "Event of Default"), then upon any such event of
default, fifty percent (50%) the balance of the maximum amounts payable under
this Agreement shall be accelerated and forthwith due and payable. The
parties hereto acknowledge and agree that Buyer shall not be in default of
its obligation hereunder, if, pursuant to the terms of this Agreement, Buyer
does not pay part of an Installment Payment based upon a reasonable
adjustment with respect to EBITDA, or if Buyer applies as a set-off a
reasonable amount related to a claim for indemnification under the terms of
this Agreement.
(b) In the event that Buyer shall fail to make any payment
to the Shareholders within fifteen (15) days from the date due pursuant to
the terms of this Agreement, Buyer shall be obligated to pay interest on all
amounts payable to the Shareholders pursuant to the Purchase Agreement,
inclusive of any amounts accelerated pursuant to Section 14.19 (a), at the
rate of twelve percent (12%) per annum.
(c) No extension of time for payment granted by Shareholders
of all or any part of the amount owing herein at any time shall effect the
liability of the parties, including any surety, accommodation party or
guarantor. Acceptance by the Shareholders of any installment after any
default shall not operate to extend the time for payment of any amount then
remaining unpaid or constitute a waiver of any of the other rights herein. No
delay by Shareholders in exercising any power or right shall operate as a
waiver of any power or right. The waiver of any default by Shareholders shall
not operate as a waiver of any subsequent default or any power or right that
Mountain may have under the terms of this Agreement.
14.20 FURTHER ASSURANCES OF BUYER.
(a) From and after the Closing Date, Buyer shall afford to
Shareholders and their attorneys, accountants and other representatives,
reasonable access, during normal business hours, to such books and records
possessed by Buyer relating to Mountain or the business of Mountain as may
reasonably be required in connection with the preparation of financial
information for any period of time on or prior to the Closing Date. Buyer
shall cooperate in all reasonable respects with Shareholders with respect to
their former interest in the business and in connection with financial
account closing and reporting all claims in litigation asserted by or against
third parties, including, but not limited to, making employees of Buyer
reasonably available to assist with, or provide information in connection
with financial account closing and reporting and claims in litigation,
provided, that Shareholders reimburse Buyer for its reasonable out-of-pocket
expenses (including costs of employees so assisting) in connection therewith.
(b) For a period of not less than seven (7) years after the
Closing Date, Buyer shall preserve and retain the Buyer's corporate
accounting, legal, auditing and other books and records of the business
acquired from Mountain (including, but not limited to any governmental or
non-governmental
32
actions, suits, proceedings or investigations arising out of the conduct of
the business and operations of the business acquired from Mountain prior to
the Closing Date); provided, however, that such seven (7) year period shall
be extended in the event that any action, suit, proceeding, or investigation
has been commenced or is pending or threatened at the termination of such
seven (7) year period and such extension shall continue until any such
action, suit proceeding, or investigation has been settled through judgment
or otherwise or is no longer pending or threatened. Notwithstanding the
foregoing, Buyer may discard or destroy any of such books and records prior
to the end of such seven (7) year period or period of extension, if
applicable, if it gives Shareholders at least sixty (60) days prior written
notice of its intent to do so and Shareholders have not taken possession of
such books and records, at its expense, within such sixty (60) day period.
(c) Nothing in SECTION 14.20 shall relieve the Shareholders
of the obligations to indemnify Buyer and DCRI pursuant to the terms of this
Agreement.
14.21 LIQUIDATED DAMAGES. Notwithstanding anything in this Agreement
to the contrary, the parties hereto acknowledge and agree that the
Shareholders shall forfeit the right to receive any portion of the unpaid
Installment Payments (as herein defined) if there has been a determination by
arbitrator(s) involved that (a) Xxxxxx has violated the nonsolicitation or
noncompetition provisions of the Xxxxxx Employment Agreement, or (b) Xxxxxx
Xxxxxx has violated her nonsolicitation or noncompetition agreement with
Buyer and DCRI.
14.22 ARBITRATION. If Shareholders dispute the amount of any
Installment Payment to be made to the Shareholders by Buyer, or any
adjustments thereto based upon Applicable EBITDA, Shareholders must give
Buyer and DCRI written notice thereof, within the time period specified in
SECTION 2.1 specifying the reasons for the dispute and verifying the dollar
amount involved with respect to each dispute and the amount of the
Installment Payment which Shareholders deem to be payable. If such dispute is
not resolved by negotiation within thirty (30) days from the date of receipt
of such notice by Buyer and DCRI, the dispute shall be referred to a firm of
independent certified public accountants jointly selected by the Shareholders
and DCRI and whose decision shall be rendered promptly and shall be binding
on all parties. The costs of the jointly selected independent accounting firm
shall be borne and the Buyer in the manner determined by the arbitrator(s)
involved. In the event that Shareholders and Buyer are unable to agree upon
an independent firm of accountants, the parties agree to use an accounting
firm selected by the outside accounting firm of both Shareholders and Buyer
as the accounting firm to resolve the dispute(s) involved.
Any other controversy between the parties to this Agreement
involving the construction of application of any of the terms, covenants, or
conditions of this Agreement shall be submitted to arbitration in the State
of Texas, if either party to this Agreement shall request arbitration by
notice in writing to the other party. In such event, the parties to this
Agreement shall, within thirty (30) days after this right to arbitration the
Shareholders and the Buyer shall both appoint one person as an arbitrator to
hear and determine the dispute, then the two arbitrators so chosen shall,
within fifteen (15) days, select a third impartial arbitrator; the majority
decision of the arbitrators shall be final and conclusive upon the parties to
this Agreement. Each party to the arbitration proceedings shall bear his
33
or its own expenses, except that the expenses of the arbitrators shall be
borne by the Shareholders and/or the Buyer as determined by the arbitrator(s)
involved.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto this 6th day
of August, 1999.
BUYER:
SHAREHOLDERS:
DIVERSIFIED CORPORATE RESOURCES, INC.
----------------------------
Xxxxxx X. Xxxxxx By:
----------------------------------------
M. Xxx Xxxxxxx
-----------------------------
Xxxxxx Xxxxxx MAGIC NORTHEAST, INC.
By:
----------------------------------------
M. Xxx Xxxxxxx
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