1
EXHIBIT 10.9
STOCK PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 21, 1995
BY AND AMONG
ARGO BANCORP, INC.
BY AND THROUGH
OLF ACQUISITION CORP.
AND
ON-LINE FINANCIAL SERVICES, INC.,
SUPERIOR SAVINGS BANK,
I.S.C., INCORPORATED ("ISC"),
SAVINGS AND LOAN SERVICE BUREAU OF INDIANA ("SLI"),
O&H SERVICE BUREAU OF MICHIGAN ("OHM")
AND THE STOCKHOLDERS OF ISC, SLI AND OHM
2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of September 21, 1995, by and among ARGO BANCORP, INC., a Delaware
corporation, by and through its wholly owned subsidiary, OLF ACQUISITION CORP.,
an Illinois corporation (collectively "Purchaser"), and ON-LINE FINANCIAL
SERVICES, INC., an Illinois corporation ("On-Line"), SUPERIOR SAVINGS BANK, a
Wisconsin savings bank ("Superior"), I.S.C., INCORPORATED, an Illinois
corporation ("ISC"), SAVINGS AND LOAN SERVICE BUREAU OF INDIANA, an Indiana
corporation ("SLI"), O&H SERVICE BUREAU OF MICHIGAN ("OHM"), (ISC, SLI and OHM
hereinafter collectively referred to as the "Service Corps"), and the entities
listed on Schedules "X," "X" and "C" hereto (such entities hereinafter
collectively referred to as the "Thrifts"), the Thrifts constituting all the
stockholders of the Service Corps (Superior and the Thrifts hereinafter
collectively referred to as the "Selling Entities").
W I T N E S S E T H:
WHEREAS, Purchaser desires to acquire and the owners thereof, direct or
otherwise, desire to transfer, one hundred (100%) percent of the 26,120 issued
and outstanding shares of the capital stock of On-Line, by: (i) the direct
purchase by Purchaser of Superior's stockholdings in On-Line, and (ii) the
purchase by Purchaser from the Thrifts of their stockholdings in the Service
Corps which own the remaining shares of the capital stock of On-Line (Superior,
ISC, SLI and OHM hereinafter collectively referred to as the "On-Line
Stockholders"), on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, it is hereby agreed between On-Line, the On-Line
Stockholders and the Thrifts (collectively the "On-Line Group"), and Purchaser
as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINITIONS. In addition to other terms defined in this
Agreement, the following terms shall have the respective meanings set forth
below:
"Accounts Receivable" as of any specified date shall mean the accounts,
notes and other receivables (including without limitation any "accounts" as
defined under the Uniform Commercial Code) of On-Line or the Service Corps, as
the case may be, as of such date, including any indebtedness arising from the
sale or license of products or merchandise or the provision of services by
On-Line or the Service Corps and the right to payment of any interest or finance
charges or similar fees or charges relating thereto.
"Affiliate" shall mean any Person that directly or indirectly through
one or more intermediaries controls, is controlled by or is under common control
with the Person specified; provided, however, that each term shall not
1
3
include, with respect to On-Line and the Service Corps, any shareholder of the
Service Corps.
"Agent" shall mean Midwest Trust Services, Inc., an Illinois
corporation, pursuant to the Powers of Attorney.
"Balance Sheets" shall mean the unaudited consolidated balance sheets
for each of On-Line and the Service Corps, as the case may be, as of August 31,
1995.
"Balance Sheet Date" shall mean the last day of the fiscal month to
which the Balance Sheets relate.
"Books and Records" shall mean all accounting, financial reporting,
Tax, business, marketing, corporate and other files, documents, instruments,
papers, books and records of a specified Person, including without limitation
financial statements, budgets, ledgers, journals, deeds, titles, policies,
manuals, minute books, stock certificates and books, stock transfer ledgers,
Contracts, franchises, permits, agency lists, policyholder lists, supplier
lists, reports, computer files, retrieval programs, operating data or plans and
environmental studies or plans.
"Business" shall mean the business and operations of On-Line or the
Service Corps, as the case may be, as presently conducted and as conducted at
any time within the 12 calendar months immediately preceding the Effective Date.
"Business Day" shall mean a day on which federally chartered banks
located in Chicago, Illinois, are not required or authorized to close and not be
open for business (other than a Saturday or Sunday) under the Legislative
Enactments of the United States.
"Charter" shall mean the Articles of Incorporation or Certificate of
Incorporation of any Person.
"Closing" shall mean those events which occur on the Effective Date for
the purpose of consummating the transactions contemplated by this Agreement in
accordance with Article II.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, together with any amendments and supplements thereto, providing for
health care continuation coverage under Section 4980B of the Code or Section 601
et seq. of ERISA.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, including without limitation any successor revenue code of the United
States federal government, together with the rules and regulations promulgated
thereunder.
"Consents" shall mean consents, waivers, permits, clearances, approvals
and other authorizations.
"Contract" shall mean any contract, agreement, understanding, lease,
sublease, license, sublicense, distribution agreement, promissory note, evidence
of indebtedness, indenture, instrument, mortgage, insurance policy, annuity or
other binding commitment, whether written or oral and shall include any proposal
or other offer to any Person to enter into any of the foregoing.
2
4
"Designated On-Line Net Revenue" shall mean (a) during the period from
the Effective Date to the first anniversary of the Effective Date, 10.5% of
On-Line Net Revenue for such period, (b) during the period from first
anniversary of the Effective Date to the third anniversary of the Effective
Date, 15.5% of On-Line Net Revenue for such period, and (c) during the period
from third anniversary of the Effective Date to the seventh anniversary of the
Effective Date, 11.0% of On-Line Net Revenue for such period.
"Designated Funds" shall mean, during the period from the Effective
Date to the seventh anniversary of the Effective Date, Designated On-Line Net
Revenue for such period, provided, however, that the amount of Designated Funds
during the period from the second anniversary of the Effective Date to the
seventh anniversary of the Effective Date shall be reduced by the amount of any
Balloon Note Payment (as defined in the Asset Notes) not theretofore
automatically set off against Designated Funds when and as they are determined;
provided, further, that Designated Funds shall not include any deferred revenue
received by On-Line in any such period.
"Effective Date" shall mean the date on which the Closing actually
occurs.
"Environmental Laws" shall mean all Legislative Enactments and Official
Actions relating to industrial hygiene, environmental protection, air emissions,
water discharges, or the use, transportation, generation, handling, treatment,
storage, disposal, release or threatened release of any Regulated Material or
the cleanup or remediation of any contamination by any Regulated Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974.
"Expense Items" shall mean 110% of third party rebillable expenses,
third-party passthroughs, third-party fees and third-party telecommunication
services.
"Financial Statements" shall mean such of the following audited or
unaudited statements as were prepared by or for On-Line in the ordinary and
regular course of the business of On-Line for use by the officers and directors
of On-Line in or with respect to the conduct of On-Line Business: (a) balance
sheets for On-Line and related operating statements (such as with respect to
results of operations, retained earnings and cash flows) for all fiscal years
ending in the calendar years 1990, 1991, 1992, 1993, and 1994; and (b) balance
sheets for On-Line and related operating statements (such as with respect to
results of operations, retained earnings and cash flows) for the eleven months
ending August 31, 1995.
"GAAP" shall mean generally accepted accounting principles which are
recognized as such by the American Institute of Certified Public Accountants,
which are consistently applied for all periods so as to fairly reflect the
financial condition, the results of operations and the cash flows of the
relevant Person or Persons.
"Intellectual Property" shall mean and include (a) Patent Rights, (b)
Trademark Rights, (c) copyrights and registrations of claim to copyright, (d)
Inventions, (e) Software and (f) Trade Secrets.
"Inventions" shall mean and include novel devices, processes,
compositions of matter, methods, techniques, observations, discoveries,
apparatuses, designs, expressions, theories and ideas, whether or not
patentable.
"IRS" shall mean the United States Internal Revenue Service.
"Know-How" shall mean scientific, engineering, mechanical, electrical,
financial, marketing or practical
3
5
knowledge or experience useful in the operation of any of the On-Line Business.
"Legal Expenses" of a Person shall mean any and all reasonable
out-of-pocket fees, costs and expenses of any kind (including attorneys' and
experts' fees) incurred by a Person and its counsel in investigating, preparing
for, prosecuting, defending against or providing evidence, producing documents
or taking other action with respect to any threatened or asserted claim.
"Legislative Enactments" shall mean laws (including without limitation
common law), ordinances, regulations and rules at any governmental level.
"Lien" shall mean any lien, mortgage, security interest, tax lien,
financing statement, pledge, assessment, lease, sublease, adverse claim, levy,
charge, hypothecation or other encumbrance of any kind or nature whatsoever
including without limitation any conditional retention Contract or other
Contract to give or to refrain from giving any of the foregoing.
"Official Action" shall mean any domestic or foreign decision, order,
writ, injunction, decree, judgment, award or any determination by any Tribunal.
"Ownership Interests" shall mean the ownership interests in any Person,
whether classified as debt, equity, profit-sharing or some other type of
ownership interest, including without limitation capital stock, bonds, notes or
other securities.
"On-Line Net Revenue" shall mean revenue from information processing
services ("Customer Contracts") accrued by Purchaser (or any person related to
Purchaser as defined in Section 267(b) of the Code) from those customers of
On-Line disclosed on Schedule D ("Effective Date Customer Contracts"). On-Line
Net Revenue shall include additional amounts attributable to "add-on" business
with respect to those customers disclosed on Schedule D. On-Line Net Revenue
shall be reduced by Expense Items properly allocable to such revenues. With
respect to any Contract with such customer renewed or entered into by Purchaser
(or a person related to Purchaser) after the Effective Date, On-Line Net Revenue
shall be accrued using the method of accounting described in Section 467 of the
Code.
"Patent Rights" shall mean and include all domestic and foreign patents
(including without limitation certificates of invention and other patent
equivalents), patent applications and patents issuing therefrom as well as any
division, continuation or continuation in part thereof, and any reissue,
extension, revival or renewal of any patent.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, an agency
of the United States government.
"Permit" shall mean any permit, license, exemption, waiver or other
authorization required under any Environmental Law.
"Person" shall mean any natural person, corporation, general
partnership, limited partnership, joint venture, proprietorship, trust,
association, unincorporated association or Tribunal.
4
6
"Personal Property" shall mean that personal property owned or leased
(as lessor, sublessor, lessee or sublessee) by On-Line and used in the current
conduct of On-Line Business.
"Powers of Attorney" shall mean the separate powers of attorney
executed and delivered by Superior and each Thrift, substantially in the form of
Exhibit A hereto, in each case effective not later than the date hereof.
"Purchased Stock" shall mean (i) three hundred (300) shares of the
common capital stock of On-Line, $10.00 par value, owned and held by Superior;
(ii) sixteen thousand five hundred (16,500) shares of the common capital stock
of ISC, $1.00 par value, owned and held by the entities listed on Schedule "A"
hereto; (iii) four thousand one hundred seventy five (4,175) shares of the
common capital stock of SLI, no par value, owned and held by the entities listed
on Schedule "B" hereto; and (iv) five hundred (500) shares of the common capital
stock of OHM, $100.00 par value, owned and held by the entities listed on
Schedule "C" hereto.
"Real Property" shall mean that real property (together with the
fixtures and improvements thereon) owned or leased (as lessor, sublessor, lessee
or sublessee) by On-Line and used in the current conduct of On-Line Business, as
more fully described in Schedule 4.20(a).
"Regulated Material" shall mean any substance, waste, or material as to
which the use, handling, disposal, storage, transportation, generation, release
or threatened release is prohibited, limited or regulated under any Legislative
Enactment or Official Action.
"Software" shall mean the expression of an organized set of
instructions in a natural or coded language which is contained on a physical
media of any nature (e.g., written, electronic, magnetic, optical or otherwise)
and which may be used with a computer or other automated data processing
equipment device of any nature which is based on digital technology, to make
such computer or other device operate in a particular manner and for a certain
purpose, as well as any related documentation for such set of instructions. The
term shall include computer programs in source and object code, test or other
significant data libraries, user documentation for computer programs, and any of
the following which is contained on a physical media of any nature and which is
used in the design, development, modification, enhancement, testing,
installation, maintenance, diagnosis or assurance of the performance of a
computer program: narrative descriptions, notes, specifications, designs,
flowcharts, parameter descriptions, logic flow diagrams, masks, input and output
formats, file layouts, database formats, test programs, installation and
operating instructions, diagnostic and maintenance instructions, and other
similar materials and information.
"Tax Return" shall mean any report, return, information statements or
returns, estimates or other information required to be supplied to, or filed
with, the IRS or any other tax Tribunal, and any amendment thereto, with respect
to Taxes.
"Taxes" shall mean all taxes, charges, fees, levies or other similar
assessments or liabilities, including without limitation income, receipts, ad
valorem, value added, purchases, premium, excise, real property, personal
property, windfall profit, sales, stamp, use, licensing, withholding,
employment, payroll, share, capital, surplus, franchise, occupational or other
taxes imposed by a Tribunal, together with any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with, any such tax or any contest or dispute thereof, and "Tax" shall
mean any of the foregoing.
"Trade Payables" shall mean a present or current (as opposed to an
accrued or future) obligation or liability resulting from the acquisition of
goods or the use of services.
5
7
"Trade Secrets" shall mean any formula, design, device or compilation
of information which is used or held for use in the On-Line Business, which
gives the holder thereof an advantage or opportunity for advantage over
competitors which do not have or use the same, and which is not generally known
by the public. Trade Secrets can include, by way of example, information
contained on drawings and other documents, and information relating to research,
development or testing.
"Trademark Rights" shall mean and include all domestic and foreign
trademarks (whether registered or at common law), trade names, service marks,
assumed names, trade dress, and logos used in the On-Line Business and
registrations for and applications to register any of the same.
"Tribunal" shall mean any government, any arbitration or other
alternative dispute resolution panel, any court or any governmental department,
commission, board, bureau, agency or instrumentality of the United States or any
foreign or domestic state, province, commonwealth, nation, territory,
possession, country, parish, town, township, village or municipality.
"WARN Act" shall mean the Federal Workers Adjustment and Retraining
Act, P.L. 100-379, 102 Stat. 890.
1.2 OTHER. All references in this document to this "Agreement" include
all documents, Schedules and Exhibits referred to herein. Any term referred to
in a Schedule hereto is deemed to be disclosed on any other applicable Schedule.
All references in this Agreement to the "knowledge" of any Person refer to the
actual knowledge of the officers specifically referred to herein or if none, the
executive officers (or persons occupying comparable positions) of such Person.
When used with respect to a group of Persons, "knowledge" includes the knowledge
of any Person in such group. References to any Legislative Enactment shall be
construed to include any successor Legislative Enactment and any amendments or
supplements to any of the foregoing, together with, in each case, the rules and
regulations promulgated thereunder, but only to the extent that such are in
effect at the time, as the context requires with respect to the taking of an
action or the making of a representation or warranty. All terms defined in this
Agreement shall have such meanings ascribed thereto when used in any
certificate, Schedule, Exhibit, report or other document made or delivered
pursuant to this Agreement, unless the context shall otherwise clearly require.
ARTICLE II
THE CLOSING
2.1 TIME AND PLACE OF CLOSING. The Closing will take place on the
Effective Date at 10:00 a.m. (as prevailing in the Central Time Zone) at the
offices of On-Line, 000 Xxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxx, or at such other
time and place on the Effective Date as may be mutually agreed upon by Purchaser
and the Agent. The Closing shall be effective as of 12:01 a.m. on the Effective
Date. The Effective Date shall be the date which is 5 Business Days after the
last to occur of the dates on which the conditions set forth in Articles XII and
XIII are satisfied (or such other date as Purchaser and the Agent may agree upon
in writing).
2.2 ACQUISITION OF THE SHARES. (a) At the Closing, on the terms and
subject to the conditions set forth in this Agreement, and on the basis of the
representations and warranties, covenants and agreements set forth in this
Agreement, the Selling Entities shall assign, transfer and convey to Purchaser
and Purchaser shall acquire from the Selling Entities immediately following the
distribution to the Selling Entities as provided in Section 10.14 hereof, all
the Purchased Stock in exchange for the following (collectively, the "Purchase
Price"): (i) the distributions to the Selling
6
8
Entities provided pursuant to Section 11.6 hereof; (ii) the amount (the "Asset
Amount") of the positive aggregate Net Book Value (as defined in Section 2.2(c)
of the assets of On-Line and the Service Corps, as such assets are reflected in
accordance with GAAP on the Closing Balance Sheet, and (iii) such amount (the
"Contingent Payment") equal to the difference between $10 million and the Asset
Amount, but payable solely from and to the extent of Designated Funds that are
realized by On-Line (or any successor thereto) during, and determined with
respect to, the period from the Effective Date to the seventh anniversary of the
Effective Date (such period, the "Revenue Period"). The Asset Amount shall be
payable to the Agent in accordance with the terms of the promissory notes (the
"Asset Notes") in the form of Exhibit B. The Contingent Payment shall not accrue
interest or other charges with respect to the dates on which any part thereof
may be paid. Designated Funds shall be payable against the Asset Notes and the
Contingent Payment only on and after 60 calendar days after the last day of
On-Line's fiscal year end (which year end Purchaser shall cause to be changed to
December 31st subsequent to the Effective Date) with respect to which the amount
of Designated Funds are determinable. No part of the Contingent Payment shall be
payable until all of the Asset Amount shall have been paid or be payable.
The Purchase Price shall be payable to the Selling Entities in the
following percentages:
ISC Stockholders 74.8%
SLI Stockholders 22.2%
OHM Stockholders 1.9%
Superior 1.1%
With respect to any and each payment of the Purchase Price to the Agent
on behalf of the Selling Entities, each Selling Entity agrees that the Agent
shall receive such payment as the agent for, and on behalf of, such Selling
Entity.
(b) In such amounts as any of the following are not accrued on the
Closing Balance Sheet, the Purchase Price and the remaining principal amount of
the Asset Notes (and, if required, amounts due as the Contingent Payment) shall
be adjusted by the following items, prorated (if applicable) to the Effective
Date: (i) increased by security deposits and prepaid license fees and expenses
from which the Business of On-Line and the Service Corps directly derives
quantifiable economic benefit, prorated to the Effective Date; and (ii)
decreased by advance user deposits, deferred income, real estate taxes, personal
property taxes, ad valorem taxes, rent, and other unpaid expenses payable in
arrears including employee compensation and related expenses.
(c) Not more than 90 calendar days after the Effective Date, the
Selling Entities shall prepare and promptly deliver to Purchaser audited
consolidated Balance Sheets of On-Line and the Service Corps as of the Effective
Date (the "Closing Balance Sheet"), which shall have been prepared in accordance
with GAAP, applied on a consistent basis with the application thereof in
preparing the Balance Sheets. The Selling Entities shall also then state the
amount of the net book value reflected in the Closing Balance Sheet (the "Net
Book Value"). Within the 60 calendar days following delivery of the Closing
Balance Sheet to Purchaser, Purchaser, at its sole expense, may audit or review
the Closing Balance Sheet and may propose any adjustments Purchaser believes
should be made to the Closing Balance Sheet. If the Selling Entities and
Purchaser fail to agree on any adjustment to the Closing Balance Sheet proposed
by Purchaser, then an independent accounting firm mutually selected by Purchaser
and the Selling Entities shall make a determination of the appropriateness of
any such proposed adjustment which determination shall be final and binding on
all parties. After delivery of the Closing Balance Sheet and completion of any
such audit or review, proposed adjustments and further determination, the
remaining principal amount of the Asset Notes and (if required) amounts due as
the Contingent Payment shall be adjusted, dollar for dollar, as follows: (i)
increased by the amount by which the Net Book Value as of the Effective Date
exceeds the Asset Amount; or (ii) decreased by the amount by which Asset Amount
7
9
exceeds the Net Book Value as of the Effective Date.
(d) Except as provided in Sections 14.2 and 10.18, notwithstanding
anything to the contrary contained in this Agreement or the Asset Notes, the
Selling Entities agree that in addition to adjustments pursuant to Sections
2.2(b) or 2.2(c), Purchaser shall be entitled to credit and offset against any
payments due to any of the Selling Entities by Purchaser as a result of the
transactions contemplated hereby (including by way of the Asset Notes and the
Contingent Payment), an aggregate amount equal to all amounts due to Purchaser
by any of the Selling Entities under this Agreement or any other agreement
furnished or to be furnished by any of the Selling Entities to Purchaser
pursuant thereto, including, without limitation, (i) amounts due pursuant to
Article XIV, (ii) amounts of any expenses relating to the period prior to the
Effective Date that have been deferred to the period after the Effective Date,
(iii) amounts of any revenue relating to the period after the Effective Date
that was received by On-Line prior to the Effective Date, (iv) if not otherwise
taken into account in determining the Purchase Price, the amount of any decrease
in Net Book Value from that initially determined pursuant to Section 2.2(b), and
(v) payments to the Selling Entities pursuant to Section 11.6. No such offset
shall be made without thirty (30) business days prior written notice to the
Agent, which notice shall state the nature of the items comprising the offset
and shall include copies of all supporting documentation evidencing same. Any
such offset shall be made first against the Asset Notes and then against the
Contingent Payment. The exercise of such right to offset if made in good faith
by Purchaser shall not constitute a breach or violation of the provisions of
this Agreement or any other agreement contemplated hereby and shall not be
construed to be the sole and exclusive remedy of Purchaser.
(e) If a Service Corp is unable to procure: (i) the unanimous written
consent of all of its shareholders to the terms of this Agreement and (ii) the
tender to Purchaser by such shareholders of all their stockholdings in such
Service Corp, then Purchaser, upon delivery of written notice to Agent, within
ten (10) days of its obtaining knowledge of such Service Corps's inability to
procure the foregoing items (i) and (ii), shall have the option to proceed with
the transactions contemplated by this Agreement, as modified by this
subparagraph 2(e), with the parties who are then signataries to this Agreement.
In such event, Purchaser and such Service Corp shall agree upon an amount to be
withheld from that portion of the Purchase Price payable to such Service Corp
pursuant to the terms of Section 2.2(a) and such amount shall be deposited (out
of the proceeds to be distributed to such Service Corp pursuant to Section
10.14) in a joint order escrow between Purchaser and the Agent, at a mutually
agreed upon financial institution, upon terms agreed upon by Purchaser, such
Service Corp and the Agent.
2.3 CLOSING DELIVERIES BY PURCHASER. At the Closing, Purchaser shall
deliver to the Selling Entities the items listed on Exhibit C.
8
10
2.4 CLOSING DELIVERIES BY THE ON-LINE GROUP. At the Closing, the
On-Line Group shall deliver to Purchaser the items listed on Exhibit D, in
addition to the Purchased Stock.
2.5 OTHER DELIVERIES. Each of Agent, on behalf of itself and the
Selling Entities, and Purchaser shall deliver to the other a duly executed copy
of this Agreement.
2.6 EMPLOYMENT AGREEMENTS. As an inducement to Purchaser to consummate
the transactions contemplated hereby, On-Line has heretofore permitted Purchaser
to enter into employment agreements (the effectiveness of which shall commence
as of the Effective Date) with Xxxxxx Xxxxxx and Xxxxxxx Xxxxxxxx.
2.7 WAIVERS OF DELIVERIES OR CONDITIONS PRECEDENT. Notwithstanding any
provision to the contrary in this Agreement or in any certificate, document or
instrument delivered pursuant to this Agreement, any express or implied waiver
by Purchaser of the requirement of the On-Line Group to deliver any item or
Consent to be delivered at the Closing (including without limitation those items
referenced in Section 2.4) or to satisfy any conditions precedent shall not
abrogate, diminish or otherwise affect any rights of Purchaser under this
Agreement, including without limitation those rights set forth in Section 14.2.
Notwithstanding any provision to the contrary in this Agreement or in any
certificate, document or instrument delivered pursuant to this Agreement, any
express or implied waiver by the Selling Entities of the requirement of
Purchaser to deliver any item or Consent to be delivered at the Closing
(including without limitation those items referenced in Section 2.3) or to
satisfy any conditions precedent shall not abrogate, diminish or otherwise
affect any rights of the Selling Entities under this Agreement, including
without limitation those rights set forth in Section 14.1.
2.8 XXXXXXX MONEY. Purchaser has heretofore deposited with On-Line's
counsel, the amount of $100,000 as its xxxxxxx money deposit, to be held at an
insured institution acceptable to Purchaser, with the interest thereon to accrue
to and for the benefit of Purchaser. Unless Purchaser shall be in default under
this Agreement, the xxxxxxx money and all interest thereon, shall be refunded to
Purchaser at Closing immediately prior to the distributions to be made pursuant
to Section 10.14.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
To induce the On-Line Group to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser and each of them,
jointly and severally, represents and warrants to the On-Line Group as follows:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state or
other jurisdiction of its incorporation or other organization, as set forth in
Schedule 3.1. Purchaser has all requisite power and all requisite franchises,
license, permits and authority to own and lease its properties and assets and to
carry on its business, as such business has been conducted and is being
conducted currently. Purchaser is not in breach or violation of its Charter or
Bylaws.
9
11
3.2 AUTHORIZATION AND EFFECT OF AGREEMENT, ETC. Purchaser has all
requisite power and authority to enter into, execute and deliver this Agreement
and the other agreements contemplated hereby to which Purchaser is a party and
to perform its obligations hereunder and thereunder and to consummate the
respective transactions contemplated hereby and thereby for Purchaser. The
execution, delivery and performance of this Agreement by Purchaser and the other
agreements contemplated hereby to which Purchaser is a party and the
consummation by Purchaser of the transactions contemplated hereby and thereby
have been duly authorized by all corporate and other entity action. This
Agreement has been, and the other agreements contemplated hereby to which
Purchaser is a party will be, duly executed and delivered by Purchaser and
constitutes, or when executed and delivered will constitute, the valid and
binding obligation of Purchaser, enforceable in accordance with its respective
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and (ii) the remedy of specific
performance and injunctive relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding may be brought.
3.3 NO VIOLATION. Neither the execution, delivery or performance by
Purchaser of this Agreement or any other agreement contemplated hereby to which
Purchaser is a party, nor the consummation by Purchaser of any of the
transactions contemplated hereby or thereby in accordance with the terms hereof
or thereof, does or will (with the passage of time, the giving of notice or
otherwise): (a) violate or conflict with any provision of the Charter or Bylaws
of Purchaser; (b) violate, conflict with, modify or cause any default under or
acceleration of (or give any party any right to declare any default or
acceleration, upon notice or passage of time or otherwise, with respect to), in
whole or in part, any Lien or Contract to which Purchaser is a party or by which
it or Purchaser or any of its respective properties are bound; (c) violate,
conflict with or cause any default under (or give any party any right to declare
any default, upon notice or passage of time or otherwise, under) any Legislative
Enactments, Official Actions or any other restriction of any kind or character
to which Purchaser is a party or by which Purchaser or any of its respective
properties is bound; (d) result in the creation or imposition of any Lien,
proscription or restriction on any property or asset; or (e) permit any Tribunal
to impose any restrictions or limitations of any nature on Purchaser or its
respective properties or activities.
3.4 CHALLENGES TO THIS AGREEMENT. No suit, action, proceeding or
investigation challenging this Agreement or any of the transactions contemplated
hereby or claiming damages in connection with this Agreement or any of the
transactions contemplated hereby has been instituted or, to the knowledge of
Purchaser, threatened.
3.5 CONSENTS. No Consent of or from, and no registration, declaration
or filing with, any Tribunal, lessor, lender or any other Person is required to
be made or obtained by Purchaser in connection with the execution, delivery and
performance by Purchaser of this Agreement or the other agreements contemplated
hereby or the consummation of the transactions contemplated hereby or thereby in
accordance with the terms hereof and thereof.
3.6 BROKERS. Purchaser has not authorized any Person to act on its
behalf as a broker or finder or in any similar capacity in connection with this
Agreement or the transactions contemplated hereby in such a manner as to give
rise to a valid claim against any member of the On-Line Group for any brokers'
or finders' fees or similar fees or expenses.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ON-LINE
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby,
10
12
On-Line represents and warrants to Purchaser as follows:
4.1 CORPORATE EXISTENCE AND AUTHORITY. On-Line is a corporation duly
organized, validly existing and in good standing under the laws of the state or
other jurisdiction of its incorporation or other organization, as set forth on
Schedule 4.1. On-Line has all requisite power and all requisite material
franchises, licenses, permits and authority to own and lease its properties and
assets and to carry on the On-Line Business, as such business is being conducted
currently. Schedule 4.1 contains a true, complete and correct list of: (a) all
jurisdictions in which On-Line owns or leases any real property or has employees
or offices relating to the On-Line Business; (b) all jurisdictions in which
On-Line is qualified or licensed to do business as a foreign corporation or
other legal entity; and (c) all officers and directors of On-Line. On-Line is
duly qualified and licensed to do business as a foreign corporation or entity
and is in good standing in all jurisdictions in which the nature of the business
being conducted requires it to be so qualified, except where the failure so to
qualify may reasonably be expected not to have a material adverse effect on the
On-Line Business or On-Line.
4.2 AUTHORIZATION AND EFFECT OF AGREEMENT, ETC. On-Line has all
requisite power and authority to enter into, execute and deliver this Agreement
and the other agreements contemplated hereby to which On-Line is a party and to
perform its obligations hereunder and thereunder and to consummate the
respective transactions contemplated hereby and thereby. The execution, delivery
and performance of this Agreement by On-Line and the other agreements
contemplated hereby to which On-Line is a party and the consummation by On-Line
of the transactions contemplated hereby and thereby have been duly authorized by
all corporate and other entity action. This Agreement has been, and the other
agreements contemplated hereby to which On-Line is a party will be, duly
executed and delivered by On-Line and constitute, or when executed and delivered
will constitute the valid and binding obligation of On-Line, enforceable in
accordance with its respective terms, except that: (a) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally, and (b)
the remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding may be brought.
4.3 NO VIOLATION. Except as set forth on Schedule 4.3, neither the
execution, delivery or performance by On-Line or of any other agreement
contemplated hereby to which On-Line is a party, nor the consummation by On-Line
of any of the transactions contemplated hereby or thereby in accordance with the
terms hereof or thereof does or will (with the passage of time, the giving of
notice or otherwise): (a) violate or conflict with any provision of the Charter
or By-laws of On-Line; (b) violate, conflict with, modify or cause any default
under or acceleration of (or give any party any right to declare any default or
acceleration, upon notice or passage of time or otherwise with respect to), in
whole or in part, any Contract to which On-Line is a party or by which On-Line
or any of its properties is bound; (c) violate, conflict with or cause any
default under (or give any party any right to declare any default, upon notice
or passage of time or otherwise, under) any Legislative Enactments, Official
Actions or any other restriction of any kind or character to which On-Line is a
party or by which On-Line or any of its properties is bound; (d) result in the
creation or imposition of any Lien, proscription or restriction on any
11
13
of the properties of On-Line; or (e) permit any Tribunal to impose any
restrictions or limitations of any nature on On-Line or its properties or
activities.
4.4 CHALLENGES TO THIS AGREEMENT. Except as set forth in Schedule 4.4,
no suit, action, proceeding or investigation challenging this Agreement or any
of the transactions contemplated hereby or claiming damages in connection with
this Agreement or any of the transactions contemplated hereby has been
instituted or, to the knowledge of On-Line, threatened.
4.5 CONSENTS. Except as set forth in Schedule 4.5, no Consent of or
from, and no registration, declaration or filing with, any Tribunal, lessor,
lender or any other Person: (a) is required to be made or obtained by On-Line in
connection with the execution, delivery and performance by On-Line of this
Agreement or the other agreements contemplated hereby or the consummation of the
transactions contemplated hereby or thereby in accordance with the terms hereof
and thereof, (b) is necessary to prevent a breach of, or a default, penalty, or
increase in payments under, or a termination of, any material Contract relating
to the On-Line Business as a result of the consummation of the transactions
contemplated by this Agreement or the other agreements contemplated hereby, or
(c) is necessary to enable Purchaser to carry on and conduct the On-Line
Business, in all material respects, immediately subsequent to the Closing in
substantially the same manner as was carried on and conducted prior to the
Closing.
4.6 COMPLIANCE WITH LAW. Except as otherwise disclosed herein,
On-Line: (a) has substantially complied with all Legislative Enactments and
Official Actions applicable to the On-Line Business or the capital stock of
On-Line, (b) has duly and timely made all filings and submissions that are
required by Legislative Enactments or Official Actions to be made with respect
to the On-Line Business or the capital stock of On-Line, (c) has obtained and
put into place all licenses and regulatory approvals necessary for operation and
continuation of the On-Line Business, and (d) has no knowledge of any facts
which, upon examination, may reasonably be interpreted to form the basis of an
unasserted claim of non-compliance with Legislative Enactments and Official
Actions, non-timely filing or submission under Legislative Enactments or
Official Actions, or non-procurement or failure to put into place licenses and
regulatory approvals necessary for operation and continuation of the On-Line
Business.
4.7 CAPITALIZATION OF ON-LINE. The total number of shares of capital
stock (and the par value thereof) which On-Line is authorized to issue, and the
number of such shares which are issued and outstanding are set forth on Schedule
4.7. Schedule 4.7 sets forth a list, by On-Line Stockholders, of: (a) each
record holder of any shares of capital stock or other Ownership Interests of
On-Line, accurately setting forth the number and class of such shares or other
Ownership Interests held by each person, and (b) each record holder of any
outstanding rights, warrants, options, puts, calls, convertible securities or
convertible indebtedness, exchangeable securities or exchangeable indebtedness,
or other rights, exercisable for or convertible or exchangeable into, directly
or indirectly, common stock or other Ownership Interests of On-Line, whether as
of the date of this Agreement or upon the occurrence of some future event (the
foregoing, "Capital Stock Equivalents"), accurately setting forth the number and
type of Capital Stock Equivalents issuable now or in the future, in connection
therewith and indicating applicable prices and dates or time periods relevant to
any such issuance. To the knowledge of On-Line, each such holder listed on
Schedule 4.7 is the sole beneficial owner of all of the shares or Capital Stock
Equivalents as to which such holder is so listed as the record holder.
12
14
On-Line does not have any direct or indirect subsidiaries or any
Affiliates. With respect to On-Line, all such issued and outstanding shares of
capital stock or other Ownership Interests have been duly authorized and validly
issued and are fully paid and nonassessable. None of such shares of capital
stock or other Ownership Interests were issued in contravention of any
preemptive rights. Except as described in Schedule 4.7, there are no Ownership
Interests or other agreements of any character authorized, granted or issued by
On-Line or to which On-Line is a party or by which it is bound which provide for
the purchase, issuance or transfer of any shares of capital stock or any other
security or cash in lieu of any security of On-Line. All voting rights in
On-Line that are presently exercisable or that may be exercised at any time in
the future are vested exclusively in the capital stock listed on Schedule 4.7 or
(as indicated on Schedule 4.7) other Ownership Interests. There are no voting
trusts or other voting arrangements with respect to any voting rights of
On-Line.
4.8 FINANCIAL STATEMENTS; BOOKS OR RECORDS. On-Line has provided true,
complete and correct copies of the Financial Statements as of August 31, 1995 to
Purchaser. The Financial Statements fairly represent in all material respects
the financial position of On-Line and the related results of operations, and
changes in retained earnings and cash flows, at the dates and for the periods
covered thereby, subject to normal, recurring year-end audit adjustments. The
Financial Statements have been prepared in accordance with GAAP. The Financial
Statements were prepared consistent with past practices, for general use by the
officers and directors of On-Line in the conduct of the ordinary and regular
course of business. As of the Balance Sheet Date, (A) On-Line had no liability
or expense which was not reflected in the Financial Statements and which was of
a nature required under GAAP to be reflected in the Financial Statements or
disclosed in the notes thereto, (B) all allowances and reserves set forth in the
Financial Statements were adequate for the respective purposes for which they
were established, and (C) there were no loss contingencies (as such term is used
in Statement of Financial Accounting Standards No. 5) or contingent liabilities
which were of a nature required under GAAP to be reflected or disclosed therein
and were not reflected in the Financial Statements or disclosed in the notes
thereto and which would have a material adverse effect on the financial
condition or results of operation of On-Line with respect to the On-Line
Business. Since the Balance Sheet Date, except for liabilities that have been
incurred in the ordinary course of the On-Line Business, On-Line has not
incurred any liability required under GAAP to be reflected or disclosed in the
Balance Sheet or disclosed in the notes thereto. Except as set forth in the
Financial Statements, On-Line 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 of a nature
required under GAAP to be reflected or disclosed in the Closing Balance Sheet or
disclosed in the notes thereto. The Financial Statements fairly reflect the
liabilities with respect to the employee benefits payable under the plans,
programs and arrangements set forth in Schedule 4.23(c), consistent with prior
application of the terms of such plans, programs and arrangements and taking
into account performance to date. On-Line has provided to Purchaser, true,
complete and correct copies of all external audit management letters with
respect to On-Line concerning the years and periods covered by the Financial
Statements. Management of On-Line makes and keeps Books and Records with respect
to the On-Line Business which, in reasonable detail, accurately and fairly
reflect in all material respects its transactions and the acquisitions and
dispositions of its assets.
4.9 INTERCOMPANY TRANSACTIONS. Since the Balance Sheet Date, except as
set forth in Schedule 4.9, all financial liabilities between On-Line, on the one
hand, and any On-Line Stockholder, on the other hand, have been settled in the
ordinary course of the On-Line Business, consistent with past practices. Since
the Balance Sheet Date, all allocations of intercompany expenses between On-Line
and any On-Line Stockholder have been applied, in the ordinary course of the
On-Line Business, consistent with past practices. Schedule 4.9 sets forth all
Contracts between On-Line, on the one hand, and any On-Line Stockholder, on the
other hand. Each of such Contracts which was entered into in the ordinary course
of business, consistent with past practices, and contain only provisions
(including terms and conditions of performance and payment) that are
substantially similar to provisions (including terms and
13
15
conditions of performance and payment) contained in Contracts entered into with
non-related third parties.
4.10 ACCOUNTS RECEIVABLE, COLLECTION OF ACCOUNTS RECEIVABLE. All of the
Accounts Receivable of On-Line have arisen in connection with bona fide sales
and deliveries of goods, performance of services or other bona fide business
transactions in the ordinary course of the On-Line Business, consistent with
past practices (including regular credit practices). Except as set forth in
Schedule 4.10, since the Balance Sheet Date, On-Line has not granted or agreed
to provide any rebates, discounts, advances or allowances to any customers which
would result in On-Line being required to provide, subsequent to Closing, any
products or services at discounted rates or free of charge to any customer as a
rebate, discount or advance to any customer to forgive or release, or to collect
or to accelerate the collection of any Accounts Receivable of On-Line.
4.11 ABSENCE OF CHANGES. Except as set forth in Schedule 4.11, since
the Balance Sheet Date there has not been, occurred or arisen any change in, or
any event (including without limitation any damage, destruction or loss whether
or not covered by insurance), condition or state of facts of any character that
individually or in the aggregate has or may be reasonably expected as of the
date hereof to have a material adverse effect on On-Line or the On-Line
Business. Since the Balance Sheet Date, except as set forth in Schedule 4.11:
(a) On-Line has not taken or failed to take any action the taking of which or
failure of which to take, as the case may be, would have violated any of the
provisions of Sections 10.2 or 10.3 if they had then been applicable to On-Line
during such period; and (b) there has not been any damage, destruction or loss
(whether or not covered by insurance) affecting On-Line, which damage,
destruction or loss individually exceeds $10,000 or the result of which
individually or in the aggregate has or may reasonably be expected to have a
material adverse effect on On-Line or the On-Line Business.
4.12 INTELLECTUAL PROPERTY AND KNOW-HOW. Schedule 4.12(a) sets forth a
list of all material Intellectual Property utilized by On-Line other than Trade
Secrets and licenses for generally available "shrink-wrapped" commercial
software used on a microcomputer (personal computer) having an acquisition cost
per copy of $1,000 or less. Except as set forth in Schedule 4.12(a), On-Line
owns or has the right to use all Intellectual Property and Know-How utilized by
On-Line and no other Intellectual Property or Know-How is necessary for the
conduct of On-Line Business as presently conducted. The interests of On-Line in
and to all such Intellectual Property is free and clear of any and all Liens or
any other rights of others or other adverse interests, and such Intellectual
Property is not currently being challenged in any way and is not involved in any
pending or, to the knowledge of On-Line, threatened interference or opposition
action or other civil or governmental litigation proceeding or Official Action.
The use by On-Line of its equipment and processes, the use by the customers of
On-Line of its products and services for the purposes for which are sold or
otherwise provided, and the use by On-Line of its Intellectual Property and
advertising, technical or other literature, do not to the knowledge of On-Line,
infringe upon or conflict with any patent, trademark, trade name, Intellectual
Property or other property right of others; and On-Line has not been advised,
nor has any knowledge of the existence of any claim of any such infringement or
conflict. Schedule 4.12(b) sets forth all Consents of third parties (relating to
the Intellectual Property) required as a result of the consummation of the
transactions contemplated by this Agreement. All Know-How that is material to
the On-Line Business is included in the assets of On-Line. On-Line has taken
appropriate measures to protect in all material respects the confidential and
proprietary nature of any material information related to the business strategy,
finances, marketing plans or employees of On-Line which has not been published
and is not generally known to the public.
4.13 TAXES. (a) Except as disclosed in Schedule 4.13(a), during the
period of any unexpired statutes of limitations (taking into account any waiver
or the like with respect thereto), On-Line has duly filed all federal, foreign,
state and local Tax Returns, reports and estimates for all years and periods
(and portions thereof) for which any such returns, reports or estimates were
due, all such returns and estimates were prepared in the manner required by
14
16
applicable law, and all Taxes shown thereby to be payable (or that are otherwise
payable) have been paid. No such Tax Return filed contains a disclosure
statement under former Section 6661 (or any replacement provision thereof) of
the Code or any similar provision of any other Legislative Enactment or Official
Action. There is no outstanding request for any extension of time within which
to file any Tax Returns or to pay any taxes. There are no outstanding
agreements, waivers, grants or other arrangements extending the period of
limitations applicable to any claim for, or the period for the collection or
assessment of, any Taxes due from On-Line. On-Line has not taken any action that
would have the effect of deferring any liability for Taxes for On-Line from any
taxable period ending on or before the Effective Date to any taxable period
ending thereafter. On-Line has provided to Purchaser or its representatives
true, complete and correct copies of its federal, state or local Tax Returns
filed for the periods ending September 30, 1989 through September 30, 1994, and
all examination reports, if any, relating to the audit of such returns by the
IRS or other taxing authority for each taxable year beginning on or after
October 1, 1991. The accrued liability for Taxes shown on the Balance Sheets of
On-Line (excluding any reserve for deferred Taxes established to reflect timing
differences between book and tax income) is adequate to cover the liability of
On-Line to the Balance Sheet Date for all Taxes (including all interest and
penalties, if any, thereon and all deficiencies with respect thereto) payable by
On-Line, including with respect to any employee of, or independent contractor
to, On-Line. The accrued liability for Taxes to be shown on the Closing Balance
Sheet (excluding any reserve for deferred Taxes established to reflect timing
differences between book and tax income) is adequate to cover the liability of
On-Line to the Effective Date for all Taxes (including all interest and
penalties, if any, thereon and all deficiencies with respect thereto) payable by
On-Line, including with respect to any employee of, or independent contractor
to, On-Line. There are no Liens for Taxes upon any assets of On-Line except for
statutory Liens in the amounts disclosed on Schedule 4.13, which Liens are for
Taxes or assessments not yet delinquent or the validity of which is being
contested in good faith by appropriate proceedings, as disclosed in Schedule
4.13(a).
(b) The statute of limitations for the assessment of Taxes has expired
(or all Tax Returns with respect to any such Taxes have been examined by the IRS
or other applicable taxing authority and any liability with respect thereto has
been satisfied) for all periods through 1991 (for federal income taxes) and
through September 30, 1991 (for all other Taxes). Except as disclosed in
Schedule 4.13(b) On-Line has not been audited by the IRS or any other taxing
authority in respect to any Tax year for which the statute of limitations has
not expired. No deficiency for any Taxes has been proposed, asserted or assessed
against On-Line which has not been resolved and paid in full and on a timely
basis. No claim is being made that On-Line is or may be subject to taxation in a
jurisdiction where On-Line does not file Tax Returns nor does On-Line have
knowledge of facts which, upon examination, may reasonably be interpreted to
form the basis of an unasserted claim for Taxes in any such jurisdiction. No
investigations for the assessment or collection of any Taxes, audits or other
administrative proceedings or court proceedings are presently pending or
threatened with regard to any Taxes or Tax Returns. Except as disclosed in
Schedule 4.13(b), there are no requests for rulings, determination letters,
subpoenas or requests for information pending from any taxing authority.
(c) On-Line is not, nor has it been, a member of an "affiliated group"
(as defined in Section 1504(a) of the Code) filing a consolidated federal income
Tax Return. On-Line has no liability for the Taxes of any other person under
Treasury Regulations Section 1.1502-6 (or any similar provision of any other
Legislative Enactment or Official Action), as a transferee or successor, by
contract, or otherwise. On-Line was not acquired in a "qualified stock purchase"
under Section 338(d)(3) of the Code, and no election under Section 338(g) of the
Code, protective carryover basis election, or offset prohibition election is
applicable to On-Line. Except as may be affected by the transactions
contemplated by this Agreement, as of the Effective Date, the ability of On-Line
to use any Tax attributes (including, without limitation, net operating losses)
will not have been affected by Sections 382, 383 or 384 of the Code or similar
rules or regulations. On-Line has not filed a consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of the subsection (f) asset (as such term is
15
17
defined in Section 341(f)(4) of the Code) owned by On-Line. No closing agreement
pursuant to Section 7121 of the Code or any similar provisions of any other
Legislative Enactment or Official Action has been executed or entered into by or
with respect to On-Line.
(d) On-Line is not, nor has it been, a party to any tax sharing or
allocation agreement or arrangement pursuant to which it has any contingent or
outstanding liability to any Person. On-Line is not required to include in
income any adjustment pursuant to Section 481(a) of the Code (or similar
provision of law or regulations) by reason of a change in accounting method, nor
is the IRS or any other taxing authority considering any such change in
accounting method. On-Line does not own any interest in an entity which, for
federal income tax purposes, is characterized as a partnership (whether limited
or general) or a limited liability company. On-Line is not a party to any
interest rate swap, currency swap or similar transaction. On-Line has disclosed
on its federal income Tax Returns all positions taken therein that could give
rise to a "substantial understatement" of federal income Tax within the meaning
of Section 6662 of the Code. On-Line has not disposed of any property which has
been accounted for Tax purposes under the installment method. On-Line would not
be liable for any increase in Tax under Section 481 of the Code, were On-Line to
dispose of all of its assets on the Effective Date. On-Line has not issued or
assumed any "corporate acquisition indebtedness" (within the meaning of Section
279(b) of the Code), or any obligation described in Section 279(a)(2) of the
Code. On-Line does not have or maintain a permanent establishment for Tax
purposes in any foreign jurisdiction. No election under Section 1504(d) of the
Code has been made with respect to On-Line. On-Line has not participated in or
cooperated with any international boycott, within the meaning of Section 999 of
the Code. As of the Effective Date, On-Line will not have any (i) "overall
foreign losses" (within the meaning of Section 904(f) of the Code), or (ii)
"non-recapture net Section 1231 losses" (within the meaning of Section 1231(c)
of the Code). None of the assets of On-Line are or will be subject to a lease to
a "tax exempt entity" (as such term is defined in Section 168(h)(2) of the
Code). None of the assets of On-Line is property that On-Line is required to
treat as being owned by any other person pursuant to the "safe harbor lease"
provisions of former Section 168(f)(8) of Code.
4.14 DISPUTES AND LITIGATION. Except as set forth in Schedule 4.14,
there is not existing or pending or, to the knowledge of On-Line, threatened:
(a) any suit, action, litigation, proceeding, investigation, claim, complaint or
accusation affecting or against On-Line in or before any Tribunal, claiming
damages, or affecting this Agreement or any of the transactions contemplated
hereby; or (b) any Official Actions which individually or in the aggregate have
or may reasonably be expected to have a material adverse effect on the On-Line
Business or On-Line or any Employee Benefit Arrangement (as defined in Section
4.23) to which On-Line is a party or may otherwise have obligations.
4.15 ENVIRONMENTAL MATTERS. On-Line has not received, nor to the
knowledge of On-Line there is not threatened, any notice, claim, demand, or
inquiry from any Person asserting or alleging responsibility or liability on the
part of On-Line or any predecessor in interest for any remedial, response,
investigatory, or clean-up costs or liability arising under any Environmental
Law. All operations of On-Line have been conducted in compliance with all
Environmental Laws, except where the failure to so comply would not have a
material adverse effect on the On-Line Business or On-Line. All Regulated
Materials generated or used in connection with the operations of On-Line have
been properly stored, handled, transported and disposed of in accordance with
applicable Environmental Laws. On-Line possesses all requisite Permits necessary
for the conduct of its business as it is currently conducted and as it is
proposed to be conducted.
4.16 BANK ACCOUNTS. Schedule 4.16 contains a true, complete and correct
list of each bank or other financial institution at which On-Line maintains an
account, safe deposit box or safekeeping arrangement, the number and name of
such account or other relationship, each signatory thereon and the balance
therein after giving effect to the distribution to be made pursuant to Section
10.14 hereof. All such bank accounts or other relationships are the sole
property of On-Line, and the property therein or held thereby is free of any
claims, Liens or other adverse interest or
16
18
restrictions.
4.17 INSURANCE. Schedule 4.17(a) lists all insurance policies presently
carried by On-Line together with the name of the insurer, a brief description of
the types and amount of coverage and the amounts of any deductibles. The
existing insurance carried by On-Line is in full force and effect. On-Line has
not failed to give any notice or present any material claim under such insurance
policies in a timely fashion. Schedule 4.17(b) sets forth the 1992, 1993, and
1994 claims history with respect to: (a) all such insurance policies, and (b)
workers compensation. Since December 31, 1990, except for annual notices of
termination of professional liability and errors and omissions insurance
coverages, and requirements for submission of a current application, On-Line has
not received any notification of the cancellation or reduction of any of such
policies or that any of such policies will not be renewed or will be reduced.
Except as set forth in Schedule 4.17(b), to the knowledge of On-Line, there is
no claim, demand or offset, or any state of facts or occurrence of events which
might form the basis of any claim, demand or offset, which may materially
increase the premiums or impair the full value of said insurance policies.
4.18 RIGHTS USED; CERTAIN RELATIONSHIPS. Except as set forth in
Schedule 4.18, On-Line owns or holds, free from all material liens, all rights,
properties and assets utilized or necessary in the conduct of the On-Line
Business, which are sufficient to carry on and conduct the On-Line Business in
the period immediately after the Closing in substantially the same manner as it
was carried on and conducted prior thereto. Neither On-Line nor any of its
directors and officers have directly or indirectly, given or agreed to give any
improper gift or similar benefit to any creditor, lessor, lessee, supplier,
dealer, distributor, franchisee, customer, competitor or governmental employee
or official (domestic or foreign) (a) that could subject On-Line or Purchaser or
any Affiliate of Purchaser to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, or (b) the absence or discontinuation of
which could have had a material adverse effect on the On-Line Business or
On-Line.
4.19 TITLE TO PROPERTIES AND ABSENCE OF LIENS; USE OF REAL AND PERSONAL
PROPERTY. On-Line has good and marketable title or valid leasehold title to its
properties, subject to no Liens, existing or threatened claims of default, or
any other adverse interests or restrictions of any kind except: (a) as disclosed
in Schedule 4.19, (b) valid and prior security interests held by lenders in Real
Property in which On-Line holds a leasehold interest, (c) the Lien with respect
to current Taxes not yet due and payable and incurred in the ordinary course of
its business and (d) such minor imperfections of title, Liens and easements as
do not materially detract from or interfere with the present use of the
properties of On-Line subject thereto or affected thereby, or materially detract
from the value thereof or otherwise materially impair present business
operations at such properties (such Liens referred to in clauses (a) through (d)
hereof being hereinafter collectively referred to as "Permitted Encumbrances").
4.20 REAL PROPERTY/PERSONAL PROPERTY. (a) Schedule 4.20(a) sets forth
the street address of each parcel of Real Property used or held for use by
On-Line, including the property commonly known as 000 Xxxxxxxx, Xxx Xxxxx,
Xxxxxxxx (the "Leased Premises"). On-Line does not have any right, title or
interest in any such parcel of Real Property other than a leasehold interest.
On-Line enjoys peaceful possession of its entire leasehold interest in all such
Real Property, subject to no existing or to its knowledge threatened claims of
default. The Real Property used or held for use by On-Line and all material
Personal Property owned or leased by On-Line are in good operating condition and
repair (ordinary wear and tear excepted), except as set forth in of Schedule
4.20(a) and suitable and sufficient for the purposes for which used and for the
current operations of the On-Line Business.
17
19
(b) Except as set forth in Schedule 4.20(b), to On-Line's knowledge
none of the buildings, structures or improvements located on any of such Real
Property is the subject of any official complaint or notice of violation of any
applicable zoning ordinance, building code or regulations governing land use,
and to the knowledge of On-Line, no such violation exists which materially
detracts from or interferes with the present and continued use of such
properties or materially detracts from the value thereof or materially impairs
the operations thereon; and there is no zoning ordinance, building code, use or
occupancy restriction or condemnation action or proceeding pending, or, to the
knowledge of On-Line, threatened with respect to any such building, structure or
improvement on any of the Real Property which would materially detract from, or
interfere with the present and continued use of, such parcel or materially
detract from the value thereof or materially impair the operations thereon, as
presently conducted On-Line.
(c) Each lease of Real Property listed in Schedule 4.20(a) is in full
force and effect and On-Line holds a valid and existing leasehold interest under
each such lease for the terms set forth on such Schedule 4.20(a), free and clear
of all Liens, existing or threatened claims of default or other adverse
interests or restrictions of any kind, except for the Permitted Encumbrances and
as otherwise disclosed on Schedule 4.20(c). There are no existing or threatened
claims of defaults with respect to any such lease on the part of On-Line, and to
the knowledge of On-Line, there are no defaults on the part of the other party
thereto, and there has not occurred any event which, with the giving of notice
or passage of time, may reasonably be expected to constitute a default. All
expenses or other sums due under any lease are and have been calculated and paid
in accordance with the terms of each lease. On-Line has delivered or made
available to Purchaser true, complete and correct copies of each lease described
on Schedule 4.20(a), and none of such leases has been supplemented or otherwise
modified in any respect, except to the extent that such modifications are
disclosed on such copies.
(d) On-Line has no policies of title insurance held or maintained by
On-Line with respect to any parcel of Real Property leased or used by On-Line.
4.21 LIST OF CONTRACTS, CUSTOMERS AND SUPPLIERS. Schedule 4.21 sets
forth a true, complete and correct list, correlated with the applicable clauses
of this Section 4.21 and except as set forth in the applicable clauses of
Schedule 4.21, of the following (true, complete and correct copies or, if none
exists,
18
20
written descriptions, of which have been provided or made available to
Purchaser, together with all exhibits, amendments or modifications thereto):
(a) Each business name which has been used by On-Line since January 1,
1985; and the city and state of the principal office from which such business
was conducted since January 1, 1988;
(b) All Contracts that involve the disposition or acquisition after the
date hereof of any assets of or by On-Line that involves an amount exceeding
$10,000 or do not relate to transactions entered into in the ordinary course of
business, consistent with past practices;
(c) All Contracts which require, by specific agreement or
representation or by implication of function, responsibility or geographic
location, the services, presence or availability of one or more specific
employees of On-Line;
(d) All Contracts (including Contracts with covenants not to compete,
confidentiality or non-disclosure provisions) relating to the On-Line Business:
(i) that contain any provision, covenant or obligation limiting or restricting
in any manner whatsoever (whether during any particular period of time from and
after the Effective Date, with respect to certain geographic areas, time
periods, industries, or otherwise) the ability of On-Line or any of the
employees of On-Line to engage in any line of business, compete with, or to
obtain products or services from, any Person, or (ii) that limit the ability of
any other Person to engage in any line of business, compete with, or to obtain
from or provide products or services to On-Line;
(e) All Contracts pursuant to which On-Line may have granted, or agreed
to grant, to another Person any form of exclusive rights with respect to
obtaining or providing any goods or services, items of Software or territory;
(f) To the extent not covered in clause (e) above, all franchises,
distribution, licensing, partnership, joint venture, teaming, profit-sharing
(other than Employee Benefit Arrangements) or similar Contracts of On-Line with
any Person;
(g) All Contracts (other than Contracts which provide for discounts
granted in the ordinary course of business for long term Contracts) pursuant to
which On-Line has granted favorable pricing (including purchase or lease) or
other terms to any other Person, including pricing or other terms that are based
upon, or related to, prices or terms now or in the future available to such
Person or any other customer or supplier of On-Line (whether or not such is
commonly described as "most favored nation" terms);
(h) All Contracts providing any Person with any kind of registration
rights with respect to stock or other securities of On-Line;
(i) All Contracts wherein On-Line: (i) provides indemnification to any
other Person, or (ii) guarantees the obligations of any other Person;
(j) All Contracts pursuant to which during the last 60 months On-Line
agreed to acquire or sell a
19
21
majority of the equity securities in, or all or substantially all of the assets
and operations of, On-Line or any other Person;
(k) All outstanding proxies, powers of attorney or similar delegations
of authority of On-Line;
(l) All leases of personal property to which On-Line is a party,
either as lessee or lessor;
(m) All outstanding bids involving amounts exceeding $10,000 for new
business or projects submitted by On-Line in connection with the On-Line
Business;
(n) All performance bonds posted by On-Line;
(o) All Contracts (subcontracts) pursuant to which goods or services
are obtained from any Person with respect to goods and services which On-Line
provides to any customer of the On-Line Business under any specific Contract
(prime contract);
(p) All Contracts pursuant to which On-Line may have granted, or
agreed to grant (whether or not any requirement such as the giving of notice,
the lapse of time or the happening of any further condition, event or act has
been satisfied), to another Person the right to sublicense or transfer any
Intellectual Property or Know-How of or relating to On-Line;
(q) All Contracts pursuant to which On-Line may have delivered to
another Person, or granted or agreed to grant (whether or not any requirement
such as the giving of notice, the lapse of time or the happening of any further
condition, event or act has been satisfied) to another Person the rights to
obtain, any source code to any Intellectual Property or Know-How of or relating
to the On-Line Business;
(r) All other Contracts relating to On-Line, to the extent not set
forth above, that individually involve the payment or potential payment,
pursuant to the terms of such Contracts, of more than $10,000 or that are
otherwise material to On-Line or the On-Line Business which are not terminable
upon notice of 30 days or less without penalty, premium or other termination
payment.
4.22 CONTRACT STATUS. Schedules 4.9, 4.12(a), 4.17(a), 4.20(a),
4.20(c), 4.21, 4.23(a), 4.23(b), 4.23(c), 4.24(a), 4.24(b), and 4.24(c)
collectively set forth a true, complete and correct list of all Contracts (true,
complete and correct copies, or (if no written Contracts exist), written
descriptions of which, together with all exhibits, amendments and modifications
thereto, relating to On-Line, have been delivered to Purchaser. With respect to
each such Contract:
(a) Such Contract is in full force and effect, constitutes a valid,
legal and binding obligation of (i) On-Line, enforceable against On-Line in
accordance with its terms and (ii) to the knowledge of On-Line, with respect to
the other party thereto enforceable against such party in accordance with its
terms, except that (A) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and (B) the remedy of specific
performance and injunctive relief may be subject to equitable defenses and to
the discretion of the court
20
22
before which any proceeding may be brought.
(b) Except as set forth on Schedule 4.22(b), On-Line is not, and to
the knowledge of On-Line, no other party to such Contract is, in material breach
or default thereunder. No notice of default, defense, offset, counterclaim,
termination, cancellation or acceleration has been received by On-Line with
respect thereto. To the knowledge of On-Line, except as disclosed in Schedule
4.22(b): (i) there exists no event or condition that (with or without notice or
lapse of time or both) would constitute a material breach or violation thereof,
or a default thereunder, or give rise to any right of offset, counterclaim,
termination, cancellation or acceleration pursuant thereto, (ii) there is no
threat to cancel, or not to renew or extend, any such Contract which by its
terms may be renewed or extended, and (iii) there are no material disputes with
respect to any such Contract. On-Line has not received any notice that any other
Person currently contemplates, any amendment or change to any customer Contract,
except as disclosed in Schedule 4.22(b). Except as listed in Schedule 4.22(b),
no customer or supplier of On-Line has refused, or communicated that it will or
may refuse, whether as a result of the transactions contemplated by this
Agreement or otherwise, to purchase or supply goods or services, as the case may
be, or has communicated that it will or may substantially reduce the amounts of
goods or services that it is willing to purchase from, or sell to, On-Line.
(c) Except as set forth in Schedule 4.22(c), On-Line does not have
any present expectation or intention of not materially performing such Contract
substantially in accordance with its terms.
(d) Except (i) as set forth on Schedule 4.22(d) or Schedule 4.12(b),
the benefits of such Contract is transferable (and will be transferred) pursuant
to the transactions contemplated hereby without requiring any payment to, or
Consent from, any Person or any waiting period, payment of any charge, fee or
expense or any notice to any Person, including without limitation any transfer
fee, relicensing fee or other fee with respect to Software to be transferred or
assigned, if any. The enforceability of such Contract and the enjoyment of all
the rights and benefits thereunder will not be affected by the execution and
delivery of this Agreement or any of the other agreements contemplated hereby,
the performance by the parties of their obligations hereunder and thereunder or
the consummation of the transactions contemplated hereby and thereby.
4.23 EMPLOYEE BENEFIT MATTERS.
(A) EMPLOYEE WELFARE BENEFIT PLANS. Schedule 4.23(a) indicates
therein each and every "employee welfare benefit plan" (as defined in Section
3(1) of ERISA), whether or not it is funded: (i) to which On-Line is a party or
by which it is bound, or (ii) with respect to which On-Line has made or been
obligated to make any payments or contributions within the six most recent
fiscal years of On-Line or may otherwise have or retain any liability (including
any such plan or arrangement formerly maintained by On-Line), along with a brief
description of any such liability. Such plans are hereinafter collectively
referred to as the "Employee Welfare Benefit Plans."
(B) EMPLOYEE PENSION BENEFIT PLANS. Schedule 4.23(b) indicates
therein each and every "employee pension benefit plan" (as defined in Section
3(2) of ERISA) whether or not any of the foregoing is funded: (i) to which
On-Line is a party or by which it is bound, or (ii) with respect to which
On-Line has made or
21
23
been obligated to make any payments or contributions within the six most recent
fiscal years of On-Line or may otherwise have or retain any liability (including
any such plan or arrangement formerly maintained by On-Line including any
Multiemployer Pension Plan (as defined in either Section 3(37) or Section
4001(a)(3) of ERISA), along with a brief description of any such liability. Such
plans are hereinafter collectively referred to as the "Employee Pension Benefit
Plans."
(C) OTHER EMPLOYEE BENEFIT ARRANGEMENTS. Other than those items
referred to in Schedules 4.23(a) or 4.23(b), Schedule 4.23(c) indicates each and
every stock option plan, pension plan, collective bargaining agreement, bonus
(including deferred bonus arrangement), incentive award, employee discount,
employee assistance plan, vacation pay, sick pay, personal pay, severance pay,
savings plan, profit sharing plan, insurance plan, sabbatical or any other
material personnel policy, employee benefit plan arrangement, agreement or
understanding (including, but not limited to expatriate status or benefits or
compensation related thereto) with respect to one or more present or past
employees (or their dependents or beneficiaries) of the On-Line Business whether
or not any of the foregoing is funded: (i) to which On-Line is a party or by
which it is bound, or (ii) with respect to which On-Line has made or been
obligated to make any payments or contributions within the six most recent
fiscal years of On-Line or may otherwise have or retain any liability (including
any such plan or arrangement formerly maintained by On-Line), along with a brief
description of any such liability. Such plans or arrangements are hereinafter
collectively referred to as the Other Employee Benefit Arrangements. The
foregoing text in this Section 4.23(c) applies to such arrangements anywhere in
the world, not being restricted to such arrangements in the United States.
(D) PBGC AND OTHER LIABILITIES. Neither Purchaser nor any of its
Affiliates will have any material liability of whatever nature or kind,
including with respect to the establishment, maintenance, operation or
termination of any employee benefit plan, practice or program of On-Line or
otherwise associated with On-Line prior to the Closing (including any Employee
Welfare Benefit Plan, Employee Pension Benefit Plan or Other Employee Benefit
Arrangements (all of the foregoing, "Employee Benefit Arrangements")) by reason
of the transactions contemplated hereby, including any liability to the PBGC (to
the extent applicable), the trustee of any Employee Benefit Arrangement or any
employee or participant or any other corporation, individual, trust, entity or
government agency except normal and customary costs associated with the
maintenance, administration and termination of the foregoing. Except as set
forth in Schedule 4.23(a), 4.23(b) and 4.23(c) or as required under COBRA or
with respect to accrued pay for services rendered during the current pay period,
On-Line has no liability or obligation of any kind or nature whatever under any
such employee benefit plan, practice or program (including any Employee Welfare
Benefit Plan, or Employee Pension Benefit Plan or Other Employee Benefit
Arrangement), to any natural person who is not currently a full-time or
part-time employee of On-Line (including former employees, directors, officers,
agents, consultants, or dependents or beneficiaries of any of the foregoing or
of any employee). Except as set forth in Schedule 4.23(d), each Employee Benefit
Arrangement that is subject to ERISA is in material compliance with ERISA; each
Employee Benefit Arrangement intended to be "qualified" (within the meaning of
Section 401(a) of the Code) has been determined by the IRS to be so qualified;
no Employee Benefit Arrangement is subject to Title IV of ERISA; and no
prohibited transaction (within the meaning of Section 406 of ERISA), has
occurred under any Employee Benefit Arrangement with respect to which a tax or
penalty has been or may be imposed upon On-Line under Section 4975 of the Code.
All contributions or other amounts payable by On-Line as of the date hereof with
respect to each Employee Benefit Arrangement in respect of current
22
24
or prior plan years have been either paid in full or accrued in full on the
Financial Statements. As of the date hereof, there are no pending or, to the
knowledge of On-Line, threatened claims (other than routine claims for benefits)
by, on behalf of or against any Employee Benefit Arrangement or any trusts
related thereto which would have a material adverse effect on On-Line or the
On-Line Business.
(e) On-Line has delivered to Purchaser true, complete and accurate
copies of each and every (i) Employee Welfare Benefit Plan, (ii) Employee
Pension Benefit Plan, and (iii) Other Employee Benefit Arrangement, and with
respect to each of the foregoing, On-Line has delivered to Purchaser true,
complete and correct copies of any written or oral plan or arrangements
documents (including with respect to any plan or arrangements (or parts thereof)
which are unwritten, a detailed written description of eligibility,
participation, benefits, funding arrangements, assets and any other material
matters which relate to the obligations of On-Line), summary plan descriptions,
summaries of material modifications and together with true, complete and correct
copies of all actuarial reports, trust statements or government filings
(including Form 5500 filings) with respect thereto made in or with respect to
such six most recent fiscal year periods.
4.24 EMPLOYEES. (a) Section 1 of Schedule 4.24(a) contains a true,
complete and correct list of each manager, officer and employee of On-Line,
together with each such Person's name, job title, current annual compensation,
total compensation (base and additions) for 1993 and 1994, and duration of
employment with such entity, all ranked in descending order of annual
compensation. On-Line: (i) is in substantial compliance with all applicable
Legislative Enactments and Official Actions regarding employment, wages and
hours with respect to its employees, consultants and independent contractors,
and (ii) is not engaged in any unfair labor practice or discriminatory
employment practice that is prohibited by applicable Legislative Enactments or
Official Actions. Since January 1, 1989 and except as set forth in Section 2 of
Schedule 4.24(a), no complaint of any such practice against On-Line has been
filed or, to the knowledge of On-Line, threatened to be filed, with or by the
National Labor Relations Board, the Equal Employment Opportunity Commission, the
Illinois Department of Human Rights, the Illinois Department of Labor or any
other Tribunal that regulates labor or employment practices, and there is no
grievance filed or, to the knowledge of On-Line, threatened to be filed, against
On-Line by any employee pursuant to any collective bargaining or other
employment agreement. Section 3 of Schedule 4.24(a) sets forth each consultant
or independent contractor who, individually or together with others, is material
to the On-Line Business. There are no material controversies pending, or to the
knowledge of On-Line, threatened, between On-Line and any of its employees, and
no labor union or other organization represents or claims to represent any of
such employees' interests. Except as set forth in Section 4 of Schedule 4.24(a)
and since January 1, 1989, On-Line has not been a party to any Contract with any
union, labor organization or collective bargaining unit with respect to any of
its employees. No union organizing or election activities involving any
employees of On-Line are in progress or, to the knowledge of On-Line,
threatened.
(b) Schedule 4.24(b) sets forth a true, complete and correct list of
all employment agreements or other compensation or benefit arrangements to which
On-Line is a party with respect to any of its employees.
(c) Schedule 4.24(c) sets forth a true, complete and correct list of
all employee manuals, policies, procedures and work related rules that apply to
any of On-Line's employees.
23
25
(d) All payments due from On-Line on account of employer's social
security contributions and employee health and welfare insurance under
collective bargaining agreements, if any, applicable Legislative Enactments or
otherwise with respect to On-Line in respect of years and periods (and portions
thereof) ended on or prior to the Balance Sheet Date were either paid prior to
the Balance Sheet Date or accrued in full as a liability on the Balance Sheets
of On-Line.
(e) On-Line has withheld proper amounts of Taxes from the wages or
other compensation paid or payable to any current or past employees or
independent contractors with respect to the period prior to the Effective Date
(all of which Taxes have been or will be timely remitted to the appropriate Tax
authority) and has properly and timely filed or will properly and timely file
all Tax Returns (required to be filed by the Effective Date) with respect to
employee income Tax withholding and social security and unemployment Taxes, all
in compliance with the Tax withholding provisions of the Code and other
applicable Legislative Enactments and has paid or will timely pay all Taxes
shown thereby to be payable.
(f) On-Line shall have taken all necessary actions to comply with the
WARN Act, to the extent it is subject to such act, and Purchaser shall not have
any disclosure or announcement obligations under the WARN Act based upon any
action taken by On-Line prior to Closing. As of the date hereof, On-Line does
not contemplate any "plant closing" or "mass layoff," as such terms are used in
the WARN Act, with respect to any of its employees, except as set forth in
Schedule 4.24(f).
(g) All severance payments, if any, which as of the Effective Date were
payable by On-Line with respect to any employees or any past employees of
On-Line under the terms of any oral or written agreement or commitment will have
been paid on or prior to the Effective Date.
(h) On-Line has not made any payments, and is not and will not become
obligated to make any payments, to any Person which could result in "excess
parachute payments" (as defined in Section 28OG(b) of the Code) to any such
Person or in any payments that will not be deductible under Section 28OG of the
Code.
(i) On-Line has not made any representations or warranties or any other
statements or communications regarding Purchaser's right, ability, plan or
intention to dismiss any employee or the terms and conditions upon which any
such employee will be employed by Purchaser, without the consent of Purchaser.
(j) Except as set forth in Schedule 4.24(j), no employees of On-Line
are "leased employees" as such term is defined in Section 414(n) of the Code.
(k) To the knowledge of On-Line, all employees of On-Line are
authorized to be employed in, the United States. Schedule 4.24(k) sets forth a
list of any employees of On-Line which, to the knowledge of On-Line, are foreign
nationals employed in the United States.
(l) Schedule 4.24(l) sets forth the names of each Person presently
employed by On-Line who has not
24
26
been, since at least September 30, 1994, continuously employed by On-Line on a
full-time basis or on a part-time basis.
4.25 CONFIDENTIAL INFORMATION. On-Line has requested that all
confidential or proprietary information relating to On-Line or any aspect of the
On-Line Business which has been provided since January 1, 1992 by On-Line to any
Person that entered or proposed to enter into negotiations either for the sale
of (a) any Ownership Interests in On-Line or (b) substantially all the assets of
On-Line, whether or not under a Contract or other assurances of confidentiality,
be destroyed or returned to On-Line.
4.26 BROKERS. On-Line has not authorized any Person to act as a broker
or finder or in any similar capacity in connection with this Agreement or the
transactions contemplated hereby in such a manner as to give rise to a valid
claim against Purchaser for any brokers' or finders' fees or similar fees or
expenses. All fees and expenses of The Chicago Corporation and any other broker,
finder or similar representative of On-Line shall be borne by On-Line prior to
Closing and under no circumstances, by Purchaser.
4.27 DISCLOSURE. No representation or warranty and no information,
financial statement, report, certificate or other document prepared on furnished
by or on behalf of On-Line under or in connection with this Agreement contains
any untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading. There is no
fact known to On-Line (other than general economic conditions, which conditions
are commonly known and affect businesses generally) which has, or which could
reasonably be expected to have, in the reasonable judgment of On-Line, a
material adverse effect on On-Line or the On-Line Business.
4.28 ON-LINE'S KNOWLEDGE. For purposes of this Agreement, the phrase
"to the knowledge of On-Line" or phrases of similar import means the actual
knowledge of employees of On-Line with a title of departmental director or
above.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SUPERIOR
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Superior represents and warrants to Purchaser
as follows:
5.1 ORGANIZATION, GOOD STANDING OF SUPERIOR. Superior is a state
savings bank duly organized, validly existing and in good standing under the
laws of the State of Wisconsin and has all necessary corporate power to own its
properties and assets and to carry on its business as now conducted. No
governmental authority or agency of any other jurisdiction has advised Superior
in writing that Superior is required to qualify or register to transact business
as a foreign corporation in such jurisdiction.
5.2 SUPERIOR'S ON-LINE STOCK INTEREST. Superior owns and holds three
hundred (300) shares of the common capital stock of On-Line, $10.00 par value,
free and clear of all Liens.
5.3 AUTHORIZATION, NO VIOLATION, ETC. Except as further limited by:
(i) bankruptcy, insolvency, moratorium,
25
27
reorganization, fraudulent conveyance laws and other similar laws affecting
creditors' rights generally, and (ii) general principles of equity regardless of
whether asserted in a proceeding in equity or at law, the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Superior and this Agreement constitutes the legal, valid and binding obligation
of Superior, enforceable against Superior in accordance with its terms.
5.4 BROKER'S AND FINDER'S FEES. Except for the fees payable to The
Chicago Corporation, Superior has not incurred any obligation or liability,
contingent or otherwise, for any brokers or finders in respect of the matters
provided for in this Agreement.
5.5 TRUE AND COMPLETE INFORMATION. No representation or warranty made
by Superior contained in this Agreement and no statement made by or on behalf of
Superior contained in any certificate, schedule, list, exhibit or other
instrument specified in this Agreement, whether heretofore furnished to
Purchaser or hereinafter required to be furnished to Purchaser, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein not misleading.
26
28
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ISC
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, ISC represents and warrants to Purchaser as
follows:
6.1 ORGANIZATION, GOOD STANDING OF ISC. ISC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois and has all necessary corporate power to own its properties and assets
and to carry on its Business as now conducted. No governmental authority or
agency of any other jurisdiction has advised ISC in writing that ISC is required
to qualify or register to transact business as a foreign corporation in such
jurisdiction.
6.2 CAPITAL STOCK. On the date hereof, ISC has authorized, issued and
outstanding capital stock (the "ISC Stock") as follows:
CLASS OF
STOCK AUTHORIZED PAR VALUE ISSUED OUTSTANDING TREASURY
Common 100,000 $1.00 19,550 16,500 3,050
All of the issued and outstanding shares of ISC Stock are duly and validly
authorized and issued, fully paid and nonassessable. None of the issued and
outstanding shares of ISC Stock have been issued in violation of any preemptive
rights. There are no (nor will there be on the Effective Date) shares of any
class of capital stock or equity securities of ISC outstanding (other than the
ISC Stock) and there are no (nor will there be on the Effective Date)
outstanding or existing subscriptions, options, warrants, convertible
securities, preemptive rights or other agreements, commitments or obligations
relating to the issuance of additional shares of any class of capital stock or
other equity securities of ISC.
6.3 STOCKHOLDERS OF ISC. Schedule A sets forth the stockholders of
record of ISC and the number of shares of ISC Stock held by such stockholders.
6.4 ISC'S ON-LINE STOCK INTEREST. ISC owns and holds nineteen thousand
five hundred twenty (19,520) shares of the common capital stock of On-Line,
$10.00 par value, free and clear of all Liens.
6.5 AUTHORIZATION, NO VIOLATION, ETC. Except as further limited by:
(i) bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance
laws and other similar laws affecting creditors' rights generally, and (ii)
general principles of equity regardless of whether asserted in a proceeding in
equity or at law, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of ISC and this Agreement
constitutes the legal, valid and binding obligation of ISC, enforceable against
ISC in accordance with its terms.
6.6 SUBSIDIARIES. Other than its equity or ownership interest in
On-Line, ISC has no equity or ownership interest in any other corporation,
partnership, joint venture or inactive corporation.
27
29
6.7 FINANCIAL STATEMENTS. ISC has delivered to Purchaser certified
balance sheets of ISC for the fiscal years ended December 31, 1993 and December
31, 1994, which statements present fairly the results of operations for the
respective periods covered thereby.
6.8 TAXES AND TAX RETURNS.
(a) ISC has duly filed all federal, state and local Tax Returns
required to be filed by it (all such Tax Returns being accurate and complete in
all material respects) and has duly paid or made provision for the payment of
all Taxes which have been incurred or are shown to be due on said Tax Returns or
are claimed in writing to be due from it or imposed on it or its properties,
assets, income, franchises, licenses, sales or use, by any federal, state and
local taxing authorities on or prior to the date hereof. The amounts recorded as
reserves for Taxes on gross or net basis, on the December 31, 1994 financial
statements of ISC, are sufficient in the aggregate for the payment by ISC of all
unpaid Taxes (including any interest or penalties thereon) whether or not
disputed or accrued, for the period ended December 31, 1994 or for any year or
period prior thereto. As of the date hereof, there has not been any audit or
notification of any pending audit of any Tax Return of ISC. There are no
material disputes pending, or claims asserted, for Taxes upon ISC, nor does ISC
have knowledge of facts which, upon examination, may reasonably be interpreted
to form the basis of an unasserted claim for Taxes. ISC has not been required to
give any currently effective waivers extending the statutory period of
limitation applicable to any federal, state, local or foreign Tax Return for any
period. ISC does not have in effect any power of attorney or authorization to
anyone to represent it with respect to any Taxes. ISC has not filed any
consolidated federal income tax return with an "affiliated group" (within the
meaning of Section 1504 of the Code). ISC is not nor has it been, a party to any
tax allocation agreement or arrangement pursuant to which it has any contingent
or outstanding liability to anyone. ISC has not filed a consent under Section
341(f) of the Code. ISC has provided to Purchaser or its representatives
complete and correct copies of its federal, state or local income Tax Returns
filed on or prior to December 31, 1994 and all examination reports, if any,
relating to the audit of such Tax Returns by the IRS or other tax authority for
each taxable year beginning on or after January 1, 1989.
(b) All monies required to be withheld from employees of ISC for
income Taxes, social security and unemployment insurance Taxes or collected from
customers or others as sales, use or other Taxes have been withheld or collected
and paid, when due, to the appropriate governmental authority, or if such
payment is not yet due, an adequate reserve has been established.
6.9 ISC MATERIAL CONTRACTS. There are no material contracts to which
ISC is a party.
6.10 PROPERTY. ISC has good title to all of the assets reflected as
owned by it in the December 31, 1994 financial statements of ISC free and clear
of all Liens.
6.11 NO MATERIAL ADVERSE CHANGE. Since December 31, 1994, there has
been no material adverse change in the Business, financial condition,
properties, results of operation, or capitalization of ISC, taken as a whole,
except for such changes as may occur as a consequence of the transactions
contemplated by this Agreement.
6.12 INVESTIGATIONS, LITIGATION. There is no investigation by any
federal, state or local governmental agency of which ISC is aware, or any
action, suit, proceeding or claim pending or, to the knowledge of ISC,
threatened, against or adversely affecting ISC (including, without limitation,
any investigation, action, or proceeding with respect to Taxes), or the assets
or Business of ISC, which would, if adversely determined, have a material
adverse effect on the Business or financial condition of ISC, taken as a whole.
Neither ISC nor any director, officer, employee or agent of ISC in their
respective capacities as directors, officers, employees or agents, is a party to
any, and there are no pending
28
30
or, to ISC's knowledge threatened, legal, administrative, arbitral or other
proceedings, claims, suits, actions or governmental investigations of any nature
against ISC or any director, officer, employee or agent of ISC in their
respective capacities as directors, officers, employees or agents, or involving
any property or assets of ISC. There is no outstanding order, writ, injunction
or decree of any court, government or governmental agency against or, to the
knowledge of ISC, affecting ISC or the assets or Business of ISC, and no claim
for indemnification has been made with respect to any legal, administrative,
arbitral or other proceeding, claim, suit, action or governmental investigation
by any director, officer, employee or agent of ISC in his or her capacity as
director, officer, employee or agent, which could reasonably be expected to have
a material adverse effect on the Business or financial condition of ISC, taken
as a whole, or which challenges the validity or propriety of the transaction
contemplated by this Agreement.
6.13 INSURANCE. ISC has no policies of insurance in effect.
6.14 COMPLIANCE WITH LAWS, REGULATIONS. ISC has conducted its Business
in substantial compliance with all applicable federal, state and local laws,
regulations and orders except to the extent that non-compliance with any such
law, regulation or order would not have a material adverse effect on ISC taken
as a whole.
6.15 LIABILITIES. ISC has not incurred any obligation or liability,
contingent or otherwise, in excess of $500.
6.16 ACCOUNTS RECEIVABLE, COLLECTION OF ACCOUNTS RECEIVABLE. ISC has no
Accounts Receivable.
6.17 EMPLOYEE BENEFIT PLANS. ISC has no employee benefit plans within
the meaning of Section 3(3) of ERISA.
6.18 TRUE AND COMPLETE INFORMATION. No representation or warranty made
by ISC contained in this Agreement and no statement made by or on behalf of ISC
contained in any certificate, schedule, list, exhibit or other instrument
specified in this Agreement, whether heretofore furnished to Purchaser or
hereinafter required to be furnished to Purchaser, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading.
6.19 ISC'S KNOWLEDGE. For purposes of this Agreement, the phrase "to
the knowledge of ISC" or phrases of similar import means the actual knowledge of
the following officers of ISC: President and Treasurer.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SLI
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, SLI represents and warrants to Purchaser as
follows:
7.1 ORGANIZATION, GOOD STANDING OF SLI. SLI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Indiana and has all necessary corporate power to own its properties and assets
and to carry on its Business as now conducted. No governmental authority or
agency of any other jurisdiction has advised SLI in writing that SLI is required
to qualify or register to transact business as a foreign corporation in such
jurisdiction.
7.2 CAPITAL STOCK. On the date hereof, SLI has authorized, issued and
outstanding capital stock (the "SLI Stock") as follows:
29
31
CLASS OF
STOCK AUTHORIZED PAR VALUE ISSUED OUTSTANDING TREASURY
Common 10,000 NPV 5,950 4,175 1,775
All of the issued and outstanding shares of SLI Stock are duly and validly
authorized and issued, fully paid and nonassessable. None of the issued and
outstanding shares of SLI Stock have been issued in violation of any preemptive
rights. There are no (nor will there be on the Effective Date) shares of any
class of capital stock or equity securities of SLI outstanding (other than the
SLI Stock) and there are no (nor will there be on the Effective Date)
outstanding or existing subscriptions, options, warrants, convertible
securities, preemptive rights or other agreements, commitments or obligations
relating to the issuance of additional shares of any class of capital stock or
other equity securities of SLI.
7.3 STOCKHOLDERS OF SLI. Schedule B sets forth the stockholders of
record of SLI and the number of shares of SLI Stock held by such stockholders.
7.4 SLI'S ON-LINE STOCK INTEREST. SLI owns and holds five thousand
eight hundred (5,800) shares of the common capital stock of On-Line, $10.00 par
value, free and clear of all Liens.
7.5 AUTHORIZATION, NO VIOLATION, ETC. Except as further limited by:
(i) bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance
laws and other similar laws affecting creditors' rights generally, and (ii)
general principles of equity regardless of whether asserted in a proceeding in
equity or at law, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of SLI and this Agreement
constitutes the legal, valid and binding obligation of SLI, enforceable against
SLI in accordance with its terms.
7.6 SUBSIDIARIES. Other than its equity or ownership interest in
On-Line, SLI has no equity or ownership interest in any other corporation,
partnership, joint venture or inactive corporation.
7.7 FINANCIAL STATEMENTS. SLI has delivered to Purchaser certified
balance sheets of SLI for the fiscal years ended September 30, 1993 and
September 30, 1994, which statements present fairly the results of operations
for the respective periods covered thereby.
7.8 TAXES AND TAX RETURNS.
(a) SLI has duly filed all federal, state and local Tax Returns
required to be filed by it (all such Tax Returns being accurate and complete in
all material respects) and has duly paid or made provision for the payment of
all Taxes which have been incurred or are shown to be due on said Tax Returns or
are claimed in writing to be due from it or imposed on it or its properties,
assets, income, franchises, licenses, sales or use, by any federal, state and
local taxing authorities on or prior to the date hereof. The amounts recorded as
reserves for Taxes on gross or net basis, on the September 30, 1994 financial
statements of SLI, are sufficient in the aggregate for the payment by SLI of all
unpaid Taxes (including any interest or penalties thereon) whether or not
disputed or accrued, for the period ended September 30, 1994 or for any year or
period prior thereto. As of the date hereof, there has not been any audit or
notification of any pending audit of any Tax Return of SLI. There are no
material disputes pending, or claims asserted, for Taxes upon SLI, nor does SLI
have knowledge of facts which, upon examination, may reasonably be interpreted
to form the
30
32
basis of an unasserted claim for Taxes. SLI has not been required to give any
currently effective waivers extending the statutory period of limitation
applicable to any federal, state, local or foreign Tax Return for any period.
SLI does not have in effect any power of attorney or authorization to anyone to
represent it with respect to any Taxes. SLI has not filed any consolidated
federal income tax return with an "affiliated group" (within the meaning of
Section 1504 of the Code). SLI is not nor has it been, a party to any tax
allocation agreement or arrangement pursuant to which it has any contingent or
outstanding liability to anyone. SLI has not filed a consent under Section
341(f) of the Code. SLI has provided to Purchaser or its representatives
complete and correct copies of its federal, state or local income Tax Returns
filed on or prior to December 31, 1994 and all examination reports, if any,
relating to the audit of such Tax Returns by the IRS or other tax authority for
each taxable year beginning on or after January 1, 1989.
(b) All monies required to be withheld from employees of SLI for
income Taxes, social security and unemployment insurance Taxes or collected from
customers or others as sales, use or other Taxes have been withheld or collected
and paid, when due, to the appropriate governmental authority, or if such
payment is not yet due, an adequate reserve has been established.
7.9 SLI MATERIAL CONTRACTS. There are no material contracts to which
SLI is a party.
7.10 PROPERTY. SLI has good title to all of the assets reflected as
owned by it in the September 30, 1994 financial statements of SLI free and clear
of all Liens.
7.11 NO MATERIAL ADVERSE CHANGE. Since September 30, 1994, there has
been no material adverse change in the Business, financial condition,
properties, results of operation, or capitalization of SLI, taken as a whole,
except for such changes as may occur as a consequence of the transactions
contemplated by this Agreement.
7.12 INVESTIGATIONS, LITIGATION. There is no investigation by any
federal, state or local governmental agency of which SLI is aware, or any
action, suit, proceeding or claim pending or, to the knowledge of SLI,
threatened, against or adversely affecting SLI (including, without limitation,
any investigation, action, or proceeding with respect to Taxes), or the assets
or Business of SLI, which would, if adversely determined, have a material
adverse effect on the Business or financial condition of SLI, taken as a whole.
Neither SLI nor any director, officer, employee or agent of SLI in their
respective capacities as directors, officers, employees or agents, is a party to
any, and there are no pending or, to SLI's knowledge threatened, legal,
administrative, arbitral or other proceedings, claims, suits, actions or
governmental investigations of any nature against SLI or any director, officer,
employee or agent of SLI in their respective capacities as directors, officers,
employees or agents, or involving any property or assets of SLI. There is no
outstanding order, writ, injunction or decree of any court, government or
governmental agency against or, to the knowledge of SLI, affecting SLI or the
assets or Business of SLI, and no claim for indemnification has been made with
respect to any legal, administrative, arbitral or other proceeding, claim, suit,
action or governmental investigation by any director, officer, employee or agent
of SLI in his or her capacity as director, officer, employee or agent, which
could reasonably be expected to have a material adverse effect on the Business
or financial condition of SLI, taken as a whole, or which challenges the
validity or propriety of the transaction contemplated by this Agreement.
7.13 INSURANCE. SLI has no policies of insurance in effect.
7.14 COMPLIANCE WITH LAWS, REGULATIONS. SLI has conducted its Business
in substantial compliance with all applicable federal, state and local laws,
regulations and orders except to the extent that non-compliance with any such
law, regulation or order would not have a material adverse effect on SLI taken
as a whole.
31
33
7.15 LIABILITIES. SLI has not incurred any obligation or liability,
contingent or otherwise, in excess of $500.
7.16 ACCOUNTS RECEIVABLE, COLLECTION OF ACCOUNTS RECEIVABLE. SLI has no
Accounts Receivable.
7.17 EMPLOYEE BENEFIT PLANS. SLI has no employee benefit plans within
the meaning of Section 3(3) of ERISA.
7.18 TRUE AND COMPLETE INFORMATION. No representation or warranty made
by SLI contained in this Agreement and no statement made by or on behalf of SLI
contained in any certificate, schedule, list, exhibit or other instrument
specified in this Agreement, whether heretofore furnished to Purchaser or
hereinafter required to be furnished to Purchaser, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading.
7.19 SLI'S KNOWLEDGE. For purposes of this Agreement, the phrase "to
the knowledge of SLI" or phrases of similar import means the actual knowledge of
the following officers of SLI: President and Treasurer.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF OHM
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, OHM represents and warrants to Purchaser as
follows:
8.1 ORGANIZATION, GOOD STANDING OF OHM. OHM is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan and has all necessary corporate power to own its properties and assets
and to carry on its Business as now conducted. No governmental authority or
agency of any other jurisdiction has advised OHM in writing that OHM is required
to qualify or register to transact business as a foreign corporation in such
jurisdiction.
32
34
8.2 CAPITAL STOCK. On the date hereof, OHM has authorized, issued and
outstanding capital stock (the "OHM Stock") as follows:
CLASS OF
STOCK AUTHORIZED PAR VALUE ISSUED OUTSTANDING TREASURY
Common 1,000 $100 500 500 0
All of the issued and outstanding shares of OHM Stock are duly and validly
authorized and issued, fully paid and nonassessable. None of the issued and
outstanding shares of OHM Stock have been issued in violation of any preemptive
rights. There are no (nor will there be on the Effective Date) shares of any
class of capital stock or equity securities of OHM outstanding (other than the
OHM Stock) and there are no (nor will there be on the Effective Date)
outstanding or existing subscriptions, options, warrants, convertible
securities, preemptive rights or other agreements, commitments or obligations
relating to the issuance of additional shares of any class of capital stock or
other equity securities of OHM.
8.3 STOCKHOLDERS OF OHM. Schedule C sets forth the stockholders of
record of OHM and the number of shares of OHM Stock held by such stockholders.
8.4 OHM'S ON-LINE STOCK INTEREST. OHM owns and holds five hundred
(500) shares of the common capital stock of On-Line, $10.00 par value, free and
clear of all Liens.
8.5 AUTHORIZATION, NO VIOLATION, ETC. Except as further limited by:
(i) bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance
laws and other similar laws affecting creditors' rights generally, and (ii)
general principles of equity regardless of whether asserted in a proceeding in
equity or at law, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of OHM and this Agreement
constitutes the legal, valid and binding obligation of OHM, enforceable against
OHM in accordance with its terms.
8.6 SUBSIDIARIES. Other than its equity or ownership interest in
On-Line, OHM has no equity or ownership interest in any other corporation,
partnership, joint venture or inactive corporation.
8.7 FINANCIAL STATEMENTS. OHM has delivered to Purchaser certified
balance sheets of OHM for the fiscal years ended December 31, 1993 and December
31, 1994, which statements present fairly the results of operations for the
respective periods covered thereby.
8.8 TAXES AND TAX RETURNS.
(a) OHM has duly filed all federal, state and local Tax Returns
required to be filed by it (all such Tax Returns being accurate and complete in
all material respects) and has duly paid or made provision for the payment of
all Taxes which have been incurred or are shown to be due on said Tax Returns or
are claimed in writing to be due from it or imposed on it or its properties,
assets, income, franchises, licenses, sales or use, by any federal, state and
local taxing authorities on or prior to the date hereof. The amounts recorded as
reserves for Taxes on gross or net basis, on the December 31, 1994 financial
statements of OHM, are sufficient in the aggregate for the payment by OHM of all
unpaid Taxes (including any interest or penalties thereon) whether or not
disputed or accrued, for the period ended December 31, 1994 or for any year or
period prior thereto. As of the date hereof, there has not been any audit or
notification of
33
35
any pending audit of any Tax Return of OHM. There are no material disputes
pending, or claims asserted, for Taxes upon OHM, nor does OHM have knowledge of
facts which, upon examination, may reasonably be interpreted to form the basis
of an unasserted claim for Taxes. OHM has not been required to give any
currently effective waivers extending the statutory period of limitation
applicable to any federal, state, local or foreign Tax Return for any period.
OHM does not have in effect any power of attorney or authorization to anyone to
represent it with respect to any Taxes. OHM has not filed any consolidated
federal income tax return with an "affiliated group" (within the meaning of
Section 1504 of the Code). OHM is not nor has it been, a party to any tax
allocation agreement or arrangement pursuant to which it has any contingent or
outstanding liability to anyone. OHM has not filed a consent under Section
341(f) of the Code. OHM has provided to Purchaser or its representatives
complete and correct copies of its federal, state or local income Tax Returns
filed on or prior to December 31, 1994 and all examination reports, if any,
relating to the audit of such Tax Returns by the IRS or other tax authority for
each taxable year beginning on or after January 1, 1989.
(b) All monies required to be withheld from employees of OHM for
income Taxes, social security and unemployment insurance Taxes or collected from
customers or others as sales, use or other Taxes have been withheld or collected
and paid, when due, to the appropriate governmental authority, or if such
payment is not yet due, an adequate reserve has been established.
8.9 OHM MATERIAL CONTRACTS. There are no material contracts to which
OHM is a party.
8.10 PROPERTY. OHM has good title to all of the assets reflected as
owned by it in the December 31, 1994 financial statements of OHM free and clear
of all liens and encumbrances.
8.11 NO MATERIAL ADVERSE CHANGE. Since December 31, 1994, there has
been no material adverse change in the business, financial condition,
properties, results of operation, or capitalization of OHM, taken as a whole,
except for such changes as may occur as a consequence of the transaction
contemplated by this Agreement.
8.12 INVESTIGATIONS, LITIGATION. There is no investigation by any
federal, state or local governmental agency of which OHM is aware, or any
action, suit, proceeding or claim pending or, to the knowledge of OHM,
threatened, against or adversely affecting OHM (including, without limitation,
any investigation, action, or proceeding with respect to Taxes), or the assets
or Business of OHM, which would, if adversely determined, have a material
adverse effect on the Business or financial condition of OHM, taken as a whole.
Neither OHM nor any director, officer, employee or agent of OHM in their
respective capacities as directors, officers, employees or agents, is a party to
any, and there are no pending or, to OHM's knowledge threatened, legal,
administrative, arbitral or other proceedings, claims, suits, actions or
governmental investigations of any nature against OHM or any director, officer,
employee or agent of OHM in their respective capacities as directors, officers,
employees or agents, or involving any property or assets of OHM. There is no
outstanding order, writ, injunction or decree of any court, government or
governmental agency against or, to the knowledge of OHM, affecting OHM or the
assets or Business of OHM, and no claim for indemnification has been made with
respect to any legal, administrative, arbitral or other proceeding, claim, suit,
action or governmental investigation by any director, officer, employee or agent
of OHM in his or her capacity as director, officer, employee or agent, which
could reasonably be expected to have a material adverse effect on the Business
or financial condition of OHM, taken as a whole, or which challenges the
validity or propriety of the transaction contemplated by this Agreement. 8.13
INSURANCE. OHM has no policies of insurance in effect.
8.14 COMPLIANCE WITH LAWS, REGULATIONS. OHM has conducted its Business
in substantial compliance with all applicable federal, state and local laws,
regulations and orders except to the extent that non-compliance with any
34
36
such law, regulation or order would not have a material adverse effect on OHM
taken as a whole.
8.15 LIABILITIES. OHM has not incurred any obligation or liability,
contingent or otherwise, in excess of $500.
8.16 ACCOUNTS RECEIVABLE, COLLECTION OF ACCOUNTS RECEIVABLE. OHM has no
Accounts Receivable.
8.17 EMPLOYEE BENEFIT PLANS. OHM has no employee benefit plans within
the meaning of Section 3(3) of ERISA.
8.18 TRUE AND COMPLETE INFORMATION. No representation or warranty made
by OHM contained in this Agreement and no statement made by or on behalf of OHM
contained in any certificate, schedule, list, exhibit or other instrument
specified in this Agreement, whether heretofore furnished to Purchaser or
hereinafter required to be furnished to Purchaser, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading.
8.19 OHM'S KNOWLEDGE. For purposes of this Agreement, the phrase "to
the knowledge of OHM" or phrases of similar import means the actual knowledge of
the following officers of OHM: President and Treasurer.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF THE THRIFTS
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, each of the Thrifts, not jointly and
severally, but individually, represents and warrants to Purchaser as follows:
9.1 ORGANIZATION, GOOD STANDING OF SUCH THRIFT. Such Thrift is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has all necessary corporate power to own
its properties and assets and to carry on its Business as now conducted. No
governmental authority or agency of any other jurisdiction has advised such
Thrift in writing that such Thrift is required to qualify or register to
transact business as a foreign corporation in such jurisdiction.
9.2 SUCH THRIFT'S SERVICE CORP STOCK INTEREST. Such Thrift owns and
holds the number of shares of the common capital stock of the applicable Service
Corp as set forth in Schedule "X," "X," or "C" hereto, as the case may be, free
and clear of all Liens.
9.3 AUTHORIZATION, NO VIOLATION, ETC. Except as further limited by:
(i) bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance
laws and other similar laws affecting creditors' rights generally, and (ii)
general principles of equity regardless of whether asserted in a proceeding in
equity or at law, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of such Thrift and this Agreement
constitutes the legal, valid and binding obligation of such Thrift, enforceable
against such Thrift in accordance with its terms.
9.4 BROKER'S AND FINDER'S FEES. Except for the fees payable to The
Chicago Corporation, such Thrift has not incurred any obligation or liability,
contingent or otherwise, for any brokers or finders in respect of the matters
provided for in this Agreement.
35
37
9.5 TRUE AND COMPLETE INFORMATION. No representation or warranty made
by such Thrift contained in this Agreement and no statement made by or on behalf
of such Thrift contained in any certificate, schedule, list, exhibit or other
instrument specified in this Agreement, whether heretofore furnished to
Purchaser or hereinafter required to be furnished to Purchaser, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein not misleading.
ARTICLE X
COVENANTS OF THE MEMBERS OF THE ON-LINE GROUP
With respect to the covenants set forth in this Article X, On-Line and
each On-Line Stockholder (and to the extent specifically provided herein, each
Selling Entity) agrees to be liable for the performance of such covenants.
10.1 CONSUMMATION OF TRANSACTIONS. Subject to the terms and conditions
herein provided, from the date hereof through the Effective Date, On-Line and
each of the On-Line Stockholders will use its best efforts to take, or cause to
be taken, all actions and to do, and cause to be done, all things necessary,
proper or advisable to consummate and make effective, as promptly as
practicable, the transactions contemplated by this Agreement in accordance with
the terms of this Agreement applicable to On-Line and such On-Line Stockholder.
From the date hereof through the Effective Date, On-Line and each On-Line
Stockholder shall not voluntarily take or fail to take any action or course of
action inconsistent with the satisfaction of the respective conditions, terms
and provisions of this Agreement or the consummation of the respective
transactions contemplated by this Agreement in accordance with the terms of this
Agreement applicable to On-Line and such On-Line Stockholder.
10.2 CONDUCT OF BUSINESS. From the date hereof and through the
Effective Date, On-Line will conduct the On-Line Business (and each Service Corp
will conduct its respective Business) only in the ordinary course, consistent
with past practices, except as Purchaser may otherwise consent in writing.
Without limiting the generality of the foregoing, unless Purchaser has given its
prior written consent otherwise, On-Line and each On-Line Stockholder will not
take any action that would cause the material breach of any covenant of On-Line
or any On-Line Stockholder in this Agreement (including in this Article X) or
that would cause the representations and warranties of any member of the On-Line
Group in this Agreement to be untrue in any material respect at any time through
the Effective Date.
10.3 PRESERVATION OF BUSINESS. Without limiting the generality of
Section 10.1 and Section 10.2 and except as otherwise expressly provided in or
disclosed in this Agreement, from the date hereof and through the Effective
Date, On-Line and each Service Corp will:
(a) use its best efforts to preserve intact its present Business
organization and not materially alter or change its methods of operation;
(b) use its best efforts to preserve its goodwill and its present
Business relationships with all Persons;
(c) use commercially reasonable efforts to keep available the services
of its present officers and employees;
(d) maintain and keep its properties in good repair and condition,
normal wear and tear and damage due to casualty excepted;
(e) pay and perform, when due, all material obligations under its
Contracts;
36
38
(f) comply with and perform all its material obligations and duties
imposed by all Legislative Enactments and Official Actions, except as may be
contested by On-Line or such Service Corp in good faith by appropriate
proceedings and, in such event, disclose all such contests and proceedings to
Purchaser;
(g) maintain in full force and effect policies of insurance of the same
type, character and coverage as the policies of insurance currently in force
unless any change in coverage is effected in the ordinary course of the On-Line
Business or the Business of such Service Corp, consistent with past practices;
(h) not amend or make other changes to its Charter or Bylaws in any
manner whatsoever that would inhibit or hinder its ability to consummate the
transactions contemplated hereby;
(i) not merge or consolidate, or enter into any agreement to merge or
consolidate, with any other Person or purchase or invest in, or enter into any
agreement to purchase or invest in, the Business of another Person;
(j) not: (i) sell, grant, issue or otherwise dispose of any Ownership
Interests (or any options, interests, or other securities convertible into any
Ownership Interests) in any Person or any interest therein, or (ii) acquire
(through redemption or otherwise) any Ownership Interests (or any options,
interests, or other securities convertible into any Ownership Interests) in any
Person;
(k) except in accordance with Section 10.14, not declare, set aside or
pay any dividends on, or other distributions (whether by way of redemption,
repurchase or otherwise) with respect to, any Ownership Interests or otherwise
change or alter its cash management practices;
(l) not purchase, sell, lease, mortgage, pledge or otherwise acquire or
dispose of any of its properties, except for tangible personal property
purchased, sold, leased or pledged in the ordinary course of its Business,
consistent with past practices, but not in any event any assets having in the
aggregate a book or market value in excess of: (A) $10,000 with respect to
On-Line or (B) $500 with respect to such Service Corp;
(m) not enter into, or become obligated under, any Contract, or change,
amend, terminate or otherwise modify any Contract, except for: (i) customer
Contracts and other normal purchase, sale, license and lease agreements and
commitments for tangible personal property which are entered into in the
ordinary course of its Business, consistent with past practices, or (ii)
Contracts not entered into in the ordinary course of its Business, consistent
with past practices, and that involve an amount in the aggregate not exceeding:
(A) $10,000 with respect to On-Line, or (B) $500 with respect to such Service
Corp;
(n) not: (i) enter into any new line of Business; (ii) change any
investment, liability management or other material policies in any material
respect; or (iii) incur or commit to any capital expenditures, obligations or
liabilities in connection therewith, other than capital expenditures,
obligations or liabilities in connection therewith not in excess of: (A) $10,000
in the aggregate with respect to On-Line, or (B) $1,000 in the aggregate with
respect to such Service Corp;
(o) not change its method of accounting from that in effect at the
Balance Sheet Date nor change its method of accounting for income and deductions
for federal income tax purposes from that employed in the preparation of its
federal income Tax Return for the taxable year ending in 1994;
37
39
(p) not increase or otherwise change the rate or nature of the
compensation (including wages, salaries, bonuses, perquisites and benefits under
pension, profit sharing, deferred compensation and similar plans or programs)
which is paid or payable, directly or indirectly, to or for the benefit of any
of its directors, officers or employees employed or engaged; or hire any such
employee: (A) with respect to such Service Corp for any reason whatsoever, and
(B) with respect to On-Line at an annual salary in excess of $25,000, or (except
in the ordinary course of On-Line's Business, consistent with past practices)
terminate any such employee whose annual base compensation is in excess of
$62,500;
(q) not establish any employee plan or program as described in Section
4.23 nor make, or commit to make, any payment, contribution or award under or
into any such employee plan or program except in the ordinary course of its
Business as required thereunder and only in amounts consistent with past
practices in determining similar amounts;
(r) not waive, compromise or settle any right or claim (other than
through the making of any payments in cash), or institute, settle or agree to
settle any litigation, action or proceeding before any Tribunal;
(s) not subject any of its properties to any newly created Lien or
other adverse interest or restriction, other than Permitted Encumbrances or
Liens for Taxes not yet due and payable that have been incurred in the ordinary
course of its Business, consistent with past practices;
(t) not incur or commit to any indebtedness, obligation or liability,
except: (i) in connection with customer Contracts, those arising in the ordinary
course of its Business, consistent with past practices and (ii) in any other
case, those arising in the ordinary course of its Business, consistent with past
practices, but not in any event with respect to this clause (ii) in an amount
exceeding: (A) $10,000 in the aggregate with respect to On-Line, or (B) $500 in
the aggregate with respect to such Service Corp;
(u) not: (i) assume, guaranty or endorse the obligations of any Person,
except in the ordinary course of its Business, consistent with past practices,
for the endorsement of negotiable instruments for deposit to the account of the
Person to whom such instrument is originally payable, and (ii) in any other
case, in the ordinary course of its Business, consistent with past practices
(but not in any event with respect to this clause in an amount exceeding $1,000
in the aggregate); and
(v) not extend any credit or commit to extend credit to any Person;
(w) use or sell the inventories and supplies reflected in its Balance
Sheets only in the ordinary course of its Business, consistent with past
practices, except for those items that are returned in the ordinary course of
its Business in amounts consistent with the past returns experience.
10.4 ACCESS TO INFORMATION. From the date hereof to the Effective Date,
On-Line and each Service Corp shall furnish the officers, employees and agents
of Purchaser reasonable access during normal business hours to: (a) the
officers, employees, agents, properties, Books and Records of On-Line and such
Service Corp, and (b) all of its financial, operating and other data and
information. Purchaser shall have the right to review the Books and Records of
On-Line and the Service Corps prior to the Effective Date. No such examination,
inspection or audit by Purchaser or its agents and representatives (whether in
accordance with this Section 10.4 or otherwise) shall in any way diminish,
modify, terminate or otherwise affect the respective representations,
warranties, covenants or agreements of a member of the On-Line Group contained
in this Agreement or in any certificate or other instrument furnished or to be
furnished by a member of the On-Line Group pursuant to this Agreement.
38
40
10.5 NOTIFICATION OF CERTAIN MATTERS. Prior to the Effective Date,
On-Line and each Service Corp shall give prompt notice to Purchaser of: (a) any
threatened or actual lawsuit, any proposed settlement of any threatened or
actual lawsuit and any pending or threatened governmental action or proceeding
of any kind known to On-Line or such Service Corp which relates the On-Line
Business or On-Line or such Service Corp or its Business or the transactions
then contemplated by this Agreement; (b) any material failure of On-Line or such
Service Corp or any officer, director, employee or agent thereof, to comply with
or satisfy any covenant, condition or agreement then remaining to be complied
with or satisfied by it hereunder; and (c) any material adverse change which may
hereafter occur with respect to the financial condition, Business, rights,
properties or assets of On-Line or such Service Corp, whether or not covered by
insurance, or with respect to relationships between On-Line and such Service
Corp and their respective employees, creditors, suppliers, distributors,
franchisors, licensees, customers or others having business relationships with
On-Line or such Service Corp.
10.6 FURNISHING OF INFORMATION. From the date hereof and through the
Effective Date, On-Line will furnish to Purchaser, as soon as available, but in
any event not later than 15 days after the end of each calendar month of each
year, commencing with the month ending August 31, 1995, an unaudited balance
sheet for On-Line as of the end of such month and the related unaudited
statements of income, retained earnings, accrued liabilities and cash flows of
On-Line for such month and for the portion of the fiscal year of the same
through such date in the form and detail similar to those customarily prepared
by management of On-Line for internal use, setting forth in each case in
comparative form the figures for the corresponding month of the previous year,
certified by the chief financial officer or treasurer (or other comparable
officer) of On-Line as being prepared in accordance with GAAP and fairly
presenting the financial position of On-Line and each Service Corp as of the
dates thereof and the results of operations of the same for the period then
ended, subject to normal, recurring quarter-end and year-end audit adjustments,
consistent (as to size, subject matter and reason thereafter) with past
practices. All such financial statements described above shall be true, complete
and correct and shall be prepared in reasonable detail and in accordance with
GAAP applied consistently throughout the periods reflected therein and with
prior periods (except as approved by such officer and disclosed therein).
39
41
10.7 ACCOUNTS RECEIVABLE. In connection with attempting to collect the
Effective Date Accounts Receivable, Purchaser shall not be required to institute
legal proceedings, and Purchaser shall not be entitled to settle or compromise
any of the same without the prior written consent of Agent. Upon the written
request of Agent, Purchaser shall assign the Effective Date Accounts Receivable
(as defined in Section 11.6) to Agent who shall then have sole responsibility
for the collection of the Effective Date Accounts Receivable.
10.8 FURTHER ASSURANCES. If at any time after any Closing, Purchaser
shall consider or be advised that any further assignments, conveyances,
transfers or assurances in law, or any other actions or things, may be necessary
or appropriate to assign, convey, transfer, set over or deliver to, or to vest,
perfect or confirm in, Purchaser any right, title or interest of any Selling
Entity, of record or otherwise, in or to the Purchased Stock such Selling Entity
shall, at Purchaser's sole cost and expense, promptly execute, deliver and
record, or cause to be executed, delivered and recorded, any and all such
further instruments of assignment, conveyance and transfer and take, or cause to
be taken, all actions and do, or cause to be done, all things, as may be
reasonably requested by Purchaser to assign, convey, transfer, set over and
deliver to, and to vest, perfect and confirm in, Purchaser all right, title and
interest of the Selling Entities, of record and otherwise, in and to the
Purchased Stock; provided, however, that any such request by Purchaser shall be
subject to any limitations or restrictions expressly provided in this Agreement.
10.9 ACQUISITION TRANSACTIONS WITH OTHERS. On-Line and each On-Line
Stockholder will not, directly or indirectly: (a) solicit, initiate or encourage
submission of proposals or offers from any person other than Purchaser relating
to any acquisition or purchase of all or a material part of the properties of
On-Line or the Service Corps or the stock of On-Line or the Service Corps by way
of any sale of assets or merger, consolidation or business combination with, or
any recapitalization, restructuring or issuance or offering of debt or equity
securities of, On-Line or the Service Corps (an "Acquisition Proposal"), or (b)
participate in any discussions or negotiations regarding, or furnish to any
person other than Purchaser and its representatives any information with respect
to or otherwise cooperate in any way or assist, facilitate or encourage any
Acquisition Proposal by any person other than Purchaser. If, notwithstanding the
foregoing, On-Line or any On-Line Stockholder or any officers, directors or
representatives of On-Line or any On-Line Stockholder should receive any
Acquisition Proposal or any inquiry regarding any such proposal from a third
party, On-Line and such On-Line Stockholder shall promptly inform Purchaser.
On-Line and each On-Line Stockholder shall use its best efforts to prevent any
director, officer, employee or other representative or agent of On-Line or the
On-Line Stockholders from negotiating, or soliciting or participating in
negotiations with respect to any Acquisition Proposal any other transaction
inconsistent with those contemplated by this Agreement.
10.10 CONSENTS. Except as otherwise provided in this Section 10.10,
On-Line and the Service Corps shall bear and be responsible for all costs of
obtaining, all Consents from any and all Tribunals and other Persons, that are
required: (i) for the consummation of the transactions contemplated by this
Agreement in accordance with this Agreement; (ii) to permit the continued
operation of the Business of On-Line and the Service Corps on or after the
Closing in substantially the same manner as it was carried on and conducted
prior thereto; (iii) to prevent a breach of, a default, penalty or increase in
payment under, or a termination of any license, supply contract, distribution
agreement, joint venture or other Contract relating to the Business of each
On-Line and each of the Service Corps. On-Line and each of the Service Corps
agrees to use its best efforts to obtain such Consents. Purchaser agrees to use
commercially reasonable efforts to assist On-Line and the Service Corps in
obtaining such Consents.
10.11 CONFIDENTIAL INFORMATION. Each Selling Entity hereby acknowledges
that On-Line and Purchaser would be irreparably damaged if any proprietary or
confidential information possessed by any Selling Entity concerning the On-Line
Business, the Business of each Service Corp, On-Line, the Service Corps or
Purchaser (except for any information that is or becomes generally known to the
public, otherwise than through a breach of this Agreement) were
40
42
disclosed to or used by any Person other than On-Line, the Service Corps or
Purchaser. For a period of five years from and after the Effective Date, each
Selling Entity agrees that it will not use or disclose, and will prevent its
directors, officers, accountants, agents and other representatives from using or
disclosing, any such confidential or proprietary information, except as
expressly permitted hereunder or under any other agreement between such Selling
Entity and Purchaser. If any Selling Entity is requested or required by any
Tribunal to disclose any of such proprietary or confidential information, then
such Selling Entity will provide Purchaser with prompt written notice of such
request or requirement unless prohibited by applicable law. Purchaser may then
either seek appropriate protective relief from all or part of such request or
requirement or waive such Selling Entity's compliance with the provisions of
this Section 10.11 with respect to all or part of such request or requirement.
Such Selling Entity will cooperate with Purchaser, at Purchaser's expense, in
attempting to obtain any reasonable protective relief that Purchaser chooses to
seek. If, after Purchaser has had a reasonable opportunity to seek such relief,
Purchaser fails to obtain such relief, then such Selling Entity may disclose
only that portion of such proprietary or confidential information which its
legal counsel advises it is compelled to disclose.
10.12 ENFORCEMENT OF CONFIDENTIALITY AGREEMENT RIGHTS. The Selling
Entities agree to enforce, at the cost and for the benefit of Purchaser, any and
all rights of the Selling Entities under any Contract pursuant to which any
confidential or proprietary information relating to any aspect of On-Line or the
On-Line Business, or the Service Corps or the Business of each Service Corp, was
provided by any Selling Entity to any Person if such Contract is not a part of
the properties of On-Line or the Service Corps. The Selling Entities shall
promptly inform Purchaser of any breach of which they become aware by any Person
of the confidentiality obligations under any such Contract relating to
confidential or proprietary information relating to On-Line or the On-Line
Business, or the Service Corps or the Business of each Service Corp.
10.13 UPDATED DISCLOSURE. Between the date of this Agreement and the
Closing, On-Line and the Service Corps will: (a) promptly propose to Purchaser
any supplement or amendment to the Exhibits or Schedules with respect to any
matter arising after the date of this Agreement which, if existing or occurring
at the date of this Agreement, would have been required to have been set forth
or described in the Exhibits or Schedules or which is necessary to correct any
information in the Exhibits or Schedules which has been rendered untrue or
inaccurate thereby, and (b) promptly notify Purchaser of any other event which
has caused or would cause a material adverse change in On-Line or the Service
Corps or the On-Line Business or the Business of each Service Corp or in the
condition (financial or otherwise), assets, liabilities, Business, operations,
liquidity, properties or prospects of On-Line or the Service Corps.
10.14 MISCELLANEOUS DISTRIBUTIONS. Immediately prior to the Effective
Date, On-Line shall distribute to the On-Line Stockholders and the Service Corps
will distribute to the Thrifts, all cash on hand (as reflected in the Balance
Sheets of On-Line and the Service Corps), less (i) the amount of all Trade
Payables of On-Line and the Service Corps as of the Effective Date, (ii) such
other current liabilities of On-Line and the Service Corps that are properly
attributable to the operations of On-Line and the Service Corps for the period
prior to the Effective Date, and (iii) the amount to be refunded pursuant to
Section 2.8.
10.15 JURISDICTION. In relation to any legal action, suit, or
proceeding to which Purchaser, or any member of the On-Line Group is a party
arising out of or in connection with this Agreement or any of the transactions
contemplated by this Agreement ("Proceedings"), Purchaser, and each member of
the On-Line Group hereby irrevocably: (a) submits to the exclusive jurisdiction
of the courts of the State of Illinois and the courts of the United States of
America for the Northern District of Illinois (such courts, the "Courts"), as
Purchaser and any such member of the On-Line Group commencing such Proceedings
may elect, solely in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to herein, and (b)
waives and agrees not to assert, as
41
43
a defense in any action, suit, or proceeding for the interpretation or
enforcement hereof or of any document referred to herein, that it is not subject
to the jurisdiction of the Courts, or that such action, suit, or proceeding may
not be brought or is not maintainable in the Courts, or that this Agreement or
any of such documents may not be enforced in or by the Courts, or that its
property is exempt or immune from execution, or that the action, suit, or
proceeding is brought in any inconvenient forum, or that the venue of the
action, suit, or proceeding is improper.
10.16 AFFIRMATIVE COVENANTS OF ON-LINE. Prior to the making of the
distributions called for in Section 10.14, On-Line shall accomplish the
following:
(a) enter into a lease or financing arrangement for the Cartridge
Tape Subsystem at a monthly cost not to exceed $5,000; and
(b) pay into a reserve account to be maintained by On-Line, such sums
as the Board of Directors of On-Line has determined, for the period ending
September 30, 1995, are to be paid to employees of On-Line: (i) as bonuses
(discretionary or otherwise), or (ii) as contributions (discretionary or
otherwise) of On-Line under any Employee Pension Benefit Plans.
10.17 CASH SWEEP DEBITS. (a) At Closing and prior to the distributions
called for in Section 10.14, the Agent and Purchaser shall create a joint order
escrow at a mutually agreed upon financial institution, into which On-Line shall
deposit the amount of $65,000 (the "Halon System Escrow"). Such sum shall be
used by Purchaser to offset all losses, costs and expenses of Purchaser, if any
(the "Halon Loss") incurred by Purchaser in connection with a discharge from the
Halon gas fire notification system employed at the Leased Premises (the "Halon
System") which occurs, if at all, prior to October 31, 1996, including costs and
expenses of installation of a water-based system to replace the Halon System. In
the event no such discharge takes place prior to October 31, 1996 (or if such
discharge results in losses, costs or expenses to Purchaser of less than $65,000
prior to October 31, 1996), the Halon System Escrow, or the remaining balance
thereof, as the case may be, shall be paid to the Agent by October 31, 1996.
Purchaser agrees to provide written notice of a Halon Loss to the Agent promptly
upon the occurrence of the event causing such Halon Loss and to supply the Agent
with all documentation evidencing or substantiating such Halon Loss. In the
event of a dispute between the parties with respect to the subject matter of
this Section 10.17(a), the parties agree to submit such dispute to the
alternative dispute resolution process described in Section 15.9.
Notwithstanding the foregoing, if Purchaser renews its lease for the Leased
Premises and replaces the Halon System within a new fire protection notification
system prior to October 31, 1996, Purchaser may use such portion of the proceeds
of the Halon System Escrow as is necessary to offset the costs incurred by
Purchaser in connection with the disposal of the Halon gas used therein. All
sums still held in the Halon System Escrow and not effectively used for the
foregoing (or held pending a claim for the foregoing) shall be paid to the Agent
by December 31, 1996. Purchaser's claims and remedies, if any, against any
On-Line Group member with respect to any matter involving the Halon System,
including without limitation a defect therein or a discharge therefrom, shall be
limited to a claim against funds then held in the Halon System Escrow.
(b) To the extent that On-Line has not enhanced its existing ROLM
phone system so as to make it operational under the North American Numbering
Plan (the "ROLM Enhancement"), at Closing and prior to the distributions called
for in Section 10.14, the Agent and Purchaser shall create a joint order escrow
at a mutually agreed upon financial institution, into which On-Line shall
deposit the amount of $35,000 (the "ROLM Escrow"). Such sum shall be used by
Purchaser for the ROLM Enhancement. In the event that Purchaser does not
complete the ROLM Enhancement by January 1, 1996, or the cost to enhance such
system is less than $35,000, the ROLM Escrow, or the remaining balance thereof,
as the case may be, shall be paid to Agent by January 2, 1996. Purchaser agrees
to supply
42
44
the Agent with all documentation evidencing or substantiating the ROLM
Enhancement and agrees to act in good faith to minimize the cost thereof. In the
event of a dispute between the parties with respect to the subject matter of
this Section 10.17(b), the parties agree to submit such dispute to the
alternative dispute resolution process described in Section 15.9. Purchaser's
claims and remedies, if any, against any On-Line Group member with respect to
any matter involving On-Line's ROLM phone system including without limitation
any defect therein, shall be limited to a claim against funds then held in the
ROLM Escrow.
(c) To the extent that On-Line has not adopted and implemented a
Disaster Recovery Plan for the currently existing BankForce product (the "DRP"),
at Closing and prior to the distributions called for in Section 10.14, the Agent
and Purchaser shall create a joint order escrow at a mutually agreed upon
financial institution, into which On-Line shall deposit the amount of $10,000
(the "DRP Escrow"). Such sum shall be used by Purchaser to adopt and implement
the DRP. In the event that Purchaser does not adopt and implement the DRP by
March 31, 1996 or the cost to accomplish same is less than $10,000, the DRP
Escrow, or the remaining balance thereof, as the case may be, shall be paid to
the Agent by April 15, 1996. Purchaser agrees to supply the Agent with all
documentation evidencing or substantiating the DRP and agrees to act in good
faith to minimize the cost thereof. In the event of a dispute between the
parties with respect to the subject matter of this Section 10.17(c), the parties
agree to submit such dispute to the alternative dispute resolution process
described in Section 15.9. Purchaser's claims and remedies, if any, against any
On-Line Group member with respect to any matter involving the DRP shall be
limited to a claim against funds then held in the DRP Escrow.
(d) At Closing and prior to the distributions called for in Section
10.14, the Agent and Purchaser shall create a joint order escrow at a mutually
agreed upon financial institution, into which On-Line shall deposit the amount
of $400,000 (the "Audit Escrow"). Such sum shall be used by Purchaser to offset
all losses, costs and expenses of Purchaser, if any (the "Audit Loss") incurred
by Purchaser in connection with a claim by the IRS against On-Line for taxes,
interest and penalties owed by On-Line as a result of the current audit of the
IRS of On-Line's Tax Returns for the fiscal years ending September 30, 1992,
1993 and 1994 (the "Audit Taxes"). The Audit Escrow, or the remaining balance
thereof, as the case may be, shall be paid to Agent by the earlier of (i) the
written acknowledgement of the IRS that On-Line has no continuing liability for
the Audit Taxes, or (ii) June 30, 1998. Purchaser agrees to provide written
notice of an Audit Loss to the Agent promptly upon the occurrence of the event
causing such Audit Loss and to supply the Agent with all documentation
evidencing or substantiating such Audit Loss. Subsequent to the Effective Date,
neither Purchaser nor On-Line shall, with respect to the Audit Taxes, sign any
waivers extending the period of limitations in respect thereof, or make any
settlement or compromise of the Audit Taxes without Agent's prior written
consent, which consent shall not be unreasonably withheld. In the event of a
dispute between the parties with respect to the subject matter of this Section
10.17(d), the parties agree to submit such dispute to the alternative dispute
resolution process described in Section 15.9. Purchaser's claims and remedies,
if any, against any On-Line Group member with respect to any matter involving
the Audit Taxes shall be limited to a claim against funds then held in the Audit
Escrow.
(e) The escrows contemplated by Sections 10.17(a) through (d) may be
maintained at the same financial institution and held by the escrowee(s)
thereunder in one account provided separate accounting is maintained for each of
the above-described escrows. The escrows shall provide that all interest and
earnings thereon shall be paid to the Agent on an annual basis. The cost of any
escrow shall be satisfied from the earnings thereon and if insufficient, then
from the principal thereof.
10.18 OFFSETS TO CONTINGENT PAYMENT. (a) Purchaser shall be entitled to
offset against the Asset Notes and the Contingent Payment all losses, costs and
expenses of Purchaser, if any (the "SD Loss"), incurred by Purchaser in
43
45
connection with a claim by the State of South Dakota against On-Line for taxes,
interest and penalties owed by On-Line for all periods prior to Closing (the "SD
Taxes"). Purchaser agrees to provide written notice of an SD Loss to the Agent
promptly upon the occurrence of the event causing such SD Loss. No offset
hereunder shall be made without thirty (30) business days' prior written notice
to the Agent, which notice shall state the nature of the items comprising the
offset and shall include copies of all documents evidencing same. Subsequent to
the Effective Date, neither Purchaser nor On-Line shall, with respect to the SD
Taxes, sign any waivers extending the period of limitations in respect thereof,
or make any settlement or compromise of the SD Taxes without Agent's prior
written consent, which consent shall not be unreasonably withheld. In the event
of a dispute between the parties with respect to the subject matter of this
Section 10.18(a), the parties agree to submit such dispute to the alternative
dispute resolution process described in Section 15.9. Any such offset shall be
made first against the Asset Notes and then against the Contingent Payment.
Purchaser's claims and remedies, if any, against any On-Line Group member with
respect to any matter involving the SD Taxes shall be limited to a claim against
the Asset Notes and the Contingent Payment.
(b) Purchaser shall be entitled to offset against the Asset Notes and
the Contingent Payment all losses, costs and expenses of Purchaser, if any (the
"Tax Loss"), incurred by Purchaser in connection with a claim by the City of
Chicago against On-Line for taxes, interest and penalties arising under the
Chicago Personal Property Lease Transaction Tax Ordinance, Chapter 3-32 of the
City of Chicago Municipal Code (the "Chicago Taxes") for all periods prior to
Closing. Purchaser agrees to provide written notice of a Tax Loss to the Agent
promptly upon the occurrence of the event causing such Tax Loss. No offset
hereunder shall be made without thirty (30) business days' prior written notice
to the Agent, which notice shall state the nature of the items comprising the
offset and shall include copies of all documents evidencing same. Subsequent to
the Effective Date, neither Purchaser nor On-Line shall, with respect to the
Chicago Taxes, sign any waivers extending the period of limitations in respect
thereof, or make any settlement or compromise of the Chicago Taxes without
Agent's prior written consent, which consent shall not be unreasonably withheld.
In the event of a dispute between the parties with respect to the subject matter
of this Section 10.18(b), the parties agree to submit such dispute to the
alternative dispute resolution process described in Section 15.9. Any such
offset shall be made first against the Asset Notes and then against the
Contingent Payment. Purchaser's claims and remedies, if any, against any On-Line
Group member with respect to any matter involving the Chicago Taxes shall be
limited to a claim against the Asset Notes and the Contingent Payment.
44
46
ARTICLE XI
COVENANTS OF PURCHASER
11.1 CONSUMMATION OF TRANSACTIONS. Subject to the terms and conditions
herein provided, from the date hereof through the Effective Date, Purchaser will
use its best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective, as promptly as practicable, the transactions contemplated by
this Agreement in accordance with the terms of this Agreement applicable to
Purchaser. From the date hereof through the Effective Date, Purchaser shall not
voluntarily take any action or course of action inconsistent with the
satisfaction of the respective conditions, terms and provisions of this
Agreement or the consummation of the respective transactions contemplated by
this Agreement in accordance with the terms of this Agreement applicable to
Purchaser.
11.2 NOTIFICATION OF CERTAIN MATTERS. Prior to the Effective Date,
Purchaser shall give prompt notice to the Agent of: (a) any threatened or actual
lawsuit, any proposed settlement of any threatened or actual lawsuit and any
pending or threatened governmental action or proceeding of any kind known to
Purchaser which relates to the transactions then contemplated by this Agreement;
and (b) any material failure of Purchaser or any officer, director, employee or
agent thereof, to comply with or satisfy any covenant, condition or agreement
then remaining to be complied with or satisfied by it hereunder.
11.3 PERSONNEL. On-Line has not made and, without obtaining the prior
written consent of Purchaser, shall not make any representation, promise or
other communication, whether written or oral, to its employees regarding
employment with Purchaser or the employment benefits, plans or practices of
Purchaser.
11.4 CONFIDENTIAL INFORMATION. Purchaser hereby acknowledges that the
On-Line Group would be irreparably damaged if any proprietary or confidential
information possessed by On-Line, the Service Corps, Purchaser or any Affiliate
of Purchaser, concerning any member of the On-Line Group (except for any
information that is or becomes generally known to the public, otherwise than
through a breach of this Agreement) were disclosed to or used by any Person
engaged in competition with any member of the On-Line Group. For a period of
five years from and after the Effective Date, Purchaser agrees that it will not
use or disclose any such confidential or proprietary information, except as
expressly permitted hereunder or under any other agreement between such On-Line
Group member and Purchaser or any of its Affiliates. If Purchaser is requested
or required by any Tribunal to disclose any of such proprietary or confidential
information, then Purchaser will provide the Agent with prompt written notice of
such request or requirement unless prohibited by law. The Agent may then either
seek appropriate protective relief from all or part of such request or
requirement or waive Purchaser's compliance with the provisions of this Section
11.4 with respect to all or part of such request or requirement. Purchaser will
cooperate with the Agent at the Agent's expense, in attempting to obtain any
reasonable protective relief that the Agent chooses to seek. If, after the Agent
has had a reasonable opportunity to seek such relief, the Agent fails to obtain
such relief, then Purchaser may disclose only that portion of such proprietary
or confidential information which its legal counsel advises it is compelled to
disclose. Nothing herein contained shall be construed so as to limit or
otherwise diminish any obligations of confidentiality owed to customers of
On-Line pursuant to any agreements involving On-Line and its customers.
11.5 ASSISTANCE AND COOPERATION. After the Effective Date, at the
Selling Entities' expense, Purchaser agrees:
(a) to assist the Selling Entities in preparing the Closing Balance
Sheet;
45
47
(b) to provide timely notice to the Agent in writing of any pending or
threatened tax audits or assessments related to the On-Line Business or On-Line
or the Service Corps or the Business of each Service Corp, for periods beginning
prior to the Closing and of which Purchaser has knowledge and to furnish such
Selling Entities with copies of all correspondence received from any Tribunal in
connection with any tax audit or information request with respect to any such
period; and
(c) to provide access, upon reasonable notice during normal business
hours, to the Agent or any other authorized representatives of the Selling
Entities, to the Books and Records of On-Line and the Service Corps, and such
Books and Records of Purchaser and its Affiliates as the Selling Entities shall
determine in their sole but reasonable discretion are necessary to determine
and/or verify the accuracy of the payments and contingent payments due the
Selling Entities hereunder.
11.6 MISCELLANEOUS DISTRIBUTIONS. Provided same have not been assigned
in their entirety to the Agent as provided in Section 10.7 hereof, within 90
days of the end of each of the first four fiscal quarters of On-Line ending
after the Effective Date, Purchaser will pay to the Agent all sums received by
On-Line (and the Service Corps) that are payments upon Accounts Receivable of
On-Line and the Service Corps in existence prior to the Effective Date that are
not related to prepayment for services to be performed after the Effective Date
("Effective Date Accounts Receivable"), net of: (a) the third party costs of
collecting any of Effective Date Accounts Receivable, and (b) the third party
costs of any claims or disputes with respect to the Effective Date Accounts
Receivable or to the services or goods to which they relate.
11.7 TAX ELECTION. Purchaser will not, in connection with any of the
transactions contemplated by this Agreement, make an election under Section 338
of the Code.
ARTICLE XII
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF PURCHASER FOR THE CLOSING
The obligations of Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment of all of the
following conditions on or before the Effective Date, each of which conditions
is individually deemed material:
12.1 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by any member of the On-Line Group as set forth herein or in any
Schedule, Exhibit, instrument or other document delivered to Purchaser pursuant
to this Agreement shall be true and correct in all material respects as of the
date hereof and on and as of the Effective Date, to the same extent and with the
same effect as if made on and as of the Effective Date, except where such
representation clearly relates to another date specified therein (in which case,
such representation shall relate to such specific date).
12.2 PERFORMANCE BY THE ON-LINE GROUP. The On-Line Group shall have
materially performed and complied with all covenants and agreements required by
this Agreement to be performed or complied with by each of them on or before the
Effective Date.
12.3 PROHIBITIONS, RESTRICTIONS AND LITIGATION. On the Effective Date,
there shall be no Official Action
46
48
outstanding, and no proceeding or other litigation shall be pending by any other
Person, against any On-Line Group member or Purchaser which prohibits or
restricts, challenges or reasonably may be expected to give rise to a material
challenge to, consummation of the transactions contemplated by this Agreement or
which claims (or reasonably may be expected to give rise to a claim of damages
as a result of the consummation of the transactions contemplated by this
Agreement or otherwise have a material adverse effect on On-Line or the Service
Corps, or Purchaser or its Affiliates, subsequent to the Closing. There shall
not have occurred any change of Legislative Enactments or Official Actions which
may reasonably be expected to materially and adversely affect the transactions
contemplated with respect to the Closing or the Business and operations of
On-Line or the Service Corps, or Purchaser, as a result of the consummation of
the transactions contemplated with respect to the Closing.
12.4 CONSENTS. On-Line shall have received the Consents referred to in
Schedule 12.4 and such other material Consents from any Tribunal or other Person
as may be necessary: (a) to consummate the transactions contemplated by this
Agreement in accordance with this Agreement; (b) to enable On-Line to carry on
and conduct the On-Line Business (and the Service Corps to carry on and conduct
their respective Business) immediately subsequent to the Closing in
substantially the same manner as was carried on and conducted prior to the
Closing; or (c) that are necessary to prevent a material breach of, a material
default, a material penalty, or a material increase in payments under, or a
termination of any Contract of On-Line or the Service Corps.
12.5 GOVERNMENTAL CLEARANCES. All required filings with Tribunals
shall have been made and all waiting periods, including any extensions thereof,
which may be applicable to the transactions contemplated by this Agreement with
respect to the Closing shall have expired or terminated.
12.6 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date of this
Agreement, there shall have occurred no materially adverse change in the
condition (financial or otherwise), assets, liabilities, Business, operations,
properties, or prospects of On-Line or the Service Corps.
12.7 CERTIFICATE OF PURCHASER AND CERTAIN OFFICERS. Purchaser shall
have received a certificate, dated the Effective Date, executed by the Chairman
of the Board, President or any Vice President of each of On-Line and the Service
Corps, to the effect that the conditions set forth in Sections 12.1, 12.2, 12.3,
12.4, 12.5, and 12.6 have been satisfied.
12.8 DELIVERY OF DOCUMENTS. Purchaser shall have received the
documents and other items described on Exhibit D.
12.9 SATISFACTORY PROCEEDINGS. All proceedings to be taken in
connection with the consummation of the transactions contemplated by this
Agreement, and all certificates, documents and instruments incidental hereto and
required hereby, shall be reasonably satisfactory in form and substance to
Purchaser and shall have received copies of all such documents and instruments
as Purchaser may reasonably request in connection with such transactions.
12.10 WAIVER OF CONDITIONS. Purchaser shall have the right and the
authority to waive any or all of the foregoing conditions precedent to the
obligations of Purchaser.
ARTICLE XIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE SELLING ENTITIES FOR THE CLOSING
47
49
The obligations of each Selling Entity to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment of all of the
following conditions on or before the Effective Date, each of which conditions
is individually deemed material:
13.1 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by Purchaser as set forth herein or in any Schedule, Exhibit,
instrument or other document delivered to such Selling Entity pursuant to this
Agreement shall be true and correct in all material respects as of the date
hereof and on and as of the Effective Date, to the same extent and with the same
effect as if made on and as of the Effective Date, except where such
representation clearly relates to another date specified therein (in which case
such representation shall relate to such specified date).
13.2 PERFORMANCE BY PURCHASER. Purchaser shall have fully performed
and complied with all covenants and agreements required by this Agreement to be
performed or complied with by each of them on or before the Effective Date.
13.3 PROHIBITIONS, RESTRICTIONS AND LITIGATION. On the Effective Date,
there shall be no Official Action outstanding, and no proceeding or other
litigation shall be pending by any other Person, against On-Line or the Service
Corps or any of the other parties participating in the Closing which prohibits
or restricts, challenges or reasonably may be expected to give rise to a
material challenge to consummation of the transactions contemplated by this
Agreement with respect to the Closing or which claims (or reasonably may be
expected to give rise to a claim of) damages as a result of the consummation of
the transactions contemplated by this Agreement or otherwise have a material
adverse effect on the Selling Entities subsequent to the Closing.
13.4 CONSENTS. Purchaser shall have received the Consents referred to
in Schedule 13.4 and such other material Consents from any Tribunal or other
Person as may be necessary to enable the Selling Entities to consummate the
transactions contemplated by this Agreement with respect to the Closing in
accordance with this Agreement without any conditions which such Selling
Entities might reasonably consider to be material and adverse to any of such
Selling Entity or its respective Business and operations after the Closing.
13.5 GOVERNMENTAL CLEARANCES. All required filings with Tribunals
shall have been made and all waiting periods, including any extensions thereof,
which may be applicable to the transactions contemplated by this Agreement with
respect to the Closing shall have expired or terminated.
13.6 CERTIFICATE OF PURCHASER AND CERTAIN OFFICERS. The Agent shall
have received a certificate, dated the Effective Date, executed by the President
or any Vice President of Purchaser, to the effect that the conditions set forth
in Sections 13.1, 13.2, 13.3, 13.4 and 13.5 have been satisfied.
13.7 DELIVERY OF DOCUMENTS. The Agent shall have received the
documents and other items described on Exhibit C.
48
50
13.8 SATISFACTORY PROCEEDINGS. All proceedings to be taken in
connection with the consummation of the transactions contemplated by this
Agreement, and all certificates, documents and instruments incidental hereto and
required hereby, shall be reasonably satisfactory in form and substance to the
Agent, and the Agent shall have received copies of all such documents and
instruments as the Agent may reasonably request in connection with such
transactions.
13.9 WAIVER OF CONDITIONS. The Agent shall have the right and the
authority, on behalf of the Selling Entities, to waive any or all of the
foregoing conditions precedent to the obligations of such Selling Entities.
ARTICLE XIV
INDEMNIFICATION
14.1 INDEMNIFICATION BY PURCHASER. Purchaser and each of them, jointly
and severally, agrees to indemnify and hold harmless each Selling Entity and its
respective directors, officers, employees, advisors, Affiliates, agents and
representatives, stockholders, successors and assigns ("SE Indemnities") from
and against any and all losses, damages, liabilities, claims, costs, fees and
expenses, including without limitation Legal Expenses (collectively, "Losses")
arising out of, based upon or resulting from: (a) any violation or breach by
Purchaser of, or any default by Purchaser under, this Agreement or any
certificate, Schedule, Exhibit or other document or instrument furnished or to
be furnished by Purchaser to any Selling Entity pursuant to and as described in
this Agreement or any agreement contemplated hereby or the consummation of the
transactions contemplated hereby or thereby, or (b) any error, inaccuracy or
misrepresentation in any of the representations and warranties made by, or on
behalf of, Purchaser herein or therein, or (c) any violation or breach of the
WARN Act which arises subsequent to Closing, or (d) any suit or action at law or
in equity, any arbitration or alternative dispute resolution proceeding, any
interference or opposition proceeding, any governmental or quasi-governmental
proceeding, complaint, or investigation, or any liability claim which arises in
connection with, or relates to, any of the matters referred to in clause (a),
(b) or (c) of this Section 14.1. The foregoing obligations of Purchaser with
respect to any error, inaccuracy or misrepresentation in any particular
representation and warranty made by, or on behalf of, Purchaser shall terminate
on the Expiration Date (as defined in Section 15.1) applicable to such
representation and warranty (except that such obligations shall thereafter
continue in full force and effect with respect to any Losses of which Purchaser
has received a Request (as defined in Section 14.3) or written notice of a claim
or action for loss or damage made by an unaffiliated Person (a "Third-Party
Matter") prior to the Expiration Date). Notwithstanding the foregoing provisions
of this Section 14.1, with respect to any Losses ("SE Losses") arising out of,
based upon or resulting from any error, inaccuracy or misrepresentation in any
of the representations and warranties contained in Article III or in any of the
representations and warranties (but not covenants) of Purchaser contained in any
certificate, document, affidavit or instrument delivered pursuant to this
Agreement: (a) the foregoing indemnity and hold harmless obligations of
Purchaser relating to such SE Losses shall become operative and effective only
if and when all SE Losses for which SE Indemnities are entitled to receive
indemnification under this Section 14.1 exceed, in the aggregate, $10,000 (it
being understood and agreed that all such SE Losses shall accumulate until such
time as they exceed $10,000, at which time Purchaser shall be obligated to
indemnify any SE Indemnities seeking indemnification under this Section 14.1 for
the amount that such SE Losses, in the aggregate, exceed $10,000), and (b) with
respect to the foregoing indemnity and hold harmless obligations of Purchaser
relating to the SE Losses, the liability of Purchaser to indemnify and hold
harmless the SE Indemnities for all SE Losses under this Section 14.1 shall not
exceed, in the aggregate, the Purchase Price.
14.2 INDEMNIFICATION BY SELLING ENTITIES. The Selling Entities,
individually and not jointly and severally, agree to indemnify and hold harmless
Purchaser and its directors, officers, employees, advisors, Affiliates, agents,
representatives, stockholders, successors and assigns ("Purchaser Indemnities")
from and against any and all Losses
49
51
arising out of, based upon or resulting from: (a) any violation or breach by
On-Line, a Service Corp or any Selling Entity of, or default by On-Line, a
Service Corp or any Selling Entity under, this Agreement or any certificate or
other document or instrument furnished or to be furnished by On-Line, a Service
Corp or any Selling Entity to Purchaser pursuant to and as described in this
Agreement or any agreement contemplated hereby or the consummation of the
transactions contemplated hereby or thereby, or (b) any error, inaccuracy or
misrepresentation in any of the representations and warranties made by, or on
behalf of On-Line, a Service Corp or any Selling Entity herein or therein, or
(c) any violation or breach of the WARN Act not indemnified by Section 14.1
which arises prior to Closing, or (d) any liability or obligation arising out of
payment of any part of the Purchase Price to the Agent as agent for any Selling
Entity, or (e) any suit or action at law or in equity, any arbitration or
alternative dispute resolution proceeding, any interference or opposition
proceeding, any governmental or quasi-governmental proceeding, complaint, or
investigation, or any liability claim which arises in connection with, or
relates to, any of the matters referred to in clause (a), (b), (c) or (d) of
this Section 14.2. The foregoing obligations of the Selling Entities with
respect to any error, inaccuracy or misrepresentation in any particular
representation and warranty made by, or on behalf of, any Selling Entity shall
terminate on the Expiration Date applicable to such representation and warranty
(except that such obligations shall thereafter continue in full force and effect
with respect to any Losses of which the Agent has received a Request or written
notice of a Third-Party Matter prior to the Expiration Date). Notwithstanding
the foregoing provisions of this Section 14.2, with respect to any Losses
("Purchaser Losses") arising out of, based upon or resulting from any error,
inaccuracy or misrepresentation in any of the representations and warranties
contained in Articles IV through IX or in any of the representations and
warranties (but not covenants) of On-Line, a Service Corp or any Selling Entity
contained in any certificate, document, affidavit or instrument delivered
pursuant to this Agreement: (a) the foregoing indemnity and hold harmless
obligations of Purchaser relating to such Purchaser Losses shall become
operative and effective only if and when all Purchaser Losses for which
Purchaser Indemnities are entitled to receive indemnification under this Section
14.2 exceed, in the aggregate, $10,000 (it being understood and agreed that all
such Purchaser Losses shall accumulate until such time as they exceed $10,000,
at which time the Selling Entities shall be obligated to indemnify any Purchaser
Indemnities seeking indemnification under this Section 14.2 for the amount that
such Purchaser Losses, in the aggregate, exceed $10,000), and (b) with respect
to the foregoing indemnity and hold harmless obligations of the Selling Entities
relating to the Purchaser Losses, the liability of the Selling Entities to
indemnify and hold harmless the Purchaser Indemnities for all Purchaser Losses
under this Section 14.2 shall not exceed, in the aggregate, the sum of the Asset
Notes and the Contingent Payment (collectively the "Deferred Payment").
Notwithstanding any other provision of this Agreement, the aggregate
indemnification liability of the Selling Entities shall be limited to the
aggregate amount of the Deferred Payment theretofore paid or thereafter payable
to such Selling Entity, and the amount of any Purchaser Losses at any time then
payable shall be limited to the aggregate amount of the Deferred Payment
theretofore paid or payable, with the balance of such Purchaser Losses
thereafter payable when and as additional amounts of the Deferred Payment are
paid or payable. The aggregate indemnification liability of the Selling Entities
shall be further limited such that a Selling Entity shall not be responsible for
a breach of a representation or warranty made by a Service Corp under Articles
VI, VII and XIII unless such Selling Entity is a stockholder of such breaching
Service Corp. By way of example and not as a limitation, a breach by ISC of its
representations and warranties under Article VI will not result in any
indemnification liability to Superior, the SLI Stockholders or the OHM
Stockholders, but rather, Purchaser's right to indemnification shall be limited
to that portion of the Deferred Payment allocated to the ISC Stockholders under
Section 2.2(a). Nothing herein contained shall be construed so as to limit the
liability of any Selling Entity for a breach by such Selling Entity of its
representations and warranties made under Article V (as to Superior) or under
Article IX (as to the Thrifts).
14.3 SATISFACTION OF CLAIMS. If any Person entitled to indemnification
under this Article XIV (an "Indemnified Party") desires to assert any claim for
indemnification or to be held harmless under this Article XIV (a "Claim"), the
Indemnified Party shall deliver to the Person that is obligated to provide such
indemnification (the
50
52
"Indemnifying Party") notice of its demand for satisfaction of such Claim (a
"Request"), specifying in reasonable detail the amount of such Claim and, to the
extent practicable under the circumstances, the basis for asserting such Claim.
Within 20 Business Days after the Indemnifying Party has been given a Request,
the Indemnifying Party shall either: (a) satisfy the Claim requested to be
satisfied in such Request by delivering to the Indemnified Party payment by wire
transfer or a certified or bank cashier's check payable to the Indemnified Party
in immediately available Federal Reserve Funds in an amount equal to the amount
of such Claim, or (b) notify the Indemnified Party that the Indemnifying Party
contests such Claim by: (i) delivering to the Indemnified Party an objection to
such Claim, specifying in reasonable detail, to the extent practicable under the
circumstances, the basis for contesting such Claim, and (ii) demanding
alternative dispute resolution of the Claim in accordance with Section 15.9. In
the case of any Selling Entity, notice to the Agent shall be sufficient for all
purposes.
14.4 MATTERS WHICH MAY GIVE RISE TO CLAIMS. (A) NOTICE AND CONTROL.
Promptly after receipt by an Indemnified Party of notice of the commencement of
any action, such Indemnified Party will, if a Claim in respect thereof is to be
made against the Indemnifying Party under this Article XIV, notify the
Indemnifying Party of the commencement thereof; but the omission so to notify
the Indemnifying Party will not relieve it from any liability which it may have
to any Indemnified Party otherwise than under this Article XIV. In case any such
action is brought against any Indemnified Party and it notifies the Indemnifying
Party of the commencement thereof, the Indemnifying Party will be entitled to
participate therein, with counsel satisfactory to such Indemnified Party. The
Indemnified Party shall have the right, but shall not have any duty or
obligation, to undertake and contest any Third-Party Matter in such manner as it
may deem appropriate, at the cost and expense of the Indemnifying Party. An
Indemnifying Party shall not be liable for any settlement of any such action or
proceeding effected without its written consent (which shall not be unreasonably
withheld), but if any such action or proceeding is settled with its written
consent, or if there is a final judgment for the plaintiff in any such action or
proceeding, the Indemnifying Party shall indemnify and hold harmless such
Indemnified Party from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. In the case of any Selling
Entity, notice to the Agent shall be sufficient for all purposes.
(B) EXPENSES. If the Indemnified Party undertakes the defense,
compromise and settlement of such Third-Party Matter pursuant to Section
14.4(a), the Indemnifying Party will promptly reimburse the Indemnified Party
for all reasonable fees, costs and expenses (including without limitation any
Legal Expenses) incurred by the Indemnified Party in respect of such Third-Party
Matter. The reimbursement of such fees, costs and expenses shall be made by
periodic payments during the course of any investigation or defense, as and when
bills are received or expenses incurred.
(C) COOPERATION. The Indemnified Party and the Indemnifying Party
shall cooperate in the defense of a Third Party Matter that is defended in
accordance with this Section 14.4, and shall make available to the defending,
person or its representative all records and materials required for its use in
such defense.
ARTICLE XV
GENERAL
15.1 SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations
and warranties contained in this Agreement or in any certificate, document,
affidavit or instrument delivered pursuant to this Agreement shall survive the
Closing, the consummation of the transactions contemplated hereby and any
investigation made at any time by or on behalf of any of the parties and shall
continue in full force and effect: (a) until the expiration of the applicable
statute
51
53
of limitations in the case of the representations and warranties set forth in
Sections 4.13, 6.8, 7.8 and 8.8; (b) until the earlier of the expiration of the
seven-year period following the Effective Date or payment in full of the
Purchase Price, in the case of all other representations and warranties of an
On-Line Group member or Purchaser; and (c) for the comparable periods of time
set forth above in this Section 15.1 in the case of each representation and
warranty (but not any covenant) set forth in any certificate, document,
affidavit or instrument delivered pursuant to this Agreement, based upon the
nature of such representation and warranty when compared to the most analogous
representation and warranty set forth above. The date of the expiration of the
applicable time period referenced above for any particular representation and
warranty is hereinafter referred to as the "Expiration Date." Covenants and
agreements set forth in this Agreement to be performed after the Effective Date
will survive the Effective Date in accordance with their respective terms. All
representations, warranties, covenants and agreements made or contained in this
Agreement or in any certificate, document, affidavit or instrument delivered in
accordance with this Agreement shall be deemed to be material to the extent so
provided and to have been relied upon by the parties hereto, notwithstanding any
investigation heretofore or hereafter made by the parties hereto or on their
behalf before the Closing.
15.2 TERMINATION. This Agreement may be terminated at any time prior to
the Closing: (a) by the mutual consent in writing of Purchaser and the Agent; or
(b) by Purchaser or the Agent if any court of competent jurisdiction in the
United States or other United States Tribunal shall have issued an Official
Action or taken any other action resting, enjoining or otherwise prohibiting any
part of the transactions contemplated by this Agreement, and such order, decree,
ruling or other action shall have become final. If for any reason whatsoever the
Closing shall not have taken place on or before October 30, 1995; the Agent
shall have the right and the authority, on behalf of the Selling Entities, to
terminate this Agreement upon notice given to Purchaser at any time prior to
such Closing.
15.3 EXPENSES OF TRANSACTION; FINDERS' FEES. Each party shall be
responsible for its own costs associated with the negotiation and consummation
of the transactions contemplated hereby, including without limitation all legal,
consulting and accounting expenses and any fees or commissions due any broker as
a consequence of the consummation of such transactions. Each of the parties
hereto is responsible for, and shall indemnify the other against, any claim by
any third party to a fee, commission or other remuneration arising by reason of
any services alleged to have been rendered to or at the instance of said party
with respect to this Agreement or any of the transactions contemplated hereby.
15.4 PUBLIC DISCLOSURE. No party shall issue any press release or
otherwise make any public statement with respect to the transactions
contemplated hereby, except with the prior written consent of the other party;
provided, however, that such consent shall not be required either for any
announcement intended solely for internal distribution by Purchaser or the
Selling Entities to their employees or for any
52
54
disclosure or reporting obligations of any party, to the extent required by
applicable Legislative Enactments or other competent authority, but (as is
practicable under the circumstances) such disclosing party shall consult with
the other party in advance.
15.5 NOTICES. Any notices or other communications required or permitted
hereunder or under any other agreement contemplated hereunder shall be deemed
given if sent by overnight delivery via nationally recognized courier or
(provided that a copy is also sent by such courier) by facsimile transmission,
in each case addressed as follows: if to Purchaser, to OLF Acquisition Corp,
0000 Xxxx 00xx Xxxxxx, Xxxxxx, XX 00000, Attention: Xxxxxxx Xxxxx, Executive
Vice-President and General Counsel, Facsimile No.: (000) 000-0000; if to any
On-Line Group member, to On-Line Financial Services, Inc., 000 Xxxxxxxx, Xxx
Xxxxx, XX 00000, Attention: Xxxxxx X. Xxxxxx, President, Facsimile No.: (708)
571-8864, with a copy (which shall not constitute notice) to Xxxx, Xxxxxxxxxxxx
& Xxxxxxxxx, Ltd., 0000 Xxxxxx Xxxx, Xxxxx 000, Xxx Xxxxx, XX 00000-0000,
Attention: Xxxxx X. Xxxx, Xx., Facsimile No.: (000) 000-0000. The delivery
receipt for such a courier or the answer-back for facsimile transmission shall
be conclusive evidence of such delivery.
15.6 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
Purchaser may not assign any right under this Agreement or delegate any
obligations hereunder without the express prior written consent of the Agent,
except to an Affiliate of Purchaser; provided, however, that any such delegation
of obligations hereunder to an Affiliate of Purchaser shall not relieve
Purchaser of any of its obligations under this Agreement. No Selling Entity may
assign any rights under this Agreement or delegate any obligations hereunder
without the express prior written consent of Purchaser.
15.7 AMENDMENTS, WAIVERS, ETC. This Agreement may not be modified or
amended except by a written instrument executed by or on behalf of each of the
parties to this Agreement. The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver shall
be effective only if it is in writing signed by the party against which such
waiver is to be asserted. The Agent may act in the name of, for, and on behalf
of any Selling Entity. Unless otherwise expressly provided in this Agreement, no
delay or omission on the part of any party in exercising any right or privilege
under this Agreement shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right or privilege under this Agreement operate as
a waiver of any other right or privilege under this Agreement nor shall any
single or partial exercise of any right or privilege preclude any other or
further exercise thereof or the exercise of any other right or privilege under
this Agreement.
15.8 GOVERNING LAW. Notwithstanding the place where this Agreement may
be executed by any of the parties hereto, the parties expressly agree that all
the terms and provisions hereof shall be governed by, and interpreted and
construed in accordance with, the substantive laws of the State of Illinois,
without giving effect to principles relating to conflicts of laws.
15.9 DISPUTE RESOLUTION. In the event of any dispute, controversy or
claim of any kind or nature arising under or in connection with this Agreement
or any other agreement contemplated hereby that the parties are unable to
resolve through informal discussions or negotiations, the parties agree to
submit such dispute, controversy or claim to alternative dispute resolution in
accordance with the procedures set forth on Exhibit E.
53
55
15.10 NUMBER AND GENDER. Unless the context otherwise requires, the
singular and plural forms in this Agreement shall be mutually inclusive, and the
masculine, feminine and neuter forms in this Agreement shall be mutually
inclusive.
15.11 SECTION HEADINGS, SCHEDULES, ETC. The cover page and table of
contents preceding this Agreement and the headings of the various sections of
this Agreement and of the Schedules hereof and Exhibits hereto are for
convenience of reference only and do not, and shall not be deemed to, modify,
define, expand or limit any of the terms or provisions hereof. Any item
referenced in a Schedule hereto is deemed to be disclosed only with respect to
the specific Section number of this Agreement which is explicitly referenced in
such Schedule. The absence of any Schedule hereto, the purpose of which is to
set forth exceptions or other qualifications to the representations and
warranties hereunder, shall be deemed to state that no such exceptions or
qualifications exist.
15.12 COMPLETE AGREEMENT; COUNTERPARTS. This document and the documents
(including Exhibits and Schedules) delivered pursuant hereto, contain the
complete agreement and understanding of the parties hereto and thereto with
respect to the matters covered hereby and thereby, and they rescind and
supersede any prior agreements and understandings which may have in any way
related to the subject matter hereof and thereof. The express terms hereof
control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof. This Agreement may be executed by the
parties hereto in several counterparts, and, when so executed and delivered,
shall be an original as against any party whose signature appears thereon, but
all such counterparts shall together constitute but one and the same instrument.
Each counterpart may consist of a number of copies hereof each executed by less
than all, but together executed by all, of the parties hereto. This Agreement
shall become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories. It shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
15.13 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any Person or circumstance, shall be
declared judicially to be invalid, unenforceable or void, such decision shall
not have the effect of invalidating or voiding the remainder of this Agreement,
it being the intent and agreement of the parties that this Agreement shall be
deemed amended by modifying such provision to the extent necessary to render it
valid, legal and enforceable while preserving its intent or, if such
modification is not possible, by substituting therefor another provision that is
legal and enforceable and that achieves the same objective.
15.14 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended or shall be construed to give any Person, other than the parties
hereto, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.
54
56
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed by their respective duly authorized officers or
representatives, all as of the day and year first above written.
"PURCHASER"
OLF ACQUISITION CORP, ARGO BANCORP, INC.,
an Illinois corporation a Delaware corporation
By:_______________________________ By:_______________________________
Name:_____________________________ Name:_____________________________
Title:____________________________ Title:____________________________
"ON-LINE"
ON-LINE FINANCIAL SERVICES, INC.,
an Illinois corporation
By:_______________________________
Name:_____________________________
Title:____________________________
THE "ON-LINE STOCKHOLDERS"
SUPERIOR SAVINGS BANK, a Wisconsin SAVINGS AND LOAN SERVICE BUREAU OF INDIANA,
savings bank an Indiana corporation
By:_______________________________ By:______________________________
Name:_____________________________ Name:____________________________
Title:_____________________________ Title:___________________________
I.S.C., INCORPORATED, an Illinois O&H SERVICE BUREAU OF MICHIGAN, a
corporation Michigan Corporation
By:_______________________________ By:______________________________
Name:_____________________________ Name:____________________________
Title:_____________________________ Title:___________________________
THE "THRIFTS"
55
57
LIST OF EXHIBITS
EXHIBIT
A Form of Powers of Attorney
B Form of Asset Note(s)
C Closing Deliveries by Purchaser
D Closing Deliveries by the On-Line Group
E Dispute Resolution Process
58
EXHIBIT A
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That , a financial institution organized and incorporated
in accordance with the laws of the , constitutes and appoints
Midwest Trust Services, Inc., the undersigned's true and lawful attorney-in-fact
in the undersigned's place and stead and for the undersigned's use and benefit,
to collect and thereafter distribute the Purchase Price pursuant to that certain
Stock Purchase Agreement dated as of September 21, 1995, by and among Argo
Bancorp, Inc. by and through its wholly-owned subsidiary, OLF Acquisition Corp.,
("Purchaser") and On-Line Financial Services, Inc., Superior Savings Bank,
I.S.C., Incorporated, Savings and Loan Service Bureau of Indiana, O & H Service
Bureau of Michigan and the Thrifts listed on Schedules A, B and C to said Stock
Purchase Agreement (the "Agreement") (collectively the "Selling Entities").
The undersigned gives to said attorney-in-fact full power and authority
to collect the Purchase Price (as defined in the Agreement) and to distribute
the Purchase Price to the Selling Entities in accordance with the terms of the
Agreement.
The undersigned gives to said attorney-in-fact said power and authority
as if the undersigned's proportionate share of the Purchase Price were paid
directly to the undersigned, hereby ratifying and confirming all that said
attorney-in-fact shall lawfully do or cause to be done by authority hereof,
subject to oversight by a committee duly appointed by the Selling Entities.
IN WITNESS WHEREOF, this Power of Attorney has been executed this
day of , 1995.
SELLING ENTITY:
------------------------------
By:
---------------------------------------------
Name: Title:
------------------------------ --------------
-------------------------
STATE OF )
-----------------
) SS
COUNTY OF )
----------------
and personally known to me to be the
President and Secretary of , a financial institution duly
organized under the laws of the , whose names are subscribed to the
within Power of Attorney, acknowledged to me that they executed the same in
their authorized capacity and that by their signatures they executed the said
Power of Attorney as the free and voluntary act of the financial institution.
WITNESS my hand and official seal.
------------------------------
Notary Public
59
EXHIBIT B
FORM OF ASSET NOTE(S)
(See Exhibits B-1 and B-2)
60
EXHIBIT B-1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") OR ANY OTHER SECURITIES STATUTE AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS IN THE OPINION OF COUNSEL
TO, OR SATISFACTORY TO OLF ACQUISITION CORP. AND/OR ARGO BANCORP, INC.,
ANY PROPOSED SALE, TRANSFER OR OTHER DISPOSITION WOULD NOT VIOLATE OR
REQUIRE REGISTRATION UNDER THE ACT OR ANY OTHER SECURITIES STATUTE.
_____________, 1995
$_________________ Oak Brook, Illinois
NEGOTIABLE PROMISSORY NOTE
FOR VALUE RECEIVED, OLF ACQUISITION CORP., an Illinois corporation, and
ARGO BANCORP, INC., a Delaware corporation (collectively "Maker") hereby,
jointly and severally, promise to pay to the order of MIDWEST TRUST SERVICES,
INC., an Illinois corporation (the "Agent"), the amount of
___________________________________ ($____________) [the "Asset Amount"], with
interest on the unpaid balance thereof from the date of this Note until paid at
the rate of ___% per annum [the interest rate to be fixed at Closing at the
simple interest rate equal to the higher of (A) the Applicable Federal Rate, or
(B) the rate currently bid for the most recently auctioned two (2)-year Treasury
bills as reported in The Wallstreet Journal]. Said principal shall be payable
when and as described in that certain Stock Purchase Agreement dated as of
September 21, 1995, by and among On-Line Financial Services, Inc., the Service
Corps and the Selling Entities specified therein, and Maker (the "Agreement"),
with a final payment (the "Balloon Note Payment") of the entire unpaid balance
of such principal being due and payable on the second anniversary of the
Effective Date (as defined in the Agreement). Said interest shall be payable on
the same dates as said principal is payable.
This promissory note (this "Note") is issued under and pursuant to the
Agreement. Capitalized terms not otherwise defined in this Note shall have the
respective meanings ascribed thereto in the Agreement.
With respect to this Note, Maker, the Selling Entities and the Agent
shall be entitled to the benefits of the Agreement and shall also be subject to
the obligations and other burdens of the Agreement.
Payments hereunder shall be timely made when deposited in the United
States mail, postage prepaid, addressed to the Agent at 0000 X. Xxxxxx Xxxxxx,
Xxxxxxx Xxxx, Xxxxxxxx 00000 (or such other address as the Agent may from time
to time specify in writing to Maker by a notice in accordance with the
Agreement). This Note may, at the option of the Maker be prepaid in whole or in
part, in the minimum denomination of $10,000 or an integral multiple thereof,
without premium, at any time or from time to time. Each prepayment of principal
shall be made together with interest accrued thereon to the date of such
prepayment.
All payments of principal and of interest on this Note shall be made in
coin or currency of the United Sates which, at the time of payment, is legal
tender for the payment of public and private debts, and shall be made by
delivery to the Agent of a United States dollar check issued by a federally
chartered bank in the United States or by transfer of federal funds to a United
States Dollar account maintained by the Agent at a bank in the United States. If
the due date for any payment of principal of this Note shall be a Saturday, a
Sunday, a legal holiday in the United States or the State of Illinois, or a day
on which banks in Chicago, Illinois, are authorized or obligated by law, rule or
regulation to close, such payment need not be made on such due date but may be
deferred to the next succeeding day
61
which is not a Saturday, a Sunday, a legal holiday in the United States or the
State of Illinois, or a day on which banks in Chicago, Illinois, are authorized
or obligated by law, rule or regulation to close; provided, however, that
interest on this Note shall continue to accrue for such deferral period.
No delay or omission of the Agent to exercise rights under this Note
shall impair any such right or power or shall be construed to be a waiver of any
such default or any acquiescence therein. No waiver of any default shall be
construed, taken or held to be a waiver, acquiescence in or consent to, any
further or succeeding default of the same nature. Any subsequent holder of this
Note and any beneficiaries of this Note shall be bound by any written waiver or
consent given hereunder. This Note shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
IN WITNESS WHEREOF, Maker, and each of them, has caused this Note to be
duly executed by its duly authorized officer or representative, all as of the
day and year first above written.
OLF ACQUISITION CORP., ARGO BANCORP, INC.,
AN ILLINOIS CORPORATION A DELAWARE CORPORATION
BY:_______________________________ BY:_______________________________
NAME:_____________________________ NAME:_____________________________
TITLE:____________________________ TITLE:____________________________
EXHIBIT B-2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") OR ANY OTHER SECURITIES STATUTE AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS IN THE OPINION OF COUNSEL
TO, OR SATISFACTORY TO OLF ACQUISITION CORP. AND/OR ARGO BANCORP, INC.,
ANY PROPOSED SALE, TRANSFER OR OTHER DISPOSITION WOULD NOT VIOLATE OR
REQUIRE REGISTRATION UNDER THE ACT OR ANY OTHER SECURITIES STATUTE.
_____________, 1995
$460,616.90 Oak Brook, Illinois
NEGOTIABLE PROMISSORY NOTE
FOR VALUE RECEIVED, OLF ACQUISITION CORP., an Illinois corporation, and
ARGO BANCORP, INC., a Delaware corporation (collectively "Maker") hereby,
jointly and severally, promise to pay to the order of MIDWEST TRUST SERVICES,
INC., an Illinois corporation (the "Agent"), the amount of FOUR HUNDRED SIXTY
THOUSAND SIX HUNDRED SIXTEEN AND 90/100THS ($460,616.90) with interest on the
unpaid balance thereof from the date of this Note until paid at a rate equal to
the rate of return on funds of On-Line currently held in escrow pursuant to the
terms of that certain Escrow Agreement dated December 22, 1994 by
60
62
and among On-Line, Unisys Leasing Corporation and Colorado National Bank, such
funds currently invested in United States government securities maturing within
397 days, and in repurchase agreements and reverse purchase agreements relating
to such securities; with a payment of all sums due hereunder, if not sooner due
and payable, on January 1, 1998.
This promissory note (this "Note") is issued under and pursuant to that
certain Stock Purchase Agreement dated as of September 21, 1995, by and among
On-Line Financial Services, Inc., the Service Corps and the Selling Entities
specified therein, and Maker (the "Agreement"). Capitalized terms not otherwise
defined in this Note shall have the respective meanings ascribed thereto in the
Agreement.
With respect to this Note, Maker, the Selling Entities and the Agent
shall be entitled to the benefits of the Agreement and shall also be subject to
the obligations and other burdens of the Agreement.
Payments hereunder shall be timely made when deposited in the United
States mail, postage prepaid, addressed to the Agent at 0000 X. Xxxxxx Xxxxxx,
Xxxxxxx Xxxx, Xxxxxxxx 00000 (or such other address as the Agent may from time
to time specify in writing to Maker by a notice in accordance with the
Agreement). This Note may, at the option of the Maker be prepaid in whole or in
part, in the minimum denomination of $10,000 or an integral multiple thereof,
without premium, at any time or from time to time. Each prepayment of principal
shall be made together with interest accrued thereon to the date of such
prepayment.
All payments of principal and of interest on this Note shall be made in
coin or currency of the United Sates which, at the time of payment, is legal
tender for the payment of public and private debts, and shall be made by
delivery to the Agent of a United States dollar check issued by a federally
chartered bank in the United States or by transfer of federal funds to a United
States Dollar account maintained by the Agent at a bank in the United States. If
the due date for any payment of principal of this Note shall be a Saturday, a
Sunday, a legal holiday in the United States or the State of Illinois, or a day
on which banks in Chicago, Illinois, are authorized or obligated by law, rule or
regulation to close, such payment need not be made on such due date but may be
deferred to the next succeeding day which is not a Saturday, a Sunday, a legal
holiday in the United States or the State of Illinois, or a day on which banks
in Chicago, Illinois, are authorized or obligated by law, rule or regulation to
close; provided, however, that interest on this Note shall continue to accrue
for such deferral period.
No delay or omission of the Agent to exercise rights under this Note
shall impair any such right or power or shall be construed to be a waiver of any
such default or any acquiescence therein. No waiver of any default shall be
construed, taken or held to be a waiver, acquiescence in or consent to, any
further or succeeding default of the same nature. Any subsequent holder of this
Note and any beneficiaries of this Note shall be bound by any written waiver or
consent given hereunder. This Note shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
IN WITNESS WHEREOF, Maker, and each of them, has caused this Note to be
duly executed by its duly authorized officer or representative, all as of the
day and year first above written.
OLF ACQUISITION CORP., BY:_______________________________
AN ILLINOIS CORPORATION NAME:_____________________________
61
63
TITLE:____________________________ ARGO BANCORP, INC.,
A DELAWARE CORPORATION
BY:_______________________________
NAME:_____________________________
TITLE:____________________________
EXHIBIT C
CLOSING DELIVERIES BY PURCHASER
At the Closing, Purchaser shall deliver to the Agent:
(a) duly executed certificates of the Secretary or Assistant Secretary
(or other appropriate officer) of Purchaser, certifying as of the Effective Date
as to the incumbency and signatures of the officers of Purchaser who have
executed this Agreement and the documents delivered at the Closing on behalf of
such Person;
(b) other documents or instruments as the Agent may reasonably request;
provided, however, that any such request shall be subject to any limitations or
restrictions expressly provided in this Agreement;
(c) appropriate evidence of all Consents referred to in Schedule 13.4
relating to the Closing;
(d) the Asset Note(s);
(e) a copy of the By-Laws (as in effect on the Effective Date) of
Purchaser, certified as of the Closing by the Secretary or Assistant Secretary
(or other appropriate officer) of Purchaser;
(f) a copy of all resolutions adopted by the Board of Directors or
other governing body of Purchaser authorizing the execution, delivery and
performance by Purchaser of this Agreement (including the Asset Notes) and the
other agreements contemplated hereby to which Purchaser is a party and the
consummation contemplated hereby and thereby, certified as of the Effective Date
by the Secretary or Assistant Secretary (or other appropriate officer) of
Purchaser;
(g) certificates of existence and, to the extent available in the
appropriate jurisdiction, good standing (including evidence of payment of any
franchise Taxes), dated, to the extent practicable, within the five-day period
preceding the Effective Date from the appropriate Tribunals in Purchaser's
jurisdiction of incorporation or other organization; and
(h) duly executed certificates of the Secretary of Assistant Secretary
(or other appropriate officer) of Purchaser, certifying as of the Effective Date
as to the incumbency and signature of the officers of Purchaser who have
executed this Agreement and the documents delivered at the Closing on behalf of
Purchaser (including the Asset Notes).
62
64
EXHIBIT D
CLOSING DELIVERIES BY THE ON-LINE GROUP
At the Closing, the On-Line Group shall deliver to Purchaser:
(a) a copy of the Charter (as in effect on the Effective Date) of
On-Line and each of the Service Corps certified, within the five-day period
preceding the Closing by the Secretary of State (or other appropriate official)
of the respective State or other jurisdiction of its incorporation or
organization;
(b) a copy of the Bylaws (as in effect on the Effective Date) of
On-Line and each of the Service Corps, certified as of the Closing by the
Secretary or Assistant Secretary (or other appropriate officer) of On-Line or
the respective Service Corps, as applicable;
(c) a copy of all resolutions adopted by the Board of Directors or
other governing body of On-Line and each of the Service Corps (together with a
copy of all resolutions adopted by the shareholders of On-Line and each of the
Service Corps, where legally required), authorizing the execution, delivery and
performance by On-Line and each of the Service Corps of this Agreement and the
other agreements contemplated hereby to which such Person is a party (including
the respective Power of Attorney), and the consummation of the transactions
contemplated hereby and thereby, certified as of the Effective Date by the
Secretary or Assistant Secretary (or other appropriate officer) of On-Line and
each of the Service Corps;
(d) appropriate evidence of all Consents required to transfer the
Shares to Purchaser in accordance with this Agreement (including those listed on
Schedule 12.4);
(e) certificates of existence and, to the extent available in the
appropriate jurisdiction, good standing (including evidence of payment of any
franchise Taxes), dated, to the extent practicable, within the five-day period
preceding the Effective Date from the appropriate Tribunals in On-Line's or the
respective Service Corp's jurisdiction of incorporation or other organization;
(f) duly executed certificates of the Secretary or Assistant Secretary
(or other appropriate officer) of On-Line and each of the Service Corps,
certifying as of the Effective Date as to the incumbency and signature of the
officers of the respective Selling Corps who have executed this Agreement and
the documents delivered at the Closing on behalf of such Person (or any
applicable Power of Attorney);
(g) stock certificates representing all of the Purchased Stock, duly
registered in the name of the respective Selling Entity, as contemplated by
Section 2.2, and a duly executed Securities Power and Assignment from each of
the Selling Entities, dated the Effective Date, pursuant to all of which taken
as a whole, the Selling Entities shall sell, assign, convey, transfer, set over
and deliver to Purchaser, the Purchased Stock and associated rights, all in form
and substance reasonably satisfactory to Purchaser and its counsel;
(h) with respect to each lease of Real Property listed in Schedule
4.20(a), appropriate evidence of (i) all Consents from all Persons and Tribunals
necessary to continue the same and to permit continued possession of such Real
Property in substantially the same manner as such possession was enjoyed as of
the Effective Date, (ii) estoppel letters in the form agreed to by the parties,
and (iii) duly executed instruments of assignment and transfer relating thereto.
65
(i) appropriate evidence, reasonably satisfactory to Purchaser, that
all Contracts identified in Schedule C(i) as requiring waiver or modification
thereof prior to their transfer or assignment to Purchaser, have been so waived
or modified, in each case upon the terms and conditions previously agreed to by
the parties;
(j) copies of any and all releases, termination statements and other
documents and instruments as are necessary to remove and release any Liens
(other than Permitted Encumbrances) which may encumber any of the Purchased
Stock and the properties of On-Line or the Service Corps;
(k) such other instruments of assignment or transfer as Purchaser may
reasonably request and shall be necessary or appropriate in order to more
effectively convey and transfer the Purchased Stock to Purchaser or for aiding
and assisting, collecting and reducing to possession, and exercising, any rights
with respect thereto;
(l) other documents or instruments as Purchaser may reasonably request;
(m) the minute books and stock records of On-Line and the Service
Corps;
(n) copies of the tax returns described in Sections 4.13, 6.8, 7.8 and
8.8;
(o) the written resignations, dated as of the Effective Date, of the
directors and officers of the Service Corps; and
(p) Proof of settlement and payment under the Chicago Personal Property
Lease Transaction Tax Ordinance Settlement Program.
66
EXHIBIT E
DISPUTE RESOLUTION PROCESS
(a) Either the Agent or Purchaser may demand arbitration by giving the
other party written notice to such effect, which notice will (A) describe, in
reasonable detail, the nature of the dispute, controversy or claim, the amount,
if any, involved and the remedy sought, and (B) name an independent arbitrator
employed by Endispute, Inc., who is experienced in the resolution of disputes,
controversies or claims of such a nature. In addition, such party demanding
arbitration shall take such steps as are necessary to commence arbitration
proceedings under the rules of the American Arbitration Association (including,
without limitation, the payment of any administrative fees provided thereunder).
(b) Within 30 days after the other party's receipt of such demand, such
other party will name a second independent arbitrator, also employed by
Endispute, Inc., who is experienced in the resolution of disputes, controversies
or claims of such a nature.
(c) The two arbitrators so named will promptly select a third neutral
arbitrator, also employed by Endispute, Inc., who is experienced in the
resolution of disputes, controversies and claims of such a nature. The
arbitration will be heard by a panel of the three arbitrators so chosen (the
"Arbitration Panel") in Chicago, Illinois, and the resolution of the dispute,
controversy or claim will be determined by a majority vote of the Arbitration
Panel. The Commercial Arbitration Rules of the American Arbitration Association
will govern the conduct of the arbitration and the selection of the arbitrators.
(d) The Arbitration Panel may apportion between the parties as the
Arbitration Panel may deem equitable the fees, costs and expenses of the
arbitration incurred by the parties. The Arbitration Panel may also award
interest on any awards made by the Arbitration Panel. In the assessment of any
award of interest, the Arbitration Panel shall consider any delay in the
satisfaction of claims by the indemnifying party.
(e) The party demanding arbitration will request the Arbitration Panel
to (A) allow for the parties to request reasonable discovery pursuant to the
rules then in effect under the Federal Rules of Civil Procedure for a period not
to exceed 60 days prior to such arbitration (all with the stated intent of
establishing a fair, speedy and cost-effective dispute resolution mechanism),
and (B) require the testimony to be transcribed. No findings of fact or opinions
of law will be required to be made by the arbitrators.
(f) Any award rendered by the Arbitration Panel will be final,
conclusive and binding upon the parties, and any judgment thereon may be entered
and enforced in any court of competent jurisdiction.
Other than actions for temporary and permanent injunctive relief or
specific performance or any action necessary to enforce the award of the
Arbitration Panel, the provisions of Section 15.9 (which includes this Exhibit
E) will constitute the exclusive remedy of the parties and a complete defense to
any suit, action or other proceeding instituted in any court or before any other
Tribunal with respect to any dispute, controversy or claim arising under or in
connection with this Agreement or the other agreements contemplated hereby.
Notwithstanding any other provision in Section 15.9 (which includes this Exhibit
E) to the contrary, the Arbitration Panel will not have the authority to amend
the provisions of Section 15.9 (which includes this Exhibit E) without obtaining
the prior written consent of each of the parties to this Agreement.
67
SCHEDULES
TO
STOCK PURCHASE AGREEMENT
BY AND AMONG
ARGO BANCORP, INC.
BY AND THROUGH
OLF ACQUISITION CORP.
AND
ON-LINE FINANCIAL SERVICES, INC.,
SUPERIOR SAVINGS BANK,
I.S.C., INCORPORATED ("ISC"),
SAVINGS AND LOAN SERVICE BUREAU OF INDIANA ("SLI"),
O&H SERVICE BUREAU OF MICHIGAN ("OHM")
AND THE STOCKHOLDERS OF ISC, SLI AND OHM
DATED AS OF SEPTEMBER 21, 1995
The Schedules attached hereto have been prepared in connection with the
Stock Purchase Agreement, made and entered into as of September 21, 1995 (the
"Stock Purchase Agreement"), by and among Argo Bancorp, Inc. by and through OLF
Acquisition Corp. and On-Line Financial Services, Inc., Superior Savings Bank,
I.S.C., Incorporated ("ISC"), Savings and Loan Service Bureau of Indiana
("SLI"), O&H Service Bureau of Michigan ("OHM") and the Stockholders of ISC, SLI
and OHM. Unless otherwise defined in these Schedules, terms used herein shall
have the meanings assigned to them in the Stock Purchase Agreement. Any item
referenced in a Schedule hereto is deemed to be disclosed on any other
applicable Schedule.
68
LIST OF SCHEDULES
SCHEDULE
A ...................... ISC Stockholders
B ...................... SLI Stockholders
C ...................... OHM Stockholders
D ...................... Effective Date Customer Contracts
3.1 ...................... Corporate Existence & Authority
4.1 ...................... Corporate Existence and Authority
4.3 ...................... No Violations
4.4 ...................... Challenges to this Agreement
4.5 ...................... Consents
4.7 ...................... Capitalization of On-Line
4.9 ...................... Intercompany Transactions
4.10 ...................... Accounts Receivable, Collection of Accounts Receivable
4.11 ...................... Absence of Changes
4.12(a) ...................... Intellectual Property and Know-How
4.12(b) ...................... Consents Required for Intellectual Property
4.13(a) ...................... Taxes
4.13(b) ...................... Tax Audits
4.14 ...................... Disputes and Litigation
4.16 ...................... Bank Accounts
4.17(a) ...................... Insurance
4.17(b) ...................... Insurance Claim History
4.18 ...................... Rights Used; Certain Relationships
4.19 ...................... Title to Properties and Absence of Liens; Use of
Real and Personal Property
4.20(a) ...................... Real Property/Personal Property
4.20(b) ...................... Official Complaints and Notices of Violations
4.20(c) ...................... Real Property Liens
4.21 ...................... List of Contracts, Customers and Suppliers
4.22(b) ...................... Contracts in Breach or Default
4.22(c) ...................... Non-Performance of Contracts
4.22(d) ...................... Non-Transferable Contracts
4.23(a) ...................... Employee Welfare Benefit Plans
4.23(b) ...................... Employee Pension Benefit Plans
4.23(c) ...................... Other Employee Benefit Arrangements
4.23(d) ...................... Non-Compliance Under Employee Benefit Arrangements
4.24(a) ...................... Employees
4.24(b) ...................... Employment/Compensation Agreements
4.24(c) ...................... Employee Manuals and Policies
4.24(f) ...................... WARN Act Matters
4.24(j) ...................... Leased Employees
4.24(k) ...................... Foreign National Employees
69
4.24(l) ...................... Non-Continuously Employed Employees
12.4 ...................... Consents of On-Line
13.4 ...................... Consents of Purchaser
C(i) ...................... Contract Waivers
68
