EXHIBIT 99.1
Conformed Copy
ASSET PURCHASE AGREEMENT
DATED AS OF JANUARY 31, 1998
BY AND AMONG
PRT GROUP INC.
("BUYER")
AND
ADVANCED COMPUTING TECHNIQUES, INC.
("SELLER"),
XXXXXX X. XXXXX,
XXXXX X. XXXXXXXX
AND
XXXXXXX X. XXX
(THE "SELLER SHAREHOLDERS")
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement"), dated as of
January 31, 1998, is made by and among PRT Group Inc., a Delaware
corporation ("Buyer"), Xxxxxx X. Xxxxx, Xxxxx X. Xxxxxxxx and Xxxxxxx X.
Xxx (the "Seller Shareholders") and Advanced Computing Techniques, Inc.,
a Connecticut corporation ("Seller").
WHEREAS, Buyer desires to purchase certain assets of Seller,
and Seller desires to sell such assets to Buyer, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the
respective covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale. On the terms and subject to
the conditions set forth in this Agreement
(a) Seller shall sell to Buyer, and Buyer shall purchase
from Seller, all of the accounts receivable, inventory, intellectual
property and other assets, as set forth in Section 1.1(b)(i) hereof, of
Seller for an aggregate unadjusted purchase price of $12,800,000, as set
forth in Section 1.1(b)(ii) hereof, subject to adjustment as provided
herein (the "Purchase Price"); and
(b) at the Pre-Closing referred to in Section 1.2 hereof:
(i) Seller shall sell, assign, transfer and
deliver to Buyer the assets, business, accounts receivable,
intellectual property, contracts and rights of Seller of every kind
and nature, tangible and intangible, wherever located and whether
or not on the books of Seller, as set forth on the instrument of
transfer (the "Instrument of Transfer") in the form attached hereto
as Exhibit A and made a part hereof, all as shall exist as of the
Closing Date referred to in Section 1.2 hereof (collectively, the
"Assets", and the information technology staff augmentation,
projects and solutions businesses carried on using the Assets are
collectively referred to herein as the "Business"); provided, that
the Assets shall not include any assets specifically described on
Schedule 1.1 hereto as excluded assets (the "Excluded Assets"); and
(ii) Buyer shall accept and purchase the
Assets and the Business from Seller and in payment therefor
Buyer shall
(A) assume the liabilities and
obligations of Seller specified in Section 7.1 hereof;
and
(B) deliver to Seller an amount equal to
$11,800,000 ("Unadjusted Closing Payment"), as adjusted
pursuant to Section 1.4 hereof, to be paid in cash by wire
transfer to a bank account designated by Seller upon three
days' prior written notice to Buyer or by certified or
official bank check in federal or other immediately available
funds at the Pre-Closing; and
(C) deliver to the escrow agent (the "Escrow
Agent") named in the escrow agreement (the "Escrow
Agreement") attached hereto as Exhibit B hereto an amount
equal to $1,000,000 (the "Escrow Amount") to be paid in cash
by wire transfer to a bank account designated by the Escrow
Agent upon three days' prior written notice to Buyer and
which shall be disbursed as set forth in the Escrow
Agreement.
(c) The Purchase Price (including the liabilities expressly
assumed by Buyer under this Agreement) shall be allocated in a manner
consistent with Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"), as mutually agreed to by Buyer and Seller and set
forth on Exhibit J hereto promptly after the Tangible Net Worth (as
defined herein) of the Business as of the Closing Date (as herein
defined) is finally established. Any post-Closing adjustment in the
Purchase Price shall be reflected in the final allocation of the Purchase
Price in a manner consistent with Section 1060 of the Code. Each of the
parties agree to cooperate in filing all tax forms necessary with regard
to the allocation of the Purchase Price and not to take any position on
such forms inconsistent with this Section 1.1(c).
Section 1.2 Pre-Closing; Closing. The pre-closing of the
purchase and sale of the Assets and the Business pursuant to this
Agreement (the "Pre-Closing") shall take place at the Windsor,
Connecticut offices of Buyer at 9:00 a.m. on (a) January 28, 1998, or (b)
such other date, time and place which is agreed to by Buyer and Seller.
The date on which the closing of the purchase and sale of the Assets and
the Business pursuant to this Agreement (the "Closing") shall be deemed
to occur shall be January 31, 1998; the date on which the Closing shall
be deemed to occur is herein referred to as the "Closing Date" and the
Closing shall be deemed to be effective as of the close of business on
the Closing Date.
Section 1.3 Deliveries at the Pre-Closing. At the
Pre-Closing:
(a) Seller or the Seller Shareholders, as the case may
be, shall deliver to Buyer:
(i) the Instrument of Transfer, a form of which
is attached hereto as Exhibit A;
(ii) any other documents (to the extent that the
same can be delivered at the Pre-Closing) that are necessary
to transfer to Buyer good title to all the Assets, including,
without limiting the foregoing, assignments of leases
(together with landlord's consents, if required by the
respective lease, and estoppels, if Seller is entitled to
obtain an estoppel from the landlord under the terms of the
applicable lease, each in a form as is required under such
lease) constituting a part of the Assets, an affidavit
affirming that Seller is not a "foreign person" in accordance
with Section 1445 of the Code and the Treasury regulations
promulgated thereunder (the "Regulations"), and a
cross-receipt; and
(iii) a certificate substantially in
the form annexed as Exhibit C hereto, dated as of the
Closing Date and executed by an appropriate officer of
Seller;
(iv) an opinion of Seller's legal
counsel, dated the Closing Date, substantially in the
form annexed as Exhibit D hereto;
(v) the respective employment agreements, forms
of which are attached hereto as Exhibits E, F and G
(collectively, the "Employment Agreements") of each of the
Seller Shareholders, duly executed by the Seller
Shareholders; and
(vi) any other certificates, undertakings and
other instruments and documents required to be delivered by
Seller at the Pre-Closing or otherwise required in connection
herewith.
(b) Buyer shall deliver and pay, or cause to be delivered
or paid, to Seller:
(i) the Unadjusted Closing Payment;
(ii) the Undertaking, a form of which is attached
hereto as Exhibit H, pursuant to which Buyer shall assume
certain liabilities and obligations of Seller as set forth in
Section 7.1 hereof; and
(iii) a certificate substantially in the form annexed
as Exhibit C hereto, dated as of the Closing Date executed by
an appropriate officer of Buyer;
(iv) an opinion of Buyer's legal counsel, dated the
Closing Date, substantially in the form annexed as Exhibit I
hereto;
(v) the Employment Agreements of each of
the Seller Shareholders, duly executed by an
appropriate officer of Buyer; and
(vi) any other certificates, cross-receipts,
undertakings and other instruments and documents required to
be delivered by Buyer at the Closing or otherwise required in
connection herewith.
Section 1.4 Purchase Price Adjustment.
(a) On or prior to March 1, 1998 Seller shall determine the
Tangible Net Worth (as defined herein) of the Business as of the Closing
Date. Buyer shall review Seller's determination of the Tangible Net Worth
as of the Closing Date on or prior to March 15, 1998 and the parties
shall make an adjustment to the Unadjusted Closing Payment as follows:
(i) if the actual amount of the Tangible Net Worth as
of the Closing Date is greater than $1,050,000, the Unadjusted
Closing Payment shall be increased by the amount of such
difference; or
(ii) if the actual amount of the Tangible Net Worth as
of the Closing Date is less than $1,050,000, the Unadjusted Closing
Payment shall be decreased by the amount of such difference
and, in either case, the Unadjusted Closing Payment as so adjusted
shall be the "Final Closing Payment."
(b) For the purposes hereof, the term "Tangible Net Worth" as
used herein shall be equal to the difference between (i) the sum of
Seller's cash and cash equivalents; accounts receivable; property, plant
and equipment net of depreciation and amortization in accordance with
generally accepted accounting principles ("GAAP"), consistently applied;
and other assets exclusive of intangible assets, and (ii) the sum of
Seller's trade accounts payable; deferred revenue (sales liability);
accrued wages and payroll taxes; accrued sales taxes payable; bank
revolver and term loans; long term leases; and other accrued expenses
related to the Business (exclusive of shareholder loans payable; any fees
due to The Mid-Atlantic Companies, Ltd., Xxxxxx, Xxxxx & Xxxxxx, P.C. or
any other representative or agent employed by Seller in connection with
the transactions contemplated hereby; and any contribution accrued by
Seller for the benefit of the participant's in Seller's profit sharing
plan).
(c) The Tangible Net Worth as of January 31, 1998 shall be
determined by Seller and reviewed by Buyer and/or Buyer's independent
certified public accountants, in accordance with Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants and in the same manner as appears on the Seller Financial
Statements previously supplied by Seller to Buyer. To the extent that
there is any difference (positive or negative), in the aggregate, in the
calculation of Tangible Net Worth as determined by each party, (x) if the
amount of such difference is less than $25,000, the Tangible Net Worth
shall be deemed to be the mean of the amounts calculated by the parties,
(y) if the amount of such difference is greater than $25,000, the parties
shall attempt to resolve such difference and, failing to reach such a
resolution, a certified public accountant with whom neither of the
parties have had no business dealings in the last five years shall be
jointly appointed by the parties within five (5) business days to resolve
any such difference within thirty (30) days after appointment; any such
resolution shall be final and binding on the parties hereto. The cost of
retaining any such certified public accountant to resolve any such
difference shall be borne one-half by the Seller and the Seller
Shareholders, collectively, and one-half by Buyer. Any adjustment to the
Unadjusted Closing Payment required under this Section 1.4 shall be paid
within five (5) business days after the Tangible Net Worth of the
Business as of the Closing Date is finally determined.
ARTICLE II
[RESERVED]
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE SELLER SHAREHOLDERS
Seller and each of the Seller Shareholders represents and warrants
(provided that any representation or warranty made by any Selling
Shareholder in his personal capacity shall only be made by, and be
binding upon, such individual Selling Shareholder) to Buyer as follows:
Section 3.1 Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Connecticut and Seller has all requisite corporate power and authority to
own, lease and operate its properties and to carry on the Business and
its operations as now being conducted, except where any such failure to
be so organized, existing and in good standing or to have such power and
authority would not have a material adverse effect (taken in the
aggregate) on the business, operations, Assets, liabilities, results of
operations, cash flows, prospects or financial condition of the Business
(a "Material Adverse Effect"); provided, that, to the extent that results
of operations of the Business are reported at a loss, a Material Adverse
Effect shall mean a material increase in such loss from the prior
financial reporting period or date. Seller is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except in any such
jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a Material Adverse Effect. Seller has
heretofore delivered to Buyer complete and correct copies of Seller's
certificate of incorporation and by-laws, as currently in effect.
Section 3.2 Authorization. Seller has the corporate power
and corporate authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors and shareholders of Seller and no other corporate proceedings
on the part of Seller are necessary to authorize the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby. All of the shareholders of Seller are named on the
signature page hereof and, except as set forth on Section 3.2 of the
Disclosure Schedule being delivered herewith by Seller to Buyer (the
"Disclosure Schedule"), there are no persons or entities having the right
to acquire or dispose of the "beneficial ownership" (as such term is
defined under the rules and regulations promulgated under the Securities
Exchange Act of 1934) of, or control the vote of, any equity securities
of Seller, whether by subscription, pre-emptive right, option,
contractual agreement or arrangement, convertible instrument or security
or otherwise. This Agreement has been duly executed and delivered by
Seller and the Seller Shareholders and constitutes, and, when executed
and delivered, each of the other agreements, documents and instruments to
be executed and delivered by Seller and/or the Seller Shareholders, as
the case may be, pursuant hereto will constitute, a valid and binding
agreement of Seller and/or the Seller Shareholders, as the case may be,
enforceable against Seller and/or the Seller Shareholders, as the case
may be, in accordance with its terms, except that (a) such enforcement
may be subject to any bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other laws, now or hereafter in effect, relating
to or limiting creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
Section 3.3 Consents and Approvals; No Violations. Except as
set forth in Section 3.3 of the Disclosure Schedule, neither the
execution, delivery or performance of this Agreement nor the consummation
by Seller of the transactions contemplated hereby will (a) conflict with
or result in any breach or violation of any provision of the certificate
of incorporation or by-laws of Seller; (b) require any filing or
registration with, or notice or declaration to, or the obtaining of any
permit, license, authorization, consent or approval of, any federal or
state governmental or regulatory authority; (c) violate, conflict with or
result in a default (or any event which, with notice or lapse of time or
both, would constitute a default) under, or result in any termination,
cancellation or acceleration or give rise to any such right of
termination, cancellation or acceleration under, any of the terms,
conditions or provisions of any note, mortgage, other evidence of
indebtedness or guarantee to which Seller is a party or by which the
Business, Seller or any of their assets are subject or by which either of
them may be bound; (d) violate any order, injunction, decree, statute,
rule or regulation applicable to the Business, Seller, or any of their
respective assets or properties, (e) result in the creation or imposition
of any liens, pledges, mortgages, charges, claims or other encumbrances
("Liens") upon any properties, assets or business of Seller or the
Business, or (f) violate any existing third party Security Interest (as
defined in Section 3.6 hereof) in any properties, assets or business of
Seller or the Business, excluding from the foregoing clauses (b), (c),
(d), (e) and (f) such requirements, conflicts, defaults, rights, Liens or
violations which would not individually or in the aggregate have a
Material Adverse Effect and would not adversely affect the ability of
Seller to consummate the transactions contemplated by this Agreement.
Section 3.4 Financial Statements. Seller previously has
delivered to Buyer true and complete copies of the reviewed balance
sheets of Seller as of December 31, 1995 and 1996 and the related
reviewed statements of income for the years then ended, and a balance
sheet of Seller as of December 31, 1997 and the related statement of
income for the year ended on such date (collectively, the "Seller
Financial Statements"). Except as set forth on Section 3.4 of the
Disclosure Schedule, the Seller Financial Statements have been prepared
from the books and records of Seller in conformity with GAAP,
consistently applied, and fairly present the financial position and
results of operations of Seller as of the date and for the period
indicated. The statements of income included in the Seller Financial
Statements do not contain any special or nonrecurring items except as
expressly specified therein, and the balance sheets included in the
Seller Financial Statements do not reflect any write-up or revaluation
increasing the book value of any assets. The books and accounts of Seller
are complete and correct and fully and fairly reflect all of the
transactions of Seller.
Section 3.5 Absence of Material Adverse Effect. Except to
the extent set forth in Section 3.5 of the Disclosure Schedule, since
December 31, 1997 there has not been (i) any Material Adverse Effect with
respect to Seller, the Business or the Assets, properties, prospects,
financial position or results of operations or cash flows of the
Business; (ii) any damage or destruction or property loss not covered by
insurance constituting a Material Adverse Effect on the Assets or the
operation of the Business; (iii) any increase in the compensation or
bonus, incentive compensation, profit sharing, retirement, insurance,
medical reimbursement or other employee benefit plan or arrangement
payable or owed or to become payable or owed by Seller or the Business,
other than increases made in the ordinary course of business consistent
with past practice, compensation increases attendant to promotions and
falling within the normal range for the new position and scheduled
increases; (iv) any sale or other disposition of any capital asset of
Seller or the Business having net book value in excess of $10,000, other
than sales or dispositions of Excluded Assets; (v) any entry by Seller or
the Business into any material contract, lease, license, obligation,
indebtedness, commitment, purchase or sale, or transaction (including,
without limitation, any borrowing or capital expenditure), other than
those contemplated by or within the limits permitted by this Agreement;
(vi) any settlement, release or waiver of any material litigation, right
or claim of Seller or the Business with respect to any contract, lease,
license or permit; (vii) any material mortgage or pledge or imposition of
a material lien or other material encumbrance on any of the Assets or the
Business; or (viii) any material change by Seller in accounting
principles or methods.
Section 3.6 Title, Ownership and Related Matters.
(a) Except as set forth in Section 3.6 of the
Disclosure Schedule, the Assets owned by or leased to Seller are in
satisfactory condition and repair for their continued use as they have
been used and adequate for the continued conduct of the Business as
presently conducted. The assets, properties and rights included in the
Assets comprise substantially all of the assets, properties, and rights
of every type and description, real, personal and mixed, tangible and
intangible, used by Seller in, and necessary to, the conduct and
operation of the Business as presently conducted and operated. The sale
of the Assets by Seller pursuant hereto will convey to Buyer the
Business, including all tangible and intangible assets and properties
thereof, free and clear of any security interest, pledge, lien, charge,
option or restriction on transfer ("Security Interest") except as may
otherwise be disclosed on Section 3.6 of the Disclosure Schedule.
(b) Seller owns no real property. Set forth in Section
3.6 of the Disclosure Schedule is a list of all leases of real property
("Real Property Leases") creating for the benefit of Seller leasehold
interests ("Leasehold Interests") in the locations in which Seller
operates the Business. Copies of the Real Property Leases have been
previously provided to Buyer. Seller is not party to any options or other
contracts to acquire any interest in real property.
(c) Seller represents, as of the date of this
Agreement, that it has no knowledge of any default or breach of any
terms, covenants or conditions of any Real Property Lease, or of any
actions which would be reasonably likely to, with the passage of time or
the giving of notice by the respective landlord, result in any default or
breach which would give rise to a right in the landlord to terminate such
Real Property Lease.
(d) Permits and Compliance. To Seller's knowledge,
there are no pending or threatened or contemplated, condemnation
proceedings or litigation which would be reasonably likely to affect
Seller's interests in the Leasehold Interests or any part thereof. To
Seller's knowledge, all necessary and material certificates of occupancy,
site plans, signs and other permits, licenses and governmental approvals
for the locations covered by the Leasehold Interests are in full force
and effect and will be maintained until Closing. To Seller's knowledge,
the real property subject to the Leasehold Interests, and the operations
of the Business at the locations covered thereby, comply in all material
respects with all applicable federal, state and local laws, regulations,
rules, ordinances and orders, including, without limitation, those
relating to zoning, building, site plan, boiler, safety, fire, health,
signs, parking, or flood control, or protection of the environment, such
as sewage treatment, water quality, asbestos-containing and presumed
asbestos-containing rules, and air pollution.
(e) Physical Condition. To Seller's knowledge, there
are no material defects in the structural walls, foundations, roofs,
common area improvements, mechanical, electrical, plumbing, heating,
ventilating or air conditioning systems of the real property subject to
the Leasehold Interests, other than as a result of ordinary wear and
tear. Except as is otherwise explicitly provided herein with respect to a
casualty loss, all equipment in or on the real property subject to the
Leasehold Interests is now in operating condition and materially in
compliance with all applicable local, state, federal and insurance
requirements. The real property subject to the Leasehold Interests is
serviced by public utilities in a manner adequate to operate the Business
conducted at such location and Seller has no responsibility for
maintenance of off-site utility lines.
Section 3.7 Intellectual Property.
(a) Schedule 3.7(a) of the Disclosure Schedule contains a
complete and correct list of all material Intellectual Property (as
hereafter defined) owned by the Seller other than off-the-shelf software.
Schedule 3.7(b) of the Disclosure Schedule identifies each material
agreement pertaining to the licensed use of such Intellectual Property in
the Business and listing, in each case, whether Seller is the licensor or
licensee thereunder, the subject matter of the license, and whether the
rights granted are exclusive or non-exclusive (the "License Agreements").
As used herein, "Intellectual Property" shall mean all U.S.
and foreign patents and patent applications, registered and unregistered
copyrights and copyright applications (including copyrights in
proprietary computer software and databases), trademarks, service marks,
trade dress, logos, tradenames and similar business identifiers,
including, in each case, all registrations and applications therefor, and
the goodwill of the business symbolized by any of the foregoing,
confidential or proprietary technical and business information, know-how
and trade secrets, formulae, processes, inventions (whether patentable or
unpatentable) and other technical information.
(b) Except as set forth in Section 3.7 of the Disclosure
Schedule, Seller owns all material Intellectual Property or possesses
adequate licenses or other valid right to the material Intellectual
Property used in or necessary to conduct the Business as currently
conducted, in each case without the payment of any royalties except under
the agreements set forth on Schedule 3.7(b) of the Disclosure Schedule.
Seller is the sole and exclusive owner of the Intellectual Property set
forth on Section 3.7(a) of the Disclosure Schedule, free and clear of all
Liens, except as set forth therein. All applications and registrations
that exist for the Intellectual Property set forth on Schedule 3.7(a) of
the Disclosure Schedule stand in the name of Seller. To the knowledge of
the Seller, the Intellectual Property set forth on Schedule 3.7(a) of the
Disclosure Schedule has not lapsed, expired or been abandoned and is
valid and enforceable. To the knowledge of Seller, no application or
registration therefor is the subject of any opposition or cancellation
proceeding before any registration authority in any jurisdiction for
which notice has been provided to Seller nor is any such proceeding
threatened.
(c) To the knowledge of Seller, the activities, products and
services of Seller do not infringe upon, violate or conflict with the
Intellectual Property rights of any other person or entity. There are no
claims or suits pending for which notice has been provided or, to the
knowledge of Seller, threatened (i) alleging that Seller's activities or
products infringe upon or constitute the unauthorized use of a third
party's Intellectual Property rights or (ii) challenging Seller's
ownership of, right to use, or the validity or enforceability of any
Intellectual Property owned or used by Seller. To the knowledge of
Seller, there are no infringements by third parties of any Intellectual
Property owned by Seller. Seller has not entered into any consent,
indemnification, forbearance to xxx, or settlement agreement with any
third party relating to Intellectual Property.
(d) The License Agreements constitute binding and enforceable
obligations of Seller, and, to the knowledge of Seller, Seller is not in
breach of or default under the License Agreements nor has an event or
condition occurred (or is alleged by any other party to have occurred)
which, with or without due notice or lapse of time or both, would
constitute a breach or event of default on the part of Seller or would
provide a basis for a valid claim, acceleration or termination by any
other party under the License Agreements. To the knowledge of Seller, no
other party is in breach of or default under the License Agreements nor
has any event or condition occurred (or is alleged by any other party to
have occurred) which, with or without due notice or lapse of time or
both, would constitute a breach or event of default on the part of such
other party under the License Agreements. The consummation of the
transactions contemplated by this Agreement will not result in the loss
or impairment of any of Seller's rights pursuant to the License
Agreements in the Intellectual Property used in or necessary to conduct
the Business as currently conducted. Except as disclosed in Section
3.7(b) of the Disclosure Schedule, Seller is not a party to any
technology license agreement or sales agency or distributorship agreement
that limits in any material manner the ability of Seller to compete or to
conduct any significant line of business or compete with any person or
entity in any geographic area or during any period of time exceeding one
year from the date hereof.
(e) Computer Software. Except as set forth in Section 3.7(e)
of the Disclosure Schedule, Seller has such title to or the right to use,
by license or other agreement, all material computer software programs
used by Seller as are necessary to permit Seller to conduct the Business
as currently conducted, without any known conflict with the rights of
others or any known use by others which conflicts, in any material
respect, with the rights of Seller.
Section 3.8 Litigation. Set forth in Section 3.8 of the
Disclosure Schedule is a list of all material actions, suits,
administrative, arbitration or other proceedings and governmental
investigations and inquiries to the knowledge of Seller pending or
threatened (collectively "Cases") against Seller or any of its
properties, assets, Plans (as defined in Section 3.11 hereof) and
business operations, as of the date hereof, whether at law or in equity
or by or before any court, governmental or regulatory authority or by any
third party. No such Cases are pending or, to the knowledge of Seller,
threatened which, if adversely determined, would be likely to have a
Material Adverse Effect on the Assets, the Business, or the properties,
financial position, prospects or results of operations of Seller and
Seller is not subject to any judgment, consent, award, order or decree
having or which is likely to have such a Material Adverse Effect; nor is
there outstanding any writ, order, award, decree or injunction applicable
to Seller that (i) calls into question Seller's authority or right to
enter into this Agreement and consummate the transactions contemplated
hereby, or (ii) would otherwise prevent or delay the transactions
contemplated by this Agreement.
Section 3.9 Compliance with Applicable Law. Except as set
forth in Section 3.9 of the Disclosure Schedule, Seller is, and conducts
the Business, in compliance with all applicable laws, ordinances, codes,
rules, regulations, standards, judgments, decrees, writs, rulings,
injunctions, orders and other requirements, including, without
limitation, all applicable building, zoning, environmental and other land
use laws, of all governmental, administrative and judicial entities
(collectively, "Legal Requirements") of any federal, state, local or
foreign governmental authority applicable to Seller and its operations,
except for violations, if any, which would not have a Material Adverse
Effect on the Business. Except as set forth in Section 3.9 of the
Disclosure Schedule, no notice of any claim, suit, action, or inquiry has
been issued and served upon or delivered to Seller, and no investigation
or review is pending with respect to any alleged violation by Seller of
any Legal Requirements in connection with the Assets or operations of the
Business.
Section 3.10 Contracts and Arrangements. Set forth in
Section 3.10 of the Disclosure Schedule is a list of each (a) employment
agreement, consulting agreement, independent contractor agreement,
personal service or similar agreement; (b) indenture, mortgage, note,
installment obligation, agreement or other instrument relating to the
borrowing of money by Seller, or the guaranty by Seller of any obligation
for the borrowing of money; (c) other contract or agreement, including
without limitation, any purchase order, or any enforceable oral
agreement, which individually, or together with related agreements with
the same or related parties, involves the receipt or payment after the
date hereof of more than $50,000 on an annual basis or over the remaining
term thereof, (d) fixed price contract under which Seller is obligated to
provide over $25,000 in services, or (e) contract related to year 2000
computer software or hardware compliance, analysis, renovation, testing
or the like, to which Seller is a party or is otherwise bound. All such
contracts and arrangements, together with the Real Property Leases and
any other agreements to which Seller is a party and which are listed on
Section 3.10 of the Disclosure Schedule, are hereinafter referred to
collectively as the "Assigned Agreements". Copies of all of the Assigned
Agreements have been provided to Buyer. Except as set forth in Section
3.10 of the Disclosure Schedule, all such agreements are valid, binding
and enforceable in accordance with their terms and neither Seller nor, to
the knowledge of Seller, any other party thereto is in default under any
of the aforesaid agreements. Except as set forth in Section 3.10 of the
Disclosure Schedule, neither Seller nor the Seller Shareholders nor any
director or officer of Seller, nor, to Seller's knowledge, any employee
of Seller, is a party to any agreement, arrangement or understanding
which prohibits or limits in any material way the Seller, any employee,
director or officer of Seller, or the Business from competing in any
business anywhere in the world.
Section 3.11 Employee Benefit Plans; ERISA.
(a) Section 3.11(a) of the Disclosure Schedule lists each
"employee plan" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all other
employee benefit, bonus and fringe benefit plans, programs, agreements,
policies, arrangements or understandings sponsored or maintained for the
benefit of, or contributed to by Seller or any trade or business, whether
or not incorporated (an "ERISA Affiliate"), that, together with Seller
would be deemed a "single employer" within the meaning of Section 4001 of
ERISA, for the benefit of any employee or former employee of Seller (the
"Plans").
(b) Each of the Plans is in material compliance with its
terms. Each of the Plans that is subject to ERISA materially complies
with ERISA and the applicable provisions of Code. Each of the Plans
intended to be "qualified" within the meaning of Section 401(a) of the
Code has been determined by the IRS to be so qualified and Seller knows
of no fact or set of circumstances that would adversely affect such
qualification for events taking place prior to the Closing. Except as set
forth in Section 3.11 of the Disclosure Schedule, no "reportable event",
as such term is defined in Section 4043(c) of ERISA for which the thirty
day notice requirement to the Pension Benefit Guaranty Corporation has
not been waived, has occurred or will occur as a result of the Closing
with respect to any Plan. There is no "accumulated funding deficiency" as
such term is defined in Section 412 of the Code, whether or not waived
with respect to any Plan. There are no pending or, to the knowledge of
Seller, threatened material claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts
related thereto. Seller and its ERISA affiliates do not contribute, are
not required to contribute and have not been required, within the
preceding six years, to contribute, to any "multiemployer plans" as such
term is defined in Section 4001(a)(3) of ERISA. Seller has not received
written notice of, and there are no, claims or defaults, nor, to Seller's
knowledge, are there any facts or conditions which if continued, or on
notice, will result in, a default under any of the Plans. Seller has not
engaged in any prohibited transaction with respect to any Plan.
(c) As to any Plan, except as set forth Section 3.11 of the
Disclosure Schedule, all of the following are true: (i) all amounts due
as contributions, insurance premiums and benefits to the date hereof have
been fully funded and paid by Seller; (ii) all applicable requirements of
law have been observed with respect to the operation thereof and all
material reporting and disclosure requirements have been timely
satisfied; and (iii) there are no claims pending, and Seller has received
no written notice of claims by, and to Seller's knowledge there are no
claims threatened by, any taxing authority for taxes or penalties, which
have not been satisfied in full except those pending payment or
satisfaction in the ordinary course of business. With respect to all of
the Plans, Seller has made available to Buyer complete copies of each
Plan, each Plan's summary plan description and all other material
employee communications, the most recent valuation reports prepared by
the enrolled actuary for each Plan, the most recent annual reports for
each Plan as filed with the IRS, and the most recent reviewed financial
statements of the Plan. No liability under Title IV or section 302 of
ERISA has been incurred by Seller or any ERISA Affiliate that has not
been satisfied in full, and no condition exists that presents a material
risk to Seller or any ERISA Affiliate of incurring any such liability,
other than liability for premiums due the Pension Benefit Guaranty
Corporation ("PBGC") (which premiums have been paid when due). Insofar as
the representation made in this section 3.11(c) applies to sections 4064,
4069 or 4204 of Title IV of ERISA, it is made with respect to any
employee benefit plan, program, agreement or arrangement subject to Title
IV of ERISA to which Seller or any ERISA Affiliate made, or was required
to make, contributions during the five (5)-year period ending on the last
day of the most recent plan year ended prior to the Closing Date.
(d) No amounts payable under any Plan will fail to be
deductible for federal income tax purposes by virtue of section 280G of
the Code.
(e) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event,
(i) entitle any current or former employee or officer of Seller or any
ERISA Affiliate to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
Section 3.12 Certain Fees. Except for The Mid-Atlantic
Companies, Ltd., whose fees shall be the sole responsibility of Seller,
none of Seller or any of its affiliates has employed any financial
advisor or finder or incurred any liability for any financial advisory or
finders' fees in connection with this Agreement or the transactions
contemplated hereby.
Section 3.13 Environmental Protection.
Except as set forth in Section 3.13 of the
Disclosure Schedule,
(a) Seller or its affiliates have obtained, with respect to
the Business and the real property leased by Seller, all material
permits, licenses, and other authorizations which are required under
federal, state and local statutes, ordinances, and other laws relating to
pollution or protection of the environment ("Environmental Permits"),
including laws and regulations relating to emissions, discharges,
releases, threatened releases, investigations or remediation of
pollutants, contaminants, chemicals, or industrial, hazardous, or toxic
materials or waste into the environment (including, without limitation,
ambient air, surface water, ground water, land surface, sediments,
building materials or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or
industrial, hazardous, or toxic materials or wastes, or any regulation,
rule, code, plan, judicial order, decree, judgment, injunction, or notice
issued, entered, promulgated, or approved thereunder ("Environmental
Laws"). All such Environmental Permits are now in full force and effect.
Seller has timely filed for all necessary renewals of Environmental
Permits, so as not to jeopardize the renewal thereof. A list of all
material Environmental Permits is set forth in Section 3.13 of the
Disclosure Schedule. Except as set forth in Section 3.13 of the
Disclosure Schedule, Seller, with respect to the Business and the real
property subject to the Leasehold Interests, is in substantial compliance
with all terms and conditions of such Environmental Permits and is also
in substantial compliance, with respect to the Business and the real
property leased by Seller, with all other requirements of Environmental
Laws.
(b) To the knowledge of Seller, there is no pending civil,
administrative or criminal investigation, litigation, material notice of
violation, or administrative proceeding relating, with respect to the
Business or the real property leased by Seller, in any way to
Environmental Laws.
(c) To the knowledge of Seller, with respect to the Business
or the real property subject to the Leasehold Interests, there have not
been and there are not any events, conditions, circumstances, activities,
practices, incidents or actions on-site or off-site which may reasonably
be expected to interfere with or prevent continued substantial compliance
with Environmental Laws after the Closing Date, require investigation or
remediation pursuant to any Environmental Law or otherwise form the basis
of any claim, action or suit under Environmental Law based on or related
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge, release, or
threatened release into the environment, of any pollutant, contaminant,
chemical, industrial, hazardous, or toxic material or waste, including,
without limitation, any liability arising, or any claim, action, demand,
suit, proceeding, hearing, study, or investigation which may be brought,
under RCRA, Superfund, or similar state or local laws (an "Environmental
Condition").
(d) To the knowledge of Seller, there are no polychlorinated
biphenyls or asbestos-containing materials present at any real property
subject to the Leasehold Interests.
Section 3.14 Absence of Undisclosed Liabilities. Other than
as set forth in Section 3.14 of the Disclosure Schedules, there are no
material liabilities or obligations of Seller, accrued, contingent or
otherwise, other than (i) the Excluded Liabilities (as defined in Section
7.2 hereof), (ii) the liabilities or obligations reflected in the Seller
Financial Statements and the notes thereto, and (iii) liabilities
incurred in the ordinary course of business subsequent to the date
thereof.
Section 3.15 License, Permits, Etc. Set forth in Section
3.15 of the Disclosure Schedule is a list of all material licenses and
permits relating to Seller's operation of the Business. Such licenses and
permits are in full force and effect and constitute all material permits,
licenses, approvals and other governmental authorizations which are
necessary to the lawful operation of the Business as presently conducted.
Seller has materially complied with the terms, conditions and
requirements of all such licenses and permits and agrees to extend or
renew expiring licenses and permits as required prior to the Closing.
Seller is not in default under any material license or permit to which
Seller is a party or by which it is bound relating to Seller's operation
of the Business.
Section 3.16 Labor Matters. No employee, union or other
representative of employees has asserted any material claim or grievance
against Seller under any agreement, statute, regulation or order of any
governmental entity. Seller is not a party to any collective bargaining
agreements. There are no representation elections, arbitration
proceedings, labor strikes, stoppages or material grievances pending, or,
to the knowledge of Seller, threatened, with respect to the employees of
Seller.
Section 3.17 Employees and Independent Contractors. Section
3.17 of the Disclosure Schedule sets forth a list of all employees and
independent contractors of Seller, the date of hire of each and the
present wage rate of each.
Section 3.18 Related Party Transactions. Except as set forth
in Section 3.18 of the Disclosure Schedule, no officer, director or
stockholder of Seller or member of his or her immediate family
(collectively, the "Related Parties") has any direct or indirect
ownership interest in any firm or corporation with which the Business is
affiliated or with which Seller has a business relationship, or any firm
or corporation that competes with Seller, except that such Related
Parties may own stock in publicly traded companies that may compete with
Seller. No Related Party is directly or indirectly interested in any
material contract or agreement with Seller other than employment
contracts which have been disclosed or made available to Buyer.
Section 3.19 Customers and Suppliers. Section 3.19(a) of the
Disclosure Schedule sets forth a complete and correct list of (i) the
names of the ten largest customers (by revenues generated) of the
Business and the approximate amount of revenues generated by each such
customer in the year ended December 31, 1997 and (ii) the names of
suppliers to whom Seller paid more than $50,000 in the year ended
December 31, 1997 and the approximate total purchases by the Business
from each such supplier during such year. Except as and to the extent set
forth on Section 3.19(b) of the Disclosure Schedule, there have been no
material adverse changes in the relationships between Seller and its
customers and suppliers since December 31, 1997. Seller has not been
provided with any notice that any material supplier, manufacturer or
customer intends to cease doing business with the Business or Seller. To
the knowledge of Seller, there are no facts or circumstances that could
reasonably be expected to have an adverse affect on Seller's
relationships with its customers and suppliers.
Section 3.20 Taxes. (a) Except as set forth as Section 3.20
of the Disclosure Schedule:
(i) Giving effect to all extensions obtained, Seller has (x)
duly and timely filed, within the time and in the manner prescribed by
law, (or there has been filed on its behalf) with the appropriate
governmental authorities all Tax Returns (as hereafter defined) required
to be filed by it, and all such Tax Returns are true, correct and
complete in all material respects and (y) timely paid all Taxes(as
hereafter defined), within the time and in the manner prescribed by law,
shown thereon as due or for which notification of a claim has been
received by Seller from any taxing authority;
(ii) Seller has complied in all respects with all applicable
laws, rules and regulations relating to the payment and withholding of
Taxes (including, without limitation, withholding of taxes pursuant to
Sections 1441 and 1442 of the Code, or similar provisions under any
foreign laws) and have, within the time and manner prescribed by law,
withheld and paid over to the proper governmental authorities all amounts
required to be withheld and paid over under all applicable laws;
(iii) There are no Liens for Taxes upon the assets or
properties of Seller except for statutory Liens for current Taxes not yet
due as are reserved for and properly reported on the Seller Financial
Statements;
(iv) Seller has not requested any extension of time within
which to file any Tax Return that has not since been filed and no
outstanding waivers or comparable consents regarding the application of
the statute of limitations with respect to any Taxes or Tax Returns has
been given by or on behalf of Seller;
(v) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings ("Audits") exist or have
been initiated with regard to any Taxes or Tax Returns of Seller, and
Seller has not received any notice that such an Audit is pending or
threatened with respect to any Taxes due from or with respect to Seller
or any Tax Return filed by or with respect to Seller;
(vi) Seller has not requested a ruling or received an
adverse ruling from any taxing authority or signed a closing or similar
agreement with any taxing authority which could have an adverse effect on
Seller;
(vii) The Tax Returns of Seller have not been examined by
any governmental authority;
(viii) All Tax deficiencies which have been claimed,
proposed or asserted against Seller have been fully paid or finally
settled, and no issue has been raised in any examination by any taxing
authority which, by application of similar principles, could be expected
to result in the proposal or assertion of a Tax deficiency for any other
year not so examined;
(ix) [Reserved];
(x) Seller is not a party to, is not bound by, and has no
obligation under, any Tax sharing agreement, Tax indemnification
agreement or similar contract or arrangement. Seller is not aware of any
potential liability or obligation to any person as a result of, or
pursuant to, any such agreement, contract or arrangement;
(xi) [Reserved];
(xii) No amounts paid by Seller to any Plan would fail to be
deductible under Section 404 of the Code;
(xiii) [Reserved];
(xiv) [Reserved];
(xv) Seller is not and has never been a member of an
affiliated group (or similar state or local filing group);
(xvi) Seller is not and has never been a United States real
property holding company as defined in Section 897(c)(2) of the Code;
(xvii) Seller has not knowingly taken any position on any
Tax Return that could give rise to an understatement of federal income
tax liability within the meaning of Section 6662(d) of the Code or
otherwise result in the imposition of a similar liability or the
assessment of penalties or interest related to such Tax Return;
(xviii) Seller has not participated in, or cooperated with,
an international boycott within the meaning of Section 999 of the Code;
(xix) [Reserved];
(xx) Except as set forth in Section 3.20 of the Disclosure
Schedule, no property of Seller is property that is required to be
treated as owned by another person pursuant to the provisions of Section
168(f)(8) of the Code prior to its amendment by the Tax Reform Act of
1986 or is "tax-exempt use property" within the meaning of Section 168(h)
of the Code;
(xxi) None of the Assets directly or indirectly secures any
debt the interest on which is tax exempt under Section 103(a) of the Code;
and
(xxii) Seller is, and for all times since its incorporation
has been, a properly organized and operating Subchapter S corporation for
which an election with regard to such status has been properly in effect
in accordance with the provisions of Section 1362 of the Code.
(b) [Reserved]
(c) Seller has previously delivered or made available to
Buyer complete and accurate copies of (i) all audit reports, letter
rulings, technical advice memoranda and similar documents issued by a
governmental authority relating to the United States federal, state,
local or foreign Taxes due from or with respect to Seller, (ii) the
United States federal, and any state, local and foreign income Tax
Returns filed by Seller and (iii) any closing agreements entered into by
Seller with any taxing authority in each case existing on the date
hereof.
(d) For purposes of this Agreement, (i) "Taxes" (including,
with correlative meaning, the term "Tax") shall mean all taxes, charges,
fees, levies, penalties or other assessments of any kind whatsoever
imposed by any federal, state, local or foreign taxing authority,
including, but not limited to, income, gross receipts, excise, property,
sales, transfer, franchise, payroll, withholding, social security or
other taxes, including any interest, penalties or additions attributable
thereto and (ii) "Tax Return" shall mean any return, report, information
return or other document (including any related or supporting
information) required to be filed with a governmental taxing authority
with respect to Taxes.
Section 3.21 Receivables. All of the receivables reflected
in the Seller Financial Statements are bona fide accounts receivable
incurred in the ordinary course of the Business and to the knowledge of
Seller none of such account receivables are subject to set-offs,
counterclaims, or disputes existing or asserted with respect thereto or
subject to any Lien.
Section 3.22 Disclosure. No representation or warranty of
Seller in this Agreement, and no statement by Seller in any other
document delivered to Buyer or its representatives or agents or referred
to herein (including the Disclosure Schedule), contains any untrue
statement of a material fact or omits to state any material fact
necessary, in order to make the statements made herein or therein, in
light of the circumstances under which they were made, not misleading.
Section 3.23 Insurance. Section 3.23(a) of the Disclosure
Schedule sets forth a complete and correct list as of the Closing Date of
all primary, excess and umbrella policies, bonds and other forms of
insurance, and renewals thereof, owned or held by or on behalf of Seller,
copies of which have previously been made available to Buyer. All of such
insurance policies are in full force and effect, all premiums currently
payable or previously due have been paid, no notice of cancellation or
termination has been received with respect to any such policy and no
assignment of proceeds or Liens exist with respect to the proceeds of any
such policy. Except as and to the extent set forth on Section 3.23(b) of
the Disclosure Schedule, there are no pending claims against such
policies.
Section 3.24 Bank Accounts. Section 3.24 of the Disclosure
Schedule sets forth a complete and correct list of (i) the names and
locations of all financial institutions at which the Seller maintains a
checking account, deposit account, securities account, safety deposit box
or other deposit or safekeeping arrangement, (ii) the number or other
identification of all such accounts and arrangements and (iii) the names
of all persons authorized to draw thereon or have access thereto.
Section 3.25 Warranties. Section 3.25 of the Disclosure
Schedule sets forth a complete and correct list of all material express
written warranties with respect to any products or services (including,
without limitation, Year 2000 software and computer system compliance,
renovation, testing and related services) created, sold, distributed,
rendered or licensed by Seller, including warranties in customer
contracts; all agreements to provide Year 2000 services containing such
warranties, to Seller's knowledge, are specifically identified on Section
3.25 of the Disclosure Schedule. Except as and to the extent set forth on
Section 3.25 of the Disclosure Schedule, there are no material express or
implied warranties outstanding with respect to any products or services
created, sold, distributed, rendered or licensed by Seller (other than
those imposed by applicable law).
Section 3.26 Proprietary Information of Third Parties. To
Seller's knowledge, no third party has claimed that any person employed
by or under the control of Seller, including, without limitation,
Seller's independent contractors, has (i) violated or may be violating
any of the material terms or conditions of his employment, independent
contractor, non-competition or non-disclosure agreement with such third
party, (ii) disclosed or may be disclosing or utilized or may be
improperly utilizing any trade secret or proprietary information or
documentation of such third party or (iii) interfered or may be
interfering in the employment relationship between such third party and
any of its present or former employees and to Seller's knowledge, no
third party has requested information from Seller which suggests that
such a claim might be contemplated. To Seller's knowledge, other than any
of the Assigned Agreements which may require consent to assignment by the
other party or parties thereto, none of the execution or delivery of this
Agreement, or the carrying on of the Business by any officer, director,
independent contractor, or employee of Seller, or the conduct of the
Business, will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such person is obligated. To
Seller's knowledge, no person employed by or under the control of Seller
has, in connection with such person's performance of any employment or
other services rendered to Seller, employed any material trade secret or
any information or documentation proprietary to any former employer, and
to Seller's knowledge, no person employed by or under the control of
Seller has, in connection with such person's performance of any
employment or other services rendered to Seller, violated any material
confidentiality obligation which such person may have owed to any third
party.
Section 3.27 Operation of the Business Between December 31,
1997 and the Closing Date. Except as set forth on Sections 3.5 and/or
3.27 of the Disclosure Schedule, during the period from December 31, 1997
to the Closing Date, except as otherwise contemplated by this Agreement
or consented to in writing by Buyer:
(a) Seller has conducted the Business and its
operations only in the ordinary course consistent with past practice and
Seller has used its best efforts to preserve the organization of Seller
and the Business, the services of the present officers, employees,
independent contractors and agents thereof and to continue business
relationships with suppliers, customers and clients of Seller and to
properly maintain the leased real property Assets; and
(b) Seller has not, except in the ordinary course of
business consistent with past practice (i) sold or disposed of any of the
material properties of Seller; (ii) terminated or materially amended any
material contracts, leases or licenses of Seller; (iii) entered into any
new material agreement (iv) entered into any employment agreement with
any employee or independent contractor agreement with any independent
contractor or made any material change in the terms of employment of any
employee or independent contractor or increased in any manner the
compensation of any of the officers or other employees or independent
contractors of Seller, except for such increases which were granted in
the ordinary course of business in accordance with its customary
practices (which shall include normal periodic performance reviews and
related compensation and benefit increases); (v) adopted, granted,
extended or increased the rate or terms of any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made to, for or
with any such officers or employees of Seller, except increases required
by any applicable law, rule or regulation; (vi) made any change in any of
the present accounting methods and practices of Seller, except as
approved by Buyer; or (vii) entered into or assumed any mortgage, pledge,
conditional sale or other title retention agreement, or permitted any
material lien, encumbrance or charge to be placed upon any of the Assets
(other than liens, encumbrances or charges arising by operation of law).
(c) Seller has used its commercially reasonable
efforts to keep and maintain all improvements to the real property
subject to the Leasehold Interests, machinery and equipment used in the
Business in good repair and working order (ordinary wear and tear
excepted) in accordance with the past practices of Seller and Seller has
duly observed and conformed to all material terms and conditions of the
Real Property Leases.
(d) Seller has maintained in full force and effect in
all material respects all insurance coverage in effect as of December 31,
1997.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
Section 4.1 Organization and Authority of Buyer.
(a) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Buyer has the corporate power and corporate authority to execute and
deliver this Agreement and consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Buyer and no other corporate
proceeding on the part of Buyer is necessary to authorize the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
(b) This Agreement has been duly executed and
delivered by Buyer and constitutes, and, when executed and delivered,
each of the other agreements, documents and instruments to be executed
and delivered by Buyer pursuant hereto will constitute, a valid and
binding agreement of Buyer, enforceable against Buyer in accordance with
its terms, except that (i) such enforcement may be subject to any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other laws, now or hereafter in effect, relating to or limiting
creditors' rights generally, and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.2 Consents and Approvals; No Violations. Neither
the execution, delivery or performance of this Agreement nor the
consummation by Buyer of the transactions contemplated hereby will (a)
conflict with or result in any breach or violation of any provision of
the certificate of incorporation or by-laws of Buyer; (b) require any
filing or registration with, or notice or declaration to, or the
obtaining of any permit, license, authorization, consent or approval of,
any governmental or regulatory authority; (c) violate, conflict with or
result in a default (or any event which, with notice or lapse of time or
both, would constitute a default) under, or result in any termination,
cancellation or acceleration, or give rise to any such right of
termination, cancellation or acceleration under, any of the terms,
conditions or provisions of any note, mortgage, other evidence of
indebtedness or guarantee to which Buyer is a party or by which Buyer or
any of its assets is subject or by which it may be bound; (d) violate any
order, injunction, decree, statute, rule or regulation applicable to
Buyer, (e) result in the creation or imposition of any Lien upon any
properties, assets or business of Buyer, or (f) violate any existing
third party Security Interest, excluding from the foregoing clauses (b),
(c), (d), (e) and (f) such requirements, conflicts, defaults, rights,
Liens, or violations which would not materially adversely affect the
ability of Buyer to consummate the transactions contemplated by this
Agreement or which become applicable as a result of any acts or omissions
by, or the status of or any facts pertaining to, Seller.
Section 4.3 Assigned Agreements. Buyer acknowledges
receipt of copies of all of the Assigned Agreements.
Section 4.4 Availability of Funds. Buyer currently has
sufficient funds and will have at the Closing sufficient immediately
available funds, in cash, to pay the Purchase Price, to provide the
Business with sufficient working capital and to pay any other amounts
payable pursuant to this Agreement and to effect the transactions
contemplated hereby.
Section 4.5 Certain Fees. Neither Buyer nor any of its
affiliates has employed any financial advisor or finder or incurred any
liability for any financial advisory or finders' fees in connection with
this Agreement or the transactions contemplated hereby.
ARTICLE V
POST-CLOSING COVENANTS
Section 5.1 Consents; Assignment of Certain Contracts. (a)
From and after the Closing, each of Seller and Buyer shall cooperate, and
use their commercially reasonable efforts, to make all filings and obtain
all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and other third
parties necessary to consummate the transactions contemplated by this
Agreement. In addition to the foregoing, Buyer agrees to provide such
assurances as to financial capability, resources and creditworthiness as
may be reasonably requested by any third party whose consent or approval
is sought hereunder. Notwithstanding the foregoing, nothing herein shall
obligate or be construed to obligate Seller or Buyer to make any payment
to any third party in order to obtain the consent or approval of such
third party. Seller and the Seller Shareholders shall be reimbursed by
Buyer for any reasonable costs associated with Seller's and the Seller
Shareholder's compliance with this Section 5.1(a).
(b) From and after the Closing, Seller and Buyer shall
promptly file any additional information requested as soon as practicable
after receipt of any request for additional information. The parties
hereto will coordinate and cooperate with one another in exchanging such
information and providing such reasonable assistance as may be requested
in connection with such filings.
(c) Anything in this Agreement or any document
contemplated hereby or executed in furtherance hereof notwithstanding,
neither this Agreement nor any such document shall constitute an
agreement to assign any right, title or interest in, to or under any
contract, license, lease, commitment, sales order, purchase order, task
order or other agreement or any claim or right to any benefit arising
thereunder or resulting therefrom if an attempted assignment thereof,
without the consent of a third party thereto, would constitute a breach
thereof or in any way adversely affect the rights of Seller or Buyer
thereunder. Promptly after the Closing, Seller and the Seller
Shareholders shall use their best efforts to obtain, and Buyer agrees to
cooperate with Seller and the Seller Shareholders in their efforts to
obtain, any required consent of any third party to the assignment or
transfer of any of the foregoing to Buyer in all cases in which consent
is required for assignment or transfer. If such consent is not obtained,
Seller, the Seller Shareholders and Buyer shall cooperate in any
reasonable arrangements designed to provide to Buyer the benefits
thereunder, including, without limitation, enforcement for the benefit of
Buyer of any and all rights of Seller against such third party arising
out of the cancellation or termination by such third party or otherwise,
in each case, at Buyer's sole cost and expense.
Section 5.2 Public Announcements. It is contemplated that
immediately following the execution hereof, Buyer and Seller will issue a
press release (the "Press Release") disclosing such action, the language
of which shall be mutually agreed by Buyer and Seller. Thereafter, except
as otherwise agreed to by the parties, no party shall issue any report,
statement or press release or otherwise make any public statements with
respect to this Agreement and the transactions contemplated hereby,
except as in the reasonable judgment of such party may be required by
law, in which case Seller and Buyer will consult with each other with
respect to the issuance of a report, statement or press release as to the
language of any such report, statement or press release.
Section 5.3 Covenant to Purchase Shares. Subject to
applicable law, each of Xxxxxx X. Xxxxx, Xxxxx X. Xxxxxxxx and Xxxxxxx X.
Xxx (i) shall purchase an aggregate of $300,000 worth of shares of Buyer
common stock (the "Purchased Shares") on the NASDAQ National Market at
such Purchased Shares' then current market value within one hundred and
twenty(120) days after the Closing Date, and (ii) agree not to sell,
dispose of, hypothecate or otherwise terminate "beneficial ownership" (as
such term is defined under the rules and regulations promulgated under
the Securities Exchange Act of 1934, as amended) of their respective
Purchased Shares before the first anniversary of the purchase of the
Purchased Shares.
Section 5.4 Employees; Employee Benefits.
(a) (i) On the Closing Date, each person who is an
employee or independent contractor of Seller immediately prior to the
Closing (the "Affected Employees and Independent Contractors") shall
cease to be an employee or independent contractor of Seller, and (ii) for
at least a one-month period following the Closing Date, Buyer shall cause
the Business to continue to employ each such Affected Employee and
Independent Contractor in a position substantially similar to that held
with Seller as of the Closing Date and at the same location, with
salaries or wages substantially equivalent to those provided as of such
date, except for employees or independent contractors who (x) shall be
terminated "for cause," (y) voluntarily terminate their employment, or
(z) prior to the Closing were employed for a contractually specified time
period and are terminated upon expiration of that time period. Following
the Closing Date, Buyer shall, or shall cause the Business to, provide
each Affected Employee and Independent Contractor with benefits that are
substantially comparable in the aggregate to the benefits provided, in
Buyer's sole discretion, to (x) similarly situated employees and
independent contractors of Buyer, or (y) each such Affected Employee or
Independent Contractor immediately prior to the Closing Date. Except as
provided in Section 5.4(b), Buyer, in providing such substantially
comparable benefits, shall not be required to provide or maintain any
particular plan or benefit which was provided to or maintained for
Affected Employees and Independent Contractors prior to the Closing Date.
Buyer shall give full credit for all service with Seller or any ERISA
Affiliate to the extent that service was recognized under the applicable
Plan of Seller or any ERISA Affiliate, to each Affected Employee or
Independent Contractor for purposes of eligibility to participate in,
vesting or payment of benefits under any employee benefit plan
(including, but not limited to, any "employee benefit plan" as defined in
Section 3(3) of ERISA) maintained by Buyer or its subsidiaries
(including, without limitation, any vacation pay plan or policy) on or
after the Closing Date but not for purposes of benefit accrual. Prior to
the Closing, Seller will furnish Buyer with a list of the length of
service with Seller or its Affiliates for each of the Affected Employees
and Independent Contractors. For purposes of computing deductible amounts
(or like adjustments or limitations on coverage) under any employee
welfare benefit plan (including, without limitation, any "employee
welfare benefit plan" as defined in Section 3(1) of ERISA), expenses and
claims previously recognized for similar purposes under the applicable
welfare benefit plan of Seller or any Affiliate for the current plan year
shall be credited or recognized under the comparable plan maintained
after the Closing Date by Buyer or its subsidiaries for the plan year
ending in 1998.
(b) After the Closing Date, Buyer shall be responsible
for, and shall indemnify and hold harmless Seller and its Affiliates and
their respective officers, directors, employees, affiliates and agents
and the fiduciaries (including plan administrators) of the Plans, from
and against, any and all claims, losses, damages, costs and expenses
(including, without limitation, attorneys' fees and expenses) and other
liabilities and obligations relating to or arising out of (i) all
salaries, commissions and vacation entitlements accrued but unpaid as of
the Closing Date and post-Closing bonuses due to any Affected Employee or
Independent Contractor, (ii) the liabilities assumed by Buyer under this
Section 5.4 or any failure by Buyer to comply with the provisions of this
Section 5.4, (iii) any claims of, or damages or penalties sought by, any
Affected Employee or Independent Contractor, or any governmental entity
on behalf of or concerning any Affected Employee or Independent
Contractor, with respect to any act or failure to act by Buyer to the
extent arising as a result of the consummation of the transactions
contemplated hereby or from the employment, discharge, layoff or
termination of any Affected Employee or Independent Contractor who
becomes an employee of Buyer after the Closing Date, and (iv) all Plan
obligations and employment relationships in existence on or after the
Closing Date which are assumed by Buyer.
(c) Notwithstanding anything contained in this Section
5.4 to the contrary, Seller and its Affiliates shall remain responsible
for, and shall indemnify and hold harmless Buyer and its respective
officers, directors, employees, affiliates and agents from and against
any and all claims, losses, damages, costs and expenses (including,
without limitation, attorneys' fees and expenses) and other liabilities
relating to or arising out of (i) any plans or obligations thereunder not
assumed by Buyer pursuant to this Section 5.4, (ii) coverage of any and
all claims for medical, dental or other coverage of Affected Employees or
Independent Contractors and their dependents occurring on or prior to the
Closing Date and continuing on or after the Closing Date so long as such
continuing claim relates to an occurrence prior to the Closing Date
within the meaning of the applicable welfare plan of Seller as in effect
on the date of this Agreement, (iii) any disability, workers'
compensation claims or welfare claims (medical, dental, life and
disability insurance claims) for disabled Affected Employees and
Independent Contractors and their dependents, and/or for disabled
dependents of Affected Employees and Independent Contractors, occurring
on or prior to the Closing Date which continue thereafter, and (iv)
coverage under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, which commenced on or prior to the Closing Date for the
remainder of any required period under such law, except for such coverage
the basis for which arises as a result of the consummation of the
transactions contemplated hereby.
Section 5.4 [Reserved]
Section 5.5 Covenant Not to Compete.
(a) In furtherance of the sale to Buyer of the Assets
and the Business, Seller shall not, and shall cause its subsidiaries and
affiliates not to, and each of the Seller Shareholders shall not,
directly or indirectly, through equity ownership or otherwise:
(i) compete with Buyer in any geographic
location (i.e. within 150 miles of any Buyer location) and in any
business in which Buyer, Seller or the Business competes,
including, without limitation, the (x) information technology
solutions and projects business, (y) contract computer software
programming, outsourcing and servicing business, and (z)
information technology staff augmentation business, for a period of
one (1) year following (A) the termination for Cause (as defined in
Section 2(c) of the respective Seller Shareholder's Employment
Agreement) by Buyer or its successor of such Seller Shareholder's
employment with Buyer or its successor, (B) the willful termination
by such Seller Shareholder of the Seller Shareholder's employment
with Buyer or its successor as set forth in Section 2(b) of the
Seller Shareholder's Employment Agreement, or (C) the termination
without Cause (as set forth in Section 2(a) of the Seller
Shareholder's Employment Agreement) by Buyer or its successor of
such Seller Shareholder's employment with Buyer or its successor
upon the payment to the terminated Seller Shareholder of an amount
equal to the prior six months salary of such Seller Shareholder;
provided, that nothing herein shall be construed to prevent any
Seller Shareholder from owning, as an investment, up to 1% of a
class of equity securities issued by any competitor of Buyer that
is publicly traded;
(ii) for a period of one (1) year following (A) the
termination for Cause (as defined in Section 2(c) of the respective
Seller Shareholder's Employment Agreement) by Buyer or its
successor of such Seller Shareholder's employment with Buyer or its
successor, (B) the willful termination by such Seller Shareholder
of the Seller Shareholder's employment with Buyer or its successor
as set forth in Section 2(b) of the Seller Shareholder's Employment
Agreement, or (C) the termination without Cause (as set forth in
Section 2(a) of the Seller Shareholder's Employment Agreement) by
Buyer or its successor of such Seller Shareholder's employment with
Buyer or its successor upon the payment to the terminated Seller
Shareholder of an amount equal to the prior six months salary of
such Seller Shareholder, communicate with or contact any customers
of the Business or Buyer for the purpose of soliciting such
customers to purchase any goods, products or services of the type
being rendered, offered or sold by the Business or Buyer; nor
(iii) use or disclose to others any trade
secrets or other confidential information, including the names,
addresses and any other information relating to the aforesaid
customers, and confirm that such information shall constitute
exclusive property of Buyer and agrees that any such property shall
not be used by Seller or disclosed to other persons or business
enterprises for any reason or purpose.
(b) The parties intend that the covenant contained in
the preceding Section 5.5(a) shall be construed as a series of separate
covenants, one for each area of business and country, county and city
included within each state and, except for geographic coverage, each such
separate covenant shall be deemed identical. The parties agree that the
covenants included in this Section 5.5 are, taken as a whole, reasonable
in their business scope, geographic scope and duration and no party shall
raise any issue of the reasonableness of the scope or duration of the
covenants in any proceeding to enforce any such covenants. If, in any
judicial proceeding, a court shall refuse to enforce any of the separate
covenants deemed included in this Section 5.5, then the unenforceable
covenant shall be deemed eliminated from these provisions for the purpose
of those proceedings to the extent necessary to permit the remaining
separate covenants to be enforced.
Section 5.6 Trademark Registrations, Corporate Names. As of
the Closing Date, if any of the Intellectual Property to be transferred
to Buyer hereunder is in the process of registration or renewal, or is
entitled to be as of the Closing, but has not been, registered with the
U.S. Patent and Trademark Office, U.S. Copyright Office, or similar U.S.
or foreign patent, trademark or copyright authorities, Seller shall, at
the request of Buyer, reasonably assist Buyer in pursuing and securing
any and all such registrations in the name of Buyer. Such assistance by
Seller shall not include any requirement on Seller to engage in
litigation with, or make any payments to, third parties, including
(without limitation), governmental agencies and entities.
Section 5.7 Certain Customers. Buyer and Seller covenant and
agree to cooperate in contacting the customers of Seller set forth on
Schedule 3.19(a) hereto after the execution hereof (i) to inform such
customers of the transactions proposed hereby, and (ii) to encourage such
customers to remain customers of the Business after the Closing. The
parties further covenant and agree to promptly notify the other party
hereto of their receipt of any written or verbal notice from any such
customer of its intention not to continue to be a customer of the
Business after the Closing.
Section 5.8 [Reserved]
Section 5.9 Real Property Covenants.
(a) Leases. With regard to all Real Property Leases, Seller
agrees to use its best efforts to assign and transfer all of its right,
title and interest as tenant under all such Leases. Buyer shall bear the
cost of any fees related to such transfer; provided, that Seller and
Buyer shall each pay one-half of any transfer taxes applicable thereto.
Seller agrees to use its best efforts to obtain and deliver such consents
as are required under any Real Property Lease and, if Seller is entitled
to obtain an estoppel from the landlord(s) under the terms of the
applicable Lease and in a form as is required under such Lease, estoppels
from the landlord(s) thereof.
(b) Adjustment Items. Buyer and Seller covenant and agree
that the following items as related to the Business or the Assets shall
be adjusted between Buyer and Seller as of the Closing Date: occupancy
rents; security deposits and all interest due thereon; personal and
intangible property taxes; real estate taxes (except any such taxes
related to the transfer of the Leasehold Interests to Buyer); sewer rents
and charges; water rents and charges; front foot benefit charges (if
applicable); utilities and fuel oil; and all other operating and
maintenance charges with respect to each Leasehold Interest (the
"Adjustment Items"); provided, that to the extent that any Adjustment
Item is included in the calculation of Tangible Net Worth, such item
shall not be subject to this Section 5.9(b). Buyer and Seller covenant
and agree (i) to cooperate and use their respective best efforts to
promptly establish the net amount of such Adjustment Items and (ii) to
pay the net amount of such Adjustment Items to the appropriate party
hereto, as the case may be, promptly after the Closing, such payment to
be treated by the parties hereto as an adjustment to the Purchase Price
for federal, state, local and foreign tax purposes and with appropriate
adjustments to the tax basis of the Assets to be made in accordance with
Section 1060 of the Code and the Regulations thereunder. For purposes of
apportioning between Buyer and Seller liability for real estate, personal
and intangible property taxes for a tax year commencing prior to the
Closing Date and concluding subsequent thereto pursuant to this Section
5.9, such taxes shall be apportioned between Buyer and Seller on a per
diem basis with respect to such tax year in a manner consistent with
Section 10.2 hereof.
Section 5.10 Certain Tax Matters.
(a) Certain Definitions. As used in this Agreement:
(i) "Pre-Closing Period" means any taxable
period which ends on or before the Closing Date.
(ii) "Straddle Period" means any taxable period
that includes (but does not end on) the Closing Date.
(b) Except as otherwise provided by Section 5.9 hereof, the
Seller shall be responsible for the timely payment of, and shall hold
harmless Buyer against, all sales (including, without limitation, bulk
sales), use, transfer, recording, ad valorem and other similar Taxes and
fees ("Transfer Taxes"), arising out of or in connection with or
attributable to the transactions effected pursuant to this Agreement.
Seller shall further be solely responsible for any federal, state,
provincial, local or foreign income or gains tax assessed as the result
of the transactions contemplated hereby. The Seller shall prepare and
timely file all Tax Returns required to be filed in respect of Transfer
Taxes (including, without limitation, all notices required to be given
with respect to bulk sales taxes), except that Buyer shall be permitted
to prepare any such Tax Returns that are the primary responsibility of
Buyer under applicable law.
(c) Each of Buyer and Seller shall provide the other with
such assistance as may reasonably be requested by any of them in
connection with the preparation of any Tax Return, any audit or other
examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for Taxes, and each will retain and
provide the requesting party with any records or information which may be
relevant to such return, audit or examination, proceedings or
determination and the Seller shall specifically provide Buyer the
information necessary for Buyer to satisfy the requirements (if
applicable) of Section 41(f)(3)(A) of the Code. Any information obtained
pursuant to this Section 5.10(c) or pursuant to any other Section hereof
providing for the sharing of information or the review of any Tax Return
or other schedule relating to Taxes shall be kept strictly confidential
by the parties hereto.
(d) No new tax elections with respect to Taxes, or any
changes in current elections with respect to Taxes, affecting the
Business or any of the Assets thereof, shall be made after the date of
this Agreement without the prior written consent of the Buyer.
(e) The Seller shall retain all records not included within
the books and records related to Taxes or Tax Returns of the Business
until such time as the applicable statute of limitations with respect to
such Taxes or Tax Returns shall expire.
(f) Tax Indemnification.
(i) Notwithstanding anything in this Agreement to the
contrary, and except as provided by Section 5.9 or to the extent
reflected in the calculation of the Tangible Net Worth of the
Business as of the Closing Date, Seller and the Seller Shareholders
shall, jointly and severally, indemnify, defend and hold harmless
Buyer and its affiliates, at any time after the Closing, from and
against any liability for Taxes of the Seller or the Seller
Shareholders for all taxable periods or the Business for the
Pre-Closing Period or the portion of the Straddle Period prior to
and including the Closing Date (including, without limitation,
Transfer Taxes). The indemnity provided for in this Section shall
be independent of and in addition to any other indemnity provision
of this Agreement and shall not be subject to any monetary
limitations or time bars.
(ii) Notwithstanding anything in this Agreement to the
contrary, Buyer shall indemnify, defend and hold harmless Seller
and the Seller Shareholders, at any time after the Closing, from
and against any liability for Taxes related to the Business
(exclusive of Transfer Taxes) accruing subsequent to the Closing
Date.
(iii) If a claim for Taxes shall be made by any taxing
authority in writing, which, if successful, might result in an
indemnity payment pursuant to this Section 5.10, the party seeking
indemnification (the "Tax Indemnified Party") shall promptly notify
the other party (the "Tax Indemnifying Party") in writing of such
claim (a "Tax Claim") within a reasonably sufficient period of time
to allow the Tax Indemnifying Party effectively to contest such Tax
Claim, and in reasonable detail to apprise the Tax Indemnifying
Party of the nature of the Tax Claim, and provide copies of all
correspondence and documents received by it from the relevant
taxing authority. Failure to give prompt notice of a Tax Claim
hereunder shall not affect the Tax Indemnifying Party's obligation
under this Section except to the extent that the Tax Indemnifying
Party is prejudiced by such failure to give prompt notice.
(iv) With respect to any Tax Claim which might result in an
indemnity payment to Buyer pursuant to this Section 5.10(f), Seller
or the Seller Shareholders shall control all proceedings taken in
connection with such Tax Claim and, without limiting the foregoing,
may in their sole discretion and at their sole expense pursue or
forego any and all administrative appeals, proceedings, hearings
and conferences with any taxing authority with respect thereto, and
may, in their sole discretion, either pay the Tax claimed and xxx
for a refund where applicable law permits such refund suits or
contest such Tax Claim. Buyer shall not under any circumstances
settle or otherwise compromise any Tax Claim referred to in the
preceding sentence without Seller's and the Seller Shareholders'
prior written consent; provided, that, if Buyer does so settle or
otherwise compromise such a Tax Claim, Seller and the Seller
Shareholders shall not indemnify Buyer for any such Taxes. In
connection with any proceeding taken in connection with such Tax
Claim, (A) Seller and the Seller Shareholders shall keep Buyer
informed of all material developments and events relating to such
Tax Claim if involving a material liability for Taxes and (B) Buyer
shall have the right, at its sole expense, to participate in any
such proceedings; provided, that, the final decision with respect
to any settlement or compromise of any such Tax Claims shall be
that of Seller and the Seller Shareholders. Buyer shall cooperate
with Seller and the Seller Shareholders in contesting such Tax
Claim, which cooperation shall include, without limitation, the
retention and the provision to Seller and the Seller Shareholders
of records and information which are reasonably relevant to such
Tax Claim, and making employees available to Seller and the Seller
Shareholders to provide additional information or explanation of
any material provided hereunder or to testify at proceedings
relating to such Tax Claim. The Seller Shareholders shall reimburse
Buyer for reasonable out-of-pocket expenses incurred by Buyer in
providing such assistance to the Seller Shareholders.
(v) With respect to any Tax Claim not described in Section
5.10(f)(iv) hereof which might result in an indemnity payment to
Seller or the Seller Shareholders pursuant hereto, Buyer shall
control all proceedings in accordance with provisions that are
parallel to those in Section 5.10(f)(iv) hereof.
(d) Any Indemnification payment made pursuant to this
Section 5.10 shall be treated by the parties hereto as an adjustment to
the Purchase Price for federal, state, local and foreign tax purposes and
appropriate adjustments to the tax basis of the Assets in accordance with
Section 1060 of the Code and the Regulations shall be made.
Section 5.11 Allocation of Purchase Price/Tax Filings. Any
post-Closing adjustment to the Purchase Price shall be reflected in the
final allocation of the Purchase Price among the Assets in the manner
required on Internal Revenue Service ("IRS") Form 8594 in compliance with
Section 1060 of the Code and the Regulations thereunder. Buyer and Seller
agree to timely file all forms and tax returns required to be filed in
connection with such purchase price allocation and to take no position
inconsistent with such forms or tax returns. Buyer agrees to permit
Seller to have reasonable access to any records required in order for
Seller to prepare any tax returns or forms to be filed by Seller after
the Closing.
Section 5.12 Books and Records of Seller. Any books, records,
forms and returns of Seller which are not delivered to Buyer hereunder
will be preserved by Seller for a period of at least six (6) years
following the Closing and Seller will permit Buyer and its authorized
representatives to have reasonable access to, and examine and make copies
of, all such books, records, forms and returns as reasonably requested by
Buyer. All books, records, forms and returns delivered by Seller to Buyer
will be preserved by Buyer for a period of at least six (6) years
following the Closing and Buyer will permit Seller and its authorized
representatives to have reasonable access to, and examine and make copies
of, all such books, records, forms and returns as reasonably requested by
Seller.
Section 5.13 Assumed Liabilities. Buyer covenants and
agrees to pay any and all of the Assumed Liabilities, subject to
the provisions of Section 7.1 hereof.
Section 5.14 Liquidation of Advanced Computing Techniques,
Inc. The Seller Shareholders shall take all measures reasonable necessary
to liquidate and dissolve Seller within one year after the entire Escrow
Amount shall have been released pursuant to the terms to the Escrow
Agreement or the Escrow Agreement shall have otherwise been terminated.
ARTICLE VI
[RESERVED]
ARTICLE VII
ASSUMPTION OF CERTAIN LIABILITIES AND OBLIGATIONS
Section 7.1 Assumed Liabilities. Subject to Section 7.2 of
this Agreement, Buyer shall assume and be responsible on the Closing Date
for only the following liabilities and obligations of Seller (such
liabilities and obligations being hereinafter referred to collectively as
the "Assumed Liabilities"):
(a) all liabilities and obligations reflected
in the calculation of Tangible Net Worth as of the Closing Date; and
(b) all liabilities, obligations and duties to perform
any and all Assigned Agreements and all commitments of any kind entered
into by Seller on or prior to the Closing Date in the ordinary course of
business consistent with past practice which relate directly to the
Business or the Assets; provided, however, that such liabilities shall
not include any amount related to Taxes for such period except to the
extent included in the determination of the Tangible Net Worth of the
Business as of the Closing Date or as otherwise provided in Section 5.9
hereof.
At the Closing, Buyer will deliver to Seller the Undertaking,
substantially in the form of Exhibit H hereto, whereby Buyer will assume
and agree to pay and discharge the Assumed Liabilities.
Section 7.2 Non-Assumed Liabilities. (a) Except for the
Assumed Liabilities, Buyer does not assume or agree to pay, satisfy,
discharge or perform, and shall not be deemed by virtue of the execution
and delivery of this Agreement, or of any instrument, paper or document
delivered by it pursuant to this Agreement, or as a result of the
consummation of the transactions contemplated by this Agreement, to have
assumed or become a successor to, or to have agreed to pay, satisfy,
discharge or perform, any liability, obligation or indebtedness of Seller
(whether absolute, accrued, or contingent, whether filed or asserted
prior to or after the Closing Date) all of which, except for the Assumed
Liabilities, Seller agrees to pay, satisfy, discharge and perform (the
"Excluded Liabilities"). The Excluded Liabilities shall include, without
limitation, those liabilities, obligations and contingencies set forth on
Section 7.2 of the Disclosure Schedule.(1)
---------------
1 Excluded Liabilities shall include all accrued self insured health
claims occurring prior to the Closing Date; Xxxxxxx Xxx Deferred
Compensation Agreement and all Shareholder Agreements; any fees due to
The Mid-Atlantic Companies, Ltd., Xxxxxx, Xxxxx & Xxxxxx, P.C. or any
other representative or agent employed by Seller in connection with the
transactions contemplated hereby; any contribution accrued by Seller for
the benefit of the participants in Seller's profit sharing plan; any
common stock or other equity obligations arising under the Xxxxx III
employment agreement; other liabilities may be excluded upon further due
diligence and receipt of Disclosure Schedules.
(b) Other than with respect to any liabilities
reflected in the Tangible Net Worth, Buyer shall have the right to
resist, contest, defend against, litigate, compromise and/or otherwise
dispose of any and all Assumed Liabilities to such extent and in such
manner as Buyer, in its sole discretion, shall deem desirable, advisable
and for its best interests, and Buyer shall be deemed to have performed
its obligations under and pursuant to such instruments, papers and
documents notwithstanding such resistance, contest, defense against,
litigation, compromise or other disposition, so long as, and to the
extent that, neither Seller, its affiliates nor the Seller Shareholders
shall be required to pay, satisfy, discharge or perform any of the
Assumed Liabilities.
(c) Nothing in this Agreement, nor any instrument,
paper or document delivered pursuant hereto, is intended to be construed,
or shall be construed, as enlarging or extending in any manner, or to any
extent, the period of limitations prescribed by any statute of
limitations applicable to any of the Assumed Liabilities, or as enlarging
or extending to any extent, or in any manner whatsoever, the rights which
any owner, holder or obligee of any of the Assumed Liabilities has had,
now has, or hereafter can, shall or may have in respect thereto against
Seller, or as rendering valid, or enforceable, against Buyer any of the
Assumed Liabilities which, for any reason whatsoever, would not have been
valid and enforceable against Seller, its affiliates or the Seller
Shareholders, and that any of the Assumed Liabilities which would have
been valid or enforceable, against Seller, its affiliates or the Seller
Shareholders only partially, conditionally, contingently or to a limited
extent, or in a limited manner, shall be valid and enforceable against
Buyer to no greater extent, and in no different manner, than the Assumed
Liabilities would have been valid and enforceable against Seller, its
affiliates or the Seller Shareholders.
ARTICLE VIII
[RESERVED]
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 9.1 Survival of Representations, Warranties and
Agreements. The representations and warranties of Seller and Buyer made
in this Agreement shall survive the Closing until the first anniversary
of the Closing Date (the "Indemnity Period"); provided, that, if a claim
for indemnification is made during the Indemnity Period, the
representation or warranty that is the subject matter of such claim shall
survive until the settlement or satisfaction of such claim. The Indemnity
Period shall not apply to damages arising out of a breach of any covenant
contained in this Agreement or obligation arising pursuant to Sections
9.2(a)(ii), (a)(iii), (a)(iv), or (a)(v) or Sections 9.3 (a)(ii),
(a)(iii), (a)(iv), or (a)(v) hereof. This Section 9.1 shall not limit any
covenant or agreement of the parties which contemplates performance after
the Closing, including, without limitation, the covenants and agreements
set forth in Sections 5.4, 5.10 and 10.2 hereof.
Section 9.2 Seller's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth
herein, from and after the Closing, Seller, or if Seller shall be
wound-up and dissolved or shall otherwise cease to exist or shall
otherwise fail to satisfy its obligations hereunder, the Seller
Shareholders, shall indemnify and hold harmless Buyer and its successors
and assigns from and against all liability, demands, claims, actions or
causes of action, assessments, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' and accountant's
fees and expenses) (collectively "Buyer Damages") asserted against or
incurred by Buyer and its successors and assigns as a result of, relating
to or arising out of the following:
(i) a breach of any representation, warranty,
obligation, covenant or agreement contained in this Agreement;
(ii) any of the Excluded Assets or the Excluded
Liabilities or any other liability or obligation of Seller not
expressly assumed by Buyer under this Agreement regardless of
whether or not such events constitute a breach of a representation
or warranty hereunder;
(iii) any event, fact or condition relating to or
arising from the ownership, control, management or operation of the
Business or the Assets or otherwise arising or occurring prior to
the Closing Date, regardless of whether or not such events
constitute a breach of a representation or warranty hereunder;
(iv) any liability or obligation arising as a result of
the purchase by Xxxxxxx X. Xxx, one of the Seller Shareholders, of
the common stock of Buyer during the twelve (12) month period
ending on the Closing Date; provided, that, the indemnity
obligation created under this paragraph (iv) shall be solely that
of Xxxxxxx X. Xxx, and
(iv) any liability or obligation arising as a result of
any claims by Xxxxxxx X. Xxxx III with respect to the equity or
other securities of (A) Seller or (B) any separate business entity
that was to have been formed under certain circumstances as a
subsidiary or affiliate of Seller or the Seller Shareholders
pursuant to the Memorandum from Xxxxx X. Xxxxxxxx to Xxxxxxx X.
Xxxx III, dated March 11, 1997 or any other document with respect
to the subject matter thereof
provided, that in no case shall the provisions of this Section 9.2
relieve Buyer of its obligations to assume, discharge and pay the Assumed
Liabilities.
(b) In the event of any conflict or inconsistency between any
of the provisions this Article IX and any other Article or Section of
this Agreement, on the one hand and Section 5.10 on the other hand, the
provisions of Section 5.10 will control.
(c) The Seller Shareholders shall be jointly and
severally liable for all Buyer Damages.
Section 9.3 Buyer's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth
herein, from and after the Closing, Buyer shall indemnify and hold
harmless Seller and, if Seller shall be wound-up and dissolved or shall
otherwise cease to exist, the Seller Shareholders and their respective
successors and assigns, from and against all liability, demands, claims,
actions or causes of action, assessments, losses, damages, costs and
expenses (including, without limitation, reasonable attorneys' and
accountant's fees and expenses) (collectively "Seller Damages") asserted
against or incurred by Seller or the Seller Shareholders and their
respective successors and assigns, as the case may be, as a result of,
relating to or arising out of the following:
(i) a breach of any representation, warranty,
obligation, covenant or agreement contained in this Agreement;
(ii) any of the Assets or the Assumed
Liabilities or any other obligation of Seller expressly
assumed by Buyer under this Agreement;
(iii) any event, fact or condition relating to or
arising from the ownership, control, management or operation of the
Business or the Assets or otherwise arising or occurring subsequent
to the Closing Date, regardless of whether or not such events
constitute a breach of a representation or warranty hereunder;
(iv) any liability or obligation for any Taxes
attributable to the business, operations, property, payroll or
other matters attributable to or involving the Business or the
Assets for any taxable year or taxable period (or other portion
thereof) beginning on or after the Closing Date; and
(v) any liability, fine or penalty imposed upon Seller
or the Seller Shareholders for failure to comply with the
provisions of the Worker Adjustment and Retraining Act (29 U.S.C.
2101 et seq.); Connecticut General Statutes xx.xx. 31-51(n) and
(o); the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act; or for
compliance with the provisions of Section 5.3 hereof.
Section 9.4 Procedures for Indemnification. The obligations
and liabilities of the Seller with respect to any Buyer's Damages and the
obligations and liabilities of the Buyer with respect to any Seller's
Damages shall be subject to the following terms and conditions, with the
indemnified party designated as the "Indemnitee", the party with the
indemnification obligations designated as the "Indemnitor", and the
Buyer's Damages or Seller's Damages, as the case may be, designated as
the "Indemnified Claim" for the purposes of this Section 9.4:
(i) As soon as reasonably practicable after Indemnitee
receives written notice of any basis for an Indemnified Claim,
Indemnitee shall give the Indemnitor written notice of any such
Indemnified Claim, which notice shall state the facts giving rise
to an alleged basis for the Indemnified Claim and an approximation
of the amount of liability under such Indemnified Claim, to the
extent known to Indemnitee, and copies of any notice, summons,
complaint or other documentation thereof or with respect thereto
(the "Indemnification Notice").
(ii) In the event any action, suit or proceeding is brought
against the Indemnitee with respect to an Indemnified Claim, the
action, suit or proceeding shall, at the Indemnitor's written
election made within fifteen (15) days of the Indemnitor's receipt
of written notice of the commencement of such action, suit or
proceeding, be defended by the Indemnitor (including all
proceedings on appeal or review in connection therewith) at the
Indemnitor's expense and liability. Pending the Indemnitor's
election hereunder, Indemnitee shall have the right to employ its
own counsel to file a request for an extension of time to file an
answer, or to file an answer if the Indemnitor fails to have its
counsel file an answer within three (3) days prior to the
expiration of the period within which an answer must be filed, as
such period may be extended, without waiving any of Indemnitee's
rights under Article IX. The Indemnitee shall have the right to
employ its own counsel, for the duration of such action, suit or
proceeding, but the fees and expenses of such counsel shall be at
the expense of the Indemnitee unless the Indemnitor has not elected
within the required time period to defend any such action, suit or
proceeding, or unless the actions or inactions of counsel retained
by Indemnitor appear reasonably likely to result in a judgment
against Indemnitee because of a failure to defend the action in a
reasonably prudent manner (the burden to prove same by a
preponderance of the evidence to rest with Indemnitee), in which
event the Indemnitor shall pay such counsel fees and expenses. The
Indemnitee shall be kept fully informed of such action, suit or
proceeding at all stages, whether or not it is so represented.
(iii) If Indemnitor does not assume the defense of any
Indemnified Claim in accordance with the terms hereof, Indemnitee
may defend against such Indemnified Claim in such manner as it may
deem appropriate or may settle or pay such claim, after giving
notice of the same to Indemnitor, on such terms as Indemnitee may
deem appropriate. If Indemnitor does assume the defense of any
Indemnified Claim and, for whatever reason (including, without
limitation, Indemnitor's failure to pay any judgment, settlement or
attorney's fees with respect thereto) Indemnitor fails to resolve
or settle such matter, or if Indemnitee is permitted to retain its
own counsel with respect to any Indemnified Claim at Indemnitor's
expense, Indemnitee may pay such amounts which Indemnitee may deem
appropriate after giving notice of same to Indemnitor. In the event
of any such payments by Indemnitee pursuant to this Section 9.4,
Indemnitor shall reimburse Indemnitee for the amounts actually so
paid by Indemnitee within ten (10) days after Indemnitee's demand
therefor.
(iv) In the event the Indemnitor fails to pay to Indemnitee
any of the Indemnitor's obligations to Indemnitee pursuant to this
Section 9.4, when such payments are due, the amounts of such
payments shall accrue interest at the rate per annum equal to one
percent (1%) above the so-called variable Prime Rate per annum
announced from time to time by The Wall Street Journal (the "Prime
Rate") from the due date hereunder (i.e., with respect to amounts
actually paid by Indemnitee) through and including the date of such
payment by the Indemnitor. The Indemnitor shall be liable to
Indemnitee for all reasonable attorneys' fees and expenses incurred
by Indemnitee to enforce its rights and remedies under this Section
9.4.
Section 9.5 Indemnification Threshold. No Indemnitor shall have
any obligation to indemnify an Indemnitee unless the aggregate amount of
all Indemnified Claims incurred by such Indemnitee, or any affiliate thereof,
hereunder is at least Fifty Thousand Dollars ($50,000) in the aggregate
(the "Threshold Amount"). In such event, the Indemnitor shall be
obligated to indemnify the Indemnitee for all amounts in excess of the
Threshold Amount which are the subject of the Indemnified Claims. The
indemnification threshold set forth herein shall have no application for
any loss, expenses or damage incurred as a result of the breach by a
party to this Agreement of a covenant that requires an action to be taken
or an obligation (including a payment obligation) to be met after the
Closing.
Section 9.6 Indemnification Funds. Any Buyer Damages to be
indemnified hereunder shall be first satisfied by payment from the Escrow
Amount pursuant to the Escrow Agreement and, if the Escrow Amount is
insufficient to satisfy such Buyer Damages in full, by the Seller
Shareholders, who shall be jointly and severally liable for the entire
amount of such Buyer Damages.
Section 9.7 Settlement of Action. Anything in this Article
IX to the contrary notwithstanding, the indemnifying party shall not
enter into any settlement or compromise of any action, suit or proceeding
or consent to the entry of any judgment (i) which does not include as an
unconditional term thereof the delivery by the claimant or plaintiff to
the Indemnitee of a written release from all liability in respect of such
action, suit or proceeding or (ii) for other than monetary damages to be
borne by the indemnifying party without the prior written consent of the
Indemnitee, which consent shall not be unreasonably withheld.
ARTICLE X
MISCELLANEOUS
Section 10.1 [Reserved]
Section 10.2 Property Taxes. Liability for real, personal
and intangible property taxes imposed upon Buyer or Seller with respect
to the Assets for a tax year commencing prior to the Closing Date and
concluding subsequent to the Closing Date shall be apportioned between
Buyer and Seller on a per diem basis with respect to such tax year.
Section 10.3 Fees and Expenses. Whether or not the
transactions contemplated herein are consummated pursuant hereto, except
as otherwise provided herein, each of Seller, on the one hand, and Buyer,
on the other hand, shall pay all fees and expenses incurred by, or on
behalf of, such party in connection with, or in anticipation of, this
Agreement and the consummation of the transactions contemplated hereby.
Each of Seller, on the one hand, and Buyer, on the other hand, shall
indemnify and hold harmless the other party from and against any and all
claims or liabilities for financial advisory and finders' fees incurred
by reason of any action taken by such party or otherwise arising out of
the transactions contemplated by this Agreement by any person claiming to
have been engaged by such party.
Section 10.4 Further Assurances. From time to time after the
Closing Date, at the request of another party hereto and at the expense
of the party so requesting, each of the parties hereto shall execute and
deliver to such requesting party such documents and take such other
action as such requesting party may reasonably request in order to
consummate more effectively the transactions contemplated hereby.
Section 10.5 Notices. All notices, requests, demands,
waivers and other communications required or permitted to be given under
this Agreement shall be in writing and may be given by any of the
following methods: (a) personal delivery; (b) registered or certified
mail, postage prepaid, return receipt requested; or (c) overnight
delivery service. Notices shall be sent to the appropriate party at its
address given below (or at such other address for such party as shall be
specified by notice given hereunder):
If to the Buyer, to:
PRT Group Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx, Esq.
with a copy to:
Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
If to Seller, to:
Advanced Computing Techniques, Inc.
000 Xxxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
with a copy to:
Xxxxxx, Xxxxx & Xxxxxx, P.C.
000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxx, Esq.
All such notices, requests, demands, waivers and communications shall be
deemed received (i) if delivered personally, upon actual receipt thereof
by the addressee, (ii) if delivered by overnight delivery service, on the
day after actual delivery thereof to the delivery service, (iii) if
delivered by mail, upon receipt of the return receipt.
Section 10.6 Severability. Should any provision of this
Agreement for any reason be declared invalid or unenforceable, such
decision shall not affect the validity or enforceability of any of the
other provisions of this Agreement, which remaining provisions shall
remain in full force and effect and the application of such invalid or
unenforceable provision to persons or circumstances other than those as
to which it is held invalid or unenforceable shall be valid and enforced
to the fullest extent permitted by law.
Section 10.7 Binding Effect; Assignment. This Agreement and
all of the provisions hereof shall be binding upon and shall inure to the
benefit of the parties hereto and upon the Seller Shareholders, jointly
and severally, and their respective successors and permitted assigns.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned, directly or indirectly, including, without
limitation, by operation of law, by any party hereto without the prior
written consent of the other party hereto, except that Buyer shall have
the right to assign this Agreement (and the rights, interests and
obligations hereunder) to any subsidiary or affiliate of Buyer without
the prior written consent of Seller; provided, that the Buyer shall
continue to remain liable to Seller for any amounts or obligation owing
to Seller hereunder.
Section 10.8 No Third Party Beneficiaries. This Agreement is
solely for the benefit of Seller and the Seller Shareholders and their
respective successors and permitted assigns with respect to the
obligations of Buyer under this Agreement, and for the benefit of Buyer
and its respective successors and permitted assigns with respect to the
obligations of Seller or the Seller Shareholders under this Agreement,
and this Agreement shall not be deemed to confer upon or give to any
other third party any remedy, claim liability, reimbursement, cause of
action or other right.
Section 10.9 Interpretation.
(a) The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
(b) As used in this Agreement, the term "person" shall
mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or
any department or agency thereof.
(c) As used in this Agreement, the term "affiliate"
shall have the meaning set forth in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
(d) As used in this Agreement, any provision referring
to the "knowledge" of Seller shall be deemed to include, without
limitation, any information known by any of Xxxxxx X. Xxxxx,
Xxxxx X. Xxxxxxxx or Xxxxxxx X. Xxx.
(e) The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event of any
ambiguity with respect to, or question of intent or interpretation of,
any provision of this Agreement or any document to be executed or
delivered hereunder (other than the Disclosure Schedule prepared
exclusively by Seller and the Seller Shareholders), such provision shall
be construed as if drafted jointly by the parties and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue
of the authorship of any provision of this Agreement or document.
Section 10.10 Jurisdiction and Consent to Service. Without
limiting the jurisdiction or venue of any other court, Seller and Buyer
(a) agree that any suit, action or proceeding arising out of or relating
to this Agreement may be brought solely in the state or federal courts of
New York; (b) consents to the exclusive jurisdiction of each such court
in any suit, action or proceeding relating to or arising out of this
Agreement; (c) waives any objection which it may have to the laying of
venue in any such suit, action or proceeding in any such court; and (d)
agrees that service of any court paper may be made in such manner as may
be provided under applicable laws or court rules governing service of
process.
Section 10.11 Entire Agreement. This Agreement, the
Confidentiality Letters, the Disclosure Schedules, and the Exhibits and
other documents referred to herein or delivered pursuant hereto which
form a part hereof constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties
or any of them with respect to the subject matter hereof.
Section 10.12 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York (regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof) as to all matters, including but
not limited to matters of validity, construction, effect, performance and
remedies.
Section 10.13 Specific Performance. The parties acknowledge
and agree that any breach of the terms of this Agreement would give rise
to irreparable harm for which money damages would not be an adequate
remedy and accordingly the parties agree that, in addition to any other
remedies, each shall be entitled to enforce the terms of this Agreement
by a decree of specific performance without the necessity of proving the
inadequacy of money damages as a remedy.
Section 10.14 Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
Section 10.15 Amendment, Modification and Waiver. This
Agreement may be amended, modified or supplemented at any time by written
agreement of Seller and Buyer. Any failure of Seller, on the one hand, or
Buyer, on the other hand, to comply with any term or provision of this
Agreement may be waived, with respect to Buyer, by Seller and, with
respect to Seller, by Buyer, by an instrument in writing signed by or on
behalf of the appropriate party, but such waiver or failure to insist
upon strict compliance with such term or provision shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure
to comply. Any condition to a party's obligation hereunder may only be
waived in writing by such party.
Section 10.16 Bulk Sales Laws. Buyer hereby waives
compliance with the "bulk sales" provisions of Article 6 of the Uniform
Commercial Code as it is in effect in the states where Seller owns Assets
to be conveyed to Buyer hereunder and Seller and the Seller Shareholders
agree to indemnify Buyer with respect to any non-compliance by Seller
with such bulk sales provisions.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
PRT GROUP INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chief Operating Officer
ADVANCED COMPUTING TECHNIQUES, INC.
By: /s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: Chief Operating Officer
THE SELLER SHAREHOLDERS:
/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
/s/ Xxxxxxx X. Xxx
Xxxxxxx X. Xxx
