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EXHIBIT 10.15
STOCK PURCHASE AGREEMENT
DATED FEBRUARY 26, 1998,
AND EFFECTIVE AS OF FEBRUARY 1, 1998,
BY AND AMONG
ABR INFORMATION SERVICES, INC.,
A FLORIDA CORPORATION,
CHARING COMPANY, INC.
A WISCONSIN CORPORATION,
XXXXXX X. SMART,
XXXXXXX X. XXXXXX,
XXXX X. XXXXX,
XXXX X. XXXXXX,
XXXXXX X. XXXXXXX, AND
XXXXXX X. XXXXXXX,
AS SHAREHOLDERS,
AND
XXXXXX X. SMART,
AS SHAREHOLDERS' AGENT
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STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
1. PURCHASE AND SALE OF SHARES......................................... 1
2. PURCHASE PRICE - PAYMENT............................................ 1
2.1. Purchase Price......................................... 1
2.2. Payment of Purchase Price.............................. 5
3. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF
COMPANY AND SHAREHOLDERS............................................ 7
3.1. Corporate.............................................. 7
3.2. Shareholders........................................... 8
3.3. No Violation........................................... 9
3.4. Financial Statements................................... 9
3.5. Tax Matters............................................ 10
3.6. Accounts Receivable.................................... 11
3.7. Absence of Certain Changes............................. 11
3.8. Absence of Undisclosed Liabilities..................... 13
3.9. No Litigation.......................................... 13
3.10. Compliance With Laws and Orders........................ 14
3.11. Title to and Condition of Properties................... 16
3.12. Insurance.............................................. 17
3.13. Contracts and Commitments.............................. 18
3.14. Labor Matters.......................................... 20
3.15. Employee Benefit Plans................................. 21
3.16. Employment Compensation................................ 25
3.17. Trade Rights........................................... 25
3.18. Major Customers and Suppliers.......................... 26
3.19. Service Warranty and Liability......................... 27
3.20. Bank Accounts.......................................... 27
3.21. Affiliates' Relationships to Company................... 27
3.22. Assets Necessary to Business........................... 28
3.23. No Brokers or Finders.................................. 28
3.24. Year 2000 Compliance .................................. 28
3.25. Systems Performance .................................. 28
3.26. Disclosure............................................. 29
4. REPRESENTATIONS AND WARRANTIES OF BUYER............................. 29
4.1. Corporate.............................................. 29
4.2. Authority.............................................. 29
4.3. No Brokers or Finders.................................. 30
4.4. Disclosure............................................. 30
4.5. Investment Intent...................................... 30
5. COVENANTS........................................................... 31
5.1. Section 338(h)(10) Election............................ 31
5.2. Employment and Noncompetition Agreement................ 32
5.3. Noncompetition; Confidentiality........................ 32
5.4. General Releases....................................... 34
5.5. Errors and Omissions Gap Coverage...................... 34
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6. INDEMNIFICATION..................................................... 34
6.1. By Shareholders........................................ 34
6.2. By Buyer............................................... 34
6.3. Indemnification of Third-Party Claims.................. 35
6.4. Payment................................................ 36
6.5. Indemnification for Environmental Matters.............. 36
6.6. Limitations on Indemnification......................... 37
6.7. No Waiver.............................................. 38
6.8. Exclusive Remedies . . . . . .......................... 38
7. CLOSING............................................................. 39
7.1. Documents to be Delivered by Company and
Shareholders........................................... 39
7.2. Documents to be Delivered by Buyer..................... 40
8. TERMINATION......................................................... 41
9. RESOLUTION OF DISPUTES.............................................. 41
9.1. Arbitration............................................ 41
9.2. Arbitrators............................................ 42
9.3. Procedures; No Appeal.................................. 42
9.4. Authority.............................................. 42
9.5. Entry of Judgment...................................... 42
9.6. Confidentiality........................................ 42
9.7. Continued Performance.................................. 42
9.8. Tolling................................................ 43
10. MISCELLANEOUS....................................................... 43
10.1. Disclosure Schedule.................................... 43
10.2. Further Assurance...................................... 43
10.3. Disclosures and Announcements.......................... 44
10.4. Assignment; Parties in Interest........................ 44
10.5. Law Governing Agreement................................ 44
10.6. Amendment and Modification............................. 44
10.7. Notice................................................. 44
10.8. Expenses............................................... 46
10.9. Tax Records............................................ 47
10.10. Entire Agreement....................................... 47
10.11. Counterparts........................................... 47
10.12. Headings............................................... 47
10.13. Shareholders' Agent; Power of Attorney................. 47
10.14. Glossary of Terms...................................... 49
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DISCLOSURE SCHEDULE
Schedule 3.1.(c) - Foreign Corporation Qualification
Schedule 3.1.(e) - Directors and Officers of the
Company
Schedule 3.1.(f) - Shareholder List
Schedule 3.2.(c) - Title Exceptions
Schedule 3.3 - Violation, Conflict, Default
Schedule 3.4 - Financial Statements
Schedule 3.5.(b) - Tax Returns (Exceptions to
Representations)
Schedule 3.5.(d) - Consolidated Group Membership
Schedule 3.6 - Accounts Receivable (Aged Schedule)
Schedule 3.7 - Certain Changes
Schedule 3.8 - Off-Balance Sheet Liabilities
Schedule 3.9 - Litigation Matters
Schedule 3.10.(a) - Non-Compliance with Laws
Schedule 3.10.(b) - Licenses and Permits
Schedule 3.10.(c) - Environmental Matters (Exceptions
to Representations)
Schedule 3.11 - Liens
Schedule 3.11.(c) - Real Property
Schedule 3.12 - Insurance
Schedule 3.13.(b) - Personal Property Leases
Schedule 3.13.(d) - Significant Sales Commitments
Schedule 3.13.(e) - Contracts with Affiliates and
Certain Others
Schedule 3.13.(g) - Collective Bargaining Agreements
Schedule 3.13.(h) - Loan Agreements, etc.
Schedule 3.13.(i) - Guarantees
Schedule 3.13.(l) - Material Contracts
Schedule 3.14 - Labor Matters
Schedule 3.15.(a) - Employee Plans/Agreements
Schedule 3.15.(e) - Controlled Group, Etc.
Schedule 3.15.(f) - Employee Plans/Agreements Payments
and Compliance
Schedule 3.16 - Employment Compensation
Schedule 3.17 - Trade Rights
Schedule 3.18.(a) - Major Customers
Schedule 3.18.(b) - Major Suppliers
Schedule 3.18.(c) - Sales Representatives
Schedule 3.19 - Service Warranty, Warranty Expense
and Liability Claims
Schedule 3.20 - Bank Accounts
Schedule 3.21.(a) - Contracts with Affiliates
Schedule 3.21.(c) - Obligations of and to Affiliates
Schedule 3.24 - Year 2000 Noncompliance
Schedule 5.1 - Purchase Price Allocation
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated February 26,
1998, and effective as of February 1, 1998, by and among ABR Information
Services, Inc., a Florida corporation ("Buyer"), Charing Company, Inc., a
Wisconsin corporation ("Company"), Xxxxxx X. Smart, Xxxxxxx X. Xxxxxx, Xxxx X.
Xxxxx, Xxxx X. Xxxxxx, Xxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxx (individually
"Shareholder" and together the "Shareholders"), and Xxxxxx X. Smart (the
Shareholders' Agent").
RECITALS
1. Company is engaged in the business of providing pension
administrative services to third parties (the "Charing Business"). Shareholders
own all of the issued and outstanding shares (the "Shares") of capital stock of
Company.
2. Company's facilities consist solely of leased offices at 0
Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxx 00000 (the "Madison
office"), 00000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxx 00000 (the
"Brookfield office"), and 000 Xxxx Xxxxxx, Xxxxx 000, P.O. Box 3059, Lacrosse,
Wisconsin 54602- 3059 (the "Lacrosse office") (collectively, the "Facilities").
3. Buyer desires to purchase the Shares from Shareholders and
Shareholders desire to sell the Shares to Buyer, upon the terms and conditions
herein set forth.
4. Shareholders wish to designate Xxxxxx X. Smart as their
agent and attorney-in-fact, with the authority to act on their behalf in
connection with the sale of the Shares to Buyer.
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows.
1. PURCHASE AND SALE OF SHARES
Subject to the terms and conditions of this Agreement, effective as of
the Effective Date (as hereinafter defined) Shareholders shall sell to Buyer and
Buyer shall purchase from Shareholders all of the Shares.
2. PURCHASE PRICE - PAYMENT
2.1. Purchase Price.
2.1.(a) Amount. The aggregate purchase price (the "Purchase
Price") payable for the Shares shall be the sum of
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(a) SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000) and (b) a
contingent payment (the "Contingent Payment") based on the Charing
Business' incremental increase in pretax profitability for the
twelve-month period commencing February 1, 1998 and ending on January 31,
1999 (the "1998 Period") as compared to the twelve-month period
commencing February 1, 1997 and ending on January 31, 1998 (the "1997
Period"). All payments of Purchase Price are to be made for pro rata
distribution among the Shareholders in accordance with their respective
shareholdings in the Company.
2.1.(b) Calculation of Contingent Payment. The Contingent Payment
shall equal the product of (i) six, multiplied by (ii) the dollar amount
obtained by subtracting the Company's net earnings before income taxes
("EBIT") for the 1997 Period ("1997 EBIT") from the Company's EBIT for
the 1998 Period ("1998 EBIT"). Thus, if for example, Company's 1997 EBIT
equalled $1,100,000 and Company's 1998 EBIT equals $1,300,000, then the
Contingent Payment will equal $1.2 million (six times $0.2 million),
resulting in an aggregate Purchase Price of $8.7 million.
2.1.(c) Calculation of EBIT. The calculation of Company's EBIT for
any period shall include revenue received from pension administration
services provided by Company but shall not include revenue received from
COBRA administration services or other services not performed by Company
as of the date hereof but offered by Buyer or any of its subsidiaries or
affiliates. Except as expressly provided herein, the calculation of EBIT
for any period shall be made in accordance with generally accepted
accounting principles applied on a consistent basis, subject to the
following adjustments:
(i) Any depreciation or amortization adjustments
resulting solely from the transactions contemplated by this
Agreement shall not be included for purposes of calculating 1998
EBIT.
(ii) Notwithstanding Company's actual expenses for the
1998 Period relating to items and functions (such as property and
casualty insurance, errors and omissions insurance, health and
welfare programs, accounting functions and human resource
functions) that Shareholders' Agent and Buyer mutually agree shall
be provided to Company by Buyer or another subsidiary thereof,
Company shall record as an expense for purposes of calculating
1998 EBIT the same dollar amount as it recorded in calculating
1997 EBIT with respect to such items and functions.
(iii) The reasonable costs and expenses of Xxxxxx, Xxxxx &
Xxxxxxx, S.C. associated with the
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preparation of Company's audited financial statements for the 1996
and 1997 calendar years and Company's federal and State of
Wisconsin tax returns for the 1997 calendar year and 1998 S
corporation fiscal period of January 1 through January 31, shall
be borne by Company, but shall not be included for purposes of
calculating 1997 EBIT or 1998 EBIT.
(iv) To the extent that any employee of Company shall be
required to travel to Buyer's Florida offices at Buyer's request,
Buyer shall make and pay for directly all necessary travel and
lodging arrangements.
(v) The calculation of 1998 EBIT shall not exclude any
expense item (or series of related items) relating to personnel
matters or exceeding $10,000 annually, unless such exclusion has
been preapproved in writing by Buyer.
(vi) Shareholders' Agent shall review with Buyer on a
monthly basis any and all expense items Shareholders' Agent
desires to exclude for purposes of calculating 1998 EBIT.
(vii) Buyer (or any subsidiary of Buyer) may generate new
pension administrative services sales revenue for Company during
the 1998 Period ("New Company Revenue"). Company may generate for
Buyer during the 1998 Period new COBRA administrative services
sales revenue (or other new business for similar administrative
services not performed by Company as of the date hereof) ("New
Buyer Revenue"). If New Company Revenue and/or New Buyer Revenue
is generated during the 1998 Period, Buyer and Company agree to
make a reasonable determination of the sales and other reasonable
costs incurred (A) by Company to obtain the New Buyer Revenue and
(B) by Buyer to obtain the New Company Revenue, for purposes of
calculating Company's 1998 EBIT. The mutually agreed upon costs
incurred by Buyer (or any subsidiary of Buyer) in generating the
New Company Revenue shall be included for purposes of calculating
the 1998 EBIT. The mutually agreed upon costs incurred by Company
in generating New Buyer Revenue shall be excluded for purposes of
calculating the 1998 EBIT. The New Company Revenue shall be
included in calculating 1998 EBIT and the New Buyer Revenue shall
be excluded in calculating 1998 EBIT.
(viii) The $9,800 Wisconsin recycling tax for the Company's
fiscal period from January 1 through February 1, 1998, shall be
paid by Company when due and shall be excluded from the
calculation of 1997 EBIT and 1998 EBIT.
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(ix) The imputed interest expense on the Buyer
Distribution Loan (as hereinafter defined) shall be included in
the calculation of 1998 EBIT.
2.1.(d) Distribution of 1997 EBIT. The Company's EBIT for calendar
year 1997 and EBIT for the period from January 1, 1998 through January
31, 1998 ("January 1998 EBIT") shall be distributed pro rata to the
Shareholders on or before the Closing Date in accordance with their
respective shareholdings in the Company as set forth in Schedule 3.1(f);
provided, however, that (i) the Company shall have a minimum net worth as
of both the Effective Date and the Closing Date of $100,000, and (ii) at
no time from the Effective Date through the Closing Date shall the
Company's cash balance fall below $100,000. Anything in this Agreement to
the contrary notwithstanding, for purposes of calculating the January
1998 EBIT, the $10,000 fee paid by the Company to Xxxxxx, Xxxxx &
Xxxxxxx, S.C. for preparing the Company's audited financial statements
for the 1996 and 1997 calendar years shall not be deducted as an expense
of the Company for January, 1998. To the extent possible, the
distribution of calendar year 1997 EBIT and January 1998 EBIT shall be
funded out of the Company's available cash (subject to the foregoing
minimum net worth and available cash requirements). The balance of the
cash necessary to fund said distribution of calendar year 1997 EBIT and
January 1998 EBIT shall be provided in accordance with Section 2.1(e).
2.1.(e) Distribution Loan. Buyer agrees to loan Company on the
Closing Date an amount equal to (i) the Company's accrued Shareholder
distribution amount of $337,838 as of December 31, 1997, plus (ii)
January 1998 EBIT, minus (iii) the total Shareholder distributions made
by Company to the Shareholders on or before the Closing Date which
Company was permitted to make from its available cash under Section
2.1(d) and still meet the financial covenants stated therein. The loan
described in this Section 2.1(e) is referred to herein as the "Buyer
Distribution Loan." The proceeds of the Buyer Distribution Loan shall
then be distributed to the Shareholders on the Closing Date so that by
the Closing Date, the Shareholders shall have received total
distributions equal to the Company's $337,838 accrued Shareholder
distribution amount as of December 31, 1997, plus January 1998 EBIT. The
Buyer Distribution Loan shall be repaid in full by Company to Buyer
during the 1998 Period. To the extent it is repaid after such time, the
unpaid principal balance as of such date shall be charged in full against
1998 EBIT, provided that the Distribution Loan has been repaid through
such date to the
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extent of available cash flow of the Company during the 1998 Period.
2.1.(f) Interest on Buyer Distribution Loan. The calculation of
Company's 1998 EBIT shall include an imputed interest expense to Company
equal to interest calculated on the outstanding principal balance of the
Buyer Distribution Loan which remains unpaid from time to time, at the
rate announced from time to time by NationsBank, N.A. (or its successor)
as its prime rate. Interest on the Buyer Distribution Loan calculated
under this Section 2.1(f) shall commence on the date the Buyer
Distribution Loan is made to the Company and continue until the Buyer
Distribution Loan is repaid.
2.2. Payment of Purchase Price. The Purchase Price shall be paid by
Buyer as follows:
2.2.(a) Cash to Shareholders' Agent. At the Closing, Buyer shall
deliver to the Shareholders' Agent the sum of Seven Million Dollars
($7,000,000.00), to be allocated among the Shareholders pro rata in
accordance with their respective shareholdings in Company as set forth in
Schedule 3.1.(f).
2.2.(b) Contingent Payment. The initial calculation of the
Contingent Payment shall be made by the Shareholders' Agent, who shall
deliver his calculation within thirty (30) days following the end of the
1998 Period to Buyer for its review and comment. If Shareholders' Agent
and Buyer are able to agree in writing upon the amount of the Contingent
Payment within fifteen (15) days following delivery of the initial
calculation to Buyer, then Buyer shall pay such amount. Such payment of
the Contingent Payment, if any, shall be made to the Shareholders' Agent
within forty-five (45) calendar days following the close of the 1998
Period. In the event Buyer and Shareholders' Agent cannot agree on the
amount of the Contingent Payment within forty-five (45) calendar days
following the close of the 1998 Period, then the determination of the
contingent payment shall be submitted to binding arbitration in
accordance with Article 9 of this Agreement.
2.2.(c) Purchase Price Holdback.
(i) On the Closing Date, Buyer will transfer the sum of
Five Hundred Thousand Dollars ($500,000) to a segregated
interest-bearing account with a bank or other financial
institution with a combined capital and surplus in excess of
$50,000,000, which amount shall be held by Buyer in such account
for the purpose of securing the indemnification obligations of
Company and Shareholders under this Agreement. For purposes
hereof, "Holdback Period" shall mean the
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period commencing on the date hereof and ending one (1) year from
the date hereof, subject to extension as hereinafter provided.
(ii) If, prior to the expiration of the Holdback Period,
Buyer determines to assert a claim for indemnification under
Article 6 of this Agreement, then Buyer shall give the
Shareholders' Agent written notice of such claim (for purposes of
this Section 2.2(c), a "Claim Notice"), specifying in reasonable
detail the basis therefor and the amount and calculation thereof.
If the Shareholders' Agent does not deliver to Buyer written
notice of an objection to the claim for indemnification within
twenty (20) days after receipt of the Claim Notice relating
thereto, Buyer shall be entitled to withdraw the dollar amount of
its claim (as set forth in the Claim Notice) from the segregated
account. If the Shareholders' Agent shall timely deliver to Buyer
such written notice of objection, then Buyer shall not make a
withdrawal from the segregated account with respect to the claim
set forth in the Claim Notice until: (x) Buyer and Shareholders'
Agent have executed joint written instructions referring to such
Claim Notice and directing Buyer to withdraw, for Buyer's own
account, funds from the segregated account; or (y) Buyer has
received a copy of a judgment, decree or order of a court, or copy
of an arbitration award, adjudicating the dispute with respect to
such claim for indemnification; whereupon Buyer shall withdraw
from the segregated account, for Buyer's own account, such amount
as provided therein.
(iii) If Buyer has not delivered a Claim Notice to
Shareholders' Agent prior to the expiration of the Holdback
Period, or if any and all Claim Notices delivered to Shareholders'
Agent during the Holdback Period have been resolved pursuant to
subsection (ii) above, then Buyer shall deliver to Shareholders'
Agent the portion of the funds held in the segregated account
equal to (x) $500,000, less (y) any amounts withdrawn by Buyer as
provided herein, plus (z) any interest earned with respect to such
amount. Buyer shall deliver such amount to the Shareholders' Agent
promptly after the expiration of the Holdback Period, unless one
or more Claim Notice(s) have not been finally resolved pursuant to
subsection (ii) above, in which case Buyer shall retain such
amount in the segregated account until: (a) Buyer and
Shareholders' Agent have executed joint written instructions
referring to such Claim Notice(s) and directing Buyer as to the
disbursement of the funds in the segregated account; or (b) Buyer
has received a copy of a judgment, decree or order of a
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court, or copy of an arbitration award, adjudicating the dispute
with respect to such Claim Notice(s); whereupon Buyer shall
disburse the funds in the segregated account as provided therein.
2.2.(d) Method of Payment. All payments under this Section 2.2
shall be made in the form of certified or bank cashier's check payable to
the order of the recipient or, at the recipient's option, by wire
transfer of immediately available funds to an account designated by the
recipient not less than 48 hours prior to the time for payment specified
herein.
3. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF COMPANY AND
SHAREHOLDERS
Company and Shareholders, jointly and severally, make the following
representations and warranties to Buyer, each of which was true and correct on
the Effective Date (other than Section 3.2(b)), remains true as of the Closing
Date, shall be unaffected by any investigation heretofore or hereafter made by
Buyer, or any knowledge of Buyer other than as specifically disclosed in the
Disclosure Schedule delivered to Buyer at the time of the execution of this
Agreement, and shall survive the Closing of the transactions provided for herein
as provided in Article 6. Regardless of the foregoing, the representations and
warranties set forth in Section 3.2 are made severally by each Shareholder, with
respect to such Shareholder only.
3.1. Corporate.
3.1.(a) Organization. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Wisconsin.
3.1.(b) Corporate Power. Company has all requisite corporate power
and authority to own, operate and lease its properties and to carry on
its business as and where such is now being conducted.
3.1.(c) Qualification. Company is duly licensed or qualified to do
business as a foreign corporation, and is in good standing, in each
jurisdiction wherein the character of the properties owned or leased by
it, or the nature of its business, makes such licensing or qualification
necessary. The states in which Company is licensed or qualified to do
business are listed in Schedule 3.1.(c).
3.1.(d) Subsidiaries. Company does not own any interest in any
corporation, partnership or other entity.
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3.1.(e) Corporate Documents, etc. The copies of the Amended and
Restated Articles of Incorporation and By-Laws of the Company, including
any amendments thereto, which have been delivered by Shareholders to
Buyer are true, correct and complete copies of such instruments as
presently in effect. The corporate minute book and stock records of the
Company which have been furnished to Buyer for inspection are true,
correct and complete and accurately reflect all material corporate action
taken by the Company. The directors and officers of the Company are
listed in Schedule 3.1.(e).
3.1.(f) Capitalization of the Company. The authorized capital
stock of the Company consists entirely of 56,000 shares of common stock,
par value $0.90 per share. No shares of such capital stock are issued or
outstanding except for 5,250 shares of common stock of the Company which
are owned of record and beneficially by Shareholders in the respective
numbers set forth in Schedule 3.1.(f). All such shares of capital stock
of the Company are validly issued, fully paid and nonassessable. There
are no (a) securities convertible into or exchangeable for any of the
Company's capital stock or other securities, (b) options, warrants or
other rights to purchase or subscribe to capital stock or other
securities of the Company or securities which are convertible into or
exchangeable for capital stock or other securities of the Company, or (c)
contracts, commitments, agreements, understandings or arrangements of any
kind relating to the issuance, sale or transfer of any capital stock or
other equity securities of the Company, any such convertible or
exchangeable securities or any such options, warrants or other rights.
3.2. Shareholders.
3.2.(a) Power. Each Shareholder has full power, legal right and
authority to enter into, execute and deliver this Agreement and the other
agreements, instruments and documents contemplated hereby (such other
documents sometimes referred to herein as "Ancillary Instruments"), and
to carry out the transactions contemplated hereby.
3.2.(b) Validity. This Agreement has been duly and validly
executed and delivered by each Shareholder and is, and when executed and
delivered each Ancillary Instrument will be, the legal, valid and binding
obligation of such Shareholder, enforceable in accordance with its terms,
except as such may be limited by bankruptcy, insolvency, reorganization
or other laws affecting creditors' rights generally, and by general
equitable principles.
3.2.(c) Title. Except as set forth in Schedule 3.2.(c), each
Shareholder has, and Buyer is receiving, good
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and marketable title to the Shares to be sold by such Shareholder
hereunder, free and clear of all Liens (as defined in Section 3.12)
including, without limitation, voting trusts or agreements, proxies,
marital or community property interests.
3.3. No Violation. Except as set forth on Schedule 3.3, neither the
execution and delivery of this Agreement or the Ancillary Instruments nor the
consummation by Company and Shareholders of the transactions contemplated hereby
and thereby (a) will violate any statute, law, ordinance, rule or regulation
(collectively, "Laws") or any order, writ, injunction, judgment, plan or decree
(collectively, "Orders") of any court, arbitrator, department, commission,
board, bureau, agency, authority, instrumentality or other body, whether
federal, state, municipal, foreign or other (collectively, "Government
Entities"), (b) will require any authorization, consent, approval, exemption or
other action by or notice to any Government Entity (including, without
limitation, under any "plant-closing" or similar law), or (c) subject to
obtaining the consents referred to in Schedule 3.3, will violate or conflict
with, or constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or will result in the termination
of, or accelerate the performance required by, or result in the creation of any
Lien upon any of the assets of Company (or the Shares) under, any term or
provision of the Amended and Restated Articles of Incorporation or By-Laws of
Company or of any contract, commitment, understanding, arrangement, agreement or
restriction of any kind or character to which Company or any Shareholder is a
party or by which Company or any Shareholder or any of its or their assets or
properties may be bound or affected.
3.4. Financial Statements. Included as Schedule 3.4 are true and
complete copies of the financial statements of Company consisting of (i) balance
sheets of Company as of December 31, 1996 and 1997, and the related statements
of income and cash flows for the years then ended (including the notes contained
therein or annexed thereto), which financial statements have been reported on,
and are accompanied by, the signed, unqualified opinions of Xxxxxx, Xxxxx &
Xxxxxxx, S.C., independent auditors for Company for such years; and (ii) a
compiled balance sheet of the Company as of January 31, 1998, and the related
compiled statements of income and cash flows for the one month then ended. The
audited balance sheet of the Company as of December 31, 1997 is hereinafter
referred to as the "Recent Balance Sheet." All of such financial statements
(including all notes and schedules contained therein or annexed thereto) are
true, complete and accurate, have been prepared in accordance with generally
accepted accounting principles (except, in the case of compiled statements, for
the absence of footnote disclosure) applied on a consistent basis, have been
prepared in accordance with the books and records of Company, and fairly
present, in accordance with generally
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accepted accounting principles, the assets, liabilities and financial position,
the results of operations and cash flows of Company as of the dates and for the
years and periods indicated.
3.5. Tax Matters.
3.5.(a) Provision For Taxes. The provision made for taxes on the
Recent Balance Sheet is sufficient for the payment of all federal, state,
foreign, county, local and other income, ad valorem, excise, profits,
franchise, occupation, property, payroll, sales, use, gross receipts and
other taxes (and any interest and penalties) and assessments, whether or
not disputed, at the date of the Recent Balance Sheet and for all years
and periods prior thereto. Since the date of the Recent Balance Sheet,
Company has not incurred any taxes other than taxes incurred in the
ordinary course of business consistent in type and amount with past
practices of Company. Notwithstanding the foregoing, Company will be
required to pay two State of Wisconsin recycling tax assessments in
calendar 1998. The assessment for the fiscal period from January 1
through February 1, 1998 will equal $9,800. The recycling tax assessment
for the balance of calendar 1998 will equal the lesser of (i) Company's
net income for that fiscal period multiplied by .004345, and (ii) $9,800.
3.5.(b) Tax Returns Filed. Except as set forth on Schedule
3.5.(b), all federal, state, foreign, county, local and other tax returns
required to be filed by or on behalf of Company have been timely filed
and when filed were true and correct in all material respects, and the
taxes shown as due thereon were paid or adequately accrued. True and
complete copies of all tax returns or reports filed by Company for each
of its six most recent fiscal years have been delivered to Buyer. Company
has duly withheld and paid all taxes which it is required to withhold and
pay relating to salaries and other compensation heretofore paid to the
employees of Company.
3.5.(c) Tax Audits. The federal and state income tax returns of
Company have never been audited by the Internal Revenue Service or any
state taxing authorities. Company has not received from the Internal
Revenue Service or from the tax authorities of any state, county, local
or other jurisdiction any notice of underpayment of taxes or other
deficiency which has not been paid nor any objection to any return or
report filed by Company. There are outstanding no agreements or waivers
extending the statutory period of limitations applicable to any tax
return or report.
3.5.(d) No Consolidated Group. Except as set forth in Schedule
3.5(d), Company has never been a member of an affiliated group of
corporations that filed a consolidated tax
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return. The Company does not have any liability for the taxes of any
person or entity under Sections 1.1502-6 or 1.1502-78 of Title 26 of the
Code of Federal Regulations (or any similar provisions of state, local or
foreign income tax laws).
3.5.(e) S Corporation. Company properly and timely filed a valid
election under Section 1362 of the Internal Revenue Code of 1986, as
amended (the "Code"), to be treated as an S corporation ("S Corp") as
defined under Section 1361 of the Code for federal income tax purposes
effective from January 1, 1989 and has corresponding elections in effect
under the laws of Wisconsin. Such elections have remained in effect since
January 1, 1989. Except for transactions contemplated by this Agreement,
neither Company nor any of the Shareholders has taken any action, nor has
any event occurred, that would result in the revocation or termination of
any of such elections effective on or after January 1, 1989. Company is
not subject to the tax imposed by Section 1374 of the Code (or any
equivalent state statute) and Company does not have a "net unrealized
built-in gain" as such phrase is defined in Section 1374(d) of the Code
(or any equivalent state statute).
3.5.(f) Other. The Company has never (i) filed any consent or
agreement under Section 341(f) of the Code, (ii) applied for any tax
ruling, (iii) entered into a closing agreement with any taxing authority,
(iv) filed an election under Section 338(g) or Section 338(h)(10) of the
Code (nor has a deemed election under Section 338(e) of the Code
occurred), except as contemplated hereby, (v) made any payments, or been
a party to an agreement (including this Agreement) that under any
circumstances could obligate it to make payments that will not be
deductible because of Section 280G of the Code, or (vi) been a party to
any tax allocation or tax sharing agreement. The Company is not a "United
States real property holding company" within the meaning of Section 897
of the Code.
3.6. Accounts Receivable. All accounts receivable of Company reflected
on the Recent Balance Sheet, and all accounts receivable accrued in the normal
course of business since the date thereof, represent arm's length sales actually
made in the ordinary course of business; are collectible (net of a five percent
(5%) allowance for doubtful accounts, even though no reserve is shown on the
Recent Balance Sheet for doubtful accounts) in the ordinary course of business
without the necessity of commencing legal proceedings; are subject to no
counterclaim or setoff; and are not in dispute. Schedule 3.6 contains an aged
schedule of accounts receivable included in the Recent Balance Sheet.
3.7. Absence of Certain Changes. Except as and to the extent set forth
in Schedule 3.7, since the date of the Recent Balance Sheet there has not been:
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3.7.(a) No Adverse Change. Any adverse change in the financial
condition, assets, liabilities, business, prospects or operations of
Company;
3.7.(b) No Damage. Any loss, damage or destruction, whether
covered by insurance or not, affecting the Company, its properties or the
Charing Business;
3.7.(c) No Increase in Compensation. Any increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of Company (including, without limitation, any increase
or change pursuant to any bonus, pension, profit sharing, retirement or
other plan or commitment), or any bonus or other employee benefit
granted, made or accrued;
3.7.(d) No Labor Disputes. Any labor dispute or disturbance, other
than routine individual grievances which are not material to the
business, financial condition or results of operations of Company.
3.7.(e) No Commitments. Any commitment or transaction by Company
(including, without limitation, any borrowing or capital expenditure)
other than in the ordinary course of business consistent with past
practice;
3.7.(f) No Dividends. Any declaration, setting aside, or payment
of any dividend or any other distribution in respect of Company's capital
stock; any redemption, purchase or other acquisition by Company of any
capital stock of Company, or any security relating thereto; or any other
payment to any shareholder of Company as such a shareholder;
3.7.(g) No Disposition of Property. Any sale, lease or other
transfer or disposition of any properties or assets of Company, other
than sales, leases, transfers or other dispositions made in the ordinary
course of business and consistent with past practice;
3.7.(h) No Indebtedness. Any indebtedness for borrowed money
incurred, assumed or guaranteed by Company;
3.7.(i) No Liens. Any mortgage, pledge, lien or encumbrance made
on any of the properties or assets of Company;
3.7.(j) No Amendment of Contracts. Any entering into, amendment or
termination by Company of any contract, or any waiver of material rights
thereunder, other than in the ordinary course of business;
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3.7.(k) Loans and Advances. Any loan or advance (other than (i)
advances to employees in the ordinary course of business for travel and
entertainment in accordance with past practice or (ii) other advances
equal to less than $1,000 individually and $5,000 in the aggregate) to
any person including, but not limited to, any Affiliate (for purposes of
this Agreement, the term "Affiliate" shall mean and include: all
Shareholders, directors and officers of Company; the spouse of any such
person; any person who would be the heir or descendant of any such person
if he or she were not living; and any entity in which any of the
foregoing has a direct or indirect interest, except through ownership of
less than 5% of the outstanding shares of any entity whose securities are
listed on a national securities exchange or traded in the national
over-the-counter market);
3.7.(l) Credit. Any grant of credit to any customer or distributor
on terms or in amounts more favorable than those which have been extended
to such customer or distributor in the past, any other change in the
terms of any credit heretofore extended, or any other change of Company's
policies or practices with respect to the granting of credit; or
3.7.(m) No Unusual Events. Any other event or condition not in the
ordinary course of business of Company.
3.8. Absence of Undisclosed Liabilities. Except as and to the extent
specifically disclosed in the Recent Balance Sheet, or in Schedule 3.8, Company
does not have any liabilities, commitments or obligations (secured or unsecured,
and whether accrued, absolute, contingent, direct, indirect or otherwise), other
than commercial liabilities and obligations incurred since the date of the
Recent Balance Sheet in the ordinary course of business and consistent with past
practice and none of which has or will have a material adverse effect on the
business, financial condition or results of operations of Company. Except as and
to the extent described in the Recent Balance Sheet or in Schedule 3.8, neither
Company nor any Shareholder has knowledge of any basis for the assertion against
Company of any liability and there are no circumstances, conditions, happenings,
events or arrangements, contractual or otherwise, which may give rise to
liabilities, except commercial liabilities and obligations incurred in the
ordinary course of Company's business and consistent with past practice.
3.9. No Litigation. Except as set forth in Schedule 3.9 there is no
action, suit, arbitration, proceeding, investigation or inquiry, whether civil,
criminal or administrative ("Litigation"), pending or threatened against
Company, its directors (in such capacity), its business or any of its assets,
nor does Company or any Shareholder know, or have grounds to know, of any basis
for any Litigation. Schedule 3.9 also identifies all Litigation to which
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Company or any of its directors (in such capacity) have been parties since
January 1, 1992. Except as set forth in Schedule 3.9, neither Company nor its
business or assets is subject to any Order of any Government Entity.
3.10. Compliance With Laws and Orders.
3.10.(a) Compliance. Except as set forth in Schedule 3.10.(a),
Company (including each and all of its operations, practices, properties
and assets) is in compliance with all applicable Laws and Orders,
including, without limitation, those applicable to discrimination in
employment, occupational safety and health, trade practices, competition
and pricing, product warranties, zoning, building and sanitation,
employment, retirement and labor relations, product advertising and the
Environmental Laws as hereinafter defined. Except as set forth in
Schedule 3.10.(a), Company has not received notice of any violation or
alleged violation of, and is subject to no Liability for past or
continuing violation of, any Laws or Orders. All reports and returns
required to be filed by Company with any Government Entity have been
filed, and were accurate and complete when filed. Without limiting the
generality of the foregoing:
(i) The operation of Company's business as it is now
conducted does not, nor does any condition existing at any of the
Facilities, in any manner constitute a nuisance or other tortious
interference with the rights of any person or persons in such a
manner as to give rise to or constitute the grounds for a suit,
action, claim or demand by any such person or persons seeking
compensation or damages or seeking to restrain, enjoin or
otherwise prohibit any aspect of the conduct of such business or
the manner in which it is now conducted.
(ii) Company has made all required payments to its
unemployment compensation reserve accounts with the appropriate
governmental departments of the states where it is required to
maintain such accounts, and each of such accounts has a positive
balance.
(iii) Company has delivered to Buyer copies of all reports
of Company for the past five (5) years required under the federal
Occupational Safety and Health Act of 1970, as amended, and under
all other applicable health and safety laws and regulations. The
deficiencies, if any, noted on such reports have been corrected.
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3.10.(b) Licenses and Permits. Company has all licenses, permits,
approvals, authorizations and consents of all Government Entities and all
certification organizations required for the conduct of the business (as
presently conducted and as proposed to be conducted) and operation of the
Facilities. All such licenses, permits, approvals, authorizations and
consents are described in Schedule 3.10.(b), are in full force and effect
and will not be affected or made subject to loss, limitation or any
obligation to reapply as a result of the transactions contemplated
hereby. Except as set forth in Schedule 3.10.(b), Company (including its
operations, properties and assets) is and has been in compliance with all
such permits and licenses, approvals, authorizations and consents.
3.10.(c) Environmental Matters. The applicable Laws relating to
pollution or protection of the environment, including Laws relating to
emissions, discharges, generation, storage, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic,
hazardous or petroleum or petroleum-based substances or wastes ("Waste")
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Waste including, without
limitation, the Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act
("CERCLA"), as amended, and their state and local counterparts are herein
collectively referred to as the "Environmental Laws". Without limiting
the generality of the foregoing provisions of this Section 3.10, Company
is in full compliance with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained in any
regulations, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder. Except
as set forth in Schedule 3.10.(c), there is no Litigation nor any demand,
claim, hearing or notice of violation pending or threatened against
Company relating in any way to the Environmental Laws or any Order
issued, entered, promulgated or approved thereunder. Except as set forth
in Schedule 3.10.(c), there are no past or present (or, to the best of
Company's and the Shareholders' knowledge, future) events, conditions,
circumstances, activities, practices, incidents, actions, omissions or
plans which may interfere with or prevent compliance or continued
compliance with the Environmental Laws or with any Order issued, entered,
promulgated or approved thereunder, or which may give rise to any
liability, including, without limitation, liability under CERCLA or
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similar state or local Laws, or otherwise form the basis of any
Litigation, hearing, notice of violation, study or investigation, 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
Waste.
3.11. Title to and Condition of Properties.
3.11.(a) Marketable Title. Company has good and marketable title
to all of Company's assets, business and properties, including, without
limitation, all such properties (tangible and intangible) reflected in
the Recent Balance Sheet, free and clear of all mortgages, liens,
(statutory or otherwise) security interests, claims, pledges, licenses,
equities, options, conditional sales contracts, assessments, levies,
easements, covenants, reservations, restrictions, rights-of-way,
exceptions, limitations, charges or encumbrances of any nature whatsoever
(collectively, "Liens") except those described in Schedule 3.11. None of
Company's assets, business or properties are subject to any restrictions
with respect to the transferability thereof; and the Company's title
thereto will not be affected in any way by the transactions contemplated
hereby.
3.11.(b) Condition. All property and assets owned or utilized by
Company are in good operating condition and repair, free from any defects
(except such minor defects as do not interfere with the use thereof in
the conduct of the normal operations of Company), have been maintained
consistent with the standards generally followed in the industry and are
sufficient to carry on the business of Company as conducted during the
preceding 12 months. All buildings, plants and other structures owned or
otherwise utilized by Company are in good condition and repair and have
no structural defects or defects affecting the plumbing, electrical,
sewerage, or heating, ventilating or air conditioning systems.
3.11.(c) Real Property. Schedule 3.11.(c) sets forth all real
property owned, leased, used or occupied by Company (the "Real
Property"), including a description of all land, and all encumbrances,
easements or rights of way of record (or, if not of record, of which
Company has notice or knowledge) granted on or appurtenant to or
otherwise affecting such Real Property, the zoning classification
thereof, and all plants, buildings or other structures located thereon.
Schedule 3.11.(c) also sets forth, with respect to each parcel of Real
Property which is leased, the material terms of such lease. There are now
in full force and effect duly issued certificates of occupancy permitting
the Real Property and improvements located thereon to be legally used and
occupied as the same are now constituted. All of the Real Property has
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permanent rights of access to dedicated public highways. No fact or
condition exists which would prohibit or adversely affect the ordinary
rights of access to and from the Real Property from and to the existing
highways and roads and there is no pending or threatened restriction or
denial, governmental or otherwise, upon such ingress and egress. To the
best of Company's and Shareholders' knowledge, there is not (i) any claim
of adverse possession or prescriptive rights involving any of the Real
Property, (ii) any structure located on any Real Property which
encroaches on or over the boundaries of neighboring or adjacent
properties or (iii) any structure of any other party which encroaches on
or over the boundaries of any of such Real Property. To the best of
Company's and Shareholders' knowledge, none of the Real Property is
located in a flood plain, flood hazard area, wetland or lakeshore erosion
area within the meaning of any Law, regulation or ordinance. No public
improvements have been commenced and to the best of Company's and
Shareholders' knowledge none are planned which in either case may result
in special assessments against or otherwise materially adversely affect
any Real Property. To the best of Company's and Shareholders' knowledge,
no portion of any of the Real Property has been used as a landfill or for
storage or landfill of hazardous or toxic materials. Neither Company nor
any Shareholder has notice or knowledge of any (i) planned or proposed
increase in assessed valuations of any Real Property, (ii) Order
requiring repair, alteration, or correction of any existing condition
affecting any Real Property or the systems or improvements thereat, (iii)
condition or defect which could give rise to an order of the sort
referred to in "(ii)" above, (iv) underground storage tanks, or any
structural, mechanical, or other defects of material significance
affecting any Real Property or the systems or improvements thereat
(including, but not limited to, inadequacy for normal use of mechanical
systems or disposal or water systems at or serving the Real Property), or
(v) work that has been done or labor or materials that has or have been
furnished to any Real Property during the period of six (6) months
immediately preceding the date of this Agreement for which liens could be
filed against any of the Real Property.
3.11.(d) No Condemnation or Expropriation. Neither the whole nor
any portion of the property or any other assets of Company is subject to
any Order to be sold or is being condemned, expropriated or otherwise
taken by any Government Entity with or without payment of compensation
therefor, nor to the best of Company's and Shareholders' knowledge has
any such condemnation, expropriation or taking been proposed.
3.12. Insurance. Set forth in Schedule 3.12 is a complete and accurate
list and description of all policies of fire, liability, errors and omissions,
electronic data processing,
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workers compensation, health and other forms of insurance presently in effect
with respect to the business and properties of Company, true and correct copies
of which have heretofore been delivered to Buyer. Schedule 3.12 includes,
without limitation, the carrier, the description of coverage, the limits of
coverage, retention or deductible amounts, amount of annual premiums, date of
expiration and the date through which premiums have been paid with respect to
each such policy, and any pending claims in excess of $5,000. All such policies
are valid, outstanding and enforceable policies and provide insurance coverage
for the properties, assets and operations of Company, of the kinds, in the
amounts and against the risks customarily maintained by organizations similarly
situated; and no such policy (nor any previous policy) provides for or is
subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the date hereof. Schedule 3.12
indicates each policy as to which (a) the coverage limit has been reached or (b)
the total incurred losses to date equal 75% or more of the coverage limit. No
notice of cancellation or termination has been received with respect to any such
policy, and neither Company nor any Shareholder has knowledge of any act or
omission of Company which could result in cancellation of any such policy prior
to its scheduled expiration date. Company has not been refused any insurance
with respect to any aspect of the operations of the business nor has its
coverage been limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the last three years.
Company has duly and timely made all claims it has been entitled to make under
each policy of insurance. Since January 1, 1989, all general liability policies
maintained by or for the benefit of Company have been "occurrence" policies and
not "claims made" policies. There is no claim by Company pending under any
errors and omissions, electronic data processing, general liability or similar
policy as to which coverage has been questioned, denied or disputed by the
underwriters of such policies, and neither Company nor any of the Shareholders
knows of any basis for denial of any claim under any such policy. Company has
not received any written notice from or on behalf of any insurance carrier
issuing any such policy that insurance rates therefor will hereafter be
substantially increased (except to the extent that insurance rates may be
increased for all similarly situated risks) or that there will hereafter be a
cancellation or an increase in a deductible (or an increase in premiums in order
to maintain an existing deductible) or nonrenewal of any such policy. Such
policies are sufficient in all material respects for compliance by Company with
all requirements of law and with the requirements of all material contracts to
which Company is a party.
3.13. Contracts and Commitments.
3.13.(a) Real Property Leases. Except as set forth in Schedule
3.11.(c), Company has no leases of real property.
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3.13.(b) Personal Property Leases. Except as set forth in Schedule
3.13.(b), Company has no leases of personal property involving
consideration or other expenditure in excess of $5,000 or involving
performance over a period of more than three months.
3.13.(c) Purchase Commitments. Company has no purchase commitments
for inventory items or supplies that, together with amounts on hand,
constitute in excess of three months normal usage, or which are at an
excessive price.
3.13.(d) Sales Commitments. Except as set forth in Schedule
3.13.(d), Company has no sales contracts or commitments to customers
which aggregate in excess of $150,000 to any one customer (or group of
affiliated customers). Company has no sales contracts or commitments
except those made in the ordinary course of business, at arm's length,
and no such contracts or commitments are for a sales price which would
result in a loss to the Company.
3.13.(e) Contracts With Affiliates and Certain Others. Except as
set forth in Schedule 3.13(e), Company has no agreement, understanding,
contract or commitment (written or oral) with any Affiliate or any
employee, agent, consultant, distributor, dealer or franchisee that is
not immediately cancelable by Company without liability, penalty or
premium of any nature or kind whatsoever.
3.13.(f) Powers of Attorney. The Company has not given a power of
attorney, which is currently in effect, to any person, firm or
corporation for any purpose whatsoever.
3.13.(g) Collective Bargaining Agreements. Except as set forth in
Schedule 3.13.(g), Company is not a party to any collective bargaining
agreements with any unions, guilds, shop committees or other collective
bargaining groups. Copies of all such agreements have heretofore been
delivered to Buyer.
3.13.(h) Loan Agreements. Except as set forth in Schedule
3.13.(h), Company is not obligated under any loan agreement, promissory
note, letter of credit, or other evidence of indebtedness as a signatory,
guarantor or otherwise.
3.13.(i) Guarantees. Except as disclosed on Schedule 3.13.(i),
Company has not guaranteed the payment or performance of any person, firm
or corporation, agreed to indemnify any person or act as a surety, or
otherwise agreed to be contingently or secondarily liable for the
obligations of any person.
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3.13.(j) Contracts Subject to Renegotiation. Company is not a
party to any contract with any governmental body which is subject to
renegotiation.
3.13.(k) Restrictive Agreements. Company is not a party to nor is
it bound by any agreement requiring Company to assign any interest in any
trade secret or proprietary information, or prohibiting or restricting
Company from competing in any business or geographical area or soliciting
customers or otherwise restricting it from carrying on its business
anywhere in the world.
3.13.(l) Other Material Contracts. Company has no lease, contract
or commitment of any nature involving consideration or other expenditure
in excess of $ 5,000, or involving performance over a period of more than
three months, or which is otherwise individually material to the
operations of Company, except as explicitly described in Schedule
3.13.(l).
3.13.(m) No Default. Company is not in default under any lease,
contract or commitment, nor has any event or omission occurred which
through the passage of time or the giving of notice, or both, would
constitute a default thereunder or cause the acceleration of any of
Company's obligations or result in the creation of any Lien on any of the
assets owned, used or occupied by Company. No third party is in default
under any lease, contract or commitment to which Company is a party, nor
has any event or omission occurred which, through the passage of time or
the giving of notice, or both, would constitute a default thereunder or
give rise to an automatic termination, or the right of discretionary
termination, thereof.
3.14. Labor Matters. Except as set forth in Schedule 3.14, within the
last five years Company has not experienced any labor disputes, union
organization attempts or any work stoppage due to labor disagreements in
connection with its business. Except to the extent set forth in Schedule 3.14,
(a) Company is in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice; (b) there is no unfair labor
practice charge or complaint against Company pending or threatened; (c) there is
no labor strike, dispute, request for representation, slowdown or stoppage
actually pending or threatened against or affecting Company nor any secondary
boycott with respect to products of Company; (d) no question concerning
representation has been raised or is threatened respecting the employees of
Company; (e) no grievance which might have a material adverse effect on Company,
nor any arbitration proceeding arising out of or under collective bargaining
agreements, is pending and no such claim therefor exists; and (f) there are no
administrative charges
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or court complaints against Company concerning alleged employment discrimination
or other employment related matters pending or threatened before the U.S. Equal
Employment Opportunity Commission or any Government Entity.
3.15. Employee Benefit Plans.
3.15.(a) Disclosure. Schedule 3.15.(a) sets forth all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other
bonus, medical, dental, life, accident insurance, benefit, employee
welfare, disability, group insurance, stock purchase, stock option, stock
appreciation, stock bonus, executive or deferred compensation,
hospitalization and other similar fringe or employee benefit plans,
programs and arrangements, and any employment or consulting contracts,
"golden parachutes," collective bargaining agreements, severance
agreements or plans, vacation and sick leave plans, programs,
arrangements and policies, including, without limitation, all "employee
benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee manuals,
and all written or binding oral statements of policies, practices or
understandings relating to employment, which are provided to, for the
benefit of, or relate to, any persons employed by Company ("Company
Employees"). The items described in the foregoing sentence are
hereinafter sometimes referred to collectively as "Employee
Plans/Agreements," and each individually as an "Employee Plan/Agreement."
True and correct copies of all the Employee Plans/Agreements, including
all amendments thereto, have heretofore been provided to Buyer. Each of
the Employee Plans/Agreements is identified on Schedule 3.15.(a), to the
extent applicable, as one or more of the following: an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA), a "defined benefit
plan" (as defined in Section 414 of the Code), an "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and/or as a plan
intended to be qualified under Section 401 of the Code. No Employee
Plan/Agreement is a "multiemployer plan" (as defined in Section 4001 of
ERISA), and Company has never contributed nor been obligated to
contribute to any such multiemployer plan.
3.15.(b) Terminations, Proceedings, Penalties, etc. With respect
to each employee benefit plan (including, without limitation, the
Employee Plans/Agreements) that is subject to the provisions of Title IV
of ERISA and with respect to which the Company or any of its assets may,
directly or indirectly, be subject to any Liability, contingent or
otherwise, or the imposition of any Lien (whether by reason of the
complete or partial termination of any such plan, the funded status of
any such plan, any "complete withdrawal" (as defined in Section 4203 of
ERISA) or "partial withdrawal" (as defined in Section
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4205 of ERISA) by any person from any such plan, or otherwise):
(i) no such plan has been terminated so as to
subject, directly or indirectly, any assets of Company to any
liability, contingent or otherwise, or the imposition of any lien
under Title IV of ERISA;
(ii) no proceeding has been initiated or
threatened by any person (including the Pension Benefit Guaranty
Corporation ("PBGC")) to terminate any such plan;
(iii) no condition or event currently exists or
currently is expected to occur that could subject, directly or
indirectly, any assets of Company to any liability, contingent or
otherwise, or the imposition of any lien under Title IV of ERISA,
whether to the PBGC or to any other person or otherwise on account
of the termination of any such plan;
(iv) if any such plan were to be terminated as of
the Closing Date, no assets of Company would be subject, directly
or indirectly, to any liability, contingent or otherwise, or the
imposition of any lien under Title IV of ERISA;
(v) no "reportable event" (as defined in Section
4043 of ERISA) has occurred with respect to any such plan;
(vi) no such plan which is subject to Section 302
of ERISA or Section 412 of the Code has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code, respectively), whether or not waived; and
(vii) no such plan is a multiemployer plan or a
plan described in Section 4064 of ERISA.
3.15.(c) Prohibited Transactions, etc. There have been no
"prohibited transactions" within the meaning of Section 406 or 407 of
ERISA or Section 4975 of the Code for which a statutory or administrative
exemption does not exist with respect to any Employee Plan/Agreement, and
no event or omission has occurred in connection with which the Company or
any of its assets or any Employee Plan/Agreement, directly or indirectly,
could be subject to any liability under ERISA, the Code or any other Law
or Order applicable to any Employee Plan/Agreement, or under any
agreement, instrument, Law or Order pursuant to or under which Company
has agreed to
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indemnify or is required to indemnify any person against liability
incurred under any such Law or Order.
3.15.(d) Full Funding. The funds available under each Employee
Plan/Agreement which is intended to be a funded plan exceed the amounts
required to be paid, or which would be required to be paid if such
Employee Plan/Agreement were terminated, on account of rights vested or
accrued as of the Closing Date (using the actuarial methods and
assumptions then used by Company's actuaries in connection with the
funding of such Employee Plan/Agreement).
3.15.(e) Controlled Group; Affiliated Service Group; Leased
Employees. Except as set forth in Schedule 3.15(e): (i) Company is not
and never has been a member of a controlled group of corporations as
defined in Section 414(b) of the Code or in common control with any
unincorporated trade or business as determined under Section 414(c) of
the Code; (ii) Company is not and never has been a member of an
"affiliated service group" within the meaning of Section 414(m) of the
Code; and (iii) there are not and never have been any leased employees
within the meaning of Section 414(n) of the Code who perform services for
Company, and no individuals are expected to become leased employees with
the passage of time. Company has no liability, actual or contingent,
under Title IV of ERISA.
3.15.(f) Payments and Compliance. Except as set forth in Schedule
3.15.(f), with respect to each Employee Plan/Agreement, (i) all payments
due from Company to date have been made and all amounts properly accrued
to date as liabilities of Company which have not been paid have been
properly recorded on the books of Company and are reflected in the Recent
Balance Sheet; (ii) Company has complied with, and each such Employee
Plan/Agreement conforms in form and operation to, all applicable laws and
regulations, including but not limited to ERISA and the Code, in all
respects and all reports and information relating to such Employee
Plan/Agreement required to be filed with any governmental entity have
been timely filed; (iii) all reports and information relating to each
such Employee Plan/Agreement required to be disclosed or provided to
participants or their beneficiaries have been timely disclosed or
provided; (iv) each such Employee Plan/Agreement which is intended to
qualify under Section 401 of the Code has received a favorable
determination letter from the Internal Revenue Service with respect to
such qualification, its related trust has been determined to be exempt
from taxation under Section 501(a) of the Code, and nothing has occurred
since the date of such letter that has or is likely to adversely affect
such qualification or exemption; (v) there are no actions, suits or
claims pending (other than routine claims for benefits) or threatened
with respect to such Employee Plan/Agreement or
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against the assets of such Employee Plan/Agreement; and (vi) no Employee
Plan/Agreement is a plan which is established and maintained outside the
United States primarily for the benefit of individuals substantially all
of whom are nonresident aliens.
3.15.(g) Post-Retirement Benefits. No Employee Plan/Agreement
provides benefits, including, without limitation, death or medical
benefits (whether or not insured) with respect to current or former
Company employees beyond their retirement or other termination of service
other than (i) coverage mandated by applicable law, (ii) death or
retirement benefits under any Employee Plan/Agreement that is an employee
pension benefit plan, (iii) deferred compensation benefits accrued as
liabilities on the books of Company (including the Recent Balance Sheet),
(iv) disability benefits under any Employee Plan/ Agreement that is an
employee welfare benefit plan and which have been fully provided for by
insurance or otherwise or (v) benefits in the nature of severance pay.
3.15.(h) No Triggering of Obligations. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any
current or former employee of Company to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due to any such employee or former employee or
(iii) result in any prohibited transaction described in Section 406 of
ERISA or Section 4975 of the Code for which an exemption is not
available.
3.15.(i) Delivery of Documents. There has been delivered to Buyer,
with respect to each Employee Plan/Agreement:
(i) a copy of the annual report, if required under
ERISA, with respect to each such Employee Plan/Agreement for the
last two years;
(ii) a copy of the summary plan description, together
with each summary of material modifications, required under ERISA
with respect to such Employee Plan/Agreement, all material
employee communications relating to such Employee Plan/Agreement,
and, unless the Employee Plan/Agreement is embodied entirely in an
insurance policy to which Company is a party, a true and complete
copy of such Employee Plan/Agreement;
(iii) if the Employee Plan/Agreement is funded through a
trust or any third party funding
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vehicle (other than an insurance policy), a copy of the trust or
other funding agreement and the latest financial statements
thereof; and
(iv) the most recent determination letter received from
the Internal Revenue Service with respect to each Employee
Plan/Agreement that is intended to be a "qualified plan" under
Section 401 of the Code.
With respect to each Employee Plan/Agreement for which an annual report
has been filed and delivered to Buyer pursuant to clause (i) of this
Section 3.15.(i), no material adverse change has occurred with respect to
the matters covered by the latest such annual report since the date
thereof.
3.15.(j) Future Commitments. Company has no announced plan or
legally binding commitment to create any additional Employee
Plans/Agreements or to amend or modify any existing Employee
Plan/Agreement.
3.16. Employment Compensation. Schedule 3.16 contains a true and correct
list of all employees to whom Company is paying compensation, including bonuses
and incentives, at an annual rate in excess of Twenty Thousand Dollars ($20,000)
for services rendered or otherwise; and in the case of salaried employees such
list identifies the current annual rate of compensation for each employee and in
the case of hourly or commission employees identifies certain reasonable ranges
of rates and the number of employees falling within each such range.
3.17. Trade Rights. Schedule 3.17 lists all Trade Rights (as defined
below) in which Company now has any interest, specifying whether such Trade
Rights are owned, controlled, used or held (under license or otherwise) by
Company, and also indicating which of such Trade Rights are registered. All
Trade Rights shown as registered in Schedule 3.17 have been properly registered,
all pending registrations and applications have been properly made and filed and
all annuity, maintenance, renewal and other fees relating to registrations or
applications are current. In order to conduct the business of Company, as such
is currently being conducted or proposed to be conducted, Company does not
require any Trade Rights that it does not already have. To the best of Company's
and Shareholders' knowledge, with respect to its use of the name "Charing,"
Company is not infringing and has not infringed any Trade Rights of another, nor
is any other person infringing the rights of Company to the name "Charing".
Other than with respect to its use of the name "Charing", Company is not
infringing and has not infringed any Trade Rights of another in the operation of
the business of Company, nor is any other person infringing the Trade Rights of
Company. Company has not granted any license or made any assignment of any Trade
Right listed on Schedule 3.17, nor does Company pay any royalties or other
consideration for the right to
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use any Trade Rights of others. There is no Litigation pending or threatened to
challenge Company's right, title and interest with respect to its continued use
and right to preclude others from using any Trade Rights of Company. All Trade
Rights of Company are valid, enforceable and in good standing, and there are no
equitable defenses to enforcement based on any act or omission of Company. The
consummation of the transactions contemplated hereby will not alter or impair
any Trade Rights owned or used by Company. As used herein, the term "Trade
Rights" shall mean and include: (i) all trademark rights, business identifiers,
trade dress, service marks, trade names and brand names, all registrations
thereof and applications therefor and all goodwill associated with the
foregoing; (ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the foregoing and the
underlying works of authorship; (iii) all patents and patent applications, and
all international proprietary rights associated therewith; (iv) all contracts or
agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; (v) all inventions, mask works
and mask work registrations, know-how, discoveries, improvements, designs, trade
secrets, shop and royalty rights, employee covenants and agreements respecting
intellectual property and non-competition and all other types of intellectual
property; and (vi) all claims for infringement or breach of any of the
foregoing.
3.18. Major Customers and Suppliers.
3.18.(a) Major Customers. Schedule 3.18.(a) contains a list of the
twenty (20) largest customers of Company for each of the two (2) most
recent fiscal years (determined on the basis of the total dollar amount
of net sales) showing the total dollar amount of net sales to each such
customer during each such year. Neither Company nor any Shareholder has
any knowledge or information of any facts indicating, nor any other
reason to believe, that any of the customers listed on Schedule 3.18.(a)
will not continue to be customers of the business of Company after the
Closing at substantially the same level of purchases as heretofore.
3.18.(b) Major Suppliers. Schedule 3.18.(b) contains a list of all
suppliers that Company paid in excess of $100,000 during either of the
two (2) most recent fiscal years, showing the total dollar amount of
purchases from each such supplier during each such year. Neither Company
nor any Shareholder has any knowledge or information of any facts
indicating, nor any other reason to believe, that any of the suppliers
listed on Schedule 3.18.(b) will not continue to be suppliers to the
business of Company after the Closing and will not continue to supply the
business with substantially the same quantity and quality of goods at
competitive prices.
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3.18.(c) Sales Representatives. Schedule 3.18.(c) contains a list
of all sales representatives of Company, together with true, correct and
complete copies of all sales representative contracts and policy
statements, and a description of all substantial modifications or
exceptions.
3.19. Service Warranty and Liability. Schedule 3.19 contains a true,
correct and complete copy of Company's standard warranty or warranties for sales
of Services (as defined below) and, except as stated therein, there are no
warranties, commitments or obligations with respect to the provision of such
Services. Schedule 3.19 sets forth the estimated aggregate annual cost to
Company of meeting warranty or liability obligations or commitments for
customers for each of the five (5) preceding fiscal years. Schedule 3.19
contains a description of all liability claims and similar Litigation relating
to services rendered, which are presently pending or which to Company's or any
Shareholder's knowledge are threatened, or which have been asserted or commenced
against Company within the last five (5) years, in which a party thereto either
requests injunctive relief or alleges damages (whether or not covered by
insurance). The provision of such services by the Company meets and complies
with all governmental laws and regulations currently in effect. As used in this
Section 3.19, the term "Services" means any and all services currently or at any
time previously rendered, provided or sold by Company, or by any predecessor of
Company under any brand name or xxxx under which services are or have been
rendered, provided or sold by Company.
3.20. Bank Accounts. Schedule 3.20 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which the Company maintains a safe deposit box, lock box or
checking, savings, custodial or other account of any nature, the type and number
of each such account and the signatories therefore, a description of any
compensating balance arrangements, and the names of all persons authorized to
draw thereon, make withdrawals therefrom or have access thereto.
3.21. Affiliates' Relationships to Company.
3.21.(a) Contracts With Affiliates. All leases, contracts,
agreements or other arrangements between Company and any Affiliate are
described on Schedule 3.21.(a).
3.21.(b) No Adverse Interests. No Affiliate has any direct or
indirect interest in (i) any entity which does business with Company or
is competitive with Company's business, or (ii) any property, asset or
right which is used by Company in the conduct of its business.
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3.21.(c) Obligations. All obligations of any Affiliate to Company,
and all obligations of Company to any Affiliate, are listed on Schedule
3.21.(c).
3.22. Assets Necessary to Business. Company presently has and at the
Closing will have good, valid and marketable title to all property and assets,
tangible and intangible, and all leases, licenses and other agreements,
necessary to permit Buyer to carry on the business of Company as presently
conducted.
3.23. No Brokers or Finders. Neither Company nor any of its directors,
officers, employees, Shareholders or agents have retained, employed or used any
broker or finder in connection with the transaction provided for herein or in
connection with the negotiation thereof.
3.24. Year 2000 Compliance. Except as set forth in Schedule 3.24:(a) the
computer source codes, programs and other software of Company (including machine
readable code, printed listings of code, databases, documentation and related
property and information of Company used or under development for use in the
Charing Business) (collectively, "Software") accurately determines chronological
dates and accurately performs all calculations, data manipulations, sorting and
transmission of date data regardless of whether the date represents or
references different centuries (For example, when the actual date changes from
12/31/1999 to 1/1/2000, the Software will accurately determine that 1/1/2000 is
the new date and determine that an individual born in 1948 is 52 years old and
not -48 [i.e., 00-48 = -48], or otherwise incorrectly perform the age
calculation); (b) the Software provides that all date related user interface
functionalities and data fields permit the entry of a four digit year (i.e., the
years 1965, 2065 and 3065 could all be entered by the user without the need of a
manual override) and such date data will result in accurate calculations, data
manipulations, sorting and transmission of all data, including the date data;
(c) the entry of a date equal to or greater than 01/01/2000 into the Software
will not affect any calculation that produces or uses time spans such that the
results of the calculation are incorrect (i.e., such as an interest
calculation); and (d) the integrity of calculations performed utilizing the
Software will not be affected by date data for dates on or after 01/02/2000, and
calculations using previously generated data (on or before 12/31/1999) will also
maintain calculation integrity.
3.25. Systems Performance. The Software and related systems owned or
used by Company perform in accordance with the written specifications previously
delivered to Buyer. The Software and related system components are capable of
interconnecting and/or interfacing with each other, and they deliver the
functionality needed to meet the information systems requirements of the Charing
Business as they are presently conducted. No Shareholder will cause any
unplanned interruption of the operations of, or
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accessibility to, the Software or related systems (or any system component)
through any device, method or means including, without limitation, the use of
any "virus," "lockup," "time bomb" or "key lock" device or program, or disabling
code, which has the potential or capability of causing any unplanned
interruption of the operations of, or accessibility of, the Software or related
systems (or any system component) to Buyer, or any user authorized by Buyer, or
which could alter, destroy or inhibit the use of the Software or related systems
(or any system component), or the data contained therein (collectively,
"Disabling Devices"), which could block access to or prevent the use of the
Software or any system (or system component) by Buyer or any authorized user. No
Shareholder has placed, nor is any Shareholder aware of, any Disabling Device on
any Software or system component owned or used by Company.
3.26. Disclosure. No written representation or warranty by Company
and/or the Shareholders in this Agreement, nor any written statement,
certificate, schedule, document or exhibit hereto furnished or to be furnished
by or on behalf of Company or Shareholders pursuant to this Agreement or in
connection with transactions contemplated hereby, contains or shall contain any
untrue statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to the
Shareholders, each of which was true and correct on the Effective Date (other
than Section 4.2)), remains true as of the Closing Date, shall be unaffected by
any investigation hereafter made by Shareholders or any notice to Shareholders,
and shall survive the Closing of the transactions provided for herein as
provided in Article 6.
4.1. Corporate.
4.1.(a) Organization. Buyer is a corporation duly organized and
validly existing, and its status is active, under the laws of the State
of Florida.
4.1.(b) Corporate Power. Buyer has all requisite corporate power
to enter into this Agreement and the other documents and instruments to
be executed and delivered by Buyer and to carry out the transactions
contemplated hereby and thereby.
4.2. Authority. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Buyer pursuant
hereto and the consummation of the
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transactions contemplated hereby and thereby have been duly authorized by the
Board of Directors of Buyer. No other corporate act or proceeding on the part of
Buyer or its shareholders is necessary to authorize this Agreement or the other
documents and instruments to be executed and delivered by Buyer pursuant hereto
or the consummation of the transactions contemplated hereby and thereby. This
Agreement constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by Buyer pursuant hereto will
constitute, valid and binding agreements of Buyer, enforceable in accordance
with their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
4.3. No Brokers or Finders. Except for Broadview Associates LLC,
neither Buyer nor any of its directors, officers, employees or agents has
retained, employed or used any broker or finder in connection with the
transaction provided for herein or in connection with the negotiation thereof.
Buyer shall be solely responsible for all fees payable to Broadview Associates
LLC in connection with the transactions contemplated by this Agreement.
4.4. Disclosure. No written representation or warranty by Buyer in this
Agreement, nor any written statement, certificate, schedule, document or exhibit
hereto furnished or to be furnished by or on behalf of Buyer pursuant to this
Agreement or in connection with transactions contemplated hereby, contains or
shall contain any untrue statement of material fact or omits or shall omit a
material fact necessary to make the statements contained therein not misleading.
4.5. Investment Intent.
4.5.(a) Not for Resale. Buyer is acquiring the Shares for its own
account, not as nominee or agent, for investment and not with a view to,
or for resale in connection with, any distribution or public offering
within the meaning of the U.S. Securities Act of 1933, as amended.
4.5.(b) Information. Buyer has been furnished with such materials
and has been given access to such information relating to Company as it
or its qualified representative has requested and it has been afforded
the opportunity to ask questions regarding Company and the Shares.
4.5.(c) No Impact on Obligations. The provisions of this Section
4.5 shall not impact or affect the obligations of Company or Shareholders
under this Agreement. Notwithstanding Section 4.5(b) above, Buyer is
acquiring the Shares in reliance on the agreements, covenants,
representations and warranties of Company and Shareholders set forth in
this
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Agreement and the other documents and instruments to be delivered by
Company and Shareholders pursuant hereto.
5. COVENANTS
5.1. Section 338(h)(10) Election.
5.1.(a) Election. At the Buyer's option, Company and Shareholders
will join with the Buyer in making an election under Section 338(h)(10)
of the Code (and any corresponding elections under state tax law)
(collectively, a "Section 338(h)(10) Election") with respect to the
purchase and sale of the stock of the Company hereunder. The Shareholders
of the Company will pay any tax attributable to the making of the Section
338(h)(10) Election and will indemnify the Buyer, the Company and their
subsidiaries against any tax (including interest and penalties) arising
out of any failure to pay such tax. The Shareholders will also pay any
state, local, or foreign tax ((and indemnify the Buyer, the Company and
their subsidiaries against any tax (including interest and penalties)
arising out of any failure to pay such tax)) attributable to an election
under state, local, or foreign law similar to the election available
under Section 338(g) of the Code (or which results from the making of an
election under Section 338(g) of the Code) with respect to the purchase
and sale of the stock of the Company hereunder; provided, however, that
the Wisconsin recycling tax for the fiscal period from January 1 through
February 1, 1998 shall be paid by Company as provided in Section 2.1.(c).
Buyer shall be responsible for the preparation and filing of such
election. The allocation of purchase price among the assets of the
Company shall be made in accordance with Schedule 5.1 hereto.
Shareholders and Buyer shall accept such purchase price allocations and
Buyer and each Shareholder shall report, act, file in all respects and
for purposes consistent with such allocations. Shareholders and the
Company (if required) shall execute and deliver to Buyer at Closing three
copies of such documents or forms (including Section 338 Forms, as
defined below) as Buyer shall request or as are required by applicable
law for an effective Section 338(h)(10) Election, including, without
limitation, any "Statement of Section 338(h)(10)" and IRS Form 8023
(together with any schedules or attachments thereto, the "Section 338
Forms") that are required pursuant to the Treasury Regulations.
5.1.(b) Payment for Additional Tax Liability. At Closing, Buyer
shall deliver to Shareholders' Agent by wire transfer the sum of Thirty
Thousand Dollars ($30,000) for additional federal and State of Wisconsin
income tax payable by Shareholders as a result of the allocation, as set
forth in
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Schedule 5.1, of a portion of the Purchase Price to the noncompetition
agreements contained herein and to certain software development costs.
5.2. Employment and Noncompetition Agreement. Contemporane- ously with
the execution of this Agreement, Shareholders shall cause (i) Xxxxxxx X. Wait to
execute and deliver to Company an Employment and Noncompetition Agreement,
substantially in the form of Exhibit A hereto, and (ii) each of Xxxxxx X. Smart,
Xxxxxxx X. Xxxxxx, Xxxx X. Xxxxx, Xxxx X. Xxxxxx, Xxxxxx X. Xxxxxxx and Xxxxxx
X. Xxxxxxx to execute and deliver to Company an Employment and Noncompetition
Agreement, substantially in the form of Exhibit B hereto.
5.3. Noncompetition; Confidentiality. As an inducement to Buyer to
execute this Agreement and complete the transactions contemplated hereby, and in
order to preserve the goodwill associated with the business of Company being
acquired pursuant to this Agreement, and in addition to and not in limitation of
any covenants contained in any agreement executed and delivered pursuant to
Section 5.2 hereof, each Shareholder hereby covenants and agrees as follows:
5.3.(a) Covenant Not to Compete. For a period of one (1) year
(five (5) years in the case of Xxxxxx X. Smart) from the Closing Date, no
Shareholder will directly or indirectly:
(i) engage in, continue in or carry on any business
which competes with Company or the Charing Business or is
substantially similar thereto, including owning or controlling any
financial interest in any corporation, partnership, firm or other
form of business organization which is so engaged;
(ii) consult with, advise or assist in any way, whether
or not for consideration, any corporation, partnership, firm or
other business organization which is now or becomes a competitor
of Company or Buyer in any aspect with respect to the Charing
Business, including, but not limited to, advertising or otherwise
endorsing the products of any such competitor; soliciting
customers or otherwise serving as an intermediary for any such
competitor; loaning money or rendering any other form of financial
assistance to or engaging in any form of business transaction on
other than an arm's length basis with any such competitor;
(iii) offer employment to an employee of Company or the
Charing Business, without the prior written consent of Buyer; or
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(iv) engage in any practice the purpose of which is to
evade the provisions of this covenant not to compete or to commit
any act which adversely affects the Company or the Charing
Business;
provided, however, that the foregoing shall not prohibit the ownership of
securities of corporations which are listed on a national securities exchange or
traded in the national over-the-counter market in an amount which shall not
exceed 5% of the outstanding shares of any such corporation. The parties agree
that the geographic scope of this covenant not to compete shall extend to and
cover the following states: Wisconsin, Minnesota, Iowa, Illinois and Michigan.
The parties agree that Buyer may sell, assign or otherwise transfer this
covenant not to compete, in whole or in part, to any person, corporation, firm
or entity that purchases all or part of the business of the Company. In the
event a court of competent jurisdiction determines that the provisions of this
covenant not to compete are excessively broad as to duration, geographical scope
or activity, it is expressly agreed that this covenant not to compete shall be
construed so that the remaining provisions shall not be affected, but shall
remain in full force and effect, and any such over broad provisions shall be
deemed, without further action on the part of any person, to be modified,
amended and/or limited but only to the extent necessary to render the same valid
and enforceable in such jurisdiction.
5.3.(b) Covenant of Confidentiality. No Shareholder shall at any
time subsequent to the Closing, except as explicitly requested by Buyer,
(i) use for any purpose, (ii) disclose to any person, or (iii) keep or
make copies of documents, tapes, discs or programs containing, any
confidential information concerning Company. For purposes hereof,
"confidential information" shall mean and include, without limitation,
all Trade Rights in which Company has an interest, all customer lists and
customer information, and all other information concerning Company's
processes, apparatus, equipment, packaging, products, marketing and
distribution methods, not previously disclosed to the public directly by
Company.
5.3.(c) Equitable Relief for Violations. Each Shareholder agrees
that the provisions and restrictions contained in this Section 5.3 are
necessary to protect the legitimate continuing interests of Buyer in
acquiring the Shares, and that any violation or breach of these
provisions will result in irreparable injury to Buyer for which a remedy
at law would be inadequate and that, in addition to any relief at law
which may be available to Buyer for such violation or breach and
regardless of any other provision contained in this Agreement, Buyer
shall be entitled to injunctive and other equitable relief as a court may
grant after considering the intent of this Section 5.3.
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5.4. General Releases. Contemporaneously with the execution of this
Agreement,, each Shareholder shall deliver a general release to Buyer, in
substantially the form attached hereto as Exhibit C.
5.5. Errors and Omissions Gap Coverage. Shareholders shall promptly
reimburse Buyer, up to a maximum of $12,000, for the cost of obtaining errors
and omissions insurance coverage for Company from a carrier acceptable to Buyer.
Such policy shall cover occurrences from February 23, 1996 to August 26, 1997,
the period during which Company did not maintain errors and omissions coverage.
6. INDEMNIFICATION
6.1. By Shareholders. Subject to the terms and conditions of this
Article 6, each Shareholder, jointly and severally, hereby agrees to indemnify,
defend and hold harmless Buyer, its directors, officers, employees and
controlled and controlling persons (hereinafter "Buyer's Affiliates") and the
Company from and against all Claims asserted against, resulting to, imposed
upon, or incurred by Buyer, Buyer's Affiliates or the Company, directly or
indirectly, by reason of, arising out of or resulting from (a) the inaccuracy or
breach of any representation or warranty of any Shareholder or Company contained
in or made pursuant to this Agreement or any agreement or instrument executed
and delivered pursuant to this Agreement, (b) the breach of any covenant or
agreement of any Shareholder or the Company contained in this Agreement or any
agreement or instrument executed and delivered pursuant to this Agreement, (c)
the litigation matters referred to in Schedule 3.9 or any Claim against the
Company and/or any Buyer Affiliate(s) by Xxxxxxx X. Xxxxxxxx, or his heirs or
successors and assigns, relating to or arising out of his sale of shares of
common stock of the Company to the Company and the Shareholders, or (d) the
conduct of the Charing Business or operations of the Company prior to the
Closing. Regardless of the foregoing, however, breaches of representations and
warranties contained in Section 3.2 hereof shall be subject only to several
indemnification by the respective Shareholders who shall have made and breached
such representations and warranties. As used in this Article 6, the term "Claim"
shall include (i) all debts, liabilities and obligations; (ii) all losses,
damages (including, without limitation, consequential damages), judgments,
awards, settlements, costs and expenses (including, without limitation, interest
(including prejudgment interest in any litigated matter), penalties, court costs
and attorneys fees and expenses); and (iii) all demands, claims, suits, actions,
costs of investigation, causes of action, proceedings and assessments, whether
or not ultimately determined to be valid.
6.2. By Buyer. Subject to the terms and conditions of this Article 6,
Buyer hereby agrees to indemnify, defend and hold
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harmless each Shareholder, and each Shareholder's heirs and permitted successors
and assigns, from and against all Claims asserted against, resulting to, imposed
upon or incurred by any such person, directly or indirectly, by reason of or
resulting from (a) the inaccuracy or breach of any representation or warranty of
Buyer contained in or made pursuant to this Agreement or any agreement or
instrument executed and delivered pursuant to this Agreement, or (b) the breach
of any covenant or agreement of Buyer contained in this Agreement or any
agreement or instrument executed and delivered pursuant to this Agreement.
6.3. Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other party under this Article 6 with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
6.3.(a) Notice and Defense. The party or parties to be indemnified
(whether one or more, the "Indemnified Party") will give the party or
parties from whom indemnification is sought (whether one or more, the
"Indemnifying Party") prompt written notice of any such Claim, and the
Indemnifying Party will undertake the defense thereof by representatives
chosen by it. In all matters concerning the Shareholders by virtue of
joint and several liability, the Shareholders' Agent shall give and
receive notice and otherwise act in all respects on their behalf. Failure
to give such notice shall not affect the Indemnifying Party's duty or
obligations under this Article 6, except to the extent the Indemnifying
Party is prejudiced thereby. So long as the Indemnifying Party is
defending any such Claim actively and in good faith, the Indemnified
Party shall not settle such Claim. The Indemnified Party shall make
available to the Indemnifying Party or its representatives all records
and other materials required by them and in the possession or under the
control of the Indemnified Party, for the use of the Indemnifying Party
and its representatives in defending any such Claim, and shall in other
respects give reasonable cooperation in such defense.
6.3.(b) Failure to Defend. If the Indemnifying Party, within a
reasonable time after written notice of any such Claim, fails to defend
such Claim actively and in good faith, the Indemnified Party will (upon
further written notice) have the right to undertake the defense,
compromise or settlement of such Claim or consent to the entry of a
judgment with respect to such Claim, on behalf of and for the account and
risk of the Indemnifying Party, and the Indemnifying Party shall
thereafter have no right to challenge the Indemnified Party's defense,
compromise, settlement or consent to judgment therein.
6.3.(c) Indemnified Party's Rights. Anything in this Section 6.3
to the contrary notwithstanding, (i) if there is
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a reasonable probability that a Claim may materially and adversely affect
the Indemnified Party other than as a result of money damages or other
money payments, the Indemnified Party shall have the right to defend,
compromise or settle such Claim, and (ii) the Indemnifying Party shall
not, without the written consent of the Indemnified Party, settle or
compromise any Claim or consent to the entry of any judgment which does
not include as an unconditional term thereof the giving by the claimant
or the plaintiff to the Indemnified Party of a release from all Liability
in respect of such Claim.
6.4. Payment. The Indemnifying Party shall promptly pay the Indemnified
Party any amount due under this Article 6, which payment may be accomplished in
whole or in part, at the option of the Indemnified Party, by the Indemnified
Party setting off any amount owed to the Indemnifying Party by the Indemnified
Party. To the extent set-off is made by an Indemnified Party in satisfaction or
partial satisfaction of an indemnity obligation under this Article 6 that is
disputed by the Indemnifying Party, upon a subsequent determination by final
judgment not subject to appeal that all or a portion of such indemnity
obligation was not owed to the Indemnified Party, the Indemnified Party shall
pay the Indemnifying Party the amount which was set-off and not owed together
with interest from the date of set-off until the date of such payment at an
annual rate equal to the rate announced by NationsBank, N.A. (or its sucessor)
as its prime rate on the date of set-off. Upon judgment, determination,
settlement or compromise of any third party Claim, the Indemnifying Party shall
pay promptly on behalf of the Indemnified Party, and/or to the Indemnified Party
in reimbursement of any amount theretofore required to be paid by it, the amount
so determined by judgment, determination, settlement or compromise and all other
Claims of the Indemnified Party with respect thereto, unless in the case of a
judgment an appeal is made from the judgment. If the Indemnifying Party desires
to appeal from an adverse judgment, then the Indemnifying Party shall post and
pay the cost of the security or bond to stay execution of the judgment pending
appeal. Upon the payment in full by the Indemnifying Party of such amounts, the
Indemnifying Party shall succeed to the rights of such Indemnified Party, to the
extent not waived in settlement, against the third party who made such third
party Claim.
6.5. Indemnification for Environmental Matters. Without limiting the
generality of the foregoing, each Shareholder, jointly and severally, agrees to
indemnify, reimburse, hold harmless and defend Buyer, Buyer's affiliates and
Company for, from, and against all Claims asserted against, imposed on, or
incurred by any such person, directly or indirectly, in connection with any
pollution, threat to the environment, or exposure to, or manufacture,
processing, distribution, use, treatment, generation, transport or handling,
disposal, emission, discharge, storage or release of
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Waste that (A) is related in any way to Company's or any previous owner's or
operator's ownership, operation or occupancy of the business, properties and
assets owned or used by Company, and (B) in whole or in part occurred, existed,
arose out of conditions or circumstances that existed, or was caused on or
before the Closing Date.
6.6. Limitations on Indemnification. Except for any willful or knowing
breach or misrepresentation, as to which claims may be brought without
limitation as to time or amount:
6.6.(a) Time Limitation. No claim or action shall be brought under
this Article 6 after the lapse of two (2) years following the Closing
Date. Regardless of the foregoing, however, or any other provision of
this Agreement:
(i) Any claim or action brought for breach of any
representation or warranty made by Shareholders with respect to
tax or ERISA matters may be brought at any time within three (3)
years following the Closing Date.
(ii) Any claim for indemnification made by a party
hereunder by delivering written notice of the claim to the
Indemnifying Party or Parties, by filing a suit or action in a
court of competent jurisdiction or a court reasonably believed to
be of competent jurisdiction (in those situations where a lawsuit
is permitted by this Agreement) or by a demand for arbitration in
accordance with Article 9 hereof for breach of a covenant,
agreement, representation or warranty prior to the termination of
the applicable survival period for such claim under this Section
6.6(a) shall be preserved despite the subsequent termination of
such survival period.
(iii) If any act, omission, disclosure or failure to
disclose shall form the basis for a claim for breach of more than
one representation or warranty, and such claims have different
periods of survival hereunder, the termination of the survival
period of one claim shall not affect a party's right to make a
claim based on the breach of representation or warranty still
surviving.
6.6.(b) Amount Limitations.
(i) Basket. An Indemnified Party shall not be entitled
to indemnification under this Article 6 for breach of a
representation or warranty unless the aggregate of the
Indemnifying Party's indemnification obligations to the
Indemnified Party pursuant to this
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Article 6 (but for this Section 6.6(b)) exceeds $25,000; but in
such event, the Indemnified Party shall be entitled to
indemnification in full for all breaches of representations and/or
warranties (subject to the aggregate limit on the indemnification
obligations of Shareholders as set forth in Section 6.6.(b)(ii)).
(ii) Cap. Except as hereinafter set forth, the aggregate
amount of the indemnification obligations of Shareholders pursuant
to this Article 6 shall not exceed Three Million Seven Hundred
Fifty Thousand Dollars ($3,750,000).
6.7. No Waiver. The closing of the transactions contemplated by this
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of condition
constituting the basis of the Claim at or before the Closing, and regardless of
whether such breach, violation or failure is deemed to be "material" for
purposes of Section 9.2.
6.8. Exclusive Remedies.
6.8.(a) Limitation Claims. Except as provided in Section 6.8(b),
anything at law or equity to the contrary notwithstanding, each party's
exclusive remedy against any and all other parties to this Agreement (i) for any
breach of any representation, warranty, covenant or agreement made in this
Agreement, (ii) any breach of any representation, warranty, covenant or
agreement made in any agreement or instrument executed and delivered pursuant to
this Agreement, and (iii) for any and all other claims, of any kind or nature,
which one party may have against any or all other parties hereto with respect to
the transactions contemplated by this Agreement, shall all be limited to a claim
for indemnification in accordance with this Article 6, which claim shall be
subject to the limitations set forth in Section 6.6.
6.8.(b) Exceptions. Section 6.8(a) shall not bar or apply to (i)
any claims or causes of action any party may have against any or all parties
relating to Section 5.3 hereof, to the Employment and Noncompetition Agreements
described in Section 5.2 hereof, or to the General Releases executed and
delivered by Shareholders pursuant to Section 5.4 hereof, (ii) any claims or
causes of action relating to any other agreement between or among any parties
hereto entered into after the Closing Date, (iii) any claims or causes of action
for specific performance of, or injunctive relief with respect to, the terms,
conditions covenants and agreements of this Agreement and any other agreements
or instruments executed and delivered pursuant to this Agreement, or
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(iv) any claims or causes of action any party may have against any or all
parties for fraud or knowing or willful misconduct.
7. CLOSING
The closing of this transaction ("xxx Xxxxxxx") shall take place
contemporaneously with the execution and delivery of this agreement at the
offices of XxXxxxxxxx & Sinykin, One East Main Street, Madison, Wisconsin, at
9:00 A.M. on February 26, 1998, or at such other hour and place as the parties
hereto shall agree upon in writing. The date hereof is referred to in this
Agreement as the "Closing Date". Unless otherwise indicated, the transactions
contemplated hereby shall be deemed for all purposes to be effective as of
February 1, 1998, which date shall be referred to herein as the "Effective
Date".
7.1. Documents to be Delivered by Company and Shareholders. At the
Closing, Company and Shareholders shall deliver to Buyer the following
documents, in each case duly executed or otherwise in proper form:
7.1.(a) Stock Certificate(s). Stock certificates representing the
Shares, duly endorsed for transfer or with duly executed stock powers
attached, in either case as of the Effective Date.
7.1.(b) Opinion of Counsel. A written opinion of XxXxxxxxxx &
Sinykin, counsel to Company and Shareholders, dated as of the Closing
Date, addressed to Buyer, substantially in the form of Exhibit D hereto.
7.1.(c) Consents and Approvals. Executed originals of all
approvals, consents and waivers that are required to effect the
transactions contemplated hereby.
7.1.(d) Estoppel Certificates. An estoppel certificate or status
letter from the landlord under each lease of Real Property, which
estoppel certificate or status letter will certify: (i) the lease is
valid and in full force and effect; (ii) the amounts payable by Company
under the lease and the date to which the same have been paid; (iii)
whether there are, to the knowledge of said landlord, any defaults
thereunder, and, if so, specifying the nature thereof; and (iv) a
statement that the transactions contemplated by this Agreement will not
constitute a default under the lease.
7.1.(e) Employment and Noncompetition Agreements. The Employment
and Noncompetition Agreements referred to in Section 5.5, duly executed
by the persons referred to in such Section.
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7.1.(f) Certified Resolutions. Certified copies of the resolutions
of the Board of Directors and the Shareholders of Company, authorizing
and approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
7.1.(g) Articles; By-Laws. A copy of the By-Laws of Company
certified by the secretary of Company, and a copy of the Amended and
Restated Articles of Incorporation of Company certified by the Secretary
of State of the state of incorpora- tion of Company.
7.1.(h) Incumbency Certificate. Incumbency certifi- xxxxx relating
to each person executing (as a corporate officer or otherwise on behalf
of another person) any document executed and delivered to Buyer pursuant
to the terms hereof.
7.1.(i) General Releases. The General Releases referred to in
Section 5.7, duly executed by the persons referred to in such Section.
7.1.(j) Resignations. The resignations of all officers and
directors of the Company, effective as of the Closing and in form
satisfactory to Buyer's counsel.
7.1.(k) Affidavit. An affidavit from each of the Shareholders in
form and substance satisfactory to Buyer, to the effect that Company is
not a "foreign person," "foreign corporation," "foreign partnership,"
"foreign trust" or "foreign estate" under Section 1445 of the Code, and
containing all such other information as is required to comply with the
requirements of such Section.
7.1.(l) Other Documents. All other documents, instruments or
writings required to be delivered to Buyer at the Closing pursuant to
this Agreement and such other certificates of authority and documents as
Buyer may reasonably request.
7.2. Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver to Shareholders the following documents, in each case duly executed or
otherwise in proper form:
7.2.(a) Cash Purchase Price. To Shareholders' Agent, certified or
bank cashier's checks (or wire transfers) as required by Section 2.2(a)
and Section 5.1.(b) hereof.
7.2.(b) Opinion of Counsel. A written opinion of Xxxxx &
Lardner, counsel to Buyer, dated as of the Closing Date, addressed to
the Shareholders, in substantially the form of Exhibit E hereto.
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7.2.(c) Certified Resolutions. A certified copy of the resolutions
of the Board of Directors of Buyer authorizing and approving this
Agreement and the consummation of the transactions contemplated by this
Agreement.
7.2.(d) Incumbency Certificate. Incumbency certifi- xxxxx relating
to each person executing any document executed and delivered to Company
or Shareholders by Buyer pursuant to the terms hereof.
7.2.(e) Other Documents. All other documents, instruments or
writings required to be delivered to Company at the Closing pursuant to
this Agreement and such other certificates of authority and documents as
Company may reasonably request.
8. TERMINATION
This Agreement may be terminated without further liability of any party
at any time prior to the Closing: (a) by mutual written agreement of Buyer and
Shareholders' Agent; or (b) by either Buyer or Shareholders' Agent (i) if the
Closing shall not have occurred by 11:59 p.m. Eastern time on the date hereof,
provided the terminating party has not, through breach of a representation,
warranty or covenant, prevented the Closing from occurring at or before such
time, or (ii) if any Government Entity shall have issued a final and
non-appealable Order enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement.
9. RESOLUTION OF DISPUTES
9.1. Arbitration.
9.1.(a) Any dispute, controversy or claim arising out of or
relating to this Agreement or any contract or agreement entered into
pursuant hereto or the performance by the parties of its or their terms
shall be settled by binding arbitration held in Madison, Wisconsin in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect, except as specifically otherwise
provided in this Article 9. Notwithstanding the foregoing, Buyer may, in
its discretion, apply to a court of competent jurisdiction for equitable
relief from any violation or threatened violation of the covenants of any
Shareholder under Section 5.3 of this Agreement, or any covenants not to
compete contained in any Employment and Noncompetition Agreement
delivered pursuant to Section 5.2 hereof.
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9.1.(b) No party shall be required to submit to arbitration
hereunder unless all persons who are not parties to this Agreement, but
who are necessary parties to a complete resolution of the controversy,
submit to the arbitration process on the same terms as the parties
hereto. Without limiting the generality of the foregoing, no claim under
Article 6 for the indemnification of a third-party claim shall be subject
to arbitration under this Article 9 unless the third party bringing such
claim against the indemnitee shall agree in writing to the application of
this Article 9 to the resolution of such claim.
9.2. Arbitrators. If the matter in controversy (exclusive of attorney
fees and expenses) shall appear, as at the time of the demand for arbitration,
to exceed $250,000, then the panel to be appointed shall consist of three
neutral arbitrators; otherwise, one neutral arbitrator.
9.3. Procedures; No Appeal. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the circumstances and
shall resolve the dispute as expeditiously as practicable, and if reasonably
practicable, within 120 days after the selection of the arbitrator(s). The
arbitrator(s) shall give the parties written notice of the decision, with the
reasons therefor set out, and shall have 30 days thereafter to reconsider and
modify such decision if any party so requests within 10 days after the decision.
Thereafter, the decision of the arbitrator(s) shall be final, binding, and
nonappealable with respect to all persons, including (without limitation)
persons who have failed or refused to participate in the arbitration process.
9.4. Authority. The arbitrator(s) shall have authority to award relief
under legal or equitable principles, including interim or preliminary relief,
and to allocate responsibility for the costs of the arbitration and to award
recovery of attorneys fees and expenses in such manner as is determined to be
appropriate by the arbitrator(s).
9.5. Entry of Judgment. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject matter
jurisdiction. Buyer and each Shareholder hereby submit to the in personam
jurisdiction of the Federal and State courts in Wisconsin, for the purpose of
confirming any such award and entering judgment thereon.
9.6. Confidentiality. All proceedings under this Article 9 and all
evidence given or discovered pursuant hereto, shall be maintained in confidence
by all parties.
9.7. Continued Performance. The fact that the dispute resolution
procedures specified in this Article 9 shall have been or may be invoked shall
not excuse any party from performing its
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obligations under this Agreement and during the pendency of any such procedure
all parties shall continue to perform their respective obligations in good
faith, subject to any rights to terminate this Agreement that may be available
to any party and to the right of setoff provided in Section 6.4 hereof.
9.8. Tolling. All applicable statutes of limitation shall be tolled
while the procedures specified in this Article 9 are pending. The parties will
take such action, if any, required to effectuate such tolling.
10. MISCELLANEOUS
10.1. Disclosure Schedule. The Schedules have been compiled in a bound
volume (the "Disclosure Schedule"), executed by Shareholders and dated and
delivered to Buyer on the date of this Agreement. Information set forth in the
Disclosure Schedule specifically refers to the article and section of this
Agreement to which such information is responsive and such information shall not
be deemed to have been disclosed with respect to any other article or section of
this Agreement or for any other purpose. The Disclosure Schedule includes a
table of contents and/or index to all of the information and documents contained
therein. The Disclosure Schedule shall not vary, change or alter the language of
the representations and warranties contained in this Agreement and, to the
extent the language in the Disclosure Schedule does not conform in every respect
to the language of such representations and warranties, such language in the
Disclosure Schedule shall be disregarded and be of no force or effect.
10.2. Further Assurance. From time to time, at Buyer's request and
without further consideration, Company and Shareholders will execute and deliver
to Buyer such documents and take such other action as Buyer may reasonably
request in order to consummate more effectively the transactions contemplated
hereby.
10.3. Disclosures and Announcements. Announcements concerning the
transactions provided for in this Agreement by Buyer, Company or Shareholders
shall be subject to the approval of the other parties in all essential respects,
except that approval of the Shareholders or Company shall not be required as to
any statements and other information which Buyer may submit to the Securities
and Exchange Commission, the Nasdaq Stock Market ("Nasdaq") or Buyer's
stockholders or be required to make pursuant to any rule or regulation of the
Securities and Exchange Commission or Nasdaq, or otherwise required by law.
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10.4. Assignment; Parties in Interest.
10.4.(a) Assignment. Except as expressly provided herein, the
rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the other
parties. Notwithstanding the foregoing, Buyer may, without consent of any
other party, (i) merge Company with and into itself and/or any subsidiary
of Buyer, or (ii) cause one or more subsidiaries of Buyer to carry out
all or part of the transactions contemplated hereby; provided, however,
that Buyer shall, nevertheless, remain liable for all of its obligations,
and those of any such subsidiary, to Shareholders hereunder.
10.4.(b) Parties in Interest. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the respective
successors and permitted assigns of the parties hereto. Nothing contained
herein shall be deemed to confer upon any other person any right or
remedy under or by reason of this Agreement.
10.5. Law Governing Agreement. This Agreement may not be modified or
terminated orally, and shall be construed and inter- preted according to the
internal laws of the State of Wisconsin, excluding any choice of law rules that
may direct the application of the laws of another jurisdiction.
10.6. Amendment and Modification. Buyer and Shareholders may amend,
modify and supplement this Agreement in such manner as may be agreed upon in
writing between Buyer and Shareholders' Agent; provided, however, that Buyer
may, in Buyer's sole discretion, require the execution of any amendment by all
of the Shareholders personally.
10.7. Notice. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight delivery courier service.
The respective addresses to be used for all such notices, demands or requests
are as follows:
(a) If to Buyer, to:
ABR Information Services, Inc.
00000 X.X. Xxxxxxx 00 Xxxxx
Xxxx Xxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. XxxXxxxxxx
Chairman of the Board, President
and Chief Executive Officer
Facsimile: (000) 000-0000
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(with a copy to)
Xxxxx & Lardner
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
or to such other person or address as Buyer shall furnish to Shareholders' Agent
in writing.
(b) If to Shareholders, to Shareholders' Agent:
0 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Smart
Facsimile: (000) 000-0000
(with a copy to)
XxXxxxxxxx & Sinykin
One East Madison Xxxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
or to such other person or address as Shareholders shall designate as a
successor Shareholders' Agent in accordance with this Agreement.
(c) If to Company, to:
Charing Company, Inc.
0 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
(with a copy to)
Xxxxx & Xxxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Any notice to Company given after Closing shall also be given in the same manner
to Buyer.
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If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent by
overnight courier pursuant to this paragraph, such communication shall be deemed
delivered upon receipt; and if sent by U.S. mail pursuant to this paragraph,
such communication shall be deemed delivered as of the date of delivery
indicated on the receipt issued by the relevant postal service, or, if the
addressee fails or refuses to accept delivery, as of the date of such failure or
refusal. Any party to this Agreement may change its address for the purposes of
this Agreement by giving notice thereof in accordance with this Section.
10.8. Expenses.
10.8.(a) Brokerage. Except as to Broadview Associates LLC, which
shall be compensated by Buyer, Shareholders and Buyer each represent and
warrant to each other that there is no broker involved or in any way
connected with the transfer provided for herein on their behalf
respectively (and Shareholders represent and warrant that there is no
broker involved on behalf of Company) and each agrees to hold the other
harmless from and against all other claims for brokerage commissions or
finder's fees in connection with the execution of this Agreement or the
transactions provided for herein.
10.8.(b) Expenses to be Paid by Shareholders. Shareholders shall
pay, and shall indemnify, defend and hold Buyer and Company harmless from
and against, any sales, use, excise, transfer or other similar tax
imposed with respect to the transactions provided for in this Agreement,
and any interest or penalties related thereto.
10.8.(c) Expenses to be Paid by Company. Company shall pay the
reasonable costs and expenses of Xxxxxx, Xxxxx & Xxxxxxx, S.C. associated
with the preparation of Company's audited financial statements for the
1996 and 1997 calendar years and Company's federal and State of Wisconsin
tax returns for the 1997 calendar year and 1998 S corporation fiscal
period of January 1 through January 31.
10.8.(d) Other. Except as otherwise provided herein, each of the
parties shall bear its own expenses and the expenses of its counsel and
other agents in connection with the transactions contemplated hereby.
10.8.(e) Costs of Litigation or Arbitration. The parties agree
that (subject to the discretion, in an arbitration proceeding, of the
arbitrator as set forth in Section 9.4) the prevailing party in any
action brought with
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respect to or to enforce any right or remedy under this Agreement shall
be entitled to recover from the other party or parties all reasonable
costs and expenses of any nature whatsoever incurred by the prevailing
party in connection with such action, including without limitation
attorneys' fees and prejudgment interest.
10.9. Tax Records. Buyer shall cause all books and records of Company in
its possession on the Closing Date and relating to the Shareholders' tax
obligations (the "Tax Records") to be retained by Company until the fifth
anniversary of the Closing Date. Thereafter, Buyer shall cause Company not to
destroy such Tax Records prior to the seventh anniversary of the Closing Date
without first giving Shareholders written notice at least forty-five (45) days
prior to the date when any such Tax Records are to be destroyed. During such
period, Shareholders shall have the right to obtain from Company Tax Records
which are intended to be destroyed. After the Closing Date, Shareholders may
inspect and make copies of Tax Records as reasonably required upon reasonable
advance notice and at reasonable times.
10.10. Entire Agreement. This instrument embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.
10.11. Counterparts; Facsimile Signatures. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. This Agreement
and the Ancillary Instruments may be effective upon the execution and delivery
by any party hereto of facsimile copies of signature pages hereto and thereto
duly executed by such party; provided, however, that any party delivering a
facsimile signature page covenants and agrees to deliver promptly after the date
hereof two (2) original copies to the other parties hereto.
10.12. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
10.13. Shareholders' Agent; Power of Attorney.
10.13.(a) Shareholders' Agent. The Shareholders hereby appoint and
constitute Xxxxxx X. Smart as Shareholders' Agent hereunder, to exercise
the powers on behalf of Shareholders set forth in this Agreement; and
Xxxxxx X. Smart hereby accepts such appointment. In the event of the
death, resignation or inability to act of Xxxxxx X. Smart, and upon
receipt by Buyer of evidence of the same which is satisfactory to Buyer,
Xxxxxx X. Xxxxxxx shall be successor Shareholders' Agent with all powers
of his predecessor.
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10.13.(b) Power of Attorney. Each Shareholder, by his or her
execution of this Agreement, hereby constitutes and appoints the
Shareholders' Agent his or her true and lawful attorney in fact, with
full power in his or her name and on his or her behalf:
(i) to receive on behalf of such Shareholder the
proceeds of sale of such Shareholder's Shares being sold
hereunder, to give Buyer a receipt therefor on behalf of such
Shareholder and to hold such proceeds subject to the terms hereof
and the instructions of such Shareholder with respect to the
ultimate disbursement thereof;
(ii) to act on such Shareholder's behalf according to the
terms of this Agreement, including, without limitation, the power
to calculate and negotiate the payment of the Contingent Payment
as provided in Sections 2.1 and 2.2.(b); to contest or acquiesce
in any claim by Buyer pursuant to Section 2.2.(c); to amend this
Agreement in accordance with Article 10.6 or terminate this
Agreement in accordance with Section 8; to consent to the
assignment of rights under this Agreement in accordance with
Section 10.4.(a); to give and receive notices on behalf of all the
Shareholders; and to act on their behalf in connection with any
matter as to which the Shareholders jointly and severally are an
"Indemnified Party" or "Indemnifying Party" under Article 6
hereof; all in the absolute discretion of the Shareholders' Agent;
(iii) in general, to do all things and to perform all
acts, including, without limitation, executing and delivering all
agreements, certificates, receipts, instructions and other
instruments contemplated by or deemed advisable, in the
Shareholders' Agent's sole discretion, in connection with this
Agreement.
This power of attorney, and all authority hereby conferred, is granted
subject to the interests of the other Shareholders and the Buyer
hereunder and in consideration of the mutual covenants and agreements
made herein, and shall be irrevocable and shall not be terminated by any
act of any Shareholder or by operation of law, whether by the death or
incapacity of any Shareholder or by the occurrence of any other event.
Each Shareholder agrees, jointly and severally, to hold the Shareholders'
Agent free and harmless from any and all loss, damage or liability which
they, or any one of them, may sustain as a result of any action taken in
good faith hereunder.
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10.14. Glossary of Terms. The following sets forth the location of
certain definitions of capitalized terms defined in the body of this Agreement:
"Affiliate" - Section 3.7.(k)
"Ancillary Instruments" - Section 3.2.(a)
"Buyer's Affiliates" - Section 6.1
"CERCLA" - Section 3.10.(c)
"Claim" - Section 6.1
"Closing" - Preamble to Article 9
"Closing Date" - Section 7
"Code" - Section 3.5.(e)
"Company Employees" - Section 3.15.(a)
"Contingent Payment" - Section 2.1
"Disclosure Schedule" - Article 10
"Effective Date" - Section 7
"Employee Plans/Agreement(s)" - Section 3.15.(a)
"Environmental Laws" - Section 3.10.(c)
"ERISA" - Section 3.15.(a)
"Escrow Agreement" - Section 5.4
"Estimated Closing Balance Sheet" - Section 2.3.(b)
"Facilities" - Second Recital
"Government Entities" - Section 3.3
"Indemnified Party" - Section 6.3.(a)
"Indemnifying Party" - Section 6.3.(a)
"Laws" - Section 3.3
"Lien" - Section 3.11.(a)
"Litigation" - Section 3.9
"Orders" - Section 3.3
"PBGC" - Section 3.15.(b)(ii)
"Purchase Price" - Section 2.1
"Real Property" - Section 3.11.(c)
"Recent Balance Sheet" - Section 3.4
"Section 338(h)(10) Election" - Section 5.1
"Services" - Section 3.19
"Settlement Date" - Section 2.2.(c)
"Shares" - First Recital
"Trade Rights" - Section 3.17
"Waste" - Section 3.10.(c)
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date and year first above written.
BUYER:
ABR INFORMATION SERVICES, INC.,
a Florida corporation
By:
-----------------------------------
Title:
-----------------------------
COMPANY:
CHARING COMPANY, INC.,
a Wisconsin corporation
By:
-----------------------------------
Title:
-----------------------------
SHAREHOLDERS:
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Xxxxxx X. Smart, Individually
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Xxxxxxx X. Xxxxxx, Individually
---------------------------------------
Xxxx X. Xxxxx, Individually
---------------------------------------
Xxxx X. Xxxxxxx, Individually
---------------------------------------
Xxxxxx X. Xxxxxxx, Individually
---------------------------------------
Xxxxxx X. Xxxxxxx, Individually
SHAREHOLDERS' AGENT:
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Xxxxxx X. Smart
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