EXHIBIT 10.25
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT is made and entered into effective as of September __,
1996, by and among Fair, Xxxxx and Company, Incorporated ("Buyer"), a Delaware
corporation; FIC Acquisition Corporation ("Acquisition Subsidiary"), a Delaware
corporation; Credit & Risk Management Associates, Inc. ("Seller"), a Delaware
corporation; and Xxxxxx X. Xxxxxxx, Xxxx X. Xxxxxxxx, and Xxxxxxxx X. Xxxxx
(collectively, the "Shareholders").
RECITALS:
A. Buyer desires to acquire by forward subsidiary merger all of the
assets and business of Seller upon the terms and conditions set forth herein.
B. The Shareholders, as the owners of all of the issued and outstanding
capital stock of Seller, wish to dispose of their interests in Seller upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and for other valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties mutually
agree as follows:
ARTICLE 1
Definitions
In this Agreement the following terms shall have the meanings assigned
to them below:
1.1 "Acquisition Subsidiary" means FIC Acquisition Corporation, a
Delaware corporation.
1.2 "Adjustment Amount" means the amount determined in accordance with
the provisions of Section 2.7(a)(i).
1.3 "Affiliate" of a specified person or entity means a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified.
1.4 "Average Market Price" means the average of the reported last sale
price at which the Buyer Common Stock is trading as reported on the New York
Stock Exchange composite tape for the twenty (20) consecutive trading days
immediately preceding the applicable date.
1.5 "Balance Sheet" means the balance sheet of Seller dated June 30,
1996, as described in Section 2.7.
1.6 "Base Consideration" means an amount equal to Three Million Four
Hundred Ninety Thousand Five Hundred Fifty-Three Dollars and no/100
($3,490,553.00) plus or minus, as the case may be, the Adjustment Amount.
1.7 "Buyer Common Stock" means shares of common stock of Buyer, $.01
par value per share.
1.8 "Cash Payment" means the amount determined in accordance with the
provisions of Section 2.4.
1.9 "Closing" means the meeting of the parties at which the
transactions contemplated herein to occur are completed, which meeting shall be
held at 9:00 a.m., local time, at the offices of Miles & Stockbridge, 10 Light
Street, Baltimore, MD, on the Closing Date, or at such other time or place as
may be mutually agreed upon by the parties.
1.10 "Closing Date" means September 30, 1996, or such other date as may
be mutually agreed upon by the parties.
1.11 "Direct Margin" shall mean the amount calculated in the manner
described in Section 2.8(a).
1.12 "Earnout Cash Payment" means the cash portion of the Earnout
Payment as determined in accordance with Section 2.8.
1.13 "Earnout Payment" means one of the three payments to be made to
the Shareholders pursuant to the provisions of Section 2.8.
1.14 "Earnout Statement" means the report delivered to the Shareholders
pursuant to the provisions of Section 2.8(c)(i).
1.15 "Effective Time" means 12:01 a.m. on the date described in Section
6.1.
1.16 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.17 "ERISA Plans" means all employee benefit plans of Seller within
the meaning of Section 3(3) of ERISA, as described in Section 3.18.
1.18 "Final Balance Sheet" means the balance sheet of Seller as of the
close of business immediately prior to the Effective Time as described in
Section 2.7(a)(i).
1.19 "Financial Statements" means the financial statements of Seller
described in Section 3.5.
1.20 "Indemnity Period" means the period described in Section 8.1.
1.21 "Intellectual Property" means patents and patent applications,
copyrights and copyright applications, trademarks, service marks, trade names,
know-how, trade secrets, data, information, technology, processes, formulas,
drawings, designs, computer programs, and license rights to any of the
foregoing.
1.22 "Liens" means any liens, mortgages, pledges, encumbrances,
conditional sales agreements, security interests, or title retention devices of
any nature.
1.23 "Merger" means the merger of Seller into Acquisition Subsidiary as
described in section 2.1.
1.24 "Merger Articles" means the Certificate of Merger with respect to
the Merger, as described in Section 2.1.
1.25 "Merger Consideration" means the aggregate consideration payable
to the Shareholders, as described in Section 2.2.
1.26 "Permitted Liens" means the Liens against the assets of Seller
described on Schedule 1.26 hereto.
1.27 "Report" means the report prepared by Buyer as described in
Section 2.7(a)(i).
1.28 "SEC" means the Securities and Exchange Commission.
1.29 "SEC Reports" means all periodic and/or current reports,
registration statements and proxy statements filed with the SEC.
1.30 "Securities Act" means the Securities Act of 1933, as amended.
1.31 "Seller Shares" means all of the issued and outstanding capital
stock of Seller.
1.32 "Surviving Corporation" means the Acquisition Subsidiary as the
surviving corporation in the Merger, as described in Section 2.1.
1.33 "Tax" means any tax or other primary, secondary or transferee
liability to any governmental entity, including without limitation, all federal,
state, county, local and foreign income, profits, gross receipts, withholding,
payroll, sales, use, employment, value added, custom, duty, and any other taxes,
obligations, and assessments of any kind whatsoever, together with all interest
and penalties; the foregoing shall include any liability arising as a result of
being (or ceasing to be) a member of any affiliated, consolidated, combined, or
unitary group as well as any liability under any Tax allocation, Tax sharing,
Tax indemnity or similar agreement.
ARTICLE 2
Merger
2.1 Merger. Buyer has caused to be formed, Acquisition Subsidiary which
is a wholly owned subsidiary of Buyer in order to consummate the acquisition by
merger contemplated hereby. At the Effective Time, pursuant to the provisions of
this Agreement and pursuant to the provisions of the General Corporation Law of
the State of Delaware, Seller shall be merged with and into Acquisition
Subsidiary (the "Merger"), which shall be the surviving corporation in the
Merger ("Surviving Corporation"), and the separate existence of Seller shall
thereupon cease. After the Effective Time, the existence and corporate
organization of Acquisition Corporation shall continue in effect as the
Surviving Corporation. Buyer shall cause to be filed with the Secretary of State
of the State of Delaware, a certificate of merger substantially in the form
attached hereto as Exhibit 2.1 (the "Merger Articles"). It is intended that the
Merger constitute and qualify as a tax-free reorganization pursuant to the
provisions of Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as
amended.
(a) The Certificate of Incorporation of Acquisition Subsidiary
in effect immediately prior to the Effective Time shall be and remain
the Certificate of Incorporation of the Surviving Corporation, except
that Article 1 of such Certificate of Incorporation shall, at the
Effective Time and pursuant to the Merger, be amended to read as
follows:
"The name of the corporation is Credit & Risk Management Associates,
Inc."
(b) The Bylaws of Acquisition Subsidiary in effect immediately
prior to the Effective Time shall be and remain the Bylaws of the
Surviving Corporation, until amended in accordance with law.
(c) The directors and the officers of the Surviving
Corporation at and after the Effective Time shall be the individuals
specified in Exhibit 2.1(c). Such individuals shall continue as the
directors and the officers, respectively, of the Surviving Corporation
until their successors are elected and qualified.
(d) Each share of stock of Acquisition Subsidiary issued and
outstanding at the Effective Time shall not be changed or converted by
virtue of the Merger and shall remain outstanding following the Merger,
having rights and preferences identical to those which it had
immediately prior to the Effective Time.
(e) Each share of stock of Seller issued and outstanding at
the Effective Time shall be changed or converted by virtue of the
Merger into the Merger Consideration described in this Article 2.
(f) At the Closing, the Shareholders shall surrender their
outstanding certificates (each referred to herein as a "Seller
Certificate") representing the Seller Shares to Acquisition
Corporation. Any outstanding Seller Certificate not so surrendered
shall be deemed for all corporate purposes to evidence the ownership of
the right to receive the Merger Consideration. No interest shall be
paid or accrued on the amounts to be received upon surrender of a
Seller Certificate.
(g) After the Effective Time, there shall be no transfers on
the stock transfer books of Seller of any Seller Certificates. If,
after the Effective Time, a Seller Certificate is presented to the
Surviving Corporation for transfer, such Seller Certificates shall be
canceled and exchanged for the Merger Consideration.
2.2 Merger Consideration. The "Merger Consideration" shall mean: (i)
the aggregate number of shares of Buyer Common Stock to be paid to the
Shareholders described in Section 2.3 below; (ii) the Cash Payment to be paid to
the Shareholders described in Section 2.4 below; (iii) the aggregate number of
shares of Buyer Common Stock to be issued to the Shareholders as part of the
Earnout as described in Section 2.8; and (iv) the Earnout Cash Payments to be
paid to the Shareholders as part of the Earnout as described in Section 2.8. The
certificates evidencing the Buyer Common Stock shall contain a legend
restricting transfer under the Securities Act and identifying other restrictions
or limitations described in this Agreement, such legend to be substantially as
follows:
The securities represented by this certificate have not been registered
or qualified under the Securities Act of 1933 or the securities laws of
any state, and may be offered and sold only if registered and qualified
pursuant to the relevant provisions of federal and state securities
laws or if the company has been provided with an opinion of counsel
satisfactory to the company that registration and qualification under
federal and state securities laws is not required.
The Buyer Common Stock constituting Merger Consideration shall be subject to the
terms of an agreement granting limited registration rights (the "Registration
Rights Agreement")in the form attached hereto as Exhibit 2.2. No consideration
of any kind, other than the Merger Consideration, shall be paid or transferred
by Buyer to the Shareholders in consideration for the Seller Shares.
2.3 Conversion of Shares. Subject to the other provisions of this
Article 2, the manner and basis of converting the Seller Shares into Buyer
Common Stock shall be as follows:
(a) At the Effective Time, the Seller Shares then outstanding
shall, by virtue of the Merger and without any further action on the
part of the holders thereof, be converted into and thereafter shall
constitute the right to receive the number of shares of Buyer Common
Stock calculated as described in Section 2.3.(b) and such other shares
as may become payable pursuant to the terms of Section 2.8.
(b) The Shareholders shall receive a number of shares of Buyer
Common Stock equal to the Base Consideration (which Base Consideration
shall be reduced by the amount of the Cash Payment described in Section
2.4) divided by the Average Market Price as of the Closing Date or, if
sooner, the date on which the Merger is publicly announced by or with
the express consent of Buyer or otherwise publicly disclosed by any
agent or employee of Buyer. The Shareholders shall each receive the
shares of Buyer Common Stock in proportion to their holdings of Seller
Shares. The parties acknowledge and agree that they will be unable to
determine the total number of shares of Buyer Common Stock on the
Closing Date due to the inability to determine the Base Consideration
and the Cash Payment. At least seven (7) business days prior to the
Closing Date, the parties shall, in good faith, estimate the number of
shares of Buyer Common Stock to be issued to the Shareholders. The
final determination of number of shares of Buyer Common Stock shall be
made in accordance with the provisions of Section 2.7.
2.4 Cash Portion of Merger Consideration. Subject to the other
provisions of this Article 2, the manner and basis of converting the Seller
Shares into cash shall be as follows:
(a) At the Effective Time, the Seller Shares then outstanding
shall, by virtue of the Merger and without any further action on the
part of the holders thereof, be converted into and thereafter shall
constitute the right to receive the payment described in Section 2.4(b)
and such other payments as may become payable pursuant to the terms of
Section 2.8.
(b) The Shareholders shall receive, in cash, an amount equal
to forty-five percent (45%) of the Base Consideration (the "Cash
Payment"). The Shareholders shall each receive a portion of the Cash
Payment in proportion to their holdings of Seller Shares. The parties
acknowledge and agree that the Cash Payment will not be able to be
finally determined by the Closing Date due to the inability to
determine the Base Consideration. At least seven (7) business days
prior to the Closing Date, the parties shall, in good faith, estimate
the Cash Payment. The final determination of the Cash Payment shall be
made in accordance with the provisions of Section 2.7.
2.5 Exchange of Certificates; Cash Payment. At the Closing, the
Shareholders shall deliver to Buyer, in escrow, certificates representing the
Seller Shares, and Buyer shall issue instructions to its transfer agent
directing the issuance to Shareholders of certificates representing the
estimated number of shares of Buyer Common Stock determined in accordance with
Section 2.3(b). In addition, on the Closing Date, Buyer shall deliver certified
or cashier's checks payable to the Shareholders, or equivalent instrument or
funds, in the amount of the estimated Cash Payment in escrow. Buyer shall then,
by 10:00 a.m. on the first business day following the Effective Time, deliver to
the Shareholders, in proportion to their holdings of Seller Shares, the
estimated Cash Payment.
2.6 Treatment of Outstanding Seller Debt and Warrants. Prior to the
Closing, Seller shall take the following actions with respect to its outstanding
debts, securities, options, warrants, and other obligations: (i) all outstanding
convertible securities of Seller will be converted to equity and become part of
the Seller Shares; (ii) all non-trade debt owed to Seller by any Affiliates or
other related parties of Seller (other than the Shareholders) will be repaid by
the Affiliate or related party to Seller; and (iii) all outstanding options,
warrants, and other rights to purchase Seller Shares will be canceled. Any
non-trade debt owed by Seller to the Shareholders at the Effective Time shall be
repaid by Buyer to the Shareholders within thirty (30) days of the Effective
Time. Any trade debt between Seller and its Affiliates or other related parties
that is outstanding at the Effective Time shall remain outstanding and be paid
in the normal course of business.
2.7 Post-Closing Adjustments. After the Closing, the final
determination of Base Consideration and the Cash Payment shall be made as
provided in this Section 2.7 as follows:
(a) (i) Not later than forty-five (45) days after the Closing
Date, Buyer shall deliver to the Shareholders a balance sheet
of Seller as of the close of business immediately prior to the
Effective Time (the "Final Balance Sheet"). The Final Balance
Sheet shall be prepared by the accountants regularly retained
by Buyer in accordance with generally accepted accounting
principles consistent with past practices of Seller including,
without limitation, revenue recognition methods and practices
employed to calculate the balance sheet of Seller dated June
30, 1996 (the "Balance Sheet"). Without limiting the
generality of the foregoing, the accountants regularly
retained by Buyer shall employ the same methods of recognizing
unbilled work in process and accrued tax liabilities as the
methods used by Seller in determining the Balance Sheet. The
cost of the preparation of the Final Balance Sheet shall be
borne by Buyer. The Final Balance Sheet shall be accompanied
by a report (the "Report") prepared by Buyer containing the
calculation of Base Consideration, Cash Payment and the number
of shares of Buyer Common Stock described in Section 2.3(b) in
reasonable detail. In determining Base Consideration, Buyer
shall determine the "Adjustment Amount" which shall be equal
to the amount determined by subtracting an amount equal to
Four Hundred Ninety Thousand Five Hundred Fifty Three and
no/100 Dollars ($490,553.00) from the retained earnings as
shown on the Final Balance Sheet. The Adjustment Amount may be
either a positive number or a negative number.
(ii) The Shareholders shall have fifteen (15) days after
delivery of the Final Balance Sheet and the Report within
which to present in writing to Buyer any objections the
Shareholders may have to any of the matters set forth therein,
which objections shall be set forth in reasonable detail. The
Shareholders and the Shareholder's independent public
accountants shall have the opportunity to examine the work
papers, schedules and other documents prepared in connection
with the preparation of the Final Balance Sheet and the
Report. If no objections are presented within such fifteen
(15) day period, or if the Shareholders shall deliver to Buyer
a notice stating that the Shareholders accept and approve the
Final Balance Sheet and Report and shall present no objection
to any matter set forth therein, the Final Balance Sheet and
Report shall be deemed accepted and approved by the
Shareholders.
(iii) If the Shareholders shall present any objection
within the fifteen (15) day period, the Shareholders and Buyer
shall attempt to resolve the matter or matters in dispute,
and, if resolved within twenty (20) days (or such longer
period as the Shareholders and Buyer may agree upon) after
delivery of any such written objections to Buyer, the parties
shall adjust the number of shares of Buyer Common Stock
payable to the Shareholders and the Cash Payment payable to
the Shareholders as provided in Section 2.7(b) based upon the
Final Balance Sheet and the Report with such changes therein,
if any, as are required to reflect the resolution of any such
disputed matter or matters.
(iv) If such dispute cannot be resolved by the
Shareholders and Buyer, then the specific matters in dispute
shall be submitted to the Baltimore office of Xxxxxx Xxxxxxxx
LLP, or, if such firm declines to act in such capacity, such
other firm of independent public accountants mutually
acceptable to Buyer and the Shareholders, which firm shall
make a final and binding written determination as to such
matter or matters within sixty (60) days after submission.
Such accounting firm shall send its written determination to
Buyer and the Shareholders and the parties shall adjust the
number of shares of Buyer Common Stock payable to the
Shareholders and the Cash Payment payable to the Shareholders
as provided in Section 2.7(b) in accordance with such written
determination. The fees and expenses of the accounting firm
referred to in this Section 2.7(a)(iv) shall be paid one-half
(1/2) by Buyer and one-half (1/2) by the Shareholders.
(v) Buyer and the Shareholders agree to cooperate
with each other's accountants and authorized representatives
in order that any matters in dispute under this Section 2.7
may be resolved as soon as possible.
(b) Following final determination of the Base Consideration
and the Cash Payment, the party shall determine the number of shares of
Buyer Common Stock transferable to the Shareholders in accordance with
the provisions of Section 2.3(b). If, as a result of the determination
of the adjustment described in this Section 2.7, the number of shares
of Buyer Common Stock to which the Shareholders are entitled is greater
than the number delivered in accordance with Section 2.5, Buyer shall
issue such additional shares of Buyer Common Stock within ten (10)
business days after the final determination of the actual number of
shares of Buyer Common Stock to be issued in accordance with Section
2.3(b). If instead the number of shares of Buyer Common Stock to be
issued to the Shareholders is less than the number of shares of Buyer
Common Stock delivered in accordance with Section 2.5, the Shareholders
shall return the necessary number of shares of Buyer Common Stock to
Buyer for cancellation by Buyer within ten (10) business days after the
final determination of the actual number of shares of Buyer Common
Stock to be issued in accordance with Section 2.3(b). If, as a result
of the determination of the Adjustment Amount described in this Section
2.7, the Cash Payment to which the Shareholders are entitled is greater
than the estimated Cash Payment paid to them in accordance with Section
2.5, Buyer shall deliver to the Shareholders by certified or bank
cashier's checks or by wire transfer to an account designated by the
Shareholders, within ten (10) business days after final determination
of the Cash Payment, the difference between the estimated Cash Payment
and the actual amount of the Cash Payment. If instead the Cash Payment
to which the Shareholders are entitled is less than the estimated Cash
Payment paid to them in accordance with Section 2.5, the Shareholders
shall deliver to Buyer by certified or bank cashier's check or by wire
transfer to an account designated by Buyer within ten (10) business
days after the final determination of the Cash Payment, the difference
between the estimated Cash Payment and the actual amount of the Cash
Payment.
2.8 Determination of Earnout Payments. For each of the following three
(3) fiscal years ending September 30, 1997, September 30, 1998 and September 30,
1999, the Shareholders shall, as additional consideration for the Merger receive
the following amounts (each an "Earnout Payment") equal to the amount determined
in accordance with this Section 2.8 as follows:
(a) For each of the fiscal years ending September 30, 1997,
1998 and 1999, Buyer shall determine the "Direct Margin." Direct Margin
shall be equal to all xxxxxxxx of Surviving Corporation less all costs
and expenses directly controllable by Surviving Corporation without
taking into consideration any federal and state income tax effects of
such income, costs and expenses. Costs and expenses directly
controllable by Surviving Corporation includes all costs and expenses
directly related to the production of xxxxxxxx. Costs and expenses
directly controllable by Surviving Corporation shall not include any
support costs or allocations of Buyer (other than services performed
for Surviving Corporation by Buyer for which Surviving Corporation has
the unrestricted option of alternatively utilizing a third party
vendor). Any sales incentives or referral fees paid to the sales staff
of Buyer shall be treated as directly controllable costs and expenses
provided that the amount of such sales incentives and referral fees
will be determined by mutual agreement between the sales management of
Surviving Corporation and Buyer. The parties acknowledge that the
employee benefits available to the employees of Seller are not as
extensive or as costly as the benefit programs that will be available
to employees of Surviving Corporation after the Merger. The parties
further acknowledge and agree that for purposes of determining Direct
Margin, such incremental costs of the employee benefits available to
the employees of Surviving Corporation will be treated as costs and
expenses directly controllable by Surviving Corporation. Salary and any
incentive compensation programs for either the Shareholders or other
employees of Surviving Corporation will be treated as costs and
expenses directly controllable by Surviving Corporation. Except as
otherwise provided herein, all revenue and expense measures shall
follow generally accepted accounting principles as specified by the
accountants regularly retained by the Buyer applied on a basis
consistent with Seller's past practices.
(b) An Earnout Payment for each fiscal year of Surviving
Corporation shall be determined in accordance with the following
formulae for the fiscal year for which the Earnout Payment is being
calculated:
(i) For the fiscal year ending September 30, 1997: if
Direct Margin is less than or equal to One Million and no/100
Dollars ($1,000,000.00), the Earnout Payment shall be equal to
Direct Margin multiplied by a factor of eighty-four one
hundredths (.84); if Direct Margin is greater than One Million
and no/100 Dollars ($1,000,000.00), then the Earnout Payment
shall be equal to Eight Hundred Forty Thousand and no/100
Dollars ($840,000.00) plus the Direct Margin in excess of One
Million and no/100 Dollars ($1,000,000.00) multiplied by a
factor equal to eight thousand two hundred seventy-five ten
thousandths (.8275); provided, in no event shall the Earnout
Payment exceed One Million Eight Hundred Thirty-Three Thousand
and no/100 Dollars ($1,833,000.00).
(ii) For the fiscal year ending September 30, 1998:
if Direct Margin is less than or equal to One Million Three
Hundred Thousand and no/100 Dollars ($1,300,000.00), the
Earnout Payment shall be equal to Direct Margin multiplied by
a factor of six thousand four hundred sixty two ten
thousandths (.6462); if Direct Margin is greater than One
Million Three Hundred Thousand and no/100 Dollars
($1,300,000.00), then the Earnout Payment shall be equal to
Eight Hundred Forty Thousand and no/100 Dollars ($840,000.00)
plus the Direct Margin in excess of One Million Three Hundred
Thousand and no/100 Dollars ($1,300,000.00) multiplied by a
factor equal to six hundred and twenty thousand six hundred
twenty-five ten thousandths (.620625); provided, in no event
shall the Earnout Payment exceed One Million Eight Hundred
Thirty-Three Thousand and no/100 Dollars ($1,833,000.00).
(iii) For the fiscal year ending September 30, 1999:
if Direct Margin is less than or equal to One Million Six
Hundred Thousand and no/100 Dollars ($1,600,000.00), the
Earnout Payment shall be equal to Direct Margin multiplied by
a factor of five thousand two hundred fifty ten thousandths
(.5250); if Direct Margin is greater than One Million Six
Hundred Thousand and no/100 Dollars ($1,600,000.00), then the
Earnout Payment shall be equal to Eight Hundred Forty Thousand
and no/100 Dollars ($840,000.00) plus the Direct Margin in
excess of One Million Six Hundred Thousand and no/100 Dollars
($1,600,000.00) multiplied by a factor equal to four thousand
nine hundred and sixty-five ten thousandths (.4965); provided,
in no event shall the Earnout Payment exceed One Million Eight
Hundred Thirty-Three and no/100 Dollars ($1,833,000.00).
(c) (i) As soon as practicable but in no event later than
sixty (60) days after the close of the fiscal years ending
September 30, 1997, September 30, 1998 and September 30, 1999,
Buyer shall deliver to the Shareholders a report detailing the
calculation of the Direct Margin and the Earnout Payment
(individually an "Earnout Statement"), which shall be prepared
in accordance with the provisions of this Section 2.8.
(ii) The Earnout Payment described in the Earnout
Statement shall be made to the Shareholders concurrently with
the delivery of the Earnout Statement in the manner described
in Section 2.8(d). The Shareholders shall have twenty (20)
days after delivery of each Earnout Statement within which to
present in writing to Buyer any objections the Shareholders
may have to any of the matters set forth therein, which
objections shall be set forth in reasonable detail. If no
objections are presented within such twenty (20) day period,
or if the Shareholders shall deliver to Buyer a notice stating
that the Shareholders accept and approve such Earnout
Statement and shall present no objection to any matter set
forth therein, the Earnout Statement and the calculation of
the Earnout Payment as set forth therein shall be deemed
accepted and approved by the Shareholders.
(iii) If the Shareholders shall present any
objections within the twenty (20) day period, Buyer and the
Shareholders shall attempt to resolve the matter or matters in
dispute and if resolved within twenty (20) days (or such
longer period as Buyer and the Shareholders may agree upon)
after delivery of any such written objections to Buyer, any
adjusted Earnout Payment shall be made based on the Earnout
Statement with such changes therein, if any, as are required
to reflect the resolution of any such disputed matter or
matters, in the manner as described in Section 2.8(d).
(iv) If such dispute cannot be resolved by Buyer and
the Shareholders, then the specific matter or matters in
dispute shall be submitted to the Baltimore office of Xxxxxx
Xxxxxxxx LLP (provided such firm is then independent of the
parties) or if such firm is not then independent of the
parties or declines to act in such capacity, such other firm
of independent public accountants mutually acceptable to Buyer
and the Shareholders, which firm shall make a final and
binding determination as to such matter or matters. Such
accounting firm shall send its written determination to Buyer
and Shareholders, and any adjusted Earnout Payment shall be
made in the manner described in Section 2.8 (3). The fees and
expenses of the accounting firm referred to in this Section
2.8 shall be paid one-half by the Buyer and one-half by the
Shareholders.
(d) The Earnout Payment shall be paid fifty-five percent (55%)
in the form of shares of Buyer Common Stock valued at their Average
Market Price as of the last day of the fiscal year for which the
Earnout Payment is being determined to the Shareholders in proportion
to their holdings of Seller Shares. The Buyer Common Stock issued as a
portion of the Earnout Payment shall be subject to the registration
rights set forth in the Registration Rights Agreement described in
Section 2.2 hereof. The balance of the Earnout Payment of forty-five
percent (45%) shall be paid in cash (the "Earnout Cash Payment"). The
Earnout Cash Payment shall be made by delivery of certified or
cashier's checks or equivalent instruments or funds to the Shareholders
in proportion to their holding of Seller Shares. In the event of a
dispute regarding the amount of the Earnout Payment, any adjustment to
the Earnout Payment, as determined pursuant to Section 2.8 shall be
paid to the Shareholders by Buyer within ten (10) business days after
any adjustment has been finally determined.
2.9 Preparation of Tax Returns. The federal and state income tax
returns for Seller for the period beginning January 1, 1996 through the close of
business on the day immediately preceding the Effective Time shall be prepared
by the Shareholders on the same bases as prior federal and state income tax
returns of Seller (including, without limitation, a cash basis personal service
corporation) and otherwise consistent with prior tax returns. Any resulting
accrued income tax liability shall appear on the Final Balance Sheet and the
liability shall be paid by Surviving Corporation.
ARTICLE 3
Representations and Warranties of Seller and the Shareholders
Seller and the Shareholders hereby make the following representations
and warranties to Buyer, all of which representations and warranties are true
and correct as of the date hereof and shall be true and correct as of (and as
though made at) the Closing:
3.1 Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified or registered to do business as a foreign corporation and is in
good standing in each jurisdiction that requires such qualification or
registration and in which it owns or leases any material properties or conducts
any material business, except where the failure so to qualify or register would
not have a material adverse effect on Seller. Seller has all necessary corporate
power to own its properties, conduct its business as presently conducted or
proposed to be conducted by it, and to do and perform all acts and things
required to be done by it under this Agreement.
3.2 Capitalization. Seller has duly authorized capital stock consisting
of 3,000 shares of common stock, of which 1,500 shares are issued and
outstanding on the date hereof and no shares are held in treasury. All such
outstanding shares (referred to collectively in this Agreement as the "Seller
Shares") are duly authorized, validly issued, fully paid and nonassessable and
were issued in compliance with, or pursuant to an exemption from, all applicable
federal and state securities laws. Except as described in this Section 3.2,
there is no other outstanding stock of Seller or outstanding rights to acquire
such stock, the holders of the Seller Shares have no preemptive rights, and
there are no outstanding subscriptions, options, warrants, calls, contracts,
demands, commitments, conversion rights or other agreements or arrangements of
any character or nature whatsoever, under which Seller is or may be obligated to
issue any capital stock or other securities of Seller; and Seller has no
obligation for the repurchase of any of its outstanding securities. Any and all
preemptive or similar rights to purchase any capital stock or securities of
Seller to which any holders of capital stock or any other security of Seller may
have been entitled with respect to prior issuances of Seller Shares or rights to
acquire Seller Shares shall have, on or before the Closing Date, been validly
and enforceably waived by all such holders or are otherwise no longer of any
force or effect. Each of the record and beneficial owners of the Seller Shares,
and the number of Seller Shares held by each such person, is as set opposite
such person's respective name on Schedule 3.2. There are no shareholder
agreements, or other agreements, understandings or commitments relating to or
otherwise affecting the Seller Shares. Copies of Seller's Articles of
Incorporation and Bylaws previously delivered by Seller to Buyer are complete
and correct.
3.3 Subsidiaries. Seller has no subsidiaries.
3.4 Corporate Authority. The execution, delivery and performance by
Seller and the Shareholders of this Agreement and the transactions contemplated
hereby have been duly and validly authorized and approved by all requisite
corporate and shareholder action, and neither the execution and delivery of this
Agreement by Seller and the Shareholders, nor the consummation of the
transactions contemplated hereby, will (i) conflict with or result in a breach
of the terms or provisions of or constitute a default under Seller's Certificate
of Incorporation or Bylaws or any material instrument, contract, or agreement,
judgment, order, decree or other restriction to which Seller or any of the
Shareholders is a party or by which any of its assets is bound or affected, (ii)
except as specifically described in Schedule 3.4, require any affirmative
approval, consent, or authorization of any person, court, or governmental or
regulatory authority, or (iii) except as specifically described in Schedule 3.4,
give any party with rights under any such material instrument, contract,
agreement, judgment, order, decree or other restriction the right to terminate,
modify or otherwise change the rights or obligations of Seller or any of the
Shareholders thereunder. This Agreement constitutes, and all other agreements
and instruments contemplated hereby, when duly executed and delivered by Seller
and the Shareholders, will constitute, valid and binding obligations of Seller
and the Shareholders enforceable in accordance with their respective terms
except as may be limited by laws affecting creditors' rights generally or by
judicial limitations on the right to specific performance.
3.5 Financial Statements. Seller has furnished Buyer with true and
complete copies of its unaudited balance sheets as of December 31, 1995 and 1994
and the related statements of earnings and cash flows and has furnished interim
unaudited balance sheets as of June 30, 1996 and the related statement of
earnings (collectively the "Financial Statements"). The Financial Statements
have been and any interim financial statements delivered to Buyer for subsequent
periods pursuant to Section 5.4 will be, prepared and conform with generally
accepted accounting principles applied on a basis consistent with prior periods,
and fairly present in all material respects the financial condition of Seller as
of the represented dates thereof and results of Seller's operations for the
period covered thereby. For purposes of this Agreement, the Financial Statements
shall be deemed to include any notes and schedules thereto.
3.6 Taxes. Seller has not failed to file any reports or Tax returns
required by any law or regulation of any jurisdiction to be filed as of the date
hereof, and all such reports and returns are true and correct in all material
respects. Seller has duly paid, or accrued on its books of account, all Taxes,
duties and charges pursuant to such reports and returns assessed or to be
assessed against Seller with respect to all periods through the date hereof, or
which Seller is obligated to withhold from amounts owing to any employee or
other person. Seller will not be liable for any Taxes with respect to any
periods up to the Effective Time, except for Taxes paid at or before the
Effective Time or which are accrued on the Final Balance Sheet. Seller has not
received any notice of proposed adjustment, audit report, deficiency notice,
notice of assessment or similar notification with respect to any Tax that could
become the obligation and liability of the Surviving Corporation.
3.7 Absence of Undisclosed Liabilities. There are no material debts,
liabilities, claims against or financial obligations of Seller, or reasonable
legal basis therefor, whether accrued, absolute, contingent or otherwise, except
to the extent reflected on the Balance Sheet, or disclosed on the footnotes
thereto or elsewhere on Schedule 3.7.
3.8 Absence of Certain Changes and Events. Except as contemplated by
this Agreement or as specifically described in Schedule 3.8, since June 30,
1996:
(a) There has not been any material adverse change in the
general affairs, management, net worth or condition (financial or
otherwise) of Seller or its business or assets.
(b) Seller has not (1) made or suffered any material adverse
change in its assets; (2) entered into any contract, license, franchise
or commitment other than ones that either were entered into in the
ordinary course of business or, if not entered into in the ordinary
course of business, involved amounts to be paid or received of less
than Twenty-Five Thousand and no/100 Dollars ($25,000.00), or made any
capital expenditures or commitment therefor except in the ordinary
course of business or in amounts of less than Twenty-Five Thousand and
no/100 Dollars ($25,000.00), or waived any material rights, or made,
permitted, or suffered any amendment or termination of any material
contract, license, franchise or agreement; (3) altered or revised its
accounting procedures, methods or practices except as required by law;
(4) incurred, assumed, discharged or satisfied any material liability
(absolute or contingent), mortgage, lien, security interest or
encumbrance, other than in the ordinary course of business or, if not
in the ordinary course of business, involving amounts of less than
Twenty-Five Thousand and no/100 Dollars ($25,000.00) (and otherwise in
compliance with this Agreement); (5) declared, set aside, or paid any
dividend or shareholder distributions in cash, securities, or property;
(6) sold, transferred, or leased any of its assets except in the
ordinary course of business; (7) suffered any physical damage,
destruction, or loss (whether or not covered by insurance) materially
and adversely affecting the properties or business of Seller; (8)
entered into any material transaction other than in the ordinary course
of business; or (9) agreed to do any of the foregoing other than
pursuant hereto.
3.9 Assets. Seller has good title to all of its assets, or, in the
cases of leases, valid and subsisting leasehold interests in the assets leased
thereby, in each case free and clear of all Liens, except for Permitted Liens.
Seller has not received any notice of default under any lease and, to the best
of Seller's knowledge, there is no event that, with notice or lapse of time or
both, would constitute a default under any such lease. The real and personal
properties to be included in the assets acquired by Buyer pursuant to the Merger
include all the properties used in and, except as set forth on Schedule 3.9,
necessary to the conduct of the operations of Seller and taken as a whole are in
a good state of repair, ordinary wear and tear excepted.
3.10 Intellectual Property. Except as described in Schedule 3.10, (i)
all Intellectual Property necessary to or used in the conduct of Seller's
present or proposed operations is owned by Seller or licensed to Seller, in
either case free and clear of any Liens other than Permitted Liens, and Seller's
ownership of such Intellectual Property has not been challenged in any judicial
or administrative proceeding; (ii) Seller's present and proposed operations do
not infringe, misuse or misappropriate any intellectual property rights of
others; (iii) no employees of Seller have any right in or to the Intellectual
Property necessary to or used in the conduct of Seller's present or proposed
operations, and no such employees are subject to restrictive covenants with any
person other than Seller with respect to such employee's employment by Seller or
use of Intellectual Property in such employment; and (iv) to the best of
Seller's knowledge, none of Seller's rights to Intellectual Property is being
infringed, misused, or misappropriated by others.
3.11 Licenses; Compliance with Laws, Regulations, Etc. Except as
specifically described in Schedule 3.11, Seller possesses all permits, licenses
and other approvals and authorizations that are necessary to conduct its
business, and all of such licenses, permits and other approvals and
authorizations are in full force and effect. Seller has not received any notice
that any of such licenses, permits, approvals or authorizations will lapse or be
terminated by action of a governmental authority or otherwise. Seller has
complied, and is in compliance, in all material respects with all applicable
laws, statutes, orders, rules, regulations and requirements promulgated by
governmental or other authorities relating to the conduct of Seller's
businesses.
3.12 Litigation; Insolvency. Except as specifically described in
Schedule 3.12, there is no action, lawsuit, claim, proceeding, or investigation
of any kind pending or, to the best of the knowledge of each of Seller and the
Shareholders, threatened against, by or affecting Seller. Seller (i) is not in
default with respect to any order, writ, injunction, or decree of any court or
of any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) has not
suffered a garnishment, summons or writ of attachment against or served upon it
for the attachment of any material property that has not been expunged, bonded
against or otherwise discharged within thirty (30) calendar days after the
issuance or service thereof, or (iii) has not voluntarily filed, or had filed
against it involuntarily, a petition under the United States Bankruptcy Code
that, in the case of an involuntary petition, shall not have been vacated or
dismissed within thirty (30) calendar days after the filing thereof, and (iv)
has not taken action or otherwise had proceedings commenced to dissolve or
liquidate it.
3.13 Environmental Matters. Seller has obtained, and is in compliance
with, all permits, licenses or other approvals necessary under Environmental
Laws (as defined below) with respect to Seller and its business, operations,
products or properties. Neither Seller nor its business, operations, products,
or properties, currently or formerly owned, operated, or leased (i) have
violated or violate or, to the best of Seller's knowledge, have been or are
subject to any judicial or administrative investigations, proceedings or other
actions alleging the violation of, any federal, state, local or foreign
environmental, superfund, conservation, health or safety statute, regulation,
ordinance, common law, order or decree (collectively, "Environmental Laws")
governing "Hazardous Substances," which for purposes hereof means asbestos, urea
formaldehyde, polychlorinated biphenyls, nuclear fuel or materials, chemical
waste, radioactive materials, explosives, known carcinogens, petroleum products,
or substances defined as hazardous or as a pollutant or contaminant in, or the
generation, handling, storage, release or disposal of which is regulated by, any
Environmental Laws or (ii) to the best of Seller's knowledge, have been or are
the subject of any federal, state, local or foreign investigation, proceeding or
other action evaluating whether any remedial action is needed to respond to a
release of any Hazardous Substance or (iii) have taken any action or failed to
take any action that might reasonably result in violation of any Environmental
Laws. Neither Seller, nor, to the best of Seller's knowledge, any prior or
current lessee, owner, occupant, operator or other person has released, spilled
or disposed of any Hazardous Substance in or on the ground of any real property
currently or formerly owned, operated, or leased by Seller, and no above-ground
or underground storage tanks or Hazardous Substances are or were present on such
real property or any structures thereon. Seller has no removal, restoration or
similar obligation under any Environmental Laws with respect to any property.
Seller has delivered to Buyer true and complete copies of all reports, studies
or tests in the possession of or initiated by Seller pertaining to Hazardous
Substances or other environmental concerns regarding Seller, its business,
operations, products or properties, currently or formerly owned, operated or
leased.
3.14 Contracts; Leases. Schedule 3.14 attached hereto contains a list
of each of the following contracts, agreements, plans (other than those
described in Schedule 3.18), arrangements or commitments (the "Contracts"),
including amendments thereto, to which Seller is a party or by which any assets
of Seller are in any way bound or obligated:
(a) Written employment and compensation agreements and written
employment policies with employees or independent contractors,
officers, or directors and agreements that contain any severance pay
liability or obligation to any employee, former employee, director,
former director, or consultant;
(b) Agreements of guarantee or indemnification (except
endorsements of negotiable instruments in the ordinary course of
business);
(c) Loan or credit agreements providing for any extension of
credit to or by Seller, except for trade credit extended by Seller in
the ordinary course of business;
(d) Collectively bargained union agreements;
(e) Leases to or for any personal property that involve the
payment or receipt of annual rent of more than Ten Thousand and no/100
Dollars ($10,000.00) individually or Twenty-Five Thousand and no/100
Dollars ($25,000.00) in the aggregate, and leases to or for any real
property, regardless of the dollar amount involved;
(f) Contracts for products or services provided by Seller that
(i) involve the receipt of more than Twenty Thousand and no/100 Dollars
($20,000.00) individually in any period of twelve (12) consecutive
months, or (ii) may reasonably be expected to result in a loss to
Seller, based on the facts known to Seller as of the date hereof, or
(iii) commit Seller to provide technology or other products, the
development of which has not been completed as of the date hereof; and
(g) Any other agreement, contract, commitment, or other
arrangement (oral or written) not otherwise described above if it:
(i) is of six (6) month or longer duration and Seller
cannot terminate it, without liability to Seller, on notice of
thirty (30) days or less; or
(ii) requires payment by Seller of more than
Twenty-Five Thousand and no/100 Dollars ($25,000.00) per year;
provided, however, that the aggregate amount of the
obligations under contracts excluded by reason of these
Sections 3.14(g)(i) and 3.14(g)(ii) shall not exceed Fifty
Thousand and no/100 Dollars ($50,000.00) in any period of
twelve (12) consecutive months.
Except as specified in Schedule 3.14, (i) all of the Contracts listed on
Schedule 3.14 or material to the business of Seller are valid, binding and in
full force and effect in accordance with their terms and conditions (except as
may be limited by laws affecting creditors' rights generally or by judicial
limitations on the right to specific performance), (ii) there is no existing
material default under any of the Contracts listed on Schedule 3.14, and no
default under any other Contract which default is material to the business of
Seller, and (iii) none of the Contracts listed on Schedule 3.14 or material to
the business of Seller by their express terms requires the consent of any party
thereto to Buyer's assumption thereof by reason of the Merger or provides that a
merger involving Seller constitutes an event of default thereunder. Copies of
all of the Contracts (or in the case of oral Contracts, descriptions of the
material terms thereof) described in Schedule 3.14 have been delivered by Seller
to Buyer.
3.15 Insurance. Listed on Schedule 3.15 attached hereto is a list of
all of the policies of fire, liability, life, health, product liability and
other insurance maintained by or on behalf of Seller whether for its own benefit
or the benefit and protection of employees, agents, lessors or lenders, and
copies of such policies have been delivered by Seller to Buyer. Seller's
physical assets are and will be through the Effective Time insured against loss
by fire and other insurable perils to which they may be subject at or above the
levels of coverage maintained by Seller as of June 30, 1996. Except as set forth
on Schedule 3.15, Seller currently maintains in effect insurance coverage for
all of its properties and assets.
3.16 Inventories. No material inventory is included in any of Seller's
balance sheets described in Section 3.5 and no material inventory will be
included in the Closing Date balance sheet of Seller.
3.17 Accounts Receivable. All accounts receivable of Seller (i) have
arisen in the ordinary course of business, and (ii) are collectible in the
amounts at which they are carried on Seller's books, except to the extent
reflected in the reserve for doubtful accounts reflected on the Balance Sheet
which reserve is adequate to cover accounts not collectible in the ordinary
course of business consistent with standard and reasonable business practices.
3.18 ERISA Matters. Schedule 3.18 attached hereto contains a complete
list and description of all employee benefit plans ("ERISA Plans") within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), including all such benefit plans that Seller maintains for
any of its employees or former employees and with respect to which Seller has or
may incur any future or contingent obligations. True and correct copies of the
ERISA Plans have been delivered to Buyer; all required contributions and other
payments to be made by Seller to the ERISA Plans as of the Effective Time shall
have been made or accrued, as appropriate; all reports and disclosures relating
to the ERISA Plans required to be filed or distributed under ERISA as of the
Effective Time shall have been filed or distributed; and the ERISA Plans that
are "employee pension benefit plans," as that term is defined in ERISA, have
received favorable determination letters from the Internal Revenue Service with
respect to their qualification and continue, to the best of the knowledge of
Seller, to be so qualified under Section 401(a) of the Internal Revenue Code.
3.19 Employee Matters. Seller has complied in all material respects
with all applicable federal and state laws relating to the employment of labor,
including the provisions thereof relating to wages, hours, collective
bargaining, and the payment of all payroll, withholding and social security
taxes, and is not liable for any wages, taxes or penalties for the failure to
comply with any of the foregoing. All amounts due to employees of Seller for
commissions, salaries, wages, bonuses, fringe benefits and vacation benefits
accrued through the Effective Time shall have been paid in the ordinary course
or accrued, as appropriate, before the Effective Time. Except as disclosed in
Schedule 3.19, Seller has not (i) promulgated any policy or entered into any
written agreements relating to the payment of severance pay to employees whose
employment is terminated or suspended, voluntarily or involuntarily, or
otherwise, or (ii) entered into any written employment agreements with any
employee. Schedule 3.19 attached hereto contains a complete list of all
full-time and part-time employees of Seller and the current level of
compensation payable to each. There are no strikes, work stoppages or
controversies pending or, to the best of the knowledge of the officers of Seller
after diligent inquiry, threatened, between Seller and any of its employees.
3.20 Miscellaneous Information. Schedule 3.20 attached hereto
constitutes a true and complete list of the following:
(a) the names of the directors and officers of Seller;
(b) the name of each financial institution in which Seller has an
account or safety deposit box, the account numbers with
respect thereto, and the names of all persons authorized to
draw thereon or who have access thereto; and
(c) the names of all persons holding powers of attorney from
Seller and a copy of the documents providing such powers.
3.21 No Finders. No act of Seller or its representatives has given or
will give rise to any valid claim against any of the parties hereto for a
brokerage commission, finder's fee or other like payment.
3.22 Investment Intent. The shares of Buyer Common Stock being acquired
by the Shareholders pursuant to this Agreement are being acquired for the
Shareholders' own account and not with a view to, or for resale in connection
with, any distribution or public offering thereof except in compliance with the
Securities Act and any applicable state securities laws. The Shareholders
understand that the shares of Buyer Common Stock have not been registered under
the Securities Act or any state securities laws by reason of their contemplated
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and any applicable state securities laws, and
that the reliance of Buyer upon this exemption is based in part upon this
representation and warranty by each of the Shareholders. The Shareholders
further understand that the shares of Buyer Common Stock may not be transferred
or resold without (i) registration under the Securities Act and any applicable
state securities laws, or (ii) the existence of an exemption from the
registration requirements of the Securities Act and such state securities laws.
3.23 Shareholder Status. The state of residence of each of the
Shareholders is as shown on Schedule 3.23 attached hereto. Each of the
Shareholders has such knowledge and experience in financial and business matters
that such Shareholder is capable of evaluating the merits and risks of the
investment to be made by such Shareholder in the shares of Buyer Common Stock.
Each Shareholder acknowledges that such Shareholder has had access to such
Shareholder's satisfaction to such financial and other information regarding
Buyer and to officers of Buyer as such Shareholder deems necessary for purposes
of making an investment in the shares of Buyer Common Stock.
3.24 Disclosure. No representation or warranty by Seller in this
Agreement, and no information disclosed in the Schedules, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE 4
Representations and Warranties of Buyer
Buyer hereby makes the following representations and warranties to
Seller and the Shareholders, all of which representations and warranties are
true and correct as of the date hereof and shall be true and correct as of (and
as though made at) the Closing.
4.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified or registered to do business as a foreign corporation and is in
good standing in each jurisdiction that requires such qualification or
registration and in which it owns or leases any material properties or conducts
any material business, except where the failure so to qualify or register would
not have a material adverse effect on Buyer. Buyer has all necessary corporate
power to own its properties, conduct its businesses as presently conducted or
proposed to be conducted by it, and to do and perform all acts and things
required to be done by it under this Agreement.
4.2 Corporate Authority. The execution, delivery and performance by
Buyer of this Agreement and the transactions contemplated hereby have been duly
and validly authorized and approved by all requisite corporate action, and
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will conflict with or result in a breach of the
terms or provisions of or constitute a default under its Certificate of
Incorporation or Bylaws or any material instrument, contract, agreement,
judgment, order, decree or other restriction to which Buyer is a party or by
which any of its assets is bound or affected, or require any affirmative
approval, consent, or authorization of any person, court, or governmental or
regulatory authority. This Agreement constitutes, and the other agreements and
instruments contemplated hereby, when duly executed and delivered by Buyer, will
constitute, valid and binding obligations of Buyer enforceable in accordance
with their respective terms, except as may be limited by laws affecting
creditors' rights generally or by judicial limitations on the right to specific
performance.
4.3 SEC Filings and Financial Statements. Buyer has heretofore
furnished to Seller copies of all SEC Reports filed by Buyer with the SEC on or
after September 30, 1995. Each of the SEC Reports was complete and correct in
all material respects as of its effective date and, as of its effective date,
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which made, not misleading.
The financial statements of Buyer and the notes thereto contained in the SEC
Reports are correct and complete and fairly present the combined financial
position of Buyer and its subsidiaries as of the respective dates thereof and
the results of operations for the periods then ended, except as disclosed
therein or in the notes thereto or in the explanations thereof contained in the
SEC Reports; and the balance sheets and notes thereto contained therein show and
properly reflect all material liabilities of Buyer and its combined subsidiaries
on the respective dates thereof, except for any claims and lawsuits against
Buyer and its combined subsidiaries now pending, the total liability from which
would not materially adversely affect the business, properties, or financial
condition of Buyer and its combined subsidiaries, taken as a whole. Each such
financial statement was prepared in conformity with generally accepted
accounting principles consistently applied (except, in the case of unaudited
statements, as permitted by the SEC for its Quarterly Reports on Form 10-Q).
4.4 No Material Adverse Changes. Except as otherwise disclosed herein
or in the SEC Reports issued by Buyer, since September 30, 1995, there has not
been any material adverse change in the financial condition or in the business
operations, properties, assets or liabilities of Buyer and its subsidiaries,
taken as a whole, whether or not arising in the ordinary course of business.
4.5 Tax-Related Representations and Warranties. The parties intend to
adopt this Agreement as a tax-free plan of reorganization and to consummate the
Merger in accordance with the provisions of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code") by virtue of the provisions of
Section 368(a)(2)(D) of the Code. The parties believe that the value of the
Buyer Common Stock to be issued to the Shareholders in the Merger, together with
the cash portion of the Merger Consideration, is equal, in each instance, to the
value of the Seller Shares to be surrendered in exchange therefor. Buyer and
Acquisition Subsidiary will pay their respective expenses, if any, incurred in
connection with the Merger. Buyer represents and warrants that, (a) the only
liabilities of Acquisition Subsidiary are those incurred in connection with its
incorporation and organization and in connection with the Merger; (b)
immediately following the Merger, Acquisition Subsidiary will hold at least 90%
of the fair market value of the net assets of Seller and at least 70% of the
fair market value of the gross assets of Seller held immediately prior to the
Merger; (c) prior to the Merger, Buyer will be in control of Acquisition
Subsidiary within the meaning of Section 368(c) of the Code; (d) Buyer has no
present plan or intention to (i) issue additional shares of the common stock of
Acquisition Subsidiary after the Merger that would result in Buyer losing
control of Acquisition Subsidiary within the meaning of Section 368(c) of the
Code; (ii) reacquire any of the shares of Buyer Common Stock issued to the
Shareholders in the Merger; or (iii) liquidate the Surviving Corporation or
merge the Surviving Corporation with or into another corporation or sell or
otherwise dispose of the stock of the Surviving Corporation or cause the
Surviving Corporation to sell or otherwise dispose of any of its assets or any
of the assets acquired from Seller (except for dispositions made in the ordinary
course of business or transfers described in Section 368 (a)(2)(C) of the Code);
(e) it has not owned, nor has it owned during the past five years, any shares of
stock of Seller and (f) neither it nor the Acquisition Subsidiary are investment
companies as defined in Section 368 (a)(2)(F)(iii) and (iv) of the Code. The
parties shall not take a position on any tax returns inconsistent with this
Section. In addition, Buyer represents now, and as of the Closing Date, that it
presently intends to continue Seller's historic business or use a significant
portion of Seller's business assets in a business. The provisions and
representations contained or referred to in this Section 4.5 shall survive until
the expiration of the applicable statute of limitations.
4.6 No Finders. No act of Buyer or its representatives has given or
will give rise to any valid claim against any of the parties hereto for a
brokerage commission, finder's fee or other like payment.
4.7 Disclosure. No representation or warranty by Buyer in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE 5
Covenants
5.1 Access. Seller shall, prior to Closing, give Buyer and its
representatives full access to Seller's properties, records and personnel and
such other information of Seller as Buyer may reasonably request to analyze
Seller and its business, assets and prospects. Buyer agrees to maintain, and to
cause its representatives to maintain, the confidentiality of any material
nonpublic information that they receive as a result of such access and which is
identified to them by Seller as being nonpublic, and to obtain Seller's consent
prior to disclosing any of such information to any other person or entity.
5.2 Conduct of Business Until Effective Time. Except as Buyer may
otherwise consent in writing (which consent shall not be unreasonably delayed or
withheld) or otherwise contemplated by this Agreement, from the date hereof
until the Effective Time, Seller shall operate its business only in the usual,
regular, and ordinary course and consistent with past practice and use its best
efforts to preserve intact its business, to keep available the services of its
officers and employees, and to maintain good relationships with suppliers,
contractors, customers and others having business relationships with it, and
shall not (i) amend its Certificate of Incorporation; (ii) make or grant any
increase in the compensation payable to or to become payable to any officer,
employee, director, or consultant or any increase in any officer, employee,
director, or consultant benefit plan, provided that Seller may pay bonuses to
its employees prior to the Closing Date which bonuses shall reduce the retained
earnings of Seller; (iii) merge with or enter into, consolidate with or acquire
all or substantially all of the stock or assets of any other corporation,
partnership, limited partnership, joint venture, association, or other entity;
(iv) issue, deliver or sell, or authorize or propose the issuance, delivery, or
sale of, any shares of its capital stock of any class or series, any securities
or debt convertible into, or any rights, warrants, calls, subscriptions or
options to acquire, any such shares, convertible securities, or debt; (v)
declare or pay any dividend or shareholder distribution in cash, securities, or
property; (vi) incur, assume, discharge or satisfy any material liability
(absolute or contingent), mortgage, lien, security interest or encumbrance other
than trade payables or other obligations in the ordinary course of business (and
in compliance with this Agreement); (vii) sell, assign, lease, or otherwise
transfer or dispose of any of its assets without the replacement thereof with a
substantially equivalent asset of substantially equivalent kind, condition, and
value, except for assets having an aggregate original cost of not more than Five
Thousand and no/100 Dollars ($5,000.00) and except for increases and decreases
in receivables in the ordinary course of business under circumstances consistent
with past practice; (viii) make any capital expenditures in excess of
Twenty-Five Thousand and no/100 Dollars ($25,000.00); (ix) enter into any
material transaction other than in the ordinary course of business (subject to
the exceptions stated above); or (x) agree to any of the foregoing other than
pursuant hereto.
5.3 Exclusive Dealing. Prior to the Closing Date, Seller will not
negotiate or discuss with any party (other than Buyer), or solicit or encourage
the submission of inquiries, proposals or offers from any party (other than
Buyer), or otherwise provide information to any other person, with respect to
the sale of or investment in Seller (whether by merger, combination, sale of
assets, sale of stock, or otherwise) or the sale, licensing, distribution, or
other disposition of Seller's assets or business except in the ordinary course.
5.4 Financial Statements. Prior to the Closing Date, Seller shall
provide Buyer with unaudited monthly financial statements within thirty (30)
days after the end of each fiscal month. Such financial statements shall be
prepared from the books and records of Seller on a consistent basis with the
accounting principles and practices applied with respect to the year-end
financial statements of Seller described in Section 3.5 hereof.
5.5 Employment Agreements. On the Closing Date, to be effective at the
Effective Time, Buyer and each of the Shareholders shall execute and deliver an
Employment and Bonus Compensation Agreement (containing an agreement not to
compete with Buyer or the Surviving Corporation during the employment term and
for a period of two (2) years thereafter) for each such individual in
substantially the form attached hereto as Exhibit 5.5.
5.6 Officer and Director Indemnification. On or before the Closing
Date, Seller shall have obtained the written agreement of the Shareholders, in
form reasonably satisfactory to Buyer, either to (i) indemnify the Surviving
Corporation for all claims, demands, losses, obligations, liabilities, damages,
deficiencies, actions, settlements, judgments, costs and expenses (including
reasonable costs and legal fees incident thereto or in seeking indemnification
therefor) that the Surviving Corporation may incur or suffer by reason of
Seller's indemnification of its officers and/or directors (whether in their
capacity as officers or directors of Seller or in any other capacity) under its
Certificate of Incorporation or Bylaws, applicable law, or otherwise, that are
in excess of the losses that the Surviving Corporation would have incurred or
suffered in the absence of such indemnification of those individuals by Seller
during the period prior to the Effective Time or (ii) waive all of their rights
to any such indemnification that had been provided by Seller.
5.7 Approvals and Consents. As promptly as possible, Seller and Buyer
each shall take all corporate and other action, make all filings with courts or
governmental authorities, and use their respective best efforts to obtain in
writing all approvals and consents required to be taken, made, or obtained by
them in order to effectuate the Merger and the transactions contemplated hereby,
including the approvals and consents described in Section 3.4 hereof; shall
cooperate with each other in effecting the foregoing; and shall deliver promptly
to the other copies of such filings, approvals, and consents.
5.8 Insurance Coverage. Seller agrees to maintain in effect, for the
period prior to the Effective Time, each of the types of insurance maintained by
Seller as described in Section 3.15.
5.9 Integrity of Business of Seller. During the Earnout period the
Buyer will actively assist the Surviving Corporation to maintain and grow its
business. Accordingly, during the Earnout period, Buyer shall not (a) materially
change the business of the Surviving Corporation from Seller's historical
business objectives; (b) substantially change or divert the nature of the duties
of the Shareholders as employees/principals of Surviving Corporation; (c)
develop alternative businesses that directly compete with the Surviving
Corporation; or (d) sell the stock of the Surviving Corporation or merge the
Surviving Corporation with or into any other entity or sell or transfer any part
of the business or assets of Surviving Corporation (whether, in each case, to an
affiliate or unrelated third party). During the Earnout period, Buyer shall (a)
seek to maximize referrals of business opportunities arising during the course
of the Buyer's business; (b) credit the Surviving Corporation with revenues
(based on prevailing market rates of the Surviving Corporation) for the
provision of services under contract by the Surviving Corporation (or any
employee or subcontractor thereof) to Buyer, any affiliate of Buyer or any
customer of Buyer; and (c) maintain the Surviving Corporation as a separate
subsidiary of Buyer.
5.10 Buyer's Tax-Related Covenants. (a) Buyer and the Shareholders
agree that it or they will not take any action that causes the Merger to not
qualify as a tax-free plan of reoganization under Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), by virtue of the
provisions of Section 368(a)(2)(D) of the Code.
(b) The Shareholders agree that they shall not amend any tax return for
Seller for any period ending on or prior to the Closing Date if such amendment
would in any way affect any item or income, deduction or basis for income tax
purposes for any period ending after the Closing Date.
5.11 Employee Benefits. The Buyer agrees that it will provide employees
of the Surviving Corporation with substantially the same employee benefits, as a
whole, that are provided to similarly situated employees of Buyer.
ARTICLE 6
Closing
6.1 Effective Time. If the Closing occurs, the Merger shall become
effective at 12:01 a.m. on the day following the date that the Merger Articles
are accepted for filing by the Delaware Secretary of State (the "Effective
Time"), after the properly executed and certified Merger Articles have
previously been duly filed with the Delaware Secretary of State. Subject to the
provisions hereof, the filing shall be made by or at the direction of counsel
for Buyer at any time on the Closing Date and prior to the Effective Time, the
actual time of the filing to be as the parties shall mutually determine.
6.2 Closing and Execution of Merger Articles. Subject to the
satisfaction (or waiver) of the conditions described in this Article 6, the
appropriate officers of Acquisition Subsidiary and Seller shall execute the
Merger Articles on the Closing Date. The consummation of the deliveries,
exchanges, and transactions described herein shall occur on the Closing Date,
but to be effective as of the Effective Time, except that the Merger
Consideration described in Section 2.5 shall be delivered on the first business
day following the Effective Time.
6.3 Conditions to Buyer's Obligations. The obligations of Buyer under
this Agreement to consummate the Closing shall, at its discretion, be subject to
the satisfaction, on or prior to the Closing Date, of all of the following
conditions, any of which conditions may be waived in writing by Buyer:
(a) Seller and Shareholder Approval. Seller and the
Shareholders shall have taken action to approve the Merger, and such
approval shall not have been rescinded.
(b) No Misrepresentations, Breaches or Adverse Events. All
representations and warranties of Seller and the Shareholders in this
Agreement shall be true and correct in all material respects as of the
Closing Date with the same force and effect as though made on such
date, and there shall have been no material breach by, or material
failure or inability of, Seller or the Shareholders in the performance
of any of their material covenants or obligations herein.
(c) Approvals; Consents. All permissions, consents, releases,
or approvals, governmental or otherwise, necessary on the part of
Seller to consummate the transactions contemplated by this Agreement
shall have been obtained by Seller and delivered to Buyer.
(d) Due Diligence. Buyer and its representatives shall have
been given full access to Seller's properties, records and personnel
and such other information of Seller as Buyer may reasonably request to
assess and analyze Seller and its business and prospects and shall have
been satisfied with the results of such due diligence.
(e) No Litigation. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this
Agreement and there shall not then have been instituted or pending any
action or proceeding before any federal or state court or governmental
agency or other regulatory or administrative agency or instrumentality
(i) challenging the Merger or otherwise seeking to restrain or prohibit
consummation of the transactions contemplated by this Agreement or
seeking to impose any material limitations on any provisions of this
Agreement; or (ii) seeking to impose limitations on Buyer's ability
effectively to exercise full rights of ownership of Seller following
the Merger.
(f) Delivery of Documents. Seller and the Shareholders shall
have executed and delivered to Buyer all of the documents and
instruments required to be delivered by Seller and/or the Shareholders
to Buyer at or prior to the Closing, including each of the following:
(i) A true and correct copy of Seller's Certificate
of Incorporation, and all amendments thereto, and Bylaws, as
amended to date.
(ii) Certified copy of resolutions of Seller's Board
of Directors and shareholders authorizing the execution and
delivery of this Agreement and performance of the transactions
contemplated herein, including specifically the authorization
of the Merger.
(iii) The Merger Articles as described in Section
2.1.
(iv) Any tax clearance certificates required under
applicable law in order to consummate the Merger.
(v) The Employment and Bonus Compensation Agreements
described in Section 5.5.
(vi) Agreements waiving or terminating the
indemnification of Seller's directors and officers, as
described in Section 5.6.
(g) Officer's Certificate. Buyer shall have received
a certificate signed by the president and the treasurer of
Seller to the effect that:
(i) The representations and warranties of Seller set
forth herein are true and correct in all material respects as
of the Closing.
(ii) All acts, covenants and conditions to be
performed or complied with by Seller on or before the Closing
have been fully performed or complied with in all material
respects.
(iii) The copies of the Certificate of Incorporation
and Bylaws provided by Seller to Buyer pursuant to Section
6.3(f)(i) above are current as of the Closing.
(h) Legal Opinion. Buyer shall have received a favorable
opinion, addressed to Buyer, of Miles & Stockbridge, counsel to Seller,
in form and substance satisfactory to counsel for Buyer, dated as of
the date of the Closing, to the effect set forth on Schedule 6.3(h)
hereto.
6.4 Conditions to Seller's Obligations. The obligations of Seller and
the Shareholders under this Agreement to consummate the Closing shall, at
Seller's discretion, be subject to the satisfaction, on or prior to the Closing
Date, of all of the following conditions, any of which conditions may be waived
in writing by Seller:
(a) No Misrepresentations, Breaches or Adverse Events. All
representations and warranties of Buyer in this Agreement shall be true
and correct in all material respects as of the Closing Date with the
same force and effect as though made on such date, and there shall have
been no material breach by, or material failure or inability of, Buyer
in the performance of any of its material covenants or obligations
herein.
(b) Approvals; Consents. All permissions, consents, releases,
or approvals, governmental or otherwise, necessary on the part of Buyer
to consummate the transactions contemplated by this Agreement shall
have been obtained by Buyer and delivered to Seller.
(c) No Litigation. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this
Agreement and there shall not then have been instituted or pending any
action or proceeding before any federal or state court or governmental
agency or other regulatory or administrative agency or instrumentality
challenging the Merger or otherwise seeking to restrain or prohibit
consummation of the transactions contemplated by this Agreement or
seeking to impose any material limitations on any provisions of this
Agreement.
(d) Delivery of Documents. Buyer shall have executed and
delivered to Seller (except for the items described in Section
6.4(d)(i) below, which Buyer shall deliver to the Shareholders on the
dates described in Section 2.5) all of the documents and instruments
required to be delivered by Buyer to Seller at or prior to the Closing,
including each of the following:
(i) The Merger Consideration, described in Section
2.5.
(ii) The Merger Articles as described in Section
2.1.
(iii) Certified copy of resolutions of Buyer's Board
of Directors authorizing execution and delivery of this
Agreement and performance of the transactions contemplated
herein, including specifically the authorization of the Merger
and the formation of Acquisition Subsidiary.
(iv) The Registration Rights Agreement as described
in Section 2.2.
(v) The Employment and Bonus Compensation Agreements
described in Section 5.5.
(e) Officer's Certificate. Seller shall have received a
certificate signed by an executive officer of Buyer to the effect that:
(i) The representations and warranties of Buyer set
forth herein are true and correct in all material respects as
of the Closing.
(ii) All acts, covenants and conditions to be
performed or complied with by Buyer on or before the Closing
have been fully performed or complied with by Buyer in all
material respects.
(f) Legal Opinion. Seller and the Shareholders shall have
received a favorable opinion, addressed to each of them, of Xxxxx X.
XxXxxxxxx, General Counsel of Buyer, in form and substance satisfactory
to counsel for Seller, dated as of the date of the Closing, to the
effect set forth on Schedule 6.4(f).
ARTICLE 7
Termination
7.1 Termination Prior to Closing. The obligation of the parties hereto
to consummate the Closing may be terminated and abandoned at any time on or
before the Closing as follows:
(a) By and at the option of Buyer, upon written notice to
Seller, if the conditions set forth in Section 6.3 have not been
satisfied and the Closing shall not have occurred by September 30,
1996.
(b) By and at the option of Seller and the Shareholders, upon
written notice to Buyer, if either (i) the conditions set forth in
Section 6.4 have not been satisfied and the Closing shall not have
occurred by September 30, 1996.
(c) At any time, without liability of either party to the
other, upon the mutual written consent of Buyer and Seller.
7.2 Consequences of Termination Prior to Closing. In the event of
termination of this Agreement prior to the Closing, without limiting the
parties' respective remedies for any breach of this Agreement, Buyer and Seller
each will return to the other all documents and materials obtained from the
other pursuant to this Agreement.
ARTICLE 8
Survival; Indemnification
8.1 Survival. All representations, warranties, covenants, and
agreements contained in this Agreement, or any Schedule, certificate, or
statement delivered pursuant hereto, shall survive (and not be affected in any
respect by) the Closing, any investigation conducted by any party hereto, or any
information that any party may receive, and shall remain in full force and
effect until the close of business on the date that is two (2) years after the
Effective Time (the "Indemnity Period"). Upon the expiration of the Indemnity
Period, all such representations, warranties, covenants, and agreements shall
expire, terminate, and be of no further force or effect, except that the
representations and warranties contained in Section 3.6 (relating to Tax
matters) and Section 3.13 (relating to environmental matters) shall not expire
but shall continue in perpetuity.
8.2 Indemnification by Seller and the Shareholders. Seller and the
Shareholders, jointly and severally, shall indemnify, defend and hold harmless
Buyer and its officers, directors, shareholders, employees, agents and
affiliates (collectively, all such indemnitees are referred to in this section
as "Buyer") against and in respect of any and all claims, demands, losses,
obligations, liabilities, damages, deficiencies, actions, settlements,
judgments, costs and expenses (including reasonable costs and legal fees
incident thereto or in seeking indemnification therefor) that Buyer may incur or
suffer arising out of or based upon the breach by Seller or the Shareholders of
any of their respective representations, warranties, covenants or agreements
contained or incorporated in this Agreement or any agreement, certificate or
document executed and delivered to Buyer by Seller in connection with the
transactions hereunder. The indemnification provided for under this Section 8.2,
as it relates to breaches of Seller's and the Shareholders' representations,
warranties, covenants and agreements contained herein, shall specifically be
interpreted to mean and include the following occurrences for which Seller and
the Shareholders shall be liable pursuant hereto: (i) occurrences prior to the
Effective Time (that result in any such breach giving rise to indemnification
hereunder), regardless of when the claim is made or the loss is booked; and (ii)
any nonpayment of an account receivable of Seller as of the Effective Time that
is subsequently written off (after good faith, diligent efforts to collect such
receivable by September 30, 1997), but only to the extent that the aggregate
amount of such accounts receivable so written off exceed the reserve for
doubtful accounts reflected on the Final Balance Sheet of Seller as described in
Section 2.7(a)(i).
8.3 Indemnification by Buyer. Buyer shall indemnify, defend and hold
harmless Seller, and its officers, directors, shareholders, employees, agents
and affiliates (collectively, all such indemnitees are referred to in this
Section as "Seller") against and in respect of any and all claims, demands,
losses, obligations, liabilities, damages, deficiencies, actions, settlements,
judgments, costs and expenses (including reasonable costs and legal fees
incident thereto or in seeking indemnification therefor) that Seller may incur
or suffer arising out of or based upon the breach by Buyer of any of its
representations, warranties, covenants or agreements contained or incorporated
in this Agreement or any agreement, certificate or document executed and
delivered to Seller by Buyer in connection with the transactions hereunder.
8.4 Procedure for Claims. If a claim by a third party is made against
any indemnified party, and if the indemnified party intends to seek indemnity
with respect thereto under this Article 8, such indemnified party shall promptly
provide written notice to the indemnifying party of such claim, including the
amount of the claim to the extent then known. With respect to claims for
indemnification made under this Article 8, other than claims with respect to
certain items specified in Section 8.1 dealing with Taxes and environmental
matters, an indemnifying party shall be liable to an indemnified party only if
such written notice of the claim for indemnification is given by the indemnified
party to the indemnifying party prior to the expiration of the Indemnity Period.
If such notice is timely given, the indemnifying party's obligation to indemnify
the indemnified party shall survive the expiration of the Indemnity Period until
resolved. If the indemnifying party hereunder is Seller, references in this
Section 8.4 to actions to be taken by the indemnifying party shall mean and
refer to the actions to be taken by the Shareholders collectively. The
indemnifying party shall have twenty (20) days after receipt of the
above-mentioned notice to undertake, conduct and control, through counsel of its
own choosing (subject to the consent of the indemnified party, such consent not
to be unreasonably withheld) and at its expense, the settlement or defense
therefor, and the indemnified party shall cooperate with it in connection
therewith; provided that: (i) the indemnifying party shall not thereby permit to
exist any Lien upon any asset of any indemnified party, (ii) the indemnifying
party shall permit the indemnified party to participate in such settlement or
defense through counsel chosen by the indemnified party, with the fees and
expenses of such counsel to be borne by the indemnifying party only if and to
the extent that such counsel is necessary by reason of a demonstrable conflict
of interest, and (iii) the indemnifying party shall agree promptly to reimburse
the indemnified party for the full amount of any loss resulting from such claim
and all related expenses incurred by the indemnified party pursuant to this
Article 8. So long as the indemnifying party is reasonably contesting any such
claim in good faith, the indemnified party shall not pay or settle any such
claim. If the indemnifying party does not notify the indemnified party within
twenty (20) days after receipt of the indemnified party's notice of a claim of
indemnity hereunder that it elects to undertake the defense thereof, the
indemnified party shall have the right to contest, settle or compromise the
claim in the exercise of its exclusive discretion at the expense of the
indemnifying party.
8.5 Set-off. In the event Seller or the Shareholders fail to pay when
due any claim Buyer may have for indemnification pursuant to this Article 8,
Buyer may, in addition to any other remedies to which it may be entitled,
set-off any amount equal to Buyer's claim against the amounts otherwise owed by
Buyer to the Shareholders or any of them, under this Agreement, the agreements
executed pursuant to this Agreement, or otherwise. Buyer shall provide the
Shareholders written notice of such set-off which written notice shall contain a
description (in reasonable detail) of the claim on which the set-off is based.
Such written notice shall be provided within ten (10) business days after the
set-off is made.
ARTICLE 9
Miscellaneous Provisions
9.1 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and the successors and permitted
assigns of the parties hereto. No party may assign or delegate its obligations
hereunder without the written consent of the other parties, and no party may
assign its rights hereunder, without the written consent of the other parties,
to any person or entity unless the assignor remains liable for the performance
of its obligations hereunder and the assignment is to an Affiliate of the
assignor or a business organization that shall succeed to substantially all the
assets and business, to which this Agreement relates, of the assignor or of such
Affiliate.
9.2 Further Assurances. Buyer, on the one hand, and Seller and the
Shareholders, on the other, shall, at the request of the other and without
further consideration, execute and deliver such instruments of assignment,
transfer, license or assumption and take such further actions as the other may
reasonably request in order more effectively to carry out the intents and
purposes of this Agreement and the transactions contemplated hereby.
9.3 Waiver, Discharge, Amendment, Etc. The failure of any party hereto
to enforce at any time any of the provisions of this Agreement, including the
election of a party to proceed with the Closing despite the nonfulfillment of
conditions to such party's obligations, shall in no way be construed to be a
waiver of any such provision, nor in any way to affect the validity of this
Agreement or any part thereof or the right of the party thereafter to enforce
each and every such provision. No waiver of any breach of this Agreement shall
be held to be a waiver of any other or subsequent breach. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated, nor may
any waiver, permit, consent or approval of any kind or character on the part of
any party be effective against such party, other than by a written instrument
signed by the party against whom enforcement of such amendment, waiver,
discharge, termination, permit, consent or approval is sought and expressly
stating the extent to which such instrument shall be an amendment, waiver,
discharge, termination, permit, consent or approval.
9.4 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be personally delivered, mailed by
certified or registered mail or telecopied (with confirmation of transmission)
to the party receiving such notice or shall be delivered by Federal Express or
similar overnight courier, addressed as follows:
if to Buyer to:
Fair, Xxxxx and Company, Incorporated
000 Xxxxx Xxxxxxx Xxxxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. XxXxxxxxx
Telecopy No. (000) 000-0000
if to Seller or the Shareholders to:
Credit & Risk Management Associates, Inc.
Attention: Xxxxxx X. Xxxxxxx
000 Xxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Telecopy No. (000) 000-0000
with a copy to:
Miles & Stockbridge
Attention: Xxxx X. Xxxxxxx, Esq.
00 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Telecopy No. (000) 000-0000
Any party may change the above-specified recipient and/or mailing address by
notice to the other party given in the manner herein prescribed. Following the
Effective Time, notices otherwise to be provided to Seller shall instead be
provided to the Shareholders. All notices shall be deemed given on the day when
actually delivered as provided above, if delivered personally or by telecopy,
three (3) business days after the date deposited, if mailed, or the business day
after the date deposited, if delivered by overnight courier.
9.5 Publicity. Seller shall make no public announcement with respect to
the transactions contemplated hereby and will respond to all inquiries with
respect thereto by stating that it is the policy of Seller not to comment on
such matters. Seller and the Shareholders agree to maintain the absolute
confidentiality of all information related to the transactions contemplated by
this Agreement, including the existence of negotiations and all terms, until
such information has been publicly announced by Buyer. If Buyer proposes to
issue any press release or public announcement concerning any provisions of this
Agreement or the transactions contemplated hereby, Buyer shall so advise Seller
and review the text thereof with Seller prior to publication. After an initial
public announcement has been made, simple references by Buyer to the
arrangements in annual reports or other stockholder communications shall not be
subject to the previous sentence.
9.6 Expenses. Each party hereto shall be solely responsible for and
shall pay its own expenses and broker's fees, if any, incident to the
negotiation and preparation of this Agreement and the preparation for, and
consummation of, the transactions provided for herein.
9.7 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of
Delaware, including all matters of construction, validity, performance and
enforcement, without giving effect to principles of conflict of laws. Venue for
any lawsuit or other proceeding arising under this Agreement or in any way
relating to the transactions contemplated herein may be in the City of
Baltimore, State of Maryland, and any such proceeding may be brought in any
state or federal court in such jurisdiction. Each party hereto consents to the
jurisdiction of the state and federal courts in the District of Maryland.
9.8 Arbitration. Any dispute arising out of or relating to this
Agreement or the breach of it shall be discussed between the disputing parties
in a good-faith effort to arrive at a mutual settlement of any such controversy.
If, notwithstanding, such dispute cannot be resolved, such dispute shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, and judgment upon the award may be entered
in any court having jurisdiction of the controversy. The arbitrator shall be a
retired state or federal judge or an active or retired attorney experienced in
business or commercial litigation selected by the mutual agreement of the
parties. If the parties cannot so agree within twenty (20) days, the arbitrator
shall be selected in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The costs of the proceedings shall be shared
equally by the disputing parties.
9.9 Severability and Interpretation. In the event that any provision of
this Agreement is held invalid by a court of competent jurisdiction, the
remaining provisions shall nonetheless be enforceable according to their terms.
Any provision held overbroad as written shall be deemed amended to narrow its
application to the extent necessary to make the provision enforceable under
applicable law, and enforced as amended. Titles and headings to sections herein
are inserted for convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement. This Agreement shall be
construed without regard to any presumption or other rule requiring construction
hereof against the party causing this Agreement to be drafted.
9.10 Knowledge. Knowledge, as used in this Agreement or the
instruments, certificates or other documents required hereunder, means actual
knowledge of a fact or constructive knowledge if a reasonably prudent person in
a like position would have known.
9.11 Benefit. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective permitted successors or assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.12 Complete Agreement. This Agreement, the Exhibits and the Schedules
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all previous proposals or agreements, oral
or written, with respect to the subject matter hereof, including but not limited
to the Letter of Intent by and among the parties dated August 17, 1996. The
Exhibits and Schedules to this Agreement shall be construed as an integral part
of this Agreement to the same extent as if they had been set forth verbatim
herein.
9.13 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute but one agreement.
[THIS SPACE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in the manner appropriate for each, and to be dated and effective as of
the day and year first above written.
FAIR, XXXXX AND COMPANY, INCORPORATED
By /s/ Xxxxx X. XxXxxxxxx
-----------------------------------
Its Xxxxx X. XxXxxxxxx
FIC ACQUISITION CORPORATION,
By /s/ Xxxxx X. XxXxxxxxx
-----------------------------------
Its Xxxxx X. XxXxxxxxx
CREDIT & RISK MANAGEMENT ASSOCIATES, INC.
By /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxxxxx
--------------------------------------
Xxxx X. Xxxxxxxx
/s/ Xxxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxxx X. Xxxxx
