ASSET PURCHASE AGREEMENT
by and among
COMPUTER HORIZONS CORP.,
RPM ASSOCIATES, INC.
and
THE STOCKHOLDERS
effective as of
July 27, 1998
ASSET PURCHASE AGREEMENT (this "Agreement"), and effective as of July
27, 1998, by and among COMPUTER HORIZONS CORP., a New York corporation (the
"Purchaser"), on the one hand, and RPM ASSOCIATES, INC., a Delaware corporation
(the "Company") and the persons listed on Schedule A hereto, who are the owners
of all of the outstanding shares of common stock of the Company, (each a
"Stockholder," collectively the "Stockholders" and, together with the Company,
the "Sellers") on the other hand.
W I T N E S S E T H:
The Purchaser wishes to enter into a definitive agreement with the
Company and the Stockholders for the acquisition of all the tangible and
intangible assets of the Company used to conduct the Business (as hereinafter
defined) on the terms hereinafter described.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. In addition to those terms defined elsewhere
herein, the following capitalized terms shall have the meanings indicated:
(a) "Assumed Liabilities" means the following liabilities and
obligations of the Company arising from or relating to the Business, except
those liabilities which are described in Section 1(d) herein or listed on
Schedule 1(d) hereto (the "Excluded Liabilities"):
(i) the Service Contracts (as hereinafter defined);
(ii) all accounts payable, accrued expenses and deferred
payments received as reflected on the December 31, 1997 audited balance sheet
of the Company or arising thereafter in the ordinary course of the Business;
(iii) all other contracts, subcontracts, agreements, instruments
and arrangements entered into by the Company in the ordinary course of the
Business which (y) are identified on Schedule 1(a)(iii) hereto or (z) do not
individually or in the aggregate involve an aggregate liability or obligation in
excess of $100,000; and
(iv) all other liabilities which the Purchaser and the Company
agree will be assumed by the Purchaser and which are identified on Schedule
1(a)(iv) hereto.
(b) "Business" means the business of providing strategic
business consulting, enterprise management and network engineering services
as conducted by the Company.
(c) "Excluded Assets" means the accounts receivable of the
Company that as of March 31, 1998 were in excess of 180 days past due and which
have not been collected by the Company as of the Closing Date (as hereinafter
defined).
(d) "Excluded Liabilities" means any liability not described
in (i) through (iv) of Section 1(a), including without limitation, any
liabilities or obligations arising from (a) obligations in respect of borrowed
money other than the obligation specified on Schedule 1(a)(iv) hereto, (b)
obligations of Sellers in respect of any securities (equity or debt) issued by
Sellers, (c) any income, franchise, sales, payroll, withholding or other taxes,
(d) any expenses related to the negotiation, preparation and execution of this
Agreement or the consummation of the transactions contemplated hereby, or (e)
any liabilities or obligations listed on Schedule 1(d) hereto.
(e) "Material Adverse Effect" shall mean any material adverse
effect, individually or in the aggregate, on the condition (financial or
otherwise), business, assets, operations or prospects of Seller, the Company or
the Purchased Assets.
(f) "Purchased Assets" means: all of the Company's right,
title and interest in and to the Company's assets, other than the Excluded
Assets or any assets listed on Schedule 1(f) hereto, (wherever located, tangible
and intangible, real, personal or mixed, whether known or unknown and whether or
not carried on the books and records of the Company) and the goodwill associated
therewith, including but not limited to, the following:
(i) all right, title and interest in and to the contracts,
subcontracts, work orders, agreements, instruments and arrangements pursuant to
which the Business is conducted including, without limitation, those which are
identified on Schedule 1(f)(i) of this Agreement (the "Service Contracts");
(ii) all computer software, inventions, trade secrets, licensed
software and confidential information, if any, and programs owned and/or
developed by the Company and utilized to conduct the Business, including,
without limitation, those which are identified on Schedule 1(f)(ii) of this
Agreement;
(iii) all tangible personal property (including, without
limitation, all computers, computer equipment, furniture, fixtures, and other
equipment) relating to or utilized to conduct the Business, including, without
limitation, those which are identified on Schedule 1(f)(iii) of this Agreement;
(iv) all client lists, files, books and records and related
information pertaining to the Business;
(v) the Company's rights under leases and service or other
agreements for the use of equipment and/or the furnishing of services relating
to the Business which are identified on Schedule 1(f)(v) of this Agreement;
(vi) all prepaid and prorated fees and expenses relating to the
Business and all of the Company's accounts receivable;
(vii) all of the Company's copyrights and all of the Company's
rights in the trademarks, service marks, tradenames, and logos, if any, now or
previously used by the Company in connection with the Business (including
registrations and applications for registration of any of them);
(viii) all rights to the name "RPM Associates, Inc." and all
names derivative therefrom, except for the phrase "XXX.xxx," which shall be
retained by the Sellers; provided, however, that Sellers' retention of the
rights to such phrase shall be conditioned upon Sellers' agreement to refrain
from utilizing such phrase in any manner so as to compete with the business
interests of Purchaser;
(ix) all municipal, state, federal, franchise, permits,
licenses and authorizations held or used by Sellers; and
(x) all claims against third parties.
2. SALE AND TRANSFER OF ASSETS. Subject to the terms and conditions
of this Agreement, the parties hereto agree to effect the following
transactions:
2.1 Sale and Transfer of Assets. At the Closing (as
hereinafter defined), the Company will sell, convey, transfer, assign and
deliver to Purchaser, and Purchaser will purchase, the Purchased Assets (the
"Asset Purchase").
2.2 Assumption of Liabilities. At the Closing, the Purchaser
will assume the Assumed Liabilities.
2.3 Consideration to be Paid.
(a) Initial Payment. Upon the terms and subject to the
conditions contained herein (including Section 2.4 below regarding Escrow
Shares) in consideration of, and in full payment for and solely in respect of,
the Asset Purchase, Purchaser shall deliver or cause to be delivered to the
Stockholders an aggregate purchase price (the "Purchase Price") of US
$27,700,000 consisting of (i) certificates representing a number of authorized
and newly issued shares of Common Stock, par value $0.10 per share, of Purchaser
(the "Purchaser Common Stock") which shall be of the same class and identical in
all respects to the shares of the Purchaser's Common Stock currently publicly
traded on the Nasdaq Stock Market (National Market) and which shares of
Purchaser Common Stock will have an aggregate Closing Date Market Value (as
defined herein) equal to US $9,233,333 (the "Purchaser Shares"), such Purchaser
Shares being free and clear of all liens, claims, charges, security interests,
options or other legal or equity encumbrances of any kind ("Liens") and (ii) US
$18,466,667 in cash, payable in immediately available funds by wire transfer.
The allocation of the Purchase Price between Purchaser Shares and cash shall be
subject to adjustment as provided below. For purposes of this Agreement, the
"Closing Date Market Value" of the Purchaser Shares shall mean the average of
the closing sale prices per share of the Purchaser Common Stock during the
period consisting of the 30 consecutive trading days ending on the day which is
three days prior to the Closing Date.
In the event the closing price of the Purchaser Shares on
the trading day immediately preceding the Closing Date is 10% lower than the
closing price of the Purchaser Shares for the 20 consecutive trading days ending
on the day which is three days prior to the Closing Date (subject to appropriate
adjustment in the event of a recapitalization, spin-off, stock dividend, stock
split, or other similar transaction) the Sellers, at their option, may require
Purchaser to negotiate i good faith to implement an allocation of the Purchase
Price which would increase the percentage of cash consideration and decrease the
percentage of Purchaser Shares to be received by the Sellers. In the event the
parties are unable to agree on an appropriate reallocation of the Purchase
Price, such reallocation, if the Sellers opt to implement the reallocation,
shall be as follows:
Percentage decline in price of Purchaser Shares Reallocation of consideration
----------------------------------------------- ------------------------------
less than 10% none
10% to 15% 70% cash, 30% Purchaser Shares
15% to 20% 80% cash, 20% Purchaser Shares
greater than 20% 85% cash, 15% Purchaser Shares
(b) Subsequent Payment. In the event the Company meets
certain financial targets agreed upon by the Company and the Purchaser (and
specified in Schedule 2.3(b)) with respect to the period from July 1, 1998
through and including June 30, 1999, Purchaser will be obligated to pay the
Company an additional cash purchase price payment in an amount not to exceed
$2,000,000.
(c) Post-Closing Adjustment. Schedule 2.3(c) hereto
sets forth, as of December 31, 1997 (i) the current assets of the Company (other
than the Excluded Assets), (ii) the current liabilities of the Company (other
than the Excluded Liabilities), and (iii) the positive amount by which (i)
exceeds (ii) (the "December Adjusted Net Current Assets"). As soon as
practicable following the Closing, Purchaser shall prepare and deliver to the
Company a statement (the "Closing Statement") setting forth, as of the Closing
Date, (i) the current assets of the Company (other than the Excluded Assets)
(ii) the current liabilities of the Company (other than the Excluded
Liabilities), and (iii) the positive or negative amount obtained by subtracting
(ii) from (i) (the "Closing Adjusted Net Current Assets"). If the December
Adjusted Net Current Assets exceeds the Closing Adjusted Net Current Assets,
Sellers shall pay to Purchaser, as directed by Purchaser, an amount equal to
such excess. If the Closing Adjusted Net Current Assets exceeds the December
Adjusted Net Current Assets, the Purchaser shall pay to the Company an amount
equal to such excess. Such payments, if any, shall be made in cash in U.S.
dollars.
2.4 Escrow Arrangements. Upon receipt of the Purchaser Shares,
at the Closing, the Company shall deliver to the Escrow Agent (as hereinafter
defined) certificates representing a number of Purchaser Shares having an
aggregate Closing Date Market Value equal to $2,770,000 in respect of the Escrow
(as defined herein), duly endorsed for transfer, to be held by the Escrow Agent
in accordance with the terms of the Escrow Agreement, in the form of Attachment
A hereto.
2.5 Change in Capitalization. In the event of any change in
the number and/or price of the outstanding Purchaser Shares from and after the
date hereof through the Closing Date, by reason of a recapitalization, spin-off,
stock dividend, stock split, extraordinary dividend or other similar
transaction, or of a dividend, recapitalization, merger or other similar
transaction involving Purchaser, amounts hereunder shall be appropriately and
proportionately adjusted.
2.6 Deliveries by the Company. At the Closing, the Company
shall deliver to the Purchaser (unless delivered previously) the following:
(a) the Purchased Assets, transferred by means of a
General Assignment and Xxxx of Sale in substantially the form set forth in
Attachment B hereto and other assignment and transfer agreements consistent with
the terms of this Agreement as may reasonably be required by the Purchaser to
evidence transfer of the Purchased Assets;
(b) certificates, dated as of the Closing Date,
executed by the Company and the Stockholders certifying (i) that the
representations and warranties of the Company and the Stockholders contained in
this Agreement were true and correct when made and are true and correct as of
the Closing Date; and (ii) that the Company and the Stockholders have performed
and complied in all material respects with all of the covenants, agreements and
obligations set forth in this Agreement to be performed or complied with by them
on or prior to the Closing Date; (iii) certifying the Company's Certificate of
Incorporation and By-laws, its valid existence and good standing in all
jurisdictions in which the conduct of the Business requires such qualification,
except where the failure to so qualify would not have a materially adverse
effect on the Business and operations of the Company, the incumbency of officers
or others acting in a representative capacity, the due authorization of the
transactions contemplated hereby, and (iv) each Stockholder certifying such
Stockholder's capacity, the accuracy of such Stockholder's representations and
warranties, the due performance by such Stockholder of and with all of its
covenants and agreements hereunder and satisfaction of the conditions to
Purchaser's and Seller's obligations hereunder to be satisfied by such
Stockholder and such other matters as Purchaser shall reasonably request;
(c) copies of resolutions adopted by the Board of
Directors of the Company, duly authorizing and approving the execution of this
Agreement and the consummation of the transactions contemplated hereby,
certified by its Secretary as being true and correct as of the Closing Date; and
(d) an opinion of counsel to the Company, as required
by Section 8.3(c) hereof.
2.7 Deliveries by the Purchaser. At the Closing, the Purchaser
shall deliver to the Seller (unless delivered previously) the following:
(a) the initial payment of the Purchase Price;
(b) payment of applicable sales or transfer taxes, if
any, payable by Sellers as a result of the transactions contemplated hereby;
(c) an Assumption Agreement in substantially the form
set forth in Attachment C hereto and other assumption agreements consistent with
the terms of this Agreement as may reasonably be required by the Company to
evidence assumption of the Assumed Liabilities by the Purchaser;
(d) a certificate, dated as of the Closing Date,
executed by the Purchaser certifying (i) that the representations and warranties
of the Purchaser contained in this Agreement were true and correct when made and
are true and correct as of the Closing Date, as though made on and as of the
Closing Date; and (ii) that the Purchaser has performed and complied in all
material respects with all of the covenants, agreements and obligations set
forth in this Agreement to be performed or complied with by it on or prior to
the Closing Date;
(e) copies of resolutions duly adopted by the Board of
Directors of the Purchaser, duly authorizing and approving the execution of this
Agreement and the consummation of the transactions contemplated hereby,
certified by its Secretary as being true and correct as of the Closing Date; and
(f) an opinion of counsel to the Purchaser, as required
by Section 8.2(b) hereof.
3. CLOSING. The closing ("Closing") shall occur at 10:00 a.m. on
July __, 1998 (the "Closing Date"), or such other date as is mutually agreed, at
the offices of Proskauer Rose LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000,
or at such other time or place as may be agreed upon by the parties hereto.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND THE
COMPANY. Each of the Stockholders, (a) severally but not jointly, with respect
to the representations in Section 4.1(b) (as it relates to such Stockholder),
and (b) jointly and severally together with the Company, with respect to the
other representations set forth in this Section 4, hereby represents and
warrants to the Purchaser that the statements contained in this Section 4 are
true and correct, except as set forth in the schedules delivered by the Company
and the Stockholders on or before the date of this Agreement.
4.1 Incorporation; Authorization; Etc.
(a) The Company is a corporation, duly organized and
validly existing under the laws of the State of Delaware. The Company (i) has
all requisite power and authority to own all of its properties and assets and to
carry on its business as it is now being conducted, and (ii) is in good
standing, and is duly licensed, authorized or qualified to transact business in
each jurisdiction in which the ownership or lease of real property or the
conduct of its business requires i to be so qualified except where the failure
to be in good standing or to be duly licensed, authorized or qualified to
transact business, would not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect on the business, assets, results of
operations, or financial condition (collectively, the "Business Condition") of
the Company. The Company has heretofore delivered or made available to Purchaser
complete and correct copies of its organizational documents as in effect o the
date hereof.
(b) Each of the Stockholders has full power, capacity
and authority to execute and deliver this Agreement and to perform his or her
obligations under this Agreement. This Agreement has been duly executed and
delivered by and is the legal, valid and binding obligation of each of the
Stockholders and, assuming the due execution and delivery thereof by Purchaser,
is enforceable against each of the Stockholders in accordance with its terms.
(c) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Company, and no additional
proceedings (corporate or otherwise) on the part of any of the Stockholders or
the Company are necessary to authorize the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by and assuming the due
execution and delivery thereof of Purchaser, constitutes the legal, valid and
binding obligation of the Company and is enforceable against the Company in
accordance with its terms.
(d) Except as set forth in Schedule 4.1(d), the
execution and delivery of this Agreement by the Company and the Stockholders and
the consummation by the Company and the Stockholders of the transactions
contemplated by this Agreement will not (i) violate any provision of the
certificate of incorporation or by-laws or similar organizational instrument of
the Company, (ii) result in a violation of any provision of, or constitute a
default (with or without notice or lapse --------------- of time) under, or give
rise to a right of termination, cancellation or acceleration of (or entitle any
party to accelerate whether after the giving of notice or lapse of time or both)
any obligation under, or result in the imposition of any lien upon or the
creation of a security interest in any of the Shares or any of the Company's
assets or properties pursuant to, any note, bond, debt instrument, mortgage,
indenture, lien, lease agreement or other instrument, or any judgment,
injunction, order or decre to which the Company or any of the Stockholders is a
party or by which any of them is bound, or (iii) violate or conflict with any
United States (federal, state or local) or foreign (federal, provincial or
local) law, statute, ordinance, rule or regulation ("Law") or any order, writ,
injunction, judgment, award, stipulation or decree rendered by any Governmental
Authority (as defined herein) ("Order") applicable to the Company or any of its
material properties or assets or any of the Stockholders.
(e) No consent, approval, order or authorization of, or
registration, declaration or filing with (i) any Governmental Authority or (ii)
any individual, corporation or other entity (including any holder of the
Company's securities) is required by or with respect to the Company or any
Stockholder in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (A) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under federal securities laws, applicable state "blue
sky" laws, and the securities laws of any foreign country, (B) those set forth
in Schedule 4.1(e), and (C) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not be
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on the Business Condition of the Company.
4.2 Capitalization; Structure; No Investments.
(a) The entire authorized capital stock of the Company
is 1,000 shares of Common Stock, no par value per share, of which 560 shares are
issued and outstanding and all of such issued and outstanding shares are owned
by the Stockholders as set forth on Schedule A. All of the issued and
outstanding shares of the Company's Common Stock have been duly and validly
issued and are fully paid and nonassessable, free of preemptive rights and are
owned by the Stockholders. Except as set forth on Schedule 4.2(a),
there are outstanding (i) no shares of capital stock or other voting securities
of the Company, (ii) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(iii) no options, warrants or other rights to acquire from the Company
(including any rights issued or issuable under a shareholders rights plan or
similar arrangement), and no obligations of the Company to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company, (iv) no equity equivalents,
interests in the ownership or earnings of the Company (including stock
appreciation or phantom stock rights) or other similar rights, and (v) no
outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any securities of the Company or to make any investment (by loan,
capital contribution or otherwise) in any other entity.
(b) The Company has no subsidiaries nor any equity
investment of any kind in any corporation, partnership, limited liability
company, joint venture or other legal entity.
4.3 Financial Statements.
(a) The Company has previously delivered to the
Purchaser true, correct and complete copies of audited balance sheets of the
Company and the related audited statements of income, changes in stockholders'
equity, and cash flows as, at and for the fiscal years ended December 30, 1996
and 1997, as well as the unaudited balance sheets for the period beginning
January 1, 1998 and ending March 31, 1998, together with the report thereon of
Ellin & Xxxxxx, independent certifie public accountants (the "Company Financial
Statements").
(b) The Company Financial Statements were prepared in
accordance with GAAP consistently applied for all periods presented. The Company
Financial Statements present fairly the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Company as at
the respective dates of and for the periods referred to therein.
4.4 Title to Properties; Encumbrances. Except for properties
disposed of in the ordinary course of business consistent with past practice,
the Company has good and marketable title to, or holds by valid and existing
lease or license, free and clear of all Liens, each piece of real and personal
property currently used by it in, and reasonably necessary to enable it to carry
on, its business as presently conducted except for such Liens as (a) are
reflected or reserved against in the Company Financial Statements, or (b) would
not, individually or in the aggregate, have a Material Adverse Effect on the
Business Condition of the Company (the Liens described in clauses (a) and (b)
above, collectively, the "Company Permitted Liens"). Schedule 4.4 sets forth all
real property owned and all real property leased by the Company with the name,
address, terms of material leases and annual payment obligations (whether
mortgage or rent) for each. The Stockholders have received no written notice of
any violation of any zoning, use or other similar laws with respect to any
material property used in the operation of the Company's businesses.
4.5 Intellectual Property.
(a) The Company owns, or has a valid license to use,
all of the patents, trademarks, tradenames, service marks, registered copyrights
or applications ("Intellectual Property"), if any, which are currently used by
it in, and are reasonably necessary to enable it to carry on, its business as
presently conducted. Schedule 4.5 lists (i) all material Intellectual Property,
including jurisdictions in which each such material Intellectual Property right
has been issued or registered, and (ii) all material licenses, sublicenses and
other agreements, where the Company has taken or given a right to use such
Intellectual Property right from or to a third party. To the Company's and the
Stockholders' knowledge, all registered Intellectual Property held by the
Company and its Subsidiaries are valid and subsisting.
(b) Except as set forth in Schedule 4.5, no claims
which would, individually or in the aggregate, have a Material Adverse Effect on
the Business Condition of the Company have been asserted by any person (i)
challenging the ownership, validity or effectiveness of any Intellectual
Property owned, used, filed by or licensed to or by the Company as of the date
hereof, (ii) to the effect that the sale of any product or the provision of any
service as now sold or provided by the Company infringes on any Intellectual
Property of a third party, or (iii) against the use by the Company of any
Intellectual Property.
4.6. Labor Matters. Except as set forth in Schedule 4.6, as of
the date hereof, (i) the Company is not involved in or, to the Company's or the
Stockholders' knowledge, threatened with any labor dispute, arbitration, lawsuit
or administrative proceeding relating to labor matters involving the employees
of the Company (excluding routine workers' compensation claims) that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Business Condition of the Company; (ii) the Company is not
a party to, bound by, or charged with any violation of, any collective
bargaining agreement, contract or other understanding with a labor union or
labor organization; (iii) the Company is not engaged in any unfair labor
practices, or been charged or threatened with any charges of unfair labor
practices; (iv) to the knowledge of the Company and the Stockholders, there is
no activity involving any labor union or similar organization of the Company
seeking representation of any group of employees of the Company, to certify a
collective bargaining unit or engaging in any other organizational activity and
there are no strikes, shutdowns, work stoppages, lockouts, or threats thereof,
by or with respect to any group of employees of the Company; (v) no executive or
key employee of the Company has indicated that he or she is considering
terminating his or her employment; and (vi) no employee or former employee of
the Company is entitled to any severance payment or similar payment, either by
statute or by contract, upon the termination of his or her employment.
4.7 Customers.
(a) Schedule 4.7 hereto sets forth a list of the
Company's 50 largest customers (including the addresses, phone numbers and names
of contact persons at such customers) in order of dollar volume of sales for
each of its last two fiscal years and for the period from the end of the last
fiscal year through March 31, 1998, showing the approximate total sales in
dollars by the Company to each such customer during each such period.
(b) The Company is not engaged in any disputes with
customers except for xxxxx xxxx adjustments and similar disputes in the ordinary
course of business not exceeding $5,000 with respect to any single xxxx
adjustment or similar dispute and which individually or in the aggregate do not
exceed $50,000, and there has not been any adverse change, and there are no
facts known to the Company or any of the Stockholders which may reasonably be
expected to indicate that any adverse change may occur, in the business
relationship of the Company with any customer named on Schedule 4.7 hereto. To
the knowledge of the Company and the Stockholders, none of the customers named
on Schedule 4.7 hereto is considering termination, non-renewal or any adverse
modification of its arrangements with the Company, and the transactions
contemplated by this Agreement will not, to the knowledge of the Company and the
Stockholders, have any adverse effect on the Company's relationship with any o
such suppliers.
4.8 Compliance with Laws. Except as set forth in Schedule 4.8,
to the Company's or the Stockholders' knowledge, the conduct of the business of
the Company substantially complies with all applicable Laws and all Orders
applicable thereto, except for violations or failures so to comply, if any, that
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Business Condition of the Company.
4.9 Material Contracts.
(a) Schedule 4.9(a) identifies each of the following
material agreements, contracts, documents and other items (whether written or
oral) as to which the Company is a party or otherwise is bound (and all such
contracts, or summaries thereof, have been made available to Purchaser) as of
the date of the execution of this Agreement: (i) all Service Contracts; (ii) all
documents relating to indebtedness for money borrowed, including guarantees;
(iii) all agreements or plan relating to employment, compensation of or benefits
for officers, employees or consultants of the Company; (iv) all contracts
for the purchase of materials, supplies, services, merchandise or equipment
involving consideration of more than $10,000 or involving purchases in excess
of normal operating requirements; (v) any contract, agreement, or
instrument not entered into in the ordinary course of the business of the
Company; (vi) any contract containing material restrictions on the
operations of the Company or any restrictions on its ability to compete in any
geographic region or in any line of business; (vii) any lease of real property
and all personal property leases calling for annual lease payments in excess
of $50,000; and (viii) each and every other contract which is material to the
financial condition, earnings, operations or business of the Company. The
contracts and agreements identified in Schedule 4.8(a), including each of the
Service Contracts, are collectively referred to herein as the
Contracts."
(b) Except as set forth in Schedule 4.9(b):
(i) Neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated hereby will conflict in any material respect with or result in a
material breach of, or give rise to a right of termination of, or accelerate the
performance required by, any terms of any Contracts which are material, either
individually or collectively, or constitute a default in any material respect
thereunder; and
(ii) Each of the Contracts is valid and existing
in full force and effect; the Company has, in all material respects, performed
all obligations required to be performed by it under and is not in a material
default in any respect under, in material conflict in any respect with, or in
material violation in any respect of, any of the Contracts; and the Company has
not received notice of noncompliance or alleged noncompliance with any of the
Contracts; to the knowledge of the Stockholders, each other party to any
Contract has, in all material respects, performed all obligations required to be
performed by it under, and is not in material default in any respect under, in
material conflict in any respect with, or in material violation in any respect
of, any of the Contracts which are material, either individually or
collectively.
4.10 Taxes. The Company has properly prepared and filed all tax
returns required to be filed by it in connection with its business, operations
and assets. True and complete copies of all such tax returns for the Company
have been delivered to the Purchaser. Except as set forth on Schedule 4.10, the
Company does not have any unpaid liability for any taxes whatsoever that arose
or otherwise was incurred in connection with the Business. No proposed taxes,
additions to tax, interest or penalties have been asserted or are pending
against the Company and no such matters are under discussion with the applicable
taxing authorities. There are no agreements, waivers or other arrangements
providing for extensions of time with respect to the assessment or collection of
any unpaid tax against the Company. The Company has withheld or otherwise
collected all taxes or amounts it was required to withhold or collect under any
applicable law, including, without limitatio any amounts required to be withheld
or collected with respect to employee income tax withholding, social security,
unemployment compensation, sales or use taxes or workmen's compensation, and all
such amounts have been timely remitted to the proper authorities.
4.11 Employee Benefit Matters. Except as set forth in Schedule
4.11, the Company does not maintain, sponsor or contribute to any plans for
pension, profit-sharing, deferred compensation, severance pay, bonuses, stock
options, stock purchases, or any other retirement or deferred benefit, or for
any health, accident or other welfare plan, or any other employee or retired
employee benefits or incentive plan, program, contract, understanding or
arrangement in which any of the Company's employees, former employees, retired
employees or consultants (or beneficiaries of any of the foregoing) is entitled
to participate. The plans, programs, contracts, understandings and arrangements
listed in Schedule 4.11 are hereinafter referred to as the "Employee Plans." The
Company has supplied the Purchaser with complete and accurate copies of each
such Employee Plan. Each Employee Plan has been operated according to its terms
in material compliance with all applicable laws. There are no past due tax or
other liabilities of the Company with respect to any of the Employee Plans.
Except as set forth in Schedule 4.11, there is no underfunding liability nor any
anticipated underfunding liability with respect to any of the Employee Plans.
4.12. No Material Adverse Change. Except as set forth in
Schedule 4.12, since December 31, 1997, there has not been any event, occurrence
or circumstance that has had, individually or in the aggregate, a Material
Adverse Effect on the Business Condition of the Company, or any event,
occurrence or circumstance that would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on the Business Condition of
the Company, or a Material Adverse Effect on the ability of any of the
Stockholders to consummate the transactions contemplated hereby.
4.13. Brokers, Finders, Etc. Except for the services provided by
BT Alex. Xxxxx Incorporated, neither the Company nor any of the Stockholders has
employed, or is subject to any claim of, any broker, finder, or similar
consultant or intermediary in connection with the transactions contemplated by
this Agreement which might be entitled to a fee or commission from the Company
upon the consummation of the transactions contemplated hereby. All of the fees,
commissions and expenses of BT Alex. Xxxxx Incorporated shall be solely for the
account of, and borne by, the Company.
4.14. No Implied Representation. Notwithstanding anything
contained in this Section 4 or any other provision of this Agreement, it is the
explicit intent of each party hereto that none of the Stockholders is making any
representation or warranty whatsoever, express or implied, beyond those
expressly given in this Agreement, including, but not limited to, any implied
warranty or representation as to condition, merchantability, suitability or
fitness for a particular purpose as to any of the properties or assets of the
Company. It is understood that any cost estimates, projections or other
projections or predictions or any other information concerning the Company
contained in or referred to in other materials that have been or may hereafter
be provided to Purchaser or any of its affiliates, agents or representatives are
not and shall not be deemed to be representations or warranties of the
Stockholders or the Company.
To the best knowledge of the Company, the Company has complied in
all material respects with all environmental laws relating to its operations or
properties occupied by it, and, there are no asbestos containing materials or
underground storage tanks located on any properties occupied by the Company
4.15. Bank Accounts, Etc. Schedule 4.15 sets forth a list of all
bank accounts, safe deposit boxes, and lock boxes of the Company including, with
respect to each such account and lock box, identification of all authorized
signatories.
4.16. Insurance. Schedule 4.16 sets forth a list of all material
general liability, product liability, fire, casualty, motor vehicle and other
insurance or bonding maintained by or on behalf of the Company or any of its
respective employees as of the date hereof. All requirements and provisions of
all such policies are being substantially complied with. No notice of
cancellation has been given to or received by the Company with respect to any
such insurance policy. To the knowledge of the Company and the Stockholders, no
such policies are or will become subject to an assessment due to any retroactive
rate or audit adjustments or coinsurance arrangements.
4.17. Recent Operations. Since December 31, 1997, (a) the
Company has operated its business substantially as it was operated immediately
prior to such date in the ordinary course of business; (b) the Company and each
of the Stockholders has used its or his commercially reasonable efforts to
preserve intact the business relationships of the Company; (c) there have been
no material bonuses paid to or material increases in the compensation of
officers or employees of the Company, except as set forth in Schedule 4.17;
and (d) except as set forth in Schedule 4.17, the Company has not declared
or paid any dividend or made any otherdistribution with respect to its capital
stock.
4.18. Investment Intent.
(a) It is understood that, as of the Closing, the
Purchaser Shares will not have been registered under the Securities Act or any
state securities laws, and that such shares will be delivered without
registration in reliance upon an exemption from the registration requirements of
the Securities Act and applicable state securities laws. Each of the
Stockholders represents that he or she is acquiring the Purchaser Shares
hereunder only for his or her own account for investment and not with any
intention of making, or with a view to, or for the sale in connection with, any
distribution thereof within the meaning of the Securities Act.
(b) In connection with the foregoing, each of the
Stockholders hereby severally represents and warrants that:
(i) he or she has reviewed, discussed and
evaluated the information made available by Purchaser and has had the
opportunity to ask questions of, and receive answers from, executive officers of
Purchaser concerning the terms and conditions of this Agreement and to obtain
any additional information which he considered necessary to verify the accuracy
of the information delivered by Purchaser in connection with this Agreement;
(ii) he or she understands that he or she must
bear the economic risks of the investment in Purchaser's Common Stock to be made
hereunder for an indefinite period of time because such stock has not been
registered under the Securities Act and, therefore, may not be sold until such
stock subsequently is registered under the Securities Act or an exemption from
registration is available; and
(iii) he or she has sufficient knowledge and
experience in financial and business matters to enable him or her to be capable
of evaluating the merits and the risks of the exchange of his or her shares of
equity interest in the Company for his or her Purchaser Shares, as contemplated
by this Agreement and his or her prospective investment in Purchaser.
(c) It is understood and agreed that, to implement the
requirements of the Securities Act and state securities laws and evidence the
restrictions upon transfer contained in this Agreement, Purchaser will cause a
legend to be conspicuously noted on the certificates representing the Purchaser
Common Stock deliverable hereunder, and that Purchaser will issue stop transfer
instructions to its transfer agent, to the effect that such stock has not been
registered under the Securities Act and that no transfer may take place except
pursuant to an effective registration statement or after delivery of any opinion
of counsel reasonably satisfactory to Purchaser to the effect that registration
thereof for the purpose of transfer is not required under the Securities Act.
4.19 Disclosure. No representation or warranty made by the
Company and the Stockholders in this Agreement and no statement contained in a
certificate, schedule, list or other instrument or document specified in or
delivered pursuant to this Agreement, whether heretofore furnished by the
Company and the Stockholders or hereafter required to be furnished by the
Company and the Stockholders, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
the statements contained herein or therein not misleading.
4.20 Litigation. Except as set forth on Schedule 4.20, there is
no suit, action, proceeding or investigation pending or threatened against or
affecting the Company or any of the Stockholders. There is no judgment, decree,
injunction, ruling or order of any Governmental Entity outstanding against the
Company or any of the Stockholders.
4.21 Absence of Undisclosed Liabilities. Except for material
liabilities or obligations which are accrued or reserved against on the Company
Financial Statements (including the financial statement notes thereto) or which
were incurred after March 31, 1998 in the ordinary course of business and
consistent with past practice, the Company has no material liabilities or
obligations (whether absolute, accrued, contingent or otherwise).
4.22 Environmental Laws. To the Company's and the Stockholder's
knowledge, the Company and all properties currently and formerly owned, leased,
or operated by the Company (the "Properties"), are and have been, in all
material respects, in compliance with, all applicable laws, rules, regulations,
common law, ordinances, decrees, orders, permits, and other binding legal
requirements relating to health, safety, pollution or protection of the
environment ("Environmental Laws") and there are no outstanding allegations
or claims by any person or Governmental Entity concerning the Company's
compliance with Environmental Laws.
4.23 Affiliate Transactions. Except as set forth on Schedule
4.23 hereto, there are no agreements, obligations, contracts, commitments or
understandings, whether written or oral, or other transactions between the
Company, on the one hand, and any (i) current or former officer or director of
the Company, (ii) current or former record or beneficial owner of voting
securities of the Company or (iii) family member of any such officer, director
or record or beneficial owner, on the other hand.
4.24 Accounts Receivable. Except for the Excluded Assets, all
of the accounts and notes receivable of the Company set forth on the books and
records of the Company or to be incurred after the date hereof (in each case net
of the applicable reserves reflected or, with respect to future accounts and
notes receivable, to be reflected on the books and records of the Company and in
the financial statements of the Company): (i) represent or will represent sales
actually made or to b made in the ordinary course of business for goods or
services delivered or rendered to unaffiliated customers in bona fide arm's
length transactions, (ii) constitute or will constitute valid claims, and (iii)
are, or upon incurrence will be, good and collectible, in each case at the
aggregate recorded amounts thereof without right of recourse, defense,
deduction, return of goods, counterclaim, or offset and have been or will be
collected in the ordinary course of business and consistent with past
experience.
4.25 Restrictions on Business Activities. Except for this
Agreement, there is no agreement, judgment, injunction, order or decree binding
upon either the Company or any of the Stockholders which has or could reasonably
be expected to have (after giving effect to the consummation of the transactions
contemplated hereby) the effect of prohibiting or impairing the business
practices of the Company, the acquisition of property by the Company, or the
conduct of the Business as currently conducted or as proposed to be conducted by
the Company.
4.26 Minute Books. The minute books of the Company, as
previously made available to Purchaser, contain complete and accurate records of
all meetings and accurately reflect all other corporate action of the
stockholders and Board of Directors of the Company.
4.27 Illegal Payments. Based upon reasonable investigation, to
the knowledge of the Sellers, neither the Company nor any of its officers or
agents has made any illegal payments to, or provided any illegal benefit or
inducement for, any supplier, customer or other person, in an attempt to
influence any such person to take or to refrain from taking any action relating
to the Company. Further, neither the Stockholders nor the Company are aware of
any facts or circumstances which would suggest that any such illegal payments
have been made.
For purposes of the preceding representations and warranties, the
term "knowledge of the Company" or the "Company's knowledge" shall mean the
actual knowledge of a matter by the senior executives of the Company.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company and the Stockholders that the
statements contained in this Section 5 are true and correct.
5.1. Incorporation; Authorization; Etc.
(a) Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York. Purchaser
(i) has all requisite power and authority to own all of its properties and
assets and to carry on its business as it is now being conducted, and (ii) is in
good standing, and is duly licensed, authorized or qualified to transact
business in each jurisdiction in which the ownership or lease of real property
or the conduct of its business requires it to be so qualified except where the
failure to be in good standing or to be duly licensed, authorized or qualified
to transact business, would not reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect on the Business Condition of
Purchaser and its Subsidiaries (as hereinafter defined), taken as a whole.
Purchaser has heretofore delivered or made available to the Stockholders
complete and correct copies of its certificate of incorporation and by- laws as
in effect on the date hereof. As used in the Agreement, "Subsidiary" shall mean
a corporation, partnership, limited liability company or other legal entity more
than 50% of the voting power of whose outstanding voting securities or equity
interests are, directly or indirectly, owned by Purchaser.
(b) The execution and delivery of this Agreement have
been duly authorized by the Board of Directors of Purchaser. No additional
proceedings (corporate or otherwise) on the part of Purchaser or its
stockholders are necessary to authorize the execution and delivery of this
Agreement and, except for the approval of the Board of Directors of Purchaser,
no such proceedings are necessary to authorize the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by, and, assuming the due execution and delivery thereof by the
Company and the Stockholders, constitutes the legal, valid and binding
obligation of, Purchaser and is enforceable against Purchaser in accordance with
its terms.
(c) The execution and delivery of this Agreement by
Purchaser and the consummation by Purchaser of the transactions contemplated by
this Agreement will not (i) violate any provision of the articles of
incorporation or by-laws or similar organizational instrument of Purchaser or
any of its material Subsidiaries, (ii) result in a violation of any provision
of, or constitute a default (with or without notice or lapse of time) under, or
give rise to a right of termination, cancellation or acceleration of (or entitle
any party to accelerate whether after the giving of notice or lapse of time or
both) any obligation under, or result in the imposition of any lien upon or the
creation of a security interest in any of Purchaser's or its Subsidiaries'
assets or properties pursuant to, any note, bond, debt instrument, mortgage,
indenture, lien, lease, agreement or other instrument, or any judgment,
injunction, order or decree to which Purchaser or any of its Subsidiaries is a
part or by which any of them is bound, or (iii) violate or conflict with any Law
or Order applicable to Purchaser or any of its Subsidiaries, except, in the case
of clauses (ii) and (iii), for any such violations, defaults, rights or
restrictions that would not, individually or in the aggregate, (A) have a
Material Adverse Effect on the Business Condition of Purchaser and its
Subsidiaries, taken as a whole, (B) an adverse effect on the value of the
Purchaser Shares or (C) on adverse effect on the ability of Purchaser to
consummate the Stock Purchase.
(d) No consent, approval, order or authorization of, or
registration, declaration or filing with (i) any Governmental Authority or (ii)
any individual, corporation or other entity (including any holder of Purchaser's
securities) is required by or with respect to Purchaser in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (A) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
federal securities laws, applicable state "blue sky" laws, and the securities
laws of any foreign country, and (B) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
be reasonably likely to have (i) a Material Adverse Effect on the Business
Condition of Purchaser and its Subsidiaries, taken as a whole or (ii) an adverse
effect on the value of the Purchaser Shares.
5.2 Capitalization. As of May 11, 1998, Purchaser's
entire authorized capital stock consists of 100,200,000 shares, 100,000,000 of
which are classified as Common Stock, $0.10 par value ("Purchaser Common
Stock"), and 200,000 of which are classified as Preferred Stock, par value $0.10
per share. As of May 11, 1998, no shares of Preferred Stock were issued or
outstanding, 28,942,078 shares of Purchaser Common Stock were outstanding and
2,179,000 shares of Purchaser Common Stock were reserved for issuance upon
exercise of options outstanding under Purchaser's stock option plans (the
"Outstanding Purchaser Options"), 45,130 shares of Purchaser Common Stock
were reserved for issuance upon exercise of outstanding warrants (the
"Outstanding Purchaser Warrants") and 5,556,000 shares of Purchaser Common
Stock were reserved for issuance upon exercise of future option grants under
Purchaser's stock option plans. Except as set forth above or in Schedule 5.2,
there are outstanding (i) no shares of capital stock or other voting
securities of Purchaser, (ii) no securities of Purchaser or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of Purchaser, (iii) no options, warrants or other rights to
acquire from Purchaser or any of its Subsidiaries (including any rights issued
or issuable under a shareholder rights plan or similar arrangement), and no
obligations of Purchaser or any of its Subsidiaries to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of Purchaser, (iv) no equity equivalents, interests
in the ownership or earnings of Purchaser or any of its Subsidiaries or other
similar rights, and (v) no outstanding obligations of Purchaser or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Purchaser Securities
or to make any investment (by loan, capital contribution or otherwise) in any
other entity.
5.3 Title to Purchaser Shares. Upon completion of the
transactions contemplated in this Agreement, the Purchaser Shares issued to the
Stockholders will be duly authorized, validly issued, fully paid, non-assessable
and free of preemptive rights. Each of the Stockholders will acquire good and
valid title to the Purchaser Shares issued by the Purchaser hereunder, free and
clear of any Liens or restrictions thereunder, except as regards restrictions as
described in Section 4.18(c) herein.
5.4 Reports and Financial Statements.
(a) Purchaser has filed all reports (including
without limitation proxy statements) required to be filed with the United States
Securities and Exchange Commission (the "SEC") during the twenty four months
preceding the date of this Agreement (collectively, the "Purchaser SEC
Reports"). The Purchaser SEC Reports were filed on a timely basis, and Purchaser
has furnished or made available to the Stockholders true and complete copies of
all the Purchaser SEC Reports. Non of the Purchaser SEC Reports, as of their
respective dates (as amended through the date hereof), contained any untrue
statement of material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All of the Purchaser
SEC Reports, as of their respective dates (as amended through the date hereof),
complied in all material respects with the applicable requirements of the
Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of
1934 (the "Exchange Act") and the applicable rules and regulations thereunder.
(b) Purchaser previously has made available to
the Stockholders correct and complete copies of its audited consolidated
financial statements (including balance sheets, statements of operations and
statements of cash flows, and, in each case, the related footnotes thereto) as
of December 31, 1996 and December 31, 1997, and for each of the three years in
the period ended December 31, 1997, accompanied by the report of Xxxxx Xxxxxxxx
LLP in the form contained in Purchaser's Annual Report to the SEC on Form 10-K
for the year ended December 31, 1997 (the "Audited Purchaser Financial
Statements"). Each of the consolidated balance sheets included in the Audited
Purchaser Financial Statements presents fairly, in all material respects, the
consolidated financial position of Purchaser and its Subsidiaries as of the
respective date thereof, and each of the other related consolidated statements
included in such Audited Purchaser Financial Statements presents fairly, in all
material respects, the consolidated results of operations and cash flows of
Purchaser and its Subsidiaries for the respective periods thereof, all in
conformity with GAAP consistently applied during the periods involved except as
otherwise noted therein.
5.5 Litigation; Orders. There is no action by or before any
Governmental Authority pending nor, to the knowledge of Purchaser, is any action
threatened against or involving Purchaser or any of Purchaser's Subsidiaries, or
affecting any properties or assets of any Purchaser, or any of Purchaser's
Subsidiaries which, in any such case, could reasonably be expected to (a)
materially prevent or delay the ability of Purchaser to consummate the
transactions contemplated hereby, or (b individually or in the aggregate, have a
Material Adverse Effect on the Business Condition of Purchaser and its
Subsidiaries, taken as a whole. Purchaser is not subject to any Order which
could reasonably be expected to materially prevent or delay the ability of
Purchaser to consummate the transactions contemplated hereby or, individually or
in the aggregate, have a Material Adverse Effect on the Business Condition of
Purchaser and its Subsidiaries, taken as a whole.
5.6 Compliance with Laws. The conduct of the business of each
of Purchaser and its Subsidiaries substantially complies with all applicable
Laws and all Orders applicable thereto, except for violations or failures so to
comply, if any, that would not reasonably be expected to have a Material Adverse
Effect on the Business Condition of Purchaser and its Subsidiaries, taken as a
whole.
5.7. No Undisclosed Liabilities. Except as reflected, reserved
against or otherwise disclosed in the Audited Purchaser Financial Statements
(including the notes thereto), neither Purchaser nor any of its Subsidiaries has
any liabilities or obligations of a character that would be required to be
reflected in a balance sheet prepared in accordance with GAAP except liabilities
and obligations which (a) were incurred after December 31, 1997 in the ordinary
course of business consistent with past practice, (b) would not have a Material
Adverse Effect on the Business Condition of Purchaser and its Subsidiaries,
taken as a whole, or (c) are specifically contemplated by this Agreement.
5.8 No Material Adverse Change. Since the date of the last
Purchaser SEC Report, there has not been any event, occurrence or circumstance
that has had a Material Adverse Effect on the Business Condition of Purchaser
and its Subsidiaries, taken as a whole, or any event, occurrence or circumstance
that would, or would reasonably be expected to, have a Material Adverse Effect
on the Business Condition of Purchaser and its Subsidiaries, taken as a whole,
or a Material Adverse Effect on the ability of Purchaser to consummate the
transactions contemplated hereby.
5.9 Brokers, Finders, Etc. Neither Purchaser nor of its
Subsidiaries has employed, or is subject to any claim of, any broker, finder, or
similar consultant or intermediary in connection with the transactions
contemplated by this Agreement which might be entitled to a fee or commission
from Purchaser upon the consummation of the transactions contemplated hereby.
5.10 Disclosure. No representation or warranty made by the
Purchaser in this Agreement and no statement contained in a certificate,
schedule, list or other instrument or document specified in or delivered
pursuant to this Agreement, whether heretofore furnished by the Purchaser or
hereafter required to be furnished by the Purchaser, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make the statements contained herein or therein not
misleading.
6. ASSIGNMENT OF SERVICE CONTRACTS. Most of the Service Contracts to
be sold and assigned to the Purchaser pursuant to the provisions of Section 2.1
of this Agreement include a requirement for consent by one or more third parties
to the assignment of the Service Contracts to the Purchaser. The parties agree
that they will cooperate and use reasonable efforts to secure any such required
consents and approvals prior to the Closing Date; provided, however, that the
Company and the Purchaser shall not be obligated to pay any consideration for
such assignment to the third party from whom such approval is requested. In the
event that receipt of the approval has not been obtained by the Company as of
the Closing Date, the Company shall, during the remaining term of such contract,
use all reasonable efforts to (i) at the request of the Purchaser, cooperate
with the Purchaser to obtain the consent of any such third party to the
assignment of the contract and (ii) at the request of the Purchaser, cooperate
with Purchaser in any reasonable and lawful arrangements designed to provide the
benefits of any such contract to the Purchaser (through subcontract or other
arrangement). Notwithstanding the fact that the assignment of a contract has not
been concluded as of the Closing Date, the Purchaser will assume any and all
related obligations or liabilities, and the Purchaser will indemnify and hold
harmless the Company from any claim or obligation in connection therewith. To
the extent that the Company and the Purchaser enter into lawful arrangements
reasonably satisfactory to the Purchaser designed to provide the benefits of
such contract to the Purchaser, such contract shall be deemed to have been
conveyed to the Purchaser for all purposes of this Agreement.
7. COVENANTS OF THE COMPANY, THE STOCKHOLDERS AND THE PURCHASER. The
Company and the Stockholders covenant to the Purchaser and the Purchaser
covenants to the Company and the Stockholders that, except as consented to in
writing by the Purchaser or by the Company and the Stockholders after the date
of this Agreement until the Closing hereunder:
7.1 Investigation of Business; Access to Properties and
Records; Records Retention.
(a) Between the date hereof and the Closing Date, each
of the Company and Purchaser shall (and Purchaser shall cause each of its
Subsidiaries to) afford to representatives of the other party ("Respective
Representatives") reasonable access to their respective offices, properties,
books and records during normal business hours in order that such party may have
full opportunity to make such investigations as it desires of the affairs of the
other party and the Company an Purchaser shall, and shall cause their employees
and officers to furnish such data as is reasonably requested by the other
party's representatives; provided, however, that such investigation shall be
upon reasonable prior written notice and shall not unreasonably disrupt the
personnel and operations of the other party. All requests for access shall be
made to such representatives of the other party as such party shall designate in
writing, who shall be solely responsible for coordinating all such request and
all access permitted hereunder. It is further understood and agreed that neither
party nor its representatives shall contact any of the employees, customers,
suppliers, joint venture partners, or other associates or affiliates of the
other party, or any of Purchaser's Subsidiaries, in connection with the
transactions contemplated by this Agreement, whether in person or by telephone,
mail or other means of communication, without the specific prior authorization
of the other party. No information or knowledge obtained in any investigation
pursuant to this Section 7.1(a) shall affect or be deemed to modify any
representation or warranty contained in this Agreement or any disclosure
schedule or the conditions to the obligations of the parties to consummate the
transactions contemplated hereunder.
(b) Each of the Stockholders and the Company and the
Purchaser will hold and will cause their respective employees, agents and
representatives to hold in confidence, unless compelled to disclose by judicial
or administrative process or, in the opinion of its legal counsel, by other
requirements of law, all documents and information concerning the other party
and Purchaser's Subsidiaries furnished to it in connection with the transactions
contemplated by this Agreement, and will not release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors and other consultants and advisors in connection with this Agreement
who need to know such information. If the transactions contemplated by this
Agreement are not consummated, such confidence shall be maintained and, if
requested by or on behalf of the furnishing party, the other party will, and
will use all reasonable efforts to cause its auditors, attorneys, financial
advisors and other consultants, agents and representatives to, return to the
furnishing party or destroy all copies of written information so furnished to it
or its agents and representatives.
7.2 Further Assurances. The Stockholders, the Company and
Purchaser agree that, from time to time, whether at or after the Closing Date,
each of them will execute and deliver such further instrument of conveyance and
transfer and take such other action as may be necessary to carry out the terms
of this Agreement. The parties will take all reasonable actions including,
without limitation, taking of all action reasonably necessary to obtain material
Governmental Entity approvals of, material third party consents to,
contesting any legal proceedings filed to prevent or delay, and executing
additional documents reasonably necessary to consummate the transactions
contemplated hereby as promptly as practicable. The Stockholders, the Company
and Purchaser further agree that they will not take any action that will prevent
their performance of this Agreement in accordance with its terms.
7.3 Conduct of Business of the Company. Except as contemplated
by this Agreement, during the period from the date of this Agreement to the
Closing Date, the Company and the Stockholders shall cause the Company to
conduct its operations in the ordinary course of business consistent with past
practice, and to use their commercially reasonable efforts to maintain and
preserve its business organization and its material rights and franchises and to
retain the services of its officers and key employees and maintain relationships
with customers, suppliers and other third parties to the end that its goodwill
and ongoing business shall not be impaired in any material respect at or prior
to the Closing Date. Without limiting the generality of the foregoing, during
the period from the date of this Agreement to the Closing Date, the Company and
the Stockholders covenant that, except as otherwise contemplated by this
Agreement and the transactions contemplated hereby, without the prior written
consent of Purchaser, the Company will not, and the Stockholders agree not to,
and to cause the Company not to:
(a) amend or propose to amend its certificate of
incorporation or by-laws or similar organization instruments;
(b) except as set forth in Schedule 7.3(b), (i) create,
incur or assume any indebtedness in an amount greater than $25,000 for money
borrowed (excluding obligations in respect of capital leases) or issue any debt
securities; (ii) except in the ordinary course of business, assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any person other than the
Company; (iii) make any material loans, advances or capital contributions to or
investments in, any person other than the Company (except for customary loans or
advances to employees not exceeding $5,000 in the aggregate); or (iv) pledge or
otherwise encumber its equity interests;
(c) except in the ordinary course of business or as
required by any Law or contractual obligations existing on the date hereof or as
provided for in or contemplated by this Agreement the Company shall not (i)
sell, transfer or otherwise dispose of any assets outside of the ordinary course
of business, (ii) create any new Lien, other than a Company Permitted Lien, on
its properties or assets, (iii) enter into any joint venture or partnership, or
(iv) purchase any assets or securities of any person;
(d) (i) acquire or agree to acquire (by merger,
consolidation, acquisition of stock or assets or otherwise) any corporation,
partnership or other business organization or division thereof or any equity
interest therein; (ii) enter into any contract or agreement other than in the
ordinary course of business consistent with past practice; (iii) authorize any
new capital expenditure or expenditures which, individually, is in excess of
$25,000; or (iv) enter into or amend any contract, agreement, commitment or
arrangement providing for the taking of any action that would be prohibited
hereunder;
(e) except as set forth in Schedule 7.3(e), mortgage or
pledge any of its assets, tangible or intangible, or create or suffer to exist
any Lien thereupon;
(f) enter into any commitment or transaction outside
the ordinary course of business consistent with past practice; or
(g) take or agree to take any action prohibited by this
Section 7.3.
7.4 Public Announcement. From the date hereof until the
Closing Date, the Stockholders and Purchaser will, before issuing, or permitting
any agent or affiliate to issue, any press release or otherwise making or
permitting any agent or affiliate to make, any public statement with respect to
this Agreement and the transactions contemplated hereby, obtain the consent of
the other party, except in the event, and only to the extent, that disclosure is
required by law; provided, that in such instances the disclosing party will, to
the extent practicable, consult with the other party prior to making such
disclosure.
7.5 Notification of Certain Matters. The Company or the
Stockholders shall give prompt written notice to Purchaser, and Purchaser shall
give prompt written notice to the Company, of (a) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which would be
likely to cause any representation or warranty contained in this Agreement to be
untrue in any material respect at or prior to the Closing Date, and (b) any
material failure of the Company or Purchaser, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.5 shall not cure such breach or non-compliance or limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.6 Expenses. Whether or not the transactions contemplated
hereby are consummated, all costs and expenses incurred in connection with this
Agreement (including the Exhibits hereto) and the transactions contemplated
hereby (and thereby) shall be paid by the party incurring such expenses.
7.7 Stock Options; Compensation. Within 60 days following the
Closing, the Purchaser shall with respect to key employees and executives of the
Company hired by Purchaser (i) grant options to purchase an aggregate of 150,000
shares of Purchaser Common Stock, and (ii) provide compensation and other
remuneration incentives, consistent with existing compensation programs of the
Purchaser.
7.8 Accounts Receivable. As soon as practicable after July 31,
1999, Purchaser shall advise Seller in writing of the aggregate amount of the
Company's accounts receivable as of the Closing Date that had not been collected
as of July 31, 1999 (the "Uncollected AR's"). The Sellers, jointly and
severally, shall thereafter promptly pay to Purchaser an amount equal to the
Uncollected AR's less any reserve for doubtful accounts Sellers transferred to
Purchaser as part of the Asset Purchase, provided that the amount of such
Uncollected AR's exceeds $100,000. Such payment, if any, shall be made in U.S.
dollars by wire transfer to such account as Purchaser shall designate. Nothing
herein contained shall obligate Purchaser to take any action, other than routine
collection efforts, not including litigation, to collect any account receivable
sold to Purchaser in the Asset Purchase. Upon payment by Sellers for the
Uncollected AR's, Purchaser shall assign the Uncollected AR's to Sellers The
Purchaser shall not involuntarily terminate the employment of any of the
Company's employees (who are employed by Purchaser and identified on Schedule
7.8 hereto) responsible for the collection of the Company's accounts receivable
sold in the Asset Purchase until the earlier of the following events to occur:
(a) the collection of all such accounts receivable, or (b) one (1) year from the
date of this Agreement.
8. CONDITIONS.
8.1 Mutual Conditions. The obligations of the parties hereto
to consummate the transactions contemplated hereunder shall be subject to
fulfillment of the following conditions:
(a) No Order or attachment which prevents the
consummation of the transactions contemplated hereunder shall have been issued
and remain in effect, and no statute, rule or regulation shall have been enacted
by any Governmental Authority which prohibits, restrains, enjoins or restricts
the consummation of the transactions contemplated hereunder.
(b) All authorizations, approvals, consents and waivers
of, or declarations or filings with, any Governmental Authorities or third
parties, required to permit consummation of the transactions contemplated by
this Agreement shall have been filed or obtained and shall not have been
terminated, suspended or withdrawn as of the Closing Date.
8.2 Conditions to Obligations of the Stockholders and the
Company. The obligations of the Stockholders and the Company to consummate the
transactions contemplated hereby and such transactions shall be subject to the
fulfillment of the following conditions unless waived by all of the
Stockholders:
(a) Covenants and Representations of the Purchaser. The
Purchaser shall have executed all agreements contemplated by this Agreement and
the Closing Documents to be executed on or prior to Closing and shall have
performed and complied in all material respects with all agreements, covenants,
obligations and conditions required thereby to be performed or complied with by
it on or prior to Closing. All representations and warranties of the Purchaser
shall be true and correct in all material respects as if made for the first time
on the Closing Date.
(b) Opinion of Counsel to the Purchaser. The Purchaser
shall have delivered to each of the Companies a favorable opinion of the
Purchaser's counsel, Proskauer Rose LLP, dated the date of Closing, in form and
substance satisfactory to the Stockholders and their counsel, to the effect that
(a) the Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York; (b) the Purchaser has the
corporate power to carry on its business as it is now being conducted and to own
or hold under lease the properties and assets it now owns or holds under lease;
(c) the Purchaser has the corporate power to enter into the transactions
contemplated by this Agreement; (d) the execution, delivery and performance of
this Agreement and all other documents to be executed by the Purchaser in
connection with this Agreement (the "Purchaser Documents") have been duly
authorized and approved by all requisite action of the Board of Directors and
stockholders of the Purchaser, and this Agreement and all other Purchaser
Documents have been duly executed and delivered by the Purchaser and constitute
valid and legally binding obligations of the Purchaser, subject to applicable
bankruptcy, insolvency, moratorium and other similar laws of general application
and such general principles of equity as a court having jurisdiction may apply;
(e) the execution and delivery of this Agreement and the other Purchaser
Documents did not, and the consummation of the transactions contemplated hereby
or thereby will not, violate or conflict with any provision of the Charter or
By-Laws of the Purchaser; (f) the execution and delivery of this Agreement and
the other Purchaser Documents did not, and the consummation of the transactions
contemplated hereby or thereby will not, violate any provision of any agreement,
instrument, order, judgment or decree, of which such counsel has knowledge, to
which the Purchaser may be a party or by which it is bound; (g) except as may be
specified by such counsel, such counsel does not know of any material suit or
proceeding pending or threatened against the Purchaser which seeks to restrain
or prohibit the consummation of the transactions contemplated by this Agreement;
(h) the Purchaser Shares have been duly authorized and reserved for issuance
and, when issued and delivered in accordance with this Agreement, will be duly
and validly issued, fully paid and non assessable under the laws of the State of
New York; and (i) to the knowledge of such counsel, all regulatory and
governmental approvals, consents and filings required of the Purchaser for the
consummation of the transactions contemplated by this Agreement or any of the
other the Purchaser Documents have been obtained or made, and to the knowledge
of such counsel, all such approvals, consents or filings remain in full effect
as of the date of such opinion.
(c) No Adverse Proceedings or Events. No suit, action
or other proceeding against the Company or the Purchaser, or their respective
officers, directors or employees, or against the Stockholders, shall be
threatened or pending before any court or governmental agency in which it will
be, or it is, sought to restrain or prohibit any transactions contemplated by
this Agreement or to obtain material monetary damages in connection with this
Agreement or the transactions contemplated hereby.
(d) Other Evidence. The Company and the Stockholders
shall have received from the Purchaser such further certificates and documents
evidencing due action in accordance with this Agreement, as they reasonably
shall request.
8.3 Conditions to Obligation of Purchaser. The obligations of
Purchaser to consummate the Asset Purchase and other transactions contemplated
hereby shall be subject to the fulfillment of the following conditions unless
waived by Purchaser:
(a) Covenants and Representations of the Sellers and
the Stockholders. The Sellers and the Stockholders shall have executed all
agreements contemplated by this Agreement to be executed on or prior to Closing
and shall have performed and complied in all material respects with all
agreements, covenants, obligations and conditions required thereby to be
performed or complied with by them on or prior to Closing. All representations
and warranties of the Sellers and the Stockholders shall be true and correct in
all material respects as if made for the first time on the Closing Date.
(b) No Material Adverse Change. Since the date of this
Agreement, there shall not have been any event, occurrence, development or
circumstances that individually or in the aggregate had, or reasonably would be
expected to have, a Material Adverse Effect on the (i) Business Condition,
financial or otherwise, or the earnings, business affairs or management of the
Company, whether or not in the ordinary course of business or (ii) ability of
the Company or the Stockholders to consummate the transactions contemplated
hereby.
(c) Opinion of the Company's Counsel. Purchaser shall
have received the opinion of counsel to the Company as reasonably requested by
Purchaser, in form and substance reasonably satisfactory to the Purchaser and
its counsel, to the effect that: (i) the Company is duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
full power to carry on its business as it is now being conducted and to own or
hold under lease the properties and assets it now owns or holds under lease;
(ii) the Company is duly qualified to do business in all jurisdictions where the
character of it properties or the nature of its activities makes such
qualification necessary and where the failure to qualify would be materially
adverse to the Company; (iii) to the best knowledge of such counsel, the
authorized, issued and outstanding capital stock or equity interests of the
Company are as set forth in Section 5.2 of this Agreement and the Company
Disclosure Schedule, and to the actual best knowledge of such counsel, each of
the issued and outstanding shares of such stock has been duly authorized and
issued and is fully paid and non-assessable; (iv) the execution, delivery and
performance of this Agreement and all other documents to be executed by the
Company in connection with this Agreement and all other Company Documents in the
case of the Company, and other documents to be executed by the Stockholders in
connection with this Agreement (the "Stockholder Documents") and, together with
the Company Documents (the "Seller Documents") have been duly executed and
delivered by the Company and the Stockholders, as the case may be, and
constitute valid and legally binding obligations of the Company and the
Stockholders, as the case may be; (v) the execution and delivery of this
Agreement and the other Seller Documents did not, and the consummation of the
transactions contemplated hereby or thereby will not, violate any provision of
any agreement, instrument, order, judgment or decree, of which such counsel has
actual knowledge, to which the Company and the Stockholders, as the case may be,
is a party or by which it or any of them is bound; (vi) except as may be
specified by such counsel, such counsel does not know of any material suit or
proceeding pending or threatened against or affecting any of the Stockholders or
the Company, its business or properties or the consummation of the transactions
contemplated hereunder; (vii) all regulatory and governmental approvals,
consents and filings required of any of the Stockholders and the Company for the
consummation of the transactions contemplated by this Agreement or any of the
other Seller Documents have been obtained or made, and, to the best knowledge of
such counsel, all such approvals, consents or filings remain in full effect as
of the date of such opinion; and (viii) such other opinions regarding the
validity and sufficiency of legal proceedings and matters relative to the
transactions contemplated by thi Agreement as the Purchaser may reasonably
request.
(d) No Adverse Proceedings or Events. Except for those
matters disclosed in the Company's Disclosure Schedule, no suit, action or other
proceeding against the Company or the Purchaser, or their respective officers,
directors or employees, or against any of the Stockholders, shall be threatened
or pending before any court or governmental agency, including any proceeding
(regardless of the materiality or the lack thereof) related to the Service
Contracts or in which it will be, or it is, sought to restrain or prohibit any
of the transactions contemplated by this Agreement or any in which it is sought
to obtain material monetary damage in connection with this Agreement or the
transactions contemplated hereby.
(e) Consents and Actions; Contracts. All requisite
consents of any third parties and other actions which the Company and the
Stockholders have covenanted to use their best efforts to obtain and take under
Section 7 hereof shall have been obtained and completed in all material
respects, or have been waived by Purchaser. All material contracts and
agreements of the Company, including, without limitation, those listed on the
Company's Disclosure Schedule, shall be in full force and effect and shall not
be affected by the consummation of the transactions contemplated hereby.
(f) Consulting, Non-Compete and Other Matters. Each of
the persons named in Schedule 8.3(f) shall have executed and delivered an
Employment Agreement, Stockholder Non-Competition and Confidentiality Agreement,
or Management Non-Competition or Confidentiality Agreement, as provided in such
Schedule, in substantially the form attached hereto as Attachments D, E and F,
respectively.
(g) Other Evidence. The Purchaser shall have received
from the Company and the Stockholders such further certificates and documents
evidencing due action in accordance with this Agreement as the Purchaser
reasonably shall request.
(h) Consents. All consents required in connection with
the consummation of the transactions contemplated by this Agreement shall have
been obtained.
(i) Board of Directors Approval. The Board of Directors
of Purchaser shall have approved the transactions contemplated hereby.
(j) Due Diligence. Purchaser shall have completed its
due diligence review of Sellers and determined that the results of such review
are satisfactory to Purchaser.
9. TERMINATION, AMENDMENT AND MODIFICATION.
9.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent of each of the parties
hereto;
(b) by Purchaser, or the Stockholders and the Company,
as the case may be (provided that the party seeking termination has diligently
and in good faith performed or complied in all material respects with the
agreements and covenants required to be performed by it hereunder) in the event
that the transactions contemplated hereby are not consummated pursuant to this
Agreement on or before August 1, 1998;
(c) by Purchaser, or the Stockholders and the Company,
as the case may be, if a court of competent jurisdiction or other Governmental
Authority shall have issued a nonappealable final Order or taken any other
action, in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby,
except, if the party relying on such Order or other action has not complied with
its obligations under this Agreement; or
(d) by Purchaser, or the Stockholders and the Company,
as the case may be, if there has been a material breach of any representation,
warranty, covenant or agreement on the part of the other party set forth in this
Agreement, which breach shall not have been cured in the case of a
representation or warranty, prior to the Closing or, in the case of a covenant
or agreement, within 45 business days following receipt by the breaching party
of written notice of such breach from the other party.
(e) by Purchaser, in the event that Purchaser
determines from the results of its due diligence review that consummation of the
transactions contemplated by this Agreement are not in Purchaser's best
interests or Purchaser's Board of Directors declines to approve such
transactions.
9.2 Procedure and Effect of Termination. In the event of
termination of this Agreement pursuant to Section 9.1, written notice thereof
shall forthwith be given by the terminating party to the other party hereto, and
this Agreement shall thereupon terminate and become void and have no effect, and
the transactions contemplated hereby shall be abandoned without further action
by the parties hereto, except that the provisions of Sections 7.1(b) and 11.7
shall survive the termination of this Agreement; provided however, that such
termination shall not relieve any party hereto of any liability for any willful
breach of this Agreement. If this Agreement is terminated as provided herein,
all filings, applications and other submissions made pursuant hereto shall, to
the extent practicable, be withdrawn from the agency or other persons to which
they were made.
10. INDEMNIFICATION AND ESCROW
10.1 Indemnification by the Stockholders. The Company and each
of the Stockholders, jointly and severally (except that indemnity shall be
several and not joint with respect to any representation and warranty or
covenant made by the Stockholders severally and not jointly), hereby covenants
and agrees to indemnify and hold harmless the Purchaser and its respective
successors and assigns (subject to the notice, timing and amount limitations set
forth in this Agreement) against and in respect of any liability, loss, damage,
expense or other cost, including without limitation reasonable attorneys' fees
and expenses (such amounts, after deducting insurance proceeds received by the
Indemnitee (as defined herein) in respect thereof; being referred to herein as a
"Loss") resulting from any (a) breach of any representation or warranty, or (b)
breach or nonfulfillment of any agreement or covenant on the part of the
Company. The indemnity provided in this Section 10.1 shall be satisfied solel
out of the Escrow (as defined in Section 10.5) and Purchaser shall have no
recourse whatsoever to the Stockholders or their assets (other than the Escrow
Shares as provided in Section 10.5 and their respective Escrow Agreements).
The remedy provided in this Section 10 shall be Purchaser's exclusive remedy
with respect to Losses arising out of the matters set forth in this Section
10.1; provided nothing herein shall relieve any party for liability for fraud.
10.2 Indemnification by the Purchaser. Purchaser hereby
covenants and agrees to indemnify and hold harmless each of the Stockholders,
their successors and assigns (subject to the notice and timing requirements and
survival and amount limitations provided in this Agreement), against and in
respect of any Loss resulting from any (a) breach by Purchaser of any
representation or warranty made by it herein or (b) breach or nonfulfillment of
any agreement or covenant on the part of Purchaser.
10.3 Indemnification Procedure. The procedure for
indemnification of parties shall be as follows:
(a) If at any time a party is entitled to
indemnification hereunder (the "Indemnitee") or shall become aware of any state
of facts that have resulted or may result in a Loss, the Indemnitee shall
promptly give written notice (a "Notice of Claim") to the party obligated to
provide indemnification (the "Indemnitor") of the discovery of such potential or
actual Loss. The Notice of Claim shall set forth (A) a description of the nature
of the potential or actual Loss, and (B) the total amount of Loss anticipated
(including any costs or expenses which have been or may be reasonably incurred
in connection therewith). Except for a failure to deliver a Notice of Claim
within the applicable survival period as provided under Section 11.6 (which
failure shall constitute a complete defense) the Indemnitee's failure to give
prompt notice shall constitute a defense (in whole or in part) to any claim by
the Indemnitee against the Indemnitor for indemnification only to the extent
that such failure shall have caused or increased such liability or adversely
affected the ability of the Indemnitor to defend against or reduce its
liability.
(b) The Indemnitor shall accept or reject any Loss as
to which a Notice of Claim is sent by the Indemnitee by giving written notice of
such acceptance or rejection (the "Indemnitor Notice") to the Indemnitee within
sixty (60) days after the date of receipt of the Notice of Claim. Failure of the
Indemnitor to reject a Loss within 60 days of receipt of the Notice of Claim
shall be conclusive evidence of the Indemnitor's acceptance of its
responsibility to indemnify the Indemnitee against such Loss.
(c) If the Indemnitor elects to reject the claim, the
Indemnitor Notice shall set forth a description of the nature of the basis for
the rejection of such claim.
(d) Should the Indemnitee and the Indemnitor fail to
reach a settlement within ten (10) days of the Indemnitor's notice, the
Purchaser and the Stockholders agree that such controversy shall be settled
exclusively by arbitration in New York, New York in accordance with the National
Rules of the American Arbitration Association. The decision of the arbitration
or arbitrators shall be binding on all parties hereto, and judgment upon the
award rendered by the arbitrator may be entered by any court having jurisdiction
thereof. In reaching its decision, the arbitrator shall have no authority to
change or modify any provision of this Agreement.
(e) If any Notice of Claim relates to any Third-Party
Claim, the Notice of Claim shall state the nature, basis and amount of such
claim. In the event that the Indemnitor accepts the Loss as to which the Notice
of Claim is sent or an arbitrator determines that such Loss is covered by this
Section 10, or if a dispute is pending before an arbitrator, the Indemnitor
shall have the right, at its election, by written notice given to the
Indemnitee, to assume the defense of the claim as t which such notice has been
given with counsel reasonably acceptable to the Indemnitee. Except as provided
in the next sentence, if the Indemnitor so elects to assume such defense, it
shall diligently and in good faith defend such claim and shall keep the
Indemnitee reasonably informed of the status of such defense, and the Indemnitee
shall cooperate with the Indemnitor in the defense of such claim, provided that
in the case of any settlement providing for remedies other than monetary damages
for which indemnification is provided, the Indemnitee shall have the right to
approve the settlement, which approval shall not be unreasonably withheld or
delayed. If the Indemnitor does not so elect to defend any claim as aforesaid or
shall fail to defend any claim diligently and in good faith (after having so
elected), the Indemnitee may, at the Indemnitor's expense, assume the defense of
such claim and take such other action as it may elect or defend or settle such
claim as it may determine in its reasonable discretion.
10.4 Limitations on Indemnity. Purchaser shall make no claim
for indemnity under Section 10.1, and the Stockholders shall make no claim for
indemnity under Section 10.2, until the dollar amount of all Losses shall exceed
$300,000 (the "Basket"), in which event the Indemnitor shall be responsible for
the aggregate amount of such Losses, including the amount of the Basket,
provided that no party shall be required to make any payments with respect to
individual items where the Losses related thereto are less than $10,000 and such
items shall not be aggregated for purposes of determining the Basket, provided,
further that the Stockholders' obligation and liability for any and all breaches
of the representations and warranties and covenants set forth in this Agreement,
other than the representations and warranties contained in Sections 4.1, 4.4,
4.10, 4.12, 4.13, shall be limited to the Escrow Shares (as hereinafter
defined).
10.5 Escrow.
(a) At the Closing the Company and the Stockholders,
the Purchaser and an escrow agent (which shall be a commercial bank selected by
the Purchaser and reasonably acceptable to the Stockholders, shall enter into an
escrow agreement (the "Escrow Agreement"), the terms of which shall be mutually
satisfactory to all of the parties, pursuant to which a portion of the Purchase
Price having an aggregate Market Value equal to US $2,770,000 (the "Escrow
Amount"), will be delivered by the Stockholders to the escrow agent (the
"Escrow"). The Escrow Agreement shall permit the Company or the Stockholders to
receive all dividends and other distributions, if any, paid in respect of any
Purchaser Shares delivered to the Escrow Agent (the "Escrow Shares") and to vote
all Escrow Shares. The Escrow Shares will stand as security for any and all
claims made under this Section 10 by the Purchaser.
(b) Payment to the Purchaser of any amounts pursuant to
this Section 10 shall be delivered to and released by such escrow agent as and
when provided pursuant to the Escrow Agreement. The Escrow Agreement shall
provide that the number of Escrow Shares released in respect of any Escrow
claims shall be determined by using the Closing Date Market Value. The Escrow
Agreement shall also provide that promptly upon the expiration of the period
ending twelve (12) months from the Closing Date, the escrow agent shall release
from the Escrow and deliver to Stockholders the balance of the Escrow Amount,
unless a claim against the Escrow is pending at such time, in which event the
remaining Escrow Amount not covered by such claim shall be released to the
Stockholders and the release of the Escrow Amount subject to such claim shall
occur promptly after the resolution of such pending claim.
10.6 Indemnification Sole Remedy. The indemnification contained
in this Section 10 shall be deemed to be the exclusive remedy of the Indemnified
Party in connection with or arising from any failure of the Indemnifying Party
to perform any of its covenants or obligations in this Agreement or any breach
by the Indemnifying Party of any representation or warranty contained in this
Agreement; provided the provisions of this Section 10.6 shall in no way restrict
or limit any parties' liability for fraud.
11. SELLERS' "PUT" OPTION; RIGHT OF FIRST REFUSAL.
11.1 Sellers' "Put" Option. The Sellers may require Purchaser
to repurchase the Purchaser Shares (the "Put Option") pursuant to the Put Option
Agreement attached hereto as Attachment G.
11.2 Purchaser's Right of First Refusal. Not less than ten (10)
days prior to the sale by Sellers of any shares of Purchase Common Stock
delivered to Sellers in accordance with Section 2.3(a) hereof, the Sellers shall
provide Purchaser with written notice of Sellers' intention to sell such shares
of Purchaser Common Stock (a "Sale Notice") and Purchaser shall be entitled
within ten (10) days of receipt of such notice to notify Sellers in writing of
its intent to repurchase all or a part of such shares at the closing price for
such shares on the Nasdaq Stock Market (National Market) as of the date of
Sellers' notice to Purchaser of its intention to sell such shares. Purchaser
shall make payment to Seller for such shares no later than seven (7) days after
Sellers' receipt of Purchaser's written notice of its intent to make such
purchase. If Sellers do not sell such shares within thirty (30) days after a
Sale Notice is given, Sellers shall again be subject to the provisions of this
Section 11.2.
12. NON-COMPETITION/NON-SOLICITATION
12.1 Non-Competition. The Company shall not, for a period of
four years after the Closing Date, directly or indirectly, engage, anywhere the
Purchase does business as of the Closing Date in the sale or offering or
promoting for sale of any product, process, good or service which is the same
as, is functionally similar to, or competes with, any product, process, good or
service which the Company, Purchaser or any of its Subsidiaries has sold or
offered or promoted for sale within the three years preceding the Closing Date.
12.2 Non-Solicitation of Employees. The Company shall not
directly or indirectly, for itself or on behalf of any individual or entity,
hire any employee of Purchaser or any of its Subsidiaries, or induce or attempt
to induce any such employee to leave his or her employment with Parent or any of
its Subsidiaries, at any time within four years from the Closing Date.
12.3 Non-Solicitation or Interference with Customers and
Suppliers. The Company shall not, directly or indirectly, for itself or on
behalf of any individual or entity, solicit, divert, take away or attempt to
take away any of Purchaser's, the Company's or any of the Purchaser's
Subsidiaries' customers or suppliers or the business or patronage of any such
customers or suppliers or in any way interfere with, disrupt or attempt to
disrupt any then existing relationships between Purchaser or any of its
Subsidiaries, and any of their respective customers or suppliers or other
individuals or entities with whom any of them deals or contact or enter into any
business transaction with any such customers or suppliers or other individuals
or entities for any purpose at any time within four years from the Closing Date.
12.4 Acknowledgments. Sellers acknowledge that, in view of the
nature of the Company's business and the business objectives of Purchaser in
acquiring the Assets and the Business, and the consideration paid therefor, the
restrictions contained in this Article XII are reasonably necessary to protect
the legitimate business interests of Purchaser and that any violation of such
restrictions will result in irreparable injury to Purchaser and the business
Purchaser has acquired hereunder for which damages will not be an adequate
remedy. The Company and the Stockholders therefore acknowledge that if any such
restrictions are violated, Purchaser shall be entitled to preliminary and
injunctive relief as well as to an equitable accounting of earnings, profits and
other benefits arising from such violation.
13. MISCELLANEOUS
13.1 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
13.2 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of all the parties hereto.
13.3 Governing Law and Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of New York without
reference to the choice of law principles thereof. The parties hereto agree
that, except as otherwise provided in Section 10.3(d) hereof, the appropriate
and exclusive forum for any disputes between any of the parties hereto arising
out of this Agreement or the transactions contemplated hereby shall be federal
district court in New York, New York. The parties hereto further agree that the
parties will not bring suit with respect to any disputes arising out of this
Agreement or the transactions contemplated hereby, except as expressly set forth
below for the execution or enforcement of judgment, in any court or jurisdiction
other than the above specified court. The foregoing shall not limit the rights
of any party to obtain execution of judgment in any other jurisdiction. The
parties further agree, to the extent permitted by law, that final and
unappealable judgment against any of them in any action or proceeding
contemplated above shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and amount of such judgment.
13.4 Entire Agreement. This Agreement and the Schedules hereto
contain the entire agreement between the parties with respect to the subject
matter hereof and there are no agreements, understandings, representations or
warranties between the parties with respect to the subject matter hereof other
than those set forth or referred to herein or therein, except for certain
confidentiality provisions set forth in that certain letter of intent dated May
28, 1998, between Purchaser and the Company, as modified in writing from time to
time, shall remain in full force and effect.
13.5 Agreement for the Parties' Benefit Only. This Agreement is
not intended to confer upon any person not a party hereto any rights or remedies
hereunder, and no person other than the parties hereto is entitled to rely on
any representation, warranty or covenant contained herein.
13.6 Survival of Representations and Warranties. Solely for
purposes of the indemnification provisions set forth in Section 10, and subject
to the limitations set forth therein, the representations and warranties set
forth in this Agreement, shall survive the Closing under this Agreement for a
period of twelve (12) months from the Closing Date, provided that the
representations and warranties in Sections 4.1, 4.4 and 4.10 shall survive the
Closing until the third anniversary of the Closing Date. If prior to the close
of business on the scheduled date for expiration of a particular representation,
warranty or covenant that is the basis for a claim for indemnity under Section
10, the Company and Stockholders or Purchaser shall have been notified of such
claim, then the representation, warranty or covenant that is the basis for such
claim shall continue to survive and shall remain a basis for indemnity, to the
extent of such specific claim only, until such claim is finally resolved or
disposed of. Except as described above, to the extent that the covenants of the
parties contained in this Agreement that contemplate or may involve actions to
be taken (a) solely prior to the Closing shall not survive the Closing, and (b)
after the Closing, they shall survive until such actions shall have been
performed in accordance with their terms.
13.7 Expenses. All legal and other costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses. Without limiting the
generality of the foregoing, consistent with the notion that each party shall
bear its expenses, and subject at all times to the representations and
agreements set forth herein, the Company shall pay the investment banking,
accounting and legal fees incurred in connection with this Agreement.
13.8 Specific Performance. The Stockholders and Purchaser each
acknowledge that, in view of the uniqueness of the Company, the Stockholders and
Purchaser would not have an adequate remedy at law for money damages in the
event that this Agreement were not performed in accordance with its terms, and
therefore agree that the Stockholders and Purchaser shall be entitled to
specific enforcement of the terms hereof in addition to any other remedy to
which any of the Stockholders or Purchaser may be entitled, at law or in equity.
13.9. Notices. All notices hereunder shall be sufficiently given
for all purposes hereunder if in writing and delivered personally or sent by
registered mail or certified mail, postage prepaid, to the appropriate address
as set forth below. Notice to the Company shall be addressed to:
RPM Associates, Inc.
0000 Xxxxxxxx Xxx
Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Xx., President
Facsimile No.: (000) 000-0000
with copies to:
Piper & Marbury L.L.P.
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
and
Xxxxxxxx & Xxxxx
Ninth Floor, World Trade Center
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxx Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
or at such other address and to the attention of such other person as the
Company may designate by written notice to Purchaser. Notice to the Stockholders
shall be addressed as set forth on Schedule 12.9, with copies to the Company,
Piper & Marbury L.L.P. and Xxxxxxxx & Xxxxx. Notice to Purchaser shall be
addressed to:
Computer Horizons Corp.
00 Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx Xxxxx, XX 00000-0000
Attention: Xxxxxx XxXxxxxx, Esq.
Facsimile No.: (000) 000-0000
with copies to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
or at such other address and to the attention of such other person as Purchaser
may designate by written notice to the Company and the Stockholders. Any notice
shall be deemed to have been served or given upon receipt.
13.10 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their successors and
assigns. Neither this Agreement nor any of the rights, interests or obligations
shall be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties and any
purported assignment without such consent shall be null and void; provided, that
prior to the Closing, the Purchase may assign its rights hereunder to a
wholly-owned subsidiary; and provided, further, that notwithstanding any such
permitted assignment, the Purchaser shall remain liable for all of the
Purchaser's obligations under this Agreement.
13.11 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular
shall be held to include the plural and vice versa and words of one gender shall
be held to include the other gender as the context requires, (ii) the terms
"hereof," "herein," and "herewith" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole (including
all of the Schedules hereto) and not to any particular provision of this
Agreement, and Article, Section, paragraph, and Schedule references are to the
Articles, Sections, paragraphs, and Schedules to this Agreement unless otherwise
specified, (iii) the word "including" and words of similar import when used in
this Agreement shall mean "including, without limitation," unless the context
otherwise requires or unless otherwise specified, (iv) the word "or" shall not
be exclusive, and (v) provisions shall apply, when appropriate, to successive
events and transactions.
(b) This Agreement shall be construed without regard to
any presumption or rule requiring construction or interpretation against the
party drafting or causing any instrument to be drafted.
13.12 Extension; Waiver. At any time prior to the Closing
Date, each party hereto may but shall not be required to (a) extend the time for
the performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document, certificate or writing delivered pursuant
hereto, or (c) waive compliance by the other party with any of the agreements or
conditions contained herein. Any agreement on the part of either party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the parties hereto, and the failure of any party hereto to
assert any of its rights hereunder and shall not constitute a waiver of such
rights absent such instrument in writing.
13.13 Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the day first above written.
COMPUTER HORIZONS CORP.
By:__________________________________
Name:
Title:
RPM ASSOCIATES, INC.
By:__________________________________
Name: Xxxxxx X. Xxxxxx, Xx.
Title: President
STOCKHOLDERS
-------------------------------------
Xxxxxx X. Xxxxxx, Xx.
-------------------------------------
Xxxxx X. Xxxxxx
SCHEDULES
Schedule A Stock Ownership
Schedule 1(a)(iii) Other Contract Obligations Delegated
Schedule 1(a)(iv) Liabilities Assumed by Purchaser
Schedule 1(d) Excluded Liabilities
Schedule 1(f)(i) Contracts
Schedule 1(f)(ii) Computer Software and Programs
Schedule 1(f)(iii) Tangible Personal Property
Schedule 1(f)(v) Office Equipment Leases
Schedule 2.3(b) Subsequent Payment
Schedule 2.3(c) Post-Closing Adjustment
Schedule 4.1(d) No Violations or Breaches
Schedule 4.1(e) Required Consents or Authorizations
Schedule 4.2(a) Company Securities
Schedule 4.4 Real Property Owned or Leased
Schedule 4.5 Intellectual Property; Licenses
Schedule 4.6 Labor Matters
Schedule 4.7 Customers
Schedule 4.8 Compliance with Laws
Schedule 4.9(a) Material Contracts
Schedule 4.9(b) Status of Material Contracts
Schedule 4.10 Taxes
Schedule 4.11 Employee Benefit Plans
Schedule 4.12 Material Adverse Changes
Schedule 4.15 Bank Accounts, Etc.
Schedule 4.16 Insurance
Schedule 4.17 Recent Operations
Schedule 4.20 Litigation
Schedule 4.23 Affiliate Transactions
Schedule 5.2 Purchaser Securities
Schedule 7.3(b) Conduct of Company's Business: Indebtedness, Loans, Pledges
Schedule 7.3(e) Conduct of Company's Business: Liens
Schedule 7.8 Employees Responsible for Accounts Receivable Collection
Schedule 8.3(f) Individuals to be Subject to Employment Agreements
Schedule 12.9 Notices
ATTACHMENTS
Attachment A Form of Escrow Agreement
Attachment B Form of General Assignment and Xxxx of Sale
Attachment C Form of Assumption Agreement
Attachment D Form of Employment Agreement
Attachment E Form of Stockholder Non-Competition and
Confidentiality Agreement
Attachment F Form of Management Non-Competition and
Confidentiality Agreement
Attachment G Form of Put Agreement
