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EXHIBIT 2.1
EXECUTION COPY
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LIMITED LIABILITY COMPANY
MEMBERSHIP PURCHASE AGREEMENT
among
ACS ENTERPRISE SOLUTIONS, INC.,
as Purchaser,
AFFILIATED COMPUTER SERVICES, INC.,
as Guarantor,
CONSULTEC, LLC
and
GENERAL AMERICAN LIFE INSURANCE COMPANY
as Sole Member and Seller of
Consultec, LLC
Dated as of September 30, 1999
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TABLE OF CONTENTS
PAGE
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Article I. SALE AND TRANSFER OF SELLER'S INTEREST; PURCHASE PRICE; CLOSING AND POST-CLOSING MATTERS.....1
Section 1.01. Sale and Transfer of Seller's Interest......................................................1
Section 1.02. Purchase Price; Method of Payment...........................................................1
Section 1.03. Closing.....................................................................................2
Section 1.04. Assignment of Fiscal Agent Contracts; Post-Closing Purchase Price Adjustment................2
Section 1.05. Treatment of Transaction....................................................................5
Section 1.06. Satisfaction of Inter-Company Obligations...................................................5
Section 1.07. Collection of Accounts Receivable...........................................................5
Section 1.08. Promissory Note.............................................................................6
Section 1.09. Disclosure Schedule; Standard...............................................................7
Article II. REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY.............................................8
Section 2.01. Organization, Qualifications and Power; Subsidiaries........................................8
Section 2.02. Capitalization of the Company...............................................................9
Section 2.03. Financial Statements........................................................................9
Section 2.04. Absence of Undisclosed Liabilities.........................................................10
Section 2.05. Absence of Certain Changes or Events.......................................................10
Section 2.06. Consents and Approvals.....................................................................12
Section 2.07. Title to Properties; Absence of Liens and Encumbrances.....................................12
Section 2.08. Properties, Contracts, and Other Data......................................................12
Section 2.09. Limit on Employee Obligations..............................................................13
Section 2.10. Intangible Rights..........................................................................13
Section 2.11. Software...................................................................................14
Section 2.12. Litigation, Etc............................................................................14
Section 2.13. Taxes......................................................................................15
Section 2.14. Governmental Authorizations and Regulations................................................16
Section 2.15. Labor Matters, Employees...................................................................17
Section 2.16. Insurance..................................................................................17
Section 2.17. Use of Real Property.......................................................................18
Section 2.18. Condition of Assets........................................................................18
Section 2.19. Employee Benefit Plans.....................................................................18
Section 2.20. Related Party Transactions.................................................................19
Section 2.21. Environmental Matters......................................................................19
Section 2.22. System Capacity............................................................................20
Section 2.23. Securities Laws Matters....................................................................20
Section 2.24. Year 2000 Compliance.......................................................................20
Section 2.25. Authorization of Agreements, Etc...........................................................21
Section 2.26. Validity...................................................................................21
Section 2.27. Largest Customers..........................................................................21
(i)
3
Section 2.28. Accounts Receivable........................................................................21
Section 2.29. Illegal or Unauthorized Payments, Political Contributions; Antitrust.......................21
Article III. REPRESENTATIONS AND WARRANTIES AS TO THE SELLER.............................................22
Section 3.01. Organization, Qualifications, and Power....................................................22
Section 3.02. Authorization of Agreements, Etc...........................................................22
Section 3.03. Validity...................................................................................22
Section 3.04. Title to Seller's Interest.................................................................22
Section 3.05. Brokers' or Finders' Fees..................................................................23
Article IV. REPRESENTATIONS AND WARRANTIES AS TO THE PURCHASER AND THE GUARANTOR........................23
Section 4.01. Organization, Power, Etc...................................................................23
Section 4.02. Authorization of Agreements, Etc...........................................................23
Section 4.03. Validity...................................................................................23
Section 4.04. Governmental Approvals.....................................................................24
Section 4.05. Litigation Relating to Transaction.........................................................24
Section 4.06. Brokers' or Finders' Fees..................................................................24
Section 4.07. Investment Intention.......................................................................24
Section 4.08. No Material Adverse Change.................................................................24
Section 4.09. Revenue Recognition Policies...............................................................24
Article V. COVENANTS...................................................................................25
Section 5.01. Certain Covenants of the Seller and the Guarantor..........................................25
Section 5.02. Books and Records..........................................................................25
Section 5.03. Allocation of Purchase Price for Tax Purposes..............................................26
Section 5.04. Certain Tax Matters........................................................................27
Section 5.05. Consents and Approvals.....................................................................28
Section 5.06. Retention of Employees; Employee Benefits; Employee Bonuses................................28
Section 5.07. Access to Tax and Other Records............................................................29
Section 5.08. Further Assurances.........................................................................30
Section 5.09. Publicity..................................................................................30
Section 5.10. Compliance with HSR Act....................................................................30
Section 5.11. Guaranty of Obligations....................................................................30
Section 5.12. Treatment of Certain Insurance Claims......................................................31
Section 5.13. [intentionally omitted]....................................................................31
Section 5.14. Treatment of Deferred Compensation Plans...................................................31
Section 5.15. Treatment of Employment Agreement..........................................................32
Section 5.16. Non-Competition............................................................................32
Section 5.17. Release of Fiscal Agent Guaranties.........................................................34
Section 5.18. Customer Visits............................................................................34
Section 5.19. Post-Closing Services......................................................................34
Section 5.20. Employee Benefits Plans....................................................................34
(ii)
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Article VI. CONDITIONS PRECEDENT........................................................................35
Section 6.01. Conditions Precedent to the Obligations of the Purchaser...................................35
Section 6.02. Conditions Precedent to the Obligations of the Seller......................................37
Article VII. INDEMNIFICATION.............................................................................39
Section 7.01. Survival of Representations, Warranties and Indemnification................................39
Section 7.02. General Seller Indemnification Obligations.................................................39
Section 7.03. Y2K Seller Indemnification Obligations.....................................................41
Section 7.04. General Purchaser Indemnification Obligations..............................................42
Section 7.05. Indemnification Procedures.................................................................42
Section 7.06. Remedies Limited...........................................................................45
Article VIII. TERMINATION AND ABANDONMENT.................................................................45
Section 8.01. Termination................................................................................45
Section 8.02. Procedure and Effect of Termination........................................................46
Section 8.03. Pre-Closing Breach.........................................................................46
Article IX. MISCELLANEOUS...............................................................................47
Section 9.01. Expenses, Etc..............................................................................47
Section 9.02. Execution in Counterparts..................................................................47
Section 9.03. Notices....................................................................................47
Section 9.04. Waivers....................................................................................48
Section 9.05. Amendments, Supplements, Etc...............................................................48
Section 9.06. Entire Agreement...........................................................................49
Section 9.07. Applicable Law.............................................................................49
Section 9.08. Binding Effect; Benefits...................................................................49
Section 9.09. Assignability..............................................................................49
(iii)
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INDEX TO EXHIBITS AND SCHEDULES
Schedule Description
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1.04(d) Estimated Lost Revenue
2.01 Organization, Qualifications and Power; Subsidiaries
2.03(a) Financial Statements
2.03(b) Interim Financial Statements
2.04 Undisclosed Liabilities
2.05 Absence of Certain Changes or Events
2.06 Consents and Approvals
2.08 Contracts
2.11 Software
2.12 Litigation, Etc.
2.13 Taxes
2.14 Governmental Authorizations and Regulations
2.15 Labor Matters, Employees
2.16 Insurance
2.17 Use of Real Property
2.18 Condition of Assets
2.19 Employee Benefit Plans
2.24 "Year 2000" Compliance
2.27 Largest Customers
2.28 Accounts Receivable
2.29 Illegal or Unauthorized Payments, Political Contributions; Antitrust
5.03 Allocation of Purchase Price
Exhibit Description
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1.08 Form of Promissory Note
6.01(g) Form of Opinion of Counsel to the Seller
6.02(h) Form of Opinion of Counsel to the Purchaser and the Guarantor
The referenced schedules and exhibits, the contents of which are
described in the Purchase Agreement, have been omitted but will be
supplementally provided to the SEC upon request.
(iv)
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LIMITED LIABILITY COMPANY MEMBERSHIP PURCHASE AGREEMENT
THIS LIMITED LIABILITY COMPANY MEMBERSHIP PURCHASE AGREEMENT,
dated as of September 30, 1999 (this "Agreement"), among ACS ENTERPRISE
SOLUTIONS, INC., a Delaware corporation (the "Purchaser"), AFFILIATED COMPUTER
SERVICES, INC., a Delaware corporation and the indirect parent of the Purchaser
(the "Guarantor"), CONSULTEC, LLC, a Delaware limited liability company
(together with its predecessor entity, Consultec, Inc., hereinafter collectively
referred to as the "Company"), and GENERAL AMERICAN LIFE INSURANCE COMPANY, a
Missouri corporation (the "Seller"), as sole member of the Company.
WHEREAS, the Seller is, as of the date hereof, and will be on
the Closing Date (as defined in Section 1.03 hereof), the sole member of the
Company with complete ownership interest in the Company (the "Seller's
Interest"); and
WHEREAS, the Seller desires to sell and the Purchaser desires
to purchase the Seller's Interest on the terms and subject to the conditions
hereinafter set forth, including structuring the transaction as an asset sale
and purchase for purposes of federal and state income tax laws; and
WHEREAS, the Guarantor is a party to this Agreement to, among
other things, guarantee the obligations of the Purchaser hereunder.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows.
ARTICLE I.
SALE AND TRANSFER OF SELLER'S INTEREST; PURCHASE PRICE; CLOSING
AND POST-CLOSING MATTERS
SECTION 1.01. SALE AND TRANSFER OF SELLER'S INTEREST. Subject
to the terms and conditions set forth herein, on the Closing Date the Seller
shall sell to the Purchaser, and the Purchaser shall purchase from the Seller,
all of the Seller's Interest in the Company. On the Closing Date, the Seller
shall deliver to the Purchaser a certificate or certificates in definitive form,
registered in the name of the Seller (being the sole member of the Company),
evidencing the Seller's Interest being sold by the Seller hereunder, duly
endorsed for transfer or accompanied by transfer powers duly endorsed in blank,
with all requisite transfer taxes paid and, if applicable, stamps affixed.
SECTION 1.02. PURCHASE PRICE; METHOD OF PAYMENT.
(a) The aggregate consideration to be paid by the Purchaser to
the Seller for the Seller's Interest (the "Purchase Price") shall be (i)
$97,000,000, less (ii) the amount, if any, by which the Short-Term Debt (as
defined below in this Section 1.02(a)) as of the Closing Date is less than
$8,000,000. The term "Short-Term Debt," as used herein, shall mean the
short-term
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debt obligations of the Company to the Seller as evidenced by the certain
promissory note dated November 15, 1998. As of the Closing Date, the Short-Term
Debt will be $8,000,000. The Purchase Price shall be subject to adjustment after
the Closing Date as provided in Section 1.04 hereof.
(b) The Purchase Price shall be paid by the Purchaser to the Seller on
the Closing Date in immediately available funds to the account designated by the
Seller no later than the business day immediately prior to the Closing Date.
SECTION 1.03. CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of ▇▇▇▇▇▇ & ▇▇▇▇, L.L.P., Dallas, Texas, within two (2) business days after the
satisfaction or waiver of all conditions to Closing set forth herein, or at such
other place or at such other date and time as the Seller and the Purchaser may
mutually agree (the date of the Closing is herein called the "Closing Date");
provided, however, that the Seller and the Purchaser shall use their respective
best efforts to cause the Closing Date to occur on or before September 30, 1999
but no later than December 31, 1999. In addition to the deliveries referred to
in Section 1.02 hereof, on the Closing Date the Purchaser and the Seller shall
deliver the certificates, documents and other items described in Sections 6.01
and 6.02 hereof.
SECTION 1.04. ASSIGNMENT OF FISCAL AGENT CONTRACTS;
POST-CLOSING PURCHASE PRICE ADJUSTMENT.
(a) The Purchaser and the Guarantor may, in accordance with
Section 5.18 hereof, between the date hereof and the Closing Date, jointly with
the Seller or the Company, contact or otherwise initiate discussions with any of
the counter-parties to those certain Medicaid fiscal agent contracts with the
States of Colorado, Florida, Iowa, Montana, New Mexico, Washington, West
Virginia and Wyoming to which the Company is a party (the "Fiscal Agent
Contracts") regarding any required assignment of such Fiscal Agent Contracts
pursuant to the terms thereof or the consent of such counter-parties to the
change of control of the Company to be effected upon the consummation of the
transactions contemplated hereby (collectively, the "Fiscal Agent Consents").
The obligations of the parties hereto to consummate the transactions
contemplated hereby shall not be conditioned upon the receipt of any required
Fiscal Agent Consents prior to the Closing Date. The sole remedy of the
Purchaser and the Guarantor in the event that a required Fiscal Agent Consent
shall not have been obtained after the Closing Date shall be the Purchase Price
adjustment set forth in this Section 1.04.
(b) The Purchaser shall, no later than 30 days after the
Closing Date, commence discussions with the applicable counter-party to each
Fiscal Agent Contract in each of the Required States (as defined below in this
Section 1.04(b)) in order to obtain the Fiscal Agent Consents from the
counter-party to the Fiscal Agent Contract in each such Required State. Prior to
the Closing Date, such discussions may be conducted only if jointly with the
Seller or the Company and in accordance with Section 5.18 hereof, unless the
Seller shall otherwise agree. The term "Required States," as used herein, shall
mean and include only the States of Colorado,
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Iowa, West Virginia and Wyoming, and any other State with respect to which the
Purchaser shall have delivered to the Seller, on or prior to the Closing Date,
an opinion of counsel reasonably satisfactory to the Seller to the effect that
the Fiscal Agent Contract with such State expressly requires the affirmative
consent of the counter-party thereto in order remain in full force and effect as
a result of, or following the consummation of, the transactions contemplated by
this Agreement.
(c) The Purchase Price shall be adjusted as provided in this
Section 1.04 in the event that, with respect to any Required State, (i) the
counter-party to the Fiscal Agent Contract in such Required State shall have
refused or failed to execute a Fiscal Agent Consent within 60 days after the
Closing Date, and (ii) the Company (or its successors or assigns) shall have
been terminated or otherwise dismissed as Medicaid fiscal agent under the Fiscal
Agent Contract with such Required State and shall not otherwise be providing
Medicaid fiscal agent services for such Required State on the date which is
twelve months following the Closing Date (or, in the case of Colorado, on the
date which is eighteen months following the Closing Date); provided, however,
that the condition in this clause (ii) shall not be deemed to have been
satisfied if the Purchaser or the Company (or their respective successors or
assigns) shall have terminated or otherwise breached the Fiscal Agent Contract
with such Required State after the Closing Date (other than a breach resulting
solely from the failure to obtain the Fiscal Agent Consent with respect to such
Required State). Any Fiscal Agent Contract with a Required State with respect to
which each of the conditions set forth in clauses (i) and (ii) in the
immediately preceding sentence shall have been satisfied is referred to herein
as a "Terminated Fiscal Agent Contract."
(d) The amount of the Purchase Price adjustment referred to in
Section 1.04(c) hereof shall be equal to the product of "A" multiplied by "B,"
where "A" shall equal $89,000,000, and "B" shall equal a fraction, the numerator
of which shall be equal to an amount equal to the Estimated Lost Revenue (as
defined below in this Section 1.04(d)) attributable to the Terminated Fiscal
Agent Contract, and the denominator of which shall be equal to an amount equal
to the total revenue of the Company for the twelve full months immediately
preceding the Closing Date determined in accordance with the past practices of
the Company consistently applied; provided, however, that in no event shall the
aggregate Purchase Price adjustment pursuant to this Section 1.04 be greater
than $10,000,000. The term "Estimated Lost Revenue," as used herein, shall mean,
with respect to each Required State, the revenue set forth on Schedule 1.04(d)
hereof with respect to such Required State.
(e) The Purchaser shall notify the Seller in writing (within
five days after the date which is the first anniversary of the Closing Date for
all Required States other than Colorado, and within five days after the date
which is the date eighteen months after the Closing Date for Colorado) whether
there are any Terminated Fiscal Agent Contracts and the Required State(s)
involved (each, a "Termination Notice"). If the Seller disputes the existence of
the Terminated Fiscal Agent Contract, then the Seller and the Purchaser shall
resolve the dispute as provided in Sections 1.04(g), (h) and (i) hereof.
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(f) Within 10 days after its receipt of the Termination
Notice, and provided that the Seller shall not then dispute the existence of the
Terminated Fiscal Agent Contract, the Seller shall notify the Purchaser in
writing of the amount of the Purchase Price adjustment determined in accordance
with Section 1.04(d) hereof (the "Purchase Price Reduction Notice"). If the
Purchaser does not dispute the amount of the Purchase Price reduction referred
to in the Purchase Price Reduction Notice within 10 days after its receipt of
the Purchase Price Reduction Notice, then an amount equal to the amount of the
Purchase Price reduction referred to in the Purchase Price Reduction Notice
shall be paid by the Seller to the Purchaser in immediately available funds no
later than the second (2nd) day after the end of such 10 day period to the
account designated by the Purchaser in full satisfaction of the obligations of
the Seller hereunder with respect to such Terminated Fiscal Agent Contract. If
the Purchaser disputes the amount of the Purchase Price reduction referred to in
the Purchase Price Reduction Notice within the 10 day period referred to in the
immediately preceding sentence, then the Seller and the Purchaser shall resolve
the dispute as provided in Sections 1.04(g), (h) and (i) hereof.
(g) The Seller and the Purchaser shall attempt in good faith
to resolve any disputed matters referred to in Sections 1.02(e) and/or (f)
hereof by negotiation between executives who have the authority to settle and
resolve the disputed matters and who are at a higher level of management than
the persons with direct responsibility for administration of this Agreement. Any
party hereto may give the other party hereto written notice of any dispute not
resolved in the normal course of business. Within 15 days after delivery of the
written notice, the receiving party shall submit to the other party a written
response. The notice and response shall include (i) a statement of each party's
position and a summary of the arguments supporting that position, and (ii) the
name and title of the executive who shall represent that party and of any other
person who shall accompany the executive. Within 15 days after the delivery of
the disputing party's notice, the executives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to attempt to resolve the disputed matters. All reasonable
requests for information made by one party to the other shall be honored. All
negotiations pursuant to this Section 1.04(g) shall be confidential and shall be
treated as compromise and settlement negotiations for purposes of applicable
rules of evidence.
(h) If the disputed matter shall not have been resolved as
provided in Section 1.04(g) hereof, then the Seller and Purchaser shall attempt
in good faith to resolve any disputed matters referred to in Sections 1.02(e)
and/or (f) hereof by negotiation between the Seller's and the Purchaser's
respective chief financial officer within 7 days after the expiration of the
second 15 day period referenced in Section 1.02(g) hereof. All reasonable
requests for information made by one party's chief financial officer to the
other party's chief financial officer shall be honored. All negotiations
pursuant to this Section 1.02(h) shall be confidential and shall be treated as
compromise and settlement negotiations for purposes of applicable rules of
evidence.
(i) If the disputed matters shall not have been resolved as
provided in Section 1.04(h) hereof, then the Seller and the Purchaser shall
thereafter endeavor to settle such dispute by mediation under the then current
Center for Public Resources ("CPR") Model Procedure for Mediation of Business
Disputes. The neutral third party required by this procedure shall be a
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lawyer selected by CPR Panels of Neutrals. If the parties encounter difficulty
in agreeing on a neutral third party, they shall seek the assistance of CPR in
the selection process. If such disagreement has not been resolved by negotiation
or mediation within 30 days of the initiation of such procedure, the parties
shall finally settle such dispute by binding arbitration conducted expeditiously
in accordance with the Center for Public Resources Rules for Non-Administered
Arbitration of Business Disputes by a sole arbitrator; provided, however, that
if one party has requested the other to participate in negotiation or mediation
and the other has failed to participate, the requesting party may initiate
arbitration before expiration of the above period. The sole arbitrator shall be
a lawyer selected from the CPR Panels of Neutrals. If the parties encounter
difficulty in agreeing on an arbitrator they shall seek the assistance of CPR in
the selection process. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. Section 1-16, and judgment upon the award rendered by
the arbitrator may be entered into any court having jurisdiction thereof. The
parties shall conduct any mediation or arbitration proceedings pursuant to this
Section 1.02(h) in St. Louis, Missouri (if brought by the Purchaser) or in
Dallas, Texas (if brought by the Seller), and the arbitrator shall apply the
substantive law of Delaware as applicable to the dispute.
(j) Notwithstanding the foregoing, if the Purchaser or the
Seller, as the case may be, shall have been found by the arbitrator pursuant to
this Section 1.04 to be liable to the other party for an amount in excess of
$1,000,000 (an "Excess Award"), then the party that shall have been found by the
arbitrator to be liable for such Excess Award shall have the right to appeal
such Excess Award in accordance with the law of the State of Delaware applicable
to appeals of judgments by a court of law.
SECTION 1.05. TREATMENT OF TRANSACTION. The parties intend
that, for purposes of state contract law, the transaction contemplated hereby
shall be treated as a sale of the Seller's Interest and, for federal and state
income tax purposes, the transaction contemplated hereby shall be treated as a
sale of certain assets of the Company and the assumption of certain liabilities
of the Company as described in Revenue Ruling 99-5.
SECTION 1.06. SATISFACTION OF INTER-COMPANY OBLIGATIONS. The
Seller shall use a portion of the Purchase Price (i) to satisfy the Short-Term
Debt obligations of the Company to the Seller as of the Closing Date, and (ii)
to satisfy the Long-Term Debt (as defined below in this Section 1.06) of the
Company to the Seller as of the Closing Date. The Seller and the Company shall
not permit the amount of the Short-Term Debt of the Company to exceed $8,000,000
between the date hereof and the Closing Date. The term "Long-Term Debt," as used
herein, shall mean the long-term debt obligations of the Company to the Seller
as evidenced by that certain promissory note dated November 1, 1998. As of the
Closing Date, the Long-Term Debt will be $13,990,000. The Company shall, on or
prior to the Closing Date, pay to the Seller an amount of cash equal to the
accrued and unpaid interest due with respect to the Short-Term Debt and the
Long-Term Debt as of the Closing Date.
SECTION 1.07. COLLECTION OF ACCOUNTS RECEIVABLE. The Seller
shall guaranty the collection of all of the customer accounts receivable
identified on the balance sheet of the
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Company as of the Closing Date (the "Closing Receivables") as provided in this
Section 1.07. The Seller shall deliver a list of the Closing Receivables to the
Purchaser within ten days after the Closing Date. (The amount of the accounts
receivable of the Company as of August 31, 1999 was $17,548,150.77.). The
Purchaser and the Company shall use commercially reasonable and diligent efforts
from and after the Closing Date to collect the Closing Receivables consistent
with the pre-Closing collection practices of the Company. The Purchaser shall
advise the Seller in writing as to the status of its collection efforts with
respect to the Closing Receivables on the 30th, 60th and 90th days after the
Closing Date and shall confer and consult with the Seller on such dates
regarding appropriate collection efforts. No later than the 130th day after the
Closing Date, the Purchaser shall disclose in writing to the Seller which, if
any, of the Closing Receivables remain uncollected as of the date which is 120
days after the Closing Date together with available supporting detail with
respect to such Closing Receivables (each such uncollected Closing Receivable is
referred to herein as a "Delinquent Receivable"); provided, however, that the
amount of any concessions or set-offs granted by the Purchaser or the Company to
an account debtor under any Closing Receivable shall not be deemed a Delinquent
Account for purposes of the obligations of the Seller under this Section 1.07.
Within 5 days after its receipt of such notice from the Purchaser, the Seller
shall pay to the Purchaser, in immediately available funds to the account
designated by the Purchaser, an amount equal to the aggregate uncollected
balance of such Delinquent Receivables. The Purchaser shall, contemporaneous
with its receipt of the payment from the Seller referred to in the immediately
preceding sentence, transfer and assign to the Seller all of its right, title
and interest in, under and to the Delinquent Receivables, free and clear of any
Liens (as defined in Section 2.02(a) hereof). Thereafter, (i) the Seller shall
have the right to pursue all reasonable collection efforts which the Seller
shall deem appropriate (consistent with the pre-Closing collection practices of
the Company but in no event unduly or unreasonably harassing the obligor on such
Delinquent Receivable) with respect to the Delinquent Receivables; and (ii) if
the Purchaser receives any amounts payable on the Delinquent Receivables (other
than from the Seller in accordance with this Section 1.07), the Purchaser shall
promptly deliver such amounts to the Seller. The rights of the Purchaser under
this Section 1.07 shall be the sole and exclusive remedy of the Purchaser and
the Guarantor with respect to Closing Receivables and the representation and
warranty of the Seller related to accounts receivable (Section 2.28 hereof)
shall not survive the Closing.
SECTION 1.08. PROMISSORY NOTE. On the Closing Date, the
Purchaser and the Guarantor shall deliver to the Seller a Promissory Note in the
original principal amount of $3,976,683 (the "Unadjusted Principal Amount"), in
substantially the form of Exhibit 1.08 attached hereto (the "Note") representing
cash due from the Purchaser to the Seller as of the Closing Date. The Unadjusted
Principal Amount shall be retroactively adjusted after the Closing Date in an
amount which corresponds with the Seller's updates to the amounts set forth in
the August 31 Pro Forma Balance Sheet (as defined in Section 5.03(c) hereof)
under the columns "incentive deferred compensation plan and assets not assumed"
and "federal and state tax liabilities and assets not transferred", all in
accordance with Section 5.03(c) hereof (the "Adjusted Principal Amount").
Interest shall accrue on the Adjusted Principal Amount at the rate specified in
the Note from and after the Closing Date until the Adjusted Principal Amount is
paid in full. Not later than 5 days after the Closing Balance Sheet (as defined
in Section 5.03(c)
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hereof) is finalized pursuant to Section 5.03(c) hereof, the Purchaser and the
Guarantor shall execute and deliver to the Seller an additional promissory note
in the same form and with identical terms as the Note, except that the principal
amount of such additional note shall be equal to the difference between the
Adjusted Principal Amount and the Unadjusted Principal Amount.
SECTION 1.09. DISCLOSURE SCHEDULE; STANDARD.
(a) The Schedules attached hereto set forth, among other
things, items the disclosure of which the Seller and the Company deem necessary
or appropriate either in response to an express disclosure requirement contained
in a provision hereof or as an exception to one or more representations or
warranties contained in Article II hereof; provided, that (i) no such item shall
be required to be set forth in a Schedule as an exception to a representation or
warranty if its absence would not be reasonably likely to result in the related
representation or warranty being deemed untrue or incorrect under the standard
established by Section 1.09(b) hereof, and (ii) the mere inclusion of an item in
a Schedule as an exception to a representation or warranty shall not be deemed
an admission by the Seller that such item represents a material exception or
fact, event or circumstance or that such item is reasonably likely to result in
a Material Adverse Effect (as defined in Section 1.09(b) hereof). The Schedules
attached hereto set forth, among other things, items the disclosure of which the
Purchaser and the Guarantor deem necessary or appropriate either in response to
an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in Article IV
hereof; provided, that (i) no such item shall be required to be set forth in a
Schedule as an exception to a representation or warranty being deemed untrue or
incorrect under the standard established by Section 1.09(b) hereof, and (ii) the
mere inclusion of an item in a Schedule as an exception to a representation or
warranty shall not be deemed an admission by the Purchaser and the Guarantor
that such item represents a material exception or fact, event or circumstance or
that such item is reasonably likely to result in a Material Adverse Effect.
Items may be disclosed on a Schedule regardless of whether the representation
and warranty to which such Schedule relates refers to the existence of such
Schedule.
(b) No representation or warranty as to the Company or the
Seller contained in Article II or Article III hereof, or the Purchaser and the
Guarantor contained in Article IV hereof, shall be deemed untrue or incorrect,
and neither the Company and the Seller, on the one hand, nor the Purchaser and
the Guarantor, on the other hand, as the case may be, shall be deemed to have
breached a representation or warranty, as a consequence of the existence of any
fact, event or circumstance unless such fact, event or circumstance,
individually or taken together with all other facts, events or circumstances
inconsistent with any representation or warranty contained in Article II or
Article III hereof, in the case of the Company and the Seller, or Article IV
hereof, in the case of the Purchaser and the Guarantor, has had or is reasonably
likely to have a Material Adverse Effect on the Company, in the case of the
representations and warranties made in Article II and Article III hereof, or on
the Purchaser and the Guarantor, in the case of the representations and
warranties made in Article IV hereof. The term "Material Adverse Effect," as
used herein, shall mean, with respect to the Company and the Seller, on the one
hand, and the
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Purchaser and the Guarantor, on the other hand, any effect that (i) is, or is
reasonably expected to be, material and adverse to the financial position,
results of operations, prospects or business of the Company and its subsidiaries
taken as a whole, on the one hand, or the Purchaser and the Guarantor and their
subsidiaries taken as a whole, on the other hand, or (ii) would materially
impair the ability of either the Seller and/or the Company, on the one hand, or
the Purchaser and/or the Guarantor, on the other hand, to perform its
obligations under this Agreement or otherwise materially threaten or materially
impede the consummation of the transactions contemplated hereby; provided,
however, that Material Adverse Effect shall not be deemed to include the impact
of changes in generally accepted accounting principles ("GAAP") or regulatory
accounting requirements applicable to companies such as the Company.
(c) The Seller shall be permitted to update and supplement the
Schedules so as to disclose exceptions to one or more representations or
warranties contained in Article II or Article III hereof which shall have arisen
between the date hereof and the Closing Date; provided, however, that anything
herein to the contrary notwithstanding, the exceptions and other information set
forth on any such updated or supplemented Schedule shall not be taken into
consideration in determining, for purposes of this Agreement, whether any of the
conditions set forth in Section 6.01(a) hereof shall have been satisfied. The
Purchaser and the Guarantor shall be permitted to update and supplement the
Schedules so as to disclose exceptions to one or more representations or
warranties contained in Article IV hereof which shall have arisen between the
date hereof and the Closing Date; provided, however, that anything herein to the
contrary notwithstanding, the exceptions and other information set forth on any
such updated or supplemented Schedule shall not be taken into consideration in
determining, for purposes of this Agreement, whether any of the conditions set
forth in Section 6.02(a) hereof shall have been satisfied.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY
The Seller and the Company jointly and severally represent and warrant
to the Purchaser as follows:
SECTION 2.01. ORGANIZATION, QUALIFICATIONS AND POWER;
SUBSIDIARIES.
(a) The Company is a limited liability company duly organized
and validly existing under the laws of the State of Delaware, and, except as set
forth in Schedule 2.01 hereto, is duly licensed or qualified as a foreign
limited liability company in each other jurisdiction in which it owns or leases
any real property, except in those jurisdictions in which the nature of business
transacted by it makes such licensing or qualification unnecessary. The Company
has the power and authority, and the legal right, to own and operate its
properties and to carry on its business as currently conducted.
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(b) The Company does not own of record or beneficially, or
have any right or obligation to acquire, directly or indirectly, (i) any shares
of outstanding capital stock or securities convertible into or exchangeable for
capital stock of any other corporation or (ii) any participating interests in
any partnership, joint venture or other non-corporate business enterprise.
SECTION 2.02. CAPITALIZATION OF THE COMPANY.
(a) As of the date hereof, the Seller is the sole member of
the Company and owns, and as of the Closing Date shall own, all of the Seller's
Interest in the Company. The Seller's Interest constitutes 100% of the total
issued and outstanding membership interests in the Company and is free and clear
of any lien, pledge, security interest or other encumbrance or claim of any
person or entity (each a "Lien"). Upon consummation of the transactions
contemplated in this Agreement and transfer of the Seller's Interest to the
Purchaser, the Purchaser shall acquire the entire legal and beneficial interest
in the Seller's Interest, free and clear of any Liens.
(b) (i) No subscription, warrant, option, convertible security
or other right (contingent or other) to purchase or acquire any membership
interest in the Company are authorized or outstanding, (ii) there is not any
commitment of the Company, or with respect to the Company, commitment of the
Seller, to issue any membership interests, warrants, options, or other such
rights or to distribute to members of any class any evidences of indebtedness or
assets, and (iii) the Company has no obligation (contingent or other) to
purchase, redeem, or otherwise acquire any membership interest in the Company or
to pay any dividend or make any other distribution in respect thereof. At the
Closing, no options nor any right to receive payment of any sort in respect of
any options, will be outstanding.
(c) Effective upon the consummation of the transactions
contemplated hereby, the Seller, by its execution and delivery of this
Agreement, acknowledges satisfaction in full of all distributions payable in
respect of the Seller's Interest through the Closing Date, and forever waives
any claim, right, title, or interest in or to any such distributions not
actually paid as of the Closing Date.
SECTION 2.03. FINANCIAL STATEMENTS.
(a) Attached hereto as Schedule 2.03(a) is the balance sheet
of the Company as of December 31, 1998, and the related statements of
operations, cash flows and shareholders' equity for the twelve months then
ended, including the notes thereto (the "Financial Statements"). The Financial
Statements (i) are complete and correct in all material respects, (ii) were
prepared from the books and records of the Company in conformity with GAAP
applied on a consistent basis, and (iii) fairly present the financial position
and shareholders' or members' equity, as applicable, of the Company as of the
date specified therein, and the income and cash flows for the period then ended.
The Financial Statements do not include any items of a special or non-recurring
nature, except as expressly stated therein.
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(b) Attached hereto as Schedule 2.03(b) is the balance sheet
of the Company as of August 31, 1999, and the related statements of operations
and shareholders' or members' equity, as applicable, for the time period
beginning on January 1, 1999 and ending on such date (the "Interim Financial
Statements"). The Interim Financial Statements (i) are complete and correct in
all material respects, and (ii) were prepared from the books and records of the
Company in conformity with GAAP applied on a consistent basis and fairly present
the financial position and shareholders' or members' equity, as applicable, of
the Company as of the date specified therein, and the income and cash flows for
the period then ended (except as expressly set forth therein and except for the
fact that they do not include normal footnote disclosures and subject to normal
year-end adjustments). The Interim Financial Statements do not include any items
of a special or non-recurring nature, except as expressly stated therein.
SECTION 2.04. ABSENCE OF UNDISCLOSED LIABILITIES. Except (a)
as and to the extent reflected in the Financial Statements and the Interim
Financial Statements, (b) as set forth in Schedule 2.04 hereto, or (c) for
immaterial trade payables and similar operating liabilities incurred since
January 1, 1999 in the ordinary course of business and consistent with past
practice, the Company has no liabilities or obligations of any kind or nature,
whether known or unknown, secured, unsecured, absolute, accrued, contingent, or
otherwise, and whether due or to become due (including without limitation any
tax liabilities due or to become due, or whether incurred in respect of or
measured by the assets, sales, income, or receipts of the Company for any
period), which liabilities or obligations would be required to be reflected as
of the date hereof on a balance sheet of the Company prepared in accordance with
GAAP.
SECTION 2.05. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
January 1, 1999, except as otherwise set forth in Schedule 2.05 hereto or as
expressly contemplated by this Agreement, the Company has not:
(a) changed or amended its Certificate of Formation or its
Operating Agreement, dated March 25, 1999 (collectively, the "Company
Organization Documents");
(b) incurred any obligation or liability (fixed or
contingent), except normal trade or business obligations incurred in the
ordinary course of business and consistent with past practice, none of which
individually or in the aggregate is materially adverse;
(c) discharged or satisfied any Lien, security interest,
charge, or other encumbrance or paid any obligation or liability (fixed or
contingent), other than in the ordinary course of business and consistent with
past practice or as otherwise expressly permitted hereunder;
(d) mortgaged, pledged, or subjected to any Lien, security
interest, charge, or other encumbrance any of its assets or properties (other
than Permitted Liens as defined in Section 2.07 hereof);
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(e) transferred, leased, or otherwise disposed of any of its
assets or properties, except for fair consideration in the ordinary course of
business and consistent with past practice, or acquired any assets or
properties, except in the ordinary course of business and consistent with past
practice;
(f) declared, set aside, or paid any distribution (whether in
cash, membership interests or property or any combination thereof) in respect of
its membership interests, or redeemed or otherwise acquired any of its
membership interests, or split, combined or otherwise similarly changed its
membership interests, or authorized the creation or issuance of, or issued or
sold any securities or obligations convertible into or exchangeable therefor, or
given any person any right to acquire any membership interest from the Company,
or agreed to take any such action;
(g) made any investment of a capital nature, whether by
purchase of stock or securities, contributions to capital, property transfers,
or otherwise, in any other partnership, corporation, or other entity, or
purchased any material property or assets, where the investment exceeds $250,000
or otherwise is out of the ordinary course of business of the Company;
(h) canceled or compromised any debt or claim, other than in
the ordinary course of business consistent with past practice;
(i) waived or released any rights of value, including without
limitation, any Intangible Rights (as defined in Section 2.08(b) hereof);
(j) transferred or granted any rights under or with respect to
any Intangible Rights, or permitted any license, permit, or other form of
authorization relating to an Intangible Right to lapse;
(k) made or granted any wage or salary increase applicable to
any group or classification of employees generally, entered into any employment
contract with, or made any loan to, or entered into any material transaction of
any other nature with, any manager, officer, or employee of the Company;
(l) suffered any theft, condemnation, eminent domain
proceeding, casualty loss or damage (whether or not such loss or damage shall
have been covered by insurance) which affects in any material respect its
ability to conduct its business;
(m) had a material change in the way it operates its business;
(n) breached or defaulted (or upon notice or with the passage
of time) will have breached or defaulted on any of the terms or provisions of
any material agreement to which the Company is a party or by which the Company
may be bound; or
(o) suffered a material adverse change in the condition
(financial or otherwise), results of operations, business, prospects, assets or
liabilities of the Company.
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SECTION 2.06. CONSENTS AND APPROVALS. Except as provided in
Section 1.04 hereof or on Schedule 2.06 hereto, no order, authorization,
approval, or consent from, or filing with, (a) any federal or state governmental
or public body or other authority having jurisdiction over either the Seller or
the Company (other than the Missouri Department of Insurance and the
requirements under the HSR Act (as defined in Section 5.10 hereof)), or (b) any
third party (including, without limitation, pursuant to any contract to which
the Company is a party), is necessary (i) for the execution, delivery, and
performance by the Seller of its obligations under this Agreement or the
consummation of the transactions contemplated hereby, or (ii) in order that the
business of the Company can be conducted immediately following the Closing Date
substantially in the same manner as heretofore conducted. Any items listed on
Schedule 2.06 shall be settled as provided in Section 5.05 hereof. All orders,
authorizations, approvals or waivers necessary at the time the Company was
reorganized from a corporation to a limited liability company were obtained.
SECTION 2.07. TITLE TO PROPERTIES; ABSENCE OF LIENS AND
ENCUMBRANCES. The Company has, and will have as of the Closing Date, good and
valid title to all its assets and properties, in each case free and clear of all
Liens, charges, security interests, or other encumbrances of any nature
whatsoever, other than (a) Liens for taxes not yet due and Liens securing
obligations reflected on the Financial Statements, the Interim Financial
Statements and Schedule 2.04, (b) mechanic's, materialman's, and similar
statutory Liens arising in the ordinary course of business, or (c) security
interests securing indebtedness not in default for the purchase price of or
lease rental payments on property purchased or leased under capital lease
arrangements in the ordinary course of business (the Liens, charges, security
interests, and other encumbrances described in paragraphs (a), (b) and (c) above
being referred to herein as "Permitted Liens").
SECTION 2.08. PROPERTIES, CONTRACTS, AND OTHER DATA. True and
complete copies of all documents relating to the matters set forth below have
been provided or made available, as requested, to the Purchaser and its counsel:
(a) all leases of real or personal property to which the
Company is a party, either as lessee or lessor, including a description of the
parties to each such lease, the property to which each such lease relates, and
the rental term and monthly (or other) rents payable under each such lease;
(b) (i) all patents, trademarks and trade names, trademark and
trade name registrations, logos, servicemark registrations, copyright
registrations, all applications pending on the date hereof for patent or for
trademark, trade name, servicemark or copyright registrations, and all other
material intellectual property rights (collectively "Intangible Rights") owned
by the Company (specifying the nature of the rights therein), and (ii) all
licenses granted by or to the Company and all other agreements to which the
Company is a party that relate, in whole or in part, to any Intangible Rights
mentioned in (i) above or to other proprietary rights reasonably necessary to
the Company, whether owned by the Seller or the Company or otherwise;
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(c) all collective bargaining agreements, employment and
consulting agreements, independent contractor agreements, executive compensation
plans, bonus plans, deferred compensation agreements, employee profit
sharing/401(k) plans, group life insurance, health insurance, or other similar
plans or arrangements maintained for or providing benefits to employees of, or
independent contractors or other agents for the Company;
(d) all contracts, including without limitation, guarantees,
mortgages, indentures, and loan agreements, to which the Company is a party, or
to which the Company or its assets or properties is subject and which are not
specifically referred to in paragraphs (a), (b), or (c) above; and
(e) all agreements with customers.
All provisions of the aforementioned contracts and agreements
are valid and enforceable obligations of the Company and, to the knowledge of
the Company and the Seller, of the other parties thereto, except to the extent
that enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws of general
application relating to or affecting the enforcement of the rights of creditors
or by equitable principles, regardless of whether enforcement is sought in a
proceeding in equity or at law. Except as disclosed on Schedule 2.08, neither
the Company nor the Seller has been notified of, or is aware that any basis
exists for, any claim that any contract described above is not valid and
enforceable in accordance with its terms for the periods stated therein, or that
there is under any such contract any existing default or event of default or
event which with notice or lapse of time or both would constitute such a
default.
SECTION 2.09. LIMIT ON EMPLOYEE OBLIGATIONS. After the Closing
Date neither the Company nor the Purchaser shall have any payment, severance,
bonus, or other compensatory obligations of any sort whatsoever arising from or
relating to the employment of any employee of the Company on or prior to the
Closing Date, except for (i) the obligations of the Company listed in the
Employment Agreements (as defined in Section 2.15(c) hereof as provided in
Sections 5.06 and 5.15 hereof), (ii) the obligation to provide credit for past
service in determining eligibility and status in the Purchaser's employee
benefit plans as provided in Section 5.06(b) hereof, (iii) the obligation to pay
salary for the pay period in which the Closing Date takes place, (iv)
reimbursement obligations for business expenses incurred by such employees and
submitted for payment in accordance with the Company's policies now in effect,
and (v) for any other liabilities specifically listed on the Closing Balance
Sheet or the Backup Materials (each as defined in Section 5.03 hereof).
SECTION 2.10. INTANGIBLE RIGHTS. Except as set forth in
Schedule 2.10 hereto, (i) the Company has complied with its contractual
obligations relating to the protection of such of the Intangible Rights used by
it pursuant to licenses or other contracts, (ii) the Company has the right to
use its Intangible Rights to provide, sell, and produce the services provided
and sold by it and to conduct its business as heretofore conducted, and the
consummation of the
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transactions contemplated hereby will not alter or impair any such Intangible
Rights, (iii) all such Intangible Rights are valid, enforceable, and in good
standing, and no claims have been asserted with respect to the use by the
Company of any of the Intangible Rights or otherwise for patent, copyright, or
trademark infringement, and (iv) to the knowledge of the Company and the Seller,
no person is infringing on or violating the Intangible Rights or know-how used
by the Company.
SECTION 2.11. SOFTWARE.
(a) Except as set forth on Schedule 2.11, the Company owns
outright or holds valid licenses to all copies of the operating and applications
computer software programs and databases used by the Company in the conduct of
its business (other than programs and databases that are generally commercially
available for a per unit license fee of less than $3,000) (collectively, the
"Software"). None of the Software used by the Company, and no use by the Company
thereof, infringes upon or violates any patent, copyright, trade secret, or
other proprietary right of any other person and, to the knowledge of the Company
and the Seller, no claim with respect to any such infringement or violation is
threatened. The Company has taken all steps reasonably necessary to protect its
right, title, and interest in and to the Software owned by the Company,
including, without limitation, the use of written agreements containing
appropriate confidentiality provisions with all third parties having access to
the source code relating to the Software.
(b) The Company possesses or has access to the original and
all copies of all documentation, including, without limitation, all source code
for all Software owned by it. Upon consummation of the transactions contemplated
by this Agreement, except as set forth in Schedule 2.11, the Company will
continue to own all the Software owned by it, free and clear of all claims,
Liens, encumbrances, obligations, and liabilities, and, with respect to all
agreements for the lease or license of Software which require consents or other
actions as a result of the consummation of the transactions contemplated by this
Agreement in order for the Company to continue to use and operate such Software
after the Closing Date, the Company will have obtained such consents or taken
such other actions so required.
(c) Any programs, modifications, enhancements or other
inventions, improvements, discoveries, methods, or works of authorship included
in the Software that were created by employees of the Company were made in the
regular course of such employees' employment with the Company using the
Company's facilities and resources and, as such, constitute "works made for
hire."
SECTION 2.12. LITIGATION, ETC. Schedule 2.12 hereto sets forth
a complete list and an accurate description of all claims, actions, suits,
proceedings, and investigations pending or, to the knowledge of the Company and
the Seller, threatened, by or against the Company or any of its properties,
assets, rights, or businesses. There are no actions, suits, proceedings, or
claims pending before or by any court, arbitrator, regulatory authority, or
government agency against or affecting the Seller or the Company that might
enjoin or prevent the consummation of the transactions contemplated by this
Agreement. Except as set forth in Schedule 2.12, neither the
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Company nor any of its assets are subject to or bound by any currently existing
judgment, order, writ, injunction or decree.
SECTION 2.13. TAXES.
(a) Except as set forth in Schedule 2.13 hereto, the Company
has (i) duly and timely filed all returns, declarations, reports, estimates,
information returns, and statements ("Returns") required to be filed by it in
respect of any Taxes (as defined in this Section 2.13(a)), all of which Returns
(including all informational Returns) were correct in all respects as filed (or
as subsequently amended) and correctly reflect the facts regarding the income,
business, assets, operations, activities, and status of the Company as well as
any Taxes required to be paid or collected by the Company, (ii) timely paid or
withheld all Taxes that are due and payable with respect to the Returns referred
to in paragraph (i), (iii) established, consistent with past practice, an
adequate reserve, if any, on its books and records for the payment of all Taxes
with respect to any taxable period (or portion thereof) ending on or prior to
the Closing Date, and (iv) complied in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes and has
timely withheld from employee wages and paid over to the proper governmental
authorities when due all amounts required to be so withheld and paid over. For
purposes of this Agreement, the term "Taxes" shall mean (A) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, withholding on
amounts paid or received, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit taxes, custom
duties or other taxes, governmental fees or other like assessments or charges of
any kind whatsoever, together with any interest or any penalty, addition to tax
or additional amount imposed on the Company by any governmental authority
responsible for the imposition of any such taxes (domestic or foreign) ("Taxing
Authorities"), (B) liability for the payment of any amounts of the type
described in paragraph (A) as a result of being a member of an affiliated,
consolidated, combined or unitary group, or being a party to any agreement or
arrangement whereby liability for payments of such amounts was determined or
taken into account with reference to the liability of any other person for any
period prior to the Closing Date, and (C) liability with respect to the payment
of any amounts described in paragraph (A) as a result of any express or implied
obligation to indemnify any other person.
(b) Except as set forth in Schedule 2.13 hereto, no Federal,
state, or local income Tax Returns of the Company are being examined or have
been examined by any Taxing Authority during any year for which the applicable
statute of limitations period remains open.
(c) Except as set forth in Schedule 2.13 hereto, the Company
has never (i) requested or received a Tax ruling (other than a determination
with respect to a qualified employee benefit plan) or entered into a legally
binding agreement (such as a closing agreement) with any Taxing Authority, which
ruling or agreement could have an effect on the Taxes of the Company on or after
the Closing Date, or (ii) filed any election or caused any deemed election under
Section 338 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any similar state or local provision.
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(d) Except as set forth in Schedule 2.13 hereto, (i) no
extensions of time have been granted to the Company to file any Return, which
Return has not been filed in the time period permitted by any such extension,
(ii) no deficiency or adjustment for any Taxes has been proposed, asserted or
assessed against the Company, which deficiency or adjustment has not been paid
in full, and no Federal, state, local or foreign audits or other administrative
proceedings or court proceedings are currently in progress or pending against
the Company with respect to any Taxes owed by the Company, and (iii) no waiver
or consent extending any statute of limitations for the assessment or collection
of any Taxes owed by the Company, which waiver or consent remains in effect, has
been executed by the Company or on behalf of the Company, nor are any requests
for such waivers or consents pending.
(e) Except as set forth in Schedule 2.13 hereto, the Company
has never (i) been a member of any consolidated, combined or unitary group for
Federal, state, local or foreign Tax law purposes or (ii) been a party to any
Tax-sharing or allocation agreement. Any Tax-sharing or allocation agreement
shall be terminated as of the Closing Date and will have no further impact for
any taxable year beginning after the Closing Date.
(f) Except for the Employment Agreements (as defined in
Section 2.15(c) hereof), the Company is not a party to any agreement, contract
or arrangement that would result, by reason of the consummation of any of the
transactions contemplated herein, separately or in the aggregate, in the payment
of any "excess parachute payment" within the meaning of Section 280G of the
Code. The Company is included in an affiliated group as defined under Section
1504 of the Code and the fair market value of the assets of the Company is less
than 33% of the fair market value of the affiliated group.
(g) No sales or use taxes will be incurred upon consummation
of the transactions contemplated by this Agreement.
(h) All persons characterized as independent contractors, and
not as employees, were, to the best of the Company's knowledge, properly so
characterized for all purposes under applicable laws (including without
limitation, characterized as independent contractors for income and employment
tax withholdings and payments).
SECTION 2.14. GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS.
(a) Except as set forth in Schedule 2.14 hereto, the Company
has all governmental licenses, franchises, and permits ("Governmental Permits")
required under applicable law for the conduct of its business as currently
conducted.
(b) The business of the Company is being conducted in material
compliance with all applicable laws, ordinances, rules and regulations of all
governmental authorities relating to its properties or applicable to its
business, including without limitation the terms of all Governmental Permits and
federal securities laws. Neither the Company nor the Seller has received any
notice of any alleged violation of any of the foregoing.
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(c) Neither the Company nor any of its properties, operations,
or businesses is subject to any court or administrative order, judgment,
injunction, or decree. To the knowledge of the Company and the Seller, no action
has been taken or recommended by any governmental or regulatory official, body
or authority, either to revoke, withdraw, or suspend any license used in the
operations of the Company.
SECTION 2.15. LABOR MATTERS, EMPLOYEES.
(a) No collective bargaining agreement is applicable to any
employees of the Company. There are not any material disputes between the
Company and any of its employees. To the knowledge of the Company and the
Seller, there are no organizational efforts presently being made or threatened
involving any of such employees. Neither the Company nor the Seller has received
notice of any claim that the Company has failed to comply with any laws relating
to employment, including any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and other payroll or
similar taxes, equal employment opportunity, employment discrimination, and
employment safety, or that the Company is liable for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing.
(b) There are no proceedings pending or, to the knowledge of
the Company and the Seller, threatened before the National Labor Relations Board
with respect to any employees of the Company. There are no discrimination
charges (relating to sex, age, religion, race, national origin, ethnicity,
handicap, or veteran status) against the Company pending before any federal or
state agency or authority.
(c) The Company has entered into (i) an Employment Agreement
with certain employees as set forth on Schedule 2.15 hereto (collectively, the
"Employment Agreements"), and (ii) an Executive Deferred Compensation Joinder
Agreement related to the Company's Executive Deferred Compensation Plan
(effective January 1, 1986) with certain employees as set forth on Schedule 2.15
hereto (collectively, the "Deferred Compensation Agreements").
(d) True and complete copies of all payroll files have been
provided or made available, as requested, to the Purchaser and its counsel
relating to all current employees and independent contractors of the Company.
SECTION 2.16. INSURANCE. All policies of fire, liability,
workers' compensation and other forms of insurance providing insurance coverage
to or for the Company are listed in Schedule 2.16 hereto and, except as set
forth in said Schedule 2.16, (i) the Company is a named insured under such
policies, (ii) all premiums with respect thereto covering all periods up to and
including the Closing Date have been paid, and (iii) no notice of cancellation
or termination has been received with respect to any such policy. All such
policies are in full force and effect and will remain in full force and effect
to and including the Closing Date.
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SECTION 2.17. USE OF REAL PROPERTY. The leased real properties
listed in Schedule 2.17 hereto are used and operated by the Company in
compliance and conformity with all applicable leases. Neither the Company nor
the Seller has received notice of any violation of any applicable zoning or
building regulation, ordinance, or other law, order, regulation, or requirement
relating to the respective real estate operations or assets of the Company and,
to the knowledge of the Company and the Seller, there are no such violations.
SECTION 2.18. CONDITION OF ASSETS. Except as set forth in
Schedule 2.18 hereto, all tangible personal property, fixtures, and equipment
comprising the assets of the Company are in a good state of repair (ordinary
wear and tear excepted) and operating condition, and are sufficient and adequate
to permit the Company to conduct its business as of the Closing Date.
SECTION 2.19. EMPLOYEE BENEFIT PLANS.
(a) Schedule 2.19 attached hereto lists each employee benefit
plan within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") maintained by the Company or to which the Company
contributes or is required to contribute or in which any employee of the Company
participates (a "Plan"). The Company has complied and currently is in compliance
in all material respects, both as to form and operation, with the provisions of
ERISA and the Code applicable to each Plan.
(b) Except as set forth in Schedule 2.19 hereto, each of the
Plans which is intended to qualify under Section 401(a) of the Code does so
qualify and is exempt from taxation pursuant to Section 501(a) of the Code, and
the Company has received favorable and unrevoked determination letters from the
Internal Revenue Service to that effect.
(c) The Company has not maintained, contributed to, or been
required to contribute to, and the employees of the Company do not participate
in, a "multiemployer plan" (as defined in Section 3(37) of ERISA) or a "defined
benefit plan" (as defined in Section 3(35) of ERISA). No amount is due or owing
from the Company on account of a multiemployer plan or on account of any
withdrawal therefrom.
(d) Except as set forth in Schedule 2.19 hereto,
notwithstanding anything else set forth herein, neither the Company nor the
Seller has incurred any material liability with respect to any Plan under ERISA
(including, without limitation, Title I or Title IV of ERISA), the Code or other
applicable law, which has not been satisfied in full or which is not reflected
on the Financial Statements, the Interim Financial Statements or the Closing
Balance Sheet, and no event has occurred, and there exists no condition or set
of circumstances which could result in the imposition of any material liability
under ERISA (including, without limitation, Title I or Title IV of ERISA), the
Code or other applicable law with respect to any of the Plans.
(e) No Plan, other than a Plan which is an employee pension
benefit plan (within the meaning of Section 3(2)(A) of ERISA), provides
benefits, including without limitation, death, health, or medical benefits
(whether or not insured), with respect to current or
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former employees of the Company beyond their retirement or other termination of
service with the Company (other than (i) coverage mandated by applicable law,
(ii) deferred compensation benefits accrued as liabilities on the books of the
Company or (iii) benefits the full cost of which is borne by the current or
former employee (or his beneficiary)).
(f) Except as otherwise set forth in Schedule 2.19 or in
Schedule 2.15 hereto, the consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or officer of the
Company to severance pay, unemployment compensation, or any other payment, or
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
(g) The Company has provided or made available, as requested,
to the Purchaser true and complete copies of the following, to the extent each
is applicable, for each Plan: (i) the Plan; (ii) summary plan description of the
Plan; (iii) the trust agreement, insurance policy, or other instrument relating
to the funding of the Plan; (iv) the most recent Annual Report (Form 5500
series) and accompanying schedule filed with the Internal Revenue Service or
United States Department of Labor with respect to the Plan; (v) the most recent
audited financial statement for the Plan; (vi) the most recent actuarial report
of the Plan; (vii) the policy of fiduciary liability insurance (and agreements
related thereto) maintained in connection with the Plan; and (viii) the most
recent determination letter issued by the Internal Revenue Service with respect
to each of the Plans that is intended to qualify under Section 401(a) of the
Code.
SECTION 2.20. RELATED PARTY TRANSACTIONS. Except as
contemplated by this Agreement, there are no existing material arrangements or
proposed material transactions between the Company or its subsidiaries and (i)
any member, manager, or officer of the Company or its subsidiaries or any member
of the immediate family of any of the foregoing persons (such members, managers,
officers and family members being hereinafter individually referred to as a
"Related Party"), (ii) any business (corporate or otherwise) which a Related
Party owns, directly or indirectly, or in which a Related Party has an ownership
interest, or (iii) between any Related Party and any business (corporate or
otherwise) with which the Company or its subsidiaries regularly does business.
SECTION 2.21. ENVIRONMENTAL MATTERS.
(a) The Company, its business, operations, properties, and
assets comply in all respects with all existing Environmental Laws (as defined
in Section 2.21(c) hereof). The Company has not received notice of violations of
any existing Environmental Law relating to the Company, its business, or
operations or any of its assets or properties.
(b) The Company has not buried, dumped, spilled, released,
stored or disposed of any Hazardous Material (as defined in Section 2.21(c)
hereof) on or at any of the real properties owned or leased by the Company in
violation of any Environmental Law. Neither the Company nor the Seller has
received notice that any Hazardous Material releases have or may have occurred
or that Hazardous Material conditions might exist at, on or beneath any part of
any of the real properties owned or leased by the Company.
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(c) For purposes of this Agreement, the term "Environmental
Laws" shall mean any law, statute, regulation, rule, order, ordinance, consent
decree, settlement agreement, or governmental requirement of any governmental
authority, as in effect on the date of this Agreement, which relates to or
otherwise imposes liability or standards of conduct concerning the protection or
pollution of the environment, community health and safety, including, without
limitation, relating to releases, discharges, emissions or disposals to air,
water, land or ground water, the withdrawal or use of ground water, the use,
handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea
formaldehyde, the treatment, storage, disposal or management of hazardous
substances (including, without limitation, petroleum, crude oil or any fraction
thereof, or other hydrocarbons), pollutants or contaminants, and exposure to
toxic, hazardous or other controlled, prohibited or regulated substances. The
term "Environmental Laws" shall include but not be limited to the Comprehensive
Environmental Response Compensation and Liability Act, as amended, the Federal
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act and the Hazardous and Solid Waste Amendments, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Toxic Substance and Control Act, the
Federal Safe Drinking Water Act, and any similar or analogous statute,
regulation, decisional law, legally binding conditions, standards, prohibitions,
requirements, or judgments or any governmental authority, as now exist. For
purposes of this Agreement, the term "Hazardous Material" shall mean any
material which is defined as a "hazardous waste" or "hazardous substance" under
any Environmental Law.
SECTION 2.22. SYSTEM CAPACITY. The computer hardware, Software
and communications equipment now being used by the Company are sufficient in all
material respects to accommodate the electronic data interchange and transaction
processing currently performed by the Company.
SECTION 2.23. SECURITIES LAWS MATTERS. Neither the Company
nor, to the knowledge of the Company and the Seller, any person authorized by
the Company or the Seller as agent, broker, dealer, or otherwise in connection
with the offering or sale of the Seller's Interest, or any similar securities
has taken or will take any action (including without limitation any offer or
sale of any securities under circumstances which would require the integration
of such securities with the membership interest being transferred by the Seller
hereunder under the Securities Act, or the rules and regulations of the
Securities and Exchange Commission (the "SEC") thereunder), which would subject
such transfer to the registration provisions of the Securities Act.
SECTION 2.24. "YEAR 2000" COMPLIANCE. Except as set forth in
Schedule 2.24 hereto, the Company's equipment, computer software, hardware and
other assets are "Year 2000" compliant and there are no Y2K Deficiencies (as
defined in Section 7.03(a)) in connection with computer software code used by
the Company or related to any services or products provided by the Company to
its customers. The Seller and the Company have provided or made available to the
Purchaser any and all reports, studies and audits relating to the Year 2000 or
Year 2000 compliance of the Company's equipment, software, hardware and other
assets.
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SECTION 2.25. AUTHORIZATION OF AGREEMENTS, ETC. The execution
and delivery by the Company of this Agreement, and the performance by the
Company of its obligations hereunder, have been duly authorized by all requisite
action and will not (a) violate any provision of law, any order of any court, or
other agency of government, the Company Organization Documents, or any judgment,
award, or decree to which the Company is a party, or by which the Company or any
of the Company's properties or assets is bound or affected, or (b) result in the
creation or imposition of any Lien, charge, or encumbrance of any nature
whatsoever upon any of the Seller's Interest.
SECTION 2.26. VALIDITY. This Agreement has been duly executed
and delivered by the Company and constitutes the legal, valid, and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or similar laws of general application relating to or affecting the
enforcement of the rights of creditors or by equitable principles, regardless of
whether enforcement is sought in a proceeding in equity or at law.
SECTION 2.27. LARGEST CUSTOMERS. The Company has made
available to the Purchaser the 20 largest customers by dollar volume of the
Company (the "Largest Customers"), with the amount of revenues attributable to
each such customer, for each fiscal years ending December 31, 1997 and 1998.
Except as previously disclosed, none of the Largest Customers has terminated or
materially adversely altered its relationship with the Company since January 1,
1998 or, to the Company's knowledge, threatened to do so or otherwise notified
the Company of its intention to do so, and, except as set forth in Schedule 2.27
hereto, there has been no material dispute with any of the Largest Customers
since January 1, 1998.
SECTION 2.28. ACCOUNTS RECEIVABLE. Schedule 2.28 hereto sets
forth the accounts receivable of the Company, and the payments and rights to
receive payments related thereto, as of August 31, 1999. The amount of all
accounts receivable, unbilled invoices and other debts due or recorded in the
records and books of account of the Company as being due to the Company as of
August 31, 1999 (less the amount of any provision or reserve therefor made in
the respective records and books of account of the Company, which provision or
reserve has been computed in accordance with past practice and is reasonably
believed to be adequate) constitute valid claims against third parties not
affiliated with the Company arising in bona fide transactions in the ordinary
course of the business of the Company.
SECTION 2.29. ILLEGAL OR UNAUTHORIZED PAYMENTS, POLITICAL
CONTRIBUTIONS; ANTITRUST.
(a) Except as set forth in Schedule 2.29 hereto, neither the
Seller, the Company nor any of their respective officers, directors, employees,
agent or other representatives of any other business entity or enterprise with
which the Company is or has been affiliated or
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associated with, or has, directly or indirectly, made or authorized on behalf of
the Company any payment, contribution or gift of money, property or services,
whether or not in contravention of applicable law, (i) as a kickback or bribe to
any person or entity or (ii) to any political organization, or the holder of or
any aspirant to any elective or appointive public office, except for personal
political contributions not involving the direct or indirect use of funds of the
Company.
(b) The Company has not violated any federal or state
antitrust statutes, rules or regulations, including without limitation those
relating to unfair competition, price fixing or collusion.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES AS TO THE SELLER
The Seller represents and warrants to the Purchaser as follows:
SECTION 3.01. ORGANIZATION, QUALIFICATIONS, AND POWER. The
Seller has been duly organized and is in good standing under the laws of its
jurisdiction of organization. The Seller has all requisite power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
SECTION 3.02. AUTHORIZATION OF AGREEMENTS, ETC. The execution
and delivery by the Seller of this Agreement and the performance by the Seller
of its obligations hereunder have been duly authorized by all requisite action
and will not (a) violate any provision of law, any order of any court, or other
agency of government, the Articles of Incorporation or Bylaws of the Seller, or
any judgment, award, or decree to which the Seller is a party, or by which the
Seller or any of the Seller's properties or assets is bound or affected or (b)
result in the creation or imposition of any Lien, charge, or encumbrance of any
nature whatsoever upon any of the Seller's Interest.
SECTION 3.03. VALIDITY. This Agreement has been duly executed
and delivered by the Seller and constitutes the legal, valid, and binding
obligation of the Seller, enforceable against the Seller in accordance with its
terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or similar laws of general application relating to or affecting the
enforcement of the rights of creditors or by equitable principles, regardless of
whether enforcement is sought in a proceeding in equity or at law.
SECTION 3.04. TITLE TO SELLER'S INTEREST. The Seller is the
lawful holder of record and beneficial owner of the Seller's Interest free and
clear of any and all Liens. The delivery by the Seller of certificates or
instruments and agreements evidencing the Seller's Interest, duly endorsed for
transfer or accompanied by transfer powers duly endorsed in blank, to the
Purchaser pursuant to Section 1.01 hereof, in exchange for the Purchase Price,
will transfer valid title to said Seller's Interest to the Purchaser, free and
clear of any and all Liens.
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SECTION 3.05. BROKERS' OR FINDERS' FEES. All negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out directly with the Purchaser or through the Seller's agent,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ (whose fees and expenses shall be borne solely by
the Seller), without the intervention of any person on behalf of the Company or
the Seller in such manner as to give rise to any claim by any person against the
Purchaser for a finder's fee, brokerage commission or similar payment.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES AS TO
THE PURCHASER AND THE GUARANTOR
The Purchaser and the Guarantor represent and warrant to the Seller as
follows:
SECTION 4.01. ORGANIZATION, POWER, ETC. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Purchaser has full corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
The Guarantor is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Guarantor has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.
SECTION 4.02. AUTHORIZATION OF AGREEMENTS, ETC. The execution
and delivery by the Purchaser and the Guarantor of this Agreement and the
performance by the Purchaser and the Guarantor of their respective obligations
hereunder have been duly authorized by all requisite corporate action on the
part of the Purchaser and the Guarantor and will not (a) violate any provision
of law, any order of any court, or other agency of government, the Certificate
of Incorporation or Bylaws of the Purchaser or the Guarantor, any judgment,
award or decree or any indenture, agreement, or other instrument to which the
Purchaser or the Guarantor is a party, or by which they or any of their
properties or assets are bound or affected; (b) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement, or other instrument (including, without
limitation, any other registration rights agreement to which the Guarantor may
be a party); or (c) result in the creation or imposition of any Lien, charge, or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Purchaser or the Guarantor.
SECTION 4.03. VALIDITY. This Agreement has been duly executed
and delivered by the Purchaser and the Guarantor and constitutes the legal valid
and binding obligations of the Purchaser and the Guarantor, enforceable against
the Purchaser and the Guarantor in accordance with its terms, except to the
extent that enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, or similar laws
of general application relating to or affecting the enforcement of the rights of
creditors or by
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equitable principles, regardless of whether enforcement is sought in a
proceeding in equity or at law.
SECTION 4.04. GOVERNMENTAL APPROVALS. No order, authorization,
approval, or consent from, or filing with, any federal or state governmental or
public body or other authority having jurisdiction over the Purchaser and the
Guarantor is necessary for the execution, delivery, and performance by the
Purchaser and the Guarantor of its obligations under this Agreement, except for
the filing and approval under the HSR Act.
SECTION 4.05. LITIGATION RELATING TO TRANSACTION. There are no
actions, suits, proceedings, or claims pending before any court, arbitrator or
government agency against or affecting the Purchaser or the Guarantor which
might enjoin or prevent the consummation of the transactions contemplated by
this Agreement.
SECTION 4.06. BROKERS' OR FINDERS' FEES. All negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out by the Purchaser directly with the Seller, without the intervention
of any person on behalf of the Purchaser in such manner as to give rise to any
claim by any person against the Seller for a finder's fee, brokerage commission,
or similar payment.
SECTION 4.07. INVESTMENT INTENTION. The Purchaser is acquiring
the Seller's Interest for its own account, for investment purposes only and not
with a view to the distribution (as such terms are used in Section 2(11) of the
Securities Act). The Purchaser understands that the Seller's Interest has not
been registered under the Securities Act and cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration is
available.
SECTION 4.08. NO MATERIAL ADVERSE CHANGE. Since June 30, 1998,
there has not occurred any material adverse change (i) in the condition
(financial or otherwise), results of operations, business, prospects, assets or
liabilities of the Purchaser or the Guarantor, or (ii) in the capacity of the
Purchaser or the Guarantor to conduct their businesses in a manner consistent
with past practice.
SECTION 4.09. REVENUE RECOGNITION POLICIES. The Purchaser and
the Guarantor have received to their satisfaction sufficient information from
the Company and the Seller relating to the discussions between the Company and
KPMG LLP, the Company's independent accountant, regarding the Company's revenue
recognition policies.
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ARTICLE V.
COVENANTS
SECTION 5.01. CERTAIN COVENANTS OF THE SELLER AND THE
GUARANTOR.
(a) During the period from the date of this Agreement to the
Closing Date, the Seller will cause the Company to conduct its business and
operations according to its ordinary course of business consistent with past
practice and use its best efforts (i) to preserve its relationships with
business partners, employees, and customers, (ii) subject to the provisions of
Section 5.05 hereof, to maintain the contracts with customers in full force and
effect in accordance with their terms, and (iii) to ensure that the Company will
continue to provide its services to such customers. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
this Agreement, the Seller will not allow the Company to do any of the things
listed in paragraphs (a) through (o) of Section 2.05 hereof prior to the Closing
Date without the prior written consent of the Purchaser.
(b) Upon reasonable prior notice and at reasonable times,
between the date hereof and the Closing Date, the Seller shall, and shall cause
the Company to, provide access to representatives of the Purchaser to the
financial, accounting, and legal records of the Company, and to key employees of
the Company designated by the Purchaser, and, in connection therewith, shall
permit representatives of the Purchaser to visit the premises of the Company.
Such activities shall be performed, so far as is reasonably possible, in such a
manner as to avoid disruption of normal operations.
(c) Between the date hereof and the Closing Date and except as
required by consistently applied accounting methods, the Seller shall cause the
Company not to (i) utilize accounting principles different from those used in
the preparation of the Financial Statements, (ii) change in any manner its
method of maintaining its books of account and records from such methods as in
effect on December 31, 1998, or (iii) accelerate booking of revenues or the
deferral of expenses, other than as shall be consistent with past practice and
in the ordinary course of business.
(d) Between the date hereof and the Closing Date, the Seller
shall not, and shall cause the Company not to, enter into any transaction, make
any agreement or commitment, or take any action which would result in any of the
representations, warranties, or covenants of the Seller contained in this
Agreement not being true and correct at and as of the time immediately after the
occurrence of such transaction, event, or action.
SECTION 5.02. BOOKS AND RECORDS. Promptly after the Closing
Date, the Seller shall deliver to the Purchaser or the Company all books and
records used in the operation of the business of the Company and all files,
documents, papers, agreements, books of account, and other records pertaining to
the business of the Company, to the extent that such books, records, files and
other materials are not located at the offices of the Company.
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SECTION 5.03. ALLOCATION OF PURCHASE PRICE FOR TAX PURPOSES.
(a) After the Closing and at the sole cost and expense of the
Purchaser, the Seller shall provide the Company's auditors with all financial
information, other than information held by the Company, and data reasonably
necessary to enable its independent accountants to prepare and review an audited
consolidated balance sheet of the Company as of December 31, 1999, and the
related statements of income, shareholders' or members' equity, as the case may
be, and cash flows for the year then ended; provided, however, that the Seller
will not charge the Company or the Purchaser for the provision of information
and data that is readily available to the Seller.
(b) The Seller agrees that, if requested by the Company as
being necessary to prepare the audited financial statements as contemplated by
Section 5.03(a) hereof, the Seller shall provide to the Company's auditors a
management representation letter in a form reasonably acceptable to such
auditors covering the period from January 1, 1999 to the Closing Date.
(c) Attached as Schedule 5.03 hereto is a schedule which sets
forth (i) the balance sheet of the Company as of August 31, 1999, (ii) a summary
of the assets and liabilities of the Company that shall not be transferred to or
assumed by the Purchaser as part of the transactions contemplated hereby (which
shall include the amounts that the Company owes to the Seller for federal and
state income Taxes, the Short-Term Debt and the Long-Term Debt and accrued
interest thereon as of the Closing Date, the EDCP and the DICP (both as defined
in Section 5.14 hereof) and related assets and liabilities), and (iii) the Code
Section 1060 allocation of the Purchase Price (collectively, the "August 31 Pro
Forma Balance Sheet"). The August 31 Pro Forma Balance Sheet shall be updated by
the Seller as of the Closing Date as promptly as practicable following the
Closing Date (but in no event later than 30 days after the Closing Date) and
shall be prepared in a manner consistent with the preparation of the August 31
Pro Forma Balance Sheet (the "Closing Balance Sheet"). The updates to the August
31 Pro Forma Balance Sheet by the Seller shall include, without limitation,
updates to the amounts under the columns "incentive deferred compensation plan
and assets not assumed" and "federal and state tax liabilities and assets not
transferred". As promptly as practicable following the receipt of the Closing
Balance Sheet (but in no event later than 60 days after the Closing Date), the
Purchaser shall review the Closing Balance Sheet and deliver any adjustments,
changes or objections to the Seller in writing. In the event the Seller does not
provide any adjustments, changes or objections within 75 days after the Closing
Date (provided that the Seller has timely delivered the Closing Balance Sheet),
the Closing Balance Sheet shall be deemed final and binding for purposes of this
Section 5.03(c). In the event that the Seller and the Purchaser have any
disputes regarding the Closing Balance Sheet, within 60 days after the
expiration of the 75 day period referred to in this Section 5.03(c), the Seller
and the Purchaser shall attempt in good faith to resolve any such disputed
matters by negotiation between executives who have the authority to settle and
resolve such matters and who are at a higher level of management than the person
with direct responsibility for administration of this Agreement. If the disputed
matters shall not have been resolved as provided in the immediately preceding
sentence, then the Seller and the Purchaser shall attempt in good faith to
resolve any disputed matters referred to in this Section 5.03(c) by
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negotiation between the Seller's and the Purchaser's respective chief financial
officer within 7 days after the expiration of the 60 day period referenced in
the immediately preceding sentence. If the disputed matters shall not have been
resolved by the Seller's and the Purchaser's respective chief financial officer
as provided in the immediately preceding sentence, the Seller and the Purchaser
shall select, by lot, one of the "Big 5" national accounting firms (which shall
not include the firm currently used by the Purchaser or the Seller unless the
other party shall agree) and shall give such firm the authority to resolve the
dispute in its sole discretion.
(d) The parties hereto shall make available to the Purchaser
and the Seller such books, records and other information, including work papers
(collectively, the "Backup Materials") as any of the foregoing may reasonably
request to prepare or review the Closing Balance Sheet.
SECTION 5.04. CERTAIN TAX MATTERS.
(a) Transfer Taxes. All Taxes imposed upon or incurred by any
of the parties hereto in connection with the transfer of the Seller's Interest
to the Purchaser under this Agreement, and any legal and other expenses relating
thereto, shall be borne by the Seller. The Seller shall, at its own expense,
prepare and file all necessary Tax Returns and other documents with respect to
all such Taxes.
(b) Tax Returns. The Seller shall prepare and file all Tax
Returns of the Company for Tax periods ending on or prior to the Closing Date
consistent with prior practices, and the Seller shall provide the Purchaser with
a copy of the Tax Returns as soon as practicable after they are filed. For all
Tax Returns relating both to periods before and after the Closing Date, all
reasonable fees and expenses relating to the preparation of such returns shall
be apportioned between the Seller, on the one hand, and the Company and the
Purchaser, on the other hand, on the basis set forth in Section 5.04(c) hereof.
The Purchaser shall prepare and file all Tax Returns of the Company for any
period including the day following the Closing Date (a "Straddle Period").
Before filing any Tax Return relating in whole or in part to a Straddle Period,
the Purchaser shall deliver a copy of such Tax Return to the Seller for its
review and approval (which will not be unreasonably withheld or delayed). The
Purchaser shall make any changes requested by the Seller and reasonably
acceptable to the Purchaser. Each party shall provide the other with all
reasonable assistance required to prepare and file such Tax Returns. The Seller
shall be responsible for, and shall pay all Taxes (or any portion thereof) shown
on such Tax Returns that relate to any Tax period (or any portion thereof)
ending on or before the close of business on the Closing Date (a "Prior Tax
Period"), including any Taxes related to the transfer of the Seller's Interest
to the Purchaser under this Agreement, provided, that the Seller shall not be
responsible for any Taxes with respect to which a reserve has been established
on the Closing Balance Sheet. The Purchaser shall be responsible for, and shall
pay, any such Taxes for which the Seller is not responsible.
(c) Straddle Period. Subject to Section 5.04(b) hereof, with
respect to any Straddle Period, (i) the portion of any Tax based on income,
profits or revenue that is attributable
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to a Prior Tax Period shall be determined based on a closing of the Company's
books as of the close of business on the Closing Date, and (ii) the portion of
any other Tax attributable to a Prior Tax Period will be determined by
multiplying the amount of such Tax by a fraction, the numerator of which shall
equal the number of days in such Prior Tax Period up to and including the
Closing Date and the denominator of which shall equal the total number of days
in such Tax period.
(d) Tax Disputes. In the event the Seller disputes its
responsibility to pay any Tax under this Section 5.04, the Seller shall not be
relieved of its obligation to pay, in the first instance, the amount of such
Tax. If, within 15 days of Seller's payment of the disputed Tax, the Seller, on
the one hand, and the Purchaser, on the other, are unable to resolve the dispute
among themselves, they shall select, by lot, one of the "Big 5" national
accounting firms (which shall not include the firm currently used by the
Purchaser or the Seller unless the other party shall agree) and shall give such
firm the authority to resolve the dispute in its sole discretion.
(e) Tax Reporting. For federal income tax purposes, the
Seller and the Purchaser agree that the Company shall be disregarded as a
separate entity, to treat the transactions contemplated hereby as a sale by the
Seller and a purchase by the Purchaser of the assets of the Company, and to
report the transaction to the Internal Revenue Service on IRS Form 8594. The
Purchaser and the Seller shall be bound by and shall follow the allocation of
the Purchase Price set forth in the Closing Balance Sheet for the preparation
and filing of IRS Form 8594.
SECTION 5.05. CONSENTS AND APPROVALS. The Seller and the
Company shall use their reasonable efforts to obtain all necessary consents and
approvals with respect to all interests of the Company in any material leases,
licenses, contracts, instruments and rights which shall require the express
consent or approval of another person or entity as a result of the consummation
of the transactions contemplated hereby; provided, however, that the receipt of
approvals and consents required with respect to the Fiscal Agent Contracts shall
be subject to Section 1.04(a) hereof and not this Section 5.05.
SECTION 5.06. RETENTION OF EMPLOYEES; EMPLOYEE BENEFITS;
EMPLOYEE BONUSES.
(a) Effective as of the Closing Date, the Purchaser will cause
the Company to continue the employment of all employees of the Company employed
by the Company immediately prior to the Closing (the "Retained Employees").
(b) In addition to any benefits and payments to be made under
the Employment Agreements after the Closing (which shall include all benefits
and payments required thereunder except for the One-Time Bonus Obligations and
the Arnau Severance Reimbursement Obligation (both as defined in Section 5.15
hereof) which shall be the responsibility of the Seller), from and after January
1, 2000, the Purchaser shall provide to the Retained Employees of the Company
the employee benefits listed in Item #1 on Schedule 2.19 to
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this Agreement to the extent that the Purchaser and its subsidiaries provide
such benefits to their similarly situated employees, subject to the age and
eligibility requirements of such benefits. For purposes of all such benefits,
each Retained Employee's last continuous Period of Service (as defined in this
Section 5.06(b)) immediately prior to the Closing (determined under the rules of
the applicable Purchaser plan) shall count for eligibility and vesting (but not
for benefit amounts). For purposes of severance benefits, such Period of Service
shall count for eligibility, vesting and benefit amounts. For purposes of this
Section 5.06, the term "Period of Service" means service with the Company and
with predecessor employers. From and after the Closing Date and continuing to at
least January 1, 2000, the Purchaser shall cause the Company to adopt an
employee welfare benefit plan which provides medical, dental, group life,
long-term disability and education reimbursement identical to the coverage
provided under the Seller's employee welfare benefit plan on the date hereof;
provided, however, that the Purchaser's obligation hereunder shall be subject to
the Seller making such an employee welfare benefit plan available to the
Purchaser under the same costing method, structure and terms applicable to the
Company on the date hereof. In no event shall a preexisting condition limit be
applied to the Retained Employees upon such Retained Employees' coverage under
the Purchaser's or the Company's benefit plans.
(c) After the Closing, subject to Sections 5.14 and 5.15
hereof, the Purchaser shall, or shall cause the Company to, provide for and pay
all benefits and amounts due under the Employment Agreements in the amounts and
at the times set forth therein (which shall include all benefits and payments
required thereunder except for the One-Time Bonus Obligations and the Arnau
Severance Reimbursement Obligation (both as defined in Section 5.15), which
shall be the responsibility of the Seller).
SECTION 5.07. ACCESS TO TAX AND OTHER RECORDS.
(a) After the Closing Date, if and only to the extent that the
Purchaser has asserted a claim for Losses under Article VII hereof, or if any
other party has asserted a claim against either the Company or the Seller with
respect to any act or omission by the Company alleged to have occurred on or
prior to the Closing Date, then upon the request of the Seller, the Purchaser
shall (i) grant to the Seller and its representatives the right, during normal
business hours, to inspect and copy the books, records and other documents of
the Company, and (ii) use commercially reasonable efforts to cause the Company's
auditors to permit the Seller and its representatives to inspect and copy
worksheets and other information pertaining to the Company and its financial
statements, in each case as reasonably required by the Seller to defend the
Seller against any such claim. The Seller shall reimburse the Purchaser's, the
Company's or the Company's auditors' reasonable out-of-pocket expenses, if any,
incurred in connection with such inspection.
(b) After the Closing Date, in connection with any claim or
investigation by the Internal Revenue Service or any state or local taxing
authority with respect to (i) the Company, for any periods ending on or prior to
the Closing Date, or (ii) the transactions contemplated by this Agreement, the
Purchaser shall cause the Company to make available to the
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Seller access to appropriate employees, agents, and representatives of the
Company, in each case as reasonably required by the Seller to defend itself
against any such claim or to represent itself in any such investigation. Any
out-of-pocket expenses reasonably and actually incurred by the Purchaser or the
Company in complying with the provisions of this Section 5.07(b) shall be borne
by the Seller.
(c) The Purchaser shall, and shall cause the Company to, keep
and maintain all tax books, records and other tax information pertaining to the
Company for all Tax periods ending on or prior to the Closing Date for a period
of six years after the Closing Date.
(d) To the extent that the Seller requests information
pursuant to this Section 5.07, the Seller shall keep such information
confidential; provided, however, that the Seller may use such information for
its own benefit in connection with the claim, investigation, or proceeding
giving rise to the Seller's request for information.
(e) The Purchaser shall cooperate with the Seller after the
Closing Date in order to assist the Seller in preparing and filing its Tax
returns related to the Company and shall make available to the Seller such
books, records and other information as the Seller may reasonably request to
prepare such Tax returns.
SECTION 5.08. FURTHER ASSURANCES. At or after the Closing and
without further consideration, the Seller and the Company shall execute and
deliver to the Purchaser such further instruments of conveyance and transfer and
such other documents as the Purchaser may reasonably request in order to more
effectively convey and transfer the Seller's Interest (including all Intangible
Rights owned by the Company) to the Purchaser and to place the Purchaser in
operational control of the Company and its assets.
SECTION 5.09. PUBLICITY. The Seller, the Company, the
Purchaser and the Guarantor shall cooperate with each other in the development
and distribution of all news releases and other public disclosures relating to
the transactions contemplated by this Agreement.
SECTION 5.10. COMPLIANCE WITH HSR ACT. The Seller and the
Purchaser shall make all necessary filings and any required submissions with
respect to this Agreement and the transactions contemplated hereunder, as
required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the applicable regulations enacted thereunder (collectively, the
"HSR Act") and other applicable law. The Seller and the Purchaser shall
cooperate with each other in connection with such filings, including providing
copies of such documents to the non-filing party and its advisors prior to any
filings and, if requested, shall accept all reasonable additions, deletions or
changes suggested in connection therewith. The Seller and the Purchaser shall
request early termination of the waiting period required by the HSR Act.
SECTION 5.11. GUARANTY OF OBLIGATIONS. The Guarantor hereby
absolutely, irrevocably and unconditionally guarantees, as primary obligor and
not as surety, without set-off
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or deduction, to the Seller (a) the due punctual and full payment by the
Purchaser (or, after the Closing, by the Company) of all payment obligations of
the Purchaser and the Company under this Agreement, including without limitation
the Purchase Price, all payment obligations reflected in the Closing Balance
Sheet and all payment obligations of the Purchaser under the Note, and (b) the
performance of each and every other covenant, agreement and obligation to be
performed or observed by the Purchaser (or, after the Closing, by the Company)
under this Agreement (collectively, the "Obligations"). The Guarantor hereby
agrees that, in the event that the Purchaser fails to pay any Obligation for any
reason on the date on which such Obligation is required to be paid, the
Guarantor will pay or cause to be paid such Obligation at the time specified in
this Agreement. The Guarantor hereby agrees that, in the event that the
Purchaser fails to perform any Obligation for any reason on the date on which
such Obligation is required to be performed, the Guarantor will pay or cause to
be performed such Obligation at the time specified in this Agreement. For
purposes of Seller's enforcement of this Section 5.11, any defense available to
the Purchaser in connection with any failure by the Purchaser to pay any
Obligation shall be available to the Guarantor to the same extent such defense
is available to the Purchaser.
SECTION 5.12. TREATMENT OF CERTAIN INSURANCE CLAIMS.
(a) Prior to the Closing Date, the Company has or shall have
paid to the Seller all reserved amounts relating to any workers' compensation
claims filed prior to the Closing. Neither the Company, the Purchaser nor the
Guarantor shall have any further liability with respect to such claims after the
Closing.
(b) The deductible amount applicable to claims for workers'
compensation which are filed after the Closing but which relate to injuries
allegedly occurring prior to the Closing and which are covered by the Seller's
workers' compensation insurance shall be paid pro rata by the Seller and the
Company as follows: the Seller's share of such deductible amount shall be
calculated by multiplying such deductible amount by a fraction, the numerator of
which shall be the actual number of days elapsed from the date the person filing
such claim was originally hired (the "Hiring Date") to and including the Closing
Date, and the denominator of which shall be the actual number of days elapsed
from the Hiring Date to and including the date such claim was filed. The
Company's share of such deductible shall be calculated by subtracting the
Seller's pro rata share calculated as described above from the deductible
amount.
SECTION 5.13. [intentionally omitted] .
SECTION 5.14. TREATMENT OF DEFERRED COMPENSATION PLANS. On or
prior to the Closing Date, the Company shall transfer to the Seller, or an
affiliate of the Seller, as needed, the Company's Executive Deferred
Compensation Plan, as listed in Item #1 of Schedule 2.19 (the "EDCP") and all of
the assets and liabilities of the Company related to the EDCP, including without
limitation, the cash surrender value of life insurance policies and the note
payable relating thereto, and the other assets and liabilities shown on the
Closing Balance Sheet. The Company shall release any and all interest and claim
to the insurance policies referred to in the
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immediately preceding sentence that it has as of the Closing Date. On or prior
to the Closing Date, the Company shall transfer: (a) to the "Consultec, LLC
Deferred Compensation Plan" (the "DICP"), as needed, all amounts of accrued
executive incentive compensation (as elected to be deferred by the eligible
officers under the Officers Incentive Compensation Plan listed as Item #1(c) in
Schedule 2.19 hereto) as shown on the August 31 Pro Forma Balance Sheet (as
updated after the Closing Date in accordance with Section 5.03(c)); and (b) to
the Seller, as needed, the DICP and all of the assets and liabilities of the
Company related to the DICP; provided, however, that immediately prior to the
Closing on the Closing Date, all amounts of accrued executive incentive
compensation payable to ▇▇▇▇▇▇▇ ▇▇▇▇▇ shall be paid by the Company to ▇▇▇▇▇▇▇
▇▇▇▇▇ and 50% of accrued executive incentive compensation payable to ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ shall be paid by the Company to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. The Seller shall be
responsible for all payments and obligations under the EDCP and the DICP from
and after the Closing.
SECTION 5.15. TREATMENT OF EMPLOYMENT AGREEMENTS. Within 30
days after the Closing Date, the Seller shall pay all amounts owed under Section
5(e) of each of the Employment Agreements (the "One-Time Bonus Obligations").
Except for the One-Time Bonus Obligations and subject to Section 5.14 hereof,
the Purchaser shall assume all obligations and liabilities of the Seller and
General American Holding Company ("GAHC") under each of the Employment
Agreements (collectively, the "Assumed Employment Agreements"); provided,
however, that the Seller shall reimburse the Purchaser for 100% of amounts paid
under Section 6 of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ IV's Employment Agreement (the "Arnau
Severance Reimbursement Obligation"). Effective as of the Closing Date, except
with respect to the One-Time Bonus Obligations and the Arnau Severance
Reimbursement Obligation, the Purchaser and the Company shall release the Seller
and GAHC from any and all obligations and liabilities under the Assumed
Employment Agreements and shall indemnify the Seller and GAHC from and against
any and all claims thereunder.
SECTION 5.16. NON-COMPETITION.
(a) Acknowledgement. As an inducement to the Purchaser to
purchase the Seller's Interest as provided under this Agreement and in
consideration of the payments to be made by the Purchaser to the Seller, the
parties agree to be bound by the provisions of this Section 5.16.
(b) Certain Definitions. For purposes of this Section 5.16,
the following capitalized terms have the following meanings:
(i) "Business" means the business of providing Medicaid
related administrative management and information technology services to
government health and human services.
(ii) "Term" means the three year period beginning with
the Closing Date and ending on the first anniversary of the Closing Date.
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(iii) "Territory" means the United States.
(c) Restrictions on Competition. Subject to the terms of this
Section 5.16, Seller hereby agrees that, during the Term, it shall not, directly
or indirectly through its subsidiaries, anywhere in the Territory: (i) engage in
the Business; (ii) invest in any person or entity which is engaged in the
Business; (iii) provide consulting services to any person or entity engaged in
the Business; (iv) employ or solicit to hire, or otherwise receive the services
of, any individual who was employed by the Company as of the Closing Date at or
above an annual salary of $25,000 (excluding for purposes of this Section 5.16,
any individual employed or solicited for employment by the Seller or its
subsidiaries through general newspaper and similar employment solicitations for
clerical, administrative or similar positions); or (v) solicit or attempt to
solicit or otherwise accept for its own benefit or for the benefit of any other
person or entity any client or customer of the Company or its successors or
assigns.
(d) Permitted Investments. The parties agree that an
investment by the Seller in publicly traded stock of an entity which is engaged
in the Business shall not violate Section 5.16(c) hereof provided that Seller
owns, in the aggregate, 2% or less of all the issued and outstanding stock or
other equity interest of such entity.
(e) Restrictions Reasonable. The parties agree that the
provisions of this Section 5.16 are reasonable.
(f) Judicial Review. In the event this Section 5.16 is held to
be in any respect an unreasonable restriction upon the Seller by a court of
competent jurisdiction, the court so holding may reduce the Territory to which
this Section 5.16 applies or the Term for which it operates, or effect any other
change to the extent necessary to render this Section 5.16 enforceable by such
court. As so modified, this Section 5.16 will continue in full force and effect.
Such decision by a court of competent jurisdiction will not invalidate this
Agreement, but this Agreement will be interpreted, construed and enforced as not
containing such invalidated provision.
(g) Specific Performance and Injunctive Relief. The Seller
recognizes that, if it fails to perform, observe or discharge any of its
obligations under this Agreement, no remedy at law will provide adequate relief
to the Purchaser. Therefore, in addition to any other rights or remedies or
damages the Purchaser may otherwise be entitled to under law or equity, the
Purchaser is hereby authorized to demand specific performance of this Agreement,
and is entitled to temporary and permanent injunctive relief, in a court of
competent jurisdiction at any time when the Seller fails to comply with any of
the provisions of this Agreement. To the extent permitted under applicable law,
the Seller hereby irrevocably waives any defense that it might have based on the
adequacy of a remedy at law which might be asserted as a bar to such remedy of
specific performance or injunctive relief.
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SECTION 5.17. RELEASE OF FISCAL AGENT GUARANTIES. The
Purchaser shall, on or prior to the Closing Date, take all action reasonably
necessary to release the Seller from any and all obligations that it may have
under any performance bonds, guaranties or similar arrangements that it may have
with respect to the obligations of the Company under any Fiscal Agent Contracts
(the "Fiscal Agent Guaranties"); provided, however, that the Purchaser and the
Guarantor shall indemnify the Seller and its affiliates from and against any
liabilities or obligations that any of them may suffer or incur in connection
with, resulting from or related to the Fiscal Agent Guaranties with respect to
matters occurring or arising after the Closing Date. In the event that, on or
before October 31, 1999, the Seller shall not have received evidence reasonably
satisfactory to it demonstrating that the Seller has been released from all
obligations under the Fiscal Agent Guaranties, then the Purchaser and the
Guarantor shall cause the Company to take all actions necessary to effect such
release, including, without limitation, the cancellation of any and all bonds
securing the performance of the Company under such Fiscal Agent Contracts.
SECTION 5.18. CUSTOMER VISITS. Neither the Purchaser nor its
affiliates shall, without the prior specific written consent of the Seller,
visit or otherwise have discussions with any of the States or counter-parties
with which the Company has a Fiscal Agent Contract unless an authorized
representative of the Company shall be present during such visit or discussion
and the subject matter or agenda for such visit or discussion shall have been
approved in advance by the Company.
SECTION 5.19. POST-CLOSING SERVICES. From and after the
Closing Date, until the later to occur of, (a) the date that the Seller is
relieved of indemnification of the surety companies under the Fiscal Agent
Guaranties, and (b) the date that is eighteen months after the Closing Date, the
Purchaser shall cause the Company to provide the same quality and timeliness of
services to its clients and customers that the Company provided to its clients
prior to the Closing Date.
SECTION 5.20. EMPLOYEE BENEFITS PLANS.
(a) Retiree Medical Plan. As soon as practicable after the
Closing Date, the Purchaser shall cause the Company to amend, clarify or
otherwise modify the Company's medical benefits plan for retirees (the "Retiree
Medical Plan"), effective as of the Closing Date, as follows (the "Retiree
Medical Plan Modifications"): (i) the definition of "retiree" for purposes of
determining eligibility for participation in the Retiree Medical Plan includes
only those persons who are at least 55 years of age and who have at least 10
years of service with the Company immediately preceding the Closing Date; (ii)
clarify that each eligible participant in the Retiree Medical Plan is
responsible for 100% of the actual costs (as actuarilly determined) of his or
her coverage under the Retiree Medical Plan; and (iii) clarify that eligibility
for participation in the Retiree Medical Plan shall be limited to those persons
who meet the definition of "retiree" as modified in clause (i) above as of the
Closing Date. The Purchaser shall cause the Company to provide all notices and
take all other actions required by the Retiree Medical Plan and under applicable
laws in connection with the Retiree Medical Plan Modifications. The Seller shall
indemnify and hold harmless the Company and the Purchaser with respect to any
claims asserted
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by present or past employees of the Company relating to or in connection with
the Retiree Plan Modifications; provided, however, that no claim for
indemnification under this Section 5.20(a) may be made by the Company or the
Purchaser to the extent that the Purchaser has not satisfied in all material
respects its obligations set forth in the immediately preceding sentence.
(b) Runoff Claims for Medical and Dental Claims;
Administration of Medical and Dental Plans. Seller shall be liable for all
claims for medical and dental benefits that are covered and eligible for payment
under the terms of the Company's benefits plans applicable to such claims and
which are incurred prior to the Closing Date, but which are either not paid or
not reported, or both, prior to the Closing Date. The Seller shall not be liable
for any claims for medical or dental benefits that are incurred from and after
the Closing Date. The Company shall be liable for all claims for medical and
dental benefits that are incurred from and after the Closing Date. With respect
to the Seller's obligations in the first sentence of this Section 5.20(b), the
Seller shall administer the Company's medical and dental benefits plans from and
after the Closing Date in a manner and within the administrative and vendor fee
structure consistent with the Seller's administration of such plans for the
Company immediately prior to the Closing Date.
(c) COBRA Liabilities. The Company, and not the Seller, shall
be liable for, and shall duly and timely pay, perform and discharge all COBRA
Liabilities (as defined below in this Section 5.20(c)) to any person
participating in COBRA through the Company as of the Closing Date. The term
"COBRA Liabilities," as used herein, shall mean all liabilities and obligations
with respect to medical claims incurred from and after the Closing Date with
respect to the health care continuation of coverage requirements under Section
4980B of the Code and Sections 601-609 of ERISA.
(d) 401K/Profit Sharing Plan Contract. In connection with the
merger of the Company's 401K/Profit Sharing Plan ("Company's 401K Plan") into
the Purchaser's counterpart to such Plan ("Purchaser's 401K Plan"), the Seller
shall recognize the assignment by Southtrust State and Trust Company of Georgia,
N.A., trustee of the "Consultec, Inc. Profit Sharing Plan" (the "Trustee") of
the Fund Accumulator Participating Group Deposit Administration Contract dated
September 14, 1988 between the Company and the Trustee to the applicable trustee
of the Purchaser's 401K Plan at any time from and after the Closing Date.
ARTICLE VI.
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
PURCHASER. The obligation of the Purchaser to consummate the transactions
contemplated by this Agreement is subject, at the option of the Purchaser, to
the satisfaction on or prior to the Closing Date of each of the following
conditions:
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(a) Accuracy of Representations and Warranties. The
representations and warranties of the Seller and the Company contained in this
Agreement or in any certificate or document delivered to the Purchaser pursuant
hereto shall be true and correct (subject to the standard set forth in Section
1.09 hereof) on and as of the Closing Date as though made on and as of that
date.
(b) Compliance with Covenants. The Seller and the Company
shall have performed and complied in all material respects with all terms,
agreements, covenants, and conditions of this Agreement to be performed or
complied with by them at or prior to the Closing Date.
(c) All Proceedings To Be Satisfactory. All proceedings to be
taken by the Company and the Seller in connection with the transactions
contemplated hereby, and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser and its counsel, and the
Purchaser and said counsel shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
(d) No Material Adverse Change. There shall not have occurred
since January 1, 1999 any material adverse change (i) in the Company's condition
(financial or otherwise), results of operations, business, prospects, assets or
liabilities, or (ii) in the capacity of the Company to conduct such business in
a manner consistent with past practice.
(e) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted by any party or threatened by any
governmental department, agency, or authority, in either case seeking to
restrain, prohibit, invalidate, or otherwise affect the consummation of the
transactions contemplated hereby or which would, if adversely decided, have a
Material Adverse Effect on the Company.
(f) Supporting Documents. On or prior to the Closing Date, the
Seller shall have provided or caused to be provided to the Purchaser and its
counsel copies of the following supporting documents:
(A) (I) the charter documents of the Company and the Seller
certified as of a recent date by the Secretary of State of such entity's
jurisdiction of organization or incorporation, as applicable, and (II) a
certificate of the applicable Secretary of State as to the due organization or
incorporation and good standing of the Company and the Seller, as the case may
be;
(B) a certificate of the Secretary or an Assistant Secretary
of the Company and the Seller, dated the Closing Date and certifying (I) that
attached thereto is a true and complete copy of the Operating Agreement of the
Company or the Bylaws of the Seller, as the case may be, as in effect on the
date of such certification; (II) that the Certificate of Formation of the
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Company or Articles of Incorporation of the Seller, as the case may be, have not
been amended since the date of the last amendment contained in the certified
charter documents delivered pursuant to clause (A)(I) above; (III) that attached
thereto is a true and complete copy of the resolutions adopted by the Board of
Managers of the Company or the Board of Directors of the Seller, as the case may
be, authorizing the execution, delivery, and performance of this Agreement; and
(IV) as to the incumbency and signature of each member, manager, or officer of
the Company or the Seller that has executed or is executing this Agreement or
any certificate or other document delivered in connection with the Closing; and
(C) such additional supporting documents as the Purchaser or
its counsel may reasonably request.
All such documents shall be satisfactory in form and substance to the Purchaser
and its counsel.
(g) Opinion of Seller's Counsel. The Purchaser shall have
received an opinion of Seller's counsel opining with respect to the matters set
forth on Exhibit 6.01(g) attached hereto and which shall be satisfactory in form
and substance to the Purchaser and its counsel.
(h) Waiting Period Pursuant to HSR Act. The waiting period
required by the HSR Act shall have expired or an early termination shall have
been granted on or prior to the Closing Date.
SECTION 6.02. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
SELLER. The obligation of the Seller to consummate the transactions contemplated
by this Agreement is subject, at the option of the Seller, to the satisfaction
on or prior to the Closing Date of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser and the Guarantor contained in
this Agreement or in any certificate or document delivered to the Seller
pursuant hereto shall be true and correct (subject to the standard set forth in
Section 1.09 hereof) on and as of the Closing Date as though made on and as of
that date.
(b) Compliance with Covenants. The Purchaser and the Guarantor
shall have performed and complied in all material respects with all terms,
agreements, covenants, and conditions of this Agreement to be performed or
complied with by them on or prior to the Closing Date.
(c) All Proceedings to Be Satisfactory. All proceedings to be
taken by the Purchaser and the Guarantor, all transactions contemplated hereby,
and all documents incident hereto shall be reasonably satisfactory in form and
substance to the Seller and its counsel, and the Seller and said counsel shall
have received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
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(d) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted by any party or threatened by any
governmental department, agency, or authority, in either case seeking to
restrain, prohibit, invalidate, or otherwise affect the consummation of the
transactions contemplated hereby.
(e) No Material Adverse Change. There shall not have occurred
since the date of this Agreement any material adverse change (i) in the
condition (financial or otherwise), results of operations, business, prospects,
assets or liabilities of the Purchaser or the Guarantor, or (ii) in the capacity
of the Purchaser or the Guarantor to conduct such business in a manner
consistent with past practice.
(f) Waiting Period Pursuant to HSR Act. The waiting period
required by the HSR Act shall have expired or an early termination shall have
been granted on or prior to the Closing Date.
(g) Supporting Documents. On or prior to the Closing Date, the
Purchaser and the Guarantor shall have provided or caused to be provided to the
Seller and its counsel copies of the following supporting documents:
(A) (I) the charter documents of the Purchaser and the
Guarantor certified as of a recent date by the Secretary of State of each such
entity's jurisdiction of incorporation, and (II) a certificate of the applicable
Secretary of State as to the due incorporation and good standing of the
Purchaser and the Guarantor, as the case may be;
(B) a certificate of the Secretary or an Assistant Secretary
of the Purchaser and the Guarantor, dated the Closing Date and certifying (I)
that attached thereto is a true and complete copy of the Bylaws of the Purchaser
and the Guarantor, as applicable, as in effect on the date of such
certification; (II) that the Certificate of Incorporation of the Purchaser and
the Guarantor, as applicable, have not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to clause (A)(II)
above; (III) that attached thereto is a true and complete copy of the
resolutions adopted by the Board of Directors of the Purchaser and adopted by an
authorized committee of the Board of Directors of the Guarantor, as applicable,
authorizing the execution, delivery, and performance of this Agreement; and (IV)
as to the incumbency and signature of each officer of the Purchaser or the
Guarantor that has executed or is executing this Agreement or any certificate or
other document delivered in connection with the Closing; and
(C) such additional supporting documents as the Seller or its
counsel may reasonably request.
All such documents shall be satisfactory in form and substance to the Seller and
its counsel.
(h) Opinion of Counsel to Purchaser and Guarantor. The Seller
shall have received an opinion of counsel to the Purchaser and the Guarantor
opining with respect to the
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matters set forth on Exhibit 6.02(h) attached hereto and which shall be
satisfactory in form and substance to the Seller and its counsel.
(i) Promissory Note. The Seller shall have received the Note,
executed by the Purchaser and the Guarantor.
(j) Approval of Missouri Department of Insurance. The Seller
shall have received all consents and approvals of the Missouri Department of
Insurance as are required in connection with the consummation of the
transactions contemplated by this Agreement, and the same shall be in form and
substance satisfactory to the Seller in its reasonable opinion.
ARTICLE VII.
INDEMNIFICATION
SECTION 7.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
INDEMNIFICATION. Except as set forth in this Section 7.01, each of the
representations and warranties made by the parties hereto in or pursuant to this
Agreement shall survive the Closing Date hereunder and continue in full force
and effect for a period of eighteen months thereafter. Notwithstanding the
foregoing, (i) the representations and warranties of the Seller and the Company
set forth in Section 2.24 (captioned "Year 2000 Compliance"), Section 2.27
(captioned "Largest Customers"), and Section 2.28 (captioned "Accounts
Receivable") shall not survive the Closing Date, and (ii) the representations
and warranties of the Seller and the Company set forth in Section 2.02
(captioned "Capitalization of the Company"), Section 2.13 (captioned "Taxes")
and Section 3.04 (captioned "Title to Seller's Interest") shall survive the
Closing Date and continue in full force and effect until the expiration of the
applicable statute of limitations.
SECTION 7.02. GENERAL SELLER INDEMNIFICATION OBLIGATIONS.
(a) The Seller shall indemnify, defend and hold harmless the
Purchaser and the Company (and their respective officers, directors,
shareholders, managers, members, employees, agents, and affiliates) from,
against and in respect of any and all losses, liabilities, deficiencies,
penalties, fines, costs, damages and expenses (including without limitation,
reasonable professional fees and costs of investigation, litigation, settlement,
and judgment and interest awarded) (collectively, "Losses") that may be suffered
or incurred by any of them arising from or by reason of:
(i) any breach (which shall be determined without regard
and without giving any effect to the Material Adverse Effect standard set forth
in Section 1.09 hereof) of any representation, warranty, covenant or agreement
made by the Seller in or pursuant to this Agreement (other than the
representations and warranties made in Section 2.24 (captioned "Year 2000
Compliance"), Section 2.27 (captioned "Largest Customers"), and Section 2.28
(captioned "Accounts Receivable"));
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(ii) any Taxes incurred by, imposed upon or attributable
to the Company, including reasonable legal fees and expenses incurred by the
Company, for any Prior Tax Period that are not otherwise reserved for in the
Closing Balance Sheet, including without limitation any amount due for sales and
use Taxes payable as a result of an audit conducted by state or local
governmental authorities (for purposes of this Section 7.02(a)(ii), any
interest, penalty or additional charge included in Taxes shall be deemed to be a
Tax for the period to which the item or event giving rise to such interest,
penalty or additional charge is attributable, and not a Tax for the period
during which such interest, penalty or additional charge accrues);
(iii) the Company's litigation with The Medstat Group,
Inc. as described in Item #2 of Schedule 2.12 hereto (the "Medstat Litigation")
only to the extent that Losses incurred in connection with the Medstat
Litigation exceed $250,000; provided, however, that, notwithstanding any
provisions to the contrary set forth in this Section 7, the Seller shall have
full control of the defense and proceedings of the Medstat Litigation, including
without limitation, the compromise and settlement thereof; and
(iv) any license fees (the "Retroactive License Fees")
applicable to any period prior to the Closing Date and not paid prior to the
date hereof by the Company which shall have been paid by the Company to SAS
Institute Inc. ("SAS") after the Closing Date in connection with that certain
Program Products License Agreement dated March 22, 1983 between SAS and the
Seller and to which the Company was made a party by Supplement Number 3 dated
May 14, 1985 between SAS and the Company (the "SAS Agreement"); provided,
however: (I) any negotiations or agreements among SAS and any of the Company,
the Purchaser, the Guarantor or any of their respective affiliates with respect
to any such Retroactive License Fees shall be based solely upon the pre-Closing
relationship of the Seller, the Company and SAS and shall not take into account
any existing or proposed relationships between the Company, the Purchaser, the
Guarantor or their respective affiliates with SAS; (II) the Company, the
Purchaser and the Guarantor (on behalf of themselves and their respective
affiliates) shall confer and consult with the Seller regarding any such
negotiations with respect to the Retroactive License Fees; and (III) the
Seller's obligations under this Section 7.02(a)(iv) shall not exceed the lesser
of 50% of the amount of the Retroactive License Fees and $150,000.
(b) No claim for indemnification under this Section 7.02 may
be made by the Purchaser against the Seller (i) to the extent of any proceeds
received by the Purchaser or the Company from any insurance with respect to any
claimed Loss, (ii) unless or until the aggregate amount for all Losses claimed
or asserted by the Purchaser or the Company against the Seller pursuant to this
Section 7.02 exceeds $500,000 (the "Section 7.02 Basket Amount") and, if the
aggregate amount of all such claims exceeds the Section 7.02 Basket Amount, then
the Seller shall be obligated to indemnify the Purchaser and the Company from
and against all Losses over and above the Section 7.02 Basket Amount; provided,
however, that any Losses with respect to the Medstat Litigation and the
Retroactive License Fees shall not be subject to the Section 7.02 Basket Amount
and, subject to the other provisions of this Section 7.02(c), shall be payable
from "dollar one", (iii) more than eighteen months after the Closing Date
(provided that any such claim made during such eighteen month period may
continue to be prosecuted in accordance
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with this Agreement after such eighteen month period) (except for (1) Losses
related to breaches of the representations and warranties of the Seller and the
Company set forth in Section 2.02 (captioned "Capitalization of the Company"),
Section 2.13 (captioned "Taxes"), Section 3.04 (captioned "Title to Seller's
Interest"), and Losses related to Tax matters set forth in Section 7.02(a)(ii)
hereof, each of which shall survive for the applicable statute of limitations
period, and (2) obligations of the Seller under Section 7.02(a)(iii) (the
MedStat Litigation) and Section 7.02(a)(iv) (the Retroactive License Fees), each
of which shall survive until such matters are finally resolved). The aggregate
indemnification liability and obligation of the Seller under this Section 7.02
shall not exceed $10,000,000. Notwithstanding anything herein to the contrary,
the limitations and restrictions set forth in this Section 7.02(b) shall not
apply to Losses that shall result from breaches of agreements or covenants made
by the Seller in or pursuant to this Agreement or that result from breaches of
the representation and warranty set forth in Section 2.13 hereof (captioned
"Taxes").
SECTION 7.03. Y2K SELLER INDEMNIFICATION OBLIGATIONS.
(a) The Seller shall indemnify, defend and hold harmless the
Purchaser and the Company (and their respective officers, directors,
shareholders, managers, members, employees, agents, and affiliates) from,
against and in respect of any and all actual out-of-pocket Losses resulting from
Third Party Claims (as defined in Section 7.05(a) hereof) suffered or incurred
by either of them directly caused by Y2K Deficiencies (as defined below in this
Section 7.03(a)) of the Company in connection with: (i) computer software code
developed by the Company prior to the Closing Date, or (ii) any other service or
product used by the Company or provided by the Company to its customers which
service or product is unchanged (other than changes in the ordinary course of
business that do not affect the Company's Year 2000 compliance) from that
provided by the Company prior to the Closing Date. The term "Y2K Deficiencies,"
as used herein, shall mean any malfunction, cessation of functioning, generation
of incorrect data, or production of incorrect results when processing, providing
or receiving (i) date-related data from, into and between the twentieth and the
twenty-first centuries, or (ii) date-related data in connection with any valid
date in the twentieth and twenty-first centuries.
(b) No claim for indemnification under this Section 7.03 may
be made by the Purchaser against the Seller (i) to the extent of any proceeds
received by the Purchaser or the Company from any insurance with respect to any
claimed Loss, (ii) unless or until the aggregate amount for all Losses claimed
or asserted by the Purchaser or the Company against the Seller pursuant to this
Section 7.03 exceeds $500,000 (the "Section 7.03 Basket Amount") and, if the
aggregate amount of all such claims exceeds the Section 7.03 Basket Amount, then
the Seller shall be obligated to indemnify the Purchaser and the Company from
and against all Losses over and above the Section 7.03 Basket Amount, and (iii)
more than twelve months after the Closing Date (provided that any such claim
made during such twelve month period may continue to be prosecuted in accordance
with this Agreement after such twelve month period). The aggregate
indemnification liability and obligation of the Seller under this Section 7.03
shall not exceed $10,000,000.
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(c) Any Losses suffered or incurred by the Seller or the
Company that relate to, result from or are in connection with Y2K Deficiencies
shall be subject to the terms, conditions, restrictions and limitations of this
Section 7.03 and neither the Seller, the Company nor any other person entitled
to indemnification under this Agreement shall be entitled to recover any such
Losses under Section 7.02 hereof, notwithstanding the fact that such Losses may
also constitute a breach by the Seller or the Company of a representation or
warranty made by either or both of them in or pursuant to this Agreement that,
absent this Section 7.03, would otherwise be covered by Section 7.02 hereof.
SECTION 7.04. GENERAL PURCHASER INDEMNIFICATION OBLIGATIONS.
(a) The Purchaser and the Guarantor shall indemnify, defend
and hold harmless the Seller (and its officers, directors, shareholders,
employees, agents, and affiliates) from, against and in respect of any and all
Losses that may be suffered or incurred by any of them arising from or by reason
of any:
(i) breach (which shall be determined without regard and
without giving any effect to the Material Adverse Effect standard set forth in
Section 1.09 hereof) of any representation, warranty, covenant or agreement made
by the Purchaser or the Guarantor in or pursuant to this Agreement; and
(ii) liabilities or obligations of the Company included
in the Closing Balance Sheet or the Back-up Materials or the Fiscal Agent
Guaranties.
(b) No claim for indemnification under this Section 7.04 may
be made by the Seller against the Purchaser or the Guarantor (i) to the extent
of any proceeds received by the Seller from any insurance with respect to any
claimed Loss, (ii) unless or until the aggregate amount for all Losses claimed
or asserted by the Seller against the Purchaser pursuant to this Section 7.04
exceeds $500,000 (the "Section 7.04 Basket Amount") and, if the aggregate amount
of all such claims exceeds the Section 7.04 Basket Amount, then the Purchaser
shall be obligated to indemnify the Seller from and against all Losses over and
above the Section 7.04 Basket Amount, (iii) more than eighteen months after the
Closing Date (provided that any such claim made during such eighteen month
period may continue to be prosecuted in accordance with this Agreement after
such eighteen month period). The aggregate indemnification liability and
obligation of the Purchaser under this Section 7.04 shall not exceed
$10,000,000. Notwithstanding anything herein to the contrary, the limitations
and restrictions set forth in this Section 7.04(b) shall not apply to Losses
that shall result from breaches of agreements or covenants made by the Purchaser
or the Guarantor in or pursuant to this Agreement.
SECTION 7.05. INDEMNIFICATION PROCEDURES. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
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(a) A party claiming indemnification under this Article VII
(an "Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any third-party claim (a
"Third Party Claim") asserted against the Indemnified Party by an unrelated
third party which could give rise to a right of indemnification under this
Article VII, and (ii) transmit to the Indemnifying Party a written notice (a
"Claim Notice") describing in reasonable detail the nature of the Third Party
Claim, a copy of all papers served with respect to such Third Party Claim (if
any), an estimate of the amount of Losses attributable to the Third Party Claim,
if reasonably possible, and the basis of the Indemnified Party's request for
indemnification under this Agreement.
(b) Within 30 days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the Indemnified Party
(i) whether the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article VII with respect to such Third Party Claim,
and (ii) whether the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such Third Party
Claim.
(c) If the Indemnifying Party notifies the Indemnified Party
within the Election Period that the Indemnifying Party does not dispute its
potential liability to the Indemnified Party under this Article VII and that the
Indemnifying Party elects to assume the defense of the Third Party Claim, then
the Indemnifying Party shall have the right to defend, at its sole cost and
expense, such Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the Indemnifying Party to a final
conclusion or settled at the discretion of the Indemnifying Party. The
Indemnifying Party shall have full control of such defense and proceedings
including any compromise or settlement thereof; provided that any non-monetary
aspect of any settlement shall require the consent of the Indemnified Party,
which consent shall not be unreasonably withheld or delayed. The Indemnified
Party is hereby authorized, at the sole cost and expense of the Indemnifying
Party (but only if the Indemnified Party is actually entitled to indemnification
hereunder or if the Indemnifying Party assumes the defense with respect to the
Third Party Claim), to file, during the Election Period, any motion, answer or
other pleadings which the Indemnified Party shall deem necessary or appropriate
to protect its interests or those of the Indemnifying Party. If requested by the
Indemnifying Party, the Indemnified Party shall, at the sole cost and expense of
the Indemnifying Party, cooperate with the Indemnifying Party and its counsel in
contesting any Third Party Claim which the Indemnifying Party elects to contest.
The Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this Section 7.05 and, except as permitted above, shall bear its own
costs and expenses with respect to such participation.
(d) If the Indemnifying Party fails to notify the Indemnified
Party within the Election Period that the Indemnifying Party elects to defend
the Indemnified Party pursuant to this Section 7.05, then the Indemnified Party
shall have the right to defend, at the sole cost and expense of the Indemnifying
Party, the Third Party Claim by all appropriate proceedings. The Indemnified
Party shall have full control of such defense and proceedings; provided,
however,
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that the Indemnified Party may not enter into, without the Indemnifying Party's
consent (which shall not be unreasonably withheld or delayed) any compromise or
settlement of such Third Party Claim. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the Indemnified Party
pursuant to this Section 7.05, and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation.
(e) In the event an Indemnified Party shall have a claim
against an Indemnifying Party hereunder which does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to such claim and
the basis of the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not dispute the Indemnity Notice, then
the Indemnifying party shall indemnify the Indemnified Party for the total
amount of the Losses suffered or incurred by the Indemnified Party, subject to
the applicable terms, conditions and limitations set forth in this Article VII.
(f) In the event that the Purchaser or the Seller, as the case
may be, disputes (i) its potential liability to, or the amount of the potential
liability, the other party with respect to a Third Party Claim under this
Article VII, or (ii) its potential liability to, or the amount of the potential
liability, the other party with respect to a claim that is not a Third Party
Claim, then the Seller and the Purchaser shall attempt in good faith to resolve
any disputed matters by negotiation between executives who have the authority to
settle and resolve the disputed matters and who are at a higher level of
management than the persons with direct responsibility for administration of
this Agreement. Any party hereto may give the other party hereto written notice
of any dispute not resolved in the normal course of business. Within 30 days
after delivery of the written notice, the receiving party shall submit to the
other party a written response. The notice and response shall include (i) a
statement of each party's position and a summary of the arguments supporting
that position, and (ii) the name and title of the executive who shall represent
that party and of any other person who shall accompany the executive. Within 30
days after the delivery of the disputing party's notice, the executives of both
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, to attempt to resolve the disputed
matters. All reasonable requests for information made by one party to the other
shall be honored. All negotiations pursuant to this Section 7.05(f) shall be
confidential and shall be treated as compromise and settlement negotiations for
purposes of applicable rules of evidence. If the disputed matters shall not have
been resolved as provided above in this Section 7.05(f) hereof, then the Seller
and the Purchaser shall thereafter endeavor to settle such dispute by mediation
under the then current Center for Public Resources ("CPR") Model Procedure for
Mediation of Business Disputes. The neutral third party required by this
procedure shall be a lawyer selected by CPR Panels of Neutrals. If the parties
encounter difficulty in agreeing on a neutral third party, they shall seek the
assistance of CPR in the selection process. If such disagreement has not been
resolved by negotiation or mediation within 30 days of the initiation of such
procedure, the parties shall finally settle such dispute by binding arbitration
conducted expeditiously in accordance with the Center for Public Resources Rules
for Non-Administered Arbitration of Business Disputes by a sole arbitrator;
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provided, however, that if one party has requested the other to participate in
negotiation or mediation and the other has failed to participate, the requesting
party may initiate arbitration before expiration of the above period. The sole
arbitrator shall be a lawyer selected from the CPR Panels of Neutrals. If the
parties encounter difficulty in agreeing on an arbitrator they shall seek the
assistance of CPR in the selection process. The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the
award rendered by the arbitrator may be entered into any court having
jurisdiction thereof. The parties shall conduct any mediation or arbitration
proceedings pursuant to this Section 7.05(f) in St. Louis, Missouri (if brought
by the Purchaser) or in Dallas, Texas (if brought by the Seller), and the
arbitrator shall apply the substantive law of Delaware as applicable to the
dispute.
(g) Notwithstanding the foregoing, if the Purchaser or the
Seller, as the case may be, shall have been found by the arbitrator pursuant to
this Section 7.05 to be liable to the other party for an amount in excess of
$1,000,000 (an "Excess Award"), then the party that shall have been found by the
arbitrator to be liable for such Excess Award shall have the right to appeal
such Excess Award in accordance with the law of the State of Delaware applicable
to appeals of judgments by a court of law.
(h) The failure to provide notice as provided in this Section
7.05 shall not excuse any party from its continuing obligations hereunder;
however, any claim shall be reduced by the damages resulting from such party's
delay or failure to provide notice as provided in this Section 7.05.
SECTION 7.06. REMEDIES LIMITED. From and after the Closing
Date, the indemnification provisions of this Article VII shall be the sole and
exclusive remedy of the parties hereto with respect to any breach of this
Agreement; provided, however, that the foregoing shall not prohibit any claim
for injunctive or non-monetary equitable relief.
ARTICLE VIII.
TERMINATION AND ABANDONMENT
SECTION 8.01. TERMINATION. This Agreement may be terminated at
any time prior to the Closing:
(a) by the mutual consent of the Seller and the Purchaser;
(b) by a "Breaching Party" (as defined in Section 8.03
hereof), subject to the terms (including the payment obligations) of Section
8.03; or
(c) by the Purchaser, on the one hand, or the Seller, on the
other hand, if the Closing shall not have occurred on or before December 31,
1999 or such later date as may be agreed upon by the parties hereto; provided,
however, that the right to terminate this Agreement under this Section 8.01(c)
shall not be available to any party (a "Defaulting Party") whose failure
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to fulfill any obligation under this Agreement has been the cause of or resulted
in the failure of the Closing to occur on or before such date.
SECTION 8.02. PROCEDURE AND EFFECT OF TERMINATION. In the
event of the termination of this Agreement and the abandonment of the
transactions contemplated hereby by any or all of the parties pursuant to
Section 8.01 hereof, written notice thereof shall promptly be given to the other
parties to this Agreement and this Agreement (except for this Section and
Sections 8.01 and 9.01, which shall continue) shall terminate and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. If this Agreement is terminated as provided in this
Agreement:
(a) the parties hereto will promptly redeliver all documents,
work papers and other material of any other party relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the party furnishing the same; and
(b) no party shall have any liability or further obligation to
any other party to this Agreement pursuant to this Agreement except as provided
in this Article VIII.
SECTION 8.03. PRE-CLOSING BREACH.
(a) Between the date hereof and the Closing Date, if as a
result of any investigation by any party or any information disclosed to or
discovered by such party prior to the Closing Date (other than matters disclosed
in the Schedules to this Agreement), such party determines that any
representation or warranty of another party hereunder is not true, or that any
covenant of another party (in either case, the "Breaching Party") is
impracticable or impossible of performance (a "Pre-Closing Breach"), the party
making such determination shall use reasonable efforts to communicate the
existence of a possible Pre-Closing Breach to the Breaching Party. Promptly
after learning of any Pre-Closing Breach, the Breaching Party shall use its best
efforts to remedy or cure the same; provided that, in the event the Breaching
Party determines that the cost of remedying such Pre-Closing Breach is greater
than $100,000 or that such Pre-Closing Breach cannot be remedied prior to the
Closing Date, the Breaching Party may terminate this Agreement and all of its
obligations hereunder to the other parties hereto by paying all fees, expenses
and internal allocated costs of each other party hereto relating to the
negotiation, execution or implementation of the acquisition contemplated hereby.
Any party entitled to reimbursement for fees, expenses and costs (whether
arising before or after the date hereof) shall submit reasonably detailed
supporting documentation to the Breaching Party. Except as provided in this
Section 8.03, the Breaching Party shall have no obligation to the other parties
hereto as a result of the Breaching Party's breach of this Agreement.
(b) Nothing in Section 8.03(a) hereof shall restrict the
requirement that the Breaching Party either satisfy or obtain a waiver of all
conditions precedent set forth in Sections 6.01 or 6.02 hereof, as the case may
be, in order to cause the Purchaser or the Seller, as the case may be, to be
obligated to consummate the transactions contemplated hereby.
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(c) Notwithstanding anything to the contrary set forth in this
Agreement, no investigation or acquisition of information (whether actual,
alleged, or imputed) by any party hereto shall in any way operate as a waiver of
the representations, warranties and covenants made to or for the benefit of such
party in this Agreement. In addition to and without limiting the generality of
the foregoing, after the Closing Date any actual or alleged failure by any party
hereto to disclose a Pre-Closing Breach shall in no way restrict such party from
seeking indemnification or any other available remedy hereunder for such
Pre-Closing Breach.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. EXPENSES, ETC.
(a) Subject to Section 9.10 hereof, all costs and expenses,
including fees and disbursements of counsel, advisors, accountants, and
consultants, incurred in connection with the negotiation, preparation,
execution, and delivery of this Agreement and the closing of the transactions
contemplated hereby (collectively, the "Expenses), shall be paid by the party
incurring such Expenses; provided, however, that the Expenses of the Company
shall be borne by the Seller. All transfer, documentary, stamp, and other
similar taxes, if any, in connection with the transfer of the Seller's Interest
as provided herein shall be borne by the Seller. The Seller and the Purchaser
shall divide equally the $45,000 notice application filing fee incurred by the
Guarantor in connection with compliance with the HSR Act.
(b) The Seller, on the one hand, and the Purchaser, on the
other hand, will indemnify the other and hold the other harmless from and
against any claims for finders' fees or brokerage commissions in relation to or
in connection with such transactions as a result of any agreement or
understanding between such indemnifying party and any third party.
SECTION 9.02. EXECUTION IN COUNTERPARTS. For the convenience
of the parties, this Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 9.03. NOTICES. All notices which are required or maybe
given pursuant to the terms of this Agreement shall be in writing and shall be
sufficient and deemed to be received if (i) delivered personally, (ii) mailed by
registered or certified mail, return receipt requested and postage prepaid, or
(iii) sent via a nationally recognized overnight courier service, in each case
as follows:
if to the Purchaser, to:
ACS Enterprise Solutions, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
(copy to ▇▇▇▇▇ ▇▇▇▇▇)
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if to the Guarantor, to:
Affiliated Computer Services, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
if to the Seller, to:
General American Life Insurance Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, Mail Code ▇▇-▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Counsel
if to the Company, to:
Consultec, LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
or such other address or addresses as the parties hereto shall have designated
by notice in writing to the others.
SECTION 9.04. WAIVERS. Either the Seller or the Purchaser may,
by written notice to the other, (i) extend the time for the performance of any
of the obligations or other actions of the other under this Agreement, (ii)
waive any inaccuracies in the representations or warranties of the other
contained in this Agreement or in any document delivered pursuant to this
Agreement, (iii) waive compliance with any of the conditions or covenants of the
other contained in this Agreement, or (iv) waive performance of any of the
obligations of the other under this Agreement. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
SECTION 9.05. AMENDMENTS, SUPPLEMENTS, ETC. At any time this
Agreement may be amended or supplemented by such additional agreements,
articles, or certificates, as may be determined by the parties hereto to be
necessary, desirable, or expedient to further the purposes of this Agreement; or
to clarify the intention of the parties hereto; or to add to or modify the
covenants, terms, or conditions hereof; or to effect or facilitate any
governmental approval or acceptance of this Agreement; or to effect or
facilitate the filing or recording of this Agreement or the consummation of any
of the transactions contemplated hereby. Any such instrument must be in writing
and signed by all parties hereto.
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SECTION 9.06. ENTIRE AGREEMENT. This Agreement, its Exhibits
and Schedules and the documents executed on the Closing Date in connection
herewith, constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof.
SECTION 9.07. APPLICABLE LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware, exclusive
of the conflicts of laws provisions thereof.
SECTION 9.08. BINDING EFFECT; BENEFITS. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Notwithstanding anything contained
in this Agreement to the contrary, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
SECTION 9.09. ASSIGNABILITY. Neither this Agreement nor any of
the parties' rights hereunder shall be assignable by any party hereto without
the prior written consent of the other parties hereto.
THIS AGREEMENT CONTAINS BINDING ARBITRATION PROVISIONS WHICH MAY BE
ENFORCED BY THE PARTIES.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto as of the day and year first above written.
ACS ENTERPRISE SOLUTIONS, INC.
as Purchaser
By:
------------------------------------
Name:
Title:
AFFILIATED COMPUTER SERVICES, INC.
as Guarantor
By:
------------------------------------
Name:
Title:
GENERAL AMERICAN LIFE INSURANCE COMPANY
as Seller
By:
------------------------------------
Name:
Title:
CONSULTEC, LLC
By:
------------------------------------
Name:
Title:
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EXHIBIT 1.08
Form of Promissory Note
PROMISSORY NOTE
$3,976,683 September 30, 1999
Reference is hereby made to that certain Limited Liability Company
Membership Purchase Agreement dated as of the date hereof (the "Purchase
Agreement") among ACS ENTERPRISE SOLUTIONS, INC., a Delaware corporation
("Buyer"), AFFILIATED COMPUTER SERVICES, INC., a Delaware corporation
("Parent"), CONSULTEC, LLC, a Delaware limited liability company ("Consultec")
and GENERAL AMERICAN LIFE INSURANCE COMPANY, a Missouri corporation ("Seller").
Terms used but not otherwise defined herein have the meanings ascribed to them
in the Purchase Agreement.
This Promissory Note (the "Note") is delivered pursuant to Section 1.08
of the Purchase Agreement.
FOR VALUE RECEIVED, Buyer hereby promises to pay to the order of Seller
the principal sum of $3,976,683, together with interest thereon from the date
hereof until payment in full at the rate of 7% per annum payable by Buyer to
Seller in full upon the earlier to occur of the following (the "Maturity Date"):
(a) 120 days after the Closing Date; or (b) 3 business days following the date
on which all of the following Closing Receivables have been collected in full by
Consultec: (i) State of Colorado systems - $3,800,000, (ii) State of Florida
implementation - $2,000,000, and (iii) State of Georgia - $2,000,000. Buyer
shall notify Seller in writing promptly upon Buyer's collection of each of the
Closing Receivables set forth in the immediately preceding sentence.
The payment of the principal sum and interest under this Note shall be
made by Buyer to Seller in lawful currency of the United States by wire transfer
in accordance with the same wire transfer instructions provided by Seller to
Buyer in connection with Buyer's payment of the Purchase Price, unless Seller
provides Buyer with other written instructions no later than 2 business days
prior to the Maturity Date.
Buyer shall be privileged to prepay at any time, all or any portion of
the unpaid principal amount of this Note, with accrued interest on such prepaid
amount, but without penalty or premium. All principal prepayments shall be
applied to reduce the unpaid principal amount owed under this Note until all of
such amount has been paid, and a partial prepayment of principal shall not
extend or postpone the due date or change the amount of Buyer's payment due
hereunder. The acceptance by Seller of any partial prepayment of principal or
interest shall not be held to waive any rights of Seller to enforce prompt
payment of any other amounts due under this Note.
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The failure by Buyer to make the payment of principal and interest due
hereunder on or prior to the Maturity Date shall constitute a default of Buyer
under this Note. In the event of such a default by Buyer, in addition to any
other rights and remedies available to Seller under applicable law, Seller is
authorized and shall have the right to setoff and apply any amounts due Seller
under this Note against any and all amounts that Seller is otherwise obligated
to pay Buyer under the Purchase Agreement.
In the event of a default by Seller under the Purchase Agreement, in
addition to any other rights and remedies available to Buyer under the Purchase
Agreement, Buyer is authorized and shall have the right to set-off any amounts
due Seller under this Note against any and all amounts that Seller is otherwise
obligated to pay Buyer under the Purchase Agreement.
To the full extent permitted by law, Buyer and all endorsers, sureties,
guarantors and other persons who may become liable for the payment hereof
severally waive demand, presentment, protest, notice of dishonor or nonpayment,
notice of protest, and any and all lack of diligence in the enforcement or
collection hereof and hereby consent to any renewals, extensions, or other
indulgences, and releases of any of them all without notice to any of them.
In the event that the payment of principal or interest due hereunder
shall not be paid on or prior to the Maturity Date, and this Note is placed in
the hands of an attorney or attorneys for collection, Buyer promises to pay, in
addition to all other amounts otherwise due hereon, the costs and expenses of
such collection including without limitation, attorneys' fees and expenses,
whether or not arbitration or litigation shall be commenced in aid thereof. The
arbitration provisions set forth in Article VII of the Purchase Agreement also
shall apply to the resolution of disputes under this Note.
All provisions of this Note shall bind any permitted successors or
assigns of Buyer and shall inure to the benefit of the permitted successors or
assigns of Seller. Seller may only assign this Note to an affiliate of Seller
and any such assignee shall take this Note subject to Buyer's right of off-set
described in the seventh paragraph hereof.
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This Note shall be governed by and construed in accordance with the
laws of the State of Delaware.
ACS ENTERPRISE SOLUTIONS, INC.
By:
-------------------------------------
Print Name:
-----------------------------
Title:
----------------------------------
Parent hereby acknowledges Buyer's execution and delivery of this Note and
Parent's obligations under Section 5.11 of the Purchase Agreement with respect
to Parent's guaranty of Buyer's obligations under this Note:
AFFILIATED COMPUTER SERVICES, INC.
By:
-------------------------------------
Print Name:
-----------------------------
Title:
----------------------------------
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EXHIBIT 6.01(g)
Form of Opinion of Counsel to the Seller
[date]
RE:
Ladies and Gentlemen:
We have acted as counsel to General American Life Insurance Company, a
Missouri corporation (the "Seller") in connection with the execution and
delivery of the Limited Liability Company Membership Purchase Agreement dated as
of September 30, 1999 (the "Purchase Agreement") among ACS Enterprise Solutions,
Inc., a Delaware corporation (the "Purchaser"), Affiliated Computer Services,
Inc., a Delaware corporation (the "Guarantor"), Consultec, LLC, a Delaware
limited liability company (the "Company") and the Seller. This opinion is
delivered to you pursuant to Section 6.01(g) of the Purchase Agreement.
[INSERT QUALIFICATIONS]
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:
1. The Seller is a corporation, duly incorporated, validly existing and
in good standing under the laws of the State of Missouri.
2. The Company is a limited liability company, duly organized, validly
existing and in good standing under the laws of the State of Delaware.
3. The Purchase Agreement has been duly authorized, executed and
delivered by and is the legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms.
4. Neither the execution, delivery nor performance of the Purchase
Agreement by the Seller will violate the Seller's articles of incorporation or
any provision of the Seller's bylaws.
5. The Seller has all requisite power and authority to enter into the
Purchase Agreement, to perform all of its obligations thereunder and to
consummate the transactions contemplated thereby.
6. The Seller's Interest (as such term is defined in the Purchase
Agreement) will transfer to the Purchaser upon the consummation of the
transactions contemplated by the Purchase Agreement.
Our opinion is rendered solely for your benefit and may not be
delivered to, or relied
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upon by, any other person. Our opinion is based upon a state of facts and the
law existing and in effect on the date hereof, and we assume no obligation to
revise, supplement or update this opinion in any respect at any time subsequent
to the date hereof.
Sincerely,
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
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EXHIBIT 6.02(h)
Form of Opinion of Counsel to the Purchaser and the Guarantor
[date]
RE:
Ladies and Gentlemen:
We have acted as counsel to ACS Enterprise Solutions, Inc., a Delaware
corporation (the "Purchaser") and Affiliated Computer Services, Inc., a Delaware
corporation (the "Guarantor") in connection with the execution and delivery of
the Limited Liability Company Membership Purchase Agreement dated as of
September 30, 1999 (the "Purchase Agreement") among the Purchaser, the
Guarantor, Consultec, LLC, a Delaware limited liability company (the "Company")
and General American Life Insurance Company, a Missouri corporation (the
"Seller"). This opinion is delivered to you pursuant to Section 6.02(h) of the
Purchase Agreement.
[INSERT QUALIFICATIONS]
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:
1. Each of the Purchaser and the Guarantor is a corporation, duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.
2. Each of the Purchaser and the Guarantor has all requisite power and
authority to own or lease its properties and to carry on its business as now
being conducted.
3. The Purchase Agreement has been duly authorized, executed and
delivered by and is the legal, valid and binding obligation of the Purchaser and
the Guarantor, enforceable against the Purchaser and the Guarantor in accordance
with its terms.
4. Neither the execution, delivery nor performance of the Purchase
Agreement by the Purchaser will violate the Purchaser's certificate of
incorporation or any provision of the Purchaser's bylaws.
5. Neither the execution, delivery nor performance of the Purchase
Agreement by the Guarantor will violate the Guarantor's certificate of
incorporation or any provision of the Guarantor's bylaws.
6. Each of the Purchaser and the Guarantor has all requisite power and
authority to enter into the Purchase Agreement, to perform all of its
obligations thereunder and to consummate the transactions contemplated thereby.
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Our opinion is rendered solely for your benefit and may not be
delivered to, or relied upon by, any other person. Our opinion is based upon a
state of facts and the law existing and in effect on the date hereof, and we
assume no obligation to revise, supplement or update this opinion in any respect
at any time subsequent to the date hereof.
Sincerely,
▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.