EXHIBIT 2.7
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STOCK PURCHASE AGREEMENT
BY AND AMONG
ZEFER CORP.
▇▇▇▇▇ & COMPANY, INC.
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
AND
▇▇▇▇ ▇▇▇▇▇▇
Dated as of September 13, 1999
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TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE OF THE SHARES...................................... 1
SECTION 1.1 Basic Transaction.................................. 1
SECTION 1.2 Purchase Price..................................... 1
SECTION 1.3 The Closing........................................ 2
SECTION 1.4 Material Adverse Effect............................ 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS........................ 2
SECTION 2.1 Sellers............................................ 3
SECTION 2.2 Authority.......................................... 3
SECTION 2.3 Noncontravention................................... 3
SECTION 2.4 Brokers' Fees...................................... 3
SECTION 2.5 The Shares......................................... 3
SECTION 2.6 Investment Representations......................... 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY................ 4
SECTION 3.1 Organization and Qualification and Other
Equity Interests................................. 4
SECTION 3.2 Authority.......................................... 4
SECTION 3.3 Articles of Organization and By-Laws............... 4
SECTION 3.4 Capitalization..................................... 4
SECTION 3.5 No Conflict; Required Filings and Consents......... 5
SECTION 3.6 Compliance, Permits................................ 6
SECTION 3.7 Financial Statements............................... 6
SECTION 3.8 Absence of Certain Changes or Events............... 6
SECTION 3.9 No Undisclosed Liabilities......................... 7
SECTION 3.10 Absence of Litigation............................. 7
SECTION 3.11 Employee Benefit Plans, Employment Agreements..... 7
SECTION 3.12 Labor Matters..................................... 9
SECTION 3.13 Restrictions on Business Activities............... 9
SECTION 3.14 Title to Property................................. 9
SECTION 3.15 Taxes............................................. 9
SECTION 3.16 Environmental Matters............................. 11
SECTION 3.17 Intellectual Property............................. 11
SECTION 3.18 Immigration Compliance............................ 11
SECTION 3.19 Insurance......................................... ▇▇
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▇▇▇▇▇▇▇ 3.20 Accounts Receivable............................... 12
SECTION 3.21 Brokers........................................... 12
SECTION 3.22 Change in Control Payments........................ 13
SECTION 3.23 Expenses.......................................... 13
SECTION 3.24 Full Disclosure................................... 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER......................... 13
SECTION 4.1 Organization and Qualification..................... 13
SECTION 4.2 Charter and By-Laws................................ 13
SECTION 4.3 Authority Relative to this Agreement............... 14
SECTION 4.4 No Conflict, Required Filings and Consents......... 14
SECTION 4.5 Capitalization..................................... 14
SECTION 4.6 Purchase for Investment............................ 15
SECTION 4.7 Financial Condition................................ 15
SECTION 4.8 Title; Condition of Property....................... 15
SECTION 4.9 Intellectual Property Rights....................... 15
SECTION 4.10 Litigation........................................ 16
SECTION 4.11 No Defaults....................................... 16
SECTION 4.12 Taxes............................................. 16
SECTION 4.13 Agreements........................................ 16
SECTION 4.14 Compliance........................................ 17
SECTION 4.15 Validity of Shares................................ 17
SECTION 4.16 Related Party Transactions........................ 17
SECTION 4.17 Exemptions from Securities Laws................... 17
SECTION 4.18 Disclosure........................................ 17
SECTION 4.19 Brokers........................................... 17
ARTICLE V
CONDUCT OF BUSINESS PENDING THE CLOSING............................. 17
SECTION 5.1 Conduct of Business by the Company Pending
the Closing..................................... 17
SECTION 5.2 No Solicitation.................................... 19
ARTICLE VI
ADDITIONAL AGREEMENTS................................................ 20
SECTION 6.1 Access to Information............................... 20
SECTION 6.2 Consents; Approvals................................. 20
SECTION 6.3 Notification of Certain Matters..................... 21
SECTION 6.4 Further Action...................................... 21
SECTION 6.5 Public Announcements................................ 21
SECTION 6.6 Conveyance Taxes.................................... 21
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SECTION 6.7 Preparation and Filing of Tax Returns and
Liability for Taxes.............................. 21
SECTION 6.8 Partnership Interest; Artwork...................... 22
SECTION 6.9 Reservation of Shares.............................. 22
SECTION 6.10 Noncompetition/Nonsolicitation.................... 22
SECTION 6.11 Confidentiality................................... 23
SECTION 6.12 Repayment of Loan................................. 24
SECTION 6.13 Pre-Closing Date Distribution..................... 24
ARTICLE VII
CONDITIONS TO CLOSING................................................ 25
SECTION 7.1 Conditions to Obligation of Each Party to Closing.. 25
SECTION 7.2 Additional Conditions to Obligations of Buyer...... 26
SECTION 7.3 Additional Conditions to Obligation of the Sellers. 27
ARTICLE VIII
TERMINATION.......................................................... 28
SECTION 8.1 Termination........................................ 28
SECTION 8.2 Effect of Termination.............................. 29
SECTION 8.3 Fees and Expenses.................................. 29
ARTICLE IX
INDEMNIFICATION...................................................... 29
SECTION 9.1 Survival of Representations and Warranties......... 29
SECTION 9.2 Indemnification by the Sellers..................... 29
SECTION 9.3 Indemnification by the Buyer....................... 30
SECTION 9.4 Third Person Claims................................ 30
SECTION 9.5 Limitations on Indemnification..................... 31
SECTION 9.6 Method of Payment.................................. 31
SECTION 9.7 Exclusive Remedy........................................ 31
ARTICLE X
GENERAL PROVISIONS................................................... 31
SECTION 10.1 Disclosure........................................ 32
SECTION 10.2 Notices........................................... 32
SECTION 10.3 Certain Definitions............................... 33
SECTION 10.4 Amendment......................................... 33
SECTION 10.5 Waiver............................................ 33
SECTION 10.6 Headings.......................................... 34
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SECTION 10.7 Severability...................................... 34
SECTION 10.8 Entire Agreement.................................. 34
SECTION 10.9 Assignment........................................ 34
SECTION 10.10 Parties in Interest.............................. 34
SECTION 10.11 Failure or Indulgence Not Waiver; Remedies
Cumulative.................................... 34
SECTION 10.12 Governing Law.................................... 35
SECTION 10.13 Counterparts..................................... 35
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SCHEDULE AND EXHIBIT LIST
Schedule 1.2 Allocation of Buyer Common Stock
Schedule 2.6 Investment Representations
Exhibit 6.9 Allocation of Employee Stock Options
Exhibit 7.2(e) Form of Senior Management Agreement
Exhibit 7.2(f) Stockholders Agreement and Form of Joinder
Exhibit 7.3(f) Registration Agreement and Form of Joinder
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is dated as of September 13, 1999 (this
"Agreement"), among ZEFER Corp., a Delaware corporation (the "Buyer"), ▇▇▇▇▇ &
Company, Inc., a Massachusetts corporation (the "Company"), ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ (each a "Seller" and collectively the "Sellers").
Recitals
Whereas, the Sellers are the beneficial and record owners of all of the
outstanding capital stock of the Company (the "Shares");
Whereas, the Buyer desires to purchase the Shares from the Sellers, and the
Sellers desire to sell the Shares to the Buyer; and
Whereas, the payments provided for herein and the agreements set forth
herein constitute good and valuable consideration to the Sellers and the Sellers
acknowledge that the Buyer is relying upon the promises and indemnities made by
the Sellers herein as a material inducement to enter into this Agreement.
Now, Therefore, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
SECTION 1.1 Basic Transaction. The Sellers hereby agree to sell to the
Buyer, and the Buyer hereby agrees to purchase from the Sellers, at the Closing,
subject to and upon the terms and conditions contained herein, the Shares.
SECTION 1.2 Purchase Price. The purchase price (the "Purchase Price")
which the Buyer shall pay for the Shares and in consideration of the agreements
and covenants of the Sellers contained herein is as follows:
(a) Cash Consideration. At the Closing, the Buyer shall pay to the
Sellers an aggregate of $8,034,051.95 in cash, payable at Sellers' option by
bank or certified check or by wire transfer of immediately available funds.
(b) Stock Consideration. At the Closing, Buyer shall issue to each Seller
the number of shares of its common stock, $.01 par value per share (the "Buyer
Common Stock") set forth next to such Seller's name on Schedule 1.2.
SECTION 1.3 The Closing. The closing of the purchase and sale of the
Shares and the other transactions contemplated hereby (the "Closing") shall take
place at the offices of Ropes & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as may be agreed to by the Buyer and
the Sellers, on September 13, 1999 or on such date not later than September 17,
1999 as may be agreed to by the Buyer and the Sellers (the "Closing Date").
(a) At the Closing:
(i) the Company and the Sellers shall deliver to the Buyer the
various certificates, instruments and documents referred to in Section 7.2
below;
(ii) the Buyer shall deliver to the Company and the Sellers the
various certificates, instruments and documents referred to in Section 7.3
below;
(iii) the Sellers will deliver to the Buyer stock certificates
representing the Shares, endorsed in blank or accompanied by duly executed
assignment documents; and
(iv) the Buyer shall deliver to the Sellers the cash portion of the
Purchase Price payable at Closing and, subject to the terms and conditions
of the Senior Management Agreements, shall issue to the Sellers the Buyer
Common Stock to be held by the Company as provided in the Senior Management
Agreements.
SECTION 1.4 Material Adverse Effect. When used in connection with the
Company, or Buyer or any of its subsidiaries, as the case may be, the term
"Material Adverse Effect" means any change, effect or circumstance that,
individually or when taken together with all other such changes, effects or
circumstances that have occurred prior to the date of determination of the
occurrence of the Material Adverse Effect, (a) is or is reasonably likely to be
materially adverse to the business, properties, assets (including intangible
assets), prospects, financial condition or results of operations of the Company
or Buyer and its subsidiaries, as the case may be, in the case of the Buyer and
its subsidiaries taken as a whole, or (b) is delaying or preventing or is
reasonably likely to delay or prevent the consummation of the transactions
contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers hereby represents and warrants to the Buyer, severally
and not jointly, that, except as set forth in the written disclosure schedule
delivered on or prior to the date hereof by the Sellers to Buyer that is
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in Articles II and III (the "Seller Disclosure Schedule"):
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SECTION 2.1 Sellers. Such Seller is an individual residing at the address
indicated on the signature page hereto.
SECTION 2.2 Authority. Such Seller has full power and authority to
execute and deliver this Agreement and to perform his obligations hereunder.
This Agreement has been duly and validly executed and delivered by such Seller
and, assuming the due authorization, execution and delivery by the other parties
hereto, constitutes the valid and legally binding obligation of such Seller,
enforceable against him in accordance with its terms and conditions, except as
enforceability may be restricted, limited or delayed by applicable bankruptcy or
other laws affecting creditors' rights generally. Such Seller need not give any
notice to, make any filing with or obtain any authorization, consent or approval
of any government or governmental agency or any other third party in order to
consummate the transactions contemplated by this Agreement.
SECTION 2.3 Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or other restriction of any government,
governmental agency or court to which such Seller is subject or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel or require any notice under any agreement, contract, lease, license,
instrument or other legally binding arrangement to which such Seller is a party
or by which he is bound or to which any of his assets is subject.
SECTION 2.4 Brokers' Fees. Except for the obligations of ▇▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇▇▇ under the Letter Agreement dated as of September 10,
1999 among the Sellers, such Seller has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Buyer or the Company
could become liable or obligated.
SECTION 2.5 The Shares. Such Seller holds of record and owns beneficially
that number of the issued and outstanding shares of common stock of the Company
indicated on the signature page hereto, free and clear of any restrictions on
transfer (other than restrictions under applicable securities laws), mortgages,
pledges, liens, encumbrances, charges, security interests, options, warrants,
purchase rights, contracts, commitments, equities, claims and demands. Such
Seller is not a party to any option, warrant, purchase right or other contract
or commitment that could require such Seller to sell, transfer or otherwise
dispose of any capital stock of the Company (other than this Agreement). Such
Seller is not a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of the Company.
SECTION 2.6 Investment Representations. Each of the Sellers hereby
severally makes the representations and warranties set forth in Schedule 2.6
with respect to such Seller's purchase of the Buyer Common Stock.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Company and Sellers hereby represent and warrant to Buyer, jointly and
severally, that, except as set forth in the Seller Disclosure Schedule:
SECTION 3.1 Organization and Qualification and Other Equity Interests.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the
requisite corporate power and authority necessary to own, lease and operate the
properties it purports to own, lease or operate and to carry on its business as
it is now being conducted. The Company is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not have a Material Adverse Effect. Except for its interest
in ▇▇▇▇▇ & Company Investment Partnership, a Massachusetts limited partnership
(the "Partnership"), the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
SECTION 3.2 Authority. The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated thereby.
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by the other parties
hereto, constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be restricted, limited or delayed by applicable bankruptcy or
other laws affecting creditors' rights generally.
SECTION 3.3 Articles of Organization and By-Laws. Attached to the Seller
Disclosure Schedule are complete and correct copies of the Articles of
Organization and By-Laws of the Company as amended to date. Such Articles of
Organization and By-Laws are in full force and effect. The Company is not in
violation of any of the provisions of its Articles of Organization or By-Laws.
SECTION 3.4 Capitalization. The authorized capital stock of the Company
consists of 200,000 shares of common stock, with no par value ("Company Common
Stock"). As of the date hereof, 1,030 shares of Company Common Stock
(constituting all of the Shares) are issued and outstanding, all of which are
validly issued, fully paid and nonassessable, subject to
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no preemptive or similar rights, and no shares are held in treasury. The
ownership of the outstanding shares of Company Common Stock is set forth in
Section 3.4 of the Seller Disclosure Schedule. There are no options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or obligating the Company
to issue or sell any shares of capital stock of, or other equity interests in,
the Company. There are no obligations, contingent or otherwise, of the Company
to repurchase, redeem or otherwise acquire any shares of Company Common Stock.
SECTION 3.5 No Conflict; Required Filings and Consents.
(a) Section 3.5(a) of the Seller Disclosure Schedule includes a list of
(i) all loan agreements, indentures, mortgages, pledges, conditional sale or
title retention agreements, security agreements, equipment obligations,
guaranties, standby letters of credit, equipment leases or lease purchase
agreements to which the Company is a party or by which it is bound and (ii) all
contracts, agreements, commitments or other understandings or arrangements to
which the Company is a party or by which it or any of its properties or assets
are bound or affected, but excluding contracts, agreements, commitments or other
understandings or arrangements entered into in the ordinary course of business
and involving, in each case, payments or receipts by the Company of less than
$10,000 in any single instance but not more than $50,000 in the aggregate
(collectively, the "Contracts"). The Company has furnished to the Buyer true
and correct copies of the agreements set forth in Section 3.5 of the Seller
Disclosure Schedule and requested by the Buyer or its authorized representative.
(b) (i) The Company has not breached, is not in default under, and has not
received written notice of any breach of or default under, any of the Contracts,
(ii) to the knowledge of the Company or the Sellers, no other party to any of
the Contracts has breached or is in default of any of its obligations
thereunder, and (iii) each of the Contracts is in full force and effect, except
in any such case for breaches, defaults or failures to be in full force and
effect that are immaterial in amount and significance.
(c) The execution and delivery of this Agreement by the Company and the
Sellers does not, and the performance of this Agreement by the Company and the
Sellers and the consummation of the transactions contemplated hereby will not,
(i) conflict with or violate the Certificate of Incorporation or By-Laws of the
Company, (ii) conflict with or violate any federal, foreign, state or provincial
law, rule, regulation, order, judgment or decree (collectively, "Laws")
applicable to the Company or by which any of its properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair the Company's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a security
interest, lien, claim, encumbrance or any other restriction on any of the
properties or assets of the Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the
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Company or any of its properties is bound or affected, except in any such case
for conflicts, violations, breaches, defaults or other occurrences that would
not have a Material Adverse Effect.
(d) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any federal, foreign, state or provincial governmental or regulatory
authority except for applicable requirements, if any, of the Securities Act of
1933, as amended, and the rules and regulations thereunder (the "Securities
Act"), the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act"), and state securities laws ("Blue
Sky Laws").
SECTION 3.6 Compliance, Permits.
(a) The Company is not in conflict with, or in default or violation of,
any Law applicable to the Company or by which any of its properties is bound or
affected except where such conflict, default or violation would not have a
Material Adverse Effect.
(b) The Company holds all permits, licenses, easements, variances,
exemptions, consents, certificates, orders and approvals from governmental
authorities which are necessary for the operation of the business of the Company
as it is now being conducted (collectively, the "Company Permits"). The Company
is in compliance with the terms of the Company Permits, except where the failure
to so comply would not have a Material Adverse Effect.
SECTION 3.7 Financial Statements.
(a) Attached to the Seller Disclosure Schedule are (i) the unaudited
balance sheet of the Company as of December 31, 1998, together with the related
statement of income for the year then ended (the "Year-End Financial
Statements"), and (ii) the unaudited balance sheet of the Company as of July 31,
1999 and the related statement of income for the seven months then ended (the
"Seller Interim Financial Statements", and together with the Year-End Financial
Statements, collectively, the "Financial Statements").
(b) Each of the Financial Statements was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except for the absence of footnotes, and each
fairly presents in all material respects the financial position of the Company
as at the respective dates thereof and the results of its operations, cash flows
and stockholder equity for the periods indicated, except that the Seller Interim
Financial Statements are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount.
SECTION 3.8 Absence of Certain Changes or Events. Since July 31, 1999,
the Company has conducted its business in the ordinary course and there has not
occurred: (a) any Material Adverse Effect; (b) except as set forth in Section
3.8 of the Seller Disclosure
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Schedule, any amendments or changes in the Articles of Organization or By-laws
of the Company; (c) any damage to, destruction or loss of any asset of the
Company (whether or not covered by insurance) that has had a Material Adverse
Effect; (d) any material change by the Company in its accounting methods,
principles or practices; (e) any material sale or revaluation by the Company of
any of its assets, including, without limitation, writing off notes or accounts
receivable other than in the ordinary course of business; (f) any other action
or event that would have required the consent of Buyer pursuant to Section 5.1
had such action or event occurred after the date of this Agreement; or (g) any
sale of the property or assets of the Company, except in the ordinary course of
business.
SECTION 3.9 No Undisclosed Liabilities. The Company has no material
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent or otherwise), except for liabilities or
obligations (a) adequately reflected or reserved for in the Financial
Statements, (b) current liabilities incurred since June 30, 1999 in the ordinary
course of business consistent with past practice, or (c) incurred in connection
with this Agreement.
SECTION 3.10 Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company or the
Sellers, threatened against the Company or any properties or rights of the
Company before any federal, foreign, state or provincial court, arbitrator or
administrative, governmental or regulatory authority or body.
SECTION 3.11 Employee Benefit Plans, Employment Agreements.
(a) Section 3.11 (a) of the Seller Disclosure Schedule lists all employee
pension plans (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), all employee welfare plans (as
defined in Section 3(1) of ERISA), and all other bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or employee benefit plans, programs or arrangements,
and any current employment or executive compensation agreement, written or
otherwise, for the benefit of, or relating to, any present or former employee
(including any beneficiary of any such employee) of, or any present or former
consultant (including any beneficiary of any such consultant) to the Company,
any trade or business (whether or not incorporated) which is a member of a
controlled group including the Company or which is under common control with the
Company (an "ERISA Affiliate") within the meaning of Section 414 of the Internal
Revenue Code of 1986, as amended (the "Code") (all such plans, practices,
programs and arrangements are referred to as the "Company Employee Plans").
There have been made available to Buyer copies of (i) the most recent annual
report on Form 5500, with accompanying schedules and attachments, filed with
respect to each Company Employee Plan required to make such a filing, and (ii)
the most recent Internal Revenue Service determination letter with respect to
each Company Employee Plan intended to be qualified under Section 401(a) of the
Code.
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(b) (i) None of the Company Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person under, and neither the
Company nor any ERISA Affiliate has ever maintained, contributed to, or been
required to contribute to, any plan that is or was a "multiemployer plan" as
such term is defined in Section 3(37) of ERISA, a pension plan subject to Title
IV of ERISA or a plan subject to Part 3 of Title I of ERISA; (ii) there has been
no "prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, with respect to any Company Employee Plan, which could
result in any material liability of the Company; (iii) all Company Employee
Plans are in compliance in all material respects with the requirements
prescribed by any and all Laws (including ERISA and the Code) currently in
effect with respect thereto (including all applicable requirements for
notification to participants or the Department of Labor, Internal Revenue
Service (the "IRS") or Secretary of the Treasury), and the Company has performed
all material obligations required to be performed by it under, is not in any
material respect in default under or violation of, and neither the Company nor
the Sellers has any knowledge of any material default or violation by any other
party to, any of the Company Employee Plans; (iv) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code is the subject of a favorable
determination letter from the IRS, and nothing has occurred which may reasonably
be expected to impair such determination; and (v) there are no lawsuits or other
claims (other than claims for benefits in the ordinary course) pending or, to
the knowledge of the Company or the Sellers, threatened with respect to any
Company Employee Plan.
(c) Section 3.11(c) of the Seller Disclosure Schedule sets forth a true
and complete list of each current or former employee, officer or director of the
Company who holds (i) any option to purchase Company Common Stock as of the date
hereof, together with the number of shares of Company Common Stock subject to
such option, the option price of such option (to the extent determined as of the
date hereof), whether such option is intended to qualify as an incentive stock
option within the meaning of Section 422(b) of the Code (an "ISO"), and the
expiration date of such option; or (ii) any other right, directly or indirectly,
to acquire Company Common Stock, together with the number of shares of Company
Common Stock subject to such right. Section 3.11(c) of the Seller Disclosure
Schedule also sets forth the total number of such ISOs, such nonqualified
options and such other rights.
(d) Section 3.11(d) of the Seller Disclosure Schedule sets forth a true
and complete list of: (i) all employment agreements with officers of the
Company; (ii) all agreements with consultants who are individuals obligating the
Company to make annual cash payments in an amount exceeding $50,000 (iii) all
employees of, or consultants to, the Company who have executed a non-competition
agreement with the Company; (iv) all severance agreements, programs and policies
of the Company with or relating to its employees, in each case with outstanding
commitments exceeding $50,000, excluding programs and policies required to be
maintained by law; and (v) all plans, programs, agreements and other
arrangements of the Company with or relating to its employees which contain
change in control provisions.
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SECTION 3.12 Labor Matters. (i) There are no material controversies
pending or, to the knowledge of the Company or the Sellers, threatened between
the Company and any of its employees; (ii) the Company is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company, nor does the Company or any Seller know of any
activities or proceedings of any labor union to organize any such employees; and
(iii) neither the Company nor any Seller has knowledge of any strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of the Company.
SECTION 3.13 Restrictions on Business Activities. Except for this
Agreement, to the Sellers' or the Company's knowledge, there is no agreement,
judgment, injunction, order or decree binding upon the Company or, to the
Sellers' or the Company's knowledge, any other person which has or could
reasonably be expected to have the effect of prohibiting or impairing any
business practice of the Company as currently conducted or as proposed to be
conducted by the Company.
SECTION 3.14 Title to Property. The Company has good and marketable title
to all of its properties and assets, free and clear of all liens, charges and
encumbrances, except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which would have a Material Adverse Effect; and, to the knowledge of the Sellers
and the Company, all leases pursuant to which the Company leases from others
real or personal property are in good standing, valid and effective in
accordance with their respective terms, and there is not, to the knowledge of
the Sellers and the Company, under any of such leases, any existing material
default or event of default (or event which with notice or lapse of time, or
both, would constitute a material default thereunder). The Company does not own
any real property.
SECTION 3.15 Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean taxes,
fees, levies, duties, tariffs, imposts, and governmental impositions or charges
of any kind in the nature of (or similar to) taxes, payable to any federal,
state, local or foreign taxing authority, including, without limitation, (i)
income, franchise, profits, gross receipts, ad valorem, net worth, value added,
sales, use, service, real or personal property, special assessments, capital
stock, license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premiums, windfall profits, transfer and gains taxes, and
(ii) interest, penalties, additional taxes and additions to tax imposed with
respect thereto; and "Tax Returns" shall mean returns, reports, and information
statements with respect to Taxes required to be filed with the IRS or any other
federal, foreign, state or provincial taxing authority, domestic or foreign,
including, without limitation, consolidated, combined and unitary tax returns.
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(b) Except as set forth in Section 3.15 of the Seller Disclosure
Schedule, (i) all Tax Returns of the Company which are required to have been
filed have been filed on a timely basis with the appropriate authorities and all
such Tax Returns are true, correct and complete in all material respects, (ii)
all Taxes required to have been paid by the Company have been paid in full on a
timely basis to the appropriate authorities, and (iii) all Taxes or other
amounts required to have been collected or withheld by the Company have been
timely and properly collected or withheld.
(c) Except as set forth in Section 3.15 of the Seller Disclosure Schedule,
(i) no Taxing authority has asserted in writing any adjustment, deficiency, or
assessment that could result in additional Tax for which the Company is or may
be liable, (ii) there is no pending audit, examination, investigation, dispute,
proceeding or claim for which the Company has received notice relating to any
Tax for which the Company is or may be liable, (iii) no statute of limitations
with respect to any Tax for which the Company is or may be liable has been
waived or extended, (iv) the due date of any Tax Returns that the Company is
required to file has not been extended, and (v) the Company is not a party to
any Tax sharing or Tax allocation agreement, arrangement or understanding.
(d) There are no liens on any of the assets of the Company which arose in
connection with any failure or asserted failure to pay any Tax, other than liens
for current Taxes not yet due and payable.
(e) Except to the extent arising out of the transactions contemplated by
this Agreement, the Company is not a party to any contract, agreement, plan or
arrangement that, individually or collectively, could give rise to any payment
of a compensatory nature that would not be deductible by reason of Section 162,
280G or 404 of the Code.
(f) The liability for "Accrued Special Bonuses" posted on the Closing
Balance Sheet (item 2170 on the Closing Balance Sheet) will be deductible by the
Company for federal income tax purposes no later than the year in which such
bonus or other compensation is paid.
(g) The Company has not been a member of an affiliated group filing a
consolidated federal income Tax Return, and the Company is not liable for the
Taxes of any other person, whether under Treasury Regulation 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract or otherwise.
(h) The Company at all times since November 27, 1995 has been an S
corporation within the meaning of Section 1361 of the Code.
(i) Copies of (i) any Tax examinations, (ii) extensions of statutory
limitations, (iii) the federal, state and local income Tax Returns of the
Company, and (iv) correspondence between the Company and all Taxing authorities
for its last three (3) taxable years have previously been furnished to the Buyer
and such Tax Returns are true, correct and complete in all material respects.
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SECTION 3.16 Environmental Matters. The Company: (i) has obtained all
approvals, if any (collectively, the "Environmental Approvals"), which are
required to be obtained by it under all applicable federal, state, foreign or
local laws or any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
by the Company or its respective agents ("Environmental Laws"); (ii) is in
compliance with all terms and conditions of such required Environmental
Approvals, and also is in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in applicable Environmental Laws; and (iii) as of the date
hereof, is not aware of nor has received notice of any past or present
violations of Environmental Laws or any event, condition, circumstance,
activity, practice, incident, action or plan which is reasonably likely to
interfere with or prevent continued compliance with or which would give rise to
any common law or statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, against the Company based on or resulting from the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant or hazardous or toxic material or
waste.
SECTION 3.17 Intellectual Property. The patents, patent applications,
trademarks, service marks, trade names, corporate names, copyrights, trade
secrets or other proprietary rights necessary to the conduct of the business of
the Company are owned by or licensed to the Company and listed in Section 3.17
of the Seller Disclosure Schedule. The Company has not licensed from any third
party any proprietary rights, except for commercially available software, or, to
the knowledge of the Company and the Sellers, infringed, misappropriated or
otherwise conflicted with any proprietary rights of any third parties. To the
knowledge of the Sellers or the Company, no activity of any third party
infringes upon the rights of the Company to the items listed in Section 3.17 of
the Seller Disclosure Schedule. The Company has good title to all of the
trademarks and trade names listed in Section 3.17 of the Seller Disclosure
Schedule hereto free and clear of any lien, charge, license or other
encumbrance.
SECTION 3.18 Immigration Compliance.
(a) The Company is in compliance in all material respects with all
applicable foreign, federal, state and local laws, rules, directives and
regulations relating to the employment authorization of its employees
(including, without limitation, the Immigration Reform and Control Act of 1986,
as amended and supplemented, and Section 212(n) and 274A of the Immigration and
Nationality Act, as amended and supplemented, and all implementing regulations
relating thereto), and, to its knowledge, the Company has not employed nor, to
its
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knowledge, is it currently employing any unauthorized aliens (as such term is
defined under 8 CFR 27a.1(a)).
(b) The Company has not received any notice from the Immigration and
Naturalization Service (the "INS") or the U.S. Department of Labor (the "DOL")
of the disapproval or denial of any visa petition pending before the INS or
labor certification pending before the DOL on behalf of any employee or
prospective employee of the Company.
(c) Section 3.17 (c) of the Seller Disclosure Schedule contains a true,
complete and accurate list of all non-immigrant or immigrant visa petitions
pending before the INS and labor certifications pending before the DOL on behalf
of any of the employees or prospective employees of the Company.
(d) Since the approval of each of their respective H-1B non-immigrant visa
petitions, there has been no material change in the terms and conditions of
employment of any employees of the Company, provided that it is acknowledged
that certain employees from time to time unilaterally breach the terms of their
employment with the Company.
(e) The Company shall have delivered to Buyer by the Closing Date true,
accurate and complete copies of all visa petitions (and all supporting
documents) submitted to the INS for all employees employed by the Company
pursuant to non-immigrant visa petitions filed by the Company and for all such
prospective employees of the Company.
SECTION 3.19 Insurance. All fire and casualty, general liability,
business interruption, product liability, professional liability and sprinkler
and water damage insurance policies maintained by the Company is in character
and amount at least equivalent to that generally carried by persons engaged in
similar businesses of comparable size as the Company, and all such policies are
with reputable insurance carriers and provide adequate coverage for all normal
risks incident to the business of the Company and its respective properties and
assets.
SECTION 3.20 Accounts Receivable. The accounts receivable of the Company
as reflected in the most recent Financial Statements, to the extent uncollected
on the date hereof and the accounts receivable reflected on the books of the
Company are valid and existing and represent monies due, and the Company has
made reserves adequate for receivables not collectible in the ordinary course of
business, and (subject to the aforesaid reserves) are subject to no refunds or
other adjustments and to no defenses, rights of setoff, assignments,
restrictions, encumbrances or conditions enforceable by third parties on or
affecting any thereof, except for such refunds, adjustments, defenses, rights of
setoff, assignments, restrictions, encumbrances or conditions as could not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.21 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions
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contemplated by this Agreement based upon arrangements made by or on behalf of
the Company or the Sellers.
SECTION 3.22 Change in Control Payments. The Company is neither a party
nor subject to any plan, program or agreement pursuant to which payments may be
required or acceleration of benefits may be required upon a change of control of
the Company.
SECTION 3.23 Expenses. Section 3.23 of the Seller Disclosure Schedule
sets forth a description of all of the estimated expenses of the Company which
the Company expects to incur, or has incurred, in connection with the
transactions contemplated by this Agreement.
SECTION 3.24 Full Disclosure. No representation or warranty made by the
Sellers or the Company contained in this Agreement and no statement contained in
any certificate or schedule furnished or to be furnished by the Company or the
Sellers to Buyer in, or pursuant to the provisions of, this Agreement, including
without limitation the Seller Disclosure Schedule, contains or shall contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary, in the light of the circumstances under which it was made, in
order to make statements herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Buyer hereby represents and warrants to the Company and the Sellers that,
except as set forth in the written disclosure schedule delivered on or prior to
the date hereof by Buyer to the Sellers that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV (the "Buyer Disclosure Schedule"):
SECTION 4.1 Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being conducted. Buyer is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not reasonably be expected to have a
Material Adverse Effect.
SECTION 4.2 Charter and By-Laws. Buyer has heretofore furnished to the
Company a complete and correct copy of its Certificate of Incorporation and By-
Laws, as amended to date. Such Certificate of Incorporation and By-Laws are in
full force and effect. Buyer is not in violation of any of the provisions of
its Certificate of Incorporation or By-Laws.
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SECTION 4.3 Authority Relative to this Agreement. Buyer has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Buyer and
the consummation by Buyer of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of Buyer,
and no other corporate proceedings on the part of Buyer are necessary to
authorize this Agreement or to consummate the transactions contemplated thereby.
This Agreement has been duly and validly executed and delivered by Buyer and,
assuming the due authorization, execution and delivery by each of the other
parties hereto, constitutes a legal, valid and binding obligation of Buyer
enforceable against it in accordance with its terms.
SECTION 4.4 No Conflict, Required Filings and Consents.
(a) Except as set forth in Section 4.4 of the Buyer Disclosure Schedule,
the execution and delivery of this Agreement by Buyer does not, and the
performance of this Agreement by Buyer will not, (i) conflict with or violate
the Certificate of Incorporation or By-Laws of Buyer, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to Buyer
or any of its subsidiaries or by which its or their respective properties are
bound or affected, or (iii) result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or impair Buyer's or any of its subsidiaries' rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Buyer or
any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Buyer or any of its subsidiaries is a party or by which
Buyer or any of its subsidiaries or its or any of their respective properties
are bound or affected, except in any such case for any such conflicts,
violations, breaches, defaults or other occurrences that could not reasonably be
expected to have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Buyer does not, and
the performance of this Agreement by Buyer will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except for applicable
requirements, if any, of the Securities Act and Blue Sky Laws, which will be
complied with in all material respects within the applicable times required.
SECTION 4.5 Capitalization. The authorized capital stock of the Buyer
consists of (i) 35,000,000 shares of Buyer Common Stock and (ii) 96,632 shares
of Class A Preferred Stock, par value $.01 per share ("Preferred Stock"). As of
the date hereof, there were (i) 28,724,680 shares of Buyer Common Stock issued
and outstanding, (ii) 17,695 shares of Preferred Stock outstanding, and (iii)
3,000,000 shares of Buyer Common Stock reserved for future issuance pursuant to
Buyer's stock plans (the "Buyer Stock Plans"). Except for awards outstanding
under the Buyer Stock Plans or as otherwise set forth in Section 4.5 of the
Buyer Disclosure Schedule, there are no options, warrants or other rights,
agreements, arrangements or
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commitments of any character relating to the issued or unissued shares of
capital stock of the Buyer or obligating Buyer to issue or sell any shares of
capital stock of, or other equity interests in, the Buyer.
SECTION 4.6 Purchase for Investment. The Shares to be purchased by Buyer
pursuant to this Agreement are being acquired for investment only without a view
to any public distribution.
SECTION 4.7 Financial Condition.
(a) Attached to the Buyer Disclosure Schedule is the unaudited balance
sheet of the Buyer as of June 30, 1999 and the related statement of operations
for the six-month period then ended (the "Interim Financial Statements"). The
Interim Financial Statements have been prepared in accordance with generally
accepted accounting principles, except for the absence of footnotes. Such
balance sheet presents fairly in all material respects the financial position of
the Buyer as of June 30, 1999, and such statement of operations presents fairly
in all material respects the results of operations of the Buyer for the six
months then ended, all subject to year-end adjustments consisting of normal
recurring items that do not, individually or in the aggregate, materially and
adversely affect the financial condition or results of operations from that
presented.
(b) Except as set forth in the Interim Financial Statements, the Buyer has
no material liabilities of any nature (matured or unmatured, accrued, fixed or
contingent), except liabilities incurred in the ordinary course of business
since June 30, 1999.
(c) Since June 30, 1999 there has not been (i) any Material Adverse
Effect, (ii) any payment of dividends on, or other distribution with respect to,
or any direct or indirect redemption or acquisition of, any shares of the
capital stock of the Buyer, or any agreement or commitment therefor, (iii) any
loan by the Buyer to, or any loan to the Buyer from, any officer, director,
employee or stockholder of the Buyer, or any agreement or commitment therefor
(other than travel and other advances in the ordinary course of business), or
(iv) any damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting the assets, property or business of the
Buyer.
SECTION 4.8 Title; Condition of Property. The Buyer has good title to all
of its property and assets, real, personal or mixed, tangible or intangible,
free and clear of all liens, security interest, charges and encumbrances of any
kind, except for any liens, security interests, charges or other encumbrances
that would not have a Material Adverse Effect.
SECTION 4.9 Intellectual Property Rights. The Buyer owns or has the right
to use pursuant to license, sublicense or agreement all patents, patent
applications, trademarks, service marks, trade names, corporate names,
copyrights, trade secrets or other proprietary rights necessary to the conduct
of the business of the Buyer (the "Buyer Intellectual Property"), free and clear
of any lien, charge, license or other encumbrance. To the knowledge of the
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Buyer, (a) the Buyer has not infringed, misappropriated or otherwise conflicted
with any proprietary rights of any third parties and (b) no activity of any
third party infringes upon the rights of the Buyer with respect to the Buyer
Intellectual Property.
SECTION 4.10 Litigation. There are no claims, actions, suits, proceedings
or investigations now pending or, to the knowledge of the Buyer, threatened
against the Buyer or any properties or rights of the Buyer before any federal,
foreign, state or provincial court, arbitrator or administrative, governmental
or regulatory authority or body.
SECTION 4.11 No Defaults. The Buyer is not in violation or breach of, or
in default under, any provisions of (a) its Certificate or Incorporation or By-
Laws, any note or other obligation for borrowed money or the deferred purchase
price of property, or any other material agreement or commitment to which the
Buyer is a party or by which it or any of its property is bound or affected, or
(b) any ruling, writ, injunction, order, judgement or decree of any court,
administrative agency or other governmental body, and, to the knowledge of the
Buyer, there exists no condition which, after notice, lapse of time, or both,
would constitute a violation or breach of, or a default under, any of the
foregoing.
SECTION 4.12 Taxes. The Buyer has filed all Tax Returns which are
required to be filed by it, and all such Tax Returns were true and correct in
all material respects when filed. The Buyer has paid all Taxes pursuant to such
returns or pursuant to any assessments received by it or which it is obligated
to withhold from amounts owing to any employee, creditor or third party (and the
Buyer has withheld all Taxes that it is obligated to withhold), except, in each
case, for those which are not yet due and payable pursuant to such Tax Returns.
The Buyer has not waived any statute of limitations with respect to Taxes or
agreed to any extension of time with respect to any tax assessment or
deficiency. The Buyer has never filed a consent pursuant to Section 341(f) of
the Code relating to collapsible corporations, or filed an election pursuant to
Section 1362(a) of the Code to be treated for federal income tax purposes as an
S corporation.
SECTION 4.13 Agreements. Section 4.13 of the Buyer Disclosure Schedule
sets forth all of the following types of contracts to which the Buyer is a
party: (a) written or oral contracts not made in the ordinary course of business
and which are material to the business of the Buyer and (b) whether or not made
in the ordinary course of business, all (i) employment and consulting agreements
with the senior executive officers of the Buyer listed in Section 4.13 of the
Buyer Disclosure Schedule, (ii) bonus, pension, profit-sharing, retirement,
stock purchase, stock option and similar plans, contracts and understandings for
the benefit of any officer, director or stockholder, other than those that
benefit employees generally, (iii) agreements relating to the financing of the
Buyer, whether by means of loans to, or purchase of capital stock from, the
Buyer, (iv) any guaranties of any obligation for borrowed money or otherwise and
(v) agreements or other commitments for capital expenditures in excess of
$1,000,000 in the aggregate. The Buyer has furnished to the Sellers true and
correct copies of the agreements set forth in Section 4.13 of the Buyer
Disclosure Schedule and requested by the Sellers or their authorized
representatives.
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SECTION 4.14 Compliance. The Buyer has complied in all material respects
with all federal, state, local and foreign laws, statutes, ordinances, rules,
regulations and orders applicable to its business, the failure to comply with
which would have a Material Adverse Effect.
SECTION 4.15 Validity of Shares. The shares of Buyer Common Stock to be
issued pursuant to this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and subject to no preemptive or similar
rights.
SECTION 4.16 Related Party Transactions. Except as set forth in Section
4.16 of the Buyer Disclosure Schedule, no current employee or current or former
stockholder, director or officer of the Buyer and no "associate" (as defined in
the rules and regulations promulgated under the Securities Exchange Act of 1934)
of any such person, is currently, directly or indirectly, a party to any
transaction (other than as an employee) with the Buyer providing for the
furnishing of services by, or the purchase, rental or licensing of real or
personal property from, or otherwise requiring cash payments to, any such
person.
SECTION 4.17 Exemptions from Securities Laws. Subject to the accuracy of
the representations and warranties of the Sellers set forth in Section 2.6
hereof, the offer, issuance, sale and delivery of the Buyer Common Stock are
exempt from the provisions of Section 5 of the Securities Act of 1933, and no
consent, approval, qualification, registration or filing under any state
securities law is required in connection therewith.
SECTION 4.18 Disclosure. Neither this Agreement nor any other document,
certificate or statement furnished to the Sellers by or on behalf of the Buyer
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading.
SECTION 4.19 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Buyer.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE CLOSING
SECTION 5.1 Conduct of Business by the Company Pending the Closing. The
Company and the Sellers covenant and agree that, during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Closing, unless Buyer shall otherwise agree in writing, the
Company shall, and the Sellers shall cause the Company to, conduct its business
only in, and the Company shall not, and the Sellers shall cause the Company not
to, take any action except in, the ordinary course of business and in a manner
consistent with past practice; and the Company shall use all
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reasonable commercial efforts to preserve substantially intact the business
organization of the Company, to keep available the services of the present
officers, employees and consultants of the Company and to preserve the present
relationships of the Company with customers, suppliers and other persons with
which the Company has business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, the Company shall not, and
the Sellers shall cause the Company not to, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, directly or indirectly do, or propose to do, any of
the following without the prior written consent of Buyer:
(a) amend or otherwise change the Articles of Organization or By-Laws of
the Company;
(b) issue, sell, pledge, dispose of or voluntarily encumber, or authorize
the issuance, sale, pledge, disposition or voluntary encumbrance of, any shares
of capital stock of any class, or any options, warrants, convertible securities
or other rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in the
Company;
(c) sell, pledge, dispose of or voluntarily encumber any assets (tangible
or intangible) of the Company except for (i) dispositions of obsolete or
worthless assets and (ii) sales of immaterial assets not in excess of $10,000 in
the aggregate;
(d) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
(iii) amend the terms or change the period of exercisability of, purchase,
repurchase, redeem or otherwise acquire, any of its securities including without
limitation, shares of Company Common Stock or any option, warrant or right,
directly or indirectly, to acquire shares of Company Common Stock, or propose to
do any of the foregoing; provided, however, that the Company may make a
distribution to the Sellers on the day immediately preceding the Closing Date,
as set forth in Sections 6.8 and 6.13 hereof;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any person or, except in the ordinary
course of business consistent with past practice, make any loans or advances;
(iii) enter into or amend any material contract or agreement; (iv) authorize any
capital expenditures or purchase of fixed assets which are, in the aggregate, in
excess of $25,000 for the Company; or (v) enter into or amend any contract,
agreement, commitment or arrangement to effect any of the matters prohibited by
this Section 5.1(e);
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(f) increase the compensation payable or to become payable to its officers
or employees other than in the ordinary course of business, or grant any
severance or termination pay to, or enter into any employment or severance
agreement with any director, officer or other employee of the Company, or
establish, adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
current or former directors, officers or employees, except, in each case, as may
be required by law; provided, however, that the Company may provide for bonus
payments to be made (x) to each of ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
(the "Specified Employees") in an amount not to exceed $400,000 in the
aggregate, and (y) to the extent that the bonus payments made to the Specified
Employees are, in the aggregate, less than $400,000, to ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇ in an aggregate amount which, together with the bonuses paid to the
Specified Employees pursuant to this proviso, equals $400,000;
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
payments of accounts payable and collection of accounts receivable);
(h) make any material tax election inconsistent with past practice or
settle or compromise any material federal, state, local or foreign tax liability
or agree to an extension of a statute of limitations;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
the Financial Statements or incurred in the ordinary course of business and
consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1 (a) through (i) above, or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect or prevent the Company from performing or cause
the Company not to perform its covenants hereunder.
SECTION 5.2 No Solicitation.
(a) The Sellers and the Company shall not, and the Sellers shall cause the
Company not to, directly or indirectly, through any officer, director, employee,
representative or agent of the Company or any Seller, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement and the Closing, (i) solicit, initiate or encourage the
initiation of any inquiries or proposals regarding any merger, sale of
substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transactions involving the
Company other than the transactions contemplated by this Agreement (any of the
foregoing inquiries or proposals being referred to herein as an
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"Acquisition Proposal"), (ii) engage in negotiations or discussions concerning,
or provide any nonpublic information to any person relating to, any Acquisition
Proposal or (iii) agree to, approve or recommend any Acquisition Proposal.
(b) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement and the Closing, the Company
shall immediately notify Buyer after receipt of any Acquisition Proposal, or any
modification of or amendment to any Acquisition Proposal, or any request for
nonpublic information relating to the Company in connection with an Acquisition
Proposal or for access to the properties, books or records of the Company by any
person or entity that informs the Board of Directors of the Company that it is
considering making, or has made, an Acquisition Proposal. Such notice to Buyer
shall be made orally and in writing.
(c) The Company and the Sellers shall immediately cease and cause to be
terminated any existing discussions or negotiations with any persons (other than
Buyer) conducted heretofore with respect to any of the foregoing. The Company
agrees not to release any third party from the confidentiality provisions of any
confidentiality agreement to which the Company is a party.
(d) The Company shall ensure that the officers, directors and employees of
the Company and any investment banker or other advisor or representative
retained by the Company to assist with Acquisition Proposals are aware of the
restrictions described in this Section 5.2.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Access to Information. Upon reasonable notice, the Company
shall afford to Buyer's officers, employees, accountants, counsel and other
representatives, reasonable access, during the period from the date of this
Agreement to the Closing, to all its properties, books, contracts, commitments
and records and, during such period, the Company shall furnish promptly to Buyer
all information concerning its business, properties and personnel as Buyer may
reasonably request, and shall make available to Buyer the appropriate
individuals (including attorneys, accountants and other professionals) for
discussion of its business, properties and personnel as Buyer may reasonably
request.
SECTION 6.2 Consents; Approvals. The Company and Buyer shall each use its
reasonable best efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all United States
governmental and regulatory rulings and approvals), and the Company and Buyer
shall make all filings (including, without limitation, all filings with United
States governmental or regulatory agencies) required in connection with the
authorization, execution and delivery of this Agreement by the Company and Buyer
and the consummation by them of the transactions contemplated hereby, in each
case as promptly as
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practicable. The Company and Buyer shall furnish promptly all information
required to be included in any application or other filing to be made pursuant
to the rules and regulations of any United States or foreign governmental body
in connection with the transactions contemplated by this Agreement.
SECTION 6.3 Notification of Certain Matters. The Company shall give prompt
notice to Buyer, and Buyer shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to become materially untrue or inaccurate, or (ii) any failure of the
Company or Buyer, as the case may be, materially to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice; and provided further that failure to give such
notice shall not be treated as a breach of covenant for the purposes of Sections
7.2(b) or 7.3(b) unless the failure to give such notice results in material
prejudice to the other party.
SECTION 6.4 Further Action. Upon the terms and subject to the conditions
hereof each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and otherwise to satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement.
Without limiting the foregoing, each of the parties hereto agrees that it shall
file all Tax Returns in a manner that is consistent with the terms of this
Agreement.
SECTION 6.5 Public Announcements. Buyer, the Sellers and the Company shall
consult with each other before issuing any press release with respect to the
transaction contemplated by this Agreement and shall not issue any such press
release or make any such public statement without the prior consent of the other
party, which shall not be unreasonably withheld.
SECTION 6.6 Conveyance Taxes. Buyer, the Sellers and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes, which become payable in connection with the transactions contemplated
hereby that are required or permitted to be filed at or before the Closing.
SECTION 6.7 Preparation and Filing of Tax Returns and Liability for Taxes.
(a) The Sellers shall prepare and file or cause to be prepared and filed
all Tax Returns for the Company and each entity to which the Company is a
successor in interest (whether by
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merger or otherwise) for all taxable periods that end before the Closing Date.
The Sellers shall pay all Tax liabilities of the Company and each entity to
which the Company is a successor in interest (whether by merger or otherwise)
for all taxable periods (or portions thereof) that end before the Closing Date.
(b) Each party hereto shall, and shall cause its subsidiaries and
affiliates, if any, to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in filing any
Tax Returns, amended Tax Returns or claims for refund, determining a liability
for Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of all relevant portions of relevant Tax Returns, together with
relevant accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by taxing authorities and relevant
records concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Tax Returns pursuant to this Agreement shall bear all costs of filing
such Tax Returns.
SECTION 6.8 Partnership Interest; Artwork. On the day immediately
preceding the Closing Date, the Sellers shall cause the Company to distribute to
the Sellers all of the Company's right, title and interest in and to (a) the
partnership interest held by the Company in the Partnership (the "Partnership
Interest") and (b) any and all artwork owned by the Company (the "Artwork").
SECTION 6.9 Reservation of Shares. Buyer agrees to reserve 186,000 shares
of Buyer Common Stock for the issuance of Buyer Common Stock or options to
purchase Buyer Common Stock to employees of the Company promptly following the
Closing, which shares shall be separate and apart from any additional shares
that may be issued under any employee benefit plan of the Buyer in which such
employees are entitled to participate. The allocation of such future grants of
stock or options is set forth on Exhibit 6.9.
SECTION 6.10 Noncompetition/Nonsolicitation.
(a) For a period of 12 months after the Closing Date (the "Noncompete
Period"), each of ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ agrees that he shall not, within
the United States, directly or indirectly own, manage, control, participate in,
consult with, render services for, or in any manner engage in any business
competing with the strategic consulting business of the Company; provided that
passive ownership of less than 5% of the outstanding stock of any publicly
traded corporation shall not, in and of itself, be deemed to violate this
Section 6.10.
(b) During the Noncompete Period, each of ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
agrees that he shall not directly, or indirectly through another entity, (i)
induce or attempt to induce any employee of the Company to leave the employ of
the Company, or in any way interfere with the relationship between the Company
and any employee thereof, (ii) hire any person who
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was an employee of the Company within 180 days prior to the time such employee
was hired, or is to be hired, by either of ▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇, (iii)
induce or attempt to induce any customer, supplier, licensee or other business
relation of the Company to cease doing business with the Company or in any way
interfere with the relationship between any such customer, supplier, licensee or
business relation and the Company or (iv) directly or indirectly acquire or
attempt to acquire an interest in any business relating to the strategic
consulting business of the Company or with which the Company is entertaining
discussions or has requested and received information relating to the
acquisition of such business by the Company.
(c) For a period of 18 months after the Closing Date, each of ▇▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇ agrees that he shall not perform strategic consulting services
for any business or entity that has been a customer or client of the Company
since January 1, 1998.
(d) If, at the time of enforcement of this Section 6.10, a court holds
that the restrictions stated herein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum duration, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein to cover the maximum duration, scope and area
permitted by law. The parties hereto agree that money damages would be an
inadequate remedy for any breach of this Section 6.10. Therefore, in the event
of a breach or threatened breach of this Section 6.10, the Buyer or its
successors or assigns may, in addition to other rights and remedies existing in
its or their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions hereof (without posting a bond or other
security).
SECTION 6.11 Confidentiality.
(a) The Company and the Sellers agree that, unless and until the Closing
has been consummated, each of the Company and the Sellers will hold in strict
confidence, and will not use, any confidential or proprietary data or
information obtained from the Buyer with respect to its business or financial
condition except for the purpose of evaluating, negotiating and completing the
transaction contemplated hereby and unless the Company or the Sellers are
otherwise required to disclose such data or information by law. Information
generally known in the Buyer's industry or which has been disclosed to the
Company or the Sellers by third parties which have a right to do so shall not be
deemed confidential or proprietary information for purposes of this Agreement.
If the transactions contemplated by this Agreement are not consummated, the
Company and the Sellers will return to the Buyer (or certify that they have
destroyed) all copies of such data and information.
(b) The Buyer agrees that, unless and until the Closing has been
consummated, the Buyer will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from the Company or the
Sellers with respect to the Company's business or financial condition except for
the purpose of evaluating, negotiating and completing the
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transaction contemplated hereby and unless the Buyer is otherwise required to
disclose such data or information by law. Information generally known in the
Company's industry or which has been disclosed to the Buyer by third parties
which have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, the Buyer will return to the Company (or
certify that it has destroyed) all copies of such data and information.
SECTION 6.12 Repayment of Loan. Prior to the Closing Date, the Sellers
shall cause the Company to pay in full the outstanding amount of all line of
credit loans (collectively, the "Bank Loan") at any time made by BankBoston,
N.A. or any affiliate thereof to the Company, together with all interest accrued
through the date of repayment and not previously paid.
SECTION 6.13 Pre-Closing Date Distribution.
(a) On the day immediately preceding the Closing Date, the Sellers shall
cause the Company to distribute to the Sellers (i) cash and (ii) accounts
receivable of the Company (the "Distributed Receivables") having an aggregate
value, immediately prior to the Closing Date, equal to the Distribution Amount
(defined below).
(b) Subject to the provisions of Section 6.13(e) of this Agreement, the
"Distribution Amount" shall be $171,472.00.
(c) The term "Closing Balance Sheet" shall mean the balance sheet of the
Company, as of the close of business on August 31, 1999 (but in all events
following the distribution of the Partnership Interest and the Artwork and the
payment in full of the Bank Loan); provided, however, that the Closing Balance
Sheet shall not include the Partnership Interest or the Artwork as an asset, or
the Bank Loan as a liability, and provided, further, that the Closing Balance
Sheet shall include as a liability the aggregate amount of bonuses, not to
exceed $400,000, to be paid to the Specified Employees and/or ▇▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇, as contemplated by the proviso in Section 5.1(f) of this Agreement.
Such Closing Balance Sheet, together with a written calculation of the
Distribution Amount in reasonable detail, shall be prepared by the Sellers and
delivered to the Buyer on the Closing Date.
(d) The Distributed Receivables shall include any and all loans to the
Partnership (item 1120 on the Closing Balance Sheet) and any and all amounts due
from employees (item 1140 on the Closing Balance Sheet) as of the close of
business on the day immediately preceding the Closing Date.
(e) Buyer agrees that it will cause the Company (or any successor thereto)
to act as the agent for the Sellers for purposes of collecting the Distributed
Receivables, and that it will cause the Company (or any successor thereto), as
agent, to use its reasonable best efforts to collect in full the Distributed
Receivables. Buyer shall cause the Company (or any successor thereto) to remit
any amounts collected in respect of the Distributed Receivables to the Sellers
within five business days following the end of each week; provided, however,
that any such
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amounts collected by the Company in payment of the Distributed Receivables shall
first be applied to the payment of any liabilities (net of any prepaid expenses
paid by the Company prior to the date of the Closing Balance Sheet and not
reflected on the Closing Balance Sheet) of the Company accrued prior to the date
of the Closing Balance Sheet and assumed by the Buyer, whether or not such
liabilities are reflected on the Closing Balance Sheet, and the balance of such
amounts collected by the Company shall be remitted to the Sellers as provided in
this Section 6.13(e). All such remittances shall be made to the Sellers in
proportion to their percentage ownership in the stock of the Company immediately
prior to the Closing. In the event that a portion of the accounts receivable
owing from a single account debtor constitutes Distributed Receivables and a
portion constitutes accounts receivable retained by the Company, Buyer shall
cause the Company (or any successor thereto) to apply any payments received from
such account debtor, which payments are not designated as payment in respect of
the Distributed Receivables or the receivables retained by the Company, to the
accounts receivable owing from such account debtor in the order in which such
account receivables were billed.
(f) In the event the Buyer determines that all or a portion of the
accounts receivable or unbilled client expenses (as determined as of the close
of business on August 31, 1999) retained by the Company (i.e., accounts
receivable other than Distributed Receivables), if any, will not be able to be
collected within three months following the Closing Date despite Buyer's
reasonable best efforts, the Buyer shall give notice of such determination to
Sellers. Upon receipt of such notice, Sellers may at their option assist Buyer
in collecting the outstanding accounts receivable. In the event that not all
retained accounts receivable are collected within six months, Sellers shall pay
to the Buyer upon demand an amount equal to the uncollected accounts receivable
and, upon request of the Sellers, the Buyer shall assign such uncollected
accounts receivable (including those on account of unbilled client expenses) to
the Sellers in proportion to their percentage ownership in the stock of the
Company immediately prior to the Closing. If the Buyer reasonably determines
that an account receivable retained by the Company is or will be uncollectible,
it may withhold from amounts otherwise owing to the Sellers under paragraph (e)
of this Section 6.13 an amount equal to the amount of the uncollectible account
receivable.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1 Conditions to Obligation of Each Party to Closing. The
respective obligations of each party to consummate the purchase and sale of the
Shares at the Closing shall be subject to the satisfaction at or prior to the
Closing of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the purchase and sale of the Shares shall be in effect, nor
shall any proceeding brought by any administrative agency or commission or other
governmental authority or instrumentality
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seeking any of the foregoing be pending; and there shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the sale of the Shares, which makes the consummation of the
sale of the Shares illegal; and
(b) Governmental Actions. There shall not have been instituted, pending
or threatened any action or proceeding (or any investigation or other inquiry
that might result in such an action or proceeding) by any governmental authority
or administrative agency before any governmental authority, administrative
agency or court of competent jurisdiction, nor shall there be in effect any
judgment, decree or order of any governmental authority, administrative agency
or court of competent jurisdiction, in either case seeking to prohibit or limit
Buyer from exercising all material rights and privileges pertaining to its
ownership or operation of the Company following the Closing or the ownership or
operation by Buyer or any of its subsidiaries of all or a material portion of
the business or assets of Buyer or any of its subsidiaries as a result of the
transactions contemplated by this Agreement.
SECTION 7.2 Additional Conditions to Obligations of Buyer. The obligation
of Buyer to purchase the Shares at the Closing is also subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties of
the Company and the Sellers contained in this Agreement shall have been true and
correct in all material respects at and as of the date made, and shall be true
and correct in all material respects as of the Closing Date with the same effect
as though made on and as of the Closing Date. In addition, all representations
and warranties of the Company and the Sellers that are qualified by materiality
or similar words shall have been true and correct in all respects when made and
as of the Closing Date. Buyer shall have received a certificate to such effect
signed by each of the Sellers and on behalf of the Company by the President of
the Company;
(b) Agreements and Covenants. Each of the Sellers and the Company shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by the
Sellers or the Company at or prior to the Closing, and Buyer shall have received
a certificate to such effect signed by each of the Sellers and on behalf of the
Company by the President of the Company;
(c) Consents Obtained. All consents, waivers, approvals, authorizations
or orders required to be obtained, and all filings required to be made, by the
Sellers or the Company for the due authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by the Sellers or the Company;
(d) Opinion of Counsel to the Company. Buyer shall have received an
opinion of ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇, LLP, counsel to the Company, in form and
substance reasonably satisfactory to Buyer;
(e) Senior Management Agreements. Each of ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
shall
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have executed and delivered a senior management agreement with the Buyer, in
substantially the form attached hereto as Exhibit 7.2(e) (the "Senior Management
Agreements");
(f) Stockholders Agreement. The Buyer shall have received executed
counterparts of a joinder to the Stockholders Agreement dated as of March 23,
1999 among the Buyer and certain of its stockholders (the "Stockholders
Agreement") from each of ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, in
substantially the form attached hereto as Exhibit 7.2(f).
SECTION 7.3 Additional Conditions to Obligation of the Sellers. The
obligations of the Sellers to sell the Shares at the Closing are also subject to
the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Buyer contained in this Agreement shall have been true and correct in all
material respects at and as of the date made, and shall be true and correct, in
all material respects as of the Closing Date with the same effect as though made
on and as of the Closing Date. In addition, all representations and warranties
of the Buyer that are qualified by materiality or similar words shall have been
true and correct in all respects when made and as of the Closing Date. The
Sellers shall have received a certificate to such effect signed by the President
or a Vice President of the Buyer;
(b) Agreements and Covenants. Buyer shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing, and
the Sellers shall have received a certificate to such effect signed by the
President of the Buyer;
(c) Consents Obtained. All consents, waivers, approvals, authorizations
or orders required to be obtained, and all filings required to be made, by the
Buyer for the authorization, execution and delivery of this Agreement and the
consummation by them of the transactions contemplated hereby shall have been
obtained and made by the Buyer;
(d) Opinion of Counsel to Buyer. The Sellers shall have received an
opinion of Ropes & ▇▇▇▇, counsel to the Buyer, in form and substance
satisfactory to the Sellers; and
(e) Senior Management Agreements. The Buyer shall have executed and
delivered the Senior Management Agreements.
(f) Registration Agreement. The Buyer shall have executed and delivered a
joinder to the Registration Agreement dated as of March 23, 1999 among the Buyer
(as successor to ZC Acquisition Corp.), GTCR Fund VI, L.P., GTCR VI Executive
Fund, L.P., GTCR Associates VI and certain of its stockholders (the
"Registration Agreement"), in substantially the form attached hereto as Exhibit
7.3(f).
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ARTICLE VII
TERMINATION
SECTION 8.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent duly authorized by the Boards of Directors
of the Buyer and the Company; or
(b) by either Buyer or the Company if the Closing shall not have been
consummated by September 17, 1999 (provided that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
failure 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); or
(c) by either Buyer or the Company if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a nonappealable final order, decree or ruling or taken any other action
having the effect of permanently restraining, enjoining or otherwise prohibiting
the purchase and sale of the Shares (provided that the right to terminate this
Agreement under this Section 8.1(c) shall not be available to any party who has
not complied with its obligations under Section 6.2 and such noncompliance
materially contributed to the issuance of any such order, decree or ruling or
the taking of such action); or
(d) by Buyer, (i) if any representation or warranty of the Company or the
Sellers set forth in this Agreement shall be untrue when made, or (ii) upon a
breach of any covenant or agreement on the part of the Sellers or the Company
set forth in this Agreement, in either case, such that the conditions set forth
in Section 7.2(a) or 7.2(b) would not be satisfied (either (i) or (ii) above
being a "Seller Terminating Breach"), provided, that, if such Seller Terminating
Breach is curable prior to September 17, 1999 by the Sellers or the Company
through the exercise of their or its reasonable best efforts and for so long as
the Sellers and the Company continue to exercise such reasonable best efforts,
Buyer may not terminate this Agreement under this Section 8.1(d); or
(e) by the Company, (i) if any representation or warranty of Buyer set
forth in this Agreement shall be untrue when made, or (ii) upon a breach by
Buyer of any covenant or agreement set forth in this Agreement, in either case,
such that the conditions set forth in Section 7.3(a) or 7.3(b) would not be
satisfied (either (i) or (ii) above being a "Buyer Terminating Breach"),
provided, that, if such Buyer Terminating Breach is curable prior to September
17, 1999 by Buyer through the exercise of its reasonable best efforts and for so
long as Buyer continues to exercise such reasonable best efforts, the Company
may not terminate this Agreement under this Section 8.1(e).
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SECTION 8.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.1, all obligations of the parties hereunder
shall terminate without any liability of any party to any other party (other
than with respect to the provisions of all of Articles 8 and 9, and Sections
10.1, 10.2, 10.7 and 10.12, each of which shall survive any such termination);
provided, however, that no termination shall relieve any party from any
liability arising from or relating to breach prior to termination.
SECTION 8.3 Fees and Expenses. All fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, whether or not the Closing occurs;
provided that the fees and expenses of the Company incurred in connection with
this Agreement and the transaction contemplated hereby shall be deemed to be
expenses of the Sellers.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Survival of Representations and Warranties.
(a) The representations and warranties of the Sellers made in this
Agreement and in the documents and certificates delivered in connection herewith
shall survive the Closing for a period of two years from the Closing Date,
provided, however, that (i) the representations and warranties contained in
Sections 2.5 and 3.4 shall survive indefinitely and (ii) the representations and
warranties that relate to Taxes in Section 3.15, shall survive until the
expiration of the applicable statutes of limitations for such Taxes (including
any extensions thereof), provided, further, that representations and warranties
with respect to which a claim for indemnification is made within the applicable
survival period shall survive until such claim is finally determined and paid.
(b) The representations and warranties of the Buyer made in this Agreement
and in the documents and certificates delivered in connection herewith shall
survive the Closing for a period of two years following the Closing Date,
provided, however, that representations and warranties with respect to which a
claim for indemnification is made within such two-year period shall survive
until such claim is finally determined and paid.
(c) No claim for indemnification may be made with respect to a
representation and warranty after the expiration of the applicable survival
period, other than claims based on fraud.
SECTION 9.2 Indemnification by the Sellers. The Sellers, jointly and
severally, (each in his capacity as an indemnifying party, an "Indemnifying
Party") covenants and agrees that he will indemnify, defend, protect, and hold
harmless the Buyer and the Company and each of their respective subsidiaries and
affiliates (each in its capacity as an indemnified party, an "Indemnitee") at
all times from and after the date of this Agreement from and against all
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claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) (collectively "Damages") incurred
by such Indemnitee as a result of or incident to:
(a) any breach of any representation or warranty of the Sellers set forth
herein or in any certificate or other document delivered in connection herewith
(as each such representation or warranty would read if all qualifications as to
materiality were deleted therefrom);
(b) any breach or nonfulfillment by the Sellers or the Company of, or any
noncompliance by the Sellers or the Company with, any covenant, agreement, or
obligation contained herein; and
(c) any Taxes of any kind relating to or arising in connection with the
transfer of the Shares to the Buyer;
provided, however, that in the case of any breach by any Seller of any
representation or warranty contained in Section 2 or any covenant, agreement or
obligation contained in this Agreement, such breaching Seller shall be severally
(and not jointly and severally) liable, for any indemnification obligations
under this Section 9 resulting from such breach, and each non-breaching Seller
shall have no liability for any indemnification obligations under this Section 9
resulting from such breach.
SECTION 9.3 Indemnification by the Buyer. The Buyer (in its capacity as
an indemnifying party, an "Indemnifying Party") covenants and agrees that it
will indemnify, defend, protect and hold harmless each of the Sellers (each in
his capacity as an indemnified party, an "Indemnitee") at all times from and
after the date of this Agreement from and against all Damages incurred by such
Indemnitee as a result of or incident to (a) any breach of any representation or
warranty of the Buyer set forth herein or in any certificate or other document
delivered in connection herewith (as each such representation or warranty would
read if all qualifications as to materiality were deleted therefrom) and any
misrepresentation in connection with this Agreement or the transactions
contemplated hereby; and (b) any breach or nonfulfillment by the Buyer of, or
noncompliance by the Buyer with, any covenant, agreement or obligation contained
herein or in any certificate or other document delivered in connection herewith.
SECTION 9.4 Third Person Claims. Promptly after an Indemnitee has
received notice of or has knowledge of any claim by a person not a party to this
Agreement ("Third Person") or the commencement of any action or proceeding by a
Third Person as to which such Indemnitee desires to seek indemnification
hereunder, the Indemnitee shall give the Indemnifying Party written notice of
such claim or the commencement of such action or proceeding; provided, however,
that the failure to give such notice will not affect the Indemnitees' right to
indemnification hereunder with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a
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result of such failure. If the Indemnifying Party notifies the Indemnitee within
30 days from the receipt of the foregoing notice that he wishes to defend
against the claim by the Third Person, then the Indemnifying Party shall have
the right to assume and control the defense of the claim by appropriate
proceedings with counsel reasonably acceptable to Indemnitee. The Indemnitee may
participate in the defense, at its sole expense, of any such claim for which the
Indemnifying Party shall have assumed the defense pursuant to the preceding
sentence, provided that counsel for the Indemnifying Party shall act as lead
counsel in all matters pertaining to the defense or settlement of such claims,
suit or proceedings; provided, however, that Indemnitee shall control the
portion of defense of any claim or proceeding seeking equitable relief against
Indemnitee that in Indemnitee's reasonable judgment could have a material and
adverse effect on Indemnitee's business apart from the payment of money damages.
The Indemnitee shall be entitled to indemnification for the reasonable fees and
expenses of its counsel for any period during which the Indemnifying Party has
not assumed the defense of any claim. Whether or not the Indemnifying Party
shall have assumed the defense of any claim, neither the Indemnitee nor the
Indemnifying Party shall make any settlement with respect to any such claim,
suit or proceeding without the prior consent of the other, which consent shall
not be unreasonably withheld or delayed. It is understood and agreed that in
situations where failure to settle a claim expeditiously could have an adverse
effect on the party wishing to settle, the failure of a party controlling the
defense to act upon a request for consent to such settlement within ten business
days of receipt of notice thereof shall be deemed to constitute consent to such
settlement for purposes of this Article 9.
SECTION 9.5 Limitations on Indemnification. No Indemnitee shall be
entitled to indemnification under this Article 9 for Damages for breaches of
representations and warranties until the aggregate amount of such Damages
incurred by Indemnitee exceeds $100,000, in which event such persons shall be
entitled to indemnification for the aggregate cumulative amount of all Damages
in excess of $100,000; provided, however, that the liability of any Seller for
any indemnification obligations under this Section 9 shall be limited to the
amount of the Purchase Price paid to such Seller.
SECTION 9.6 Method of Payment. All claims for indemnification shall be
payable in cash.
SECTION 9.7 Exclusive Remedy. This Section 9 shall provide the sole and
exclusive remedy for any and all losses sustained or incurred by the Sellers,
the Buyer and the Company or the successors and assigns of the foregoing other
than for equitable action and fraud.
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ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Disclosure. Any disclosure made with reference to one or
more sections of the Seller Disclosure Schedule or the Buyer Disclosure Schedule
shall be deemed disclosed only with respect to such section or sections.
SECTION 10.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to the Buyer:
ZEFER Corp.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Executive Vice President and General Counsel
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.:(▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Sellers, at such persons address shown on the signature page
hereto and if to the Company:
▇▇▇▇▇ & Company, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Managing Director
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
-▇▇-
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.:(▇▇▇) ▇▇▇-▇▇▇▇
SECTION 10.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliates" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; including, without limitation, any partnership
or joint venture in which the first mentioned person (either alone, or through
or together with any other subsidiary) has, directly or indirectly, an interest
of 5% or more;
(b) "business day" means any day other than a day on which banks in The
Commonwealth of Massachusetts are required or authorized to be closed;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "knowledge" means actual knowledge after reasonable investigation and,
with respect to the Company, means the actual knowledge after reasonable
investigation of any director or executive officer of the Company, including,
without limitation, each Seller and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇;
(e) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in Section
13(d)(3) of the Exchange Act); and
(f) "subsidiary" or "subsidiaries" of the Company, Buyer or any other
person means any corporation, partnership, joint venture or other legal entity
of which the Company, the Buyer or such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
SECTION 10.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 10.5 Waiver. At any time prior to the Closing, any party hereto
may with respect to any other party hereto (a) extend the time for the
performance of any of the
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obligations or other acts, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, or (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
SECTION 10.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
SECTION 10.8 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.
SECTION 10.9 Assignment. Neither party may assign any of its rights under
this Agreement, except that Buyer may assign all or any of its rights hereunder
to any wholly-owned subsidiary of the Buyer provided that no such assignment
shall relieve the Buyer of its obligations hereunder. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon and
inure to the benefit of the successors and permitted assigns, including any
heirs, executors or administrators, of the parties.
SECTION 10.10 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation.
SECTION 10.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. Subject to the provisions of
Section 9.7, all rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
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SECTION 10.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of The Commonwealth of Massachusetts
without giving effect to the conflict of laws principles thereof.
SECTION 10.13 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the Buyer, the Company and the Sellers have caused this
Stock Purchase Agreement to be executed as of the date first written above.
ZEFER CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇ & COMPANY, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
No. of Shares of Common Stock: 203,883
-------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
No. of Shares of Common Stock: 87,379
------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
No. of Shares of Common Stock: 8,738
-----
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇