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AGREEMENT AND PLAN OF ORGANIZATION
dated as of January 8, 1998
by and among
IT PARTNERS, INC.,
ITP NO. 10, INC.,
(a wholly-owned subsidiary of IT Partners, Inc.)
SEQUOIA DIVERSIFIED PRODUCTS, INC.,
and
the STOCKHOLDERS named herein
TABLE OF CONTENTS
1. THE MERGER 5
1.1 Delivery and Filing of Articles of Merger 5
1.2 Effective Time of the Merger 6
1.3 Certificate of Incorporation, By-laws and Board of
Directors of Surviving Corporation 6
1.4 Certain Information With Respect to the Capital
Stock of the COMPANY, ITP and NEWCO 7
2. CONVERSION OF STOCK 7
2.1 Manner of Conversion 7
2.2 Rights -- ITP 8
3. DELIVERY OF MERGER CONSIDERATION 8
3.1 Delivery of Merger Consideration 8
3.2 Closing Date Adjustments to Merger Consideration 8
3.3 Post-Closing Adjustments to Merger Consideration 9
4. CLOSING 11
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS 12
5.1 Due Organization 12
5.2 Authorization 12
5.3 Capital Stock of the COMPANY 13
5.4 Subsidiaries 13
5.5 Financial Statements 13
5.6 Liabilities and Obligations 14
5.7 Accounts and Notes Receivable 14
5.8 Intellectual Property; Permits and Intangibles 14
5.9 Environmental Matters 15
5.10 Personal Property 17
5.11 Significant Customers; Material Contracts and
Commitments 18
5.12 Real Property 19
5.13 Insurance 20
5.14 Compensation; Employment Agreements; Organized
Labor Matters 20
5.15 Employee Plans 20
5.16 Compliance with ERISA 20
5.17 Conformity with Law; Litigation 21
5.18 Taxes 22
5.19 No Violations 25
5.20 Business Conduct 25
5.21 Misrepresentation 26
5.22 Authority; Ownership 27
5.23 No Intention to Dispose of ITP Stock 27
6. REPRESENTATIONS OF ITP and NEWCO 27
6.1 Due Organization 27
6.2 Authorization 28
6.3 Transaction Not a Breach 28
6.4 Misrepresentation 28
6.5 Capital Stock 28
6.6 Subsidiaries 29
6.7 Conformity with Law; Litigation 29
6.8 Financial Statements 30
6.9 No Undisclosed Liabilities 30
6.10 HSR Act 30
6.11 No Material Adverse Change 30
7. COVENANTS PRIOR TO CLOSING 31
7.1 Access and Cooperation: Due Diligence 31
7.2 Conduct of Business Pending Closing 31
7.3 Prohibited Activities 32
7.4 No Shop 33
7.5 Agreements 33
7.6 Notification of Certain Matters 34
7.7 Amendment of Schedules 34
7.8 Further Assurances 35
7.9 Approval of Merger Agreement 35
7.10 Conduct of Business by ITP Pending the Merger 35
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NAMED
STOCKHOLDERS AND THE COMPANY 36
8.1 Representations and Warranties 36
8.2 Performance of Obligations 36
8.3 No Litigation 36
8.4 Opinion of Counsel 36
8.5 Consents and Approvals 37
8.6 Good Standing Certificates 37
8.7 Secretary's Certificate 37
8.8 No Material Adverse Change 37
8.9 Employment Agreements 37
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF ITP AND NEWCO 37
9.1 Representations and Warranties 37
9.2 Performance of Obligations 38
9.3 No Litigation 38
9.4 Secretary's Certificate 38
9.5 No Material Adverse Change 38
9.6 STOCKHOLDERS' Release 38
9.7 Termination of Related Party Agreements 39
9.8 Opinion of Counsel 39
9.9 Consents and Approvals 39
9.10 Good Standing Certificates 39
9.11 Employment Agreements 39
9.12 Stockholders' Agreement 39
9.13 Subordination Agreement 39
9.14 Financing 39
9.15 Letter Agreement 40
9.16 Employment Matters 40
10. COVENANTS AFTER CLOSING 40
10.1 Preparation and Filing of Tax Returns 40
10.2 Stock Options 41
10.3 Annual Incentive Compensation Plan 41
11. INDEMNIFICATION 41
11.1 General Indemnification by the STOCKHOLDERS 41
11.2 Indemnification by ITP 42
11.3 Third Person Claims 42
11.4 Exclusive Remedy 43
11.5 Limitations on Indemnification 43
11.6 Subrogation 44
11.7 Tax and Insurance 44
11.8 Undertakings 44
12. TERMINATION OF AGREEMENT 44
12.1 Termination 44
12.2 Liabilities in Event of ▇▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 45
13.1 STOCKHOLDERS 45
13.2 ITP and NEWCO 46
13.3 Damages 46
13.4 Survival 46
14. STOCKHOLDERS' AGREEMENT 46
14.1 Stockholders' Agreement 46
15. FEDERAL SECURITIES ACT REPRESENTATIONS 47
15.1 Compliance with Law 47
15.2 Economic Risk: Sophistication 47
16. GENERAL 48
16.1 Cooperation 48
16.2 Successors and Assigns 48
16.3 Entire Agreement 48
16.4 Counterparts 49
16.5 Brokers and Agents 49
16.6 Expenses 49
16.7 Notices 49
16.8 Governing Law 50
16.9 Exercise of Rights and Remedies 50
16.10 Time 51
16.11 Reformation and Severability 51
16.12 Remedies Cumulative 51
16.13 Captions 51
16.14 Amendments and Waivers 51
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BY-LAWS OF ITP AND
NEWCO
ANNEX III MERGER CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCK OWNERSHIP OF ITP
ANNEX VI FORM OF OPINION OF COUNSEL TO ITP
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
ANNEX IX FORM OF JOINDER AGREEMENT
ANNEX X FORM OF PROMISSORY NOTE
ANNEX XI FORM OF SUBORDINATION AGREEMENT
ANNEX XII NORMALIZING ADJUSTMENTS OF THE COMPANY
ANNEX XIII LETTER AGREEMENT WITH CERTAIN STOCKHOLDERS
AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (this "Agreement") is made as of
January 8, 1998, by and among (i) IT PARTNERS, INC., a Delaware corporation
("ITP"), (ii) ITP NO. 10, INC., a Delaware corporation ("NEWCO"), (iii)
SEQUOIA DIVERSIFIED PRODUCTS, INC., a Michigan corporation (the "COMPANY"),
and (iv) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as Trustee U-A, dated November 9, 1995, ▇▇▇▇ ▇.
▇▇▇▇, as Trustee U-A dated December 13, 1995, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇▇, as Trustee U-A dated October 20, 1972, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (collectively, the "NAMED STOCKHOLDERS" and
together with the other shareholders of the COMPANY, the "STOCKHOLDERS").
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on December 12, 1997,
solely for the purpose of completing the transactions set forth herein, and is
a wholly-owned subsidiary of ITP;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into NEWCO pursuant to this Agreement and the applicable provisions of the
laws of the States of Delaware and Michigan (the "Merger"), and in furtherance
thereof have approved the Merger;
WHEREAS, unless the context otherwise requires, capitalized terms used in
this Agreement or in any schedule attached hereto and not otherwise defined
herein shall have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any subsidiary and any member of a
Relevant Group.
"Acquisition Companies" means NEWCO and each of the other Delaware
companies wholly-owned by ITP prior to the Closing Date.
"Acquisition Transaction" has the meaning set forth in Section 7.4.
"Affiliates" means any other person or entity that directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with a person.
"Agent" has the meaning set forth in Section 9.14.
"Articles of Merger" means those Articles or Certificates of Merger with
respect to the Merger substantially in the forms attached as Annex I hereto or
with such changes therein as may be required by applicable state laws.
"Balance Sheet" means the COMPANY's audited October 31, 1997 Balance
Sheet prepared by ITP's independent accountants, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P. and
delivered to the COMPANY.
"Balance Sheet Date" means October 31, 1997.
"Benefit Plan" means any Plan existing at the Closing Date or prior
thereto, established or to which contributions have at any time been made by
the COMPANY, any ERISA Affiliate, or any predecessor of any of the foregoing,
under which any employee or former employee of the COMPANY, or any beneficiary
thereof, is covered, is eligible for coverage or has benefit rights.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"Company Delivered Documents" means this Agreement and the Schedules
attached hereto, as well as those documents, agreements and instruments to be
executed and delivered by the COMPANY and the NAMED STOCKHOLDERS at the
Closing in connection with this Agreement.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second
recital of this Agreement.
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment
agreement, commitment, undertaking, obligation, whether written or oral,
express or implied.
"Debt" means all liabilities of the COMPANY for borrowed money.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization prepared in accordance with GAAP.
"Effective Time of the Merger" means the time as of which the Merger
becomes effective, which the parties hereto contemplate will occur on the
Closing Date.
"Environmental Requirements" has the meaning set forth in Section 5.9(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person who is, or at any time was, a member
of a controlled group (within the meaning of Section 412(n)(6) of the Code)
that includes, or at any time included, the COMPANY or any predecessor of the
COMPANY.
"Estimated Closing Date Balance Sheet" means a Closing Date balance sheet
for the COMPANY prepared by the COMPANY and reviewed by ITP, which shall
include an estimation of the Net Asset Value as of the Closing Date.
"Expiration Date" has the meaning set forth in Section 5(A).
"Final Closing Balance Sheet" means the Closing Date Balance Sheet as
finally determined under Section 3.3.
"Final Net Asset Value" means Net Asset Value as finally determined under
Section 3.3.
"Final FYE EBITDA" means the FYE EBITDA as finally determined under
Section 3.3.
"FYE EBITDA" means the EBITDA of the COMPANY for the twelve (12) month
period ending December 31, 1997, subject to the normalizing adjustments of the
COMPANY set forth on Annex XII hereto.
"GAAP" means generally accepted accounting principles of the United
States applied in a manner consistent with the past practices of the COMPANY.
"Governmental Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or judicial
authority, or any public, private or industry regulatory authority, whether
national, Federal, state, local or otherwise.
"Hazardous Materials" has the meaning set forth in Section 5.9(a).
"Intellectual Property" means trademarks, service marks, trade dress,
trade names, patents and copyrights and any registration or application for
any of the foregoing, and any trade secret, invention, discovery, method of
doing business, process, know-how, including but not limited to, training
techniques, training materials, computer software (including source and object
code), databases, technology systems and integration techniques, product
design and product packaging.
"IPO" means the sale of ITP Common Stock by or for the account of ITP
pursuant to an initial public offering registered under the 1933 Act.
"ITP" has the meaning set forth in the first paragraph of this Agreement.
"ITP Charter Documents" has the meaning set forth in Section 6.1.
"ITP Delivered Documents" means this Agreement and those documents,
agreements and instruments to be executed and delivered by ITP and NEWCO at
the Closing in connection with this Agreement.
"ITP Expiration Date" has the meaning set forth in Section 6.
"ITP Stock" means the common stock, par value $.01 per share, of ITP.
"Knowledge", "awareness" or similar expressions mean only the actual
knowledge of the individual to which the expression is applicable. When such
terms are used in connection with the knowledge of a corporate entity, such
knowledge shall include only the actual knowledge of the officers or directors
of that corporate entity.
"Lien" has the meaning set forth in Section 5.6.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Contract" means any Contract set forth on Schedule 5.8, 5.10,
5.11, 5.12 or 5.14 or any other Contract to which the COMPANY is a party or by
which its properties are bound which is material to the COMPANY.
"Merger" means the merger of the COMPANY with and into NEWCO pursuant to
this Agreement and the applicable provisions of the laws of the States of
Delaware and Michigan, with NEWCO as the Surviving Corporation.
"Net Asset Value" means the COMPANY's net worth as determined in
accordance with GAAP.
"Net Asset Value Adjustment" has the meaning set forth in Section
3.3(a)(ii).
"NEWCO" has the meaning set forth in the first paragraph of this
Agreement.
"NEWCO Stock" means the common stock, par value $.01 per share, of NEWCO.
"Note" has the meaning set forth in Section 2.1(a).
"Permitted Liens" means any purchase money security interests created in
the ordinary course of business, any Liens for Taxes either not yet due or
being contested in good faith and by appropriate proceedings (and for which
adequate reserves have been established and are being maintained), and any
materialmens', mechanics', workers', repairmens', employees' or other like
Liens arising in the ordinary course of business.
"Person" means any natural person, corporation, partnership,
proprietorship, other business organization, trust, union, association or
Governmental Authority.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA.
"Proposed Final Closing Balance Sheet" means a Closing Date Balance Sheet
for the COMPANY prepared by ITP in accordance with Section 3.3.
"Relevant Group" has the meaning set forth in Section 5.18(a).
"Returns" has the meaning set forth at the end of Section 5.18.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3(e).
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" shall mean NEWCO as the surviving party in the
Merger.
"Tax" or "Taxes" has the meaning set forth at the end of Section 5.18.
"Taxing Authority" has the meaning set forth at the end of Section 5.18.
"Transfer Taxes" has the meaning set forth in Section 17.6(c).
"Working Capital Cash Needs" means that amount of cash and cash
equivalents equal to $536,233.
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:
1. THE MERGER
1.1 Delivery and Filing of Articles of Merger. The Constituent
Corporations will cause the Articles of Merger to be signed, verified and
filed with the Secretary of State of the State of Delaware and the Department
of Consumer and Industry Services of the State of Michigan and stamped receipt
copies of each such filing to be delivered to ITP on or before the Closing
Date.
1.2 Effective Time of the Merger. At the Effective Time of the
Merger and subject to the terms and conditions of this Merger and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law")
and the Michigan Business Corporation Act, as amended ("Michigan Law"), the
COMPANY shall be merged with and into NEWCO in accordance with the Articles of
Merger, the separate existence of the COMPANY shall cease and NEWCO shall be
the Surviving Corporation in the Merger. At the Effective Time of the Merger,
the effect of the Merger otherwise shall be as provided in the applicable
provisions of Delaware Law and Michigan Law. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time of the Merger,
all the property, rights, privileges, powers and franchises of the COMPANY and
NEWCO shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the COMPANY and NEWCO shall become the debts, liabilities and duties
of the Surviving Corporation. The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, By-laws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(a) the Certificate of Incorporation of NEWCO then in effect
shall be the Certificate of Incorporation of the Surviving Corporation until
amended as provided by law;
(b) the By-laws of NEWCO then in effect shall be the By-laws of
the Surviving Corporation until amended as provided by law;
(c) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇ shall
be the directors of the Surviving Corporation until their respective
successors are elected or appointed and qualified in accordance with the terms
the By-laws of the Surviving Corporation; the Board of Directors of the
Surviving Corporation shall hold office subject to the provisions of the laws
of the State of Delaware and of the Certificate of Incorporation and By-laws
of the Surviving Corporation; and
(d) the officers of the COMPANY immediately prior to the
Effective Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, and effective upon the
Effective Time of the Merger, except that ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ shall also be
appointed Vice Chairman of the Board of the Surviving Corporation. In
addition, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall be appointed Chairman of the Board of the
Surviving Corporation and ▇▇▇▇▇ ▇. ▇▇▇▇▇ shall be appointed vice president and
assistant secretary of the Surviving Corporation, each such officer to serve,
subject to the provisions of the Certificate of Incorporation and By-laws of
the Surviving Corporation, until his or her successor is duly elected and
qualified.
(e) Subject to the provisions of the Stockholders' Agreement
referred to in Section 9.12 hereof and subject to the provisions of the laws
of the State of Delaware, ITP shall, for the period beginning on the Closing
Date and ending on the effective time of an IPO, appoint and retain ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ as a director of ITP and, after the effective time of an IPO, shall
use its best efforts to have ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ nominated and appointed as a
director of ITP to serve until his successor is duly elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, ITP and NEWCO. The respective designations and numbers of
outstanding shares and voting rights of each class of outstanding capital
stock of the COMPANY, ITP and NEWCO as of the date of this Agreement are as
follows:
(a) as of the date of this Agreement, the authorized capital
stock of the COMPANY is as set forth on Schedule 1.4 hereto;
(b) immediately prior to the Closing Date, the authorized
capital stock of ITP will consist of ten million shares of ITP Stock and two
million shares of preferred stock, par value $.01 per share ("Preferred
Stock"); and
(c) as of the date of this Agreement, the authorized capital
stock of NEWCO consists of 1,000 shares of NEWCO Stock, of which 100 shares
are issued and outstanding and beneficially owned by ITP.
2. CONVERSION OF STOCK
2.1 Manner of Conversion. The manner of converting the shares of
(i) outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO
Stock, issued and outstanding immediately prior to the Effective Time of the
Merger, respectively, into shares of (x) ITP Stock and (y) common stock of the
Surviving Corporation, respectively, shall as of the Effective Time of the
Merger be as follows:
(a) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger will be canceled and
extinguished and, by virtue of the Merger and without any action on the part
of the holder thereof, automatically shall be deemed to represent, with
respect to each STOCKHOLDER, (1) the right to receive the number of shares of
ITP Stock set forth on Annex III hereto with respect to such STOCKHOLDER; (2)
the right to receive the amount of cash set forth on Annex III hereto with
respect to such STOCKHOLDER; and (3) the right to receive a subordinated
promissory note (the "Note") issued by ITP in an amount specified on Annex III
hereto with respect to such STOCKHOLDER (collectively, the "Merger
Consideration") and with the terms specified in Annex X hereto and subject to
a Subordination Agreement in the form attached hereto as Annex XI;
(b) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of ITP Stock or
other consideration shall be delivered or paid in exchange therefor; and
(c) each share of NEWCO Stock issued and outstanding immediately prior to
the Effective Time of the Merger shall, by virtue of the Merger and without
any action on the part of ITP, automatically be converted into one fully paid
and non-assessable share of common stock of the Surviving Corporation, which
shall constitute all of the issued and outstanding shares of common stock of
the Surviving Corporation immediately after the Effective Time of the Merger.
2.2 Rights -- ITP Stock. All ITP Stock received by the
STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on
resale or transfer described in Sections 14 and 15 hereof, have the same
rights as all the other shares of outstanding ITP Stock by reason of the
provisions of the Certificate of Incorporation of ITP or as otherwise
provided by the Delaware Law.
3. DELIVERY OF MERGER CONSIDERATION; CLOSING AND POST-CLOSING ADJUSTMENTS
3.1 (a) Delivery of Merger Consideration. At the Effective
Time of the Merger and on the Closing Date, the STOCKHOLDERS, who are the
holders of all outstanding certificates representing shares of COMPANY Stock,
upon surrender of such certificates and subject to the adjustments specified
under Sections 3.2 and 3.3 below shall receive (i) the respective number of
shares of ITP Stock set forth on Annex III; (ii) the amount of cash set forth
on Annex III hereto with respect to such STOCKHOLDER; and (iii) a Note issued
by ITP in an amount specified on Annex III hereto with respect to such
STOCKHOLDER and with the terms specified in Annex X hereto and subject to a
Subordination Agreement in the form attached hereto as Annex XI. The cash
payable pursuant to clause (ii) shall be paid by wire transfer to the
STOCKHOLDERS in immediately available funds.
(b) Certificate Delivery. To the extent practicable, the
STOCKHOLDERS shall deliver to Piper & Marbury L.L.P., counsel to ITP, at the
Closing the certificates, representing all of the COMPANY Stock, duly endorsed
in blank by the STOCKHOLDERS, or accompanied by stock powers duly endorsed in
blank, with signatures guaranteed by a national or state chartered bank or
other financial institution, and with all necessary Transfer Tax and other
revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled.
The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the
endorsement of the stock certificates or other documents of conveyance with
respect to such COMPANY Stock or with respect to the stock powers accompanying
any COMPANY Stock. Upon consummation of the transactions contemplated to
occur on the Closing Date, all of such certificates shall be deemed released
by such counsel to ITP without any further action on the part of such counsel.
3.2 Closing Date Adjustments to Merger Consideration. On the
Closing Date, the amount of cash payable shown on Annex III shall be (x)
reduced by an amount equal to any Debt reflected on the Estimated Closing Date
Balance Sheet, and (y) reduced by the amount by which Working Capital Cash
Needs exceeds cash and cash equivalents as reflected on the Estimated Closing
Date Balance Sheet (the "Closing Date Adjustments"). Any additional payments
from the STOCKHOLDERS arising from the Closing Date Adjustments shall be paid
by and allocated among the STOCKHOLDERS in accordance with the provisions set
forth in Annex III under the caption "Post-Closing Adjustments to Merger
Consideration". All such additional payments shall be made by the
STOCKHOLDERS within five (5) business days after such final determination. In
the event that any of the STOCKHOLDERS are required to make any payments to
ITP in the form of the ITP Stock or the Notes, such STOCKHOLDERS shall return
to ITP (i) certificates evidencing sufficient shares of ITP Stock necessary to
comply with the additional payments required, and (ii) the Notes previously
issued to such STOCKHOLDERS; promptly after the return of the foregoing, ITP
shall reissue certificates for the ITP Stock and the Notes to the STOCKHOLDERS
in accordance with such final determination. In the event that the
STOCKHOLDERS are required to make any payments in the form of cash, such
payments shall be made in immediately available funds by wire transfer,
cashier's check or other mutually agreed upon manner.
3.3 Post-Closing Adjustments to Merger Consideration.
(a) Net Asset Value Adjustment.
(i) On January 31, 1998, ITP, together with its
accountants, shall prepare and deliver to STOCKHOLDERS' accountants a Proposed
Final Closing Balance Sheet prepared on a basis consistent with the Balance
Sheet. The Proposed Final Closing Balance Sheet shall include an evaluation
of the Net Asset Value at the Closing Date. The Proposed Final Closing
Balance Sheet shall be accompanied by a report of ITP's accountants. The
STOCKHOLDERS and STOCKHOLDERS' accountants shall have the right to consult
during reasonable business hours with appropriate personnel of ITP and ITP's
accountants and to have access to, and to review and make copies of, the work
papers of ITP and ITP's accountants with respect to the preparation of the
Proposed Closing Balance Sheet.
(ii) If the Final Net Asset Value is less than the Net
Asset Value shown on the Estimated Closing Date Balance Sheet, the
STOCKHOLDERS shall pay to ITP the difference plus interest thereon from the
Closing Date through the date of payment at a rate per annum, which may
fluctuate from time to time, equal to the then prime rate of Citibank (the
"Net Asset Value Adjustment"). Any additional payments from the STOCKHOLDERS
arising from the Net Asset Value Adjustment shall be paid by and allocated
among the STOCKHOLDERS in accordance with the provisions set forth in Annex
III under the caption "Post-Closing Adjustments to Merger Consideration". All
such additional payments shall be made by the STOCKHOLDERS within five (5)
business days after such final determination. In the event that any of the
STOCKHOLDERS are required to make any payments to ITP in the form of the ITP
Stock or the Notes, such STOCKHOLDERS shall return to ITP (i) certificates
evidencing sufficient shares of ITP Stock necessary to comply with the
additional payments required, and (ii) the Notes previously issued to such
STOCKHOLDERS; promptly after the return of the foregoing, ITP shall reissue
certificates for the ITP Stock and the Notes to the STOCKHOLDERS in accordance
with such final determination. In the event that the STOCKHOLDERS are
required to make any payments in the form of cash, such payments shall be made
in immediately available funds by wire transfer, cashier's check or other
mutually agreed upon manner.
(b) Subsequent Valuation Adjustment.
(i) On January 31, 1998, upon presentation of financial
statements accompanied by a report of ITP's accountants reflecting the
COMPANY's FYE EBITDA, the consideration received by the STOCKHOLDERS will be
adjusted (i) upward by the amount by which FYE EBITDA multiplied by 8.86 (the
"Subsequent Valuation") exceeds the Merger Consideration, or (ii) downward by
the amount by which the Subsequent Valuation is less than the Merger
Consideration. The STOCKHOLDERS and STOCKHOLDERS' accountants shall have the
right to consult during reasonable business hours with appropriate personnel
of ITP and ITP's accountants and to have access to, and to review and make
copies of, the work papers of ITP and ITP's accountants with respect to the
preparation of the financial statements reflecting the COMPANY's FYE EBITDA.
(ii) The consideration payable pursuant to this Section
3.3(b) to or by the STOCKHOLDERS shall be paid by or to and allocated among
the STOCKHOLDERS in accordance with the provisions set forth in Annex III
under the caption "Post-Closing Adjustments to Merger Consideration"; provided
however, that the aggregate value of merger consideration payable to the
STOCKHOLDERS shall not exceed $27,500,000. In the event that any of the
STOCKHOLDERS are required to make any payments to ITP in the form of the ITP
Stock or the Notes, such STOCKHOLDERS shall return to ITP (i) certificates
evidencing sufficient shares of ITP Stock necessary to comply with the
additional payments required, and (ii) the Notes previously issued to such
STOCKHOLDERS; promptly after the return of the foregoing, ITP shall reissue
certificates for the ITP Stock and the Notes to the STOCKHOLDERS in accordance
with such final determination. In the event that ITP or the STOCKHOLDERS are
required to make any payments in the form of cash, such payments shall be made
in immediately available funds by wire transfer, cashier's check or other
mutually agreed upon manner.
(c) Procedure to Resolve Dispute.
(i) The STOCKHOLDERS may dispute the Proposed Final Closing
Balance Sheet and the determination of FYE EBITDA prepared by ITP and ITP's
accountants by notice to ITP setting forth in reasonable detail the amounts in
dispute and the basis for such dispute within 45 days of its receipt of the
Proposed Final Closing Balance Sheet and the determination of FYE EBITDA. If
the STOCKHOLDERS fail to deliver a notice of objections within such 45-day
period, the STOCKHOLDERS shall be deemed to have accepted the Proposed Final
Closing Date Balance Sheet (including the Net Asset Value thereon) and the
determination of FYE EBITDA. If the aggregate amounts in dispute are less
than $100,000, the Net Asset Value and the FYE EBITDA proposed by ITP shall be
adjusted by one-half of the dispute amount which shall then constitute the
Final Closing Balance Sheet, the Final Net Asset Value and the Final FYE
EBITDA.
(ii) If the amounts in dispute exceed $100,000, ITP's
accountants and the STOCKHOLDERS' accountants shall attempt in good faith to
resolve such dispute, and any resolution as to any disputed amounts shall be
final, binding and conclusive. If there is no resolution of any such dispute
within 15 days of the date of receipt by ITP of a written notice of dispute,
ITP and the STOCKHOLDERS shall, within five additional days, retain Coopers &
▇▇▇▇▇▇▇, L.L.P., which firm shall, within 30 days of each submission, resolve
such remaining dispute, and provide written notice of such resolution by
facsimile, confirmed by mail, and such resolution shall be binding and
conclusive. Such resolution shall be within the range of amounts proposed by
ITP's accountants and the amount proposed by the STOCKHOLDERS' accountants as
to each disputed item. The fees and disbursements of Coopers & ▇▇▇▇▇▇▇,
L.L.P. shall be borne by ITP and the STOCKHOLDERS in the proportion that the
aggregate amount of disputed items submitted to Coopers & ▇▇▇▇▇▇▇, L.L.P. that
is unsuccessfully disputed by each party (as finally determined by Coopers &
▇▇▇▇▇▇▇, L.L.P.) bears to the total amount of the disputed items as submitted
to Coopers & ▇▇▇▇▇▇▇, L.L.P. After resolving the items in dispute, Coopers &
▇▇▇▇▇▇▇, L.L.P. shall prepare and deliver a Final Closing Balance Sheet
(including a certification of the Final Net Asset Value thereon) and a final
determination of FYE EBITDA.
4. CLOSING
At or prior to the Closing (as defined below), the parties shall take all
actions necessary to prepare to (i) effect the Merger (including, if permitted
by applicable state law and if desired by the parties hereto, the advance
filing with the appropriate state authorities of the Articles of Merger, which
shall become effective at the Effective Time of the Merger) and (ii) effect
the conversion and delivery of shares referred to in Section 2 hereof;
provided, that such actions shall not include the actual completion of the
Merger for purposes of this Agreement or the conversion and delivery of the
shares and transmission of funds by wire referred to in Section 3 hereof,
which actions shall only be taken upon the Closing Date as herein provided.
If there is no Closing Date and this Agreement terminates, ITP hereby
covenants and agrees to do all things required by Delaware Law and all things
which counsel for the COMPANY advise ITP are required by Michigan Law in order
to rescind any merger or other actions effected by the advance filing of the
Articles of Merger as described in this Section. The taking of the actions
described in clauses (i) and (ii) above shall take place on the date which is
mutually agreeable to the COMPANY and ITP at the offices of Piper & Marbury
L.L.P., ▇▇▇▇▇▇▇ Center South, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, or upon consent of the parties, via facsimile and overnight courier.
On the Closing Date (x) the Articles of Merger shall be or shall have been
filed with the appropriate state authorities so that they shall be or, as of
11:00 a.m. Eastern Time on the Closing Date, shall become effective and the
Merger shall thereby be effected, and (y) all transactions contemplated by
this Agreement, including the conversion and delivery of shares, issuance of
the Note, and the transmission of funds by wire pursuant to Section 3 hereof
shall occur. The date on which the actions described in the preceding clauses
(x) and (y) occurs (the "Closing") shall be referred to as the "Closing Date."
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) Representations and Warranties of the COMPANY and the
STOCKHOLDERS.
Each of the COMPANY, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇ jointly and
severally represents and warrants and each of the other NAMED STOCKHOLDERS
severally, but not jointly, represents and warrants to ITP and NEWCO that all
of the following representations and warranties in this Section 5 are true at
the Closing Date (subject to Section 7.7 hereof), and that such
representations and warranties shall survive the Closing Date for a period of
eighteen (18) months (the last day of such period being the "Expiration
Date"), except that the representations and warranties set forth in Sections
5.9 and 5.18 hereof shall survive until such time as the applicable statute of
limitations period has run, which shall be deemed to be the Expiration Date
for such purposes. For purposes of this Section 5, the term "COMPANY" shall
mean and refer to the COMPANY and all of its subsidiaries, if any.
5.1 Due Organization. The COMPANY is a corporation duly
incorporated, validly existing and in good standing under the laws of the
state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of
public authorities to carry on its business in the places and in the manner as
now conducted except to the extent any such failure to be so authorized or
qualified would not have a materially adverse effect on the COMPANY's
business, condition (financial or other), properties, business prospects or
results of operations (as used herein with respect to the COMPANY, or with
respect to any other person, a "Material Adverse Effect"), to own or hold
under lease the properties and assets it now owns or holds under lease, and to
perform all of its obligations under the Material Contracts; is duly qualified
in the jurisdictions listed in Schedule 5.1 (except for the State of Ohio) and
there are no other jurisdictions in which the conduct of the COMPANY's
business or activities or its ownership of assets requires any other
qualification under applicable law, the absence of which would have a Material
Adverse Effect. True, complete and correct copies of the Articles of
Incorporation and By-laws (except the By-laws of the foreign subsidiaries of
the COMPANY), each as amended, of the COMPANY (the "Charter Documents") are
all attached to Schedule 5.1. The minute books and stock records of the
COMPANY, as heretofore made available to ITP, are correct and complete in all
material respects.
5.2 Authorization. The representatives of the COMPANY executing
this Agreement have the authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this
Agreement and the Company Delivered Documents and performance by the COMPANY
of its obligations under this Agreement and the Company Delivered Documents
and the consummation by the COMPANY of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action in
accordance with applicable law and the Articles of Incorporation and By-Laws
of the COMPANY on the part of the COMPANY and the STOCKHOLDERS. This
Agreement constitutes the valid and binding obligation of the COMPANY,
enforceable in accordance with its terms except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
5.3 Capital Stock of the COMPANY. The entire authorized capital
stock of the COMPANY is as set forth in Schedule 1.4. All of the issued and
outstanding shares of capital stock of the COMPANY are owned by the
STOCKHOLDERS in the amounts set forth in Annex IV and, except as set forth on
Schedule 5.3, are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of
every kind. Except as disclosed on Schedule 5.3, there are no outstanding
options, rights (preemptive or otherwise), warrants, calls, convertible
securities or commitments or any other arrangements to which the COMPANY or
the STOCKHOLDERS is a party requiring or restricting issuance, sale or
transfer of any equity securities of the COMPANY or any securities convertible
directly or indirectly into equity securities of the COMPANY, or evidencing
the right to subscribe for any equity securities of the COMPANY, or giving any
person any rights with respect to the capital stock of the COMPANY. Except as
contemplated by this Agreement or disclosed on Schedule 5.3, there are no
voting agreements, voting trusts, other agreements (including cumulative
voting rights), commitments or understandings with respect to the capital
stock of the COMPANY. All of the issued and outstanding shares of capital
stock of the COMPANY have been duly authorized and validly issued, are fully
paid and nonassessable, and are owned of record and beneficially by the
STOCKHOLDERS.
5.4 Subsidiaries. Schedule 5.4 attached hereto lists the name of
each of the COMPANY's subsidiaries and sets forth the number and class of the
authorized capital stock of each of the COMPANY's subsidiaries and the number
of shares of each of the COMPANY's subsidiaries which are issued and
outstanding, all of which shares (except as set forth on Schedule 5.4) are
owned by the COMPANY, free and clear of all liens, security interests,
pledges, voting trusts, equities, restrictions, encumbrances and claims of
every kind. Except as set forth on Schedule 5.4, the COMPANY does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other
equity interest in any corporation, association or business entity, nor is the
COMPANY, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
5.5 Financial Statements. The COMPANY has delivered to ITP copies
of the following unaudited financial statements, copies of which are attached
hereto as Schedule 5.5 (collectively, the "Financial Statements"):
(a) Balance Sheet, Income Statement, Statement of Stockholders'
Equity and Statement of Cash Flows at and for the year ended December 31, 1995
and Balance Sheet at December 31, 1996; and
(b) Balance Sheets, Income Statements, Statements of
Stockholders' Equity, and Statements of Cash Flows at and for the interim
period ended October 31, 1997.
Each of the Financial Statements is consistent with the books and records
of the COMPANY (which, in turn, are accurate and complete in all material
respects) and fairly presents the COMPANY's financial condition, assets and
liabilities as of their respective dates and the results of operations and
cash flows for the periods related thereto in accordance with GAAP,
consistently applied among the periods which are the subject of the Financial
Statements, except unaudited interim financial statements which were or are
subject to normal year-end adjustments which were not and are not expected to
be material in amount and the addition of required footnotes thereto. The
COMPANY has not deferred recognition of any of its accounts payable or
accelerated recognition of any of its accounts receivable.
5.6 Liabilities and Obligations. The COMPANY's assets, tangible
or intangible, are owned by the COMPANY free and clear of any liens, claims,
mortgages, encumbrances, pledges, security interests, equities and charges of
any kind (each, a "Lien"), except for the items listed on Schedule 5.6 and the
Permitted Liens. The COMPANY has delivered to ITP an accurate list (which is
set forth on Schedule 5.6) as of the Balance Sheet Date of (i) all liabilities
of the COMPANY known to the COMPANY in excess of $10,000 which are not
reflected on the balance sheet of the COMPANY at the Balance Sheet Date or
otherwise reflected in the COMPANY Financial Statements at the Balance Sheet
Date and which are required by GAAP to be disclosed thereon, and (ii) all
material loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements to which the COMPANY is a party,
except for the Permitted Liens. Except as set forth on Schedule 5.6, and
except as otherwise described or disclosed in this Agreement (or the
Schedules, Exhibits or Annexes attached hereto), or reflected in the Financial
Statements, to the knowledge of the Named Stockholders since the Balance Sheet
Date the COMPANY has not incurred any liabilities in excess of $10,000 of any
kind, character and description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
ordinary course of business.
5.7 Accounts and Notes Receivable. The COMPANY has delivered to
ITP an accurate list (which is set forth on Schedule 5.7) of the accounts and
notes receivable of the COMPANY as of the Balance Sheet Date. Within ten (10)
days prior to Closing, the COMPANY shall provide ITP (x) an accurate list of
all outstanding receivables arising since the Balance Sheet Date and as of a
date which is within ten (10) calendar days of the Closing Date and (y) an
aging of all such accounts and notes receivable showing amounts due in 30 day
aging categories (the "A/R Aging Reports"). Except to the extent reflected on
Schedule 5.7, the accounts, notes and other receivables shown on Schedule 5.7
and on the A/R Aging Reports are, and the COMPANY has no reason to believe
that any such account receivable is not, collectible in the amounts shown net
of reserves reflected in the balance sheet as of the Balance Sheet Date.
5.8 Intellectual Property; Permits and Intangibles.
(a) To the knowledge of the COMPANY, the COMPANY owns or has
valid licenses to all Intellectual Property required for or otherwise used in
connection with the conduct of its business and the COMPANY has delivered to
ITP an accurate list (which is set forth on Schedule 5.8(a)) of all
Intellectual Property owned or used by the COMPANY including a list of all
licenses and sublicenses granted by or to the COMPANY with respect to any
Intellectual Property. To the COMPANY's knowledge, each item of Intellectual
Property owned by or licensed to the COMPANY is valid and in full force and
effect. To the knowledge of the COMPANY, except as set forth on Schedule
5.8(a), all right, title and interest in and to each item of Intellectual
Property owned by or licensed to the COMPANY is not subject to any
restriction, royalty or fee arrangement or pending or threatened claim or
dispute. To the COMPANY's knowledge, none of the Intellectual Property owned
by or licensed to the COMPANY nor any product sold or licensed or service
provided by the COMPANY, infringes any Intellectual Property right of any
other person or entity and to the COMPANY's knowledge, no Intellectual
Property owned by or licensed to the COMPANY is infringed upon by any other
person or entity.
(b) The COMPANY holds all licenses, franchises, permits and
governmental authorizations the absence of any of which would be reasonably
likely to have a Material Adverse Effect (the "Material Licenses"), and the
COMPANY has delivered to ITP an accurate list and summary description (which
is set forth on Schedule 5.8(b)) of all such Material Licenses, including
permits, licenses, franchises and certificates (a list of all environmental-
related Material Licenses is set forth on Schedule 5.9). To the COMPANY's
knowledge, the Material Licenses listed on Schedules 5.8(b) and 5.9 are valid
and in effect, and the COMPANY has not received any notice that any
Governmental Authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. To the
COMPANY's knowledge, the COMPANY has conducted and is conducting its business
in compliance in all material respects with the requirements, standards,
criteria and conditions set forth in the Material Licenses on Schedules 5.8(b)
and 5.9 and is not in material violation of any of the foregoing or of any
related regulatory or legal requirements except where such non-compliance or
violation would not have a Material Adverse Effect. Except as specifically
provided in Schedule 5.8(a) or 5.8(b), the transactions contemplated by this
Agreement will not (i) to COMPANY'S knowledge, result in the infringement or
misappropriation by the COMPANY of any Intellectual Property right of any
other person or entity, or (ii) result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded to the
COMPANY by, any Material Licenses listed on Schedule 5.8(b) or any contracts
involving the grant to the COMPANY of any rights relating to the Intellectual
Property of any third party.
(c) To the COMPANY's knowledge, the COMPANY's products and
services conform in all material respects with any material applicable
specification, documentation, performance standard, or contractual commitment
by the COMPANY existing with respect thereto, and there are no unresolved
material claims under warranty, contract or otherwise with respect to the
COMPANY's services or products, except where any of the foregoing would not
have a Material Adverse Effect.
5.9 Environmental Matters.
(a)(i) "Environmental Requirements" for purposes of this
Agreement shall mean all applicable federal, state and local laws, rules,
regulations, ordinances and requirements relating to Hazardous Materials (as
defined below), pollution, or protection of the environment, health or safety,
all as amended and as in effect as of the date hereof.
(ii) "Hazardous Materials" for purposes of this Agreement
shall include, without limitation: (A) hazardous materials, hazardous
substances, extremely hazardous substances, hazardous chemicals, toxic
chemicals, toxic substances, pollutants, contaminants, solid wastes or
hazardous wastes, as those terms are defined or used in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. sec 9601 et
seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. sec
6901 et seq. ("RCRA"), the Clean Water Act, 33 U.S.C. sec 1251 et seq., the
Clean Air Act, 42 U.S.C. sec 7401 et seq., the Toxic Substances Control Act,
15 U.S.C. sec 2601 et seq., the Emergency Planning and Community Right to Know
Act, 42 U.S.C. sec 11001 et seq., the Occupational Safety and Health Act, and
any other Environmental Requirements and other terms of similar import or
meaning; (B) petroleum and petroleum products, including, without limitation,
crude oil or any faction thereof; (C) any radioactive material, including,
without limitation, any source, special nuclear, or by-product material as
defined in 42 U.S.C. sec 2011 et seq.; and (D) asbestos in any form or
condition.
(b) Except as set forth on Schedule 5.9:
(i) the COMPANY and each of its predecessors and
subsidiaries are and at all times have been in compliance in all material
respects with, and are not and have not been in violation of or liable under,
all Environmental Requirements;
(ii) the COMPANY and each of its predecessors and
subsidiaries possess all Material Licenses required by all Environmental
Requirements, and have filed all notices or applications required thereby;
(iii) no environmental clearances, approvals or consents are
required under applicable law from any Governmental Authority or entity in
order to consummate the transactions contemplated in this Agreement or for the
COMPANY to continue operations after the Closing Date;
(iv) (A) the COMPANY and each of its predecessors and
subsidiaries are not subject to, and have not received any notice of, any
private, administrative or judicial claim or action, or notice of any intended
private, administrative or judicial claim or action or received any request
for information relating to the presence or alleged presence of Hazardous
Materials (1) in, under or upon any real property currently or formerly owned,
leased, operated or used by (a) the COMPANY or any of its predecessors or
subsidiaries or (b) any other person that has, at any time, disposed of
Hazardous Materials on behalf of the COMPANY or any of its predecessors or
subsidiaries; or (2) ever possessed, owned or generated by or on behalf of the
COMPANY or any of its predecessors or subsidiaries at any location;
(B) to the COMPANY's knowledge, there is no basis
for any such notice, claim, action or request; and
(C) there are no pending or, to the knowledge of
the COMPANY and each of its predecessors and subsidiaries, threatened claims,
actions or proceedings (or notices of potential claims, actions or
proceedings) from any Governmental Authority or any other entity regarding any
matter relating to health, safety or protection of the environment against the
COMPANY or any of its predecessors and subsidiaries.
(v) To the COMPANY'S knowledge, there are and have been no
past or present events, conditions, circumstances, activities, practices,
incidents or actions which materially interfere with or prevent continued
compliance by the COMPANY or the Surviving Corporation with any Environmental
Requirements, give rise to any legal obligation or liability, or otherwise
form the basis of any claim, action, suit, proceeding, hearing or
investigation against or involving the COMPANY or any real property presently
or previously owned or used by the COMPANY under any Environmental
Requirements or related common law theories;
(vi) No real property currently or formerly owned or
operated by the COMPANY or any of its predecessors or subsidiaries is or was
listed on the National Priorities List, the CERCLIS or any similar state or
local list of potential or confirmed hazardous waste sites;
(vii) To the COMPANY's knowledge, no conditions exist on
adjacent properties that threaten the environmental condition or safety of any
property owned, operated or used by the COMPANY; and
(viii) The COMPANY and its predecessors and subsidiaries
have not released or disposed of any Hazardous Materials at any property owned
or used by the COMPANY or its predecessors or subsidiaries, except as in
compliance with the Environmental Requirements and, to the COMPANY's
knowledge, no other person has released or disposed of Hazardous Materials at
any such property, except as in compliance with the Environmental
Requirements.
5.10 Personal Property. The COMPANY has delivered to ITP's
independent accountants, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, an accurate list (which is set
forth on Schedule 5.10) of (x) all personal property with a fair market value
in excess of $10,000 which is included (or that will be included) in
"depreciable plant, property and equipment" (or similarly named line item) on
the balance sheet of the COMPANY as of the Balance Sheet Date, (y) all other
personal property owned by the COMPANY with a value individually in excess of
$10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance
Sheet Date and (z) all leases and agreements in respect of personal property,
including, in the case of each of (x), (y) and (z), true, complete and correct
copies of all such leases which have been provided to ITP's counsel. Except
as set forth on Schedule 5.10, (i) all personal property with a value
individually in excess of $10,000 used by the COMPANY in its business is
either owned by the COMPANY or leased by the COMPANY pursuant to a lease
included on Schedule 5.10, (ii) all of the personal property listed on
Schedule 5.10 is in good working order and condition, ordinary wear and tear
excepted, and (iii) all leases and agreements included on Schedule 5.10 are in
full force and effect and constitute valid and binding agreements of the
COMPANY, and to the COMPANY's knowledge, of the other parties thereto in
accordance with their respective terms.
5.11 Significant Customers; Material Contracts and Commitments.
(a) The COMPANY has delivered to ITP an accurate list (which is set forth
on Schedule 5.11(a)) of all significant customers, it being understood and
agreed that a "significant customer," for purposes of this Section 5.11, means
a customer (or person or entity) representing 5% or more of the COMPANY's
total annual revenues as of the ten month period ended on the Balance Sheet
Date. Except to the extent set forth on Schedule 5.11(a), none of the
COMPANY's significant customers has, since the Balance Sheet Date, canceled or
substantially reduced or, to the knowledge of the COMPANY, is currently
attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
(b) Except as listed or described on Schedule 5.11(b), as of or on
the date hereof, neither the COMPANY is a party to or bound by, nor do there
exist any, Contracts relating to or in any way affecting the operation or
ownership of the COMPANY's business that are of a type described below:
(a) any collective bargaining arrangement with any labor union
or any such agreement currently in negotiation or proposed;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets for or in respect to real property other than in
the COMPANY's ordinary course of business in excess of $10,000;
(c) any Contract with a term in excess of one year for the
purchase, maintenance, acquisition, sale or furnishing of materials, supplies,
merchandise, machinery, equipment, parts or other property or services (except
that the COMPANY need not list any such contract made in the ordinary course
of business) which requires aggregate future payments of greater than $10,000;
(d) any Contract relating to the borrowing of money, or the
guaranty of another person's borrowing of money, including, without
limitation, all notes, mortgages, indentures and other obligations, agreements
and other instruments for or relating to any lending or borrowing, including
assumed indebtedness;
(e) any Contract granting any person a Lien on any of the assets
of the COMPANY, in whole or in part, except for any Permitted Liens;
(f) any Contract granting to any person a first-refusal, first-
offer or similar preferential right to purchase or acquire any of the assets
of the COMPANY's business other than in the ordinary course of business;
(g) any Contract under which the COMPANY is
(i) a lessee or sublessee of any machinery, equipment,
vehicle or other tangible personal property or real property, or
(ii) a lessor of any real property or tangible personal
property owned by the COMPANY,
in either case having an original value in excess of $10,000;
(h) any contract providing for the indemnification of any
officer, director, employee or other person (excluding any provisions in the
Charter Documents);
(i) any joint venture agreement or partnership contract;
and
(j) any other Contract with a term in excess of one year,
whether or not made in the ordinary course of business, which involves or may
involve payments in excess of $10,000 (except for the Real Property Leases (as
defined in Section 5.12)).
The COMPANY has provided ITP with a true and complete copy of each
written Material Contract, including all amendments or other modifications
thereto, except for the leases referred to under Section 5.11(b)(g)(ii), which
shall be delivered to ITP on or before January 19, 1998. Except as set forth
on Schedule 5.11(b), each Material Contract is a valid and binding obligation
of the COMPANY, enforceable in accordance with its terms, and is in full force
and effect. Except as set forth on Schedule 5.11(b), the COMPANY has
performed all obligations required to be performed by it under each Material
Contract and neither the COMPANY nor, to the knowledge of the COMPANY, any
other party to any Material Contract, is (with or without the lapse of time or
the giving of notice or both) in breach or default in any material respect
thereunder; and, to the knowledge of the COMPANY there exists no condition
which would constitute a breach or default thereunder. The COMPANY has not
been notified that any party to any Material Contract intends to cancel,
terminate, not renew or exercise an option under any Material Contract,
whether in connection with the transactions contemplated hereby or otherwise.
5.12 Real Property. (a) The COMPANY owns no real property.
(b) Schedule 5.12(b) includes an accurate list of real property
leases to which the COMPANY is a party (the "Real Property Leases"). Counsel
to ITP has been provided with true, complete and correct copies of all the
Real Property Leases. Except as set forth on Schedule 5.12(b), all of such
leases included on Schedule 5.12(b) are in full force and effect and
constitute valid and binding agreements of the COMPANY and, to the COMPANY's
knowledge, of the parties thereto in accordance with their respective terms.
5.13 Insurance. The COMPANY has delivered to ITP:
(a) true and complete copies of all certificates of insurance
evidencing insurance policies to which the COMPANY is a party or under which
the COMPANY, or any director of the COMPANY, is or has been covered at any
time within two years preceding the date of this Agreement;
(b) true and complete copies of all pending applications for
policies of insurance; and
(c) any statement made by the auditor of the COMPANY's
financial statements with regard to the adequacy of such entity's coverage or
of the reserves for claims.
5.14 Compensation; Employment Agreements; Organized Labor Matters.
The COMPANY has delivered to ITP an accurate list (which is set forth on
Schedule 5.14) showing as of December 1, 1997, all officers, directors and key
employees of the COMPANY, listing all employment agreements with such
officers, directors and key employees and the rate of compensation of each of
such persons as of the date hereof. The COMPANY has provided to ITP true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.14. Since the Balance Sheet Date, there have been no increases in
the compensation payable or any special bonuses to any officer, director, key
employee or other employee, except ordinary salary increases and bonuses
implemented on a basis consistent with past practices. Except as set forth on
Schedule 5.14, there is no, and within the last three years the COMPANY and
Manage Pro, Inc., have not experienced any, strike, picketing, boycott, work
stoppage or slowdown, other similar labor dispute, union organizational
activity, allegation, charge or complaint of unfair labor practice, employment
discrimination pending or, to the COMPANY's knowledge, threatened against the
COMPANY or Manage Pro, Inc.
5.15 Employee Plans. The COMPANY has delivered to ITP an accurate
schedule (which is set forth on Schedule 5.15) showing all Benefit Plans,
together with true, complete and correct copies of such Benefit Plans,
agreements and any trusts related thereto, summary plan descriptions thereof,
the last determination letter (if any) issued to each Benefit Plan by the
Internal Revenue Service, and the last Forms 5500 filed for such Benefit
Plans.
5.16 Compliance with ERISA.
(a) All Benefit Plans that are intended to qualify under Section
401(a) of the Code are and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified.
(b) Except as disclosed on Schedule 5.16, all reports and other
documents required to be filed with any Governmental Authority or distributed
to plan participants or beneficiaries (including, but not limited to,
actuarial reports, audits or tax returns) have been timely filed or
distributed.
(c) None of the NAMED STOCKHOLDERS, any such Benefit Plan, nor
the COMPANY has engaged in any transactions prohibited under the provisions of
Section 4975 of the Code or Section 406 of ERISA and for which no individual
or class exemption exists.
(d) No material pending claim or lawsuit has been asserted or
instituted by or against a Benefit Plan, against the assets of a trust under a
Benefit Plan or by or against the plan sponsor, plan administrator, or any
fiduciary of a Benefit Plan (other than routine claims for benefits), and the
COMPANY has no knowledge of any fact which could form the basis for any such
claim or lawsuit.
(e) Each Benefit Plan (including without limitation a Benefit
plan covering retirees or their beneficiaries) may be terminated or amended by
the plan sponsor at any time without the consent of any person covered
thereunder and may be terminated without any liability for benefits accruing
after the date of such termination.
(f) No Benefit Plan has any provisions that would prohibit the
transactions contemplated by this Agreement or give rise to any severance,
termination or other payments or liabilities (including without limitation any
acceleration in benefits vesting or distribution) as a result of the
transactions contemplated by this Agreement.
(g) There have been no terminations, partial terminations or
discontinuance of contributions to any Benefit Plan intended to qualify under
Section 401(a) of the Code without notice to and approval by the Internal
Revenue Service and the Pension Benefit Guaranty Corporation.
(h) All Benefit Plans and the administration thereof are in
substantial compliance with their terms and all applicable provisions of
ERISA, the Code and the regulations issued thereunder, as well as with all
other applicable federal, state and local statutes, ordinances and
regulations.
(i) All accrued contribution obligations of the COMPANY with
respect to any Benefit Plan have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the COMPANY as of the Balance
Sheet Date.
(j) The COMPANY further represents that it has never had any
Benefit Plans subject to Title IV of ERISA.
5.17 Conformity with Law; Litigation.
(a) Except as set forth on Schedule 5.17(a) and except with
respect to the Environmental Requirements (which are addressed in Section 5.9)
and with respect to the Benefit Plans and ERISA and similar laws (which are
addressed in Sections 5.15 and 5.16), the COMPANY has complied with all laws,
rules, regulations, writs, injunctions, decrees, and orders applicable to it
or to the operation of its Business (collectively, "Laws"), except where any
such noncompliance would not have a Material Adverse Effect, and has not
received any notice of any alleged claim or threatened claim, violation of,
liability or potential responsibility under, any such Law which has not
heretofore been cured and for which there is no remaining liability other
than, in each case, those not having a Material Adverse Effect.
(b) Except to the extent set forth on Schedule 5.17(b) (which
shall disclose the parties to, nature of, and relief sought for each matter
disclosed):
(a) There is no suit, action, proceeding, investigation,
claim or order pending or, to the COMPANY's knowledge, threatened against
either the COMPANY or, to the knowledge of the COMPANY, pending or threatened
against any of the officers, directors or employees of the COMPANY with
respect to its business or proposed business activities which would have a
Material Adverse Effect on the COMPANY, or to which the COMPANY is otherwise a
party, before any court, or before any Governmental Authority (collectively,
"Claims").
(b) The COMPANY is not subject to any judgment, order
or decree of any court or Governmental Authority expressly directed at the
COMPANY; the COMPANY has not received any written opinion or memorandum from
legal counsel to the effect that it is exposed, from a legal standpoint, to
any liability or disadvantage which may have a Material Adverse Effect. The
COMPANY is not engaged in any legal action to recover monies due it or for
damages sustained by it.
5.18 Taxes. Except as set forth on Schedule 5.18:
(a) All Returns required to have been filed with any Taxing
Authority by the COMPANY including any affiliated, combined, consolidated,
unitary or similar group of which the COMPANY is or was a member (a "Relevant
Group") have been duly filed, and each such Return correctly and completely
reflects, in all material respects, the Tax liability and other information
required to be reported thereon. All Taxes (whether or not shown on any
Return) owed by the COMPANY, any subsidiary and any member of a Relevant Group
(individually, the "Acquired Party" and collectively, the "Acquired Parties")
have been paid on or prior to the due date for payment of such Taxes, except
for Taxes being contested in good faith and by appropriate proceedings (and
for which adequate reserves have been established and are being maintained).
(b) To the knowledge of the COMPANY and the NAMED
STOCKHOLDERS, the provisions for Taxes due by the COMPANY and any subsidiaries
(as opposed to any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) in the COMPANY Financial Statements
are sufficient for all unpaid Taxes, being current taxes not yet due and
payable, of such Acquired Party.
(c) No Acquired Party is a party to any agreement extending
the time within which to file any Return. No claim has ever been made by any
Taxing Authority in a jurisdiction in which an Acquired Party does not file
Returns that it is or may be subject to taxation by that jurisdiction that is
unresolved or if adversely determined would have a Material Adverse Effect on
such Acquired Party.
(d) Each Acquired Party has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, creditor, independent contractor or other third party.
(e) No Acquired Party has received notice that any Taxing
Authority intends to assess any additional Taxes against or in respect of it
for any past period. No Acquired Party has received notice that there is a
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No Acquired Party has received notice that issues have been
raised in any examination by any Taxing Authority with respect to any Acquired
Party which, by application of similar principles, reasonably could be
expected to result in a proposed deficiency for any other period not so
examined. Schedule 5.18 attached hereto lists all federal, state, local and
foreign income Tax Returns filed by or with respect to any Acquired Party for
all taxable periods ended on or after January 1, 1991, indicates those
Returns, if any, that have been audited, and indicates those Returns that
currently are the subject of audit. Each Acquired Party has delivered to ITP
complete and correct copies of all federal, state, local and foreign income
Tax Returns filed by, and all Tax examination reports and statements of
deficiencies assessed against or agreed to by, such Acquired Party since
January 1, 1991.
(f) No Acquired Party has waived any statute of limitations, the
waiver of which remains in effect on the date hereof, in respect of Taxes or
agreed to any extension of time with respect to any Tax assessment or
deficiency.
(g) No Acquired Party has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could require it to make any payments, that are not deductible
under Section 280G of the Code.
(h) No Acquired Party is a party to any Tax allocation or
sharing agreement.
(i) None of the assets of any Acquired Party constitutes tax-
exempt bond financed property or tax-exempt use property, within the meaning
of Section 168 of the Code. No Acquired Party is a party to any "safe harbor
lease" that is subject to the provisions of Section 168(f)(8) of the Internal
Revenue Code as in effect prior to the Tax Reform Act of 1986, or to any
"long-term contract" within the meaning of Section 460 of the Code.
(j) No Acquired Party is a "consenting corporation" within the
meaning of Section 341(f)(1) of the Code, or comparable provisions of any
state statutes, and none of the assets of any Acquired Party is subject to an
election under Section 341(f) of the Code or comparable provisions of any
state statutes.
(k) No Acquired Party is a party to any joint venture,
partnership or other arrangement that is treated as a partnership for federal
income Tax purposes.
(l) There are no accounting method changes or proposed or
threatened accounting method changes, of any Acquired Party that could give
rise to an adjustment under Section 481 of the Code for periods after the
Closing Date.
(m) No Acquired Party has received any written ruling of a
Taxing Authority related to Taxes or entered into any written and legally
binding agreement with a Taxing Authority relating to Taxes.
(n) Each Acquired Party has disclosed (in accordance with
Section 6662(d)(2)(B)(ii) of the Code) on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662(d) of the Code.
(o) No Acquired Party has any liability for Taxes of any
person other than such Acquired Party (i) under Section 1.1502-6 of the
Treasury regulations (or any similar provision of state, local or foreign
law), (ii) as a transferee or successor, (iii) by contract or (iv) otherwise.
(p) Prior to ITP's acquisition of the COMPANY pursuant to this
Agreement, there currently are no limitations on the utilization of the net
operating losses, built-in losses, capital losses, Tax credits or other
similar items of any Acquired Party (collectively, the "Tax Losses") under (i)
Section 382 of the Code, (ii) Section 383 of the Code, (iii) Section 384 of
the Code, (iv) Section 269 of the Code, (v) Section 1.1502-15T and Section
1.1502-15A of the Treasury regulations, (vi) Section 1.1502-21T and Section
1.1502-21A of the Treasury regulations or (vii) Sections 1.1502-91T through
1.1502-99 of the Treasury regulations, in each case as in effect both prior to
and following the Tax Reform Act of 1986.
(q) The fair market value of the assets of the COMPANY as well
as the COMPANY's tax basis in such assets exceeds the sum of its liabilities,
plus the amount of liabilities, if any, to which the assets are subject.
(r) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 351(e)(2) of the Code.
For purposes of this Section 5.18, the following definitions shall apply:
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax
with any Taxing Authority or Governmental Authority.
"Tax" or "Taxes" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add-on minimum or other taxes, assessments,
duties, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Taxing Authority" means any Governmental Authority, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having jurisdiction with respect to
any Tax.
5.19 No Violations. The COMPANY is not in violation of any
Charter Document. To the knowledge of the COMPANY, except as set forth on
Schedule 5.19, the execution of this Agreement and the performance by the
COMPANY and the NAMED STOCKHOLDERS of their obligations hereunder and the
consummation by the COMPANY and the NAMED STOCKHOLDERS of the transactions
contemplated hereby will not (i) result in any violation or breach of, or
constitute a default under, any of the terms or provisions of the Material
Contracts or the Charter Documents or (ii) require the consent, approval,
waiver of any acceleration, termination or other right or remedy or action of
or by, or make any filing with or give any notice to, any other party, except
where the failure to receive any such consent, approval or waiver or to make
such filing would not have a Material Adverse Effect.
5.20 Business Conduct. Except as set forth on Schedule 5.20 and
except with respect to the negotiations and actions related to and as
contemplated by this Agreement, since the Balance Sheet Date, the COMPANY has
conducted its business only in the ordinary course consistent with past custom
and practices and has incurred no liabilities other than in the ordinary
course of business consistent with past custom and practices. Except as forth
on Schedule 5.20 and except with respect to the negotiations and actions
related to and as contemplated by this Agreement, since the Balance Sheet
Date, there has not been any:
(a) Material adverse change in the COMPANY's operations,
condition (financial or otherwise), operating results, assets, liabilities,
employee, customer or supplier relations or business prospects;
(b) Loan or advance by the COMPANY to any party other than
sales to customers on credit in the ordinary course of business consistent
with past custom and practices;
(c) Declaration, setting aside, or payment of any dividend or
other distribution in respect to the COMPANY's capital stock, any direct or
indirect redemption, purchase, or other acquisition of such stock, or the
payment of principal or interest on any note, bond, debt instrument or debt to
any Affiliate;
(d) Incurrence of any Debts, liabilities or obligations
except current liabilities incurred in connection with or for services
rendered or goods supplied in the ordinary course of business consistent with
past custom and practices, liabilities on account of Taxes and governmental
charges but not penalties, interest or fines in respect thereof, and
obligations or liabilities incurred by virtue of the execution of this
Agreement;
(e) Issuance by the COMPANY of any notes, bonds, or other
debt securities or any equity securities or securities convertible into or
exchangeable for any equity securities;
(f) Cancellation, waiver or release by the COMPANY of any
Debts, rights or claims, except in each case in the ordinary course of
business consistent with past custom and practices;
(g) Amendment of the COMPANY's Articles or Certificate of
Incorporation or By-Laws;
(h) Amendment or termination of any Material Contract, other
than expiration of such Material Contract in accordance with its terms;
(i) Change in accounting principles, methods or practices
(including, without limitation, any change in depreciation or amortization
policies or rates) utilized by the COMPANY;
(j) Sale or assignment by the COMPANY of any tangible assets
other than in the ordinary course of business;
(k) Capital expenditures or commitments therefor by the
COMPANY other than in the ordinary course of business in excess of $10,000 in
the aggregate;
(l) Liens of any asset of the COMPANY other than Permitted
Liens;
(m) Adoption, amendment or termination of any Benefit Plan;
(n) Increase in the benefits provided under any Benefit Plan,
except as provided in such Benefit Plan; or
(o) An occurrence or event not included in clauses (a)
through (o) that has or might reasonably be expected to have a Material
Adverse Effect on the COMPANY.
5.21 Misrepresentation. To the knowledge of the COMPANY and the
NAMED STOCKHOLDERS, none of the representations and warranties set forth in
this Agreement or the Company Delivered Documents, taken as a whole, contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
(B) Representations and Warranties of the STOCKHOLDERS.
Each STOCKHOLDER severally, and not jointly, represents and warrants that the
representations and warranties set forth below are true as of the Closing Date
(subject to Section 7.7 hereof).
5.22 Authority; Ownership. Each NAMED STOCKHOLDER has the full
legal right, power and authority to enter into this Agreement. Each NAMED
STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY
Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except
as set forth on Schedule 5.22 and except for applicable securities laws, such
COMPANY Stock is owned free and clear of any and all Liens, voting trusts and
restrictions of every kind.
5.23 No Intention to Dispose of ITP Stock. No NAMED STOCKHOLDER
has any current plan or intention, or is under any binding commitment or
contract to sell, exchange or otherwise dispose of shares of ITP Stock
received pursuant to the Merger.
(C) Disclaimer; Disclosure
Notwithstanding anything in this Agreement or the COMPANY Delivered
Documents to the contrary, the COMPANY and the NAMED STOCKHOLDERS do not make,
and have not made, any representations or warranties relating to the COMPANY
(or any of its subsidiaries) or the STOCKHOLDERS in connection with the
transactions contemplated hereby other than those expressly set forth in this
Section 5. It is understood that any cost estimates, projections or other
predictions, any data, any financial information or any memoranda or offering
materials or presentations (including but not limited to the Confidential
Memorandum, dated May 1997, distributed by First of Michigan Corporation) are
not and shall not be deemed to be or to include representations or warranties
of the COMPANY or the STOCKHOLDERS, except to the extent otherwise expressly
covered by the representations and warranties in Section 5 of this Agreement.
No Person has been authorized by the COMPANY or the NAMED STOCKHOLDERS to make
any representation or warranty relating to the COMPANY (or any of its
subsidiaries) or the STOCKHOLDERS in connection with the transactions
contemplated hereby other than those expressly set forth in this Section 5
and, if made, such representation or warranty must not be relied upon as
having been authorized by the COMPANY or the NAMED STOCKHOLDERS. Any
information disclosed in one Annex or Schedule shall be deemed to be disclosed
in this Agreement and in all Annexes and Schedules.
6. REPRESENTATIONS OF ITP and NEWCO
ITP and NEWCO jointly and severally represent and warrant to the COMPANY
and the STOCKHOLDERS that all of the following representations and warranties
in this Section 6 are true at the Closing Date (subject to Section 7.7
hereof), and that such representations and warranties shall survive the
Closing Date for a period of three years (the "ITP Expiration Date").
6.1 Due Organization. ITP and NEWCO are each corporations duly
incorporated, validly existing and in good standing under the laws of the
state of their incorporation, and are duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of
public authorities to carry on their business in the places and in the manner
as now conducted, to own or hold under lease the properties and assets they
now own or hold under lease, and to perform all of their obligations under any
material agreement to which they are a party by which their properties are
bound; are duly qualified in the jurisdictions listed in Schedule 6.1 and
there are no other jurisdictions in which the conduct of ITP's and NEWCO's
business or activities or their ownership of assets requires any other
qualification under applicable law, the absence of which would have a
Materially Adverse Effect on either ITP's or NEWCO's business. True, complete
and correct copies of the Certificate or Articles of Incorporation and Bylaws,
each as amended, of ITP and NEWCO (the "ITP Charter Documents") are all
attached hereto as Annex II. The minute books and stock records of each of
ITP and NEWCO, as heretofore made available to the COMPANY, are correct and
complete in all material respects.
6.2 Authorization. The respective representatives of ITP and NEWCO
executing this Agreement have the authority to execute and deliver this
Agreement and to bind ITP and NEWCO to perform their respective obligations
hereunder. The execution and delivery of this Agreement and the ITP Delivered
Documents by ITP and NEWCO and the performance by ITP and NEWCO of their
respective obligations under this Agreement and the ITP Delivered Documents
and the consummation by ITP and NEWCO of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action by
each in accordance with applicable law and the Certificate or Articles of
Incorporation and By-Laws of ITP and NEWCO, as the case may be. This
Agreement constitutes the valid and binding obligation of ITP and NEWCO,
enforceable in accordance with its terms.
6.3 Transaction Not a Breach. Neither the execution and delivery
of this Agreement and ITP Delivered Documents nor their performance will
violate, conflict with, or result in a breach of any provision of any Law,
rule, regulation, order, permit, judgment, injunction, decree or other
decision of any court or other tribunal or any Governmental Authority binding
on ITP or NEWCO or conflict with or result in the breach of any of the terms,
conditions or provisions of the Certificate or Articles of Incorporation or
the By-Laws of ITP or NEWCO or of any contract, agreement, mortgage or other
instrument or obligation of any nature to which ITP or NEWCO is a party or by
which ITP or NEWCO is bound or require the consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority, any
court or tribunal or any other person.
6.4 Misrepresentation. To the knowledge of ITP, none of the
representations and warranties set forth in this Agreement or in any of the
certificates, schedules, exhibits, lists, documents, exhibits, or other
instruments delivered, or to be delivered, to the COMPANY as contemplated by
any provision hereof, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading.
6.5 Capital Stock. The entire authorized capital stock of ITP
consists of ten million shares of ITP Stock and two million shares of
Preferred Stock. All of the issued and outstanding shares of capital stock of
ITP are set forth in Annex V (including the names of the persons who own
beneficially five percent (5%) or more of each class of stock). Except as
disclosed on Schedule 6.5, there are no outstanding options, rights
(preemptive or otherwise), warrants, calls, convertible securities or
commitments or any other arrangements (including stock incentive, option and
similar plans) to which ITP is a party requiring or restricting issuance, sale
or transfer of any equity securities of ITP or any securities convertible
directly or indirectly into equity securities of ITP, or evidencing the right
to subscribe for any equity securities of ITP, or giving any person any rights
with respect to the capital stock of ITP. Except as contemplated by this
Agreement or disclosed on Schedule 6.5, there are no voting agreements, voting
trusts, other agreements (including cumulative voting rights), commitments or
understandings (including repurchase or redemption obligations) with respect
to the ITP Stock. Upon the consummation of the Merger contemplated hereby and
the issuance and delivery of certificates representing the ITP Stock as
provided in this Agreement, the shares of ITP Stock issued pursuant to the
Merger will be validly issued, fully paid and non-assessable shares.
6.6 Subsidiaries. Schedule 6.6 attached hereto lists the name of
each of ITP's and NEWCO's subsidiaries and sets forth the number and class of
the authorized capital stock of each of ITP's and NEWCO's subsidiaries and the
number of shares of each of ITP's and NEWCO's subsidiaries which are issued
and outstanding prior to the Merger, all of which shares (except as set forth
on Schedule 6.6) are duly authorized, validly issued, fully paid and
nonassessable and are owned by ITP and NEWCO as the case may be, free and
clear of all liens, security interests, pledges, voting trusts, equities,
restrictions, encumbrances and claims of every kind. Except as set forth on
Schedule 6.6, ITP and NEWCO do not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation,
association or business entity.
6.7 Conformity with Law; Litigation. Except as set forth on
Schedule 6.7, ITP and NEWCO have complied with all Laws, applicable to them or
to the operation of their businesses and have not received any notice of any
alleged claim or threatened claim, violation of, liability or potential
responsibility under, any Law which has not heretofore been cured and for
which there is no remaining liability other than, in each case, those not
having a Material Adverse Effect on the business, condition (financial or
other), properties, business prospects or financial results of ITP or NEWCO,
taken as a whole.
Except to the extent set forth on Schedule 6.7 (which shall disclose to
the parties the, nature of, and relief sought for each matter):
(a) There is no suit, action, proceeding, investigation, claim
or order pending or, to the knowledge of ITP and NEWCO, threatened against
either of ITP or NEWCO or, to the knowledge of ITP and NEWCO, pending or
threatened against any of the officers, directors or employees of ITP or NEWCO
with respect to their businesses or proposed business activities which would
have a Material Adverse Effect on ITP or NEWCO, or to which ITP or NEWCO are
otherwise a party, before any court, or before any Governmental Authority.
(b) ITP and NEWCO are not subject to any judgment, order or
decree of any court or Governmental Authority; ITP and NEWCO have not received
any opinion or memorandum from legal counsel to the effect that either is
exposed, from a legal standpoint, to any liability or disadvantage which may
be material to their businesses. Neither ITP nor NEWCO are engaged in any
legal action to recover monies due it or them for damages sustained by either
of them.
6.8 Financial Statements. ITP has delivered to the COMPANY
copies of its Balance Sheets, Income Statements, Statements of Stockholders'
Equity, and Statements of Cash Flows at and for the interim period ended
October 31, 1997 (collectively the "ITP Financial Statements"). The ITP
Financial Statements are consistent with the books and records of ITP (which,
in turn, are accurate and complete in all material respects) and fairly
present ITP's financial condition, assets and liabilities as of their
respective dates and the results of operations and cash flows for the periods
related thereto in accordance with GAAP, consistently applied among the
periods which are the subject of the ITP Financial Statements, except
unaudited interim financial statements which were or are subject to normal
year-end adjustments which were not and are not expected to be material in
amount and the addition of required footnotes thereto. ITP has not deferred
recognition of any of its accounts payable or accelerated recognition of any
of its accounts receivable.
6.9 No Undisclosed Liabilities. Except as is disclosed in Schedule
6.9, neither ITP nor any of its subsidiaries has any liabilities required to
be disclosed or provided for in a balance sheet (or in the notes thereto)
(absolute, accrued, contingent or otherwise), except liabilities (a)
adequately provided for in the ITP Financial Statements (including any related
notes thereto), (b) incurred in the ordinary course of business and not
required under GAAP to be reflected in the ITP Financial Statements, (c)
incurred since October 31, 1997 in the ordinary course of business and
consistent with past practice, (d) incurred in connection with this Agreement
or other merger agreements entered into by ITP and any of its subsidiaries, or
(e) which could not reasonably be expected to have a Material Adverse Effect
on ITP, its business prospects or its financial condition.
6.10 HSR Act. Neither ITP or NEWCO nor their "ultimate parent
entity" as that term is defined in 16 C.F.R. Part 801.1(a)(3) has annual net
sales or total assets of $100,000,000 or more, as determined pursuant to 16
C.F.R. Part 801.11. Assuming that neither the COMPANY or the STOCKHOLDERS nor
their "ultimate parent entity" as that term is defined in 16 C.F.R. Part
801.1(a)(3) has annual net sales or total assets of $100,000,000 or more, as
determined pursuant to 16 C.F.R. Part 801.11, neither ITP or NEWCO nor their
"ultimate parent entity is required to file a premerger notification with the
Federal Trade Commission or with the Antitrust Division of the United States
Department of Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), in connection with the transactions
contemplated by this Agreement.
6.11 No Material Adverse Change. Except as set forth on Schedule
6.11 or as stated in the ITP Financial Statements, since October 31, 1997,
(a) there has not been any change in ITP's operations, condition (financial or
otherwise), operating results, assets, liabilities, employee, customer or
supplier relations or business prospects the result of which would have a
Material Adverse Effect , (b) any damage to, destruction or loss of any assets
of the ITP or its subsidiaries (whether or not covered by insurance) that
would have a Material Adverse Effect, (c) any material change by ITP in its
accounting methods, principles or practices, (d) any material revaluation by
ITP of any of its assets, including without limitation, writing down the value
of inventory or writing off notes or accounts receivable other than in the
ordinary course of business, (e) any other action or event that would have
required the consent of the COMPANY pursuant to Section 7.10 had such action
or event occurred after the date of this Agreement, or (f) any sale of a
material amount of assets of ITP or any of its subsidiaries except in the
ordinary course of business..
7. COVENANTS PRIOR TO CLOSING
7.1 Access and Cooperation: Due Diligence.
(a) Between the date of this Agreement and the Closing
Date, after reasonable prior notice, the COMPANY will afford to the officers
and authorized representatives of ITP access during business hours to all of
the COMPANY's sites, properties, books and records and will furnish ITP with
such additional financial and operating data and other information as to the
business and properties of the COMPANY as ITP may from time to time reasonably
request. The COMPANY will cooperate with ITP and its representatives,
including ITP's auditors and counsel, in the preparation of any documents or
other material which may be required in connection with the transactions
contemplated by this Agreement. ITP, NEWCO, the NAMED STOCKHOLDERS and the
COMPANY will treat all information obtained in connection with the negotiation
and performance of this Agreement or the due diligence investigations
conducted as confidential in accordance with the provisions of Section 14
hereof.
(b) Between the date of this Agreement and the Closing Date,
after reasonable prior notice, ITP will afford to the officers and authorized
representatives of the COMPANY and the NAMED STOCKHOLDERS access during
business hours and after reasonable prior notice to all of ITP's and NEWCO's
sites, properties, books and records and will furnish the COMPANY and the
NAMED STOCKHOLDERS with such additional financial and operating data and other
information as to the business and properties of ITP and NEWCO as the COMPANY
may from time to time reasonably request. ITP and NEWCO will cooperate with
the COMPANY and the NAMED STOCKHOLDERS, their representatives, auditors and
counsel in the preparation of any documents or other material which may be
required in connection with the transactions contemplated by this Agreement.
ITP, NEWCO, the NAMED STOCKHOLDERS and the COMPANY will treat all information
obtained in connection with the negotiation and performance of this Agreement
or the due diligence investigations conducted as confidential in accordance
with the provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of
this Agreement and the Closing Date, the COMPANY will, except as set forth on
Schedule 7.2:
(a) carry on its business in the ordinary course substantially
as conducted heretofore and not introduce any new method of management,
operation or accounting;
(b) maintain its properties and facilities, including those
held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(c) perform in all material respects its obligations under
Material Contracts relating to or affecting its assets, properties or rights;
(d) keep in full force and effect present insurance policies
or other comparable insurance coverage;
(e) maintain and preserve its business organization intact and
use its best efforts to retain its present key employees and relationships
with suppliers, customers and others having business relations with the
COMPANY;
(f) maintain compliance with all material permits, laws, rules
and regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar Governmental Authorities;
(g) maintain present Debt and lease instruments in accordance
with their respective terms and not enter into new or amended Debt or lease
instruments, provided that Debt and/or lease instruments may be replaced if
such replacement instruments are on terms at least as favorable to the COMPANY
as the instruments being replaced; and
(h) except in the ordinary course of business or as required
by law or contractual obligations or other understandings or arrangements
existing on the date hereof, the COMPANY will not (i) increase in any manner
the base compensation of, or enter into any new bonus or incentive agreement
or arrangement with, any of the employees engaged in the COMPANY's business,
(ii) pay or agree to pay any additional pension, retirement allowance or other
employee benefit to any such employee, whether past or present, (iii) enter
into any new employment, severance, consulting, or other compensation
agreement with any existing employee engaged in the COMPANY's business, (iv)
amend or enter into a new Plan (except as required by Law) or amend or enter
into a new collective bargaining agreement (except as required by this
Agreement), or (v) engage in any transaction with any Affiliates.
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3
between the date hereof and the Closing Date, the COMPANY will not, without
the prior written consent of ITP:
(a) make any change in its Articles or Certificate of
Incorporation or By-Laws;
(b) grant or issue any securities, options, warrants, calls,
conversion rights or commitments of any kind relating to its securities of any
kind other than in connection with the exercise of options or warrants listed
on Schedule 5.3;
(c) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock or engage in
any transaction that will significantly affect the cash reflected on the
balance sheet of the COMPANY as of the Balance Sheet Date.
(d) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditure, except if it is in the
ordinary course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
(e) create, assume or permit to exist any Lien upon any
assets or properties whether now owned or hereafter acquired, except (1)
Permitted Liens, or (2) Liens set forth on Schedule 5.6 hereto;
(f) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business;
(g) negotiate for the acquisition of any business or the
start-up of any new business, except in the ordinary course of business or
pursuant to the Finders' Fee Agreement;
(h) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
(i) waive any material right or claim of the COMPANY;
(j) commit a material breach of, materially amend or
terminate any Material Contract; or
(k) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
7.4 No Shop. In consideration of the substantial expenditure of
time, effort and expense undertaken by ITP in connection with its due
diligence review and the preparation and execution of this Agreement, the
COMPANY and the NAMED STOCKHOLDERS agree that neither they nor their
representatives, agents or employees will, after the execution of this
Agreement until the earlier of (i) the termination of this Agreement or (ii)
the Closing, directly or indirectly, solicit, encourage, negotiate or discuss
with any third party (including by way of furnishing any information
concerning the COMPANY) any acquisition proposal relating to or affecting the
COMPANY or any part of it, or any direct or indirect interests in the COMPANY,
whether by purchase of assets or stock, purchase of interests, merger or other
transaction ("Acquisition Transaction"), and that the COMPANY will promptly
advise ITP of the terms of any communications any of the NAMED STOCKHOLDERS or
the COMPANY may receive or become aware of relating to any bid for all or any
part of the COMPANY.
7.5 Termination of Related Party Agreements. The NAMED
STOCKHOLDERS and the COMPANY shall terminate (i) any stockholders' agreements,
voting agreements, voting trusts, options, warrants and employment agreements
between the COMPANY and any employee and (ii) any existing agreement between
the COMPANY and any STOCKHOLDER (except for that certain Real Property Lease
between the Company and Church & Church, Inc.), on or prior to the Closing
Date. A list of such agreements to be so terminated is set forth on Schedule
7.5 and copies of each such agreement have been provided to counsel for ITP.
7.6 Notification of Certain Matters. The NAMED STOCKHOLDERS and
the COMPANY shall give prompt notice to ITP of (i) the occurrence or non-
occurrence of any event of which the COMPANY or the NAMED STOCKHOLDERS have
knowledge, the occurrence or non-occurrence of which, would cause any
representation or warranty of the COMPANY or the NAMED STOCKHOLDERS contained
herein to be untrue or inaccurate in any material respect at or prior to the
Closing and (ii) any material failure of any NAMED STOCKHOLDER or the COMPANY
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by such person hereunder. ITP and NEWCO shall give prompt
notice to the COMPANY and the NAMED STOCKHOLDERS of (i) the occurrence or
nonoccurrence of any event of which ITP or NEWCO have knowledge, the
occurrence or non-occurrence of which, would cause any representation or
warranty of ITP or NEWCO contained herein to be untrue or inaccurate in any
material respect at or prior to the Closing and (ii) any material failure of
ITP or NEWCO to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder. The delivery of any notice
pursuant to this Section 7.6 shall not be deemed to (i) modify the
representations or warranties hereunder of the party delivering such notice,
which modification may only be made pursuant to Section 7.7, (ii) modify the
conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.7 Amendment of Schedules.
(a) Each party hereto agrees that, with respect to the
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing Date to
supplement or amend promptly the Schedules hereto delivered by such party
pursuant to its representation with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described in the Schedules.
(b) Notwithstanding the foregoing clause (a), no amendment
or supplement to a Schedule prepared by the COMPANY or the NAMED STOCKHOLDERS
that constitutes or reflects an event or occurrence that would have a Material
Adverse Effect, individually or cumulatively with any other events or
occurrences, may be made unless ITP consents in writing to such amendment or
supplement; and provided further, that no amendment or supplement to a
Schedule prepared by ITP or NEWCO that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless the
COMPANY and the NAMED STOCKHOLDERS consent in writing to such amendment or
supplement. In the event that the COMPANY or the NAMED STOCKHOLDERS seek to
amend or supplement a Schedule pursuant to this Section 7.7 and ITP does not
consent to such amendment or supplement, as provided above, this Agreement
shall be deemed terminated by mutual consent as set forth in Section 12.1(a)
hereof. In the event that ITP or NEWCO seeks to amend or supplement a
Schedule pursuant to this Section 7.7 and the COMPANY and the NAMED
STOCKHOLDERS do not consent to such amendment or supplement, as provided
above, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 12.1(a) hereof.
(c) For all purposes of this Agreement, including without
limitation for purposes of determining whether the conditions set forth in
Sections 8 and 9 have been fulfilled, the Schedules hereto shall be deemed to
be the Schedules as amended or supplemented pursuant to this Section 7.7. No
party to this Agreement shall be liable to any other party if this Agreement
shall be terminated pursuant to the provisions of this Section 7.7, except
that, notwithstanding anything to the contrary contained in this Agreement, if
the COMPANY or the NAMED STOCKHOLDERS on the one hand, or ITP or NEWCO on the
other hand, amends or supplements a Schedule which results in a termination of
this Agreement and such amendment or supplement arises out of or reflects
facts or circumstances which such party knew about at the time of execution of
this Agreement and knew would result in a termination of this Agreement or if
such amendment or supplement otherwise is proposed in bad faith, such party
shall pay or reimburse ITP or the COMPANY and the STOCKHOLDERS, as the case
may be, for all of the legal, accounting and other out of pocket costs
reasonably incurred in connection with this Agreement.
7.8 Further Assurances. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
convenient to carry out the transactions contemplated hereby.
7.9 Approval of Merger Agreement. Each of the NAMED STOCKHOLDERS
agrees to vote all of his or her shares of the COMPANY Stock in favor of the
Merger and all other transactions contemplated by this Agreement.
7.10 Conduct of Business by ITP Pending the Merger.. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, ITP covenants and agrees
that, unless the COMPANY and the NAMED STOCKHOLDERS shall otherwise agree in
writing, ITP shall conduct its business, and cause the businesses of its
subsidiaries to be conducted, in the ordinary course consistent with past
practice, other than actions taken by ITP or its subsidiaries in contemplation
of the Merger or the other transactions contemplated in this Agreement or any
other merger agreement entered into by ITP or any of its subsidiaries, and
shall not directly or indirectly do, or propose to do, any of the following
without the prior written consent of the COMPANY and the NAMED STOCKHOLDERS:
(a) amend or otherwise change the Certificate of
Incorporation or Bylaws of ITP; or
(b) 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, except that a wholly owned subsidiary
of ITP may declare and pay a dividend to its parent; or
(c) take or agree in writing or otherwise to take any
action which would make any of the representations or warranties of ITP
contained in this Agreement untrue or incorrect or prevent ITP from performing
or cause ITP not to perform its covenants hereunder.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NAMED STOCKHOLDERS AND THE
COMPANY
The obligations of the NAMED STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the conditions set forth in
this Section 8.
8.1 Representations and Warranties. All representations and
warranties of ITP and NEWCO contained in Section 6 shall be true and correct
in all material respects as of the Closing Date as though such representations
and warranties had been made as of such date; and a certificate to the
foregoing effect dated the Closing Date and signed by the President or any
Vice President of ITP shall have been delivered to the COMPANY and the NAMED
STOCKHOLDERS.
8.2 Performance of Obligations. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by ITP and
NEWCO on or before the Closing Date shall have been duly complied with and
performed in all material respects on or before the Closing Date, provided
that non-performance of an obligation at any time shall not constitute a
failure of the condition contained in this Section 8.2 if such non-performance
is not a material breach of such obligation; and certificates to the foregoing
effect dated the Closing Date and signed by the President or any Vice
President of ITP shall have been delivered to the COMPANY and the NAMED
STOCKHOLDERS.
8.3 No Litigation. No action or proceeding before a court or any
other Governmental Authority or body shall have been instituted or threatened
to restrain or prohibit the Merger or the transactions contemplated by this
Agreement.
8.4 Opinion of Counsel. The COMPANY and the NAMED STOCKHOLDERS
shall have received an opinion from counsel for ITP and NEWCO, dated the
Closing Date, substantially in the form annexed hereto as Annex VI.
8.5 Consents and Approvals. All material consents, waivers,
approvals, authorizations or orders required to be obtained, and all filings
required to be made, by ITP and NEWCO for the authorization, execution and
delivery of this Agreement and the performance and consummation by them of the
transactions contemplated hereby shall have been obtained and made, except
where the failure to receive such consents, etc. could not reasonably be
expected to have a Material Adverse Effect on ITP.
8.6 Good Standing Certificates. ITP and NEWCO each shall have
delivered to the COMPANY a certificate, dated as of a date no earlier than 10
days prior to the Closing Date, duly issued by the Delaware Secretary of State
and in each state in which ITP or NEWCO is authorized to do business, showing
that each of ITP and NEWCO is in good standing and authorized to do business
and that all state franchise and/or income tax returns and taxes for ITP and
NEWCO, respectively, for all periods prior to the Closing have been filed and
paid.
8.7 Secretary's Certificate. The COMPANY and the NAMED
STOCKHOLDERS shall have received a certificate or certificates, dated the
Closing Date and signed by the secretary of ITP and of NEWCO, certifying the
truth and correctness of attached copies of the ITP's and NEWCO's respective
Certificates of Incorporation (including amendments thereto), By-Laws
(including amendments thereto), and resolutions of the boards of directors
and, if required, the stockholders of ITP and NEWCO approving ITP's and
NEWCO's entering into this Agreement and the performance and consummation of
the transactions contemplated hereby.
8.8 No Material Adverse Change. As of the Closing Date, no event
or circumstance shall have occurred with respect to ITP or NEWCO which would
constitute a Material Adverse Effect, and neither ITP nor the NEWCO shall have
suffered any material loss or damages to any of its properties or assets
whether or not covered by insurance, which change, loss or damage materially
affects or impairs the ability of each of ITP and NEWCO to conduct its
business.
8.9 Employment Agreements. NEWCO shall have entered into an
employment agreement with each of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇ substantially in the form attached as Annex VIII hereto.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF ITP AND NEWCO
The obligations of ITP and NEWCO with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the conditions set forth in this Section 9.
9.1 Representations and Warranties. All the representations and
warranties of the NAMED STOCKHOLDERS and the COMPANY contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of such date; and the NAMED STOCKHOLDERS shall have
delivered to ITP certificates dated the Closing Date and signed by them to
such effect.
9.2 Performance of Obligations. All of the terms, covenants and
conditions of this Agreement to be complied with or performed by the NAMED
STOCKHOLDERS and the COMPANY on or before the Closing Date shall have been
duly performed or complied with in all material respects on or before the
Closing Date, as the case may be, provided that non-performance of an
obligation at any time shall not constitute a failure of the condition
contained in this Section 9.2 if such non-performance is not a material breach
of such obligation; and the NAMED STOCKHOLDERS shall have delivered to ITP
certificates dated the Closing Date and signed by them to such effect.
9.3 No Litigation. No action or proceeding before a court or any
other Governmental Authority or body shall have been instituted or threatened
to restrain or prohibit the Merger or the transactions contemplated by this
Agreement and no Governmental Authority or body shall have taken any other
action or made any request of ITP as a result of which the management of ITP
deems it inadvisable to proceed with the transactions hereunder.
9.4 Secretary's Certificate. ITP shall have received a
certificate or certificates, dated the Closing Date and signed by the
secretary of the COMPANY, certifying the truth and correctness of attached
copies of the COMPANY's Certificate or Articles of Incorporation (including
amendments thereto), By-Laws (including amendments thereto), and resolutions
of the board of directors and the shareholders approving the COMPANY's
entering into this Agreement and the consummation of the transactions
contemplated hereby.
9.5 No Material Adverse Change. As of the Closing Date, no event
or circumstance shall have occurred with respect to the COMPANY which would
constitute a Material Adverse Effect, and the COMPANY shall not have suffered
any material loss or damages to any of its properties or assets whether or not
covered by insurance, which change, loss or damage materially affects or
impairs the ability of the COMPANY to conduct its business.
9.6 STOCKHOLDERS' Release. The NAMED STOCKHOLDERS shall have
delivered to ITP an instrument dated the Closing Date releasing the COMPANY
from any and all (i) claims of the STOCKHOLDERS against the COMPANY and ITP
and (ii) obligations of the COMPANY and ITP to the NAMED STOCKHOLDERS, except
for (x) continuing obligations to the NAMED STOCKHOLDERS relating to their
employment by the COMPANY, (y) obligations arising under this Agreement or the
transactions contemplated hereby.
9.7 Termination of Related Party Agreements. All agreements
specified in Section 7.5 hereof to be terminated prior to or as of the Closing
Date shall have been terminated effective prior to or as of the Closing Date.
9.8 Opinion of Counsel. ITP shall have received an opinion from
counsel to the COMPANY, dated the Closing Date, substantially in the form
attached hereto as Annex VII.
9.9 Consents and Approvals. All material consents, waivers,
approvals, authorizations or orders required to be obtained, and all filings
required to be made, by the COMPANY and the NAMED STOCKHOLDERS for the
authorization, execution and delivery of this Agreement and the performance
and consummation by them of the transactions contemplated hereby shall have
been obtained and made, except where the failure to receive such consents,
etc. could not reasonably be expected to have a Material Adverse Effect on the
COMPANY.
9.10 Good Standing Certificates. The COMPANY shall have delivered
to ITP a certificate, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate Governmental Authority in the
COMPANY's state of incorporation and, unless waived by ITP, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business. In addition, the COMPANY shall have
delivered to ITP a letter from the Michigan Department of Treasury confirming
that all tax returns and taxes relating to Michigan Sales, Use and Withholding
Taxes and Michigan Single Business Taxes for all periods prior to December 15,
1997 have been filed and paid.
9.11 Employment Agreements. Each of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ shall have entered into an employment agreement
substantially in the form attached as Annex VIII hereto.
9.12 Stockholders' Agreement. Each STOCKHOLDER shall have executed
a Joinder Agreement substantially in the form of Annex IX hereto binding them
and all of their shares of ITP Stock received in the Merger to the provisions
of the Stockholders' Agreement of IT Partners, Inc. dated May 30, 1997, as
amended to date, a true, correct and complete copy of which has been provided
to the COMPANY for distribution to the STOCKHOLDERS (the "Stockholders'
Agreement").
9.13 Subordination Agreement. Each of Messrs. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇, being the only STOCKHOLDERS to receive Notes shall have executed a
Subordination Agreement substantially in the form of Annex X hereto.
9.14 Financing. ITP and/or NEWCO, as the case may be, shall have
secured adequate financing to fund the amount of cash set forth on Annex III
under the Intercompany Loan and Security Agreement by and among ITP, NEWCO,
the lenders from time to time, Creditanstalt-Bankverein and Creditanstalt
Corporate Finance, Inc. (the "Agent").
9.15 Letter Agreement. Each of the STOCKHOLDERS who are not NAMED
STOCKHOLDERS shall have executed a Letter Agreement in the form attached
hereto as Annex XIII setting forth certain representations, warranties,
covenants and agreements.
9.16 Employment Matters. The COMPANY shall have terminated any
agreement with Manage Pro, Inc. pursuant to which the COMPANY leases
employees. Further, the COMPANY shall, in the ordinary course following the
termination of such agreement, re-hire all employees previously leased from
Manage Pro, Inc.
10. COVENANTS AFTER CLOSING
10.1 Preparation and Filing of Tax Returns.
(a) The NAMED STOCKHOLDERS shall prepare draft Returns of any
Acquired Party for all taxable periods that end on or before the Closing Date
and NEWCO shall file or cause to be filed (after review and approval of such
Returns by the NAMED STOCKHOLDERS) all such Returns on or before the due dates
of such Returns.
(b) ITP shall file or cause to be filed all Returns of, or that
include, any Acquired Party for all taxable periods ending after the Closing
Date on or before the due dates of such Returns.
(c) Each party hereto shall, and shall cause its subsidiaries
and Affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in filing
any Return, amended Return or claim 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 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 Returns pursuant to this
Agreement shall bear all costs of filing such Returns.
(d) Each of the COMPANY, NEWCO, ITP and each NAMED STOCKHOLDER
hereby agrees to report the transaction as a tax free reorganization pursuant
to Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code and hereby agrees
not to take any position which is inconsistent with the foregoing, including,
without limitation, any election under Section 338 of the Code.
10.2 Stock Options Subject to the provisions of the
Stockholders' Agreement referred to in Section 9.12 hereof, ITP covenants and
agrees that a stock option plan valued at the post-closing share price
equivalent in value to 6% of the stock portion of the Merger Consideration
will be implemented for the COMPANY'S employees. ITP's Board of Directors
will consider the recommendations of Messrs. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ with regard to the employees who should receive such
options.
10.3 Annual Incentive Compensation Plan ITP shall implement an
annual incentive compensation plan (the "Annual Incentive Compensation Plan")
for the employees of NEWCO, the terms of which shall be mutually agreed upon
by the parties. In connection with the Annual Incentive Compensation Plan,
ITP shall allocate the compensation of Messrs. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ between ITP and NEWCO in a manner reflecting the
allocation of such individuals' time between ITP and NEWCO. The benefits to
be awarded under the Annual Incentive Compensation Plan shall be allocated to
the employees of NEWCO in the manner determined by Messrs. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ from time to time.
11. INDEMNIFICATION
The NAMED STOCKHOLDERS, ITP and NEWCO each make the following covenants
that are applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇ covenant and agree that they, jointly and
severally, and the other NAMED STOCKHOLDERS covenant and agree that they
severally, but not jointly, will indemnify, defend, protect and hold harmless
ITP, NEWCO, the COMPANY and the Surviving Corporation at all times, from and
after the date of this Agreement until the Expiration Date, from and against
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without
limitation, reasonable attorneys' fees and reasonable expenses of
investigation) incurred by ITP, NEWCO, the COMPANY or the Surviving
Corporation as a result of or arising from (i) any breach of the
representations and warranties of the NAMED STOCKHOLDERS or the COMPANY set
forth herein or in the Company Delivered Documents, (ii) any breach of any
agreement on the part of the NAMED STOCKHOLDERS or the COMPANY under this
Agreement or the Company Delivered Documents, (iii) any liability under any
Federal or state law or regulation, at common law or otherwise with respect to
the transactions contemplated in this Agreement, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact relating
to the COMPANY or the NAMED STOCKHOLDERS, or arising out of or based upon any
omission or alleged omission by the COMPANY and/or the NAMED STOCKHOLDERS to
state a material fact relating to the COMPANY or the NAMED STOCKHOLDERS
required to be stated or necessary to make the statements not misleading, (iv)
any Tax imposed upon the COMPANY, NEWCO or the Surviving Corporation or
relating to any third party or Acquired Party for any period ending on or
prior to the Closing Date, including, in each case, any such Tax arising out
of or in connection with the transactions effected pursuant to this Agreement
or any such Tax for which an Acquired Party may be liable under Section
1.1502-6 of the Treasury Regulations (or any similar provisions of state,
local or foreign law), as a transferee or successor, by contract or otherwise
(in excess of all amounts already paid with respect thereto or properly
accrued or reserved with respect thereto on the COMPANY Financial Statements,
the Estimated Closing Date Balance Sheet, the Final Closing Balance Sheet and
any other financial statements of the COMPANY delivered to ITP with respect to
periods ending on or prior to the Closing Date); provided, however, that any
Tax arising out of or in connection with (a) the transactions effected
pursuant to this Agreement solely as a result of the unilateral action of ITP
after the Closing Date, and (b) any gain recognized by NEWCO in the event
NEWCO (and not ITP) is deemed to have transferred the ITP Stock to the
STOCKHOLDERS and if the transactions effected pursuant to this Agreement fail
to qualify as a tax free reorganization pursuant to Section 368(a)(1)(A) and
Section 368(a)(2)(D) of the Code shall not, in the case of either (a) or (b),
give rise to indemnification under this Section 11.1, or (v) any liability (in
excess of the collateral) arising in connection with the leases listed on
Schedule 5.11(b)(g)(ii), including any assignment or financing document
associated with such leases; provided, however, the indemnity provided in this
Section 11.1(v) shall not be subject to the limitation on indemnification set
forth in Section 11.5(a).
11.2 Indemnification by ITP. ITP covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times
from and after the date of this Agreement until the ITP Expiration Date, from
and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by
ITP or NEWCO of its representations and warranties set forth herein or in the
ITP Delivered Documents, (ii) any breach of any agreement on the part of ITP
or NEWCO under this Agreement or the ITP Delivered Documents, or (iii) any
liability under any Federal or state law or regulation, at common law or
otherwise with respect to the transactions contemplated in this Agreement,
arising out of or based upon any untrue statement or alleged untrue statement
of a material fact relating to ITP or NEWCO, or arising out of or based upon
any omission or alleged omission to state a material fact relating to ITP or
NEWCO required to be stated or necessary to make the statements not
misleading, or (iv) with respect to any Tax arising out of or in connection
with the transactions effected pursuant to this Agreement caused solely as a
result of the unilateral action of ITP after the Closing Date.
11.3 Third Person Claims. Promptly after any party hereto
(hereinafter the "Indemnified Party") has received notice of or has knowledge
of any claim by a person not a party to this Agreement ("Third Person"), of
the commencement of any action or proceeding by a Third Person, the
Indemnified Party shall, as a condition precedent to a claim with respect
thereto being made against any party obligated to provide indemnification
pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying
Party"), give the Indemnifying Party written notice of such claim or the
commencement of such action or proceeding. Such notice shall state the nature
and the basis of such claim and a reasonable estimate of the amount thereof.
The Indemnifying Party shall have the right to defend and settle, at its own
expense and by its own counsel, any such matter so long as the Indemnifying
Party pursues the same in good faith and diligently, provided that the
Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party, such consent not to be unreasonably
withheld or delayed. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate, at the Indemnifying Party's
expense, with the Indemnifying Party and its counsel in the defense thereof
and in any settlement thereof. If the Indemnifying Party desires to accept a
final and complete settlement of any such Third Person claim and the
Indemnified Party refuses to consent to such settlement, then the Indemnifying
Party's liability under this Section with respect to such Third Person claim
shall be limited to the amount so offered in settlement to said Third Person
plus all indemnifiable costs and expenses incurred to date, the Indemnifying
Party shall be relieved of its duty to defend and shall tender the Third
Person claim back to the Indemnified Party, who shall thereafter, at its own
expense, be responsible for the defense and negotiation of such Third Person
claim. If the Indemnifying Party does not undertake to defend such matter to
which the Indemnified Party is entitled to indemnification hereunder, or fails
diligently to pursue such defense, the Indemnified Party may undertake such
defense through counsel of its choice, at the cost and expense of the
Indemnifying Party, and the Indemnified Party may settle such matter, and the
Indemnifying Party shall reimburse the Indemnified Party for the amount paid
in such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim
without the written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld or delayed.
11.4 Exclusive Remedy. The indemnification provided for in this
Section 11 shall (except as prohibited by ERISA and except as otherwise
expressly provided in this Agreement, the Company Delivered Documents or the
ITP Delivered Documents) be the exclusive remedy in any action seeking damages
or any other form of monetary relief brought by any party to this Agreement
against another party.
11.5 Limitations on Indemnification. (a) The persons or entities
indemnified pursuant to Section 11.1 or 11.2 shall not assert any claim other
than a Third Person claim for indemnification hereunder until such time as,
and solely to the extent that, the aggregate of all claims which such persons
may have shall exceed $150,000. An amount equal to $150,000 shall be a
cumulative deductible against any claim for indemnification hereunder. No
person shall be entitled to indemnification under this Article 11 if and to
the extent that such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
(b) ITP shall have the right, upon reasonable prior written
notice, to offset indemnification amounts due to it by a NAMED STOCKHOLDER
pursuant to this Agreement against payments due to such NAMED STOCKHOLDER
under (i) this Agreement (including, without limitation, the consideration set
forth on Annex III hereto) and/or (ii) any contract contemplated by, or
referred to in, this Agreement.
(c) Except for claims for Merger Consideration, the
indemnification obligations under Section 11.1 shall be limited, in the
aggregate, to fifty percent (50%) of the value of the Merger Consideration as
of the Closing Date received by the STOCKHOLDERS pursuant to Article 3. The
indemnification obligations under Section 11.2 shall be limited, in the
aggregate, to fifty percent (50%) of the total value of the Merger
Consideration as of the Closing Date paid by ITP pursuant to Article 3.
11.6 Subrogation. In the event that the Indemnifying Party shall
be obligated to provide indemnification hereunder to a claimant (the
"Claimant"), the Indemnifying Party shall, upon payment of such indemnity in
full, be subrogated to all rights of the Claimant with respect to the Losses
to which such indemnification relates.
11.7 Tax and Insurance. All indemnification or reimbursement
payments required pursuant to this Agreement shall be made net of all tax and
insurance benefits actually received by the Indemnified Party. In the event
that any claim for indemnification asserted hereunder is, or may be, the
subject of any insurance coverage or other right to indemnification or
contribution from any third person, the Indemnified Party(ies) expressly agree
that he (they) shall promptly notify the applicable insurance carrier of any
such claim or loss and tender defense thereof to such carrier, and shall also
promptly notify any potential third party indemnitor or contributor which may
be liable for any portion of such losses or claims. The Indemnified
Party(ies) agree to pursue, at the cost and expense of the Indemnified Party,
such claims diligently and to reasonably cooperate, at the cost and expense of
the Indemnified Party, with each applicable insurance carrier and third party
indemnitor or contributor.
11.8 Undertakings. Prior to the assertion of any claims for
indemnification under this Agreement, the Indemnified Party shall utilize all
reasonable efforts, consistent with normal practices and policies and good
commercial practice, to mitigate any losses or damages subject to
indemnification hereunder.
12. TERMINATION OF AGREEMENT
12.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date solely:
(a) by mutual consent of the boards of directors of ITP and
the COMPANY;
(b) by the NAMED STOCKHOLDERS or the COMPANY (acting through
its board of directors), on the one hand, or by ITP (acting through its board
of directors), on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated by
January 31, 1998, unless the failure of such transactions to be consummated is
due to the willful failure of the party seeking to terminate this Agreement to
perform any of its obligations under this Agreement to the extent required to
be performed by it prior to or on the Closing Date;
(c) by the STOCKHOLDERS or the COMPANY, on the one hand, or
by ITP, on the other hand, if a material breach or default shall be made by
the other party in the observance or in the due and timely performance of any
of the covenants, agreements or conditions contained herein, and the curing of
such default shall not have been made on or before the Closing Date; or
(d) pursuant to Section 7.7 hereof.
12.2 Liabilities in Event of Termination. Except as provided in
Section 7.7 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 STOCKHOLDERS. The NAMED STOCKHOLDERS recognize and
acknowledge that they had in the past, currently have, and in the future may
have, access to certain confidential information of the COMPANY and/or ITP,
such as operational policies, and pricing and cost policies that are valuable,
special and unique assets of the COMPANY's and/or ITP's respective businesses
(collectively, the "Confidential Information"). The NAMED STOCKHOLDERS,
severally and not jointly, agree that they will not disclose such Confidential
Information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
ITP who need to know such Confidential Information in connection with the
transactions contemplated hereby, who have been informed of the confidential
nature of such Confidential Information and who have agreed to keep such
Confidential Information confidential as provided hereby, (b) following the
Closing, such Confidential Information may be disclosed by the NAMED
STOCKHOLDERS as is required in the course of performing their duties for ITP
or the Surviving Corporation and (c) to counsel and other advisers, provided
that such advisers (other than counsel) agree to the confidentiality
provisions of this Section 13.1, unless (i) such Confidential Information
becomes known to the public generally through no fault of any such NAMED
STOCKHOLDERS, (ii) disclosure is required by law or the order of any
Governmental Authority under color of law, provided, that prior to disclosing
any Confidential Information pursuant to this clause (ii), the NAMED
STOCKHOLDERS shall, if possible, give prior written notice thereof to ITP and
provide ITP with the opportunity to contest such disclosure, or (iii) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by any of the NAMED STOCKHOLDERS of the
provisions of this Section 13, ITP shall be entitled to an injunction
restraining such NAMED STOCKHOLDERS from disclosing, in whole or in part, such
Confidential Information. Nothing herein shall be construed as prohibiting
ITP from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. In the event the transactions
contemplated by this Agreement are not consummated, the NAMED STOCKHOLDERS
shall have none of the above-mentioned restrictions on their ability to
disseminate Confidential Information with respect to the COMPANY.
13.2 ITP and NEWCO. ITP and NEWCO recognize and acknowledge that they
had in the past, currently have, and in the future may have, access to certain
Confidential Information of the COMPANY, such as operational policies, and
pricing and cost policies that are valuable, special and unique assets of the
COMPANY's business. ITP and NEWCO agree that, prior to the Closing, or if the
transactions contemplated by this Agreement are not consummated, they will not
disclose such Confidential Information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except (a)
to the NAMED STOCKHOLDERS and to-authorized representatives of the COMPANY,
and (b) to counsel, the Agent and the Lenders and other advisers, provided
that such advisors (other than counsel) agree to the confidentiality
provisions of this Section 13.2, unless (i) such Confidential Information
becomes known to the public generally through no fault of ITP or NEWCO, (ii)
disclosure is required by law or the order of any Governmental Authority under
color of law, provided, that prior to disclosing any Confidential Information
pursuant to this clause (ii), ITP and NEWCO shall, if possible, give prior
written notice thereof to the COMPANY and the NAMED STOCKHOLDERS and provide
the COMPANY and the NAMED STOCKHOLDERS with the opportunity to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by ITP or
NEWCO of the provisions of this Section, the COMPANY and the NAMED
STOCKHOLDERS shall be entitled to an injunction restraining ITP and NEWCO from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting the COMPANY and the NAMED
STOCKHOLDERS from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
13.3 Damages. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants in Sections 13.1
and 13.2, and because of the immediate and irreparable damage that would be
caused for which they would have no other adequate remedy, the parties hereto
agree that, in the event of a breach by any of them of the foregoing
covenants, the covenant may be enforced against the other parties by
injunctions and restraining orders.
13.4 Survival. The obligations of the parties under this Article
13 shall survive the termination of this Agreement for a period of three (3)
years from the Closing Date.
14. STOCKHOLDERS' AGREEMENT
14.1 Stockholders' Agreement. Each of the STOCKHOLDERS shall have
executed a Joinder Agreement substantially in the form of Annex IX hereto
binding them and all of their shares of ITP Stock received in the Merger to
the provisions of the Stockholders' Agreement. The certificates evidencing
the ITP Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this
Agreement will bear a legend substantially in the form set forth below and
containing such other information as ITP may deem necessary or appropriate:
EXCEPT AS PROVIDED BY THAT CERTAIN STOCKHOLDERS' AGREEMENT DATED MAY 30, 1997,
AS AMENDED, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF
THE COMPANY FOR INSPECTION, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO
GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER,
ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION.
15. FEDERAL SECURITIES ACT REPRESENTATIONS
The NAMED STOCKHOLDERS acknowledge that the shares of ITP Stock to be
delivered to the NAMED STOCKHOLDERS pursuant to this Agreement have not been
and will not be registered under the Act and therefore may not be resold
without compliance with the 1933 Act. The ITP Stock to be acquired by the
NAMED STOCKHOLDERS pursuant to this Agreement is being acquired solely for
their own respective accounts, for investment purposes only, and with no
present intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
15.1 Compliance with Law. The NAMED STOCKHOLDERS covenant, warrant
and represent that none of the shares of ITP Stock issued to the NAMED
STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after fall compliance with all of
the applicable provisions of the 1933 Act and the rules and regulations of the
SEC. All the ITP Stock shall bear the following legend in addition to the
legend required under Article 14 of this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT
OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS AND, IF REQUIRED BY IT PARTNERS, INC., AN
OPINION OF COUNSEL TO IT PARTNERS, INC. STATING THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACT.
15.2 Economic Risk: Sophistication. The NAMED STOCKHOLDERS
represent and warrant that they are able to bear the economic risk of an
investment in the ITP Stock acquired pursuant to this Agreement, can afford to
sustain a total loss of such investment and have such knowledge and experience
in financial and business matters that they are capable of evaluating the
merits and risks of the proposed investment in the ITP Stock. The NAMED
STOCKHOLDERS represent and warrant that they have had an adequate opportunity
to ask questions and receive answers from the officers of ITP concerning any
and all matters relating to the transactions described herein including,
without limitation, the background and experience of the current and proposed
officers and directors of ITP, business, operations, financial conditions and
plans for ITP, and any plans for additional acquisitions and the like. Each
NAMED STOCKHOLDER represents that after taking into consideration the
information and advice provided herein each NAMED STOCKHOLDER has the
requisite knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of this investment.
Notwithstanding the foregoing, the NAMED STOCKHOLDERS have the right to rely
fully upon each of the representations, warranties, covenants and agreements
of ITP and NEWCO contained in this Agreement, the Company Delivered Documents
and the ITP Delivered Documents.
16. GENERAL
16.1 Cooperation. The COMPANY, the NAMED STOCKHOLDERS, ITP and
NEWCO, shall each deliver or cause to be delivered to the other on the Closing
Date, and at such other times and places as shall be reasonably agreed to,
such additional instruments as the other may reasonably request for the
purpose of carrying out this Agreement. The NAMED STOCKHOLDERS will, at ITP's
expense, cooperate and use their reasonable efforts to have the present
officers, directors and employees of the COMPANY cooperate with ITP on and
after the Closing Date in furnishing information, evidence, testimony and
other assistance in connection with any Tax Return filing obligations,
actions, proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to the Closing Date.
16.2 Successors and Assigns. Except that ITP and the Surviving
Corporation may assign the benefits of this Agreement to the Agent, this
Agreement and the rights and obligations of the parties hereunder (including,
but not limited to, the right to receive the Subsequent Merger Consideration)
may not be assigned (except by operation of law) and shall be binding upon and
shall inure to the benefit of the parties hereto, the permitted successors of
ITP, and the heirs and legal representatives of the NAMED STOCKHOLDERS.
16.3 Entire Agreement. This Agreement (including the Schedules,
exhibits and annexes attached hereto), the Company Delivered Documents and the
ITP Delivered Documents constitute the entire agreement and understanding
among the NAMED STOCKHOLDERS, the COMPANY, NEWCO and ITP and supersede any
prior agreement and understanding relating to the subject matter of this
Agreement. Subject to Section 16.14, this Agreement may be modified or
amended only by a written instrument executed by the NAMED STOCKHOLDERS, the
COMPANY, NEWCO and ITP, acting through their respective officers or trustees,
duly authorized by their respective boards of directors (as the case may be).
Any disclosure made on any Schedule delivered pursuant hereto shall be deemed
to have been disclosed for purposes of any other Schedule required hereby,
provided that the COMPANY and the NAMED STOCKHOLDERS, on the one hand, and ITP
and NEWCO, on the other hand, shall make a good faith effort to cross
reference disclosure, as necessary or advisable, between related Schedules.
16.4 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
16.5 Brokers and Agents. ITP and NEWCO represent and warrant that
they employed no broker or agent in connection with this transaction. It is
acknowledged and understood that the COMPANY and the NAMED STOCKHOLDERS
retained the services of First of Michigan Corporation and the STOCKHOLDERS
will be solely responsible for any fees, commissions or expenses of that
entity.
16.6 Expenses.
(a) Except as otherwise expressly provided in this Agreement,
whether or not the transactions herein contemplated shall be consummated, each
of the parties hereto will pay its own fees, expenses and disbursements and
those of its agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments
thereto, including all costs and expenses incurred in the performance and
compliance with all conditions to be performed by it under this Agreement.
(b) Each NAMED STOCKHOLDER shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar
taxes and fees ("Transfer Taxes") imposed in connection with the transactions
contemplated hereby. Each NAMED STOCKHOLDER shall file all necessary
documentation and Returns with respect to such Transfer Taxes. In addition,
each NAMED STOCKHOLDER acknowledges that he, and not the COMPANY or ITP, will
pay all Taxes attributable to the receipt of the Merger Consideration payable
pursuant to Section 2 hereof, and will assume all Tax risks and liabilities of
such NAMED STOCKHOLDER in connection with the transactions contemplated
hereby.
16.7 Notices. All notices or communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given (i)
if physically delivered, (ii) if telephonically transmitted by facsimile
transmission, if such transmission is confirmed by delivery by certified or
registered United States Mail (with first class postage pre-paid) or
guaranteed overnight delivery, (iii) five business days after having been
deposited in the United States Mail, as certified or registered mail (with
return receipt requested and with first class postage pre-paid), or (iv) one
(1) business day after having been transmitted to a third party providing
delivery services in the ordinary course of business which guarantees delivery
on the next business day after such transmittal (e.g., via Federal Express),
all of which notices or other communications shall be addressed to the
recipient (or to an officer or agent of the recipient) as follows:
(a) If to ITP, or NEWCO, addressed to them at:
IT Partners, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with copies to:
Piper & Marbury L.L.P.
▇▇▇▇▇▇▇ Center South
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, Esquire
(b) If to the NAMED STOCKHOLDERS, addressed to them at
their addresses set forth on Annex IV, with copies to such counsel, if any, as
is set forth with respect to each NAMED STOCKHOLDER on such Annex IV;
(c) If to the COMPANY, addressed to it at:
Sequoia Diversified Products, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esquire
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 16.7 from time to time.
16.8 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Maryland, except that matters herein
within the purview of the matters covered by Delaware Law or by Michigan Law
shall be governed by such Delaware Law or Michigan Law (as the case may be),
in each case without reference to conflicts of laws principles.
16.9 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall
it be construed as a waiver of or acquiescence in any such breach or default,
or of any similar breach or default occurring later; nor shall any waiver of
any single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
16.10 Time. Time is of the essence with respect to this Agreement.
16.11 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision shall be severed from this
Agreement, and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
16.12 Remedies Cumulative. No right, remedy or election given by
any term of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies and elections available at law or
in equity.
16.13 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
16.14 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only
with the written consent of ITP, NEWCO, the COMPANY and NAMED STOCKHOLDERS who
will hold or who hold at least 50% of the ITP Stock issued or to be issued to
the STOCKHOLDERS upon consummation of the Merger. Any amendment or waiver
effected in accordance with this Section 16.14 shall be binding upon each of
the parties hereto, any other person receiving ITP Stock in connection with
the Merger and each future holder of such ITP Stock.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
IT PARTNERS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (SEAL)
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
ITP NO. 10, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (SEAL)
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman of the Board
SEQUOIA DIVERSIFIED PRODUCTS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
-----------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
NAMED STOCKHOLDERS:
/s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as Trustee U-A,
dated November 9, 1995
/s/ ▇▇▇▇ ▇. ▇▇▇▇
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇, as Trustee U-A,
dated December 13, 1995
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, as Trustee U-A,
dated October 20, 1972
/s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇
