STOCK PURCHASE AGREEMENT
MADE AS OF
FEBRUARY 26, 1998,
BUT EFFECTIVE JANUARY 1, 1998
BETWEEN
INFOCURE CORPORATION,
BUYER
AND
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ AND
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
SELLERS
TABLE OF CONTENTS
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Page
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1. DEFINITIONS.......................................................... 5
2. SALE AND TRANSFER OF SHARES; CLOSING................................. 11
2.1. Shares.......................................................... 11
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2.2. Purchase Price.................................................. 11
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2.3. Closing......................................................... 13
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2.4. Closing Obligations............................................. 13
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2.5. Adjustment Procedure............................................ 14
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3. REPRESENTATIONS AND WARRANTIES OF SELLERS............................ 15
3.1. Organization and Good Standing.................................. 15
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3.2. Authority; No Conflict.......................................... 15
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3.3. Capitalization.................................................. 17
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3.4. Financial Statements............................................ 17
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3.5. Books and Records............................................... 18
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3.6. Title to Properties; Encumbrances............................... 18
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3.7. Condition and Sufficiency of Assets............................. 19
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3.8. Accounts Receivable............................................. 19
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3.9. Inventory....................................................... 20
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3.10. No Undisclosed Liabilities..................................... 20
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3.11. Taxes.......................................................... 20
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3.12. No Material Adverse Change..................................... 21
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3.13. Employee Benefits Matters...................................... 21
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3.14. Compliance With Legal Requirements; Governmental
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Authorizations............................................... 22
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3.15. Legal Proceedings; Orders...................................... 23
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3.16. Absence of Certain Changes and Events.......................... 24
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3.17. Contracts; No Defaults......................................... 25
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3.18. Insurance...................................................... 27
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3.19. Environmental Matters.......................................... 28
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3.20. Employees...................................................... 29
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3.21. Labor Relations; Compliance.................................... 29
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3.22. Intellectual Property Rights of Company........................ 30
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3.23. Certain Payments............................................... 36
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3.24. Disclosure..................................................... 37
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3.25. Relationships With Related Persons............................. 37
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3.26. Brokers or Finders............................................. 38
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3.27. Special Representative Regarding MSI Integrated
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Services, Inc................................................ 38
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4. REPRESENTATIONS AND WARRANTIES OF BUYER.............................. 38
4.1. Organization and Good Standing.................................. 39
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4.2. Authority....................................................... 39
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4.3. Investment Intent............................................... 39
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4.4. Certain Proceedings............................................. 39
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4.5. Brokers or Finders.............................................. 39
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5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE........................... 39
5.1. Access and Investigation........................................ 39
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5.2. Operation of the Business of Company............................ 40
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5.3. Negative Covenant............................................... 40
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5.4. Required Approvals.............................................. 40
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5.5. Notification.................................................... 40
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5.6. Payment of Indebtedness by Related Persons..................... 41
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5.7. No Negotiation................................................. 41
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6. COVENANTS OF BUYER PRIOR TO CLOSING DATE............................ 41
6.1. Approvals of Governmental Bodies/Third Party Consents.......... 41
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6.2. Best Efforts................................................... 41
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7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE................. 41
7.1. Accuracy of Representations.................................... 42
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7.2. Sellers' and Company's Performance............................. 42
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7.3. Consents....................................................... 43
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7.4. Additional Documents........................................... 43
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7.5. No Proceedings................................................. 43
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7.6. No Claim Regarding Stock Ownership or Sale Proceeds............ 43
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7.7. No Prohibition................................................. 43
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7.8. Approval of Buyer's Lender..................................... 43
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7.9. Due Diligence.................................................. 43
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8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE................ 43
8.1. Accuracy of Representations.................................... 44
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8.2. Buyer's Performance............................................ 45
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8.3. Consents....................................................... 45
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8.4. Additional Documents........................................... 45
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8.5. No Injunction.................................................. 45
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9. TERMINATION......................................................... 45
9.1. Termination Events............................................. 45
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9.2. Effect of Termination.......................................... 46
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10. INDEMNIFICATION; REMEDIES............................................ 46
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10.1. Agreement by Sellers to Indemnify............................. 46
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10.2. Agreements by Buyer to Indemnify.............................. 48
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10.3. Matters Involving Third Parties............................... 49
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10.4. Other Agreements.............................................. 50
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11. GENERAL PROVISIONS................................................... 50
11.1. Expenses...................................................... 50
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11.2. Public Announcements.......................................... 50
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11.3. Confidentiality............................................... 50
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11.4. Notices....................................................... 51
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11.5. Jurisdiction; Service of Process.............................. 52
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11.6. Further Assurances............................................ 52
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11.7. Waiver........................................................ 52
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11.8. Entire Agreement and Modification............................. 53
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11.9. Disclosure Schedule........................................... 53
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11.10. Assignments, Successors and No Third-Party Rights............ 53
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11.11. Severability................................................. 54
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11.12. Section Headings; Construction............................... 54
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11.13. Time of Essence.............................................. 54
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11.14. Governing Law................................................ 54
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11.15. Counterparts................................................. 54
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STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of February 26,
1998, but effective as of January 1, 1998, by INFOCURE CORPORATION, a Delaware
corporation ("Buyer"), ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, a resident of Georgia ("▇▇. ▇▇▇▇▇▇▇▇"),
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, a resident of Georgia ("▇▇. ▇▇▇▇▇▇▇▇") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
a resident of Georgia ("Warenik" and collectively with ▇▇. ▇▇▇▇▇▇▇▇ and ▇▇.
▇▇▇▇▇▇▇▇, "Sellers").
RECITALS:
Sellers desire to sell, and Buyer desires to purchase, all of the issued
and outstanding shares (the "Shares") of capital stock of Medical Software
Integrators, Inc., a Georgia corporation (the "Company"), for the consideration
and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
14. DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.:
"ADJUSTMENT AMOUNT" - as defined in Section 2.5.
"APPLICABLE CONTRACT" - any Contract (i) under which Company has or may
acquire any rights; (ii) under which Company has or may become subject to any
obligation or liability or (iii) by which Company or any of the assets owned or
used by it is or may become bound.
"BEST EFFORTS" - the efforts that a prudent Person desirous of achieving a
result would reasonably use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
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to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions.
"BREACH" - a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been (i) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision or (ii) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence or circumstance.
"BUYER" - as defined in the first paragraph of this Agreement.
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"BUYER'S STOCK" - the Common Stock of InfoCure Corporation, a Delaware
corporation, having a par value of $.001 per share.
"CLOSING" - as defined in Section 2.3.
"CLOSING DATE" - the date and time as of which the Closing actually takes
place.
"COMPANY" - as defined in the Recitals of this Agreement.
"CONSENT" - any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" - all of the transactions contemplated by this
Agreement, including:
A. The sale of the Shares by Sellers to Buyer;
B. The execution, delivery, and performance of the Employment
Agreements, the Restrictive Covenant Agreements, the Escrow Agreement and the
Registration Rights Agreements;
C. The performance by Buyer and Sellers of their respective
covenants and obligations under this Agreement; and
D. Buyer's acquisition and ownership of the Shares and exercise of
control over the Company.
"CONTRACT" - any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"DAMAGES" - any loss, liability, claim, damages (including, without
limitation, incidental and consequential damages), expense (including, without
limitation, costs of investigation and defense and reasonable attorneys' fees)
or diminution of value, whether or not involving a third party.
"DISCLOSURE SCHEDULE" - the disclosure schedule delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
"EMPLOYMENT AGREEMENTS" - as defined in Section 2.4.A.(iv).
"ENCUMBRANCE" - any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENTAL REQUIREMENTS" - means federal, state and local laws relating
to pollution or protection of the environment, including laws or provisions
relating to emissions,
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discharges, releases or threatened releases of pollutants, contaminants, or
hazardous or toxic materials, substances, or wastes into air, surface water,
groundwater, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants or hazardous or toxic materials, substances, or wastes.
"ERISA" - the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGREEMENT" - as defined in Section 2.4.(vii).
"FACILITIES" - any real property, leaseholds, or other interests currently
or formerly owned or operated by Company and any buildings, plants, structures,
or equipment (including motor vehicles, tank cars, and rolling stock) currently
or formerly owned or operated by Company.
"GAAP" - generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the financial statements referred to
in Section 3.4. were prepared.
"GOVERNMENTAL AUTHORIZATION" - any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" - any:
A. Nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
B. Federal, state, local, municipal, foreign, or other government;
C. Governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
D. Multi-national
organization or body; or
E. Body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"IRC" - the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" - the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
A. Such individual is actually aware of such fact or other matter;
or
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B. A prudent individual given his position with Company could be
expected to discover or otherwise become aware of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer within the last five (5) years, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"OPERATING INCOME" - means the net income of Company determined in
accordance with GAAP before income taxes and after all other charges except:
A. Unless otherwise approved by ▇▇. ▇▇▇▇▇▇▇▇, any general and
administrative expense (i.e., allocation of Buyer's general corporate overhead)
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attributable to the Buyer and all subsidiaries of Buyer that is not directly
related to the operation of Company in the Ordinary Course of Business;
provided, however, Operating Income shall include reimbursement by Company of
expenses at a fair market price mutually agreed to by Buyer and ▇▇. ▇▇▇▇▇▇▇▇ for
expenses previously incurred by Company, but that have for administrative
convenience or efficiency reasons been centralized with Buyer; and
B. Any amortization of goodwill of Buyer and all Subsidiaries of
Buyer.
In the event that certain expenses incurred by the Company are for the principal
or partial benefit of Buyer or other subsidiaries of Buyer, then the parties
hereto shall endeavor to track and determine in a fair and equitable manner that
portion of such expenses that should fairly and reasonably be allocated to Buyer
or such other subsidiaries of Buyer, and therefore not included in arriving at
Operating Income for purposes of this Agreement.
"ORDER" - any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" - an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
A. Such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
B. Such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
C. Such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons
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exercising similar authority), in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business as such
Person.
"ORGANIZATIONAL DOCUMENTS" - (i) the Articles or Certificate of
Incorporation and the Bylaws of a corporation; (ii) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person and (iii) any amendment to any of the foregoing.
"PERSON" - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" - as defined in Section 3.13.1.
"PROCEEDING" - any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"RELATED PERSON" - with respect to a particular individual:
A. Each other member of such individual's Family;
B. Any Person that is directly or indirectly controlled by such
individual or one (1) or more members of such individual's Family;
C. Any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
D. Any Person with respect to which such individual or one (1) or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
A. Any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
B. Any Person that holds a Material Interest in such specified
Person;
C. Each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
D. Any Person in which such specified Person holds a Material
Interest;
E. Any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
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F. Any Related Person of any individual described in clause B. or C.
For purposes of this definition, (i) the "Family" of an individual includes
(1) the individual; (2) the individual's spouse and former spouses; (3) any
other natural person who is related to the individual or the individual's spouse
within the second degree and (4) any other natural person who resides with such
individual and (2) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least five
percent (5%) of the outstanding voting power of a Person or equity securities or
other equity interests representing at least five percent (5%) of the
outstanding equity securities or equity interests in a Person.
"REPRESENTATIVE" - with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"RESTRICTIVE COVENANT AGREEMENTS" - as defined in Section 2.4.A.(iii).
"SECURITIES ACT" - the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS" - as defined in the first paragraph of this Agreement.
"SHARES" - as defined in the Recitals of this Agreement.
"SUBSIDIARY" - with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one (1) or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of Company.
"TAX RETURN" - any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREATENED" - a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
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15. SALE AND TRANSFER OF SHARES; CLOSING.
15.1. SHARES. Subject to the terms and conditions of this Agreement, at the
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Closing, Sellers will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Sellers.
15.2. PURCHASE PRICE. The purchase price (the "Purchase Price") for the
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Shares shall equal: (i) the "Base Consideration Amount" (as defined in Section
2.2.A. below) plus the "Earnout Amount" (as defined in Section 2.2.C. below).
A. The "Base Consideration Amount" shall be equal to Seven Million
Two Hundred Thousand and No/100 Dollars ($7,200,000.00).
B. The Base Consideration Amount shall be paid:
(i) Eighty percent (80%) (i.e., $5,760,000.00) in cash (the
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"Cash Base Consideration"); and
(ii) Twenty percent (20%) (i.e., $1,440,000.00) in Buyer's Stock
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valued at the average of the closing bid price per share of Buyer's Stock for
the five (5) trading days on which such stock is traded immediately preceding
the Closing Date (the "Stock Base Consideration").
Ten percent (10%) of the Cash Base Consideration (i.e., $576,000.00)
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shall be paid to the Escrow Agent at Closing as provided in Section 2.4.A.(vii)
below and the balance of the Cash Base Consideration shall be paid to the
Sellers in the following proportions: ▇▇. ▇▇▇▇▇▇▇▇ seventy-six and one-half
percent (76.5%), ▇▇. ▇▇▇▇▇▇▇▇ ten percent (10%) and Warenik thirteen and one-
half percent (13.5%). Any Buyer's Stock payable hereunder and issued by Buyer
in payment of the Stock Base Consideration shall have the benefit of the
Registration Rights Agreement (as defined in Section 2.4.B.(ii)).
C. The "Earnout Amount" shall mean an amount not to exceed Two
Million Two Hundred Thousand and No/100 Dollars ($2,200,000.00) in the aggregate
or One Million One Hundred Thousand and No/100 Dollars ($1,100,000.00) with
respect to each of two (2) separate "Earnout Periods." The "Earnout Periods"
shall mean the "First Earnout Period" (January 1, 1998, through and including
December 31, 1998) and the "Second Earnout Period" (January 1, 1999, through and
including December 31, 1999).
The exact amount of the Earnout Amount for the First Earnout Period
and the Second Earnout Amount shall be determined as follows:
(i) If the Operating Income of Company determined at the end of
the First Earnout Period exceeds One Million Two Hundred Thousand and No/100
Dollars ($1,200,000.00), then for each One and No/100 Dollar ($1.00) of such
excess the Sellers shall earn an additional Six and No/100 Dollars ($6.00) of
Purchase Price for the First Earnout Period; and
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(ii) If the Operating Income of Company determined at the end of
the Second Earnout Period exceeds One Million Two Hundred Thousand and No/100
Dollars $1,200,000.00), then for each One and No/100 Dollar ($1.00) of such
excess the Sellers shall earn an additional Six and No/100 Dollars ($6.00) of
Purchase Price for the Second Earnout Period.
D. The Earnout Amount for the First Earnout Period and the Earnout
Amount for the Second Earnout Period, if any, due Sellers under Section 2.2.C.
shall be paid as follows:
(i) In Buyer's Stock, which stock shall be valued at the
average of the closing bid price per share of Buyer's Stock for the five (5)
trading days on which such stock is traded immediately preceding December 31,
1998 (in the case of the First Earnout Period) or December 31, 1999 (in the case
of the Second Earnout Period), as the case may be. Any Earnout Amount which is
due Sellers shall be paid within one hundred twenty (120) days of the end of the
respective Earnout Period for which the Earnout Amount is earned and shall be
paid to Sellers in the following proportions: ▇▇. ▇▇▇▇▇▇▇▇ seventy-six and one-
half percent (76.5%), ▇▇. ▇▇▇▇▇▇▇▇ ten percent (10%) and Warenik thirteen and
one-half percent (13.5%). The Earnout Amount shall be paid to Sellers only if
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the employment conditions set forth in Section 2.2.D.(ii) are satisfied and if
an Earnout Amount is earned for the First Earnout Period, Buyer shall deliver
said Earnout Amount for the First Earnout Period to the Escrow Agent pursuant to
the terms and conditions of the Escrow Agreement (as defined in Section
2.4.A.(vii)).
(ii) Buyer agrees to pay or to cause the Company to pay the
Earnout Amount to each of the Sellers in the portions set forth above if and
only if said Seller remains employed full-time by the Company, the Buyer or a
Subsidiary of Buyer throughout the entire term of both of the Earnout Periods
unless his or her full-time employment is terminated during either of the
Earnout Periods by death, disability, or by the Company, Buyer or a Subsidiary
of Buyer for a reason other than for cause; provided, however, with respect to
▇▇. ▇▇▇▇▇▇▇▇, she shall only be entitled to receive her portion of the Earnout
Amount if ▇▇. ▇▇▇▇▇▇▇▇ is entitled to receive his portion of the Earnout Amount.
For purposes of this Section, "disability" and "cause"
shall be defined in the same manner as said terms are defined or provided in ▇▇.
▇▇▇▇▇▇▇▇'▇ and ▇▇. ▇▇▇▇▇▇▇'▇ respective Employment Agreements of even date
herewith.
Should any one of the Sellers forfeit his or her right to
receive part of the Earnout Amount, said amount shall not be payable to any
Seller.
(iii) In order to ensure the parties hereto that the Earnout
Amount is computed by the Accountants in accordance with this Agreement and with
GAAP in a fair and disinterested manner, the parties agree that the procedure
set forth in Section 2.5 shall be used to settle any disputes.
(iv) Any Buyer's Stock issued by the Buyer in payment of the
Earnout Amount shall have the benefit of the Registration Rights Agreement as
defined in Section 2.4.B.(ii).
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15.3. CLOSING. The purchase and sale (the "Closing") provided for in this
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Agreement will take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.,
Buyer's counsel, at 1600 Atlanta Financial Center, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. (local time) on February ___, 1998, or at
such other time and place as the parties may agree; provided, however, the
Closing shall be effective as of January 1, 1998.
Except as otherwise provided in Section 9., failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.3. will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement.
15.4. CLOSING OBLIGATIONS. At the Closing:
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A. Sellers will deliver to Buyer:
(i) Certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with a medallion guaranteed
signatures (guaranteed by a commercial bank or by a member firm of the New York
Stock Exchange), for transfer to Buyer;
(ii) Opinion of Counsel. Buyer shall have received an opinion
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dated the Closing Date from ▇▇▇▇▇ & ▇▇▇▇▇, counsel for Sellers, substantially in
the form of EXHIBIT A attached hereto;
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(iii) Restrictive Covenant Agreements. Company and each Seller
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shall have each entered into a restrictive covenant agreement (the "Restrictive
Covenant Agreement") with Buyer, substantially in the form of EXHIBIT B hereto;
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(iv) Employment Agreements. ▇▇. ▇▇▇▇▇▇▇▇ and Warenik shall
---------------------
have entered into an employment agreement with Buyer, substantially in the forms
of EXHIBIT C and EXHIBIT D hereto, respectively;
--------- ---------
(v) Good Standing Certificate. Seller shall have delivered to
-------------------------
Buyer a certificate evidencing the good standing of Company as of a recent
practicable date;
(vi) Employee Covenants Agreements. Each employee, agent,
officer and director of Company listed on SCHEDULE 2.4 to the Disclosure
------------
Schedule shall have executed and delivered to Buyer a Covenants Agreement in
favor of Buyer in the form of EXHIBIT E;
---------
(vii) Escrow Agreement. Each Seller shall have entered into an
----------------
escrow agreement (the "Escrow Agreement") with Buyer and SunTrust Bank, Atlanta
as escrow agent substantially in the form of EXHIBIT F hereto;
---------
(viii) A certificate substantially in the form of EXHIBIT G
---------
hereto, executed by Sellers representing and warranting to Buyer that each of
Seller's representations and warranties in this Agreement was accurate in all
respects as of the date of this Agreement
-9-
and is accurate in all respects as of the Closing Date as if made on the Closing
Date (giving full effect to any supplements to the Disclosure Schedule that were
delivered by Sellers to Buyer prior to the Closing Date in accordance with
Section 5.5.);
(ix) PER Agreement. An exclusive distributorship agreement
-------------
with Physician's Equity Resources, Inc., in the form of EXHIBIT L;
---------
(x) Subscription Agreements. Subscription Agreements of each
-----------------------
Seller in the form of EXHIBIT M;
---------
(xi) Termination of Shareholders Agreement. A Termination of
-------------------------------------
Shareholders Agreement, executed by Sellers and Company in the form of EXHIBIT
-------
N;
-
(xii) Termination of ▇▇▇▇▇ ▇▇▇▇▇'▇ Employment Agreement. A
-------------------------------------------------
Termination of ▇▇▇▇▇ ▇▇▇▇▇'▇ Employment Agreement, executed by Company and ▇▇▇▇▇
▇▇▇▇▇ in the form of EXHIBIT O; and
---------
(xiii) Assignment and Assumption of Lease; Assumption Agreement. An
--------------------------------------------------------
Assignment and Assumption of Lease and an Assumption Agreement in the form of
EXHIBIT P.
---------
B. Buyer will deliver to Sellers:
(i) The following amounts by wire transfer to accounts
specified in EXHIBIT H attached hereto by ▇▇. ▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇▇ and
---------
Warenik, respectively: $3,965,760.00 to ▇▇. ▇▇▇▇▇▇▇▇, $518,400.00 to ▇▇.
▇▇▇▇▇▇▇▇ and $699,840.00 to Warenik;
(ii) Certificates representing seventy-seven thousand eight
hundred fifty-two (77,852) shares of Buyer's Stock issued to ▇▇. ▇▇▇▇▇▇▇▇,
thirteen thousand seven hundred thirty-eight (13,738) shares of Buyer's Stock
issued to ▇▇. ▇▇▇▇▇▇▇▇ and ten thousand one hundred seventy-seven (10,177)
shares of Buyer's Stock issues to Warenik and the Registration Rights Agreements
of Sellers substantially in the form of EXHIBIT I hereto;
---------
(iii) The sum of $576,000.00 to the Escrow Agent by wire transfer
in accordance with the Escrow Agreement;
(iv) A certificate in the form of EXHIBIT J hereto executed by
---------
Buyer to the effect that, except as otherwise stated in such certificate, each
of Buyer's representations and warranties in this Agreement was accurate in all
respects as of the date of this Agreement and is accurate in all respects as of
the Closing Date as if made on the Closing Date; and
(v) Sellers shall have received an opinion dated the Closing
Date from ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel for Buyer, substantially in
the form of EXHIBIT K hereto.
---------
15.5. ADJUSTMENT PROCEDURE. In order to insure the parties hereto that the
--------------------
Earnout Amount portion of the Purchase Price is computed by BDO ▇▇▇▇▇▇▇, L.L.P.
(the "Accountants")
-10-
in accordance with this Agreement and with GAAP in a fair and disinterested
manner, the parties agree as follows:
Each party shall have the right to examine during normal business hours
such books and records of the other party as may be reasonably necessary in
order to verify any determination of the Accountants under this Agreement. If
any party disagrees with any such determination, then that party may submit, at
its sole expense, within thirty (30) days an alternate determination prepared by
a certified public accountant, which the other party may accept or reject in its
reasonable discretion. If the other party rejects the alternate determination,
then the contesting party shall be entitled to submit such dispute to a
certified public accountant acceptable to both parties who shall determine the
accuracy and correctness of the Accountant's original determination. Both
parties shall each bear one-half (1/2) of the expenses of such certified public
accountant. Any additional amounts payable by a party as a result of the other
party's alternate determination shall be made within fifteen (15) days following
the acceptance of such alternate determination or the resolution of such
dispute, as the case may be.
16. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers, jointly and severally, represent and warrant to Buyer as follows:
16.1. ORGANIZATION AND GOOD STANDING.
------------------------------
A. SCHEDULE 3.1 of the Disclosure Schedule contains a complete and
------------
accurate list of Company's name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held by
each).
Company is a corporation duly organized, validly existing, and in good
standing under the laws of Georgia, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts.
Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification.
▇. ▇▇▇▇▇▇▇ have delivered to Buyer copies of the Organizational
Documents of Company, as currently in effect.
16.2. AUTHORITY; NO CONFLICT.
----------------------
A. This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms.
Upon the execution and delivery by Sellers of the Escrow Agreement, the
Employment Agreements, the Registration Rights Agreement and the Restrictive
Covenant Agreements (collectively, the "Sellers' Closing
-11-
Documents"), the Sellers' Closing Documents will constitute the legal, valid,
and binding obligations of Sellers, enforceable against Sellers in accordance
with their respective terms.
Sellers have the absolute and unrestricted right, power, authority,
and capacity to execute and deliver this Agreement and the Sellers' Closing
Documents and to perform their obligations under this Agreement and the Sellers'
Closing Documents.
B. Except as set forth in SCHEDULE 3.2 of the Disclosure Schedule,
------------
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) Contravene, conflict with, or result in a violation of (1)
any provision of the Organizational Documents of Company or (2) any resolution
adopted by the board of directors or the stockholders of Company;
(ii) Contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which Company or either Seller, or any of
the assets owned or used by Company, may be subject;
(iii) Contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Company or that otherwise relates to the business
of, or any of the assets owned or used by, Company;
(iv) Cause Buyer or Company to become subject to, or to become
liable for the payment of, any Tax;
(v) Cause any of the assets owned by Company to be reassessed
or revalued by any taxing authority or other Governmental Body;
(vi) Contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(vii) Result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by Company.
Except as set forth in SCHEDULE 3.2 of the Disclosure Schedule, none of the
------------
Sellers nor Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
-12-
C. If, pursuant to the terms of Section 2.2.C., Sellers are entitled
to receive an Earnout Amount, said Earnout Amount shall be paid in Buyer's Stock
which Sellers shall acquire for their own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act. Each
Seller is an "accredited investor" as such term is defined in Rule 501(a) under
the Securities Act.
16.3. CAPITALIZATION. The authorized equity securities of Company consist
--------------
of one hundred thousand (100,000) shares of common stock, no par value per
share, of which sixty-six thousand six hundred sixty-seven (66,667) shares are
issued and outstanding and constitute the Shares.
Sellers are and will be on the Closing Date the record and beneficial
owners and holders of the Shares, free and clear of all Encumbrances. ▇▇.
▇▇▇▇▇▇▇▇ owns fifty-one thousand (51,000) of the Shares, ▇▇. ▇▇▇▇▇▇▇▇ owns six
thousand six hundred sixty-seven (6,667) of the Shares and Warenik owns nine
thousand (9,000) of the Shares.
With the exception of the Shares (which are owned by Sellers), all of the
outstanding equity securities and other securities of Company are owned of
record and beneficially by Company, free and clear of all Encumbrances. No
legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of Company.
All of the outstanding equity securities of Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are
no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of Company.
None of the outstanding equity securities or other securities of Company
was issued in violation of the Securities Act or any other Legal Requirement.
Company does not own, nor does it have any Contract to acquire, any equity
securities or other securities of any Person (other than Company) or any direct
or indirect equity or ownership interest in any other business.
16.4. FINANCIAL STATEMENTS. Sellers have delivered to Buyer, as set forth
--------------------
on SCHEDULE 3.4:
------------
A. Unaudited balance sheets of Company as of December 31, 1995, and
as of June 30 in each of the years 1994 and 1995, and the related statements of
income for each of the fiscal years then ended.
B. Audited balance sheets of Company as of December 31 in each of
the years 1996 and 1997, and the related statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended,
prepared by the accounting firm of BDO ▇▇▇▇▇▇▇, L.L.P. (the "Accountants") in
accordance with this Agreement and with GAAP consistently applied (collectively
the "Financial Statements" and such balance sheet dated December 31, 1997, and
related statements of income, changes in stockholders' equity and cash flow
sometimes hereinafter refereed to as the "Closing Date Financial Statements").
-13-
The Financial Statements and notes, if any, fairly present the financial
condition and the results of operations, changes in stockholders' equity, and
cash flow of Company as at the respective dates of and for the periods referred
to in such financial statements, all in accordance with GAAP, subject, in the
case of interim Financial Statements, to normal recurring year-end adjustments
(the effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes.
No financial statements of any Person, other than Company, are required by
GAAP to be included in the Financial Statements of Company.
16.5. BOOKS AND RECORDS. The books of account, minute books, stock record
-----------------
books, and other records of Company, all of which have been made available to
Buyer, are complete and correct and have been maintained in accordance with
sound business practices.
The minute books of Company contain accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of Company, and no meeting
of any such stockholders, Board of Directors, or committee has been held for and
no material action has been taken at any meeting for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of Company.
16.6. TITLE TO PROPERTIES; ENCUMBRANCES. SCHEDULE 3.6 of the Disclosure
--------------------------------- ------------
Schedule contains a complete and accurate list of all real property, leaseholds,
or other interests therein owned by Company. Sellers have delivered or made
available to Buyer copies of the deeds and other instruments (as recorded) by
which Company acquired such real property and interests, and copies of all title
insurance policies, opinions, abstracts, and surveys in the possession of
Sellers or Company and relating to such property or interests.
Company owns (with good and marketable title in the case of real property,
subject only to the Encumbrances permitted by this Section) all the properties
and assets (whether real, personal, or mixed and whether tangible or intangible)
that they purport to own located in the facilities owned or operated by Company
or reflected as owned in the books and records of Company, including all of the
properties and assets reflected in the Closing Date Financial Statements (except
for assets held under capitalized leases disclosed or not required to be
disclosed in SCHEDULE 3.6 of the Disclosure Schedule).
------------
All material properties and assets reflected in the Closing Date Financial
Statements are free and clear of all Encumbrances and are not, in the case of
real property, subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except, with
respect to all such properties and assets:
A. Mortgages or security interests shown on the Closing Date
Financial Statements as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists;
B. Liens for current taxes not yet due; and
-14-
C. With respect to real property:
(i) Minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of Company; and
(ii) Zoning laws and other land use restrictions that do not
impair the present or anticipated use of the property subject thereto.
All buildings, plants, and structures owned by Company lie wholly within
the boundaries of the real property owned by Company and do not encroach upon
the property of, or otherwise conflict with the property rights of, any other
Person.
16.7. CONDITION AND SUFFICIENCY OF ASSETS. The buildings, plants,
-----------------------------------
structures, and equipment of Company are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings, plants, structures, or equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The building, plants,
structures, and equipment of Company are sufficient for the continued conduct of
Company' businesses after the Closing in substantially the same manner as
conducted prior to the Closing.
16.8. ACCOUNTS RECEIVABLE. All accounts receivable of Company that are
-------------------
reflected on the Closing Date Financial Statements or on the accounting records
of Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will
be as of the Closing Date current and collectible net of the respective reserves
shown on the Closing Date Financial Statements or on the accounting records of
Company as of the Closing Date (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the Accounts Receivable as of
the Closing Date than the reserve reflected in the Closing Date Financial
Statements represented of the Accounts Receivable reflected therein and will not
represent a material adverse change in the composition of such Accounts
Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been
or will be collected in full, without any set-off, within one hundred fifty
(150) days after the day on which it first becomes due and payable. To the
Knowledge of Sellers, there is no contest, claim, or right of set-off, other
than returns in the Ordinary Course of Business, under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable.
SCHEDULE 3.8 of the Disclosure Schedule contains a complete and accurate
------------
list of all Accounts Receivable as of December 31, 1997, which list sets forth
the aging of such Accounts Receivable.
-15-
16.9. INVENTORY. All inventory of Company, whether or not reflected in
---------
the Closing Date Financial Statements, consists of a quality and quantity usable
and salable in the Ordinary Course of Business, except for obsolete items and
items of below-standard quality, all of which have been written off or written
down to net realizable value in the Closing Date Financial Statements or on the
accounting records of Company as of the Closing Date, as the case may be.
The quantities of each item of inventory (whether raw materials, work-in-
process, or finished goods) are not excessive, but are reasonable in the present
circumstances of Company.
16.10. NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE 3.10 of
-------------------------- -------------
the Disclosure Schedule, Company has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Closing Date Financial Statements and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof.
16.11. TAXES.
-----
16.11.1. Except as set forth on SCHEDULE 3.11 to the Disclosure
-------------
Schedule, Company has timely filed all tax returns and reports required to be
filed by it, including, without limitation, all federal, state and local tax
returns, and has paid in full or made adequate provision by the establishment of
reserves for all taxes and other charges which have become due or which are
attributable to the conduct of Company's business prior to Closing. Company will
continue to make adequate provision for all such taxes and other charges for all
periods through the Closing Date.
Except as set forth on SCHEDULE 3.11 to the Disclosure Schedule,
-------------
Company and Sellers have no Knowledge of any tax deficiency proposed or
threatened against Company. There are no tax liens upon any property or assets
of Company.
Except as set forth on SCHEDULE 3.11 to the Disclosure Schedule,
-------------
Company has made all payments of estimated taxes when due in amounts sufficient
to avoid the imposition of any penalty.
16.11.2. Except as set forth on SCHEDULE 3.11 to the Disclosure
-------------
Schedule, all taxes and other assessments and levies which Company was required
by law to withhold or to collect have been duly withheld and collected, and have
been paid over to the proper governmental entity.
16.11.3. Except as set forth in SCHEDULE 3.11 to the Disclosure
-------------
Schedule, the federal and state income tax returns and local returns, if any, of
Company have never been audited by the income tax authorities, nor are any such
audits in process. Except as set forth in SCHEDULE 3.11, to the Disclosure
-------------
Schedule there are no outstanding agreements or waivers extending the statute of
limitations applicable to any federal or state income tax returns of Company for
any period.
-16-
16.11.4. Under its contracts with its customers for sales or
licenses of Software (as defined in Section 3.22. below), to the Knowledge of
Company and Sellers, such customers are liable for any and all sales or use
taxes imposed by virtue of or with respect to such sales or licenses.
16.12. NO MATERIAL ADVERSE CHANGE. Since December 31, 1997, there has not
--------------------------
been any material adverse change in the business, operations, properties,
prospects, assets, or condition of Company, and no event has occurred or
circumstance exists that may result in such a material adverse change.
16.13. EMPLOYEE BENEFITS MATTERS.
-------------------------
16.13.1. SCHEDULE 3.13.1 lists all plans, programs, and similar
---------------
agreements, commitments or arrangements, whether oral or written, maintained by
or on behalf of Company or any other party that provide benefits or compensation
to, or for the benefit of, current or former employees of Company ("Plan" or
"Plans"). Except as set forth on SCHEDULE 3.13.1 to the Disclosure Schedule only
---------------
current and former employees of Company participate in the Plans. Copies of all
Plans and, to the extent applicable, all related trust agreements, actuarial
reports, and valuations for the most recent three (3) years, all summary plan
descriptions, prospectuses, Annual Report Form 5500s or similar forms (and
attachments thereto) for the most recent three (3) years, all Internal Revenue
Service determination letters, and any related documents requested by Buyer,
including all amendments, modifications and supplements thereto, have been
delivered to Buyer, and all of the same are or will be true, correct and
complete.
16.13.2. With respect to each Plan to the extent applicable:
A. No litigation or administrative or other proceeding is
pending or threatened involving such Plan;
B. To the Knowledge of each Seller , such Plan has been
administered and operated in substantial compliance with, and has been amended
to comply with all applicable laws, rules, and regulations, including, without
limitation, ERISA, the Internal Revenue Code, and the regulations issued under
ERISA and the Internal Revenue Code;
C. Company and its predecessors, if any, have made and as
of the Closing Date will have made or accrued, all payments and contributions
required, or reasonably expected to be required, to be made under the provisions
of such Plan or required to be made under applicable laws, rules and
regulations, with respect to any period prior to the Closing Date, such amounts
to be determined using the ongoing actuarial and funding assumptions of the
Plan;
D. Such Plan is fully funded in an amount sufficient to
pay all liabilities accrued (including liabilities and obligations for health
care, life insurance and other benefits after termination of employment) and
claims incurred to the date hereof;
E. On the Closing Date such Plan will be fully funded in
an amount sufficient to pay all liabilities accrued (including liabilities and
obligations for health care, life
-17-
insurance and other benefits after termination of employment) and claims
incurred to the Closing Date, or adequate reserves will be set up on Company's
books and records, or paid-up insurance will be provided, therefor; and
F. Such Plan has been administrated and operated only in
the ordinary and usual course and in accordance with its terms, and there has
not been in the four (4) years prior hereto any increase in the liabilities of
such Plan beyond increases typically experienced by employers similar to
Company.
16.14. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
---------------------------------------------------------------
A. Except as set forth in SCHEDULE 3.14 of the Disclosure Schedule:
-------------
(i) Company is, and at all times since December 31, 1992, has
been, in full compliance with each Legal Requirement that is or was applicable
to it or to the conduct or operation of its business or the ownership or use of
any of its assets;
(ii) No event has occurred or circumstance exists that (with
or without notice or lapse of time) (1) may constitute or result in a violation
by Company of, or a failure on the part of Company to comply with, any Legal
Requirement or (2) may give rise to any obligation on the part of Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature; and
(iii) Company has not received, at any time since December 31,
1992, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (1) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement or (2) any actual, alleged, possible, or potential obligation on the
part of Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
B. SCHEDULE 3.14 of the Disclosure Schedule contains a complete and
-------------
accurate list of each Governmental Authorization that is held by Company or that
otherwise relates to the business of, or to any of the assets owned or used by,
Company. Each Governmental Authorization listed or required to be listed in
SCHEDULE 3.14 of the Disclosure Schedule is valid and in full force and effect.
-------------
Except as set forth in SCHEDULE 3.14 of the Disclosure Schedule:
-------------
(i) Company is, and at all times since December 31, 1992, has
been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in SCHEDULE
--------
3.14 of the Disclosure Schedule;
----
(ii) No event has occurred or circumstance exists that may
(with or without notice or lapse of time) (1) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any Governmental Authorization listed or required to be listed in SCHEDULE
--------
3.14 of the Disclosure Schedule or (2) result directly or indirectly in the
----
revocation, withdrawal, suspension, cancellation, or termination of, or any
-18-
modification to, any Governmental Authorization listed or required to be listed
in SCHEDULE 3.14 of the Disclosure Schedule;
-------------
(iii) Company has not received, at any time since December 31,
1992, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (1) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization or (2) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) All applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
SCHEDULE 3.14 of the Disclosure Schedule have been duly filed on a timely basis
-------------
with the appropriate Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have been duly made
on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in SCHEDULE 3.14 of the Disclosure
-------------
Schedule collectively constitute all of the Governmental Authorizations
necessary to permit Company to lawfully conduct and operate their businesses in
the manner they currently conduct and operate such businesses and to permit
Company to own and use their assets in the manner in which they currently own
and use such assets.
16.15. LEGAL PROCEEDINGS; ORDERS.
-------------------------
A. Except as set forth in SCHEDULE 3.15 of the Disclosure Schedule,
-------------
there is no pending Proceeding:
(i) That has been commenced by or against Company or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, Company; or
(ii) That challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Sellers and Company, (i) no such Proceeding has been
Threatened and (ii) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding.
Sellers have delivered to Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in SCHEDULE 3.15 of the
-------------
Disclosure Schedule. The Proceedings listed in SCHEDULE 3.15 of the Disclosure
-------------
Schedule will not have a material adverse effect on the business, operations,
assets, condition, or prospects of Company.
B. Except as set forth in SCHEDULE 3.15 of the Disclosure Schedule:
-------------
(i) There is no Order to which any of Company, or any of the
assets owned or used by Company, is subject;
-19-
(ii) Neither Seller is subject to any Order that relates to the
business of, or any of the assets owned or used by, Company; and
(iii) No officer, director, agent, or employee of Company is
subject to any Order that prohibits such officer, director, agent, or employee
from engaging in or continuing any conduct, activity, or practice relating to
the business of Company.
C. Except as set forth in SCHEDULE 3.15 of the Disclosure Schedule:
-------------
(i) Company is, and at all times since December 31, 1992, has
been, in full compliance with all of the terms and requirements of each Order to
which it, or any of the assets owned or used by it, is or has been subject;
(ii) No event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which Company,
or any of the assets owned or used by Company, is subject; and
(iii) Company has not received, at any time since December 31,
1992, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which Company, or any of the assets owned or used by Company, is or
has been subject.
16.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
-------------------------------------
SCHEDULE 3.16 of the Disclosure Schedule, since December 31, 1997, Company has
-------------
conducted its business only in the Ordinary Course of Business and there has not
been any:
A. Change in Company's authorized or issued capital stock; grant of
any stock option or right to purchase shares of capital stock of Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
Company of any shares of any such capital stock; or declaration or payment of
any dividend or other distribution or payment in respect of shares of capital
stock;
B. Amendment to the Organizational Documents of Company;
C. Payment or increase by Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
D. Adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of Company;
-20-
E. Damage to or destruction or loss of any asset or property of
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of Company,
taken as a whole;
F. Entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement or (ii) any Contract or transaction
involving a total remaining commitment by or to Company of at least Five
Thousand and No/100 Dollars ($5,000.00);
G. Sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of Company or
mortgage, pledge, or imposition of any lien or other encumbrance on any material
asset or property of Company, including the sale, lease, or other disposition of
any of the Software and Intangibles;
H. Cancellation or waiver of any claims or rights with a value to
Company in excess of Five Thousand and No/100 Dollars ($5,000.00);
I. Material change in the accounting methods used by Company; or
J. Agreement, whether oral or written, by Company to do any of the
foregoing.
16.17. CONTRACTS; NO DEFAULTS.
----------------------
A. SCHEDULE 3.17(A) of the Disclosure Schedule contains a complete
----------------
and accurate list, and Sellers have delivered to Buyer true and complete copies,
of:
(i) Each Applicable Contract that involves performance of
services or delivery of goods or materials by Company of an amount or value in
excess of Five Thousand and No/100 Dollars ($5,000.00);
(ii) Each Applicable Contract that involves performance of
services or delivery of goods or materials to Company of an amount or value in
excess of Five Thousand and No/100 Dollars ($5,000.00);
(iii) Each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of
Company in excess of Five Thousand and No/100 Dollars ($5,000.00);
(iv) Each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than Five Thousand and No/100 Dollars ($5,000.00)
and with terms of less than one (1) year);
-21-
(v) Each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Software and Intangibles;
(vi) Each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
(vii) Each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by Company with any other Person;
(viii) Each Applicable Contract containing covenants that in any
way purport to restrict the business activity of Company or any Affiliate of an
Company or limit the freedom of Company or any Affiliate of an Company to engage
in any line of business or to compete with any Person;
(ix) Each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct payments for
goods;
(x) Each power of attorney that is currently effective and
outstanding;
(xi) Each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by Company to be responsible for consequential damages;
(xii) Each Applicable Contract for capital expenditures in
excess of Five Thousand and No/100 Dollars ($5,000.00);
(xiii) Each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by Company other
than in the Ordinary Course of Business; and
(xiv) Each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
B. SCHEDULE 3.17(A) of the Disclosure Schedule sets forth reasonably
----------------
complete details concerning such Contracts, including the parties to the
Contracts, the amount of the remaining commitment of Company under the
Contracts, and Company' office where details relating to the Contracts are
located.
C. Except as set forth in SCHEDULE 3.17(C) of the Disclosure
----------------
Schedule:
(i) Neither Seller (and no Related Person of either Seller)
has or may acquire any rights under, and neither Seller has or may become
subject to any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, Company; and
-22-
(ii) To the Knowledge of Sellers and Company, no officer,
director, agent, employee, consultant, or contractor of Company is bound by any
Contract that purports to limit the ability of such officer, director, agent,
employee, consultant, or contractor to (1) engage in or continue any conduct,
activity, or practice relating to the business of Company or (2) assign to
Company or to any other Person any rights to any invention, improvement, or
discovery.
D. Except as set forth in SCHEDULE 3.17(D) of the Disclosure
----------------
Schedule, each Contract identified or required to be identified in SCHEDULE
--------
3.17(A) of the Disclosure Schedule is in full force and effect and is valid and
-------
enforceable in accordance with its terms.
E. Except as set forth in SCHEDULE 3.17(E) of the Disclosure
----------------
Schedule:
(i) Company is, and at all times since December 31, 1992, has
been, in full compliance with all applicable terms and requirements of each
Contract under which such Company has or had any obligation or liability or by
which such Company or any of the assets owned or used by such Company is or was
bound;
(ii) Each other Person that has or had any obligation or
liability under any Contract under which Company has or had any rights is, and
at all times since December 31, 1992, has been, in full compliance with all
applicable terms and requirements of such Contract;
(iii) No event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result in a
violation or breach of, or give Company or other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract; and
(iv) Company has not given to or received from any other
Person, at any time since December 31, 1992, any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract.
F. There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to
Company under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
G. The Contracts relating to the sale, design, manufacture, or
provision of products or services by Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
▇▇.▇▇.▇▇▇▇▇▇▇▇▇.
---------
A. Sellers have delivered to Buyer:
-23-
(i) True and complete copies of all policies of insurance to
which Company is a party or under which Company, or any director of Company, is
or has been covered at any time within the two (2) years preceding the date of
this Agreement;
(ii) True and complete copies of all pending applications for
policies of insurance; and
(iii) Any statement by the auditor of Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
B. Except as set forth on SCHEDULE 3.18(B) of the Disclosure
----------------
Schedule:
(i) All policies to which Company is a party or that provide
coverage to either Seller, Company, or any director or officer of an Company:
(1) Are valid, outstanding, and enforceable;
(2) Taken together in the reasonable judgment of Sellers,
provide adequate insurance coverage for the assets and the operations of Company
for all risks to which Company are normally exposed;
(3) Are sufficient for compliance with all Legal
Requirements and Contracts to which Company is a party or by which it is bound;
(4) Will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(5) Do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of Company.
(ii) Neither Company nor either Seller has received (1) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights or (2) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
(iii) Company has paid all premiums due, and have otherwise
performed all of their respective obligations, under each policy to which
Company is a party or that provides coverage to Company or director thereof.
(iv) Company has given notice to the insurer of all claims that
may be insured thereby.
16.19. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.19 of the
--------------------- -------------
Disclosure Schedule, Company has obtained and is in compliance with all permits,
licenses and other authorizations required to do business by Environmental
Requirements. To each Seller's Knowledge, there are no conditions,
circumstances, activities, practices, incidents, or actions
-24-
(collectively, "Conditions") resulting from the conduct of its business which
Conditions may reasonably form the basis of any claim or suit against Company
based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling by Company, or the
emission, discharge, release or threatened release by Company into the
environment, of any pollutant, contaminant, or hazardous or toxic materials,
substances or wastes.
16.20.EMPLOYEES.
---------
A. SCHEDULE 3.20 of the Disclosure Schedule contains a complete and
-------------
accurate list of the following information for each employee or director of
Company, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation and any change in compensation
since December 31, 1996; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under Company's pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any Director Plan.
B. No employee or director of Company is to Sellers' Knowledge a
party to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee or director of Company or (ii) the ability of Company to conduct its
business, including any Proprietary Rights Agreement with Sellers or Company by
any such employee or director. To Sellers' Knowledge, no director, officer, or
other key employee of Company intends to terminate his employment with such
Company.
C. SCHEDULE 3.20 of the Disclosure Schedule also contains a complete
-------------
and accurate list of the following information for each retired employee or
director of Company, or their dependents, receiving benefits or scheduled to
receive benefits in the future: name, pension benefit, pension option election,
retiree medical insurance coverage, retiree life insurance coverage and other
benefits.
16.21.LABOR RELATIONS; COMPLIANCE. Since December 31, 1992, Company has not
---------------------------
been nor is a party to any collective bargaining or other labor Contract. Since
December 31, 1992, there has not been, there is not presently pending or
existing, and to Sellers' Knowledge there is not Threatened:
A. Any strike, slowdown, picketing, work stoppage or employee
grievance process;
B. Any Proceeding against or affecting Company relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable
-25-
Governmental Body, organizational activity, or other labor or employment dispute
against or affecting any of Company or their premises; or
C. Any application for certification of a collective bargaining
agent.
No event has occurred or circumstance exists that could provide the basis
for any work stoppage or other labor dispute. There is no lockout of any
employees by Company, and no such action is contemplated by Company. Company
has complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health and plant closing.
Company is not liable for the payment of any compensation, Damages, taxes,
fines, penalties, or other amounts, however, designated, for failure to comply
with any of the foregoing Legal Requirements.
16.22.INTELLECTUAL PROPERTY RIGHTS OF COMPANY.
---------------------------------------
A. DEFINITIONS. As used in this Agreement, and in addition to any
-----------
other terms defined in this Agreement, the following terms shall have the
following meanings.
(i) "Software" means any computer program, operating system,
--------
applications system, firmware or software of any nature, whether operational,
under development or inactive, including all object code, source code, technical
manuals, compilation procedures, execution procedures, flow charts, programmers
notes, user manuals and other documentation thereof, whether in machine-readable
form, programming language or any other language or symbols and whether stored,
encoded, recorded or written on disk, tape, film, memory device, paper or other
media of any nature.
(ii) "Owned Software" means all Software owned by Company,
--------------
whether purchased from a third party, developed by or on behalf of Company,
currently under development or otherwise.
(iii) "Customer Software" means all Software, other than the
-----------------
Owned Software, that is, directly or through Distributors, either (x) offered or
provided to customers of Company or (y) used by Company to provide information
or services to customers of Company for a fee.
(iv) "Company Software" means the Owned Software and the
----------------
Customer Software.
(v) "Other Software" means all Software, other than Company
--------------
Software, that is licensed by Company from third parties or otherwise used by
Company for any purpose whatsoever.
-26-
(vi) "Distributor" means Company, any value added reseller,
-----------
original equipment manufacturer, distributor, or similar entity.
(vii) "Distributor Agreement" means a license agreement or other
---------------------
written or oral agreement or permission between Company and a Distributor.
(viii) "Customer License Agreement" means a license agreement or
--------------------------
other written or oral agreement or permission, other than a Distributor
Agreement, by which Company has granted to any third party any rights regarding
Company Software or any Intangibles thereof.
(ix) "Supplier License Agreement" means a license agreement or
--------------------------
other written or oral agreement or permission by which a third party has granted
to Company any rights regarding any Software or any Intangibles thereof.
(x) "Registration" means any governmental filing, whether
------------
federal, state, local, foreign or otherwise, related to Software or any
Intangible, including, without limitation, all registrations of patents,
copyrights, trademarks, service marks, trade names, and maskworks, and all re-
issues, divisions, continuations, renewals, extensions and continuations-in-part
thereof.
(xi) "Intangible" means:
----------
(1) Patents, patent applications, patent disclosures, all
re-issues, divisions, continuations, renewals, extensions and continuation-in-
parts thereof and improvements thereto;
(2) Trademarks, service marks, trade dress, logos, trade
names, and corporate names and registrations and applications for Registration
thereof and all goodwill associated therewith;
(3) Copyrights, Registrations thereof and applications
for Registration thereof;
(4) Maskworks, Registrations thereof and applications for
Registration thereof;
(5) Trade secrets and confidential business information
(including ideas, formulas, compositions, inventions, whether patentable or
unpatentable and whether or not reduced to practice, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, flow charts, processes, ideas, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing, and
business data, pricing and cost information, business and marketing plans, and
customer and supplier lists and information);
(6) Other proprietary rights;
-27-
(7) All income, royalties, Damages and payments due at
Closing or thereafter with respect to the Owned Software, Customer Software,
Other Software, or other Intangibles and all other rights thereunder including,
without limitation, Damages and payments for past, present or future
infringements or misappropriations thereof, the right to ▇▇▇ and recover for
past, present or future infringements or misappropriations thereof;
(8) All rights to use all of the foregoing forever; and
(9) All other rights in, to, and under the foregoing in
all countries.
B. Identification.
--------------
(i) SCHEDULE 3.22(B)(I) of the Disclosure Schedule contains an
-------------------
accurate and complete list and description (including a name, product
description, the language in which it is written and the type of hardware
platform(s) on which it runs) of the following:
(1) All Owned Software.
(2) All Customer Software.
(3) All Other Software.
(ii) SCHEDULE 3.22(B)(II) to the Disclosure Schedule:
--------------------
(1) Contains a complete list of each Registration of
Company;
(2) Identifies each pending Registration of Company;
(3) Identifies each application for or Registration
regarding the Intangibles and Software of Company which have been withdrawn,
abandoned, or have lapsed or been denied; and
(4) Specifies any advice to Company with respect to each
such Registration or protectability of the Intangibles and Software, summarizing
such advice. SCHEDULE 3.22 indicates Company' ownership of such items or the
-------------
source of Company' right to use such items.
(iii) SCHEDULE 3.22(B)(III) to the Disclosure Schedule
---------------------
identifies each Customer License Agreement, together with the term thereof, and
each source code escrow agreement entered into by Company and relating to any
Intangibles and Software identified in such Customer License Agreement.
(iv) SCHEDULE 3.22(B)(IV) to the Disclosure Schedule identifies
--------------------
each Distributor Agreement, together with the term thereof, and each source code
escrow agreement entered into by Company and relating to any Intangibles and
Software identified in such Distributor Agreement.
-28-
(v) SCHEDULE 3.22(B)(V) to the Disclosure Schedule identifies
-------------------
each Supplier License Agreement, together with the term thereof, all royalties
or other amounts due thereon, and each source code escrow agreement entered into
by the provider or licensor thereof running to the benefit of Company and
relating to any Intangibles and Software identified in such Supplier License
Agreement.
C. Ownership and Right to License.
------------------------------
(i) Except as set forth in SCHEDULE 3.22(C) of the Disclosure
----------------
Schedule, Company has good and marketable title to the Owned Software and
Intangibles attributable to the Owned Software, and have the full right to use
all of the Customer Software and Other Software, and Intangibles attributable
thereto, as used or required to operate Company's businesses as currently
conducted and as contemplated in the future in accordance with Company's written
business plans, free and clear of any liens, claims, charges or encumbrances
which would affect the use of such Software in connection with the operation of
Company's business as currently conducted and as contemplated in the future in
accordance with Company's written business plans.
(ii) No rights of any third party not previously obtained are
necessary to market, license, sell, modify, update, and/or create derivative
works for any Software as to which Company take any such action in their
respective businesses as currently conducted and as contemplated in the future
in accordance with Company's written business plans.
(iii) None of the Software or Intangibles listed in SCHEDULE
--------
3.22, or their respective past or current uses by or through Company have
----
violated or infringed upon, or is violating or infringing upon, any Software,
patent, copyright, trade secret or other Intangible of any Person. Company have
adequately maintained all trade secrets and copyrights with respect to such
Software.
Company has performed all obligations imposed upon them with regard to the
Customer Software and Other Software which are required to be performed by them
on or prior to the date hereof, and Company nor, to the Knowledge of Sellers,
any other party, is in breach of or default thereunder in any respect, nor to
the Sellers' Knowledge or the Knowledge of Company, is there any event which
with notice or lapse of time or both would constitute a default thereunder.
(iv) To the Knowledge of Sellers and Company, no Person is
violating or infringing upon, or has violated or infringed upon at any time, any
of Company's rights to any of the Software or Intangibles listed in SCHEDULE
--------
3.22.
----
(v) None of the Software or Intangibles listed in SCHEDULE
--------
3.22 are owned by or registered in the name of Sellers, any current or former
----
owner, shareholder, partner, director, executive, officer, employee, salesman,
agent, customer, or contractor of Sellers or Company, nor does any such Person
have any interest therein or right thereto, including, but not limited to, the
right to royalty payments. Except as set forth in SCHEDULE 3.22, Company has not
-------------
granted any third party any exclusive rights related to any Owned Software.
-29-
(vi) No litigation is pending and no claim has been made
against Company or, to the Knowledge of Sellers and Company, is threatened,
which contests the right of Company to sell or license to any Person or entity
or use any of the Owned Software, Customer Software or Other Software. No former
employer of any employee or consultant of Company has made a claim against
Company or, to the Knowledge of Sellers and Company against any other Person,
that Company or such employee or consultant is misappropriating or violating the
Intangibles of such former employer.
(vii) Company is not a party to nor bound by and, upon the
consummation of the Contemplated Transactions, Buyer will not be a party to or
bound by (as a result of any acts or agreements of Company), any license or
other agreement requiring the payment by Company or their assigns of any royalty
or license payment, excluding such agreements relating to the Customer Software
or Other Software to the extent such royalty or license payment is expressly set
forth in SCHEDULE 3.22.
-------------
(viii) Except as set forth in SCHEDULE 3.22(C), the Owned
----------------
Software, Customer Software, and Other Software and the information used by
Company, and the Intangibles thereunder, are fully transferable to Buyer.
(ix) No Software other than the Owned Software, Customer
Software and Other Software is required to operate the business of Company as
currently conducted and as contemplated in the future in accordance with the
written business plans of Company.
(x) Company has supplied Buyer with correct and complete
copies of all Customer License Agreements, Distributor Agreements and Supplier
License Agreements. Except as set forth in SCHEDULE 3.22(C), all Customer
----------------
License Agreements, Distributor Agreements and Supplier License Agreements may
be assigned to Buyer free of cost or expense without obtaining the consent or
approval of any other Person.
(xi) SCHEDULE 3.22(C) identifies all individuals compensated at
----------------
an annual rate in excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00)
who have contributed to the development of the Owned Software.
D. Performance.
-----------
(i) Except as set forth in SCHEDULE 3.22(D)(I) of the Disclosure
-------------------
Schedule, Company Software:
(1) Performs in accordance with all published
specifications for Company Software;
(2) Complies with all other published documentation,
descriptions and literature with respect to Company Software; and
(3) Complies with all representations, warranties and other
requirements specified in all Customer License Agreements and Distributor
Agreements.
-30-
Except as set forth in SCHEDULE 3.22(D)(I), no claim has been made or, to
-------------------
the Knowledge of Company and the Sellers, is Threatened, that Company Software
fails to perform as set forth in the immediately preceding sentence.
(ii) Except as set forth in SCHEDULE 3.22(D)(II), Company has
--------------------
complied with all Customer License Agreements, Distributor Agreements and
Supplier License Agreements, and to the Knowledge of Company and the Sellers,
except as set forth in SCHEDULE 3.22, all other parties to such agreements have
-------------
complied with all provisions thereof and no default or event of default exists
under any of the Customer License Agreements, Distributor Agreements and
Supplier License Agreements.
(iii) Except as set forth in SCHEDULE 3.22(D)(III), with respect
---------------------
to Company Software:
(1) Company maintain machine-readable master-reproducible
copies, reasonably complete technical documentation and/or user manuals for the
most current releases or versions thereof and for all earlier releases or
versions thereof currently being supported by Company.
(2) In each case, the machine-readable copy substantially
conforms to the corresponding source code listing.
(3) Such Company Software is written in the language set
forth in SCHEDULE 3.22, for use on the hardware set forth in SCHEDULE 3.22 with
------------- -------------
standard operating systems.
E. Such Company Software can be maintained and modified by
reasonable competent programmers familiar with such language, hardware and
operating systems.
F. Millennium Compliance. Except as set forth in SCHEDULE 3.22(E),
--------------------- ----------------
the Owned Software and to the Knowledge of Company and the Sellers, the Customer
Software and Other Software, are "Millennium Compliant." For the purposes of
this Agreement "Millennium Compliant" means:
(i) The functions, calculations, and other computing processes
of the Owned Software, Customer Software and Other Software (collectively,
"Processes") perform in an accurate manner regardless of the date in time on
which the Processes are actually performed and regardless of the date input to
the Owned Software, Customer Software, and Other Software, whether before, on,
or after January 1, 2000, and whether or not the dates are affected by leap
years;
(ii) The Owned Software, Customer Software, and Other Software
accept, store, sort, extract, sequence, and otherwise manipulate date inputs and
date values, and return and display date values, in an accurate manner
regardless of the dates used, whether before, on, or after January 1, 2000;
-31-
(iii) The Owned Software, Customer Software, and Other Software
will function without interruptions caused by the date in time on which the
Processes are actually performed or by the date input to the Owned Software,
Customer Software, and Other Software, whether before, on, or after January 1,
2000;
(iv) The Owned Software, Customer Software, and Other Software
accept and respond to two (2) digit year and four (4) digit year date input in a
manner that resolves any ambiguities as to the century in a defined,
predetermined, and accurate manner;
(v) The Owned Software, Customer Software, and Other Software
display, print, and provide electronic output of date information in ways that
are unambiguous as to the determination of the century; and
(vi) The Owned Software, Customer Software, and Other Software
have been tested by Company to determine whether the Owned Software, Customer
Software, and Other Software are Millennium Compliant. Company shall deliver the
test plans and results of such tests upon written request from Buyer. Company
shall notify Buyer immediately of the results of any tests or any claim or other
information that indicates the Owned Software, Customer Software, and Other
Software are not Millennium Compliant.
G. Trade Secrets and Confidential Information. Without limiting any
------------------------------------------
of the foregoing representations and warranties contained in the preceding
subparagraphs of this Section 3.22., to the Knowledge of Company and the
Sellers, no current or former owner, shareholder, partner, director, executive,
officer, employee, salesman, agent, customer, or contractor of Company or the
Sellers has disclosed to (without proper obligation of confidentiality) or
otherwise used or utilized on behalf of any Person other than Company, any trade
secrets or proprietary information, including, without limitation, the source
codes for Company Software; provided, however, the trade secrets and proprietary
information listed on SCHEDULE 3.22(G) have been disclosed to Physician's Equity
----------------
Resources, Inc. ("PER").
All Customer License Agreements, Distributor Agreements, software
development agreements, and any other written agreement between Company and any
third party in which trade secrets or confidential information of Company,
Company's customers, agents, or suppliers are disclosed binds the recipient
thereof to take reasonable steps to protect the proprietary rights of Company
and their customers, agents, and suppliers in such trade secrets and
confidential information.
16.23. CERTAIN PAYMENTS. Since December 31, 1992, neither Company nor any
----------------
director, officer, agent, or employee of Company, nor to Sellers' Knowledge any
other Person associated with or acting for or on behalf of Company, has directly
or indirectly:
A. Made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business; (ii) to pay for favorable treatment for business
secured; (iii) to obtain special concessions or for special
-32-
concessions already obtained, for or in respect of Company or any Affiliate of
Company or (iv) in violation of any Legal Requirement.
B. Established or maintained any fund or asset that has not been
recorded in the books and records of Company.
16.24. DISCLOSURE.
----------
A. No representation or warranty of Sellers in this Agreement and
no statement in the Disclosure Schedule omits to state a material fact necessary
to make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
B. No notice given pursuant to Section 5.5. will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
C. There is no fact known to either Seller that has specific
application to either Seller or Company (other than general economic or industry
conditions) and that materially adversely affects or, as far as either Seller
can reasonably foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of Company (on a consolidated
basis) that has not been set forth in this Agreement or the Disclosure Schedule.
16.25. RELATIONSHIPS WITH RELATED PERSONS. Except as set forth in
----------------------------------
SCHEDULE 3.25 of the Disclosure Schedule, no Seller nor any Related Person of
Sellers nor of Company has, or since December 31, 1992, has had, any interest in
any property (whether real, personal, or mixed and whether tangible or
intangible), used in or pertaining to Company's businesses.
No Seller nor any Related Person of Sellers or of Company is, or since
December 31, 1992, has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has:
A. Had business dealings or a material financial interest in any
transaction with Company; or
B. Engaged in competition with Company with respect to any line of
the products or services of such Company (a "Competing Business") in any market
presently served by such Company except for less than one percent (1%) of the
outstanding capital stock of any Competing Business that is publicly traded on
any recognized exchange or in the over-the-counter market.
Except as set forth in SCHEDULE 3.25 of the Disclosure Schedule, no Seller
-------------
or any Related Person of Sellers or of Company is a party to any Contract with,
or has any claim or right against, Company.
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16.26. BROKERS OR FINDERS. Sellers and their agents have incurred no
------------------
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
16.27. SPECIAL REPRESENTATIVE REGARDING MSI INTEGRATED SERVICES, INC. To
-------------------------------------------------------------
the Knowledge of each Seller, MSI Integrated Services, Inc. ("MSIIS") does not
presently compete and has no intention to compete or engage in any business in
competition with the business of the Company. The Sellers have no direct or
indirect ownership interest in MSIIS, and MSIIS has never made any claim with
respect to the Owned Software or any of the Intangibles owned or used by the
Company.
17. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Sellers as follows:
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17.1. ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
------------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware.
17.2. AUTHORITY. This Agreement constitutes the legal, valid, and binding
---------
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Escrow Agreement, the
Restrictive Covenants Agreements and the Employment Agreements (collectively,
the "Buyer's Closing Documents"), the Buyer's Closing Documents will constitute
the legal, valid, and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms. Buyer has the absolute and unrestricted
right, power, and authority to execute and deliver this Agreement and the
Buyer's Closing Documents and to perform its obligations under this Agreement
and the Buyer's Closing Documents.
17.3. INVESTMENT INTENT. Buyer is acquiring the Shares for its own account
-----------------
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act.
17.4. CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
-------------------
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
17.5. BROKERS OR FINDERS. Buyer and its officers and agents have incurred
------------------
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Sellers harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
18. COVENANTS OF SELLERS PRIOR TO CLOSING DATE.
18.1. ACCESS AND INVESTIGATION. Between the date of this Agreement and
------------------------
the Closing Date, Sellers will, and will cause Company and its Representatives
to:
A. Afford Buyer and its Representatives and prospective lenders
and their Representatives (collectively, "Buyer's Advisors") full and free
access to Company's personnel, properties (including subsurface testing),
contracts, books and records, and other documents and data;
B. Furnish Buyer and Buyer's Advisors with copies of all such
contracts, books and records, and other existing documents and data as Buyer may
reasonably request; and
C. Furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information as Buyer may reasonably
request.
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18.2. OPERATION OF THE BUSINESS OF COMPANY. Between the date of this
------------------------------------
Agreement and the Closing Date, Sellers will, and will cause Company to:
A. Conduct the business of Company only in the Ordinary Course of
Business;
B. Use their Best Efforts to preserve intact the current business
organization of Company, keep available the services of the current officers,
employees, and agents of Company, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and others having
business relationships with Company;
▇. ▇▇▇▇▇▇ with Buyer concerning operational matters of a material
nature; and
D. Otherwise report periodically to Buyer concerning the status of
the business, operations, and finances of Company.
18.3. NEGATIVE COVENANT. Except as otherwise expressly permitted by this
-----------------
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, and will cause Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16. is likely to occur.
18.4. REQUIRED APPROVALS. As promptly as practicable after the date of
------------------
this Agreement, Sellers will, and will cause Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Sellers will, and will cause Company to:
A. Cooperate with Buyer with respect to all filings that Buyer
reasonably elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions; and
B. Cooperate with Buyer in obtaining all required Consents.
18.5. NOTIFICATION. Between the date of this Agreement and the Closing
------------
Date, each Seller will promptly notify Buyer in writing if such Seller or
Company becomes aware of any fact or condition that causes or constitutes a
Breach of any of Sellers' representations and warranties as of the date of this
Agreement, or if such Seller or Company becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition.
Should any such fact or condition require any change in the Disclosure
Schedule if the Disclosure Schedule were dated the date of the occurrence or
discovery of any such fact or
-36-
condition, Sellers will promptly deliver to Buyer a supplement to the Disclosure
Schedule specifying such change. During the same period, each Seller will
promptly notify Buyer of the occurrence of any Breach of any covenant of Sellers
in this Section 5. or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7. impossible or unlikely.
18.6. PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
------------------------------------------
provided in this Agreement, Sellers will cause all indebtedness owed to Company
by either Seller or any Related Person of either Seller to be paid in full prior
to Closing.
18.7. NO NEGOTIATION. Until such time, if any, as this Agreement is
--------------
terminated pursuant to Section 9., Sellers will not, and will cause Company and
its Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of Company, or any of the capital stock of Company,
or any merger, consolidation, business combination, or similar transaction
involving Company.
19. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
19.1. APPROVALS OF GOVERNMENTAL BODIES/THIRD PARTY CONSENTS. As promptly
-----------------------------------------------------
as practicable after the date of this Agreement, Buyer will, and will cause each
of its Related Persons to, make all filings required by Legal Requirements to be
made by them to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will, and
will cause each Related Person to:
A. Cooperate with Sellers with respect to all filings that Sellers
are required by Legal Requirements to make in connection with the Contemplated
Transactions; and
B. Cooperate with Sellers in obtaining all consents identified in
SCHEDULE 3.2 of the Disclosure Schedule; provided that this Agreement will not
------------
require Buyer to dispose of or make any change in any portion of its business or
to incur any other burden to obtain a Governmental Authorization.
19.2. BEST EFFORTS. Except as set forth in Section 6.1., between the date
------------
of this Agreement and the Closing Date, Buyer will use its Best Efforts to cause
the conditions in Sections 7. and 8. to be satisfied.
20. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
-37-
20.1. ACCURACY OF REPRESENTATIONS.
---------------------------
A. All of Sellers' representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Schedule.
B. Each of Sellers' representations and warranties in Article 3.
must have been accurate in all respects as of the date of this Agreement, and
must be accurate in all respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Disclosure
Schedule.
20.2. SELLERS' AND COMPANY'S PERFORMANCE.
----------------------------------
A. All of the covenants and obligations that Sellers are required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
B. Each document required to be delivered pursuant to Section 2.4.
must have been delivered, and each of the other covenants and obligations in
Sections 5.4. and 5.8. must have been performed and complied with in all
respects.
C. Company shall have generated One Million Two Hundred Thousand
and No/100 Dollars ($1,200,000.00) or more of Operating Income for the twelve
(12) month period ending December 31, 1997.
-38-
20.3. CONSENTS. Each of the Consents identified in SCHEDULE 3.2 of the
-------- ------------
Disclosure Schedule must have been obtained and must be in full force and
effect.
20.4. ADDITIONAL DOCUMENTS. Seller shall deliver such other documents as
--------------------
Buyer may reasonably request for the purpose of (i) enabling its counsel to
provide the opinion referred to in Section 8.4.A.; (ii) evidencing the accuracy
of any of Sellers' representations and warranties; (iii) evidencing the
performance by either Seller of, or the compliance by either Seller with, any
covenant or obligation required to be performed or complied with by such Seller;
(iv) evidencing the satisfaction of any condition referred to in this Section 7.
or (v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
20.5. NO PROCEEDINGS. Since the date of this Agreement, there must not
--------------
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (i) involving any challenge to, or seeking
Damages or other relief in connection with, any of the Contemplated Transactions
or (ii) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the Contemplated Transactions.
20.6. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must not
---------------------------------------------------
have been made or Threatened by any Person any claim asserting that such Person
(i) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in, any of Company or (ii) is entitled to all or any portion
of the Purchase Price payable for the Shares.
20.7. NO PROHIBITION. Neither the consummation nor the performance of any
--------------
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (i) any applicable Legal
Requirement or Order or (ii) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
20.8. APPROVAL OF BUYER'S LENDER. FINOVA Capital Corporation or such
--------------------------
other institution that is acting as the senior lender to Buyer at the time the
Closing is scheduled shall have approved the Contemplated Transactions and shall
have loaned to the Buyer and its Affiliates sufficient money to fund the Cash
Purchase Price and shall have agreed to lend to the Buyer sufficient money to
fund the Earnout, subject to usual and customary conditions imposed on the Buyer
in order to draw-down funds on the Buyer's line of credit.
20.9. DUE DILIGENCE. Buyer shall have completed to its complete and sole
-------------
satisfaction a detailed investigation of the business of the Company and all
assets and agreements relating thereto, and shall be satisfied with the results
of such investigation.
21. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE.
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
-39-
21.1. ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
---------------------------
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
-40-
21.2. BUYER'S PERFORMANCE.
-------------------
A. All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
B. Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4. and must have made the cash payment
required to be made by Buyer pursuant to Sections 2.2.
21.3. CONSENTS. Each of the Consents identified in SCHEDULE 3.2 of the
-------- ------------
Disclosure Schedule must have been obtained and must be in full force and
effect.
21.4. ADDITIONAL DOCUMENTS. Buyer must have caused the following
--------------------
documents to be delivered to Sellers such other documents as Sellers may
reasonably request for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 2.4.A.(ii); (ii) evidencing the accuracy of any
representation or warranty of Buyer; (iii) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer; (iv) evidencing the satisfaction of any
condition referred to in this Section 8. or (v) otherwise facilitating the
consummation of any of the Contemplated Transactions.
21.5. NO INJUNCTION. There must not be in effect any Legal Requirement or
-------------
any injunction or other Order that (i) prohibits the sale of the Shares by
Sellers to Buyer and (ii) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
22. TERMINATION.
22.1. TERMINATION EVENTS.
------------------
This Agreement may, by notice given prior to or at the Closing, be
terminated:
A. By either Buyer or Sellers if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived;
B. (i) By Buyer if any of the conditions in Section 7. has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date;
(ii) By Sellers, if any of the conditions in Section 8. has not
been satisfied of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Sellers to comply with
their obligations under this Agreement) and Sellers have not waived such
condition on or before the Closing Date; or
-41-
C. By mutual consent of Buyer and Sellers; or
D. By either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before Monday,
March 2, 1998, or such later date as the parties may agree upon.
22.2. EFFECT OF TERMINATION. Each party's right of termination under
---------------------
Section 9.1. is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 9.1., all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 11.1. and 11.3. will survive; provided,
however, that if this Agreement is terminated by a party because of the Breach
of the Agreement by the other party or because one (1) or more of the conditions
to the terminating party's obligations under this Agreement is not satisfied as
a result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
23. INDEMNIFICATION; REMEDIES.
23.1. AGREEMENT BY SELLERS TO INDEMNIFY. Sellers, jointly and severally
---------------------------------
(the "Seller Indemnifying Parties"), agree that they will indemnify and hold
Buyer harmless in respect of the aggregate of all indemnifiable Damages of
Buyer.
For this purpose, "indemnifiable Damages" of Buyer means the aggregate of
all Damages incurred or suffered by Buyer resulting from:
A. Any inaccurate representation or warranty made by Sellers in or
pursuant to this Agreement;
B. Any default in the performance of any of the covenants or
agreements made by Sellers in this Agreement; or
C. The failure of any Seller to pay, discharge or perform any
liability or obligation of Sellers or of Company resulting from the operation of
Company's business prior to the Closing Date.
D. Any Damages arising from any relationship with any customer of
Company relating to the license, support, maintenance, or upgrade of the Company
Software or any services provided or to be provided by Company to such customer,
whether the final element of any cause of action giving rise to such Damages
arises before or after the Closing Date under the following situations: (1) the
indemnification set forth in this subparagraph D. for software license
agreements in existence as of the Closing Date shall only be for Damages in
excess of the license fees paid under such license agreement (except as set
forth in item (3) below), (2) the indemnification set forth in this subparagraph
D. for software maintenance or support agreements in existence as of the Closing
Date shall only be for Damages in excess of the maintenance or
-42-
support fees paid under such agreement for the 12 month period prior to the date
such claim was made (except as set forth in item (3) below), and (3) the
indemnification set forth in this subparagraph D. for software maintenance
obligations that are not terminable as a matter of contract right by the Company
shall not be so limited; however, the Company shall take reasonable effort to
supersede such agreements at the time annual renewal fees are due. The right of
indemnification set forth in this subparagraph D. is conditioned on the
Company's good faith efforts to perform its obligations under its existing
agreements with customers. With respect to each agreement with each customer of
the Company, the obligations of indemnification under this subparagraph D. shall
expire for claims that have not arisen by the earlier of the date that the
Company has a contractual right to terminate such agreement, the date that such
agreement actually terminates, or the date such agreement is superseded.
E. Any losses or claims of loss occurring as a result of a customer
or such customer's employees or agents selling, licensing, or otherwise
distributing or using the Company Software other than for the internal use of
such customer; provided however, the indemnification set forth in this
subparagraph E. for any particular customer shall not be effective after such
customer executes Buyer's standard form of software license agreement and
software maintenance agreement, as designated by Buyer from time to time or as
otherwise approved by Buyer in writing.
Without limiting the generality of the foregoing, with respect to the
measurement of "indemnifiable Damages", Buyer shall have the right to be put in
the same financial position as it would have been had each of the
representations and warranties of Sellers been true and correct and had each of
the covenants of Sellers been performed in full.
The amount of any indemnifiable Damages otherwise payable to Buyer
hereunder shall be reduced if the indemnifiable Damages incurred by Buyer will
provide Buyer with income tax deductions or credits. The amount of the
reduction shall be the amount of the actual cash tax savings realized by Buyer
as a result of such deductions or credits, discounted to its present value as of
the date of the payment of the indemnifiable Damages from the date such
indemnifiable Damages were incurred by Buyer at the rate of interest charged on
such date by the Internal Revenue Service on underpayment of taxes.
The foregoing obligation of Seller Indemnifying Parties to indemnify Buyer
shall be subject to each of the following principles or qualifications:
23.1.1. Each of the representations and warranties made by Sellers in
this Agreement or pursuant hereto, shall survive for a period of five (5) years
at the Closing; provided, however, that the representations and warranties made
by Sellers to the extent they relate to Sellers' title to the Shares shall
survive forever and that the representations and warranties made by Seller and
Shareholder in Section 4.5. hereof ("Tax Matters") shall in each case survive
until the first (1st) anniversary of the later of:
A. The date on which applicable period of limitation on
assessment or refund of tax has expired; or
-43-
B. The date on which the applicable taxable year (or portion
thereof) has been closed.
No claim for the recovery of indemnifiable Damages may be asserted by Buyer
against Seller Indemnifying Parties or their successors in interest after such
representations and warranties shall be thus extinguished; provided, however,
that claims first asserted in writing within the applicable period shall not
thereafter be barred. In addition, the Seller Indemnifying Parties shall have no
liability with respect to indemnifiable Damages until the total of all such
Damages exceeds $20,000.00 in which event the Seller Indemnifying Parties shall
be obligated to indemnify Buyer as provided herein for all such Damages.
Notwithstanding the foregoing, in no event shall the aggregate liability of the
Seller Indemnifying Parties under this Section 10. exceed the Purchase Price.
23.2. AGREEMENTS BY BUYER TO INDEMNIFY. Buyer (the "Buyer Indemnifying
--------------------------------
Party"), agrees to indemnify and hold Seller and Shareholder (the "Seller
Indemnified Parties") harmless in respect of the aggregate of all indemnifiable
Damages of any of Seller Indemnified Parties.
For this purpose, "indemnifiable Damages" of any of Seller Indemnified
Parties means the aggregate of all Damages incurred or suffered by any of Seller
Indemnified Parties resulting from:
A. Any inaccurate representation or warranty made by Buyer or
pursuant to this Agreement; or
B. Any default in the performance of any of the covenants or
agreements made by Buyer in this Agreement.
Without limiting the generality of the foregoing, with respect to the
measurement of "indemnifiable Damages", each of Seller Indemnified Parties shall
have the right to be put in the same financial position as they would have been
had each of the representations and warranties of Buyer Indemnifying Parties
been true and correct and had each of the covenants of Buyer Indemnifying
Parties been performed in full.
The amount of any indemnifiable Damages otherwise payable to any Seller
Indemnified Party hereunder shall be reduced if the indemnifiable Damages
incurred by Seller Indemnified Party will provide such Party with income tax
deductions or credits. The amount of the reduction shall be the amount of the
actual cash tax savings realized by Seller Indemnified Party as a result of such
deductions or credits discounted to its present value as of the date of the
payment of the indemnifiable Damages from the date such indemnifiable Damages
were incurred by Seller Indemnified Party at the rate of interest charged on
such date by the Internal Revenue Service on underpayment of taxes.
The foregoing obligation of Buyer Indemnifying Parties to indemnify Seller
Indemnified Parties shall be subject to each of the following principles or
qualifications:
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23.2.1. Each of the representations and warranties made by Buyer in
Article 3 of this Agreement shall survive for a period of three (3) years after
the Closing Date, and thereafter all such representations and warranties shall
be extinguished.
No claim for the recovery of indemnifiable Damages pursuant to clause (i)
of Section 10.2. may be asserted by Seller Indemnified Parties against Buyer
Indemnifying Parties or its successors in interest after such representations
and warranties shall be thus extinguished; provided, however, that claims first
asserted in writing within the applicable period shall not thereafter be barred.
23.3. MATTERS INVOLVING THIRD PARTIES. If any third party shall notify
-------------------------------
Buyer or Seller (the "Indemnified Party") with respect to any matter which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 10. then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent that) the Indemnifying Party thereby is
Damaged.
If any Indemnifying Party notifies the Indemnified Party within fifteen
(15) days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then:
A. The Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice satisfactory to the Indemnified Party;
B. The Indemnified Party may retain separate co-counsel at its sole
cost and expense (except that the Indemnifying Party will be responsible for the
fees and expenses of the separate co-counsel to the extent the Indemnified Party
concludes that the counsel the Indemnifying Party has selected has a conflict of
interest);
C. The Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably); and
D. The Indemnifying Party will not consent to the entry of any
judgment with respect to the matter, or enter into any settlement which does not
include a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld or delayed unreasonably).
If no Indemnifying Party notifies the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then the Indemnified Party
may defend against, or enter into any settlement with respect to, the matter in
any manner it may deem appropriate.
-45-
23.4. OTHER AGREEMENTS. Any indemnity obligations which Seller may have to
----------------
Buyer can be discharged by the Escrow Agent from the funds held in escrow
pursuant to Section 2.4.A.(vii). above.
24. GENERAL PROVISIONS.
24.1. EXPENSES. Except as otherwise expressly provided in this Agreement,
--------
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
Sellers will cause Company not to incur any out-of-pocket expenses in
connection with the Contemplated Transactions. In the event of termination of
this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
24.2. PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
--------------------
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer determines. Unless consented
to by Buyer in advance or required by Legal Requirements, prior to the Closing
Sellers shall, and shall cause Company to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Sellers and Buyer will consult with each other concerning the means by
which Company's employees, customers, and suppliers and others having dealings
with Company will be informed of the Contemplated Transactions, and Buyer will
have the right to be present for any such communication.
24.3. CONFIDENTIALITY. Between the date of this Agreement and the Closing
---------------
Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and Company to
maintain in confidence, and not use to the detriment of another party or an
Company any written, oral, or other information obtained in confidence from
another party or an Company in connection with this Agreement or the
Contemplated Transactions, unless:
A. Such information is already known to such party or to others not
bound by a duty of confidentiality or such information becomes publicly
available through no fault of such party;
B. The use of such information is necessary or appropriate in making
any filing or obtaining any consent or approval required for the consummation of
the Contemplated Transactions; or
C. The furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
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If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, Sellers waive, and
will upon Buyer's request cause Company to waive, any cause of action, right, or
claim arising out of the access of Buyer or its representatives to any trade
secrets or other confidential information of Company except for the intentional
competitive misuse by Buyer of such trade secrets or confidential information.
24.4. NOTICES. All notices, consents, waivers, and other communications
-------
under this Agreement must be in writing and will be deemed to have been duly
given when (i) delivered by hand (with written confirmation of receipt); (ii)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested or (iii) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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Buyer: InfoCure Corporation
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
1600 Atlanta Financial Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
24.5. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking
--------------------------------
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Georgia, County of DeKalb, or, if it has or can acquire jurisdiction, in the
United States District Court for the Northern District of Georgia, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
24.6. FURTHER ASSURANCES. The parties agree (i) to furnish upon request to
------------------
each other such further information; (ii) to execute and deliver to each other
such other documents and (iii) to do such other acts and things, all as the
other party may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to in this Agreement.
24.7. WAIVER. The rights and remedies of the parties to this Agreement are
------
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege.
To the maximum extent permitted by applicable law:
A. No claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one (1) party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by the other party;
B. No waiver that may be given by a party will be applicable except
in the specific instance for which it is given; and
C. No notice to or demand on one (1) party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take
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further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
24.8. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
---------------------------------
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated November 20,
1997) and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
24.9. DISCLOSURE SCHEDULE.
-------------------
A. The disclosures in the Disclosure Schedule, and those in any
Supplement thereto, must relate only to the representations and warranties in
the Section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
B. In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Schedule (other than an
exception expressly set forth as such in the Disclosure Schedule with respect to
a specifically identified representation or warranty), the statements in the
body of this Agreement will control.
24.10. ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS. Neither party
-------------------------------------------------
may assign any of its rights under this Agreement without the prior consent of
the other parties, which will not be unreasonably withheld, except that Buyer
may assign any of its rights under this Agreement to any Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
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24.11. SEVERABILITY. If any provision of this Agreement is held invalid or
------------
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
24.12. SECTION HEADINGS; CONSTRUCTION. The headings of Sections in this
------------------------------
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
24.13. TIME OF ESSENCE. With regard to all dates and time periods set
---------------
forth or referred to in this Agreement, time is of the essence.
24.14. GOVERNING LAW. This Agreement will be governed by the laws of the
-------------
State of Georgia without regard to conflicts of laws principles.
24.15. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER: SELLERS:
InfoCure Corporation
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (SEAL)
--------------------------------- ---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:Executive Vice President
------------------------------
Date:_______________________________ Date:__________________________________
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (SEAL)
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Date:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (SEAL)
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Date:__________________________________
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SCHEDULES
---------
SCHEDULE 2.4 Employees Signing Covenants Agreements
------------
SCHEDULE 3.1 Incorporation, Capitalization and Foreign Qualifications
------------
of Company
SCHEDULE 3.2 Violations/Required Third Party Consents
------------
SCHEDULE 3.4 Financial Statements
------------
SCHEDULE 3.6 Real Property, Leaseholds and Other Interests Owned by
------------
Any Acquired Company (Including, Without Limitation,
Properties and Asset Purchased Subsequent to the Date
of the Balance Sheet)
SCHEDULE 3.8 Aged Accounts, Receivable as of January 1, 1998
------------
SCHEDULE 3.10 Liabilities of Acquired Companies
-------------
SCHEDULE 3.11 Delinquent Tax Returns, Disputed Assessments,
-------------
Deficiencies and Adjustments, Audits, Extensions, Target
Affiliates and Related Matters
Schedule 3.13.1 Company Plans, Company Other Benefit Obligations,
---------------
Participants in plans other than current and former
employees of company
SCHEDULE 3.14 Non-Compliance With Legal Requirements; Governmental
-------------
Authorizations
SCHEDULE 3.15 Legal Proceedings; Orders
-------------
SCHEDULE 3.16 Changes and Events Outside of Ordinary Course of
-------------
Business
SCHEDULE 3.17(A) Material Contracts
----------------
SCHEDULE 3.17(C) Related Person Contracts
----------------
SCHEDULE 3.17(D) Exceptions to Enforceability of Material Contracts
----------------
SCHEDULE 3.17(E) Exceptions to Compliance With Material Contracts
----------------
SCHEDULE 3.18(B) Exceptions to Adequacy, Enforceability of Insurance
----------------
SCHEDULE 3.19 Environmental Matters
-------------
SCHEDULE 3.20 Employees and Directors of Acquired Companies Including
-------------
Information Regarding Retired Employees or Directors
SCHEDULE 3.22 Intellectual Property Rights; Company Software
-------------
SCHEDULE 3.22(B)(I) List of All Owned Software, Customer Software, Other
-------------------
Software
SCHEDULE 3.22(B)(II) Registrations of the Acquired Companies
--------------------
SCHEDULE 3.22(B)(III) Customer License Agreements
---------------------
SCHEDULE 3.22(B)(IV) Distributor Agreements
--------------------
SCHEDULE 3.22(B)(V) Supplier License Agreements
-------------------
SCHEDULE 3.22(C) Exceptions to Ownership and Right to License Owned
----------------
Software and Intangibles and List of All Individuals
Compensated at an Annual Rate in Excess of $25,000.00
Who Have Contributed to the Development of Owned
Software
SCHEDULE 3.22(D)(I) Exceptions to Performance of Acquired Companies
-------------------
Software
SCHEDULE 3.22(D)(II) Exceptions to Compliance With Customer License
--------------------
Agreements, Distributor Agreements and Supplier License
Agreements
SCHEDULE 3.22(D)(III) Exceptions to Readability/Reproducibility of Acquired
---------------------
Companies Software
SCHEDULE 3.22(E) Millennium Compliance
----------------
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SCHEDULE 3.22(G)
----------------
SCHEDULE 3.25 Related Party Contracts, Claims or Rights Against
-------------
Acquired Companies
-53-
EXHIBITS
--------
EXHIBIT A Opinion of Sellers' Counsel
---------
EXHIBIT B Restrictive Covenant Agreement
---------
EXHIBIT C Employment Agreement - ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------
EXHIBIT D Employment Agreement - ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------
EXHIBIT E Covenants Agreements
---------
EXHIBIT F Escrow Agreement
---------
EXHIBIT G Certificate of Sellers
---------
EXHIBIT H Wire Transfer Instructions
---------
EXHIBIT I Registration Rights Agreement
---------
EXHIBIT J Certificate of Buyer
---------
EXHIBIT K Opinion of Buyer's Counsel
---------
EXHIBIT L PER Agreement
---------
EXHIBIT M Subscription Agreements
---------
EXHIBIT N Termination of Shareholders Agreement
---------
EXHIBIT O Termination of ▇▇▇▇▇ ▇▇▇▇▇'▇ Employment
---------
Agreement
EXHIBIT P Assignment and Assumption of Lease; Assumption
---------
Agreement
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