EXHIBIT 2.1
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MERGER AGREEMENT
by and among
ANSWERTHINK CONSULTING GROUP, INC.,
(ACG)
CFT ACQUISITION, INC.,
(Newco)
CFT CONSULTING, INC.,
(CFT)
and
THE SHAREHOLDERS OF CFT
(collectively, Shareholders)
Dated as of July 6, 1999
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TABLE OF CONTENTS
Page
1. Definitions............................................................................................1
2. The Merger............................................................................................10
(a) The Merger..................................................................................10
(b) Effective Time of the Merger................................................................10
(c) Articles of Incorporation...................................................................10
(d) Bylaws......................................................................................10
(e) Directors and Officers of the Surviving Corporation.........................................10
(f) Effect of the Merger........................................................................11
(g) Conversion of CFT Shares....................................................................11
(h) Consideration...............................................................................11
(i) Earned Payout Amount........................................................................12
(j) Form and Date of Payment of Earned Payout Amount............................................13
(k) Net Worth Adjustment........................................................................14
(l) Intentionally Blank.........................................................................15
(m) Closing Determination.......................................................................15
(n) The Closing.................................................................................15
(o) Deliveries at the Closing...................................................................16
(p) Intentionally Blank.........................................................................16
(q) Representative of Shareholders'(other than the ESOP) and Representative of the ESOP.........16
(r) Other PWC Determinations....................................................................18
3. Representations and Warranties Concerning the Transaction............................................19
(a) Representations and Warranties of each Shareholder..........................................19
(i) Authorization of Transaction.......................................................19
(ii) Noncontravention..................................................................19
(iii) Broker's Fees....................................................................20
(iv) Investment........................................................................20
(v) CFT Shares.........................................................................20
(vi) Disclosure........................................................................20
(b) Representations and Warranties of ACG and Newco.............................................20
(i) Organization of ACG and Newco......................................................21
(ii) Authorization of Transaction......................................................21
(iii) Noncontravention.................................................................21
(iv) Brokers'Fees......................................................................21
(v) Investment.........................................................................22
(c) Statement of Northern Trust Regarding Fiduciary Capacity....................................22
Page
4. Representations and Warranties Concerning CFT.........................................................22
(a) Organization, Qualification, and Corporate Power............................................23
(b) Capitalization..............................................................................23
(c) Noncontravention............................................................................24
(d) Subsidiaries................................................................................24
(e) Financial Statements; Net Worth.............................................................24
(f) Events Subsequent to December 31, 1998......................................................24
(g) Undisclosed Liabilities.....................................................................27
(h) Tax Matters.................................................................................27
(i) Tangible Assets.............................................................................30
(j) Owned Real Property.........................................................................30
(k) Intellectual Property.......................................................................30
(l) Real Property Leases........................................................................31
(m) Contracts...................................................................................32
(n) Notes and Accounts Receivable; Funded Indebtedness; Liens...................................33
(o) Powers of Attorney..........................................................................34
(p) Insurance...................................................................................34
(q) Litigation..................................................................................34
(r) Employees...................................................................................35
(s) Employee Benefits...........................................................................35
(t) Guaranties..................................................................................37
(u) Environment, Health, and Safety.............................................................37
(v) Legal Compliance............................................................................38
(w) Certain Business Relationships with CFT.....................................................39
(x) Brokers'Fees................................................................................39
(y) Personal Use Assets; Debts and Obligations Owed to CFT......................................39
(z) Disclosure..................................................................................40
5. Pre-Closing Covenants.................................................................................40
(a) General.....................................................................................40
(b) Notices and Consents........................................................................40
(c) Operation of Business.......................................................................40
(d) Preservation of Business....................................................................41
(e) Access......................................................................................41
(f) Notice of Developments......................................................................41
(g) Exclusivity.................................................................................41
(h) Delivery of Information.....................................................................42
(i) Cancellation of Options, Bonus Programs and Phantom Stock Plans.............................42
(j) 401k Termination............................................................................42
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6. Additional Covenants..................................................................................42
(a) General.....................................................................................42
(b) Litigation Support..........................................................................43
(c) Transition..................................................................................43
(d) Confidentiality.............................................................................43
(e) Termination of Bank Facilities; Release of Guaranties; Modification of
Indebtedness...........................................................................44
(f) Monitoring Information......................................................................44
(g) Landlords'Consents..........................................................................44
(h) Additional Tax Matters......................................................................44
(i) Covenant Not to Compete.....................................................................45
(j) Conduct During Earned Payout Period.........................................................46
(k) ESOP Agreements.............................................................................47
(l) Reorganization Intent.......................................................................47
(m) Consents....................................................................................47
7. Conditions to Obligations to Close....................................................................48
(a) Conditions to Obligation of ACG.............................................................48
(b) Conditions to Obligations of the Shareholders...............................................52
8. Remedies for Breaches of This Agreement...............................................................53
(a) Survival....................................................................................53
(b) Indemnification Provisions for Benefit of ACG..............................................54
(c) Indemnification Provisions for Benefit of the Shareholders.................................56
(d) Matters Involving Third Parties.............................................................56
(e) Exclusive Remedy............................................................................57
(f) Payment; General Right of Offset............................................................57
(g) Other Indemnification Provisions............................................................57
(h) Arbitration with Respect to Certain Indemnification Matters.................................58
9. [INTENTIONALLY LEFT BLANK]............................................................................59
10. Miscellaneous........................................................................................59
(a) The Shareholders............................................................................59
(b) Press Releases and Announcements............................................................59
(c) No Third-Party Beneficiaries................................................................60
(d) Entire Agreement............................................................................60
(e) Succession and Assignment...................................................................60
(f) Facsimile/Counterparts......................................................................60
(g) Descriptive Headings........................................................................60
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(h) Notices.....................................................................................60
(i) Governing Law...............................................................................62
(j) Amendments and Waivers......................................................................62
(k) Severability................................................................................62
(l) Expenses....................................................................................63
(m) Construction................................................................................63
(n) Incorporation of Exhibits, Annexes, and Schedules...........................................63
(o) Specific Performance........................................................................63
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LIST OF EXHIBITS, ANNEXES AND SCHEDULES
EXHIBITS
Exhibit A Form of Equity Subscription Agreement
Exhibit B-1 Form of Stock Option Agreement (Exchange)
Exhibit B-2 Form of Stock Option Agreement (New)
Exhibit C Financial Statements
Exhibit D-1 Form of Compliance Agreement (Shareholders)
Exhibit D-2 Form of Compliance Agreement (Non-Shareholders)
Exhibit E Form of Opinion of Shareholders' Legal Counsel (other than ESOP)
Exhibit F Option Cancellation and Exchange Agreement
Exhibit G Form of Release
Exhibit H Confidentiality Agreement
Exhibit I Form of Opinion of ESOP's Legal Counsel
Exhibit J Form of Trustee Certificate
Exhibit K Form of Pledge Agreement
ANNEXES AND TABLE
Annex I Exceptions to Representations and Warranties of Shareholders
Annex II Exceptions to Representations and Warranties of ACG
Annex III Certain Shareholders to Deliver Compliance Agreements and Initial Salaries of such
Shareholders
Annex IV-1 Key Persons (other than ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇) to Deliver Compliance Agreements and
Initial Salaries for such Key Persons
Annex IV-2 Persons (other than ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ and Key Persons) to Deliver Compliance
Agreements and Initial Salaries for such Persons
Annex V List of Persons to Receive ACG's Options in Exchange for Company Options and Number of
such ACG's Options
Annex VI List of Persons to Receive ACG's Options (not in Exchange for Company's Options)
and Number of such ACG's Options
SCHEDULES
Allocation Schedule
Option Allocation Schedule
Disclosure Schedule
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MERGER AGREEMENT
This MERGER AGREEMENT ("Agreement") is entered into as of the
6th day of July 1999, by and among ANSWERTHINK CONSULTING GROUP, INC., a Florida
corporation ("ACG"), CFT ACQUISITION, INC., a Florida corporation and
wholly-owned subsidiary of ACG ("Newco"), CFT CONSULTING, INC., a Florida
corporation ("CFT"), CFT CONSULTING, INC. EMPLOYEE STOCK OWNERSHIP PLAN (the
"ESOP") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), KSM
Trust (the "KSM Trust"), ▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Charitable
Remainder Unitrust No. 1 ("Trust No. 1") and ▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Charitable Remainder Unitrust No. 2 ("Trust No. 2"). The ESOP, Goldberg, Morris,
the KSM Trust, Trust No. 1 and Trust No. 2 are collectively referred to herein
as the "Shareholders" and Goldberg, Morris, Trust No. 1 and Trust No. 2 are
collectively referred to herein as the "Principals". ACG, Newco and the
Shareholders are individually referred to herein as a "Party" and collectively
as the "Parties." CFT and Newco are sometimes referred to herein as the
"Constituent Corporations." If the context so requires, references herein to CFT
shall mean the Surviving Corporation (as hereinafter defined) for periods after
the Closing Date (as hereinafter defined).
Recitals
A. The Shareholders collectively own all of the outstanding
capital stock of CFT.
B. This Agreement contemplates a transaction in which CFT will
merge with and into Newco, with Newco being the surviving corporation, and all
of the outstanding shares of capital stock of CFT being converted into the right
to receive the Consideration (as hereinafter identified), and the Parties intend
such merger transaction to be a tax-free reorganization under Section 368 of the
Code (as defined) and intend this Agreement to be a "plan of reorganization"
within the meaning of the regulations promulgated under such Section of the
Code.
Agreement
In consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
1. Definitions.
"ACG" has the meaning set forth in the preface above.
"ACG Market Price at Closing" shall mean twenty-five ($25)
dollars per share of ACG's Common Stock.
"ACG Market Price at First Tier Earnout" shall mean the
average of the closing price of ACG's Common Stock as listed on the NASDAQ
National Market System for the five (5) business days prior to the two (2)
business days immediately prior to December 31, 1999.
"ACG Market Price at Second Tier Earnout" shall mean the
average of the closing price of ACG's Common Stock as listed on the NASDAQ
National Market System for the five (5) business days prior to the two (2)
business days immediately prior to the first anniversary of the Closing Date.
"ACG's Common Stock" means the common stock, par value $0.001
per share, of ACG.
"ACG's Options" means options to purchase ACG's Shares
pursuant to and in accordance with the terms of the Stock Option Agreement
attached hereto as Exhibit B-1 or Exhibit B-2, as applicable.
"ACG's Shares" means the shares of restricted ACG's Common
Stock, which are issued pursuant to and in accordance with the terms set forth
in the Equity Subscription Agreement attached hereto as Exhibit A.
"Adverse Consequences" means all damages from complaints,
actions, suits, proceedings, hearings, investigations, claims, demands,
judgments, orders, decrees, stipulations, injunctions, damages, dues, penalties,
fines, costs, amounts paid in settlement, liabilities, obligations, taxes,
liens, losses, expenses, and fees, including all reasonable attorneys' fees and
court costs.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"Affiliated Group" means any affiliated group within the
meaning of Code Section 1504 (or any similar group defined under a similar
provision of state, local or foreign law).
"Articles of Incorporation" has the meaning set forth in
Section 2(c) below.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms the reasonable basis
for any specified consequence.
"Bylaws" has the meaning set forth in Section 2(d) below.
"Cash Portion of the Consideration" has the meaning set forth
in Section 2(h) below.
"Cash Portion of the Earned Payout Amount" has the meaning set
forth in Section 2(j) below.
"Cash Portion of the First Tier Earned Payout Amount" has the
meaning set forth in Section 2(j) below.
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"Cash Portion of the Second Tier Earned Payout Amount" has the
meaning set forth in Section 2(j) below.
"CFT" has the meaning set forth in the preface above.
"CFT Class A Common" means the Class A voting common stock,
$1.00 par value per share, of CFT.
"CFT Class B Common" means the Class B non-voting common
stock, $1.00 par value per share, of CFT.
"CFT Common Stock" means the CFT Class A Common and the CFT
Class B Common.
"CFT Employee Benefit Plan" has the meaning set forth in
Section 2(s) below.
"CFT Employee Pension Benefit Plan" has the meaning set forth
in Section 2(s) below.
"CFT Employee Welfare Benefit Plan" has the meaning set forth
in Section 2(s) below.
"CFT Options" means all the option and other agreements
between CFT and the CFT Optionholders listed on the Option Allocation Schedule
hereto related to the issuance of shares of CFT Common Stock pursuant to options
to acquire CFT Common Stock existing as of the Closing Date, whether the same
are vested or unvested in the holder of such CFT Option as of the Effective
Time.
"CFT Optionholders" means the holders, if any, of options for
the purchase of shares of CFT Common Stock listed on the Option Allocation
Schedule hereto.
"CFT Preferred Stock" means the Class C, convertible, voting
and participating preferred stock, $1.00 par value per share, of CFT.
"CFT Shares" means all outstanding shares of CFT Common Stock.
"CFT's Business" means the business of CFT on the execution
date of this Agreement, consisting of management and technology consulting
identifying, developing, implementing and managing effective information
technology and business processes for retailers and their suppliers.
"Closing" has the meaning set forth in Section 2(n) below.
"Closing Date" has the meaning set forth in Section 2(n)
below.
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"Closing Determination" has the meaning set forth in Section
2(m) below.
"COBRA" has the meaning set forth in Section 4(s) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means all confidential information
and trade secrets of CFT including, without limitation, the identity, lists or
descriptions of any customers, referral sources or organizations; financial
statements, cost reports or other financial information; contract proposals, or
bidding information; business plans and training and operations methods and
manuals; personnel records; fee structures; and management systems, policies or
procedures, including related forms and manuals; provided, however, Confidential
Information shall not include any information which is (i) generally available
to the public or generally known to persons or entities in the computer
consulting trade, (ii) obtained by a person in a manner not in violation of any
obligation of confidentiality of such person, or (iii) already known to a person
not in violation of any obligation of confidentiality.
"Consideration" has the meaning set forth in Section 2(h
below.
"Constituent Corporations" has the meaning set forth in the
preface above.
"Controlled Group of Corporations" has the meaning set forth
in Code Section 1563.
"Cross Sell Service Revenues" shall mean revenues by which CFT
is identified as a lead for jobs where there is revenue being generated on a
project by associates from an ACG solutions team other than CFT. If more than
one lead (other than CFT) is identified, then such leads will share the revenue
on a equal pro-rata basis or on another basis as approved by the Executive Vice
President of Sales and Marketing of ACG. For purposes of determining the amount
of Cross Sell Service Revenues, the final determination shall be as reasonably
determined by ACG.
"Customer" has the meaning set forth in Section 6(j) below.
"Customer Contract or Agreement" means any agreement whereby
CFT provides consulting services to a third party during the 1997, 1998 or 1999
fiscal years of CFT.
"Deferred Intercompany Transaction" has the meaning set forth
in Treasury Regulation ss.1.1502-13.
"Disclosure Schedule" has the meaning set forth in Section
4 below.
"Documentation" has the meaning set forth in Section 4(k)
below.
"Earned Payout Amount" has the meaning set forth in Section
2(i) below.
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"Earned Payout Period" means the period from January 1, 1999,
through the day prior to the first anniversary of the Closing Date.
"Effective Time" has the meaning set forth in Section 2(b)
below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
Material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"Equitable Exceptions" has the meaning set forth in Section
3(a)(i) below.
"Equity Subscription Agreement" has the meaning set forth in
Section 2(h) below.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESOP" has the meaning set forth in the preface above.
"ESOP Representative" has the meaning set forth in Section
2(q)(i) below.
"Extremely Hazardous Substance" has the meaning set forth in
Section 302 of the Emergency Planning and Community Right-to-Know Act of 1986,
as amended.
"FBCA" has the meaning set forth in Section 2(a) below.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Final Determination" has the meaning set forth in Section
2(m) below.
"Financial Statements" has the meaning set forth in Section
4(e) below.
"First Tier Earned Payout Amount" has the meaning set forth in
Section 2(i)(i) below.
"First Tier Earned Payout Period" means the period from
January 1, 1999 through December 31, 1999.
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"First Tier Percentage" shall mean the quotient of the First
Tier Earned Payout Amount divided by $8,618,000.
"Funded Indebtedness" means, net of cash, cash equivalents and
any outstanding checks, all (i) indebtedness of CFT for borrowed money or other
interest-bearing indebtedness, including without limitation any loans from
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇; (ii) capital lease obligations of CFT; (iii) obligations of
CFT to pay the deferred purchase or acquisition price for goods or services,
other than trade accounts payable or accrued expenses in the ordinary course of
business on no more than 90 day payment terms and other indebtedness of CFT
under extended credit terms of more than 60 days from vendors provided to CFT;
(iv) indebtedness of others guaranteed by CFT or secured by an encumbrance on
CFT's property; and (v) transaction costs of CFT and/or Shareholders associated
with this Agreement or the transactions contemplated hereby that are paid by
CFT.
"GAAP" means generally accepted accounting principles,
consistently applied, as in effect from time to time.
"▇▇▇▇▇▇▇▇" has the meaning set forth in the preface above.
"Indemnified Party" has the meaning set forth in Section 8(d)
below.
"Indemnifying Party" has the meaning set forth in Section 8(d)
below.
"Independent Accountants" means Ernst & Young LLP or such
other certified public accountant or firm of certified public accountants on
whom the Representative and ACG may mutually agree in writing.
"Independent Determination" has the meaning set forth in
Section 2(r) below.
"Intellectual Property" means all (a) trademarks, service
marks, trade dress, logos, trade names, and corporate names and registrations
and applications for registration thereof, (b) copyrights and registrations and
applications for registration thereof, (c) computer software, data, and
documentation, (d) trade secrets and confidential business information
(including 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, 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), (e) other proprietary rights, and (f) copies and tangible
embodiments thereof (in whatever form or medium).
"Knowledge" means, with respect to CFT or the Principals,
actual knowledge after reasonable investigation and inquiry by the Principals,
which inquiry shall include
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an inquiry of the officers of CFT, as well as the employees of CFT, with
responsibility for the matters in question.
"KSM Trust" has the meaning set forth in the preface above.
"Liability" means any liability, debt, obligation, amount or
sum due (whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated, and whether due or to become due) including any
liability for Taxes.
"Licenses" has the meaning set forth in Section 4(k) below.
"Material" has the meaning set forth in Section 4 below.
"Merger" has the meaning set forth in Section 2(a) below.
"Merger Documents" has the meaning set forth in Section 2(b)
below.
"Minimum Net Worth" has the meaning set forth in Section 2(k)
below.
"▇▇▇▇▇▇" has the meaning set forth in the preface above.
"Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
"Most Recent Financial Statements" means the Financial
Statements for and as of the Most Recent Fiscal Year End.
"Most Recent Fiscal Year End" has the meaning set forth in
Section 4(e) below.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
"Net Service Revenues" means the gross revenues of CFT net of
reimbursed expenses as normally calculated on the Financial Statements and
pursuant to GAAP consistently applied less the cost of software that is resold
by CFT, all as calculated in accordance with GAAP, consistently applied. If for
an applicable period, CFT's gross subcontractor revenues less its cost of
subcontractors exceeds $1,200,000, the gross subcontractor revenues included in
Net Service Revenues will be reduced by an amount necessary for such revenues
less such expenses to be equal to $1,200,000.
"Net Worth of CFT" means the total assets of CFT (excluding
cash) less the total liabilities of CFT (excluding Funded Indebtedness and
including, without limitation, all liabilities arising due to the conversion
from cash to accrual accounting) determined in accordance with GAAP,
consistently applied and on the accrual method of accounting. For the purposes
of determining the Net Worth of CFT at the Closing, any liabilities of CFT paid
off or settled by ACG or Newco (whether to CFT or third parties) will be treated
as a liability of CFT.
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"Option Cancellation and Exchange Agreement" has the meaning
set forth in Section 7(a) herein.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"Principal" has the meaning set forth in the preface above.
"PWC" means PriceWaterhouse Coopers, L.L.P.
"PWC Determination" has the meaning set forth in Section 2(m)
below.
"Reportable Event" has the meaning set forth in ERISA Section
4043.
"Second Tier Earned Payout Amount" has the meaning set forth
in Section 2(i)(ii) below.
"Second Tier Earned Payout Period" means the period from the
Closing Date through the day prior to the first anniversary of the Closing Date.
"Second Tier Percentage" shall mean the quotient of the Second
Tier Earned Payout Amount divided by $1,633,000.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien, other than (a) mechanic's,
materialmen's and similar liens, (b) liens for Taxes not yet due and payable (or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings), (c) liens arising under workers' compensation, unemployment
insurance, social security, retirement, and similar legislation, (d) liens
arising in connection with sales of foreign receivables, (e) liens on goods in
transit incurred pursuant to documentary letters of credit, (f) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(g) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Shareholders" has the meaning set forth in the preface above.
"Shareholders' First Tier Earnout Shares" has the meaning set
forth in Section 2(j)(ii) below.
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"Shareholders' Representative" has the meaning set forth in
Section 2(q) below.
"Shareholders' Second Tier Earnout Shares" has the meaning set
forth in Section 2(j)(iii) below.
"Stub Period Balance Sheet" means the balance sheet included
in the Stub Period Financial Statements.
"Stub Period End" has the meaning set forth in Section 4(e)
below.
"Stub Period Financial Statements" means the Financial
Statements for and as of the Stub Period End.
"Stock Portion of the Consideration" has the meaning set forth
in Section 2(h) below.
"Stock Portion of the Earned Payout Amount" has the meaning
set forth in Section 2(j) below.
"Stock Portion of the First Tier Earned Payout Amount" has the
meaning set forth in Section 2(j) below.
"Stock Portion of the Second Tier Earned Payout Amount" has
the meaning set forth in Section 2(j) below.
"Subsidiary" means any corporation with respect to which
another specified corporation has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"Surviving Corporation" has the meaning set forth in Section
2(a) below.
"Terminated Plan" has the meaning set forth in Section 5(j)
below.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or addition
thereto.
"Tax Return" means any tax return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Trust No. 1" has the meaning set forth in the preface above.
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"Trust No. 2" has the meaning set forth in the preface above.
"Trustee" shall mean the Trustee of the ESOP, ▇▇▇▇▇ ▇. ▇▇▇▇▇.
2. The Merger.
(a) The Merger. At the Effective Time (as defined below), CFT
shall be merged with and into Newco (the "Merger"), and the separate existence
of CFT shall thereupon cease, and the name of Newco, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall be changed to
"CFT Consulting, Inc.," and the Surviving Corporation shall operate as "CFT
Consulting, Inc." in the State of Florida. The Merger shall have the effects set
forth in the Florida Business Corporations Act, as amended (the "FBCA").
(b) Effective Time of the Merger. As soon as practicable after
the satisfaction or waiver of the conditions hereinafter set forth, the parties
hereto will file with the Secretary of State of Florida the articles of merger
and other documents (the "Merger Documents"), in such forms as required by, and
executed in accordance with, the relevant provisions of the FBCA in order to
effect the Merger. The Merger shall become effective at such time as the Merger
Documents shall have been accepted for filing with the Secretary of State of the
State of Florida or such other times and dates as the parties agree to specify
in the Merger Documents (the "Effective Time").
(c) Articles of Incorporation. The articles of incorporation
of Newco (the "Articles of Incorporation") in effect at the time of the Merger
shall be the Articles of Incorporation of the Surviving Corporation, until
thereafter amended, as provided thereunder and in the FBCA.
(d) Bylaws. The bylaws of Newco (the "Bylaws") in effect at
the time of the Merger shall be the Bylaws of the Surviving Corporation until
altered, amended or repealed, as provided thereunder and in the Articles of
Incorporation and the FBCA.
(e) Directors and Officers of the Surviving Corporation.
(i) The sole director of Newco at the Effective Time, ▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, and the additional directors named as of the Effective
Time (or within two (2) business days thereafter), ▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ San ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, shall be the directors of the Surviving
Corporation and each shall hold such office from the Effective Time (or
within two (2) business days thereafter) until his respective successor
is duly elected or appointed and qualifies in the manner provided in
the Articles of Incorporation and Bylaws, or as otherwise provided by
law.
(ii) The officers of Newco at the Effective Time and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (in accordance with their
respective Compliance
-10-
agreements) shall be the officers of the Surviving Corporation and
shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualify in the manner
provided in the Articles of Incorporation and Bylaws, or as otherwise
provided by law.
(f) Effect of the Merger. The Merger shall have the effects
set forth in the FBCA. Without limiting the generality of the foregoing, at the
Effective Time, all the properties, rights, privileges, powers and franchises of
the Constituent Corporations shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Constituent Corporations shall become the
debts, liabilities and duties of the Surviving Corporation. The purpose of the
Surviving Corporation shall be the purposes of CFT immediately prior to the
Merger. The total number of shares that the Surviving Corporation is authorized
to issue shall be 1,000 shares of common stock, $0.01 par value per share.
(g) Conversion of CFT Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of the Shareholders (except as
indicated below):
(i) Each CFT Share issued and outstanding immediately
prior to the Effective Time (other than any CFT Shares as to which the
holders thereof shall have properly exercised appraisal rights under
the FBCA) shall be converted into the right to receive its allocable
portion of the Consideration (as hereinafter defined), as same is set
forth in Section 2(h) below.
(ii) Each CFT Share held in the treasury of CFT
immediately prior to the Effective Time shall be canceled and retired
and cease to exist.
(iii) No interest, dividends or other distributions shall
be payable upon the surrender of certificates that represented issued
and outstanding CFT Shares immediately prior to the Effective Time.
(h) Consideration.
(i) The consideration for CFT Shares shall be composed of
the Cash Portion of the Consideration, the Stock Portion of the
Consideration and the Earned Payout Amount and the sum of all such
amounts shall be referred to herein as the "Consideration."
(ii) ACG agrees to pay to the Shareholders in the
aggregate the sum of (A) $4,800,000 (to be (1) decreased dollar for
dollar by the payments made by CFT to terminate the CFT Options; and
(2) increased or decreased, as the case may be, as set forth in Section
2(h)(v)) in cash (the "Cash Portion of the Consideration"); and (B)
$9,973,000 (to be decreased as set forth in Section 2(k)) in the form
of such number of ACG's Shares (the "Stock Portion of the
Consideration") equal to $9,973,000 (as adjusted and to be decreased as
set forth in
-11-
Section 2(k)) divided by the ACG Market Price at Closing, all in
exchange for the CFT Shares to be exchanged pursuant to the terms
hereof.
(iii) The Cash Portion of the Consideration shall be paid
by ACG to the Shareholders at the Closing by wire transfer of
immediately available funds to an account designated by the
Shareholders listed on Schedule 2(h). The Stock Portion of the
Consideration shall be satisfied at the Closing by the issuance and
delivery of stock certificates by ACG to the Shareholders; provided,
however that each Shareholder (other than the ESOP) shall be required
to enter into an equity subscription agreement in the form attached
hereto as Exhibit A (the "Equity Subscription Agreement") and the ESOP
shall enter into an Equity Subscription Agreement in form as agreed by
ACG; provided, further that ACG's Shares issued to the ESOP shall be
registered on Form S-8 as soon as practicable after the Closing (as
hereinafter defined).
(iv) Each of (A) the Cash Portion of the Consideration
and (B) the Stock Portion of the Consideration shall be allocated among
the Shareholders in such dollar amounts determined pro rata in
accordance with the Allocation Schedule.
(v) The Cash Portion of the Consideration payable at
Closing shall be (A) decreased dollar for dollar by the amount of any
outstanding Funded Indebtedness in excess of $1,465,671 and (B)
increased dollar for dollar by the amount of any outstanding Funded
Indebtedness which is less than $1,465,671 (provided, however, that if
ACG believes that the Merger's eligibility to be treated as a tax-free
reorganization under Section 368 of the Code would be jeopardized by
any adjustment upward under this Section 2(h)(v)(B), ACG may require
that the consideration of any such adjustment upward be comprised of
fifty-five percent (55%) cash and forty-five percent (45%) ACG Shares.)
(i) Earned Payout Amount. In addition to the Cash Portion of
the Consideration and the Stock Portion of the Consideration, ACG agrees to pay
the Shareholders an amount (the "Earned Payout Amount") equal to the sum of the
following:
(i) the sum of the following (referred to herein as the
"First Tier Earned Payout Amount"): (A) the product of (1) the amount,
if any, by which the Net Service Revenues earned during the First Tier
Earned Payout Period exceeds $12,000,000 up to a maximum excess amount
of $3,000,000 and (2) 2.19416; (B) the product of (1) the amount, if
any by which the Net Service Revenues earned during the First Tier
Earned Payout Period exceed $15,000,000 up to a maximum excess amount
of $2,500,000 and (2) 0.64137; and (C) the product of (1) the amount,
if any, by which the Net Service Revenues earned during the First Tier
Earned Payout Period exceed $17,500,000 up to a maximum excess of
$2,500,000 and (2) 0.17283; and
-12-
(ii) the following (referred to herein as the "Second
Tier Earned Payout Amount"): the product of (A) the amount, if any, by
which the Cross Sell Service Revenues earned during the Second Tier
Earned Payout Period exceeds $2,000,000 up to a maximum excess amount
of $8,000,000 and (B) 0.204125.
(j) Form and Date of Payment of Earned Payout Amount. The
First Tier Earned Payout Amount, if any, shall be payable in the aggregate as
follows: (i) 47.39% in cash (the "Cash Portion of the First Tier Earned Payout
Amount") and (ii) 52.61% in such number of ACG's Shares to be determined as
hereinafter described (the "Stock Portion of the First Tier Earned Payout
Amount"); and the Second Tier Earned Payout Amount, if any, shall be payable in
the aggregate as follows: (i) 47.39% in cash (the "Cash Portion of the Second
Tier Earned Payout Amount" and collectively with the Cash Portion of the First
Tier Earned Payout Amount, the "Cash Portion of the Earned Payout Amount") and
(ii) 52.61% in such number of ACG's Shares to be determined as hereinafter
described (the "Stock Portion of the Second Tier Earned Payout Amount" and
collectively with the Stock Portion of the First Tier Earned Payout Amount, the
"Stock Portion of the Earned Payout Amount"); provided, that ACG's Shares issued
to the ESOP shall be registered on Form S-8 as soon as practicable after the
Closing.
(i) Cash Portion of Earnout. The Cash Portion of the
Earned Payout Amount, if any, shall be payable (pro rata in accordance
with the percentages set forth on the Allocation Schedule) to the
Shareholders. The Cash Portion of the First Tier Earned Payout Amount
shall be paid by wire transfer or other delivery of immediately
available funds within sixty (60) days following the expiration of the
First Tier Earned Payout Period to an account designated by the
Shareholders. The Cash Portion of the Second Tier Earned Payout Amount
shall be paid by wire transfer or other delivery of immediately
available funds within sixty (60) days following the expiration of the
Second Tier Earned Payout Period to an account designated by the
Shareholders.
(ii) Stock Portion of First Tier Earned Payout Amount
Payable to Shareholders. The Stock Portion of the First Tier Earned
Payout Amount, if any, will be issued (pro rata in accordance with the
percentages set forth on the Allocation Schedule) to the Shareholders
by the delivery to each such Shareholder of the number ACG's Shares as
calculated in this Section 2(j)(ii) (the "Shareholders' First Tier
Earnout Shares"). The aggregate number of Shareholders' First Tier
Earnout Shares will be equal to the number obtained by dividing the
Stock Portion of the First Tier Earned Payout Amount by the ACG Market
Price at First Tier Earnout. The Shareholders' First Tier Earnout
Shares shall be issued (pro rata in accordance with the percentages set
forth on the Allocation Schedule) to the Shareholders (as rounded down
to the nearest whole number); provided, however, that each Shareholder
receiving Shareholders' First
-13-
Tier Earnout Shares shall enter into an Equity Subscription Agreement
in respect of such shares.
(iii) Stock Portion of Second Tier Earned Payout Amount
Payable to Shareholders. The Stock Portion of the Second Tier Earned
Payout Amount, if any, will be issued (pro rata in accordance with the
percentages set forth on the Allocation Schedule) to the Shareholders
by the delivery to each such Shareholder of the number ACG's Shares as
calculated in this Section 2(j)(ii) (the "Shareholders' Second Tier
Earnout Shares"). The aggregate number of Shareholders' Second Tier
Earnout Shares will be equal to the number obtained by dividing the
Stock Portion of the Second Tier Earned Payout Amount by the ACG Market
Price at Second Tier Earnout. The Shareholders' Second Tier Earnout
Shares shall be issued (pro rata in accordance with the percentages set
forth on the Allocation Schedule) to the Shareholders (as rounded down
to the nearest whole number); provided, however, that each Shareholder
receiving Shareholders' Second Tier Earnout Shares shall enter into an
Equity Subscription Agreement in respect of such shares.
(iv) Payout of Stock Portion of Earnout. The Stock
Portion of the First Tier Earned Payout Amount, if any, shall be
payable on or before sixty (60) days following the expiration of the
First Tier Earned Payout Period by the delivery of certificates
representing Shareholders' First Tier Earnout Shares calculated in
accordance with this Section 2(j)(ii). The Stock Portion of the Second
Tier Earned Payout Amount, if any, shall be payable on or before sixty
(60) days following the expiration of the Second Tier Earned Payout
Period by the delivery of certificates representing Shareholders'
Second Tier Earnout Shares calculated in accordance with this Section
2(j)(iii).
(v) Determination. The Earned Payout Amount shall be
determined by PWC in accordance with the terms of this Agreement.
(k) Net Worth Adjustment. The First Tier Earned Payout Amount
shall be adjusted downward on a dollar-for-dollar basis by the amount by which
the Net Worth of CFT as of May 31, 1999, is less than $2,809,695 (the "Minimum
Net Worth"). To the extent that the First Tier Earned Payout Amount is
insufficient to fully satisfy any net worth adjustment required to be made
pursuant to this Section 2(k), after taking into account any adjustment made
pursuant to the first sentence of this Section 2(k), the Second Tier Earned
Payout Amount shall be adjusted downward on a dollar-for-dollar basis by the
amount by which the Net Worth of CFT as of May 31, 1999, is less than the
Minimum Net Worth. To the extent the sum of the foregoing adjustments is less
than the amount by which the Net Worth of CFT as of May 31, 1999, is less than
the Minimum Net Worth, each of the Shareholders shall transfer and surrender to
ACG such number of ACG Shares from their respective portion (pro rata in
accordance with the percentages set forth on the Allocation Schedule) of the
Stock Portion of the Consideration as will fully satisfy any net worth
adjustment required to be made pursuant to this Section 2(k); provided, however,
that
-14-
if ACG believes that the Merger's eligibility to be treated as a tax-free
reorganization under Section 368 of the Code would be jeopardized by any of the
foregoing manners of adjustment or transfers, ACG may require that the
consideration of any such adjustment or transfer be comprised of fifty-five
percent (55%) cash and forty-five percent (45%) ACG Shares.
(l) Intentionally Blank.
(m) Closing Determination. The projected Net Worth of CFT as
of May 31, 1999, shall initially be determined prior to the Closing Date by CFT
in good faith within two (2) business days prior to the Closing Date (the
"Closing Determination"). Following the Closing Date, the Net Worth of CFT as of
May 31, 1999, shall be determined by PWC in accordance with the terms of this
Agreement (at the expense of ACG), which determination (the "PWC Determination")
shall be submitted in writing to ACG and the Shareholders' Representative on
behalf of the Shareholders not later ninety (90) days after the Closing Date.
Unless the Shareholders' Representative on behalf of the Shareholders (other
than the ESOP) objects in writing to the PWC Determination within ten (10)
business days of the receipt of such determination, the PWC Determination shall
be final, conclusive and binding on the Parties. If no objection is made and if
the PWC Determination is less than the Minimum Net Worth, ACG shall take the
actions described in Section 2(k) above until the sum of (i) any adjustments to
the Earned Payout Amount and (ii) any transfers by the Shareholders to ACG
equals the amount by which the PWC Determination is less than the Minimum Net
Worth. In the event that the Shareholders' Representative on behalf of the
Shareholders disputes the PWC Determination within ten (10) days after the
Shareholders' Representative's receipt thereof, the parties shall retain the
Independent Accountants to review the disputed item(s) in the PWC Determination.
The final determination (the "Final Determination") of such disputed item(s) by
the Independent Accountants under this Section 2(m) shall be conclusive and
binding on the parties hereto with respect to such disputed items(s) and any
adjustments described in Section 2(k) above shall be made using the Final
Determination (rather than the PWC Determination). The cost of retaining the
Independent Accountants shall be borne by ACG; provided, however, that the
Shareholders (other than the ESOP) shall reimburse ACG for the cost of the
Independent Accountants in the event that the results of the Final Determination
differ by less than 10% in favor of the Shareholders (or are equal to or differ
in any amount in favor of ACG) from the results of the PWC Determination. Any
binding determination under this Section 2(m) shall be a joint and several
obligation of the Shareholders, on the one hand, and ACG and Newco, on the other
hand.
(n) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇ &
▇▇▇▇▇▇▇ L.L.P. in Washington, D.C., commencing at 9:00 a.m. local time on the
first business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby,
or such other date as ACG and the Shareholders may mutually determine (the
"Closing Date").
(o) Deliveries at the Closing. At the Closing, (i) the
Shareholders will deliver to ACG the various certificates, instruments, and
documents referred to in Section 7(a)
-15-
below, (ii) ACG will deliver to the Shareholders the various certificates,
instruments, and documents referred to in Section 7(b) below, (iii) each of the
Shareholders will each deliver to ACG stock certificates representing all of its
CFT Shares, endorsed in blank or accompanied by duly executed assignment
documents, (iv) ACG will deliver to the Shareholders the Consideration specified
in Section 2(h) above as may be adjusted after the Closing pursuant to Section
2(k) above, (v) the CFT Optionholders shall each deliver to ACG the Option
Cancellation and Exchange Agreements required by Section 7(a) below, if
applicable, and (vi) each party will deliver such other payments, documents and
instruments as are required to be delivered by it at Closing under the terms of
this Agreement.
(p) Intentionally Blank.
(q) Representative of Shareholders' (other than the ESOP) and
Representative of the ESOP.
(i) In order to administer efficiently (A) the
implementation of the Agreement by the Shareholders, (B) the waiver of
any condition to the obligations of the Shareholders to consummate the
transactions contemplated hereby, and (C) the settlement of any dispute
with respect to the Agreement, the Shareholders (other than the ESOP)
hereby designate ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as their representative (the
"Shareholder's Representative"). For the same purposes, the Trustee
shall be the representative of the ESOP (the "ESOP Representative").
(ii) The Shareholders (other than the ESOP) hereby
authorize the Shareholders' Representative and the Trustee hereby
confirms its authority as the ESOP Representative (A) to take all
action necessary in connection with the implementation of the Agreement
on behalf of the Shareholders, (B) to waive any condition to the
obligations of the Shareholders to consummate the transactions
contemplated hereby, (C) to settle any dispute involving the
Shareholders on behalf of the Shareholders, (D) to give and receive all
notices required to be given under the Agreement and (E) to take any
and all additional action as is contemplated to be taken by or on
behalf of the Shareholders by the terms of this Agreement.
(iii) In the event that the Shareholders' Representative
or the ESOP Representative dies, becomes legally incapacitated or
resigns from such position, W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall fill such vacancy
and shall be deemed to be the Shareholders' Representative and the
acting ESOP Representative (pending appointment of a successor Trustee)
for all purposes of the Agreement; provided, however, no change in the
Shareholders' Representative or the ESOP Representative shall be
effective until ACG is given notice of it by the Shareholders (other
than the ESOP) or by the ESOP, as the case may be.
(iv) All decisions and actions by the Shareholders'
Representative shall be binding upon all of the Shareholders (other
than the ESOP),
-16-
and no Shareholder shall have the right to object, dissent, protest or
otherwise contest the same, in the absence of fraud, gross negligence
or willful misconduct of the Shareholders' Representative. The ESOP
Representative shall have parallel authority with regard to the ESOP,
and no participant or beneficiary of the ESOP shall have the right to
object, dissent, protest or otherwise contest the same, in the absence
of fraud, gross negligence or willful misconduct of the ESOP
Representative (except to the extent that such right cannot be denied
under applicable federal law).
(v) By their execution of this Agreement, the
Shareholders (other than the ESOP) agree that: (A) ACG shall be able to
rely conclusively on the instructions and decisions of the
Shareholders' Representative as to any actions required or permitted to
be taken by the Shareholders or the Shareholders' Representative
hereunder, and no party hereunder shall have any cause of action
against ACG for action taken by ACG in reliance upon the instructions
or decisions of the Shareholders' Representative; (B) all actions,
decisions and instructions of the Shareholders' Representative shall be
conclusive and binding upon all of the Shareholders; no Shareholder
shall have any cause of action against ACG or CFT for any action taken
or omitted to be taken, decision made or omitted to be made or any
instruction given or omitted to be given by the Shareholders'
Representative; and no Shareholder shall have any cause of action
against the Shareholders' Representative for any action taken, decision
made or instruction given by the Shareholders' Representative under
this Agreement, except for fraud, gross negligence or willful breach of
this Agreement by the Shareholders' Representative; (C) the
Shareholders' Representative shall be deemed to fulfill any fiduciary
obligation to the Shareholders so long as no Shareholder is adversely
affected by any action or failure to act of the Shareholders'
Representative in a disproportionate measure compared to any other
Shareholder; (D) because remedies available at law for any breach of
the provisions of this Section 2(q) are inadequate, ACG shall be
entitled to temporary and permanent injunctive relief without the
necessity of proving damages if ACG brings an action to enforce the
provisions of this Section 2(q); (E) the provisions of this Section
2(q) are independent and severable, shall constitute an irrevocable
power of attorney, coupled with an interest and surviving death,
granted by the Shareholders to the Shareholders' Representative and
shall be binding upon the executors, heirs, legal representatives and
successors of each Shareholder; (F) all reasonable fees and expenses
incurred by the Shareholders' Representative shall be paid by the
Shareholders; and (G) the Shareholders (other than the ESOP) hereby
agree to indemnify the Shareholders' Representative from any loss,
liability or expenses incurred without the grossly negligent conduct or
bad faith on the part of the Shareholders' Representative and arising
out of or in connection with his duties as Shareholders'
Representative, including the costs, fees and expenses incurred by the
Shareholders' Representative against any such claim or liability in
connection herewith, and any such indemnity
-17-
amount may be offset against any funds received by the Shareholders'
Representative on behalf of the Shareholders (other than the ESOP).
(vi) Clauses (A) through (D), inclusive, of Section
2(q)(v) shall apply to the ESOP to that extent, and only to the extent,
that the ESOP Representative has consented (such consent not to be
unreasonably withheld) in writing to the action taken by the
Shareholders' Representative.
(r) Other PWC Determinations. Other than as set forth in
Section 2(m) hereof, any determination to be made by PWC in accordance with the
terms of this Agreement shall be made by PWC at the expense of ACG and shall be
submitted in writing to ACG, the Shareholders' Representative on behalf of the
Shareholders (other than the ESOP) and the ESOP Representative on behalf of the
ESOP. Unless the Shareholders' Representative on behalf of the Shareholders
(other than the ESOP) or the ESOP Representative on behalf of the ESOP objects
in writing to such determination within ten (10) business days of the receipt of
such determination, such determination shall be final, conclusive and binding on
the Parties. In the event that the Shareholders' Representative on behalf of the
Shareholders (other than the ESOP) or the ESOP Representative on behalf of the
ESOP disputes the determination of PWC within ten (10) business days after the
Shareholders' Representative's or the ESOP Representative's (as the case may be)
receipt thereof, the Parties shall jointly retain the Independent Accountants to
review the item(s) disputed by the Shareholders (other than the ESOP) and/or by
the ESOP. The final determination (the "Independent Determination") of such
disputed item(s) by the Independent Accountants shall be conclusive and binding
on the parties hereto with respect to such disputed items(s) and any adjustments
required to be made using the Independent Determination (rather than the
determination by PWC). The cost of retaining the Independent Accountants under
this Section 2(r) shall be borne by the party (i.e., the Shareholders'
Representative on behalf of the Shareholders or the ESOP Representative on
behalf of the ESOP) disputing the determination of PWC (or such cost shall be
shared by the Shareholders on a proportionate basis if both the Shareholders'
Representative on behalf of the Shareholders (other than the ESOP) and the ESOP
Representative on behalf of the ESOP dispute the determination of PWC) in the
event that the results of the Independent Determination differ by less than 15%
in favor of the Shareholders (other than the ESOP) or the ESOP (as the case may
be ) (or are e2.qual to or differ in any amount in favor of ACG) from the
results of the determination of PWC. Any binding determination under this
Section 2(r) shall be a joint and several obligation of the Shareholders (other
than the ESOP), on the one hand, and ACG and Newco, on the other hand.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of each Shareholder. Each
Shareholder (other than the ESOP) represents and warrants, severally, but not
jointly, to ACG that, subject to the specific qualifications and limitations set
forth below, the statements contained in this Section 3(a) are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing (as though made then and as though the Closing Date were substituted
-18-
for the date of this Agreement throughout this Section 3(a)) with respect to
itself, or himself, except as set forth on Annex I attached hereto:
(i) Authorization of Transaction. The Shareholder has
full power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and this Agreement has been duly
executed and delivered by the Shareholder. The Trustee has full power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and this Agreement has been duly executed and
delivered by the Trustee. This Agreement constitutes the valid and
legally binding obligation of the Shareholder, enforceable in
accordance with its terms and conditions, except that (A) such
enforceability may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws,
decisions or equitable principles now or hereafter in effect relating
to or affecting the enforcement of creditors' rights or debtors'
obligations generally, and to general equity principles, and (B) the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought (the terms of clause (A) and (B) are sometimes collectively
referred to as the "Equitable Exceptions"). The Shareholder need not
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
to consummate the transactions contemplated by this Agreement (other
than as provided for in Article 2 of this Agreement).
(ii) Noncontravention. Neither the execution and the
delivery of this Agreement by the Shareholder or the Trustee, nor the
consummation of the transactions contemplated hereby by the Shareholder
or the Trustee, will (A) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other
Material restriction of any government, governmental agency, or court
to which the Shareholder is subject (B) conflict with, result in a
Material breach of, constitute a Material default under, result in the
acceleration of, create in any part the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement
or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which the Shareholder is a party or
by which it is bound or to which any of its assets is subject, or (C)
violate or conflict with any provisions of CFT's articles of
incorporation and bylaws or equivalent constituent documents, or
violate or conflict with the provisions of the ESOP, the Code or ERISA.
(iii) Broker's Fees. Except as set forth in Annex I (the
payment of which is the sole responsibility of the Shareholders (other
than the ESOP)), no Shareholder has any Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which ACG could
become liable or obligated.
-19-
(iv) Investment. The Shareholder is not acquiring ACG's
Shares with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act.
(v) CFT Shares. Except as set forth in Section 3(a)(v) of
the Disclosure Schedule, the Shareholder holds of record and owns
beneficially the number of CFT Shares set forth next to its name in
Section 4(b) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), claims, Taxes, Security
Interests, options, warrants, rights, contracts, calls, commitments,
equities, and demands. The Shareholder is not a party to (or has
otherwise waived all rights under) any option, warrant, right,
contract, call, put, or other agreement or commitment providing for the
disposition or acquisition of any capital stock of CFT (other than this
Agreement). The Shareholder is not a party to (or has otherwise
terminated) any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of CFT,
other than as set forth in Annex I.
(vi) Disclosure. The representations and warranties
regarding the Shareholder contained in this Section 3(a) as amended,
modified and/or supplemented by Annex I do not contain any untrue
statement of a fact or omit to state any Material fact necessary in
order to make the statements and information contained in this Section
3(a) not misleading.
(b) Representations and Warranties of ACG and Newco. ACG and
Newco represent and warrant to the Shareholders that the statements contained in
this Section 3(b) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)), except as set forth in Annex II attached hereto.
(i) Organization of ACG and Newco. Each of ACG and Newco
is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation.
(ii) Authorization of Transaction. Each of ACG and Newco
has full power and authority (including full corporate power and
authority), and each has taken all corporate action necessary to
execute and deliver this Agreement and to perform its obligations
hereunder, and this Agreement has been duly executed and delivered by
ACG and Newco. This Agreement constitutes the valid and legally binding
obligation of ACG and Newco, enforceable in accordance with its terms
and conditions except for the Equitable Exceptions. Neither ACG nor
Newco needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement (other than (i) filing the certificates of Merger with the
Secretary of State of the State of Florida,
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(ii) any necessary filings pursuant to federal and state securities and
antitrust laws and (iii) as provided for in Article 2 of this
Agreement).
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement by ACG or Newco, nor the consummation of the
transactions contemplated hereby by ACG or Newco, will (A) violate any
statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other Material restriction of any government,
governmental agency, or court to which each of ACG or Newco is subject
or any provision of its respective articles of incorporation or bylaws,
(B) conflict with, result in a Material breach of, constitute a
Material default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require
any notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest, or other arrangement to
which ACG or Newco is a party or by which it is bound or to which any
of its assets is subject and which has a Material adverse effect on
ACG, or (C) violate or conflict with any provisions of ACG's articles
of incorporation and bylaws or equivalent constitutive documents.
(iv) Brokers' Fees. Neither Newco nor ACG has any
Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement for which the Shareholders could become liable or obligated.
(v) Investment. Neither Newco nor ACG is acquiring CFT
Shares with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act.
(c) Statement of Northern Trust Regarding Fiduciary Capacity.
Any other provision of the Agreement to contrary notwithstanding, Northern Trust
Bank of Florida N.A. ("Northern Trust") signs the Agreement solely in its
fiduciary capacity as trustee of Trust No. 1 and Trust No 2 and not in its
individual corporate capacity and its liability under the Agreement is limited
to the trust assets in its possession at the time it receives actual notice of
any claim under the Agreement. Northern Trust owns shares of CFT only in its
fiduciary capacity as trustee for the benefit of others and has no control over
or authority regarding the operations of CFT or its employees, facilities, books
or records.
4. Representations and Warranties Concerning CFT. The
Principals jointly and severally represent and warrant to ACG that, subject to
the specific qualifications and limitations set forth herein, the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4), except as set forth in the Disclosure
Schedule delivered by the Shareholders to ACG on the date hereof and initialed
by the Parties (the "Disclosure Schedule"). The Disclosure Schedule
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may be updated one or more times prior to the Closing Date. Any updated
Disclosure Schedule shall be delivered at or before the Closing. In the event
any such updated Disclosure Schedule indicates a material change from
information previously provided to ACG, ACG shall be entitled to terminate this
Agreement (without any liability whatsoever to CFT or Shareholders) by written
notice delivered to CFT following receipt of such updated Disclosure Schedule.
An event or matter that causes any representation or warranty contained in this
Section to be inaccurate, incorrect or false will not be deemed to be
"Material," to have a "Material" change in or in respect of, to have a
"Material" adverse effect or to be "Materially" affected unless the loss that
may reasonably be expected to occur to CFT with respect to such event or matter,
when taken together with all other related losses that may reasonably be
expected to occur to CFT as a result of any such events or matters, would exceed
$20,000 in the aggregate or unless such event or matter constitutes a criminal
violation of law. For purposes of this paragraph, the word "loss" shall mean any
and all direct or indirect payments, obligations, assessments, losses, losses of
income, liabilities, costs and expenses paid or incurred, or reasonably likely
to be paid or incurred, or diminutions in value or reduction in benefits or
rights of any kind or character (whether or not known or asserted before the
date of this Agreement, fixed or unfixed, conditional or unconditional, ▇▇▇▇▇▇
or inchoate, liquidated or unliquidated, secured or unsecured, accrued,
absolute, contingent or otherwise) that are reasonably likely to occur,
including without limitation, penalties, interest on any amount payable to a
third party as a result of the foregoing, and any reasonable legal or other
expenses reasonably expected to be incurred in connection with defending any
demands, claims, actions or causes of action that, if adversely determined,
could reasonably be expected to result in losses, and all amounts paid in
settlement of claims or actions; provided, however, that losses shall be net of
any insurance proceeds entitled to be received from a nonaffiliated insurance
company on account of such loss (after taking into account any cost incurred in
obtaining such proceeds or any increases in insurance premiums as a direct
result thereof). A Customer Contract or Agreement is "Material" if during either
calendar year 1998 or 1999 such Customer Contract or Agreement produced or is
expected to produce $50,000 of Net Service Revenues. Nothing in the Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein, however, unless the Disclosure Schedule identifies the
exception in a manner sufficient to give reasonable notice of the facts or
circumstances which cause the disclosure in the Disclosure Schedule to
constitute an exception to a representation or warranty. The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 4.
(a) Organization, Qualification, and Corporate Power. CFT is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Except as disclosed in Section
4(a) of the Disclosure Schedule, CFT is duly authorized to conduct business and
is in good standing under the laws of each jurisdiction in which the nature of
its businesses or the ownership or leasing of its properties requires such
qualification, unless the failure to so qualify would not have a Material
adverse effect on CFT or its business. CFT has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. Section 4(a) of the Disclosure Schedule
lists the directors and officers of CFT. The Principals have delivered to ACG
correct and complete copies of the articles of incorporation and bylaws of CFT
(as amended to date). The minute books
-22-
containing the records of meetings and/or resolutions of the stockholders, the
board of directors, and any committees of the board of directors, the stock
certificate books and the stock record books of CFT are correct and complete in
all Material respects. CFT is not in default under or in violation of any
provision of its articles of incorporation or bylaws.
(b) Capitalization. The entire authorized capital stock of CFT
consists of (i) 30,000,000 shares of CFT Class A Common, 13,289,893.2 of which
are issued and outstanding, none of which are subject to issuance pursuant to
vested options which will be canceled at Closing, none of which are subject to
issuance pursuant to unvested options which will be canceled at Closing and none
of which are reserved for issuance pursuant to future option grants, (ii)
10,000,000 shares of CFT Class B Common, 446,000 of which are issued and
outstanding, 51,181.2 of which are subject to issuance pursuant to vested
options which will be canceled at Closing, 1,416,676.8 of which are subject to
issuance pursuant to unvested options which will be canceled at Closing and none
of which are reserved for issuance pursuant to future option grants, (iii)
10,000,000 shares of CFT Preferred Stock, none of which are issued and
outstanding and none of which are subject to issuance pursuant to vested or
unvested options and none of which are reserved for issuance pursuant to future
option grants. No CFT Shares are held in treasury. All of the issued and
outstanding CFT Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the Shareholders. Except as
set forth on Section 4(b) of the Disclosure Schedule, (i) there are no
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights, or other agreements or commitments to
which CFT is a party or which are binding upon CFT providing for the issuance,
disposition, or acquisition of any of its capital stock; (ii) there are no
outstanding or authorized stock appreciation, phantom stock, or similar rights
with respect to CFT; and (iii) there are no voting trusts, proxies, or any other
agreements or understandings with respect to the voting of the capital stock of
CFT.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which CFT is subject or any provision of the
articles of incorporation or bylaws of CFT, (ii) conflict with, result in a
Material breach of, constitute a Material default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other arrangement to
which CFT is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets), or (iii) violate or conflict with any provisions of the CFT's articles
of incorporation and bylaws, or equivalent constitutive documents, of CFT or
violate or conflict with the provisions of the ESOP, the Code or ERISA. CFT has
procured all third party consents and given all notices required in connection
with this Agreement and the transactions contemplated hereby, including without
limitation all action necessary in connection with and/or the receipt of any
notices to, filings with, and authorizations, consents, and approvals of
governments, governmental agencies, and third parties, as set forth herein or in
the Disclosure Schedule, including without limitation any filing required under
the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Act.
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(d) Subsidiaries. CFT has no Subsidiaries.
(e) Financial Statements; Net Worth. Attached hereto as
Exhibit C are the following financial statements (collectively, the "Financial
Statements"): audited balance sheet and statement of income, changes in
stockholder's equity, and cash flow as of and for the fiscal year ended December
31, 1998 (the "Most Recent Fiscal Year End"), and unaudited balance sheet and
statement of income, and changes in stockholder's equity as of and for the
fiscal years ended 1996, 1997 and 1998 and unaudited balance sheet and statement
of income, as of and for the five (5) month period ended May 31, 1999 (the "Stub
Period End"), for CFT. The Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered thereby,
are correct and complete, fairly present the financial condition of CFT as of
such dates, and are consistent with the books and records of CFT (which books
and records are correct and complete), subject, in the case of the Stub Period
Financial Statements, to normal adjustments upon audit.
(f) Events Subsequent to December 31, 1998. Since December 31,
1998, except as set forth on Section 4(f) Disclosure Schedule, there has not
been any Material adverse change in the assets, Liabilities, business, financial
condition, operations, results of operations, or future prospects of CFT.
Without limiting the generality of the foregoing since that date except as set
forth on the Disclosure Schedule:
(i) CFT has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) CFT has not entered into any contract, lease,
sublease, license or sublicense (or series or related contracts,
leases, subleases, licenses and sublicenses) either involving more than
$35,000 or outside the Ordinary Course of Business;
(iii) CFT has not accelerated, terminated, modified, or
canceled any contract, lease, sublease, license or sublicense (or
series of related contracts, leases, subleases, licenses and
sublicenses) involving more than $25,000 to which CFT is a party or by
which it is bound;
(iv) no party has notified CFT of any acceleration,
termination, modification or cancellation of any outstanding Customer
Contract or Agreement or any contract, agreement, lease, sublease,
license or sublicense (or series of related contracts, leases,
subleases, licenses and sublicenses), other than any employment
agreements entered into in the Ordinary Course of Business, involving
more than $25,000 to which CFT is a party or by which it is bound;
(v) CFT has not imposed any Security Interest upon any of
its assets, tangible or intangible;
-24-
(vi) CFT has not made any capital expenditure (or series
of related capital expenditures) either involving more than $10,000
individually or $30,000 in the aggregate, or outside the Ordinary
Course of Business;
(vii) CFT has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of any other
person (or series of related capital investments, loans, and
acquisitions) involving more than $50,000 in the aggregate;
(viii) CFT has not created, incurred, assumed, or
guaranteed any indebtedness (including capitalized lease obligations)
involving more than $10,000 individually or in the aggregate or outside
the Ordinary Course of Business;
(ix) CFT has not delayed or postponed (beyond its normal
practice) the payment of any accounts payable and other Liabilities or
made any changes in any accounting methods or procedures not required
by GAAP;
(x) CFT has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $25,000 or outside the Ordinary Course of
Business;
(xi) CFT has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xii) there has been no change made or authorized in the
articles of incorporation or bylaws of CFT;
(xiii) CFT has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion or exercise)
any of its capital stock;
(xiv) CFT has not declared, set aside, or paid any
dividend or distribution with respect to its capital stock nor
redeemed, purchased, or otherwise acquired any of its capital stock;
(xv) CFT has not made any consulting or other payment to
any Shareholder;
(xvi) CFT has not experienced any damage, destruction or
loss involving more than $25,000 (whether or not covered by insurance)
to its property;
(xvii) CFT has not made any loan to, or entered into any
other transaction with, any of its officers, directors or employees
(who are not Shareholders) outside the Ordinary Course of Business
giving rise to any claim or right on its part against the person or on
the part of the person against it;
-25-
(xviii) CFT has not made any loan to, or entered into any
other transaction with, any of the Shareholders giving rise to any
claim or right on its part against the person or on the part of such
person against it;
(xix) CFT has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified in any
material respect the terms of any existing such contract or agreement
with any of its full-time staff employees;
(xx) CFT has not granted an increase outside the Ordinary
Course of Business in the base compensation of any of its directors,
officers, and employees (other than the Shareholders);
(xxi) CFT has not granted an increase in the base
compensation of any of the Shareholders, nor has CFT made any payments
or promises or commitments to make any other payments (other than
salary and reimbursement of customary expenses) to any of the
Shareholders, including without limitation bonuses.
(xxii) CFT has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E)
retirement, (F) medical, hospitalization, life, or other insurance, (G)
severance, or (H) other plan, contract or commitment for any of its
directors, officers, and employees, or modified or terminated any
existing such plan, contract or commitment;
(xxiii) CFT has not made any other change in employment
terms for any of its directors, officers, and full-time staff
employees;
(xxiv) CFT has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
(xxv) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving CFT; and
(xxvi) CFT has not entered into any legally binding
agreement to commit to any of the foregoing.
(g) Undisclosed Liabilities. CFT does not have any Liability
(and there is no Basis for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand against CFT giving
rise to any Liability, including, without limitation, Liability under the Fair
Labor Standards Act of 1938, as amended and the rules and regulations
promulgated thereunder) which is individually or in the aggregate in excess of
$5,000, except for (i) Liabilities set forth on the face of the Stub Period End
Balance Sheet (rather than in any notes thereto), and (ii) Liabilities which
have arisen after the Stub Period End in the Ordinary
-26-
Course of Business (none of which relates to any breach of contract, breach of
warranty, tort, infringement, or violation of law or arose out of any charge,
complaint, action, suit, proceedings, hearing, investigation, claim, or demand).
(h) Tax Matters. Except as set forth in Section 4(h) of the
Disclosure Schedule:
(i) CFT has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects.
All Taxes owed by CFT (whether or not shown on any Tax Return) based on
operations through the Stub Period End have been paid or accrued on the
Stub Period End Balance Sheet. CFT currently is not the beneficiary of
any extension of time within which to file any Tax Return. No claim has
ever been made by any authority in a jurisdiction where CFT does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of
CFT that arose in connection with any failure (or alleged failure) to
pay any Tax.
(ii) CFT has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party and
CFT has properly reflected the status of all employees and independent
contractors in connection therewith as required by applicable Tax law
and the Fair Labor Standards Act of 1938, as amended, and the rules and
regulations promulgated thereunder.
(iii) None of the Principals nor CFT has received, nor do
any of them have Knowledge of, any notice that any authority intends to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax Liability
of CFT either (A) claimed or raised by any authority in writing or (B)
as to which any of the Principals have Knowledge based upon personal
contact with any agent of such authority. Section 4(h) of the
Disclosure Schedule lists all federal, state, local, and foreign income
Tax Returns filed with respect to CFT for taxable periods ended on or
after December 31, 1990, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject
of audit. The Principals have delivered to ACG correct and complete
copies of all federal income Tax Returns filed, examination reports
received, and statements of deficiencies assessed against or agreed to,
by CFT since December 31, 1991.
(iv) CFT has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) CFT has not filed a consent under Code Section 341(f)
concerning collapsible corporations. CFT has not made any payments, is
not
-27-
obligated to make any payments, nor is a party to any agreement that
under certain circumstances could obligate it to make any payments that
will not be deductible to CFT under Code Section 280G. CFT has not been
a United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). CFT has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Code Section 6662. CFT is not a party to any Tax allocation or sharing
agreement. CFT has never been (nor has any Liability for unpaid Taxes
because it once was) a member of an Affiliated Group filing a
consolidated federal income Tax Return and has never incurred any
Liability for the Taxes of any Person under Treasury
Regulationss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise,
during any part of any consolidated return year within any part of
which consolidated return year also was a member of the Affiliated
Group. CFT has not had at any time during its existence any
subsidiaries (including any "qualified subchapter S subsidiaries")
within the meaning of Section 1361(b)(3)(13) of the Code or a merger.
CFT would not be liable for any Tax under Section 1374 of the Code in
connection with a deemed sale of CFT's assets caused by an election
under Section 338(h)(10) of Code. CFT has not, in the past ten (10)
years, (i) acquired assets from another corporation in a transaction in
which CFT's Tax basis for the acquired assets was determined in whole
or in part by reference to the Tax basis of the acquired assets (or any
other property) in the hands of the transferor or (ii) acquired the
stock of any other corporation that is a qualified subchapter S
subsidiary.
(vi) Section 4(h) of the Disclosure Schedule sets forth
the following information with respect to CFT as of the most recent
practicable date (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the transactions
contemplated hereby): (A) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax, or
excess charitable contribution allocable to CFT; and (B) the amount of
any deferred gain or loss allocable to CFT arising out of any Deferred
Intercompany Transaction.
(vii) The unpaid Taxes of CFT through the Stub Period End
do not exceed the reserve for Tax Liability set forth on the face of
the Stub Period Balance Sheet.
(viii) The Company (and any predecessor of the Company)
was been a validly electing S corporation within the meaning of
Sections 1361 and 1362 of the Code from its inception until December
31, 1995. With respect to all states which for state Tax purposes allow
a corporation to be treated as an S corporation or similar entity
entitled to special Tax treatment, all elections for
-28-
such treatment were properly and validly made and the Company has
maintained compliance at all times with all applicable qualifications
and filing procedures for such treatment.
(ix) CFT will not be required to include any amount in
taxable income or exclude any item of deduction or loss from taxable
income for any taxable period (or portion thereof) ending after the
Closing Date (i) as a result of a change in method of accounting for a
taxable period ending on or prior to the Closing Date, (ii) as a result
of any "closing agreement," as described in Section 7121 of the Code
(or any corresponding provision of state, local or foreign income Tax
law) entered into on or prior to the Closing Date, (iii) as a result of
any sale reported on the installment method where such sale occurred on
or prior to the Closing Date, and (iv) as a result of any prepaid
amount received on or prior to the Closing Date.
(x) No transaction contemplated by this Agreement is
subject to withholding under Section 1445 of the Code and no stock
transfer taxes, real estate transfer taxes or similar taxes will be
imposed upon the exchange of the CFT Shares pursuant to this Agreement.
(i) Tangible Assets. CFT owns or leases all tangible assets
necessary for the conduct of its businesses as presently conducted and as
presently proposed to be conducted based on affirmative action or steps taken by
CFT prior to Closing. Each such tangible asset is free from Material defects
(patent and latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
(j) Owned Real Property. CFT does not own nor does it have any
interest in any real property or improvements thereon (other than the leases
disclosed in Section 4(j) of the Disclosure Schedule, and the leasehold
improvements relating to the same) nor does CFT have any options, agreements or
contracts under which it has the right or obligation to acquire any interest in
any real property or improvements (other than as disclosed in Section 4(j) of
the Disclosure Schedule)
(k) Intellectual Property.
(i) Attached hereto as Section 4(k) of the Disclosure
Schedule is a list and brief description of all Intellectual Property
owned, utilized or licensed by CFT. CFT has furnished ACG with copies
of all written license agreements to which CFT is a party, either as
licensor or licensee, with respect to any Intellectual Property. CFT
has good title to or the right to use all the Intellectual Property and
all inventions, processes, designs, formulae, trade secrets and
know-how necessary for the conduct of CFT's business as presently
conducted or currently proposed to be conducted without the payment of
any royalty or similar payment, and CFT is not
-29-
infringing on any Intellectual Property right of others, and none of
the Principals has Knowledge of any infringement by others of any such
rights owned by CFT.
(ii) All licenses referred to on Section 4(k) of the
Disclosure Schedule are valid and binding obligations of CFT and, to
the Knowledge of the Principals, the other parties thereto, and are
enforceable against CFT and, to the Knowledge of the Principals, the
other parties thereto in accordance with their respective terms, except
for the Equitable Exceptions. CFT owns and possesses all right, title
and interest in and to, or has the right to use pursuant to a valid
license, all Intellectual Property necessary for the operation of the
business of CFT as presently conducted.
(iii) Except as set forth on Section 4(k)(iii) of the
Disclosure Schedule, all personnel, including employees, agents,
consultants, and contractors, who have contributed to or participated
in the conception and development of any Intellectual Property have
executed the nondisclosure agreements set forth in Section 4(k) of the
Disclosure Schedule.
(iv) The Principals have also delivered to ACG correct
and complete samples or copies of all trademarks, service marks, trade
names, copyrights, patents, registrations and, as related to the
foregoing, applications, licenses, agreements, and permissions (as
amended to date) held by CFT, and have made available to ACG correct
and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. With
respect to each item of Intellectual Property necessary for the conduct
of the business of CFT as heretofore conducted, each as set forth on
Section 4(k) of the Disclosure Schedule: (A) the identified owner
possesses all right, title, and interest in and to the item; (B) the
item is not subject to any outstanding judgment, order, decree,
stipulation, injunction, or charge; (C) no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand is pending
or, to the Knowledge of any of the Principals, is threatened which
challenges the legality, validity, enforceability, use, or ownership of
the item; and (D) except pursuant to standard (i.e., boilerplate),
non-negotiated indemnity provisions set forth in standard commercial
customer contracts to which it is party, CFT has never agreed to
indemnify any person or entity for or against any interference,
infringement, misappropriation, or other conflict with respect to the
item. All Intellectual Property created or developed by any Shareholder
and any other current employee of CFT that has been used historically
by CFT or is being used currently by CFT shall be one hundred percent
(100%) owned by CFT as of the Closing Date.
(v) Except as set forth on Section 4(k) of the Disclosure
Schedule, all of the computer software, computer firmware, computer
hardware (whether general or special purpose), and other similar or
related items of automated,
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computerized, and/or software system(s) owned by CFT or, to CFT's
Knowledge, licensed by CFT, that are used or relied on by CFT in the
conduct of its business will not in any Material respect malfunction,
cease to function, generate incorrect data, and produce incorrect
results when processing, providing, and/or receiving (i) date-related
data into and between the twentieth and twenty-first centuries and (ii)
date-related data in connection with any valid date in the twentieth
and twenty-first centuries.
(l) Real Property Leases. Section 4(l) of the Disclosure
Schedule lists and describes briefly all real property leased or subleased to
CFT. The Principals have delivered to ACG correct and complete copies of the
leases and subleases listed in Section 4(l) of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in Section 4(l)
of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect, subject to the Equitable
Exceptions;
(ii) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical
terms immediately following the Closing;
(iii) CFT is not and, to the Knowledge of the Principals,
no other party to the lease or sublease is in breach or default, and no
event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) CFT has not and, to the Knowledge of the Principals,
no other party to the lease or sublease has repudiated any provision
thereof;
(v) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(vi) CFT has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold
or subleasehold; and
(vii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses
and permits) required in connection with the operation thereof and have
been operated and maintained in all Material respects in accordance
with applicable laws, rules, and regulations.
(m) Contracts. Section 4(m) of the Disclosure Schedule lists
the following contracts, agreements, Customer Contracts or Agreements and other
written arrangements to which CFT is a party:
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(i) any written agreement or arrangement (or group of
related written agreements or arrangements) for the lease of personal
property from or to third parties providing for lease payments in
excess of $35,000 per annum;
(ii) any written agreement or arrangement (or group of
related written agreements or arrangements) for the furnishing or
receipt of services which either calls for performance over a period of
more than one year or involves more than the sum of $25,000 per annum
or $75,000 over the life of such agreement;
(iii) any written agreement or arrangement concerning a
partnership or joint venture;
(iv) any written agreement or arrangement (or group of
related written agreements or arrangements) under which it has created,
incurred, assumed, or guaranteed (or may create, incur, assume, or
guarantee) indebtedness (including capitalized lease obligations)
involving more than $35,000 or under which it has imposed (or may
impose) a Security Interest on any of its assets, tangible or
intangible;
(v) any written agreement or arrangement requiring
confidentiality or noncompetition other than agreements with customers,
employees or subcontractors in the Ordinary Course of Business;
(vi) any written agreement or arrangement with any of its
directors, officers, or employees, or any of its Affiliates;
(vii) any written agreement or arrangement under which
the consequences of a default or termination could have an adverse
effect on the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of CFT;
(viii) any written Customer Contract or Agreement; and
(ix) any other written arrangement (or group of related
written arrangements) either involving more than $25,000 per annum or
not entered into in the Ordinary Course of Business.
CFT has delivered to ACG a correct and complete copy of each
written agreement or arrangement listed in Section 4(m) of the Disclosure
Schedule (as amended to date). With respect to each written arrangement so
listed: (A) the written arrangement is legal, valid, binding, enforceable, and
in full force and effect, subject to the Equitable Exceptions; (B) the written
arrangement will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms immediately following the Closing; (C) CFT
is not nor, to the Knowledge of the Principals, is any other party in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
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acceleration, under the written arrangement; and (D) CFT is not nor, to the
Knowledge of the Principals, has any other party, repudiated any provision of
the written arrangement. CFT is not a party to any oral contract, agreement, or
other arrangement which, if reduced to written form, would be required to be
listed in Section 4(m) of the Disclosure Schedule under the terms of this
Section 4(m). No uncompleted Customer Contract or Agreement obligating CFT to
perform services will result in a Material loss to CFT upon completion of
performance. CFT has not been notified that any of its customers intends either
to dispute charges under or to terminate early a Customer Contract or Agreement.
(n) Notes and Accounts Receivable; Funded Indebtedness; Liens.
Except as set forth on Section 4(n) of the Disclosure Schedules, all notes and
accounts receivable of CFT are reflected properly on its books and records, are
valid receivables subject to no setoffs or counterclaims, are presently current
and collectible, and will be collected in accordance with their terms at their
recorded amounts, subject to CFT's reserves for bad debt as set forth on the
Stub Period Balance Sheet. Except as set forth on Section 4(n) of the Disclosure
Schedule in amounts described therein, there shall be no Funded Indebtedness.
(o) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of CFT, except such powers of attorney that might
exist in connection with amendments to be made to the ESOP undertaken by the
ESOP and/or its authorized representatives to be filed with the Internal Revenue
Service.
(p) Insurance. Section 4(p) of the Disclosure Schedule sets
forth the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which CFT has been a party, a
named insured, or otherwise the beneficiary of coverage at any time within the
past three (3) years:
(i) the name address and telephone number of the agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(v) a description of any retroactive premium adjustments
or other loss sharing arrangements.
With respect to each such insurance policy: (A) the policy is
legal, valid, binding, and enforceable and in full force and effe0ct; (B) the
policy will continue to be legal, valid, binding,
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and enforceable and in full force and effect on identical terms immediately
following the Closing Date; (C) CFT is not in Material breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a Material breach or default or permit termination,
modification, or acceleration, under the policy; and (D) CFT has not, and to the
Knowledge of the Principals, no party to the policy has repudiated any provision
thereof. CFT has been covered during the past three (3) years by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. Except as set forth on Section 4(p) of
the Disclosure Schedule, CFT currently has no and has never had any
self-insurance arrangements.
(q) Litigation. Section 4(q) of the Disclosure Schedule sets
forth each instance in which CFT (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge or (ii) is a party or, to the
Knowledge of the Principals, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. No action, suit, or proceeding
is pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, or (C) result in any Material adverse
effect on CFT. Except as specifically described on Section 4(q) of the
Disclosure Schedule, no matter listed thereon could reasonably be expected,
individually, to result in a Material adverse effect to CFT. None of the
Principals has any Knowledge that any such charge, complaint, action, suit,
proceeding, hearing, or investigation may be brought or threatened against CFT.
(r) Employees. To the Principals Knowledge, no employee or any
group of employees has any plans to terminate employment with CFT. CFT is not a
party to or bound by any collective bargaining agreement, nor has it experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. CFT has not committed any unfair labor practices. There are
no organizational efforts presently being made or, to the Knowledge of the
Principals, threatened by or on behalf of any labor union with respect to
employees of CFT.
(s) Employee Benefits. Section 4(s) of the Disclosure Schedule
lists all Employee Benefit Plans that CFT maintains or to which CFT contributes
for the benefit of any current or former employee of CFT or under which CFT has
any Liability (the "CFT Employee Benefit Plans") and identifies each such Plan
that is an Employee Pension Benefit Plan (a "CFT Employee Pension Benefit Plan")
or an Employee Welfare Benefit Plan (a "CFT Employee Welfare Benefit Plan").
(i) Each CFT Employee Benefit Plan (and each related
trust or insurance contract) complies in form and in operation in all
Material respects with the applicable requirements of ERISA and the
Code.
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(ii) All required reports and descriptions, if any,
(including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's
and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each CFT Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title I of ERISA and of Code
Section 4980B ("COBRA") have been met with respect to each CFT Employee
Welfare Benefit Plan.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions) which are
due have been paid to each CFT Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date which
are not yet due have been paid to each CFT Employee Pension Benefit
Plan or accrued in accordance with the past custom and practice of CFT.
All premiums or other payments which are due for all periods ending on
or before the Closing Date have been paid with respect to each CFT
Employee Welfare Benefit Plan.
(iv) Each CFT Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan" under
Code Section 401(a) and has received a currently valid and favorable
determination letter from the Internal Revenue Service, and nothing has
occurred since the receipt of such letter that would affect the tax
qualified status of each such Employee Pension Benefit Plan. The
foregoing to the contrary notwithstanding, one or more CFT Pension
Benefit Plans may require amendment prior to the expiration of the
documentary compliance amendment period established by the Internal
Revenue Service (and presently scheduled to expire at the end of the
first plan year beginning after December 31, 1999); such amendments to
reflect legislative and regulatory changes occurring or effective after
the most recent iteration or amendment of the subject plan. Some of the
required amendments will be retroactive in effect, but no retroactive
amendment will be required to be materially inconsistent with the
manner in which the subject plan has been operated between the
effective date of the change in law or regulation giving rise to the
need to make such amendment and the date of this Agreement.
(v) The market value of assets under each CFT Employee
Pension Benefit Plan (other than any Multiemployer Plan) equals or
exceeds the present value of Liabilities thereunder (determined on an
accumulated benefit obligation basis) as of the last day of the most
recent plan year. No CFT Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially terminated or been
the subject of a Reportable Event as to which notices would be required
to be filed with the PBGC. No proceeding by the PBGC to terminate any
CFT Employee Pension Benefit Plan (other than any Multiemployer Plan)
has been instituted or, to the Knowledge of the Principals, threatened.
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(vi) There have been no Prohibited Transactions with
respect to any CFT Employee Benefit Plan. No Fiduciary has any
Liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of the
assets of any CFT Employee Benefit Plans. No charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand with respect
to the administration or the investment of the assets of any CFT
Employee Benefit Plan (other than routine claims for benefits) is
pending or, to the Knowledge of the Principals, threatened. None of the
Principals has any Basis for any such charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand.
(vii) The Principals have delivered to ACG correct and
complete copies of (A) the plan documents and summary plan
descriptions, (B) the most recent determination letter received from
the Internal Revenue Service, (C) the most recent Form 5500 Annual
Report, and (D) all related trust agreements, insurance contracts, and
other funding agreements which implement each CFT Employee Benefit Plan
of CFT.
(viii) Any loan incurred by the ESOP ("ESOP Loan") to
acquire "qualifying employer securities", as that term is defined for
purposes of Section 4975 of the Code, has been paid and any obligations
under the ESOP Loan fully discharged, and there are no outstanding ESOP
Loans. Except as set forth on Section 4(s) of the Disclosure Schedule,
there is no agreement or promise, written or oral, of CFT to effect
that any CFT Employee Benefit Plan may not be terminated at CFT's
discretion at any time, subject to applicable law. All CFT Employee
Benefit Plans could be terminated as of the Closing without Material
liability in excess of the amount accrued therefore on the CFT balance
sheet used to determine the Net Worth of CFT at Closing. The balance
sheet of CFT used to determine the Net Worth of CFT reflects all
accrued vacation and other benefits, including any share repurchase
obligations, related to the ESOP accumulated as of May 31, 1999, for
CFT's employees as of the date hereof.
CFT does not contribute to, has never contributed to, nor ever
has been required to contribute to any Multiemployer Plan, and CFT has no
Liability (including withdrawal Liability) under any Multiemployer Plan. CFT has
not incurred, and none of the Principals has Knowledge that CFT will incur, any
Liability to the PBGC (other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal Liability) or under the Code with
respect to any Employee Pension Benefit Plan that CFT and the Controlled Group
of Corporations, which includes CFT, maintains or ever has maintained or to
which any of them contributes, ever has contributed, or ever has been required
to contribute or has or ever has had any Liability. CFT does not maintain, nor
has it ever maintained or contributed to or ever been required to contribute to,
any Employee Welfare Benefit Plan providing health, accident, or life insurance
benefits to former employees, their spouses, or their dependents (other than in
accordance with COBRA).
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(t) Guaranties. Except as set forth on Section 4(t) of the
Disclosure Schedule, CFT is not a guarantor nor is it otherwise liable for any
Liability or obligation (including indebtedness) of any other person.
(u) Environment, Health, and Safety.
(i) CFT and its respective predecessors and Affiliates
have complied with all laws (including rules and regulations
thereunder) of federal, state, local, and foreign governments (and all
agencies thereof properly applicable to it) concerning the environment,
public health and safety, and employee health and safety, and no
charge, complaint, action, suit, proceeding, hearing, investigation,
claim, demand, or notice has been filed or commenced against any of
them alleging any failure to comply with any such law or regulation.
(ii) CFT has no Material Liability (and there is no Basis
for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against CFT giving rise to any
Material Liability) under the Occupational Safety and Health Act, as
amended, or any other law (or rule or regulation thereunder) of any
federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety.
(iii) CFT does not have any Material Liability (and CFT
has not exposed any employee to any substance or condition that could
form the Basis for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand (under the
common law or pursuant to statute) against CFT giving rise to any
Liability) for any illness of or personal injury to any employee.
(iv) CFT has obtained and been in compliance with all of
the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all federal, state, local, and foreign laws (including
rules, regulations, codes, plans, judgments, orders, decrees,
stipulations, injunctions, and charges thereunder) relating to public
health and safety, worker health and safety, and pollution or
protection of the environment, including laws relating to emissions,
discharge, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes.
(v) Legal Compliance. Except as it would not,
individually or in the aggregate, have a Material adverse effect:
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(i) CFT has complied with all laws (including rules and
regulations thereunder) of federal, state, local, and foreign
governments (and all agencies thereof properly applicable to it) ,
including, without limitation, the Fair Labor Standards Act of 1938, as
amended, and the rules and regulations promulgated thereunder. No
charge, complaint, action, suit, proceeding, hearing, investigation,
claim, demand, or notice has been filed or commenced against CFT which
is currently pending and alleges any failure to comply with any such
law or regulation.
(ii) CFT has complied with all applicable laws (including
rules and regulations thereunder) relating to the employment of labor
(including but not limited to the engagement of independent contractors
under the Fair Labor Standards Act of 1938, as amended, and the rules
and regulations promulgated thereunder), employee civil rights, the
hiring and engaging of non-United States citizens, and equal employment
opportunities.
(iii) CFT has not violated in any respect or received a
notice or charge asserting any violation of the ▇▇▇▇▇▇▇ Act, the
▇▇▇▇▇▇▇ Act, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Act, or the Federal Trade Act, each as
amended.
(iv) CFT has not:
(A) made or agreed to make any contribution,
payment, or gift of funds or property to any governmental
official, employee, or agent where either the contribution,
payment, or gift or the purpose thereof was illegal under the
laws of any federal, state, local, or foreign jurisdiction;
(B) established or maintained any unrecorded fund or
asset for any purpose, or made any false entries on any books
or records for any reason; or
(C) made or agreed to make any contribution, or
reimbursed any political gift or contribution made by any
other person, to any candidate for federal, state, local, or
foreign public office in excess of $500.
(v) CFT has filed all reports, documents, and other
materials it was required to file (and the information contained
therein was correct and complete in all Material respects) under all
applicable laws (including rules and regulations thereunder).
(vi) CFT has possession of all records and documents it
was required to retain under all applicable laws (including rules and
regulations thereunder).
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(w) Certain Business Relationships with CFT. Except as set
forth in Section 4(w) of the Disclosure Schedule, none of the Shareholders nor
any of their respective Affiliates has been involved in any business arrangement
or relationship with CFT within the past twelve (12) months other than customary
employment relationships in the Ordinary Course of Business, and none of the
Shareholders nor any of their Affiliates owns any Material property or right,
tangible or intangible, which is used in CFT's Business.
(x) Brokers' Fees. CFT does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or similar
representative with respect to the transactions contemplated by this Agreement.
(y) Personal Use Assets; Debts and Obligations Owed to CFT The
Shareholders have purchased any personal use assets (excluding automobiles) from
CFT at a purchase price equal to the greater of (A) the net book value of such
assets as of the Closing Date or (B) the outstanding indebtedness (including,
without limitation all Funded Indebtedness) secured by such assets; provided,
however, personal use assets under this paragraph shall not include cellular
telephones and pagers purchased by CFT for use by its officers and employees.
The Shareholders and all of CFT's officers, directors and/or other senior
employees have repaid in full all debts and other obligations, if any, owed to
CFT.
(z) Disclosure. The representations and warranties contained
in this Section 4 as amended, modified and/or supplemented by the Disclosure
Schedule do not contain any untrue statement of a fact or omit to state any
Material fact necessary in order to make the statements and information
contained in this Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing or
the earlier termination of this Agreement.
(a) General. Each of the Parties including the ESOP, but only
to the extent that the Trustee deems it in the best interests of the
participants and beneficiaries of the ESOP, will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 7 below).
(b) Notices and Consents. The Principals will cause CFT and
the ESOP to give any notices to third parties, and will cause CFT to use its
reasonable best efforts to obtain third-party consents, that ACG may reasonably
request in connection with the matters disclosed or required to be disclosed in
the Disclosure Schedule. Except the ESOP to the extent that the Trustee deems it
not to be in the best interests of the participants and beneficiaries
thereunder, each of the Parties will take any additional action (and the
Shareholders will cause CFT to take any additional action) that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that he, she or it may be required to give, make, or
obtain.
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(c) Operation of Business. Except as contemplated hereby, or
as may be incidental to or in furtherance of the transactions contemplated
hereby, or as may have been set forth herein or in the Disclosure Schedule, the
Shareholders will not cause or permit CFT to engage in any practice, take any
action, embark on any course of inaction, or enter into any transaction outside
the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Shareholders will not cause or permit CFT to engage in any
practice, take any action, embark on any course of inaction, or enter into any
transaction of the sort described in Section 4(f) above.
(d) Preservation of Business. Except as contemplated hereby,
or as may be incidental to or in furtherance of the transactions contemplated
hereby, or as may have been set forth herein or in the Disclosure Schedule, CFT
will (and Shareholders (other than the ESOP) will cause CFT to) use its best
efforts to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers, and employees.
(e) Access.
(i) The Shareholders will permit, and the Shareholders
(other than the ESOP) will cause CFT to permit, representatives of ACG,
during normal business hours and upon one (1) business day's notice,
full access to CFT's personnel, officers, agents, employees, assets,
properties, titles, contracts, other books, records (including, without
limitation Tax records), files, documents (including financial, tax
basis, budget projections, auditors' work papers and other information
as ACG may reasonably request), customers, suppliers and independent
auditors of or pertaining to CFT; provided, that the representatives of
ACG shall be accompanied, at the Shareholders' Representative's option,
by either ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇.
(ii) Additionally, the Shareholders (other than the ESOP)
will provide ACG opportunities to meet with key employees and/or
customers of CFT and to otherwise conduct due diligence in respect of
CFT.
(f) Notice of Developments. The Shareholders (other than the
ESOP) will give prompt written notice to ACG of any Material development
affecting the assets, Liabilities, business, financial condition, operations,
results of operations, or future prospects of CFT. Each Party will give prompt
written notice to the others of any Material development affecting the ability
of the Parties to consummate the transactions contemplated by this Agreement.
Except for the right of the Shareholders (other than the ESOP) to update any
Disclosure Schedule as provided in Section 4 hereof, no disclosure by any Party
pursuant to this Section 5(f) however, shall be deemed to amend or supplement
Annex I, Annex II or the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, and/or breach of covenant.
(g) Exclusivity. The Principals will not (and the Principals
will not cause or permit CFT to) (i) solicit, initiate, or encourage the
submission of any proposal or offer
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from any person relating to any (A) liquidation, dissolution, or
recapitalization, (B) merger or consolidation, (C) acquisition or purchase of
securities or assets, or (D) similar transaction or business combination
involving CFT or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any person to do or seek any of the
foregoing. The Shareholders will notify ACG immediately if any person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
(h) Delivery of Information. CFT shall deliver the updated
financial and other information as frequently as its existing information
systems allow. In addition, CFT will permit and use its best efforts to assist
ACG's accountants to complete an audit of CFT's Financial Statements for the
1999 calendar year prior to the Closing.
(i) Cancellation of Options, Bonus Programs and Phantom Stock
Plans. CFT shall have provided for the cancellation, at or prior to the Closing,
of all CFT Options, stock option plans, deferred bonus programs or phantom
equity plans in exchange for ACG's Options listed on Annex V attached hereto
pursuant to the terms of the Option Cancellation and Exchange Agreement in the
form attached hereto as Exhibit F in exchange for the stock option agreement in
the form attached hereto as Exhibit B-1 to purchase ACG's Options set forth on
Annex V on the terms described therein. Any amounts payable for the cancellation
of the CFT Options (in addition to ACG's Options issued to any such holder of
CFT Options described in this Section 5(i)) will be paid by the Shareholders and
at no cost to CFT or ACG, or, if paid by CFT, such payments will be a reduction
of the Cash Portion of the Consideration pursuant to Section 2(h).
(j) 401k Termination. Prior to Closing, the Principals shall
take, or shall cause CFT to take all corporate actions necessary and appropriate
to terminate the CFT Consulting, Inc. Profit Sharing 401(k) Plan (the
"Terminated Plan") effective as of one business day or more prior to the
Closing. The Principals shall take all actions necessary in connection with the
termination of such Terminated Plan to ensure that the termination does not
result in the disqualification of the Terminated Plan or the loss of tax-exempt
status for any trust related to such Terminated Plan. Immediately prior to such
termination, the Principals shall cause CFT to make all necessary payments to
fund the contributions: (i) necessary or required to maintain the tax qualified
status of the Terminated Plan and (ii) for elective deferrals made pursuant to
the Terminated Plan for the period prior to termination. The Principals shall
indemnify and hold harmless ACG and CFT against any and all Liabilities (whether
incurred by ACG, CFT or any of their respective Affiliates) relating to the
Terminated Plan and the termination thereof arising at or prior to the Closing
Date.
6. Additional Covenants. The Parties further covenant and
agree as follows:
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as
-41-
any other Party reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under Section 8 below). The Shareholders acknowledge and agree that
from and after the Closing ACG will be entitled to possession of all documents,
books, records, agreements, and financial data of any sort relating to CFT;
provided that the Shareholders may retain any copies of the foregoing as shall
be necessary to comply with applicable tax and other laws, regulations and
ordinances.
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving CFT, each of the other Parties will cooperate with
him, her or it and his, her or its counsel in the contest or defense, make
available their respective personnel, and provide such testimony and access to
their respective books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 8 below).
(c) Transition. The Shareholders will not take any action that
primarily is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of CFT from
maintaining the same business relationships with CFT after the Closing for a
period of twenty-four (24) months thereafter as it maintained with CFT prior to
the Closing. The Shareholders will refer all customer inquiries relating to
CFT's Business to ACG and/or CFT from and after the Closing for a period of
twenty-four (24) months thereafter.
(d) Confidentiality. Both (i) the Shareholders (other than the
ESOP) and (ii) the Trustee (except to the extent that such Trustee must provide
information to the beneficiaries of the ESOP) will treat as confidential and
hold as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement for a period
of three (3) years from the Closing and, except as may be required by law,
deliver promptly to ACG or destroy, at the request and option of ACG, all
tangible embodiments (and all copies) of the Confidential Information which are
in its possession. In the event that the Shareholders are requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, the Shareholders will notify
ACG promptly of the request or requirement so that ACG may seek an appropriate
protective order or waive compliance with the provisions of this Section 6(d).
If, in the absence of a protective order or the receipt of a waiver hereunder,
the Shareholders are, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, that
Shareholders may disclose the Confidential Information to the tribunal;
provided, however, that the Shareholders shall use their reasonable efforts to
obtain, at the reasonable request of ACG, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as ACG shall designate. In addition, the
Trustee will provide confidentiality notices to the beneficiaries of the ESOP in
connection with any disclosure made to the such beneficiaries.
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(e) Termination of Bank Facilities; Release of Guaranties;
Modification of Indebtedness. The Principals shall (i) retire all of CFT's
outstanding bank indebtedness as of the Closing Date, except as otherwise
specifically agreed by ACG in writing, and (ii) use their best efforts to fully,
completely and unconditionally release CFT at or prior to Closing as guarantor
for the Shareholders on all banking facilities of CFT or other guarantees;
provided, however, that in the event such releases cannot be obtained, the
Principals shall indemnify ACG for any payments it may be obligated to make
pursuant to such guaranties, except to the extent that such payments are the
result of the fraud, gross negligence or willful misconduct of ACG. ACG shall
use its commercially reasonable best efforts to fully, completely and
unconditionally release ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ as guarantors for CFT with respect
to any indebtedness of CFT which is not retired; provided, however, that in the
event such releases cannot be obtained, ACG shall indemnify ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇
for any payments they may be obligated to make pursuant to such guaranties,
except to the extent that such payment is as the result of the fraud, gross
negligence or willful misconduct of either such Principal.
(f) Monitoring Information. Prior to the Closing, the
Principals shall cause CFT to deliver such information as may reasonably be
requested by ACG.
(g) Landlords' Consents. The Principals shall cause CFT on or
before the Closing Date to obtain from its landlords (to the extent required
under the lease of the pertinent premises) written consent to the assignment of
all leases being assumed by ACG, which assignments are deemed to have resulted
from the transactions contemplated by this Agreement.
(h) Additional Tax Matters.
(i) ACG shall cause CFT (at the sole cost and expense of
the Principals) to file with the appropriate governmental authorities
all Tax Returns required to be filed by it for any taxable period
ending prior to the Closing Date, and the Shareholders (other than the
ESOP) shall remit any Taxes due in respect of such Tax Returns (but
only to the extent such Taxes are in excess of the reserve, if any, set
forth on the balance sheet used to determine the Net Worth of CFT at
Closing). In addition, the Principals shall cause their certified
public accountant to prepare a short period tax return for CFT covering
the period from January 1, 1999, through the Closing Date; provided,
however, that the Principals shall provide PWC with at least ten (10)
days to review such return prior to its filing (such review to be at
ACG's sole cost and expense). The cost of preparation of such short
period tax return shall be paid by Shareholders.
(ii) ACG and Shareholders recognize that each of them
will need access, from time to time, after the Closing Date, to certain
accounting and Tax records and information held by ACG and/or CFT to
the extent such records and information pertain to events occurring on
or prior to the Closing Date; therefore, ACG agrees to cause CFT to (A)
use its best efforts to properly retain and maintain such records for a
period of six (6) years from the date the Tax Returns for the year
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in which the Closing occurs are filed or until the expiration of the
statute of limitations that applies to the Tax Return in question
(i.e., including Tax Returns for years preceding the year in which the
Closing occurs), whichever is later, and (B) allow the Shareholders and
their agents and representatives at times and dates mutually acceptable
to the Parties, to inspect, review and make copies of such records as
such other party may deem necessary or appropriate from time to time,
such activities to be conducted during normal business hours and at the
requesting Party's expense.
(iii) The Principals shall be jointly and severally
liable for, and shall indemnify and hold ACG and CFT harmless against,
any Taxes or other costs attributable solely to a failure on the part
of the Shareholders to take all actions required under Section 6(h)(i).
ACG shall be liable for, and shall indemnify and hold the Shareholders
harmless against, any Taxes or other costs attributable solely to a
failure on the part of the ACG to take all actions required under
Section 6(h)(i). The indemnity set forth in this Section 6(h)(iii)
shall not be subject to the conditions and limitations set forth in
Section 8(b) of this Agreement.
(i) Covenant Not to Compete. For a period of two (2) years
from and after the Closing Date, none of the Principals will, directly or
indirectly, as principal, agent, trustee or through the agency of any
corporation, partnership, association or agent or agency, (i) own, manage,
control, participate in, consult with, render services for, or in any manner
engage in any activity or business competing with the businesses of ACG, CFT or
their Affiliates as the same were constituted at any time during the term of
such Principal's employment, if any, by ACG, CFT and/or their Affiliates, in any
country, (ii) request, advise, induce or attempt to induce any customer,
supplier, licensee or other business relation of ACG, CFT or any of their
Affiliates (each a "Customer") to withdraw, curtail, cancel or otherwise cease
such Customer's business with ACG, CFT and/or such Affiliate or in any way
interfere with the relationship between any such Customer and ACG, CFT and/or
any of their Affiliates, (iii) service, canvass, solicit or accept any business
from any Customer for the purpose of competing with ACG, CFT or the Affiliates,
(iv) disclose to any other person, firm, corporation or other entity, the name
or address of any Customer for the purpose of competing with ACG, CFT or any of
their Affiliates, (v) solicit for employment or employ any person who is or was
employed by CFT, ACG or any of their Affiliates at any time within the eighteen
(18) month period immediately preceding such solicitation of employment to leave
the employ of ACG, CFT or such Affiliate and/or accept employment with any
Principal or with such Person, firm, association, corporation or other entity,
or in any way willfully interfere with the relationship among ACG, CFT or any of
their Affiliates and any such person or (vi) initiate or engage in any
discussions regarding an acquisition of, or Principal's employment (whether as
an employee, an independent contractor or otherwise) by, any businesses with
which ACG, CFT or any of their Affiliates has entertained discussions or has
requested and received information relating to the acquisition of such business
by ACG, CFT or such Affiliate upon or within the one (1) year period prior to
the date hereof; provided, however, that no owner of less than five percent (5%)
of the outstanding stock of any publicly traded corporation shall be deemed to
engage solely by reason thereof in any of its businesses. For purposes of this
Agreement, the
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Parties have agreed to allocate $100,000 of the Consideration to the covenant
not to compete contained in this Section 6(j). In addition to the definition of
Affiliate set forth in Section 1 hereof, for purposes of this Section 6(j),
"Affiliate" with respect to ACG shall include, without limitation, any
corporation or business entity that either controls or is controlled by ACG, The
▇▇▇▇▇▇▇ Group, Inc., Delphi Partners, Inc., Legacy Technology, Inc., Infinity
Consulting Group, Inc., Group Cortex, Inc., or triSpan Inc., or is controlled by
the shareholders that control ACG (and for this definition, "control" means the
ownership, either directly or through an unbroken chain of control, of more than
fifty (50%) of the equity interests or combined voting or management rights in
an entity.)
(j) Conduct During Earned Payout Period. Shareholders
acknowledge and agree that, during the Earned Payout Period, ACG shall be
entitled to oversee the operation and management of CFT's Business, and,
together with ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, set mutually acceptable goals and budgets of
CFT, all of which shall be reasonably and legally designed and intended to
maximize the productivity, efficiency, profitability and earnings of CFT. The
Shareholders further agree, during the Earned Payout Period, not and not to
allow CFT to cut staff, capital expenditures and general and administrative
expenses or take other actions that are not consistent with CFT's prior
practices and/or prudent business practices, and the Shareholders agree not and
not to allow CFT to intentionally engage in any activity in order to increase
current year profits of the business of CFT at the expense of the longer term
growth of the business of CFT. During the Earned Payout Period, ACG agrees to
(i) maintain separate books and records for CFT; (ii) maintain CFT as a separate
entity and not to sell or otherwise dispose of any of its assets except in the
Ordinary Course of Business or sell or otherwise dispose of any of its stock;
(iii) cause CFT to be operated essentially as it was prior to the sale of the
CFT Shares except in so far as the prior practices of CFT were imprudent or
unreasonable or its productivity efficiency and profitability can be improved
and increased through economies of scale, ACG's experience or otherwise; (iv)
not unreasonably change, except with the consent of Shareholders'
Representative, and except in the Ordinary Course of Business, (A) the prices
charged for CFT's services, (B) the level of compensation of CFT's consultants
and full-time corporate employees or (C) the level CFT's general and
administrative expenses, unless the prior business practices were unreasonable
or imprudent and/or unless the changes are reasonably necessary to support the
growth of CFT's business, (v) not assign, without the consent of ▇▇▇▇▇▇ or
▇▇▇▇▇▇▇▇, CFT staff to non-CFT projects; provided, however, any employee who was
employed by ACG or an ACG "Affiliate" (as defined in Section 6(i) hereof), other
than CFT or Newco, at any time prior to Closing shall continue to provide their
services as currently conducted, whether or not such services are related to
CFT's Business, and such employees will not attribute any of their revenues to,
or otherwise report to, CFT, except as otherwise agreed in writing by ACG; (vi)
properly recognize revenue earned by CFT projects during the Earned Payout
Period; (vii) grant to and continue in ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ the power and
authority customarily vested in chief operating officers to conduct the business
of CFT; (viii) not to engage in any activity solely or principally to reduce the
Earnout Payment Amount; and (ix) take all necessary action to cause ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ to continue as directors of CFT so long as, in the case of either
▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇, such individual's employment with ACG and CFT has not been
terminated by ACG and CFT with Cause (as defined in such individual's Compliance
agreement) or such individual has not terminated his employment with ACG and CFT
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without Good Reason (as defined in such individual's compliance agreement). ACG
agrees that neither ▇▇▇▇▇▇ nor ▇▇▇▇▇▇▇▇ shall be terminated without Cause (as
defined in his respective compliance agreement) during the Earned Payout Period.
ACG, CFT and the Shareholders recognize and acknowledge that the relationship
that will exist between ACG, CFT and the Shareholders upon the consummation of
the transactions contemplated herein will be based on a high degree of mutual
trust and confidence among the parties, and each of ACG and the Shareholders
agree that at all times following the Closing that each will act with respect to
its dealings with CFT and its operations in such a way as to promote, to the
extent reasonably possible, the successful operation and growth of CFT.
(k) ESOP Agreements The Trustee shall enter into an agreement
with CFT pursuant to which the Trustee shall have agreed, in form and substance
satisfactory to ACG, to remain as the sole trustee of the ESOP until such time
as (i) the ESOP and CFT receive a favorable determination letter from the
Internal Revenue Service that the ESOP is qualified and the ESOP may be
terminated, and (ii) the assets of the ESOP are completely distributed to the
ESOP Participants. Trustee shall cooperate with ACG to obtain a favorable
determination letter with respect to the qualification and termination of the
ESOP.
(l) Reorganization Intent. The Parties agree that the Merger
is intended to be a tax-free reorganization under Section 368 of the Code, and
that this Agreement is intended to be a "plan of reorganization" within the
meaning of the regulations promulgated under such section of the Code. None of
the Parties has taken, shall take or fail to take any action that would
jeopardize the qualification of the Merger as such a tax-free reorganization
(other than actions contemplated by this Agreement or as may be otherwise
legally required).
(m) Consents. In the event any consent or approval necessary
to assign or otherwise transfer any contract or agreement to CFT is not obtained
by the time of Closing, then the Principals shall obtain the consent or approval
for such contract or agreement within thirty (30) days after the Closing Date,
subject to the good faith cooperation of ACG; provided, however, that the
Principals shall, within fifteen (15) days after the Closing Date, take all
action necessary to (i) assign the motor vehicle lease agreements listed as
items 10, 11, 12 and 13 on Section 4(m)(i) of the Disclosure Schedule to the
respective users of such vehicles and (ii) cause CFT to no longer be a lessee or
co-lessee or obligated or responsible in any way or manner whatsoever under the
aforementioned motor vehicle lease agreements.
7. Conditions to Obligations to Close.
(a) Conditions to Obligation of ACG. The obligation of ACG to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction or waiver of the following conditions:
(i) the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and correct in all
Material respects at and as of the Closing Date;
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(ii) the Shareholders (other than the ESOP) shall have
performed and complied with all of their covenants hereunder in all
Material respects through the Closing;
(iii) CFT will have procured (and Principals will have
caused CFT to procure) all third party consents and given all notices
required in connection with this Agreement and the transactions
contemplated hereby, including without limitation all action necessary
in connection with and/or the receipt of any notices to, filings with,
and authorizations, consents, and approvals of governments,
governmental agencies, and third parties, as set forth herein or in the
Disclosure Schedule;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect
adversely the right of ACG to own, operate, or control CFT Shares or
CFT (and no such judgment, order, decree, stipulation, injunction, or
charge shall be in effect);
(v) the Shareholders (other than the ESOP) and CFT shall
have delivered to ACG a certificate (without qualification as to
knowledge or Materiality or otherwise) to the effect that each of the
conditions specified above in Section 7(a)(i)-(iv) is satisfied in all
respects and a certificate of CFT's secretary certifying CFT's articles
of incorporation, bylaws, corporate resolutions approving the
consummation of the transactions contemplated by this Agreement and
incumbency;
(vi) the acquisition by ACG of CFT Shares shall represent
one hundred percent (100%) of the issued and outstanding capital stock
of CFT and all of such CFT Shares shall be free and clear of any
Security Interests or other liens, claims or encumbrances of any nature
whatsoever;
(vii) The Shareholders (other than the ESOP) shall have
purchased any personal use assets (excluding automobiles) from CFT at a
purchase price equal to the greater of (A) the net book value of such
assets as of the Closing Date or (B) the outstanding indebtedness
(including, without limitation all Funded Indebtedness) secured by such
assets; provided, however, personal use assets under this paragraph
shall not include cellular telephones and pagers purchased by CFT for
use by its officers and employees;
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(viii) ACG and Newco shall have received from each
Shareholder listed on Annex III an executed compliance agreement in the
form attached hereto as Exhibit D-1 at the initial salaries described
in Annex III for each such Shareholder;
(ix) ACG and Newco shall have received from at least 100%
of the persons listed on Annex IV-1 an executed compliance agreement in
the form attached hereto as Exhibit D-2 at the initial salaries
described in Annex IV-1 for each such employee;
(x) ACG and Newco shall have received from at least 90%
of the persons listed on Annex IV-2 an executed compliance agreement in
the form attached hereto as Exhibit D-2 at the initial salaries
described in Annex IV-2 for each such employee;
(xi) ACG shall have received from each Shareholder (other
than the ESOP) an executed Equity Subscription Agreement in the form
attached hereto as Exhibit A with respect to ACG's Shares issued to
each Shareholder on the Closing Date;
(xii) The Shareholders (other than the ESOP) shall have
caused each person listed on Annex V who has executed an Option
Cancellation and Exchange Agreement in the form of Exhibit F hereto to
execute a Stock Option Agreement in the form attached hereto as Exhibit
B-1 for the issuance to each such person listed on Annex V of ACG's
Options in the amount set forth next to such person's name on Closing
Date;
(xiii) the Shareholders (other than the ESOP) shall have
caused each person listed on Annex VI to execute a Stock Option
Agreement in the form attached hereto as Exhibit B-2 for the issuance
to each such person listed on Annex VI of (A) ACG's Options in the
amount set forth next to such person's name on Closing Date and (B)
potential additional ACG's Options in accordance with the terms of
Exhibit B-2.
(xiv) ACG shall have received from counsel to the
Shareholders (other than the ESOP) an opinion with respect to the
matters set forth in Exhibit E attached hereto, addressed to ACG and
Newco and dated as of the Closing Date;
(xv) ACG shall have received the resignations, effective
as of the Closing, of each officer and director of CFT prior to the
Closing;
(xvi) ACG shall be satisfied that the Net Worth of CFT at
May 31, 1999, equaled or exceeded the Minimum Net Worth;
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(xvii) no Material adverse change shall have occurred in
CFT's Business or its future prospects;
(xviii) the Shareholders shall have caused CFT to cancel
each outstanding phantom stock, deferred bonus or option plan, if any,
and all outstanding CFT Options shall have been canceled pursuant to
the Option Cancellation and Exchange Agreement in the form of Exhibit F
hereto (individually, an "Option Cancellation and Exchange Agreement"
and collectively the "Option Cancellation and Exchange Agreements"),
and the cost of such cancellation, if any (other than to ACG's Options
issued to any such holder of CFT Options described in this Section
5(h)), shall be borne by Shareholders or if such cost is borne by CFT,
such amount will reduce the Cash Portion of the Consideration pursuant
to Section 2(h);
(xix) ACG shall have received from the Shareholders
(other than the ESOP) a release in the form and substance of Exhibit G
hereto.
(xx) all liens and Security Interests securing debts of
CFT which have been paid in full prior to or at the Closing shall have
been fully released of record to the satisfaction of ACG and ACG shall
have received executed copies of all Uniform Commercial Code financing
statement terminations covering such debts;
(xxi) no unsatisfied liens for the failure to pay Taxes
of any nature whatsoever shall exist against CFT, or against or in any
way affecting any CFT Share;
(xxii) the Shareholders (other than the ESOP) shall and
CFT shall have caused all of CFT's shareholders, officers, directors
and/or other senior employees of CFT to, have repaid in full all debts
and other obligations, if any, owed to CFT, and the Shareholders (other
than the ESOP) shall have caused all Funded Indebtedness to be paid off
prior to the Closing;
(xxiii) ACG shall have received from CFT the Financial
Statements;
(xxiv) all appropriate corporate and shareholder
authorizations and actions required to consummate the transactions set
forth herein shall have been obtained by CFT;
(xxv) since the Most Recent Balance Sheet, CFT shall have
made no dividend, consulting or other payment to the Shareholders,
except for employment salaries (not to exceed current compensation) as
set forth in Section 4(m) of the Disclosure; provided, however, that no
payment shall be made for any cash to accrual tax liability as a result
of the transactions contemplated hereby;
-49-
(xxvi) except as set forth on the Disclosure Schedule,
since the Most Recent Balance Sheet, CFT shall not have transferred,
conveyed, disposed of and/or sold any of its Material assets, except in
the Ordinary Course of Business;
(xxvii) all shareholders of CFT (other than the ESOP)
shall have agreed to participate in the Merger without any dissenter's
rights exercised, and no beneficiary under the ESOP shall have
exercised dissenters rights;
(xxviii) ACG shall have received all necessary stock
certificates representing all of the Shareholders' CFT Shares, endorsed
in blank and accompanied by duly executed assignment documents;
(xxix) all Intellectual Property created or developed by
any Shareholder that has been used historically by CFT or is being used
currently by CFT shall be one hundred percent (100%) owned by CFT as of
the Closing Date;
(xxx) ACG shall have received from counsel to the ESOP an
opinion with respect to the matters set forth in Exhibit I attached
hereto, addressed to ACG and Newco and dated as of the Closing Date;
and
(xxxi) The Trustee shall deliver a certificate to ACG
substantially in the form of Exhibit J, stating that it has notified
all ESOP participants that the accrual of benefits for all participants
under the ESOP ceases as of the Closing Date and that the ESOP shall be
frozen as of the Closing Date. ACG shall continue the sponsorship of
the ESOP until all amounts subject to Section 2(i) and Section 2(m)
have been determined. After such determinations have been made, the
ESOP will be terminated and all ESOP account balances distributed,
subject to obtaining a favorable determination letter from the Internal
Revenue Service that the ESOP, as of its termination, satisfies the
requirements of Section 401(a) of the Code.
ACG may waive any condition specified in this Section 7(a) if
it executes a writing so stating at or prior to the Closing. Upon the Closing,
ACG shall be deemed to have waived any and all conditions specified in this
Section 7(a) without recourse thereof in the absence of fraud or any willful
misconduct on the part of the Shareholders or CFT.
(b) Conditions to Obligations of the Shareholders. The
obligations of the Shareholders to consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction or waiver of
the following conditions:
(i) the representations and warranties set forth in
Section 3(b) above shall be true and correct in all Material respects
at and as of the Closing Date;
(ii) ACG shall have performed and complied with all of
its covenants hereunder in all Material respects through the Closing;
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(iii) ACG will have procured all third party consents
needed by ACG and given all notices required in connection with this
Agreement and the transactions contemplated hereby, including without
limitation all action necessary in connection with and/or the receipt
of any notices to, filings with, and authorizations, consents, and
approvals of governments, governmental agencies, and third parties, as
set forth herein or in the Disclosure Schedule, including without
limitation any filing required under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Act;
(iv) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
(v) ACG shall have delivered to the Shareholders a
certificate (without qualification as to knowledge or Materiality or
otherwise) to the effect that each of the conditions specified above in
Section 7(b)(i)-(iv) is satisfied in all respects and a certificate of
ACG's secretary certifying ACG's and Newco's articles of incorporation,
bylaws, corporate resolutions approving the consummation of the
transactions contemplated by the Agreement and incumbency;
(vi) each Shareholder listed on Annex III who has
executed a compliance agreement in the form attached hereto as Exhibit
D-1 shall have received from ACG a countersigned copy of each such
compliance agreement at the initial salaries described in Annex III for
each such Shareholder;
(vii) each person listed on Annex IV-1 and Annex IV-2 who
has executed a compliance agreement in the form attached hereto as
Exhibit D-2 shall have received from ACG a countersigned copy of each
such compliance agreement at the initial salaries described in Annex
IV-1 and Annex IV-2, as applicable, for each such employee;
(viii) each of the Shareholders who has executed an
Equity Subscription Agreement in the form of Exhibit A attached hereto
shall have received from ACG a countersigned copy of each such Equity
Subscription Agreement in the form of Exhibit A attached hereto for the
issuance to each Shareholder of ACG's Shares issued to each Shareholder
on the Closing Date;
(ix) each person listed on Annex V receiving ACG's
Options under this Agreement and who has executed an Option
Cancellation and Exchange Agreement and who has executed a Stock Option
Agreement in the form attached hereto as Exhibit B-1 shall have
received from ACG a countersigned copy of each
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such Stock Option Agreement for the issuance to each such person listed
on Annex V pursuant to the terms of Annex V with respect to vesting and
exercise price;
(x) each person listed on Annex VI receiving ACG's
Options under this Agreement and who has executed a Stock Option
Agreement in the form attached hereto as Exhibit B-2 shall have
received from ACG a countersigned copy of each such Stock Option
Agreement for the issuance to each such person listed on Annex VI;
(xi) all of the loans from ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ shall have
been repaid by CFT prior to the Closing; provided, however, that this
condition shall only be satisfied at Closing in accordance with the
settlement and closing statement; and
(xii) all appropriate corporate and shareholder
authorizations and actions required to consummate the transactions set
forth herein shall have been obtained by ACG and Newco.
The Shareholders' Representative may waive any condition
specified in this Section 7(b) if they execute a writing so stating at or prior
to the Closing. Upon the Closing, the Shareholders shall be deemed to have
waived any and all conditions specified in this Section 7(b) without recourse
therefor in the absence of fraud or any willful misconduct on the part of ACG or
Newco.
8. Remedies for Breaches of This Agreement.
(a) Survival. All of the representations and warranties of the
Shareholders contained in Section 4 above (other than the representations and
warranties of the Shareholders contained in Sections 4(h), 4(s), and 4(v) above)
shall survive the Closing hereunder (even if ACG knew or had reason to know of
any misrepresentation or breach of warranty at the time of the Closing) and
continue in full force and effect for a period of two (2) years thereafter. The
other representations, warranties, and covenants of the Parties contained in
this Agreement (including the representations and warranties of the Shareholders
contained in Sections 4(h), 4(s), and 4(v) above) shall survive the Closing
(even if the damaged Party knew or had reason to know of any misrepresentation
or breach of warranty or covenant at the time of the Closing) and continue in
full force and effect for the applicable statute of limitations period
thereafter, except as otherwise provided elsewhere in this Agreement.
(b) Indemnification Provisions for Benefit of ACG.
(i) In the event the Shareholders or CFT, as applicable,
breach any of their representations, warranties, agreements, and
covenants contained herein, and provided that the particular
representation, warranty, agreement, or covenant survives the Closing
and that ACG makes a written claim for indemnification against the
Shareholders pursuant to Section 10(h) below within the
-52-
applicable survival period, then the Principals agree to jointly and
severally indemnify ACG from and against the entirety of any Adverse
Consequences ACG may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences ACG may suffer
after the end of the applicable survival period resulting from, arising
out of, relating to, in the nature of, or caused by the breach);
provided, however, that the Principals shall not have any obligation to
indemnify ACG from and against any Adverse Consequences resulting from,
arising out of, relating to, in the nature of, or caused by the breach
of any representation, warranty or covenant of CFT or the Shareholders
contained in this Agreement (i) until ACG has suffered aggregate losses
by reason of all such breaches in excess of $100,000 at which point the
Principals will be obligated jointly and severally for indemnification
under this Section 8(b) for all covered amounts in excess of the
$100,000 threshold or (ii) in excess of the Consideration (after which
point Shareholders shall have no obligation to indemnify ACG from and
against further such Adverse Consequences); provided, further, however,
that the limitations set forth in (i) and (ii) above specifically shall
not apply to the liability of the Principals with respect to Adverse
Consequences resulting from or attributable to intentional fraud or any
willful misconduct by the Shareholders or to any breaches of the
representations, warranties and covenants contained in Section 4(g),
Section 4(h), or Section 6(h) hereof, or to any Adverse Consequences
(including, but not limited to, any interest, penalties, assessments or
deficiencies) resulting from the Shareholders' or CFT's failure to
comply with the Code and with ERISA (including, without limitation, the
Tax qualification requirements described in Section 401 of the Code and
the Form 5500 filing requirements of ERISA and the Code) and all other
laws with respect to the CFT Consulting, Inc. Profit Sharing 401(k)
Plan and any predecessor thereto and the CFT Consulting, Inc. Pension
Plan.
(ii) In the event any Shareholder breaches any of its
Several representations, warranties, and covenants contained in Section
3(a), and provided that the particular representation, warranty, or
covenant survives the Closing and that ACG makes a written claim for
indemnification against such Shareholder pursuant to Section 10(h)
below within the applicable survival period, then the Principals agree
to indemnify ACG from and against the entirety of any Adverse
Consequences ACG may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences ACG may suffer
after the end of the applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by the breach,
including without limitation any liability of CFT or Newco resulting
from options that have not been canceled, whether or not such options
are disclosed on the Disclosure Schedule.
(iii) The Principals agree to indemnify ACG from and
against the entirety of any Adverse Consequences ACG may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by any Liability of CFT arising under Regulation ss.1.1502-6
(because CFT once was a member of an Affiliated Group
-53-
during any part of any consolidated return year within any part of
which consolidated return year any corporation other than CFT also was
a member of the Affiliated Group).
(iv) The Principals agree to indemnify ACG from and
against the entirety of any sales, use, recording or other Taxes which
may become due and owing by reason of the transactions contemplated by
this Agreement.
(v) The Principals agree to indemnify ACG from and
against the entirety of (i) any brokerage fees or investment banking
commissions due by Shareholders or CFT by reason of the transactions
contemplated by this Agreement and (ii) any claims made by ▇▇▇▇▇▇
▇▇▇▇▇▇ regarding any action(s) taken, or failure to take action(s), by
CFT on or before the date hereof.
(vi) The Principals shall be liable for, and hereby
indemnify, ACG for all Taxes imposed on CFT with respect to any taxable
year ended on or before the Closing Date or with respect to any period
beginning before and ending after the Closing Date, for the portions of
such taxable year or period ending prior to the Closing Date, including
without limitation any Taxes incurred in connection with any audit by
any governmental authority for any such period ending on or prior to
the Closing Date; provided, however, that such indemnity shall be made
only to the extent such Taxes are in excess of the reserve, if any, for
such Tax Liability set forth on the balance sheet used to determine the
Net Worth of CFT at Closing. The Parties hereto shall, to the extent
permitted or not prohibited by applicable law, elect with the relevant
taxing authority, if required or necessary, to terminate the taxable
year of CFT as of the Closing Date. In any case where applicable law
does not permit CFT to treat such date as the end of a taxable year or
period, then whenever it is necessary to determine the liability for
income Taxes of CFT, for a portion of a taxable year or period, such
determination shall (unless otherwise agree to in writing by ACG and
the Shareholders) be determined by a closing of CFT's books as of the
Closing Date, except that exemptions, allowances or deductions that are
calculated on an annual basis, such as the deduction for depreciation,
shall be apportioned based upon the number of days during such taxable
year or period the Shareholders and ACG owned the stock in CFT.
(vii) The Parties shall make appropriate adjustments for
tax benefits in determining the liability of the Shareholders (other
than the ESOP) under this Section 8.
(c) Indemnification Provisions for Benefit of the
Shareholders. In the event ACG breaches any of its representations, warranties,
and covenants contained herein, and provided that the particular representation,
warranty, or covenant survives the Closing and that the Shareholders make a
written claim for indemnification against ACG pursuant to Section 10(h) below
within the applicable survival period, then ACG agrees to indemnify the
Shareholders from
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and against the entirety of any Adverse Consequences the Shareholders may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Shareholders may suffer after the end of the applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach; provided, however, that ACG shall not have any
obligation to indemnify the Shareholders from and against any Adverse
Consequences resulting from, arising out of, relating to, in the nature of, or
caused by the breach of any representation, warranty or covenant of ACG
contained in this Agreement (i) until ACG has suffered aggregate losses by
reason of all such breaches in excess of $100,000 at which point ACG will be
obligated for indemnification under this Section 8(c) for all covered amounts in
excess of the $100,000 threshold or (ii) in excess of the Consideration (after
which point ACG shall have no obligation to indemnify Shareholders from and
against further such Adverse Consequences); provided, further, however, that the
limitations set forth in (i) and (ii) above specifically shall not apply to the
liability of ACG with respect to Adverse Consequences resulting from or
attributable to intentional fraud or any willful misconduct by ACG or to any
breaches of the representations and warranties in Paragraph 3(b).
(d) Matters Involving Third Parties. If any third party shall
notify any Party (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 8, then the Indemnified Party shall
notify in writing 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) the Indemnifying Party thereby
is damaged and materially prejudiced from adequately defending such claim. In
the event any Indemnifying Party notifies the Indemnified Party within thirty
(30) days after the Indemnified Party has given notice of the matter that the
Indemnifying party is assuming the defense thereof, (A) the Indemnifying Party
will defend the Indemnified Party against the matter with counsel of its choice
reasonably 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 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 or compromise with respect to the
matter without the written consent of the Indemnifying Party (not to be withheld
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 or
compromise 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 unreasonably). In the event no Indemnifying Party notifies in writing
the Indemnified Party within twenty (20) days after the Indemnified Party has
given notice of the matter that the Indemnifying Party is assuming the defense
thereof, however, the Indemnified Party may defend against, or enter into any
settlement with respect to, the matter in any manner it reasonably may deem
appropriate. At any time after commencement of any such action, any Indemnifying
Party may request an Indemnified Party to accept a bona fide offer from the
other Party(ies) to the action for a monetary settlement payable solely by such
Indemnifying
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Party (which does not burden or restrict the Indemnified Party nor
otherwise prejudice him or her) whereupon such action shall be taken unless the
Indemnified Party determines that the dispute should be continued, the
Indemnifying Party shall be liable for indemnity hereunder only to the extent of
the lesser of (i) the amount of the settlement offer or (ii) the amount for
which the Indemnified Party may be liable with respect to such action. In
addition, the Party controlling the defense of any third party claim shall
deliver, or cause to be delivered, to the other Party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of the third party
claim, and timely notices of, and the right to participate in (as an observer)
any hearing or other court proceeding relating to the third party claim.
(e) Exclusive Remedy. The Parties acknowledge and agree that
the foregoing indemnification provisions in this Section 8 shall be the
exclusive remedy of the Parties for any breach of the representations,
warranties, and covenants of the Parties contained in this Agreement.
(f) Payment; General Right of Offset. The Indemnifying Parties
shall promptly pay to the Indemnified Party as may be entitled to indemnity
hereunder in cash the amount of any Adverse Consequences to which such
Indemnified Party may become entitled to by reason of the provisions of this
Agreement. Notwithstanding the foregoing, in connection with the indemnification
of ACG pursuant to Section 8(b)(i) above, ACG shall have the option to first
seek indemnification payments through offset against the Cash Portion of the
Consideration, the Stock Portion of the Consideration or Earned Payout Amount
payable to Shareholders, after an indemnification claim has been made therefor,
for the amount of any Adverse Consequences or any other payments to which ACG
may become entitled to by reason of the provisions of this Agreement; provided,
however, that ACG may not exercise its option to seek such offset until fourteen
(14) days after it has sent written notice of its intention to seek such offset
to the Shareholders' Representative.
(g) Other Indemnification Provisions. Except as provided in
Section 8(f) above, the foregoing indemnification provisions are in addition to,
and not in derogation of, any statutory or common law remedy any Party may have
for breach of representation, warranty, or covenant.
(h) Arbitration with Respect to Certain Indemnification
Matters.
(i) THE PARTIES AGREE TO SUBMIT TO ARBITRATION, IN
ACCORDANCE WITH THESE PROVISIONS, ANY DISPUTED CLAIM OR CONTROVERSY,
OTHER THAN THOSE SEEKING EQUITABLE RELIEF, ARISING FROM OR RELATED TO
THE ALLEGED BREACH OF THIS AGREEMENT OR ANY DISPUTED INDEMNIFICATION
CLAIM MADE PURSUANT TO THIS SECTION 8. THE PARTIES FURTHER AGREE THAT
THE ARBITRATION PROCESS AGREED UPON HEREIN SHALL BE THE EXCLUSIVE MEANS
FOR RESOLVING ALL DISPUTES MADE SUBJECT TO ARBITRATION HEREIN, BUT THAT
NO ARBITRATOR SHALL HAVE AUTHORITY TO EXPAND THE SCOPE OF THESE
ARBITRATION PROVISIONS. ANY ARBITRATION HEREUNDER SHALL BE
-56-
CONDUCTED UNDER THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION (AAA). EITHER PARTY MAY INVOKE ARBITRATION
PROCEDURES HEREIN BY WRITTEN NOTICE FOR ARBITRATION CONTAINING A
STATEMENT OF THE MATTER TO BE ARBITRATED. THE PARTIES SHALL THEN HAVE
FOURTEEN (14) DAYS IN WHICH THEY MAY IDENTIFY A MUTUALLY AGREEABLE,
NEUTRAL ARBITRATOR. AFTER THE FOURTEEN (14) DAY PERIOD HAS EXPIRED, THE
PARTIES SHALL PREPARE AND SUBMIT TO THE AAA A JOINT SUBMISSION, WITH
EACH PARTY TO CONTRIBUTE HALF OF THE APPROPRIATE ADMINISTRATIVE FEE. IN
THE EVENT THE PARTIES CANNOT AGREE UPON A NEUTRAL ARBITRATOR WITHIN
FOURTEEN (14) DAYS AFTER WRITTEN NOTICE FOR ARBITRATION IS RECEIVED,
THEIR JOINT SUBMISSION TO THE AAA SHALL REQUEST ARBITRATORS WHO ARE
PRACTICING ATTORNEYS WITH PROFESSIONAL EXPERIENCE IN THE FIELD OF
CORPORATE LAW, AND THE PARTIES SHALL ATTEMPT TO SELECT AN ARBITRATOR
FROM THE PANEL ACCORDING TO AAA PROCEDURES. UNLESS OTHERWISE AGREED BY
THE PARTIES, THE ARBITRATION HEARING SHALL TAKE PLACE IN THE MIAMI,
FLORIDA METROPOLITAN AREA, AT A PLACE DESIGNATED BY THE AAA. ALL
ARBITRATION PROCEDURES HEREUNDER SHALL BE CONFIDENTIAL. EACH PARTY
SHALL BE RESPONSIBLE FOR ITS COSTS INCURRED IN ANY ARBITRATION, AND THE
ARBITRATOR SHALL NOT HAVE AUTHORITY TO INCLUDE ALL OR ANY PORTION OF
SAID COSTS IN AN AWARD REGARDLESS OF WHICH PARTY PREVAILS. THE
ARBITRATOR MAY NOT INCLUDE EQUITABLE RELIEF. ANY ARBITRATION AWARDED
SHALL BE ACCOMPANIED BY A WRITTEN STATEMENT CONTAINING A SUMMARY OF THE
ISSUES IN CONTROVERSY, A DESCRIPTION OF THE AWARD, AND AN EXPLANATION
OF THE REASONS FOR THE AWARD. THE ARBITRATION WILL BE SUBJECT TO THE
FOLLOWING CONDITION: THAT THE LOSING PARTY SHALL PAY THE REASONABLE
LEGAL FEES AND COSTS OF THE PREVAILING PARTY, AS SHALL BE DETERMINED BY
THE ARBITRATOR.
(ii) ANY PARTY MAY, WITHOUT PURSUING ARBITRATION UNDER
SUBSECTION 8(H)(I), INSTITUTE PROCEEDINGS IN A COURT OF COMPETENT
JURISDICTION TO OBTAIN EQUITABLE RELIEF TO PREVENT IRREPARABLE HARM, OR
TO OBTAIN OTHER REMEDIES THAT CAN BE OBTAINED ONLY THROUGH EQUITABLE
RELIEF, AND THE COURT IN ANY SUCH PROCEEDING SHALL BE AUTHORIZED TO
ENTER SUCH INJUNCTIVE OR OTHER EQUITABLE RELIEF AS MAY BE APPROPRIATE,
NOTWITHSTANDING THE PROVISIONS OF SUBSECTION 8(H)(I).
(iii) PARAGRAPHS (I) AND (II) HEREOF SHALL NOT BE APPLIED
TO DENY THE TRUSTEE, THE ESOP OR ANY OF THE ESOP'S PARTICIPANTS OR
BENEFICIARIES OF RIGHTS, REMEDIES OR ACCESS TO ANY REGULATORY AGENCY OR
COURT WHERE SUCH RIGHTS, REMEDIES OR ACCESS ARE PROTECTED BY APPLICABLE
FEDERAL LAW.
9. [INTENTIONALLY LEFT BLANK].
10. Miscellaneous.
(a) The Shareholders.
(i) When any particular Shareholder (as opposed to the
Shareholders as a group) makes a representation, warranty, or covenant
herein, then
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that representation, warranty, or covenant will be referred to herein
as the "Several" obligation of that Shareholder. This means that the
particular Shareholder making the representation, warranty, or covenant
will be solely responsible for any Adverse Consequences ACG may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by any breach thereof. The representations and warranties of
each of the Shareholders in Section 3(a) above concerning the
transaction is an example of Several obligations. Notwithstanding the
foregoing, the Shareholders (other than the ESOP) shall be liable,
jointly and severally, for the breach of any representation and
warranty made by the ESOP.
(ii) When the Principals or certain of the Shareholders
as a group make a representation, warranty, or covenant herein, then
that representation, warranty, or covenant will be referred to herein
as the "Joint and Several" obligation of the Principals and such
Shareholders. This means each Principal and each such Shareholder will
be responsible for the entirety of any Adverse Consequences ACG may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by any breach thereof. The representations and warranties of
the Principals in Section 4 above concerning CFT are examples of Joint
and Several obligations.
(b) Press Releases and Announcements. Except as may be
required by applicable securities laws or stock exchange requirements, no Party
shall issue any press release or announcement relating to the subject matter of
this Agreement prior to, at or about the Closing without the prior written
approval of ACG and the Shareholders, which written approval will not be
unreasonably withheld; provided, however, that any Party may make any public
disclosure it believes in good faith is required by law or regulation (in which
case the disclosing Party will advise the other Parties prior to making the
disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement and all other ancillary
agreements and documents executed hereunder and in connection herewith,
constitutes the entire agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or among the Parties, written
or oral, that may have related in any way to the subject matter hereof;
provided, however, that unless and until the consummation of the purchase and
sale transaction contemplated hereunder occurs, the Confidentiality Agreement
attached hereto as Exhibit H shall remain in full force and effect.
(e) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his, her or its rights, interests, or obligations hereunder without the
prior written approval of ACG and the Shareholders;
-58-
provided, however, that ACG or Newco may assign (i) any or all of its respective
rights and interests hereunder to a wholly-owned Subsidiary of ACG or Newco (in
any or all of which cases ACG or Newco (as the case may be) nonetheless shall
remain liable and responsible for the performance of all of its respective
obligations hereunder) or (ii) any or all of its respective rights under Section
8 of the Agreement to any lender providing debt financing to ACG or its
Affiliates.
(f) Facsimile/Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. A facsimile,
telecopy or other reproduction of this Agreement may be executed by one or more
parties hereto, and an executed copy of this Agreement may be delivered by one
or more parties hereto by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be considered valid,
binding and effective for all purposes. At the request of any Party hereto, all
parties hereto agree to execute an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.
(g) Descriptive Headings. The descriptive section headings
contained in this Agreement are inserted for convenience or reference only and
shall not control or affect in any way the meaning, interpretation, or
construction of any of the provisions of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to CFT or the Shareholders:
c/o CFT Consulting, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇.▇▇▇▇
Fax: (▇▇▇) ▇▇▇.▇▇▇▇
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with a copy to:
Mesirov, Gelman, Jaffe, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to ESOP counsel:
Bildersee & ▇▇▇▇▇▇▇ LLP
One Penn Center, Suite 1111
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to ACG:
AnswerThink Consulting Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇ ▇▇▇▇, Esq. and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may give any notice, request, demand, claim, or
other communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail,
or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party may
change the address to which
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notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
(i) Governing Law. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT HERETO WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF FLORIDA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF FLORIDA.
(j) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
ACG and the Shareholders. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(l) Expenses. Each of the Parties and CFT will bear his, her
or its own costs and expenses (including legal fees and expenses and investment
banking fees) incurred in connection with this Agreement and the transactions
contemplated hereby. The Shareholders acknowledge and agree that CFT has not
borne or will bear any of the Shareholders' costs and expenses (including any of
its legal fees and expenses and investment banking fees) in connection with this
Agreement or any of the transactions contemplated hereby; provided, however,
that CFT may bear those costs of the ESOP consistent with applicable law and
plan provisions.
(m) Construction. The language used in this Agreement will be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any Party. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant relating to the
same subject matter as any other
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representation, warranty or covenant (regardless of the relative levels of
specificity) which the Party has not breached, it shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
(n) Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which they may be entitled, at law or in equity.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
ACG: CFT:
ANSWERTHINK CONSULTING CFT CONSULTING, INC.
GROUP, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/ W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------- ---------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Name: W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President and Title: President
Chief Executive Officer
NEWCO: SHAREHOLDERS:
CFT ACQUISITION, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
/s/ W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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ESOP:
CFT CONSULTING, INC. EMPLOYEE
STOCK OWNERSHIP PLAN
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Trustee
NORTHERN TRUST BANK OF FLA NA
AS TRUSTEE OF ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
AND ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
CHARITABLE REMAINDER TRUST NO. 1
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ III
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ III
Title: Vice President
NORTHERN TRUST BANK OF FLA NA
AS TRUSTEE ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
AND ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
CHARITABLE REMAINDER TRUST NO. 2
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ III
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ III
Title: Vice President
KSM TRUST
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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