EXHIBIT 10.3
EXECUTION
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ASSET PURCHASE AGREEMENT
BY AND AMONG
COTELLIGENT, INC.,
COTELLIGENT U.S.A., INC.
AND
COMSYS INFORMATION TECHNOLOGY SERVICES, INC.
DATED AS OF JUNE 14, 2000
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.............................................................. 1
Section 1.1 Definitions......................................... 1
Section 1.2 Other Definitional Provisions....................... 8
Section 1.3 Cross Reference of Other Definitions................ 8
ARTICLE II
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING............ 9
Section 2.1 Purchase and Sale................................... 10
Section 2.2 Purchase Price Adjustments.......................... 13
Section 2.3 Closing Transactions................................ 15
ARTICLE III
CONDITIONS TO CLOSING.................................................... 16
Section 3.1 Conditions to the Purchaser's Obligations........... 16
Section 3.2 Conditions to the Sellers' Obligations.............. 19
ARTICLE IV
COVENANTS PRIOR TO CLOSING............................................... 20
Section 4.1 Affirmative Covenants of each Seller................ 20
Section 4.2 Negative Covenants of each Seller................... 22
Section 4.3 Additional Covenants of each Seller................. 22
Section 4.4 Covenants of the Purchaser.......................... 24
Section 4.5 Mutual Covenants of the Parties..................... 24
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS............................ 25
Section 5.1 Organization and Corporate Power.................... 25
Section 5.2 Authorization of Transactions....................... 26
Section 5.3 Absence of Conflicts................................ 26
Section 5.4 Financial Statements and Related Matters............ 27
Section 5.5 Absence of Undisclosed Liabilities.................. 27
Section 5.6 Absence of Certain Developments..................... 27
Section 5.7 Assets.............................................. 29
Section 5.8 Title to Properties................................. 29
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Section 5.9 Taxes............................................... 30
Section 5.10 Contracts and Commitments........................... 31
Section 5.11 Proprietary Rights.................................. 34
Section 5.12 Litigation; Proceedings............................. 35
Section 5.13 Brokerage........................................... 35
Section 5.14 Governmental Licenses and Permits................... 35
Section 5.15 Employees........................................... 35
Section 5.16 Employee Benefit Matters............................ 36
Section 5.17 Insurance........................................... 37
Section 5.18 Officers and Directors; Bank Accounts............... 37
Section 5.19 Affiliate Transactions.............................. 37
Section 5.20 Compliance with Laws................................ 37
Section 5.21 Environmental Matters............................... 38
Section 5.22 Disclosure; Information Supplied.................... 39
Section 5.23 Closing Date........................................ 39
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.......................... 39
Section 6.1 Organization and Corporate Power.................... 40
Section 6.2 Authorization....................................... 40
Section 6.3 No Violation........................................ 40
Section 6.4 Governmental Authorities and Consents............... 40
Section 6.5 Litigation.......................................... 40
Section 6.6 Brokerage........................................... 41
Section 6.7 No Misstatements.................................... 41
Section 6.8 Closing Date........................................ 41
ARTICLE VII
TERMINATION.............................................................. 41
Section 7.1 Termination......................................... 41
Section 7.2 Effect of Termination............................... 42
ARTICLE VIII
INDEMNIFICATION AND RELATED MATTERS...................................... 42
Section 8.1 Survival............................................ 42
Section 8.2 Indemnification..................................... 43
Section 8.3 Limitations on Indemnity Obligations................ 46
Section 8.4 Exclusive Remedy.................................... 46
ARTICLE IX
ADDITIONAL AGREEMENTS.................................................... 47
Section 9.1 Continuing Assistance............................... 47
Section 9.2 Tax Matters......................................... 47
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Section 9.3 Press Releases and Announcements.................... 48
Section 9.4 Further Transfers................................... 48
Section 9.5 Specific Performance................................ 48
Section 9.6 Transition Cooperation.............................. 48
Section 9.7 Expenses............................................ 48
Section 9.8 Allocation of Purchase Price........................ 49
Section 9.9 Books and Records................................... 49
Section 9.10 Noncompetition, Nonsolicitation and Confidentiality. 49
Section 9.11 Employees and Related Matters....................... 51
Section 9.12 Third Party Consents................................ 53
Section 9.13 Bulk Sales Law...................................... 53
Section 9.14 Financial Information............................... 54
Section 9.15 Volume Discounts.................................... 54
Section 9.16 Cash Collections.................................... 54
ARTICLE X
MISCELLANEOUS............................................................ 54
Section 10.1 Amendment and Waiver................................ 54
Section 10.2 Notices............................................. 55
Section 10.3 Binding Agreement; Assignment....................... 55
Section 10.4 Severability........................................ 56
Section 10.5 No Strict Construction.............................. 56
Section 10.6 Captions............................................ 56
Section 10.7 Entire Agreement.................................... 56
Section 10.8 Counterparts........................................ 56
Section 10.9 Governing Law....................................... 56
Section 10.10 Parties in Interest................................. 56
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INDEX OF EXHIBITS
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Exhibit A - Commitment Letters
Exhibit B - Spin Off Agreements
INDEX OF SCHEDULES
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Assumed Leases Schedule
Transition Schedule
Permitted Lien Schedule
Excluded Assets Schedule
Required Consents Schedule
Lease Consent Schedule
Landlord Waiver Schedule
Organization Schedule
Conflicts Schedule
Financial Statements Schedule
Developments Schedule
Assets Schedule
Leases Schedule
Taxes Schedule
Contracts Schedule
Proprietary Rights Schedule
Litigation Schedule
Brokerage Schedule
Permits Schedule
Employees Schedule
Benefit Plans Schedule
Insurance Schedule
Officers, Directors and Bank Accounts Schedule
Affiliated Transactions Schedule
Environmental Schedule
Seller Reports Schedule
Excluded Employees Schedule
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of June 14, 2000, is made by
and among Cotelligent, Inc., a Delaware corporation ("Charlie"), Cotelligent
USA, Inc., a California corporation ("America" and, together with Charlie, the
"Sellers"), and CITS, a Delaware corporation (the "Purchaser"). The Sellers and
the Purchaser are referred to herein collectively as the "Parties" and,
individually, as a "Party." Certain capitalized terms used herein but not
otherwise defined shall have the meanings ascribed to such terms in Article I
below.
WHEREAS, Charlie owns beneficially and of record 100% of the issued
and outstanding Capital Stock of America;
WHEREAS, the Sellers are engaged in the business of providing
information technology consulting and staffing services to domestic and
international businesses, professional organizations, governmental agencies and
service organizations; and
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Purchaser desires to acquire from the Sellers, and the board
of directors of each Seller deems it advisable and in the best interests of such
Seller to sell to the Purchaser, all of the Sellers' business, properties,
assets, rights and interests (operating as a going concern) related to the
Sellers' information technology staffing business as conducted in Atlanta-GA,
Boston-MA, Cedar Rapids-IA, Cleveland-OH, Colorado Springs-CO, Dallas-TX,
Denver-CO, Fort Lauderdale-FL, Minneapolis-MN, Orlando-FL, Pittsburgh-PA,
Portland-OR, Sacramento-CA, San Diego-CA, San Francisco-CA, San ▇▇▇▇-CA, San
Mateo-CA, San ▇▇▇▇▇-CA, Seattle-WA and Saint Louis-MO, including, without
limitation, the Sellers' accounting centers located in Pittsburgh-PA and
Seattle-WA (collectively, the "Acquired Business").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, and covenants which are to be made and performed by
the respective Parties, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. When used in this Agreement, the following terms
have the meanings set forth below:
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"Accounts Receivable" means all accounts receivable (other than
Excluded Accounts Receivable), including without limitation, all billed and
unbilled receivables, all trade accounts receivable, notes receivable from
customers, customer credits and accounts receivable from employees and all other
obligations from customers (other than the Excluded Accounts Receivable) with
respect to sales of goods or services, whether evidenced or not evidenced by a
note.
"Affiliate" of any Person means any other Person controlling,
controlled by or under common control with such first Person, where "control"
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of voting
securities or otherwise.
"Affiliated Group" means an affiliated group as defined in Section
1504 of the Code (or any similar combined, consolidated or unitary group defined
under state, local or foreign income Tax law).
"Agreement" means this Asset Purchase Agreement, including all
Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
"Assumed Leases" means the Leases (as defined in Section 5.8(b)) set
forth on the Assumed Leases Schedule attached hereto.
"Baseline Net Working Capital Amount" means an amount equal to the
product of (i) 51 multiplied by (ii) the gross revenue of the Acquired Business
for the twelve months ended June 30, 2000 divided by 365.
"Book Value" has the meaning established by GAAP.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required to close under the laws of
the United States.
"Capital Stock" means (i) in the case of a corporation, any and all
shares of capital stock, (ii) in the case of an association or business entity,
any and all shares, interests, participations, rights or other equivalents
(however designated) of capital stock, (iii) in the case of a partnership or
limited liability company, any and all partnership or membership interests
(whether general or limited), (iv) in any case, any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person, and
(v) in any case, any right to acquire any of the foregoing.
"Cash" means cash, cash equivalents and marketable securities
(including, without limitation, all money market accounts and mutual fund
accounts).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
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"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Commitment Letters" means the commitment letters attached hereto as
Exhibit A providing for the debt financing necessary for the consummation of the
transactions contemplated by this agreement.
"Earn-Out Amount" means an amount equal to the lesser of (a)
$5,000,000 and (b) the number of dollars equal to the product of (i) 5.75
multiplied by (ii) the amount, if any, by which EBITDA for the three month
period ended June 30, 2000 exceeds $5,946,000.
"EBITDA" means, with respect to a period for which it is determined,
the net earnings of the Acquired Business for such period determined in the
Ordinary Course of Business (excluding any earnings relating to the accounts
receivable owed by GST Telecom, Inc., Management Solutions, Inc. or Tirada, Ltd.
and excluding any earnings of the Acquired Business for such period arising from
business activities not in the Ordinary Course of Business) prior to the
provision for interest, income taxes, depreciation and amortization (each as
determined in the Ordinary Course of Business), determined on a consolidated
basis in accordance with GAAP, applied on a consistent basis.
"Environmental Affiliate" of any Person means, with respect to any
particular matter, each other Person whose liabilities or obligations with
respect to that particular matter have been assumed by, or are otherwise deemed
by law to be those of, such first Person.
"Environmental and Safety Requirements" means all federal, state,
local and foreign statutes, regulations, ordinances and similar provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
"Environmental Lien" means any Lien, whether recorded or unrecorded,
in favor of any governmental entity or any department, agency or political
subdivision thereof relating to any liability of any Seller or any Environmental
Affiliate of any such Person arising under any Environmental and Safety
Requirement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Accounts Receivable" means (i) all accounts receivable from
Management Solutions, Inc., Tirada, Ltd. and GST Telecom, Inc., including
without limitation, all billed and
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unbilled receivables, all trade accounts receivable, notes receivable, credits
and all other obligations from Management Solutions, Inc., Tirada, Ltd. and GST
Telecom, Inc. with respect to sales of goods or services, whether evidenced or
not evidenced by a note and (ii) all accounts receivable from 3DFX Interactive,
Inc., Manpower, Inc., Network Associates, Inc., Qwest Communications and the
State of Georgia which are more than 90 days old as of the Closing Date,
including without limitation, all billed receivables, all trade accounts
receivable, notes receivable, credits and all other obligations from such
customers with respect to sales of goods or services, whether evidenced or not
evidenced by a note, which are more than 90 days old as of the Closing Date.
"Final Payment Date" means the fifth Business Day following the final
determination of the Actual Net Working Capital Amount, the Actual Baseline Net
Working Capital Amount and the Earn-Out Amount pursuant to Section 2.2(a).
"Fixed Assets" has the meaning established by GAAP.
"GAAP" means, at any given time, generally accepted accounting
principles of the United States, consistently applied.
"Gross Revenue" means the aggregate gross revenue derived by the
Parties from a specified customer.
"Indebtedness" of any Person means, without duplication: (a)
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor or otherwise (including, without limitation, trade
payables and other current liabilities and any earn-out or other contingent
payment obligations), and any commitment by which such Person assures a creditor
against loss, including contingent reimbursement obligations with respect to
letters of credit; (b) indebtedness guaranteed in any manner by such Person,
including a guarantee in the form of an agreement to repurchase or reimburse;
and (c) obligations under capitalized leases in respect of which such Person is
liable, contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which obligations such Person assures a creditor against loss.
"Insider" means, any officer, director, executive employee,
stockholder, partner or Affiliate of any Seller, or any spouse or descendant
(natural or adopted) of any such individual, or any entity in which any such
Person owns any beneficial interest.
"Intangible Assets" has the meaning established by GAAP.
"knowledge" and "aware" and terms of similar import mean, with respect
to a Person, the actual knowledge of such Person (and if such Person is an
entity, this means the actual knowledge of the officers, directors and executive
employees of such Person).
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"Leasehold Improvements" shall mean all buildings, structures,
improvements and fixtures located on any Leased Real Property which are owned by
any Seller, regardless of whether the same are subject to reversion to the
landlord or other third party upon termination or expiration of the Lease for
such Leased Real Property.
"License Agreement" means a license agreement in form and substance
reasonably satisfactory to the Parties providing for the use by the Purchaser of
the "Cotelligent" and "Cotelligent Professional Services" names for a 90 day
transition period following the Closing Date.
"Licenses" means all permits, licenses, franchises, certificates,
approvals and other authorizations of third parties or foreign, federal, state
or local governments or other similar rights.
"Liens" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against any Seller or any Affiliate of any Seller, any
filing or agreement to file a financing statement as debtor under the Uniform
Commercial Code or any similar statute other than to reflect ownership by a
third party of property leased to any Seller or any Affiliate of any Seller
under a lease which is not in the nature of a conditional sale or title
retention agreement, or any subordination arrangement in favor of another Person
(other than any subordination arising in the Ordinary Course of Business).
"Loss" means, with respect to any Person, any diminution in value,
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any governmental entity or any department,
agency or political subdivision thereof) against or affecting such Person.
"Material Adverse Effect" means any material adverse effect on the
business, financial condition, operations, results of operations, employee
relations, customer or supplier relations or assets of the Acquired Business.
"Net Working Capital Amount" means (i) the book value of the Sellers'
current assets that are Acquired Assets, determined on a consolidated basis in
accordance with GAAP, applied on a consistent basis, minus (ii) the book value
of the Sellers' current liabilities that are Assumed Liabilities, determined on
a consolidated basis in accordance with GAAP, applied on a consistent basis.
"Ordinary Course of Business" means the ordinary course of the
Acquired Business consistent with past practice (including, without limitation,
with respect to collection of accounts receivable, purchases of inventory and
supplies, repairs and maintenance, payment of accounts payable and accrued
expenses, levels of capital expenditures and operation of cash management
5
practices generally) and expense allocation practices between the Acquired
Business and the other businesses of the Sellers.
"Permitted Encumbrances" shall mean: (A) statutory liens for current
taxes or other governmental charges not yet due and payable or the amount or
validity of which is being contested in good faith in appropriate proceedings
for which adequate reserves have been established in accordance with GAAP, which
reserves are included in the Acquired Assets or Assumed Liabilities; (B)
mechanics, carriers, workers, repairers and similar statutory liens arising or
incurred in the Ordinary Course of Business for amounts which are not delinquent
and which could not, individually or in the aggregate, have a Material Adverse
Effect; (C) zoning, entitlement, building and other land use regulations imposed
by governmental agencies having jurisdiction over the real property which are
not violated by the current use and operation of the real property; (D)
covenants, conditions, restrictions, easements and other matters of record
affecting title to the real property which do not unreasonably interfere with
the current use, occupancy, or value, or the marketability of title, of the real
property; and (E) Liens in existence on the date hereof that are described
(including a description of the property subject thereto) on the "Permitted Lien
Schedule" attached hereto.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof and any other entity.
"Predecessor Entity" means a Person acquired by a Seller or an
Affiliate of a Seller whose assets comprise a portion of the Acquired Assets.
"Proprietary Rights" means any and all (i) patents, patent
applications, patent disclosures, as well as any reissues, continuations,
continuations-in-part, divisions, extensions and reexaminations thereof, (ii)
trademarks, service marks, trade dress, trade names, logos and corporate names,
and registrations and applications for registration thereof, together with all
of the goodwill associated therewith, (iii) copyrights (registered or
unregistered) and copyrightable works and registrations and applications for
registration thereof, (iv) mask works and registrations and applications for
registration thereof, (v) domain names, (vi) computer software, data, data bases
and documentation thereof, (vii) trade secrets and other confidential
information (including, without limitation, ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, financial and marketing plans, and customer and
supplier lists and information), (viii) other intellectual property rights, (ix)
copies and tangible embodiments thereof (in whatever protectable form or medium)
and (x) license agreements related thereto.
"Release" has the meaning set forth in CERCLA.
"SEC" means the Securities and Exchange Commission of the
United States.
6
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Seller Reports" means all forms, reports and documents required to be
filed by Charlie with the SEC pursuant to the Securities Act and/or the Exchange
Act.
"Shared Locations" means the following locations at which the Sellers'
information technology staffing business is conducted: Atlanta-GA; Dallas-TX;
Minneapolis-MN; San Diego-CA; and San ▇▇▇▇-CA.
"Subsidiary" means, with respect to any Person, any corporation a
majority of the total voting power of shares of stock of which is entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or any partnership, limited liability
company, association or other business entity a majority of the partnership or
other similar ownership interest of which is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes of this definition, a Person is
deemed to have a majority ownership interest in a partnership, limited liability
company, association or other business entity if such Person is allocated a
majority of the gains or losses of such partnership, limited liability company,
association or other business entity or is or controls the managing director or
general partner of such partnership, limited liability company, association or
other business entity.
"Tangible Assets" has the meaning established by GAAP.
"Tax Returns" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Taxes" 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, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, or other tax, fee, assessment or charge of any
kind whatsoever, including any interest, penalty or addition thereto, whether
disputed or not.
"Transaction Documents" means this Agreement, and all other
agreements, instruments, certificates and other documents to be entered into or
delivered by any Party in connection with the transactions contemplated to be
consummated pursuant to this Agreement.
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"Transition Services Agreement" means an agreement in form and
substance reasonably satisfactory to the Parties providing for the supply of
certain services of the types set forth on the Transition Schedule attached
hereto between the Parties in connection with the transition after the Closing
of the Acquired Business to the Purchaser.
"Treasury Regulations" means the United States Treasury Regulations
promulgated pursuant to the Code.
Section 1.2 Other Definitional Provisions.
(a) Accounting Terms. Accounting terms which are not otherwise defined
in this Agreement have the meanings given to them under GAAP. To the extent that
the definition of an accounting term that is defined in this Agreement is
inconsistent with the meaning of such term under GAAP, the definition set forth
in this Agreement will control.
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and
terms of similar import are references to this Agreement as a whole and not to
any particular provision of this Agreement. Section, clause, Schedule and
Exhibit references contained in this Agreement are references to Sections,
clauses, Schedules and Exhibits in or to this Agreement, unless otherwise
specified.
(c) Successor Laws. Any reference to any particular Code section or
any other law or regulation will be interpreted to include any revision of or
successor to that Code section, law or regulation regardless of how it is
numbered or classified.
Section 1.3 Cross Reference of Other Definitions. Each capitalized term
listed below is defined in the corresponding Section of this Agreement:
TERM SECTION
---- -------
Acquired Assets Section 2.1(a)
Acquired Business Recitals
Acquired Business Employees Section 9.11(a)
Actual Baseline Net Working Capital Amount Section 2.2(a)
Actual Net Working Capital Amount Section 2.2(a)
America Preface
Applicable Limitation Date Section 8.1
Asset Purchase Price Allocation Section 9.8
Assumed Liabilities Section 2.1(c)
Basket Amount Section 8.3
Charlie Preface
Closing Section 2.3(a)
Closing Date Section 2.3(a)
Closing Review Section 2.2(a)
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Closing Transactions Section 2.3(b)
COBRA Section 5.16(a)
Competing Activity Section 9.10(a)
Competing Persons Section 9.10(a)
Confidential Information Section 9.10(d)
Disclosure Document Section 4.5(b)
Discount Payment Section 9.15
Draft Computations Section 2.2(a)
ERISA Section 5.16(a)
Escrow Account Section 2.3(b)(i)
Escrow Agreement Section 2.3(b)(i)
Excluded Assets Section 2.1(b)
Excluded Employees Section 9.11(b)
Excluded Liabilities Section 2.1(d)
Excluded Leases Section 2.1(b)(vii)
Financial Statements Section 5.4(a)
Firm Section 2.2(a)
Fundamental Representations and Warranties Section 8.1
HSR Act Section 3.1(f)
Indemnified Party Section 8.2(e)
Indemnifying Party Section 8.2(e)
Latest Balance Sheet Section 5.4(a)
Leased Real Property Section 5.8(b)
Leases Section 5.8(b)
Net Payment Amount Section 9.15
Noncompete Period Section 9.10(a)
Objection Notice Section 2.2(a)
Parties Preface
Plans Section 5.16(a)
Prime Rate Section 2.2(b)(i)
Purchase Price Section 2.1(e)
Purchaser Preface
Purchaser Parties Section 8.2(a)
Purchaser Savings Plan Section 9.11(f)
Purchaser's Employee Benefit Plans Section 9.11(d)
Regulation S-X Section 9.14
Representative Section 4.3(a)
Restricted Geographic Area Section 9.10(a)
Sellers Preface
Seller Parties Section 8.2(c)
Seller Savings Plan Section 9.11(f)
Spin-Off Agreements Section 3.1(m)
Transaction Proposal Section 4.3(a)
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Transferred Employees Section 9.11(b)
Unassigned Contracts Section 9.12
WARN Section 5.15
ARTICLE II
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING
Section 2.1 Purchase and Sale.
(a) Purchase and Sale of Acquired Assets. On the basis of the
representations, warranties, covenants and agreements set forth herein, and
subject to the satisfaction or waiver of the conditions set forth herein and the
terms hereof, at the Closing, subject to Section 2.1(b) hereof, the Purchaser
shall purchase from each Seller, and each Seller shall sell, assign, transfer
and deliver to the Purchaser, free and clear of any Liens, all business,
properties, assets, rights and interests of every kind and nature used in or
primarily related to the Acquired Business and owned by such Seller (or in which
such Seller has another interest) on the Closing Date, whether tangible or
intangible, and wherever located and by whomever possessed (collectively, the
"Acquired Assets"), including, without limitation:
(i) all Accounts Receivable (whether current or noncurrent);
(ii) all Proprietary Rights, along with all income, royalties,
damages and payments receivable in respect of any such Proprietary
Right, including, without limitation, all damages and payments for
past, present or future infringements or misappropriations thereof,
the right to ▇▇▇ and recover for past infringements or
misappropriations thereof and any and all corresponding rights that,
now or hereafter, may be secured throughout the world with respect to
any such Proprietary Right;
(iii) all rights existing under leases, contracts, licenses,
permits, distribution arrangements, sales and purchase agreements,
accounts receivable, other agreements and business arrangements,
including, without limitation, all contracts and agreements described
on the Contracts Schedule attached hereto;
(iv) all of the Assumed Leases and Leasehold Improvements with
respect to the Assumed Leases;
(v) all transportation and office equipment, furniture and
computer equipment;
(vi) all inventories of work in process, semi-finished and
finished goods, stores, replacement and spare parts, packaging
materials, operating supplies and fuels;
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(vii) all office supplies, production supplies, other
miscellaneous supplies and other tangible property of any kind;
(viii) all prepayments, security deposits and prepaid expenses;
(ix) the right to receive and retain mail, accounts receivable
payments and other communications relating to the Acquired Business;
(x) the right to ▇▇▇▇ and receive payment for products shipped
or delivered and services performed but unbilled or unpaid as of the
Closing;
(xi) all lists, records and other information pertaining to
accounts, personnel (including, without limitation, any lists and
information contained in data bases containing names of all past,
present and potential consultants and employees) and referral sources,
all lists and records pertaining to suppliers and customers, and
copies of all books, ledgers, files and business records (including,
without limitation, all accounting records for the fiscal years ended
March 31, 2000, 1999 and 1998 and for the period between April 1, 2000
and the Closing Date) used in or primarily related to the Acquired
Business, in each case whether evidenced in writing, electronically
(including, without limitation, by computer) or otherwise;
(xii) all advertising, marketing and promotional materials and
all other printed or written materials;
(xiii) all permits, licenses, certifications and approvals from
all permitting, licensing, accrediting and certifying agencies, and
the rights to all data and records held by such permitting, licensing
and certifying agencies;
(xiv) all telephone numbers (e.g. "800" numbers);
(xv) all goodwill as a going concern and all other intangible
properties;
(xvi) all rights to and interests in, including, without
limitation, all Proprietary Rights (including, without limitation, web
pages) with respect to, the website ▇▇▇.▇▇▇▇.▇▇▇▇▇▇▇▇▇▇▇.▇▇▇; and
(xvii) except as specified in Section 2.1(b) below, all other
property used in or primarily related to the Acquired Business and
owned by any Seller (or in which any Seller has another interest) on
the Closing Date, including, without limitation, all fixed assets
included on the Latest Balance Sheet and any and all subsequent
improvements or additions thereon through the Closing Date.
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It is acknowledged that both the Acquired Business and the businesses to be
retained by the Sellers are conducted out of the Shared Locations, and thus, for
greater certainty, the Parties agree that the assets listed on the "Excluded
Assets Schedule" attached hereto in respect of the Shared Locations shall not
constitute Acquired Assets, but rather, shall constitute Excluded Assets.
(b) Excluded Assets. Notwithstanding any implication to the contrary
contained in Section 2.1(a) above, the following assets, (collectively, the
"Excluded Assets") are expressly excluded from the purchase and sale
contemplated thereby and, as such, are not Acquired Assets:
(i) all of the Sellers' business, properties, assets, rights
and interests of every kind and nature that are not used in or
primarily related to the Acquired Business, including, without
limitation, the assets listed on the Excluded Assets Schedule;
(ii) all of the Sellers' accounting centers other than the
accounting centers located in Pittsburgh-PA and Seattle-WA (other than
any accounting records referenced to in Section 2.1(a)(xi) above
contained at such location);
(iii) all Cash on hand as of the Closing Date and monies to be
received by the Sellers from the Purchaser pursuant to this Agreement;
(iv) all rights of the Sellers under this Agreement;
(v) all taxpayer and other identification numbers of the
Sellers;
(vi) all seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization,
maintenance and existence of each Seller and each Predecessor Entity
as a legal entity;
(vii) all Leases other than the Assumed Leases (the "Excluded
Leases");
(viii) the Excluded Accounts Receivable; and
(ix) subject to Section 2.1(a)(xi) and Section 9.9, all tax,
accounting, benefit plan and other books and records of the Sellers
and each Predecessor Entity.
(c) Assumed Liabilities. Subject to Section 9.12 below, as additional
consideration for the Acquired Assets, at the Closing the Purchaser will assume
all liabilities and obligations arising in connection with the Acquired Business
on or after the Closing Date (other than liabilities and obligations arising in
connection with any Excluded Lease) (collectively, the "Assumed Liabilities").
The Assumed Liabilities shall also include the following liabilities: (i)
payroll, payroll taxes and the costs of benefit obligations to participants for
the period commencing on the day after the Acquired Business' last regular
payroll payment date and ending on the Closing Date, (ii) commissions,
subcontractor payables and expense reports for the period commencing on
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the day after the Acquired Business' last regular payroll payment date and
ending on the Closing Date, (ii) commissions, subcontractor payables and expense
reports for the period commencing on the day after the Acquired Business' last
regular payment date for such items and ending on the Closing Date, (iii)
accrued liabilities as of the Closing Date for volume discounts to customers of
the Acquired Business, and (iv) other ordinary operating expenses accrued in the
Ordinary Course of Business with respect to lease payments, and office supplies.
Notwithstanding any implication to the contrary contained in this Section
2.1(c), the Purchaser will not assume and shall not be liable (x) for any
liabilities and/or obligations arising out of facts and circumstances in
existence prior to the Closing (including, without limitation, severance
obligations) other than with respect to the items specifically set forth in
clauses (i), (ii) and (iii) of this Section 2.1(c) or (y) to any current or
former employee of any Seller for any liabilities and/or obligations arising out
of the transactions contemplated herein (e.g., severance, change of control or
other similar obligations).
(d) Excluded Liabilities. Unless expressly assumed by the Purchaser
pursuant to Section 2.1(c) above, the Purchaser shall not assume or become
liable for, and the Purchaser shall not be deemed to have assumed or have become
liable for, any liabilities and/or obligations of any Seller, whether accrued,
absolute or contingent, whether known or unknown, whether disclosed or
undisclosed, whether due or to become due and regardless of when asserted,
including, without limitation, any liabilities and/or obligations arising from
or relating to the Sellers' operation of the Acquired Business and/or the
Acquired Assets prior to the Closing Date and any intercompany payables from the
Acquired Business to the Sellers or their Affiliates (collectively, the
"Excluded Liabilities").
(e) Purchase Price for Acquired Assets. The purchase price for the
Acquired Assets (the "Purchase Price") will consist of the assumption by the
Purchaser at the Closing of the Assumed Liabilities and the payment by the
Purchaser at the Closing of $116,495,000 (as adjusted pursuant to Section 2.2
below) in cash to the Sellers. The Purchase Price shall first be allocated to
Accounts Receivable, Fixed Assets and all other Tangible Assets based on their
Book Value with the remaining balance of the Purchase Price then being allocated
to Intangible Assets. The Purchase Price is subject to adjustment pursuant to
Section 2.2 hereof.
Section 2.2 Purchase Price Adjustments.
(a) Post-Closing Determination. Within 60 days after the Closing
Date, the Purchaser and its auditors will conduct a review (the "Closing
Review") of the Net Working Capital Amount and the Baseline Net Working Capital
Amount as of the close of business on the Closing Date and the Earn-Out Amount
and will prepare and deliver to the Sellers a computation of the Net Working
Capital Amount and the Baseline Net Working Capital Amount as of the close of
business on the Closing Date, and the Earn-Out Amount (the "Draft
Computations"). The Purchaser and its auditors will make available to the
Sellers and their auditors all records and work papers used in preparing the
Draft Computations. If the Sellers disagree with the computation of the Net
Working Capital Amount, the Baseline Net Working Capital Amount or the Earn-Out
Amount reflected on the Draft Computations, the Sellers may, within 30 days
after receipt of the Draft Computations, deliver a written notice (an "Objection
Notice") to the Purchaser setting forth the Sellers' calculation of the Net
Working Capital Amount and/or the Baseline Net Working Capital Amount and/or the
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Earn-Out Amount as of the close of business on the Closing Date. If the Sellers
do not deliver an Objection Notice within such 30 day period, then the Draft
Computations shall be binding and conclusive upon each of the Parties. If the
Sellers deliver the Objection Notice within such 30 day period, the Purchaser
and the Sellers will use reasonable best efforts to resolve any disagreements as
to the Draft Computations, but if they do not obtain a final resolution within
30 days after the Purchaser has received the Objection Notice, the Purchaser and
the Sellers will jointly retain an independent accounting firm of recognized
national standing (the "Firm") to resolve any remaining disagreements. If the
Purchaser and the Sellers are unable to agree on the choice of the Firm, then
the Firm will be a "big-five" accounting firm selected by lot (after excluding
one firm designated by the Purchaser and one firm designated by the Sellers).
The Purchaser and the Sellers will direct the Firm to render a determination
within 30 days of its retention, and the Purchaser and the Sellers and their
respective agents will cooperate with the Firm during its engagement. The Firm
will consider only those items and amounts in the Draft Computations set forth
in the Objection Notice which the Purchaser and the Sellers are unable to
resolve. In resolving any disputed item, the Firm may not assign a value to any
item greater than the greatest value for such item claimed by either party or
less than the smallest value for such item claimed by either party. The Firm's
determination will be based solely on presentations by the Purchaser and the
Sellers (i.e., not on independent review) and on the definitions of the Net
Working Capital Amount, the Baseline Net Working Capital Amount and the Earn-Out
Amount included herein. The determination of the Firm will be conclusive and
binding upon the Purchaser and the Sellers. The Purchaser and the Sellers shall
bear the costs and expenses of the Firm based on the percentage which the
portion of the contested amount not awarded to each Party bears to the amount
actually contested by such Party. The Net Working Capital Amount and the
Baseline Net Working Capital Amount, as determined pursuant to this Section
2.2(a), are referred to herein as the "Actual Net Working Capital Amount" and
the "Actual Baseline Net Working Capital Amount," respectively.
(b) Post-Closing Adjustment.
(i) Payment by the Purchaser. If the Actual Net Working Capital
Amount exceeds the Actual Baseline Net Working Capital Amount, then the
Purchaser shall, within five (5) Business Days after the determination
thereof, pay to the Sellers an aggregate amount equal to the result of (x)
the Actual Net Working Capital Amount, minus (y) the Actual Baseline Net
Working Capital Amount, plus (z) interest on the difference between (x) and
(y) from the Closing Date to the date of payment at an interest rate equal
to the "Prime Rate" as listed in the Wall Street Journal on the Closing
Date (the "Prime Rate"). Such payment will be made by wire transfer or
delivery of other immediately available funds on the Final Payment Date.
(ii) Payment by the Sellers. If the Actual Net Working Capital
Amount is less than the Actual Baseline Net Working Capital Amount, then
the Sellers shall, within five (5) Business Days after the determination
thereof, pay to the Purchaser an aggregate amount equal to the result of
(x) the Actual Baseline Net Working Capital Amount, minus (y) the Actual
Net Working Capital Amount, plus (z) interest on the difference between (x)
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and (y) from the Closing Date to the date of payment at an interest rate
equal to the Prime Rate. Such payment will be made by wire transfer or
delivery of other immediately available funds on the Final Payment Date.
(c) Earn-Out. The Earn-Out Amount, if any, shall become due and
payable by the Purchaser to the Sellers on the Final Payment Date.
All amounts payable on the Final Payment Date pursuant to Sections 2.2(b) and
(c) shall be added together or netted against one another, as applicable, such
that only one payment will be made from one Party to another Party on the Final
Payment Date, and such payment shall be made by wire transfer of immediately
available funds to the account(s) designated by the payee.
Section 2.3 Closing Transactions.
(a) Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, commencing at 10:00 a.m. on
the later of June 30, 2000 and the Business Day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself), or at such other place
or on such other date as may be mutually agreeable to the Purchaser and the
Sellers; provided that, in any event, if the Purchaser's senior lenders require
that the Closing take place at the offices of their attorneys, the Parties agree
that the Closing shall take place at such offices. The date and time of the
Closing are herein referred to as the "Closing Date."
(b) Closing Transactions. Subject to the conditions set forth in this
Agreement, the Parties shall consummate the following transactions (the "Closing
Transactions") at the Closing:
(i) the Purchaser (A) shall pay, in accordance with the Purchase
Price Allocation Schedule, an aggregate amount in cash equal to (x) the
Purchase Price minus (y) $5,000,000, by wire transfer of immediately
available funds to an account or accounts designated by the Sellers, and
(B) shall deposit an aggregate amount in cash equal to $5,000,000 into an
escrow account (the "Escrow Account") governed by an Escrow Agreement in
form and substance reasonably satisfactory to the Parties (the "Escrow
Agreement"); it being understood and agreed that the Escrow Account shall
have a term of one (1) year and shall be available to satisfy any amounts
owing to the Purchaser pursuant to Section 2.2 and/or Section 8.2 hereof;
(ii) the Sellers shall convey to the Purchaser good and
marketable title to all of the Acquired Assets, free and clear of all Liens
(other than Permitted Encumbrances and Liens to be removed by the Sellers
pursuant to clause (iv) below), and deliver to the Purchaser bills of sale,
assignment of leases and contracts and all other instruments of
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conveyance which are necessary or desirable to effect transfer of the
Acquired Assets, in form and substance reasonably satisfactory to the
Purchaser;
(iii) the Purchaser shall deliver to the Sellers such instruments
of assumption as are required in order for the Purchaser to assume the
Assumed Liabilities;
(vi) the Sellers shall make arrangements satisfactory to the
Purchaser for any and all Liens (other than Permitted Encumbrances) on the
Acquired Assets to be released; and
(v) the Sellers and the Purchaser, as applicable, shall deliver
the opinions, certificates and other documents and instruments required to
be delivered by or on behalf of such Party under Article III.
ARTICLE III
CONDITIONS TO CLOSING
Section 3.1 Conditions to the Purchaser's Obligations. The obligations of
the Purchaser to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article V hereof
shall be true and correct in all material respects (except that the
representations and warranties which are qualified as to "materiality" or
"Material Adverse Effect" shall be true and correct in all respects) at and as
of the Closing Date as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout such representations and
warranties (without taking into account any disclosures made by the Sellers or
any of their representatives or agents to the Purchaser pursuant to Section
4.1(g) or 5.23 hereof);
(b) The Sellers shall have performed and complied in all material
respects with all of the covenants and agreements required to be performed by
them under this Agreement on or prior to the Closing;
(c) All consents by third parties that are set forth on the Required
Consents Schedule attached hereto shall have been obtained on terms reasonably
satisfactory to the Purchaser;
(d) All governmental filings, authorizations and approvals that are
required for the transfer of the Acquired Assets to the Purchaser and the
consummation of the other transactions contemplated hereby shall have been duly
made and obtained on terms reasonably satisfactory to the Purchaser;
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(e) The purchase of the Acquired Assets by the Purchaser hereunder
shall not be prohibited by any applicable law or governmental regulation, shall
not subject the Purchaser to any material penalty or liability under or pursuant
to any applicable law or governmental regulation, and shall be permitted by the
laws and regulations of the jurisdictions to which the Purchaser is subject;
(f) The applicable waiting periods, if any, under the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Antitrust Improvement Act of 1976, as amended (the "HSR Act") shall have
expired or been terminated;
(g) 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 or before any arbitrator wherein an
unfavorable judgment, decree, injunction, order or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or materially and adversely affect the right of the
Purchaser to own, operate or control the Acquired Assets, and no judgment,
decree, injunction, order or ruling shall have been entered which has any of the
foregoing effects;
(h) Since the date hereof, there shall have been no Material Adverse
Effect;
(i) The Sellers shall have delivered to the Purchaser releases of any
and all Liens (other than Permitted Encumbrances), including appropriate UCC
termination statements, held by third parties against the Acquired Assets, in
each case on terms satisfactory to the Purchaser;
(j) The Purchaser shall have received opinions, dated as of the
Closing Date, of ▇▇▇▇▇▇ ▇▇▇▇ & Priest LLP, counsel to the Sellers, and of
Morris, Nichols, Arsht & ▇▇▇▇▇▇▇, counsel to the Sellers with respect to Section
271 of the Delaware General Corporation Law, in each case in form and substance
reasonably satisfactory to the Purchaser;
(k) The Sellers shall have entered into the Escrow Agreement, and it
shall be in full force and effect as of the Closing;
(l) The Sellers shall have entered into the Transition Services
Agreement and it shall be in full force and effect as of the Closing.
(m) The Sellers shall have entered into each of the spin-off
agreements attached hereto as Exhibit B (the "Spin-Off Agreements") and the
Spin-Off Agreements shall be in full force and effect as of the Closing.
(n) The Sellers shall have entered into the License Agreement, and it
shall be in full force and effect as of the Closing.
(o) On or prior to the Closing Date, the Sellers shall have delivered
to the Purchaser all of the following:
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(i) a certificate from the Sellers in a form reasonably
satisfactory to the Purchaser, dated as of the Closing Date, stating that
they have taken all actions required on their part to satisfy the
preconditions specified in Sections 3.1(a) through (k);
(ii) copies of all third party and governmental consents,
approvals, filings, releases and terminations required of the Sellers in
connection with the consummation of the transactions contemplated herein;
(iii) certified copies of the resolutions of the board of
directors of each Seller approving the transactions contemplated by this
Agreement;
(vi) certificates of the secretary of state of the States of
Delaware and California providing that each Seller is in good standing;
(v) a copy of the articles or certificate of incorporation of
each Seller, certified by the appropriate authority in the jurisdiction in
which such entity was incorporated;
(vi) a copy of the bylaws of each Seller, certified by an officer
of such Seller;
(vii) such other documents or instruments as the Purchaser may
reasonably request to effect the transactions contemplated hereby;
(p) The Sellers shall have obtained and delivered to the Purchaser an
estoppel certificate, lien waiver and consent in form and substance satisfactory
to the Purchaser and the Purchaser's lenders with respect to each of the Leases
set forth on the "Lease Consent Schedule", dated no more than thirty (30) days
prior to the Closing, from the other party to such Lease;
(q) The Purchaser shall have received aggregate cash proceeds from
senior and subordinated debt lenders in the amounts set forth in the Commitment
Letters and on terms no less favorable to the Purchaser than those set forth in
the Commitment Letters;
(r) The Sellers shall have completed consolidation of the Acquired
Business' processing centers into two processing centers located at Pittsburgh,
PA and Seattle, WA and such centers shall be operating in a manner reasonably
satisfactory to the Purchaser.
(s) All proceedings to be taken by the Sellers in connection with the
consummation of the Closing Transactions and the other transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to be delivered by the Sellers to effect the transactions contemplated hereby or
as reasonably requested by the Purchaser in its sole discretion shall be
reasonably satisfactory in form and substance to the Purchaser.
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Any condition specified in this Section 3.1 may be waived by the Purchaser in
its sole discretion; provided that no such waiver shall be effective against the
Purchaser unless it is set forth in a writing executed by the Purchaser.
Notwithstanding anything herein to the contrary, the Purchaser shall be deemed
to have waived any unsatisfied condition by consummating the transactions
contemplated herein.
Section 3.2 Conditions to the Sellers' Obligations. The obligations of
the Sellers to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in Article VI shall
be true and correct in all material respects (except that the representations
and warranties which are qualified as to "materiality" or "Material Adverse
Effect" shall be true and correct in all respects) at and as of the Closing Date
as though then made and as though the Closing Date were substituted for the date
of this Agreement throughout such representations and warranties (without taking
into account any disclosures made by the Purchaser to the Sellers pursuant to
Section 4.4(a) or 6.7 hereof);
(b) The Purchaser shall have performed and complied in all material
respects with all of the covenants and agreements required to be performed by it
under this Agreement on or prior to the Closing;
(c) The Purchaser shall have entered into the Escrow Agreement, the
Transition Services Agreement, the Spin-Off Agreements and the License Agreement
and they shall be in full force and effect as of the Closing.
(d) The applicable waiting periods, if any, under the HSR Act shall
have expired or been terminated;
(e) The sale of the Acquired Assets by the Sellers hereunder shall not
be prohibited by any applicable law or governmental regulation, shall not
subject the Sellers to any material penalty or liability under or pursuant to
any applicable law or governmental regulation, and shall be permitted by the
laws and regulations of the jurisdictions to which the Sellers are subject;
(f) The Sellers shall have received an opinion, dated as of the
Closing Date, of Morris, Nichols, Arsht & ▇▇▇▇▇▇▇, counsel to the Sellers, with
respect to Section 271 of the Delaware General Corporation Law, in form and
substance reasonably satisfactory to the Sellers;
(g) On or prior to the Closing Date, the Purchaser shall have
delivered to the Sellers all of the following:
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(i) a certificate from the Purchaser in a form reasonably
satisfactory to the Sellers, dated as of the Closing Date, stating that the
Purchaser has taken all actions required on its part to satisfy the
preconditions specified in Sections 3.2(a) through (d);
(ii) copies of all third party and governmental consents,
approvals, filings, releases and terminations required of the Purchaser in
connection with the consummation of the transactions contemplated herein;
(iii) a certificate of the secretary of state of the State of
Delaware providing that the Purchaser is in good standing;
(iv) certified copies of the resolutions of the Purchaser's board
of directors approving the transactions contemplated by this Agreement; and
(v) such other documents or instruments as the Sellers may
reasonably request to effect the transactions contemplated hereby.
(h) All proceedings to be taken by the Purchaser in connection with
the consummation of the Closing Transactions and the other transactions
contemplated hereby and all certificates, instruments and other documents
required to be delivered by the Purchaser to effect the transactions
contemplated hereby or as reasonably requested by the Sellers shall be
reasonably satisfactory in form and substance to the Sellers.
Any condition specified in this Section 3.2 may be waived by the Sellers in
their sole discretion; provided that no such waiver shall be effective unless it
is set forth in a writing executed by the Sellers. Notwithstanding anything
herein to the contrary, the Sellers shall be deemed to have waived any
unsatisfied condition by consummating the transactions contemplated herein.
ARTICLE IV
COVENANTS PRIOR TO CLOSING
Section 4.1 Affirmative Covenants of each Seller. Each Seller covenants
and agrees that, from the date of this Agreement and until the Closing or the
date, if any, on which this Agreement is earlier terminated pursuant to Section
7.1 hereof, unless the Purchaser otherwise agrees in writing and except as
expressly contemplated by this Agreement, each Seller shall with respect to the
Acquired Business:
(a) conduct its business and operations only in the Ordinary Course of
Business;
(b) keep in full force and effect its corporate existence and all
rights, franchises and Proprietary Rights relating or pertaining to the Acquired
Business and use its reasonable best
20
efforts to cause its current insurance (or reinsurance) policies not to be
canceled or terminated or any of the coverage thereunder to lapse;
(c) use commercially reasonable efforts to carry on the Acquired
Business in the same manner as presently conducted and to keep the Sellers'
business organization and properties intact, including its present business
operations, physical facilities, working conditions and employees and its
present relationships with lessors, licensors, suppliers and customers and
others having business relations with it;
(d) maintain the material assets in good repair, order and condition
(normal wear and tear excepted) consistent with current needs, replace in
accordance with prudent practices its inoperable, worn out or obsolete assets
with assets of good quality consistent with prudent practices and current needs
and, in the event of a casualty, loss or damage to any of such assets or
properties prior to the Closing Date (whether or not such casualty, loss or
damage is covered by insurance), either repair or replace such damaged property
or use the proceeds of such insurance in such other manner as mutually agreed
upon by the Sellers and the Purchaser;
(e) take commercially reasonable actions to facilitate the continued
employment of employees by the Purchaser and its Subsidiaries after the Closing;
(f) maintain the books, accounts and records in accordance with past
custom and practice as used in the preparation of the Financial Statements;
(g) promptly (once any Seller obtains knowledge thereof) inform the
Purchaser in writing of any exceptions from the representations and warranties
contained in Article IV hereof that were not previously disclosed or any breach
of any covenant hereunder by any Seller or any of their representatives or
agents;
(h) cooperate with the Purchaser and use commercially reasonable
efforts to cause the conditions to the Purchaser's obligations to close to be
satisfied (including, without limitation, the execution and delivery of all
agreements contemplated hereunder to be so executed and delivered and the making
and obtaining of all third party and governmental notices, filings,
authorizations, approvals, consents, releases and terminations);
(i) use commercially reasonable efforts to obtain all third party and
governmental approvals and consents necessary or desirable to consummate the
transactions contemplated hereby;
(j) use reasonable best efforts to maintain the existence of and use
commercially reasonable efforts to protect all Proprietary Rights used in the
Acquired Business;
(k) maintain the existence of and protect all of the governmental
permits, licenses, approvals and other authorizations of the Acquired Business;
21
(l) comply with all applicable laws, ordinances and regulations in
the operation of the Acquired Business; and
(m) cooperate with the Purchaser in its investigation of the Acquired
Business and permit the Purchaser and its employees, agents, accounting, legal
and other authorized representatives to (i) have full access to the premises,
books and records of the Sellers at reasonable hours, (ii) visit and inspect any
of the properties of the Sellers and (iii) discuss the affairs, finances and
accounts of the Sellers with the directors, officers, partners, key employees,
key customers, key sales representatives, key suppliers and independent
accountants of the Sellers.
Section 4.2 Negative Covenants of each Seller. Each Seller covenants and
agrees that, from the date of this Agreement and until the Closing or the date,
if any, on which this Agreement is earlier terminated pursuant to Section 7.1
hereof, unless the Purchaser otherwise agrees in writing and except as expressly
contemplated by this Agreement, the Sellers shall not with respect to the
Acquired Business:
(a) take any action that would require disclosure under Section 5.6
hereof;
(b) make any loans, enter into any transaction with any Insider or
make or grant any increase in any employee's or officer's compensation or make
or grant any increase in any employee benefit plan, incentive arrangement or
other benefit covering any of the employees;
(c) establish or, except in the Ordinary Course of Business,
contribute to any pension, retirement, profit sharing or stock bonus plan or
multiemployer plan covering the employees;
(d) except as specifically contemplated by this Agreement, enter into
any contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm's length, with unaffiliated Persons;
(e) engage in any activity other than in the Ordinary Course of
Business which would accelerate or delay the collection of its accounts or notes
receivable, accelerate or delay the payment of its accounts payable, delay its
capital expenditures, or reduce or otherwise restrict the amount of inventory on
hand; or
(f) sell, transfer, contribute, distribute, or otherwise dispose of
any securities or assets, or agree to do any of the foregoing, to or with any
Person, or negotiate or have any discussions with any Person with respect to any
of the foregoing, other than in the Ordinary Course of Business.
Section 4.3 Additional Covenants of each Seller.
22
(a) The Sellers represent and warrant to the Purchaser that the board
of directors of Charlie (the "Board") has made such assessments of the Sellers'
value and has taken such other actions as to satisfy the fiduciary duties of the
Board that must be satisfied to enable the Sellers to enter into this Agreement
and to render this Agreement binding upon the Sellers in accordance with its
terms.
(b) Each Seller hereby agrees that, prior to the Closing or
termination of this Agreement, it shall not, and shall not cause or permit any
of its directors, officers, employees, agents or representatives (each a
"Representative"), directly or indirectly, to (i) solicit, initiate or encourage
(including by way of furnishing or disclosing non-public information) the making
of, or any inquiries regarding, any Transaction Proposal, (ii) engage in
negotiations, explore or otherwise engage in substantive discussions with or
furnish any information to any Person (other than the Purchaser or its
Representatives), or enter into any agreement with respect to any Transaction
Proposal, or enter into any agreement, arrangement or understanding requiring it
to abandon, terminate or fail to consummate the transactions contemplated by
this Agreement or (iii) take or approve any actions to facilitate any such
activities. Notwithstanding the foregoing or any other provision of this
Agreement, the Sellers may, in response to a bona fide unsolicited written
Transaction Proposal from a credible third party (a "Qualified Transaction
Proposal"), participate in discussions or negotiations (including, as a part
thereof, making any counterproposal) with, or furnish information to, and enter
into an agreement (an "Alternative Transaction") with, such third party with
respect to such Qualified Transaction Proposal, if the Board, after consultation
with and upon the written advice of counsel, determines that the failure to
participate in such discussions or negotiations or to furnish such information
or to enter into such Alternative Agreement, as applicable, would constitute a
breach of its fiduciary duties under, or otherwise violate, applicable law. As
used herein, "Transaction Proposal" shall mean any proposal made by a third
party, other than the Purchaser or its Affiliates, to acquire, directly or
indirectly, (x) all or any portion of the assets, properties, business,
interests and/or other rights of the Sellers related to the Acquired Business
(other than in the Ordinary Course of Business) or (y) a controlling interest of
any Seller, whether pursuant to a merger, consolidation or other business
combination, purchase of shares, tender offer or exchange offer or any other
transaction structure, including, without limitation, any single or multi-step
transaction or series of related transactions.
(c) Upon executing this Agreement, the Sellers shall discontinue
immediately any negotiations or discussions with respect to any Transaction
Proposal and shall immediately advise the Purchaser in writing regarding the
identity of any Person with whom any Seller has had direct or indirect contact
since April 5, 2000 regarding a possible Transaction Proposal. Hereafter, the
Sellers shall advise the Purchaser in writing of (i) the receipt, directly or
indirectly, of any inquiries relating to a Transaction Proposal promptly
following such receipt, (ii) the status of any discussions or negotiations with
respect thereto, (iii) its intention to enter into any agreement relating to a
Transaction Proposal at least 48 hours prior to executing any such agreement and
(iv) any actions taken pursuant to Section 4.3(b) above promptly following such
action. Immediately following the receipt, directly or indirectly, of any
Transaction Proposal (or any inquiry regarding a Transaction Proposal), the
Sellers shall furnish to the Purchaser either a copy of such Transaction
Proposal (or
23
such inquiry) or a written summary of such Transaction Proposal (or such
inquiry), including, without limitation, information regarding pricing,
structure and material conditions to closing, as well as update the Purchaser
with respect thereto upon any change to the terms of such Transaction Proposal.
If the Sellers or any of their Representatives propose to take any actions
pursuant to the second sentence of Section 4.3(b) which are otherwise prohibited
by the first sentence of Section 4.3(b), the Sellers shall, at least 24 hours
prior to the initiation of such action, notify the Purchaser in writing, in
reasonable detail, of the basis for the Board's decision that such proposed
actions are required to avoid a breach of their fiduciary duties and shall
provide to the Purchaser the written advice the Board has received from counsel
to that effect.
(d) Nothing in this Section 4.3 shall (i) permit the Sellers to
terminate this Agreement other than pursuant to Section 7.1 hereof or (ii)
affect any other obligation of the Sellers under this Agreement.
(e) Each Seller hereby covenants that it shall use its best efforts to
cause the Net Working Capital Amount to be equal to or exceed the Baseline Net
Working Capital Amount as of the close of business on the Closing Date.
Section 4.4 Covenants of the Purchaser. Prior to the Closing, the
Purchaser shall:
(a) promptly (once it obtains knowledge thereof) inform the Sellers in
writing of any exceptions from the representations and warranties contained in
Article VI not previously disclosed or any breach of any covenant hereunder by
the Purchaser;
(b) cooperate with the Sellers and use commercially reasonable efforts
to cause the conditions to the Sellers' obligations to close to be satisfied
(including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the making and
obtaining of all third party and governmental filings, authorizations,
approvals, consents, releases and terminations); and
(c) use commercially reasonable efforts to cause the conditions to the
funding of its senior and subordinated debt as set forth in the Commitment
Letters to be satisfied.
Section 4.5 Mutual Covenants of the Parties. The Parties hereto agree
that:
(a) subject to the terms and conditions of this Agreement, each Party
will use commercially reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement (including the filing of any required report
forms under the HSR Act). In connection with, and without limiting the
foregoing, each Party shall (a) use commercially reasonable efforts to take all
action necessary to render true and correct as of the Closing Date its
representations and warranties contained in this Agreement, (b) refrain from
taking any action that would render any such representation or warranty untrue
or incorrect as of such time, (c)
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perform or cause to be satisfied each agreement, covenant or condition to be
performed or satisfied by it and (d) use commercially reasonable efforts to
satisfy the other Party's conditions to closing as set forth in Section 3.1 with
respect to the Purchaser and in Section 3.2 with respect to the Sellers. The
Sellers and the Purchaser shall each furnish to one another and to one another's
counsel all such information as may be required in order to accomplish the
foregoing actions;
(b) each Party shall cooperate with one another (i) in connection with
the preparation of any disclosure document filed after the date hereof pursuant
to the Securities Act, the Exchange Act or any state securities law (each a
"Disclosure Document"), (ii) in determining whether any other action by or in
respect of, or filing with, any governmental entity or any department, agency or
political subdivision thereof (including in connection with the HSR Act), or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts in connection with the consummation of the
transactions contemplated by this Agreement and (iii) in timely seeking to
obtain any such actions, consents, approvals or waivers and timely making any
such filings, and furnishing information required in connection therewith and/or
with any Disclosure Document; and
(c) the Seller, on the one hand, and the Purchaser, on the other hand,
shall promptly notify the other of:
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with
the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental
entity or any department, agency or political subdivision thereof in
connection with the transactions contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to
or involving or otherwise affecting the Sellers, on the one hand, or the
Purchaser, on the other hand, which relate to the consummation of the
transactions contemplated by this Agreement; and
(iv) any action, event or occurrence that would constitute a
breach of any representation, warranty, covenant or agreement of such
Person set forth in this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As a material inducement to the Purchaser to enter into this Agreement,
each Seller hereby jointly and severally represents and warrants that:
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Section 5.1 Organization and Corporate Power.
(a) The "Organization Schedule" attached hereto contains a complete
and accurate list for each Seller of its name, its jurisdiction of
incorporation, and other jurisdictions in which it is authorized to do business.
(b) Each Seller is a company duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation or
organization, with full organizational power and authority to conduct the
Acquired Business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all of its obligations
under the contracts to which it is a party or otherwise bound. Each Seller is
duly qualified to do business as a foreign company and is in good standing under
the laws of each state or other jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except where the failure to be so
duly qualified or licensed and in good standing would not individually or in the
aggregate have a Material Adverse Effect.
(c) The Sellers have provided to the Purchaser correct and complete
copies of the certificate of incorporation and by-laws of each Seller, which
documents reflect all amendments made thereto at any time before the date
hereof. No Seller is in default under or in violation of any provision of its
certificate of incorporation or by-laws.
Section 5.2 Authorization of Transactions. Each Seller has all requisite
corporate power and authority to execute and deliver the Transaction Documents
to which it is a party and to consummate the transactions contemplated hereby
and thereby and to carry out its obligations hereunder and thereunder. The
board of directors of each Seller (i) has made assessments of the value of the
Acquired Business and has taken other actions as to satisfy the fiduciary duties
that must be satisfied by it in order to enable such Seller to enter into this
Agreement and to render this Agreement binding upon such Seller in accordance
with its terms and (ii) has duly approved the Transaction Documents to which
such Seller is a party and has duly authorized the execution and delivery of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated thereby. No other corporate proceedings on the part
of any Seller is necessary to approve and authorize the execution and delivery
of the Transaction Documents and the consummation of the transactions
contemplated thereby. All Transaction Documents to which any Seller is a party
have been duly executed and delivered by such Seller and constitute the valid
and binding agreements of such Seller, enforceable against such Seller in
accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, and as limited by general principles
of equity that restrict the availability of equitable remedies.
Section 5.3 Absence of Conflicts. Except as set forth on the "Conflicts
Schedule" attached hereto, the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated
thereby by the Sellers do not and shall not (a)
26
conflict with or result in any breach of any of the terms, conditions or
provisions of, (b) constitute a default under, (c) result in a violation of, (d)
give any third party the right to modify, terminate or accelerate any obligation
under, (e) result in the creation of any Lien upon the Capital Stock or assets
of any Seller (including, without limitation, the Acquired Assets) pursuant to,
or (f) require any authorization, consent, approval, exemption or other action
by or notice or declaration to, or filing with, any court or administrative or
other governmental body or agency under, the articles of incorporation or by-
laws (or equivalent governing documents) of any Seller or any material
indenture, mortgage, lease, loan agreement or other agreement or instrument to
which any Seller is bound or affected, or any law, statute, rule or regulation
to which any Seller is subject (except in connection with the applicable
requirements of the HSR Act) or any judgment, order or decree to which any
Seller is subject.
Section 5.4 Financial Statements and Related Matters.
(a) Financial Statements. Attached hereto as the "Financial
Statements Schedule" are copies of(i) unaudited consolidated balance sheets as
of April 30, 2000 for the Acquired Business as separately stated (the "Latest
Balance Sheet") and the related statements of income and cash flows for the one-
month period then ended, and (ii) unaudited consolidated balance sheets and
statements of income for the fiscal years ended March 31, 2000, 1999 and 1998
for the Acquired Business as separately stated. Each of the foregoing financial
statements (including in all cases the notes thereto, if any) (the "Financial
Statements") is accurate and complete, is consistent with the Sellers' books and
records (which, in turn, are accurate and complete), presents fairly the
Acquired Business's financial condition and results of operations as of the
times and for the periods referred to therein, and has been prepared in
accordance with GAAP, subject in the case of unaudited financial statements to
the absence of footnote disclosure.
(b) Accounts Receivable. The Accounts Receivable of the Acquired
Business (other than the Guaranteed Receivables) are not subject to any valid
counterclaims or rights of setoff, and are valid and current receivables at the
aggregate amount recorded on the Sellers' books and records as of the Closing,
net of an amount of allowances for doubtful accounts which relate to those
Accounts Receivable computed in a manner consistent with GAAP and the accounting
practices used in the preparation of the Latest Balance Sheet.
Section 5.5 Absence of Undisclosed Liabilities. No Seller has any
material obligations or liabilities (whether accrued, absolute, contingent,
unliquidated, or otherwise, whether or not known, whether due or to become due,
and regardless of when asserted) arising out of or relating to the operation of
the Acquired Business at or before the Closing, except (i) obligations under
executory contracts or commitments described on the Contracts Schedule attached
hereto or under executory contracts and commitments which are not required to be
disclosed thereon (but not liabilities for breaches thereof), (ii) liabilities
reflected on the liabilities side of the Latest Balance Sheet, (iii) liabilities
which have arisen after the date of the Latest Balance Sheet in the Ordinary
Course of Business or otherwise in accordance with the terms and conditions of
this Agreement, and (iv) liabilities specifically disclosed elsewhere in this
Agreement or the Schedules hereto.
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Section 5.6 Absence of Certain Developments. Except as set forth on the
attached "Developments Schedule", since April 30, 2000, or solely with respect
to Section 5.6(l), since March 31, 2000, no Seller, individually or collectively
with the other Seller, has with respect to the Acquired Business:
(a) suffered any change that has had or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect, or
suffered any theft, damage, destruction, or casualty loss in excess of $100,000,
to its assets, to the extent not covered by insurance, or suffered any
substantial destruction of its books and records;
(b) subjected any portion of its properties or assets to any Lien
(other than Permitted Encumbrances);
(c) sold, leased, assigned, or transferred (including, without
limitation, transfers to any Insider) a material portion of its tangible assets,
or canceled without fair consideration any material debts or claims owing to or
held by it;
(d) sold, assigned, licensed or transferred (including, without
limitation, transfers to any Insider) any Proprietary Rights owned by, issued
to, or licensed to any Seller or disclosed any confidential information (other
than pursuant to agreements requiring the disclosure to maintain the
confidentiality of and preserving all rights of the Sellers in such confidential
information) or received any confidential information of any third party in
violation of any obligation of confidentiality;
(e) suffered any extraordinary losses or waived any rights of material
value;
(f) entered into, amended or terminated any material lease, contract,
agreement or commitment, or entered into any other transaction other than in the
Ordinary Course of Business;
(g) entered into any other material transaction, or materially changed
any business practice (other than in the Ordinary Course of Business);
(h) incurred or become subject to any liabilities, except liabilities
incurred in the Ordinary Course of Business;
(i) made or granted any bonus or any wage, salary or compensation
increase (other than in the Ordinary Course of Business) to, or entered into any
employment, severance, change of control or similar contract or agreement with,
any employee or sales representative, group of employees or consultant, or made
or granted any increase in any employee benefit plan or arrangement, or amended
or terminated any existing employee benefit plan or arrangement or adopted any
new employee benefit plan or arrangement;
28
(j) conducted its cash management customs and practices other than in
the Ordinary Course of Business (including, without limitation, with respect to
collection of accounts receivable, purchases of inventory and supplies, repairs
and maintenance, payment of accounts payable and accrued expenses, levels of
capital expenditures and operation of cash management practices generally);
(k) made any capital expenditures or commitments for capital
expenditures except in the Ordinary Course of Business or failed to make capital
expenditures at levels at least equal to those set forth in the board approved
budget;
(l) made any material change in its accounting methods or to its
methods of allocating costs or calculating reserves;
(m) made any loans or advances to, or guarantees for the benefit of,
any Person;
(n) made charitable contributions, pledges, association fees or dues
in excess of $20,000; or
(o) committed to do any of the foregoing.
Section 5.7 Assets. Except as set forth on the attached "Assets
Schedule," the Sellers have good and marketable title to, or a valid leasehold
interest in, the properties and assets used in or otherwise related to the
operation of the Acquired Business, free and clear of all Liens, except for
Permitted Encumbrances and except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Latest Balance Sheet. Except
as described on the Assets Schedule, the Sellers' buildings, equipment and other
tangible assets used in or otherwise related to the Acquired Business are in
good operating condition and are fit for use in the Ordinary Course of Business.
The Sellers own or lease all buildings, machinery, equipment and other tangible
assets necessary for the conduct of the Acquired Business as presently
conducted. Except as described on the Assets Schedule and/or as provided in the
Transition Services Agreement, the Acquired Assets constitute all of the assets
and rights necessary for the conduct of the Acquired Business as it is presently
conducted.
Section 5.8 Title to Properties.
(a) Owned Properties. In connection with the Acquired Business, no
Seller currently owns any real property, and no Seller holds any options or
contractual obligations to purchase or acquire any interest in real property.
In connection with the Acquired Business, no Seller has granted any options or
entered into any contractual obligations to sell or dispose of any interest in
real property.
(b) Leased Properties. The "Leases Schedule" sets forth a list of (i)
all of the leases, subleases, licenses and similar agreements (including,
without limitation, all amendments,
29
extensions, renewals, guaranties and other agreements with respect thereto) used
in or otherwise related to the operation of the Acquired Business (the "Leases")
and (ii) each leased, subleased, licensed and/or occupied parcel of real
property used in or otherwise related to the Acquired Business in which any
Seller has a leasehold, subleasehold, licensed or similar interest (the "Leased
Real Property"). Each of the Leases is in full force and effect, and a Seller
holds a valid and existing leasehold or subleasehold interest under each of the
Leases. The Sellers have delivered to the Purchaser true, correct, complete and
accurate copies of each written Lease. With respect to each Lease: (i) the Lease
is legal, valid, binding, enforceable and in full force and effect; (ii) the
Lease will continue to be legal, valid, binding, enforceable and in full force
and effect on identical terms following the Closing; (iii) neither the Sellers
nor, to the knowledge of the Sellers, any other party to the Lease is in breach
or default, and no event has occurred which, with notice or lapse of time, would
constitute such a breach or default or permit termination, modification or
acceleration under the Lease; (iv) no party to the Lease has repudiated any
provision thereof; (v) there are no material disputes or forbearance programs in
effect as to the Lease; (vi) the Lease has not been modified in any respect,
except to the extent that such modifications are disclosed by the documents
delivered to the Purchaser; and (vii) no Seller has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the Lease.
(c) Leasehold Improvements. The Sellers have good title to the
Leasehold Improvements, which shall be free and clear of all Liens as of the
Closing Date, except Permitted Encumbrances.
(d) Real Property Disclosure. Except as disclosed on the Leases
Schedule, the Leased Real Property and the Leasehold Improvements include all of
the real property used by the Sellers in the operation of the Acquired Business.
Section 5.9 Taxes. Except as set forth on the attached "Taxes Schedule":
(a) the Sellers have timely filed all material Tax Returns which are
required to be filed, and all such Tax Returns are true, complete and accurate
in all material respects and have been prepared in compliance with applicable
law;
(b) all material Taxes due and payable by the Sellers, whether or not
shown on a Tax Return, have been paid by the Sellers and no material Taxes are
delinquent;
(c) the amount accrued as a current liability for taxes on the Latest
Balance Sheet (excluding any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shall be sufficient to pay in
full all Taxes for taxable periods (or portions thereof) ending on or before the
date of the Latest Balance Sheet, whether or not such Taxes are due on or before
such date, except to the extent the failure to so accrue would not have a
Material Adverse Effect, and, since the date of the Latest Balance Sheet, no
Seller has incurred any liability for Taxes other than in the Ordinary Course of
Business;
30
(d) to the knowledge of the Sellers, no deficiency for any amount of
Tax which has not been resolved has been asserted or assessed by a taxing
authority against any Seller, and no Seller has knowledge that any such
assessment or asserted Tax liability shall be made;
(e) there is no action, suit, taxing authority proceeding or audit now
in progress, pending or, to the knowledge of the Sellers, threatened against or
with respect to any Seller;
(f) the Sellers do not reasonably expect any taxing authority to claim
or assess any additional Taxes in respect of any Seller for any period;
(g) no Seller has (A) waived any statute of limitations, (B) agreed to
any extension of the period for assessment or collection or (C) executed or
filed any power of attorney, in each case with respect to any Taxes, which
waiver, agreement or power of attorney is currently in force;
(h) no Seller has been a member of an Affiliated Group (as defined in
Section 1504 of the Code), or any similar group defined under local, state or
foreign Tax law (other than the Affiliated Group of which Charlie is the common
parent) and no Seller has any liability for Taxes of any Person other than the
Sellers under Treasury Regulations Section 1.1502-6 or any similar provision of
local, state or foreign Tax law;
(i) no Seller is a party to or bound by any Tax allocation, sharing,
indemnity or similar agreement or arrangement with any Person and no Seller has
any current or potential contractual obligation to indemnify any other Person
with respect to Taxes;
(j) no Seller has any obligation to make any payment that could be
non-deductible under Section 280G of the Code (or any corresponding provision of
state, local or foreign Tax law);
(k) to the knowledge of the Sellers, no claim has ever been made by a
taxing authority in a jurisdiction where the Sellers do not pay Taxes or file
Tax Returns that any Seller is or may be subject to Taxes assessed by such
jurisdiction;
(l) the Sellers have 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, except to the extent the
failure to so withhold and pay would not have a Material Adverse Effect; and
(m) the Taxes Schedule contains a list of states, territories and
jurisdictions (whether foreign or domestic) in which any Seller is required to
file Tax Returns relating to the Acquired Business.
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Section 5.10 Contracts and Commitments.
(a) Except as specifically contemplated by this Agreement and except
as set forth on the "Contracts Schedule" attached hereto, no Seller, with
respect to the Acquired Business, is a party to or bound by, whether written or
oral, any:
(i) collective bargaining agreement or contract with any labor
union or any bonus, pension, profit sharing, retirement or any other form
of deferred compensation plan or any stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether formal or
informal;
(ii) contract for the employment of any officer, individual
employee or other person on a full-time, part-time or consulting basis
providing annual compensation in excess of $150,000 and not terminable
without penalty, severance payment or other expense on the part of the
Seller and, after the Closing Date, the Purchaser;
(iii) severance or change of control agreement or similar
arrangement;
(iv) agreement or indenture relating to the borrowing of money or
other Indebtedness or to mortgaging, pledging or otherwise placing a Lien
on any of its assets;
(v) contract under which any Seller has advanced or loaned any
other Person amounts in the aggregate exceeding $25,000, other than trade
credit extended in the Ordinary Course of Business;
(vi) agreement with respect to the lending or investing of funds;
(vii) license or royalty agreements;
(viii) guaranty of any obligation, other than endorsements made
for collection;
(ix) management, consulting, advertising, marketing, promotion,
technical services, advisory or other contract or other similar arrangement
relating to the design, marketing, promotion, management or operation of
the Acquired Business;
(x) outstanding powers of attorney executed on behalf of any
Seller, other than powers of attorney granted by the Sellers in the
Ordinary Course of Business to customers receiving services so that such
customers may register, copyright or otherwise protect intellectual
property resulting from such services;
32
(xi) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other Person calling for
payments in excess of $50,000 annually;
(xii) lease or agreement under which it is lessor of or permits
any third party to hold or operate any property, real or personal, owned or
controlled by it and calling for payments in excess of $50,000;
(xiii) agreement or group of related agreements with the same
Person for the sale or purchase of products or services under which the
undelivered balance of such products and services has a price in excess of
$50,000;
(xiv) agreement or group of related agreements with the same
party or group of affiliated parties (including without limitation
agreements with customers of the Acquired Business) involving more than
$750,000 from the period from May 1, 1999 through and including April 30,
2000;
(xv) agreement with a term of more than six months which is not
terminable upon less than 60 days notice without penalty;
(xvi) confidentiality agreement or similar arrangement, other
than customary confidentiality agreements with employees, consultants,
subcontractors or customers entered into in the Ordinary Course of
Business;
(xvii) agreement which prohibits it from freely engaging in
business anywhere in the world, other than agreements with customers
entered into in the Ordinary Course of Business which prohibit the
provision of consultants used by such customer to such customer's
competitors; or
(xviii) other agreement material to it (whether or not entered
into in the Ordinary Course of Business), other than agreements with
customers of the Acquired Business entered into in the Ordinary Course of
Business.
(b) Except as disclosed on the Contracts Schedule, (i) no contract or
commitment required to be disclosed on the Contracts Schedule has been breached
or canceled by the other party and no Seller has knowledge of any anticipated
breach by any other party to any contract set forth on the Contracts Schedule,
(ii) no customer or supplier has indicated in writing or orally to any Seller or
any Insider that it intends to stop or decrease the rate of business done with
any Seller or that it desires to renegotiate its contract or current arrangement
with any Seller, (iii) the Sellers have performed all the material obligations
required to be performed by them in connection with the contracts or commitments
required to be disclosed on the Contracts Schedule and are not in default under
or in breach of any contract or commitment required to be disclosed on the
Contracts Schedule, and no event has occurred which, with the passage of time or
the giving of notice or both,
33
would result in a default or breach thereunder, (iv) no Seller has any present
expectation or intention of not fully performing any obligation pursuant to any
contract set forth on the Contracts Schedule, and (v) each agreement set forth
on the Contracts Schedule is legal, valid, binding, enforceable and in full
force and effect and will continue as such following the consummation of the
transactions contemplated hereby.
(c) The Sellers have provided the Purchaser with a true, correct,
complete and accurate copy of all written contracts which are required to be
disclosed on the Contracts Schedule, in each case together with all amendments,
waivers or other changes thereto (all of which are disclosed on the Contracts
Schedule). The Contracts Schedule contains an accurate and complete description
of all material terms of all oral contracts referred to therein.
Section 5.11 Proprietary Rights.
(a) The "Proprietary Rights Schedule" attached hereto contains a
complete and accurate list of all (a) patented and/or registered Proprietary
Rights owned by any Seller and used in or primarily related to the Acquired
Business, (b) pending patent applications and applications for registrations of
other Proprietary Rights filed by any Seller for use in the operation of the
Acquired Business, (c) unregistered trade names, internet domain names and
corporate names owned by any Seller and used in or primarily related to the
Acquired Business and (d) unregistered trademarks, service marks, and computer
software owned by any Seller and used in or primarily related to the Acquired
Business. The Proprietary Rights Schedule also contains a complete and accurate
list of all licenses and other rights granted by any Seller to any third party
with respect to any Proprietary Rights used in or primarily related to the
Acquired Business and all licenses and other rights granted by any third party
to any Seller with respect to any Proprietary Rights used in or primarily
related to the Acquired Business, in each case identifying the subject
Proprietary Rights. Except as set forth on the Proprietary Rights Schedule, the
Sellers own, free of all Liens (except for Permitted Encumbrances), all right,
title and interest to, or have the right to use pursuant to a valid written
license, all Proprietary Rights necessary for the operation of the Acquired
Business as presently conducted and such Proprietary Rights will be owned by the
Purchaser or made available for use by the Purchaser pursuant to the Transition
Services Agreement and License Agreement after the Closing on terms and
conditions identical to those under which they were owned or used by the Sellers
prior to the Closing. Except as set forth on the Proprietary Rights Schedule,
the loss or expiration of any Proprietary Rights or related group of Proprietary
Rights owned by the Sellers and used in or primarily related to the Acquired
Business has not had a Material Adverse Effect on the Acquired Business and such
a loss or expiration of Proprietary Rights is not pending or, to the knowledge
of any Seller, threatened or reasonably foreseeable.
(b) Except as set forth on the Proprietary Rights Schedule, (i) the
Sellers own and possess, without restriction as to use, all rights, title and
interest in and to the Proprietary Rights necessary for the operation of the
Acquired Business as presently conducted; (ii) no Seller has received any
notices of invalidity, infringement or misappropriation from any third party
with respect to any such Proprietary Rights; (iii) to the Sellers' knowledge, no
Seller has interfered with, infringed
34
upon, misappropriated or otherwise come into conflict with any Proprietary
Rights of any third parties; and (iv) to the knowledge of the Sellers, no third
party has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Proprietary Rights used in or primarily related to the
Acquired Business.
(c) The transactions contemplated by this Agreement shall have no
adverse effect on the Sellers' rights, title and interest in and to any of the
Proprietary Rights used in or otherwise related to the Acquired Business. The
Sellers have taken all necessary and desirable actions to maintain and protect
such Proprietary Rights and shall continue to maintain and protect such
Proprietary Rights prior to the Closing so as to not adversely affect the
validity or enforcement of such Proprietary Rights.
Section 5.12 Litigation; Proceedings. Except as set forth on
the "Litigation Schedule" attached hereto, in connection with the Acquired
Business, there are no actions, suits, complaints, charges, proceedings, orders,
investigations or claims pending or, to the knowledge of the Sellers, threatened
against or affecting any Seller (or to the knowledge of the Sellers, pending or
threatened against or affecting any of the officers, directors or key employees
of any Seller with respect to the Acquired Business and its proposed business
activities) at law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality (including, without
limitation, any actions, suits, complaints, charges, proceedings or
investigations with respect to the transactions contemplated by this Agreement);
nor have there been any such actions, suits, proceedings, orders, investigations
or claims pending against or affecting any Seller during the past three years;
and no Seller is subject to any grievance arbitration proceedings under
collective bargaining agreements or otherwise or, to the knowledge of the
Sellers, any governmental investigations or inquiries. In connection with the
Acquired Business, no Seller is subject to any judgment, order or decree of any
court or other governmental agency (or settlement enforceable therein).
Section 5.13 Brokerage. Except as set forth on the "Brokerage Schedule"
attached hereto, there are no claims by third parties for brokerage commissions,
finders' fees or similar compensation (other than any incentive compensation
which may become payable from the Sellers to one or more officers of the
Sellers) in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of any Seller.
Section 5.14 Governmental Licenses and Permits. The "Permits Schedule"
attached hereto contains a complete listing and summary description of all
material Licenses owned or possessed by the Sellers and used in the conduct of
the Acquired Business. Except as indicated on the Permits Schedule, the Sellers
own or possess all right, title and interest in and to all of the Licenses that
are necessary to conduct the Acquired Business as presently conducted,
including, without limitation, all Licenses required under any federal, state or
local law relating to public health and safety, employee health and safety,
pollution or protection of the environment. The Sellers are in compliance with
the terms and conditions of such Licenses and have received no notices that they
are in violation of any of the terms or conditions of such Licenses. The
Sellers have taken all
35
commercially reasonable action to maintain such Licenses. No loss or expiration
of any such License is threatened, pending or reasonably foreseeable other than
expiration in accordance with the terms thereof. Except as indicated on the
Permits Schedule, all of the Licenses shall survive the transactions
contemplated hereby.
Section 5.15 Employees. Except as set forth on the "Employees Schedule"
attached hereto, to the knowledge of the Sellers, no key executive employee and
no group of employees or independent contractors of any Seller with respect to
the Acquired Business has any plans to terminate his, her or its employment or
relationship as an independent contractor with any Seller. To the best of the
Sellers' knowledge, the Sellers with respect to the Acquired Business have
complied and remain in compliance with all applicable laws relating to the
employment of personnel and labor. No Seller with respect to the Acquired
Business is a party to or bound by any collective bargaining agreement, nor has
it experienced any strikes, grievances, unfair labor practices claims or other
material employee or labor disputes. No Seller has engaged in any unfair labor
practice. No Seller has knowledge of any organizational effort presently being
made or threatened by or on behalf of any labor union with respect to any
employees of any Seller with respect to the Acquired Business. No Seller has
implemented any plant closing or mass layoff of employees of the Acquired
Business as those terms are defined in the Worker Adjustment Retraining and
Notification Act of 1988, as amended ("WARN"), or any similar state or local law
or regulation, and no layoffs that could implicate such laws or regulations will
have been implemented before the Closing without advance notification to the
Purchaser.
Section 5.16 Employee Benefit Matters.
(a) Except as set forth on the "Benefit Plans Schedule" attached
hereto, with respect to the Sellers' current or former employees of the Acquired
Business, no Seller maintains or contributes to or has any actual or potential
liability with respect to any (i) deferred compensation or bonus or retirement
plans or arrangements, (ii) qualified or nonqualified defined contribution or
defined benefit plans or arrangements which are employee pension benefit plans
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), or (iii) employee welfare benefit plans, (as
defined in Section 3(1) of ERISA), stock option or stock purchase plans, or
material fringe benefit plans or programs whether in writing or oral and whether
or not terminated. No Seller with respect to the Acquired Business has ever
contributed to any multiemployer pension plan (as defined in Section 3(37) of
ERISA) or has ever maintained or contributed to any defined benefit plan (as
defined in Section 3(35) of ERISA). The plans, arrangements, programs and
agreements referred to in the preceding two sentences are referred to
collectively as the "Plans." No Seller maintains or contributes to any Plan
which provides health, accident or life insurance benefits to former employees
of the Acquired Business, their spouses or dependents, other than in accordance
with Section 4980B of the Code ("COBRA").
(b) The Plans (and related trusts and insurance contracts) set forth
on the Benefit Plans Schedule comply in form and in operation with the
requirements of applicable laws and regulations, including ERISA and the Code
and the nondiscrimination rules thereof. All
36
contributions, premiums or payments which are due on or before the Closing Date
under each Plan have been paid. Each Plan which is intended to be qualified
under section 401(a) of the Code (i) has been amended on a timely basis in
compliance with the Code and (ii) has received from the Internal Revenue Service
a favorable determination letter which considers the terms of such Plan as
amended.
(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions) with respect to
the Plans set forth on the Benefit Plans Schedule have been properly and timely
filed with the appropriate government agency and distributed to participants as
required. The Sellers have complied with all material requirements of COBRA.
(d) With respect to each Plan set forth on the Benefit Plans Schedule,
(i) there have been no prohibited transactions as defined in Section 406 of
ERISA or Section 4975 of the Code, (ii) no fiduciary (as defined in Section
3(21) of ERISA) 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 such Plans, and (iii) no actions, investigations, suits or claims
with respect to the assets thereof (other than routine claims for benefits) are
pending or threatened, and no Seller or Insider has knowledge of any facts which
would give rise to or could reasonably be expected to give rise to any such
actions, suits or claims.
(e) No Seller has incurred or has any reason to expect that it will
incur, any liability to the Pension Benefit Guaranty Corporation (other than
routine 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 (as defined in Section 3(2) of ERISA) that any Seller or any member
of its "controlled group" (within the meaning of Code Section 414) maintains or
ever has maintained or to which any of them contributes, ever has contributed or
ever has been required to contribute to.
Section 5.17 Insurance. The "Insurance Schedule" attached hereto lists
and briefly describes each insurance policy maintained by the Sellers with
respect to any of the properties and assets used in or primarily related to the
Acquired Business as presently conducted, together with a claims history for the
past three years relating to the Acquired Business; provided that such claims
history will not be required to include any period prior to the Sellers'
acquisition of the relevant Predecessor Entity). All of such insurance policies
are in full force and effect, and no Seller is in default under any such
insurance policies or has been denied insurance coverage. Except as set forth
on the Insurance Schedule, no Seller with respect to the Acquired Business has
any self-insurance or co-insurance programs, and the reserves set forth on the
Latest Balance Sheet are adequate to cover all anticipated liabilities with
respect to self-insurance or coinsurance programs.
Section 5.18 Officers and Directors; Bank Accounts. The "Officers,
Directors and Bank Accounts Schedule" attached hereto lists all officers and
directors of the Sellers, and all bank
37
accounts, safety deposit boxes and lock boxes (designating each authorized
signatory with respect thereto) used in or otherwise related to the Acquired
Business.
Section 5.19 Affiliate Transactions. Except as disclosed on the
"Affiliated Transactions Schedule" attached hereto, no Insider is a party to any
agreement, contract, commitment or transaction relating to the Acquired
Business, and no Insider has any interest in any property, real or personal or
mixed, tangible or intangible, used in or primarily related to the Acquired
Business.
Section 5.20 Compliance with Laws. The Sellers and each of their
respective officers, directors, partners, agents and employees have complied in
all material respects with and are in compliance in all material respects with
all applicable laws, regulations and ordinances of foreign, federal, state and
local governments and all agencies thereof which are applicable to the Acquired
Business, and no claims have been filed against any Seller alleging a violation
of any such laws or regulations, and no Seller has received notice of any such
violations.
Section 5.21 Environmental Matters. Except as set forth on the
"Environmental Schedule" attached hereto:
(a) The Sellers have complied with and are currently in compliance in
all material respects with all Environmental and Safety Requirements applicable
to the Acquired Business , and no Seller has received any oral or written
notice, report or information regarding any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and Safety
Requirements which relate to the properties or facilities used in or primarily
related to the Acquired Business.
(b) Without limiting the generality of the foregoing, the Sellers have
obtained and complied with, and are currently in compliance with, all permits,
licenses and other authorizations that may be required pursuant to any
Environmental and Safety Requirements for the occupancy of their properties
and/or facilities used in or primarily related to the Acquired Business and for
the operation of the Acquired Business. A list of all such permits, licenses
and other authorizations which are material to any Seller with respect to the
Acquired Business is set forth on the Environmental Schedule.
(c) Neither this Agreement nor the other Transaction Documents, nor
the consummation of the transactions contemplated hereby or thereby, shall
impose any obligations on any Seller or the Purchaser for site investigation or
cleanup, or notification to or consent of any government agencies or third
parties under any Environmental and Safety Requirements applicable to the
Acquired Business (including, without limitation, any so called "transaction-
triggered" or "responsible property transfer" laws and regulations).
(d) None of the following exists at any property or facility owned,
occupied or operated by any Seller in connection with the Acquired Business: (i)
underground storage tanks or
38
surface impoundments; (ii) asbestos-containing material in any form or
condition; (iii) materials or equipment containing polychlorinated biphenyls; or
(iv) landfills.
(e) No Seller has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or Released any substance
(including, without limitation, any hazardous substance) or owned, occupied or
operated any facility or property, so as to give rise to liabilities of any
Seller for response costs, natural resource damages or attorneys' fees pursuant
to CERCLA or any other Environmental and Safety Requirements applicable to the
Acquired Business.
(f) Without limiting the generality of the foregoing, no facts, events
or conditions relating to the past or present properties, facilities or
operations of any Seller shall prevent, hinder or limit continued compliance
with Environmental and Safety Requirements applicable to the Acquired Business,
give rise to any corrective, investigatory or remedial obligations pursuant to
Environmental and Safety Requirements applicable to the Acquired Business or
give rise to any other liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental and Safety Requirements
applicable to the Acquired Business, including, without limitation, those
liabilities relating to onsite or offsite Releases or threatened Releases of
hazardous materials, substances or wastes, personal injury, property damage or
natural resources damage.
(g) No Seller has, either expressly or by operation of law, assumed or
undertaken any liability or corrective investigatory or remedial obligation of
any other Person relating to any Environmental and Safety Requirements
applicable to the Acquired Business.
(h) No Environmental Lien has attached to any property owned, leased
or operated by any Seller in connection with the Acquired Business.
Section 5.22 Disclosure; Information Supplied. Neither this Agreement nor
the other Transaction Documents, nor any of the schedules, attachments or
Exhibits hereto, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. There is no fact, which has not been disclosed to the
Purchaser, of which any Seller has knowledge that has had, or could reasonably
be anticipated to have, a Material Adverse Effect. At the time of the filing of
any Disclosure Document, at the time of any distribution of such Disclosure
Document and throughout the Closing, each such Disclosure Document (as
supplemented or amended) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The Sellers' representations and
warranties are subject to and modified by, in each case, all disclosures set
forth in any Seller Reports filed with the SEC since July 1, 1998 and listed on
the "Seller Reports Schedule" attached hereto, but only to the extent that the
applicability of such disclosure to such representations and warranties is
reasonably apparent from the terms of such disclosure; provided that, if there
has been any material change in the facts or circumstances relating to any such
39
disclosure in a Seller Report from the date of such Seller Report through the
Closing Date, then the Sellers' representations and warranties as contained
herein shall not be subject to or modified by any such disclosure.
Section 5.23 Closing Date. All of the representations and warranties
contained in this Article V and elsewhere in this Agreement and all information
delivered in any schedule, attachment or Exhibit hereto or in any writing
delivered to the Purchaser is true and correct on the date of this Agreement and
shall be true and correct on the Closing Date, except to the extent that the
Sellers have advised the Purchaser otherwise in writing prior to the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As a material inducement to the Sellers to enter into this Agreement, the
Purchaser hereby represents and warrants to the Sellers that:
Section 6.1 Organization and Corporate Power. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to enter into
this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party and to perform the Purchaser's obligations hereunder and
thereunder.
Section 6.2 Authorization of Transaction. The execution, delivery and
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party have been duly and validly authorized by all
requisite corporate action on the part of the Purchaser, and no other corporate
proceeding on its part is necessary to authorize the execution, delivery or
performance of this Agreement. All Transaction Documents to which the Purchaser
is a party have been duly executed and delivered by the Purchaser and constitute
the valid and binding agreements of the Purchaser, enforceable against the
Purchaser in accordance with their terms.
Section 6.3 No Violation. The Purchaser is not subject to or obligated
under any provision of its certificate of incorporation or by-laws, any
applicable law, or rule or regulation of any governmental authority, or any
agreement or instrument, or any license, franchise or permit, or any order,
writ, injunction or decree, that would be breached or violated by the
Purchaser's execution, delivery or performance of this Agreement and the other
Transaction Documents contemplated hereby to which the Purchaser is a party.
Section 6.4 Governmental Authorities and Consents. The Purchaser is not
required to submit any notice, report or other filing (except in connection with
the applicable requirements of the HSR Act) with any governmental authority in
connection with the execution or delivery by the Purchaser of this Agreement or
the other agreements contemplated hereby to which the Purchaser is a party or
the consummation of the transactions contemplated hereby or thereby. No
consent,
40
approval or authorization of any governmental or regulatory authority (except in
connection with the applicable requirements of the HSR Act) or any other party
or person is required to be obtained by the Purchaser in connection with its
execution, delivery and performance of this Agreement and the other agreements
contemplated hereby to which the Purchaser is a party or the transactions
contemplated hereby or thereby.
Section 6.5 Litigation. There are no actions, suits, proceedings or
orders pending or, to the Purchaser's knowledge, threatened against or affecting
the Purchaser at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that would adversely affect the
Purchaser's performance under this Agreement or the other agreements
contemplated hereby to which the Purchaser is a party or the consummation of the
transactions contemplated hereby or thereby.
Section 6.6 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Purchaser.
Section 6.7 No Misstatements. The copies of all instruments, agreements,
other documents and written information delivered by or on behalf of the
Purchaser are and will be complete and correct in all material respects as of
the date of delivery thereof. No representations or warranties made by the
Purchaser in this Agreement, nor any document, written information, statement,
financial statement, letter, certificate or exhibit prepared and furnished or to
be prepared and furnished by the Purchaser to the Sellers pursuant hereto or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 6.8 Closing Date. All of the representations and warranties
contained in this Article VI and elsewhere in this Agreement and all information
delivered in any schedule, attachment or Exhibit hereto or in any writing
delivered to the Sellers are true and correct on the date of this Agreement and
shall be true and correct on the Closing Date, except to the extent that the
Purchaser has advised the Sellers otherwise in writing prior to the Closing.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent of the Sellers and the Purchaser;
41
(b) by the Sellers or the Purchaser, if the Closing has not occurred
on or prior to July 31, 2000; provided, however, that neither the Purchaser nor
the Sellers shall be entitled to terminate this Agreement pursuant to this
Section 7.1(b) if such Party's failure to fulfill any of its obligations under
this Agreement has prevented the consummation of the transactions contemplated
hereby at or prior to such time;
(c) by the Purchaser, (i) if the Board shall withdraw, modify or
change its recommendation or approval in respect of this Agreement and the
transactions contemplated hereby in a manner adverse to the Purchaser or (ii) if
the Sellers or any of their Representatives initiate any actions pursuant to the
second sentence of Section 4.3(b) which are otherwise prohibited by the first
sentence of Section 4.3(b);
(d) by the Sellers, to allow the Sellers to enter into an agreement in
respect of a Qualified Transaction Proposal subject to the restrictions in
Section 4.3(b) hereof; (provided that the termination described in this
subsection (d) shall not be effective unless and until the Sellers shall have
paid to the Purchaser the amounts payable to it as described in Section 7.2(b)
hereof);
(e) by the Purchaser, if there has been a material misrepresentation
or breach on the part of any Seller of the representations, warranties or
covenants set forth in this Agreement; or
(f) by the Sellers, if there has been a material misrepresentation or
breach on the part of the Purchaser of the representations, warranties or
covenants set forth in this Agreement.
Such right of termination shall be exercised by written notice of termination
given by the terminating Party to the other Parties hereto in the manner
hereinafter provided. Any such right of termination shall not be an exclusive
remedy hereunder but shall be in addition to any other legal or equitable
remedies that may be available to any non-defaulting Party hereto arising out of
any default hereunder by any other Party hereto.
Section 7.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 7.1 hereof,
this Agreement shall become void and of no effect with no liability on the part
of any Party hereto, except that the agreements contained in Section 7.2(b),
Section 9.7, Section 9.10(d) and Article X hereof shall survive the termination
hereof, and except that no such termination shall relieve any Party from
liability for breach of this Agreement or failure by it to perform its
obligations hereunder.
(b) If the Purchaser shall have terminated this Agreement pursuant to
clause (c), of Section 7.1 here of or if the Sellers shall have terminated this
Agreement pursuant to clause (d) of Section 7.1 hereof, then the Sellers shall
promptly, but in no event later than three business days after the date of such
termination, (i) pay to the Purchaser a termination fee of $3,600,000 and (ii)
pay to the Purchaser an amount equal to the out-of-pocket expenses incurred by
the Purchaser which are attributable to the proposed transaction between the
Purchaser and the Sellers, including, without
42
limitation, negotiation and execution of this Agreement and the attempted
financing and completion of the transactions contemplated herein (including,
without limitation, the fees, costs and expenses of legal counsel, accountants,
lenders and other representatives, advisors, appraisers and consultants), which
fee and amount shall be payable by wire transfer of immediately available funds
to an account designated by the Purchaser.
ARTICLE VIII
INDEMNIFICATION AND RELATED MATTERS
Section 8.1 Survival. All representations, warranties, covenants and
agreements set forth in this Agreement or in any writing or certificate
delivered in connection with this Agreement shall survive the Closing Date and
the consummation of the transactions contemplated hereby and shall not be
affected by any examination made for or on behalf of any Party, the knowledge of
any of such Party's officers, directors, stockholders, employees or agents, or
the acceptance of any certificate or opinion. Notwithstanding the foregoing, no
Party shall be entitled to recover for any Loss pursuant to Section 8.2(a)(i) or
Section 8.2(c)(i) unless written notice of a claim thereof is delivered to the
other Party prior to the Applicable Limitation Date. For purposes of this
Agreement, the term "Applicable Limitation Date" shall mean the 18 month
anniversary of the Closing Date; provided that the Applicable Limitation Date
with respect to the following Losses shall be as follows: (i) with respect to
any Loss arising from or related to a breach of the representations and
warranties of the Sellers set forth in Section 5.1 (Organization and Corporate
Power), Section 5.2 (Authorization of Transactions) or Section 5.13 (Brokerage),
there shall be no Applicable Limitation Date and (ii) with respect to any Loss
arising from or related to a breach of the representations and warranties of the
Purchaser set forth in Section 6.1 (Organization and Corporate Power), Section
6.2 (Authorization of Transactions), or Section 6.6 (Brokerage), there shall be
no Applicable Limitation Date. The representations and warranties described in
clause (i) and (ii) of the preceding sentence are referred to as the
"Fundamental Representations and Warranties."
Section 8.2 Indemnification.
(a) The Sellers shall jointly and severally indemnify the Purchaser
and each of its respective officers, directors, stockholders, employees, agents,
representatives, Affiliates, successors and assigns (collectively, the
"Purchaser Parties") and hold each of them harmless from and against all Losses
the Purchaser Parties may suffer, sustain or become subject to, through and
after the date of the claim for indemnification, to the extent resulting from or
caused by:
(i) the breach of any representation or warranty made by any
Seller contained in this Agreement or any certificate delivered by any
Seller to the Purchaser with respect thereto in connection with the Closing
(in each case, determined without regard to any qualifications therein
referencing the terms "materiality," "Material Adverse Effect," "knowledge"
or other terms of similar import or effect);
43
(ii) the breach of any covenant or agreement made by any Seller
contained in this Agreement or any certificate delivered by any Seller to
the Purchaser with respect thereto in connection with the Closing;
(iii) any breach of any covenant, representation or warranty
contained in the Spin-Off Agreements, but only to the extent such Losses
(net of an gains arising from any such inaccurate representations or breach
of covenants) arise during the period from the date of the spin-off to
December 31, 2000;
(iv) any Excluded Assets; and/or
(v) any Excluded Liabilities.
(b) The Sellers will be liable to the Purchaser Parties with respect
to claims referred to in Section 8.2(a)(i) only if the Purchaser gives the
Sellers written notice thereof within the Applicable Limitation Date.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Purchaser delivers written notice of a claim to the Sellers no later
than the Applicable Limitation Date, the Sellers shall be required to indemnify
the Purchaser Parties for all Losses which the Purchaser Parties may incur in
respect of the matters which are the subject of such claim, regardless of when
incurred.
(c) The Purchaser shall indemnify the Sellers and each of their
respective officers, directors, stockholders, employees, agents,
representatives, Affiliates, successors and assigns (collectively, the "Seller
Parties") and hold each of them harmless from and against all Losses the Seller
Parties may suffer, sustain or become subject to, through and after the date of
the claim for indemnification, to the extent resulting from or caused by:
(i) the breach of any representation or warranty made by the
Purchaser contained in this Agreement or any certificate delivered by the
Purchaser to the Sellers with respect thereto in connection with the
Closing (in each case, determined without regard to any qualifications
therein referencing the terms "materiality," "Material Adverse Effect,"
"knowledge" or other terms of similar import or effect);
(ii) the breach of any covenant or agreement made by the
Purchaser contained in this Agreement or any certificate delivered by the
Purchaser to the Sellers with respect thereto in connection with the
Closing;
(iii) any Acquired Assets on or after the Closing Date; and/or
(iv) any Assumed Liabilities.
44
(d) The Purchaser will be liable to the Seller Parties with respect to
claims referred to in Section 8.2(c)(i) only if the Sellers give the Purchaser
written notice thereof within the Applicable Limitation Date.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Sellers deliver written notice of a claim to the Purchaser no later
than the Applicable Limitation Date, the Purchaser shall be required to
indemnify the Seller Parties for all Losses which the Seller Parties may incur
in respect of the matters which are the subject of such claim, regardless of
when incurred.
(e) If a party hereto seeks indemnification under this Article VIII,
such party (the "Indemnified Party") shall give written notice to the other
party (the "Indemnifying Party") after receiving written notice of any action,
lawsuit, proceeding, investigation or other claim against it (if by a third
party) or discovering the liability, obligation or facts giving rise to such
claim for indemnification, describing the claim, the amount thereof (if known
and quantifiable), and the basis thereof; provided that the failure to so notify
the Indemnifying Party shall not relieve the Indemnifying Party of its or his
obligations hereunder except to the extent such failure shall have prejudiced
the Indemnifying Party, so long as such notification is provided prior to the
Applicable Limitation Date. In that regard, if any action, lawsuit, proceeding,
investigation or other claim shall be brought or asserted by any third party
which, if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Article VIII, the Indemnified Party shall promptly notify the
Indemnifying Party of the same in writing, specifying in detail the basis of
such claim and the facts pertaining thereto and the Indemnifying Party shall be
entitled to participate in the defense of such action, lawsuit, proceeding,
investigation or other claim giving rise to the Indemnified Party's claim for
indemnification at its expense, and at its option (subject to the limitations
set forth below), the Indemnifying Party shall be entitled to appoint, as lead
counsel for such defense, reputable counsel reasonably acceptable to the
Indemnified Party; provided that, as a condition precedent to the Indemnifying
Party's right to assume control of such defense, it must first:
(i) enter into an agreement with the Indemnified Party (in form
and substance reasonably satisfactory to the Indemnified Party) pursuant to
which the Indemnifying Party agrees to be fully responsible for all Losses
relating to such third party claim and to provide full indemnification to
the Indemnified Party for all Losses relating to such claim; and
(ii) unconditionally guarantee the payment and performance of any
Loss or other obligation which may arise with respect to such claim or the
facts giving rise thereto; and
(iii) furnish the Indemnified Party with reasonable evidence that
the Indemnifying Party is and will be able to satisfy any such Loss;
and provided, further, that the Indemnifying Party shall not have the right to
assume control of such defense, if the claim which the Indemnifying Party seeks
to assume control (i) seeks non-monetary
45
relief, (ii) involves criminal or quasi-criminal allegations, (iii) involves a
claim that is reasonably likely to have a material adverse effect on the
Indemnified Party's reputation or future business prospects, or (iv) involves a
claim which, upon petition by the Indemnified Party, the appropriate court rules
that the Indemnifying Party failed or is failing to vigorously prosecute or
defend. If the Indemnifying Party does not have the right to assume (or elects
not to assume) the defense of any third party claim, it shall reimburse the
Indemnified Party for the reasonable fees and expenses of counsel retained by
the Indemnified Party in connection with such claim.
If the Indemnifying Party is permitted to assume and control the defense and
elects to do so, the Indemnified Party shall have the right to employ counsel
separate from counsel employed by the Indemnifying Party in any such action and
to participate in the defense thereof, but the fees and expenses of such counsel
employed by the Indemnified Party shall be at the expense of the Indemnified
Party unless (i) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, or (ii) the Indemnifying Party has been advised
by independent outside counsel mutually agreeable to the Parties that a
reasonable likelihood exists of a conflict of interest between the Indemnifying
Party and the Indemnified Party.
If the Indemnifying Party shall control the defense of any such claim, the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim, if pursuant to or as a
result of such settlement or cessation, injunction or other equitable relief
will be imposed against the Indemnified Party or if such settlement does not
expressly unconditionally release the Indemnified Party from all Losses and
other obligations with respect to such claim.
(f) Amounts paid to or on behalf of the Sellers or the Purchaser as
indemnification shall be treated as adjustments to the purchase price hereunder.
Section 8.3 Limitations on Indemnity Obligations. Notwithstanding any
other provision in this Article VIII to the contrary with respect to any claims
pursuant to Section 8.2(a)(i) or Section 8.2(c)(i):
(a) The Sellers shall not be required to indemnify any of the
Purchaser Parties pursuant to Section 8.2(a)(i), and the Purchaser shall not be
required to indemnify any of the Seller Parties pursuant to Section 8.2(c)(i),
until the aggregate amount of the Losses suffered by the Purchaser Parties or
the Seller Parties, as applicable, exceeds $1,200,000 (the "Basket Amount"),
after which, subject to the other limitations set forth herein, the Sellers and
the Purchaser, as the case may be, shall be obligated for any and all Losses of
the Purchaser Parties and the Seller Parties, respectively, in excess of the
Basket Amount; provided, that this Section 8.3 shall not apply with respect to
any Losses resulting from or caused by breaches of any Fundamental
Representations and Warranties.
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(b) The cumulative indemnification obligation of Sellers pursuant to
Section 8.2(a)(i) and the cumulative indemnification obligation of Purchaser
pursuant to Section 8.2(c)(i), in each case, shall in no event exceed twenty
percent (20%) of the Purchase Price.
Section 8.4 Exclusive Remedy. Each Party acknowledges and agrees that,
from and after the Closing, its sole and exclusive remedy with respect to any
and all claims relating to the subject matter of this Agreement shall be
pursuant to the indemnification provisions set forth in this Article VIII,
except (a) each Party's right to seek specific performance of any of the
agreements contained herein, and (b) where the Sellers have defrauded the
Purchaser Parties or the Purchaser has defrauded the Seller Parties.
ARTICLE IX
ADDITIONAL AGREEMENTS
Section 9.1 Continuing Assistance. Subsequent to the Closing, the
Sellers and the Purchaser (at their own cost) shall assist each other (including
making records available) in the preparation of their respective Tax Returns and
the filing and execution of Tax elections, if required, as well as any audits or
litigation that might ensue as a result of the filing thereof, to the extent
that such assistance is reasonably requested.
Section 9.2 Tax Matters.
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest thereon)
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Sellers when due, and the Sellers shall, at their
own expense, file all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and, to the extent required by applicable law, the Purchaser
shall, and shall cause its Affiliates to, join in the execution of any such Tax
Returns and other documentation.
(b) All real property taxes, personal property taxes, ad valorem
obligations and similar taxes imposed on a periodic basis, in each case levied
with respect to the Acquired Assets, other than conveyance taxes provided for in
Section 9.2(a), for a taxable period which includes (but does not end on) the
Closing Date shall be apportioned between the Sellers and the Purchaser as of
the Closing Date based on the number of days of such taxable period included in
the pre-Closing Tax period and the number of days of such taxable period
included in the post-Closing period. The Sellers shall be liable for the
proportionate amount of such Taxes that is attributable to the pre-Closing Tax
period. Within 90 days after the Closing, the Sellers and the Purchaser shall
present a reimbursement amount to which each is entitled under this Section
9.2(b) together with such supporting evidence as is reasonably necessary to
calculate the proration amount. The proration amount shall be paid by the party
owing it to the other within 10 days after delivery of such statement.
Thereafter, the Sellers shall notify the Purchaser upon receipt of any ▇▇▇▇ for
real or
47
personal property taxes relating to the Acquired Assets, part or all of
which are attributable to the post-Closing Tax period, and shall promptly
deliver such ▇▇▇▇ to the Purchaser who shall pay or cause to be paid such taxes
to the appropriate taxing authority, provided that if such ▇▇▇▇ covers the pre-
Closing Tax period, the Sellers shall also remit to the Purchaser, prior to the
due date of assessment, payment for the proportionate amount of such ▇▇▇▇ that
is attributable to the pre-Closing Tax period. In the event that either the
Sellers or the Purchaser shall thereafter make a payment for which it is
entitled to reimbursement under this Section 9.2(b), the other party shall make
such reimbursement promptly but in no event later than 30 days after the
presentation of a statement setting forth the amount of reimbursement to which
the presenting party is entitled along with such supporting evidence as is
reasonably necessary to calculate the amount of reimbursement. Any payment
required under this Section 9.2(b) and not made within 10 days of delivery of
the statement shall bear interest at the rate per annum determined, from time to
time, under the provisions of Section 6621(a)(2) of the Code for each day until
paid.
Section 9.3 Press Releases and Announcements. Prior to the Closing Date,
no press releases related to this Agreement and the transactions contemplated
herein, or other announcements to the employees, customers or suppliers of any
Seller shall be issued without the mutual approval of the Sellers and the
Purchaser, except for any public disclosure which any Party in good faith
believes is required by applicable law or regulation or any listing agreement
with any national securities exchange. After the Closing Date, no press
releases related to this Agreement and the transactions contemplated herein, or
other announcements to the employees, customers or suppliers of the Acquired
Business shall be issued without the Purchaser's prior written consent (which
shall not be unreasonably withheld), except for any public disclosure which any
Party in good faith believes is required by law or regulation or any listing
agreement with any national securities exchange (in which case such disclosure
shall be prepared jointly by the Sellers and the Purchaser).
Section 9.4 Further Transfers. Each Party shall execute and deliver such
further instruments of conveyance and transfer and take such additional action
as any other Party may reasonably request to effect, consummate, confirm or
evidence the transfer and the consummation of the transactions contemplated
hereby.
Section 9.5 Specific Performance. Each Seller acknowledges that the
Acquired Business is unique and recognizes and affirms that in the event of a
breach of this Agreement by any Seller, money damages may be inadequate and the
Purchaser may have no adequate remedy at law. Accordingly, each Seller agrees
that the Purchaser shall have the right, in addition to any other rights and
remedies existing in its favor, to enforce its rights and the Sellers'
obligations hereunder not only by an action or actions for damages but also by
an action or actions for specific performance, injunctive and/or other equitable
relief.
Section 9.6 Transition Cooperation. The Sellers shall not, in connection
with the Acquired Business, in any manner take any action which is designed,
intended, or might be reasonably anticipated to have the effect of discouraging
customers, suppliers, lessors, licensors or other business associates from
maintaining the same business relationships with the Purchaser after
48
the date of this Agreement as were maintained with the Sellers prior to the date
of this Agreement. The Purchaser shall not, in connection with any business of
the Sellers other than the Acquired Business, in any manner take any action
which is designed, intended, or might be reasonably anticipated to have the
effect of discouraging customers, suppliers, lessors, licensors or other
business associates from maintaining the same business relationships with the
Sellers after the date of this Agreement as were maintained with the Sellers
prior to the date of this Agreement.
Section 9.7 Expenses. Except as set forth in Section 7.2(b), each Party
to this Agreement shall pay its own costs and expenses relating to this
Agreement and the transactions contemplated hereby; provided that the Sellers
shall bear and pay all costs and expenses incurred in connection with any
filings pursuant to the HSR Act.
Section 9.8 Allocation of Purchase Price. The allocation of the Purchase
Price among the Acquired Assets (the "Asset Purchase Price Allocation") shall be
made as set forth in Section 2.1(e) hereof. The Asset Purchase Price Allocation
shall be determined by the Purchaser and the Sellers reasonably and in good
faith, and such Asset Purchase Price Allocation shall be used by the Parties in
preparing (a) a Form 8594, Asset Acquisition Statement, for each of the
Purchaser and the Sellers, and (b) all Tax Returns. Each of the Purchaser and
the Sellers shall file Form 8594, prepared in accordance with this Section, with
its federal income Tax Return for its Tax period (including the Closing Date).
Section 9.9 Books and Records. Unless otherwise consented to in writing
by the Sellers or the Purchaser (as the case may be), the Purchaser and the
Sellers shall not, for a period of seven years following the date hereof,
destroy, alter or otherwise dispose of any of the books and records of the
Sellers retained by the Sellers or acquired by the Purchaser hereunder or
without first offering to surrender to the Sellers or the Purchaser (as the case
may be) such books and records, or any portion thereof, of which the Sellers or
the Purchaser may intend to destroy, alter or dispose of. The Purchaser and the
Sellers will allow the other Party's representatives, attorneys and accountants
access to such books and records, upon reasonable request during such Party's
normal business hours, for the purpose of examining and copying the same in
connection with any matter whether or not related to or arising out of this
Agreement or the transactions contemplated hereby.
Section 9.10 Noncompetition, Nonsolicitation and Confidentiality.
(a) Noncompetition. In consideration of the mutual covenants provided
for herein to the Sellers at the Closing, during the period beginning on the
Closing Date and ending on the second anniversary of the Closing Date (the
"Noncompete Period"), the Sellers shall not, and shall not cause or permit any
of their Affiliates to, engage (whether as an owner, operator, manager,
consultant, advisor, representative or otherwise) directly or indirectly in any
business that (i) competes with the Acquired Business as it is conducted as of
the Closing Date (a "Competing Activity") and (ii) is located (including,
without limitation, the presence of an office or the presence of consultants or
other employees performing services except as set forth below) within the same
greater metropolitan area as any office of the Acquired Business as of the
Closing Date (the
49
"Restricted Geographic Area"). The Parties agree that the covenant set forth in
this Section 9.10(a) is reasonable with respect to its duration, geographical
area and scope. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 9.10(a) 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. Notwithstanding anything contained in this
Section 9.10(a), consultants or other employees of the Sellers shall be
permitted to engage in Competing Activities in the Restricted Geographic Area
if, and only if, (1) at any time there are no more than ten consultants or other
employees of the Sellers engaging in Competing Activities for the Sellers'
customers in the Restricted Geographic Area ("Competing Persons") and (2) each
Competing Persons' Competing Activities in the Restricted Geographic Area for a
customer of the Sellers are incidental to the aggregate performance of services
by the Sellers for such customer.
(b) Nonsolicitation of Employees. During the period beginning on the
Closing Date and ending on the eighteen month anniversary of the Closing Date,
the Sellers shall not, and shall not cause or permit any of their Affiliates to,
directly or indirectly, (i) induce or attempt to induce any employee of the
Purchaser or any of its Affiliates to leave the employ of such Person, or in any
way interfere with the relationship between the Purchaser or any of its
Affiliates and any employee of such Person or (ii) hire any person who is then
an employee of the Purchaser or any of its Affiliates; provided that nothing
contained in this Agreement shall prohibit the Sellers from (A) general
solicitations of employees over any medium not specifically targeted toward the
Purchaser or its Affiliates, including, without limitation, newspaper,
television, radio, Internet and similar forms of mass media, and (B) hiring
consultants (excluding, without limitation, officers, management level
employees, sales people and recruiters of the Purchaser or any of its
Affiliates) who have responded to the general forms of solicitation described in
clause (A).
(c) Nonsolicitation of Customers. During the period beginning on the
Closing Date and ending on the second anniversary of the Closing Date, the
Sellers shall not, and shall not cause or permit any of their Affiliates to,
directly or indirectly, induce or attempt to induce any customer, supplier,
licensee, licensor, franchisee or other business relation of the Purchaser or
any of its Affiliates to cease doing business with such Person, or in any way
interfere with the relationship between any such customer, supplier, licensee,
licensor, franchisee or other business relation and such Person; provided that
nothing in this Section 9.10(c) shall prohibit or in any way limit the Sellers'
ability to offer and/or perform services or products to any such parties in the
ordinary course of business; and further provided that nothing contained in this
Agreement shall prohibit the Sellers from general solicitations of customers
over any medium not specifically targeted toward the Purchaser or its
Affiliates, including, without limitation, newspaper, television, radio,
Internet and similar forms of mass media.
50
(d) Confidentiality. The Sellers (referred to collectively in this
Section 9.10(d) as one "Party"), on the one hand, and the Purchaser, on the
other hand, shall, and shall cause their Affiliates to, treat and hold as
confidential any information concerning the business and affairs of the Acquired
Business and the other businesses currently conducted by the Sellers that is not
already generally available to the public or required to be disclosed to the SEC
(the "Confidential Information"), refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the other Party or destroy, at the request and option of the other Party, all
tangible embodiments (and all copies) of the Confidential Information which are
in such Person's possession or under such Person's control. In the event that
any Party or any of its Affiliates 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, such Party shall, and shall cause such Affiliates to,
notify the other Party promptly of the request or requirement so that the other
Party may seek an appropriate protective order or waive compliance with the
provisions of this Section 9.10(d). If, in the absence of a protective order or
the receipt of a waiver hereunder, any Party or any of its Affiliates are, on
the written advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, such Party or
such Affiliates may disclose the Confidential Information to the tribunal;
provided that such disclosing Person shall use his or its reasonable best
efforts to obtain, at the request of the other Party, an order or other
assurance that confidential treatment shall be accorded to such portion of the
Confidential Information required to be disclosed as the other Party shall
designate.
(e) Remedy for Breach. Each Party acknowledges and agrees that in the
event of any breach by any other Party or any of its Affiliates of any of the
provisions of this Section 9.10, monetary damages shall not constitute a
sufficient remedy. Consequently, in the event of any such breach, the non-
breaching Party and/or its successors or assigns may, in addition to other
rights and remedies existing in their favor, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof,
in each case without the requirement of posting a bond or proving actual
damages.
Section 9.11 Employees and Related Matters.
(a) The Sellers have provided the Purchaser with a true, correct,
complete and accurate list of all employees of the Sellers employed in the
Acquired Business (the "Acquired Business Employees"), which list indicates the
rate of pay of each such employee during the twelve months preceding the date
hereof and the status of each such employee as active, on leave, full-time,
part-time or otherwise.
(b) Except for the employees set forth on the "Excluded Employees
Schedule" attached hereto (the "Excluded Employees"), the Purchaser will offer
at-will employment to all Acquired Business Employees who are actively employed
full-time in the Acquired Business as of the Closing Date on terms and
conditions which, in the aggregate, are substantially equivalent to
51
those applicable to such employee's employment with the Sellers immediately
prior to the Closing Date; provided that the Purchaser shall have no obligation
to offer employment to any employee who, as of the Closing Date, is absent from
active employment with the Sellers for any reason (including as a result of
layoff, leave of absence, illness or injury). The Sellers shall provide the
Purchaser within a reasonable period prior to the Closing (and again on the
Closing Date) a true, complete and accurate list of each Acquired Business
Employee who is absent from active employment, the date such employee changed
from active to inactive status, the reason for such inactive status and, if
applicable, the anticipated date of return to active employment. Acquired
Business Employees who, on or immediately after the Closing Date, become
employees of the Purchaser shall be referred to herein as the "Transferred
Employees." Each Seller acknowledges that it is likely that not all Acquired
Business Employees to whom the Purchaser offers employment pursuant to this
Section 9.11 will accept the Purchaser's offer of employment, and each Seller
agrees that the Purchaser shall have no liability whatsoever (including under
Section 4980B of the Code) with respect to any Acquired Business Employee who is
offered employment but who does not become a Transferred Employee. The Purchaser
shall not assume any liability whatsoever and the Sellers shall retain, bear and
discharge all liabilities and obligations with respect to all employees and
former employees of any Seller who do not become Transferred Employees
(including liabilities under Section 4980B of the Code). Nothing contained
herein shall limit the Purchaser's right to terminate any Transferred Employee
at any time and for any reason, without recourse.
(c) Except for any Assumed Liabilities assumed by the Purchaser
pursuant to Section 2.1(c), the Sellers will be responsible for and shall pay to
all Acquired Business Employees (including, without limitation, all Transferred
Employees) (i) all amounts of wages, bonuses and other remuneration (including,
without limitation, discretionary benefits and bonuses) payable to such
employees with respect to the period ending at the close of business on the
Closing Date, (ii) any workers' compensation claims for which any Seller is
liable, amounts payable under Plans maintained by any Seller and other amounts
payable on an ongoing basis to such employees in connection with events or
incidents occurring prior to the Closing, except to the extent that such amounts
are paid under insurance, (iii) amounts equal to the vacation pay, sick leave
pay and floating holiday pay earned or accrued by such employees as of the close
of business on the Closing Date, whether or not such pay is vested or has been
accrued on the books of the Sellers at such close of business, based upon the
remuneration of such employees, normally used in computing such vacation pay,
sick leave pay and floating holiday pay and (iv) all severance payments, if any,
due to such employees as a result of the termination of their employment with
any Seller. The Sellers shall also be responsible for and shall pay any related
payroll burden (including, without limitation, FICA and other employment taxes)
with respect to payments made under this Section 9.11(c).
(d) The Purchaser shall not assume and shall have no liability or
obligation whatsoever, and the Sellers shall retain, bear and discharge all
liabilities and obligations, under any Plan of the Sellers. As of the Closing
Date, the Purchaser shall cause each Transferred Employee who was covered under
any Plan of the Sellers immediately prior to the Closing Date to be covered
under the employee benefit plans, programs and arrangements of the Purchaser
(the "Purchaser's Employee Benefit Plans"). The Purchaser's Employee Benefit
Plans shall recognize the prior service
52
of each Transferred Employee to the extent that such service is recognized under
the Plans of the Sellers (and prior service with the Seller's predecessors to
the extent such prior service is recognized under the Plans of the Sellers) for
purposes of eligibility to participate, vesting, and waiting periods but not for
purposes of benefit accruals.
(e) The Sellers shall provide promptly to the Purchaser, at
Purchaser's request, any information or copies of personnel records (including
addresses, dates of birth, dates of hire and dependent information) relating to
any Transferred Employees or relating to the service of any Transferred
Employees with the Sellers prior to the Closing Date. The Sellers and the
Purchaser shall each cooperate with the other and shall provide to the other
such documentation, information and assistance as is reasonably necessary to
effect the provisions of this Section 9.11.
(f) Effective as of the Closing Date, the Purchaser shall allow
eligible Transferred Employees to participate in the Purchaser's Code Section
401(k) savings plan (the "Purchaser Savings Plan"). The Purchaser Savings Plan
shall recognize each Transferred Employee's prior service with the Sellers for
purposes of eligibility to participate and vesting and shall accept rollover
distributions initiated by the Transferred Employees from the Charlie 401(k)
Plan (the "Seller Savings Plan"). Prior to acceptance any such rollover
distributions, the Purchaser shall amend the Purchaser Savings Plan so that it
may accept the rollover of promissory notes which evidence outstanding
Transferred Employee loan balances in the Seller Savings Plan. The Sellers
shall fully vest all Transferred Employees with respect to their benefits in the
Seller Savings Plan and, if necessary, shall amend the Seller Savings Plan so
that Transferred Employees may rollover promissory notes which evidence
outstanding Transferred Employee loan balances in the Seller Savings Plan.
(g) Effective as of the Closing Date, the Purchaser shall allow
eligible Transferred Employee to participate in the Purchaser's flexible
benefits plan, and the Sellers shall (i) spin-off the benefits pursuant to the
Spin-Off Agreements and (ii) transfer the related assets (and liabilities) and
record keeping information with respect to the Sellers' flexible benefits plan
to the Purchaser.
Section 9.12 Third Party Consents. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement shall not constitute an
agreement to transfer, sell or otherwise assign any instrument, contract, lease,
license, permit or other agreement or arrangement which is not permitted to be
assigned in connection with a transaction of the type contemplated by this
Agreement (collectively, the "Unassigned Contracts"). The beneficial interest
in and to each Unassigned Contract shall in any event pass to the Purchaser at
the Closing, and each Seller covenants and agrees to cooperate with the
Purchaser in any lawful and economically feasible arrangement to provide the
Purchaser with the Sellers' entire interest in the benefits under each of the
Unassigned Contracts. If and only if the Purchaser receives the economic
benefits under an Unassigned Contract, does the Purchaser agree to accept the
burdens and perform the obligations under such Unassigned Contract as
subcontractor of the Sellers. Furthermore, if the other party(ies) to an
Unassigned Contract subsequently consent to the assignment of such contract to
the Purchaser (without modification thereto which is adverse to the Purchaser),
the Purchaser shall thereupon agree
53
to assume and perform all liabilities and obligations arising thereunder after
the date of such consent, at which time such Unassigned Contract shall be deemed
an Acquired Asset. Each Seller agrees to indemnify the Purchaser and to hold it
harmless against any and all Losses which the Purchaser may suffer, sustain or
become subject to, as a result of any claims by any party to any of the
Unassigned Contracts for breach of contract in connection with the consummation
of the transactions contemplated by this Agreement.
Section 9.13 Bulk Sales Law. Each Party hereby waives compliance with any
provision of any bulk sales law which is applicable to the transfer of the
Acquired Assets pursuant to this Agreement; provided that the Sellers shall
jointly and severally indemnify the Purchaser against any loss, liability,
obligation or cost arising as a result of such noncompliance.
Section 9.14 Financial Information. The Sellers agree to cooperate with
the Purchaser and cause the Sellers' auditors to cooperate with the Purchaser,
in preparing such financial statements, selected financial data and
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" descriptions that the Purchaser requires with respect to periods
prior to the Closing Date to comply with the requirements of Regulation S-X of
the Securities Act of 1933, as amended (and any successor regulation(s) thereto)
("Regulation S-X"), and the requirements of Regulation S-K of the Securities Act
and any successor regulation(s) thereto. The Purchaser shall be responsible
for, or reimburse the Sellers for, the payment of any reasonable fees and
expenses incurred by the Sellers in adjusting the Financial Statements to
conform with the requirements of Regulation S-X and providing any other
assistance to the Purchaser pursuant to the preceding sentence.
Section 9.15 Volume Discounts. The Sellers shall reimburse to the
Purchaser the Sellers' pro rata share of any customer volume discounts relating
to periods prior to the Closing Date which are paid to customers of the Acquired
Business by the Purchaser (each a "Discount Payment"). The amount of a Discount
Payment payable by the Sellers to the Purchaser (a "Net Payment Amount") shall
equal (a) (i) the amount of any volume discount paid by the Purchaser to a
customer of the Acquired Business multiplied by (ii) the fraction determined by
dividing (A) the revenue the Sellers derived from such customer determined under
the agreement(s) giving rise to the Discount Payment by (B) the Gross Revenue
for such customer under the agreement(s) giving rise to the Discount Payment,
minus (b) an amount equal to the portion of such Discount Payment which was
accrued as a liability on the books and records of the Sellers as of the Closing
Date and included in the Assumed Liabilities. The Net Payment Amount shall be
paid within 10 days of notice thereof and shall be payable by a cashier's or
certified check, or by wire transfer of immediately available funds to the
account(s) designated by the Purchaser.
Section 9.16 Cash Collections. Following the Closing, if the Sellers
receive any cash (including, without limitation, cash received with respect to
outstanding Accounts Receivable) relating to the Acquired Business, then such
cash shall be remitted by wire transfer of immediately available funds to the
account(s) designated by the Purchaser within three Business Days after the
Sellers' receipt thereof. Following the Closing, if the Purchaser receives any
cash payment from any
54
Person with respect to any Excluded Accounts Receivable, which payment is
specifically designated by such Person as being made in respect of such Excluded
Accounts Receivable, then such cash shall be remitted by wire transfer of
immediately available funds to the account(s) designated by the Sellers within
three Business Days after the Purchaser's receipt thereof.
ARTICLE X
MISCELLANEOUS
Section 10.1 Amendment and Waiver. This Agreement may be amended and any
provision of this Agreement may be waived, provided that any such amendment or
waiver shall be binding upon a Party only if such amendment or waiver is set
forth in a writing executed by the Purchaser and the Sellers. No course of
dealing between or among any persons having any interest in this Agreement shall
be deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any Party under or by reason of this Agreement.
Section 10.2 Notices. All notices, demands and other communications given
or delivered hereunder shall be in writing and be deemed to have been given when
personally delivered, mailed by first class mail, return receipt requested, or
delivered by express courier service or telecopied (with hard copy to follow).
Notices, demands and communications to the Parties shall, unless another address
is specified in writing, be sent to the address or telecopy number indicated
below:
Notices to the Sellers: with a copy to:
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Cotelligent, Inc. ▇▇▇▇▇▇ ▇▇▇▇ & Priest LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
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Attention: General Counsel Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Notices to the Purchaser: with a copy to:
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COMSYS Information Technology Services, Inc. ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.3 Binding Agreement; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
and their respective successors and permitted assigns; provided that neither
this Agreement nor any of the rights, interests or
55
obligations hereunder may be assigned by the Sellers without the prior written
consent of the Purchaser or by the Purchaser (except as otherwise provided in
this Agreement) without the prior written consent of the Sellers; provided
further that:
(a) the Purchaser may at any time prior to the Closing, at its sole
discretion, assign, in whole or in part, its rights and obligations pursuant to
this Agreement to one or more of its Affiliates;
(b) the Purchaser may assign its rights under this Agreement for
collateral security purposes to any lender providing financing to the Purchaser
or any of their respective Affiliates and any such lender may exercise all of
the rights and remedies of such Person hereunder; and
(c) the Purchaser may assign its rights under this Agreement, in whole
or in part, to any subsequent purchaser of the Purchaser or any material portion
of the Purchaser's assets (whether such sale is structured as a sale of stock, a
sale of assets, a merger or otherwise).
Section 10.4 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
Section 10.5 No Strict Construction. The language used in this Agreement
shall 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 Person.
Section 10.6 Captions. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
Section 10.7 Entire Agreement. This Agreement and the documents referred
to herein contain the entire agreement between the Parties and supersede any
prior understandings, agreements or representations by or between the Parties,
written or oral, which may have related to the subject matter hereof in any way.
Section 10.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
Section 10.9 Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware, without giving
effect to any choice of law or conflict of law provision
56
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.
Section 10.10 Parties in Interest. Except with respect to Sections 7.2(b),
8.2 and 9.7, nothing in this Agreement, express or implied, is intended to
confer on any person other than the Parties and their respective successors and
assigns any rights or remedies under or by virtue of this Agreement.
* * * * *
57
IN WITNESS WHEREOF, the Parties hereto have executed this Asset
Purchase Agreement as of the date first written above.
COMSYS INFORMATION TECHNOLOGY
SERVICES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
______________________________
Name: ▇▇▇▇ ▇▇▇▇▇
Its: Vice President
COTELLIGENT, INC.
By: /s/ J. R. ▇▇▇▇▇▇▇
______________________________
Name: J. R. ▇▇▇▇▇▇▇
Its: ________________________________
COTELLIGENT U.S.A., INC.
By: /s/ J. R. ▇▇▇▇▇▇▇
______________________________
Name: J. R. ▇▇▇▇▇▇▇
Its: ________________________________
June 14, 2000