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EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BETWEEN
SYNTEL, INC.,
A MICHIGAN CORPORATION,
METIER, INC.
A CALIFORNIA CORPORATION,
▇▇▇▇▇▇ ▇▇▇▇
ARABELLA ▇▇▇
▇▇▇▇▇▇ KONG
AND
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
AS OF
JULY 1, 1999
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TABLE OF CONTENTS
PAGE
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I. PURCHASE AND SALE OF ACQUIRED ASSETS 1
1.1. Purchase and Sale. 1
1.2. Acquired Assets. 1
1.3. Transfer of Title to Acquired Assets. 4
1.4. Excluded Assets. 4
1.5. Certain Liabilities Assumed. 5
1.6. Liabilities Not Assumed. 6
1.7. Purchase Price. 8
1.8. Employee Retention Options. 13
1.9. Allocation. 14
1.10. Post Effective Date Taxes. 14
II. CLOSING 14
2.1. Closing Date. 14
2.2. Deliveries at the Closing. 14
2.3. Third Party Consents. 16
III. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDERS 16
3.1. Organization. 17
3.2. Qualification; Location of Business and Assets. 17
3.3. Subsidiaries and Investments. 17
3.4. Authority and Enforceability. 17
3.5. Third-Party Consents. 18
3.6. No Conflict or Violation. 18
3.7. Financial Condition and Liabilities. 18
3.8. Absence of Certain Changes. 19
3.9. Accounts Receivable. 21
3.10. Inventories. 21
3.11. Title. 21
3.12. Condition of Assets. 22
3.13. Owned Real Property. 22
3.14. Leased Real Property. 22
3.15. Leased Personal Property. 23
3.16. Employment Matters. 23
3.17. Employee Benefit Plans. 26
3.18. Material Contracts. 29
3.19. Customers and Suppliers. 30
3.20. Tax Returns and Taxes. 30
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3.21. Licenses and Permits. 31
3.22. Intellectual Property Rights. 31
3.23. No Pending Litigation or Proceedings. 33
3.24. Compliance with Laws. 33
3.25. OSHA. 33
3.26. Environmental Matters. 34
3.27. Insurance Coverage. 36
3.28. Products Liability and Warranty and Indemnity Claims. 36
3.29. Software Applications; Year 2000. 36
3.30. Insider Interests. 38
3.31. Brokers and Finders. 38
3.32. Disclosure. 38
3.33. Last Regularly-Prepared Balance Sheet. 39
3.34. Financial Accounts. 39
3.35. Checking Account. 39
3.36. Subcontractor Agreements. 39
IV. REPRESENTATIONS AND WARRANTIES OF BUYER 39
4.1. Organization. 39
4.2. Authority and Enforceability. 40
4.3. Third-Party Consents. 40
4.4. No Conflict or Violation. 40
4.5. Brokers and Finders. 40
4.6. SEC Documents. 41
V. COVENANTS 41
5.1. Access to Information. 41
5.2. Conduct of Business. 42
5.3. Consents. 42
5.4. Best Efforts. 42
5.5. Further Assurances. 42
5.6. Update Schedules. 43
5.7. Bulk Transfer Laws. 43
5.8. Change in Name. 43
5.9. Checks and Drafts. 43
5.10. COBRA/ERISA/Applicable State Law. 44
5.11. Endorsement Authorization. 44
5.12. Tax Clearance Certificates, Filings and Notices. 44
5.13. Cooperation in Litigation. 44
5.14. Exclusivity. 44
5.15. Press Releases. 45
5.16. Confidentiality. 45
5.17. Landlord Estoppel Letters. 45
5.18. Share Price Guaranty. 46
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5.19. Audit of Post-Effective Date Payments. 47
5.20. Metier Division's Operating Guidelines. 47
VI. CONDITIONS TO CLOSING 47
6.1. Conditions to Obligations of Buyer. 47
6.2. Conditions to Obligations of Seller. 49
VII. INDEMNIFICATION 49
7.1. Indemnification By Seller. 49
7.2. Indemnification by Buyer. 50
7.3. Basket; Indemnity. 51
7.4. Defense of Claims. 51
7.5. Environmental Matters. 53
7.6. Survival of Representations and Warranties. 53
7.7. Remedies. 53
7.8. Payment; Offset. 54
VIII. TERMINATION 54
8.1. Termination. 54
8.2. Effect of Termination. 55
IX. CERTAIN DEFINITIONS 55
X. OTHER PROVISIONS 59
10.1. Dispute Resolution. 59
10.2. Annexes, Exhibits and Schedules. 61
10.3. Amendment. 61
10.4. No Waiver. 61
10.5. Entire Agreement; No Third Party Beneficiaries. 61
10.6. Governing Law. 61
10.7. Accounting Terms. 61
10.8. Notices. 62
10.9. Counterparts; Headings. 63
10.10. Expenses. 63
10.11. Construction. 63
10.12. Successors and Assigns. 63
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EXHIBITS
A Intentionally Omitted
B Assumption Agreement
C ▇▇▇▇ of Sale
D Metier Division Operating Guidelines
E-1 Form of Employment Agreement (Executive)
E-2 Form of Employment Agreement (Non-Executive)
F Form of Non-Competition Agreement
G Form of Seller's Confidentiality, Nondisclosure and Non-Competition
Agreements
H Opinion of Seller's Counsel
I Opinion of Buyer and of Buyer's Counsel
J Seller Financial Statements
INDEX OF SCHEDULES
Schedule A - Holders
Schedule 1.5 - Certain Liabilities Assumed
Schedule 1.9 - Purchase Price Allocation
Schedule 3.2 - Qualification; Location of Business and Assets
Schedule 3.3 - Interest Held In Other Entities
Schedule 3.5 - Third-Party Consents
Schedule 3.6 - No Conflict or Violation
Schedule 3.8 - Absence of Certain Changes
Schedule 3.9 - Accounts Receivable
Schedule 3.11 - Title
Schedule 3.14 - Leased Real Property
Schedule 3.15 - Leased Personal Property
Schedule 3.16 - Employment Matters
Schedule 3.17 - Employee Benefit Plans
Schedule 3.18 - Material Contracts
Schedule 3.19 - Customers and Suppliers
Schedule 3.20 - Tax Returns and Taxes
Schedule 3.21 - Licenses and Permits
Schedule 3.22 - Intellectual Property Rights
Schedule 3.23 - Litigation
Schedule 3.24 - Compliance with Laws
Schedule 3.25 - OSHA
Schedule 3.26 - Environmental Matters
Schedule 3.27 - Insurance Coverage
Schedule 3.28 - Product Liability and Warranty Claims
Schedule 3.29 - Software Applications; Year 2000
Schedule 3.30 - Insider Interests
Schedule 3.34 - Financial Accounts
Schedule 5.1 - Confidential Information
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of July 1, 1999 (the
"Effective Date"), by and among SYNTEL, INC., a Michigan corporation (the
"Buyer") and METIER, INC., a California corporation (the "Seller"), and each of
the following shareholders of Seller: ▇▇▇▇▇▇ ▇▇▇▇, Arabella ▇▇▇, ▇▇▇▇▇▇ Kong and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ (individually, each a "Shareholder" and collectively, the
"Shareholders").
Seller is a provider of information technology consulting services and
is located in Los Angeles, CA, with major offices in San Diego, CA, Costa Mesa,
CA and Phoenix, AZ (the "Business").
Seller wishes to sell to Buyer, and Buyer wishes to purchase from
Seller, the Acquired Assets (as defined in Section 1.2), upon the terms and
subject to the conditions of this Agreement (the "Asset Purchase").
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
I. PURCHASE AND SALE OF ACQUIRED ASSETS
1.1. PURCHASE AND SALE.
Upon the terms and subject to the conditions of this Agreement, Seller
agrees to sell, assign, transfer, convey and deliver, or cause to be sold,
assigned, transferred, conveyed and delivered, to Buyer and Buyer agrees to
purchase, at the Closing (as defined in Section 2.1), all the Acquired Assets
free and clear of all Liens (as defined in Article IX), liabilities or
obligations, except those expressly assumed by Buyer pursuant to Section 1.5.
1.2. ACQUIRED ASSETS.
The term "Acquired Assets" means all of the assets, properties,
goodwill and rights owned by Seller and used or held for use in connection with
the operation of the Business, of whatever kind and nature, real or personal,
tangible or intangible, other than the Excluded Assets (as defined in Section
1.4), including, but not limited to, the following:
(a) Seller's business checking account maintained at Citibank FSB,
San Francisco, California, account number 601031909 (the
"Checking Account"), which as of June 30, 1999 had a book
value of approximately $3,752,943.90;
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(b) all accounts and notes receivable;
(c) all inventory (including raw materials, components, work in
process, finished goods, service parts and supplies, packaging
materials and similar items);
(d) all machinery, equipment (including, but not limited to
computer equipment, network equipment, leasehold improvements
and Software (as defined in Article IX)), trade fixtures,
spare parts, furniture, designs, drawings and supplies;
(e) all rights in, to and under all leases of tools, furniture,
machinery, supplies, equipment and other items of personal
property, including those listed on Schedule 3.15;
(f) all leasehold, fee simple and other interests in real property
of Seller listed on Schedule 3.14, in each case together with
all buildings, improvements, fixtures and all appurtenances
thereto;
(g) all right, title and interest of Seller in, to and under all
Intellectual Property Rights (as defined in Article IX);
(h) to the extent legally assignable, all right, title and
interest of Seller in, to and under all franchises, licenses,
permits, orders, certificates, approvals and other
governmental authorizations which are necessary to own or
lease and operate the Acquired Assets and to conduct the
Business as it has been conducted by Seller (the "Permits"),
including those listed on Schedule 3.21;
(i) all right, title and interest of Seller in, to and under all
contracts, agreements, purchase orders, customer orders and
work orders listed on Schedule 3.18, except for contracts
listed on Section B of Schedule 3.18 which pertain to
"headhunters" or placement agents (it being understood that,
to the extent any such "headhunters" or placement agents are
utilized after the Closing Date, they will be compensated
pursuant to terms negotiated directly by Buyer); provided,
however (with respect to the above exception), that Buyer
agrees to pay any fees that were accrued under such contracts
between the Effective Date and the Closing Date;
(j) all computer programs and a copy of the source code and object
code of all such programs, together with all additions,
modifications, updates, and enhancements thereto; all design
specifications including, but not limited to, program
descriptions, system flow charts, file layouts, report
layouts, screen
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layouts, and all other computer program documentation; and all
user's manuals, training manuals, sales literature, and other
system and operations documentation relating to such computer
programs;
(k) all rights, claims, causes of action and choses in action
against third parties (including, but not limited to, rights
against suppliers under warranties covering any inventory,
machinery or equipment) existing on the Closing Date, the
benefits of which have been assumed by or assigned to Buyer
pursuant to this Agreement;
(l) all stationery, forms, labels, shipping materials, brochures,
art work, photographs, advertising materials, and any similar
items;
(m) all rights in connection with prepaid expenses with respect to
the assets being sold hereunder;
(n) all letters of credit issued to Seller;
(o) all insurance policies not included in the Excluded Assets;
(p) all sales and promotional materials, catalogues and
advertising literature;
(q) all telephone numbers of Seller and all lock boxes to which
Seller's account debtors remit payments;
(r) all products and security deposits;
(s) all books and records relating to the Business, including, but
not limited to, financial, accounting records, employee
payroll, I-9 and other non-confidential information relating
to employees of Seller who accept offers of employment with
Buyer, property records, production records, engineering
records, environmental compliance records, files, invoices,
customer lists and records, supplier lists and records and
other data owned or used by Seller relating to the Acquired
Assets described in subparagraphs (a) through (r) of this
Section 1.2; and
(t) all other tangible and intangible assets of Seller relating to
the Business, whether or not carried at value or listed on the
books and records of Seller, and whether or not in the
possession of Seller or others.
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1.3. TRANSFER OF TITLE TO ACQUIRED ASSETS.
The sale, assignment, conveyance, transfer and delivery by Seller of
the Acquired Assets shall be made at the Closing by such general warranty deeds,
bills of sale, assignments, licenses, endorsements and other appropriate
instruments of transfer as shall be necessary to vest in Buyer, as of the
Closing Date (as defined in Section 2.1), good and marketable title to the
Acquired Assets, free and clear of all Liens, except for the Assumed Liabilities
(as defined in Section 1.5). The sale shall be effective retroactively to the
Effective Date. Any transfer or recording charges relating to the Acquired
Assets will be paid by Seller. Any sales taxes assessed on or applicable to the
conveyance of real estate or personal property hereunder will be paid by Buyer.
1.4. EXCLUDED ASSETS.
The term "Excluded Assets" means:
(a) Seller's ▇▇▇▇▇▇▇ ▇▇▇▇▇ account, having account number
250-07T47 (the "▇▇▇▇▇▇▇ ▇▇▇▇▇ Account");
(b) minute books, stock records, tax returns and similar corporate
records of Seller;
(c) the rights of Seller to any of Seller's claims for any
federal, state, local or foreign tax refunds related to the Business
for periods prior to July 1, 1999;
(d) Seller's Employee Plans (as defined in Section 3.17(a));
(e) insurance policies of Seller in effect as of the Closing Date
and rights in connection therewith (except for insurance policies that
constitute "employee welfare benefit plans" under Section 3(1) of ERISA
(as herein defined)), unless prior to the Closing, Buyer elects, by
written notice delivered to Seller prior to the Closing Date, to accept
assignments of any of such insurance policies;
(f) rights arising from prepaid expenses, if any, with respect to
assets not being sold hereunder;
(g) any rights which the Seller may have to the book entitled
"Oracle
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Certified Preferred Financials Exam Guide," written by ▇▇▇▇▇▇ ▇▇▇▇ and
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
(h) rights arising from any refunds due with respect to insurance
premium payments to the extent they relate to insurance policies which
constitute Excluded Assets; and
(i) personnel files of employees of Seller who do not accept
offers of employment with Buyer.
1.5. CERTAIN LIABILITIES ASSUMED.
Upon the terms and subject to the conditions of this Agreement, Buyer
shall execute and deliver to Seller on the Closing Date an agreement in the form
attached hereto as Exhibit B (the "Assumption Agreement") pursuant to which
Buyer shall assume and agree to pay, perform and discharge the following
(subject to the limitations in Section 1.6), which shall be referred to herein
collectively as the "Assumed Liabilities":
(a) the accounts payable and accrued liabilities of Seller listed
on Schedule 1.5;
(b) Seller's obligation to pay California sales tax on the sale of
assets contemplated hereby;
(c) the reasonable fees and costs of (1) ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
associated with the negotiation and execution of this Agreement and the
transactions contemplated hereby; (2) C. H. Fu & Associates related to
the preparation of accounting information related to this Agreement and
the transactions contemplated hereby; or (3) any other legal or
accounting or professional fees paid or payable arising out of or
related to this Agreement or the transaction contemplated thereby,
which fees and costs shall be paid at the Closing (except that, with
respect to ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ only, estimated fees and costs shall be
paid at the Closing, with the remaining fees and costs to be paid
within 30 days of the Closing); provided, however, that such fees and
costs may not exceed $150,000 in the aggregate;
(d) the brokerage fees and costs of Broadview Int'l LLC with
respect to the transactions contemplated hereby, which fees and costs
shall be paid at the Closing; provided, however, that said broker fees
and costs shall not exceed $500,000, plus 1% of the amount by which the
value of the Closing Consideration exceeds $20,000,000;
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(e) all obligations and liabilities of Seller under the contracts
and agreements which are to be acquired by Buyer pursuant to the
provisions of this Agreement, and with respect to which Buyer succeeds
to the rights of Seller thereunder, to the extent that such obligations
and liabilities accrue from and after the Effective Date; and
(f) all accrued liabilities as of the Closing Date for unexercised
vacation benefits for any Seller Employee not accepting employment with
Buyer.
The assumption by Buyer of the Assumed Liabilities shall not expand the
rights or remedies of any third party against Buyer or Seller as compared to the
rights and remedies which such third party would have had against Seller had
Buyer not assumed the Assumed Liabilities. Without limiting the generality of
the preceding sentence, the assumption by Buyer of the Assumed Liabilities shall
not create any third party beneficiary rights.
1.6. LIABILITIES NOT ASSUMED.
Except as set forth in Section 1.5, Buyer shall not assume and shall
not be responsible to pay, perform or discharge any other obligations,
liabilities, contracts or commitments of Seller of any kind or nature whatsoever
(the "Excluded Liabilities"). Seller shall pay and satisfy when due all Excluded
Liabilities. Without limiting the generality of the foregoing and
notwithstanding anything to the contrary in this Agreement, the Excluded
Liabilities shall include, but not be limited to, the following:
(a) any obligations or liabilities of Seller arising or incurred
in connection with the negotiation, preparation, investigation and
performance of this Agreement and the transactions contemplated hereby,
including, without limitation, fees and expenses of counsel,
accountants, consultants, advisers, brokers and others to the extent
such fees and expenses exceed the amounts assumed by Buyer as set forth
in Section 1.5 of the Agreement;
(b) any liabilities of Seller under those leases, contracts,
insurance policies, commitments, sales orders, purchase orders, Permits
and Environmental Permits (as defined in Article IX) which are not
assigned to Buyer pursuant to the provisions of this Agreement; any
liabilities for retrospective or similar insurance premium adjustments;
(c) any liabilities of Seller in connection with or arising out of
the transfer or assignment of any lease, contract, commitment, or other
agreement, including, without limitation, under any computer software
agreement;
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(d) any liabilities of Seller under collective bargaining
agreements pertaining to the Employees; any liabilities of Seller to
pay severance benefits to Employees of Seller whose employment is
terminated prior to the Effective Date or in connection with or
following the sale of the Acquired Assets pursuant to the provisions
hereof; or any liability under any Federal or state civil rights or
similar law, or the so-called "WARN Act", resulting from the
termination of employment of employees;
(e) product warranty and indemnity liabilities of Seller with
respect to products shipped on or prior to the Effective Date and
products constituting finished goods inventory as of the Effective Date
whether such warranty and indemnity liabilities arise pursuant to the
assumed contracts or otherwise;
(f) any product liability or similar claim for injury to person or
property which arises out of or is based upon any express or implied
representations, warranty, agreement or guarantee made by Seller, or by
reason of the improper performance or malfunctioning of a product,
improper design or manufacture, failure to adequately package, label or
warn of hazards or other related product defects of any products at any
time manufactured or sold or any service performed by Seller on or
prior to the Effective Date;
(g) any obligations or liabilities of Seller arising under or in
connection with any Employee Plan (as defined in Section 3.17(a)),
except for the vacation benefit payment assumed in Section 1.5(f);
(h) any obligations or liabilities of Seller for any present or
past employees, agents or independent contractors of Seller, including,
without limitation, any workers' compensation claims and employee
severance claims;
(i) any obligations or liabilities with respect to the litigation,
investigations and other matters set forth on Schedule 3.23;
(j) any obligations or liabilities for any Taxes (as defined in
Section 3.20) of Seller; excluding any California sales taxes arising
from or associated with the conveyance and transfer from Seller to
Buyer of the Acquired Assets; and
(k) any other obligation or liability of Seller of any kind or
nature, whether now in existence or hereafter arising, not constituting
Assumed Liabilities.
1.7. PURCHASE PRICE.
The purchase price for the Acquired Assets shall be as set forth in
this Section
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1.7. Certain capitalized terms in this Section 1.7 shall have the
meanings ascribed thereto in Section 1.7(f):
(a) Cash and Stock. At the Closing, Buyer shall pay to Seller
$17,389,611 (the "Cash Consideration") (i.e., $18,650,000, less
$840,535 ($840,535 representing the fair market value of the ▇▇▇▇▇▇▇
▇▇▇▇▇ Account on the date said account was liquidated) and less
$419,854 ($419,854 representing the exercise price of vested options
issued under Seller's non-qualified stock option plan)). On the date
one year following the Closing Date (as defined in Section 2.1 herein),
Buyer shall deliver to Seller 300,000 shares of Buyer's Common Stock,
(the "Stock Consideration"), (collectively, the Cash Consideration and
the Stock Consideration are the "Closing Consideration"). The Stock
Consideration, when delivered, shall be unrestricted and fully
registered and tradable to the public. The Stock Consideration shall be
subject to the Share Price Guaranty as defined in Section 5.18 of this
Agreement.
(b) Advance. Buyer hereby agrees to advance $1,600,000 (the
"Advance") to Seller. The Advance represents an advance payment of the
Earn-Outs described in Section 1.7(c). The Advance shall be advanced on
April 1, 2000. The Advance shall be adjusted from the Earn-Out proceeds
earned by Seller. To the extent Seller does not achieve the sufficient
Earn-Out to repay the Advance in full, Seller shall not be required to
repay any portion of the deficiencies.
(c) Gross Revenues and EBIT Earn-Outs. The Buyer shall pay
additional consideration to Seller based on the Metier Division's
achievement of certain revenues and earnings targets as set forth in
this Section 1.7(c). Such consideration shall be payable in accordance
with the terms of Section 1.7(e).
(i) Gross Revenues Earn-Out. The Gross Revenues Earn-Out
will be paid in two installments. The first installment will be an
amount equal to (A) 11.95% multiplied by (B) the difference of (w)
the Gross Revenues for the 2000 Earn-Out Period (not to exceed
$40,353,000), minus (x) $25,221,000. The second installment will
be an amount equal to (C) 11.95% multiplied by (D) the difference
of (y) Gross Revenues for the 2001 Earn-Out Period, less (z)
$40,353,000). The aggregate Gross Revenues Earn-Out shall not
exceed $4,410,000.
(ii) EBIT Earn-Out. The EBIT Earn-Out will be paid in two
installments. The first installment will be an amount equal to (A)
the applicable Earn-Out Multiple for the year 2000; multiplied by
(B) the difference of (w) the EBIT for the 2000 Earn-Out Period
(not to exceed
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$9,233,000), less (x) $4,271,000. The second installment will be
an amount equal to (C) the applicable Earn-Out Multiple for the
year 2001; multiplied by (D) the difference of (y) EBIT for the
2001 Earn-Out Period, less (z) $9,233,000. The aggregate EBIT
Earn-Out shall not exceed $6,590,000.
(iii) Earn-Out Limitation. Notwithstanding clauses 1.7(c)(i)
and 1.7(c)(ii), the aggregate Earn-Outs described in this Section
1.7(c) shall not exceed and Buyer shall not be obligated to pay in
excess of $11,000,000.
(d) Additional Earn-Out. Buyer shall pay Seller additional
consideration (the "Additional Earn-Out") in the event the Metier
Division meets or exceeds certain aggregate revenues and EBIT targets
for the ▇▇▇▇ ▇▇▇▇-▇▇▇ Year and the 2001 Earn-Out Year. The Additional
Earn-Out will be paid in one installment after the 2001 Earn-Out Year
and in accordance with the terms of Section 1.7(e). If each of the
following conditions are satisfied:
(i) Gross Revenues (A) during the 2000 Earn-Out Year equal
or exceed $38,335,350; and (B) during the 2001 Earn-Out Year equal
or exceed $62,143,000; and
(ii) the EBIT Margin during (A) the 2000 Earn-Out Year is
equal to or greater than 21.755% and (B) the 2001 Earn-Out Year is
equal to or greater than 26.9%; and
(iii) the aggregate Gross Revenues for the ▇▇▇▇ ▇▇▇▇-▇▇▇
Year and the 2001 Earn-Out Year equal or exceed $112,750,000; and
(iv) the quotient (expressed as a percentage) of (A) the
sum of (i) EBIT during the 2000 Earn-Out Year plus (ii) EBIT
during the 2001 Earn-Out Year; divided by (B) the sum of (i) Gross
Revenues for the 2000 Earn-Out Year plus (ii) Gross Revenues for
the 2001 Earn-Out Year is equal to or greater than 25.5%, then
the Additional Earn-Out shall be an amount equal to $1,000,000
multiplied by the Revenue Multiple.
(e) Procedure for Payment of Earn-Outs. As soon as practicable
after the close of the Metier Division's books for each Earn-Out
Period, but, in any event, no later than ninety (90) days after the end
of each such Earn-Out Period (except in the case of the Additional
Earn-Out, which shall be calculated no
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later than ninety (90) days after the end of the 2001 Earn-Out Period),
Buyer will determine the final aggregate amount of the Earn-Out, if
any, for such preceding Earn-Out Period based upon Buyer's internal
accounting records, and shall notify Seller in writing of the amount of
the Earn-Out, if any (the "Earn-Out Notice"). Seller may, within thirty
(30) days after receipt of an Earn-Out Notice, deliver to Buyer written
notice (the "Dispute Notice") identifying any dispute that Seller may
have with respect to the amount set forth in the Earn-Out Notice. If a
Dispute Notice is not delivered by Seller to Buyer within such thirty
(30) day period, the amount of the applicable Earn-Out, if any, set
forth in the Earn-Out Notice shall be final and binding on the parties
hereto. Within fifteen (15) days following Buyer's receipt of a Dispute
Notice, Buyer, on the one hand, and Seller, on the other hand, shall in
good faith attempt to agree upon the Gross Revenues Earn-Out, the EBIT
Earn-Out or the Additional Earn-Out, if any, for the applicable
Earn-Out Period(s). If Buyer, on the one hand, and Seller, on the other
hand, cannot agree to the amount of the Earn-Out, if any, for such
Earn-Out Period(s), they shall jointly submit the disputed portion of
any Earn-Out for final determination by a Big 5 Accounting firm other
than Ernst &Young or Price Waterhouse Coopers (the "Arbitrating
Accountant"). The Buyer and the Seller shall select ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as
the Arbitrating Accountant, unless ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (i) has a
relationship with the Buyer or the Seller which creates a conflict of
interest; or (ii) is otherwise unavailable to serve as the Arbitrating
Accountant. If ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ is unavailable, the Buyer and the Seller
shall select Deloitte & Touche as the Arbitrating Accountant, unless
Deloitte & Touche is similarly unavailable, in which case the Buyer and
the Seller shall select KPMG Peat Marwick as the Arbitrating
Accountant. The Arbitrating Accountant's determination shall be made
within ninety (90) days of the date on which the dispute is submitted
to the Arbitrating Accountant. The fees and expenses of the Arbitrating
Accountant shall be shared equally between the Buyer and Seller. The
Arbitrating Accountant's determination as to the disputed amount of the
Earn-Out for such Earn-Out Period(s) shall be final and binding on the
parties hereto. The Earn-Out awarded to Seller shall be paid by Buyer
to Seller in cash and within fifteen days of the final determination of
the Earn-Out, if any, with interest at the "prime" rate of Bank of
America NT&SA from time to time in effect from the date the Earn-Out
would otherwise have been due. In connection with the determination of
each of the Earn-Outs, Buyer shall give Seller and the Arbitrating
Accountant, as applicable, reasonable access to the portion of its
books and records which are relevant to the calculation of the Earn-Out
to which the Dispute Notice relates for such Earn-Out Period(s) during
normal business hours upon reasonable advance notice.
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(f) Definitions. For purposes of this Section 1.7, the following
terms shall have the following meanings:
(i) "Earn-Out" means any of the Earn-Outs described in
Section 1.7(c) or the Additional Earn-Out described in Section
1.7(d).
(ii) "Earn-Out Multiple" means, for a specified EBIT Margin
during a given Earn-Out Period, the number set forth under the
applicable row and column below for such Earn-Out Period and
beside the EBIT Margin achieved during the applicable Earn-Out
Period:
EARN-OUT PERIOD
---------------
EBIT MARGIN 2000 2001
----------- ---- ----
Less than 17.0% 0.00 0.00
Greater than or equal to 0.19 0.00
17.0% and less than 19.0%
Greater than or equal to 0.39 0.00
19.0% and less than 21.0%
Greater than or equal to 0.48 *
21.0% and less than 22.9%
Greater than or equal to * 0.19
21.0% and less than 23.0%
Greater than or equal to 0.53 *
22.9% and less than 25.0%
Greater than or equal to * 0.39
23.0% and less than 25.0%
Greater than or equal to 0.53 0.48
25.0% and less than 26.9%
Greater than or equal to 0.53 0.53
26.9%
For example, if (A) during the 2000 Earn-Out Period, the EBIT Margin
achieved by the Metier Division is 21.5%, then the Earn-Out Multiple
for the 2000 Earn-Out Period will be 0.48; and (B) during the 2001
Earn-Out Period, the EBIT Margin achieved by the Metier Division is
21.5%, then the Earn-Out Multiple for the 2001 Earn-Out Period will be
0.19.
(iii) "EBIT" shall mean the Metier Division's earnings
before interest
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and income taxes, as reported in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved, excluding amortization charges attributable to
the goodwill resulting from the Buyer's purchase of the Seller and
its assets.
(iv) "EBIT Earn-Out" shall mean the Earn-Out described in
Section 1.7(c)(ii).
(v) "EBIT Margin" for a given period means the quotient
(indicated as a percentage) obtained by dividing (i) EBIT for such
period, by (ii) the Gross Revenues for such period. For example,
if Gross Revenues for the 2000 Earn-Out Period is $40.0 million
and the EBIT for the 2000 Earn-Out Period is $9.0 million, then
the EBIT Margin for the 2000 Earn-Out Period would be 22.5%.
(vi) "Gross Revenues" shall mean the Metier Division's
gross revenues as reported in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved, but which shall not include customer reimbursable
expenses.
(vii) "Gross Revenues Earn-Out" shall mean the Earn-Out
described in Section 1.7(c)(i).
(viii) "Metier Division" means Seller's operating division as
more particularly described in Exhibit D.
(ix) "Revenue Margin" means the quotient (expressed as a
percentage) of (A) the sum of Gross Revenues for the 2000 Earn-Out
Year plus the Gross Revenues for the 2001 Earn-Out Year; divided
by (B) $102,500,000.
(x) "Revenue Multiple" means the number set forth under
the column entitled Multiple for the applicable Revenue Margin set
forth in the left column below:
REVENUE MARGIN MULTIPLE
-------------- --------
Less than 110% 0
Greater than or equal to 110% and less 1
than 120%
Greater than or equal to 120% and less 2
than 130%
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Greater than or equal to 130% and less 3
than 140%
Greater than or equal to 140% and less 4
than 150%
Greater than or equal to 150% 5
For example, if the Revenue Margin equals 147%, then the Revenue
Multiple is 4.
(xi) "2000 Earn-Out Period" means the period commencing on
January 1, 2000 and ending on December 31, 2000.
(xii) "2001 Earn-Out Period" means the period commencing on
January 1, 2001 and ending on December 31, 2001.
1.8. EMPLOYEE RETENTION OPTIONS.
Buyer agrees to issue to the former employees of Seller who accept
employment with Buyer (the "Retained Employees") options to purchase shares of
Buyer's Common Stock under Buyer's incentive stock option program (the
"Options"). If all of Seller's employees accept employment with Buyer, an
aggregate of at least: (i) 269,927 Options to be issued promptly following the
Closing Date; (ii)70,273 Options to be issued on or prior to December 31, 1999;
(iii) 223,021 Options to be issued on or prior to December 31, 2000; (iv)
234,813 Options to be issued on or prior to December 31, 2001; (v) 158,197
Options to be issued on or prior to December 31, 2002; and (vi) 85,521 Options
to be issued on or prior to December 31, 2003. The options to be issued in any
calendar year shall be issued to employees based on their anniversary dates of
employment with Seller. If less than all of Seller's employees accept employment
with Buyer, the foregoing amounts shall be reduced by the number of Options
which would have been issued to the employees of Seller who did not accept
employment with Buyer. Buyer and Seller will agree on an allocation of the
foregoing Options among the Retained Employees promptly following the Closing
Date and in no event later than October 31, 1999. If a Retained Employee is not
employed by Buyer on the date of any of the future option grants, such Retained
Employee shall not be entitled to receive any Options as part of such grant and
the Options which would otherwise have been issued to such employee shall not be
issued. Any options issued pursuant to this Section 1.8 shall be governed by the
terms of Buyer's standard option agreement, and shall be subject to the Buyer's
standard vesting schedule. The exercise price for each share under a particular
option shall equal the fair market value of the Buyer's Common Stock on the date
of issuance of
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the option, as determined in good faith by Buyer's Board of Directors.
1.9. ALLOCATION.
The allocation of the Purchase Price and Assumed Liabilities to the
Acquired Assets and Assumed Liabilities (the "Allocation") shall be as is set
forth on Schedule 1.9. The parties acknowledge that the Allocation has been
determined pursuant to arm's length bargaining between the parties regarding the
fair market values of the Acquired Assets in accordance with Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code"). The parties shall report
(including with respect to the filing of Form 8594 to the Internal Revenue
Service) the sale and purchase of the Acquired Assets for all income tax
purposes in a manner consistent with such Allocation and will not, in connection
with the filing of such return, make any Allocation of the Purchase Price and
Assumed Liabilities which is contrary to the Allocation. The parties agree to
consult with one another with respect to any tax audit, controversy or
litigation relating to the Allocation.
1.10. POST EFFECTIVE DATE TAXES.
Buyer agrees that for state and federal income tax purposes it will
report all accrual basis income and expenses of Seller for the period commencing
the Effective date.
II. CLOSING
2.1. CLOSING DATE.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ at 10 a.m., local time, on September 22,
1999, or at such other location, time or date as may be mutually agreed upon
between Buyer and Seller (such time and date being herein called the "Closing
Date").
2.2. DELIVERIES AT THE CLOSING.
At the Closing:
(a) Seller shall deliver or cause to be delivered to Buyer:
(i) a duly executed general assignment and ▇▇▇▇ of sale in
the form attached hereto as Exhibit C (the "▇▇▇▇ of Sale");
(ii) such other deeds, assignments, conveyances and other
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instruments of transfer relating to the Acquired Assets, in form
and substance reasonably satisfactory to Buyer and its counsel, as
Buyer may reasonably request to effect the sale to Buyer of the
Acquired Assets and to convey good and marketable title to the
Acquired Assets;
(iii) a power of attorney in favor of Buyer with respect to
any instruments of payment of any of the accounts receivable
included in the Acquired Assets or any other Acquired Assets made
payable to Seller;
(iv) a certified copy of Seller's consents or resolutions
authorizing the execution, delivery and performance of this
Agreement and any other document delivered by Seller hereunder;
(v) certificates of good standing of Seller issued not
earlier than ten days prior to the Closing Date by the Secretaries
of State of each of the following States: California and Arizona;
(vi) physical possession of all records, tangible assets,
licenses, policies, contracts, plans, leases or other documents or
instruments pertaining to the Seller's business (other than the
Excluded Assets), which are in the Seller's possession;
(vii) the various agreements, opinions, certificates and
other documents and instruments referred to in Section 6.1; and
(viii) such other certificates and documents as Buyer or its
counsel may reasonably request to demonstrate satisfaction of the
conditions and compliance with the agreements set forth in this
Agreement; and
(b) Buyer shall deliver or cause to be delivered to Seller:
(i) the payment of the Closing Consideration for the
Acquired Assets as provided in Section 1.7;
(ii) an executed copy of the Assumption Agreement;
(iii) a certified copy of Buyer's resolutions authorizing
the execution, delivery and performance of this Agreement and any
other document delivered by Buyer hereunder;
(iv) the various agreements, opinions, certificates and
other documents and instruments referred to in Section 6.2; and
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(v) such other certificates and documents as Seller or its
counsel may reasonably request to demonstrate satisfaction of the
conditions and compliance with the agreements set forth in this
Agreement.
2.3. THIRD PARTY CONSENTS.
To the extent that Seller's rights under any agreement, contract,
commitment, lease, Permits or other asset to be assigned to Buyer hereunder may
not be assigned without the consent of another person which has not been
obtained, this Agreement shall not constitute an agreement to assign the same if
an attempted assignment would constitute a breach thereof or be unlawful, and
Seller, at its expense, shall use its best efforts to obtain any such required
consent(s) as promptly as possible. If any such consent shall not be obtained or
if any attempted assignment would be ineffective or would impair Buyer's rights
under the asset in question so that Buyer would not in effect acquire the
benefit of all such rights, Seller, to the maximum extent permitted by law and
the asset, shall act after the Closing as Buyer's agent in order to obtain for
Buyer the benefits thereunder and shall cooperate, to the maximum extent
permitted by law and the asset, with Buyer in any other reasonable arrangement
designed to provide such benefits to Buyer. Notwithstanding the foregoing, the
parties acknowledge that Buyer shall have no obligation to close the purchase of
the Business unless the consents of Seller's five (5) largest customers to the
assignment of their contracts with Seller to Buyer are first obtained.
III. REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE SHAREHOLDERS
Seller and each of the Shareholders, jointly and severally (with the
understanding, however, that: (i) each Shareholder's liability shall not exceed
one hundred fifty percent (150%) of the total consideration now or hereafter
received by such Shareholder pursuant to the terms of this Agreement; and (ii)
the liability of all Shareholders (in the aggregate) shall not exceed the total
consideration now or hereafter paid to the Seller, the Shareholders and the
holders listed on Schedule A pursuant to the terms of this Agreement), represent
and warrant to Buyer that the following representations and warranties are true
and correct as of the Closing Date:
3.1. ORGANIZATION.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of California. Seller has all requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on the Business as and
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where now being conducted. Seller has heretofore delivered to Buyer complete and
correct copies of Seller's Articles of Incorporation and Bylaws, as currently in
effect.
3.2. QUALIFICATION; LOCATION OF BUSINESS AND ASSETS.
Seller is duly licensed or qualified to do business as a foreign
corporation and is in good standing in the jurisdictions set forth on Schedule
3.2, which jurisdictions are the only jurisdictions wherein the character or
location of the properties owned or leased or the nature of activities conducted
by Seller make such qualification necessary. There has not been any claim by any
jurisdiction to the effect that Seller is required to qualify or otherwise to be
authorized to do business as a foreign corporation in any jurisdiction in which
Seller has not qualified or obtained such authorization. Set forth on Schedule
3.2 is each location where Seller (a) has a place of business, or (b) owns or
leases property.
3.3. SUBSIDIARIES AND INVESTMENTS.
Except as set forth in Schedule 3.3, Seller holds no stock or other
interest, either of record, beneficially or equitably, in any firm, venture,
corporation, partnership or other entity.
3.4. AUTHORITY AND ENFORCEABILITY.
Seller and each of the Shareholders has full power and authority to
enter into this Agreement and to carry out the transactions contemplated hereby.
The execution, delivery and performance of this Agreement, the Employment
Agreements (as defined in Section 6.1(e)), the Noncompetition Agreements (as
defined in Section 6.1(f)), and the other agreements and documents to be
executed and delivered by Seller and/or the Shareholders pursuant to the
provisions of this Agreement (the "Seller Documents") have been duly authorized
by all necessary action on the part of Seller and the Shareholders, as the case
may be. This Agreement has been, and at the Closing the Seller Documents shall
be, duly executed and delivered by Seller and the Shareholders, as the case may
be, and constitute, or shall constitute, the legal, valid and binding obligation
of Seller or the Shareholders, as the case may be, enforceable in accordance
with their respective terms, subject to the effect of applicable bankruptcy and
similar laws applicable to the rights of creditors generally and to the
potential unavailability of equitable remedies. Seller and its Shareholders have
also been advised by their counsel that certain of the Seller Documents may
contain provisions which are unenforceable as a matter of law. Seller and its
Shareholders make no representation or warranty as to the enforceability of such
provisions. However, Seller and each of the Shareholders reaffirm that
notwithstanding any potential unenforceability, they have reviewed the Seller
Documents and agree to be
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bound thereby.
3.5. THIRD-PARTY CONSENTS.
Except as set forth on Schedule 3.5, no consent, authorization or
approval of, and no registration or filing with, any third parties or any
governmental or regulatory body or authority, is required for the execution,
delivery and performance of this Agreement and the Seller Documents by Seller
and the consummation of the transactions contemplated hereby and thereby.
3.6. NO CONFLICT OR VIOLATION.
Except as provided in Schedule 3.6, the execution, delivery and
performance of this Agreement and the Seller Documents, the consummation by
Seller and the Shareholders of the transactions contemplated hereby and thereby,
and the compliance with the terms hereof and thereof do not and will not (with
or without notice, the passage of time, or both), (a) violate any provision of
the Articles of Incorporation or Bylaws of Seller, (b) violate, conflict with or
result in a breach of or constitute a default under, any term, condition, or
provision of any material agreement, contract, mortgage, lease or other
instrument, document or understanding to which Seller or any Shareholder is a
party, by which Seller or any Shareholder may have rights or by which any of the
assets of Seller or any Shareholder may be bound or affected, (c) violate any
material law, ordinance, code, rule, regulation, order, judgment, injunction,
award or decree of any court, arbitrator, administrative agency, or governmental
body or authority applicable to Seller or its assets or any Shareholder or any
Shareholders' assets, (d) give any person the right to terminate, modify,
accelerate or otherwise change the existing rights or obligations of Seller
relating to the Business or assets of Seller, or (e) result in the creation of
any Lien on any of the Acquired Assets.
3.7. FINANCIAL CONDITION AND LIABILITIES.
Seller has previously delivered to Buyer true and complete copies of
(a) the unaudited balance sheets of Seller as of September 30, 1998, 1997 and
1996 and December 31, 1998, and the related unaudited statements of income, cash
flow and shareholders equity for the fiscal years then ended, together with the
related notes thereto and the report thereon of C.H. Fu and Associates, and (b)
the unaudited balance sheet of Seller as of June 30, 1999 (the "Pre-closing
Balance Sheet"), and related income statements for the period then ended, all of
which are correct and complete and in accordance with the books and records of
Seller and have been prepared in accordance with generally accepted accounting
principles applicable to modified accrual-basis accounting entities and
consistently applied throughout the
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periods involved, except, as to unaudited financial statements, that no notes to
such financial statements are included. Such balance sheets present fairly the
financial condition, assets and liabilities of Seller as of the dates indicated,
and such statements of income, cash flow and shareholders equity present fairly
the results of operations, cash flows and shareholders equity of Seller for the
periods indicated. Seller has no liability or obligation of any nature, whether
due or to become due, fixed, contingent, accrued or otherwise, including
liabilities for or in respect of federal, state, local and foreign taxes and any
interest or penalties relating thereto, except (a) to the extent fully reflected
as a liability on the Pre-closing Balance Sheet and (b) liabilities incurred in
the ordinary course of business since June 30, 1999 and fully reflected as
liabilities on Seller's books of account, none of which, individually or in the
aggregate, has been materially adverse.
3.8. ABSENCE OF CERTAIN CHANGES.
Except as set forth on Schedule 3.8, since June 30, 1999, Seller has
not:
(a) incurred any liability or obligation, fixed, contingent,
accrued, or otherwise, other than liabilities incurred in the ordinary
course of business consistent with past practice or liabilities or
obligations which, individually, do not exceed Five Thousand Dollars
($5,000), or discharged or satisfied any Lien or paid any liabilities,
other than in the ordinary course of business consistent with past
practice, or failed to pay or discharge when due any material
liabilities (individually or in the aggregate), or failed to perform
any material obligations (individually or in the aggregate);
(b) mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract
or other encumbrance of any nature whatsoever;
(c) made or suffered any amendment or termination of any material
agreement, contract, commitment, lease or plan, or canceled, modified
or waived any material debts or claims held by it or waived any rights
material to the Business;
(d) declared, set aside or paid any dividend or made or agreed to
make any other distribution or payment in respect of its capital shares
or redeemed, purchased or otherwise acquired or agreed to redeem,
purchase or acquire any of its capital shares;
(e) sold or in any way transferred or otherwise disposed of any of
its assets or property except for sales of inventory and other
transfers and dispositions in
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the ordinary course of business;
(f) suffered any casualty, damage, destruction or loss, or any
material interruption in use, of any material assets or properties,
whether or not covered by insurance, or suffered any repeated,
recurring or prolonged shortage, cessation or interruption of supplies
or utility or other services required to conduct its business and
operations;
(g) suffered any material change in its business, operations,
assets, liabilities, properties, prospects or condition (financial or
otherwise);
(h) made or committed to make any capital expenditures or capital
additions or betterments exceeding in the aggregate $25,000;
(i) encountered any labor union organization activity, had any
actual or overtly threatened employee strikes, work stoppages,
slow-downs or lock outs, or had any material change in its relationship
with any of its employees, salesmen, distributors, or independent
contractors;
(j) made any change in the rate of compensation, commission,
bonus, or other remuneration payable, or paid or agreed to pay any
bonus, extra compensation, pension, severance, vacation pay, loan or
advance, to any shareholder, director, officer, employee, salesman, or
distributor other than regularly scheduled increases about which Buyer
has received prior written notice;
(k) changed any of the accounting principles followed by it or the
methods of applying such principles or revalued any of its assets;
(l) transferred or granted any rights under, or entered into any
settlement regarding the breach or infringement of, any United States
or foreign license, patent, copyright, trademark, service ▇▇▇▇, trade
name, or invention, or modified any existing rights with respect
thereto;
(m) instituted, settled, or agreed to settle any litigation,
action, proceeding, or arbitration related to the Acquired Assets or
the Business;
(n) failed to replenish its inventories or supplies in a normal
and customary manner consistent with Seller's prior practices or made
any purchase commitment other than in the ordinary course of business;
or
(o) except for the execution of this Agreement, entered into any
material transaction other than in the ordinary course of business
consistent with past
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practice.
3.9. ACCOUNTS RECEIVABLE.
Schedule 3.9 hereto sets forth all accounts receivable of Seller which
would be on Seller's financial statements, as of June 30, 1999, if they were
prepared on an accrual basis, in accordance with GAAP. Except as set forth in
Schedule 3.9, the accounts receivable of Seller as set forth on Schedule 3.9 or
arising since the date thereof are valid and genuine; have arisen solely out of
bona fide sales and deliveries of goods, performance of services and other
business transactions in the ordinary course of business consistent with past
practice; are not subject to valid defenses, set-offs or counterclaims; and are
fully collectible in the normal and ordinary course of business within a
reasonable period of time.
3.10. INVENTORIES.
All inventory of Seller, including, without limitation, raw materials,
work in process and finished goods, reflected on the Pre-closing Balance Sheet
or acquired since the date thereof was acquired and has been maintained in the
ordinary course of business; is merchantable; consists of items of a quality and
quantity usable and saleable in the ordinary course of business within a
reasonable period of time; is valued at the lower of cost or market value; and
is not subject to any write-down or write-off. The quantities of all lines of
inventory are reasonable and appropriate in the present circumstances of the
Business of Seller. The inventories of raw materials and component parts are
sufficient to satisfy all of the business needs of the Business therefor,
consistent with the historical sales trends of the Business. Except as
specifically reserved on the Pre-closing Balance Sheet, none of the inventory of
Seller is obsolete or slow moving. Seller is not under any liability or
obligation with respect to the return of inventory in the possession of
wholesalers, retailers or other customers.
3.11. TITLE.
Seller has good and marketable title to all of the Acquired Assets
free and clear of all Liens of any nature whatsoever, except as set forth on
Schedule 3.11. The Acquired Assets include all the assets and properties which
are necessary to conduct the Business as presently conducted, and to perform all
of the contracts, leases, agreements, commitments, purchase orders, work orders,
customer orders, and other arrangements of Seller.
3.12. CONDITION OF ASSETS.
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All of the buildings, structures and fixtures owned or leased by
Seller are in good operating condition and repair, subject only to ordinary wear
and maintenance, and are usable in the regular and ordinary course of business.
All the personal property owned or leased by Seller material to the business,
operations or financial condition of Seller is in good operating condition and
repair, subject only to ordinary wear and maintenance, and are usable in the
regular and ordinary course of business.
3.13. OWNED REAL PROPERTY.
Seller does not own of record or beneficially any real property owned
of record or beneficially for use in the Business.
3.14. LEASED REAL PROPERTY.
Schedule 3.14 contains a correct and complete list of all leases for
real property leased by Seller (the "Real Property Leases"). Seller has
delivered to Buyer true, correct and complete copies of all Real Property
Leases. The Real Property Leases are valid, binding, enforceable and in full
force and effect, there is no default thereunder and no event has occurred which
with notice or lapse of time or both, would constitute a default, or permit
termination, modification or acceleration thereunder. Seller has not assigned,
pledged, encumbered or sublet its interest in any Real Property Lease. The
leased real property is in compliance with all applicable laws, orders,
regulations, ordinances and governmental and contractual requirements relating
to its construction, use and operation.
3.15. LEASED PERSONAL PROPERTY.
Schedule 3.15 contains a correct and complete list of all leases and
other agreements under which Seller leases, holds or operates any tools,
furniture, machinery, equipment, vehicles or other personal property owned by
any other person. Seller has delivered to Buyer true, correct and complete
copies of all such leases and agreements. All of such leases and agreements are
valid, binding, enforceable and in full force and effect, there is no default
thereunder and no event has occurred which, with notice or lapse of time or
both, would constitute a default or permit termination, modification or
acceleration thereunder.
3.16. EMPLOYMENT MATTERS.
(a) Schedule 3.16 lists the name, date of hire, appointment
and/or retention and current annual salary, commissions, fees,
allowances or wage rates, along
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with any arrangement to increase such annual salary, commissions, fees,
allowances or wage rates, of (i) each present director and officer of
Seller, regardless of the level of their compensation, and (ii) each
Employee of Seller who is paid at an annual rate in excess of $30,000
per annum, together with a statement of the nature of the services
rendered.
(b) Schedule 3.16 lists the names and addresses of all agents or
agencies of Seller (including powers of attorney) with power or
authority to bind Seller in any material respect and the purpose and
scope of authority of such agency.
(c) Seller shall honor and make all applicable unemployment
contributions and interest due applicable governmental agencies with
respect to its Employees under applicable laws and Seller shall deliver
to Buyer prior to Closing a receipt or certificate from such
governmental agencies showing that such unemployment contributions and
interest have been paid or are not due.
(d) Except as disclosed on Schedule 3.16:
(i) Seller is not a party to any collective bargaining
agreement or other contract or agreement with any labor
organization or other representative of any of its Employees nor
is any such contract or agreement presently being negotiated;
(ii) there is no unfair labor practice charge or complaint
pending or threatened before any civil, administrative or criminal
tribunal, agency, body or other forum against or otherwise
affecting the Employees of Seller;
(iii) there is no labor strike, slowdown, work stoppage,
dispute, lockout or other labor controversy in effect, threatened
against or otherwise affecting Seller, and Seller has not
experienced any such labor controversy within the past five years;
(iv) To the best of Seller's and the Shareholders'
knowledge, no Employee has made a formal complaint, whether oral
or written, to any member of the Seller's management or Seller's
human resources center that such Employee has been subjected to
unlawful discrimination or harassment which, if proven, would
violate Title VII of the Civil Rights Act of 1964, the Federal Age
Discrimination in Employment Act of 1967, the Americans with
Disabilities Act, the California Fair Employment and Housing Act
or any state or federal laws concerning discrimination or
harassment;
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(v) to the best of Seller's and the Shareholders'
knowledge, no Employee has (a) committed an act of violence in the
workplace; (b) been convicted of or pleaded nolo contendere to a
felony; (c) committed or been alleged to have committed an act of
sexual harassment in the workplace; (d) been observed by any
supervisor or manager of Seller while under the influence of
alcohol or illegal drugs in the workplace; or (e) been removed
from any work assignment for performance-related reasons;
(vi) Seller is not a party to any employment agreement or
consulting agreement with any person or entity, nor is any such
contract or agreement presently being negotiated;
(vii) no action, suit, complaint, charge, arbitration,
inquiry, proceeding or investigation by or before any court,
governmental agency, administrative agency or commission brought
by or on behalf of any Employee, prospective Employee, former
Employee, retiree, labor organization or other representative of
the Employees of Seller is pending or, to the knowledge of Seller
and the Shareholders, threatened;
(viii) Seller is not a party to or otherwise bound by, any
consent decree with, or citation by, any government agency
relating to Employees or employment practices, wages, hours, and
terms and conditions of employment with respect to its business;
(ix) Seller has paid in full, or set forth in a schedule to
its financial books and records, to all Employees of Seller, all
wages, salaries, commissions, bonuses, benefits and other
compensation due to such Employees or otherwise arising under any
policy, practice, agreement, plan, program, statute or other law;
(x) Except to the extent caused by termination of
Employees of Seller on the Closing Date, Seller is not liable for
any severance pay or other payments to any Employee or former
Employee arising from the termination of employment, and neither
Seller nor Buyer will have any liability under any benefit or
severance policy, practice, agreement, plan or program which
exists or arises, or may be deemed to exist or arise, under any
applicable law or otherwise, as a result of or in connection with
the transactions contemplated by this Agreement or as a result of
the termination by the Seller of any persons employed or retained
by Seller on or prior to the Closing Date;
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(xi) Seller has not closed any plant or facility,
effectuated any layoffs of Employees or implemented any early
retirement or separation program within the past five years, nor
has Seller planned or announced any such action or program for
the future; and
(xii) To the knowledge of Seller and the Shareholders, the
services of all essential Employees of Seller will continue to be
available on the same terms and at the same locations for the
continuation of the business of Seller after consummation of the
transactions contemplated hereby.
3.17. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.17 contains a true and complete list of all
employment-related plans, including but not limited to, employment or
consulting agreements, collective bargaining and supplemental
agreements, pension, profit sharing, incentive, bonus, deferred
compensation, retirement, stock option, stock purchase, severance,
cafeteria, medical and hospitalization, life insurance, tuition
reimbursement, vacation, salary continuation, sick pay, welfare, fringe
benefit and other employee benefit plans, contracts, programs, policies
and arrangements (including, but not limited to any "employee benefit
plan" as defined in Section 3.3 of the Employee Retirement Income
Security Act of 1974 ("ERISA"), whether written or oral, or funded or
unfunded, which Seller sponsors, maintains or contributes to, or under
which Seller could have any obligations or liability with respect to
any Employee or former Employee, now or at any time during the past
five years (the "Employee Plans").
(b)(i) Seller has no unfunded liabilities in connection with any
of the Employee Plans; (ii) all contributions, premium payments and
other payments due from Seller to or under such Employee Plans have
been paid in a timely manner; and (iii) all additional contributions,
premium payments and other payments due on or before the Closing Date
shall have been paid by that date.
(c) Between the date of this Agreement and the Closing Date, no
Employee Plan will be (i) terminated (whether partially or otherwise),
nor will any proceedings be initiated to terminate any such Employee
Plan; (ii) amended in any manner which would directly or indirectly
increase the benefits accrued or to be accrued by any participant
thereunder; or (iii) amended in any manner which would materially
increase the cost of maintaining such Employee Plan.
(d) Seller does not maintain or contribute to, and has never
maintained or
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contributed to (or been obligated to contribute to), any multi-employer
plan within the meaning of ERISA Section 3(37) or 4001(a)(3) or Code
Section 414(f), any multiple employer plan within the meaning of ERISA
Section 4063 or 4064 or Code Section 413(c), or any employee benefit
plan, fund, program, contract or arrangement that is subject to Code
Section 412, ERISA Section 302 or Title IV of ERISA.
(e) Seller is not, and has never been, a member of (i) a
controlled group of corporations, within the meaning of Code Section
414(b); (ii) a group of trades or businesses under common control,
within the meaning of Code Section 414(c); (iii) an affiliated service
group, within the meaning of Code Section 414(m), or (iv) any other
group of persons, organizations and/or entities that is treated as a
single employer under Code Section 414(o).
(f) With respect to each of the Employee Plans:
(i) such Employee Plan has been established, maintained,
funded and administered in all material respects in accordance
with its governing documents, and all applicable provisions of
ERISA, the Code, other applicable law, and all regulations
thereunder, and Seller and all persons and entities have at all
times properly performed all obligations required by them, in
connection with such Employee Plan;
(ii) all disclosures to employees and all filings and other
reports relating to each such Employee Plan and required (under
ERISA, the Code, other applicable law, including federal and state
securities laws, and all regulations thereunder) to have been made
or filed on or before the Closing Date have been or will be duly
and timely made or filed by that date;
(iii) there is no litigation, disputed claim (other than
routine claims for benefits), governmental proceeding, audit,
inquiry or investigation pending or, to the knowledge of Seller
and the Shareholders, threatened with respect to any such Employee
Plan, its related assets or trusts, or any fiduciary,
administrator or sponsor of such Employee Plan;
(iv) neither any such Employee Plan nor any other person or
entity has engaged in a "prohibited transaction" (as defined in
ERISA Section 406 or Code Section 4975) with respect to such
Employee Plan, for which no individual or class exemption exists;
(v) each Employee Plan which is a "group health plan" (as
defined in
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Code Section 5000(b)(1)) has complied and will comply at all times
(whether before, on, or after the Closing Date) in all respects
with the applicable requirements of ERISA Sections 601 and 602,
Code Section 162(k) (through December 31, 1988) and Code Section
4980B (commencing on January 1, 1989); and
(vi) with respect to each Employee Plan which is an
"employee welfare benefit plan" (as defined in ERISA Section 3(1))
that provides benefits to or on behalf of any person following
retirement or other termination of employment (other than to the
extent required by Code Section 4980B): there is no "disqualified
benefit" (as defined in Code Section 4976(b)) that would subject
Seller or Buyer to any tax under Code Section 4976(a); and under
the terms of each such Employee Plan, the benefits provided to
such retired or terminated persons under the Employee Plan may be
modified or terminated by Seller or Buyer at any time on or after
the Closing Date.
(g) With respect to each Employee Plan which is an "employee pension
benefit plan" (as defined in ERISA Section 3(2)):
(i) each such Employee Plan which is intended to qualify
as a tax-qualified retirement plan under Code Section 401(a) has
received a favorable determination letter(s) from the Internal
Revenue Service (copies of which have been delivered to Buyer) as
to qualification of such Employee Plan covering the period from
its adoption through the Closing Date; all amendments required to
maintain such qualification have been timely adopted; nothing has
occurred, whether by action or failure to act, which has resulted
in or could cause the loss of such qualification (whether or not
eligible for review under the Internal Revenue Service's Closing
Agreement Program, Voluntary Compliance Resolution program or any
similar governmental agency program); and each trust thereunder is
exempt from tax pursuant to Code Section 501(a);
(ii) no event has occurred and no condition exists relating
to any such Employee Plan that would subject Seller or Buyer to
any tax, fine or penalty under any law or regulation, including
but not limited to Chapter 43 of Subtitle D of the Code, or to any
liability under ERISA Section 502; and
(iii) to the extent applicable, no such Employee Plan has
experienced any "accumulated funding deficiency" (as defined in
Code Section 412),
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whether or not waived, at any time.
3.18. MATERIAL CONTRACTS.
(a) Schedule 3.18(a) lists all contracts, leases (other than
those described in Schedule 3.14 or Schedule 3.15, which are
incorporated by reference into Schedule 3.18(a)), agreements,
commitments, purchase orders, work orders, customer orders, and other
arrangements, including all amendments thereto, to which Seller is a
party, except for those contracts, leases, commitments, purchase
orders, work orders, and agreements (i) which were entered into in the
ordinary course of business, (ii) under which the obligations of Seller
have been or shall be fully discharged within ninety (90) days from the
date such obligation was entered into, and (iii) which individually
involve an obligation or liability on the part of Seller in any amount
less than Ten Thousand Dollars ($10,000) (the "Material Contracts").
True and complete copies of each of such Material Contracts have been
provided to Buyer.
(b) All of the Material Contracts are valid and binding
obligations of Seller and, except as set forth on Schedule 3.18(b), do
not require the consent of any other party thereto to the sale of the
Business or the Acquired Assets to Buyer hereunder to continue to be
valid and binding. Except as set forth in Schedule 3.18(b), (i) none of
the payments required to be made by Seller under any of the Material
Contracts has been prepaid more than thirty (30) days prior to the due
date of such payment thereunder, and (ii) to the best knowledge of
Seller and the Shareholders, there is not any existing default, or
event which, with notice or lapse of time, or both, would constitute a
default under any of the Material Contracts.
(c) Except as set forth on Schedule 3.18(c), Seller is not a
party to any of the following:
(i) any indenture, mortgage, note, guaranty, letter of
credit, installment obligation, agreement, or other instrument
relating to the borrowing of money or the guaranteeing of any
obligation for the borrowing of money;
(ii) any agreement, contract, or other commitment that
would limit the ability of Seller (or any manager or officer
thereof) to compete in any line of business or with any person or
in any geographic area, or otherwise to conduct the Business as
presently conducted, or to use or
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disclose any information in the possession of Seller;
(iii) any license agreement, including any agreement with
respect to any manufacturing rights granted to or by Seller; or
(iv) any joint venture or similar agreement.
(d) To the knowledge of Seller and the Shareholders, all prior
contracts, leases, agreements and instruments of Seller which have been
fully performed by Seller and Seller has no ongoing or unfulfilled
obligations thereunder.
3.19. CUSTOMERS AND SUPPLIERS.
Except as set forth on Schedule 3.19, Seller does not have any
knowledge of any intention of or indication by a "Significant Customer" (as
defined below) of Seller or a "Significant Supplier" (as defined below) to
terminate its business relationship with Seller or to limit or alter its
business relationship with Seller in any material respect. As used in this
Agreement, "Significant Customer" means any of the twenty (20) largest
customers, by dollar volume, of Seller during the year ended August 31, 1999,
and "Significant Supplier" means any of the fifteen (15) largest suppliers, by
dollar volume, of Seller during the year ended August 31, 1999. Schedule 3.19
contains a true and correct list of the Significant Customers and Significant
Suppliers of Seller.
3.20. TAX RETURNS AND TAXES.
(a) Except as set forth in Schedule 3.20, Seller has (i) timely
filed all federal, state, local and foreign tax returns, reports,
statements and other similar filings (the "Tax Returns") which are
required to be filed by Seller with respect to any federal, state,
local or foreign income, payroll, disability, withholding, excise,
sales, use, personal property, occupancy, business, mercantile, real
estate, capital stock, franchise or other taxes (the "Taxes"); and (ii)
paid all Taxes, interest, penalties, assessments and deficiencies due
or assessed pursuant to the Tax Returns. All Tax Returns properly
reflect the liabilities of Seller for Taxes for the periods, properties
or events covered thereby. Except as set forth on Schedule 3.20, no
extensions of time in which to file any Tax Returns have been executed
or filed with any taxing authority. Seller has not received any notice
of assessment of additional Taxes and has not executed or filed with
any taxing authority any agreement extending the period of assessment
of any Taxes. There are no claims, examinations, proceedings or
proposed deficiencies for Taxes pending or, to the knowledge of Seller
and the Shareholders, threatened against Seller. Seller is current in
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the payment of all withholding and other employee Taxes which are due
and payable. The accruals for Taxes contained in the Pre-closing
Balance Sheet are adequate to cover all liabilities for Taxes of Seller
for all periods ending on or before June 30, 1999, and include adequate
provisions for all deferred Taxes. All Taxes for periods beginning
after December 31, 1998, have been paid or are adequately reserved
against on the books of Seller. Except as set forth on Schedule 33.20,
Seller has not been audited by the Internal Revenue Service or any
other governmental agency or authority within the past five years.
(b) Seller and the Shareholders have reviewed with their own tax
advisors the federal, state, local and foreign tax consequences of the
transaction contemplated by this Agreement. Seller and the Shareholders
are relying solely on such advisors and not on any statements or
representations of Buyer or any of its agents. Seller and the
Shareholders understand that Seller and the Shareholders (and not
Buyer) shall be responsible for the Seller's and the Shareholders' own
tax liability that may arise as a result of the transactions
contemplated by this Agreement. Seller and the Shareholders acknowledge
that it is Seller's and the Shareholders' sole responsibility and not
Buyer's to file timely all tax filings required by law.
3.21. LICENSES AND PERMITS.
Seller owns, holds, possesses or lawfully uses all material Permits
which are necessary to own or lease and operate its assets and to conduct the
Business of Seller as now or previously conducted by it. Set forth on Schedule
3.21 is a correct and complete list of the Permits of Seller. Seller has
fulfilled and performed its obligations under each of the material Permits, and
no event has occurred which constitutes or, after notice or lapse of time or
both, would constitute a breach or default under any of such Permits or would
permit revocation or termination of any of such Permits. The Permits are in full
force and effect and are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees. None of the Permits will be
adversely affected by consummation of the transactions contemplated hereby.
3.22. INTELLECTUAL PROPERTY RIGHTS.
Set forth on Schedule 3.22(a), is a correct and complete list of all
domestic and foreign (i) patents and registered or material unregistered
trademarks, trade names and service marks held, owned or used by Seller, and
(ii) patent, trademark, trade name and service ▇▇▇▇ applications filed in
connection with the Business of Seller (the "Issued Rights and Applications").
Set forth on Schedule 3.22(b) is a correct and
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complete list of all material license and other agreements allowing Seller to
use intellectual property rights of third parties in the United States or
foreign countries, which agreements were entered into by Seller, either as
licensee or as licensor, and used in its Business (the "License Agreements").
Set forth on Schedule 3.22(c) is a correct and complete list of all material
agreements concerning Intellectual Property Rights of Seller. Except as set
forth on Schedule 3.22:
(a) no other intellectual property rights are required or
necessary for Seller to conduct its Business as presently conducted or,
to the best knowledge of Seller, proposed by Seller to be conducted;
(b) as to all material Intellectual Property Rights created or
commissioned by Seller or used in Seller's Business, Seller owns or has
the right to use all right, title and interest in and to such
Intellectual Property Rights (including the exclusive right to use,
sell, license or dispose of such rights and to bring actions for
infringement thereof) free and clear of any and all Liens;
(c) as to the Intellectual Property Rights required to be listed
on Schedule 3.22(c), and except as otherwise set forth herein, Seller
has taken all appropriate actions and made all applications and filings
pursuant to applicable federal and state law to perfect, protect and
maintain its interests in the Issued Rights and Applications;
(d) for any items listed in Schedule 3.22(a), (b) and (c) which
are listed thereon as being held by Seller other than in exclusive
ownership, Seller has sufficient rights, and at the time of use had
sufficient rights, in such Intellectual Property to conduct its
business in the manner being conducted;
(e) Seller has no knowledge of any infringements of, or claims or
assertions of infringement of, any of the material Intellectual
Property Rights;
(f) Seller has not, to the knowledge of the executive officers of
Seller, taken or omitted to take any action which would have the effect
of waiving any of its rights relating to any of the Intellectual
Property Rights. For purposes of this Agreement, "knowledge" shall
include matters which any reasonable executive officer should have
known in the performance of his/her duties;
(g) to the knowledge of Seller's executive officers and the
Shareholders, there have been no claims, and there is no reasonable and
material basis for any claim challenging the scope, validity or
enforceability of any of the Intellectual Property Rights;
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(h) to the knowledge of the Seller's executive officers, the
manufacture, advertising, sale or use of any products now or heretofore
manufactured or sold by Seller did not and does not infringe (nor has
any claim been made that any such action infringes) the Intellectual
Property Rights of others (nothing in this paragraph shall imply that
Seller manufactures any goods);
(i) each of the License Agreements is in full force and effect
pursuant to its terms, and there has occurred no material default which
is continuing in respect of any License Agreement;
(j) there are no royalties, honoraria, fees or other payments
payable by Seller to any person by reason of the ownership, use,
license, sale or disposition of the material Intellectual Property
Rights; and
(k) except as described in Schedule 3.22(k), Seller has entered
into confidentiality, nondisclosure and non-competition agreements (in
the form attached hereto as Exhibit G) with all officers, directors and
employees of Seller with access to or knowledge of the Intellectual
Property Rights.
3.23. NO PENDING LITIGATION OR PROCEEDINGS.
Except as set forth on Schedule 3.23, there is no litigation,
investigation, arbitration or proceeding pending or, to the knowledge of Seller
and the Shareholders, threatened against or affecting Seller or any of the its
properties or assets, at law or in equity, by or before any court, arbitrator or
governmental or regulatory official, body or authority, nor does Seller know of
any reasonably likely basis for any such litigation, arbitration, investigation
or proceeding, the result of which could adversely affect Seller, its assets or
the transactions contemplated hereby. There are presently no outstanding
judgments, decrees or orders of any court or any governmental or administrative
agency against or affecting Seller or any of its properties or assets.
3.24. COMPLIANCE WITH LAWS.
Except as set forth on Schedule 3.24, the Business of Seller has been
conducted in compliance in all material respects with all applicable laws,
statutes, rules, regulations and orders of all governmental and regulatory
entities, whether federal, state, local or foreign. No notice, citation, summons
or order has been assessed and no investigation or review is pending or, to the
knowledge of Seller and the Shareholders, threatened by any governmental or
other entity with respect to any alleged violation by Seller of any such laws,
statutes, rules, regulations or orders.
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3.25. OSHA.
All of the facilities of Seller are maintained and operated in
compliance in all material respect with the Occupational Safety and Health Act
of 1970 ("OSHA") and any similar state statute and the rules and regulations
promulgated thereunder. Except as set forth in Schedule 3.25, neither Seller nor
its predecessors are or have been subject to an investigation by the U.S.
Department of Labor, litigation over compliance with such rules and regulations
or any fine, penalty or citation relating to or arising out of a violation or
alleged violation of OSHA and any similar state statute and such rules and
regulations.
3.26. ENVIRONMENTAL MATTERS.
(a) Schedule 3.26 (i) contains a description of all Environmental
Permits currently held by Seller in connection with the operation of
its Business, properties and assets, and identifies the, nature,
duration and renewal dates of and the issuing governmental entity with
respect to each Environmental Permit, and (ii) contains a complete list
of all solid waste dumps and hazardous waste disposal, treatment, and
storage facilities which are presently or were used by Seller at any
time in the operation of its Business for disposal of Hazardous
Materials (as defined in Article IX).
(b) Except as disclosed on Schedule 3.26:
(i) Seller has obtained all Environmental Permits, timely
filed for the renewal, extension or reissuance of all
Environmental Permits, kept all records, and made all filings
required by applicable Environmental Laws (as defined in Article
IX) in connection with the operation of its Business as presently
conducted and as may reasonably be expected to be conducted in the
future;
(ii) all Environmental Permits are in full force and
effect;
(iii) Seller is operating and has at all times operated its
Business in compliance with all Environmental Permits and
applicable Environmental Laws;
(iv) the operation of Seller's Business does not involve
the generation, usage, release, transportation, treatment,
storage, or disposal of Hazardous Materials;
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(v) neither Seller nor any of its employees, affiliates,
agents, consultants or contractors, nor, to the knowledge of
Seller and the Shareholders, any other person, has disposed or
caused the Release (as defined in Article IX) of any Hazardous
Material in, on, under, from or about the ground or waters of any
property now or previously owned, leased or used by Seller in the
operation of its Business;
(vi) Seller's assets, including, but not limited to the
Acquired Assets and the Owned Real Property, do not contain any
Hazardous Materials;
(vii) no underground storage tanks or surface impoundments
are located at, on, or under any property owned, leased or used by
Seller in the operation of its Business;
(viii) there is not pending or, to the knowledge of Seller
and the Shareholders, threatened against Seller, the Business or
the Acquired Assets any Environmental Claim (as defined in Article
IX) and, to the knowledge of Seller and the Shareholders, there
are no facts or circumstances that could reasonably be expected to
give rise to any such Environmental Claim;
(ix) to the knowledge of Seller and the Shareholders, none
of the operations of Seller is the subject of any federal, state,
or local investigation evaluating whether any Remedial Action (as
defined in Article IX) is needed to respond to a Release of any
Hazardous Material into the environment; and
(x) Seller has not filed, nor has Seller been required to
file, any notice under federal, state, or local laws indicating
past or present treatment, storage, or disposal of Hazardous
Materials as defined under 40 C.F.R., Parts 260-270 or reporting a
spill or Release of a Hazardous Material at, on, under, from or
about any property owned, leased or used by Seller in the
operation of its Business.
3.27. INSURANCE COVERAGE.
Schedule 3.27 sets forth a complete and correct list of all insurance
policies maintained by Seller and indicating for each policy the insurance
company, type of coverage, annual premium and whether the terms of such policy
provide for retrospective premium adjustments. There is no default with respect
to any provision contained in any such policy, nor has there been any failure to
give any notice or
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present any claim under any such policy in a timely fashion or in the manner or
detail required by the policy. No notice of cancellation or non-renewal with
respect to, or disallowance of any claim under, any such policy has been
received by Seller. Seller has not been refused any insurance, nor has its
coverage been limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the last five years.
3.28. PRODUCTS LIABILITY AND WARRANTY AND INDEMNITY CLAIMS.
Except as set forth on Schedule 3.28:
(a) Seller has not made any oral or written warranties,
indemnities or provided any similar assurances with respect to the
quality or absence of defects of its products or services which are in
force as of the date of this Agreement, including, without limitation,
oral or written warranties pertaining to so-called "Year 2000" software
compliance. To the extent any exceptions to this Section 3.28(a) are
listed in Schedule 3.28, Seller and the Shareholders represent that all
of the Seller's obligations under the contracts containing such oral or
written warranties, indemnities or assurances have been met or will be
performed, and that there will not be any claims for breach of the
warranties or for the enforcement of Seller's indemnities or assurances
contained therein. This representation shall not apply to warranties
(if any) which may be implied by law and which were not made by Seller
orally or in writing;
(b) there are no liabilities of or claims against Seller and, to
the knowledge of Seller and the Shareholders, no liabilities or claims
are threatened against Seller, with respect to any product liability
(or similar claim) of Seller or product warranty (or similar claim) of
Seller that relates to any product manufactured or sold by Seller;
(c) neither Seller nor any of the Shareholders has any knowledge
of any facts or circumstances which might reasonably give rise to such
liabilities or claims.
3.29. SOFTWARE APPLICATIONS; YEAR 2000.
Except as otherwise noted on Schedule 3.29, Seller's work for its
customers and all Software created by Seller for its customers has complied with
the necessary requirements to function efficiently after the year 2000, and is
otherwise "Year 2000 Compliant" (as defined in Article IX). A description of any
non-compliance and an estimate of the capital expenditures necessary to make
such Software "Year 2000 Compliant" is set forth on Schedule 3.29.
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(a) To the extent that any of the Software has been designed or
developed by Seller's management information or development staff or by
consultants on Seller's behalf, and is not within the public domain,
such Software is original and, to the extent such Software is material,
capable of copyright protection in the United States, and Seller has
complete rights to use such Software, including possession of, or ready
access to, the source code for such Software in its most recent
version. No part of any such Software is an imitation or copy of, or
infringes upon, the software of any other person or entity, or violates
or infringes upon any common law or statutory rights of any other
person or entity, including, without limitation, rights relating to
defamation, contractual rights, copyrights, trade secrets, and rights
of privacy or publicity. Seller has not sold, assigned, licensed,
distributed or in any other way disposed of or encumbered any of the
Software, except as disclosed in Schedule 3.29.
(b) The Software, to the extent it is licensed from any third
party licensor or constitutes "off-the-shelf" software, is held by the
Company legitimately and is fully transferable to Buyer without any
third party consent. All of the Company's computer hardware has
legitimately licensed software installed therein. The foregoing shall
not apply to Software which is installed on the Company's computers
without the Company's permission or knowledge and which is not material
to the Business.
(c) The Software functions for the purpose for which it was
created, operates and runs in a reasonable and efficient business
manner, conforms to the stated specifications thereof, and, with
respect to owned Software, the applications can be recreated from their
associated source codes.
(d) Seller has not knowingly altered its data, or any Software or
supporting software which may, in turn, damage the integrity of the
data, stored in electronic, optical, or magnetic or other form. Except
as set forth on Schedule 3.29, the Seller has no knowledge of the
existence of any bugs or viruses with respect to the Software.
(e) Seller has furnished Buyer with true and accurate copies of
all documentation in Seller's possession relating to the use,
maintenance and operation of the Software. Any documentation which is
not in Seller's possession either: (i) can be created by Seller's
employees in the ordinary course of business without undue difficulty
or expense; or (ii) relates to "off-the-shelf" Software and can be
acquired without material cost or expense.
(f) Schedule 3.29 sets forth the agreements governing or relating
to Seller's
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Internet Web site. Pursuant to Section 1.2, Buyer has assumed these
agreements.
3.30. INSIDER INTERESTS.
Except as set forth on Schedule 3.30, no officer or director of Seller
has any interest in any property, real or personal, tangible or intangible,
including without limitation the Intellectual Property Rights used in or
pertaining to the Business of Seller, and no such person has any business
relationship with Seller, except as such officer or director and except for the
normal rights of a shareholder of Seller.
3.31. BROKERS AND FINDERS.
Seller has not employed any broker or finder or incurred any liability
for any financial advisory fees, brokerage fees, commissions or finders' fees,
and no broker or finder has acted directly or indirectly for Seller in
connection with this Agreement or the transactions contemplated herein, except
for Broadview Int'l LLC, whose fees shall be paid by Seller.
3.32. DISCLOSURE.
No representation or warranty of Seller or the Shareholders contained
in this Agreement, and no statement contained in any certificate, schedule, list
or other writing furnished to Buyer pursuant hereto, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which such statements are made, not misleading. There is no
fact known to Seller or Shareholders which has or could reasonably be expected
to have a material adverse effect on the Business which has not been set forth
in this Agreement or any Schedule hereto.
3.33. LAST REGULARLY-PREPARED BALANCE SHEET.
The Seller's last regularly-prepared balance sheet and income
statement were dated June 30, 1999 and are attached hereto as Exhibit J. Such
balance sheet and income statement reflect that the Seller's total assets are
not in excess of $10 Million as of the date thereof. The Seller's next
regularly-prepared balance sheet will be prepared as of September 30, 1999.
3.34. FINANCIAL ACCOUNTS.
Schedule 3.34 sets forth the names and locations of all banks, trust
companies, savings and loan associations, brokerage firms and other financial
institutions at which the Seller maintains safe deposit boxes or accounts of any
nature
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and the names of all persons authorized to draw thereon, make withdrawals
therefrom or have access thereto.
3.35. CHECKING ACCOUNT.
Seller has deposited all funds that Seller has received after the
Effective Date into the Checking Account. Except for up to $300,000 in dividends
paid to shareholders, all such funds have either been retained in the Checking
Account or used to pay ordinary and necessary business expenses.
3.36. SUBCONTRACTOR AGREEMENTS.
To the extent that Seller has subcontracted any work under its
customer contracts, Seller has retained or obtained sufficient title or rights
to the intellectual property created by the subcontractors such that Seller is
able to perform its obligations under its customer contracts without infringing
the rights of the subcontractors to such intellectual property.
IV. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
4.1. ORGANIZATION.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. Buyer has all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry out its business as and where now being conducted. Buyer
has heretofore delivered to Seller complete and correct copies of Buyer's
Articles of Incorporation and Bylaws as currently in effect.
4.2. AUTHORITY AND ENFORCEABILITY.
The execution, delivery and performance of this Agreement, the
Employment Agreements, the Noncompetition Agreements, and all other agreements
and documents to be delivered by Buyer pursuant to the provisions of this
Agreement (the "Buyer Documents") have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been, and at the
Closing the Buyer Documents shall be, duly executed and delivered by Buyer and
constitute, or shall constitute, the legal, valid and binding obligation of
Buyer enforceable in accordance with their respective terms.
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4.3. THIRD-PARTY CONSENTS.
Except for the expiration of the applicable waiting period under the
HSR Act, no consent, authorization or approval of, and no registration or filing
with, any third parties or any governmental or regulatory body or authority is
required for the execution, delivery and performance of this Agreement and the
Buyer Documents by Buyer and the consummation of the transactions contemplated
hereby.
4.4. NO CONFLICT OR VIOLATION.
The execution, delivery and performance of this Agreement and the
Buyer Documents, the consummation by Buyer of the transactions contemplated
hereby and thereby, and the compliance with the terms hereof and thereof by
Buyer do not and will not (with or without notice, the lapse of time, or both)
(a) violate any provision of the Articles of Incorporation or Bylaws of Buyer,
(b) violate, conflict with or result in a breach of or constitute a default
under, any term, condition, or provision of any agreement, contract, mortgage,
lease or other instrument, document or understanding to which Buyer is a party,
by which it may have rights or by which any of its assets may be bound or
affected, (c) violate any law, ordinance, code, rule, regulation, order,
judgment, injunction, award or decree of any court, arbitrator, administrative
agency or governmental body or authority applicable to Buyer or its assets.
4.5. BROKERS AND FINDERS.
Buyer has not employed any broker or finder or incurred any liability
for any financial advisory fees, brokerage fees, commissions or finders' fees,
and no broker or finder has acted directly or indirectly for Buyer in connection
with this Agreement or the transactions contemplated herein, except for Polaris
Group, Inc., whose fees shall be paid by Buyer.
4.6. SEC DOCUMENTS.
Buyer has provided to Seller and each Shareholder its Annual Report on
Form 10-K for the year ended December 31, 1998, its Quarterly Report on Form
10-Q for the quarter ended June 30, 1999 (such documents collectively referred
to herein as the "SEC Documents"). As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under
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which they were made, not misleading. The consolidated financial statements of
Buyer included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the Commission with respect thereto, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of Buyer and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (except in the case of
interim period financial information for normal year-end adjustments).
V. COVENANTS
5.1. ACCESS TO INFORMATION.
Except for the items set forth on Schedule 5.1, which Seller shall not
be obligated to divulge to Buyer at any time, each of Buyer and Seller shall
afford to the officers, employees, accountants, attorneys and authorized
representatives of the other party reasonable access to the facilities,
properties, books and records and employees of other party, or by its duly
accredited agents, for reasonable business purposes at all reasonable times
during normal business hours, for a period of three (3) years after the date
hereof, with respect to all transactions between and among the Seller, the
Shareholders and the Buyer occurring prior to and those relating to the Closing,
and the historical financial condition, assets, liabilities, operations, cash
flows and prospects of the Seller. Seller shall further provide reasonable
access by Buyer to the Significant Suppliers and Significant Customers of
Seller. The representatives of a party inspecting the records of the other party
shall be reasonably satisfactory to the other party.
5.2. CONDUCT OF BUSINESS.
Except as otherwise contemplated by this Agreement, during the period
from the date of this Agreement and continuing until the Closing, Seller agrees
to operate its Business in the ordinary course and consistent with past
practices and to use its best efforts to: (a) preserve the Business intact and
conserve the goodwill related thereto, (b) preserve intact the present business
organization of Seller, keep available the services of present key officers and
employees, (c) preserve present relationships with suppliers, customers, lenders
and others having business dealings with them, (d) maintain in full force and
effect all Permits required for the operation of the Business as presently
conducted, (e) maintain consistent with past practices of Seller, all of
Seller's buildings, offices and other properties, or (f) not knowingly do any
act or omit any act or permit any omission to act which will cause a breach or
default under any
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of the contracts, commitments or obligations included in the Acquired Assets or
Assumed Liabilities. Without the prior written consent of Buyer, Seller shall
not engage in any activity, take any action, or enter into any transaction of
the type described in Section 3.8. From and after the date hereof, the parties
agree to operate the Acquired Assets and the Assumed Liabilities as a separate
division of Buyer (the "Metier Division"), which Metier Division will be
operated pursuant to the guidelines attached hereto as Exhibit D.
5.3. CONSENTS.
Seller shall obtain, prior to the Closing Date, all consents,
authorizations and registrations specified in Schedule 3.5.
5.4. BEST EFFORTS.
Subject to the terms and conditions of this Agreement, each of the
parties shall use its best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary or desirable to consummate
the transactions provided for in this Agreement.
5.5. FURTHER ASSURANCES.
Seller, after the Closing, without further consideration, shall
execute, acknowledge, and deliver any further deeds, assignments, conveyances,
and other assurances, documents, and instruments of transfer, reasonably
requested by Buyer, and shall take any other action consistent with the terms of
this Agreement that may reasonably be requested by Buyer for the purpose of
assigning, transferring, granting, conveying, and confirming the Acquired Assets
or any part of the Acquired Assets to Buyer or to better enable Buyer to
complete, perform or discharge any of the liabilities or obligations assumed by
Buyer. Each of the parties hereto will cooperate with the other and execute and
deliver to the other parties hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence and confirm the intended
purposes of this Agreement.
5.6. UPDATE SCHEDULES.
Seller shall promptly disclose to Buyer any information contained in
its representations and warranties or the Schedules which, because of an event
occurring after the date hereof, is incomplete or is no longer correct as of all
times after the date hereof until the Closing Date; provided, however, that none
of such disclosures shall be deemed to modify, amend or supplement the
representations and warranties of
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Seller or the Schedules hereto for the purpose of Article III hereof, unless
Buyer shall have consented thereto in writing.
5.7. BULK TRANSFER LAWS.
Buyer hereby waives compliance by Seller with the provisions of any
so-called "bulk transfer law" of any jurisdiction in connection with the sale of
the Acquired Assets to Buyer. In accordance with the terms of Section 7.1,
Seller agrees to indemnify and hold harmless Buyer from and against any and all
Losses (as defined in Section 7.1) that may be asserted by third parties against
Buyer as a result of noncompliance with any such bulk transfer law.
5.8. CHANGE IN NAME.
Seller shall deliver to Buyer all such executed documents and filing
fees as may be required to change Seller's name on the Closing Date to another
name bearing no similarity to Metier, Inc., and an appropriate name change
notice for each state where Seller is qualified to do business. Seller hereby
appoints Buyer as its attorney-in-fact to file all such documents on or after
the Closing Date.
5.9. CHECKS AND DRAFTS.
Seller shall honor (whether presented before, on, or after the
Closing) all checks and drafts drawn by them on or prior to the Closing to pay
trade payables and accrued expenses of the Business.
5.10. COBRA/ERISA/APPLICABLE STATE LAW.
Seller shall be solely responsible for satisfying any and all
obligations and liabilities relating to health care continuation coverage under
COBRA (as set forth in Code Section 4980B(f) and Part 6 of Subtitle B of Title I
of ERISA, as may be amended from time to time) or under any applicable state
law.
5.11. ENDORSEMENT AUTHORIZATION.
Effective as of the Closing Date, Seller appoints Buyer its
attorney-in-fact to open all mail relating to the Business addressed to Seller
and to endorse in the name of Seller any checks, drafts, or other instruments
received in payment of accounts accrued after the Closing Date. Buyer promptly
will send to Seller all mail not relating to the Acquired Assets or the
Business, except personal mail of any Employee or former employee of the
Business. Personal mail shall be forwarded to any Employee or former employee
pursuant to Buyer's normal policies and procedures for handling such mail.
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5.12. TAX CLEARANCE CERTIFICATES, FILINGS AND NOTICES.
Seller shall cooperate with Buyer and take all actions required to
obtain all conditional tax clearances, tax clearance certificates and similar
documents in connection with the consummation of the transactions contemplated
by this Agreement. Seller shall make all filings and deliver all notices
required by any taxing or other governmental authority in connection with the
consummation of the transactions contemplated by this Agreement.
5.13. COOPERATION IN LITIGATION.
In the event that, after the Closing Date, Seller or Buyer shall
require the participation of officers and employees employed by the other to aid
in the defense or settlement of litigation or claims by third parties, and so
long as there exists no conflict of interest between the parties, Seller and
Buyer shall use their best efforts to make such officers and employees available
to participate in such defense, provided that the party requiring the
participation of such officers or employees shall pay all reasonable
out-of-pocket costs, charges and expenses arising from such participation.
5.14. EXCLUSIVITY.
Seller grants to Buyer the exclusive right to acquire the Business
and the Acquired Assets until the Final Termination Date (as defined in Section
8.1). Seller shall not and shall instruct Broadview Int'l LLC not to (i)
solicit, initiate or encourage the submission of any proposal or offer from any
person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets of, Seller (including any
acquisition structured as a merger, consolidation or share exchange) or (ii)
participate in any discussions or negotiations regarding, furnishing any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing. Seller will notify Buyer immediately if any person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing and
Seller shall provide copies and disclose the terms thereof to Buyer.
5.15. PRESS RELEASES.
Except as required by applicable law, no party to this Agreement shall
give notice to third parties or otherwise make any public statement or releases
concerning this Agreement or the transactions contemplated hereby except for
such written information as shall have been approved in writing as to form and
content by the other parties, which approval shall not be unreasonably withheld.
Each of the parties hereto
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shall use its best efforts to cause its agents to comply with the terms of this
Section 5.15.
5.16. CONFIDENTIALITY.
Unless and until the Closing has been consummated, Buyer will hold,
and shall cause their counsel, independent certified public accountants,
appraisers and investment bankers to hold, in confidence any confidential data
or information made available to Buyer in connection with this Agreement with
respect to the Business using the same standard of care to protect such
confidential data or information as is used to protect Buyer's confidential
information. If the transactions contemplated by this Agreement are not
consummated, Buyer agrees that it shall return or cause to be returned to Seller
all written materials and all copies thereof that were supplied to Buyer by
Seller and that contain any such confidential data or information.
5.17. LANDLORD ESTOPPEL LETTERS.
Seller shall have furnished to Buyer estoppel letters executed by each
of the Landlords at Seller's Los Angeles, Costa Mesa, San Diego and Phoenix
offices, in each case certifying to Buyer (i) that the Real Property Lease for
such facility is valid and binding and in full force and effect and that,
attached to such certificate is a true and complete copy of the Real Property
Lease then in effect for such facility; (ii) that neither said Landlord nor
Seller is in default under the Real Property Lease then in effect for such
facility; (iii) the last date through which rent has been paid under said Real
Property Lease; (iv) the amount of any security deposit held by such Landlord
pursuant to such Real Property Lease; and (v) that such Landlord consents to the
assignment by Seller to Buyer of all of Seller's right, title and interest in
and to such Real Property Lease. Notwithstanding the foregoing, if the Seller,
after reasonable efforts, cannot obtain the consent required by subsection (v),
immediately above, with respect to a particular Real Property Lease, then the
Seller shall sublease the property subject to the particular Real Property Lease
to the Buyer pursuant to terms and conditions substantially identical to the
terms and conditions in the Real Property Lease until the Seller acquires said
consent.
5.18. SHARE PRICE GUARANTY.
Buyer agrees that during the period commencing on the second
anniversary of the Closing Date and ending 90 days after the second anniversary
of the Closing Date, Buyer shall, upon a Shareholder's request, repurchase from
such Shareholder at a price of $20.00 per share the Stock Consideration
delivered to such Shareholder in conjunction with Section 1.7 hereof (the "Share
Price Guaranty"). The Share Price Guaranty shall not be transferable or
assignable, except (i) by will or operation of law
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following the death of the Shareholder; or (ii) in connection with a
Shareholder's estate planning. This Share Price Guaranty shall be void with
respect to any attempted transfer or assignment of the Share Price Guaranty in
violation of this Section 5.18 and shall not be honored by Buyer. Buyer shall
make payment with respect to any shares tendered hereunder within thirty (30)
days following request by the authorized party hereunder.
5.19. AUDIT OF POST-EFFECTIVE DATE PAYMENTS.
Buyer shall audit the Checking Account after the Closing and Seller
shall reimburse the Checking Account to the extent that, during the period
commencing the Effective Date, Seller made any withdrawals from the Checking
Account which were not used to pay ordinary and necessary business expenses or
incurred toward expenses or payment related to services prior to July 1, 1999
and not assumed by Buyer as a liability pursuant to Schedule 1.5 of this
Agreement. The term "ordinary and necessary business expenses" shall mean, for
the purposes of this Agreement, expenses related to the Business that were
incurred and paid by Seller consistent with past Seller practice. For the
avoidance of confusion, it is understood that any withdrawals or disbursements
from the account used to make payments to an investment account or to make
direct investments or distribute dividends to shareholders in excess of
$300,000.00 (said amount being the amount of dividends which has been
distributed since June 30, 1999) are not ordinary and necessary business
expenses. Seller shall reimburse to Buyer the amount of any accounts receivable
or other funds received by Seller after June 30, 1999 which were not deposited
into the Checking Account.
5.20. METIER DIVISION'S OPERATING GUIDELINES.
Buyer agrees to operate the Metier Division according to the Metier
Division Operating Guidelines attached hereto as Exhibit D (the "Guidelines").
The Shareholders agree to be bound by the terms of the Guidelines with respect
to management of the Metier Division.
VI. CONDITIONS TO CLOSING
6.1. CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer to consummate the transactions provided for
by this Agreement are subject, at the discretion of Buyer, to the satisfaction,
at or prior to September 30, 1999, of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of
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Seller contained in this Agreement shall be true and correct at and as
of the Closing as if such representations and warranties were made at
the Closing, and Seller shall have performed all agreements and
covenants required by this Agreement to be performed by it prior to or
at the Closing Date. On the Closing Date, there shall be delivered to
Buyer a certificate signed by the President of Seller and each of the
Shareholders to the foregoing effect.
(b) Material Adverse Change. Since the date of this Agreement,
there shall not have occurred with respect to the Business any material
adverse change in the condition (financial or otherwise), nature or
amount of liabilities, results of operations, assets, business or
prospects of Seller, or any events which, individually or in the
aggregate, could reasonably be expected to have such a material adverse
change.
(c) Uniform Commercial Code Filings. (i) Seller shall have
obtained UCC termination statements from each of the parties named as
"secured parties" in the Uniform Commercial Code financing statements
of record; (ii) Buyer shall have received a "bringdown" search of the
records of the California and Arizona Secretaries of State as to
Uniform Commercial Code financing statements on file naming Seller as
"debtor"; and (iii) Seller shall have provided Buyer with a form UCC-1
financing statement in appropriate form to perfect the sale of Seller's
accounts receivable and chattel paper to Buyer.
(d) Consents. Seller shall have obtained all consents,
authorizations, registrations, and waivers from Seller's five (5)
largest customers and the other third parties and governmental agencies
specified in Schedule 3.5 or otherwise necessary to permit the
transactions contemplated by this Agreement.
(e) Employment Agreements. Seller shall have delivered to Buyer
Employment Agreements substantially in the form of those attached
hereto as Exhibit E-1 and Exhibit E-2, executed by Employees of a
number, and having skills, reasonably acceptable to the Buyer (the
"Employment Agreements").
(f) Noncompetition Agreements. Seller and each of the
Shareholders shall have delivered to Buyer covenants not to compete
substantially in the form of that attached hereto as Exhibit F (the
"Noncompetition Agreements").
(g) Anti-Trust / Competition Laws. The applicable waiting periods
under the HSR Act and the rules and regulations promulgated thereunder
shall have expired and there shall be in effect no preliminary or
permanent injunction or other order of a court or governmental or
regulatory agency of competent jurisdiction directing that the
transactions contemplated by this Agreement not
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be consummated.
(h) Legal Opinion. Buyer shall have received an opinion from
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, counsel to Seller, in form and substance of that
attached hereto as Exhibit H.
(i) Litigation: Other Events. No action, suit or proceeding shall
have been instituted by any person which seeks to prohibit, restrict or
delay consummation of the transactions contemplated herein or any of
the conditions material to consummation of the transactions
contemplated herein.
(j) Termination of Employment and Services. Seller shall deliver
to Buyer resignations, effective on or before the Closing Date, of each
employee or independent contractor terminating all employment or
service relationships with the Seller.
6.2. CONDITIONS TO OBLIGATIONS OF SELLER.
The obligations of Seller to consummate the transactions provided for
by this Agreement are subject, in the discretion of Seller, to the satisfaction,
at or prior to September 30, 1999, of each of the following conditions:
(a) Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and
correct at and as of the Closing as if such representations and
warranties were made at and as of the Closing, and Buyer shall have
performed all agreements and covenants required by this Agreement to be
performed by it prior to or at the Closing Date. On the Closing Date,
there shall be delivered to Seller a certificate signed by the
President of Buyer to the foregoing effect.
(b) Legal Opinion. Seller shall have received from ▇▇▇▇▇▇▇ Coie
LLP, counsel for Buyer and from Syntel, Inc., an opinion, dated the
Closing Date, in form and substance of that attached hereto as Exhibit
I.
(c) Employment Agreements. Buyer shall have delivered to Seller
duly executed Employment Agreements for Employees of a number, and
having skills, reasonably acceptable to the Seller.
(d) Offer Letters. Buyer shall have delivered to Seller true
copies of the offers for employment which Buyer has made to Employees
of Seller who are listed on Schedule 3.16.
(e) Noncompetition Agreements. Buyer shall have delivered to
Seller the
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Noncompetition Agreements.
VII. INDEMNIFICATION
7.1. INDEMNIFICATION BY SELLER.
Notwithstanding any investigation of the business and assets of Seller
by or on behalf of Buyer, Seller shall indemnify, defend and hold harmless
Buyer, its successors and assigns, and its officers, directors, employees,
sellers, agents and affiliates ("Buyer's Indemnified Persons") from and against
any and all losses, liabilities, claims, obligations, damages, deficiencies,
actions, judgments, regulatory, legislative or judicial proceedings or
investigations, assessments, levies, fines, penalties, costs and Legal Expenses
(as defined in Article IX) (collectively, "Losses"), arising out of, based upon
or in any way relating to:
(a) any misrepresentation in or breach of any representation or
warranty or nonfulfillment of any covenant, agreement or other
obligation of Seller set forth in this Agreement or in any document
delivered to Buyer pursuant to the provisions of this Agreement;
(b) any Excluded Liability;
(c) any claims by parties other than Buyer to the extent caused
by acts or omissions of Seller on or prior to the Closing Date,
including, but not limited to, claims for Losses which arise or arose
out of Seller's operation of the Business or by virtue of Seller's
ownership of the Business on or prior to the Closing Date;
(d) any Environmental Claim arising under any of the
Environmental Laws or any Remedial Action arising pursuant to any of
the Environmental Laws including, but not limited to, investigation,
remediation, treatment or clean up of any contaminant that is
reasonably shown to have been or are present, released, or disposed of
prior to the Closing Date on properties now or previously owned or
leased by Seller, or which are reasonably shown to have migrated or
been discharged or transported from such properties prior to the
Closing Date, in violation of Environmental Laws, or at levels which
could give rise to liability for investigation, remediation, removal,
treatment or clean up under Environmental Laws; provided that the
disclosures made pursuant to Section 3.26 or any attachment thereto in
no way limit the right of any of Buyer's Indemnified Persons to
indemnification under this Section 7.1; and
(e) enforcement of this Section 7.1.
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7.2. INDEMNIFICATION BY BUYER.
Notwithstanding any investigation of the business and assets of Buyer
by or on behalf of Seller, Buyer shall indemnify, defend and hold harmless
Seller from and against any and all Losses arising out of, based upon or in any
way relating to:
(a) any misrepresentation in or breach of any representation or
warranty or nonfulfillment of any covenant, agreement or other
obligation of Buyer set forth in this Agreement or in any document
delivered to Seller pursuant to the provisions of this Agreement;
(b) any Assumed Liability;
(c) any claims by parties other than Seller to the extent caused
by the acts or omissions of Buyer after the Closing Date, including,
but not limited to, claims for Losses which arise out of Buyer's
operation of Seller or by virtue of Buyer's ownership of Seller after
the Closing Date; and
(d) enforcement of this Section 7.2.
7.3. BASKET; INDEMNITY
(a) An "Indemnified Party" (as defined in Section 7.4) shall not
be entitled to assert any claim for indemnification under this Article
7 unless and until such time as all claims for Losses of the
Indemnified Party exceed $188,000 in the aggregate (the "Basket"). Once
all Losses of an Indemnified Party exceed the Basket, the Indemnified
Party shall, subject to the terms of this Article 7, be entitled to
full indemnification for all Losses, including the Basket.
(b) The parties hereto agree that the aggregate claims resulting
from a breach or multiple breaches by any of the parties hereto of
their respective representations, warranties, covenants or agreements
made hereby or the failure by any party to perform their respective
obligations under this Agreement, except as otherwise provided in the
Non-Competition Agreement described on Exhibit F attached hereto, shall
not exceed the total consideration paid by Buyer as set forth in
Section 1.7 of this Agreement.
7.4. DEFENSE OF CLAIMS.
If any legal proceedings shall be instituted or any claim is asserted
by any third party in respect of which any party hereto may have an obligation
to indemnify another party, the party asserting such right to indemnity (the
"Indemnified Party")
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shall give the party from whom indemnity is sought (the "Indemnifying Party")
written notice thereof, but any failure to so notify the Indemnifying Party
shall not relieve it from any liability that it may have to the Indemnified
Party other than to the extent the Indemnifying Party is actually prejudiced
thereby. The Indemnifying Party shall have the right, at its option and expense,
to participate in the defense of such proceeding or claim, but not to control
the defense, negotiation or settlement thereof, which control shall at all times
rest with the Indemnified Party, unless the Indemnifying Party (i) admits in
writing its liability to the Indemnified Party hereunder with respect to such
proceeding or claim; and (ii) furnishes satisfactory evidence of its financial
ability to indemnify the Indemnified Party, in which case, the Indemnifying
Party may assume such control at its expense through counsel reasonably
satisfactory to such Indemnified Party; provided, however, that:
(a) the Indemnified Party shall be entitled to participate in the
defense of such claim and to employ counsel at its own expense to
assist in the handling of such claim; provided, however, that the
employment of such counsel shall be at the expense of the Indemnifying
Party if the Indemnified Party determines in good faith that such
participation is appropriate in light of defenses not available to the
Indemnifying Party, conflicts of interest or other similar
circumstances;
(b) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into any settlement
of such claim or ceasing to defend against such claim (with such
approval not to be unreasonably withheld);
(c) no Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each Indemnified Party of a release from all liability in respect of
such claim; and
(d) the Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense of),
and the Indemnified Party shall be entitled to have sole control over,
the defense or settlement of (A) any claim to the extent the claim
seeks an order, injunction, non-monetary or other equitable relief
against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party or (B) any claim
relating to Taxes.
After written notice by the Indemnifying Party to the Indemnified Party
of its election to assume control of the defense of any such action, the
Indemnifying Party
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shall not be liable to such Indemnified Party hereunder for any Legal Expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation and of liaison counsel for
the Indemnified Party; provided, however, that the Indemnifying Party shall be
liable for such Legal Expenses if the Indemnified Party determines in good faith
that the incurrence of the same is appropriate in light of defenses not
available to the Indemnifying Party, conflicts of interest or other similar
circumstances. If the Indemnifying Party does not assume control of the defense
of such claim as provided in this Section 7.4, the Indemnified Party shall have
the right to defend such claim in such manner as it may deem appropriate at the
cost and expense of the Indemnifying Party, and the Indemnifying Party will
promptly reimburse the Indemnified Party therefor in accordance with this
Section 7.4. The reimbursement of fees, costs and expenses required by this
Section 7.4 shall be made by periodic payments during the course of the
investigations or defense, as and when bills are received or expenses incurred.
7.5. ENVIRONMENTAL MATTERS.
Seller shall, at its sole expense and in the manner reasonably
determined by Seller, conduct or direct any environmental clean-up or
remediation which is required by law after the date of Closing and for which
Seller is responsible under this Agreement, if any; provided, however, Seller
will consult with Buyer with respect to such matters, will not take any action
which will interfere with the ability of Buyer to carry on the Business in the
ordinary course (unless required by law to do so), and will provide Buyer with a
complete copy of any governmental filing or submission at the time it is made.
Buyer agrees to cooperate with Seller in connection with any such clean-up or
remediation including, without limitation, making relevant personnel and records
available to Seller at all reasonable times at a reasonable charge to be agreed
upon between Buyer and Seller.
7.6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each party contained in this
Agreement shall survive the Closing Date for a period of two years plus 60 days
following the Closing Date, provided, however, that (i) the representations and
warranties of Seller set forth in Sections 3.1 and 3.4 and, as to the title of
the Business and the Acquired Assets, set forth in Section 3.11, shall survive
indefinitely, and (ii) the representations and warranties set forth in Section
3.19 (relating to Taxes), shall survive until 60 days after the running of the
applicable statute of limitations with respect to the taxable period to which
the particular claim relates. Any claim for indemnity under Sections 7.1(a) or
7.2(a) shall be asserted in writing within the foregoing time periods.
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7.7. REMEDIES.
The rights and remedies of each party hereto arising by reason of the
breach of any representation or warranty, or the default in any covenant,
condition or undertaking by any other party hereto, shall not be limited to
those set forth in this Agreement.
7.8. PAYMENT; OFFSET.
Payment of any amounts due pursuant to this Article 7 shall be made
within ten business days after resolution of the claim. The Seller and the
Shareholders agree that any Earn-Out amounts payable by Buyer pursuant to
Section 1.7 shall be offset by the amount of any Losses or any other amounts
owed to Buyer by Seller and the Shareholders, as Indemnifying Parties or
otherwise, provided, however, that such offset shall not constitute Buyer's sole
remedy for Losses.
VIII. TERMINATION
8.1. TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(a) by mutual consent of Buyer and Seller;
(b) by Buyer if Buyer, in its sole discretion, is not satisfied
with its financial, business, environmental or legal due diligence
review of Seller.
(c) by either Buyer or Seller if there has been a material breach
of any representation, warranty, covenant or agreement on the part of
the other party set forth in this Agreement;
(d) by either Buyer or Seller at any time after September 30,
1999 (the "Final Termination Date"), provided that if the Closing shall
not have occurred by the Final Termination Date as the result of a
breach of this Agreement, then any party responsible for such breach
may not avail itself of the right under this Section 8.1, and provided
further that in any such event, the non-breaching party(ies) shall not
be deprived of any remedy hereunder or at law against the breaching
party;
(e) by Buyer if the Closing shall not have occurred on the
Closing Date by reason of the failure of any of the conditions
specified in Section 6.1 and such failure has not been waived by Buyer
(unless the failure results primarily from
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the Buyer itself breaching any representation, warranty or covenant
contained in this Agreement);
(f) by Seller if the Closing shall not have occurred by the
Closing Date by reason of the failure of any of the conditions
specified in Section 6.2 and such failure has not been waived by Seller
(unless the failure results primarily from Seller himself breaching any
representation, warranty or covenant contained in this Agreement); or
(g) by either Buyer or Seller if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any
other action, in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement
and such order, decree, ruling or other action shall have become final
and nonappealable.
8.2. EFFECT OF TERMINATION.
In the event of termination of this Agreement by either Seller or
Buyer, as provided above, this Agreement shall forthwith terminate and there
shall be no liability on the part of either Seller or Buyer or Buyer's officers
or directors, except for liabilities arising from a material breach by a party
hereto of any of its representations, warranties, covenants or agreements set
forth in this Agreement; provided, however, that the obligations of the parties
set forth in Sections 5.16 (Confidentiality) and 10.10 (Expenses) hereof shall
survive such termination.
IX. CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following respective meanings:
"Affiliate" or "affiliate" of a specified person shall mean a person
that directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, the
person specified.
"Employee" means the Seller's employees, sales agents and independent
contractors who spend the majority of their working time on the
business of the Company.
"Environmental Claim" means any notice of any violation, claim, demand,
abatement or other order or direction (conditional or otherwise) by any
governmental authority or any person for personal injury (including
sickness,
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disease or death), tangible or intangible property damage, damage to
the environment, nuisance, pollution, contamination or other adverse
affects on the environment, or for fines, penalties or restrictions,
resulting from or based upon (i) the existence, or the continuation of
the existence, of a Release (including, but not limited to, sudden or
non-sudden, accidental or non-accidental Releases) of, or exposure to,
any substance, chemical, material, pollutant, contaminant, odor or
audible noise or other release or emission in, into or onto the
environment (including, but not limited to, the air, ground, water or
any surface) at, in, by, from, or related to Seller's Business or any
properties now or previously owned or leased by Seller, (ii) the
environmental aspects of the transportation, storage, treatment or
disposal of Hazardous Materials or other substances in connection with
the operation of Seller's business or any properties owned or leased by
Seller or (iii) the violation, or alleged violation, of any
Environmental Laws in connection with Seller's Business or any
properties now or previously owned or leased by Seller.
"Environmental Laws" means all federal, state, regional or local
statutes, laws, rules, regulations, codes, ordinances, orders, plans,
injunctions, decrees, rulings, licenses or judicial or administrative
interpretations thereof, or similar laws, all as are currently in
existence, issued, or promulgated, any of which govern, or relate to
pollution, protection of the environment, public health and safety, air
emissions, water discharges, waste disposal, hazardous or toxic
substances, solid or hazardous waste, as any of these terms are or may
be defined in such statutes, laws, rules, regulations, codes, orders,
ordinances, injunctions, decrees, rulings, licenses, or judicial or
administrative interpretations thereof, including without limitation:
the comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Resource Conservation and Recovery Act
of 1976 and subsequent Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. ss. 6901 et seq. (herein, collectively, RCRA"), the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. ss. 1801, et seq.
(the "Hazardous Materials Transportation Act"); the Clean Water Act, as
amended, 33 U.S.C. ss. 1311, et seq. (the "Clean Water Act"); the Clean
Air Act, as amended, 42 U.S.C. ss. 7401-7642, (the "Clean Air Act");
the Toxic Substances Control Act, as amended, 15 U.S.C. ss. 2601 et
seq. (the "Toxic Substances Control Act"), the Federal Insecticide,
Fungicide, and Rodenticide Act as amended, 7 U.S.C. ss. 136-136y
("FIFRA"), the Emergency Planning and Community Right-to-Know Act of
1986 as amended 42 U.S.C ss. 11001, et seq. (Title III of ▇▇▇▇)
("EPCRA") and similar or related state and local laws.
"Environmental Permits" means, collectively, all permits, licenses,
consents,
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approvals, registrations, certifications and authorizations presently
required under Environmental Laws.
"Generally Accepted Accounting Principles" or "GAAP" shall mean
generally accepted United States accounting principles.
"Hazardous Materials" shall be construed to include any toxic or
hazardous substance, material or waste or constituent thereof, and any
other contaminant, pollutant, waste or by-product material whether
liquid, solid, semisolid, sludge and/or gaseous, including without
limitation, chemicals, compounds, pesticides, asbestos containing
materials, petroleum or petroleum products, and polychlorinated
biphenyls, the presence of which requires or may require investigation
or remediation under any Environmental Laws or which are or become
regulated, listed or controlled by, under or pursuant to any
Environmental Laws, or which has been determined or interpreted by any
governmental authority to be a hazardous or toxic substance regulated
under any Environmental Laws.
"Intellectual Property Rights" shall mean:
(i) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and
all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof;
(ii) all trademarks, service marks, trade dress, logos,
trade names, and corporate names (including the name "Metier"),
together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in
connection therewith;
(iii) all copyrightable works, all copyrights, all mask
works, and all applications, registrations, and renewals in
connection therewith;
(iv) all material (1) trade secrets and (2) confidential
business information (including ideas, research and development,
technology, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and
cost information, and business and marketing plans and proposals);
and
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(v) all other proprietary rights, all copies and tangible
embodiments of any of the foregoing (in whatever form or medium),
and all license agreements (as licensee or licensor) relating to
any of the foregoing.
"Legal Expenses" means reasonable attorneys', accountants',
investigators', and experts' fees, and expenses reasonably sustained or
incurred in connection with the defense or investigation of any Losses.
"Lien" shall mean any pledge, lien (including without limitation any
tax lien), charge, claim, encumbrance, security interest, mortgage,
option, restriction on transfer (including without limitation any
buy-sell agreement or right of first refusal or offer), forfeiture,
penalty, license, equity or other right of another person of every
nature and description whatsoever.
"Person" or "person" shall mean an individual or any corporation,
partnership, joint venture, association, limited liability company,
trust, unincorporated organization, or other legal entity or a
government or governmental entity.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the environment, including the movement of any Hazardous
Material or other substance through or in the air, soil, surface water,
groundwater, or property.
"Remedial Action" means any action required under any Environmental
Laws to (i) clean up, remove, treat, or in any other way address any
Hazardous Material or other substance in the environment, (ii) prevent
the Release or threat of Release, or minimize the further Release of
any Hazardous Material or other substance so it does not migrate or
endanger or threaten to endanger public health or welfare or the
environment, or (iii) perform pre-remedial studies and investigations
and post-remedial monitoring and care.
"Software" means all computer software, whether owned, licensed or
rented, which is used by Seller in the operation of the Business.
"To the knowledge," or "known," and words of similar import shall mean
the knowledge of a person after due and reasonable investigation.
"Year 2000 Compliant" means:
(i) the functions, calculations and other computing
processes of Seller's proprietary software, including without
limitation all applications and formats (collectively, the
"Processes") perform in a
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consistent manner regardless of the date in time on which the
Processes are actually performed and regardless of the date of
input to Seller's proprietary software, whether before, on or
after January 1, 2000, and whether or not the dates are affected
by leap years;
(ii) Seller's proprietary software accepts, calculates,
compares, sorts, extracts, sequences and otherwise processes date
inputs and date values, and returns and displays date values, in a
consistent manner regardless of the dates used, whether before, on
or after January 1, 2000;
(iii) Seller's proprietary software will function without
interruptions caused by the date in time on which the Processes
are actually performed or by the date of input to Seller's
proprietary software, whether before, on or after January 1, 2000;
(iv) Seller's proprietary software accepts and responds to
two-digit year-date input in a manner that resolves any
ambiguities as to the century in a defined, predetermined and
appropriate manner;
(v) Seller's proprietary software stores and displays date
information in ways that are unambiguous as to the determination
of the century; and
(vi) All services provided by Seller to its customers
relating to the customer's software will not cause the customer's
software to fail but instead operate in a manner which would be
Year 2000 Compliant as if the software had been Seller's
proprietary software.
X. OTHER PROVISIONS
10.1. DISPUTE RESOLUTION.
Except to the extent that a specific dispute resolution mechanism is
specified in this Agreement, the parties agree that all controversies or claims
arising out of or relating to this Agreement shall be resolved as follows:
(a) The parties will first attempt in good faith to promptly
resolve any such controversy or claim arising hereunder by negotiation.
The disputing party shall give the other party written notice of the
dispute. Within fifteen (15) days after receipt of such notice, the
receiving party shall submit to the disputing party a written response.
The notice and response shall include a statement of each party's
position and a summary of the evidence and arguments supporting its
position. The parties shall meet at a mutually acceptable time and
place within ten (10) days of the date of the disputing party's notice
and thereafter as
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often as they reasonably deem necessary to exchange relevant
information and to attempt to resolve the dispute.
(b) If the matter has not been resolved by the parties within
thirty (30) days after the disputing party's notice, or if the party
receiving such notice will not agree to meet with the disputing party
within ten (10) days after its receipt of such notice, either party may
initiate mediation of the controversy or claim in accordance with the
Commercial Mediation Rules of the American Arbitration Association;
except that, as to claims requesting equitable or declaratory relief,
the disputing party may skip mediation and directly file for
arbitration following the end of negotiation. The mediation shall be
conducted in Oakland County, Michigan. The mediator(s) shall apply
Michigan substantive law to the matter(s) which are the subject of the
mediation.
(c) If the matter has not been resolved pursuant to the mediation
procedure referred to in Section 10.1(b) above within thirty (30) days
of the initiation of such procedure, or if either party will not
participate in a mediation, then any controversy, dispute or claim
arising out of the interpretation, performance or breach of this
Agreement (including disputes as to the jurisdiction of the
arbitrator(s)) shall be resolved, at the request of any party hereto
(the "Initiation") directed to the American Arbitration Association
(the "AAA"), by a binding arbitration. In the event that the amount in
controversy in the arbitration is less than Two Hundred Thousand
Dollars ($200,000) or the initiating party seeks equitable or
declaratory relief, the arbitration shall be conducted by a single
arbitrator; and if the amount in controversy in the arbitration equals
or exceeds Two Hundred Thousand Dollars ($200,000) or the amount in
controversy cannot be reasonably estimated at the Initiation, the
arbitration shall be conducted by a panel of three arbitrators. The
arbitration shall be conducted in accordance with the Commercial
Arbitration Rules (the "CAR") of the AAA, except as modified by the
terms of this Section 10. The arbitration shall be conducted in Oakland
County, Michigan. The arbitrator(s) shall apply Michigan substantive
law to the matter(s) which are the subject of the arbitration. The
arbitrator(s) shall have the power to grant all legal and equitable
remedies and award such compensatory and punitive damages as may be
granted or awarded by a court of the State of Michigan. The
arbitrator(s) shall prepare and provide to the parties a written
decision (the "Decision") on all matter(s) which are the subject of the
arbitration, including factual findings and the legal reasons which
form the basis of the Decision of the arbitrator(s). In the event that
the arbitrator(s) shall commit errors of law or legal reasoning in the
Decision, the arbitrator(s) shall be deemed to have exceeded the
arbitrator(s)' powers; and the Decision and the award may be vacated or
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corrected pursuant to Michigan law. Any judgment upon the award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction over the subject matter thereof. Costs of the arbitration
shall be borne as directed by the arbitrator(s).
(d) One or more of the parties to any arbitration proceeding
commenced hereunder shall be entitled as a part of the arbitration
award to the costs and expenses (including reasonable attorneys' fees
and interest on any award) of investigating, preparing and pursuing an
arbitration claim as such costs and expenses are awarded by the
arbitration panel.
10.2. ANNEXES, EXHIBITS AND SCHEDULES.
All Annexes, Exhibits and Schedules referred to herein are intended to
be and hereby are specifically made a part of this Agreement.
10.3. AMENDMENT.
This Agreement and the Exhibits and Schedules hereto may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. 10.4. NO WAIVER. No failure of any party to this Agreement to
exercise any power given it under this Agreement, or to insist upon strict
compliance with any provision of this Agreement, and no custom or practice at
variance with the terms of this Agreement shall constitute a waiver any such
party's right to demand strict compliance with the terms of this Agreement.
10.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
This Agreement, together with the Annexes, Exhibits and Schedules
hereto, (a) constitutes the entire Agreement between the parties pertaining to
the subject matter hereof and supersedes all prior and contemporaneous
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and (b) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
10.6. GOVERNING LAW.
This Agreement shall be governed by, construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
Michigan (regardless of the laws that might be applicable under principles of
conflicts of law).
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10.7. ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined in
this Agreement shall have the respective meanings given to them in accordance
with Generally Accepted Accounting Principles as applied in the United States on
the date hereof.
10.8. NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed given (a) on the day of service if served personally on the
party to whom notice is given, (b) on the date of receipt if delivered by
telecopy or nationally recognized overnight courier, or (c) on the third (3rd)
business day after deposit in the U.S. mail if mailed to the party to whom
notice is given by registered or certified mail, postage prepaid, return receipt
requested and properly addressed as follows:
If to Buyer, addressed to:
Syntel, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ Coie LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to Seller, addressed to:
Metier, Inc. (aka JACF, Inc.)
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇
Facsimile: 213-629-4300
With a copy to:
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▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or to such other place and with such other copies as either party may
designate as to itself by written notice to the others.
10.9. COUNTERPARTS; HEADINGS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The headings of the several Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
10.10. EXPENSES.
Regardless of whether the transactions contemplated hereby are
consummated, except as otherwise set forth in Section 1.5 (such exception to
apply only if the transactions hereby are consummated), each party hereto shall
pay its or their own costs and expenses, including legal, accounting, consulting
and other professional fees, incurred in connection with the negotiation,
preparation, investigation, and performance by such party of this Agreement and
the transactions contemplated hereunder.
10.11. CONSTRUCTION.
The parties acknowledge that they have participated jointly in the
negotiation and drafting of the terms of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
10.12. SUCCESSORS AND ASSIGNS.
This Agreement, and all rights and powers granted hereby, will bind
and inure to the benefit of the parties hereto and their respective successors
and assigns.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
SYNTEL, INC., a Michigan corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------
Its: Chief Administrative Officer
-----------------------------
METIER INC., a California corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
----------------
Its: Chief Executive Officer
------------------------
/s/ ▇▇▇▇▇▇ ▇▇▇▇
----------------
▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇
-----------------
▇▇▇▇▇▇▇▇ ▇▇▇
/s/ ▇▇▇▇▇▇ Kong
----------------
▇▇▇▇▇▇ Kong
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇