Exhibit 1
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 19, 2000
BY AND AMONG
TMP WORLDWIDE INC.
MOVECENTRAL, INC.,
MOVECENTRAL COMPANY
AND
THE BENEFICIAL OWNERS OF MOVECENTRAL COMPANY
TABLE OF CONTENTS
Article I The Purchase .....................................................................................1
1.1 The Transaction................................................................................1
1.2 Adjustment to Purchase Price...................................................................1
1.3 Post-Closing Adjustment........................................................................1
1.4 Allocation of Purchase Price...................................................................2
Article II Manner of Exchange ..............................................................................2
2.1 Exchange of Shares.............................................................................2
2.2 Further Assurances.............................................................................3
Article III Representations and Warranties of the Company, The Trust and the Beneficiaries..................3
3.1 Organization and Good Standing.................................................................3
3.2 Power and Authorization........................................................................3
3.3 Subsidiaries ..................................................................................3
3.4 Organizational Documents.......................................................................4
3.5 Ownership of the Company.......................................................................4
3.6 No Violation ..................................................................................4
3.7 No Consent Required............................................................................4
3.8 Financial Statements...........................................................................4
3.9 Absence of Undisclosed Liabilities.............................................................5
3.10 Compliance with Laws; Permits.................................................................5
3.11 Property .....................................................................................5
3.12 Condition of Property and Related Matters.....................................................6
3.13 Material Contracts............................................................................6
3.14 Intellectual Property.........................................................................6
3.15 Accounts Receivable...........................................................................7
3.16 No Prebillings or Prepayments.................................................................8
3.17 Employee Benefit Plans........................................................................8
3.18 Salaries .....................................................................................9
3.19 Personnel Agreements, Plans and Arrangements..................................................9
3.20 Customers ...................................................................................10
3.21 Interest of the Company in Customers, etc....................................................10
3.22 Books and Records............................................................................10
3.23 Insurance Policies...........................................................................10
3.24 Bank Accounts................................................................................11
3.25 Taxes .......................................................................................11
3.26 Litigation ..................................................................................12
3.27 Environmental and Safety Requirements........................................................13
3.28 Conduct of the Business......................................................................13
3.29 Power of Attorney............................................................................14
3.30 Brokers .....................................................................................14
3.31 Reserved ....................................................................................14
3.32 No Illegal or Improper Transactions..........................................................14
3.33 No Misrepresentation.........................................................................14
3.34 Year 2000 Compliance.........................................................................14
Article IV Representations and Warranties of Buyer.........................................................15
4.1 Organization and Good Standing; Power..........................................................15
4.2 Authorization..................................................................................15
4.3 No Violation ..................................................................................15
4.4 No Consent Required............................................................................15
4.5 No Misrepresentation...........................................................................15
Article V Intentionally Omitted ...........................................................................16
Article VI Conditions Precedent to the Closing.............................................................16
6.1 Conditions Precedent to Obligations of Buyer....................................................16
6.2 Conditions Precedent to Obligations of the Company, the Trust and the Beneficiaries............17
Article VII Closing .......................................................................................17
7.1 Closing ........................................................................................17
7.2 Deliveries by the Company, the Trust and the Beneficiaries......................................17
7.3 Deliveries by Buyer.............................................................................19
Article VIII Other Agreements .............................................................................19
8.1 Noncompetition; Nonsolicitation and Confidentiality.............................................19
8.2 Reserved ......................................................................................20
8.3 Survival of Representation and Warranties......................................................20
8.4 Cooperation After the Closing...................................................................21
8.5 Tax Matters ....................................................................................21
8.6 Closing Date Financials........................................................................23
Article IX Indemnification ................................................................................24
9.1 Indemnification by the Beneficiaries...........................................................24
9.2 Indemnification by Buyer.......................................................................24
9.3 Procedure for Indemnification..................................................................24
9.4 Limitation on Indemnification Rights...........................................................25
9.5 Waiver of Claims...............................................................................25
9.6 Sole Remedy for Damages........................................................................25
9.7 Order of Claims................................................................................25
9.8 Certain Reductions.............................................................................26
Article X Miscellaneous ...................................................................................26
10.1 Notices, Consents, etc........................................................................26
10.2 Severability..................................................................................27
10.3 Amendment and Waiver...........................................................................27
10.4 Documents ....................................................................................27
10.5 Counterparts..................................................................................27
10.6 Expenses .....................................................................................27
10.7 Governing Law.................................................................................27
10.8 Headings .....................................................................................28
10.9 Assignment ...................................................................................28
10.10 Definitions..................................................................................28
10.11 Entire Agreement.............................................................................29
10.12 Third Parties................................................................................29
10.13 Interpretative Matters.......................................................................29
10.14 No Strict Construction.......................................................................29
10.15 Arbitration..................................................................................29
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
this 19th day of June, 2000, by and among TMP Worldwide Inc., a Delaware
corporation ("Buyer" or "TMP"), MoveCentral, Inc., a Massachusetts corporation
(the "Company"), MoveCentral Company, a Massachusetts business trust (the
"Trust"), the beneficial owners of the Trust listed on SCHEDULE A (each a
"Beneficiary" and, collectively, the "Beneficiaries").
WHEREAS, as of the date hereof, the Trust owned 107,941 shares of
common stock (the "Company Common Stock") of the Company in the amounts set
forth on SCHEDULE A;
WHEREAS, the Company Common Stock (collectively, the "Company
Shares," and individually, a "Company Share") constitutes all of the issued and
outstanding capital stock of the Company;
WHEREAS, the Trust desires to sell the Company Shares to Buyer
and Buyer desires to purchase the Company Shares from the Trust, upon the terms
and conditions set forth herein (the "Transaction"); and
WHEREAS, the parties wish to set forth certain other agreements
among them.
NOW THEREFORE, in consideration of the mutual covenants of the
parties set forth in this Agreement and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE PURCHASE
1.1 THE TRANSACTION. Subject to the terms and conditions of this
Agreement, at the Closing (as defined in Section 7.1 below) and upon the basis
of the representations, warranties, covenants and agreements contained herein,
the Trust shall sell, convey, transfer and deliver to Buyer, and Buyer shall
purchase from the Trust, the Company Shares in consideration for an aggregate of
twenty million dollars ($20,000,000), subject to adjustment under Section 1.2
below for the estimated amount that Equity (as defined in Section 1.3(b) below)
on the Closing Date is less than zero dollars ($0) (the "Purchase Price").
1.2 ADJUSTMENT TO PURCHASE PRICE. The Purchase Price shall be
adjusted downward at the Closing for the estimated amount that Equity on the
Closing Date (as defined in Section 7.1 below) is less than zero dollars ($0).
In addition, at the Closing, Buyer will pay the Company's estimated liability
for "due to affiliates" on the Closing Date. The payment of such estimated
liability will not impact the Equity calculation but will reduce the liability
"due to affiliates" amount and increase the liability "due to TMP" on the
Closing Date Financials. The parties agree that at the Closing, the estimated
"due to affiliates" is three million five hundred thousand dollars ($3,500,000)
and the estimated Equity is negative two million nine hundred thousand dollars
(negative $2,900,000).
1.3 POST-CLOSING ADJUSTMENT.
(a) Notwithstanding anything to the contrary contained herein, as
soon as practicable and in any event no later than 45 days after the Closing,
the Beneficiaries shall deliver to Buyer an unaudited balance sheet and
statements of operation and cash flows for the Company as of and for the period
April 1, 2000 through the time on the Closing Date immediately prior to the
Closing, but after giving effect to the third sentence of Section 1.2
(collectively, the "Closing Date Financials"). The Closing Date Financials shall
be prepared in accordance with generally accepted accounting principles and on
the same basis as the Company's other financial statements set forth on SCHEDULE
3.8 hereto, and include all normal and recurring adjustments necessary for a
fair presentation of the information set forth therein. During the 45 days after
the Closing, Buyer shall grant the Beneficiaries reasonable access to the books
and records of the Company solely to the extent that such access is necessary to
prepare the Closing Date Financials. As soon as is reasonably practicable, but
in any event no later than the later of 75 days
following the Closing Date and 30 days following receipt of the Closing Date
Financials from the Beneficiaries, Buyer shall complete a review of the Closing
Date Financials and shall inform the Beneficiaries in writing that the Closing
Date Financials are acceptable or object to the Closing Date Financials in
writing, setting forth a specific description of Buyer's objections. If Buyer
does not so object to the Closing Date Financials within such period, then Buyer
will be deemed to have accepted the Closing Date Financials. If Buyer so objects
to the Closing Date Financials and the Beneficiaries do not agree with Buyer's
objections or such objections are not resolved on a mutually agreeable basis
within 15 days of the Beneficiaries' receipt of Buyer's objections, any such
disagreements shall be promptly submitted by either party to a mutually
agreeable independent certified accounting firm (the "Independent Firm"). The
Independent Firm shall resolve such dispute within 30 days after submission of
the dispute by the parties. The decision of the Independent Firm shall be final
and binding upon the Beneficiaries and Buyer and its fees, costs and expenses
shall be borne by the party against which the Independent Firm shall rule or
proportioned as deemed appropriate by such Independent Firm.
(b) Subject to the proviso in the last sentence of this Section
1.3(b), the Purchase Price shall be adjusted upward or downward, on a
dollar-for-dollar basis, by the amount that Equity as shown on the balance sheet
included in the Closing Date Financials, as finally determined (the "Closing
Balance Sheet") is less negative or more negative than the Equity amount of
negative $2,900,000 set forth in Section 1.2 above. "Equity" is defined as total
assets minus total liabilities, calculated using GAAP. In the event that Equity
is more negative than negative $2,900,000 on the Closing Balance Sheet, the
Trust or the Beneficiaries shall pay to Buyer (in the case of the Beneficiaries,
pro rata in proportion to each Beneficiary's proportionate share of the Purchase
Price) in cash within 10 business days of the acceptance of the Closing Balance
Sheet the amount of such downward adjustment. In the event that Equity is less
negative than negative $2,900,000 on the Closing Balance Sheet, Buyer shall pay
to the Beneficiaries (pro rata in proportion to each Beneficiary's proportionate
share of the Purchase Price) in cash within 10 business days of the acceptance
of the Closing Balance Sheet the amount of such upward adjustment; provided,
however, that in no event shall such upward adjustment exceed $500,000.
(c) Any amount "due from affiliates" on the Closing Balance Sheet
shall be paid in cash to Buyer by the Beneficiaries (pro rata in proportion to
each Beneficiary's proportionate share of the Purchase Price) on behalf of such
affiliates within 10 business days of the acceptance of the Closing Balance
Sheet. Any amount "due to affiliates" on the Closing Balance Sheet shall be paid
in cash by Buyer to the Beneficiaries (pro rata in proportion to each
Beneficiary's proportionate share of the Purchase Price) on behalf of such
affiliates within 10 business days of the acceptance of the Closing Balance
Sheet.
1.4 ALLOCATION OF PURCHASE PRICE. For purposes of this Agreement
(including the preparation of Section 338(h)(10) Forms (as defined in Section
8.5(h) below)), an amount equal to the excess of the purchase price over the tax
book value of the Company's assets shall be allocated to goodwill. The balance
of the purchase price shall be allocated to the assets shown on the Company's
balance sheet in an amount equal to their respective tax book values. Buyer, the
Trust and the Beneficiaries shall file, and cause their respective Affiliates to
file, all Tax Returns and statements, forms and schedules in connection
therewith in a manner consistent with such allocation of purchase price and
shall take no position contrary thereto unless required to do so by applicable
Tax laws.
ARTICLE II
MANNER OF EXCHANGE
2.1 EXCHANGE OF SHARES.
(a) DELIVERY OF CERTIFICATES. At the Closing, the Trust shall
surrender to Buyer the certificate(s) representing all of the issued and
outstanding shares of the Company's capital stock, accompanied by stock power(s)
duly executed in blank, with all necessary stock transfer and other documentary
stamps attached, and any other documents that are necessary to transfer to Buyer
full ownership of the Company Shares free and clear of all Liens (hereinafter
defined).
(b) PAYMENT OF PURCHASE PRICE. At the Closing, Buyer shall pay to
the Trust or its designee fourteen million four hundred ninety thousand dollars
($14,490,000) (the "Firm Funds") by wire transfer of
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immediately available funds, and the remaining portion of the Purchase Price
payable at the Closing shall be held in escrow accounts in accordance with the
Escrow Agreement and the Tax Escrow Agreement (each as defined in Section 2.1(c)
below).
(c) RELEASE OF ESCROW FUNDS AND TAX ESCROW FUNDS. One million
seven hundred ten thousand dollars ($1,710,000) (the "Escrow Funds") shall be
held pursuant to an Escrow Agreement among Buyer, Boston Safe Deposit & Trust
Company (the "Escrow Agent"), the Trust and the Beneficiaries, substantially in
the form of EXHIBIT A hereto (the "Escrow Agreement"). The Escrow Funds shall be
released to the Beneficiaries in accordance with the terms of the Escrow
Agreement. Nine hundred thousand dollars ($900,000) (the "Tax Escrow Funds")
shall be held pursuant to an Agreement among Buyer, the Escrow Agent, the Trust
and the Beneficiaries, substantially in the form of EXHIBIT B hereto (the "Tax
Escrow Agreement"). The Tax Escrow Funds shall be released to the Beneficiaries
in accordance with the terms of the Tax Escrow Agreement.
2.2 FURTHER ASSURANCES. At the Closing and from time to time
thereafter, the Trust and the Beneficiaries shall execute such additional
instruments and take such other actions as Buyer may reasonably request in order
to effectively sell, transfer and assign the Company Shares to Buyer and confirm
Buyer's title thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE TRUST AND THE
BENEFICIARIES
As an inducement to Buyer to enter into and perform its
obligations under this Agreement, the Company, the Trust and the Beneficiaries,
jointly and severally, represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has full power and authority to conduct its
business as it is now being conducted and to own, operate or lease the
properties and assets it currently owns, operates or holds under lease. The
Company is duly licensed and qualified to do business and is in good standing as
a foreign corporation in each other jurisdiction set forth on SCHEDULE 3.1
hereto, which are all jurisdictions where the character of its business or the
nature of its properties or assets makes such qualification or licensing
necessary, except for those jurisdictions where the failure to be so qualified,
licensed or in good standing would not individually or in the aggregate have a
material adverse effect on the business, results of operations, financial
condition or assets of the Company. The Trust is a Massachusetts business trust
duly organized and validly existing as such under the laws of the Commonwealth
of Massachusetts.
3.2 POWER AND AUTHORIZATION. Each of the Company and the Trust
has full power and authority to execute and deliver this Agreement and any
agreement, document, certificate or instrument being delivered pursuant to or in
connection with the transactions contemplated by this Agreement (collectively
the "Transaction Documents"), to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
Each Beneficiary has full power and authority to execute and deliver this
Agreement and each of the other Transaction Documents to which he or she is or
will be a party, and to perform his obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Transaction Documents, and the performance by
each of the Company and the Trust of its obligations hereunder and thereunder,
and the consummation of the transactions contemplated hereunder and thereunder,
have been duly authorized by the Company and by the shareholders of the Company
and the Trust. This Agreement and the Transaction Documents have been duly
executed and delivered by the Company and by the Trust and the Beneficiaries and
constitute the legal, valid and binding obligations of the Company and of the
Trust and the Beneficiaries, enforceable against the Company, the Trust and the
Beneficiaries in accordance with their respective terms.
3.3 SUBSIDIARIES. Other than the Trust's ownership of the Company
Common Stock, neither the Company nor the Trust owns or controls (directly or
indirectly), or owns or holds any right to acquire, any stock, partnership
interest, joint venture interest, equity participation or other security or
interest in any other entity, corporation, partnership, trust or any other
business association.
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3.4 ORGANIZATIONAL DOCUMENTS. The copies of the Certificate of
Incorporation and Bylaws of the Company and the organizational documents of the
Trust, each as heretofore amended, which have been delivered to Buyer are true,
complete and correct. SCHEDULE 3.4 contains a true and complete list of all
officers and directors of the Company.
3.5 OWNERSHIP OF THE COMPANY. The authorized capital stock of the
Company consists of 200,000 shares of Company Common Stock, of which 107,941 are
issued and outstanding, all of which are owned of record and beneficially by the
Trust, free and clear of any and all Liens. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in respect of
the Company Common Stock are as set forth in the Certificate of Incorporation of
the Company, as amended to the date hereof, and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable and in accordance with all applicable laws. All
outstanding shares of capital stock of the Company have been duly authorized and
validly issued, are fully paid and non-assessable, and were issued in compliance
with all applicable federal and state securities laws. None of the outstanding
securities of the Company have been issued in violation of any pre-emptive
rights, rights of first refusal or similar rights. No contract, commitment or
undertaking of any kind has been made for the issuance of additional shares of
capital stock or other securities of the Company, nor is there in effect or
outstanding any subscription, option, warrant or other right to acquire any
shares of the Company Common Stock or other instruments convertible into or
exchangeable for such shares. There are no voting trust agreements or other
contracts, agreements or arrangements restricting or otherwise relating to
voting, dividend or other rights with respect to the Company's capital stock.
Except as set forth in SCHEDULE 3.5, the Company does not hold any shares of
capital stock in its treasury. Upon delivery of the Company Shares to Buyer
pursuant to the provisions of this Agreement, Buyer will acquire good, valid and
marketable title to the Company Shares, free and clear of any and all Liens. All
transfer taxes imposed by law in connection with sale, transfer and delivery of
the Company Shares to Buyer will be paid as of the Closing.
3.6 NO VIOLATION. Except as set forth in SCHEDULE 3.7, the
execution, delivery and performance by the Company, the Trust and the
Beneficiaries of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated herein and therein do not and will
not:
(a) conflict with, result in the breach, modification,
termination or violation of, or loss of any benefit under, constitute a default
under, accelerate the performance required by, result in or give rise to a right
to amend or modify the terms of, result in the creation of any Lien upon any
assets or properties, or in any manner release any party thereto from any
obligation under, any mortgage, note, bond, indenture, lease or Material
Contract by which the Company, the Trust or any Beneficiary, or any of their
respective properties or assets, may be bound or affected;
(b) conflict with, violate or result in any loss of benefit
under, any permit, concession, franchise, order, judgment, writ, injunction,
regulation, statute or decree; or
(c) conflict with or violate any provision of the Certificate of
Incorporation or Bylaws or other organizational documents, each as heretofore
amended, of the Company or the Trust, as the case may be.
3.7 NO CONSENT REQUIRED. Except as set forth on SCHEDULE 3.7, no
consent, approval, order or authorization of, or declaration, filing or
registration with, any governmental authority or any party to any mortgage,
note, bond, indenture, lease or Material Contract is required to be made or
obtained by the Company, the Trust or any Beneficiary in connection with the
authorization, execution, delivery or performance of this Agreement, the
Transaction Documents or the transactions contemplated hereby and thereby.
3.8 FINANCIAL STATEMENTS. As of the date hereof, SCHEDULE 3.8
contains the following: the Company's audited balance sheets and statements of
operation and cash flows as of, and for the fiscal years ended, December 31,
1997, 1998 and 1999, respectively, and statements of stockholders' equity for
the fiscal years ended December 31, 1998 and December 31, 1999 (the "Historical
Financial Statements"), and unaudited balance sheets and statements of
operation, stockholders' equity and cash flows as of and for the three-month
period January 1, 2000 through March 31, 2000 (the "Interim Financial
Statements"). The materials included and to be included in SCHEDULE 3.8 hereto
are sometimes collectively referred to herein as the "Financial Statements".
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Each of the Financial Statements is true, complete and correct in
all material respects, is consistent with the books and records of the Company
and is in accordance with generally accepted accounting principles consistently
applied and fairly presents the Company's financial condition, assets,
liabilities and retained earnings as of their respective dates and the
statements of operation, stockholders' equity and cash flows for the periods
related thereto. All material liabilities and obligations, whether accrued,
absolute, contingent, direct or indirect, perfected, inchoate, unliquidated or
otherwise and whether due or to become due, which existed as of (i) December 31,
1999 and March 31, 2000, have been disclosed in the balance sheets included in
the Historical Financial Statements and the Interim Financial Statements,
respectively, or in the notes thereto and in SCHEDULE 3.8 and (ii) the time on
the Closing Date immediately prior to the Closing will be disclosed in the
Closing Date Financials. The statements of operation included or to be included
in the Financial Statements do not contain any material items of special or
non-recurring income or other income not earned in the ordinary course of
business except as expressly specified on SCHEDULE 3.8 as attached hereto on the
date hereof or in the footnotes to the Financial Statements. All amounts billed
to the Company's customers and clients reflected or to be reflected on the
Historical Financial Statements for the year ended December 31, 1999 and the
Interim Financial Statements and SCHEDULE 3.15 hereto are for Business (as
defined in Section 10.10 below) activities and not for any other business.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. As of the date hereof,
the Company has not, and as of the Closing Date, the Company will not have, any
debts, liabilities or obligations of any nature (whether accrued, absolute,
contingent, direct, indirect, perfected, inchoate, unliquidated or otherwise and
whether due or to become due) arising out of transactions entered into on or
prior to the Closing Date, or any transaction, series of transactions, action or
inaction occurring on or prior to the Closing Date, or any state of facts or
condition existing on or prior to the Closing Date (regardless of when such
liability or obligation is asserted), including but not limited to liabilities
or obligations on account of Taxes (as defined in Section 10.10 below) or
governmental charges or penalties, assessments, interest or fines thereon or in
respect thereof, except (a) for liabilities specifically delineated in the
Historical Financial Statements and/or the Interim Financial Statements, which
are set forth on SCHEDULE 3.8 as attached hereto on the date hereof, (b) for
liabilities and obligations under agreements, contracts, leases or commitments
disclosed in this Agreement or in a Schedule hereto (none of which relates to
any breach of contract, breach of warranty, tort, injury caused to another,
infringement, claim, lawsuit or violation of law or the allegation or claim
thereof), (c) for Taxes not yet due and owing, and (d) for liabilities and
obligations arising in the ordinary course of business, consistent in form and
amount with past practice, since March 31, 2000, none of which liabilities or
obligations, individually or in the aggregate, is material in amount with
respect to the business, prospects, results of operations, financial condition
or assets of the Company. Except as disclosed on SCHEDULE 3.9, the Company is
not under any obligation, contingent or otherwise, to refund or rebate any
amounts paid or payable to it for services rendered prior to the date hereof. As
of the date hereof, the Company does not have, and as of the Closing Date, the
Company will not have, any debts, liabilities or obligations of any nature
(whether accrued, absolute, contingent, direct, indirect, perfected, inchoate,
unliquidated or otherwise and whether due or to become due) to, or owing from,
any Beneficiaries of the Company.
3.10 COMPLIANCE WITH LAWS; PERMITS. The Company is in compliance
with all laws, regulations, rules, ordinances, orders and other requirements
applicable to the operation, conduct or ownership of its property or business in
all material respects. Neither the Company nor the Beneficiaries has received
notice (written or oral) of the violation or of any claim of violation of any
law, regulation, rule, ordinance, order or other requirement or Permit (as
defined below) applicable to it, except for any such violation which would not
have a material adverse effect on the Company. The Company holds all of the
permits, licenses, approvals and authorizations of governmental authorities or
third parties (collectively, "Permits") necessary for the conduct of its
business as it is presently conducted, except where the failure to hold such
permit, license, approval or authorization would not have a material adverse
effect on the Company. All such Permits are in full force and effect, and will
remain with the Company upon, and will not be affected by, the Closing. To the
knowledge of the Company, there is no condition, nor has any event occurred,
which constitutes or with the giving of notice or passage of time or both would
constitute a violation of the terms of any Permit. No cancellation, modification
or revocation of any of the Permits is pending or, to the knowledge of the
Company, threatened.
3.11 PROPERTY. The Company owns no real property. Except as set
forth on SCHEDULE 3.14, the Company has good and marketable title or rights as
lessee to all real, personal, mixed, tangible and intangible property of any
kind or nature owned or used by the Company, and the Company owns each of the
assets shown or reflected or to be shown or reflected on the Financial
Statements, in each case free and clear of all Liens, except for Liens
identified on SCHEDULE 3.11 hereto on the date hereof. The assets and properties
owned or leased by the
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Company are sufficient to operate and conduct the business of the Company in a
manner consistent with at least the same standards of quality and reliability as
have been achieved as of the date hereof.
All leases of real property and all material leases of personal
property leased by the Company and utilized in its business, including any and
all leases with related parties or any Affiliates (as defined in Section 10.10
below) of the Company (collectively, the "Leased Property"), are listed on
SCHEDULE 3.13, and true, correct and complete copies previously have been
furnished or made available to Buyer. All leases with Affiliates and/or related
parties carry terms and conditions no less favorable nor more favorable in all
material respects to the Company than those which could have been obtained in
arms'-length transactions with unrelated third parties. The Company enjoys
peaceful and undisturbed possession under all such leases. Any real property
that the Company occupies or leases under such leases is in good condition and
repair (reasonable wear and tear excepted) with adequate plumbing, heating and
air conditioning and with access to public roads and utilities as required for
the conduct of its business, except for such deficiencies which are not
material, individually or in the aggregate, in nature or cost.
3.12 CONDITION OF PROPERTY AND RELATED MATTERS.
(a) All buildings, machinery, equipment and other tangible assets
used by the Company are in fair or good operating condition and repair,
reasonable wear and tear excepted, are usable in the ordinary course of business
and are adequate and suitable for the uses to which they are being put. None of
such items requires any repairs or replacement except for maintenance in the
ordinary course of business or such other repairs or replacements which are not
material, individually or in the aggregate, in nature or cost. All such assets
and property are located at real property locations constituting the Leased
Property, or as otherwise identified on SCHEDULE 3.12 hereto.
(b) None of the properties or assets reflected in the balance
sheet included in the Historical Financial Statements and the Interim Financial
Statements and to be included in the Closing Date Financials is obsolete and not
usable in the ordinary course of business. The Company is not contemplating, nor
is the Company obligated to make, any capital expenditure in excess of $10,000
individually or in the aggregate which has not been disclosed to Buyer in
writing.
3.13 MATERIAL CONTRACTS. The Company has not entered into nor is
it bound by any material contract, agreement, relationship or commitment,
written or oral, including without limitation any obligations for money borrowed
or under leases, or any arrangements with customers, other than those identified
on SCHEDULE 3.13 hereto (the "Material Contracts"). True, correct and complete
copies of all written Material Contracts and true and complete descriptions of
all oral Material Contracts previously have been furnished to Buyer. Except as
set forth on SCHEDULE 3.13, the Company is not in default, and no event has
occurred which with the giving of notice or the passage of time or both would
constitute a default by the Company, or to the knowledge of the Company and the
Beneficiaries, any other party under any Material Contract or any other
obligation owed by the Company, and, to the knowledge of the Company and the
Beneficiaries, no event has occurred which with the giving of notice or the
passage of time or both would constitute a default by any other party to any
such Material Contract or obligation. Except as set forth on SCHEDULE 3.13, the
continuation, validity and effectiveness of all Material Contracts will in no
way be affected by the transactions contemplated hereby and there are no
negotiations pending to revise the terms of any such Material Contracts. Except
as specifically described on SCHEDULE 3.13, the Company is not a party to or
bound by any contract, agreement, relationship or commitment which in any way
restricts or purports to restrict the Company's ability to acquire any property
or assets or conduct business or provide services to any person or entity
anywhere in the world. Without limiting the foregoing, none of the Company, the
Trust nor any Beneficiary is a party to, or obligated to any party under, any
(i) shareholders' agreement, buy/sell agreement or any other agreement, written
or oral, relating to or in any way affecting the disposition of the capital
stock of the Company or (ii) any agreement, written or oral, relating to the
indemnification of directors and/or officers of the Company.
3.14 INTELLECTUAL PROPERTY. Except as set forth on SCHEDULE 3.14:
(a) Notwithstanding any disclosure set forth on SCHEDULE 3.14,
the Company owns and possesses all right, title and interest in and to, or has a
valid license or right to use, all of the Proprietary Rights (as defined below)
necessary for the operation of its business as presently conducted and none of
such Proprietary Rights have been abandoned;
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(b) no claim by any third party contesting the validity,
enforceability, use or ownership of any such Proprietary Rights has been made,
is currently outstanding or is threatened, and, to the knowledge of the Company,
there is no reasonable basis for any such claim;
(c) neither the Company, the Beneficiaries nor, to the knowledge
of the Company and the Beneficiaries, any registered agent of any of the
foregoing, has received any notice of, nor is the Company or the Beneficiaries
aware of any reasonable basis for an allegation of, any infringement or
misappropriation by, or conflict with, any third party with respect to such
Proprietary Rights, nor has the Company, any Beneficiary, or any registered
agent of any of them received any claim of infringement or misappropriation of
or other conflict with any Proprietary Rights of any third party;
(d) to the knowledge of the Company, the Company has not
infringed, misappropriated or otherwise violated any Proprietary Rights of any
third parties, and neither the Company nor the Beneficiaries are aware of any
infringement, misappropriation or conflict which will occur as a result of the
continued operation of the Company as presently operated or as a result of the
consummation of the transactions contemplated hereby;
(e) all personnel, including without limitation employees,
agents, consultants and contractors, who have contributed to or participated in
the conception and/or development of all or any part of the Proprietary Rights
which are not licensed to the Company from a third party either (1) have been
party to a "work-for-hire" arrangement or agreement with one of the Company, in
accordance with applicable federal and state law, that has accorded the Company
full, effective, exclusive, and original ownership of all tangible and
intangible property thereby arising, or (2) have executed appropriate
instruments of assignment in favor of the Company as assignee that have conveyed
to the Company full, effective and exclusive ownership of all tangible and
intangible property thereby arising.
As used herein, the term "Proprietary Rights" means all
proprietary information of the Company, including all patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice), all trademarks, service marks, trade dress,
trade names, corporate names, domain names, copyrights, all trade secrets,
confidential information, ideas, formulae, compositions, know-how, processes and
techniques, drawings, specifications, designs, logos, plans, improvements,
proposals, technical and computer data, documentation and software, financial,
business and marketing plans, and related information and all other proprietary,
industrial or intellectual property rights relating to the Company's businesses,
including but not limited to those found at the website at
XXXX://XXX.XXXXXXXXXXX.XXX. The consummation of the transactions contemplated by
this Agreement and the Transaction Documents will not adversely affect the right
of Buyer or the Company to continue to use the Company' Proprietary Rights. To
the extent that registration of any Proprietary Right is deemed useful by the
Company or required by law, such Proprietary Right has been duly and validly
registered or filed, and any fees that are necessary to maintain in force any
Proprietary Rights or registrations thereof have been paid. SCHEDULE 3.14 sets
forth a list and description of the copyrights, trademarks, service marks, trade
dress and trade names used or held by the Company and, where appropriate, the
date, serial or registration number, and place of any registration thereof.
3.15 ACCOUNTS RECEIVABLE. SCHEDULE 3.15 is a true, correct and
complete listing and aging of the Company's accounts receivable as of the last
day of the last full calendar month preceding the date hereof, determined in
accordance with generally accepted accounting principles consistently applied
and determined in a manner consistent with the presentation in the Financial
Statements. All of such accounts receivable have arisen in bona fide arm's
length transactions in the ordinary course of business and are valid and binding
obligations of the account debtors. Such accounts receivable are not subject to
counterclaims or set-offs, except to the extent that reserves for doubtful
accounts have been established by the Company and are set forth on SCHEDULE 3.15
and which reserves have been adequately reflected on, and are consistent with
presentation in, the Interim Financial Statements attached hereto on the date
hereof. Promptly after the Closing Date but in no event later than thirty (30)
days thereafter, the Beneficiaries will deliver to Buyer a true, correct and
complete listing and aging of the Company's accounts receivable as of the day
immediately preceding the Closing Date determined in accordance with generally
accepted accounting principles consistent with the presentation in the Interim
Financial Statements (the "Closing Date Receivables"), to be appended as part of
SCHEDULE 3.15 hereto. SCHEDULE 3.15 shall be deemed amended to include such
listing upon delivery to Buyer thereof. As of the Closing Date, the Closing Date
Receivables have arisen in bona fide arm's length transactions in the ordinary
course of business and are valid and binding obligations of the account debtors.
Such accounts receivable are not subject to counterclaims or set-offs, except to
the extent
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that reserves for doubtful accounts are established by the Company and are set
forth on the Interim Financial Statements and SCHEDULE 3.15, in each case as
attached hereto on the date hereof. The reserves for doubtful accounts
established by the Company and reflected or to be reflected on SCHEDULE 3.15 or
on the Interim Financial Statements have been or shall be determined in
accordance with generally accepted accounting principles consistently applied
and are and shall be consistent with the presentation in the Financial
Statements.
3.16 NO PREBILLINGS OR PREPAYMENTS. Except as set forth on
SCHEDULE 3.16, the Company has not billed and the Company will not xxxx, and the
Company has not received any payments (in the form of retainers or otherwise)
from, any of its customers or potential customers for services to be rendered or
for expenses to be incurred subsequent to the Closing Date.
3.17 EMPLOYEE BENEFIT PLANS. Except as set forth in SCHEDULE
3.17, neither the Company nor any Plan Affiliate (as defined in Section 10.10
below) has maintained, sponsored, adopted, made contributions to or obligated
itself to make contributions to or to pay any benefits or grant rights under or
with respect to or made any commitments to create any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA (as defined in Section 10.10 below)),
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA),
"multi-employer plan" (as defined in Section 3(37) of ERISA), "employee benefit
plan" (as defined in Section 3(3) of ERISA), plan of deferred compensation,
medical plan, life insurance plan, disability plan, dental plan or other plan
providing for the welfare of any of the Company's or any Plan Affiliate's
employees or former employees or beneficiaries thereof, personnel policy
(including but not limited to vacation time, holiday pay, bonus programs, moving
expense reimbursement programs and sick leave), excess benefit plan, bonus or
incentive plan (including but not limited to stock options, restricted stock,
phantom stock, stock bonus and deferred bonus plans), salary reduction
agreement, change-of-control agreement, golden parachute, or any other program
(collectively, "Employee Benefit Plans"), whether or not written or pursuant to
a collective bargaining agreement, which has been in effect at any time since
January 1, 1997 or which are reasonably likely to give rise to or result in the
Company or Buyer having any debt, liability, claim or obligation of any kind or
nature, whether accrued, absolute, contingent, direct, indirect, known or
unknown, perfected or inchoate or otherwise and whether or not due or to become
due. True, correct and complete copies of all Employee Benefit Plans previously
have been furnished to Buyer along with all applicable summary plan
descriptions, material employee communications, the annual reports for the two
most recent years, the annual and periodic accounting of plan assets, most
recent determination letter of the Internal Revenue Service, the most recent
actuarial valuation relating thereto and the last PBGC-1. The Employee Benefit
Plans (which, for purposes of this sentence and notwithstanding the reference to
January 1, 1997 above, include any such plan maintained, sponsored, adopted,
contributed to or obligated to by the Company or any Plan Affiliate within the
last six years) have been maintained in all material respects in compliance with
governing documents and agreements and with applicable laws, regulations, rules,
ordinances, orders and other requirement of law. The Company, the Plan
Affiliates, the Employee Benefit Plans and any related trusts have fulfilled all
applicable obligations under the minimum funding standards of ERISA and the Code
(as defined in Section 10.10 below), have not incurred and will not incur any
liability under Title IV of ERISA to the Pension Benefit Guaranty Corporation
("PBGC") or otherwise (except for payment of PBGC premiums which have been
paid), and have not incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA). No Employee Benefit Plan or trust created thereunder has
been terminated or partially terminated, and there have been no "reportable
events" (as such term is defined in Section 4043 of ERISA), with respect thereto
which will or could result in the termination of such plan or give rise to a
liability to the Company or Buyer. The present value of all benefits, determined
as of the most recent valuation date for such benefits, vested under each
Employee Benefit Plan that is a "Plan" (as defined in Section 3(3) of ERISA)
does not exceed the value of the assets of such Plan allocable to such vested
benefits, determined as of such date. None of the Employee Benefits Plans is a
"Multi-employer Plan" within the meaning of Section 3(37) of ERISA and neither
the Company nor any Plan Affiliate contributes to or has an obligation to
contribute to, or has within the last six years contributed to or had an
obligation to contribute to, a Multi-employer Plan. Each Employee Benefit Plan
which is intended to be a tax qualified plan under Section 401(a) of the Code
has been since its inception so qualified and is the subject of a favorable
determination or opinion letter from the Internal Revenue Service with respect
to such qualified status. All voluntary employee benefit associations have been
submitted to and approved as exempt from federal income tax under Section
501(c)(9) of the Code by the Internal Revenue Service. There has occurred no
transaction prohibited by Section 406 of ERISA or which constitutes a
"prohibited transaction" under Section 4975(c) of the Code and with respect to
which a prohibited transaction exemption is not currently in effect. Except as
set forth in SCHEDULE 3.17, the consummation of the transactions contemplated by
this Agreement and the Transaction Documents will not (either alone or in
conjunction with another event, such as termination of employment or other
services) entitle any employee or other person to receive severance or other
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compensation which would not otherwise be payable absent the consummation of the
transactions contemplated by this Agreement and the Transaction Documents or
cause the acceleration of the time of payment or vesting of any award or
entitlement under any Employee Benefit Plan. Except as set forth on SCHEDULE
3.17, each Employee Benefit Plan may be unilaterally terminated and/or amended
by the Company at any time without damage or penalty.
All contributions, insurance premiums, benefits and other
payments required to be made to or under each Employee Benefit Plan with respect
to all periods prior to the Closing have been or will be timely made prior to
the Closing. With respect to each Employee Benefit Plan, (i) the Company has no
knowledge of any application, proceeding or other matter that is pending before
the Internal Revenue Service, the Department of Labor or any other governmental
agency; (ii) no action, suit, proceeding or claim (other than routine claims for
benefits) is pending or, to the Company's knowledge, threatened; and (iii) to
the knowledge of the Company, no facts exist which are reasonably likely to give
rise to an action, suit, proceeding or claim which, if asserted, could result in
a material liability or expense to the Company or the plan assets. Neither the
Company nor any Plan Affiliate maintains, contributes to, or is obligated under
any plan, contract, policy or arrangement providing health or death benefits
(whether or not insured) to current or former employees or other personnel
beyond the termination of their employment or other services, except as may be
required pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985
or state health continuation law.
3.18 SALARIES. SCHEDULE 3.18 contains a true, complete and
correct list setting forth, as of May 15, 2000, (i) the names, job
descriptions/titles, current compensation rate (including but not limited to
salary, commission and bonus compensation), date of hire, vacation accrual rate
and accrued vacation time of all individuals presently employed by the Company
indicating whether they are employed on a salaried, hourly or piecework basis,
and (ii) the names and total annual compensation for all independent contractors
who render services on a regular basis to the Company whose current annual
compensation is or is expected to be in excess of $20,000. Except as set forth
on SCHEDULE 3.18, there has been no increase in the compensation of the
foregoing individuals or independent contractors since December 31, 1999, except
for increases in the ordinary course of business consistent with the Company's
past practice. Except as set forth on SCHEDULE 3.18, there has been no increase
in the compensation of the foregoing individuals or independent contractors
since May 15, 2000. Except as set forth on SCHEDULE 3.18, there has not been any
promise to the employees listed on SCHEDULE 3.18 orally or in writing of any
bonus or increase in compensation, whether or not legally binding, except for
increases in the ordinary course of business consistent with the Company's past
compensation practices and except for obligations incurred under existing bonus,
insurance, pension or other Employee Benefit Plans described on SCHEDULE 3.17 OR
3.18. The Company has not made any prepayments of salaries, bonuses or any other
amounts due to any of its employees or former employees. All obligations to
employees, whether for salaries, commissions, bonuses, vacation or otherwise,
which are required to be accrued on the Financial Statements in accordance with
generally accepted accounting principles consistently applied have been accrued
on the Financial Statements or will be accrued on the Closing Date Financials,
in each case in accordance with generally accepted accounting principles
consistently applied.
3.19 PERSONNEL AGREEMENTS, PLANS AND ARRANGEMENTS. Except as
listed in SCHEDULES 3.17, 3.18 or 3.19, the Company is not a party to or
obligated with respect to any (a) outstanding contracts with current or former
employees, agents, consultants, advisers, salesmen, sales representatives,
distributors, sales agents, independent contractors, or dealers, or (b)
collective bargaining agreements or contracts with any labor or trade union,
employee bargaining agency or other representative of employees or any employee
benefits provided for by any such agreement. True, correct and complete copies
of all items listed on SCHEDULE 3.17, 3.18 and 3.19 previously have been
furnished or made available to Buyer. No strike, picketing, slow-down, work
stoppage, lock-out, union organizational activity, allegation, charge or
complaint of employment discrimination, unfair labor practice or other similar
occurrence has occurred or is pending or, to the knowledge of the Company and
the Beneficiaries, is threatened against the Company nor do the Company or the
Beneficiaries know of any basis for any such allegation, charge, or complaint.
The Company has complied in all material respects with all applicable laws
relating to the employment of labor, including but not limited to provisions
thereof relating to wages, hours, vacation pay, equal opportunity, collective
bargaining and the payment, deduction and remittance of all amounts required to
be deducted and/or remitted in respect of wages and salaries and of other Taxes
and such deductions are consistent with past practices and in accordance with
generally accepted accounting principles consistently applied and consistent
with the Financial Statements and either remitted same to the legally
constituted authorities entitled to receive payment thereof or has reserved for
same in its accounts and an amount of cash equal to the amount of such
-9-
reserve has been set aside for payment thereof. The Company is not liable for
any arrears of wages or any Taxes or penalties with respect to the foregoing.
The Company has not entered into and the Company is not obligated to enter into
any agreement relating to the payment of vacation pay to any employee, and the
Company has no obligation to any employees to provide them with pay for vacation
time other than as required by generally applicable provisions of law. Neither
the Company nor the Beneficiaries have received notice from any employee of the
Company that any such employee is terminating his or her employment with the
Company, nor to the best knowledge of the Company and the Beneficiaries does any
employee intend to terminate his or her employment with the Company as a result
of the transactions contemplated hereby. There are no administrative charges or
court complaints pending or, to the knowledge of the Company and the
Beneficiaries, threatened against the Company concerning alleged employment
discrimination or any other matters relating to the employment of labor. No
trade union, counsel of trade unions, employee bargaining agency or affiliated
bargaining agent (i) holds bargaining rights with respect to any of the
Company's employees by way of certification, interim certification, voluntary
recognition, designation or successor right, (ii) has applied to be certified as
the bargaining agent of the Company's employees, or (iii) has applied to have
the Company declared a related employer pursuant to the provision of applicable
law. To the knowledge of the Company and the Beneficiaries, no claim,
injunction, fact, event or condition exists which would give rise to a material
claim by any employee or former employee (including dependents and spouses
thereof and other individuals covered thereunder) of the Company under any
workers compensation laws, regulations, requirements or programs or for other
medical costs and expenses.
3.20 CUSTOMERS. SCHEDULE 3.20 is a complete list of all customers
of the Company with xxxxxxxx in excess of $5,000 on an annualized basis in each
of 1998, 1999 and the period from January 1, 2000 through April 30, 2000. The
Company has furnished to Buyer a list of all customers of the Company since
January 1, 1998, together with the amount of all xxxxxxxx with respect to each
such customer from January 1, 1998 through April 30, 2000. Except as set forth
on SCHEDULE 3.20, none of the customers for whom the Company provided services
at any time since January 1, 1999, whether or not one of the Company's thirty
(30) largest, has canceled or otherwise terminated, or, to the knowledge of the
Company and the Beneficiaries, threatened in writing to cancel or otherwise
terminate, its relationship with the Company or materially reduced, or to the
knowledge of the Company and the Beneficiaries, threatened to materially reduce,
its business with the Company. Except as set forth on SCHEDULE 3.20, neither the
Company nor any Beneficiary has received any notice or has any knowledge or
reason to believe that any customer intends to cancel or otherwise modify its
relationship with the Company on account of the transactions contemplated hereby
or otherwise.
3.21 INTEREST OF THE COMPANY IN CUSTOMERS, ETC. Except as set
forth in SCHEDULE 3.21, neither the Company, the Beneficiaries nor any of their
respective Affiliates has any direct or indirect interest in any competitor,
supplier or customer of the Company or in any person from whom or to whom the
Company leases any real or personal property or in any other person with whom
the Company has any business relationship. SCHEDULE 3.21 also describes, (i) all
management, administrative, computer, telephone or other services provided by
any of the Company's Affiliates, any Beneficiary or any of the Affiliates of any
Beneficiary to the Company and all such services provided by the Company to any
of such persons and entities, and (ii) all other contracts, agreements,
arrangements or transactions (including the purchase and sale of inventory,
supplies and other goods) between the Company, on the one hand, and any of such
individuals or entities on the other hand, currently in effect, including,
without limitation any agreement or arrangement relating to indebtedness to or
from any of such individuals or entities, in each case setting forth the terms
thereof if not effected on an arm's-length basis.
3.22 BOOKS AND RECORDS. All the books, records and accounts of
the Company are in all material respects accurate and complete, accurately
reflect all material matters normally entered into the books, records or
accounts maintained by similar businesses, are in all material respects in
accordance with all laws, regulations and rules applicable to the Company and
accurately present and reflect in all material respects all of the transactions
described therein. The Company has accounting controls sufficient to ensure that
its transactions are (i) in all material respects executed in accordance with
its management's general or specific authorization and (ii) recorded in
conformity with generally accepted accounting principles.
3.23 INSURANCE POLICIES. SCHEDULE 3.23 is a correct and complete
list and description, including policy numbers, of all insurance policies owned
or held by the Company or otherwise covering the Company, its employees or
assets. Such policies are in full force and effect, and the Company is not in
material default under any of them. The Company has not received any written
notice of non-renewal, cancellation or intent to cancel, not renew or increase
premiums or deductibles with respect to such insurance policies (other than with
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respect to increases in premiums and deductibles in the ordinary course of
business). SCHEDULE 3.23 also contains a list of all pending claims in excess of
$5,000 with any insurance company (other than health, medical and dental
insurance claims of employees) and any instances within the previous two years
of a denial of coverage in excess of $5,000 of the Company by any insurance
company.
3.24 BANK ACCOUNTS. SCHEDULE 3.24 is a complete and correct list
of each bank and brokerage firm in which the Company has an account or safe
deposit box, the number of each such account or box, the names of all persons
authorized to draw thereon or to have access thereto, the amount on deposit in
each such account and a description of the items in each such box as of a date
not more than seven days prior to the date hereof.
3.25 TAXES. Except as set forth on SCHEDULE 3.25:
(a) The Company has properly prepared and duly and timely filed
with the appropriate taxing authorities all material Tax Returns that are
required to have been filed for, by, on behalf of or with regard to the Company
and its assets, operations and businesses, and such returns are true, correct
and complete in all material respects and reflect all material liabilities for
Taxes for the periods covered thereby.
(b) All material Taxes due and payable by or with respect to the
Company for all periods through the Closing Date have been or will be fully and
timely paid when due, and adequate cash reserves or accruals for Taxes (rather
than for deferred Taxes) have been provided in the books and records of the
Company with respect to any period for which Tax Returns have not yet been filed
or for which Taxes are not yet due and owing. The reserves and/or accruals
described in the prior sentence are set forth on SCHEDULE 3.25. The Company has
not incurred any Taxes other than in the ordinary course of business.
(c) The Company has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of material Taxes and has duly and timely withheld from employee salaries, wages
and other compensation and has paid over to the appropriate taxing authorities
all such material amounts required to be so withheld and paid over for all
periods under all applicable laws.
(d) Any deficiencies asserted, assessed or proposed as a result
of any governmental audits of the Tax Returns of the Company have been paid or
settled, and there are no present disputes as to Taxes payable by the Company.
There is no audit, investigation, or proceeding in progress, pending or
threatened in writing against the Company by any governmental agency in
connection with Taxes. No issue has been raised by a federal, state, local or
foreign taxing authority in any current or prior examination of the Company
which, by application of the same or similar principles, is expected to result
in a proposed deficiency for any subsequent taxable period.
(e) The Company (1) for any open taxable year, has not executed
or filed with any taxing authority any agreement extending the period for
assessment or collection of any Taxes, including but not limited to any
applicable statute of limitations; (2) for any open taxable year, has not
requested any extension of time within which to file any Tax Return, which Tax
Return has not since been filed; (3) has not received any written ruling of a
taxing authority related to Taxes or entered into any written and legally
binding agreement with a taxing authority relating to Taxes, and (4) as of the
date of this agreement, has not made and is not obligated to make any payments,
nor is it a party to any agreement that could require it or any successor in
interest to make payments that are not deductible under Section 280G of the
Code.
(f) The Company is not a party to any tax sharing agreement or
similar document or arrangement.
(g) After the date hereof, no election or consent which could or
shall result in a material adverse effect on the Company or the Buyer with
respect to any material Tax (or the computation thereof) materially affecting
the Company will be made without Buyer's prior written consent.
(h) The Beneficiaries have provided Buyer with true, correct and
complete copies of (A) all income Tax Returns of the Company for all applicable
taxable periods during the Company's last three full fiscal years and (B) any
audit report issued within the last three years, relating to any Taxes due from
or with respect to the Company, or its income, assets or operations. SCHEDULE
3.25 sets forth the jurisdictions in which the Company filed
-11-
its Tax Returns since its inception, and no claim has ever been made by any
taxing authority in a jurisdiction in which the Company does not (or did not)
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
(i) Neither the Company nor any other person (including the Trust
and the Beneficiaries) on behalf of the Company has (1) agreed to or is required
to make any adjustments pursuant to Section 481(a) of the Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method, nor has any such change been proposed or threatened or (2) executed or
entered into a closing agreement pursuant to Section 7121 of the Code or any
similar provision of state, local or foreign law. Neither the Company nor any
other person (including the Beneficiaries) on behalf of the Company has filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
that term is defined in Section 341(f)(4) of the Code) owned by the Company.
(j) The Trust (and the Company as its predecessor prior to the
formation of the Trust) has properly and timely elected under Section 1362 of
the Code, and (except in the case of the Trust) under each analogous or similar
provision of state or local law in each jurisdiction where it is required to
file a Tax Return, to be treated as an "S" corporation for all taxable periods
since October 1, 1995. There has been no voluntary or involuntary termination or
revocation of any such election. The Trust has properly elected for federal
income tax purposes to be classified as an association taxable as a corporation
effective as of the date of its formation.
(k) No Beneficiary is a foreign person within the meaning of
Section 1445 of the Code.
(l) The Company is not subject to any private letter ruling of
the Internal Revenue Service or comparable rulings of other taxing authorities.
(m) The Company has never been a member of any affiliated group
within the meaning of Section 1504 of the Code or any similar group defined
under a similar provision of state, local or foreign law, including, but not
limited to, any combined, consolidated or unitary group other than such a group
of which Cross Country Automotive Services, Inc. f/k/a the Cross Country Group,
Inc. was the common parent. The Company does not own any interest in any entity
that is treated as a partnership for U.S. federal income tax purposes or would
be treated as a pass-through or transparent entity for any tax purpose.
(n) No property owned by the Company is (1) "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code or (2) is
"tax-exempt bond financed property" within the meaning of Section 168(g) of the
Code. There are no liens as a result of any unpaid taxes upon any of the assets
of the Company other than for Taxes not yet due and owing.
(o) No Tax will be imposed on the Company under Section 1374 of
the Code in connection with the Transaction.
(p) The Trust, the Company and the Beneficiaries will properly
elect to apply Treasury Regulation Sections 1.1361-2 through 1.1361-5 for
taxable years beginning on or after January 1, 2000.
(q) The Trust has properly elected to treat the Company as a
qualified subchapter S subsidiary within the meaning of Section 1361(b)(3)(B) of
the Code.
3.26 LITIGATION. Except as set forth in SCHEDULE 3.26, there is
no claim, counter-claim, action, suit, order, proceeding or investigation
pending or, to the knowledge of the Company and the Beneficiaries, threatened
against or involving the Company (or pending or, to the knowledge of the Company
and the Beneficiaries, threatened against any of the officers, directors or key
employees of the Company with respect to business activities on behalf of the
Company) with respect to or affecting the Company, its accounts, business,
properties, assets or rights, or relating to the transactions contemplated
hereby, before any court, agency, regulatory, administrative or other
governmental body or officer or before any arbitrator; nor, to the knowledge of
the Company and the Beneficiaries, is there any reasonable basis for any such
claim, action, suit, proceeding or governmental, administrative or regulatory
investigation, in any case reasonably likely to have a material adverse effect
on the Company. The Company is not directly subject to or affected by any order,
judgment, decree or ruling of any court or governmental agency. Neither the
Company nor the Beneficiaries have received any written opinion or memorandum of
legal advice from legal counsel to the effect that either of them is exposed to
any liability which
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may be material to the business, results of operations, financial condition or
assets of the Company. The Company is not engaged in any legal action to recover
monies due it or for damages sustained by it, and none of the assets of the
Company nor any of its business practices is in any manner, directly or
indirectly, affected by injunction of any court or governmental, administrative
or regulatory agency, body or officer.
3.27 ENVIRONMENTAL AND SAFETY REQUIREMENTS. The Company is in
material compliance with all applicable Environmental and Safety Requirements
(as defined below), and the Company possesses all required permits, licenses and
certificates, and has filed all notices or applications, required thereby.
Neither the Company nor the Beneficiaries has received any written notice or
other written communication from any party with respect to the Company's failure
to comply with Environmental and Safety Requirements. For purposes of this
Agreement, "Environmental and Safety Requirements" means all federal,
provincial, foreign and local laws, bylaws, rules, regulations, ordinances,
decrees, orders, statutes, actions, guidelines, standards, arrangements,
injunctions, policies and requirements relating to public health and safety,
worker health and safety, pollution and protection of the environment (including
without limitation the handling of any polluted, toxic or hazardous materials),
all as amended. The Company has no, nor are its properties subject to any, nor
are there any facts or circumstances which the Company or the Beneficiaries
reasonably believe could form the basis for any, liability, contingent or
otherwise arising out of any Environmental and Safety Requirements. The Company
does not have in its possession or under its control any hazardous substances,
except those Hazardous Substances as are used in the ordinary course of the
business of the Company and are used or maintained in compliance with the
Environmental and Safety Requirements.
3.28 CONDUCT OF THE BUSINESS. Except as set forth on SCHEDULE
3.28, since December 31, 1999, the Company has conducted its business only in
the ordinary course of business consistent with past custom and practice, and
has incurred no liabilities or obligations whatsoever other than in the ordinary
course of business consistent with past custom and practice and there has been
no material adverse change in the assets, condition (financial or otherwise),
results of operations, employee or customer relations of the Company, nor has
the Company received any written notice of any such change which is threatened,
nor has there been any damage, destruction or loss materially adversely
affecting any of the assets, or the business condition (financial or otherwise),
results of operations, prospects or activities of the Company, whether or not
covered by insurance. Without limitation of the foregoing and except as set
forth on SCHEDULE 3.28, since March 31, 2000, neither the Company nor any person
acting on the Company's behalf has:
(a) voluntarily or involuntarily sold, transferred, abandoned,
surrendered, subjected to a Lien or otherwise disposed of any assets or property
rights except in the ordinary course of business consistent with past custom and
practice;
(b) changed any accounting principles, methods or practices
utilized by it or changed any of its depreciation rates or amortization policies
or rates;
(c) made any loan or advance to any party in excess of $5,000;
(d) issued, redeemed or purchased any stock, bond or corporate
security or declared or made any payment or distribution on or with respect to
its capital stock;
(e) incurred debt, liabilities, or obligations of any nature
whether accrued, absolute, contingent, direct, indirect, perfected or otherwise
and whether due or to become due except (i) current liabilities incurred and
liabilities under contracts entered into in the ordinary course of business
consistent with past custom and practice and (ii) bonus obligations to the
Beneficiaries incurred in the ordinary course of business consistent with past
custom and practice;
(f) increased the compensation payable to any of its officers,
employees or agents, except in the ordinary course of business consistent with
past practice;
(g) paid any amounts to or for the benefit of the Beneficiaries,
or any officer, employee, consultant, contractor or agent other than salaries at
the rates set forth on SCHEDULE 3.18;
(h) waived any rights of substantial value;
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(i) transferred or disposed of any cash or cash equivalents
outside of the ordinary course of business, consistent with past custom and
practice;
(j) entered into any other material transaction; or
(k) committed to any of the foregoing.
3.29 POWER OF ATTORNEY. Neither the Company, the Trust nor any
Beneficiary has given to any person or entity for any purpose any power of
attorney which is currently in effect.
3.30 BROKERS. Except as set forth on SCHEDULE 3.30, neither the
Company, the Trust nor any Beneficiary has incurred any obligation or liability,
contingent or otherwise, for brokers' or finders' fees or commissions in
connection with the transactions contemplated by this Agreement or the
Transaction Documents.
3.31 [RESERVED.]
3.32 NO ILLEGAL OR IMPROPER TRANSACTIONS. None of the Company,
the Trust, the Beneficiaries or any of the Company's directors or officers or,
to the knowledge of the Company and the Beneficiaries, any employees of the
Company has, directly or indirectly used funds or other assets of the Company,
or made any promise or undertaking in such regard, for (a) illegal
contributions, gifts, entertainment or other expenses relating to political
activity; (b) illegal payments to or for the benefit of governmental officials
or employees, whether domestic or foreign; (c) illegal payments to or for the
benefit of any person, firm, corporation or other entity, or any director,
officer, employee, agent or representative thereof; or (d) the establishment or
maintenance of a secret or unrecorded fund; and there have been no false or
fictitious entries made in the books or records of the Company.
3.33 NO MISREPRESENTATION. None of the representations and
warranties of the Company, the Trust and the Beneficiaries set forth in this
Agreement or any of the Transaction Documents contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. To the knowledge of the Company, the Trust and the
Beneficiaries, there is no material fact or information which has not been
disclosed to Buyer in writing which materially adversely affects or could
reasonably be anticipated to materially adversely affect the business, condition
(financial or otherwise), property or assets of the Company or the ability of
the Company, the Trust and the Beneficiaries to consummate the transactions
contemplated hereby.
3.34 YEAR 2000 COMPLIANCE. Except as set forth in the SCHEDULE
3.34, the computer systems of the Company (including without limitation all
software, hardware, workstations and related components, automated devices,
embedded chips and other date sensitive equipment such as security systems,
alarms, elevators and HVAC systems) are Year 2000 Compliant, except to the
extent any failure to be Year 2000 Compliant, either individually or in the
aggregate, would not have a material adverse effect on the business or prospects
of the Company. The term "Year 2000 Compliant" as used herein means that the
computer systems are (1) capable of recognizing, processing, managing,
representing, interpreting, and manipulating correctly date related data for
dates earlier and later than January 1, 2000, including, but not limited to,
calculating, comparing, sorting, storing, tagging and sequencing, without
resulting in or causing logical or mathematical errors or inconsistencies in any
user-interface functionalities or otherwise, including data input and retrieval,
data storage, data fields, calculations, reports, processing, or any other input
or output, (2) have the ability to automatically function into and beyond the
year 2000 without human intervention and without any change in operations
associated with the advent of the year 2000, (3) have the ability to correctly
interpret data, dates and time into and beyond the year 2000, (4) have the
ability to correctly process after January 1, 2000 data containing dates before
that date, and (5) have the ability to recognize all "leap years", including the
leap year 2000.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to the Company, the Trust and the Beneficiaries
to enter into and perform their respective obligations under this Agreement,
Buyer hereby represents and warrants to the Company, the Trust and the
Beneficiaries as follows:
4.1 ORGANIZATION AND GOOD STANDING; POWER. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full power and authority to execute and deliver this
Agreement and the Transaction Documents, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby.
4.2 AUTHORIZATION. The execution and delivery of this Agreement
and the Transaction Documents, and the performance by Buyer of its obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by Buyer. This Agreement and the
Transaction Documents have been duly executed and delivered by Buyer and
constitute the legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms.
4.3 NO VIOLATION. The execution, delivery and performance by
Buyer of this Agreement and the Transaction Documents and the consummation of
the transactions contemplated herein and therein do not and will not:
(a) conflict with, result in the breach, modification,
termination or violation of, or loss of any benefit under, constitute a default
under, accelerate the performance required by, result in or give rise to a right
to amend or modify the terms of, result in the creation of any Lien upon any
assets or properties, or in any manner release any party thereto from any
obligation under, any mortgage, note, bond, indenture, contract, agreement,
lease, license or other instrument or obligation of any kind or nature by which
Buyer or any of its properties or assets may be bound or affected;
(b) conflict with, violate or result in any loss of benefit
under, any permit, concession, franchise, order, judgment, writ, injunction,
regulation, statute or decree; or
(c) conflict with or violate any provision of the Certificate of
Incorporation or Bylaws, each as heretofore amended, of Buyer.
4.4 NO CONSENT REQUIRED. No consent, approval, order or
authorization of, or declaration, filing or registration with, any person,
entity or governmental authority is required to be made or obtained by Buyer in
connection with the authorization, execution, delivery or performance of this
Agreement, the Transaction Documents or the transactions contemplated hereby.
4.5 NO MISREPRESENTATION. To the knowledge of Buyer, there is no
material fact or information which has not been disclosed to the Company, the
Trust and the Beneficiaries in writing which materially adversely affects or
could reasonably be anticipated to materially adversely affect the ability of
Buyer to consummate the transactions contemplated hereby.
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ARTICLE V
[** INTENTIONALLY OMITTED]
ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations
of Buyer under this Agreement to consummate the transactions contemplated hereby
will be subject to the satisfaction, at or prior to the Closing, of all of the
following conditions, any one or more of which may be waived at the option of
Buyer:
(a) NO BREACH OF COVENANTS; TRUE AND CORRECT REPRESENTATIONS AND
WARRANTIES. There shall have been no material breach by the Company, the Trust
or any Beneficiary in the performance of any of their respective covenants
herein to be performed by any or all of them in whole or in part prior to the
Closing, and the representations and warranties of the Company, the Trust and
the Beneficiaries contained in this Agreement, if specifically qualified by
materiality, shall be true and correct as of the Closing and, if not so
qualified, shall be true and correct in all material respects as of the Closing,
except for representations or warranties that are made by their terms as of a
date specified by month, day and year, which shall be true and correct or true
and correct in all material respects, as applicable, as of such specified date.
Buyer shall receive at the Closing a certificate dated and validly executed on
behalf of the Company, the Trust and the Beneficiaries (to the extent
applicable) certifying, in such detail as Buyer may reasonably require, the
fulfillment of the foregoing conditions, and restating and reconfirming as of
the Closing all of the covenants, representations and warranties of the Company,
the Trust and the Beneficiaries (to the extent applicable) contained in this
Agreement, specifying in detail the extent of any breaches thereof.
(b) DELIVERY OF DOCUMENTS. Buyer shall have received all
documents and other items to be delivered under Section 7.2.
(c) NO LEGAL OBSTRUCTION. No suit, action or proceeding not
disclosed in the Schedules to this Agreement by any person, entity or
governmental agency shall be pending or threatened in writing, which if
determined adverse to the Company, the Trust or any Beneficiary could reasonably
be expected to have a material adverse effect upon (i) the properties, assets,
condition (financial or otherwise), operating results, employee or customer or
supplier relations of the Company, (ii) Buyer or its Affiliates, or (iii) the
benefits to Buyer or its Affiliates of the transactions contemplated hereby. No
injunction, restraining order or order of any nature shall have been issued by
or be pending before any court of competent jurisdiction or any governmental
agency challenging the validity or legality of the transactions contemplated
hereby or restraining or prohibiting the consummation of such transactions or
compelling Buyer to dispose of or discontinue or materially restrict the
operations of a significant portion of the Company. All material permits,
approvals, filings and consents required or advisable to be obtained or made,
and all waiting periods required or contemplated to expire, prior to the
consummation of the transactions contemplated hereby under applicable federal
laws of the United States or applicable laws of any state or foreign country
having jurisdiction over the transactions contemplated hereby shall have been
obtained, made or expired, as the case may be (all such permits, approvals,
filings and consents and the lapse of all such waiting periods being referred to
as the "Requisite Regulatory Approvals"), and all such Requisite Regulatory
Approvals shall be in full force and effect.
(d) DAMAGE OR DESTRUCTION. From the date hereof until the
Closing, there shall have been no material loss or destruction of any portion of
the properties or assets of the Company, nor any institution or written threat
of any condemnation or other proceedings to acquire or limit the use of
any of the properties or assets of the Company.
(e) NO MATERIAL ADVERSE CHANGE. From the date hereof until the
Closing, there shall have been no material adverse change in the properties,
assets, condition (financial or otherwise), operating results, employee, or
customer or supplier relations of the Company.
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(f) APPROVAL BY BUYER'S COUNSEL AND ACCOUNTANTS. All actions,
proceedings, instruments and documents reasonably required to carry out this
Agreement and all other related legal and accounting matters shall have been
reasonably approved as to form and substance by counsel and accountants for
Buyer.
(g) BENEFICIARIES LOANS. Any and all loans from the Company to
any Beneficiary or any Affiliate of the Company shall have been repaid to the
Company in full, except as contemplated by Sections 1.2 and 1.3(c), and
documentation evidencing such repayment, in form and substance satisfactory to
Buyer, shall have been delivered to Buyer.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY, THE TRUST
AND THE BENEFICIARIES. The obligations of the Company, the Trust and the
Beneficiaries under this Agreement to consummate the transactions contemplated
hereby will be subject to the satisfaction, at or prior to the Closing, of all
the following conditions, any one or more of which may be waived at the option
of the Company, the Trust and the Beneficiaries:
(a) NO BREACH OF COVENANTS; TRUE AND CORRECT REPRESENTATIONS AND
WARRANTIES. There shall have been no material breach by Buyer in the performance
of any of the covenants herein to be performed by it in whole or in part prior
to the Closing, and the representations and warranties of Buyer contained in
this Agreement, if specifically qualified by materiality, shall be true and
correct as of the Closing and, if not so qualified, shall be true and correct in
all material respects as of the Closing, except for representations or
warranties that are made by their terms as of a date specified by month, day and
year, which shall be true and correct or true and correct in all material
respects, as applicable, as of such specified date. The Company, the Trust and
the Beneficiaries shall receive at the Closing a certificate dated as of the
Closing and executed on behalf of Buyer, certifying in such detail as the
Company, the Trust and the Beneficiaries may reasonably require, the fulfillment
of the foregoing conditions, and restating and reconfirming as of the Closing
all of the covenants, representations and warranties of Buyer contained in this
Agreement, specifying in detail the extent of any breaches thereof.
(b) DELIVERY OF DOCUMENTS. The Company, the Trust and the
Beneficiaries shall have received all documents and other items to be delivered
by Buyer under Section 7.3.
(c) NO LEGAL OBSTRUCTION. All Requisite Regulatory Approvals
shall be in full force and effect.
(d) APPROVAL BY COUNSEL AND ACCOUNTANTS. All actions,
proceedings, instruments and documents reasonably required to carry out this
Agreement and all other related legal and accounting matters shall have been
reasonably approved as to form and substance by counsel and accountants for the
Company and the Beneficiaries.
(e) NO MATERIAL ADVERSE CHANGE. From the date hereof until the
Closing, there shall have been no material adverse change in the properties,
assets, condition (financial or otherwise), operating results, employee,
customer or supplier relations, business activities or business prospects of
Buyer.
ARTICLE VII
CLOSING
7.1 CLOSING. The consummation of the transactions that are the
subject of this Agreement are being closed (the "Closing") at the office of
Buyer, 0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000 no later than the third
business day after the satisfaction or waiver of the conditions to the parties'
obligations set forth in Article VI hereof (other than the delivery of
certificates and opinions contemplated to be delivered at the Closing, which
shall be delivered at the Closing) or at such other time or place as the parties
may mutually agree (the "Closing Date"). The parties acknowledge that the
Closing Date is June 19, 2000.
7.2 DELIVERIES BY THE COMPANY, THE TRUST AND THE BENEFICIARIES.
At the Closing, the Company, the Trust and the Beneficiaries shall deliver or
cause to be delivered to Buyer:
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(a) STOCK CERTIFICATES AND INSTRUMENTS OF CONVEYANCE.
Certificates for all of the Company Shares, accompanied by stock powers duly
executed in blank, with all necessary stock transfer and other documentary
stamps attached;
(b) CONSENTS. Copies of all written consents required by Buyer to
be obtained by the Company, the Trust or any Beneficiary in connection with the
transactions contemplated by this Agreement and the Transaction Documents, if
any, in form and substance reasonably satisfactory to Buyer;
(c) OPINION OF COUNSEL. An opinion of counsel for the Company,
the Trust and the Beneficiaries, dated as of the Closing Date, in form and
substance reasonably satisfactory to Buyer;
(d) ORGANIZATIONAL DOCUMENTS. The Certificate of Incorporation of
the Company and the organizational documents of the Trust, as heretofore
amended, certified by an appropriate official of their jurisdiction of
incorporation as being in effect as of a recent date, and the Company's Bylaws
certified by an appropriate officer of the Company as in effect at the Closing;
(e) CERTIFICATE OF GOOD STANDING. A certificate of good standing,
dated as of a recent date, issued by an appropriate official of each of the
state of Massachusetts and of each other jurisdiction in which the Company is
qualified to do business;
(f) EMPLOYMENT AGREEMENTS. An employment agreement between Buyer
and each of Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxxx, in form and substance mutually
agreed to by Buyer and each of Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxxx (the
"Employment Agreements"), duly executed by Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxxx,
respectively;
(g) RESOLUTIONS. A copy of the resolutions of the Board of
Directors of the Company and of the shareholders of the Company certified by the
secretary of the Company as having been duly and validly adopted and in full
force and effect as of the Closing Date authorizing execution and delivery of
this Agreement and the Transaction Documents and performance, and consummation
of the transactions contemplated hereby and thereby by the Company;
(h) RESIGNATIONS. Resignations of all of the directors and
officers of the Company, effective as of the Closing;
(i) LIEN SEARCHES. Such lien searches and such other instruments
showing that, except as set forth on SCHEDULE 7.2(i), there were no financing
statements, judgments, taxes or other Liens outstanding against the Company or
any of its assets or properties as of the Closing Date or a date that is not
more than ten days prior to the Closing Date;
(j) OTHER DOCUMENTS. Such other documents and instruments as
Buyer or its counsel or accountants reasonably shall deem necessary to
consummate the transactions contemplated hereby;
(k) ESCROW AGREEMENT. The Escrow Agreement, duly executed by the
Trust and the Beneficiaries;
(l) TAX ESCROW AGREEMENT. The Tax Escrow Agreement, duly executed
by the Trust and the Beneficiaries;
(m) TAX OPINION OF COUNSEL. A tax opinion of counsel for the
Company, the Trust and the Beneficiaries, dated as of the Closing Date, in form
and substance reasonably satisfactory to Buyer;
(n) SECTION 338(h)(10) FORMS. The Section 338(h)(10) Forms (as
defined in Section 8.5(h) below), duly executed by the Beneficiaries;
(o) TERMINATION AGREEMENTS. A termination agreement between the
Company and each of Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxxx, in form and substance
mutually agreed to by Buyer and each of Xxxxxxx X.
-18-
Xxxxx and Xxxxx X. Xxxxxx (the "Termination Agreements"), duly executed by
Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxxx, respectively; and
(p) AMENDMENT OF CROSS COUNTRY MARKETING AGREEMENT. An amendment
to that certain Marketing Agreement, dated as of January 1, 2000, between Cross
Country Home Services, Inc. ("CCHS") and the Company, in form and substance
mutually agreed to by Buyer, the Company and CCHS, duly executed by the Company
and CCHS.
All documents delivered to Buyer shall be in form and substance
reasonably satisfactory to counsel and accountants for Buyer.
7.3 DELIVERIES BY BUYER. At the Closing, Buyer will deliver to
the Company, the Trust and/or the Beneficiaries, as applicable, simultaneously
with delivery of the items referred to in Section 7.2 above:
(a) PURCHASE PRICE. The Firm Funds to the Trust and the Escrow
Funds and the Tax Escrow Funds to the Escrow Agent;
(b) EMPLOYMENT AGREEMENTS. The Employment Agreements, duly
executed by Buyer;
(c) ESCROW AGREEMENT. The Escrow Agreement, duly executed by
Buyer;
(d) TAX ESCROW AGREEMENT. The Tax Escrow Agreement, duly executed
by Buyer.
(e) OPINION OF COUNSEL. An opinion of counsel for Buyer, dated as
of the Closing Date, in form and substance reasonably satisfactory to the
Company; and
(f) LEASE GUARANTY. A guaranty in favor of Xxxxxx X. Xxxxxxx
d/b/a The Xxxxxxx Company (the "Landlord") of the Lease, dated February 12,
1997, between the Company and the Landlord.
(g) OTHER DOCUMENTS. Such other documents and instruments as the
Company, the Beneficiaries or their counsel or accountants reasonably shall deem
necessary to consummate the transactions contemplated hereby.
All documents delivered to the Company, the Trust and/or the
Beneficiaries shall be in form and substance reasonably satisfactory to counsel
for the Company, the Trust and the Beneficiaries.
ARTICLE VIII
OTHER AGREEMENTS
8.1 NONCOMPETITION; NONSOLICITATION AND CONFIDENTIALITY.
(a) NONCOMPETITION. Each Beneficiary acknowledges that it has had
access to all of the proprietary and confidential information used in the
business of the Company. Each Beneficiary further acknowledges that if he or any
of his Affiliates were to compete with the Company or Buyer in such Business
following the Closing, great harm might come to Buyer thereby destroying any
value associated with the purchase of the Company and the goodwill of the
Company. In furtherance of the sale of the Company Shares to Buyer hereunder by
virtue of the transactions contemplated hereby and to more effectively protect
the value of the Company so sold, each Beneficiary covenants and agrees that,
for a period beginning on the Closing Date and ending on the date which is three
years after the Closing Date (the "Term"), such Beneficiary shall not, and such
Beneficiary shall cause his Affiliates not to, directly or indirectly, as
employee, agent, consultant, stockholder, director, partner or in any other
individual or representative capacity, own, operate, manage, control, engage in,
invest in or participate in any manner in, act as a consultant or advisor to,
render services for (alone or in association with any person, firm, corporation
or entity), or otherwise assist any person or entity that engages in or owns,
invests in, operates, manages or controls any venture or enterprise that
directly or indirectly engages in the Business
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anywhere in or into the United States (the "Territory"), other than on behalf of
and as an employee of the Company, the Buyer or an Affiliate of the Buyer.
Notwithstanding the foregoing, nothing contained in this Section 8.1(a) shall
prohibit such Beneficiary or his or her respective Affiliates from owning not
more than an aggregate of one percent (1%) of any class of stock of any company
whose primary activity is the Business which is listed on a national securities
exchange or traded in over-the-counter market. Buyer acknowledges that (i) the
Beneficiaries own or control certain other business entities engaged in
providing services to real estate brokers and agents and home buyers and
sellers, including without limitation Cross Country Home Services, Inc. and HMS
National, Inc., and (ii) certain of the business entities owned or controlled by
the Beneficiaries, but which business entities are not engaged in the Business,
provide and perform change of address services that are ancillary to the
business of such entities and are not the primary business of such entities.
Each Beneficiary acknowledges that the covenants contained in this ARTICLE VIII
are essential conditions for Buyer entering into this Agreement without which
Buyer would not have entered into this Agreement or have paid the consideration
payable by it. Each Beneficiary acknowledges that the restrictions set forth
herein are reasonable, valid and necessary for the protection of the legitimate
interest of Buyer and the Company.
(b) NONSOLICITATION. Without limiting the provisions of Section
8.1(a) hereof, each Beneficiary agrees that neither such Beneficiary nor his
respective Affiliates will, directly or indirectly, as employee, agent,
consultant principal or otherwise (i) during the Term, solicit any Business from
or in any way transact or seek to transact any Business with or otherwise seek
to influence or alter the relationship between the Company or any of its
Affiliates with any person or entity to whom the Company or any of its
Affiliates provided Business services or to whom the Company or any of its
Affiliates made a presentation relating to the Business at any time during the
one year period preceding the Closing Date, or (ii) during the period beginning
on the Closing Date and ending on the date which is two years after the Closing
Date, solicit for employment or other services or otherwise seek to influence or
alter the relationship between the Company or any of its Affiliates and any
person who is or was an employee of the Company or any of its Affiliates that
was engaged in the Business at any time during the one year period preceding the
Closing Date, other than on behalf of and as an employee of the Company, Buyer
or an Affiliate of Buyer.
(c) CONFIDENTIALITY. After the Closing, each Beneficiary and its
Affiliates shall strictly maintain the confidentiality of all information,
documents and materials relating to the Company or the transactions contemplated
by this Agreement, including without limitation the existence of the Agreement
and the terms thereof, except to the extent disclosure of any such information
is required by law or authorized by Buyer or reasonably occurs in connection
with disputes over the terms of this Agreement. In the event that any
Beneficiary reasonably believes after consultation with counsel that it is
required by law to disclose any confidential information described in this
Section 8.1(c), such Beneficiary will (i) provide Buyer with prompt notice
before such disclosure in order that Buyer may attempt to obtain a protective
order or other assurance that confidential treatment will be accorded to
confidential information, and (ii) cooperate with Buyer in attempting to obtain
such order or assurance. The provisions of this Section 8.1(c) shall not apply
to any information, documents or materials which are in the public domain or
shall come into the public domain, other than by reason of default by any
Beneficiary or any of its Affiliates of this Agreement or becomes known in the
industry through no wrongful act on the part of any Beneficiary or any of its
Affiliates.
(d) REMEDIES. Without limiting the right of Buyer to pursue all
other legal and equitable rights available to it, including without limitation,
damages for violation of this Section 8.1 by any Beneficiary or any of its
Affiliates, it is agreed that other remedies cannot fully compensate Buyer for
such a violation and that Buyer shall be entitled to injunctive relief and/or
specific performance to prevent violation or continuing violation thereof,
without bond and without the necessity of showing actual monetary damages. It is
the intent and understanding of each party hereto that if, in any action before
any court or agency legally empowered to enforce this Section 8.1, any term,
restriction, covenant or promise in this Section 8.1 is found to be unreasonable
and for that reason unenforceable, then such term, restriction, covenant or
promise shall be deemed modified to the extent necessary to make it enforceable
by such court or agency.
8.2 [RESERVED.]
8.3 SURVIVAL OF REPRESENTATION AND WARRANTIES. All of the
representations and warranties of the parties contained in this Agreement or in
any of the Transaction Documents shall, regardless of any investigation made by
or on behalf of or any knowledge of Buyer, the Company or the Beneficiaries,
survive the
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Closing and continue in full force and effect for a period of two years
thereafter, except that (i) the representations and warranties made in Sections
3.17, 3.25 and 3.27 shall survive until six months after the expiration of the
applicable statute of limitations and (ii) the representations and warranties
made in Sections 3.1, 3.2, 3.5, 3.29 and 3.30 shall survive indefinitely. The
date on which a claim would be extinguished in accordance with Section 8.3 is
sometimes referred to as the "Expiration Date" of such claim. Notwithstanding
anything to the contrary herein, no claim for indemnification under Article IX
shall be made with respect to any representation or warranty herein after the
survival period for such representation or warranty, except as to any matters
with respect to which a bona fide written claim shall have been made or an
action at law or in equity shall have commenced before such date, in which event
the applicable survival period shall continue (but only with respect to, and to
the extent of, such claim) until the final resolution of such claim or action,
including all applicable periods for appeal.
8.4 COOPERATION AFTER THE CLOSING. Buyer, the Company and the
Beneficiaries will, at any time, and from time to time, after the Closing Date,
execute and deliver such further instruments of conveyance and transfer and take
such additional action as may be reasonably necessary to effect, consummate,
confirm or evidence the transactions contemplated by this Agreement and the
Transaction Documents. Without limiting the other obligations of the
Beneficiaries hereunder, the Beneficiaries agree that, after the Closing, the
Beneficiaries shall provide reasonable cooperation and assistance to Buyer or
the Company, at Buyer's or the Company's sole cost and expense, with respect to
any matters, disputes, suits or claims by or against any person not a party to
this Agreement.
8.5 TAX MATTERS.
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. The
Beneficiaries shall be responsible for the preparation and filing of the Tax
Returns of the Company for all taxable periods ending on or prior to the Closing
Date and for the preparation and filing of all Tax Returns of the Trust. Tax
Returns of the Company for the taxable year ended December 31, 1999 (if not
already filed by the Closing Date) and the "S short year" (within the meaning of
Section 1362(e) of the Code), together with all work papers and schedules
related thereto, shall be delivered to Buyer for its review and comment no later
than twenty (20) days prior to the filing of such returns, and shall be prepared
in a manner consistent with prior practice unless otherwise required by
applicable laws. The Beneficiaries shall pay or cause to be paid any and all
built-in gains taxes under Section 1374 of the Code payable as a result of the
Transaction.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING
DATE. Buyer shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns of the Company for all periods which begin on or prior to the
Closing Date and end after the Closing Date. Such Tax Returns shall be prepared
in a manner consistent with prior practice unless otherwise required by
applicable laws.
(c) TAX INDEMNITIES.
(i) Except to the extent reserves for Taxes are taken into
account in the determination of Equity under Section 1.3, the Beneficiaries
shall be responsible for, shall pay or cause to be paid, and shall indemnify,
defend and hold harmless Buyer and its Affiliates, on a joint and several basis,
against and reimburse Buyer and its Affiliates for any and all Taxes that may be
imposed upon or assessed against the Company or its assets: (i) with respect to
any Pre-Closing Period (as defined in Section 8.5(c)(iii)), (ii) arising by
reason of any breach or inaccuracy of the representations contained in Section
3.25 hereof, (iii) with respect to any and all Taxes of any member of an
affiliated group of which the Company (or any predecessor thereof) is or was a
member on or prior to the Closing Date, including any Taxes for which the
Company may be liable under Section 1.1502-6 of the Treasury regulations
promulgated under the Code (or any similar provision of state, local or foreign
law), (iv) by reason of being a successor-in-interest or transferee of another
Person on or prior to the Closing Date, and (v) without duplication, with
respect to any Taxes incurred by the Company or Buyer in connection with the
transactions contemplated by this Agreement (including any Taxes arising as a
result of any Section 338(h)(10) Election). In addition, if the Transaction does
not result in an increase in the tax basis of the assets of the Company for
federal or state excise, income or franchise tax purposes as a result of the
transfer by the Beneficiaries of the Company Shares to the Trust or otherwise
because of the participation or existence of the Trust, the Beneficiaries shall
indemnify and hold harmless Buyer and its Affiliates against, and shall pay to
Buyer an amount equal to, the Tax Benefits not realized by Buyer or its
Affiliates that would have been realized had Buyer acquired the assets of the
Company for the Purchase Price. The Beneficiaries shall also pay and shall
indemnify and hold harmless Buyer and its Affiliates, on a joint and several
basis, from and against any Losses (as defined in Section 9.1) incurred in
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connection with the Taxes for which the Beneficiaries are responsible to
indemnify Buyer hereunder.
(ii) Subject to Section 8.5(d), payment by the Beneficiaries
of any amount due to Buyer under this Section 8.5(c) shall be made within 10
days following written notice by Buyer that payment of such amount to the
appropriate Tax authority is due by Buyer.
(iii) For purposes of this Section 8.5, "Pre-Closing Period"
shall mean a taxable period or portion thereof that ends on or prior to the
Closing Date. If a taxable period begins on or prior to the Closing Date and
ends after the Closing Date, then the portion of the taxable period that ends on
(and including) the Closing Date shall constitute a Pre-Closing Period. In the
case of any Tax that is imposed on a periodic basis and is payable for a period
that begins before the Closing Date and ends after the Closing Date, the portion
of such Taxes payable for the Pre-Closing Period shall be (i) in the case of any
Tax other than a Tax based upon or measured by income, the amount of such Tax
for the entire period multiplied by a fraction, the numerator of which is the
number of days in the period ending on the Closing Date and the denominator of
which is the number of days in the entire period and (ii) in the case of any Tax
based upon or measured by income, the amount which would be payable if the
taxable year ended on the Closing Date. Any credit shall be prorated based upon
the fraction employed in clause (i) of the preceding sentence. In the case of
any Tax based upon or measured by capital (including net worth or long-term
debt) or intangibles, any amount thereof required to be allocated under this
Section 8.5(c) shall be computed by reference to the level of such items on the
Closing Date. For purposes of this Section 8.5, "Post-Closing Period" means any
period other than a Pre-Closing Period.
(iv) The indemnification provided for in this Section 8.5
shall be without regard to the limitations on indemnification rights contained
in Section 9.4(c); provided, however, that the indemnification set forth in the
next to last sentence of Section 8.5(c)(i) (relating to Buyer's increase in Tax
basis in the Company's assets) and any indemnification relating to the tax
provided under Mass. Gen. L. Ch. 63, section 32D(b), frequently referred to as
the Massachusetts "big S" tax, together with related surtaxes, interest and
penalties (the "Massachusetts Big S Tax") shall be without regard to the
limitations on indemnification rights contained in Sections 9.4(c) and 9.4(d).
(d) CONTESTS.
(i) After the Closing, the Buyer and the Beneficiaries (or
their designee) shall promptly notify each other in writing of any demand or
claim received by the Beneficiaries, Buyer or the Company from any Tax authority
or other party with respect to Taxes for which the Beneficiaries are liable
pursuant to Section 8.5(c)(i). Such notice shall contain factual information (to
the extent known) describing the asserted Tax liability in reasonable detail and
shall include copies of any notice or other document received from any Tax
authority in respect of any such asserted Tax liability.
(ii) The Beneficiaries (or their designee) may elect to
control the conduct, through counsel of its own choosing and at its own expense,
of any audit, claim for refund and administrative or judicial proceeding
involving any asserted liability with respect to which indemnity may be sought
under Section 8.5(c)(i) (any such audit, claim for refund or proceeding relating
to an asserted Tax liability is referred to herein as a "Contest"), other than
any Contest relating to the Massachusetts Big S Tax. If the Beneficiaries (or
their designee) elect to control such a Contest, they shall within 20 calendar
days of receipt of the notice of asserted Tax liability notify the Buyer of
their intent to do so, and the Beneficiaries (or their designee) shall have all
rights to settle, compromise and/or concede such asserted liability; PROVIDED,
HOWEVER, that Buyer shall have the right to consult with the Beneficiaries
regarding any Contest that may affect the Company for any Post-Closing Period
and PROVIDED FURTHER that the Beneficiaries shall not have the right to settle,
compromise and/or concede any such Contest that may affect the Company for any
period after the Closing Date without Buyer's prior written consent, which
consent shall not be unreasonably withheld. If the Beneficiaries elect not to
control such a Contest or fail to notify Buyer of their election as herein
provided, Buyer or the Company may pay, compromise or contest, at its own
expense, subject to (i) reimbursement by the Beneficiaries for reasonable third
party expenses and (ii) the Beneficiaries' indemnification obligations under
Section 8.5(c)(i); provided, however, that (A) the Beneficiaries shall have the
right to consult with Buyer regarding any Contest that may affect the
Beneficiaries or the Trust for any Pre-Closing Period or with respect to which
the Beneficiaries or the Trust may owe indemnification under this Agreement, and
(B) Buyer shall not have the right to settle, compromise and/or concede any such
Contest without the Beneficiaries' prior written consent, which consent shall
not be unreasonably withheld. Buyer shall have the sole right to represent
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the Company in any other Contest.
(iii) In the event that the Beneficiaries or any of their
Affiliates shall after the Closing take any position in any Tax Return, or reach
any settlement or agreement on audit, which is in any manner inconsistent with
any position taken by the Beneficiaries or any of their Affiliates in any
filing, settlement or agreement made by the Beneficiaries prior to the Closing
and such inconsistent position (i) requires the payment by Buyer of more Tax
than would have been required to be paid had such position not been taken or
such settlement or agreement not been reached, (ii) affects the determination of
useful life, basis or method of depreciation, amortization or accounting of any
of the assets or properties of the Company or (iii) accelerates the time at
which any Tax must be paid by Buyer, then the Beneficiary, in each such case,
shall provide timely and reasonable notice to Buyer of such position and shall
indemnify Buyer and hold it harmless from any Tax liability or Tax cost or any
Loss arising from, in connection with or otherwise with respect to such
position.
(e) COOPERATION AND EXCHANGE OF INFORMATION. The Beneficiaries,
Buyer and the Company will provide each other with such cooperation and
information as any of them reasonably may request of another in filing any Tax
Return, amended Tax Return or claim for refund, determining a liability for
Taxes or a right to a refund of Taxes or participating in or conducting any
audit or other proceeding in respect of Taxes. Each such party shall make its
employees available on a mutually convenient basis to provide explanations of
any documents or information provided hereunder. Each such party will retain all
Tax Returns, schedules and work papers and all material records or other
documents relating to Tax matters of the Company for the Tax period first ending
after the Closing Date and for all prior Tax periods until the expiration of the
statute of limitations of the Tax periods to which such Tax Returns and other
documents relate, without regard to extensions except to the extent notified by
another party in writing of such extensions for the respective Tax periods. Any
information obtained under this Section 8.5(e) shall be kept confidential,
except as may be otherwise necessary in connection with the filing of Tax
Returns or claims for refund or in conducting an audit or other proceeding.
(f) CONVEYANCE TAXES. The Beneficiaries agree to assume liability
for and to pay any and all sales, value added, transfer, stamp, registration,
real property transfer or gains and similar Taxes incurred as a result of the
transactions contemplated hereby and to file all required change of
ownership and similar statements.
(g) TAX CHARACTERIZATION OF TRANSACTION. The parties hereto agree
and covenant that the sale of the Company Shares by the Trust to the Buyer shall
be characterized and reported for income tax purposes as a sale of assets and
will file all Tax Returns (including amended returns and claims for refund) and
information reports in a manner consistent with such characterization, subject
to Section 8.5(h).
(h) PROTECTIVE SECTION 338(h)(10) ELECTION. Buyer and the
Beneficiaries shall join in making protective elections to have the provisions
of Section 338(h)(10) of the Code and similar provisions of state, local or
foreign law ("Section 338(h)(10) Elections") apply to the acquisition of the
Company. The Beneficiaries shall execute and deliver to Buyer such documents or
forms (including Section 338(h)(10) Forms as defined below) as Buyer shall
request or as are required by applicable law for an effective Section 338(h)(10)
Election. "Section 338(h)(10) Forms" shall mean all returns, documents,
statements, and other forms that are required to be submitted to any federal,
state, county or other local taxing authority in connection with a Section
338(h)(10) Election, including, without limitation, any "statement of Section
338(h)(10) election" and IRS Form 8023 (together with any schedules or
attachments thereto) that are required pursuant to the treasury regulations
promulgated under Section 338(h)(10) of the Code. The Beneficiaries shall be
responsible for and shall pay any income, franchise or similar Taxes arising as
a result of any Section 338(h)(10) Election or any comparable or resulting
election under state, local or foreign law.
(i) MISCELLANEOUS.
(i) The parties agree to treat all payments made under
ARTICLE I, ARTICLE IX and this Section 8.5 as adjustments to the Purchase Price
for Tax purposes.
(ii) Except as expressly provided otherwise herein and except
for the representations contained in Section 3.25 of this Agreement, this
Section 8.5 shall be the sole provision governing Tax matters and indemnities
therefor under this Agreement.
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8.6 CLOSING DATE FINANCIALS. SCHEDULE 3.8 shall be deemed amended
to include the Closing Date Financials upon receipt thereof by the Buyer from
the Company.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE BENEFICIARIES. From and after the
Closing, the Beneficiaries, jointly and severally, agree to indemnify, defend
and save Buyer and its Affiliates, and each of their respective officers,
directors, employees, agents, Employee Benefit Plans and fiduciaries, plan
administrators or other parties dealing with any such plans (each, an
"Indemnified Buyer Party"), harmless from and against, and to promptly pay to an
Indemnified Buyer Party or reimburse an Indemnified Buyer Party for, any and all
liabilities (whether contingent, fixed or unfixed, liquidated or unliquidated,
or otherwise), obligations, deficiencies, demands, claims, suits, actions, or
causes of action, assessments, losses, Taxes, costs, expenses, interest, fines,
penalties, actual or punitive damages or costs or expenses of any and all
investigations, proceedings, judgments, environmental analyses, remediations,
settlements and compromises (including reasonable fees and expenses of
attorneys, accountants and other experts incurred by any indemnified party in
any action or proceeding between such indemnified party and the indemnitor or
between any indemnified party and any third party or otherwise) (individually a
"Loss" and collectively, the "Losses") sustained or incurred by any Buyer
Indemnified Party relating to, resulting from, arising out of or otherwise by
virtue of (i) any breach of a representation or warranty made herein by the
Company or a Beneficiary, (ii) any non-compliance with or breach by the Company
or a Beneficiary of any of their respective covenants or agreements contained in
this Agreement or the Transaction Documents to be performed by the Company or a
Beneficiary, (iii) any allegations by a third party that is not an Indemnified
Buyer Party which, if true, would constitute a breach of a representation or
warranty made herein by the Company or a Beneficiary or non-compliance with or
breach by the Company or a Beneficiary of any of their respective covenants or
agreements contained in this Agreement or the Transaction Documents to be
performed by a Beneficiary, the Company or any or their respective Affiliates,
(iv) any obligation or liability, contingent or otherwise, of the Company for
brokers' or finders' fees or commissions in connection with the Transaction or
the Transaction Documents, except for such fees payable to FleetBoston Xxxxxxxxx
Xxxxxxxx set forth on SCHEDULE 3.30, and (v) the claim described on SCHEDULE
3.26. Notwithstanding anything to the contrary in the first sentence of this
Section 9.1, in no event shall any one Beneficiary be required to provide
indemnification in excess of the PRO RATA portion of the Purchase Price received
by such Beneficiary.
9.2 INDEMNIFICATION BY BUYER. From and after the Closing, Buyer
agrees to indemnify, defend and save the Beneficiaries and their Affiliates, and
each of their respective officers, directors, employees, agents, Employee
Benefit Plans and fiduciaries, plan administrators or other parties dealing with
such plans (each, an "Indemnified Seller Party") harmless from and against, and
to promptly pay to an Indemnified Seller Party or reimburse an Indemnified
Seller Party for, any and all Losses sustained or incurred by any Seller
Indemnified Party relating to, resulting from, arising out of or otherwise by
virtue of (i) any breach of a representation or warranty made herein by Buyer,
(ii) any non-compliance with or breach by Buyer of any of the covenants or
agreements contained in this Agreement or the Transaction Documents to be
performed by Buyer, (iii) any allegations by a third party that is not an
Indemnified Seller Party which, if true, would constitute or breach of a
representation or warranty made herein by Buyer or non-compliance with or breach
by Buyer of any of the covenants or agreements contained in this Agreement or
the Transaction Documents to be performed by Buyer, and (iv) any obligation or
liability, contingent or otherwise, for brokers' or finders' fees or commissions
in connection with the transactions contemplated by this Agreement or the
Transaction Documents.
9.3 PROCEDURE FOR INDEMNIFICATION. The following procedure shall
apply to the foregoing agreements to indemnify and hold harmless:
(a) The party who is seeking indemnification (the "Claimant")
shall give written notice to the party from whom indemnification is sought (the
"Indemnitor") promptly after the Claimant learns of the claim or proceeding,
provided that the failure to give such notice shall not relieve the Indemnitor
of its obligations hereunder except to the extent it is actually damaged
thereby.
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(b) With respect to any third-party claims or proceedings as to
which the Claimant is entitled to indemnification, the Indemnitor shall have the
right to select and employ counsel of its own choosing to defend against any
such claim or proceeding, to assume control of the defense of such claim or
proceeding, and to compromise, settle or otherwise dispose of the same, if the
Indemnitor deems it advisable to do so, all at the expense of the Indemnitor.
The parties will fully cooperate in any such action, and shall make available to
each other any books or records useful for the defense of any such claim or
proceeding. The Claimant may elect to participate in the defense of any such
third party claim, and may, at its sole expense, retain separate counsel in
connection therewith. Subject to the foregoing (i) the Claimant shall not settle
or compromise any such third party claim without the prior written consent of
the Indemnitor and (ii) the Indemnitor shall not settle or compromise any such
third party claim without the prior written consent of the Claimant, in each
case of (i) and (ii) which consent shall not be unreasonably withheld.
9.4 LIMITATION ON INDEMNIFICATION RIGHTS.
(a) Subject to the provisions of Sections 9.4(b) and 9.4(c) below
it is understood and agreed that no claim for recovery of indemnifiable damages
may be asserted based on a representation or warranty or applicable portion
thereof set forth in this Agreement or the Transaction Documents after the
applicable Expiration Date.
(b) The parties agree that any dispute, disagreement or
controversy between any party relating to a warranty or representation or
applicable portion thereof set forth in this Agreement or Transaction Documents
that is not resolved by the applicable Expiration Date shall promptly be
submitted to the JAMS/Endispute to be resolved by binding arbitration in
accordance with their rules. The arbitration tribunal shall be composed of three
arbitrators, one of whom shall be appointed by Buyer within ten business days of
the applicable Expiration Date and one of whom shall be appointed by the other
party or parties to the dispute, disagreement or controversy within ten business
days of the applicable Expiration Date and one of whom shall be appointed by
such two arbitrators within 15 business days of the applicable Expiration Date.
The arbitrators will be directed to and shall resolve such dispute, disagreement
or controversy on the basis of the information provided to them or as soon as
practicable and, in any event, by the applicable Expiration Date.
(c) Notwithstanding anything to the contrary contained in this
Agreement, but subject to the next sentence of this Section 9.4(c), neither the
Indemnified Buyer Parties, on the one hand, nor the Indemnified Seller Parties,
on the other hand, shall be entitled to be indemnified pursuant to Section 9.1,
Section 9.2 or any other provision hereof unless and until the aggregate of all
Losses incurred by Indemnified Buyer Parties or the Indemnified Seller Parties,
as the case may be, exceeds $100,000 (the "Basket"), at which time the
indemnifying party shall be obligated to indemnify the indemnified party for all
Losses and not merely Losses in excess of such $100,000. The parties acknowledge
that the Basket shall not apply to Losses arising out of or relating to (i) a
breach of the covenant contained in the last sentence of Section 1.3(a), (ii)
any adjustment to the Purchase Price under ARTICLE I or (iii) the
indemnification provisions of Section 8.5.
(d) Notwithstanding anything to the contrary set forth in this
Agreement, but subject to the next sentence of this Section 9.4(d), the
aggregate liability of the Beneficiaries under Section 9.1 shall not exceed
thirty-five percent (35%) of the Purchase Price, as adjusted pursuant to
Sections 1.2 and 1.3. The parties acknowledge that the limitation on
indemnification rights set forth this Section 9.4(d) shall not apply to (i) any
payment resulting from any adjustment to the Purchase Price under SECTION 1.3 or
(ii) the indemnification set forth in the next to last sentence of Section
8.5(c)(i) (relating to Buyer's increase in Tax basis in the Company's assets),
or (iii) any indemnification relating to the Massachusetts Big S Tax.
9.5 WAIVER OF CLAIMS. Without in any way limiting the obligations
of the Beneficiaries under this Agreement, the Beneficiaries hereby expressly
and irrevocably waives any rights of contribution, subrogation, recoupment,
counterclaim, set-off or indemnification that the Beneficiaries may have against
the Company.
9.6 SOLE REMEDY FOR DAMAGES. Subject to the provisions of the
next sentence of this Section 9.6 and except for Section 8.5, the
indemnification obligations of the parties set forth in this Article IX shall
constitute the sole and exclusive remedy of the parties for the recovery of
money damages with respect to any and all matters arising out of this Agreement,
the Transaction Documents or the Transaction. Notwithstanding the
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foregoing, the terms of this Section 9.6 shall not be construed as limiting in
any way whatsoever any remedy to which any party may be entitled other than the
recovery of money damages, including but not limited to equitable remedies,
specific performance, injunctive relief and rescission.
9.7 ORDER OF CLAIMS. Any claim by Buyer against the Company or
any Beneficiary for recovery of indemnifiable damages pursuant to this Article
IX or any other provision of this Agreement shall be first made against the
value of the Escrow Funds before the claimant may proceed against the
Beneficiaries for any remaining amounts due by the Beneficiaries. Any claim by
Buyer against the Beneficiaries for indemnification with respect to the
Massachusetts Big S Tax shall be first made against the value of the Tax Escrow
Funds before Buyer may proceed against the Beneficiaries for any remaining
amounts due by the Beneficiaries with respect to the Massachusetts Big S Tax.
9.8 CERTAIN REDUCTIONS. Indemnification by any indemnified party
pursuant to Article IX hereof shall be (i) reduced by the amount of any Tax
Benefit to the relevant indemnified party, (ii) increased to take into account
any Tax Cost incurred by the relevant Indemnified Buyer Party or Indemnified
Seller Party, and (iii) limited to the amount of any liability or damage that
remains after deducting therefrom any insurance proceeds or any indemnity,
contribution or other similar payment actually recovered by the indemnified
party or any of its affiliates from any third party with respect thereto. The
parties hereto shall treat all payments under this Article IX as an adjustment
to the Purchase Price hereunder, unless a final determination (within the
meaning of Section 1313 of the Code) causes any such payment not to be treated
as an adjustment.
ARTICLE X
MISCELLANEOUS
10.1 NOTICES, CONSENTS, ETC. Any notices, consents or other
communication required to be sent or given hereunder by any of the parties shall
in every case be in writing and shall be deemed properly served if (a) delivered
personally, (b) delivered by registered or certified mail, in all such cases
with first class postage prepaid, return receipt requested, (c) delivered by
courier, at the addresses as set forth below or at such other addresses as may
be furnished in writing. All such notices and communications shall be deemed
received upon the actual delivery thereof in accordance with the foregoing.
(a) If to the Beneficiaries:
c/o Xxxxxx X. Xxxx
The Cross Country Group
0000 Xxxxxx Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000
with a copy to:
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: H. Xxxxx Xxxxxx, P.C.
(b) If to the Company (prior to the Closing):
c/o The Cross Country Group
0000 Xxxxxx Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000
with a copy to:
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
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Xxxxxx, XX 00000
Attn: H. Xxxxx Xxxxxx, P.C.
(c) If to the Trust:
x/x Xxxx Xxxxxx & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxx, as trustee
with a copy to:
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: H. Xxxxx Xxxxxx, P.C.
(d) If to Buyer or, after the Closing, the Company:
TMP Worldwide Inc.
0000 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. XxXxxxxx
with a copy to:
TMP Worldwide Inc.
0000 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxxx, Esq.
10.2 SEVERABILITY. The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity of
any other provision which shall remain in full force and effect and be
enforceable to the fullest extent permitted by law.
10.3 AMENDMENT AND WAIVER. This Agreement may not be amended
orally. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other breach. The
failure to enforce any provision of this agreement or to enforce a party's
remedies with respect to the breach or default of any provision of this
Agreement shall not operate as a waiver by such party of such provision.
10.4 DOCUMENTS. Each party will execute all documents and take
such other actions as any other party may reasonably request in order to
consummate the transactions provided for herein and to accomplish the purposes
of this Agreement.
10.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
10.6 EXPENSES. Except as reflected in the calculation of Equity
pursuant to Section 1.3(b), the Beneficiaries shall pay all costs and expenses
incurred or to be incurred by the Beneficiaries, the Trust and/or the Company in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement and the Transaction Documents,
including without limitation all legal and accounting fees and expenses and fees
and expenses relating to the preparation of the Financial Statements, and the
Beneficiaries, the Trust and the Company agree that such costs and expenses
shall not be deemed obligations of the Company for purposes of the Financial
Statements.
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10.7 GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Agreement shall be governed by,
the laws of the State of New York, without giving effect to provisions thereof
regarding conflicts of law.
10.8 HEADINGS. The subject headings of Articles and Sections of
this Agreement are included for purposes of convenience only and shall not
affect the construction or interpretation of any of its provisions.
10.9 ASSIGNMENT. This Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
Neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned or delegated by either party hereto in any manner whatsoever,
whether directly or by operation of law or otherwise, without the prior written
consent of the other party hereto.
10.10 DEFINITIONS. For purposes of this Agreement, the following
terms have the meaning set forth below:
"AFFILIATE" shall have the meaning ascribed to that term in Rule
405 of the Securities Act of 1933, as amended.
"BUSINESS" shall be a collective reference to any and all aspects
of services and products relating to change of address services, whether online
or offline.
"CODE" means the Internal Revenue Code of 1986, as amended.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"GAAP" means generally accepted accounting principles, applied on
a consistent basis.
"LIENS" means any liens, claims, mortgages, charges, security
interests, pledges or other encumbrances or adverse claims or interests of any
nature.
"PERSON" means any individual, sole proprietorship, general or
limited partnership, corporation, limited liability company, joint venture,
unincorporated society or association, trust or other entity or governmental
authority.
"PLAN AFFILIATE" means any person or entity with which the
Company constitutes all or part of a controlled group of corporations, a group
of trades or businesses under common control or an affiliated service group, as
each of those terms is defined in Section 414 of the Code.
"TAX" and "TAXES" includes any federal, state, local or foreign
income, gross receipts, capital, franchise, import, goods and services, value
added, sales and use, estimated, alternative minimum, add-on minimum, sales,
use, transfer, registration, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee withholding, or other tax, of any kind
whatsoever, including any interest, penalties or additions to tax or additional
amounts in respect of the foregoing; the foregoing shall include any transferee
or secondary liability for a Tax and any liability assumed by agreement or
arising as a result of being (or ceasing to be) a Beneficiaries of any
Affiliated group, as defined in Section 1504 of the Code (or being included (or
required to be included) in any Tax Return relating thereto).
"TAX BENEFIT" or "TAX COST" means the foreign, federal, state and
local income Tax savings or Tax cost that have resulted or would result, if
claimed, from any items of income, gain, loss, deduction or credit that (i) an
Indemnified Seller Party or Indemnified Buyer Party is required to report in
accordance with applicable law on a foreign, federal, state or local Tax Return
of an Indemnified Seller Party or Indemnified Buyer Party filed for any year and
(ii) is directly attributable to such claim.
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"TAX RETURNS" means returns, declarations, reports, claims for
refund, information returns or other documents (including any related or
supporting Schedules, statements or information) filed or required to be filed
in connection with the determination, assessment or collection of any Taxes of
any party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
10.11 ENTIRE AGREEMENT. This Agreement, the Transaction
Documents, and the documents, schedules and exhibits described herein or
attached or delivered pursuant hereto and the Confidentiality Agreement
previously executed by Buyer and the Company (the "Confidentiality Agreement")
collectively constitute the sole and only agreement among the parties with
respect to the subject matter hereof. Any agreements, representations or
documentation respecting the transactions contemplated by this Agreement,
including without limitation, any correspondence, discussions or course of
dealing (including but not limited to the letter agreement between Buyer and the
Company dated May 2, 2000), which are not expressly set forth in this Agreement,
the Transaction Documents, or the documents, schedules and exhibits described
herein or attached or delivered pursuant hereto or are null and void, it being
understood that no party has relied on any representation not set forth in this
Agreement, the Transaction Documents or the documents, schedules and exhibits
described herein or attached or delivered pursuant hereto. It is expressly
understood and agreed that upon Closing, the Confidentiality Agreement shall
automatically be rendered null and void to the same extent as if it were never
executed.
10.12 THIRD PARTIES. Except as expressly set forth in ARTICLE
VIII OR IX of this Agreement, nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person or entity, other than
the parties to this Agreement and their respective permitted successors and
assigns, any rights or remedies under or by reason of this Agreement.
10.13 INTERPRETATIVE MATTERS. Unless the context otherwise
requires, (a) all references to Articles, Sections or Schedules are to Articles,
Sections or Schedules in this Agreement, and (b) words in the singular or plural
include the singular and plural, pronouns stated in either the masculine, the
feminine or neuter gender shall include the masculine, feminine and neuter, and
(d) the term "including" shall mean by way of example and not by way of
limitation. The word "knowledge," or any similar usage, when used herein respect
to the Company, means the actual knowledge of the directors, officers and key
employees of the Company. The word "knowledge," or any similar usage, when used
herein respect to the Beneficiaries, means the actual knowledge of Xxxxxx X.
Xxxx, Xxxxxx X. Xxxx and Xxxxxxx X. Xxxx.
10.14 NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party hereto.
10.15 ARBITRATION. Subject to Section 9.4(b), the parties agree
that any dispute, disagreement or controversy between any party relating to any
matter set forth in this Agreement shall be submitted to JAMS/Endispute to be
resolved by biding arbitration in accordance with their rules. The arbitration
tribunal shall be composed of three arbitrators, one of whom shall be appointed
by Buyer and one of whom shall be appointed by the other party or parties to the
dispute, disagreement or controversy and one of whom shall be appointed by such
two arbitrators. The arbitrators will be directed to and shall resolve such
dispute, disagreement or controversy on the basis of the information provided to
them or as soon as practicable and, in any event, by the applicable Expiration
Date. Notwithstanding the foregoing provisions of this Section 10.15, but
subject to Section 9.4(b), neither party shall be obligated to utilize the
arbitration procedure set forth above with respect to any dispute, disagreement,
controversy or claim for which one of the remedies sought is equitable or
injunctive relief.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
TMP WORLDWIDE INC.
By: /S/ XXXXX XXXXXXXXXX
--------------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: Vice President
MOVECENTRAL, INC.
By: /S/ XXXXXX X. XXXX
--------------------------------------
Name: Xxxxxx X. Xxxx
Title: Vice President
MOVECENTRAL COMPANY
By: /S/ XXXXXX X. XXXX
--------------------------------------
Name: Xxxxxx X. Xxxx
Title: Trustee
/S/ XXXXXX X. XXXX
--------------------------------------------
Xxxxxx X. Xxxx
/S/ XXXXXX X. XXXX
--------------------------------------------
Xxxxxx X. Xxxx
/S/ XXXXXXX X. XXXX
--------------------------------------------
Xxxxxxx X. Xxxx
/S/ XXXXXXX X. XXXX
--------------------------------------------
Xxxxxxx X. Xxxx
/S/ XXXXX X. XXXX
--------------------------------------------
Xxxxx X. Xxxx
/S/ XXXXXX X. XXXX
--------------------------------------------
Xxxxxx X. Xxxx
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