ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of
the day of , 1998, by and among CALL BUSINESS SYSTEMS,INC., a
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Utah corporation ("Seller"), XXXXXXX X. CALL ("STOCKHOLDER") and IT PARTNERS,
INC. a
Delaware corporation ("ITP" or "Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is, among other things, engaged in the business of
selling and
installing technology software and providing related consulting services
(the
"Business"); and
WHEREAS, Seller desires to sell and Purchaser desires to purchase certain
assets
of Seller, upon the terms and subject to the conditions set forth herein;
WHEREAS, immediately following the Closing, the Purchaser shall sell,
assign,
transfer, convey and deliver and ITP No. 7, Inc., a Delaware corporation
and
wholly owned subsidiary of Purchaser ("NEWCO"), shall purchase and
acquire all
of Purchaser's right title and interest in the Assets and Assumed
Liabilities
(as such terms are defined herein) (the "Drop Down"); and
WHEREAS, the parties hereto desire to enter into certain other covenants
among
themselves as an inducement to and in connection with the execution,
delivery
and performance of this Agreement;
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants,
agreements, representations and warranties set forth herein, and other good
and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged,
the parties hereto, intending to be legally bound hereby, agree as follows:
Section 1.
Sale and Purchase of the Assets
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Section 1.1 Sale and Purchase. At the Closing (as defined below), upon
the
terms and subject to the conditions set forth in this Agreement, Seller shall
sell, assign, transfer,
convey and deliver to Purchaser, and Purchaser shall purchase and acquire from
Seller, all of
Seller's right, title and interest in and to all the assets of Seller of every
kind, character and
description, whether now owned or hereafter
acquired by Seller prior to the Closing Date, whether tangible or intangible,
and
whether real, personal or mixed, and wherever located, which are owned, used
or held
for use in connection with, generated by, derived from or attributable to, or
otherwise related to, the Business (excluding the Excluded Assets (as defined
in
Section 1.2 hereof) (all of which are collectively referred to herein as the
"Assets"), including, but not limited to, all of the following:
(a) all equipment, machinery, vehicles, office furniture, fixtures,
tools,
dies, spare parts, appliances, computer hardware, equipment and supplies, and
other
similar tangible personal property, including, without limitation, the
personal
property and equipment set forth on Schedule 1.1(a) hereto;
(b) all inventories, including, without limitation, raw materials,
work in
process, finished goods, inventories held by customers on a consignment basis,
stores, supplies, materials and manufactured and purchased parts, but
excluding all
items of inventory rejected by Purchaser because of Purchaser's determination
that
they are either not related to the Business, or are obsolete or
inappropriately
valued;
(c) all patents, trademarks, trade names, service marks and
copyrights,
and all applications, registrations, extensions, reissues and continuations
thereof,
all licenses and sublicenses with respect thereto, all rights thereunder, and
all
remedies against infringement thereof, including without limitation those
items set
forth on Schedule 1.1(c) hereto;
(d) all technologies, materials, formulations, data bases, trade
secrets,
secret processes, know how, inventions and other intellectual property and
intangible
property of every kind and nature;
(e) all computer software (including documentation and related
object and
source codes);
(f) all rights and interests under orders, bids, quotations and
similar
arrangements relating to the purchase or sale of Seller's goods and services,
to the
extent not fulfilled prior to the Closing Date;
(g) all rights and interests under licenses, contracts, agreements,
leases
or commitments, including without limitation, contracts providing for the
lease of
equipment, machinery, office equipment, furniture and vehicles, sales
representative
agreements, distributor agreements, consignment agreements and other similar
agreements, whether as principal or agent or distribution, to the extent (i)
transferable to Purchaser and (ii) set forth on Schedule 1.1(g) hereof
("Assigned
Contracts");
(h) all franchises, approvals, permits, licenses, qualifications,
authorizations, orders, registrations, certificates, variances, and similar
rights
obtained from or issued by any Governmental Authority (as defined in Section
3.5
below), and all pending applications therefor;
(i) all rights and interests of Seller under all warranties,
guarantees
and covenants not to compete for the benefit of the Business or the Assets;
(j) all books, records, accounts, ledgers, files, data, documents,
forms,
correspondence, lists, plats, architectural plans, drawings, specifications,
creative
materials, advertising and promotional literature and materials, studies,
reports,
and other printed, written, machine readable, electronic or computer-generated
materials to the extent they relate to the Assets or the Business;
(k) the Accounts Receivable of Seller;
(l) the name "Call Business Systems, Inc" and all variations and
derivations thereof; and
(m) the Business as a going concern and all goodwill associated
therewith.
Section 1.2 Excluded Assets. Notwithstanding any provision in Section
1.1 or
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elsewhere herein to the contrary, the Assets shall not include any of the
following:
(a) those Assets disposed of in the ordinary course of business as
permitted by this Agreement;
(b) all matters pertaining to Seller's corporate existence
including
minute books, stock transfer books, tax returns, and tax identifications,
books of
account and other records pertaining to Seller's corporate organization;
(c) the consideration and all other rights accruing to Seller
under this
Agreement;
(d) the amount of cash in excess of $140,000.00 in working capital,
which
shall be the minimum amount of cash on hand as of the Closing Date (the
"Working
Capital"). If the Working Capital cash requirements shall be in excess of
$140,000.00
during the period between Closing and ninety (90) days thereafter (the
"Working
Capital Adjustment Period"), then Stockholder shall contribute such excess
funds to
Working Capital. If the Purchaser determines that the Working Capital
shortfall is
due to a delay in the timely payment of accounts receivable or the prepayment
of an
expense not in the ordinary course of business, then Purchaser shall reimburse
Stockholder the amount paid to cover such shortfall. During the Working
Capital
Adjustment Period, Stockholder covenants and agrees to operate NEWCO's
business in
accordance with Seller's past practices and to collect or expense accounts
payable,
accounts receivable and payroll in accordance therewith. At the conclusion of
the
Working Capital Adjustment Period, Purchaser shall perform a limited review
(the
"Working Capital Review") of NEWCO's accounts payable, accounts receivable and
payroll practices for the period ending on the last day of the Working Capital
Adjustment Period to verify that NEWCO operated in accordance with Seller's
past
practices and in accordance with its vendor contract terms and payroll
policies. If
Purchaser determines that the Stockholder operated NEWCO in a manner that has
not
been authorized by Purchaser, or if Purchaser determines that the Stockholder
operated NEWCO in violation of the covenants hereinabove in a manner
calculated to
avoid a Working Capital shortfall during the Working Capital Adjustment
Period, then
Stockholder shall remit to Purchaser the amount of income improperly
accelerated, or
expense improperly deferred, as determined in accordance with Purchaser's
Working
Capital Review; and
(e) the rights to all of Seller's claims for any federal, state,
local or
foreign tax refunds or adjustments;
(f) any rights and interests of Seller under contracts, agreements
and
commitments that are not set forth on Schedule 1.1(g); and
(g) items of personal property, including furniture in the office
of
Stockholder.
Section 1.3 Liabilities.
(a) Notwithstanding any other provision herein to the contrary,
Purchaser
is not assuming and shall have no obligation to pay, perform or discharge any
liabilities, debts, accounts payable or other obligations of Seller of any
kind or
nature whatsoever, whether known or unknown, fixed or contingent, whenever
arising or
accruing, other than the Assumed Liabilities (as such term is defined in this
Section
1.3).
(b) From and after the Closing Date, Purchaser shall assume and
perform
the Assumed Liabilities and shall hold Seller and Stockholder harmless
therefrom. As
used herein, the term "Assumed Liabilities" means only the following:
(i) the Assigned Contracts set forth on Schedule 1.1(g)
hereto;
(ii) any trade or accounts payable of Seller accrued prior to
the
Closing Date; and
(iii) the Assumed Warranty Obligations as such term is
defined in
Section 5.10 herein.
(c) Notwithstanding the foregoing, except for Assumed Liabilities
expressly and specifically set forth above, for purposes of amplification and
not of
limitation Purchaser shall not assume and shall have no obligation to pay or
perform
any of the following debts, liabilities or obligations of Seller:
(i) any tax, fee or charge pertaining to the Assets accruing
on or
prior to the Closing Date, including but not limited to income, sales, use,
transfer
or other tax, whether imposed on Seller or Purchaser, accruing due to the
transactions contemplated hereby;
(ii) any contract, agreement, lease or commitment not
specifically set
forth on Schedule 1.1(g) hereto;
(iii) any environmental liability;
(iv) any debts, liabilities or obligations arising under any
guarantee, bond, debt, loan or credit agreement, promissory note, mortgage,
security
agreement, pledge or other similar agreement or instrument;
(v) any obligation or liability to indemnify any person or
entity
(including but not limited to any officer, director or stockholder) for any
expense,
loss, damage, judgment, fine, cost, amount paid in settlement, legal fees or
otherwise, whether such indemnity is pursuant to any statute, charter
document,
bylaws, agreement or otherwise;
(vi) any liability or obligation relating to any financial
indebtedness of Seller;
(vii) any debt, liability or obligation incurred by Seller
under
this Agreement, or any cost or expense incurred in connection herewith or the
transactions contemplated hereby, including, but not limited to attorney's
fees and
broker's fees; or
(viii) any other debt, liability or obligation of Seller or
of the
Business, fixed, contingent or otherwise, whenever accrued, whether or not
arising in
the ordinary course of business.
Section 2.
Purchase Price and Payment.
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Section 2.1 Purchase Price. In payment and consideration for the sale
and
transfer of the Assets by Seller to Purchaser, upon the terms and subject to
the conditions set
forth herein, Purchaser shall assume and thereafter perform the Assumed
Liabilities of Seller set
forth in Section 1.3(b) hereof and Purchaser shall pay to Seller as
consideration (the
"Consideration") the amounts set forth below. The Consideration shall be paid
as follows:
(i) (a) On the Closing Date, Seller shall receive $3,516,785.00 in
cash
(the "Cash Portion") subject to 2.1(i)(b) below, which shall be paid by
certified or
bank cashier's check or by wire transfer of immediately available funds to an
account
designated by Seller.
(b) On the Closing Date, Purchaser, with the assistance of
Seller,
will deliver to Seller a Closing Date balance sheet (the "Estimated Closing
Date
Balance Sheet"), for the period ended on the Closing Date, prepared on a basis
consistent with Seller's December 31, 1997 balance sheet (the "Balance
Sheet"). The
Cash Portion payable pursuant to Section 2.1(i)(a) shall be reduced by any
debt
reflected on the Estimated Closing Balance Sheet ("Debt") and any shortfall in
Working Capital reflected on the Estimated Closing Balance Sheet.
(ii) (a) On the Closing Date, Purchaser shall issue and
deliver
to Seller 586,131 shares (the "Issued Shares") of Common Stock, par value $
.01 per
share, of Purchaser (the "Common Stock"), which will be valued for purposes of
the
Consideration at $5.70 per share;
(b) On the Closing Date, Purchaser shall grant and deliver to
Seller
a fully assignable option to purchase 47,524 shares of Common Stock at an
exercise
price of $.01 per share, in the form attached hereto as Annex VIII.
(iii) (a) On the Closing Date, Purchaser shall issue and
deliver to
Seller an interest bearing, unsecured, subordinated, convertible promissory
note (the
"First Note") in the principal amount of $2,876,206.00 (the "Initial
Principal")
substantially in the form attached hereto as Annex V.
(b) Seller may not convert the First Note until after the
final
determination of the principal amount of the First Note (the "Amended
Principal")
determined in accordance with the NTM EBITDA calculation (discussed below).
After
the determination of the NTM EBITDA, the First Note shall be convertible into
Common
Shares of ITP which will be valued at the time of conversion at $5.70 per
share.
(c) The Initial Principal amount of the First Note will be
subject to
adjustment within ninety (90) days after February 28, 1999, upon presentation
of
financial statements accompanied by a report of Purchaser@s accountants
establishing
NEWCO's earnings before interest, taxes, depreciation and amortization for the
period
beginning March 1, 1998, and ending February 28, 1999 ("NTM EBITDA"). The
Amended
Principal amount of the First Note shall be determined as follows:
(1) If the NTM EBITDA does not exceed $1,188,103.00 (the
"LTM
EBITDA"), the Amended Principal amount of the First Note will be the Initial
Principal amount less $2,851,447.20 (derived by multiplying (LTM
EBITDA)(8)(.3) and
referred to herein as the "First Holdback").
(2) If the NTM EBITDA is equal to or greater than
$1,485,128.80
(125% of LTM EBITDA), then the Amended Principal amount of the First Note
shall be
maintained in the amount of $2,876,206.00;
(3) If the NTM EBITDA is between $1,188,103.00 and
$1,485,128.80, then the Amended Principal amount of the First Note shall be an
amount
reduced by a percentage of the First Holdback such percentage being determined
as
follows:
(A) by subtracting NTM EBITDA from $1,485,128.80;
(B) by dividing the result in subparagraph (1) above
by
$297,025.80 (the difference between NTM EBITDA and LTM EBITDA); and
(C) by multiplying the result of subparagraph (2)
above by
the First Holdback;
For example, if the NTM EBITDA was determined to be
$1,346,329.00
then the calculation would be as follows: (A) $1,485,128.80 - $1,346,329.00 =
$138,799.00; (B) $138,799.00/$297,025.80 = $0.47; and (C)
($0.47)($2,851,447.20) =
$1,340,180.20. In this example, the Amended Principal amount of the First
Note would
be $1,536,025.80 (Initial Principal less the result in subparagraph (C)
above).
(d) If the Amended Principal amount of the First Note is less
than
the Initial Principal amount, then Seller shall transfer the First Note to
Purchaser
for cancellation and Purchaser shall issue and deliver to Seller an amended
and
restated First Note (the "Amended First Note"), reflecting the Amended
Principal
amount. Within seven (7) days after the issuance of the Amended First Note,
Seller
shall pay to Purchaser in cash or in Common Stock the amount representing the
excess
interest payment paid to Seller on the First Note or by further reducing the
principal amount of the Amended First Note.
(iv) On the Closing Date, the Purchaser shall execute and deliver an
interest bearing, unsecured tax promissory Note in the principal amount of
$500,000.00 (the "Tax Note") substantially in the form attached hereto as
Annex VI;
(v) On the Closing Date, Purchaser shall assume the Assumed
Liabilities as
defined herein; and
Section 2.2 Post-Closing Adjustments to Consideration.
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(a) As promptly as practicable, and in any event not more than
ninety (90)
days following the Closing Date, Purchaser, together with its accountants,
shall
prepare and deliver to Seller's accountants a proposed final closing balance
sheet
(the "Proposed Final Closing Balance Sheet") for the period ended on the
Closing
Date, prepared on a basis consistent with the Purchaser's 1997 balance sheet.
The
Proposed Final Closing Balance Sheet shall be accompanied by a report of
Purchaser's
accountants. The Seller and Seller's accountants shall have the right to
consult
during reasonable business hours with appropriate personnel of Purchaser and
Purchaser's accountants and have access to, and review and make copies of,
the work
papers of Purchaser and Purchaser's accountants with respect to the
preparation of
the Proposed Final Closing Balance Sheet.
(b) (i) The Seller may dispute the Proposed Final Closing Balance
Sheet
prepared by Purchaser and Purchaser's accountants by notice to Purchaser
setting
forth in reasonable detail the amounts in dispute and the basis for such
dispute
within forty-five (45) days of its receipt of the Proposed Final Closing
Balance
Sheet. If the Seller fails to deliver a notice of objections within such
45-day
period, the Seller shall be deemed to have accepted the Proposed Final Closing
Balance Sheet which shall then constitute the final Closing Balance Sheet (the
"Final
Closing Balance Sheet").
(ii) If the amount of Debt or the balance in the Working
Capital on
the Proposed Final Closing Balance is in dispute, Purchaser's accountants and
the
Seller's accountants shall attempt in good faith to resolve such dispute, and
any
resolution as to any disputed amounts shall be final, binding and conclusive.
If
there is no resolution of any such dispute within fifteen (15) days of the
date of
receipt by Purchaser of a written notice of dispute, Purchaser and the Seller
shall,
within five (5) additional days, retain Coopers & Xxxxxxx, L.L.P., which firm
shall,
within thirty (30) days of such submission, resolve such remaining dispute,
and
provide written notice of such resolution by facsimile, confirmed by mail, and
such
resolution shall be binding and conclusive. The fees and disbursements of
Coopers &
Xxxxxxx, L.L.P. shall be borne by Purchaser in the proportion that the
aggregate
amount of disputed items submitted to Coopers & Xxxxxxx, L.L.P. are in
Seller's
favor, and any of the remaining amount shall be borne by Seller. After
resolving the
items in dispute, Coopers & Xxxxxxx, L.L.P. shall prepare and deliver a Final
Closing
Balance Sheet and a certification of the conclusions thereon.
(iii) If the amount of cash in Working Capital on the
Final
Closing Balance Sheet is less than $140,000.00, or if there is any Debt, then
Seller
shall pay to Purchaser, in cash, the difference between such amount and
$140,000.00,
plus the Debt amount within seven (7) days after receiving a copy of the
Final
Closing Balance Sheet.
Section 2.3 Additional Consideration. Within ninety (90) days after
February
28,1999 upon presentation of financial statements accompanied by a report of
Purchaser's
accountants demonstrating that NEWCO's NTM EBITDA exceeds $1,485,128.80, the
Seller
shall receive additional consideration (the "Additional Consideration"). The
amount
of Additional Consideration shall be eight (8) times the amount by which the
NTM
EBITDA exceeds $1,485,128.80. Purchaser shall pay to Seller any Additional
Consideration as follows:
(i) Within ninety (90) days after February 28, 1999, Seller shall
receive
thirty seven percent (37%) of the Additional Consideration in cash (the
"Additional
Cash Portion");
(ii) Within ninety (90) days after February 28, 1999, Seller
shall
receive thirty eight percent (38%) of any Additional Consideration in Issued
Shares
of Common Stock of Purchaser (the "Additional Common Stock"), which will be
valued
for purposes of the Additional Consideration at its current fair market value
determined in a manner consistent with Purchaser's common practices and taking
into
consideration the value of the common shares of Purchaser issued pursuant to
Purchaser's most recent acquisition occurring prior to the time of such
issuance (the
"Additional Common Stock Market Value");
(iii) Within ninety (90) days after February 28, 1999, Purchaser
shall
issue and deliver to Seller an interest bearing, unsecured, subordinated,
convertible
promissory note (the "Second Note") in the principal amount equal to
twenty-five
percent (25%) of the Additional Consideration (the "Second Note Initial
Principal").
(a) Seller shall not convert the Second Note until after the
final
determination of the principal amount of the Second Note (the "Second Note
Amended
Principal") determined in accordance with the FTM EBITDA calculation
(discussed
below). After the determination of the FTM EBITDA, the Second Note will be
convertible into Common Shares of Purchaser which will be valued at the time
of
conversion at the Additional Common Stock Market Value.
(b) The Second Note Initial Principal amount will be subject
to
adjustment within ninety (90) days after February 29, 2000, upon presentation
of
financial statements accompanied by a report of Purchaser's accountants
establishing
NEWCO's earnings before interest, taxes, depreciation and amortization for the
period
beginning March 1, 1999, and ending February 29, 2000 (the "Following Twelve
Month's
or (FTM) EBITDA"). The Second Note Amended Principal amount shall be
determined as
follows:
(1) If the FTM EBITDA does not exceed the NTM EBITDA,
then the
Second Note Amended Principal amount will be $0.00 and the Seller shall
return the
Second Note to Purchaser for cancellation.
(2) If the FTM EBITDA is equal to or greater than 125% of
NTM
EBITDA, then the Second Note Amended Principal will be maintained at the
amount of
the Second Note Initial Principal;
(3) If the FTM EBITDA is between 100% and 125% of the NTM
EBITDA, then the principal amount of the Second Note shall be reduced by a
percentage
of the Second Note Initial Principal (the "Second Holdback") determined as
follows:
(A) by subtracting the amount of the FTM EBITDA from
125%
of the NTM EBITDA;
(B) by dividing the result of subparagraph (A) above
by the
difference between FTM EBITDA and NTM EBITDA; and
(C) by multiplying the result of subparagraph (B)
above by
the Second Note Initial Principal.
(D) by subtracting the result of subparagraph (C)
above
from the Second Note Initial Principal.
(c) If the Second Note Amended Principal is less than the
Second Note
Initial Principal amount, then Seller shall transfer the Second Note to
Purchaser for
cancellation and Purchaser shall issue and deliver to Seller an amended and
restated
Second Note (the "Amended Second Note"), reflecting the Second Note Amended
Principal amount. Within seven (7) days after the issuance of the Amended
Second
Note, Seller shall pay to Purchaser in cash or in Common Stock the amount
representing the excess interest payment paid to Seller on the Second Note or
by
further reducing the principal amount of the Amended Second Note.
Section 2.4 NTM/FTM EBITDA Calculation Determination. The Seller may
dispute
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the NTM EBITDA or the FTM EBITDA calculation set forth in the financial
statements
prepared by Purchaser and Purchaser's accountants by notice to Purchaser
setting
forth in reasonable detail the amounts in dispute and the basis for such
dispute
within forty-five (45) days of its receipt of such financial statements. If
the
Seller fails to deliver a notice of objections within such respective 45-day
period,
the Seller shall be deemed to have accepted the NTM EBITDA or FTM EBITDA. If
the NTM
EBITDA or FTM EBITDA amount is in dispute, Purchaser's and Seller's
accountants shall
attempt in good faith to resolve such dispute, and any resolution as to any
disputed
amounts shall be final, binding and conclusive. If there is no resolution of
any
such dispute within fifteen (15) days of the date of receipt by Purchaser of a
written notice of dispute, Purchaser and the Seller shall, within five (5)
additional
days, retain Coopers & Xxxxxxx, L.L.P., which firm shall, within thirty (30)
days of
such submission, resolve such remaining dispute, and provide written notice of
such
resolution by facsimile, confirmed by mail, and such resolution shall be
binding and
conclusive. The fees and disbursements of Coopers & Xxxxxxx, L.L.P. shall be
borne
by Purchaser in the proportion that the aggregate amount of disputed items
submitted
to Coopers & Xxxxxxx, L.L.P. are in Seller's favor, and any of the remaining
amount
shall be borne by Seller. After resolving the items in dispute, Coopers &
Xxxxxxx,
L.L.P. shall prepare and deliver financial statements for the period beginning
March
1, 1998 and ending February 28, 1999, or beginning March 1, 1999 and ending
February
29, 2000, as the case may be, and a certification of the NTM EBITDA or FTM
EBITDA set
forth therein.
Section 2.5 Issued Shares. The Issued Shares shall be issued by
Purchaser in a
transaction exempt from the registration requirements of the Securities Act of
1933,
as amended (the "Securities Act"), and applicable state securities laws and
shall
constitute "restricted securities" as such term is defined in Section 144
promulgated
under the Securities Act.
Section 2.6 Interest on First and Second Note. The First Note and the
Second
Note, if any, shall bear interest, respectively, on the unpaid principal
balance at a fixed rate per
annum equal to 8.0% in the amounts and pursuant to the terms specified in
the respective Note. The First and Second Note will be payable in full in
five (5)
years from the time of issuance, with interest paid quarterly to Seller.
Section 2.7 Tax Note. The Tax Note shall be payable in full in two
years and
Shall bear interest on the unpaid principal amount at a fixed rate per annum
equal to ten
percent (10%) in the amount and pursuant to the terms specified on Annex VI
attached
hereto. The Tax Note will not be convertible into Common Shares of Purchaser.
Interest and principal on the Tax Note will be paid yearly.
Section 2.8 Allocation of Purchase Price. The Consideration set forth in
Section 2.1, and any Additional Consideration paid in accordance with Section
2.3 hereof shall
be allocated among the Assets for all purposes (including financial reporting
and tax purposes) as
set forth in this Section 2.8. Seller and Purchaser each hereby
covenants and agrees that it will not take a position on any income tax
return,
before any governmental agency charged with the collection of any income tax,
or in
any judicial proceeding that is in any way inconsistent with the allocation
set forth
herein.
Section 3.
Representations and Warranties of Seller and STOCKHOLDER.
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Seller and STOCKHOLDER hereby jointly and severally represents and
warrants to
and for the benefit of Purchaser as follows:
Section 3.1 Organization. Seller is a corporation duly organized,
validly
existing and in good standing under the laws of the State of Utah. Seller is
duly qualified or
licensed to do business and is in good standing as a foreign corporation in
each state and other
jurisdiction in which the ownership, lease or operation of the assets and
properties or the conduct
of its business requires such qualification or
licensing, as set forth on Schedule 3. l hereto, except where the failure to
be so
qualified would not have a material adverse effect upon the Seller or the
Business.
Except for the jurisdictions in which Seller is incorporated or is qualified
or
licensed as a foreign corporation, (i) no other jurisdiction has claimed,
orally or
in writing, that Seller is required to be licensed or qualified as a foreign
corporation therein, (ii) Seller has never filed any franchise, income or
other tax
return in any other jurisdiction, based upon the ownership, lease or operation
of
property or assets therein or the derivation of income therefrom, and (iii)
Seller
does not own, lease or operate any property in any other jurisdiction, and the
Assets
are not located in any other jurisdiction.
Section 3.2 Subsidiaries. Seller has no direct or indirect subsidiaries
and
does not own, hold or control, directly or indirectly, any shares of capital
stock or any equity,
ownership, management or voting interest in any corporation, general or
limited
partnership, limited liability company, joint venture, business trust or other
business entity or association except as set forth on Schedule 3.2.
Section 3.3 Power and Authority. Seller has all requisite right, power
and
authority, corporate or otherwise, to conduct its business and affairs
(including the Business) as
presently conducted and as proposed to be conducted, to own, lease and operate
its assets and
properties (including the Assets), and to execute, deliver and perform its
obligations under, this
Agreement and the other agreements and instruments to be executed and
delivered by Seller
hereunder (the "Related Seller Agreements"). The
execution and delivery by Seller of this Agreement and the Related Seller
Agreements
and the performance by Seller of its obligations hereunder and thereunder have
been
duly and validly authorized by all requisite action, corporate or otherwise,
of
Seller.
Section 3.4 Enforceability. This Agreement and the Related Seller
Agreements
Have been, or at Closing will have been duly and validly executed and
delivered on behalf
of Seller and constitute or will constitute legal, valid and binding
obligations of
Seller, enforceable against Seller in accordance with their respective terms,
except
as such enforcement may be limited by applicable bankruptcy, insolvency,
receivership, reorganization, moratorium and other similar laws now or
hereafter in
effect relating to or affecting creditors' rights and remedies generally, and
by
general principles of equity, whether applied by a court of law or in equity.
Section 3.5 No Conflicts. The execution and delivery by Seller of this
Agreement and the Related Seller Agreements and the performance by Seller of
the transactions
and obligations contemplated hereby and thereby do not and will not, directly
or indirectly, (a)
violate, conflict with, or constitute a breach of or a default (or an event
that, after the giving of
notice or the lapse or time or both, would constitute a default) under, any
provision of (i) its
articles of incorporation, bylaws or other charter or organizational
documents, (ii) any agreement
among its shareholders or between Seller and its shareholders, (iii) any
contract, obligation, note,
security
agreement, mortgage, bond, indenture, lease, loan agreement, debt instrument
or other
instrument, commitment or agreement to which Seller is a party or by which
Seller or
any of its assets (including the Assets) is or may be bound, or (iv) any
license,
franchise, approval, certificate, permit or authorization held by Seller or
applicable to its assets (including the Assets), which violation, conflict,
breach or
default would have a material adverse effect upon the Seller or the Business;
(b)
violate any applicable federal, state, local or foreign law, statute, rule,
regulation or ordinance, or any order, injunction, writ, judgment, decree or
ruling
of any court, arbitrator or governmental, quasi-governmental, administrative
or
regulatory body, agency or authority ("Governmental Authority"), which
violation
would have a material adverse effect upon the Company or the Business; (c)
result in
the creation or imposition of any mortgage, lien, pledge, security interest,
conditional sales rights under any applicable bulk sales or bulk transfer law
or
other title retention agreement, or any other restriction, encumbrance or
claim of
any kind or description on or against any of Sellers' assets (including the
Assets);
or (d) constitute an event which would permit any individual, Entity or
Governmental
Authority (collectively, "Person") to terminate or modify any agreement,
instrument
or commitment or to accelerate the maturity of any debt, liability or
obligation of
Seller.
Section 3.6 Defaults. It is not presently in material breach or
violation of
or material default under or conflict with any item set forth in Section
3.5(a) or (b); and no event
or condition has occurred which, after the giving of notice or the lapse of
time or both, could be reasonably expected to result in any such material
breach,
violation, default or conflict.
Section 3.7 Consents. Except as set forth on Schedule 3.7, no consent,
authorization, permit or approval of, notice or report to, or filing or
registration with, or waiver
(collectively, "Consents") by, any Person is necessary for Seller to execute
and deliver this
Agreement and the Related Seller Agreements and to perform its
obligations hereunder and thereunder. Prior to the Closing Date, Seller shall
obtain
all Consents listed on Schedule 3.7 unless failure to obtain such would not
have a
material adverse effect on the Seller or the Business.
Section 3.8 Litigation. There are no actions, suits, claims,
investigations,
arbitrations, hearings or other proceedings (whether civil, criminal,
administrative, investigative
or informal) (collectively, "Proceedings") pending or, to Seller's best
knowledge, threatened by,
before or involving any court, arbitrator or Governmental Authority (i)
against or affecting
Seller, the Business or the Assets, (ii) in which any Person has sought or is
reasonably likely to
seek to restrain or prohibit, or to obtain
damages or other relief in connection with, this Agreement or the Related
Seller
Agreements or the transactions contemplated hereby or thereby, (iii) which, if
determined adversely to Seller, would be reasonably likely to have a material
adverse
effect on Seller, the Business or the Assets or Seller's ability to perform
its
obligations hereunder or to consummate the transactions contemplated hereby,
or (iv)
involving in whole or in part the issue of criminal liability by Seller or any
of its
officers, directors, employees or agents, or pertaining to the Assets or the
Business. Neither Seller nor any of the Assets are subject to any outstanding
judgment, order, writ, injunction or governmental or regulatory order or
authority.
Seller is not presently engaged in any legal action to recover moneys due from
damages caused by or to enforce its rights against any third party.
Section 3.9 Ability to Dispose of the Assets. Seller is the sole legal
owner
of the Assets and has the sole dispositive power with respect to the Assets.
Section 3.10 Brokers' Fees. Except as set forth on Schedule 3.10, no
broker,
finder, investment broker or similar agent is or shall be entitled to receive
any fee,
commission or other remuneration or compensation relating to the transactions
contemplated by this Agreement based on any action taken by or on behalf of
Seller.
Section 3.11 Capitalization. The authorized capital stock of Seller
consists
of 50,000 shares of common stock, par value $1.00 per share, of which 1,000
shares are issued
and outstanding all of which are owned beneficially and of record by
STOCKHOLDER.
Section 3.12 Dividends. Seller has no liability or indebtedness for
dividends
or other distributions declared or accumulated but unpaid with respect to any
of its
outstanding capital stock. Since December 31, 1997, Seller has not declared
or paid
any dividends or other distributions to its shareholders.
Section 3.13 Corporate Documents. Seller has furnished to Purchaser
true and
complete copies or originals, as the case may be, of the following documents:
(i) the
articles of incorporation and bylaws of Seller; (ii) the minute books of
Seller
containing all records required to be set forth of all proceedings, consents,
actions
and meetings of the shareholders and board of directors (and all committees
thereof)
of Seller; and (iii) the stock transfer books of Seller setting forth all
issuances
and transfers of capital stock of Seller.
Section 3.14 Financial Statements. Seller has furnished (or, with
respect to
the 1997 financial statement prior to the Closing will forward,) to Purchaser
true and
complete copies of Seller's audited balance sheets as of December 31, 1996 and
1997,
and the related statements of operations and cash flows for the fiscal years
then
ended (together with the report thereon of an independent certified public
accountants, as to the 1997 financial statements and to the 1996 financial
statements, and in each case together with the notes thereto). All such
Financial
Statements (together with all related schedules and notes) (i) present fairly
the
financial condition, results of operations and cash flows of Seller as of the
respective dates thereof and for the respective periods covered thereby; (ii)
have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated and with prior periods
(except
for changes specifically noted therein); (iii) have been prepared in
accordance and
consistent with the books and records of Seller which have been maintained in
accordance with sound business practices, including the maintenance of an
adequate
system of internal controls; and (iv) reflect reserves which are reasonably
adequate
for all known or reasonably contemplated liabilities or obligations of any
nature,
whether accrued, absolute, fixed, contingent or otherwise and whether due or
to
become due, and all reasonably anticipated losses.
Section 3.15 Absence of Undisclosed Liabilities. As of the date hereof,
except
as set forth in the balance sheet of Seller as of December 31, 1997 and the
related notes
thereto ("1997 Balance Sheet"), Seller does not have any debt, liability,
guarantee,
demand or obligation of any kind or nature whatsoever, whether known or
unknown,
whether accrued, absolute, contingent or otherwise, and whether due or to
become due,
except for those that (i) are not required by generally accepted accounting
principles to be included in the 1997 Balance Sheet, and (ii) have been
incurred
after the date of the 1997 Balance Sheet in the ordinary course of business
and are
usual and normal in amount, both individually and in the aggregate. To the
best of
Seller's knowledge, there has been no circumstance, condition, event or
arrangement
that could be reasonably expected to give rise to any additional debts,
liabilities
or obligations of Seller.
Section 3.16 No Material Adverse Change.
(a) Since December 31, 1997, (i) the business of Seller has been
conducted
only in its historic, ordinary course, (ii) there has been no material adverse
change
in the Assets, liabilities, Business, operations, affairs, condition
(financial or
otherwise) or prospects of Seller; and (iii) there has been no damage,
destruction,
loss, occurrence or event (whether or not insured against) which, either
singly or in
the aggregate, has had, or might reasonably be expected to have, a material
adverse
effect on the Assets, liabilities, Business, operations, affairs, condition or
prospects (financial or otherwise) of Seller.
(b) Without limiting the generality of the foregoing, since
December 31,
1997, there has not been any:
(i) Sale, assignment, transfer, lease or other disposition of
any
Assets, except of inventory and equipment to customers in the ordinary course
of
business for fair consideration;
(ii) Mortgage, pledge, lien, claim or other encumbrance,
created or
imposed on or against any Asset;
(iii) Capital expenditure (or series of related capital
expenditures) by Seller exceeding $25,000.00;
(iv) Material destruction, damage to or loss (whether or not
insured
against) of any Assets;
(v) Labor trouble, dispute, strike, work stoppage, or other
event or
condition of any character, actual or threatened;
(vi) Declaration, setting aside, or payment of any dividend or
other
distribution in respect of the capital stock of Seller, or any direct or
indirect
redemption, purchase, or other acquisition by Seller of any of its shares of
capital
stock;
(vii) Entering into any agreement, contract, lease or
license (or
series of related instruments), either involving more than $25,000.00, or
outside the
ordinary course of business;
(viii) Modification, amendment, cancellation or termination
of any
contract, agreement, lease or license to which Seller is a party, except in
the
ordinary course of business;
(ix) Commencement or notice or threat of commencement of any
Proceeding against or affecting Seller, the Business or the Assets;
(x) Incurrence of indebtedness for borrowed money or increase
in the
long-term indebtedness of Seller;
(xi) Amendment to Seller's articles of incorporation or bylaws;
(xii) Capital investment in, loan to or acquisition of the
securities or assets, or any other Person (other than in the ordinary course
of
business);
(xiii) Grant of any license or sublicense of any Assets or
any
rights under or with respect to any Intellectual Property;
(xiv) Any transaction between Seller and any of its
officers,
directors or employees, or involving any of the Assets and involving any
officers,
directors or employees of Seller;
(xv) Waiver, cancellation, compromise or release of any
material right
or claim of Seller, or forgiveness or cancellation of any material debt or
claim;
(xvi) Loan by Seller to any Person, or guaranty by Seller
of any
loan, debt or other obligation of any other Person;
(xvii) Increase in the salary, benefits or other
compensation
payable or to become payable by Seller to any of its officers, directors,
employees
or consultants other than normal merit increases, or the declaration, payment,
or
commitment or obligation of any kind for the payment by Seller of a bonus or
other
additional salary or compensation to any such person;
(xviii) Agreement, contract, plan, policy or arrangement
binding
upon Seller either created or modified as to severance or termination benefits
of any
employee, officer, director or agent;
(xix) Failure to maintain levels of inventory proportionate
to
Seller's existing business, or alteration of the inventory practices
maintained by
Seller during the previous twelve months;
(xx) Other events or conditions of any character that,
individually or in the aggregate, (A) have or might reasonably have a material
adverse effect on the Assets, Business, operations, financial condition,
liabilities
or prospects of Seller, or (B) cause or might reasonably be expected to cause
Seller
to be in breach of any of its representations, warranties or covenants
hereunder; or
(xxi) Any agreement, commitment, arrangement or
understanding by
Seller to do any of the actions described in the preceding clauses (i) through
(xvi).
Section 3.17 Taxes.
(a) Within the times (or if later all penalties and interest
related
thereto having been paid in full) and in the manner prescribed, Seller has
accurately
prepared in good faith and properly filed all federal, state, local and
foreign tax
returns, reports and forms required by law, rule, regulation or otherwise to
be filed
and has paid all taxes, assessments and penalties due and payable, and Seller
has
furnished to Purchaser true and complete copies of all such tax returns,
reports and
forms so filed since December 31, 1994. All tax returns, reports and forms
filed by
Seller accurately set forth all items (to the extent required to be included
or
reflected in such returns) relevant to its future tax liabilities, including
the tax
bases of the Assets. Seller has fully paid or has made adequate provision in
the
1997 Balance Sheet for all federal, state, local and foreign taxes for the
period
ending on the date of the 1997 Balance Sheet. Seller has timely collected,
withheld
and paid over all taxes required to be withheld by any federal, state, local
or
foreign taxing authority and complied with all information reporting
requirements
related thereto.
(b) There are no disputes pending or overtly threatened by any
taxing
authority as to taxes of any nature payable by Seller. No examinations or
audits of
the federal, state, local or foreign tax returns of Seller are currently in
progress
or, to the best knowledge of Seller, threatened or proposed. No deficiency or
adjustment for any tax has been claimed, proposed or assessed against Seller
by any
taxing authority. Seller has not waived or extended any applicable statute of
limitations relating to the assessment of federal, state, local or foreign
taxes.
Seller is not a party to any tax indemnity, tax sharing, or tax allocation
agreement.
There are no tax liens upon any property or assets of Seller except for taxes
not yet
due and payable.
(c) Seller has not filed and will not file any consent agreement
under
Section 341(f) of the Code or agreed to have Section 341(f) of the Code apply
to any
disposition of subsection (f) assets (as such term is defined in Section
341(f)(4) of
the Code) owned by Seller. The acquisition of the Assets by Purchaser will
not
result in the payment of any "excess parachute payment" within the meaning of
Section
280G of the Code, and Seller is not a party to any agreement, plan or
arrangement
that could give rise to any payment that would not be deductible pursuant to
Section
280G or Section 162 of the Code. No outstanding debt obligations of Seller
are
"corporate acquisition indebtedness" within the meaning of Section 279(b) of
the
Code. Seller is not a "United States real property holding company" as
defined in
Section 897(c)(2) of the Code. Seller has not filed an election under Section
338(g)
or Section 338(h)(10) of the Code or caused or been the subject of a deemed
election
under Section 338(e) of the Code. Seller has not made any payments, and is
not
obligated to make any payment, and is not a party to any agreement, plan or
arrangement that under any circumstances could obligate it to make any
payments that
will not be deductible under Section 162(m) of the Code.
(d) As used in this Section 3.17, the term "tax" includes all
federal,
state, local or foreign income, franchise, profits, gross receipts, value
added, net
worth, real property, personal property, sales, transfer, use, service, ad
valorem,
stamp, environmental, windfall profits, employment, social security, Medicare,
disability, workers' compensation, unemployment compensation, occupation
severance,
purchaser premiums, excise, withholding, payroll and other taxes, charges,
fees,
levies, tariffs, duties and other assessments of any kind or nature, imposed
by the
laws and regulations of any governmental jurisdiction (federal, state, local
or
foreign) or by any taxing authority (federal, state, local or foreign) and all
interest, fines and penalties related thereto.
Section 3.18 Title to and Condition of Assets. The Assets constitute
all of
the assets, rights and interests of every kind and description that are used
by Seller in the
Business or necessary for the Business and will permit Purchaser to operate
the
Business in compliance with all legal requirements substantially as conducted
by
Seller. All tangible Assets are physically located at 000 Xxxxx Xxxxxx
Xxxxxxx,
Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000 and 0000 Xxxx Xxxxxx Xxxxxx Xxxx, Xxxxx
000X,
Xxxxxxxxxx, Arizona. Seller has and will transfer to Purchaser at Closing
good,
valid, marketable and exclusive title to and rightful and peaceful possession
of all
of the Assets, free and clear of any and all mortgages, liens, security
interests,
pledges, charges, encumbrances, equities, rights of first refusal, options to
purchase, equitable interest, deeds of trust, claims, easements,
rights-of-way,
covenants, conditions or restrictions of any kind or nature whatsoever
("Liens"),
except for (i) those disclosed in the 1997 Balance Sheet; (ii) liens for
current
taxes not yet due and payable; and (iii) liens disclosed on Schedule 3.18
hereto
which will be removed and released at or prior to the Closing. Seller is in
rightful
possession of all premises and personal property leased to it from others.
All
tangible personal property of Seller is generally in good operating condition
and
repair (ordinary wear and tear excepted), has been utilized or serviced only
in a
manner that would not void or limit the coverage of any warranty thereon, has
been
properly maintained and are adequate and suitable for its intended purposes.
Section 3.19 Real Property. Seller does not, directly or indirectly,
own any
Real property. Schedule 3.19 hereto contains a true and complete list of all
leases and
subleases pursuant to which Seller is the lessee or lessor of any real
property,
complete and accurate copies of which leases have been previously furnished to
Purchaser. Seller has a valid leasehold in and enjoys peaceful and quiet
possession
of all property leased under such leases.
Section 3.20 Personal Property Leases. Schedule 3.20 hereto sets forth
each
lease of
------------------
personal property under which Seller is either a lessee or lessor of certain
of the
Assets. Each such lease is in full force and effect and is a valid and
binding
obligation of Seller and of each of the parties thereto. Seller is not, and
Seller
does not have any knowledge that any other party is, in default with respect
to any
material term or condition of any such lease, and no event has occurred which
through
the passage of time or the giving of notice, or both, would constitute a
material
default thereunder or would cause the acceleration of any obligation of any
party
thereto or the creation of a lien or encumbrance upon any Asset.
Section 3.21 Inventory. All of Seller's inventory of raw materials,
work in
process and finished goods, parts and supplies (including inventory on
consignment) consists of
items of a quantity and quality usable and saleable in the ordinary course of
business by Seller (net of any reserve reflected in the 1997 Balance Sheet),
except
for obsolete, defective, damaged and slow-moving items and items below
standard
quality, all of which have been written down on the books of Seller to net
realizable
market value or have been provided for by adequate reserves in the 1997
Balance
Sheet. All inventories of finished goods consist of items that have been
manufactured in accordance with, and which meet, applicable industry
standards. All
inventories are correctly marked. The inventories shown on the 1997 Balance
Sheet
are based on quantities determined by physical count or measurement and are
valued at
the lesser of cost (determined on a first-in, first-out basis) or market value
and on
a basis consistent with that of prior years and are adjusted for excess and
obsolescence in compliance with Seller's accounting policies which have been
delivered in writing to Purchaser.
Section 3.22 Intellectual Property.
---------------
(a) Schedule 3.22 sets forth a complete and accurate list and brief
description of all patents, trademarks, logos, service marks, trade names,
corporate
names, fictitious names and copyrights, and each application therefor, which
are
either owned by Seller or which are used by Seller in the Business and, in
each case
where Seller is not the owner thereof, the name of the owner thereof. Except
as set
forth in Section 3.22, Seller is the exclusive owner of or possesses adequate
and
valid licenses and other rights to use all of the items set forth in Schedule
3.22
hereto and all trade secrets, licenses, inventions, processes, discoveries,
developments, designs, formulas, know-how, drawings, customer and supplier
lists,
software, confidential information and other proprietary information and all
other
proprietary rights, intangible assets and intellectual property, and all
copies and
tangible embodiments thereof in whatever form or medium (collectively,
"Intellectual
Property") necessary for the operation of the Business as presently conducted
and as
proposed to be conducted.
(b) All rights of Seller in and to its Intellectual Property will
be
transferred to Purchaser at the Closing.
(c) Seller has taken all necessary and desirable action to maintain
and
protect each item of Intellectual Property that it owns or uses. To Seller's
best
knowledge, Seller has not interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of any
third
parties, and Seller has never received any charge, complaint, claim, demand or
notice
alleging any such interference, infringement, misappropriation or conflict
(including
any claim that Seller must license or refrain from using any Intellectual
Property
rights of any third party). To Seller's best knowledge, no third party has
interfered with, infringed upon, misappropriated or otherwise come into
conflict with
any Intellectual Property rights of Seller. No claim, demand, assertion,
action,
suit, arbitration, hearing, investigation or proceeding is pending or, to the
best
knowledge of Seller, threatened, which pertains to or challenges the validity,
ownership or enforceability of any right of Seller in respect to of
Intellectual
Property. To Seller's best knowledge, the continued operation of the Business
as
currently conducted will not interfere with, infringe upon, misappropriate or
otherwise come into conflict with any Intellectual Property rights of any
third
parties.
(d) Seller is not a party to any agreement, document, arrangement
or
understanding pursuant to which Seller has licensed or granted any right or
interest
in, to or under any of its Intellectual Property. Seller is not obligated or
under
any liability whatsoever to make any payment, by way of fees, royalties or
otherwise,
to any owner or licensor of, or other claimant to, any of the Intellectual
Property.
Seller has not disclosed any of its trade secrets or other proprietary or
confidential information to any Person, except pursuant to a loan or other
agreement
obligating the recipient to maintain the confidentiality thereof. To the best
of
Seller's knowledge, no employee of Seller is subject to any agreement,
arrangement or
commitment with any former employer or other person, or is subject to any
judgments,
order, decree or ruling of any court, arbitrator or Governmental Authority
regarding
confidential information, or rights or restrictions on competition, that would
otherwise affect such employee's ability to perform his duties to Seller.
Seller has
never agreed to indemnify any person for or against any interference,
infringement,
misappropriation or other conflict with respect to any item of its
Intellectual
Property.
Section 3.23 Name. Seller has the exclusive right in perpetuity to use
the
name "Call Business Systems, Inc." in the State of Utah and Arizona and any
derivations and
variations thereof, for and in connection with the Business, and has not
granted and
will not grant to any other Entity the right to use, and will not after the
Closing
use, such name as either corporate names, trade names or fictitious names.
Section 3.24 Relationships with Suppliers and Customers. Schedule 3.24
contains a complete and accurate list of (i) the names, addresses and dollar
amounts of business
of each of the 20 largest customers of the Seller, in terms of sales during
1997, and (ii) the name,
address and dollar amounts of business of each of the Company's 10 largest
suppliers during the
1997 fiscal year. Since December 31, 1997, no supplier
or customer of Seller has canceled any contract or order or has indicated any
intention to terminate or materially alter its existing business relationship
with
Seller, whether as a result of the transactions contemplated hereby or
otherwise
which cancellation or termination would have a material advance effect on the
business of Seller. Seller is not involved, and Seller has no knowledge of
any facts
or circumstances which is reasonably expected could result, in any material
claim,
dispute or controversy, with any of its material suppliers or customers.
Section 3.25 Labor and Employment Matters.
-----------------------
(a) Schedule 3.25(a) contains a true list of all persons employed
full
time by Seller as of March 31, 1998 or as of the Closing Date, whichever date
is
later.
(b) Seller is not a party to any contract, collective bargaining
agreement
or other agreement with any labor union including any collective bargaining
agreement. There has never been an actual or threatened labor dispute,
strike,
picket, work slowdown, work stoppage or any other job action at any business
location
of Seller. There is no unfair labor practice complaint against Seller pending
before
the National Labor Relations Board or any state or local agency, no pending or
threatened labor strike or other material labor trouble affecting Seller, no
material
labor grievance pending or threatened against Seller, no pending
representation
question respecting the employees of Seller, no pending or threatened
arbitration
proceedings arising out of or under any collective bargaining agreement to
which
Seller is a party, and no basis for which a claim may be made under any
collective
bargaining agreement to which Seller is a party or under which Seller is
alleged to
be obligated. No union organizing attempts have been made or threatened.
Seller has
not received a demand for recognition from any labor union with respect to,
and, to
Seller's knowledge, no attempt has been made or is being made to organize, any
of the
persons employed by Seller.
(c) Seller is in compliance in all material respects with all
applicable
laws, rules and regulations respecting the employment of, including but not
limited
to, fair employment practices, terms and conditions of employment, and wages
and
hours. Seller has not engaged in any unfair or illegal labor practice, and
there are
no charges or claims of employment discrimination or unfair labor practices
pending,
or, to the best knowledge of Seller after due inquiry, threatened against,
Seller.
(d) No proceedings or claims are pending or, to the best knowledge
of
Seller, threatened against Seller with respect to any violation or alleged
violation
of any applicable federal, state or local laws, rules and regulations relating
to the
employment of labor, including, without limitation, those related to wages and
hours,
collective bargaining, discrimination on any basis, including without
limitation, on
the basis of race, color, religion, sex, national origin or age, and Seller
has
complied in all material respects with all applicable laws and regulations
relating
to employment of labor.
(e) Seller has made, or will have made, payment in full to all of
its
employees through the end of the payment period ending immediately prior to
the
Closing Date of all wages, salaries, commissions, bonuses, benefits and other
compensation due to such employees or otherwise arising under any policy,
practice,
agreements, plan, program, statute or law.
(f) Seller, STOCKHOLDER and their affiliates are in compliance with
their
obligations, if any, pursuant to the Workers Adjustment and Retraining
Notification
Act of 1988, as amended ("WARN"), and all other notification obligations
arising
under any federal, state or local, or foreign statute, rule or regulation.
Section 3.26 Employee Benefit Plans.
-----------------
(a) List of Plans. Except for the plans set forth on Schedule 3.26
hereto,
Seller does not now nor has it ever established, maintained, sponsored or
contributed to any "employee benefit plan. as such term is defined in Section
3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
any
other welfare, bonus, deferred compensation, retirement, incentive, pension,
profit
sharing, stock purchase, stock option, stock appreciation right, severance, or
other
similar employee benefit plan, program, policy, arrangement or practice,
whether
formal or informal, written or oral (collectively, "Employee Plans"), covering
any
current or former employee, officer or director of Seller.
(b) Claims. No Proceeding with respect to any Employee Plan (other
than
routine claims for benefits) is pending or, to the best knowledge of Seller,
threatened, and the Company (and employees with responsibility for employee
benefits
matters) has no knowledge of any facts that it is reasonably expected could
form the
basis for any such action, suit, proceeding, hearing or investigation.
(c) ERISA Liabilities. Neither Seller, nor any of the Employee
Plans, nor
any trust created thereunder, nor, to the knowledge of Seller, any fiduciary
(as defined
in Section 3(21) of ERISA) thereof, is or has been in violation of, or has
incurred
any liability, directly or indirectly, under any provision of ERISA or the
Code or to
its Pension Benefit Guaranty Corporation ("PBCC"), other than liability for
premiums
due to the PBCC which, to the extent they are due and payable, have been paid.
(d) Severance Obligations. Seller has not entered into any
severance or
Similar arrangement in respect to any present or former employee that would
result in
the obligation, absolute or contingent, of the Purchaser to make any payment
to any
present or former employee following termination of employment.
(e) Liabilities Due to Agreement. The consummation of the
transactions
contemplated hereby will not (i) modify or accelerate any benefits or the
vesting of
benefits under any Employee Plan or constitute an event entitling any Person
to any
additional or other benefits, or (ii) result in any liability to Purchaser for
taxes,
penalties, interests or other claims resulting from any Employee Plan.
Section 3.27 Insurance. Schedule 3.27 hereto sets forth a complete and
accurate list of all of the insurance policies (showing the insurer, types of
coverage, policy
expiration dates, policy numbers, deductibles and policy limits as to each
such
policy) currently in force under which the Assets are insured or which provide
for
bonding and surety arrangements in connection with the Business. All such
policies
are in full force and effect and have been issued under valid policies for the
benefit of Seller by properly licensed insurance companies. The premiums on
such
policies have been paid as they became due and payable, and Seller is not in
default
with respect to payment of premiums on any such policy. All of the Assets of
a type
customarily insured are covered by effective insurance in amounts at least
equal to
their fair market value, and such insurance provides protection against losses
and
risks that are customarily insured against by comparable businesses.
Section 3.28 Contracts.
Except as set forth on Schedule 3.28, each lease, contract,
agreement,
license, understanding, indenture, mortgage, deed of trust, sales order,
obligation
and commitment ("Contract") to which Seller is a party, or by which it or any
of the
Assets are bound, (i) is in full force and effect and is a valid and binding
obligation of Seller and of the other parties thereto, enforceable by Seller
in
accordance with its terms, and (ii) if an Assigned Contract, may be
transferred by
Seller to Purchaser without penalty and will be enforceable by Purchaser.
Neither
Seller nor, to the best knowledge of Seller, any other party to such Contract
is in
any material respect in breach of or in default under any Contract, nor has
any event
or circumstance occurred which, with notice or lapse of time or both, would
constitute a material breach or default of the Contract. Seller has not
received
notice and has no reason to believe that any party to any Contract intends to
cancel
or terminate any Assigned Contract or to exercise or not exercise any option
thereunder.
(b) Schedule 3.28 hereto sets forth a complete and accurate list of
each
of the following Contracts to which Seller is a party or by which the Assets
are
bound: (i) any distributor's or manufacturer's representative or agency
agreement;
(ii) any output or requirements agreements; (iii) any agreement not entered
into in
the ordinary course of business; (iv) any indenture, mortgage, deed of trust,
lease
or any agreement that is unusual in nature, duration, or amount (including,
without
limitation, any agreement requiring the performance by the Seller of any
obligation
for a period of time extending beyond one year from the Closing Date involving
total
consideration of more than $10,000.00); (v) any contract with any Government
Authority, (vi) any Contract that is materially adverse to the business,
properties,
assets, liabilities, financial condition or results of operations of Seller;
(vii)
any Contract for the lease of personal property to or from any Person; (viii)
any
Contract for the purchase or sale of raw materials, commodities, supplies,
products
or other personal property, or for the furnishing or receipt of services, the
performance of which would extend over a period of more than one (1) year or
that
involves consideration in excess of $10,000.00; (ix) any Contract concerning a
partnership or joint venture; (x) any Contract under which it has created,
incurred,
assumed, guaranteed any indebtedness for borrowed money, or any capitalized
lease
obligation, or under which it has imposed a lien on any of the assets; (xi)
any
Contract concerning confidentiality or non-competition; (xii) any Contract
involving
any director, officer, stockholder or other affiliate of Seller; (xiii) any
Contract
for the employment of any individual on a full-time, part-time, consulting,
independent contractor or other basis or providing severance benefits; (xiv)
any
profit sharing, deferred compensation, severance, termination or other plan or
arrangement for the benefit of current or former directors, officers, or
employees;
(xv) any Contract under which it has advanced or loaned any amount to any of
its
directors, officers or employees; or (xvi) any Contract material to the Assets
or the
Business.
Section 3.29 Licenses. All licenses, rights, privileges, franchises,
permits,
approvals, consents and other authorizations related to the Assets reasonably
necessary for the
lawful conduct of the Business as it is presently conducted and reasonably
necessary to own,
operate, maintain and use the Assets in the manner in which they are now being
operated,
maintained and used, including all applicable zoning, environmental,
health, safety and other permits, have been timely obtained and are currently
in
effect, and Seller has not violated, and is not in violation of, any such
licenses,
rights, privileges, permits, franchises, consents or other authorizations.
Section 3.30 Product Liability Claims. No Proceeding is pending or, to
the
best knowledge of Seller, threatened against or affecting Seller, arising out
of any
injury to individuals or to property as a result of the ownership, possession
or use
of any product manufactured, sold, leased or delivered by Seller, and Seller
knows of
no facts, circumstances, actions or omission that could reasonably create the
basis
for any such Proceeding.
Section 3.31 Product Warranties. Schedule 3.31 sets forth a complete
and
Accurate description of all warranties and pending warranty and service
obligations of Seller to
its customers with respect to the products manufactured or sold by Seller
within the two year
period prior to the date of this Agreement, including the beginning and ending
dates of such
warranty obligations, and a summary of the warranty charges
incurred by Seller during 1996, 1997 and to date in 1998. Schedule 3.31 also
contains a copy of all such written warranties, and a list and amount of all
products
manufactured or sold by Seller. Each product manufactured, sold, leased or
delivered
by Seller to any of its customers has been in conformity with all applicable
contractual commitments and all express and implied warranties. Seller has no
current liability, and knows of no reasonable basis for any present or future
Proceeding against it giving rise to any liability, for replacement or repair
thereof
or other damages in connection therewith, subject only to the reserve for
product
warranty claims set forth on the 1997 Balance Sheet. There is no pending or,
to the
best knowledge of Seller, threatened Proceeding under such warranties.
Section 3.32 Compliance with Laws. Seller, the Business and the Assets
are and
have been in material compliance with all applicable federal, state, local and
foreign
laws, statutes, ordinances, rules, regulations, codes, licenses, permits,
orders,
judgments, decrees and other legal requirements (including, without
limitation, those
applicable to building, health, employment, labor, product liability, zoning,
occupational safety, conservation, unfair competition, labor practices or
corrupt
practices) which affect or are applicable to the Assets and the Business.
Section 3.33 Environmental Laws.
---------------
(a) Seller is, and at all times has been, in compliance in all
material
respects with all federal, state, local and foreign laws (whether common or
statutory), statutes, codes, rules, regulations, orders, injunctions, decrees,
judgments, compacts, treaties, conventions, legal doctrines, plans, demand
letters,
agreements with any governmental or regulatory authorities and all other
requirements
relating to pollution or the protection of health, safety or the environment
("Environmental Laws"), including without limitation the release, discharge or
emission of any Hazardous Substances (as defined below) into the environment
(including, without limitation ambient air, surface water, ground water, land
surface, or subsurface strata) and the manufacture, generation, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous
Substances, resulting from the operation of the Business or the ownership,
lease or
use of the Assets, or relating to any real estate currently or previously
owned but
leased by Seller.
(b) Seller has not received any notices, demand letters, citations,
summons, complaints or requests for information from, and no action, suit,
hearing,
investigation, order or other proceeding is pending or, to the best knowledge
of
Seller, threatened by or before any court, Governmental Authority or other
Person
regarding any actual or threatened violation of or liability under any
Environmental
Law.
(c) Seller is not subject to any judicial, executive, legislative,
regulatory or administrative ruling, order or decree arising under or relating
to any
Environmental Law.
(d) Seller has timely obtained, currently holds and is in
compliance in
all material respects with the provisions of all permits, licenses,
certificates,
consents and other authorizations and approvals required in connection with
the
operation of its business and the ownership, leasing or use of its assets and
properties under all Environmental Laws.
(e) Seller is not aware of any event, condition, circumstance,
activity,
practice, action or plan which is reasonably likely to (i) prevent continued
compliance with the foregoing, (ii) give rise to any liability under any
Environmental Law, including but not limited to liability based on or
resulting from
Seller's manufacturing, processing, distribution, use, treatment, storage,
disposal,
transport or handling, or the emission, discharge or release into the
environment of
any Hazardous Substance, (iii) give rise to any liability for remedial actions
(including removal, clean-up, response and monitoring), or (iv) otherwise have
a
material adverse effect on Seller or cause Seller to incur substantial costs.
No
Hazardous Substance has been used, stored, placed, treated, transported,
manufactured, generated, processed, deposited, distributed, handled, released,
deposited, spilled, discharged or disposed of on or under any property
currently or
previously owned or leased by Seller except for common household and office
products
in de-minimis quantities.
(f) There is no above-ground or underground storage tank located on
or
under, or to Seller's best knowledge any asbestos located on, any real
property or
structure owned or leased by Seller.
(g) As used herein, the term "Hazardous Substance" means (i) any
substance
or material heretofore or hereafter designated as "hazardous" or "toxic" under
the
Resource Conservation and Recovery Act, 42 U.S.C. Section 9601 et seq., the
Federal Water Pollution Control
-- --
Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C. Section 7401
et seq., the
Comprehensive Environmental Response Compensation and Liability Act of 1980,
42 U.S.C. Section
9601 et seq., or the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801 et seq., all as
amended and in the regulations promulgated thereunder pursuant thereto; (ii)
any "solid waste,"
"hazardous waste," "contaminant," "pollutant" or "infectious waste," as such
terms are defined in
any other Environmental Law at any time; (iii) asbestos, urea-
formaldehyde, polychlorinated biphenyls ("PCBs"), methylene chloride,
trichlorethylene, 1,2-transdichloreoethyline, dioxins, dibenzofurans, nuclear
fuel or
material, chemical waste, radioactive material, explosives, known carcinogens,
petroleum products and byproducts, and other dangerous, toxic or hazardous
pollutants, contaminants, chemicals, materials or substances listed or
identified in,
or regulated by, any Environmental Law; (iv) any substances listed in the
United
States Department of Transportation Table (49 C.F.R. 172.17d.101 and
amendments
thereto) or by the Environmental Protection Agency (or any successor agency)
as
hazardous substances (40 C.F.R. Part 302 and amendments thereto); and (v) any
additional substances, materials and wastes which at any time become
classified or
considered to be hazardous or toxic under any Environmental Law.
Section 3.34 No Loss of Rights or Legal Obstacles. The execution and
delivery
of this Agreement and the Related Seller Agreements by Seller and its
performance of the
transactions and its obligations contemplated hereby and thereby do not and
will not:
(a) result in any loss of any material legal right of Seller being transferred
to
Purchaser; (b) result in any termination, modification or cancellation of any
Assigned Contract; (c) result in the termination, modification, or
cancellation of,
give rise to any right of termination, modification, or cancellation with
respect to,
give rise to the acceleration of any performance required under, result in any
increase in any payment due or other liability under, change the performance
required
under, or otherwise adversely affect any material contract, or modify any
material
contract, or result in, or require, the creation or imposition of any material
lien,
charge, or encumbrance upon the Assets, or result in the termination or
impairment of
any material permit, license, franchise, or authorization pertaining to the
Assets;
or (d) to the best of Seller's knowledge, adversely affect the Assets or the
Business
in any material respect.
Section 3.35 Bank Debt. Schedule 3.35 hereto sets forth a complete and
accurate list of all loans and credit agreements, line of credit, promissory
notes, loan agreements
and other arrangements between Seller and any bank, financial institution,
lender or creditor of
any sort.
Section 3.36 Transactions with Shareholders and Employees. Seller has
no
outstanding loans or other advances to, and is not a party to any lease,
license or
other agreement, understanding or arrangement with, any shareholder, officer,
director or employee of Seller, other than out-of-pocket expenses incurred in
the
ordinary course of business. No shareholder, officer, director or employee of
Seller
owns or has any interest in any of the Assets.
Section 3.37 Absence of Certain Commercial Practices. To the best of
Seller's
knowledge, neither Seller nor any officer, director, employee or agent of
Seller (or
any Person acting on behalf of any of the foregoing), has directly or
indirectly (i)
given or agreed to give any gift or similar benefit of more than nominal value
on
behalf of Seller to any customer, supplier, employee or official of any
Governmental
Authority (domestic or foreign), to induce the recipient or his employer to do
business, grant favorable treatment or compromise or forego any claim, (ii)
made any
significant payment which might be improper under prevailing law (regardless
of the
jurisdiction in which such payment was made) to promote or retain sales or to
help,
procure or maintain good relations with suppliers, (iii) engaged in any
activity
which constitutes a violation of the Foreign Corrupt Practices Act of 1977, as
amended, and the rules and regulations promulgated thereunder, (iv) engaged in
any
practice violating any law prohibiting compliance with an unsanctioned foreign
boycott, (v) established or maintained any unrecorded or illegal corporate
fund or
account or assets, (vi) made false or fictitious entries on the books or
records of
Seller, or (vii) failed to perform its obligations in any material respect
under any
Contract with, or violated in any material respect any federal law known to
Seller in
its dealings with, the Federal government or any agency or department thereof,
including, but not limited to, any law with respect to conspiracy to defraud,
false
claims, conspiracy to defraud the United States, embezzlement or theft of
public
money, fraud and false statements, false demands against the United States,
mail
fraud, wire fraud, RICO, and truth in negotiations. To the best of Seller's
knowledge, no such gift or benefit is required in connection with the
operations of
Seller or its business to avoid any fine, penalty, cost, expense or adverse
change in
the assets, properties, liabilities, financial condition, results of
operations or
business of Seller.
Section 3.38 Non-Foreign Status. Seller is not a "non-resident alien",
"foreign corporation", "foreign partnership", "foreign trust" or "foreign
estate" within the
meaning of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
Section 3.39 Full Disclosure. No representation, warranty or other
statement
by Seller in this Agreement, or in any schedule, exhibit, certificate,
financial statement or other
instrument or document furnished or to be furnished to Purchaser, contains or
will contain any
untrue statement of a material fact or omits or will omit any material fact
necessary in order to
make any of the statements contained herein or
therein, when taken as a whole, not false or misleading in any material
respect in
light of the circumstances in which they were made. There is no fact or
circumstance
known to Seller that materially adversely affects, or in the future may be
reasonably
expected to (insofar as Seller can now reasonably foresee) materially
adversely
affect, the Assets or the properties, liabilities, business, affairs,
operations,
condition (financial or otherwise) or prospects of Seller that has not been
set forth
herein or otherwise described to Purchaser.
Section 4.
Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to and for the benefit of
Seller and
STOCKHOLDER as follows:
Section 4.1 Organization. Purchaser is a corporation duly organized,
validly
Existing and in good standing under the laws of the State of Delaware.
Purchaser is duly
qualified or licensed to do business and is in good standing as a foreign
corporation in each state
and other jurisdiction in which the ownership, lease or operation of the
assets and properties or
the conduct of its business requires such
qualification or licensing, as set forth on Schedule 4. l hereto. Except for
the jurisdictions in
which Purchaser is incorporated or is qualified or licensed as a foreign
corporation, (i) no other
jurisdiction has claimed, orally or in writing, that Purchaser is required to
be licensed or qualified
as a foreign corporation therein, (ii) Purchaser
has never filed any franchise, income or other tax return in any other
jurisdiction,
based upon the ownership, lease or operation of property or assets therein or
the
derivation of income therefrom, and (iii) Purchaser does not own, lease or
operate
any property in any other jurisdiction, and the Assets are not located in any
other
jurisdiction.
Section 4.2 Power and Authority Purchaser has, or will as of the
Closing Date
have all requisite right, power and authority, corporate or otherwise, to
conduct its business and
affairs as presently conducted and as proposed to be conducted, to own, to
lease and operate its
assets and properties, and to execute all requisite right, power and
authority, corporate or
otherwise, to execute, deliver and perform its obligations
under this Agreement and the other agreements and instruments to be executed
and
delivered by Purchaser hereunder (the "Related Purchaser Agreements"). The
execution
and delivery by Purchaser of this Agreement and the Related Purchaser
Agreements and
performance of Purchaser's obligations hereunder and thereunder has been, or
as of
the Closing Date will have been duly and validly authorized by all requisite
action,
corporate or otherwise, of Purchaser.
Section 4.3 Enforceability. This Agreement and the Related Purchaser
Agreements have been, or as of Closing will have been duly and validly
executed and delivered
on behalf of Purchaser and constitute, or will constitute as of the Closing
Date the legal, valid
and binding obligations of Purchaser, enforceable against Purchaser in
accordance with its terms,
except as such enforcement may be limited by applicable
bankruptcy, insolvency, receivership, reorganization, moratorium or other
similar
laws now or hereafter in effect relating to creditors' rights and remedies
generally,
and by general principles of equity.
Section 4.4 No Conflicts. The execution and delivery by Purchaser of
this
Agreement and the Related Purchaser Agreements and the performance by
Purchaser of the
transactions and obligations contemplated hereby and thereby do not and will
not (a)
violate, conflict with, contravene or constitute a breach or a default (or an
event
that, after the giving of notice or the lapse or time or both, would
constitute a
default) under any provision of (i) its certificate of incorporation, bylaws
or other
charter or organizational documents; (ii) any agreement among its shareholders
or
between Purchaser and its shareholders; (iii) any contract, agreement,
obligation,
understanding, commitment, note, security agreement, lease, loan agreement,
debt
instrument or other instrument or agreement to which Purchaser is a party or
by which
Purchaser or any of its assets is or may become bound; (iii) any license,
approval,
certificate, permit or authorization held by Purchaser; or (b) violate any
applicable
federal, state or local law, statute, rule, regulation or ordinance, or any
order,
injunction, writ, judgment, decree, or ruling of any court, arbitrator or
Governmental Authority.
Section 4.5 Consents. No Consent by any Person is necessary for
Purchaser to
Execute and deliver this Agreement and the Related Purchaser Agreements, and
to perform its
obligations hereunder and thereunder.
Section 4.6 Litigation. There are no Proceedings pending or, to the
best of
Its knowledge, threatened by or before any court, arbitrator or Governmental
Authority
against Purchaser (i) in which any Person is seeking or is reasonably likely
to seek
to restrain or prohibit, or to obtain damages or other relief in connection
with,
this Agreement or the Related Purchaser Agreements or the transactions
contemplated
hereby or thereby, (ii) which if determined adversely to Purchaser would be
reasonably likely to have a material adverse effect on Purchaser's ability to
perform
its obligations hereunder or to consummate the transactions contemplated
hereby,
(iii) which, if determined adversely to it, would be reasonably likely to have
a
material adverse effect on the assets, business, affairs, financial condition
or
operations of Purchaser or (iv) involving in whole or in part the issue of
criminal
liability by Purchaser or any of its officers, directors, employees or agents,
or
pertaining to its assets or business. Neither Purchaser nor any of its assets
are
subject to any outstanding judgment, order, writ, injunction or governmental
or
regulatory order or authority which would have a material adverse effect on
this
Agreement or any of the Related Purchaser Agreements. Purchaser is not
presently
engaged in any legal action to recover moneys due from damages caused by or to
enforce its rights against any third party which would have a material adverse
effect
on this Agreement or any of the Related Purchaser Agreements.
Section 4.7 Shares. The Shares have been validly authorized and, when
issued
as contemplated by this Agreement, will be validly issued, fully paid and
non-assessable.
Section 4.8 Capitalization of Purchaser. As of the date hereof, the
authorized Capital stock of Purchaser consists of 20,000,000 shares of Common
Stock, par value $.01 per share, of which 7,693,524 shares are issued and
outstanding, and 6,000,000 of Preferred Stock, par value $.01 per share, of
which 1,633,935 shares are issued and outstanding.
Section 4.9 Capitalization of NEWCO. As of the date hereof, the
authorized Capital stock of NEWCO consists of 1,000 shares of Common Stock,
par
alue $.01 per share, of which 100 shares are issued and outstanding.
Section 4.10 Financial Statements. In all material respects, the
December
31, 1997 financial statements of Purchaser (including any notes thereto) were
prepared in
accordance with generally accepted accounting principles applied on a
consistent
basis through the periods covered thereby (except as disclosed in such
financial
statements), and fairly present in all material respects the consolidated
financial
condition of Purchaser as of the dates thereof and the consolidated results of
Purchaser's operations and consolidated cash flow for the periods then ended,
subject, in the case of any unaudited interim financial statements, to the
omission
of certain notes not ordinarily accompanying such unaudited financial
statements, and
to normal year-end adjustments.
Section 4.11 Absence of Adverse Change. Since December 31, 1997, there
has not
been any material adverse change in the assets, business, affairs, operations,
financial condition or operations of Purchaser.
Section 4.12 No Brokers. No broker, finder, investment broker or
similar
agent
is or shall be entitled to receive any fee, commission or other remuneration
or
compensation relating to the transactions contemplated by this Agreement based
on any action taken by or on behalf of Purchaser.
Section 4.13 Corporate Documents. Purchaser has furnished, or will
furnish to
Seller true and complete copies or originals, as the case may be, of the
following
documents: (i) the articles of incorporation and bylaws of Purchaser; and
(ii),
if
requested, the minute books of Purchaser containing all records required to be
set
forth of all proceedings, consents, actions and meetings of the shareholders
and
board of directors (and all committees thereof) of Purchaser.
Section 4.14 Compliance with Laws. To Purchaser's knowledge and belief
it
is
and has been in material compliance with all applicable federal, state, local
and
foreign laws, statutes, ordinances, rules, regulations, codes, licenses,
permits,
orders, judgments, decrees and other legal requirements (including, without
limitation, those applicable to building, health, employment, labor, product
liability, zoning, occupational safety, conservation, unfair competition,
labor
practices or corrupt practices) which affect or are applicable to its assets
and
business.
Section 4.15 Full Disclosure. No representation, warranty or other
statement
by Purchaser in this Agreement, or in any schedule, exhibit, certificate,
financial
statement or other instrument or document furnished or to be furnished to
Seller,
contains or will contain any untrue statement of a material fact or omits or
will
omit any material fact necessary in order to make any of the statements
contained
herein or therein, when taken as a whole, not false or misleading in any
material
respect in light of the circumstances in which they were made. There is no
fact
or
circumstance known to Purchaser that materially adversely affects, or in the
future
may be reasonably expected to (insofar as Purchaser can now reasonably
foresee)
materially adversely affect, the assets or the properties, liabilities,
business,
affairs, operations, condition (financial or otherwise) or prospects of
Purchaser
that has not been set forth herein or otherwise described to Seller.
Section 5.
Pre-Closing Covenants.
--------------------
Section 5.1 Conduct of Business of Seller.
(a) From the date of this Agreement until the Closing, Seller shall
conduct its business only in the ordinary course consistent with past
practices,
including but not limited to (i) using its best efforts to (i) preserve intact
its
business organization and its good will, including its relationships with its
suppliers, customers, lenders and others having business relationships with
it,
(ii)
perform all its obligations in accordance with their terms, (iii) maintain the
Assets
in good operating condition, (iv) keep available the services of its present
lessors,
lessees, licensors, licensees, suppliers, customers, employees and agents, and
(v)
comply with all applicable laws, rules, regulations and orders.
(b) Without limiting the generality of the foregoing, from the date
of
this Agreement until the Closing, Seller shall not, without the prior written
consent
of Purchaser:
(i) Take any action referred to in Section 3.15(b) hereof;
(ii) Take any action or omit to take any action which would
breach any covenant or agreement of Seller herein; or
(iii) Take any action which would cause any representation or
warranty of Seller herein to be inaccurate in any material respect.
Section 5.2 Access.
(a) From the date of this Agreement through the Closing Date, Seller
shall provide Purchaser and its officers, directors, employees and agents and
representatives full access during normal business hours to the Assets and to
the
employees, agents, properties, books, contracts, accounts, commitments,
records,
tax
returns and documents of Seller and shall furnish to Purchaser and its agents
and
representatives books, records, contracts, data and information concerning the
Assets
and the business and affairs of Seller as Purchaser and its agents and
representatives may reasonably request. In the event that the transactions
contemplated by this Agreement fail to be consummated, then Purchaser shall
promptly
return to Seller all data and information furnished to it and shall keep all
such
data and information confidential. No investigation pursuant to this Section
5.2(a)
shall affect any representation or warranty of Seller or any condition to the
closing
obligations of Purchaser.
(b) From the date of this Agreement through the Closing Date,
Purchaser
shall provide Seller and its officers, directors, employees and agents and
representatives full access during normal business hours to the assets and to
the
employees, agents, properties, books, contracts, accounts, commitments,
records,
tax
returns and documents of Purchaser and shall furnish to Seller and its agents
and
representatives data and information concerning the assets and the business
and
affairs of Purchaser as Seller and its agents and representatives may
reasonably
request. In the event that the transactions contemplated by this Agreement
fail
to be
consummated, then Seller shall promptly return to Purchaser all data and
information
furnished to Seller and shall keep all such data and information confidential.
No
investigation pursuant to this Section 5.2(b) shall affect any representation
or
warranty of Purchaser or any condition to the closing obligations of Seller.
Section 5.3 Risk of Loss. Until the Closing, Seller assumes all risk of
loss,
whether by reason of theft, fire, act of God, or other casualty, and Purchaser
shall not be obligated to consummate the transactions contemplated hereby if
here is any material
loss of the Assets caused by any casualty, whether through the fault or
negligence of
Seller or otherwise.
Section 5.4 Consummation of Transactions. Upon the terms and subject to
the
conditions of this Agreement, each of the parties hereto shall use its
reasonable
best efforts, and will cooperate with each other, to take, or cause to be
taken,
as
promptly as practicable, all such actions and to do, or cause to be done, all
other
things necessary to carry out its obligations under this Agreement and under
all
other agreements contemplated by this Agreement and to consummate and make
effective
the transactions contemplated hereby and thereby, including obtaining all
Consents
which are necessary in connection with the transactions contemplated hereby
and
thereby, provided that Purchaser shall not be obligated to assume any
additional
liability of Seller or pertaining to the Assets other than the Assumed
Liabilities.
Section 5.5 Public Announcements. Until the Closing Date or the earlier
Termination of this Agreement for any reason, Purchaser and Seller shall
consult
with each other before issuing any press releases or otherwise making any
public
statements or disclosures with respect to this Agreement or the transactions
contemplated hereby (directly or through affiliates) and shall not issue any
such press release or make any such public statement without the prior consent
of the other party, which consent shall not be unreasonably withheld, except
that a party hereto may make a public statement without such consent to the
xtent the same shall be required by applicable law, in which case such party
should use its reasonable best efforts to advise the other party of such
statement in a timely manner.
Section 5.6 Notification of Certain Matters. From the date of this
Agreement to the Closing Date, Purchaser and Seller each shall give prompt
notice to the other of (a) the
occurrence, or failure to occur, of any event, fact or circumstance the
occurrence or failure of which would be reasonable likely to cause any
representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material
respect, or that breaches or is reasonably likely to breach any covenant or
agreement
set forth in this Agreement, and (b) any material failure on its part to
comply
with
or satisfy any material covenant, condition or agreement to be complied with
or
satisfied by it hereunder.
Section 5.7 Taxes.
(a) Pre-Closing. Seller shall be responsible for the timely preparation
of, all federal, state, local or foreign income, excise, withholding,
property,
sales, use, franchise and other tax returns, reports and forms of Seller
pertaining to the Assets for all taxable periods ending on or before the
Closing
Date, and the payment of all amounts due thereunder.
(b) Due to Transactions. Seller shall pay all federal, state and local
sales, use, income, franchise, worker's compensation, unemployment documentary
and other transfer taxes and fees arising out of the transfer of the Assets in
accordance herewith,whether imposed by law on Seller or Purchaser, and shall
pay
its portion, prorated as of the Closing Date, of all federal, state, local and
foreign personal property taxes relating to the Assets. Purchaser shall not
be
responsible for any business,occupation, withholding, or similar tax, or any
taxes of any kind related to the
Assets or the business being purchased for any period before the Closing Date.
Seller shall indemnify, reimburse and hold Purchaser harmless in respect of
any
liability for payment of or failure to pay any such taxes or any filing of or
failure to file any reports required in connection therewith.
Section 5.8 No Shopping. From the date of this Agreement to the Closing
Date, Neither Seller, STOCKHOLDER nor any affiliates thereof shall, directly
or
indirectly, through any officer, director, employee, agent or otherwise,
solicit, initiate, or encourage the initiation orsubmission of inquiries,
proposals or offers from, provide any information to, enter into any
agreement with, or participate in any discussions or
negotiations concerning any direct or indirect acquisition of any interest in
Seller or any of the Assets (other than the sale of inventory and equipment in
the ordinary course of business) by, any Person other than Purchaser. Seller
shall immediately notify Purchaser of, and communicate to Purchaser the terms
of
any such inquiry, proposal or offer that Seller may receive.
Section 5.9 Employee Matters.
(a) Seller will pay, and remain responsible after the Closing, to all
its
employees for all compensation and benefits, including wages, salaries,
commissions,bonuses, deferred compensation, severance, termination, insurance,
pensions, profit-sharing, vacation, sick pay and other compensation or
benefits
("Seller Employees Compensation") to which they are entitled for periods prior
to the Closing Date. Until the Closing Date, Seller will not, without the
prior
written consent of Purchaser, change the compensation or benefits of any of
its
employees.
(b) Purchaser is not assuming and shall have no obligation to pay any
Seller Employees Compensation, whether accruing before, as a result of, or
after
the Closing. Seller shall perform, and Purchaser is not assuming and shall
have
no obligation to perform, any severance or termination obligations,
liabilities
and commitments accruing or arising by agreement, plan or policy of Seller as
a
result of the transactions contemplated hereby.
(c) Purchaser may, but shall have no obligation to, offer employment to
any of the current employees of Seller. Any employee of Seller considered for
employment by Purchaser shall be subject to Purchaser's normal application and
screening procedure and, if hired, shall be eligible for Purchaser's
compensation and benefits policies. No provisions of this Agreement, express
or
implied, shall confer on any employee or former employee of Seller any right
to
employment or any continued right to employment for any extended period.
(d) All claims and obligations under, pursuant to or in connection with
any Employee Plans of Seller or arising under any legal requirement affecting
employees of Seller incurred on or before the Closing Date resulting in or
arising from events or occurrences occurring or commencing on or prior to the
Closing Date shall remain the responsibility of Seller, whether or not such
employees are hired by Purchaser after the Closing. Purchaser will have and
assume no obligation or liability under or in connection with any such plan
and
will assume no obligation with respect to any pre-existing condition of any
employee of Seller who is hired as an employee of Purchaser, except as
required
by applicable law.
(e) Prior to Closing, Seller shall have entered into an agreement to
amend
that certain Client Services Agreement by and between Seller and PMSI, such
agreement
ensuring that PMSI and its agents and any employee of Seller under contract
with
PMSI, will agree that at all times, that any confidential information obtained
or
learned during the course of employment with NEWCO will remain confidential
and
will
not be divulged to any person, firm or corporation without Purchaser's express
written consent.
(f) Subject to the terms of the Stockholder Agreement, Purchaser
covenants
and agrees that it will reserve shares of Purchaser's Common Stock valued at
up
to
five percent (5%) of the Initial Consideration for issuance upon exercise of
options
(the "Options") granted from time to time to employees of NEWCO on and after
the
Closing Date as deemed appropriate by the management of NEWCO. The parties
hereto
agree that all of the Options issued to employees of NEWCO within thirty (30)
days of
the Closing Date will have an exercise price equal to $5.70 per share and that
any
Options issued after that date will have an exercise price equal to the Fair
Market Value.
Section 5.10 Assumed Warranty Obligations. At the Closing, Purchaser
shall
Assume at Purchaser's discretion certain warranty obligations of Seller (the
"Assumed Warranty Obligations") for all equipment and products sold by Seller
within two years
prior to the Closing Date with respect to the Business. A complete and
accurate
list
of all such sales (by customer, amount, sale and type of equipment or
services)
is set forth on Schedule 5.10 hereto.
Section 5.11 Release of Liens. Contemporaneously with or prior to the
Closing, Seller shall take all action necessary to cause any Liens on or
against
the Assets to be released and terminated as of the Closing date.
Section 6.
Conditions Precedent to Purchaser's Closing Obligations.
The obligations of Purchaser to purchase the Assets and to assume the
Assumed Liabilities and to take the other actions contemplated hereby to be
taken by Purchaser at or prior to the Closing are subject to the satisfaction
(unless waived in writing by Purchaser), at or prior to the Closing, of each
of
the following conditions.
Section 6.1 Accuracy of Representations and Warranties. Each and every
--------------------------------
representation and warranty made by Seller in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date with the
same
effect as if made or given on the Closing Date.
Section 6.2 Performance of Covenants. Seller shall have performed,
satisfied
And complied with all covenants, agreements, obligations and conditions under
this
Agreement which are to be performed, satisfied or complied with by Seller at
or prior
to the Closing.
Section 6.3 No Litigation. No Proceeding shall be pending or overtly
threatened by or before any court, arbitrator or Governmental Authority (a)
which
seeks the
restraint, prohibition or the obtaining of damages or other relief in
connection with
this
Agreement or the consummation of the transactions contemplated hereby, (b)
which
questions the legitimacy, validity or enforceability of this Agreement or the
transactions contemplated hereby or (c) which, if successful, would have a
Material
Adverse Effect on the Assets or the Business or would materially and adversely
affect
the ability of Purchaser to consummate the transactions contemplated hereby or
to
operate the Business substantially as currently operated.
Section 6.4 Deliveries at Closing. Seller shall have delivered to
Purchaser at
The Closing the Assets and each of the certificates, instruments, documents
and
agreements required to be delivered to Purchaser hereunder or reasonably
necessary to
consummate the transactions contemplated hereby.
Section 6.5 Consents. All Consents of any Person necessary to permit
the
consummation of the transactions hereby shall have been duly obtained, made or
taken
prior to the Closing.
Section 6.6 Condition of Assets. No event or change in circumstances,
including but not limited to fire, accident, storm, or other casualty or labor
or
civil disputes or act
of God or public enemy, shall have occurred (whether or not insured against)
that in
the
reasonable judgment of Purchaser has or is reasonably likely to have a
material
adverse effect on
the Assets or the value thereof or on the Business.
Section 6.7 Employment Agreement. Purchaser and STOCKHOLDER shall have
entered into a Senior Executive Employment Agreement pursuant to the terms and
conditions of such agreement attached hereto as Annex III.
Section 7.
Conditions Precedent to Seller's Closing Obligations.
The obligations of Seller to sell and deliver the Assets to Purchaser and
to
perform its other obligations contemplated hereby to be taken at or prior to
the
Closing are subject to the satisfaction (unless waived in writing by Seller),
at or
prior to the Closing, of each of the following conditions:
Section 7.1 Accuracy of Representations and Warranties. Each of the
Representations and warranties made by Purchaser in this Agreement shall be
true and
correct as
of the date of this Agreement and as of the Closing Date with the same effect
as if
made or given
on the Closing Date.
Section 7.2 Performance of Covenants. Purchaser shall have performed,
satisfied and complied with all of the covenants, agreements, obligations and
conditions under
this Agreement which are to be performed, satisfied or complied with by
Purchaser at
or prior to
the Closing.
Section 7.3 No Litigation. No proceeding shall be pending or overtly
threatened before any court, arbitrator or Governmental Authority which seeks
the
restraint,
prohibition or the obtaining of damages or other relief in connection with
this
Agreement or the
consummation of the transactions contemplated hereby, which
questions the legitimacy, validity or enforceability of this Agreement or the
transactions contemplated hereby or which, if successful, would have a
material
adverse effect on the Purchaser's assets or business or would materially and
adversely affect the ability of Purchaser to consummate the transactions
contemplated
hereby or for Purchaser to operate its business substantially as currently
operated.
Section 7.4 Deliveries at Closing. Purchaser shall have delivered to
Seller a
the Closing the
Consideration pursuant to Section 2.1 herein and each of the other
certificates, instruments, documents and agreement required to be delivered to
Seller
hereunder.
Section 7.5 Employment Agreement. Purchaser and STOCKHOLDER shall have
entered into a Senior Executive Employment Agreement pursuant to the terms and
conditions of such agreement attached hereto as Annex III.
Section 8. The Closing.
Section 8.1 Date and Place. The consummation of the sale and purchase
of the
Assets contemplated hereby (the "Closing") shall take place at the offices of
Xxxxxxx
&
Berlin, Chartered at 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X. at ten a.m. local
time,
on, 1998, or at such other time, date or place as the parties shall mutually
agree (the
"Closing Date").
Section 8.2 Deliveries by Seller. At the Closing, Seller and
STOCKHOLDER shall
deliver or cause to be delivered to Purchaser, in form reasonably acceptable
to
Purchaser's counsel:
(a) Full, actual and unimpeded possession and enjoyment of the Assets;
(b) Assignments and assumptions of all Assigned Contracts being assumed by
and assigned to Purchaser, duly executed by Seller, along with all consents
required
to permit such assignment and assumption;
(c) One or more duly executed bills of sale warranting good and marketable
title in and to the Assets, and such other instruments of sale, conveyance,
assignment and transfer as may be reasonably requested by Purchaser, in order
to vest
in Purchaser all of Seller's right, title and interest in and to all of the
other
Assets, free and clear of all Liens, Consents, restrictions or obligations to
any
third party, of any kind whatsoever;
(d) All assignments required to transfer any Intellectual Property to
Purchaser;
(e) All Consents necessary to permit the consummation of the transactions
contemplated by this Agreement;
(f) All releases of all Liens encumbering any of the Assets;
(g) True and complete copies of corporate resolutions, certified as of the
Closing Date by the Secretary of Seller as having been duly adopted by the
Board of
Directors and, if necessary, shareholders of Seller authorizing Seller's and
STOCKHOLDER'S execution and delivery of this Agreement and the Related Seller
Agreements and their consummation of the transactions contemplated hereby and
thereby;
(h) Certificates duly executed by the President or Chief Executive Officer
of Seller and by STOCKHOLDER, dated as of the Closing Date, certifying that,
to the
best of their knowledge and belief after due inquiry, (i) each of Seller and
STOCKHOLDER, respectively, has fully performed, satisfied and complied with
all
agreements, obligations, covenants and conditions required by this Agreement
to be
performed, satisfied or complied with at or prior to the Closing, and (ii) all
of the
representations and warranties of Seller and STOCKHOLDER, respectively, set
forth in
Section 3 of this Agreement are true and correct as of the Closing Date;
(i) An opinion of counsel for Seller, dated as of the Closing Date,
substantially in the form attached hereto as Annex I;
(j) The Senior Executive Employment Agreement, duly executed by
STOCKHOLDER;
(k) STOCKHOLDER shall have delivered to Purchaser an instrument dated the
Closing Date releasing Purchaser and NEWCO from any and all obligations to the
STOCKHOLDER, except for (x) continuing obligations to the STOCKHOLDER relating
to his
employment by NEWCO and (y) obligations arising under this Agreement or the
transactions contemplated hereby;
(l) STOCKHOLDER shall have executed a Joinder Agreement substantially in
the form attached hereto as Annex IV binding him and all his shares of
Purchaser
Stock to the provisions of the Amended and Restated Stockholders' Agreements
of ITP
dated March 31, 1998 (the "Stockholders' Agreement");
(m) Seller shall have executed a Subordination Agreement substantially in
the form attached hereto as Annex VII relating to the First Note and the Tax
Note,
and will execute a Subordination Agreement for any and all subsequent notes;
and
(n) All other items required to be delivered by Seller or STOCKHOLDER
pursuant to any provision of this Agreement.
Section 8.3 Deliveries by Purchaser. At the Closing, Purchaser shall
deliver
to Seller, in form reasonably acceptable to Seller's counsel:
(a) The Cash Portion of the Purchase Price as set forth in Section
2.1(a)(i) hereof, by cashier's or certified bank check or wire transfer of
immediately available funds to an account designated by Seller;
(b) One or more certificates representing the Initial Shares, duly
registered on the books of ITP in the name of Seller;
(c) The First Note, duly executed by Purchaser;
(d) The Tax Note duly executed by Purchaser;
(e) True and complete copies of corporate resolutions, certified as of the
Closing Date by the Secretary of Purchaser as having been duly adopted by the
Board
of Directors of Purchaser, respectively, authorizing Purchaser's execution and
delivery of this Agreement and the Related Purchaser Agreements and their
consummation of the transactions contemplated hereby and thereby;
(f) Certificates duly executed by the Chairman of the Board, President or
Chief Executive Officer of Purchaser, dated as of the Closing Date, certifying
that,
to the best of their knowledge and belief after due inquiry, (i) Purchaser
has fully
performed, satisfied and complied with all agreements, obligations, covenants
and
conditions required by this Agreement to be performed, satisfied or complied
with by
Purchaser at or prior to the Closing, and (ii) all of the representations and
warranties of Purchaser set forth in Section 4 of this Agreement are true and
correct
as of the Closing Date;
(g) An opinion of counsel for the Purchaser, dated as of the Closing Date,
substantially in the form attached hereto as Annex II; and
(h) All other items required to be delivered by Purchaser pursuant to any
provision of this Agreement.
Section 8.4 Effectiveness of Closing. No action to be taken or delivery
to be
made at the Closing shall be effective until all of the actions to be taken
and
deliveries to be made at the Closing are complete.
Section 9.
Survival and Indemnification.
Section 9.1 Survival. The indemnification obligations and the
representations,
warranties, covenants and agreements set forth in this Agreement shall survive
the
Closing and shall continue in full force and effect until they expire on the
second
anniversary of the Closing Date (or such later date as expressly provided
herein),
regardless of any investigation made by any party hereto, except as to any
Claims
relating to fraud, environmental, intellectual or tax matters, which claims
shall
expire only upon expiration of the applicable statute of limitations. No
Claim
pursuant to this Section 9 shall be asserted by any party hereto after the
expiration
of the applicable survival period or statute of limitations, as the case may
be,
except for Claims made in writing prior to such expiration or actions (whether
instituted before or after such expiration) based on any Claim made in writing
prior
to such expiration.
Section 9.2 Indemnification by the Seller and STOCKHOLDER. Seller and
STOCKHOLDER shall jointly and severally indemnify, defend and hold harmless
Purchaser, NEWCO, their affiliates, successors and assigns, and the officers,
directors, shareholders, partners, employees, agents and representatives of
any of
them, harmless from and against, any and all claims, actions, suits,
proceedings
demands, losses, expenses, obligations, taxes, liabilities, damages,
recoveries and
deficiencies (including, without limitation, interest, fines, penalties, costs
of
investigation, reasonable attorneys', accountants' and other professionals'
fees and
expenses and amounts paid in settlement) (collectively, "Damages") arising out
of,
based upon or resulting from (i) any breach or violation of, inaccuracy or
misrepresentation in, or failure by the Seller or STOCKHOLDER to perform, any
representations, warranties, covenants, agreements or other obligations of
Seller or
STOCKHOLDER made in this Agreement or in any schedule, certificate, exhibit,
annex or
other document or instrument furnished or to be furnished by Seller or
STOCKHOLDER to
Purchaser pursuant to this Agreement, (ii) any debt, liability or obligation
of
Seller or STOCKHOLDER not included in the Assumed Liabilities, (iii) any
failure by
Seller or STOCKHOLDER to completely and timely comply with all applicable
provisions
of (A) any WARN or similar state or local laws or (B) the fraudulent transfer
or
fraudulent conveyance laws of any jurisdiction, (iv) any statute or common law
doctrine of de facto merger or successor liability or (v) any product
liability
claims relating to products made or sold or services performed by Seller or
STOCKHOLDER prior to the Closing Date. Notwithstanding the foregoing, any
adjustment
to the Working Capital balance as of the Closing Date pursuant to Section 2.2
above
shall not constitute a basis for a further Claim for Damages hereunder.
Section 9.3 Indemnification by Purchaser and ITP. Purchaser shall
indemnify,
defend and hold harmless Seller and STOCKHOLDER, their affiliates, successors
and
assigns, and the officers, directors, shareholders, partners, employees,
agents and
representatives of any of them, from and against, any and all Damages arising
out of,
based upon or resulting from any breach or violation of, inaccuracy or
misrepresentation in, or failure by Purchaser to perform, any of the
representations,
warranties, covenants, agreements or other obligations of Purchaser made in
this
Agreement or in any schedule, certificate, exhibit, Annex or other document or
instrument furnished or to be furnished by Purchaser to Seller or STOCKHOLDER
pursuant to this Agreement.
Section 9.4 Claims for Indemnification.
(a) Whenever any party hereunder believes it has suffered or incurred or
is likely to suffer or incur any Damages, or any action or proceeding is
commenced or
threatened or claim is made that could result in Damages, which is reasonably
likely
to give rise to a claim ("Claim") for indemnification under this Agreement,
the party
seeking indemnification ("Indemnified Party") shall, upon obtaining knowledge
thereof, promptly notify in writing the party against whom indemnification is
sought
("Indemnifying Party") of the Claim and, when known, the facts constituting
the basis
for such Claim and the amount and nature of the Damages or an estimate
thereof. The
Indemnified Party's failure to timely notify Indemnifying Party of any Claim
or
potential Claim shall not relieve the Indemnifying Party of any liability
hereunder
unless and only to the extent that such failure causes Indemnifying Party to
lose the
right to assert any substantive rights or defenses or to the extent that the
Indemnifying Party is actually prejudiced in its rights or obligations.
(b) The Indemnified Party shall give the Indemnifying Party a reasonable
opportunity to participate in and to assume the defense of any such Claim at
the
Indemnifying Party's own expense and with counsel of the Indemnifying Party's
own
selection reasonably satisfactory to the Indemnified Party provided, however,
that
Indemnified Party shall at all times also have the right but not the
obligation, to
fully participate in the defense of the Claim and to employ its own counsel at
its
own expense. Notwithstanding the foregoing, if the Indemnified Party
reasonably
determines that: (i) legal defenses may be available to the Indemnified Party
that
are different from or in addition to those available to the Indemnifying
Party, (ii)
a conflict or potential conflict of interest exists between the Indemnified
Party and
the Indemnifying Party (in which case the Indemnifying Party shall not have
the right
to direct the defense of such Claim on behalf of the Indemnified Party), or
(iii) the
Indemnifying Party has not in fact employed legal counsel to assume the
defense of
such Claim within a reasonable time after receiving notice of the Claim, then
the
reasonable fees, disbursements and other charges of counsel from one separate
firm
selected by the Indemnified Party (and reasonably acceptable to the
Indemnifying
Party) shall be reimbursed by the Indemnifying Party promptly as they are
incurred.
(c) No party hereto shall compromise, settle or consent to the entry of
any judgment with respect to any Claim without the prior written consent of
the other
interested party or parties (which consent shall not be unreasonably withheld
or
delayed) unless such compromise, settlement or consent includes an
unconditional
release of all other interested parties hereto from any and all liabilities on
any
Claims that are the subject matter thereof.
(d) Each party hereto shall cooperate in every reasonable way with the
party assuming responsibility for the defense and disposition of any such
Claim,
including making available to the defending party all books, records, and
other
material reasonably required by the defending party for its use in defending
the
Claim.
Section 9.5 Limitation on Liability.
(a) Notwithstanding the foregoing, the Indemnifying Party shall not be
required to indemnify the Indemnified Party hereunder unless and until and
only to
the extent that the aggregate amount of all Damages exceeds $100,000.00.
(b) Neither party shall seek or be entitled to consequential damages or
damages for lost profits in any Claim for indemnification under this Section 9
nor
shall it accept payment of any award or judgment against the other party to
the
extent that such award or judgment includes consequential damages or damages
for lost
profits.
Section 9.6 Non-Exclusive Indemnification. The foregoing
indemnification
provisions are in addition to, and not in derogation of, or statutory,
equitable or
common law remedies any party hereto may have for any breach of
representation,
warranty, covenant or agreement.
Section 9.7 Effect of Knowledge. No disclosure to and no investigation
by or
on behalf of any party hereto, other than disclosures made in the Schedules
hereto,
shall be deemed to affect its reliance on the representations, warranties,
covenants
and agreements contained herein or to waive its rights to indemnification as
provided
herein for the breach or violation of or inaccuracy or failure to perform or
comply
with any representation, warranty, covenant or agreement of any other party
hereto.
Section 9.8 Contribution. If the indemnification provided for in this
Section
9 is for any reason unavailable or insufficient to indemnify the Indemnified
Party in
respect of any Damages, then the Indemnifying Party shall in lieu of
indemnifying the
Indemnified Party contribute to the total damages to which the Indemnified
Party may
be subject in such proportion that shall be appropriate to reflect the
relative fault
of the Indemnifying Party, on the one hand, and the Indemnified Party, on the
other
hand, in connection with any actions or omissions which resulted in such
Damages as
well as any other relevant equitable considerations; provided, however, that
the
amount of any such contribution obligation shall not exceed what would
otherwise be
the amount of the Indemnifying Party's indemnification obligation hereunder.
Section 10.
Post-Closing and Other Covenants.
Section 10.1 Further Assurances. At the Closing, Seller, through its
officers, directors, employees and agents, shall put Purchaser into full,
actual and
unimpaired ownership, possession, enjoyment and control of the Assets. At any
time
and from time to time after the Closing, Seller shall, at the sole expense of
Purchaser, execute, acknowledge and deliver any further deeds, assignments,
conveyances, consents, permits and other assurances, documents and instruments
of
transfer reasonably requested by Purchaser, and take any and all further
actions
consistent with the terms of this Agreement, that may be reasonably requested
by
Purchaser for the purpose of more effectively and fully assigning,
transferring,
granting and conveying to and vesting in Purchaser all of Seller's right,
title and
interest in and to, or reducing to possession, any or all of the Assets. If
requested by Purchaser, Seller shall, solely at Purchaser's expense (unless
required
due to a breach of any representation, warranty, or covenant hereof by
Seller),
prosecute or otherwise enforce in its own name for the benefit of Purchaser
any
claims, rights or benefits that are transferred to Purchaser by this Agreement
and
require prosecution and enforcement in Seller's name.
Section 10.2 Preservation of Files and Records.
(a) By Purchaser. For a period of 3 years after the Closing Date,
Purchaser shall preserve all files and records relating to the Business and
the
Assets that are in existence as of the Closing Date and that are less than 5
years
old as of the Closing Date, and shall allow Seller access to such files and
records
and the right to make copies and extracts therefrom at any time during normal
business hours, and shall not dispose of any thereof, provided that at any
time after
the Closing, Purchaser may give Seller written notice of its intention to
dispose of
any part thereof, specifying the items to be disposed of in reasonable detail.
Seller
may, within a period of sixty (60) days after receipt of any such notice,
notify
Purchaser of Seller's desire to retain one or more of such items to be
disposed of.
Purchaser shall, upon receipt of such notice from Seller, deliver to Seller at
Seller's expense, the items specified in Purchaser's notice to Seller which
Seller
has elected to retain.
(b) By Seller. For a period of three (3) years after the Closing Date,
Seller shall preserve all files and records relating to the Business and the
Assets
that are in existence as of the Closing Date not otherwise delivered to
Purchaser and
that are less than five (5) years old as of the Closing Date, and shall allow
Purchaser access to such files and records and the right to make copies and
extracts
therefrom at any time during normal business hours, and shall not dispose of
any
thereof, provided that at any time after the Closing, Purchaser may give
Seller
written notice of its intention to dispose of any part thereof, specifying the
items
to be disposed of in reasonable detail. Purchaser may, within a period of
sixty (60)
days after receipt of any such notice, notify Seller of Purchaser's desire to
retain
one or more of such items to be disposed of. Purchaser shall, upon receipt of
such
notice from Seller, deliver to Purchaser at Purchaser's expense, the items
specified
in Purchaser's notice to Seller which Purchaser has elected to retain.
Section 10.3 Mutual Cooperation.
(a) Preparation of Reports, Etc. Each of Purchaser and Seller shall
cooperate and cause its respective employees and agents to cooperate with each
other
in the preparation of financial and other reports and statements relating to
the
Business and the Assets for periods ending on or prior to the Closing.
(b) Taxes and Other Matters. In connection with the preparation of any
tax returns, any audit or other examination by any taxing or other
Governmental
Authority, or any Proceeding or other matters including but not limited to,
environmental and other matters relating to the transactions contemplated by
this
Agreement, each party will provide the other with the opportunity to make
copies of
any records or information which may be relevant to such return, audit or
examination, Proceeding or determination. Each party shall make its employees
available on a mutually convenient and reasonable basis to provide additional
information and explanation of any material provided hereunder.
(c) Cooperation in Litigation. In the event that, after the Closing Date,
Seller or Purchaser shall reasonably require the participation of officers and
employees by each other to aid in the defense or prosecution of litigation or
claims,
and so long as there exists no unwaived conflict of interest between the
parties,
each of Seller and Purchaser shall make such officers and employees reasonably
available to participate in such defense or prosecution provided that, except
as
required pursuant to the provisions herein, the party requiring the
participation of
such officers and employees shall pay all reasonable out-of-pocket costs,
charges and
expenses arising from such participation.
Section 10.4 Solicitation and Hiring.
(a) STOCKHOLDER's Covenant. For a period of five (5) years after the
Closing Date, STOCKHOLDER, shall not, directly or indirectly, as a
stockholder,
investor, partner, director, officer, employee or otherwise (i) solicit or
attempt to
induce any employee to terminate his or her employment with NEWCO or
Purchaser, or
(ii) hire or attempt to hire any employee of Purchaser.
Section 10.5 Seller's and STOCKHOLDER's Right of First Refusal to
Acquire
NEWCO.
(a) Proposed Transaction. From and after the Drop Down, if Purchaser
intends or proposes to sell all or substantially all of the assets and capital
stock
of NEWCO to a Person other than an affiliate or subsidiary of Purchaser
("Proposed
Purchaser"), or to consummate the merger, consolidation or combination into a
Proposed Purchaser in which transaction NEWCO is not the survivor (a "Proposed
Transaction"), unless the Proposed Transaction is with a strategic purchaser,
as
reasonably determined by Purchaser, Purchaser shall first deliver to Seller a
notice
of such Proposed Transaction ("Notice of Proposed Sale") which shall include a
copy
or summary of the Proposed Transaction and the terms and conditions thereof in
reasonable detail, including, without limitation, the proposed purchase price
(or the
basis of determining the purchase price) ("Proposed Purchase Price") and the
terms
and conditions of payment.
(b) Exercise. Seller shall have the prior right and option ("Right of
First Refusal"), unless the Proposed Transaction is with an affiliate,
subsidiary or
strategic purchaser, to consummate the Proposed Transaction in the place of
the
Proposed Purchaser upon the terms set forth in the Notice of Proposed Sale, or
on
such other terms and conditions, no less favorable to Purchaser and NEWCO,
from
Purchaser's and NEWCO's perspective and as determined in their sole
discretion, as
the terms in the Notice of Proposed Sale. Seller shall exercise its Right of
First
Refusal by giving written notice of such exercise ("Notice of Exercise") to
Purchaser
on or before the thirtieth (30) day after Seller shall have received the
Notice of
Proposed Sale. Seller, with the consent of Purchaser, may assign this Right
of First
Refusal to STOCKHOLDER, such consent not to be unreasonably withheld.
(c) Non-Exercise of Rights of First Refusal. If Seller does not exercise
its Right of First Refusal, then ITP or Purchaser shall have the right, for a
period
ending on the 150th day after the delivery of Notice of Proposed Sale, to
consummate
the Proposed Transaction with the Proposed Purchaser, at substantially the
same
Proposed Purchase Price and otherwise upon substantially the same terms and
conditions described in the Notice of Proposed Sale.
Section 11.
Termination and Confidentiality.
Section 11.1 Events of Termination. This Agreement may be terminated at
any
time prior to the Closing as follows:
(a) By mutual written agreement of Seller and Purchaser;
(b) By Seller or Purchaser if (i) the non-terminating party shall have
failed to perform, satisfy or comply with any of its, obligations, agreements,
or
covenants to be performed, satisfied, or complied with hereunder prior to the
Closing, or (ii) the non-terminating party materially breaches any of its
representations, warranties or covenants hereunder;
(c) By any party hereto by giving written notice to the other parties
hereto if the Closing Date has not occurred on or before May 15, 1998, unless
such
party's intentional failure to fulfill any obligation hereunder has been the
cause
of, or has resulted in, the failure of the Closing to occur on or before such
date;
or
(d) By Purchaser or Seller if any court or Governmental Authority of
competent jurisdiction shall have issued an order, judgment, decree, ruling or
taken
other action restraining, enjoining or otherwise prohibiting the transaction
contemplated hereby.
Section 11.2 Effect of Termination. If any party terminates this
Agreement in
accordance with Section 11.1, then all rights and obligations of the parties
shall
cease, except for the obligations set forth in Sections 11.3 and 12.2 which
shall
survive such termination; provided, however, that any termination of this
Agreement
shall not affect the rights or either Seller or Purchaser against the other
for
breach of any representation, warranty, covenant or agreement set forth in
this
Agreement.
Section 11.3 Confidentiality. Notwithstanding the provisions of this
Section
11, if for any reason the transactions contemplated by this Agreement are not
consummated, each of the parties hereto shall keep confidential any
information
obtained from any other party (except information publicly available or in
such
party's domain prior to the date hereof, and except as required by court
order) and
shall not use any such information to the detriment of the other party and
shall
promptly return to the other party all schedules, documents, instruments, work
papers
or other written information, without retaining copies thereof, previously
furnished
by it as a result of this Agreement or in connection herewith.
Section 12.
General Provisions.
Section 12.1 Governing Law. This Agreement shall in all respects be
governed
by and construed and enforced in accordance with the internal substantive laws
of the
State of Maryland, without giving effect to any principle or rule of conflict
or
choice of laws. Any action suit, or other proceeding seeking to enforce any
right,
remedy, obligation, duty, covenant or provision of, or arising out of, this
Agreement
shall be brought and entered against any party hereto exclusively in any
federal or
state court of the State of Utah or of the United States located in the State
of
Utah. Each party hereto irrevocably submits to the personal jurisdiction of
any such
court and irrevocably waives, to the fullest extent of the law, any objection
that it
may now or hereafter have to the laying of venue in any such court and any
claim that
such action, suit or proceeding has been brought in an inconvenient form.
Section 12.2 Expenses. Except as expressly provided herein, each of the
parties to this Agreement agrees to pay its own costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including
the fees and expenses of its counsel, accounting and other advisers and
agents.
Section 12.3 Assignment. Neither this Agreement nor any of the rights
or
obligations hereunder may be assigned or transferred by any party hereto
without
either party giving at least ninety (90) days prior written notice to all
other
parties hereto, provided, however, that Purchaser may, without providing
notice to
Seller, sell, assign, transfer or delegate its rights or obligation, under
this
Agreement to NEWCO or any of its affiliates, in which case such assignee or
transferee shall be substituted for Purchaser hereunder as though it was the
original
party to this Agreement, and Purchaser shall be released from all its
obligations
under this Agreement.
Section 12.4 Amendments. This Agreement may not be supplemented,
amended or
modified in any manner in whole or in part except by a writing signed by all
parties
to this Agreement that specifically states that it amends this Agreement.
Section 12.5 Notices. Any and all notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and
shall be deemed to have been duly given hereunder if delivered personally, or
if sent
by facsimile transmission (upon receipt of confirmation of delivery), on the
next
business day if sent by overnight courier service, or three business days
after being
sent by first class (registered/certified) mail, postage prepaid, return
receipt
requested, to the parties at the following addresses:
If to Purchaser: 0000 Xxxxxx Xxxx Xxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:Xxxxxxx & Berlin, Chartered
0000 X Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxx X. Xxx
Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to STOCKHOLDER: 0000 Xxxx Xxxx Xxxx Xxxxx
Xxxxx, Xxxx 00000
Attn: Xxxxxxx X. Call
Telephone: (000) 000-0000
With a copy to: Ray, Xxxxxxx & Xxxxxxx
400 Deseret Building
00 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000-0000
Attn: Xxxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may change its designated address by giving written notice
thereof to
all other parties hereto in the manner provided in this Section 12.5. Any
party
hereto may send any notice, request, demand, or other communication to the
intended
recipient at the address above by using any other means (such as telecopy,
telex,
expedited courier, messenger, ordinary mail or electronic mail), but no such
notice,
demand, request or other communication shall be deemed to have been given
until it is
actually received by the recipient.
Section 12.6 Waiver. The obligations of any party hereto may be waived
only
with the written consent of the party giving the waiver. Any waiver by any
party of
a breach of any provision of this Agreement shall not operate or be construed
to be a
waiver of any other breach of that provision or of any breach of any other
provision
of this Agreement. The failure of a party to insist upon strict adherence to
any
provision of this Agreement on one or more occasions shall not be considered a
continuing waiver or deprive that party of the right thereafter to insist upon
strict
adherence to that provision or any other provision of this Agreement.
Section 12.7 Severability. If any provision of this Agreement is
invalid,
illegal or unenforceable in any situation, the balance of this Agreement shall
remain
in effect, and such illegality, invalidity or unenforceability shall not
affect the
legality, validity or enforceability of that provision in any other situation
or
legality, validity or enforceability of any other provision of this Agreement.
Section 12.8 Headings. The headings used in this Agreement are solely
for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
Section 12.9 Successors and Assigns. This Agreement shall be binding
upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
Section 12.10 Pronouns, etc. The number and gender of each pronoun used
in
this Agreement and the term "person" or "persons" or the like shall be
construed to
mean both the number and gender of the individual, corporation, limited
liability
company, partnership, firm, trust, agency and other entity as the context,
circumstance or its antecedent may require. The terms "herein," "hereof,"
"hereby,"
"hereto" and the like refer to this Agreement as a whole.
Section 12.11 No Third Party Beneficiaries. Except as expressly
provided in
this Agreement, this Agreement does not confer or create, is not intended by
the
parties hereto to confer or create, and shall not be construed as conferring
or
creating, upon any person or entity other than the parties hereto and their
successors and permitted assigns any rights, remedies or causes of action
under or by
reason of this Agreement.
Section 12.12 Schedules, Exhibits and Annexes. The schedules, exhibits
and
annexes attached to this Agreement are incorporated into and made a part of
this
Agreement as if they were fully set forth herein.
Section 12.13 Specific Performance; Cumulative Remedies. The parties
hereto
acknowledge and agree that the transactions contemplated by this Agreement are
unique
in that remedies at law for any breach or threatened breach of this Agreement
would
be an inadequate remedy for any loss, and that any defense in any action for
specific
performance that a remedy at law would be adequate is hereby specifically
waived.
Accordingly, in the event of any actual or threatened breach to any of the
terms of
this Agreement, the non-breaching party shall have the right of specific
performance
and injunctive relief giving effect to its rights under this Agreement, in
addition
to any and all other rights and remedies, at law or in equity, and all such
rights
and remedies are cumulative.
Section 12.14 Counterparts. This Agreement may be executed in one or
more
counterparts, including counterparts executed by less than all parties hereto,
by
facsimile or otherwise, each of which shall be deemed an original, but all of
which
together shall constitute one and the same instrument.
Section 12.15 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties hereto with respect to the
subject
matter hereof and supersedes all prior and contemporaneous arrangements,
agreements
and understandings, whether oral or written, among the parties hereto in
connection
with the subject matter of this Agreement.
( Next page is the Signature Page).
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement
to be executed and delivered by their duly authorized officers as of the date
first
above written.
PURCHASER:
IT PARTNERS, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------
Xxxxxx X. Xxxxx
Title: President
SELLER:
CALL BUSINESS SYSTEMS, INC.
By: /s/Xxxxxxx X. Xxxxx
---------------------
Title:
STOCKHOLDER:
XXXXXXX X. CALL
By: Xxxxxxx X. Call
(Print Name)
/s/ Xxxxxxx X. Call
--------------------
(Signature)
