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EXHIBIT 2.1
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") is being entered into on
this the 4th day of November, 1999 between WT Technologies, Inc., a Georgia
corporation (the "Transferee"), Xxxxxx X. Ltd., a Virginia corporation d/b/a
International Software Products (the "Target"), and Xxxxxxxxxxx X. Xxxxxxx,
Xxxxx X. Xxxxxx, F. Xxxxxx Xxxxx and Xxxx X. Xxxxx and Xxxx X. Xxxxx, as
Trustees of the Xxxx X. Xxxxx and Xxxx X. Xxxxx Trust, each of whom is a
shareholder of the Target (the "Transferors"). The Transferee, the Transferors,
and the Target are sometimes referred to collectively herein as the "Parties".
W I T N E S S E T H
WHEREAS, the Transferors are the record holders and beneficial owners
of all of the issued and outstanding capital stock of the Target;
WHEREAS, the Transferors desire to transfer and the Transferee desires
to accept all of the issued and outstanding Target Shares (as defined below) on
the terms and subject to the conditions hereinafter set forth;
WHEREAS, this Agreement contemplates a transaction in which the
Transferors will transfer all of the outstanding capital stock of the Target to
the Transferee in return for (i) cash, (ii) the Transferee Notes (as defined
below), and (iii) an equity ownership interest in the Transferee, all as more
specifically described herein; and
WHEREAS, the Parties expressly intend that the transaction contemplated
by this Agreement constitute a transfer of property (i.e., Target Shares) by the
Transferors in exchange for common stock of the Transferee (plus additional
non-stock consideration) where the Transferors constitute some of a larger group
of transferors who are collectively intending to participate in a series of
transactions with the Transferee that taken together, qualify as a "Section 351
exchange" within the meaning of Section 351 of the Code.
NOW THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS. CAPITALIZED TERMS USED BUT NOT OTHERWISE DEFINED HEREIN
SHALL HAVE THE following meanings:
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D
promulgated under the Securities Act.
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"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Section 1504(a) of the Code.
"APPLICABLE RATE" means the "prime rate" as published in the Wall
Street Journal from time to time.
"BCD" means BCD Technology, Inc., a Georgia corporation.
"CLOSING" means the consummation of the transactions contemplated by
this Agreement.
"CLOSING DATE" means the date upon which this Agreement is executed by
all of the Parties hereto.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B.
"CODE" means the Internal Revenue Code of 1986, as amended.
"EMPLOYEE BENEFIT PLAN" means any agreement, arrangement, commitment,
policy or understanding of any kind (whether written or oral) which (i) makes
available retirement or welfare benefits; (ii) pertains to the present or former
employees, retirees, directors or independent contractors (or their
beneficiaries, dependents or spouses) of the Target, its predecessors in
interest or any ERISA Affiliate; and (iii) is currently or expected to be
adopted, maintained by, sponsored in whole or in part by, or contributed to by
the Target, any of its predecessors in interest or any ERISA Affiliate or as to
which the Target, any of its predecessors in interest or any ERISA Affiliate has
any ongoing liability or obligation whatsoever including, but not limited to,
all: (a) employee benefit plans as defined in Section 3(3) of ERISA; (b) other
deferred compensation, early retirement, incentive, profit-sharing, thrift,
stock ownership, stock appreciation rights, bonus, stock option, stock purchase,
severance, educational assistance, employee assistance, welfare or vacation, or
other nonqualified benefit plans or arrangements; and (c) trusts, insurance
policies or other funding media for the plans and arrangements described
hereinabove.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(l).
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"ENVIRONMENTAL, HEALTH AND SAFETY REQUIREMENTS" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, and all common law concerning public health and
safety, worker health and safety and pollution or protection of the environment,
including without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means each entity which is treated as a single
employer with the Target for purposes of Section 414 of the Code.
"FIDUCIARY" has the meaning set forth in ERISA Section 3(21).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, (h) all copies and
tangible embodiments thereof (in whatever form or medium), and (i) all
contracts, agreements or understandings relating to any of the above items that
are owned or used by the Target.
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"MAJORITY TRANSFERORS" means Xxxxxxxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxx
and F. Xxxxxx Xxxxx.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
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"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"REORGANIZATION" means the transactions pursuant to which the
Transferee will acquire all of the issued and outstanding shares or other
interests in the Target and the Transferee Affiliates.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043(b).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens for amounts not yet due and payable, and (b) liens for taxes
not yet due and payable or for taxes that the taxpayer is contesting in good
faith through appropriate proceedings.
"SUBSIDIARY" means any corporation or other entity with respect to
which a specified Person (or a Subsidiary thereof) owns a majority of the
capital stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors or has the power to direct the
management of such corporation or other entity.
"TARGET SHARES" means all issued and outstanding shares of the common
stock, par value $1.00 per share, of the Target.
"TAX" (and, with correlative meaning, "Taxes" and "Taxable") means any
federal, state, county, local or foreign taxes, charges, fees, duties (including
customs duties), levies or other assessments, including income, gross receipts,
net proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
user, capital, registration, transfer, fuel, excess profits, occupational,
interest equalization, windfall profits, license, payroll, environmental,
capital stock, disability, severance, employee's income withholding, other
withholding, unemployment and Social Security taxes, which are imposed by any
taxing authority, and such term shall include any interest, penalties or
additions to tax attributable thereto.
"TAX RETURN" shall mean any report, return or other information
required to be supplied to a taxing authority in connection with any Taxes.
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"TRANSFEREE AFFILIATES" shall mean WTT, Travel Technologies Group,
L.L.C. and BCD.
"TRANSFERORS' REPRESENTATIVE" shall mean Xxxxx X. Xxxxxx.
"WTT" shall mean WorldTravel Technologies, L.L.C., a Georgia limited
liability company.
2. TRANSFER OF TARGET SHARES.
(a) Basic Transaction. On and subject to the terms and conditions
of this Agreement, each Transferor agrees to transfer to the Transferee, all of
his Target Shares for the consideration specified below in this Section 2.
(b) Consideration. Subject to the adjustments set forth in Section
2(c) hereof, the aggregate consideration to be provided to the Transferors for
the Target Shares shall be Seven Million Eight Hundred Thousand Dollars
($7,800,000) less the Transferors' calculation of Tangible Net Worth Shortfall
(the "Aggregate Consideration"). The Aggregate Consideration shall be payable to
the Transferors at Closing as follows:
(i) First, Five Million Dollars ($5,000,000) of the
Aggregate Consideration shall be in the form of 289,781 shares of common stock,
par value $.01 per share, of the Transferee (the "Transferee Shares"); provided,
however, that thirty percent (30%) of the number of Transferee Shares (the
"Escrow Shares") shall, at the Closing, be pledged to the Transferee as security
for any Consideration Adjustment (as defined below) and the Transferors'
indemnification obligations under Section 5 hereof, and such shares shall be
held in escrow and released pursuant to the Escrow Agreement attached hereto as
Exhibit A (the "Escrow Agreement"). The parties acknowledge and agree that they
have attempted to structure the Escrow Agreement so that the Escrow Shares will
satisfy the Internal Revenue Service advance ruling guidelines for Section 351
exchanges set forth in Section 3.06 of Rev. Proc. 77-37, as amplified by Rev.
Proc. 84-42. At the Closing, the Transferee shall deliver to each Transferor a
certificate or certificates representing the number of Transferee Shares to
which each such Transferor is entitled as of the Closing, and shall issue
separate share certificates to cover the Escrow Shares to be pledged and held
pursuant to the Escrow Agreement;
(ii) Next, Eight Hundred Thousand Dollars ($800,000) of any
remaining Aggregate Consideration shall be payable to each Transferor by a
promissory note in the form of Exhibit B attached hereto (the "Transferee
Notes"). The Transferee Notes shall have, in the aggregate, a principal amount
of Eight Hundred Thousand Dollars ($800,000) and interest thereon shall be
calculated at the Applicable Rate; and
(iii) Next, the balance of any remaining Aggregate
Consideration shall be paid to the Transferors at Closing by wire transfer or
delivery of other immediately available funds.
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The Aggregate Consideration shall be allocated among and paid to the Transferors
in proportion to each such Transferor's respective holdings of Target Shares as
set forth in paragraph (v) of the Transferors' Disclosure Schedule ("Percentage
Interest").
(c) Consideration Adjustment.
(i) Simultaneous with the execution of this Agreement, the
Transferors have delivered to the Transferee (A) an unaudited balance sheet of
the Target, based on and prepared in a manner consistent with the Target Most
Recent Financial Statement (as defined below), as of the close of business on
the day immediately preceding the Closing Date (the "Closing Balance Sheet"),
and (B) the Transferors' calculation of any Tangible Net Worth Shortfall (as
defined below) based thereon. As used herein, "Tangible Net Worth Shortfall"
means the amount by which Tangible Net Worth (as defined below) is less than
Zero Dollars ($0) on an applicable balance sheet. As used herein, the term
"Tangible Net Worth" means the total assets of the Company as reflected on the
applicable balance sheet minus intangible assets and total liabilities of the
Company as reflected on the applicable balance sheet, determined as of the close
of business on the day immediately preceding the Closing Date; provided,
however, that "Tangible Net Worth" shall not include capitalized software costs
and costs related to Navigator Software (and no depreciation associated
therewith shall be included in the calculation of Tangible Net Worth).
(ii) The Transferee and its accountants shall have sixty (60)
days following receipt of the Closing Balance Sheet and the Transferors'
calculation of Tangible Net Worth Shortfall to review such items, and, at the
Transferee's option, perform an audit thereon. The Closing Balance Sheet and the
Transferors' calculation of Tangible Net Worth Shortfall shall become final and
binding on the Parties (A) unless the Transferee gives written notice to the
Transferors' Representative of its disagreement with the Closing Balance Sheet
and/or the Transferors' calculation of Tangible Net Worth Shortfall (a "Notice
of Disagreement") within such sixty (60) day period or (B) at such earlier time
as the Transferee notifies the Transferors' Representative of its acceptance of
the Closing Balance Sheet and the Transferor's calculation of Tangible Net Worth
Shortfall. Any Notice of Disagreement shall specify in reasonable detail the
nature of any disagreement so asserted. During the thirty (30) days immediately
following the delivery of any Notice of Disagreement, the Transferee and the
Transferors' Representative shall seek in good faith to resolve in writing any
differences which they may have with respect to any matter specified in such
Notice of Disagreement. At the end of such thirty (30) day period, the
Transferee and the Transferors' Representative shall submit to an accounting
firm mutually agreed upon by the Transferee and the Transferors' Representative
(the "Accounting Firm") for review and resolution any and all matters which
remain in dispute and which were included in any Notice of Disagreement, and the
Accounting Firm shall reach a final, binding resolution of all matters which
remain in dispute, which final resolution shall be (w) in writing, (x) furnished
to the Transferee and the Transferors' Representative as soon as practicable
after the items in dispute have been referred to the Accounting Firm, (y) made
in accordance with this Agreement, and (z) conclusive and binding upon the
Parties. If a timely Notice of Disagreement is delivered by the Transferee with
respect to the Closing Balance Sheet and/or the Transferors' calculation of
Tangible Net Worth Shortfall, the Closing Balance Sheet and calculation of
Tangible Net Worth Shortfall (as revised,
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if at all, in accordance with clauses (A) or (B) below) shall become final and
binding upon the Parties on the earlier of (A) the date the Transferee and the
Transferors' Representative resolve in writing any differences they have with
respect to any matter specified in a Notice of Disagreement, or (B) the
date any matters in dispute are finally resolved in writing by the Accounting
Firm (as defined below) (the date on which the Closing Balance Sheet and
calculation of Tangible Net Worth Shortfall, as revised, if at all, in
accordance with clauses (A) or (B) above, become final and binding is referred
to as the "Final Determination Date"; such final and binding Closing Balance
Sheet is referred to as the "Final Closing Balance Sheet"; and such calculation
of any Tangible Net Worth Shortfall is referred to as the "Final Tangible Net
Worth Shortfall"). The Transferee and the Transferors shall disclose to each
other any past or present material relationship with the Accounting Firm
(including any past or present material relationship between the Target and the
Accounting Firm). The Transferee and the Transferors covenant that they will not
enter into, or arrange to enter into, any additional relationship with the
Accounting Firm until after the Final Determination Date. Each Party shall pay
its own costs and expenses incurred in connection with such dispute resolution;
provided, however, that the fees and expenses of the Accounting Firm shall be
borne fifty percent (50%) by the Transferee and fifty percent (50%) by the
Transferors, pro rata based on each such Transferors' Percentage Interest. The
Transferors hereby appoint the Transferors' Representative as their
attorney-in-fact to make all decisions on behalf of the Transferors with respect
to the matters set forth in this Section 2, and acknowledge that such
appointment is irrevocable and coupled with an interest.
(iii) Upon the determination of the Final Closing Balance
Sheet and calculation of the Final Tangible Net Worth Shortfall in accordance
with this Section 2(c), the following Consideration Adjustment (as hereinafter
defined) will be payable, as applicable, in accordance with Section 2(c)(iv):
(x) if the Final Tangible Net Worth Shortfall is greater than the Transferor's
calculation of Tangible Net Worth Shortfall (the "Estimated Tangible Net Worth
Shortfall"), then each Transferor shall pay to the Transferee its pro rata
portion, based on each such Transferor's Percentage Interest, of the amount by
which the Final Tangible Net Worth Shortfall is greater than the Estimated
Tangible Net Worth Shortfall; (y) if the Final Tangible Net Worth Shortfall
equals the Estimated Tangible Net Worth Shortfall, then there shall be no
adjustment hereunder; and (z) if the Final Tangible Net Worth Shortfall is less
than the Estimated Tangible Net Worth Shortfall, the Transferee shall pay to the
Transferors their pro rata portion, based on each such Transferor's Percentage
Interest, of the amount by which the Estimated Tangible Net Worth Shortfall
exceeds the Final Tangible Net Worth Shortfall; provided, however, that in no
event shall the Transferee be obligated to pay to the Transferors (including any
payment under this Section 2(c)(iii)) an aggregate amount for the Target Shares
in excess of $7,800,000. The required adjustments to the Aggregate Consideration
pursuant to this Section 2(c)(iii) shall be referred to as the "Consideration
Adjustment".
(iv) Any Consideration Adjustment pursuant to Section
2(c)(iii) hereof shall be satisfied as follows: each Transferor shall pay to the
Transferee, in immediately available funds, its pro rata portion of the
Consideration Adjustment and such payment shall be made within three (3)
business days following the Final Determination Date; provided, however, that if
the Final Determination Date is the Closing Date
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and the Transferee is entitled to a Consideration Adjustment in its favor
pursuant to Section 2(c)(iii) hereof, the Transferee shall deduct, on a pro rata
basis, the entire amount of such Consideration Adjustment from the funds
otherwise payable to the Transferors pursuant to Section 2(b)(ii). If any
Transferor does not pay the Transferee the remaining Consideration Adjustment
attributable to such Transferor within the time period set forth in the
preceding sentence, the Transferee shall, at its option, be entitled to direct
the Escrow Agent (as defined in the Escrow Agreement) to pay to the Transferee
such number of Escrow Shares as shall equal the Consideration Adjustment
attributable to such Transferor.
(d) Accounts Receivable. At the Closing, the Target shall, and the
Transferors shall cause the Target to, deliver to the Transferee a complete list
of the Target's accounts receivable as of the Closing Date (the "Closing
Accounts Receivable"), which list shall itemize the Closing Accounts Receivable
by customer and account. Such list of Closing Accounts Receivable shall be
prepared on a basis consistent with the Closing Balance Sheet. Unless otherwise
expressly provided herein, the Transferee and the Target shall have the sole
right to collect the Closing Accounts Receivable following the Closing Date. No
later than one hundred eighty (180) days after the Closing, the Transferee shall
prepare and deliver to the Transferors' Representative a report setting forth
all relevant information concerning the collection of the Closing Accounts
Receivable during the one hundred eighty (180) day period following the Closing
Date (the date such report is delivered being referred to as the "A/R
Notification Date"), which report shall include, among other things, (i) a list
of all uncollected Closing Accounts Receivable as of the A/R Notification Date
("Uncollected A/R") and (ii) a list of Uncollected A/R for which the Transferors
will be required to compensate the Transferee on the terms set forth below (such
Uncollected A/R being referred to as "Reimbursable Uncollected A/R"). Within
three (3) business days after the A/R Notification Date, the Transferors shall
pay to the Transferee the full amount in cash of all Reimbursable Uncollected
A/R. After the Transferee has received from the Transferors the entire amount of
all Reimbursable Uncollected A/R, the Transferee shall assign all of its rights
in and to the Reimbursable Uncollected A/R to the Transferors and the
Transferors shall then, and only then, be entitled to collect such Reimbursable
Uncollected A/R and retain the proceeds therefrom. Such Reimbursable Uncollected
A/R shall be assigned to the Transferors free and clear of all Security
Interests, except for those Security Interests in existence on or prior to the
Closing Date. The Transferee shall remit to the Transferors any payments
received by it with respect to Reimbursable Uncollected A/R, provided that the
Transferee has received from the Transferors the full amount of such
Reimbursable Uncollected A/R. Notwithstanding the foregoing, the Transferors
shall be relieved of their obligations under this Section 2(d) to the extent
that the Transferee and the Target, as applicable, have failed to use
commercially reasonable efforts to collect the Closing Accounts Receivable
during such one hundred eighty (180) day period which, for purposes hereof,
shall not involve the institution of legal action to collect such Closing
Accounts Receivable.
(e) Deliveries at the Closing. Simultaneous with the execution
hereof, the following actions have been taken:
(i) each Transferor has delivered (A) the Non-Competition
Agreement in the form attached hereto as Exhibit D, (B) the stock certificate or
certificates representing all of his or its Target
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Shares, endorsed in blank and accompanied by a duly executed stock power; (C)
the Shareholders Agreement in the form attached hereto as Exhibit E; the (D) the
Escrow Agreement; (E) the list of Closing Accounts Receivable as more fully
described in Section 2(d) hereof; and (F) the Put Agreement in the form attached
hereto as Exhibit F.
(ii) Xxxxx X. Xxxxxx has delivered an Employment Agreement in
the form attached hereto as Exhibit G and Xxxxxxxxxxx X. Xxxxxxx has delivered
an Employment Agreement in the form attached hereto as Exhibit H;
(iii) the Transferee has delivered (A) the Aggregate
Consideration to the Transferors pursuant and subject to Section 2(b) hereof;
(B) the Escrow Agreement; (C) the Shareholders Agreement in the form attached
hereto as Exhibit E; and (D) the Put Agreement in the form attached hereto as
Exhibit F.
(iv) WTT has delivered the Employment Agreement in the form
attached hereto as Exhibit G and, the Target has delivered the Employment
Agreement in the form attached hereto as Exhibit H.
(v) The Target has delivered to the Transferee a written
instrument or instruments, in form and substance reasonably satisfactory to the
Transferee, pursuant to which each person listed on Exhibit I hereto has waived
his or her rights under, and released the Target from all of its obligations in
connection with, the document set forth beside his or her name.
(f) Allocation. The Aggregate Consideration shall be allocated as
set forth on Exhibit J attached hereto, which exhibit shall be amended, if
necessary, on the Final Determination Date. The Transferors, the Target and the
Transferee agree (i) to file their federal and state income tax return (and Form
8594, if applicable) on the basis of the allocation set forth on Exhibit J and
(ii) that none of them shall thereafter take a tax return position inconsistent
with such allocation unless such inconsistent position shall arise out of or
through an audit or other inquiry or examination by the Internal Revenue
Service.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) Representations and Warranties of the Transferors Regarding
the Transferors. Each Transferor represents and warrants to the Transferee that
the statements contained in this Section 3(a) are correct and complete as of the
date of this Agreement, except as set forth in the disclosure schedule delivered
by the Transferors to the Transferee on the date hereof and initialed by the
Transferors (the "Transferors' Disclosure Schedule"), which is arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 3(a). All representations made in this Section 3(a) shall be deemed
to be made by each Transferor individually and severally and not jointly;
provided, however, that the representations and warranties in Sections 3(a)(iii)
and 3(a)(v) shall be deemed to be made by the Transferors jointly and severally.
Except with respect to those representations which are made jointly and
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severally, with respect to the representations in this Section 3(a) only, no
Transferor shall have the obligation, or shall be deemed to have assumed or
undertaken the obligation, to ascertain, verify, or confirm the accuracy or
completeness of any representation made by any Transferor other than himself
(except to the extent that a Transferor has actual personal knowledge (without
any obligation of investigation) of matters or events regarding a representation
made by another Transferor). Except with respect to those representations which
are made jointly and severally, with respect to the representations in this
Section 3(a) only, no liability shall be imposed on any Transferor for the
inaccuracy or incompleteness of a representation made by any other Transferor
(unless a Transferor has actual personal knowledge (without any obligation of
investigation) of a material misrepresentation or omission made by another
Transferor).
(i) Authorization of Transaction. Each Transferor has full
power, authority and legal capacity and competence to execute and deliver this
Agreement and to perform his obligations hereunder. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by all necessary
action on the part of each Transferor. This Agreement has been duly and validly
executed and delivered by the Transferors and constitutes the valid and legally
binding obligation of each Transferor, enforceable in accordance with its terms
and conditions. No Transferor needs to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this
Agreement.
(ii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any Transferor or his assets is subject
or (B) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Transferor is a party or
by which he is bound or to which any of his assets is subject.
(iii) Brokers' Fees. No Transferor has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(iv) Investment. Each Transferor (A) understands that the
Transferee Shares and the Transferee Notes have not been, and will not be,
registered under the Securities Act, or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (B) is acquiring the Transferee
Shares and the Transferee Notes solely for his own account for investment
purposes, and not with a view to distribution, (C) is a sophisticated investor
with knowledge and experience in business and financial matters, (D) has
received certain information concerning the Transferee and has had the
opportunity to obtain all the information requested by him concerning the
Transferee and considered necessary or appropriate in order to evaluate
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the merits and the risks inherent in holding the Transferee Shares and the
Transferee Notes, (E) is able to bear the economic risk and lack of liquidity
inherent in holding the Transferee Shares and the Transferee Notes, and (F) is
an Accredited Investor.
(v) Target Shares. The Transferors are the record holders and
beneficial owners of all of the issued and outstanding capital stock of the
Target. Each Transferor holds of record and owns beneficially, and has good and
valid title to, the number of Target Shares set forth next to his name in
paragraph (v) of the Transferors' Disclosure Schedule, and such shares are (i)
validly issued, fully paid and non-assessable, and (ii) free and clear of any
restrictions on transfer (other than any restrictions under the Securities Act
and state securities laws), taxes, Security Interests, options, warrants,
purchase rights, contracts, rights of first refusal, encumbrances of any kind
whatsoever, commitments, equities, claims, and demands. No Transferor is a party
to any option, warrant, purchase right, or other contract or commitment that
could require the Transferor to sell, transfer, or otherwise dispose of any
capital stock of the Target (other than this Agreement). No Transferor is a
party to any voting trust, proxy, or other agreement or understanding with
respect to the voting or transfer of any capital stock of the Target. Upon the
occurrence of the Closing, the Transferee shall have obtained good and valid
title to all of the capital stock of the Target, free and clear of any
restrictions on transfer (other than any restrictions under the Securities Act
and state securities laws), taxes, Security Interests, options, warrants,
purchase rights, contracts, rights of first refusal, encumbrances of any kind
whatsoever, commitments, equities, claims and demands. The Transferors have the
full and exclusive power, right and authority to vote and dispose of the Target
Shares.
(b) Representations and Warranties of the Majority Transferors
Concerning the Target. The Majority Transferors jointly and severally represent
and warrant to the Transferee that the statements contained in this Section 3(b)
are correct and complete as of the date of this Agreement, except as set forth
in the disclosure schedule delivered by the Majority Transferors to the
Transferee on the date hereof and initialed by the Majority Transferors (the
"Target Disclosure Schedule"), which is arranged in paragraphs corresponding to
the lettered and numbered paragraphs contained in this Section 3(b).
(i) Organization, Qualification, and Corporate Power. The
Target is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation. The Target is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required by virtue of the conduct of
business or ownership of properties and assets, except where the lack of such
qualification would not affect the enforceability of any material contract to
which the Target is a party and would not have a material adverse effect on the
business, financial condition, operations, results of operations, or future
prospects of the Target. The Target has full corporate power and authority to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. Paragraph (i) of the Target Disclosure Schedule lists the
directors and officers of the Target. The copies of the charter documents and
bylaws of the Target that have been previously delivered to the Transferee are
the complete, true and correct charter documents and bylaws of the Target. The
minutes of directors' and shareholders' meetings and the stock books of the
Target that have previously been delivered to the Transferee are the complete,
true and correct records of directors'
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and shareholders' meetings and stock issuances through and including the date
hereof and reflect all transactions and other matters required to be reflected
in such records.
(ii) Capitalization. The entire authorized capital stock of
the Target consists of 20,000 shares of common stock, par value $1.00 per share,
of which 10,000 shares of common stock, Class A, are issued and outstanding. All
of the issued and outstanding Target Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
respective Transferors as set forth in paragraph (ii) of the Target Disclosure
Schedule. There are no outstanding or authorized, nor is the Target bound by
any, options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights or rights of any character or other contacts or commitments that
could require the Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock. All issuances, transfers or purchases of
the capital stock of the Target have been in compliance with all applicable
agreements and laws, and all taxes thereon have been paid. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Target. There are no
outstanding obligations of the Target to repurchase, redeem or otherwise acquire
any outstanding shares of capital stock of the Target. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting or transfer of the capital stock of the Target.
(iii) Absence of Other Claims. No prior offer, issue,
redemption, call, purchase, sale, merger, transfer, involvement in any transfer,
negotiation or other transaction of any nature or kind with respect to any
capital stock (including shares, offers, options, warrants, or debt convertible
into shares, options or warrants) of the Target has given, or may give rise to
(i) any valid claim or action by any person (including, without limitation, any
former or present holder of any of the Target Shares or any other capital stock
of the Target or the Transferors) which is enforceable against the Target or the
Transferee; or (ii) any valid interest in the Target, and to the Knowledge of
the Majority Transferors and the Target, no fact or circumstance exists which
could give rise to any such right, claim, action or interest on behalf of any
person.
(iv) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will, with or without notice or the lapse of time, or both, (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Target is subject or any provision of the charter or bylaws
of the Target or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Target is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). The Target does not need to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
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(v) Brokers' Fees. The Target has no liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated hereby.
(vi) Title to Assets. The Target has good and marketable
and/or valid title to, or a valid leasehold interest in, the real, personal and
mixed, tangible and intangible properties and assets used by it, located on its
premises, shown on the Target Most Recent Balance sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Target Most Recent Fiscal Month End. All properties and assets of the Target are
located on the premises and principal business operations of the Target.
(vii) Subsidiaries; Investments. The Target has no
Subsidiaries. The Target does not own any capital stock or other securities or
have any other investment in any Person.
(viii) Financial Statements. Paragraph (viii) of the Target
Disclosure Schedule contains the following financial statements (collectively
the "Target Financial Statements"): (i) unaudited consolidated balance sheets
and statements of income as of and for the fiscal years ended December 31, 1996
and December 31, 1997 for the Target; (ii) an unaudited consolidated balance
sheet and statement of income, changes in stockholders' equity and cash flow as
of and for the fiscal year ended December 31, 1998 (the "Target Most Recent
Fiscal Year End") for the Target; and (iii) an unaudited consolidated balance
sheet (the "Target Most Recent Balance Sheet") and statement of income, changes
in stockholders' equity, and cash flow (the "Target Most Recent Financial
Statements") as of and for the six months ended June 30, 1999 (the "Target Most
Recent Fiscal Month End") for the Target. The Target Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby and present fairly,
in all material respects, the financial condition of the Target as of such dates
and the results of operations of the Target for such periods; provided, however,
that the Target Most Recent Financial Statements are subject to normal,
recurring year-end adjustments (which will not be material individually or in
the aggregate) and lack footnotes; and provided, further, that the Target
Financial Statements identified in clause (i) above do not include statements of
changes in stockholders' equity and cash flow.
(ix) Events Subsequent to Target Most Recent Fiscal Year
End. Since the Target Most Recent Fiscal Year End, the Target has conducted its
business in the Ordinary Course of Business and there has not been any material
adverse change in the business, financial condition, operations, results of
operations, or future prospects of the Target taken as a whole. Without limiting
the generality of the foregoing, since that date:
(A) the Target has not sold, leased, transferred, or
assigned any assets, tangible or intangible, outside the Ordinary Course of
Business;
(B) the Target has not entered into any agreement,
contract, lease, or license outside the Ordinary Course of Business;
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(C) no party (including the Target) has accelerated,
terminated, made material modifications to, or canceled any material agreement,
contract, lease, or license to which the Target is a party or by which any of
them is bound;
(D) the Target has not imposed any Security Interest
upon any of its assets, tangible or intangible;
(E) the Target has not made any single capital
expenditure or investment in excess of $10,000 or cumulative capital
expenditures or investments in excess of $25,000;
(F) the Target has not made any loan to any other
Person outside the Ordinary Course of Business;
(G) the Target has not created, incurred, assumed or
guaranteed more than $10,000 in aggregate indebtedness for borrowed money and
capitalized lease obligations;
(H) the Target has not granted any license or
sublicense of any rights under or with respect to any Intellectual Property;
(I) there has been no change made or authorized in
the charter or bylaws of the Target;
(J) the Target has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock;
(K) the Target has not declared, set aside, or paid
any dividend or made any distribution with respect to its capital stock (whether
in cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(L) the Target has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its property,
which damage, destruction or loss, individually or in the aggregate, exceeds
$25,000;
(M) the Target has not made any loan to, or entered
into any other transaction with, any of its current or former directors,
officers, and employees outside the Ordinary Course of Business;
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(N) the Target has not entered into any employment or
severance contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(O) the Target has not granted any bonus to or increase
in the base or other compensation of any of its directors, officers, and
employees outside the Ordinary Course of Business;
(P) the Target has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its current or former
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(Q) the Target has not made any other change in
employment terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(R) the Target has not managed working capital
components, including cash, receivables, other current assets, trade payables
and other current liabilities in a fashion inconsistent with past practice,
including failing to sell inventory and other property in an orderly and prudent
manner or failing to make all budgeted and other normal capital expenditures,
repairs, improvements and dispositions;
(S) the Target has not changed any accounting method for
GAAP or Tax purposes and has not made or changed any Tax election;
(T) the Target has not suffered any adverse change in
its working capital, assets, liabilities, financial condition, business
property, or relationships with any suppliers or customers; or
(U) the Target has not committed to, or otherwise
entered into any contract or agreement with respect to, any of the foregoing.
(x) Undisclosed Liabilities. The Target has no liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes), except for
(i) liabilities set forth on the face of the Target Most Recent Balance Sheet
(rather than in any notes thereto) and (ii) liabilities which have arisen after
the Target Most Recent Fiscal Month End in the Ordinary Course of Business.
(xi) Legal Compliance. The Target has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced or, to the
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Knowledge of the Majority Transferors or the Target, threatened against the
Target alleging any failure so to comply.
(xii) Tax Matters.
(A) The Target has timely filed, including applicable
extensions, all Tax Returns that it was required to file. All such Tax Returns
are true, correct and complete in all material respects. All Taxes owed by the
Target (whether or not shown on any Tax Return) have been paid by the Target or
Target has made adequate provision on its books and records for the payment of
all Taxes required to be paid by it for all tax periods ending on or prior to
the Closing Date, whether or not in connection with such Tax Returns. All
deficiencies asserted against the Target as a result of any examinations by the
Internal Revenue Service or any other taxing authority have been paid, fully
settled or adequately provided for in the Target Most Recent Balance Sheet. The
Target currently is not the beneficiary of any extension of time within which to
file any Tax Return.
(B) There is no pending dispute or claim concerning any
Tax liability of the Target for any period either (A) claimed or raised by any
taxing authority in writing or (B) as to which the Target has knowledge based
upon personal contact with any agent of such authority. There are no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any Tax Return of Target for any period.
(C) Paragraph (xii) of the Target Disclosure Schedule
lists all federal, state, local, and foreign Tax Returns filed with respect to
the Target for taxable periods ended on or after June 30, 1999, indicates those
Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Target delivered to the Transferee
correct and complete copies of all federal Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by any of the Target
since June 30, 1999 and made available such other Tax Returns requested by the
Transferee. The Target does not conduct business or derive income from any
state, local, or foreign taxing jurisdiction other than those for which Tax
Returns have been filed. The Target has disclosed on its federal income Tax
Returns all positions taken thereon that could give rise to any accuracy-related
penalty within the meaning of Section 6662 of the Code. The Target has complied
for all prior periods and will comply through the Closing Date with the Tax
withholding provisions of all applicable federal, state, local and other laws.
All accounting periods and methods used by the Target for Tax reporting purposes
are permissible periods and methods under applicable law.
(D) The Target has not filed a consent under Code
Section 341(f) concerning collapsible corporations. The Target has not made any
material payments, is not obligated to make any material payments, and is not a
party to any agreement that under certain circumstances could obligate it to
make any material payments that will not be deductible under Code Section 280G.
The Target has not been a United States real property holding corporation within
the meaning of Code Section 897(c)(2) during the applicable period specified in
Code Section 897(c)(1)(A)(ii). The Target is not a party to any
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Tax allocation or sharing agreement. The Target (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return or (B) has no
liability for the taxes of any other Person under Treas. Reg. Section 1.1502-6
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise.
(E) The unpaid Taxes of the Target (A) did not, as of
the Target Most Recent Fiscal Month End, exceed by any material amount the
reserve for Tax liability (rather than any reserve for deferred taxes
established to reflect timing differences between book and tax income) set forth
on the face of the Target Most Recent Balance Sheet (rather than in any notes
thereto) and (B) will not exceed by any material amount that reserve as adjusted
for operations and transactions through the Closing Date in accordance with the
past custom and practice of the Target in filing its Tax Returns.
(xiii) Property.
(A) The Target owns no real property. Paragraph (xiii)
of the Target Disclosure Schedule lists and briefly describes all of the (i)
real property that the Target leases or subleases, has agreed (or has an option)
to lease, or may be obligated to lease and (ii) personal property that the
Target owns or leases (or subleases), has agreed (or has an option) to purchase,
sell or lease, or may be obligated to purchase, sell or lease. With respect to
each such parcel of leased real property:
(1) there are no pending or, to the Knowledge of
the Target or the Majority Transferors, threatened condemnation proceedings,
lawsuits, or administrative actions relating to the property or other matters
adversely affecting the current use, occupancy, or value thereof;
(2) to the Knowledge of the Target and the Majority
Transferors, there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any party or parties the right of use
or occupancy of any portion of the parcel of real property; and
(3) there are no parties (other than the Target) in
possession of the parcel of real property, other than tenants under any leases
disclosed in paragraph (xiii) of the Target Disclosure Schedule who are in
possession of space to which they are entitled.
(B) The Target has delivered to the Transferee correct
and complete copies of the leases and subleases listed in paragraph (xiii) of
the Target Disclosure Schedule (as amended to date). With respect to each lease
and sublease listed in paragraph (xiii) of the Target Disclosure Schedule:
(1) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all respects;
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(2) no party to the lease or sublease is in breach
or default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(3) no party to the lease or sublease has repudiated
verbally or in writing to the Target or the Majority Transferors any provision
thereof;
(4) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(5) the Target has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold; and
(6) all facilities leased or subleased thereunder
have received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof, and have been
operated and maintained in accordance with applicable laws, rules, and
regulations in all material respects.
(C) The rights, properties and other assets presently
owned, leased or licensed by the Target and described in paragraph (xiii) of the
Target Disclosure Schedule include all rights, properties and other assets
necessary to permit the Target to conduct its business in the same manner as its
business has been heretofore conducted, without any need for replacement,
refurbishment or extraordinary repair.
(D) All of the inventories of the Target included on the
Target Most Recent Balance Sheet or subsequently acquired are merchantable and
of a quality and quantity usable and saleable in the Ordinary Course of
Business, and the quantities of each type of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable,
adequate and appropriate in the present circumstances of the Target. All of the
inventories of the Target included on the Target Most Recent Balance Sheet are
valued for the purposes thereof at the lower of cost or market.
(xiv) Intellectual Property.
(A) The Target has not interfered with, infringed upon,
misappropriated, or violated any material Intellectual Property rights of third
parties in any respect, and neither the Target nor the Majority Transferors have
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that the Target must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of the Majority Transferors or the
Target, no third party has interfered with, infringed upon, misappropriated, or
violated any material Intellectual Property rights of the Target in any respect.
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(B) Paragraph (xiv)(B) of the Target Disclosure Schedule
identifies each patent or registration which has been issued to the Target with
respect to any of its Intellectual Property, identifies each pending patent
application or application for registration which the Target has made with
respect to any of its Intellectual Property, and identifies each license,
agreement, or other permission which the Target has granted to any third party
with respect to any of its Intellectual Property (together with any exceptions).
The Target has delivered to the Transferee correct and complete copies of all
such patents, registrations, applications, licenses, agreements, and permissions
(as amended to date). Paragraph (xiv)(B) of the Target Disclosure Schedule also
identifies each trade name or unregistered trademark used by the Target in
connection with any of its businesses. With respect to each item of Intellectual
Property required to be identified in paragraph (xiv)(B) of the Target
Disclosure Schedule:
(1) the Target possesses all right, title, and
interest in and to the item, free and clear of any Security Interest, license,
or other restriction;
(2) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(3) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Knowledge of the Target or the Majority Transferors, is threatened which
challenges the legality, validity, enforceability, use, or ownership of the
item; and
(4) the Target has not agreed to indemnify any
Person for or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(C) Paragraph (xiv)(C) of the Target Disclosure Schedule
identifies each item of Intellectual Property that any third party owns and that
the Target uses pursuant to license, sublicense, agreement, or permission other
than non-proprietary software for desktop computers. The Target has delivered to
the Transferee correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in paragraph (xiv)(C) of the
Target Disclosure Schedule:
(1) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and in full
force and effect in all respects;
(2) no party to the license, sublicense, agreement,
or permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(3) no party to the license, sublicense, agreement,
or permission has repudiated any provision thereof; and
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(4) the Target has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, or permission.
(xv) Tangible Assets. The buildings, machinery, equipment,
and other tangible assets that the Target owns (or purports to own) and leases
are free from material defects (patent and latent), have been maintained in
accordance with normal industry practice, are in good operating condition and
repair (subject to normal wear and tear) and are adequate for the uses to which
they are being put.
(xvi) Contracts. Paragraph (xvi) of the Target Disclosure
Schedule lists the following contracts and other agreements to which the Target
is a party:
(A) any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing for lease
payments in excess of $25,000 per annum;
(B) any agreement (or group of related agreements)
that may continue over a period of more than six months from the date hereof or
involve consideration in excess of $25,000;
(C) any agreement concerning a partnership or joint
venture;
(D) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or any capitalized lease obligation, in excess of $50,000 or
under which it has imposed a Security Interest an any of its assets, tangible or
intangible;
(E) any agreement concerning confidentiality or
limiting the freedom of the Target to compete in any line of business in any
geographic area or requiring the Target to share any profits;
(F) any agreement with any of the Transferors and
their Affiliates (other than the Target);
(G) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(H) any collective bargaining agreement;
(I) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis;
(J) any agreement under which it has advanced or
loaned any amount to any of its current or former directors, officers, and
employees outside the Ordinary Course of Business;
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(K) any other agreement (or group of related
agreements) the performance of which involves consideration in excess of $5,000.
(L) any agreement or contract that is material to its
business, operations or prospects; or
(M) any agreement or arrangement entitling any person
or other entity to any profits, revenues or cash flows of the Target or
requiring any payments or other distributions based on such profits, revenues or
cash flows.
The Transferors have delivered to the Transferee a correct and complete copy of
each written agreement listed in paragraph (xvi) of the Target Disclosure
Schedule (as amended to date). With respect to each agreement, contract, lease
and license arrangement referred to in this Agreement and required to be
disclosed in any paragraph of the Target Disclosure Schedule: (A) the agreement
is legal, valid, binding, enforceable, and in full force and effect in all
respects; (B) no party is in breach or default, and no event has occurred which
with or without notice or lapse of time, or both, would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (C) no party has repudiated verbally or in writing to the Target
or the Transferors any provision of the agreement.
(xvii) Notes and Accounts Receivable. All notes and accounts
receivable of the Target are reflected properly on its books and records, are
valid receivables subject to no setoffs or counterclaims, represent monies due
for goods sold or services rendered in the Ordinary Course of Business, are
current and fully collectible, and will be collected in accordance with their
terms at their recorded amounts, subject only to the reserve for bad debts set
forth on the face of the Target Most Recent Balance Sheet (rather than in any
notes thereto) as adjusted for operations and transactions through the Closing
Date in accordance with the methodologies used to make accruals for bad debt on
the Target Most Recent Balance Sheet.
(xviii) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Target.
(xix) Insurance. Paragraph (xix) of the Target Disclosure
Schedule sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) with respect to which
the Target or any employee thereof is a party, a named insured, or otherwise the
beneficiary of coverage:
(A) the name of the insurer, the name of the
policyholder, and the name of each covered insured; and
(B) the policy number and the period of coverage.
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With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect in all respects; (B) the
Target is not in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (C) no party
to the policy has repudiated any provision thereof. Neither the Target nor the
Majority Transferors have received notice of any pending or threatened
termination or premium increase (retroactive or otherwise). Paragraph (xix) of
the Target Disclosure Schedule describes any self-insurance arrangements
affecting any of the Target.
(xx) Litigation. Paragraph (xx) of the Target Disclosure
Schedule sets forth each instance in which the Target (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to the Knowledge of any of the Majority Transferors or the Target, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator.
(xxi) Product Warranty. All of the products manufactured,
sold, leased, and delivered by the Target have conformed in all material
respects with all applicable contractual commitments and all express and implied
warranties, and the Target has no liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due)
for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set forth on the face of
the Target Most Recent Balance Sheet (rather than in any notes thereto).
Substantially all of the products manufactured, sold, leased, and delivered by
the Target are subject to standard terms and conditions of sale or lease.
Paragraph (xxi) of the Target Disclosure Schedule includes copies of the
standard terms and conditions of sale or lease for the Target (containing
applicable guaranty, warranty, and indemnity provisions).
(xxii) Product Liability. The Target has no liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by the Target.
(xxiii) Employees. Paragraph (xxiii) of the Target Disclosure
Schedule sets forth the names and current compensation (broken down by category,
e.g., salary, bonus, commission) of all employees of the Target, together with
the date and amount of the last increase in compensation for
such persons. To the Knowledge of the Target or the Majority Transferors, no
executive, key employee, or significant number of employees plans to terminate
employment with the Target during the next 12 months. The Target is not a party
to or bound by any collective bargaining agreement, nor has it experienced any
strike or grievance, claim of unfair labor practices, or other collective
bargaining dispute within the past two
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years. The Target has not committed any unfair labor practice. Neither the
Majority Transferors nor the Target have Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Target. The Target is in material compliance with
all laws related to employees and their compensation.
(xxiv) Employee Benefits.
(A) Paragraph (xxiv)(A) of the Target Disclosure
Schedule lists each corporation, trade, business or other entity which now or at
any time in the past would constitute an ERISA Affiliate. Paragraph (xxiv)(A) of
the Target Disclosure Schedule also contains a true and complete list of each
Employee Benefit Plan, designates those Employee Benefit Plans maintained by, or
contributed to by, the Target on behalf of its employees, and designates each
Employee Benefit Plan intended to be tax-qualified under Code Section 401(a).
(1) The Target, its predecessors in interest, and
each ERISA Affiliate have complied in all material respects with all of their
respective obligations with respect to all Employee Benefit Plans. To the
Knowledge of the Target or the Majority Transferors, each Employee Benefit Plan
complies in form and in operation in all material respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
(2) Other than may be required by law,
neither the Target, its predecessors in interest nor any ERISA Affiliate has any
agreement, arrangement, commitment or understanding, whether legally binding or
not, to create any additional Employee Benefit Plan or to continue, modify,
change in any material respect, or terminate any existing Employee Benefit Plan.
(3) To the Knowledge of the Target or the
Majority Transferors, none of the Employee Benefit Plans is currently under
investigation, audit or review by the Department of Labor, the Internal Revenue
Service or any other federal or state agency or is liable for any federal,
state, local or foreign taxes. There is no transaction in connection with which
the Target, any ERISA Affiliate or any Fiduciary of any of the Employee Benefit
Plans could be subject to either a civil penalty assessed pursuant to ERISA
Section 502, a tax imposed by Code Section 4975 or liability for a breach of
Fiduciary responsibility under ERISA.
(4) Other than routine claims for benefits
payable to participants or beneficiaries in accordance with the terms of the
Employee Benefit Plans, there are no claims, pending or threatened, by any
participant or beneficiary against any of the Employee Benefit Plans or any
Fiduciary of any of the Employee Benefit Plans, and to the Knowledge of the
Target or the Majority Transferees, no basis for any such claim or claims
exists.
(5) The levels of insurance reserves and
accrued liabilities with regard to all Employee Benefit Plans (to which such
reserves or liabilities do or should apply) are reasonable and
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sufficient to provide for all incurred but unreported claims and any retroactive
or prospective premium adjustments.
(6) It is intended that each Employee
Benefit Plan can be terminated on or prior to the Closing Date without liability
to the Target, its predecessors in interest or any ERISA Affiliate, including,
without limitation, any additional contributions, penalties, premiums, fees or
any other charges as a result of the termination.
(7) All required reports and descriptions
(Including Form 5500 Annual Reports, summary annual reports, PBGC-1's, and
summary plan descriptions) have been timely filed and distributed appropriately
with respect to each Employee Benefit Plan.
(8) All contributions (including all
employer contributions and employee salary reduction contributions) which are
due have been paid to each Employee Benefit Plan on or before the Closing Date
have been paid to each Employee Pension Benefit Plan or accrued in accordance
with the past custom and practice of the Target and applicable law.
(9) It is intended that each Employee
Benefit Plan which is designated as a tax-qualified plan meets the requirements
of a "qualified plan" under Code Section 401(a), has received a current
favorable determination letter from the Internal Revenue Service that it is a
"qualified plan," and the Majority Transferors are not aware of any facts or
circumstances that could result in the revocation of such determination letter.
(10) The Target has delivered to the
Transferee correct and complete copies of all written plan documents and
contracts, as amended, evidencing the Employee Benefit Plans, all summary plan
descriptions, the most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report and certified financial
statements, the most recent actuarial reports, and all related trust agreements,
insurance or annuity contracts, and other funding agreements which implement
each Employee Benefit Plan, as well as all other documents related to the
Employee Benefit Plans reasonably requested by the Transferee.
(B) Paragraph (xxiv)(B) of the Target Disclosure
Schedule identifies by plan name all of the Employee Benefit Plans (other than
unfunded retirement plans which are not subject to the minimum coverage, minimum
funding or Fiduciary requirements of ERISA by virtue of being an unfunded plan
for a select group of management or highly compensated employees) that are
pension plans within the meaning of ERISA Section 3(2) (the "Pension Plans").
There are no other Pension Plans maintained by any ERISA Affiliate.
(1) No liability to the Pension Benefit
Guaranty Corporation ("PBGC") (other than the liability to pay premiums when
due) has been incurred with respect to the Pension Plans. All premiums due and
payable to the PBGC with respect to the Pension Plans have been paid in
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a timely manner. The PBGC has not instituted proceedings to terminate any of the
Pension Plans. No event has occurred, and there exists no condition or set of
circumstances, which reasonably could be expected to result in the involuntary
termination of any of the Pension Plans by the PBGC pursuant to ERISA Section
4042. Moreover, even if a Pension Plan were terminated voluntarily pursuant to
ERISA Section 4041, neither the Target, its predecessors in interest nor any
ERISA Affiliate would have any liability to the PBGC as a result of the
termination.
(2) No notice of a Reportable Event has been
filed with the PBGC by the plan administrator of any of the Pension Plans, nor
has any such Reportable Event occurred for which a notice to the PBGC is
required.
(3) The current present value of all accrued
benefit obligations under each of the Pension Plans which is subject to Title IV
of ERISA did not, as of its latest valuation date, exceed the then current value
of the Pension Plan assets allocable to such benefit liabilities, based on
reasonable actuarial assumptions currently used for such Pension Plan. In
addition, each of the Pension Plans which is subject to Title IV of ERISA is
fully funded on a termination basis, such that the net fair market value of the
assets equals or exceeds the present value of the accrued benefits under such
Pension Plan. The representation made in the preceding sentence is based upon
the reasonable actuarial assumptions currently used for such Pension Plan with
such modifications as is required by the PBGC for determining benefits on a
termination basis.
(4) No accumulated funding deficiency (as
defined in ERISA Section 302(a)(2)), whether or not waived and regardless of the
reason arising, exists with respect to any Pension Plan.
(5) None of the Pension Plans has been
terminated or partially terminated nor have the contributions to any such
Pension Plans been discontinued (within the meaning of Code Section 411), nor
have there been any events which might constitute grounds for such a
termination, partial termination or discontinuance of contributions.
(C) Neither the Target, its predecessors in interest
nor any ERISA Affiliate maintains, sponsors or contributes to, has ever
maintained, sponsored or contributed to, or has ever been required to maintain,
sponsor or contribute to any Employee Benefit Plan providing medical, health, or
life insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with COBRA).
(D) Neither the Target, its predecessors in interest
nor any ERISA Affiliate maintains, sponsors or contributes to, or have ever
maintained, sponsored or contributed to any Multiemployer Plan as defined in
ERISA Section 3(37)(A), or have any material liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or
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unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any withdrawal liability (as defined in ERISA Section 4201),
under any such plan.
(xxv) Guaranties. The Target is not a guarantor or
otherwise responsible for any liability or obligation (including indebtedness)
of any other Person.
(xxvi) Certain Business Relationships With the Target.
None of the Transferors or their Affiliates have been involved in any business
arrangement or relationship with the Target within the past 12 months, and none
of the Transferors or their Affiliates own any asset, tangible or intangible,
which is used in the business of the Target.
(xxvii) Environmental, Health and Safety Matters. The Target
is not now, and has never been, in violation of any applicable Environmental,
Health and Safety Requirements. No claims have been made by any governmental
authority, and to the Knowledge of the Majority Transferors and the Target, no
such claim is anticipated, to the effect that the Target fails or may fail to
comply with any applicable Environmental, Health and Safety Requirements.
(xxviii) Indebtedness. Paragraph (xxviii) of the Target
Disclosure Schedule sets forth a complete and accurate list and description of
all instruments or other documents relating to any direct or indirect
indebtedness for borrowed money of the Target, as well as indebtedness by way of
lease-purchase arrangements, guarantees, undertakings on which others rely in
extending credit and all conditional sales contracts, chattel mortgages and
other security arrangements with respect to personal property used or owned by
the Target. The Target has made available to the Transferee a true, correct and
complete copy of each of the items listed on paragraph (xxviii) of the Target
Disclosure Schedule.
(xxix) Required Licenses and Permits. The Target has all
licenses, permits or other authorizations of governmental authorities necessary
for the conduct of its business. A correct and complete list of all such
licenses, permits and other authorizations is set forth on paragraph (xxix) of
the Target Disclosure Schedule.
(xxx) Major Suppliers and Customers. Paragraph (xxx) of the
Target Disclosure Schedule sets forth a list of each supplier of goods or
services to, and each customer of, the Target, to whom the Target paid or billed
in the aggregate more than $10,000 during the 12-month period ended as of the
date hereof, together, in each case, with the amount paid or billed during such
period. The Target is not engaged in any dispute with any of such suppliers or
customers. Neither the Transferors nor the Target knows or has reason to believe
that the consummation of the transactions contemplated hereunder will have any
adverse effect on the business relationship of the Target with any such supplier
or customer.
(xxxi) Required Consents and Approvals. No consent or
approval is required by virtue of the execution hereof by the Target or the
consummation of any of the transactions contemplated herein by the Target to
avoid the violation or breach of, or the default under, or the creation of a
lien on assets of
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the Target pursuant to the terms of, any regulation, order, decree or award of
any court or governmental agency or any lease, agreement, contract, mortgage,
note, license, or any other instrument to which the Target is a party or to
which it or any of its properties or assets or any of the Target Shares are
subject.
(xxxii) Disclosure. The representations and warranties
contained in this Section 3(b) do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 3(b) not misleading.
(c) Representations and Warranties of the Transferee. The
Transferee represents and warrants to the Transferors that the statements
contained in this Section 3(c) are correct and complete as of the date of this
Agreement, except as set forth in the disclosure schedule delivered by the
Transferee to the Transferors and the Target on the date hereof and initialed by
the Transferee (the "Transferee Disclosure Schedule"), which is arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 3(c). All matters set forth in any documents relating to the
Reorganization which have been provided to counsel for the Transferors or the
Target shall, for the purposes hereof, be deemed to have been disclosed in the
appropriate portion of the Transferee Disclosure Schedule.
(i) Organization, Qualification, and Corporate Power. The
Transferee is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Georgia. The Transferee is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required by virtue of the conduct of
business ownership of properties or assets, except where the lack of such
qualification would not affect the enforceability of any material contract to
which the Transferee is a party and would not have a material adverse effect on
the business, financial condition, operations, results of operations, or future
prospects of the Transferee. The Transferee has full power and authority to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. Paragraph (i) of the Transferee Disclosure Schedule lists
the directors and officers of the Transferee. The copies of the charter
documents and bylaws of the Transferee that have been previously delivered to
the Target are the complete, true and correct charter documents and bylaws of
the Transferee. The minutes of directors' and stockholders' meetings and the
stock books of the Transferee that have previously been delivered to the Target
are the complete, true and correct records of directors' and shareholders'
meetings and stock issuances through and including the date hereof and reflect
all transactions and other matters required to be reflected in such records.
(ii) Capitalization. The entire authorized capital stock of
the Transferee consists of 20,000,000 shares of common stock, par value $.01 per
share, and 100,000 shares of preferred stock, without par value, of which
9,269,373 shares of common stock will be issued and outstanding and zero (0)
shares will be held in treasury following the consummation of the
Reorganization. All shares of capital stock in the Transferee have been duly
authorized, and are fully paid, nonassessable, and held by the persons as set
forth in paragraph (ii) of the Transferee Disclosure Schedule. There
are no outstanding or authorized, nor is the Transferee bound by any, options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights or rights of any character or other contacts or commitments that could
require the
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Transferee to issue, sell, or otherwise cause to become outstanding any of its
capital stock. All issuances, transfers or purchases of the capital stock of the
Transferee have been in compliance with all applicable agreements and laws, and
all taxes thereon have been paid. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Transferee. There are no outstanding obligations of the
Transferee to repurchase, redeem or otherwise acquire any outstanding shares of
capital stock of the Transferee. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting or transfer of the
capital stock of the Transferee.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will, with or without notice or the lapse of time, or both, (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Transferee is subject or any provision of the articles of
incorporation or bylaws of the Transferee or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Transferee is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). The Transferee does not need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Transferee to
consummate the transactions contemplated by this Agreement.
(iv) Brokers' Fees. The Transferee has no liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(v) Subsidiaries. The Subsidiaries of the Transferee are as
set forth on paragraph (v) of the Transferee Disclosure Schedule.
(vi) Authorization of Transaction. The Transferee has full
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Transferee, enforceable in accordance with its term and
conditions. The Transferee need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement.
(vii) Investment. The Transferee is not acquiring the Target
Shares with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(viii) Financial Statements. Paragraph (viii) of the
Transferee Disclosure Schedule contains the following financial statements
(collectively the "Transferee Financial Statements"): (i) audited balance sheets
and statements of income, changes in members' equity, and cash flow as of and
for the fiscal
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years ended December 31, 1997 and December 31, 1998 for WTT; (ii) an unaudited
balance sheet as of and for the fiscal year ended December 31, 1998 for BCD; and
(iii) an unaudited balance sheet for BCD and an unaudited balance sheet and
statement of income, changes in members' equity, and cash flow for WTT
(collectively, the "Transferee Most Recent Financial Statements") as of and for
the seven months ended July 31, 1999 (the "Transferee Most Recent Fiscal Month
End"). The Transferee Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby and present fairly, in all material respects, the
financial condition of WTT and BCD as of such dates and the results of
operations for such periods; provided, however, that the Transferee Most Recent
Financial Statements are subject to normal recurring year-end adjustments (which
will not be material individually or in the aggregate) and lack footnotes and
other presentation items.
(ix) Events Subsequent to Most Recent Fiscal Year End. Since
July 31, 1999, the Transferee Affiliates have conducted their respective
businesses in the Ordinary Course of Business and there has not been any
material adverse change in the business, financial condition, operations,
results of operations, or future prospects of the Transferee and the Transferee
Affiliates taken as a whole.
(x) Undisclosed Liabilities. The Transferee and the
Transferee Affiliates have no liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including any liability for taxes), except for (i) liabilities set forth on the
face of the Transferee Most Recent Balance Sheet and (ii) liabilities which have
arisen after the Transferee Most Recent Fiscal Month End in the Ordinary Course
of Business.
(xi) Legal Compliance. The Transferee and the Transferee
Affiliates have complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against them, or
to the Knowledge of the Transferee, threatened against them alleging any failure
to so comply.
(xii) Litigation. Paragraph (xii) of the Transferee Disclosure
Schedule sets forth each instance in which the Transferee or any Transferee
Affiliate (i) is subject to any outstanding injunction, judgment, order, decree,
ruling, or charge or (ii) is a party or, to the Knowledge of the Transferee, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator.
(xiii) Guaranties. Neither the Transferee nor any Transferee
Affiliate is a guarantor or otherwise responsible for any liability or
obligation (including indebtedness) of any other Person.
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(xiv) Required Consents and Approvals. No consent or approval
is required by virtue of the execution hereof by the Transferee or the
consummation of any of the transactions contemplated herein by the Transferee to
avoid the violation or breach of, or the default under, or the creation of a
lien on assets of the Transferee or the Transferee Affiliates pursuant to the
terms of, any regulation, order, decree or award of any court or governmental
agency or any lease, agreement, contract, mortgage, note, license, or any other
instrument to which the Transferee or a Transferee Affiliate is a party or to
which the Transferee or any of the Transferee Affiliates or any of their
properties or assets are subject.
(xv) Intellectual Property. Neither the Transferee nor the
Transferee Affiliates have interfered with, infringed upon, misappropriated or
violated any material Intellectual Property rights of third parties in any
respect, and neither the Transferee nor the Transferee Affiliates have received
any charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or violation (including any claim that the
Transferee or the Transferee Affiliates must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of the
Transferee, no third party has interfered with, infringed upon, misappropriated,
or violated any material Intellectual Property rights of the Transferee or the
Transferee Affiliates in any respect.
(xvi) Contracts. Neither the Transferee nor any Transferee
Affiliate nor any other party is in breach or default of any agreement,
contract, lease or license arrangement to which the Transferee or any Transferee
Affiliate is party, except where such breach or default would not reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of the Transferee and the Transferee Affiliates taken
as a whole.
(xvii) Employee Benefits. To the Knowledge of the Transferee,
the Transferee Benefit Plans have been maintained in material compliance with
the applicable requirements of ERISA, the Code and other applicable laws. For
purposes hereof "Transferee Benefit Plans" shall mean any agreement,
arrangement, commitment, policy or understanding of any kind (whether written or
oral) which (i) makes available retirement or welfare benefits; (ii) pertaining
to the present or former employees, retirees, directors or independent
contractors (or their beneficiaries, dependents or spouses) of the Transferee,
its predecessors in interest or any entity which is treated as a single employer
with the Transferee for purposes of Section 414 of the Code (an "ERISA Affiliate
of the Transferee"); and (iii) is currently or expected to be adopted,
maintained by, sponsored in whole or in part by, or contributed to by the
Transferee, any of its predecessors in interest or any ERISA Affiliate of the
Transferee or as to which the Transferee, any of its predecessors in interest or
any ERISA Affiliate of the Transferee has any ongoing liability or obligation
whatsoever including, but not limited to, all: (a) employee benefit plans as
defined in Section 3(3) or ERISA; (b) other deferred compensation, early
retirement, incentive, profit sharing, thrift, stock ownership, stock
appreciation rights, bonus, stock option, stock purchase, severance, educational
assistance, employee assistance, welfare or vacation, or other nonqualified
benefit plans or arrangements; and (c) trusts, insurance policies or other
funding media for the plans and arrangements described herein above.
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(xviii) Insurance. All of the assets of the Transferee and the
Transferee Affiliates of an insurable nature and of a character usually insured
by companies of comparable size and carrying on businesses similar to that of
the Transferee and the Transferee Affiliates are insured in such amounts and
against such losses or casualties as is usual in such companies and for such
assets, except where the failure to be so insured would not reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of the Transferee and the Transferee Affiliates taken
as a whole.
4. OTHER AGREEMENTS. THE PARTIES AGREE AS FOLLOWS:
(a) General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 5 below).
The Transferors acknowledge and agree that from and after the Closing, the
Transferee will be entitled to possession of all documents, books, records
(including tax records), agreements, and financial data of any sort relating to
the Target.
(b) Transition. None of the Transferors will take any action that
is designed or intended or likely to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Target from
maintaining the same business relationships with the Target after the Closing as
it maintained with the Target prior to the Closing.
(c) Transferee Notes. The Transferee Notes will be imprinted with
a legend substantially in the following form:
THIS NOTE WAS ORIGINALLY ISSUED ON NOVEMBER 4,
1999, AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE IS
NON-TRANSFERABLE AND NON-NEGOTIABLE.
(d) Transferee Shares. All certificates for the Transferee Shares
and the Escrow Shares shall bear the following legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER STATE SECURITIES LAWS
(COLLECTIVELY, THE "STATE SECURITIES ACTS"), AND HAVE BEEN
ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACTS,
INCLUDING, BUT NOT NECESSARILY LIMITED TO, THE
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EXEMPTIONS CONTAINED IN SECTION 4(2) OF THE
SECURITIES ACT.
(e) Reporting of Transaction. The Transferee agrees to report and
document the transactions hereunder in accordance with such transactions being
part of a tax-free exchange under Section 351 of the Code.
(f) Shareholder Debt. At the Closing, the Transferee shall satisfy
and retire the entire amount of the liabilities set forth on Exhibit C attached
hereto including, without limitation, the outstanding balance due under the
notes and/or agreements set forth on Exhibit K hereto (collectively, the
"Notes") pursuant to written instructions delivered by Xxxxxxxxxxx X. Xxxxxxx to
the Transferee at least two (2) business days prior to the Closing. Immediately
upon receipt of such payment, the original Notes marked "Paid in Full" shall be
delivered to the Transferee and all obligations thereunder or with respect
thereto shall be satisfied.
(g) Certain Obligations. If, as of the date hereof, Xxxxx X.
Xxxxxx and Xxxxxxxxxxx X. Xxxxxxx have not been released from their obligations
as guarantors of the Target pursuant to (i) that certain Continuity Guaranty of
the Periodic Payment Business Loan and the Business Ready Credit Agreement
between CitiBank, F.S.B. and the Target (collectively, the "CitiBank Loan") and
(ii) that certain lease agreement, dated January 30, 1998, between the Target
and Xxxxxx Xxxxx, Inc. (collectively, the "Target Obligations"), the Transferee
shall indemnify and held harmless Xxxxx X. Xxxxxx and Xxxxxxxxxxx X. Xxxxxxx
from and against all Adverse Consequences related to such Target Obligations
arising after the Closing Date. The Transferee will use commercially reasonable
efforts to satisfy and retire the outstanding balance due under the Citibank
Loan within twelve (12) business days following the Closing Date.
5. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) Survival; Time to Assert Claims.
(i) The representations and warranties of the Parties
contained herein shall not be extinguished by the Closing but shall survive the
Closing, subject to the limitations set forth in Section 5(a)(ii) hereof with
respect to the time periods within which claims for indemnity must be asserted,
and the covenants and agreements of the Parties made herein shall survive
without limitation as to time except as may be otherwise specified herein. No
investigation by one Party of the other shall affect the term of survival of any
representation or warranty contained herein, or the term of the respective
rights of the Transferee Protected Parties or the Transferor Protected Parties
(as defined below) to seek indemnification hereunder.
(ii) All claims for indemnification hereunder shall be
asserted no later than two (2) years after the Closing Date, except as follows:
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(A) claims with respect to Adverse Consequences arising
out of or related in any way to any breach of or inaccuracy in the
representations and warranties contained in Section 3(a), Sections 3(b)(i)-(v)
or Sections 3(c)(i)-(iv) hereof may be made without limitation, except as
limited by law; and
(B) claims with respect to Adverse Consequences
arising out of or related in any way to any breach of or inaccuracy in the
representations and warranties contained in Sections 3(b)(xi), (xii), (xxiv) and
(xxvii) or Sections 3(c)(xi) and (xvii) hereof may be made until, and shall be
made no later than, thirty (30) days after the expiration of the applicable
statute of limitations relative to the liability relating to such representation
or warranty.
(The matters cited in clauses (A) and (B) above being hereinafter collectively
referred to as the "Surviving Matters.")
Nothing herein shall be deemed to prevent a Transferee Protected Party or a
Transferor Protected Party from making a claim for indemnity hereunder for
potential or contingent claims or demands provided the notice of Adverse
Consequences sets forth the specific basis for any such potential or contingent
claim or demand to the extent then feasible and the party making the claim has
reasonable grounds to believe that such a claim or demand may become actual.
(b) Indemnification Provisions for Benefit of the Transferee. In
the event of any breach of the Transferors' or the Majority Transferors'
representations, warranties, or covenants contained herein, and, if there is an
applicable survival period pursuant to Section 5(a) above, provided that the
applicable Transferee Protected Party makes a written claim for indemnification
against any of the Transferors or the Majority Transferors, as applicable,
pursuant to Section 5(e) below within such survival period, then the Transferors
or the Majority Transferors, as applicable, jointly and severally (except where
as otherwise specifically set forth herein) agree to indemnify the Transferee,
the Target, or any successors or assigns thereto, and their respective officers,
employees, consultants and agents (the "Transferee Protected Parties") from and
against the entirety of any Adverse Consequences the Transferee Protected
Parties suffer resulting from, arising out of, relating to, in the nature of, or
caused by the breach. Notwithstanding the foregoing, the maximum liability of
the Transferors and the Majority Transferors pursuant to this Section 5 shall
not exceed the Aggregate Consideration and the Transferors and the Majority
Transferors shall not have any obligation to indemnify the Transferee Protected
Parties from and against any Adverse Consequences resulting from, arising out
of, relating to, in the nature of or caused by the breach of any representation
or warranty of the Transferors or the Majority Transferors contained herein
until the Transferee Protected Parties have suffered, in the aggregate, Adverse
Consequences by reason of all such breaches in excess of $75,000 (the "Basket
Amount"), after which point the Transferors or the Majority Transferors, as
applicable, will be obligated to indemnify the applicable Transferee Protected
Parties from and against the entire amount of such Adverse Consequences from the
first dollar thereof; provided, however, that claims with respect to the
Surviving Matters shall not be subject to the Basket Amount, nor
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shall the amount of any such claim with respect to a Surviving Matter be applied
or included with other claims to determine whether the Basket Amount has been
reached.
(c) Indemnification Provisions for Benefit of the Transferors. In
the event of any breach of the Transferee's representations, warranties, or
covenants contained herein, and, if there is an applicable survival period
pursuant to Section 5(a) above, provided that the applicable Transferor
Protected Party makes a written claim for indemnification against the Transferee
pursuant to Section 5(e) below within such survival period, then the Transferee
agrees to indemnify each of the Transferors or any successors or assignees
thereto, and their respective officers, employees, consultants and agents (the
"Transferor Protected Parties") from and against the entirety of any Adverse
Consequences the Transferor Protected Parties suffer resulting from, arising out
of, relating to, in the nature of, or caused by the breach. Notwithstanding the
foregoing, the maximum liability of the Transferee pursuant to this Section 5
shall not exceed the Aggregate Consideration and the Transferee shall not have
any obligation to indemnify the Transferor Protected Parties from and against
any Adverse Consequences resulting from, arising out of, relating to, in the
nature of or caused by the breach of any representation or warranty of the
Transferee contained herein until the Transferor Protected Parties have
suffered, in the aggregate, Adverse Consequences by reason of all such breaches
in excess of the Basket Amount, after which point the Transferee will be
obligated to indemnify the applicable Transferor Protected Parties from and
against the entire amount of such Adverse Consequences from the first dollar
thereof; provided, however, that claims with respect to the Surviving Matters
shall not be subject to the Basket Amount, nor shall the amount of any such
claim with respect to a Surviving Matter be applied or included with other
claims to determine whether the Basket Amount has been reached.
(d) Matters Involving Third Parties.
(i) For purposes of this Section 5(d), the term "Party" shall
include all Transferee Protected Parties and Transferor Protected Parties. If
any third party shall notify, or be notified by, any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 5, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to assume, at
its cost and expense, the defense of the Third Party Claim with counsel of his
or its choice reasonably satisfactory to the Indemnified Party at any time
within 15 days after the Indemnified Party has given notice of the Third Party
Claim; provided, however, that the Indemnifying Party must conduct the defense
of the Third Party Claim actively and diligently thereafter in order to preserve
its rights in this regard; and provided further that the Indemnified Party may
retain separate co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim.
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(iii) So long as the Indemnifying Party has assumed and is
conducting the defense of the Third Party Claim in accordance with Section
5(d)(ii) above, however, (A) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (not to
be withheld unreasonably) unless the judgment or proposed settlement involves
only the payment of money damages by one or more of the Indemnifying Parties and
does not impose an injunction or other equitable relief upon the Indemnified
Party and (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to be withheld
unreasonably).
(iv) In the event none of the Indemnifying Parties assumes
and conducts the defense of the Third Party Claim in accordance with Section
5(d)(ii) above, however, (A) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner he or it reasonably may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent from,
any Indemnifying Party in connection therewith) and (B) the Indemnifying Parties
will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim to the fullest extent provided in this Section 5.
(e) Notice of Claim. The Indemnified Party shall notify the
Indemnifying Party, in writing, of any claim for indemnification hereunder,
specifying in reasonable detail, the nature of the Adverse Consequence and, if
known, the amount or an estimate of the amount of the liability therefrom. The
Indemnified Party shall provide to the Indemnifying party as promptly as
practicable such information and documentation as may be reasonably requested to
support and verify the claim asserted, so long as such disclosure would not
violate the attorney-client privilege of the Indemnified Party.
(f) Exclusive Remedy. The Transferee and the Transferors
acknowledge and agree that the foregoing indemnification provisions in this
Section 5 shall be the exclusive remedy of the Transferee and the Transferors
with respect to claims related to this Agreement and the matters covered
hereunder, except for fraud.
(g) Escrow of Funds. If payment under any Transferee Note is due
and payable at the time that a claim for indemnity by any Transferee Protected
Party pursuant to this Section 5 is outstanding, the Transferee shall deposit
with the Escrow Agent (as defined in the Escrow Agreement) such amount from the
Transferee Notes as shall be sufficient, together with the remaining balance of
cash and stock held by the Escrow Agent pursuant to the Escrow Agreement, to
satisfy the entire amount of the indemnity claim and such amount shall be held
pursuant to the Escrow Agreement pending final resolution of such indemnity
claim.
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6. MISCELLANEOUS.
(a) Nature of Certain Obligations. Certain representations and
warranties of the Transferors contained herein are made severally, and not
jointly. With respect to such representations and warranties, the particular
Transferors making the representation, warranty, or covenant will be solely
responsible to the extent provided in Section 5 above for any Adverse
Consequences the Transferee Protected Parties may suffer as a result of any
breach thereof.
(b) Press Releases and Public Announcements. No Party shall issue
any press release or make a public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of the
Transferee and the Majority Transferors.
(c) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties, the Transferee
Protected Parties, the Transferor Protected Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Transferee and the Majority Transferors; provided,
however, that the Transferee may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or all of
which cases the Transferee nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then on such
business day) it is sent by facsimile or if (and then two business days after)
it is sent by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
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If to the Transferors: Xxxxx X. Xxxxxx
International Software Products
0000 Xxxxx Xxxxxx Xxxx, Xxxxx 000
XxXxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile: (000) 000-0000
Copy to: Xxxxxxxxx Traurig
0000 Xxxxxx Xxxx., Xxxxx 0000
XxXxxx, XX 00000
Attention: C. Xxxxxx Xxxxx III, Esq.
Facsimile: (000) 000-0000
If to the Transferee: WT Technologies, Inc.
0000 Xxxxx Xxxx Xxxxxxxxx, Xxxxxx
Xxxxx
Xxxxxxx, Xxxxxxx
Attention: President
Facsimile: (000) 000-0000
Copy to: Long Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Any Party may send any notice, request demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means, but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is received
by the intended recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder to be delivered by
giving the other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Georgia without
giving effect to any choice or conflict of law provision or rules thereof.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Transferee and the Majority Transferors. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation,
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or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties will bear his or its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. The Transferors agree
that the Target has not borne and will not bear any of the Transferors' costs
and expenses (including any of their legal fees and expenses) in connection with
this Agreement or any of the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The word "his" shall
include "her."
(n) Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, the Transferors' Disclosure Schedule, the Target Disclosure Schedule
and the Transferee Disclosure Schedule identified in this Agreement are
incorporated herein by reference and made a part hereof.
(SIGNATURES BEGIN ON THE FOLLOWING PAGE)
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
"TRANSFEREE":
WT TECHNOLOGIES, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
"TARGET":
XXXXXX X. LTD.
D/B/A INTERNATIONAL SOFTWARE PRODUCTS
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
"TRANSFERORS":
---------------------------------------
Xxxxxxxxxxx X. Xxxxxxx
---------------------------------------
Xxxxx X. Xxxxxx
THE XXXX X. XXXXX AND
XXXX X. XXXXX TRUST
By:
-------------------------------------------
Name: Xxxx X. Xxxxx
Title: Trustee
By:
-------------------------------------------
Name: Xxxx X. Xxxxx
Title: Trustee
----------------------------------------------
F. Xxxxxx Xxxxx
40
[SIGNATURE PAGE TO CONTRIBUTION AGREEMENT]
41
EXHIBIT A
ESCROW AGREEMENT
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42
EXHIBIT B
TRANSFEREE NOTES
43
EXHIBIT C
SHAREHOLDER DEBT
44
EXHIBIT D
NON-COMPETITION AGREEMENT
45
EXHIBIT E
SHAREHOLDERS AGREEMENT
46
EXHIBIT F
PUT AGREEMENT
47
EXHIBIT G
HOPLEY EMPLOYMENT AGREEMENT
48
EXHIBIT H
XXXXXXX EMPLOYMENT AGREEMENT
49
EXHIBIT I
EMPLOYEE RETIREMENT FUND CONTRIBUTIONS
Name Document
---- --------
1. Xxxxxxxx Xxxxxxx Offer letter of employment
2. Xxxx X. Xxxxxxxx Offer letter of employment
3. Xxxxxxxx Xxxxxxxx Offer letter of employment
4. Xxxxx Xxxxxx Offer letter of employment
5. Xxxxxx Xxxxxx Offer letter of employment
6. Xxxxx Xxxxxxx Offer letter of employment
7. Xxxxxxxxxxx X. Xxxxxxx Offer letter of employment
8. Xxxxxx Xxxxxx Offer letter of employment
9. Xxxxx Decatur Offer letter of employment
10. Xxxxx Xxxxx Offer letter of employment
11. Xxxx Xxxxxxx Offer letter of employment
12. Xxxxxx Xxxxxx Offer letter of employment
13. Xxxxx X. Xxxxxx Offer letter of employment
14. Xxxxxxxx Xxxxx Offer letter of employment
15. Xxxxxxx Xxxxxx Offer letter of employment
16. Xxxxxx Xxxxxxx Offer letter of employment
17. F. Xxxxxx Xxxxx Offer letter of employment
18. Xxxx Xxxxxx Offer letter of employment
19. Xxx Xxxxxx Offer letter of employment
29. Xxxxx Xxxxxxx Offer letter of employment
50
EXHIBIT J
ALLOCATION
1. Target Shares $ 7,271,239.17
2. Non-Competition Agreements $ 100,000*
--------------
$ 7,371,239.17**
--------------
* Represents $71,000 for the Non-Competition Agreement entered into by Xxxxx
X. Xxxxxx and $29,000 for the Non-Competition Agreement entered into by
Xxxxxxxxxxx X. Xxxxxxx.
** Aggregate Consideration is subject to adjustment pursuant to Section 2(c)
of the Agreement.
51
EXHIBIT K: NOTES
