EXHIBIT 2.1
HUNTINGTON ASSET PURCHASE AGREEMENT
by and among
Xxxx, Xxxxxx & Associates, Inc.,
Huntington Acquisition Corporation,
Alexander, Xxxxxxx and Xxxxxxx, LLC,
Xxxxxxx Xxxxxxx and Xxxxx Vacheron Alexander,
dated as of
November 18, 1998
TABLE OF CONTENTS
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Page
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ARTICLE 1: PURCHASE AND SALE OF ASSETS......................................... 1
1.1 Description of Assets to be Acquired................................ 1
1.2 Excluded Assets..................................................... 3
1.3 Non-Assignment of Certain Contracts................................. 3
ARTICLE 2: LIABILITIES ASSUMED................................................. 3
2.1 Liabilities Assumed................................................. 3
ARTICLE 3: PURCHASE PRICE...................................................... 3
3.1 Consideration....................................................... 3
3.2 Amount.............................................................. 4
3.3 Certain Definitions................................................. 4
3.4 Adjustment Upon Determination of Closing Date Balance Sheet......... 6
3.5 Earn-Out Payments................................................... 6
3.6 Special Provision Regarding Existing Clients........................ 7
3.7 Accounting Procedures............................................... 8
3.8 Examination of Books and Records.................................... 9
ARTICLE 4: REPRESENTATIONS AND WARRANTIES...................................... 10
4.1 Representations of Xxxx Xxxxxx and Purchaser........................ 10
(a) Organization.................................................. 10
(b) Authorization................................................. 10
(c) Compliance With Other Instruments............................. 10
(d) Litigation.................................................... 10
4.2 Representations of Seller and the Members........................... 10
(a) Organization, Good Standing and Qualification of the Seller... 11
(b) Authorization of the Seller................................... 11
(c) Authorization of the Members.................................. 11
(d) Capital Structure............................................. 11
(e) Assets and Bulk Sales Laws.................................... 12
(f) Title to the Property......................................... 12
(g) Financial Information......................................... 12
(h) Absence of Certain Changes and Events......................... 12
(i) Receivables................................................... 13
(j) Taxes......................................................... 13
(k) Compliance With Law........................................... 14
(l) Immigration Compliance........................................ 14
(m) Proprietary Rights............................................ 14
(n) Contracts and Commitments..................................... 15
(o) Insurance..................................................... 15
(p) Litigation.................................................... 15
(q) No Conflict or Default........................................ 16
(r) Third-Party Consents.......................................... 16
(s) Employees and Employee Benefit Plans.......................... 16
(t) Interested Party Relationships................................ 18
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(u) Indebtedness.................................................. 18
(v) Books and Records............................................. 18
(w) Complete Disclosure.......................................... 18
ARTICLE 5: COVENANTS........................................................... 19
5.1 Maintenance of Huntington Business.................................. 19
5.2 Post-Closing Access to Information.................................. 19
5.3 Employees........................................................... 19
5.4 Taxes............................................................... 19
5.5 Confidentiality..................................................... 20
5.6 Publicity........................................................... 20
ARTICLE 6: CLOSING............................................................. 20
6.1 Time of Closing..................................................... 20
6.2 Deliveries by Members and the Seller................................ 20
6.3 Deliveries by Xxxx Xxxxxx and Purchaser............................. 21
6.4 Further Assurances.................................................. 21
ARTICLE 7: CONDITIONS PRECEDENT TO OBLIGATIONS................................. 21
Conditions to Obligations of Purchaser.............................. 21
(a) Representations and Warranties............................... 21
(b) Consents..................................................... 21
(c) Performance of Agreement..................................... 22
(d) No Material Adverse Change................................... 22
(e) Absence of Governmental or Other Objection................... 22
(f) Approval of Documentation.................................... 22
(g) Employment Agreements........................................ 22
(h) Intentionally Omitted........................................ 22
(i) Termination of 401(k) Plan................................... 22
(j) Due Diligence Review......................................... 22
(k) ITC Asset Purchase Agreement................................. 22
(l) Assignment of Real Estate Lease.............................. 22
7.2 Conditions to Obligations of Members and Seller..................... 23
(a) Representations and Warranties............................... 23
(b) Performance of Agreement..................................... 23
(c) No Material Adverse Change................................... 23
(d) Employment Agreements........................................ 23
(e) Huntington Asset Purchase Agreement.......................... 23
(f) Assignment of Real Estate Lease.............................. 23
ARTICLE 8: INDEMNIFICATION..................................................... 23
8.1 Survival of Representations, Warranties, and Agreements............. 23
8.2 Indemnification of the Purchaser.................................... 24
8.3 Indemnification of the Members...................................... 24
8.4 Procedure for Indemnification with Respect to Third-Party Claims.... 25
8.5 Procedure for Indemnification with Respect to Non-Third Party Claims 26
8.6 Threshold Determination of and Limitations on Indemnification....... 26
8.7 Limitation on Xxxx Xxxxxx'x Indemnification of Purchaser............ 26
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ARTICLE 9: MISCELLANEOUS PROVISIONS............................................ 27
9.1 Notices............................................................. 27
9.2 Entire Agreement.................................................... 28
9.3 Binding Effect; Assignment.......................................... 28
9.4 Captions............................................................ 28
9.5 Expenses of Acquisition............................................. 28
9.6 Waiver; Consent..................................................... 28
9.7 Third-Party Beneficiaries........................................... 28
9.8 Counterparts........................................................ 28
9.9 Gender.............................................................. 29
9.10 Severability........................................................ 29
9.11 Remedies of the Purchaser........................................... 29
9.12 Governing Law....................................................... 29
9.13 Venue............................................................... 29
9.14 Attorney's Fees..................................................... 29
9.15 Rules of Construction............................................... 29
Exhibits
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6.2(a) Form of Xxxx of Sale and Assignment
6.2(d) Opinion of Xxxxx & Xxxx, P.C.
6.3(d) Opinion of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx,
LLP
7.1(g)(i) Form of Employment Agreement for Xxxxxxx Xxxxxxx
7.1(g)(ii) Form of Employment Agreement for Xxxxx Vacheron Alexander
7.1(k) Form of ITC Asset Purchase Agreement
7.1(l) Form of Lease Assignment
Schedules
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1.1(a) List of Personal Property
1.1(b) List of Current Assets
1.1(c) List of Contracts
1.1(d) List of Governmental Permits
1.1(e) List of Proprietary Rights
1.1(k) List of Real Property
1.2 List of Excluded Assets
2.1 List of Assumed Liabilities
4.2(g) October 31, 1998 Balance Sheet of Seller
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HUNTINGTON ASSET PURCHASE AGREEMENT
THIS AGREEMENT is dated as of November 18, 1998 by and among Xxxx,
Xxxxxx & Associates, Inc., a Delaware corporation ("Xxxx Xxxxxx"), Huntington
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Xxxx Xxxxxx (the "Purchaser"), Alexander, Xxxxxxx and Xxxxxxx, LLC, a
Connecticut limited liability company ("Huntington" or the "Seller"), and
Xxxxxxx Xxxxxxx and Xxxxx Vacheron Alexander individuals (each, a Member, and
collectively, the "Members").
WHEREAS, Huntington and Interactive Technology Consultants, LLC, a
Connecticut limited liability company ("ITC") operate as affiliated businesses
which provide information technology professionals to meet the MIS staffing
needs of customers; and
WHEREAS, ITC is engaged in the business of placing temporary employees
who have information technology skills with employers in need of such skilled
temporary employees (the "ITC Business"); and
WHEREAS, Huntington is in the business of placing permanent employees
who have information technology skills with employers in need of such skilled
permanent employees (the "Huntington Business"); and
WHEREAS, Interactive Acquisition Corporation, another wholly-owned
subsidiary of Xxxx Xxxxxx ("IAC") has contracted to acquire from ITC, and ITC
has contracted to transfer to Purchaser, pursuant to the Asset Purchase
Agreement, dated as of even date herewith, by and among Xxxx Xxxxxx, Interactive
Acquisition Corporation, ITC, Xxxxxxx Xxxxxxx, Xxxxx Vacheron Alexander and Xxxx
Xxxxxx (the "ITC Asset Purchase Agreement"), substantially all of the assets,
properties, and rights of ITC used or utilized in the ITC Business; and
WHEREAS, Purchaser desires to acquire from the Seller, and the Seller
desires to transfer to Purchaser, substantially all of the assets, properties,
and rights of the Seller in the Huntington Business (except as provided in
Section 1.2 below) as provided by this Agreement, upon the terms and conditions
of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
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1.1 Description of Assets to be Acquired. Upon the terms and subject
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to the conditions set forth in this Agreement, at the Time of Closing (as
defined in Section 6.1), the Seller agrees to convey, sell, transfer, assign and
deliver to Purchaser, and Purchaser shall purchase from the Seller, all right,
title and interest of the Seller at the Time of Closing in and to the assets,
properties, and rights of the Huntington Business of every kind, nature and
description, personal, tangible and intangible, known or unknown, wherever
located, including, without limiting the generality of the foregoing (but
excluding the "Excluded Assets," as such term is defined in Section 1.2 below):
(a) All interests in machinery, equipment, copiers, computers,
furniture, fixtures, supplies, other tangible personal property and fixed assets
and all proprietary rights relating thereto (the "Personal Property"), including
without limitation those listed on Schedule 1.1(a) hereto, subject to changes in
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the ordinary course of business, consistent with prior practice, since the date
specified on Schedule 1.1(a);
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(b) All lease deposits, prepaid expenses, prepaid property taxes
and all other current assets, including cash (the "Current Assets"), including
without limitation those listed on Schedule 1.1(b) hereto;
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(c) All claims and rights under all agreements, contracts,
contract rights, licenses, evidences of indebtedness, purchase and sale orders,
quotations and other executory commitments but excluding any liabilities
associated therewith (collectively, the "Contracts"), including, without
limitation those listed on Schedule 1.1(c) hereto;
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(d) All franchises, licenses, permits, consents, authorizations
and approvals of any federal, state or local regulatory, administrative or other
governmental agency or body, that are not listed on Schedule 1.1(d) under the
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heading "Non-Transferable Governmental Permits" (the "Non-Transferable
Governmental Permits"), including but not limited to those listed on Schedule
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1.1(d) under the heading "Transferable Governmental Permits" (those franchises,
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franchises, licenses, permits, consents, authorizations and approvals that are
not Non-Transferable Governmental Permits are hereinafter referred to as the
"Transferable Governmental Permits");
(e) All rights in and to inventions, formulae, process
engineering, art works, schematic drawings, secret processes, product plans,
logos, trademarks, trademark applications, service marks, copyrights, trade
names, trade secrets, know-how, technical information, patents, patent
applications, software, databases, source code, employee lists, and customer
lists (collectively, the "Proprietary Rights"), including without limitation
those listed on Schedule 1.1(e) hereto;
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(f) Originals of all sales invoices, revenue registers and
accounts receivable records, and originals of all warranties on all supplies and
equipment, files, papers and all other records of the Seller, that relate to the
Huntington Business (collectively the "Records");
(g) All rights under express or implied warranties from suppliers
of the Seller and/or the Huntington Business to the extent assignable;
(h) All causes of action, judgments and claims or demands of
whatever kind or description of the Seller, or that arise out of or relate to
the Huntington Business;
(i) All rights and interests of the Seller to the proceeds of
insurance claims arising from damage to the Assets (as defined below) prior to
Closing;
(j) All employee and customer lists and records of the Seller;
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(k) All interests in the lease of office space described in
Schedule 1.1(k), including all leasehold improvements thereto, and all related
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rights (collectively, the "Real Property");
(l) All goodwill of the Huntington Business (the "Goodwill"); and
(m) Such rights, if any, as Huntington may have in the assets to
be conveyed by ITC pursuant to the terms of the ITC Asset Purchase Agreement.
The assets, properties, and rights to be conveyed, sold, transferred,
assigned, and delivered to Purchaser pursuant to this Section 1.1 are sometimes
hereinafter collectively referred to as the "Assets."
1.2 Excluded Assets. Notwithstanding the provisions of Section 1.1
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hereof, the Assets to be transferred to Purchaser pursuant to this Agreement
shall not include the Non-Transferable Governmental Permits and other assets, if
any, listed on Schedule 1.2 (collectively, the "Excluded Assets").
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1.3 Non-Assignment of Certain Contracts. Notwithstanding anything to
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the contrary in this Agreement, to the extent that the assignment hereunder of
any of the Assets shall require the consent of any other party (or in the event
that any of the same shall be nonassignable), neither this Agreement nor any
action taken pursuant to its provisions shall constitute an assignment or an
agreement to assign if such assignment or attempted assignment would constitute
a breach thereof or result in the loss or diminution thereof; provided, however,
that in each such case, the Seller shall, at its own expense, use its best
efforts to obtain the consent of such other party to an assignment to Purchaser.
ARTICLE 2
LIABILITIES ASSUMED
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2.1 Liabilities Assumed. Purchaser hereby agrees to assume, satisfy,
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and/or perform when due and to indemnify and hold harmless the Seller from those
liabilities and obligations of the Seller specifically listed on Schedule 2.1
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attached hereto (the "Assumed Liabilities"). Purchaser shall not assume any
liabilities of the Seller not specifically set forth on Schedule 2.1.
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ARTICLE 3
PURCHASE PRICE
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3.1 Consideration. Upon the terms and subject to the conditions
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contained in this Agreement, in consideration for the Assets and in full payment
therefor, Purchaser will pay to the Seller (or cause to be paid to the Seller),
for the benefit of the Seller and the Members, the purchase price set forth in
Section 3.2, subject to the adjustment in accordance with Section 3.3 below, and
Purchaser will assume all the liabilities listed on Schedule 2.1, if any. Hall
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Xxxxxx hereby guarantees the Purchaser's obligations contained herein to pay the
consideration, to assume the liabilities, and to perform the covenants contained
or provided in this Article 3.
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3.2 Amount. The Purchaser shall pay to the Seller the purchase price
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("Purchase Price") for the Assets as follows:
(a) One Million Nine Hundred Seventy-Nine Thousand Six Hundred
Forty Dollars ($1,979,640) in cash, payable to the Seller by check or wire
transfer at the time of Closing (the "Initial Consideration");
(b) Up to Three Million Six Hundred Thousand Dollars ($3,600,000)
shall be paid pursuant to the terms and conditions of Section 3.3 hereof (each
such payment shall be referred to as an "Earn-Out Payment" and such funds shall
be referred to as the "Earn-Out Funds"); and
(c) An assumption of liabilities pursuant to Section 2.1.
3.3 Certain Definitions.
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(a) "Closing Date Balance Sheet" shall mean the balance sheet
reflecting the Companies' Closing Date Net Worth. The Closing Date Balance
Sheet shall be prepared by Purchaser as soon as reasonably practicable following
the Closing but in any event not later than December 31, 1998, as more
particularly set forth in Section 3.7.
(b) "Closing Date Net Worth" shall equal total assets of the
Companies at the time of Closing minus total liabilities of the Companies at the
time of Closing, as set forth on the Closing Date Balance Sheet, which shall be
determined in accordance with generally accepted accounting principles
consistently applied ("GAAP").
(c) "Minimum Net Worth" shall equal $602,589.
(d) "Closing Date Net Worth Shortfall" shall be the amount by
which (x) the Minimum Net Worth exceeds (y) the Closing Date Net Worth.
(e) "Base Revenue" shall equal $3,280,562.08 and shall mean the
Companies' Gross Margin for the twelve (12) month period ending October 31,
1998, calculated in accordance with GAAP, including appropriate adjustments,
including adjustments for bad debt reserves.
(f) "Companies" shall mean the ITC Business and the Huntington
Business, on a combined basis, or the subsidiary or subsidiaries of Xxxx Xxxxxx,
including without limitation, Purchaser, ITC and any successors in interest
thereto which, after the Closing, is or are comprised of the former ITC Business
and Huntington Business on a combined basis, the financial results of which, for
purposes of calculating the Closing Date Net Worth and the Earn-Out Payments,
are accounted for on a consolidated stand-alone basis.
(g) "Gross Margin" is calculated by adding: (1) the revenue
generated during the twelve (12) month period ending October 31, 1998 from the
ITC Business (including conversion fees), less Bad Debt or refunds, less the
Cost of Goods Sold; and (2) the revenue generated during the twelve (12) month
period ending October 31, 1998 from the Huntington Business (including
conversion fees), less Bad Debt or refunds, less the Cost of Goods Sold.
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(h) "Cost of Goods Sold" for each of ITC and Huntington is equal
to the revenue generated during the twelve (12) month period ending October 31,
1998 by ITC or Huntington, as the case may be, plus fifteen percent (15%)* of
such revenue to account for the burden of, specifically, direct payroll,
employer payroll taxes, business insurance, workers' compensations, unemployment
and other costs incurred by Xxxx Xxxxxx or Purchaser that are directly tied to
the employment of a specific contractor during the ordinary course of business.
(i) "Bad Debt" shall mean any account receivable that has not
been collected within 120 days and/or any customer revenue adjustment.
(j) "First Year Achieved Revenue" shall mean the Companies' total
revenues for the twelve (12) month period ending on October 31, 1999.
(k) "Second Year Achieved Revenue" shall mean the Companies'
total revenues for the twelve (12) month period ending on October 31, 2000.
(l) "Third Year Achieved Revenue" shall mean the Companies' total
revenues for the twelve (12) month period ending on October 31, 2001.
(m) "First Year Period" shall mean the twelve (12) month period
from November 1, 1998 to October 31, 1999.
(n) "Second Year Period" shall mean the twelve (12) month period
from November 1, 1999 to October 31, 2000.
(o) "Third Year Period" shall mean the twelve (12) month period
from November 1, 2000 to October 31, 2001.
(p) "First Year Target Revenue" shall equal the sum of Base
Revenue plus the product that results from multiplying Base Revenue by .45.
(q) "Second Year Target Revenue" shall equal the sum of First
Year Achieved Revenue plus the product that results from multiplying First Year
Achieved Revenue by .25.
(r) "Third Year Target Revenue" shall equal the sum of Second
Year Achieved Revenue plus the product that results from multiplying Second Year
Achieved Revenue by .20.
(s) "First Year Factor" shall mean a fraction, the numerator of
which is (i) First Year Achieved Revenue minus (ii) Base Revenue, and the
denominator of which is (x) First Year Target Revenue minus (y) Base Revenue.
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* Xxxx Xxxxxx shall retain the right to adjust the percentage above or below
fifteen (15) in accordance with changes to insurance rates or tax rates beyond
Hall Xxxxxx'x control, provided that Xxxx Xxxxxx provide the Members with
reasonable notice of such modification.
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(t) "Second Year Factor" shall mean a fraction, the numerator of
which is (i) Second Year Achieved Revenue minus (ii) First Year Achieved
Revenue, and the denominator of which is (x) Second Year Target Revenue minus
(y) First Year Achieved Revenue.
(u) "Third Year Factor" shall mean a fraction, the numerator of
which is (i) Third Year Achieved Revenue minus (ii) Second Year Achieved
Revenue, and the denominator of which is (x) Third Year Target Revenue minus (y)
Second Year Achieved Revenue.
(v) "Maximum Earnout Payment Per Year" shall equal One Million
Six Hundred Thousand Dollars ($1,600,000.00) for the First Year Period; One
Million Six Hundred Thousand Dollars ($1,600,000.00) for the Second Year Period
and Four Hundred Thousand Dollars ($400,000.00) for the Third Year Period.
3.4 Adjustment Upon Determination of Closing Date Balance Sheet. No
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adjustment shall be made to the Purchase Price provided that Seller has not
engaged in any business or activities outside of the ordinary course of business
from October 31, 1998 through the time of Closing. In the event that Seller has
engaged in any business or activities outside of the ordinary course of business
during such period, then on the date that is not more than five (5) business
days after the final determination of the Closing Date Balance Sheet, ITC and
Huntington shall pay, by check or wire transfer, to the Purchaser an amount
equal to the Closing Date Net Worth Shortfall, if any. In the event ITC and
Huntington do not timely remit such amount to Purchaser, Purchaser shall have,
in addition to such other rights and remedies as Purchaser shall be entitled to
exercise by law or equity, the right to offset any or all EarnOut Payments (as
such term is defined in Section 3.5) by such amount together with interest
thereon at the lesser of (x) ten percent (10%) per annum, compounded annually,
or (y) the maximum rate allowable by law.
3.5 Earn-Out Payments. (a) Subject to offset pursuant to the
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indemnification provisions set forth in Article 8 hereof, Purchaser shall pay to
ITC and Huntington up to an aggregate amount of Three Million Six Hundred
Thousand Dollars ($3,600,000) in cash, payable by check or wire transfer in
three (3) payments (collectively, the "Earnout Payments"), based upon the
achievement of certain milestones over a three (3) year period ending October
31, 2001 (the "Earnout Period") as follows:
(i) The subsequent payment corresponding to the First Year
Period (the "First Earnout Payment"), shall be the Maximum Earnout Payment for
the First Year Period, provided that the First Year Achieved Revenue is greater
than or equal to the First Year Target Revenue. If the First Year Achieved
Revenue is less than the sum of Base Revenue plus the product that results from
multiplying Base Revenue by .35, then the First Earnout Payment shall be equal
to zero. However, if the First Year Achieved Revenue is greater than or equal to
the sum of Base Revenue plus the product that results from multiplying Base
Revenue by .35, but less than the First Year Target Revenue, then the First
Earnout Payment shall be calculated by multiplying the Maximum Earnout Payment
for the First Year Period by the First Year Factor. The date of the First
Earnout Payment, if any, shall not be later than December 15, 1999, or within
ten (10) days after any dispute under Section 3.7 is finally resolved, whichever
is later.
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(ii) The subsequent payment corresponding to the Second Year
Period (the "Second Earnout Payment"), shall be the Maximum Earnout Payment for
the Second Year Period, provided that the Second Year Achieved Revenue is
greater than or equal to the Second Year Target Revenue. If the Second Year
Achieved Revenue is less than the sum of First Year Achieved Revenue plus the
product that results from multiplying First Year Achieved Revenue by .20, then
the Second Earnout Payment shall be equal to zero. However, if the Second Year
Achieved Revenue is greater than or equal to the sum of First Year Achieved
Revenue plus the product that results from multiplying First Year Achieved
Revenue by .20, but less than the Second Year Target Revenue, then the Second
Earnout Payment shall calculated by multiplying the Maximum Earnout Payment for
the Second Year Period by the Second Year Factor. The date of the Second Earnout
Payment, if any, shall not be later than December 15, 2000, or within ten (10)
days after any dispute under Section 3.7 is finally resolved, whichever is
later.
(iii) The subsequent payment corresponding to the Third Year
Period (the "Third Earnout Payment"), shall be the Maximum Earnout Payment for
the Third Year Period, provided that the Third Year Achieved Revenue is greater
than or equal to the Third Year Target Revenue. If the Third Year Achieved
Revenue is less than the sum of Second Year Achieved Revenue plus the product
that results from multiplying Second Year Achieved Revenue by .15, then the
Third Earnout Payment shall be equal to zero. However, if the Third Year
Achieved Revenue is greater than or equal to the sum of Second Year Achieved
Revenue plus the product that results from multiplying Second Year Achieved
Revenue by .15, but less than the Third Year Target Revenue, then the Third
Earnout Payment shall calculated by multiplying the Maximum Earnout Payment for
the Third Year Period by the Third Year Factor. The date of the Third Earnout
Payment, if any, shall not be later than December 15, 2001, or within ten (10)
days after any dispute under Section 3.7 is finally resolved, whichever is
later.
(b) By way of example, if (i) Base Revenue equals $5,000,000;
(ii) First Year Achieved Revenue equals $10,000,000; (iv) Second Year Achieved
Revenue equals $12,000,000; and (v) Third Year Achieved Revenue equals
$13,700,000, then First Year Target Revenue would equal $7,250,000, Second Year
Target Revenue would equal $12,500,000 and Third Year Target Revenue would equal
$14,400,000. The amount of the First Earnout Payment would be $1,600,000, the
amount of the Second Earnout Payment would be $1,280,000 and the amount of the
Third Earnout Payment would be zero.
(c) 75.56% of any Earn-Out Payment made hereunder shall be made
payable to ITC and the remaining 24.44% shall be made payable to Huntington.
3.6 Special Provision Regarding Existing Clients. Any reference to
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the Companies' First Year Achieved Revenue, Second Year Achieved Revenue or
Third Year Achieved Revenue (in each case, "Annual Achieved Revenue") shall
include, without limitation, any revenue derived by the Purchaser after the Time
of Closing from clients that were clients of ITC or Huntington within the two
year period prior to the Time of Closing as shall be determined pursuant to an
inter-company accounting method mutually acceptable to the Chief Financial
Officer of Purchaser and Xxxxxxx Xxxxxxx.
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3.7 Accounting Procedures.
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(a) As soon as practicable after the Time of Closing, but in any
event not later than December 31, 1998, Xxxx Xxxxxx shall cause its chief
financial officer (the "Xxxx Xxxxxx CFO") to prepare the Closing Date Balance
Sheet and a related unaudited statement of income of the Companies for the
twelve (12) months ended October 31, 1998 setting forth for the period under
examination (i) the Closing Date Net Worth, if not sooner agreed upon in writing
by Purchaser, Xxxx Xxxxxx, ITC and Huntington (the "Special Determination"). If
Xxxxxxx Xxxxxxx and Xxxxx Vacheron Alexander, acting jointly (the "Remaining
Members"), do not agree that the Special Determination correctly states the
Closing Date Net Worth, the Remaining Members shall promptly (but not later than
30 days after the delivery of the Special Determination) give written notice to
Xxxx Xxxxxx of any exceptions thereto (in reasonable detail describing the
nature of the disagreement asserted). If the Remaining Members and Xxxx Xxxxxx
reconcile their differences, the Closing Date Net Worth shall be adjusted
accordingly and shall thereupon become binding, final and conclusive upon all of
the parties hereto and enforceable in a court of law. If the Remaining Members
and Xxxx Xxxxxx are unable to reconcile their differences in writing within 20
days after written notice of exceptions is delivered to the Purchaser, the items
in dispute shall be submitted to a mutually acceptable accounting firm selected
from among the six largest accounting firms in the United States in terms of
gross revenues (the "Independent Auditors") for final determination, and the
Closing Date Net Worth shall be deemed adjusted in accordance with the
determination of the Independent Auditors and shall become final and conclusive
upon all of the parties hereto and enforceable in a court of law. The
Independent Auditors shall consider only the items in dispute and shall be
instructed to act within 20 days (or such longer period as the Remaining Members
and Xxxx Xxxxxx may agree) to resolve all items in dispute. If the Remaining
Members do not give notice of any exception within 30 days after the delivery of
the Special Determination or if the Remaining Members in their discretion give
written notification of their acceptance of the Closing Date Net Worth prior to
the end of such 30 day period, the Closing Date Balance Sheet set forth in the
Special Determination (as the case may be) shall thereupon become binding, final
and conclusive upon all the parties hereto and enforceable in a court of law.
Notwithstanding the foregoing, the Special Determination shall not be made
unless the Seller has engaged in business or activities outside of the ordinary
course of business from October 31, 1998 through the time of Closing and the
Xxxx Xxxxxx CFO notifies the Seller of that fact (to which the Seller may take
exception pursuant to the same procedures set forth above) within the Special
Determination.
(b) For each of the First Year Period, the Second Year Period and
the Third Year Period, respectively, (each, an "Annual Earn-Out Period"), Hall
Xxxxxx'x CFO shall prepare a report containing an unaudited balance sheet of the
Company and a related statement of income of the Companies for the Annual Earn-
Out Period then ended, setting forth for the period under examination the
calculation of Annual Achieved Revenue and the Annual Earn-Out Payments to be
paid in respect of such Earn-Out Period, and all adjustments required to be made
to such financial statements in order to make the calculations required under
Section 3.5 (the "Annual Determination"). Xxxx Xxxxxx shall deliver a copy of
each such Annual Determination to the Remaining Members within 30 days after the
end of the Annual Earn-Out Period to which such Annual Determination relates.
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(c) If the Remaining Members do not agree that the Annual
Determination for any Earn-Out Period correctly states the Annual Achieved
Revenue or the Annual Earn-Out Payments for the Earn-Out Period under
examination, the Remaining Members shall promptly (but not later than 30 days
after the delivery of the Annual Determination) give written notice to Xxxx
Xxxxxx of any exceptions thereto (in reasonable detail describing the nature of
the disagreement asserted). If the Remaining Members and Xxxx Xxxxxx reconcile
their differences, such Annual Determination shall be adjusted accordingly and
shall thereupon become final and conclusive upon all of the parties hereto and
enforceable in a court of law. If the Remaining Members and Xxxx Xxxxxx are
unable to reconcile their differences the items in dispute shall be submitted to
the Independent Auditors for final determination, and such Annual Determination
shall be deemed adjusted in accordance with the determination of the Independent
Auditors and shall become binding, final and conclusive upon all of the parties
hereto and enforceable in a court of law. The Independent Auditors shall
consider only the items in dispute and shall be instructed to act within 20 days
(or such longer period as the Remaining Members and Xxxx Xxxxxx may agree) to
resolve all items in dispute. If the Remaining Members do not give notice of
any exception within 30 days after the delivery of an Annual Determination or if
the Remaining Members in their discretion give written notification of their
acceptance of an Annual Determination prior to the end of such 30 day period,
such Annual Determination shall thereupon become binding, final and conclusive
upon all the parties hereto and enforceable in a court of law.
(d) In the event the Independent Auditors are for any reason
unable or unwilling to perform the services required of them under this section,
then Xxxx Xxxxxx and the Remaining Members agree to select another accounting
firm from among the six largest accounting firms in the United States in terms
of gross revenues to perform the services to be performed under this Section by
the Independent Auditors. If Xxxx Xxxxxx and the Remaining Members fail to
select another accounting firm within 7 days after it is determined that the
Independent Auditors will not perform the services required, either Xxxx Xxxxxx
or the Remaining Members may request the American Arbitration Association to
appoint an independent firm of certified public accountants of recognized
national standing to perform the services required under this section by the
Independent Auditors. For purposes of this section the term "Independent
Auditors" shall include such other accounting firm chosen in accordance with
this clause (d).
(e) The fees and expenses of the Independent Auditors shall be
borne equally by Xxxx Xxxxxx on the one hand and ITC and Huntington on the other
hand.
3.8 Examination of Books and Records.
--------------------------------
The books and records of the Company shall be made available during
normal business hours upon reasonable advance notice at the principal office of
the Company to the parties and the Independent Auditors to the extent required
to determine the Closing Date Net Worth or the calculations required under
Section 3.5 (as the case may be).
9
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 Representations of Xxxx Xxxxxx and Purchaser. Each of Hall
--------------------------------------------
Xxxxxx and the Purchaser hereby represents to the Seller that:
(a) Organization. It is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware.
(b) Authorization. It has full corporate power and authority to
-------------
enter into this Agreement and the Related Agreements (as defined below) to which
it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby, including, without
limitation, the execution and delivery of this Agreement and the Related
Agreements to which it is a party. It has taken all necessary and appropriate
corporate action with respect to the execution and delivery of this Agreement
and the Related Agreements, to which it is a party, and this Agreement and each
of the Related Agreements to which it is a party (to the extent to which it is a
party) constitute valid and binding obligations of it enforceable in accordance
with their terms, except as limited by applicable bankruptcy, insolvency,
moratorium, reorganization or other laws affecting creditors' rights and
remedies generally. For purposes of this Agreement, the "Related Agreements"
shall mean the Employment Agreements (as defined in Section 7.1(g)), the
Noncompetition Agreement (as defined in Section 7.1(h)) and the Lease Assignment
(as defined in Section 7.1(l)).
(c) Compliance With Other Instruments. Its execution and delivery
---------------------------------
of this Agreement and the Related Agreements to which it is a party, the
consummation of the transactions contemplated hereby and thereby, and the
compliance with the terms hereof and thereof by it do not, or as of the Closing
will not, conflict with or result in a breach of any terms of, or constitute a
default under, its Certificate of Incorporation or Bylaws, or any material
agreement, obligation or instrument to which it is a party or by which it is
bound.
(d) Litigation. Except as set forth in the statements, reports
----------
and other documents filed or required to be filed by Xxxx Xxxxxx with the
Securities and Exchange Commission, there is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of Purchaser,
threatened against Purchaser or any of its subsidiaries or any of their
respective properties or any of their respective officers or directors (in their
capacities as such) that, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on Purchaser's ability to comply with
the Earn-Out provisions of Section 3.5 herein. There is no judgment, decree or
order against Purchaser or any of its subsidiaries or, to the knowledge of
Purchaser or any of its subsidiaries, any of their respective directors or
officers (in their capacities as such) that could prevent, enjoin, or materially
alter or delay any of the transactions contemplated by this Agreement.
4.2 Representations of Seller and the Members. Except as otherwise
-----------------------------------------
set forth in the disclosure letter dated as of the date hereof and delivered by
the Seller and the Members to the Purchaser and its counsel (the "Disclosure
Letter") or as set forth in the Schedules to this
10
Agreement, the Seller and the Members hereby jointly and severally represent and
warrant to the Purchaser that:
(a) Organization, Good Standing and Qualification of the Seller.
-----------------------------------------------------------
Seller is a limited liability company duly organized and validly existing under
the laws of the State of Connecticut and has all corporate power and authority
to carry on its business as now conducted. Seller is qualified to transact
business and in good standing in each jurisdiction where failure to qualify
would have a material adverse effect on the Huntington Business or the assets of
the Seller (the "Assets").
(b) Authorization of the Seller. Seller has full corporate power
---------------------------
and authority to enter into this Agreement and those Related Agreements to which
it is a party, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby, including, without
limitation, the execution and delivery of this Agreement, general conveyances,
bills of sale, assignments and other documents and instruments evidencing the
conveyance of the Assets or delivered in accordance with Section 6.2 hereunder
(the "Closing Documents") and the Related Agreements to which it is a party.
Seller has taken all necessary and appropriate company action with respect to
the execution and delivery of this Agreement, the Closing Documents, and the
Related Agreements to which it is a party. This Agreement, the Closing Documents
and the Related Agreements to which the Seller is a party (to the extent to
which it is a party) constitute valid and binding obligations of the Seller
enforceable in accordance with their terms, except as limited by applicable
bankruptcy, insolvency, moratorium, reorganization, or other laws affecting
creditors' rights and remedies generally.
(c) Authorization of the Members. Each of the Members has full
----------------------------
power and authority to enter into this Agreement and those Related Agreements to
which he or she is a party, to perform his or her obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby.
The Members have taken all necessary and appropriate Member action with respect
to the execution and delivery of this Agreement, the Closing Documents, and the
Related Agreements to which he or she is a party. This Agreement, the Closing
Documents and the Related Agreements (to the extent to which he or she is a
party) constitute valid and binding obligations of each Member enforceable in
accordance with their terms, except as limited by applicable bankruptcy,
insolvency, moratorium, reorganization, or other laws affecting creditors'
rights and remedies generally.
(d) Capital Structure. The membership interests of Huntington are
-----------------
held by the following individuals and in the following amounts: 90% are held by
Xxxxxxx Xxxxxxx and 10% are held by Xxxxx Xxxxxxxxx. These interests constitute
all of the membership interests of Huntington. There are no outstanding
subscriptions, options, warrants, calls, conversion rights, rights of exchange,
or other rights, plans, agreements or commitments of any character whatsoever
(including, without limitation, conversion or preemptive rights) providing for
the purchase, issuance or sale of any membership interest of Huntington or any
securities convertible into or exchangeable for any membership interest of
Huntington. There are no obligations, contingent or otherwise, of Huntington to
repurchase, redeem or otherwise acquire any membership interest of Huntington.
11
(e) Assets and Bulk Sales Laws. The Assets include all
--------------------------
intellectual property, and all other property in which the Seller has any right,
title, and interest. The Assets include all the assets necessary to operate the
Huntington Business in the same manner as the Huntington Business was operated
by the Seller prior to the Time of Closing. A listing of the fixed assets of the
Seller as of September 30, 1998 is set forth in the Disclosure Letter or
Schedule 1.1(a). There are no "bulk sales" laws in the State of Connecticut
---------------
which impose any obligation on Purchaser regarding the sale and transfer of the
Assets contemplated hereunder.
(f) Title to the Property.
---------------------
(i) The Seller has good and marketable title to the Assets,
free and clear of all mortgages, pledges, liens, encumbrances, security
interests, equities, charges and restrictions of any nature whatsoever, except,
with respect to Personal Property, such rights as ITC may have thereunder and
liens arising from Taxes not yet due and payable, statutory mechanics and
materialman's liens incurred in the ordinary course of business to secure
obligations which are not past due and liens and encumbrances disclosed in the
Disclosure Letter. The Seller has valid leasehold interests in all leased
properties listed on Schedule 1.1(a) and Schedule 1.1(k) as leased by the
--------------- ---------------
Seller.
(ii) By virtue of the deliveries made at the Closing,
Purchaser will obtain good and marketable title to the Assets, free and clear of
all liens, mortgages, pledges, encumbrances, security interests, charges,
equities, and restrictions of any nature whatsoever, other than those described
in Section 4.2(f)(i) hereof.
(g) Financial Information. The Seller and the Members have
---------------------
delivered to the Purchaser (i) unaudited financial statements (balance sheet,
profit and loss statement and statement of cash flows) for the Seller and ITC at
and for the twelve month period ended December 31, 1997, and, with the
Purchaser's support and utilizing the Purchaser's method of accounting, for the
twelve-month period ended October 31, 1998 (collectively, the "Financial
Statements"). The Financial Statements include the Combined Balance Sheet and
Related Combined Statements of Income and Members' Equity and cash flows of ITC
and the Seller for the twelve months ended October 31, 1998, a copy of which is
attached hereto as Schedule 4.2(g) and is hereinafter referred to as the
---------------
"Balance Sheet." The Balance Sheet is complete and correct in all material
respects, and was prepared in accordance with generally accepted accounting
principles. The Balance Sheet accurately describes and fairly presents the
financial condition and operating results of the Seller as of the date, and for
the period, indicated therein. Except as set forth in the Balance Sheet, there
are no debts, liabilities or obligations of the Seller and ITC to which the
Assets or the Business are subject, contingent or otherwise (whether or not such
debts, liabilities or obligations would be required to be described or included
under generally accepted accounting principles), other than liabilities incurred
in the ordinary course of business subsequent to October 31, 1998.
(h) Absence of Certain Changes and Events. Except as
-------------------------------------
contemplated herein, since October 31, 1998, there has not been:
(i) Any material adverse change in the financial condition,
results of operation, assets, liabilities, or prospects of the Huntington
Business, or, to the
12
knowledge of the Seller and the Members any occurrence, circumstance, or
combination thereof which reasonably could be expected to result in any such
material adverse change;
(ii) Any material transaction relating to or involving the
Huntington Business or the Seller (other than the transactions contemplated
herein) which was entered into or carried out by the Seller other than in the
ordinary and usual course of business;
(iii) Any material change made by the Seller in its method
of operating the Huntington Business or its accounting practices relating
thereto;
(iv) Any mortgage, pledge, lien, security interest,
hypothecation, charge, or other encumbrance imposed or agreed to be imposed on
or with respect to the Seller, the Huntington Business or the Assets;
(v) Any sale, lease, or disposition of, or any agreement to
sell, lease or dispose of any of the Assets, other than sales, leases, or
dispositions in the usual and ordinary course of business and consistent with
prior practice;
(vi) Any increase in or modification of the compensation or
benefits payable or to become payable by the Seller to any director or officer
of the Seller or any employee of the Seller or the Huntington Business; or
(vii) Any other event or condition of any character which,
to the knowledge of the Seller and the Members, materially adversely affects, or
may reasonably be expected to so affect, the Assets taken as a whole or the
results of operations, financial condition or prospects of the Seller or the
Huntington Business.
(i) Receivables. Except as set forth in the reserve for doubtful
-----------
accounts, set forth on the Balance Sheet, the accounts receivable shown on the
Balance Sheet arose in the ordinary course of business, have been collected or
are collectible in the book amounts thereof, without setoff or counter-claim.
(j) Taxes. Seller has completed and duly and timely filed in
-----
correct form with the appropriate tax authorities all tax returns and reports
required to be filed on or prior to the date hereof. All of such tax returns
that have been filed were accurate and complete as filed. Sellers have paid in
full all taxes, assessments or deficiencies shown to be due on those tax returns
that have been filed, claimed to be due by any taxing authority or otherwise due
or owing. Seller has made all withholdings of tax required to be made under all
applicable tax laws and regulations; and such withholdings have been or will be
paid to the respective governmental agencies when due and to the extent not yet
due have been set aside in accounts for purposes of such payment. The Assets are
not subject to any liens for taxes, except liens for current ad valorem taxes
not yet due, and neither Purchaser nor any affiliate thereof will become
directly or indirectly liable for, and no lien, claim or encumbrance will be
placed upon the Assets with respect to, (A) any taxes attributable to the
ownership or use of the Assets with respect to periods prior to and including
the Closing Date (other than ad valorem taxes not yet due and payable as of the
Closing Date) or (B) any other taxes (regardless of whether attributable to
periods prior to and including the Closing Date) imposed upon the Seller or
attributable to the actions or activities of the Seller.
13
(k) Compliance With Law. The use of the Assets and Seller's
-------------------
conduct of the Huntington Business is and has been in compliance, in all
material respects, with all applicable laws, statutes, ordinances, rules
regulations, decrees and orders (each and all of the foregoing being herein
referred to as "Laws"), including Laws respecting employment, employment
practices, labor and safety.
(l) Immigration Compliance.
----------------------
(i) Seller is in compliance with all applicable federal,
state and local laws, rules, directives and regulations relating to the
employment authorization of their respective employees (including, without
limitation, the Immigration Reform and Control Act of 1986, as amended and
supplemented, and Section 212(n) and 274A of the Immigration and Nationality
Act, as amended and supplemented, and all implementing regulations relating
thereto), and Seller has not employed nor is any such entity currently employing
any unauthorized aliens (as such term is defined under 8 CFR 274a.1(a)).
(ii) Seller has not received any notice from the Immigration
and Naturalization Service (the "INS") or the United States Department of Labor
(the "DOL") of the disapproval or denial of any visa petition or entry permit
pending before the INS or labor certification pending before the DOL on behalf
of any employee or prospective employee of Seller.
(iii) Since the approval of each of their respective visa
petitions, there has been no material change in the terms and conditions of
employment of any employees of Seller.
(iv) Seller shall have delivered to Purchaser by the Closing
Date true, accurate and complete copies of all visa petitions, entry permits and
visa applications (and all supporting documents) submitted to the INS for all
foreign employees and prospective foreign employees of Seller.
(m) Proprietary Rights. The Seller has sufficient title and
------------------
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes necessary for its
business as now conducted without any conflict with or infringement of the
rights of others. There are no outstanding options, licenses, or agreements of
any kind relating to the foregoing, nor is the Seller bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity,
except, in either case, for standard end-user, object code, internal-use
software license and support/maintenance agreements. The Seller has not received
any communications alleging that the Seller has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. Neither the execution nor delivery of this Agreement
or the Related Agreements, nor the carrying on of the Seller's business by the
employees of the Seller, nor the conduct of the Seller's business as proposed,
will, to the best of the Seller's knowledge, conflict with or result in a breach
of the terms,
14
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.
(n) Contracts and Commitments. Except as set forth in the
-------------------------
Disclosure Letter, there are no agreements or contracts, whether or not in
writing, to which the Seller is a party which may: (i) involve obligations of or
payments by (contingent or otherwise) the Seller in excess of $25,000; (ii)
contain provisions restricting and/or affecting the development, distribution,
marketing or sales of the Seller's or the Huntington Business' products or
services; (iii) involve any joint venture or partnership contract or arrangement
or any other agreement which has involved or is expected to involve a sharing of
profits with other persons; (iv) involve any agreement containing covenants
purporting to limit the freedom of the Seller to compete in any line of business
or geographic area or involve the distribution of the Seller's or the Huntington
Business' products or services; (v) involve any agreement of indemnification
regarding the Seller and/or the Huntington Business; (vi) establish any powers
of attorney regarding the Seller and/or the Huntington Business, (vii) obligate
the Seller for the repayment of borrowed money; or (viii) involve any other
agreement, contract, or commitment which is material to the Seller taken as a
whole. To the best knowledge of the Seller and the Members, each such contract
is valid and binding on all parties thereto and in full force and effect.
Neither the Seller nor any of the Members have received any notice of default,
cancellation, or termination in connection with any such contract.
(o) Insurance. The Seller has not been refused any insurance by
---------
an insurance carrier during the past three (3) years nor has any insurance
policy been canceled with respect to the Seller, the Huntington Business or the
Assets. The Disclosure Letter lists and summarizes all insurance policies and
fidelity bonds covering the Assets, the Huntington Business, and the operations,
employees, officers, and directors of the Seller and the amounts of coverage
under each such policy and bond. There is no claim by the Seller pending under
any of such policies or bonds with respect to the Seller, the Huntington
Business or the Assets. All premiums payable under all such policies and bonds
have been paid, and the Seller is otherwise in full compliance with the material
terms of such policies and bonds. Such policies of insurance and bonds are of
the type and in amounts customarily carried by entities conducting business
similar to that of the Seller. Neither the Seller nor the Members knows of any
threatened termination of or material premium increase with respect to any of
such policies.
(p) Litigation. Neither the Seller nor any of the Seller's
----------
officers or directors is engaged in, or has received any threat of, any
litigation, arbitration, investigation, or other proceeding, at law or in
equity, before any federal, state, local or foreign court, or regulatory agency,
or other governmental authority, involving the Seller, the Huntington Business,
the Assets, or the temporary or regular employees of Seller (the "Employees");
or against or affecting the transactions contemplated by the Agreement and the
Related Agreements. There is no action, suit, proceeding, or investigation
pending or to the knowledge of the Seller and the Members threatened against the
Seller or the Seller's officers or directors that questions the validity of this
Agreement, the Related Agreements to which it is or they are a party, or the
right of the Seller, to enter into this Agreement, the Related Agreements, to
consummate the transactions contemplated hereby or thereby, or which might
result in any material adverse change in the Seller, the Business, the Assets or
the results of operations, prospects, or financial condition of the Huntington
Business or the Seller. There is no action,
15
suit, proceeding, or investigation by the Seller currently pending or which it
currently intends to initiate. None of the Seller nor the Seller's officers or
directors is bound by any judgment, decree, injunction, ruling, or order of any
court, governmental, regulatory or administrative department, commission, agency
or instrumentality, arbitrator, or any other person which has or could have a
material adverse effect on the Huntington Business, the Assets, or the results
of operations, prospects, or financial condition of the Huntington Business or
the Seller.
(q) No Conflict or Default. Neither the execution and delivery of
----------------------
this Agreement by the Seller or the Members, nor compliance by each of the
Seller and each of the Members with the terms and provisions hereof, including
without limitation, the consummation of the transactions contemplated hereby,
will violate any statute, regulation, or ordinance of any governmental
authority, or conflict with or result in the breach of any term, condition, or
provision of the Articles of Organization, or the Bylaws of the Seller or of any
agreement, deed, contract, mortgage, indenture, writ, order, decree, legal
obligation, or instrument to which the Seller is a party or by which it or any
of the Assets are or may be bound, or constitute a default (or an event which,
with the lapse of time or the giving of notice, or both, would constitute a
default) thereunder, where such violation, conflict and/or default could have a
material adverse effect on (i) the continued operation by the Purchaser of the
Huntington Business after the Closing on substantially the same basis as
theretofore operated by the Seller, (ii) the consummation of the transactions
contemplated by this Agreement, or (iii) the Assets, or result in the creation
or imposition of any lien, charge, or encumbrance, or restriction of any nature
whatsoever with respect to any of the Assets, or give to others any interest or
rights, including rights of termination, acceleration, or cancellation in or
with respect to the Assets.
(r) Third-Party Consents. No consent, approval, or authorization
--------------------
of any third party on the part of the Seller is required in connection with the
consummation of the transactions contemplated hereunder, where the failure to
obtain such consent, approval, and/or authorization could have a material
adverse effect on (i) the continued operation by the Purchaser of the Seller and
the Huntington Business after the Closing on substantially the same basis as
theretofore operated, (ii) the consummation of the transactions contemplated by
this Agreement, or (iii) the Assets.
(s) Employees and Employee Benefit Plans.
------------------------------------
(i) The Disclosure Letter sets forth a full and complete
list of all directors, officers, employees, and consultants of the Seller and
the Huntington Business (collectively, "Regular Service Providers") as of
October 31, 1998, which schedule includes the names, job title, and the total
amount of base salary, whether fixed or commission or a combination thereof, and
bonus for each Regular Service Provider. The Disclosure Letter sets forth a full
and complete list of those individuals the Seller has assigned to its customers
(the "Temporary Service Providers") as of October 31, 1998, which schedule
includes such Temporary Service Providers' names, job title, hourly or daily
compensation, and hourly or daily xxxx rate, the name of client/customer where
such Temporary Service Provider is working, and to the best of the Members' and
the Seller's knowledge, the date assignment is expected to terminate. The
Regular Service Providers and the Temporary Service Providers are sometimes
collectively referred to herein as the "Service Providers." None of the Service
Providers is subject to any contracts, written or unwritten, that specify a
particular employment or service
16
term, or limit the Seller's right to terminate the employment or service
relationship of such Service Provider with the Seller. The Seller does not have
any contractual obligation (1) to provide any particular form or period of
notice prior to termination, or (2) to pay any of such Service Providers any
severance benefits in connection with their termination of employment or
service. In addition, no severance pay will become due to any Service Providers
in connection with the transactions contemplated by this Agreement, as a result
of any Seller agreement, plan, or program. Neither the execution and delivery of
this Agreement by the Seller nor the consummation of the transactions
contemplated by this Agreement will result in the acceleration or creation of
any rights of any Service Provider to benefits under any employee plan
(including, without limitation, the acceleration of the vesting or
exercisability of any stock options or the acceleration of the vesting of any
restricted stock). Following the consummation of the transactions contemplated
by this Agreement, the Purchaser will not have any obligations towards any
Service Provider, nor any former director, officer, employee, or consultant of
the Huntington Business, or of the Seller, other than pursuant to agreements
directly entered into by Purchaser with such persons. Neither the Seller nor the
Members is aware that any Employee, or that any group of Employees, intends to
terminate their employment with the Seller, nor does it have a present intention
to terminate the employment of any of the foregoing.
(ii) The Seller has not failed to comply in any respect with
Title VII of the Civil Rights Act of 1964, as amended, the Fair Labor Standards
Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the
Safe Drinking Water and Toxic Enforcement Act of 1986, as amended, all
applicable federal, state, and local laws, rules, and regulations relating to
employment, and all applicable laws, rules, and regulations governing payment of
minimum wages and overtime rates, and the withholding and payment of taxes from
compensation of employees, where the failure to so comply could have a material
adverse effect on the continued operation by the Purchaser of the Huntington
Business after the Closing Date on substantially the same basis as theretofore
operated.
(iii) The Seller is not a party to any plan defined in
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") including a pension, profit sharing, savings, or retirement plan; any
plan defined in Section 3(2) of ERISA, including a cafeteria or group health
plan; or other deferred compensation plan, or any bonus (whether payable in cash
or stock) or incentive program; or any stock, stock purchase, option, or similar
plan; director or employee loan or fringe benefit program; or severance plan or
arrangement; or any other plan that provides any benefits to employees,
including but not limited to any plan defined in Section 3(3) of ERISA.
If any such plans exist, the Seller has furnished to the Purchaser or
their counsel complete and accurate copies of such plans, summaries, summary
plan descriptions, annual reports such as Form 5500s. The Seller has prepared
in good faith and timely filed all requisite governmental reports including Form
5500s and a determination letter with the IRS to the extent applicable and has
properly and timely posted, or distributed all notices and reports to employees
required to be filed, posted, or distributed with respect to each of such plans.
The terms of each such plans comply with all applicable laws, including ERISA,
the Internal Revenue Code of 1986, as amended (the "Code") and the Family
Medical Leave Act (FMLA) and the plans at all times have been operated and
administered in all material respects in accordance with its terms and all
applicable laws currently in effect, including ERISA, the Code and FMLA.
17
(iv) The Seller has not violated any of the health care
continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") applicable to its employees prior to the
Time of Closing.
(v) There are no material pending claims by or on behalf of
any ERISA Plan by any Employee or beneficiary covered under any such plan or
otherwise involving any such plan (other than routine claims for benefits).
(vi) All contributions, premiums or other payments due from
the Seller to (or under) any Plan have been fully paid or adequately provided
for on the books and financial statements of Seller. All accruals (including,
where appropriate, proportional accruals for partial periods) have been made in
accordance with prior practices.
(t) Interested Party Relationships. Neither the Seller, nor any
------------------------------
officer or director of the Seller (nor any family member of such officer or
director of the Seller, nor any corporation, partnership, or other entity that,
directly or indirectly, alone or together with others, controls, is controlled
by, or is in common control with the Seller, any officer or director of the
Seller, or any such family member), have any material financial interest, direct
or indirect, in any material supplier or customer of or to the Huntington
Business or other party to any contract that is material to the Huntington
Business.
(u) Indebtedness. The Disclosure Letter sets forth a list of all
------------
agreements and other instruments under which the Seller is indebted for borrowed
money. The Seller has furnished the Purchaser with true and correct copies of
each such agreement or other instrument under or pursuant to which it has
outstanding indebtedness for borrowed money. Except as set forth in the
Disclosure Letter, the Seller is not in default in any material respect under
any of such agreements or other instruments, nor is the Seller or the Members
aware of any event that, with the passage of time, or notice, or both, would
result in an event of default thereunder. No employee or consultant of the
Seller or the Huntington Business is indebted to the Seller.
(v) Books and Records. The books and records of the Seller to
-----------------
which the Purchaser has been given access are the true books and records of the
Seller and truly and accurately reflect the underlying facts and transactions in
all material respects.
(w) Complete Disclosure. No representation or warranty by the
-------------------
Seller in this Agreement, and no exhibit, schedule, statement, certificate, or
other writing furnished to the Purchaser or its advisors pursuant to this
Agreement or the Related Agreements to which it is a party or in connection with
the transactions contemplated hereby and thereby, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein and therein not
misleading.
18
ARTICLE 5
COVENANTS
---------
5.1 Maintenance of Huntington Business.
----------------------------------
(a) During the period from the date hereof through the Time of
Closing, the Seller shall carry on and use commercially reasonable efforts to
preserve the Huntington Business, the goodwill of the Huntington Business, and
relationships with customers, suppliers, officers, employees, agents, licensees
and others with respect to the Huntington Business in substantially the same
manner as the Seller did prior to the date hereof. The Seller will use
commercially reasonable efforts to keep and maintain the existing favorable
business relationship with each of its respective customers, suppliers, and
officers, employees, licensees and agents with respect to the Huntington
Business. If the Seller or the Members become aware of a deterioration in a
relationship with any customer, supplier, licensee or officer, employee, or
agent with respect to the Huntington Business, they will promptly bring such
information to the attention of the Purchaser and will use commercially
reasonable efforts to restore such relationship.
(b) During the period from the date hereof through the Time of
Closing, the Seller and the Members agree to advise the Purchaser of any
material operating decisions (including, without limitation, proposed employee
hiring, layoff, and termination decisions) with respect to the Huntington
Business. Notwithstanding the foregoing, the Seller and the Members acknowledge
that such operating decisions shall be made independently by the Seller and the
Seller shall be solely responsible for its implementation, consequences, and
liabilities, if any.
5.2 Post-Closing Access to Information. With respect to the
----------------------------------
originals of the books and records of Seller relating to the Huntington Business
prior to the Time of Closing provided to Purchaser pursuant to this Agreement,
Purchaser shall allow Seller or its representatives appropriate access to such
original books and records. The Purchaser agrees that for three (3) years after
the Time of Closing such originals shall not be removed from their principal
places of business or destroyed without the prior written consent of the
Members, which shall not be unreasonably withheld.
5.3 Employees. Purchaser shall use its best efforts to employ all of
---------
the employees of Seller and/or the Huntington Business immediately following the
time of Closing. Without limiting the generality of the foregoing, Purchaser
and Xxxx Xxxxxx shall use their best efforts to incentivize Xxxxx Xxxxxxxx and
Xxxxx Xxxxxxx on substantially similar terms as those under which each is
currently employed by Seller, ITC or Huntington Group Leasing Corporation, as
the case may be.
5.4 Taxes. Seller will complete and duly and timely file in correct
-----
form with the appropriate tax authorities all tax returns and reports required
to be filed after the date hereof. All of such tax returns that will be filed
will be accurate and complete when filed. Seller will pay in full when due all
taxes due after the date hereof. The Seller shall pay all taxes imposed upon
the Seller as a result of the sale of the Assets. The Seller shall also pay, or
indemnify the Purchaser for, all taxes imposed on the Purchaser or any affiliate
and any taxes to which the
19
Assets are subject or for which a lien, claim or encumbrance can be placed upon
the Assets but only in each case to the extent that any such taxes relate to
periods (or portions thereof) ending on or prior to the Closing Date or
transactions or events occurring on or prior to the Closing Date. Liability for
any taxes that Seller is required to satisfy pursuant to this Section 5.5 shall
not constitute or be treated as Assumed Liabilities.
5.5 Confidentiality. Without the prior written consent of the other
---------------
party, neither Purchaser nor Xxxx Xxxxxx nor Seller (nor any of their respective
officers, directors, employees, agents members or affiliates) will disclose the
existence or terms of this Agreement prior to the Closing, except to the extent
that disclosure is required by law, including, without limitation, the federal
securities laws and regulations or the disclosure obligations of Purchaser.
5.6 Publicity. Purchaser and Seller agree not to issue any press
---------
release or public statement regarding this Agreement or the transactions
contemplated hereunder without the prior consent of the other party, which shall
not be unreasonably withheld. A mutually agreed upon press release shall be
made upon the execution of the Agreement.
ARTICLE 6
CLOSING
-------
6.1 Time of Closing. The transactions contemplated by this Agreement
---------------
shall be effective as of 11:00 a.m. (California time) on November 18, 1998, or
if later, on the first business day on which the last of the conditions
contained in Article 7 hereof is fulfilled or waived (the "Time of Closing");
provided, that in no event shall the Closing occur later than December 31, 1998
unless otherwise agreed to by the parties ("Termination Date"). The Closing
shall take place at the offices of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx
& Xxxxxxxxx, LLP, Menlo Park, California, or at such other place or date as may
be agreed upon from time to time in writing by the parties. The "Closing" shall
mean the deliveries to be made by the Purchaser, the Seller and the Members at
the Time of Closing in accordance with this Agreement.
6.2 Deliveries by Members and the Seller. At the Time of Closing,
------------------------------------
the Seller and the Members shall deliver to Purchaser, all duly and properly
executed, the following:
(a) A Xxxx of Sale in the form attached hereto as Exhibit 6.2(a).
(b) Good and sufficient assignments of the Contracts, which shall
be in form and substance reasonably satisfactory to Purchaser and shall include,
subject to Section 1.3 hereof, the written consents of all parties necessary in
order to transfer all of Members' rights thereunder to Purchaser.
(c) Certificates executed by the Members of Huntington certifying
(i) that the conditions specified in subsections (a)-(d) of Section 7.1 have
been satisfied, (ii) that there shall have been no adverse change in the
Huntington Business since October 31, 1998 and (iii) that the financial
statements previously delivered to the Purchaser fairly present the financial
condition of the Seller as of the date of such financials.
20
(d) An opinion of Xxxxx & Xxxx, P.C., dated the date of the
Closing, in substantially the form attached hereto as Exhibit 6.2(d).
--------------
(e) Executed copies of the Related Agreements to the extent to
which each is a party.
6.3 Deliveries by Xxxx Xxxxxx and Purchaser. At the Closing,
---------------------------------------
Purchaser and Xxxx Xxxxxx shall deliver, or cause to be delivered to the Seller
and the Members, as applicable, all duly and properly executed, the following:
(a) The portion of the Purchase Price set forth in Section
3.2(a).
(b) Executed copies of the Related Agreements to the extent to
which it is a party.
(c) Officers' Certificates executed by the President or Chief
Financial Officer of Purchaser and Xxxx Xxxxxx, respectively, certifying that
the conditions specified in subsections (a)-(c) of Section 7.2 have been
satisfied.
(d) An opinion of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx &
Xxxxxxxxx, LLP, dated the date of the Closing, in substantially the form
attached hereto as Exhibit 6.3(d).
--------------
6.4 Further Assurances. At or after the Time of Closing, each party
------------------
shall each prepare, execute and deliver, at the preparer's expense, such further
instruments of conveyance, sale, assignment or transfer, and shall take or cause
to be taken such other or further action, as any party shall reasonably request
of any other party at any time or from time to time in order to perfect, confirm
or evidence in Purchaser title to all or any part of the Assets or to
consummate, in any other manner, the terms and provisions of this Agreement.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS
-----------------------------------
7.1 Conditions to Obligations of Purchaser. Each and every
--------------------------------------
obligation of Purchaser to be performed at the Closing shall be subject to the
satisfaction as of or before the Time of Closing of the following conditions
(unless waived in writing by Purchaser):
(a) Representations and Warranties. The Seller's and Members'
------------------------------
representations and warranties set forth in Section 4.2 of this Agreement shall
have been true and correct when made and shall be true and correct at and as of
the Time of Closing, as if such representations and warranties were made as of
such date and time.
(b) Consents. The Seller shall have obtained and delivered to the
--------
Purchaser all consents the Purchaser deems necessary or desirable, in the
Purchaser's sole discretion, in order to consummate the transactions
contemplated herein. Without limiting the effect of Section 1.3, the
representations and warranties in Article 4 or the Indemnification obligations
in Article 8, Purchasers acknowledges that the consents listed on Schedule
7.1(b)
21
have not been obtained and the failure to obtain same shall not constitute a
breach of this Agreement.
(c) Performance of Agreement. All covenants, conditions, and
------------------------
other obligations under this Agreement that are to be performed or complied with
by the Seller prior to the Time of Closing shall have been fully performed and
complied with at or prior to the Time of Closing, including the delivery of the
instruments and documents in accordance with Section 6.2.
(d) No Material Adverse Change. There shall have been no material
--------------------------
adverse change in the financial condition, business, or properties of the
Huntington Business or the Seller, which materially adversely affects the
conduct of the Huntington Business or the Seller as presently being conducted or
the condition or business prospects, financial or otherwise, of the Huntington
Business or the Seller, since October 31, 1998.
(e) Absence of Governmental or Other Objection. There shall be no
------------------------------------------
pending or threatened lawsuit challenging the transaction by any body or agency
of the federal, state, or local government or by any third party, and the
consummation of the transaction shall not have been enjoined by a court of
competent jurisdiction as of the Time of Closing;
(f) Approval of Documentation. The form and substance of all
-------------------------
certificates, instruments, opinions, and other documents delivered or to be
delivered to the Purchaser under this Agreement shall be satisfactory to the
Purchaser and its counsel in all reasonable respects.
(g) Employment Agreements. The Purchaser IAC shall have entered
---------------------
into employment agreement with Xxxxxxx Xxxxxxx and Xxxxx Vacheron Alexander in
substantially the forms attached hereto as Exhibits 7.1(g)(i) and 7.1(g)(ii)
(the "Employment Agreements").
(h) Intentionally Omitted.
---------------------
(i) Termination of 401(k) Plan. The Seller shall take all actions
--------------------------
necessary to cause the termination of any 401(k) or pension plan or the like as
requested by Purchaser prior to Closing.
(j) Due Diligence Review. The Purchaser shall have completed to
--------------------
its sole satisfaction its due diligence review of the Seller, the Assets, the
Huntington Business and its business operations, financial condition and
prospects, and the Purchaser shall have received favorable reviews from its
advisors of the results of their due diligence review of the same.
(k) ITC Asset Purchase Agreement. Xxxx Xxxxxx, ITC and the other
----------------------------
parties thereto shall have executed the ITC Asset Purchase Agreement in
substantially the form attached hereto as Exhibit 7.1(k).
--------------
(l) Assignment of Real Estate Lease. The Seller shall have
-------------------------------
executed the Assignment of Lease and Assumption of Lease Obligations with
respect to the Seller's leased premises at 0000 Xxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxxx, in substantially the form attached hereto as Exhibit 7.1(l) (the
"Lease Assignment").
22
7.2 Conditions to Obligations of Members and Seller. Each and every
-----------------------------------------------
obligation of Members and the Seller to be performed at the Time of Closing
shall be subject to the satisfaction as of or before such time of the following
conditions (unless waived in writing by the Seller):
(a) Representations and Warranties. The Purchaser's and Hall
------------------------------
Xxxxxx'x representations and warranties set forth in Section 4.1 of this
Agreement shall have been true and correct when made and shall be true and
correct at and as of the Time of Closing as if such representations and
warranties were made as of such time and date.
(b) Performance of Agreement. All covenants, conditions, and
------------------------
other obligations under this Agreement which are to be performed or complied
with by the Purchaser and Xxxx Xxxxxx shall have been fully performed and
complied with at or prior to the Time of Closing, including the delivery of the
instruments and documents in accordance with Section 6.3.
(c) No Material Adverse Change. There shall have been no material
--------------------------
adverse change in the financial condition, business, or properties of the
Purchaser or Xxxx Xxxxxx which materially adversely affects the conduct of its
business as presently being conducted or the condition or business prospects,
financial or otherwise, of the Purchaser, since October 31, 1998.
(d) Employment Agreements. The Purchaser and Xxxx Xxxxxx shall
---------------------
have entered into the Employment Agreements.
(e) ITC Asset Purchase Agreement. Xxxx Xxxxxx, IAC, ITC and the
----------------------------
other parties thereto shall have executed the ITC Asset Purchase Agreement.
(f) Assignment of Real Estate Lease. The Purchaser and Hall
-------------------------------
Xxxxxx shall have executed the Lease Assignment.
ARTICLE 8
INDEMNIFICATION
---------------
8.1 Survival of Representations, Warranties, and Agreements.
-------------------------------------------------------
(a) Subject to this Article 8, all representations, warranties,
covenants, and agreements of each party in this Agreement shall survive the
execution, delivery, and performance of this Agreement and shall in no way be
affected by any investigation of the subject matter thereof made by or on behalf
of the parties to this Agreement. All representations and warranties of each
party set forth in this Agreement shall be deemed to have been made again by
such party at and as of the Time of Closing. The obligations of indemnity
provided herein with respect to the representations and warranties of the Seller
and the Members set forth in Section 4.2 shall terminate on November 30, 1999;
provided, however, that the representations and warranties set forth in Section
4.2(k) (Compliance With Law), and Section 4.2(e) (Assets) and the obligations of
indemnity therefor shall survive indefinitely, and the representations and
warranties set forth in Section 4.2(j) (Taxes) and the obligations of indemnity
therefor shall survive until the expiration of the applicable statutes of
limitation. The obligations of indemnity provided herein with respect to the
representations and warranties of the Purchaser set forth in Section 4.1 shall
terminate November 30, 1999.
23
(b) As used in this Article, any reference to a representation,
warranty, or covenant contained in any Section of this Agreement shall include
the schedule relating to such Section.
8.2 Indemnification of the Purchaser.
--------------------------------
(a) The Seller and each of the Members hereby agrees, jointly and
severally to indemnify and hold harmless the Purchaser, and its respective
officers, directors, stockholders and affiliates against any and all losses,
liabilities, damages, demands, claims, suits, actions, judgments or causes of
action, assessments, costs and expenses, including, without limitation,
interest, penalties, attorneys' fees, any and all expenses incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation (collectively, "Purchaser Damages"), asserted
against, resulting from, imposed upon, or incurred or suffered by the Purchaser,
or its respective officers, directors, stockholders or affiliates directly or
indirectly,
(i) as a result of or arising from any inaccuracy in or
breach or nonfulfillment of any of the representations, warranties, covenants,
or agreements made by the Seller or the Members in this Agreement; or
(ii) except as specifically set forth on Schedule 2.1,
without giving effect to any of the disclosures set forth in this Agreement, any
accompanying schedule, exhibit, certificate or the Disclosure Letter, any
Purchaser Damages arising from the operation of the Huntington Business prior to
the Time of Closing, or arising out of the Seller's status as employer of
current or former employees of Seller, or as a result of failure to comply with
the requirements of the "bulk sales" laws of any jurisdiction applicable to the
sale of the Assets to Purchaser.
All of the claims described in Sections 8.2(a)(i) and 8.2(a)(ii) shall be
referred to as "Purchaser Indemnifiable Claims."
(b) Subject in all cases to the limitations upon survival of
claims as set forth in Section 8.1(a), with respect to the payment of such
Purchaser Damages owed by the Members to the Purchaser or its officers,
directors or affiliates, the Members agree that the Purchaser shall, in addition
to other remedies, be entitled to offset as payment for such Purchaser Damages
any portion or all of any Earnout Payment pursuant to Section 3.5 hereof,
provided that no offset shall be made from Earnout Payments due and payable
after November 30, 2000.
8.3 Indemnification of Seller and the Members. The Purchaser and
-----------------------------------------
Xxxx Xxxxxx hereby agree to indemnify and hold harmless the Seller and the
Members against any and all losses, liabilities, damages, demands, claims,
suits, actions, judgments or causes of action, assessments, costs and expenses,
including, without limitation, interest, penalties, attorneys' fees, any and all
expenses incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation (collectively, the "Seller
Damages" or the "Member Damages"), asserted against, resulting from, imposed
upon, or incurred or suffered by the Seller or the
24
Members directly or indirectly, as a result of or arising from any inaccuracy in
or breach or nonfulfillment of any of the representations, warranties,
covenants, or agreements made by the Purchaser in this Agreement (all of which
shall be referred to as "Member Indemnifiable Claims"). (Purchaser Indemnifiable
Claims and Member Indemnifiable Claims are sometimes referred to herein as
"Indemnifiable Claims;" Purchaser Damages and Member Damages or Seller Damages
are sometimes referred to herein as "Damages.")
8.4 Procedure for Indemnification with Respect to Third-Party Claims.
----------------------------------------------------------------
If the Purchaser, its respective officers, directors or affiliates or the Seller
or any of the Members determines to seek indemnification under this Article 8
with respect to Indemnifiable Claims (the party seeking such indemnification is
hereinafter referred to as the "Indemnified Party" and the party against whom
such indemnification is sought is hereinafter referred to as the "Indemnifying
Party") resulting from the assertion of liability by third parties, the
Indemnified Party shall give written notice to the Indemnifying Party within
thirty (30) days of the Indemnified Party becoming aware of any such
Indemnifiable Claim or of facts upon which any such Indemnifiable Claim will be
based; the notice shall set forth such material information with respect thereto
as is then reasonably available to the Indemnified Party; provided, however,
that such written notice shall be effective only if delivered to the
Indemnifying Party before the later of November 30, 2000 or the termination,
pursuant to Section 8.1(a) hereof, of the representation and warranties upon
which such Indemnifiable Claim(s) are based. In case any such liability is
asserted against the Indemnified Party, and the Indemnified Party notifies the
Indemnifying Party thereof, the Indemnifying Party will be entitled, if it so
elects by written notice delivered to the Indemnified Party within twenty (20)
days after receiving the Indemnified Party's notice, to assume the defense
thereof with counsel satisfactory to the Indemnified Party. Notwithstanding the
foregoing, (i) the Indemnified Party shall also have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of the Indemnified Party unless the Indemnified Party shall
reasonably determine that there is a conflict of interest between the
Indemnified Party and the Indemnifying Party with respect to such Indemnifiable
Claim, in which case the fees and expenses of such counsel will be borne by the
Indemnifying Party, (ii) the Indemnified Party shall not have any obligation to
give any notice of any assertion of liability by a third party unless such
assertion is in writing, and (iii) the rights of the Indemnified Party to be
indemnified hereunder in respect of Indemnifiable Claims resulting from the
assertion of liability by third parties shall not be adversely affected by its
failure to give notice pursuant to the foregoing unless, and, if so, only to the
extent that, the Indemnifying Party is materially prejudiced thereby. With
respect to any assertion of liability by a third party that results in an
Indemnifiable Claim, the parties hereto shall make available to each other all
relevant information in their possession material to any such assertion.
(a) In the event that the Indemnifying Party, within twenty (20)
days after receipt of the aforesaid notice of an Indemnifiable Claim, fails to
assume the defense of the Indemnified Party against such Indemnifiable Claim,
the Indemnified Party shall notify the Indemnifying Party of such failure,
whereupon the Indemnifying Party shall have ten (10) additional days to assume
the defense of the Indemnifiable Claim, after the expiration of which the
Indemnified Party shall have the right to undertake the defense, compromise, or
settlement of such action on behalf of and for the account and risk of the
Indemnifying Party.
25
(b) Notwithstanding anything in this Section to the contrary, (i)
if there is a reasonable probability that an Indemnifiable Claim may materially
and adversely affect the Indemnified Party, the Indemnified Party shall have the
right to participate, at its own cost and expense, in such defense, compromise,
or settlement and the Indemnifying Party shall not, without the Indemnified
Party's written consent (which consent shall not be unreasonably withheld),
settle or compromise any Indemnifiable Claim or consent to entry of any judgment
in respect thereof unless such settlement, compromise, or consent includes as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect of such Indemnifiable
Claim.
8.5 Procedure For Indemnification with Respect to Non-Third Party
-------------------------------------------------------------
Claims.
------
(a) In the event that the Indemnified Party asserts the existence
of a claim giving rise to Damages (but excluding claims resulting from the
assertion of liability by third parties), it shall give written notice to the
Indemnifying Party. Such written notice shall state that it is being given
pursuant to this Section 8.5, specify with particularity the nature and amount
of the claim asserted, accompanied by any written materials supporting such
claim, and indicate the date on which such assertion shall be deemed accepted
and the amount of the claim deemed a valid claim (such date to be established in
accordance with the next sentence); provided, however, that such written notice
shall be effective only if delivered to the Indemnifying Party before the later
of November 30, 2000 or the termination, pursuant to Section 8.1(a) hereof, of
the representation and warranties upon which such Indemnifiable Claim(s) are
based. If the Indemnifying Party, within 60 days after the mailing of notice by
the Indemnified Party, shall not give written notice to the Indemnified Party
announcing its intent to contest such assertion of the Indemnified Party, such
assertion shall be deemed accepted and the amount of claim shall be deemed a
valid claim. In the event, however, that the Indemnifying Party contests the
assertion of a claim by giving such written notice to the Indemnified Party
within said period, then the parties shall act in good faith to reach agreement
regarding such claim.
8.6 Threshold Determination of and Limitations on Indemnification.
-------------------------------------------------------------
Notwithstanding anything in this Article 8 to the contrary, the Seller and the
Members shall not be under any obligations of indemnity with respect to
Purchaser, and Purchaser shall not be under any obligations to the Seller and
the Members until such time as Purchaser or Member (or Seller), respectively,
has incurred Purchaser Damages or Member Damages (or Seller Damages), as the
case may be, in the aggregate in excess of $25,000, for which Purchaser or
Member (or Seller), respectively, would have been entitled to be indemnified
against but for the provisions of this Section 8.6; and upon reaching the
$25,000 threshold set forth above, an Indemnifying Party shall only be liable
for Damages to the extent of the excess over such $25,000 threshold.
8.7 Limitation on Xxxx Xxxxxx'x Indemnification of Purchaser.
--------------------------------------------------------
Notwithstanding anything contained in this Agreement to the contrary, Xxxx
Xxxxxx shall bear no liability whatsoever to Purchaser in connection with any
matter relating to Huntington.
26
ARTICLE 9
MISCELLANEOUS PROVISIONS
------------------------
9.1 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given (a) on the same day if delivered
personally, (b) three (3) business days after being mailed by registered or
certified mail (return receipt requested), or (c) on the same day if sent by
facsimile, confirmation received, to the parties at the following addresses and
facsimile numbers (or at such other address or number for a party as shall be
specified by like notice):
If to Purchaser, to:
Xxxx, Xxxxxx & Associates, Inc.
00000 Xxxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with copy (which shall not constitute notice) to:
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to Seller or Member:
Alexander, Xxxxxxx and Xxxxxxx, LLC
0000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx or Xxxxx Xxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with copy (which shall not constitute notice) to:
Xxxxx & Wolf, P.C.
0000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
27
9.2 Entire Agreement. This Agreement, the exhibits and schedules
----------------
hereto, and the documents referred to herein embody the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof,
and supersede all prior and contemporaneous agreements and understandings, oral
or written, relative to said subject matter including the letter of intent dated
October 16, 1998.
9.3 Binding Effect; Assignment. This Agreement and the various
--------------------------
rights and obligations arising hereunder shall inure to the benefit of and be
binding upon the Seller, its successors and permitted assigns, the Members,
their successors and permitted assigns, and the Purchaser and its successors and
permitted assigns. Neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be transferred or assigned (by operation of law or
otherwise) by either of the parties hereto without the prior written consent of
the other party; provided, however, that the Purchaser may, without such written
consent, assign its rights in connection with a merger of the Purchaser with or
into another entity, a sale of all or substantially all of the Purchaser's
assets, or a reorganization involving the Purchaser.
9.4 Captions. The Article and Section headings of this Agreement are
--------
inserted for convenience only and shall not constitute a part of this Agreement
in construing or interpreting any provision hereof.
9.5 Expenses of Acquisition. The Seller and the Members shall pay in
-----------------------
full all fees and expenses incurred by the Seller and the Members in connection
with this Agreement, and the transactions contemplated hereby. The Purchaser
shall pay all fees and expenses incurred by the Purchaser in connection with
this Agreement, and the transactions contemplated hereby.
9.6 Waiver; Consent. This Agreement may not be changed, amended,
---------------
terminated, augmented, rescinded, or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations hereunder or
thereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by the
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
9.7 Third-Party Beneficiaries. Except as otherwise expressly
-------------------------
provided for in this Agreement, nothing herein, expressed or implied, is
intended or shall be construed to confer upon or give to any person, firm,
corporation, or legal entity, other than the parties hereto, any rights,
remedies, or other benefits under or by reason of this Agreement.
9.8 Counterparts. This Agreement may be executed simultaneously in
------------
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument. A facsimile
signature may be in lieu of an original signature provided that original
signatures are thereafter delivered to the other party by overnight courier
within twenty-four (24) hours.
28
9.9 Gender. Whenever the context requires, words used in the
------
singular shall be construed to mean or include the plural and vice versa, and
pronouns of any gender shall be deemed to include and designate the masculine,
feminine, or neuter gender.
9.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
9.11 Remedies of the Purchaser. The Seller and the Members agree that
-------------------------
the Assets are unique and not otherwise readily available to the Purchaser.
Accordingly, the Seller and the Members acknowledge that, in addition to all
other remedies to which the Purchaser is entitled, the Purchaser shall have the
right to enforce the terms of this Agreement by a decree of specific
performance, provided the Purchaser is not in material default hereunder.
9.12 Governing Law. This Agreement shall in all respects be construed
-------------
in accordance with and governed by the laws of the State of California, as
applied to contracts entered into and to be performed solely within the state,
solely between residents of the state.
9.13 Venue. Any dispute arising under or in relation to this
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Agreement shall be resolved exclusively in a federal district court in the State
of California and each of the parties hereby submits irrevocably to the
exclusive jurisdiction of such court.
9.14 Attorney's Fees. If any action at law or in equity is necessary
---------------
to enforce or interpret the terms of this Agreement or to protect the rights
obtained hereunder the prevailing party shall be entitled to its reasonable
attorneys' fees, costs, and disbursements in addition to any other relief to
which it may be entitled.
9.15 Rules of Construction. The parties hereto agree that they have
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been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
[The Remainder of this Page is Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
XXXX, XXXXXX & ASSOCIATES, INC.
By:
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Xxxx X. Xxxxxxxx
President
Address: 00000 Xxxxxxx Xxxxx Xxxx., Xxx. 000
Xxxxxxxxx, XX 00000
PURCHASER:
HUNTINGTON ACQUISITION CORPORATION
By:
-----------------------------------------
Address: 00000 Xxxxxxx Xxxxx Xxxx., Xxx. 000
Xxxxxxxxx, XX 00000
SELLER:
ALEXANDER, XXXXXXX AND
XXXXXXX, LLC
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address: 0000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
30
MEMBERS:
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Xxxxxxx Xxxxxxx
Address:
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----------------------------------
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Xxxxx Vacheron Alexander
Address:
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31
