EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
by and among
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ LA TERRA,
GUIDELINE RESEARCH CORP.
and
FIND/SVP, INC.
Dated as of April 1, 2003
TABLE OF CONTENTS
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ARTICLE I: DEFINITIONS............................................................................................2
ARTICLE II: SALE AND PURCHASE OF SHARES...........................................................................9
SECTION 2.1 PURCHASE OF SHARES..............................................................................9
SECTION 2.2 CONSIDERATION..................................................................................10
SECTION 2.3 ONE YEAR DEFERRED CONSIDERATION................................................................10
SECTION 2.4 TWO YEAR DEFERRED CONSIDERATION................................................................11
SECTION 2.5 PAYMENT OF CONSIDERATION.......................................................................11
SECTION 2.6 PUT OPTION.....................................................................................11
(A) PRICE................................................................................................11
(B) NUMBER OF SHARES EXERCISABLE.........................................................................11
(C) GUARANTY OF ▇▇▇▇▇ ▇▇▇▇▇..............................................................................12
(D) SECURITY FOR DW GUARANTY.............................................................................12
(E) PAYMENT AND DELIVERY TERMS...........................................................................13
(F) ASSIGNMENT...........................................................................................13
(G) ADJUSTMENTS TO CONSIDERATION SHARES..................................................................13
(H) EXTENSION OF EXERCISE PERIOD.........................................................................13
(I) BLACKOUT PERIODS.....................................................................................13
(J) EXERCISE OF CONSIDERATION SHARES PUT WITH RESPECT TO ESCROW CONSIDERATION SHARES.....................13
(K) SECOND EXERCISE OF CONSIDERATION SHARES..............................................................14
SECTION 2.7 DETERMINATION OF CALCULATIONS..................................................................14
SECTION 2.8 LEGENDING OF CONSIDERATION SHARES..............................................................15
ARTICLE III: CLOSING.............................................................................................16
SECTION 3.1 TIME AND PLACE OF CLOSING......................................................................16
SECTION 3.2 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE........................................16
(A) REPRESENTATIONS AND WARRANTIES.......................................................................16
(B) COMPLIANCE WITH OBLIGATIONS..........................................................................16
(C) NO MATERIAL ADVERSE CHANGE...........................................................................16
(D) CONSENTS.............................................................................................16
(E) DUE DILIGENCE........................................................................................17
(F) NO INJUNCTIONS. ETC..................................................................................17
(G) RECEIPT OF DOCUMENTS, ETC............................................................................17
(H) SUBSIDIARIES.........................................................................................18
(I) AUDITED FINANCIAL STATEMENTS AND ADDITIONAL FINANCIAL STATEMENTS.....................................18
SECTION 3.3 CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS TO CLOSE.................................18
(A) REPRESENTATIONS AND WARRANTIES.......................................................................18
(B) COMPLIANCE WITH OBLIGATIONS..........................................................................18
(C) NO INJUNCTIONS. ETC..................................................................................19
(D) RECEIPT OF DOCUMENTS, ETC............................................................................19
ARTICLE IV: REPRESENTATIONS AND WARRANTIES.......................................................................19
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS................................................19
(A) ORGANIZATION AND STANDING OF THE CONSOLIDATED COMPANIES..............................................19
(B) ARTICLES OF INCORPORATION, BYLAWS AND CORPORATE RECORDS OF THE CONSOLIDATED COMPANIES................20
(C) CAPITALIZATION OF THE CORPORATION....................................................................20
(D) CAPITALIZATION OF THE SUBSIDIARIES...................................................................21
(E) AUTHORITY............................................................................................21
(F) SUBSIDIARIES.........................................................................................22
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(G) FINANCIAL STATEMENTS: LIABILITIES AND OBLIGATIONS OF THE CONSOLIDATED COMPANIES.....................22
(H) TAXES................................................................................................22
(I) TANGIBLE PROPERTY....................................................................................23
(J) BUYOUT AGREEMENTS....................................................................................24
(K) AGREEMENT RELATED TO OTHER INSTRUMENTS...............................................................24
(L) ABSENCE OF CHANGES...................................................................................24
(M) LITIGATION...........................................................................................26
(N) LICENSES AND PERMITS: COMPLIANCE WITH LAW............................................................27
(O) REAL PROPERTY LEASES.................................................................................27
(P) REAL PROPERTY OWNERSHIP..............................................................................28
(Q) INTELLECTUAL PROPERTY................................................................................28
(R) CONTRACTS............................................................................................31
(S) LABOR MATTERS........................................................................................32
(T) PENSION AND BENEFIT PLANS............................................................................32
(U) INSURANCE............................................................................................35
(V) EMPLOYEES............................................................................................36
(W) CUSTOMERS AND SUPPLIERS..............................................................................36
(X) GOVERNMENTAL APPROVALS...............................................................................37
(Y) POWERS OF ATTORNEY...................................................................................37
(Z) GUARANTIES...........................................................................................37
(AA) TRANSACTIONS WITH RELATED PARTIES....................................................................37
(BB) BROKERS AND INTERMEDIARIES...........................................................................38
(CC) TITLE TO SECURITIES..................................................................................38
(DD) LIST OF ACCOUNTS AND PROXIES.........................................................................38
(EE) ENVIRONMENTAL AND SAFETY MATTERS.....................................................................38
(FF) ACCOUNTS RECEIVABLE, NOTES RECEIVABLE, AND COSTS IN EXCESS OF BILLING................................39
(GG) INVESTMENT IN THE CONSIDERATION SHARES...............................................................39
(HH) DISCLOSURE...........................................................................................40
(II) FIRPTA...............................................................................................40
SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER....................................................40
(A) ORGANIZATION AND STANDING............................................................................40
(B) CORPORATE POWER AND AUTHORITY........................................................................40
(C) AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS.........................................................40
(D) LITIGATION...........................................................................................41
(E) APPROVALS............................................................................................41
(F) BROKERS AND INTERMEDIARIES...........................................................................41
(G) SOLVENCY.............................................................................................41
ARTICLE V: COVENANTS.............................................................................................41
SECTION 5.1 AFFIRMATIVE COVENANTS OF THE SHAREHOLDERS......................................................41
SECTION 5.2 AFFIRMATIVE COVENANTS OF THE SHAREHOLDERS......................................................42
SECTION 5.3 NEGATIVE COVENANTS OF THE SHAREHOLDERS.........................................................42
SECTION 5.4 AFFIRMATIVE COVENANTS OF PURCHASER.............................................................45
SECTION 5.5 NOTIFICATION...................................................................................45
SECTION 5.6 CONFIDENTIALITY................................................................................46
SECTION 5.7 FURTHER ASSURANCES.............................................................................46
SECTION 5.8 COVENANT NOT TO COMPETE........................................................................46
SECTION 5.9 ACQUISITION PROPOSALS: NO SOLICITATION.........................................................50
SECTION 5.10 SUBSIDIARY SHAREHOLDERS........................................................................50
SECTION 5.11 TAX COVENANTS..................................................................................50
ARTICLE VI: TERMINATION..........................................................................................53
SECTION 6.1 TERMINATION BY PURCHASER.......................................................................53
SECTION 6.2 TERMINATION BY THE SHAREHOLDERS................................................................54
SECTION 6.3 REMEDIES FOR FAILURE TO CLOSE..................................................................54
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SECTION 6.4 NOTICE OF TERMINATION..........................................................................55
ARTICLE VII: INDEMNIFICATION.....................................................................................55
SECTION 7.1 SURVIVAL OF THE REPRESENTATIONS AND WARRANTIES.................................................55
SECTION 7.2 INVESTIGATION.................................................................................55
SECTION 7.3 INDEMNIFICATION GENERALLY......................................................................55
SECTION 7.4 OBLIGATION.....................................................................................58
ARTICLE VIII: MISCELLANEOUS PROVISIONS...........................................................................59
SECTION 8.1 EXPENSES.......................................................................................59
SECTION 8.2 GOVERNING LAW..................................................................................59
SECTION 8.3 NOTICES........................................................................................59
SECTION 8.4 PRESS RELEASES, ETC............................................................................60
SECTION 8.5 NO WAIVER OF REMEDIES, ETC.....................................................................60
SECTION 8.6 ARBITRATION....................................................................................60
SECTION 8.7 COUNTERPARTS...................................................................................61
SECTION 8.8 SECTION AND OTHER HEADINGS.....................................................................61
SECTION 8.9 ENTIRE AGREEMENT; INCORPORATION BY REFERENCE...................................................61
SECTION 8.10 BINDING EFFECT.................................................................................61
SECTION 8.11 AMENDMENT OR MODIFICATION......................................................................61
SECTION 8.12 WAIVER.........................................................................................61
SECTION 8.13 SEVERABILITY...................................................................................62
SECTION 8.14 ASSIGNMENT.....................................................................................62
SECTION 8.15 GUARANTY OF THE CORPORATION....................................................................62
SECTION 8.16 SHAREHOLDER MANAGEMENT POSITION................................................................62
Exhibits and Schedules
Exhibit A Escrow Agreement
Exhibit B Capitalization of the Subsidiaries
Exhibit 2.6(i) Put Notice
Exhibit 2.6(ii)(a) and (b) Letters of Credit
Exhibit 3.2(x) Form of Opinion of Wormser, Kiely, Galef &
▇▇▇▇▇▇ LLP
Exhibit 3.2(xii) Form of Closing Date Release
Exhibit 3.3(d) Form of Opinion of ▇▇▇▇ ▇▇▇▇▇▇▇, P.C.
Schedule 2.3 Year End Deferred Consideration Amount
Schedule 2.4 Two Year Deferred Consideration Amount
Schedule 2.5 Payment of Consideration
Schedule 2.6 Consideration Shares Put
Schedule 4.1(a) Foreign Qualifications
Schedule 4.1(c) Convertible Securities/Voting Agreements
Schedule 4.1(d) Capitalization of Subsidiaries
Schedule 4.1(e) Required Consents (Shareholders)
Schedule 4.1(f) Other Interests
Schedule 4.1(g)(i) Consolidated Financial Statements
Schedule 4.1(g)(ii) Additional Financial Statements
Schedule 4.1(h) Taxes
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Schedule 4.1(i) Tangible Property
Schedule 4.1(j) Subsidiary Share Purchase Agreements
Schedule 4.1(k) Required Consents (Consolidated Companies)
Schedule 4.1(l) Absence of Changes
Schedule 4.1(m) Litigation
Schedule 4.1 (n) Reports of Inspections
Schedule 4.1 (o) Real Property Leases
Schedule 4.1 (q) Intellectual Property
Schedule 4.1 (r)(i) Contracts
Schedule 4.1 (r)(ii) Material Agreements
Schedule 4.1 (s) Labor Matters
Schedule 4.1 (t) Employee Benefit Plans
Schedule 4.1 (u) Insurance
Schedule 4.1 (v)(i) Employment Agreements
Schedule 4.1 (v)(ii) Salary and Compensation of Officers, Directors,
Consultants and Employees
Schedule 4.1 (v)(iii) Employee Policies and Manuals
Schedule 4.1 (w) Customer Disputes
Schedule 4.1 (x) Governmental Approvals
Schedule 4.1 (y) Powers of Attorney
Schedule 4.1 (z) Guaranties
Schedule 4.1 (aa) Related Party Transactions
Schedule 4.1 (bb) Brokers and Intermediaries
Schedule 4.1 (dd) Bank Accounts and Proxies
Schedule 4.1 (ee) Environmental and Safety Matters
Schedule 4.2 (c) Violation of Purchaser Agreements
Schedule 5.3(a) Changes in Compensation or Benefits Prior to
Closing
Schedule 5.3(e) Material Agreements Prior to Closing Date
Schedule 5.3(f) Commitments or Transactions Prior to Closing Date
Schedule 5.3(k) Redemption or Purchase of Shares
Schedule 5.3(m) Application of Assets for Debt
Schedule 5.3(p) Prepayment of Debt
Schedule 5.3(q) Payment to a Shareholder
Schedule 5.11 Liabilities and Accruals for Taxes
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of April 1,
2003, (the "Effective Date") is entered into by and among FIND/SVP, INC., a New
York corporation with its principal offices at ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("Purchaser"); ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, an individual residing at
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇"); ▇▇▇▇▇▇ LA TERRA, an
individual residing at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ("La
Terra") (▇▇▇▇▇▇▇▇▇ and La Terra are hereinafter sometimes collectively referred
to as the "Shareholders" and individually as a "Shareholder"); only with respect
to Sections 2.4, 5.3(e), 7.3(c) and 8.1, GUIDELINE RESEARCH CORP., a New York
corporation with its principal offices at ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
(the "Corporation").
W I T N E S S E T H:
WHEREAS, the Shareholders are the legal and beneficial owners of all of
the issued and outstanding shares of capital stock of Guideline Research Corp.,
a New York corporation with its principal offices located at ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Corporation"); and
WHEREAS, Advanced Analytics, Inc., a New York corporation ("Advanced
Analytics") is a subsidiary of the Corporation, the outstanding capital stock of
which, prior to the Closing, is owned seventy-five percent (75%) by the
Corporation and twenty-five percent (25%) by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"); and
WHEREAS, Guideline/Chicago, Inc., an Illinois corporation ("Guideline
Chicago") is a subsidiary of the Corporation, all of the outstanding capital
stock of which is owned entirely by the Corporation; and
WHEREAS, Tabline Data Services, Inc., a New York corporation ("Tabline")
is a subsidiary of the Corporation, all of the outstanding capital stock of
which is owned entirely by the Corporation; and
WHEREAS, Guideline Consulting Corp., a New York corporation ("Guideline
Consulting") is a subsidiary of the Corporation, the outstanding capital stock
of which, prior to the Closing, is owned eighty percent (80%) by the Corporation
and twenty percent (20%) by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇"); and
WHEREAS, immediately prior to Closing the Shareholders or Advanced
Analytics shall acquire all of the issued and outstanding shares of capital
stock of Advanced Analytics issued to Whitcup; and
WHEREAS, immediately prior to Closing the Shareholders or Guideline
Consulting shall acquire all of the issued and outstanding shares of capital
stock of Guideline Consulting issued to ▇▇▇▇▇▇▇▇▇▇; and
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WHEREAS, the Shareholders desire to sell, and Purchaser desires to
acquire, all of the shares of the capital stock of the Corporation, upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises herein contained, Purchaser and the Shareholders hereby agree as
follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following meanings
unless the context otherwise requires:
"Acquisition Proposal" has the meaning set forth in Section 5.9 below.
"Additional Financial Statements" means (a) the unaudited and reviewed
balance sheets and related statements of income and cash flows of the
Consolidated Companies for the nine-month period ending October 31, 2002, (b)
the unaudited balance sheet and income statement of the Consolidated Companies
for the twelve-month period ending January 31, 2003, and (c) the unaudited
balance sheet and income statement of the Consolidated Companies for the two
month period ending March 31, 2003, all as attached hereto as SCHEDULE
4.1(g)(ii).
"Affiliate" of a Person means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with such Person. The term "Affiliate" shall include any Person
that owns or has control over more than ten percent (10%) of the equity
interests in another Person. With respect to Section 5.8 only, "Affiliate" shall
only mean the subsidiaries and related entities of Purchaser set forth in its
filings with the U.S. Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934.
"After-Tax Basis" shall mean grossing up of an indemnification payment
under this Agreement for a Tax cost, if any, to the Person receiving such
payment arising from the receipt or accrual thereof, and in the case of
indemnification payments under this Agreement, reduced by the Tax benefit, if
any, to the Person receiving such payment resulting from its or a Consolidated
Company's incurring the damages, loss, liability, or expense giving rise to such
payment or the payment of any Taxes indemnified hereunder.
"Agents" has the meaning set forth in Section 5.9 below.
"Applicable Law" means, with respect to any Person, any international,
national, regional, state or local treaty, statute, law, ordinance, rule,
administrative action, regulation, order, writ, injunction, judgment, decree or
other requirement of any Governmental Entity and any requirements imposed by
common law or case law, applicable to such Person or any of its properties,
assets, officers, directors, employees, consultants or agents (in connection
with their
2
activities on behalf of such Person). Applicable Law includes, without
limitation, environmental laws, state and local zoning laws and ordinances, land
use and building laws, laws respecting the sale of services, laws respecting
employment and labor, and laws respecting bidding on contracts.
"Assets" means all tangible and intangible property owned by the
Consolidated Companies and any other assets of the Consolidated Companies
designated as assets pursuant to GAAP.
"Audit" means the audit of the Consolidated Companies for the fiscal years
ending January 31, 2001 and January 31, 2002 to be completed prior to Closing by
auditors designated by Purchaser.
"Audited Financial Statements" means the audited balance sheet and related
statements of income and cash flows of the Consolidated Companies to be prepared
in connection with the Audit.
"Average Closing Price" means the average closing price of the Purchaser
Common Stock quoted on the NASDAQ System for a ten (10) consecutive trading day
period ending on the second trading day prior to the Closing Date.
"Average Put Price" means, as of the Exercise Date, a per share price
equal to the average closing price of the Purchaser Common Stock quoted on the
NASDAQ System for a ten (10) consecutive trading day period ending on the
trading day immediately prior to the Exercise Date; provided that in no event
shall such per share price exceed 150% of the Average Closing Price.
"Business" means market research and consulting services based primarily
on survey research and related methods, including related field work and data
tabulation services.
"CERCLA" shall have the meaning set forth in Section 4.1(ee).
"Closing" means the consummation of the transactions provided for in this
Agreement.
"Closing Date" means the date on which the Closing occurs pursuant to
Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statutes thereto.
"Common Shares" means all of the issued and outstanding shares of Common
Stock.
"Common Stock" means the authorized common stock, no par value, of the
Corporation.
"Consideration Shares" has the meaning set forth in Section 2.2 below.
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"Consideration Shares Put" has the meaning set forth in Section 2.6 below.
"Consolidated Company" and "Consolidated Companies" means the Corporation
and the Subsidiaries.
"Consolidated Companies Intellectual Property" shall have the meaning set
forth in Section 4.1(q).
"Consolidated Financial Statements" shall mean the audited consolidated
balance sheet of the Consolidated Companies as of January 31, 2001 and January
31, 2002 and the audited consolidated statements of income and cash flow for the
years then ended, both as attached hereto as SCHEDULE 4.1(g)(i).
"Content" shall mean any and all information, pictures, images, graphics,
video, text, and any other content or information, in whatever form or on any
media.
"Corporation" means Guideline Research Corp., a New York corporation.
"Determining Accountants" has the meaning set forth in Section 2.7(b) of
this Agreement.
"Effective Date" has the meaning set forth in the first paragraph of this
Agreement.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in Section 3(2)
of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in Section 3(1)
of ERISA.
"Encumbrance" shall mean any mortgage, lien, security interest, pledge,
encumbrance, restriction on use, voting or transferability, defect of title,
charge or claim of any nature whatsoever on any property or property interest,
exclusive of any obligations under New York Business Corporation Law Section
630.
"Environmental Release" shall have the meaning set forth in CERCLA.
"Environmental and Safety Requirements" shall mean all Applicable Law
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including, without limitation, all those relating
to the presence, use, production, generation, handling, transport, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
Environmental Release, threatened Environmental Release, control or cleanup of
any
4
hazardous or otherwise regulated materials, substances or wastes, chemical
substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals,
petroleum products or distillates, asbestos, polychlorinated biphenyls, noise or
radiation).
"Equity Equivalents" has the meaning set forth in Section 2.6(g) below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means the law firm of ▇▇▇▇ ▇▇▇▇▇▇▇, P.C., having an address
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"Escrow Agreement" means that certain escrow agreement to be entered into
at Closing by and among the Escrow Agent, Purchaser, the Shareholders and
Whitcup substantially in the form annexed hereto as EXHIBIT A.
"Exercise Date" shall mean one (1) business day after the receipt by
Purchaser of a Put Notice from a Shareholder during the Exercise Period.
"Exercise Period" has the meaning set forth in Section 2.6 below.
"Exercise Price" has the meaning set forth in Section 2.6 below.
"Exercise Shares" has the meaning set forth in Section 2.6 below.
"Fiduciary" has the meaning set forth in Section 3(21) of ERISA.
"GAAP" means U.S. generally accepted accounting principles, consistently
applied.
"Governmental Entity" shall mean any national, international, territorial,
state, regional, provincial or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative
commission or other agency, or any political or other subdivision, department or
branch of any of the foregoing, or any arbitrator or mediator.
"Guaranty" shall mean, as to any Person, all liabilities or obligations of
such Person, with respect to any indebtedness or other obligations of any other
person, which have been guaranteed, directly or indirectly, in any manner by
such Person, through an agreement, contingent or otherwise, primarily for the
purpose of enabling the debtor to make payment of such indebtedness or
obligation or to guarantee the payment to the owner of such indebtedness or
obligation against loss, or to supply funds to or in any manner invest in the
debtor, or otherwise.
"Insurance Policies" has the meaning set forth in Section 4.1(u) below.
"Intellectual Property" shall mean any United States, foreign,
international and state patents and patent applications, industrial design
registrations, certificates of invention and utility models (collectively,
"Patents"); trademarks, service marks, and trademark or service ▇▇▇▇
5
registrations and applications, trade names, logos, designs, slogans, and
general intangibles of like nature, together with all goodwill related to the
foregoing (collectively, "Trademarks"); Internet domain names; copyrights,
copyright registrations, renewals and applications for copyrights, including
without limitation for the Content and the Software (each as defined herein)
(collectively, "Copyrights"); Content; Software, technology, trade secrets and
other confidential information, know-how, proprietary processes, formulae,
algorithms, models and methodologies, rights of privacy and publicity, including
but not limited to, the names, likenesses, voices and biographical information
of real persons, and all license agreements and other agreements granting rights
relating to any of the foregoing which are classified as intangible assets under
GAAP.
"Knowledge", whether capitalized or not, means (i) the actual knowledge of
such Person after due inquiry or (ii) knowledge that such Person should have
reasonably been expected to know in the Ordinary Course of Business, unless
otherwise provided for herein to the contrary. A Person (other than an
individual) will be deemed to have "knowledge" of a particular fact or other
matter if any of such Person's current Affiliates, officers or directors, has,
or at any time had, knowledge of such fact or other matter. In addition, the
Shareholders and each of the Consolidated Companies shall be deemed to have
"knowledge" of a particular fact or other matter if ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ has knowledge of such fact or
matter.
"Lease" and "Leases" have the meanings set forth in Section 4.1(o) below.
"Leased Property" has the meaning set forth in Section 4.1(o) below.
"Liability" and "Liabilities" means any liability (whether known or
unknown, whether absolute or contingent, whether liquidated or unliquidated and
whether due or to become due).
"License Agreements" shall have the meaning set forth in Section 4.1(q).
"Liquidated Damages Amount" has the meaning set forth in Section 6.3(a)(y)
below.
"Litigation" has the meaning set forth in Section 4.1(m) below.
"Losses" has the meaning set forth in Section 7.3 below.
"Material Adverse Effect" means any change, event or condition of any
character which has had or could have a material adverse effect on the condition
(financial or otherwise), results of operations, assets, liabilities,
properties, business or prospects of the Consolidated Companies or on any of
their respective relations with any Person, employee, customer or supplier.
"Multiemployer Plan" has the meaning set forth in Section 3(37)(A) of
ERISA.
"NEBEX" shall mean "New England Business Exchange, Inc."
6
"One Year Deferred Consideration Amount" means a sum determined in
accordance with the formula set forth on SCHEDULE 2.3 hereto.
"One Year Deferred Consideration Threshold" means an amount of Year End
Adjusted EBITDA equal to $841,000.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" shall mean any individual, corporation, partnership, joint
venture, trust, business association, organization, governmental authority or
other entity.
"Preferred Shares" means all of the outstanding shares of Preferred Stock.
"Preferred Stock" means the authorized preferred stock of the Corporation,
$1.00 par value.
"Prohibited Transaction" has the meaning set forth in Section 406 of ERISA
and Section 4975 of the Code.
"Purchase Price" has the meaning set forth in Section 2.2 below.
"Purchaser Transaction Expenses" has the meaning set forth in Section
6.3(a) below.
"Purchaser's Business" means (i) subscription-based research and
consulting services, (ii) any short-answer or rapid-turnaround research and
consulting services, or (iii) any in-depth business research or competitive
intelligence services.
"Put Notice" has the meaning set forth in Section 2.6 below.
"Related Party" and "Related Parties" has the meaning set forth in Section
4.1(aa) below.
"Reportable Event" has the meaning set forth in Section 4043 of ERISA.
"Representatives" means, as to any Person, its accountants, attorneys,
consultants, officers, directors, employees, agents and other advisers and
representatives.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations in effect thereunder.
"Shareholder" and "Shareholders" have the meanings set forth in the first
paragraph of this Agreement.
"Shareholders' Taxes" has the meaning set forth in Section 5.11 below.
7
"Shareholder Transaction Expenses" has the meaning set forth in Section
6.3(e) below.
"Shares" means all shares of Common Stock and all shares of Preferred
Stock.
"Software" shall mean any and all (i) computer programs, including any and
all software implementations of algorithms, models and methodologies, whether in
source code or object code form, (ii) databases, compilations, and any other
electronic data files, including any and all collections of data, whether
machine readable or otherwise, (iii) descriptions, flow-charts, technical and
functional specifications, and other work product used to design, plan,
organize, develop, test, troubleshoot and maintain any of the foregoing, (iv)
without limitation to the foregoing, the software technology supporting any
functionality contained on any of the Consolidated Companies' Internet site(s),
and (v) all documentation, including technical, end-user, training and
troubleshooting manuals and materials, relating to any of the foregoing.
"Straddle Returns" has the meaning set forth in Section 5.11 below.
"Subsidiaries" means, collectively, Advanced Analytics, Guideline Chicago,
Guideline Consulting and Tabline.
"Subsidiary Shareholders" means any Person, other than the Corporation,
that owns the capital stock of any of the Subsidiaries.
"Tax" or "Taxes" means any federal, state, local or foreign income, gross
receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, stamp, excise,
occupation, sales, use, transfer, value added, alternative minimum, estimated or
other tax, including any interest, penalty or addition thereto, whether disputed
or not.
"Transaction" has the meaning set forth in Section 5.9 below.
"Two Year Adjusted EBITDA" means, for the two year period ending March 31,
2005, in accordance with GAAP, computed consistent with historical practices,
gross profit of the Consolidated Companies less the sum of:
(a) Eight Million Two Hundred Thousand Dollars ($8,200,000), inclusive of
labor costs historically included by the Consolidated Companies in the "Selling,
General and Administrative" expense category in their GAAP financial statements;
(b) to the extent not already deducted in calculating EBITDA, three
percent (3%) of the sales of the Consolidated Companies, such sales to be
determined in accordance with GAAP; and
(c) to the extent not already deducted in calculating EBITDA, ten percent
(10%) of sales of the Consolidated Companies that are sourced by the Purchaser
or its Affiliates (other than the
8
Consolidated Companies), such sales to mean sales determined in accordance with
GAAP less pass through costs charged to customers.
For purposes of this definition, gross profit will include, without
limitation, the gross profit from each Valid Market Research Project.
"Two Year Deferred Consideration Amount" means a sum determined in
accordance with the formula set forth on SCHEDULE 2.4 hereto.
"Two Year Deferred Consideration Threshold" means an amount of Two Year
Adjusted EBITDA equal to $2,200,000.
"Valid Market Research Project" means each project of a nature
historically performed by the Consolidated Companies that is either (i)
performed by the Consolidated Companies; or (ii) available to be performed by
the Consolidated Companies and selected by ▇▇▇▇▇▇▇▇▇ and La Terra to be
performed by the Consolidated Companies but actually performed elsewhere as a
result of a decision by Purchaser.
"Year End Adjusted EBITDA" means, for the one year period ending March 31,
2004, in accordance with GAAP, computed consistent with historical practices,
gross profit of the Consolidated Companies less the sum of:
(a) Four Million One Hundred Thousand Dollars ($4,100,000), inclusive of
labor costs historically included by the Consolidated Companies in the "Selling,
General and Administrative" expense category in their GAAP financial statements;
(b) to the extent not already deducted in calculating EBITDA, three
percent (3%) of the sales of the Consolidated Companies, such sales to be
determined in accordance with GAAP; and
(c) to the extent not already deducted in calculating EBITDA, ten percent
(10%) of sales of the Consolidated Companies that are sourced by the Purchaser
or its Affiliates (other than the Consolidated Companies), such sales to mean
sales determined in accordance with GAAP less pass through costs charged to
customers.
For purposes of this definition, gross profit will include, without
limitation, the gross profit from each Valid Market Research Project.
ARTICLE II
SALE AND PURCHASE OF SHARES
Section 2.1 PURCHASE OF SHARES. Subject to the terms and conditions set
forth herein, on the Closing Date, the Shareholders shall sell to Purchaser, and
Purchaser shall purchase from the Shareholders, all of the Shareholders' right,
title and interest in and to the Shares, which shall
9
collectively constitute one hundred percent (100%) of the issued and outstanding
capital stock of the Corporation. At the Closing, the Shareholders shall deliver
to Purchaser all of the certificates representing the Shares together with stock
powers separate from the certificates duly executed by the Shareholders in blank
and sufficient to convey to Purchaser good title to all of the Shares free and
clear of any and all Encumbrances of any nature whatsoever, other than
restrictions arising under applicable securities laws.
Section 2.2 CONSIDERATION. (a) Subject to the terms and conditions set
forth in this Agreement, in addition to any One-Year Deferred Consideration
Amount that may be payable pursuant to Section 2.3 hereof or Two Year Deferred
Consideration Amount that may be payable pursuant to Section 2.4 hereof, the
aggregate purchase price for the Shares shall be up to Four Million Four Hundred
Fifteen Thousand Two Hundred and Eight ($4,415,208) Dollars (the "Purchase
Price"), payable by Purchaser to or for the benefit of the Shareholders, as
follows:
(i) $3,689,167 shall be payable in cash by wire transfer of
immediately available funds at the Closing (the "Cash
Consideration") to such parties and in such amounts as
set forth on SCHEDULE 2.5 annexed hereto.
(ii) $351,042 of duly authorized and non-assessable
unregistered shares (the "Closing Consideration Shares")
of Purchaser's common stock, par value $.0001 per share
(the "Purchaser Common Stock") distributed to such
parties and in such amounts as set forth on SCHEDULE 2.5
annexed hereto;
(iii) $375,000 of duly authorized and non-assessable
unregistered shares (the "Escrow Consideration Shares")
of Purchaser Common Stock, shall be deposited by
Purchaser at the Closing with the Escrow Agent, which
shares shall be held and distributed, subject to the
set-offs, if any, authorized herein, pursuant to the
terms and provisions hereof and the Escrow Agreement;
For purposes of determining the number of shares of Purchaser Common Stock
which shall constitute the Consideration Shares payable at Closing to the
Shareholders or deposited in Escrow, the value of Purchaser Common Stock shall
be determined based upon the Average Closing Price. The "Consideration Shares"
shall mean, collectively, the Closing Consideration Shares and the Escrow
Consideration Shares and shall not include any Purchaser Common Stock issued
pursuant to Section 2.3 hereof.
Section 2.3 ONE YEAR DEFERRED CONSIDERATION. If the Year End Adjusted
EBITDA for the twelve months ended March 31, 2004 shall exceed the One Year
Deferred Consideration Threshold, subject to the set-offs, if any, authorized
herein, the Purchaser shall pay, or shall arrange for the Corporation to pay, to
such parties and in such amounts as set forth on SCHEDULE 2.5, in cash by wire
transfer of immediately available funds the One Year Deferred Consideration
Amount indicated on SCHEDULE 2.3 hereto within thirty (30) days after the
determination of the Year End Adjusted EBITDA; provided, however, that each of
the Shareholders may separately elect to have up to fifty percent (50%) of the
amount of One Year
10
Deferred Consideration Amount payable to such Shareholder in an amount of duly
authorized and non-assessable unregistered shares of Purchaser's Common Stock by
providing Purchaser with written notice of the exercise of such election and
stating the percentage of One Year Deferred Consideration Amount to be payable
in Purchaser's Common Stock within ten (10) days after the determination of the
Year End Adjusted EBITDA. The price of any Purchaser Common Stock delivered as
partial consideration for the One Year Deferred Consideration Amount shall be
determined by taking the average closing price of the Purchaser Common Stock
quoted on the NASDAQ System for a ten (10) consecutive trading day period ending
on the trading day immediately prior to the twentieth (20th) day after the
determination of the Year End Adjusted EBITDA.
Section 2.4 TWO YEAR DEFERRED CONSIDERATION. If the Two Year Adjusted
EBITDA for the twenty-four months ended March 31, 2005 shall exceed the Two Year
Deferred Consideration Threshold, subject to the set-offs, if any, authorized
herein, the Purchaser shall pay, or shall arrange for the Corporation to pay, to
such parties and in such amounts as set forth on SCHEDULE 2.5, in cash by wire
transfer of immediately available funds the Two Year Deferred Consideration
Amount indicated on SCHEDULE 2.4 hereto within thirty (30) days after the
determination of the Two Year Adjusted EBITDA.
Section 2.5 PAYMENT OF CONSIDERATION. The Cash Consideration, the
Consideration Shares, the One Year Deferred Consideration Amount, if any, and
the Two Year Deferred Consideration Amount, if any, shall be allocated, and to
the extent required hereby payments shall be made, to or for the benefit of each
of the Shareholders in the amounts and percentages set forth on SCHEDULE 2.5
hereto.
Section 2.6 PUT OPTION. SUBJECT to the terms hereof, each of the
Shareholders shall, beginning on the date that is 735 days after the Closing
Date and ending on the date that is 855 days after the Closing Date (or the
immediately following business day if such date is a Saturday, Sunday or United
States banking holiday) (the "Exercise Period"), on a one time basis (except as
provided in Section 2.6(k) below), be entitled to each put to the Purchaser up
to an amount of Consideration Shares set forth on SCHEDULE 2.6 annexed hereto by
providing the Purchaser with written notice in substantially the form set forth
in EXHIBIT 2.6(i) annexed hereto (the "Put Notice") of its election to exercise
this put right, and after its receipt of the Put Notice, the Purchaser, or its
designee, shall, to the extent that it has funds legally available therefor and
is not restricted contractually, purchase from the Shareholders, the Exercise
Shares (as defined below) upon the terms set forth below in this Section 2.6
(the "Consideration Shares Put"):
(a) PRICE. Upon exercise of the Consideration Shares Put pursuant to
the terms hereof, the Purchaser shall, to the extent that it has
funds legally available therefor and is not restricted
contractually, repurchase an amount of Exercise Shares for a price
per share equal to the greater of (i) the Average Closing Price and
(ii) the Average Put Price (the "Exercise Price").
(b) NUMBER OF SHARES EXERCISABLE. The Consideration Shares Put shall
be for the aggregate number of Consideration Shares set forth in the
Put Notices, provided that the maximum number of Consideration
Shares exercisable, in the
11
aggregate, shall be an amount of shares of Purchaser Common Stock
equal to the Consideration Shares divided by the Exercise Price (the
"Exercise Shares").
(c) GUARANTY OF ▇▇▇▇▇ ▇▇▇▇▇ ("DW"). In the event that after exercise
of the Consideration Shares Put by a Shareholder, if the Purchaser
either does not fulfill its obligations to repurchase, does not have
funds legally available to repurchase, or is contractually
restricted from repurchasing any portion of the Consideration Shares
within thirty (30) days after receipt of written notice thereof by
the Shareholders of the Purchaser's failure to comply with such
obligations regarding the Consideration Shares Put, DW shall, to the
extent that the Purchaser fails to fulfill such obligations pursuant
to the terms of the Consideration Shares Put, either (i) loan the
Purchaser sufficient funds for the purpose of the Purchaser
fulfilling its repurchase obligations under the Consideration Shares
Put, or (ii) purchase or arrange for a third party to purchase any
remaining portion of the Exercise Shares for such party's benefit;
provided, that in the event that DW makes the loans, purchases or
arranges for the purchases of the Exercise Shares described in (i)
or (ii) above through the Letters of Credit described in Section
2.6(d) or otherwise, the Exercise Price for the Exercise Shares to
be purchased thereby shall be limited to the Average Closing Price.
In the event that DW purchases the Exercise Shares either pursuant
to the provisions of this Section 2.6(c) or 2.6(d) below, the
Purchaser shall be relieved of any further obligation and liability,
and the Shareholders shall have no further recourse in respect of,
the Consideration Shares Put or otherwise relating to those shares
actually purchased at the Average Closing Price. In the event that
DW loans to the Purchaser funds pursuant to Section 2.6(c)(i), the
Purchaser agrees that such funds shall be used to fulfill its
repurchase obligations under the Consideration Shares Put.
(d) SECURITY FOR DW GUARANTY. DW shall provide two letters of credit
at Closing aggregating Seven Hundred Twenty-Six Thousand and
Forty-Two Dollars ($726,042) (the "Security Amount") in form and
substance as set forth as EXHIBIT 2.6(ii)(a) AND 2.6(ii)(b) annexed
hereto (the "Letters of Credit") to secure in full all of his
obligations pursuant to Section 2.6(c) hereof. Each of the Letters
of Credit shall remain outstanding and in effect to the extent that
such Letter of Credit is not drawn upon in accordance with its
terms, until the earlier to occur of (i) sixty (60) days after the
end of the Exercise Period or (ii) the sale of all of the
Consideration Shares; provided, that notwithstanding (i) and (ii)
above, DW shall cause each Letter of Credit to remain outstanding
for a number of days equal to the same number of days that the
Exercise Period was extended as a result of a Blackout Period. Upon
the transfer of any of the Consideration Shares, the amount of the
Letter of Credit shall be proportionately reduced to equal the
product of the Security Amount multiplied by a fraction, the
numerator of which is the number of Exercise Shares held by the
Shareholders, as the case may be, after such transfer and the
denominator of which is the original number of Exercise Shares held
by the Shareholders. Purchaser and the Shareholders, as the case may
be, covenant to promptly provide any written instructions to the
issuer of the Letter of Credit and to provide such issuer with such
documentation or
12
instruments as the issuer may reasonably request from time to time
to effect the reductions provided for in this Section 2.6(d).
(e) PAYMENT AND DELIVERY TERMS. Payment for any Exercise Shares to
be transferred under the Consideration Shares Put shall be made by
bank or certified check pursuant to a Closing scheduled pursuant to
the Put Notice.
(f) ASSIGNMENT. The Consideration Shares Put may not be assigned or
transferred to any Person except by will or the applicable laws of
descent and distribution so long as such transferee agrees to be
bound by all of the terms and provisions of this Agreement.
(g) ADJUSTMENTS TO CONSIDERATION SHARES. If all or any portion of
the Consideration Shares Put shall be exercised subsequent to any
share distribution, share split, split-up, split-off, spin-off,
recapitalization, reincorporation merger with a wholly owned
Delaware subsidiary, separation, reorganization, liquidation,
combination, redemption, or exchange of shares, warrants or other
units of equity (together, "Equity Equivalents") of the Purchaser,
occurring after the date hereof, as a result of which Equity
Equivalents of any class shall be issued in respect of outstanding
Common Stock being changed into the same or a different number of
shares of Common Stock or other Equity Equivalents, the terms of the
Consideration Shares Put shall be correspondingly and ratably
adjusted by the Board of Directors of the Purchaser so as to be
substantially the economic equivalent of the terms in effect
immediately prior to such event.
(h) EXTENSION OF EXERCISE PERIOD. The Exercise Period may be
extended upon the written agreement of Purchaser, DW and the
Shareholders.
(i) BLACKOUT PERIODS. Notwithstanding anything to the contrary, the
Shareholders may not exercise the Consideration Shares Put during
any Blackout Period. "Blackout Period" shall mean (A) any period
during which the Shareholders are aware of material nonpublic
information with respect to the Purchaser and (B) the period
beginning on the first day of the last month of any fiscal quarter
of the Purchaser and ending on the second business day after the
public disclosure of revenue and earnings of the Purchaser for the
quarter; provided, that the Purchaser covenants that at expiration
of the Exercise Period, Purchaser will not cause, permit or allow
any Blackout Period or Periods to interfere with the Consideration
Shares Put for more than forty-five (45) days in the aggregate. If
the Exercise Period expires during a Blackout Period, the Exercise
Period shall be extended for a period of fifteen (15) business days
commencing on the first business day after the expiration of any
operative Blackout Period.
(j) EXERCISE OF CONSIDERATION SHARES PUT WITH RESPECT TO ESCROW
CONSIDERATION SHARES. If during the Exercise Period, there is an
outstanding unsatisfied indemnification claim pursuant to the Escrow
Agreement whereby
13
Consideration Shares are being retained by the Escrow Agent pursuant
to the Escrow Agreement, the Shareholders shall be able to exercise
the Consideration Shares Put as to such Consideration Shares
remaining in escrow provided that (a) upon exercise of the
Consideration Shares Put as to such Consideration Shares, all
amounts payable for such Consideration Shares being held by Escrow
Agent shall be delivered directly to the Escrow Agent to be held
pursuant to the terms of the Escrow Agreement and (b) in connection
with such exercise, if either of the Shareholders draw down a Letter
of Credit for payment due under the Consideration Shares Put with
respect to Consideration Shares that remain in escrow pursuant to
the Escrow Agreement, such Shareholder shall deliver to Escrow Agent
in the manner set forth in the required certification set forth in
the applicable Letter of Credit such amounts payable thereunder as a
result of the exercise of the Consideration Shares Put with respect
to such Consideration Shares being held in escrow.
(k) SECOND EXERCISE OF CONSIDERATION SHARES. Each Shareholder shall
be able to only deliver one Put Notice with respect to the number of
shares set forth adjacent to such Stockholder's name set forth on
Schedule 2.6 and exercise the Consideration Shares Put once;
provided, that if a Shareholder is exercising the Consideration
Shares Put with respect to Consideration Shares issued to Whitcup as
a representative of Whitcup, such Shareholder may deliver up to two
Put Notices so long as one (and only one) of such Put Notices is
being delivered solely for the exercise of the Consideration Shares
Put with respect to Consideration Shares issued to Whitcup.
Section 2.7 DETERMINATION OF CALCULATIONS. (a) The Year End Adjusted
EBITDA, the One Year Deferred Consideration Amount, and whether the One Year
Deferred Consideration Threshold has been met shall be determined by the Chief
Financial Officer of the Purchaser no later than May 31, 2004 and notice thereof
shall be delivered to the Shareholders within ten (10) days of such
determination. The Two Year Adjusted EBITDA, the Two Year Deferred Consideration
Amount, and whether the Two Year Deferred Consideration Threshold has been met
shall be determined by the Chief Financial Officer of the Purchaser no later
than May 31, 2005 and notice thereof shall be delivered to the Shareholders
within ten (10) days of such determination. The Average Put Price shall be
determined by the Chief Financial Officer of the Purchaser no later than five
days after the Exercise Date.
(b) The Shareholders and their respective accountants shall be afforded
access to and shall be entitled to review the work papers in connection with the
determination of the Year End Adjusted EBITDA, the Two Year Adjusted EBITDA, the
One Year Deferred Consideration Amount, the Two Year Deferred Consideration
Amount, whether the One Year Deferred Consideration Threshold or the Two Year
Deferred Consideration Threshold has been met, and the Average Put Price. These
determinations shall become final and binding upon the parties unless, within
thirty (30) days following delivery to the Shareholders, notice is given by the
Shareholders to Purchaser and Escrow Agent of the Shareholders' dispute, setting
forth in reasonable detail the Shareholders' basis for such objection. If notice
of dispute is timely given
14
by the Shareholders, the parties shall work together in good faith to resolve
such dispute. If the parties are unable to reach agreement within thirty (30)
days after notice of dispute has been received by Purchaser, the dispute shall
be referred as promptly as practicable for resolution to PricewaterhouseCoopers
or such other independent accounting firm that Shareholders and Purchaser
jointly agree on within fifteen (15) days after the expiration of such thirty
(30) day period (the "Determining Accountants"). The Determining Accountants
will make a determination as to each item in dispute, which determination will
be (i) in writing, (ii) furnished to Purchaser, the Shareholders and the Escrow
Agent as promptly as practicable after the items in dispute have been referred
to the Determining Accountants, (iii) made in accordance with this Agreement,
and (iv) final and binding upon each party hereto. Each of Purchaser and the
Shareholders will use reasonable efforts to cause the Determining Accountants to
render their decision as soon as reasonably practicable, including without
limitation by promptly complying with all reasonable requests by the Determining
Accountants for information, books, records and similar items. All costs and
expenses incurred as a result of the services rendered by the Determining
Accountants in connection with the determination of such disputed item shall be
divided equally between the Shareholders and the Purchaser.
Section 2.8 LEGENDING OF CONSIDERATION SHARES. Each certificate for
Purchaser Common Stock to be issued to the Shareholders pursuant to this
Agreement and the Escrow Agreement shall bear substantially the following
legend:
NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS IN EFFECT THEREUNDER (THE "ACT") AND
ALL APPLICABLE STATE SECURITIES LAWS OR (B) IF SUCH TRANSFER
IS EXEMPT FROM THE PROVISIONS OF THE ACT.
15
ARTICLE III
CLOSING
Section 3.1 TIME AND PLACE OF CLOSING. Provided that each condition
precedent to close set forth in this Article has been satisfied or waived by the
party entitled to waive such condition, the Closing shall take place at the
offices of ▇▇▇▇ ▇▇▇▇▇▇▇, P.C., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ on April 1, 2003 or at such earlier time as the parties shall agree. All
proceedings to be taken and all documents to be executed at the Closing shall be
deemed to have been taken, delivered and executed simultaneously, and no
proceeding shall be deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed.
Section 3.2 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE. The
obligation of Purchaser to purchase the Shares and to perform its other
obligations under this Agreement shall be subject to the satisfaction of each
and every of the following conditions precedent (or waiver thereof by Purchaser)
on or prior to the Closing Date:
(a) REPRESENTATIONS AND WARRANTIES. On the Closing Date, each of the
representations and warranties of the Shareholders contained in Section 4.1 of
this Agreement, or in any certificate or other document delivered pursuant to
this Agreement or in connection with the transactions contemplated hereby, shall
be true and correct in all material respects at and as of the Closing Date with
the same effect as though such representations and warranties were made at and
as of the Closing Date, and Purchaser shall have received a certificate from
each of the Shareholders, dated the Closing Date, to that effect.
(b) COMPLIANCE WITH OBLIGATIONS. The Shareholders shall have
performed and shall have caused the Consolidated Companies, as the case may be,
to perform or comply in all material respects with all agreements, covenants and
obligations required by this Agreement to be performed or complied with by them
on or prior to the Closing Date and Purchaser shall have received a certificate
from each of the Shareholders, dated the Closing Date, to that effect.
(c) NO MATERIAL ADVERSE CHANGE. Except as may be set forth herein,
since January 31, 2002, there shall have been no change, occurrence or
circumstance having or reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect and Purchaser shall have received a
certificate from each of the Shareholders, dated the Closing Date, to such
effect.
(d) CONSENTS. Except as specified in SCHEDULE 4.1(k), the
Consolidated Companies shall have obtained, on or prior to the Closing Date, the
consent of all Persons, the consent of which is required, so that the
consummation of the transactions contemplated by this Agreement will not
constitute a default or accelerate any liability under any agreement to which
any of the Consolidated Companies is a party or by which any of the Consolidated
Companies is bound.
16
(e) DUE DILIGENCE. The Shareholders shall have afforded Purchaser,
its agents and other Representatives, complete access to the properties,
facilities and books and records of the Consolidated Companies.
(f) NO INJUNCTIONS. ETC. The Closing shall not have been enjoined or
prohibited by any judicial or regulatory proceeding, nor shall any action,
proceeding, suit, litigation or investigation be pending or threatened before
any Governmental Entity (i) that seeks to enjoin or prohibit, or to obtain
damages in connection with the Closing or (ii) that purports to affect the
legality, validity or enforceability of this Agreement and the other documents,
instruments and agreements to be entered into by the Shareholders pursuant
hereto.
(g) RECEIPT OF DOCUMENTS, ETC. Purchaser shall have received the
following, in form and substance reasonably satisfactory to Purchaser:
(i) certificates representing the Shares, which certificates
shall be in good delivery form, duly endorsed or accompanied
by appropriate stock transfer powers duly executed;
(ii) certificates issued in the name of the Corporation
representing all of the issued and outstanding shares of each
of the Subsidiaries;
(iii) for each of the Consolidated Companies, copies of the
Articles of Incorporation (as recently certified by their
respective jurisdictions of formation) and Bylaws, certified
by the Secretary of each of the Consolidated Companies as of
the Closing Date as being true and correct copies thereof as
in effect on the Closing Date;
(iv) all corporate minute books, stock certificate books and
other corporate records of each of the Consolidated Companies;
(v) a certificate of the Secretary of State of the State of
New York, dated as of a date within thirty (30) days prior to
the Closing Date, certifying that the Corporation is in good
standing under the laws of the State of New York;
(vi) a certificate of the Secretary of State of the State of
New York, dated as of a date within thirty (30) days prior to
the Closing Date, certifying that Advanced Analytics is in
good standing under the laws of the State of New York;
(vii) a certificate of the Secretary of State of the State of
Illinois, dated as of a date within thirty (30) days prior to
the Closing Date, certifying that Guideline Chicago is in good
standing under the laws of the State of Illinois;
(viii) a certificate of the Secretary of State of the State of
New York, dated as of a date within thirty (30) days prior to
the Closing Date,
17
certifying that Tabline is in good standing under the laws of
the State of New York;
(ix) a certificate of the Secretary of State of the State of
New York, dated as of a date within thirty (30) days prior to
the Closing Date, certifying that Guideline Consulting is in
good standing under the laws of the State of New York;
(x) a favorable opinion letter of Wormser, Kiely, Galef &
▇▇▇▇▇▇ LLP, counsel to the Shareholders, dated the Closing
Date and addressed to Purchaser substantially in the form
attached hereto as EXHIBIT 3.2(x);
(xi) duly executed Employment Agreements, dated the Closing
Date, in form and substance reasonably satisfactory to
Purchaser, by and between the Corporation (or one of the
Subsidiaries satisfactory to Purchaser), and each of
▇▇▇▇▇▇▇▇▇, La Terra, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇; and
(xii) a release in the form annexed hereto as EXHIBIT 3.2(xii)
executed by each of the Shareholders.
(h) SUBSIDIARIES. At Closing, the equity interests in and to each of
the Subsidiaries of the Corporation shall be owned one hundred percent by the
Corporation and the Purchaser shall have received satisfactory evidence that the
stockholders agreements between (I) Advanced Analytics and Whitcup and (II)
Guideline Consulting and ▇▇▇▇▇▇▇▇▇▇ have been terminated.
(i) AUDITED FINANCIAL STATEMENTS AND ADDITIONAL FINANCIAL
STATEMENTS. Purchaser shall receive and be reasonably satisfied with the
Additional Financial Statements and the Audited Financial Statements together
with an unqualified opinion letter of the auditor performing the Audit.
Section 3.3 CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS TO
CLOSE. The obligations of the Shareholders to sell the Shares and for each to
perform their other obligations under this Agreement shall be subject to the
satisfaction of the following conditions precedent (or waiver thereof by the
Shareholders) on or prior to the Closing Date:
(a) REPRESENTATIONS AND WARRANTIES. On the Closing Date, each of the
representations and warranties of Purchaser contained in Section 4.2 of this
Agreement or in any certificate or other document delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby shall be
true and correct in all material respects at and as of the Closing Date with the
same effect as though such representations and warranties were made at and as of
the Closing Date, and the Shareholders shall have received a certificate from
Purchaser, dated the Closing Date, to that effect.
(b) COMPLIANCE WITH OBLIGATIONS. Purchaser shall have performed or
complied in all material respects with all agreements, covenants and obligations
required by this
18
Agreement to be performed or complied with by it on or prior to the Closing Date
and the Shareholders shall have received a certificate from Purchaser, dated the
Closing Date, to that effect.
(c) NO INJUNCTIONS. ETC. The Closing shall not have been enjoined or
prohibited by any judicial or regulatory proceeding, nor shall any action,
proceeding, suit, litigation or investigation be pending or threatened before
any court, arbitration, tribunal, governmental or regulatory agency or
legislative body (i) that seeks to enjoin or prohibit, or to obtain substantial
damages in connection with, the Closing, or (ii) that purports to affect the
legality, validity or enforceability of this Agreement and the other documents,
instruments and agreements to be entered into by Purchaser pursuant hereto.
(d) RECEIPT OF DOCUMENTS, ETC. The Shareholders shall have received
the following, in form and substance reasonably satisfactory to the
Shareholders:
(i) the Cash Consideration;
(ii) the Closing Consideration Shares;
(iii) certified copies of resolutions of the Board of Directors of
Purchaser approving the transactions set forth in this
Agreement;
(iv) a Certificate of the Secretary of State of the State of New
York, as of a date within thirty (30) days prior to the
Closing Date, certifying that Purchaser is in good standing
under the laws of the State of New York; and
(v) A favorable opinion letter of ▇▇▇▇ ▇▇▇▇▇▇▇, P.C., counsel to
the Purchaser and DW, dated the Closing Date and addressed to
the Shareholders in the form substantially attached hereto as
EXHIBIT 3.3(d).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. The
Shareholders represent and warrant to Purchaser that each of the following
statements is true, accurate and complete as of the date hereof:
(a) ORGANIZATION AND STANDING OF THE CONSOLIDATED COMPANIES. Each of
the Consolidated Companies is a corporation duly organized, validly existing,
and in good standing under the laws of the state in which it was incorporated,
has the full corporate power and authority and possesses all governmental
franchises, licenses, permits, authorizations and approvals required to carry on
the Business in the places and as it is now being conducted and to own, lease
and sublease the properties and assets with respect to the Business which it now
owns, leases or subleases and is qualified to do business as a foreign
corporation in each of the
19
jurisdictions listed in SCHEDULE 4.1(a) attached hereto, which constitute all of
the jurisdictions in which such qualification is required with respect to the
operation by the Consolidated Companies of the Business. Other than the
Shareholders, no Person controls the Corporation, whether by contract or
otherwise. Other than the Corporation, no Person controls the Subsidiaries,
whether by contract or otherwise.
(b) ARTICLES OF INCORPORATION, BYLAWS AND CORPORATE RECORDS OF THE
CONSOLIDATED COMPANIES. The Shareholders have heretofore furnished to Purchaser
complete and correct copies of the Articles of Incorporation, Bylaws, stock
ledgers and all minutes of the meetings of the Board of Directors and
stockholders of each of the Consolidated Companies. All material actions taken
by each of the Consolidated Companies since their organization and incorporation
have been duly authorized and/or subsequently ratified by the Shareholders or
Board of Directors of each of the Consolidated Companies, as necessary, and are
set forth in the respective minute books of the Consolidated Companies. The
minute books of each of the Companies has previously been provided to the
Purchaser. Such minute books contain complete and accurate records of all
meetings and other corporate actions of the board of directors, committees of
the board of directors, incorporators and shareholders of each of the
Consolidated Companies from the date of its incorporation to the date hereof.
All such meetings were duly called and held, and a quorum was present and acting
throughout each such meeting. Such stock ledgers and stock transfer records
reflect all issuances and registrations of transfer of all shares of capital
stock of the Consolidated Companies, and certificates representing all canceled
shares of capital stock have been returned to the stock ledger, except where a
lost certificate affidavit has been received from the registered owner (or their
lawful representative) of the shares evidenced thereby. Execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Shareholders does not and will not violate any
provision of the Articles of Incorporation and Bylaws of the Consolidated
Companies.
(c) CAPITALIZATION OF THE CORPORATION. The entire authorized capital
stock of the Corporation consists of 12,000 shares of Preferred Stock of which
6,000 shares are issued to ▇▇▇▇▇▇▇▇▇ and remain outstanding, and 2,500 shares of
Common Stock of which 100 shares are issued to each of ▇▇▇▇▇▇▇▇▇ and La Terra
and remain outstanding. All of the issued and outstanding Common Stock and
Preferred Stock have been duly authorized, are validly issued, fully paid and
non-assessable (other than pursuant to New York Business Law Section 630) and
are held of record by the Shareholders, and are free and clear of any liens,
charges, Encumbrances or in violation of any statutory or common law preemptive
rights. Except as set forth in SCHEDULE 4.1(c) attached hereto, there are no
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights or other agreements or commitments to
which the Corporation or any Shareholder is a party or which are binding upon
the Corporation or any Shareholder providing for the issuance, transfer,
disposition or acquisition of any of its capital stock. There are no outstanding
or authorized equity appreciation, phantom stock or similar rights with respect
to the Corporation. There are no dividends which have accrued or been declared
but are unpaid on the outstanding capital stock of the Corporation. All Taxes
required to be paid in connection with the issuance and any transfers of the
outstanding capital stock of the Corporation have been paid. All permits or
authorizations required to be obtained from or registrations required to be
effected with any Person in connection with any and all issuances of securities
of the Corporation from the date of its incorporation to the date hereof have
been obtained or effected, and all securities of the Corporation have been
issued and are
20
held in accordance with the provisions of all Applicable Law. There are no
voting trusts, proxies or any other agreements or understandings with respect to
the voting of the capital stock of the Corporation, which would not otherwise be
terminated at or before the Closing. Upon consummation of the Closing, the
Corporation will not have any securities convertible into or exchangeable for
any shares of its capital stock which have been created prior to the Closing,
nor will it have outstanding any rights, options, agreements or arrangements to
subscribe for or to purchase its capital stock or any securities convertible
into or exchangeable for its capital stock, which has been created prior to the
Closing.
(d) CAPITALIZATION OF THE SUBSIDIARIES. The entire authorized
capital stock of the Subsidiaries is as set forth on SCHEDULE 4.1(d) hereto. All
of the issued and outstanding capital stock of the Subsidiaries has been duly
authorized, is validly issued, fully paid and non-assessable (other than
pursuant to New York Business Law Section 630) and at Closing will be held of
record by the Corporation, as set forth on EXHIBIT B attached hereto, and are
free and clear of any liens, charges or other Encumbrances. Except as set forth
in SCHEDULE 4.1(d) attached hereto, there are no outstanding or authorized
options, warrants, rights, contracts, calls, puts, rights to subscribe,
conversion rights or other agreements or commitments to which the Subsidiaries
or the Corporation is a party or which are binding upon the Subsidiaries or the
Corporation providing for the issuance, transfer, disposition or acquisition of
any of their capital stock. There are no outstanding or authorized equity
appreciation, phantom stock or similar rights with respect to the Subsidiaries.
There are no dividends which have accrued or been declared but are unpaid on the
outstanding capital stock of the Subsidiaries. All Taxes required to be paid in
connection with the issuance and any transfers of the outstanding capital stock
of the Subsidiaries have been paid. All permits or authorizations required to be
obtained from or registrations required to be effected with any Person in
connection with any and all issuances of securities of the Subsidiaries from the
their respective dates of incorporation to the date hereof have been obtained or
effected, and all securities of the Corporation have been issued and are held in
accordance with the provisions of all Applicable Law. Except as provided in
SCHEDULE 4.1(d) attached hereto, there are no voting trusts, proxies or any
other agreements or understandings with respect to the voting of the capital
stock of the Subsidiaries, which would not otherwise be terminated at or before
the Closing. Upon consummation of the Closing, the Subsidiaries will not have
any securities convertible into or exchangeable for any shares of its capital
stock which have been created prior to the Closing, nor will it have outstanding
any rights, options, agreements or arrangements to subscribe for or to purchase
its capital stock or any securities convertible into or exchangeable for its
capital stock, which has been created prior to the Closing.
(e) AUTHORITY. Each Shareholder has the full power and authority to
execute and deliver this Agreement and the other documents, instruments and
agreements to be entered into by him pursuant hereto, to perform hereunder and
thereunder, and to consummate the transactions identified in this Agreement
without the necessity of any act or consent of any other Person or entity
whomsoever, except for the consents described in SCHEDULE 4.1(e) hereto. This
Agreement and each and every agreement, document and instrument to be executed,
delivered and performed by each Shareholder in connection herewith, constitute
or will, when executed and delivered, constitute the legal, valid and binding
obligation of each Shareholder, enforceable against him in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws from time to time
in
21
effect affecting the enforcement of creditors' rights generally, and except as
enforcement of remedies may be limited by general equitable principles.
(f) SUBSIDIARIES. Except as set forth in SCHEDULE 4.1(f) attached
hereto, the Corporation does not control directly or indirectly or have any
direct or indirect equity participation in any corporation, partnership, trust,
joint venture, limited liability company or other business association other
than the Subsidiaries.
(g) FINANCIAL STATEMENTS: LIABILITIES AND OBLIGATIONS OF THE
CONSOLIDATED COMPANIES.
(i) The Consolidated Financial Statements attached hereto as
SCHEDULE 4.1(g)(i) have been prepared in accordance with
GAAP and the books and records of the Consolidated
Companies, are correct and complete, and fairly present,
in all material respects, the financial position and the
results of operations and cash flows of the Consolidated
Companies as of the dates and for the periods indicated
therein, subject to customary and usual audit
adjustments consistently applied.
(ii) The Additional Financial Statements attached hereto as
SCHEDULE 4.1(g)(ii) have been prepared in accordance
with GAAP and the books and records of the Consolidated
Companies, are correct and complete, and fairly present,
in all material respects, the financial position and the
results of operations and cash flows of the Consolidated
Companies as of the dates and for the periods indicated
therein, subject to customary and usual audit
adjustments consistently applied.
(iii) Except as set forth in SCHEDULES 4.1(g)(i) AND
4.1(g)(ii) attached hereto, the Consolidated Companies
have no direct or indirect indebtedness, liability,
claim, loss, damage, deficiency, obligation or
responsibility, known or unknown, fixed or unfixed,
▇▇▇▇▇▇ or inchoate, liquidated or unliquidated, secured
or unsecured, accrued, absolute, contingent or
otherwise, including, without limitation, liabilities on
account of Taxes, other governmental charges or lawsuits
brought, whether or not of a kind required by GAAP to be
set forth on a financial statement, except for (A) the
liabilities and obligations of the Consolidated
Companies disclosed in the Consolidated Financial
Statements and the Additional Financial Statements or
(B) liabilities incurred or accrued in the Ordinary
Course of Business since January 31, 2003.
(h) TAXES. Each of the Consolidated Companies has duly filed or
caused to be filed all Tax reports and returns that it was required to file.
Except as set forth in SCHEDULE 4.1(h) attached hereto, all such reports and
returns were prepared and filed in accordance with
22
Applicable Law and, to the Knowledge of Shareholders, are correct and complete
in all material respects and the Corporation has not reported on its income tax
returns any positions taken therein that could give rise to a substantial
understatement of federal or other income tax. No claim has ever been made by an
authority in a jurisdiction where any of the Consolidated Companies does not
file Tax returns that it is or may be subject to taxation by that jurisdiction.
All Taxes owed by each of the Consolidated Companies as set forth on any filed
return have been fully paid or fully reserved against in the Consolidated
Financial Statements. Each of the Consolidated Companies has withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor or other third
party. Except as set forth in SCHEDULE 4.1(h), there is no action, suit,
proceeding, investigation, audit dispute or claim concerning any Tax Liability
of any of the Consolidated Companies either (i) claimed or raised by any
authority in writing or (ii) as to which the Shareholders have any actual
knowledge, and, to the knowledge of the Shareholders, there exists no reasonable
basis for the making of any such actions, suits, proceedings, investigations,
audit disputes or claims. There is not now and there will not be, any liability
for federal, state, local or foreign income, sales, use, employment, excise,
property, franchise, ad valorem, license, employment or other Taxes,
assessments, fees, charges or additions to Tax arising out of, or attributable
to, or affecting the Assets or the conduct of the Business through the Closing
Date, for which any of the Consolidated Companies will have any Liability for
payment or otherwise in excess of the amounts so paid by any of the Consolidated
Companies which would be reflected as a liability of any of the Consolidated
Companies in its financial statements if prepared as of the Closing Date in
accordance with GAAP. Except as set forth in SCHEDULE 4.1(h) attached hereto,
the Consolidated Companies have not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency. Neither the Shareholders, with respect to any of the Consolidated
Companies, nor any of the Consolidated Companies has agreed or is required to
make any adjustments pursuant to Section 481(a) of the Code or any similar
provision of other tax law, domestic or foreign, by reason of a change in
accounting method initiated by it or any other relevant party nor has it any
knowledge that any taxing authority has proposed any such adjustment or change
in accounting method. The Corporation does not have any application pending with
any taxing authority requesting permission for any changes in accounting
methods.
(i) TANGIBLE PROPERTY.
(i) ASSETS. SCHEDULE 4.1(i) hereto sets forth all plant, machinery,
equipment, furniture, leasehold improvements, fixtures, vehicles,
structures, any related capitalized items and other tangible
property used in the Business ("Tangible Property").
(ii) TITLE TO ASSETS. Except as disclosed in SCHEDULE 4.1(i)
attached hereto, each of the Consolidated Companies have good and
valid title to, or a valid leasehold interest in, all Tangible
Property, in each case free and clear of any Encumbrances.
(iii) ENFORCEABILITY OF PERSONAL PROPERTY LEASES. Each of the leases
for personal property included in the Assets is in full force and
effect and constitutes
23
a legal, valid and binding obligation of one or more of the
Consolidated Companies and each other party thereto, enforceable in
accordance with its terms, and there is not existing under any of
such leases any default of one or more of the Consolidated Companies
or any event or condition which, with notice or lapse of time, or
both, would constitute a default.
(iv) OPERATING CONDITION. All of the tangible material Assets are in
operating condition and sufficient state of repair to operate the
Business as presently conducted by the Consolidated Companies, and
is inspected, maintained and operated in conformity with all
Applicable Law.
(v) SUFFICIENCY. Other than as set forth on SCHEDULE 4.1(i), there
are no assets owned by any third party which are used in the
operation of the Business, as presently conducted by the
Consolidated Companies.
(j) BUYOUT AGREEMENTS. SCHEDULE 4.1(j) attached hereto, lists all
agreements wherein the Corporation has the right or obligation to repurchase
shares of any of the Subsidiaries held by any Subsidiary Shareholder.
(k) AGREEMENT RELATED TO OTHER INSTRUMENTS. Except as listed in
SCHEDULE 4.1(k) attached hereto, the execution and delivery of this Agreement
and the other documents, instruments and agreements to be entered into pursuant
hereto by the Shareholders do not, and the consummation of the transactions
contemplated hereby and thereby will not, violate or constitute a breach or an
occurrence of default under any provision of: (i) any mortgage, deed of trust,
conveyance to secure debt, note, loan or lien of any of the Consolidated
Companies; (ii) any contract, lease, sublease or other agreement of any of the
Consolidated Companies; or (iii) any consent, order, judgment or decree to which
any of the Consolidated Companies are a party or by which any of the
Consolidated Companies are bound.
(l) ABSENCE OF CHANGES. Except as disclosed in SCHEDULE 4.1(1)
attached hereto, since January 31, 2002:
(i) the Consolidated Companies have not (a) sold leased,
licensed, transferred or assigned any of the Assets, tangible
or intangible, in excess of $10,000 in the aggregate, other
than for fair consideration in the Ordinary Course of Business
and the Consolidated Companies have not written up the value
of any of the Assets, or (b) sold, leased, licensed,
transferred, assigned or disposed of any of the material
Assets of the Consolidated Companies.
(ii) the Consolidated Companies have not entered into any
written contract, lease, sublease or license involving more
than $25,000, other than customer contracts and subcontractor
contracts related thereto entered into in the Ordinary Course
of Business;
(iii) no party (including, without limitation, the
Consolidated Companies) has accelerated, terminated, modified
or canceled any
24
contract, agreement, lease, sublease or license (or series of
related contracts, agreements, leases, subleases and licenses)
involving more than $25,000 to which any of the Consolidated
Companies is a party or by which they are bound, and no party
(including, without limitation, the Consolidated Companies)
has threatened, or notified the Shareholders or any of the
Consolidated Companies, of its intent to do any of the
foregoing;
(iv) the Consolidated Companies have not imposed any written
mortgage or pledge of, or permitted or allowed the subjection
of any lien, charge, security interest or Encumbrance of any
kind on any of its Assets, tangible or intangible;
(v) the Consolidated Companies have not made or committed to
make any capital expenditure (or series of related capital
expenditures) involving more than $25,000;
(vi) the Consolidated Companies have not created, incurred,
assumed or guaranteed any indebtedness (including capitalized
lease obligations) involving more than $25,000 in the
aggregate;
(vii) the Consolidated Companies have not canceled, amended,
delayed or postponed (beyond its normal practice) the payment
of accounts payable and other Liabilities;
(viii) the Consolidated Companies have not canceled,
compromised, waived or released any right or claim (or series
of related rights and claims) involving more than $25,000 in
the aggregate;
(ix) the Consolidated Companies have not become a defendant in
any legal action or proceeding, exclusive of ▇▇▇▇▇▇▇'▇
compensation claims, where the amount involved or the
potential loss is claimed to be more than $25,000;
(x) there has been no change made or authorized in the
charter, by-laws or other organizational documents of any of
the Consolidated Companies and there has been no change in any
method of accounting or accounting practice of any of the
Consolidated Companies;
(xi) the Consolidated Companies have not issued, sold or
otherwise disposed of, or authorized for issuance or sale,
their capital stock or other equity securities, or granted or
authorized for issuance or sale any options, warrants or other
rights to purchase or obtain (including upon conversion or
exercise) any of its capital stock;
25
(xii) the Consolidated Companies have not declared, set aside
or paid any dividend or distribution with respect to its
capital stock or redeemed, purchased or otherwise acquired any
of their capital stock;
(xiii) the Consolidated Companies have not experienced any
damage, destruction or loss (whether or not covered by
insurance) which has had or could have a Material Adverse
Effect;
(xiv) the Consolidated Companies have not made any new loan
to, or entered into any other transaction with, any of their
directors, officers and employees giving rise to any claim or
right on their part against the Person or on the part of the
Person against them, other than in the Ordinary Course of
Business;
(xv) the Consolidated Companies have not granted any increase
in the compensation, fringe benefits, or other compensation
of, or paid any bonus or special payment of any kind
(including increases under any bonus, pension, profit-sharing
or other plan or commitment) to any of (A) their employees,
other than in the Ordinary Course of Business or (B) their
shareholders, officers or directors or their Related Parties;
(xvi) the Consolidated Companies have not adopted any (A)
bonus, (B) profit-sharing, (C) incentive compensation, (D)
pension, (E) retirement, (F) medical, hospitalization, life or
other insurance, (G) severance, (H) other plan, contract or
commitment for any of its directors, officers or employees, or
modified or terminated any existing such plan, contract or
commitment;
(xvii) the Consolidated Companies have not made any charitable
or other capital contribution outside of the Ordinary Course
of Business;
(xviii) there has not been any other occurrence, commitment,
event, incident, action, failure to act or transaction outside
the Ordinary Course of Business involving any of the
Consolidated Companies which has or will have a Material
Adverse Effect; and
(xix) the Consolidated Companies have not received notice of
any material adverse change in their relationships with any
financial institution, customer or supplier with which they
currently do Business, nor are the Consolidated Companies or
the Shareholders aware of any circumstance that could
reasonably lead to such a change; and
(xx) the Consolidated Companies have not committed to any of
the foregoing.
(m) LITIGATION. Except as otherwise set forth in SCHEDULE 4.1(m)
attached hereto, there has been no suit, action, proceeding, investigation or
claim ("Litigation") pending
26
against any of the Consolidated Companies or any of the Shareholders during the
past three (3) years in connection with the Business or the Assets nor, to the
knowledge of the Shareholders, threatened against any of the Consolidated
Companies or any of the Shareholders. There is no Litigation pending or
threatened against any of the Consolidated Companies or any of the Shareholders
that materially and adversely affects any of the Consolidated Companies, the
Assets or the Business or the transactions contemplated by this Agreement and
none of the items described in SCHEDULE 4.1(m), singly or in the aggregate, if
pursued and/or resulting in a judgment against any of the Consolidated Companies
or any of the Shareholders would have a Material Adverse Effect on the Assets or
the Business. There are no outstanding judgments, decrees, orders or injunctions
issued against any of the Consolidated Companies or any of the Shareholders that
in any way materially and adversely affects the Business.
(n) LICENSES AND PERMITS: COMPLIANCE WITH LAW. Each of the
Consolidated Companies possesses all licenses, certificates, permits and
franchises required to be obtained from federal, foreign, state, county,
municipal or other public authorities in the operation of the Business, and each
of the Consolidated Companies is presently conducting the Business so as to
comply with all Applicable Law and in all material respects with all licenses,
certificates, permits and franchises. The Consolidated Companies are not
currently in receipt of written notice from any Governmental Entity alleging the
violation of any Applicable Law and to the knowledge of the Consolidated
Companies and the Shareholders no investigation, inspection, audit, or other
proceeding by any Governmental Entity involving an allegation of violation of
any Applicable Law is threatened or contemplated. Attached hereto as SCHEDULE
4.1(n) are true and correct copies of all reports of inspections of the Business
and Assets occurred during the past three (3) years through the date hereof
under all Applicable Law that are in the possession of the Consolidated
Companies, the Shareholders or their agents or employees.
(o) REAL PROPERTY LEASES.
(i) LEASES. SCHEDULE 4.1(o) attached hereto, lists all leases
(each a "Lease," and collectively the "Leases") entered into
by any of the Consolidated Companies pursuant to which any
real property is occupied or used by the Consolidated
Companies with respect to the Business (the "Leased
Property"). The Shareholders have delivered to Purchaser
correct and complete copies of the Leases (including all
amendments thereto) listed in SCHEDULE 4.1(o). Except as set
forth in SCHEDULE 4.1(o) hereto, with respect to each Lease
listed in SCHEDULE 4.1(o): (i) the Leases are legal, valid,
binding, enforceable and in full force and effect; (ii) the
Leases will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the
Closing, and (iii) there are no disputes, claims,
controversies, oral agreements or forbearance programs in
effect as to the Leases; there are no other agreements that
concern the right, title or interest in and to the Leases or
grant to any other Person the right to occupy the Premises
used in the Business. All rent and other sums and charges
payable under the Leases are current, no notice of default or
termination under the Leases are outstanding, no termination
event or condition or uncured default on the part of any of
the Consolidated Companies or on the part of the landlord
thereunder exists
27
under the Leases, and no event has occurred and no condition
exists which, with the giving of notice or the lapse of time
or both, would constitute such a default or termination event
or condition. There are no subleases, licenses or other
agreements granting to any person other than the Consolidated
Companies any right to the possession, use, occupancy or
enjoyment of the premises demised by the Leases. All of the
premises demised under the Leases are used in the conduct of
the Business. To the Shareholders Knowledge, no landlord under
the Leases have any plans to make any material alterations to
any of the Leased Property, the construction of which would
interfere with the use of any portion of the Leased Property.
No landlord under the Leases have any plans to make any
material alterations to any of the buildings in which Leased
Property is located, the costs of which alterations would be
borne in any part by a tenant under such Leases.
(ii) LEASEHOLD IMPROVEMENTS. All improvements located on the
Leased Property are in a state of good maintenance and repair
and in a condition adequate and suitable for the effective
conduct therein of the Business conducted and proposed to be
conducted by the Consolidated Companies. The heating,
ventilation, air conditioning, plumbing and electrical systems
at the Leased Properties are in and will be at Closing in good
working order and repair to the extent that it is Tenant's
obligation. To the knowledge of Shareholders, the heating,
ventilation, air conditioning, plumbing and electrical systems
at the Leased Properties are in and will be at Closing in good
working order and repair to the extent that it is the
landlord's obligation, or the Shareholders will have advised
the landlord in writing, with a copy delivered to Purchaser,
of any defect and requested correction of same. The
Consolidated Companies have not experienced any material
interruption in such services provided to the Leased Property
within the last year.
(p) REAL PROPERTY OWNERSHIP. None of the Consolidated Companies owns
any real property.
(q) INTELLECTUAL PROPERTY.
(i) SCHEDULE 4.1(q) sets forth a complete and accurate list of
all United States, international and state (i) patents and
patent applications, (ii) Trademark registrations and
applications and all material unregistered Trademarks, (iii)
Internet domain names, and (iv) copyright registrations and
applications and Software (excluding commercially available
off the shelf Software), owned by any of the Companies or any
other person listed on SCHEDULE 4.1(q) or used in the regular
course of business of the Consolidated Companies as currently
conducted, indicating for each, the applicable jurisdiction,
registration number (or application number), date issued (or
date filed) and descriptions of such property.
28
(ii) Except as set forth on SCHEDULE 4.1(q), the Consolidated
Companies, directly or indirectly, own or presently have the
valid right to use pursuant to license agreements (the
"License Agreements"), or otherwise, all Intellectual Property
currently used in connection with the business of the
Consolidated Companies as currently conducted (such
Intellectual Property, together with the License Agreements
the "Consolidated Companies Intellectual Property").
(iii) Except as set forth on SCHEDULE 4.1(q), the Intellectual
Property set forth on SCHEDULE 4.1(q) is solely and
exclusively owned by the Consolidated Companies free and clear
of all Encumbrances, and as for all registered Intellectual
Property, one of the Consolidated Companies is listed in the
records of the appropriate United States, state or foreign
agency as the sole owner of record for each registration and
application for any Patent, Trademark, Internet domain name
and Copyright. Except as set forth on SCHEDULE 4.1(q), all of
the Intellectual Property registrations and applications and
common law trademarks set forth on SCHEDULE 4.1(q), and the
trademark rights underlying any trademark registrations,
applications and common law marks set forth on SCHEDULE
4.1(q), are valid and subsisting, in full force and effect,
and have not been cancelled, expired, or, to the Knowledge of
the Shareholders and the Consolidated Companies, abandoned.
Neither the Shareholders nor any of the Consolidated Companies
has received any written, or, to the knowledge of the
Shareholders or any of the Consolidated Companies, oral
notification of any pending or threatened opposition,
interference or cancellation proceeding before any court or
registration authority in any jurisdiction against the items
set forth on SCHEDULE 4.1(q) or any other Consolidated
Companies Intellectual Property, directly or indirectly, owned
by any of the Consolidated Companies or against any
Consolidated Companies Intellectual Property not owned by any
of the Consolidated Companies.
(iv) Except as set forth on SCHEDULE 4.1(q), there are no
settlements, injunctions, forbearances to ▇▇▇, consents,
judgments, or orders or similar obligations to which any of
the Consolidated Companies is a party or, to the Knowledge of
the Shareholders, is otherwise bound, which (i) restrict any
of the Consolidated Companies' rights to use any Consolidated
Companies Intellectual Property, (ii) restrict any of the
Consolidated Companies' business in order to accommodate a
third party's Intellectual Property rights or (iii) permit
third parties to use any Intellectual Property which would
otherwise infringe any Consolidated Companies Intellectual
Property. None of the Consolidated Companies' has licensed or
sublicensed its rights in any Consolidated Companies
Intellectual Property other than pursuant to the License
Agreements set forth on SCHEDULE 4.1(q) and no royalties,
honoraria or other fees are payable by any of the Consolidated
Companies for the use of or right to use any Consolidated
Companies Intellectual Property in connection with the
Consolidated
29
Companies' business as currently conducted, except pursuant to
the License Agreements set forth on SCHEDULE 4.1(q).
(v) Except as set forth on SCHEDULE 4.1(q), the License
Agreements, permits and other agreements under which any of
the Consolidated Companies has rights to the Consolidated
Companies Intellectual Property are valid and binding
obligations of such Consolidated Companies and all other
parties thereto, enforceable in accordance with their terms,
and the Shareholders do not have Knowledge of any event or
condition not listed on Schedule 4.1(q) which will result in a
violation or breach of, or constitute (with or without due
notice or lapse of time or both), a default by any of the
Consolidated Companies, under any such License Agreement or
other agreement.
(vi) The Shareholders or the Consolidated Companies have
received no written or oral notification that the conduct of
the business of the Consolidated Companies as currently
conducted infringes any Intellectual Property rights owned or
controlled by any third party (either directly or indirectly
such as through contributory infringement or inducement to
infringe) or is defamatory or violative in any way of any
publicity, privacy, or other rights. Neither the Shareholders
nor the Consolidated Companies has received any written or
oral notification of any pending or threatened claims or suits
(i) alleging that any of the Consolidated Companies'
activities or the conduct of their businesses infringes upon
or constitutes the unauthorized use of the Intellectual
Property rights of any third party, nor alleging libel,
slander, defamation, or other violation of a personal right,
or (ii) challenging the ownership, use, validity or
enforceability of any Consolidated Companies Intellectual
Property.
(vii) Except as set forth on Schedule 4.1(q), to the Knowledge
of the Shareholders and the Consolidated Companies, no third
party is misappropriating, infringing, or otherwise violating
any Consolidated Companies Intellectual Property, and no such
claims are pending against a third party by any of the
Consolidated Companies.
(viii) The consummation of the transactions contemplated
hereby will not result in the loss or impairment of the
Consolidated Companies' right to own or use any of the
Consolidated Companies Intellectual Property nor require the
consent of any Governmental Authority or third party in
respect of any such Consolidated Companies Intellectual
Property.
(ix) Except as set forth on SCHEDULE 4.1(q), none of the
Consolidated Companies is currently licensing to a third
party, and has not assigned its rights to any Consolidated
Companies Intellectual Property anywhere in the world.
30
(r) CONTRACTS.
(i) SCHEDULE 4.1(r)(i) sets forth a list of the following
contracts, agreements, binding bids, binding proposals, or
binding quotations to which, as of the date hereof, any of the
Consolidated Companies is a party or signatory or pursuant to
which any of the Consolidated Companies has third party rights
(except with respect to the Leases, which are set forth on
SCHEDULE 4.1(o), which is hereby incorporated by reference
into SCHEDULE 4.1(r)(i) and made a part thereof): (i) contract
or series of contracts resulting in a commitment or potential
commitment for expenditure or other obligation or potential
obligation, or which provides for the receipt or potential
receipt, involving in excess of Fifty Thousand Dollars
($50,000) in any instance, or series of related contracts that
in the aggregate give rise to rights or obligations exceeding
such amount; (ii) indenture, mortgage, promissory note, loan
agreement, guarantee or other agreement or commitment for the
borrowing or lending of money or Encumbrance of Assets
involving more than Twenty-Five Thousand Dollars ($25,000) in
each instance; (iii) agreement which restricts any of the
Consolidated Companies from engaging in any line of business
or from competing with any other Person; (iv) any partnership,
shareholder, joint venture, or similar agreement or
arrangement to which any of the Consolidated Companies is a
party (collectively, and together with the Leases and all
other agreements required to be disclosed on any schedule to
this Agreement, the "Material Agreements"). The Shareholders
have previously made available to Purchaser true, complete and
correct copies of all written Material Agreements. Except as
described in SCHEDULE 4.1(r)(i) or as set forth in SCHEDULE
4.1(o) related to real property leases, the Consolidated
Companies are not a party to any Material Agreement, which is
not terminable by the Consolidated Companies with no more than
one (1) month prior notice. None of the Material Agreements
was entered into outside the Ordinary Course of Business.
(ii) Except as set forth on SCHEDULE 4.1(r)(ii), each of the
Material Agreements is in full force and effect and are the
valid and legally binding obligations of the Corporation or
the Subsidiary which is party to such Material Agreement and,
to the knowledge of the Consolidated Companies and the
Shareholders, the other parties thereto, enforceable in
accordance with their respective terms, subject only to
bankruptcy, insolvency or similar laws affecting the rights of
creditors generally and to general equitable principles.
(iii) Neither the Shareholders nor the Consolidated Companies
have received written or oral notice of default by any of the
Consolidated Companies under any of the Material Agreements,
including any contract or agreement relating to borrowed money
to which any of the Consolidated Companies is a party or by or
to which it or its Assets are
31
bound or subject, and no event has occurred which, with the
passage of time or the giving of notice or both, would
constitute a material default by any of the Consolidated
Companies thereunder. Neither the Corporation nor any
Subsidiary which is party to any Material Agreement nor, to
the knowledge of the Shareholders and the Consolidated
Companies, any of the other parties to any of the Material
Agreements is in material default thereunder, nor, to the
knowledge of the Shareholders and the Consolidated Companies,
has an event occurred which, with the passage of time or the
giving of notice or both would constitute a material default
by such other party thereunder. Neither the Shareholders nor
any of the Consolidated Companies have received written notice
or, to the knowledge of the Shareholders and any of the
Consolidated Companies, oral notice of the pending or
threatened cancellation, revocation or termination of any of
the Material Agreements, including, without limitation, any
agreements relating to borrowed money to which any of the
Consolidated Companies is a party or by or to which it or its
assets are bound or subject, nor are any of them aware of any
facts or circumstances which are reasonably likely to lead to
any such cancellation, revocation or termination.
(s) LABOR MATTERS.
(i) Except as set forth on SCHEDULE 4.1(s) attached hereto,
within the last three (3) years, the Consolidated Companies
have not been the subject of any union activity or labor
dispute, nor has there been any strike of any kind or similar
labor activity called, or threatened to be called, against any
of the Consolidated Companies; and, except as set forth on
SCHEDULE 4.1(s), the Consolidated Companies have not violated
in any material respects any applicable federal or state law
or regulation relating to labor or labor practices with regard
to the Business, including, without limitation, all laws
relating to labor relations, equal employment opportunities,
fair employment practices, prohibited discrimination and
similar employment activities, and the Consolidated Companies
are not a party to any collective bargaining agreement
affecting the Business.
(ii) There are no unfair labor practices, representation or
other proceedings claimed, pending or threatened before any
Governmental Entity and neither the Shareholders nor any of
the Consolidated Companies knows of any facts or circumstances
which might give rise to such unfair labor practice,
representation or other proceeding.
(t) PENSION AND BENEFIT PLANS.
(i) SCHEDULE 4.1(t) attached hereto lists all Employee Benefit
Plans that the Consolidated Companies maintain, or at any time
since February l, 1995 has maintained, or to which any of the
Consolidated Companies
32
contributes, or at any time since February l, 1995 has had any
obligation to contribute for the benefit of any current or
former employee of any of the Consolidated Companies. The
representations and warranties set forth in the following
subsections A, B, C, D, E and F are with reference to such
Employee Benefit Plans:
(A) Each Employee Benefit Plan (and each related trust
or insurance contract) complies, in form and in
operation in all material respects, and has been
maintained in material compliance with the applicable
requirements of ERISA and the Code and all other
applicable law including, but not by way of limitation,
the requirements of Part 6 of Subtitle B of Title I of
ERISA and of Section 4980B of the Code (together with
any regulations and proposed regulations promulgated
thereunder) and there has been no notice issued by any
governmental authority questioning or challenging such
compliance. All Employee Benefit Plans are in compliance
with Code Section 412, to the extent that it is
applicable. None of the Consolidated Companies have or
have been party to a defined benefit employee pension
plan under or subject to ERISA.
(B) All required reports, disclosures and descriptions
(including Form 5500 Annual Reports, Summary Annual
Reports and Summary Plan Descriptions) have been filed
or distributed appropriately with respect to each
Employee Benefit Plan through plan years ending January
31, 2002. All required reports, disclosures and
descriptions (including Form 5500 Annual Reports,
Summary Annual Reports and Summary Plan Descriptions)
through Plan year ended January 31, 2003 have been or
will be prepared and have been or will be filed or
distributed appropriately with respect to each Employee
Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction
contributions) which are due, with the exception of the
top heavy minimum contribution of $8,426.42 for Advanced
Analytics, Inc., which has been accrued on the Financial
Statements and/or the Additional Financial Statements,
have been paid to each Employee Pension Benefit Plan and
all contributions for any period ending on or before the
Closing Date which are not yet due through Plan year
ended January 31, 2003 have been paid to each Employee
Pension Benefit Plan or properly accrued prior to the
Closing Date in accordance with the terms of the plan
and past custom and practice of the Consolidated
Companies. All premiums or other payments for all
periods ending on or before the Closing Date have been
paid or properly accrued with respect to each Employee
Welfare Benefit Plan. All tax filings required to be
33
made prior to the date of Closing with respect to each
Employee Benefit Plan have been made, including but not
limited to IRS Forms 990-T and 5330, and any taxes due
in connection with such filings have been paid.
(D) Each Employee Pension Benefit Plan meets the
requirements of a "qualified plan" under Section 401(a)
of the Code and a request has been made for a favorable
determination letter from the Internal Revenue Service
for GUST. No event has occurred and no condition exists
which could result in the revocation of such letter.
(E) Except as set forth on SCHEDULE 4.1(t), there have
been no Prohibited Transactions with respect to any
Employee Benefit Plan. None of the Shareholders nor any
other Fiduciary has any liability for breach of
fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the
assets of any Employee Benefit Plan. No charge,
complaint, action, suit, proceeding, hearing,
investigation, claim or demand against or involving any
Employee Benefit Plan or with respect to the
administration or the investment of the assets of any
Employee Benefit Plan (other than routine claims for
benefits) is pending or threatened. None of the
Shareholders has any Knowledge of any basis for any such
charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand.
(F) With respect to each Employee Benefit Plan, the
Shareholders have furnished to Purchaser correct and
complete copies of (1) the plan documents and summary
plan descriptions, (2) the most recent determination
letter received from the Internal Revenue Service, (3)
the most recent Form 5500 Annual Report, together with
all schedules, as required, filed with the Internal
Revenue Service or the Department of Labor, as
applicable, and (4) all related trust agreements,
insurance contracts and other funding agreements which
implement each Employee Benefit Plan.
(ii) The Consolidated Companies do not maintain, contribute to
or have any liability with respect to, and have never
maintained, contributed nor been required to contribute to any
Multiemployer Plan. The Consolidated Companies have not
incurred, and none of the Shareholders have Knowledge that the
Consolidated Companies will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV
of ERISA (including any withdrawal Liability) or under the
Code with respect to any Employee Pension Benefit Plan that
the Consolidated Companies maintain or at any time maintained
or to which the Consolidated Companies contribute or at any
time contributed or at any
34
time been required to contribute unless in each instance such
Liability has been reflected or accrued on the Financial
Statements or Additional Financial Statements.
(iii) The Consolidated Companies do not maintain, have not
maintained, do not contribute, have not contributed and have
not been required to contribute to any Employee Welfare
Benefit Plan providing health, accident or life insurance
benefits to former employees, their spouses or their
dependents other than in accordance with Section 4980B of the
Code.
(u) INSURANCE. SCHEDULE 4.1(u) attached hereto sets forth the
following information with respect to each insurance policy (including but not
limited to policies providing property, casualty, liability and workers'
compensation coverage and bond and surety arrangements) to which the
Consolidated Companies have been a party, a named insured or otherwise the
beneficiary of coverage at any time within the past five years (the "Insurance
Policies"):
(i) the name, address and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder and
the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence or other basis) and
amount (including a description of how deductibles and
ceilings are calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss sharing arrangements.
The Consolidated Companies have previously provided the Purchaser with
true and complete copies of all of the Insurance Policies, as amended to the
date hereof. The Insurance Policies that are currently in effect are designated
as such on SCHEDULE 4.1(u) (the "Current Policies"). The Insurance Policies
provide adequate and customary coverage for the business in which the
Consolidated Companies are engaged and are sufficient for compliance by the
Consolidated Companies with all requirements of Applicable Law and all material
agreements to which any of the Consolidated Companies is a party or by which any
of the Assets are bound. All of the Current Policies are in full force and
effect and are valid and enforceable in accordance with their terms, and each of
the Consolidated Companies has complied with all terms and conditions of such
policies, including premium payments, except where such non-compliance would not
provide grounds for termination or a reduction in or declination of coverage by
the insurance company. None of the insurance carriers has indicated to the any
of the Consolidated Companies or the Shareholders an intention to cancel, or
alter the coverage under, any of the Current Policies. Other than as set forth
on SCHEDULE 4.1(u), none of the
35
Consolidated Companies has any claim pending against any of the insurance
carriers under any of the Insurance Policies and there has been no actual or
alleged occurrence of any kind which may give rise to any such claim and has not
made any claims under any policy at any time since January 1, 1998. All
applications for the Insurance Policies are accurate in all respects.
(v) EMPLOYEES.
(i) Except as disclosed in SCHEDULE 4.1(v)(i) attached hereto,
none of the Consolidated Companies have entered into any
written employment agreement with any director, officer or
employee of any of the Consolidated Companies, and none of the
Consolidated Companies have entered into any agreements
granting severance benefits or benefits payable upon a change
of control of any of the Consolidated Companies or of the
Business. To the actual knowledge of the Shareholders, no key
employee or group of employees has any plans to terminate
employment with any of the Consolidated Companies.
(ii) SCHEDULE 4.1(v)(ii) contains the names, descriptive
title, and annual salary rates and other compensation of all
officers, directors, consultants and employees of each of the
Consolidated Companies who do work for any of the Consolidated
Companies.
(iii) SCHEDULE 4.1(v)(iii) sets forth a list of all employee
policies, employee manuals or other written statements of
rules or policies as to working conditions, vacation and sick
leave applicable to such persons.
(w) CUSTOMERS AND SUPPLIERS.
(i) Except as disclosed in SCHEDULE 4.1(w) attached hereto,
there are no pending disputes or controversies between any of
the Consolidated Companies and any major customer or supplier
of any of the Consolidated Companies where the amount in
controversy exceeds, or could reasonably be expected to exceed
$5,000 in Losses to the Consolidated Companies, nor, to the
Shareholder's knowledge, are there any facts which would
impair the relationship of any of the Consolidated Companies
with its major customers or suppliers. There has not been any
material adverse change in the relations of any of the
Consolidated Companies with their respective customers,
suppliers, contractors, licensors and lessors, as a result of
the announcement or consummation of the transactions
contemplated by this Agreement and the Shareholders and the
Consolidated Companies have no knowledge that any of the
Consolidated Companies' major customers or suppliers has or is
contemplating terminating its relationship with any of the
Consolidated Companies. To the Shareholders' knowledge, no
major customer or supplier has experienced any type of work
stoppage or other material adverse circumstances or conditions
that may jeopardize or adversely affect any of
36
the Consolidated Companies' relationship with any major
customer or supplier.
(ii) The Consolidated Companies nor any Person acting with
authority on behalf of any of the Consolidated Companies, nor
any Affiliates of the Consolidated Companies nor the
Shareholders, acting alone or together, has with respect to
the Business directly or indirectly in violation of Applicable
Law, given or agreed to give any gift or similar benefit
during the past two (2) years to any customer, supplier,
trading company, shipping company, governmental employee or
other Person who is or may be in a position to help or hinder
the Business (or assist any of the Consolidated Companies in
connection with any actual or proposed transaction) which (A)
may subject any of the Consolidated Companies to any material
damage or any material penalty in any civil, criminal or
governmental litigation, proceeding or investigation, (B) if
not given, may have had a Material Adverse Effect, or (C) if
not continued in the future, may have a Material Adverse
Effect.
(x) GOVERNMENTAL APPROVALS. Except to the extent set forth in
SCHEDULE 4.1(x) attached hereto, no filing or registration with, and no consent,
approval, authorization, license, permit, certificate or order of any
Governmental Entity is required by Applicable Law to permit the Shareholders to
execute, deliver or perform this Agreement or any instrument or agreement
required hereby to be executed by them at the Closing.
(y) POWERS OF ATTORNEY. Except as set forth in SCHEDULE 4.1(y)
attached hereto, there are no outstanding powers of attorney executed on behalf
of the Consolidated Companies.
(z) GUARANTIES. Except as set forth in SCHEDULE 4.1(z) attached
hereto, none of the Consolidated Companies are party to a Guaranty or are
otherwise liable for any Liability or obligation (including indebtedness) of any
other Person except for a Guaranty made by one or more of the Consolidated
Companies of the Liabilities of one or more of the Consolidated Companies.
(aa) TRANSACTIONS WITH RELATED PARTIES. Except as set forth in
SCHEDULE 4.1(aa), the Consolidated Companies are not a party to any material
transaction with any Person which is a present or former officer or director or
shareholder of or partner of any of the Consolidated Companies, or Affiliate or
family member of such officer, director, shareholder or partner (each such party
being a Related Party and, collectively, the "Related Parties"). Except as set
forth on SCHEDULE 4.1(aa), there are no material commitments to and no material
income reflected in either the Consolidated Financial Statements or the
Additional Financial Statements that has or have been derived from any person or
entity which is a Related Party and, following the Closing, Purchaser shall have
no obligation of any kind or description to any such Related Party other than as
set forth in accordance with this Agreement. Except as disclosed on SCHEDULE
4.1(aa) or reflected in either the Consolidated Financial Statements or the
Additional Financial Statements, no material expense relating to the operation
of the Business has been borne by any Person
37
which is a Related Party. Except as disclosed on SCHEDULE 4.1(aa), none of the
Consolidated Companies have any material income reflected on either the
Consolidated Financial Statements or the Additional Financial Statements that is
dependent upon or conditioned on the Business' affiliation with any Related
Party and the Consolidated Companies and the Shareholders have no reason to
believe that any income source will not be available to the Consolidated
Companies after Closing due to lack of sufficient affiliation. Except as
disclosed on SCHEDULE 4.1(aa), the Consolidated Companies and the Shareholders
have no reason to believe that any material expense reflected in either the
Consolidated Financial Statements or the Additional Financial Statements will be
affected by loss of the Business' affiliation with any Related Party and has no
reason to believe that any expense will increase for the Consolidated Companies
after the Closing due to lack of such affiliation. For purposes of this
subsection 4.1(aa) transactions among the Consolidated Companies shall be
disregarded.
(bb) BROKERS AND INTERMEDIARIES. The Corporation has not employed
any broker, finder, advisor or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to a broker's, finder's
or similar fee or commission in connection therewith or upon the consummation
thereof except for NEBEX. All agreements that have been entered into with NEBEX
are set forth on SCHEDULE 4.1(bb) and full and complete copies of such
agreements are annexed thereto (the "NEBEX Agreement(s)").
(cc) TITLE TO SECURITIES. At the Closing, the Shareholders will
transfer and convey, and Purchaser will acquire, good and marketable title to
the Shares, free and clear of all Encumbrances. At Closing, the Corporation will
have good and marketable title to all of the issued and outstanding shares of
each of the Subsidiaries, free and clear of all Encumbrances. Upon the transfer
of the Shares to Purchaser, the Consolidated Companies will possess ownership of
the entire Business necessary to operate the Consolidated Companies as an
on-going concern, including as such Business is presently being conducted and
there will be no assets not owned by the Consolidated Companies which are
necessary or useful to conduct the Business of the Consolidated Companies as
presently conducted.
(dd) LIST OF ACCOUNTS AND PROXIES. Set forth on SCHEDULE 4.1(dd) is:
(a) the name and address of each bank or other institution in which any of the
Consolidated Companies maintains an account (cash, securities or other) or safe
deposit box; (b) the name and phone number of each Consolidated Companies'
contact person at such bank or institution; (c) the account number of the
relevant account and a description of the type of account; (d) the name of each
person authorized by any of the Consolidated Companies to effect transactions
therewith or to have access to any safe deposit box or vault; and (e) all
proxies, powers of attorney or other like instruments to act on behalf of any of
the Consolidated Companies in matters concerning its business or affairs.
(ee) ENVIRONMENTAL AND SAFETY MATTERS.
(i) Except as set forth on SCHEDULE 4.1(ee), each of the
Consolidated Companies is currently in compliance with all
Environmental and Safety Requirements, and the Shareholders
have not incurred Liabilities or is subject to any corrective,
investigatory or remedial obligations arising under
Environmental and Safety Requirements which relate to any of
the
38
Consolidated Companies or any of their respective properties
or facilities, except for such matters which is not reasonably
likely to result in a Material Adverse Effect.
(ii) The Consolidated Companies have not treated, stored,
disposed of, arranged for or permitted the disposal of,
transported, handled or released any hazardous substance
causing any of them to incur any Liabilities for response
costs, natural resource damages or attorneys fees pursuant to
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), or any other
Environmental and Safety Requirements, which is not reasonably
likely to give rise to a Material Adverse Effect.
(iii) The Consolidated Companies have not either expressly or
by operation of law, assumed or undertaken any liability or
corrective, investigatory or remedial obligation of any other
Person relating to any Environmental and Safety Requirements,
which is not reasonably likely to give rise to a Material
Adverse Effect.
(ff) ACCOUNTS RECEIVABLE, NOTES RECEIVABLE, AND COSTS IN EXCESS OF
BILLING. All accounts, notes receivable and costs in excess of billing of each
of the Consolidated Companies as of the date hereof have arisen in the Ordinary
Course of Business, represent valid obligations to such company for sales made,
services performed or other charges and are, to the knowledge of the
Shareholders and the Consolidated Companies, not subject to claims or set-off,
or other defenses or counter-claims except for reserves for bad debts provided
on either the Consolidated Financial Statements or the Additional Financial
Statements. All items which are required by GAAP to be reflected as accounts and
notes receivable on the Consolidated Financial Statements and on the books and
records of the Consolidated Companies are so reflected and have been recorded in
accordance with GAAP on a consistent basis in a manner consistent with past
practice.
(gg) INVESTMENT IN THE CONSIDERATION SHARES. The Shareholders are
acquiring the Consideration Shares for their own account and will not sell,
transfer, or otherwise dispose of any of the Consideration Shares or any
interest therein, without registration under the Securities Act and applicable
state "blue sky" laws, except in a transaction which in the opinion of counsel
reasonably acceptable to Purchaser is exempt therefrom. The Shareholders are
each an "accredited investor" as that term is defined in rules promulgated under
the Securities Act. The Shareholders each have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risk of an investment in the Purchaser Common Stock and has obtained, in its
judgment, sufficient information from Purchaser to evaluate the merits and risks
of an investment in the Purchaser Common Stock. The Shareholders have been
provided the opportunity to obtain information and documents concerning
Purchaser and the Purchaser Common Stock, and have been given the opportunity to
ask questions of, and receive answers from, the directors and officers of the
Purchaser concerning Purchaser and the Purchaser Common Stock and other matters
pertaining to this investment. The Shareholders acknowledge that the offer of
the Purchaser Common Stock will not be reviewed by any Governmental Entity and
is being sold to the Shareholders in reliance upon exemption from the Securities
Act. The
39
Shareholders are aware of the risks inherent in an investment in the Purchaser
and specifically the risks of an investment in the Purchaser Common Stock. In
addition, the Shareholders are aware and acknowledges that there can be no
assurance of the future viability or profitability of the Purchaser, nor can
there be any assurance relating to the current or future price of the Purchaser
Common Stock, as quoted on the NASDAQ System, or market conditions generally.
(hh) DISCLOSURE. No representation or warranty of the Shareholders
contained in this Agreement, or the schedules hereto, and no closing certificate
furnished by the Shareholders to the Purchaser at the Closing contains or will
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
(ii) FIRPTA. Neither of the Shareholders are a `foreign person'
within the meaning of Section 1445 of the Code.
Section 4.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants to the Shareholders that each of the following
statements is true, accurate and complete as of the date hereof in all respects:
(a) ORGANIZATION AND STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, and has the full corporate power and authority to carry on its
business in the places and as it is now being conducted and to own and lease its
properties and assets.
(b) CORPORATE POWER AND AUTHORITY. Purchaser has the full corporate
power and authority to execute and deliver this Agreement and the other
documents, instruments, and agreements to be entered into pursuant hereto by
Purchaser, to perform hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby without the necessity of any act,
approval or consent of any other Person or entity whomsoever. The execution,
delivery and performance by Purchaser of this Agreement, and each and every
other agreement, document and instrument to be executed, delivered and performed
in connection herewith have been, or by the Closing will be, approved by all
requisite corporate action on the part of Purchaser and constitute or will, when
executed and delivered, constitute the legal, valid and binding obligation of
Purchaser, enforceable against it in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws from time to time in effect
affecting the enforcement of creditors' rights generally, and except as
enforcement of remedies may be limited by general equitable principles.
(c) AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. The execution and
delivery of this Agreement and the other documents, instruments, and agreements
to be entered into pursuant hereto by Purchaser do not, and the consummation of
the transactions contemplated hereby and thereby will not, violate any
provisions of the Certificate of Incorporation, as amended, or Bylaws, as
amended, of Purchaser or, except as set forth on SCHEDULE 4.2(c) attached
hereto, constitute an occurrence of default under any provision of: any
mortgage, deed of trust, conveyance to secure debt, note, loan, lien, lease,
agreement, instrument, or any consent, order, judgment or decree to which it is
a party or by which it is bound or its assets are affected.
40
(d) LITIGATION. There is no suit, action, proceeding or claim
pending or, to Purchaser's Knowledge, threatened against or affecting Purchaser
or any of its affiliates that would impair the ability of Purchaser to
consummate the transactions contemplated by this Agreement or operate the
Business or own the Assets after the Closing.
(e) APPROVALS. Assuming the accuracy of the representations and
warranties set forth in Section 4.1(gg) hereof, no filing or registration with,
and no consent, approval, authorization, license, permit, certificate or order
of any governmental authority is required by any applicable law or by any
applicable judgment, order or decree or any applicable rule or regulation of any
governmental authority, to permit Purchaser to execute, deliver or perform this
Agreement or any instrument or agreement required hereby to be executed by it at
the Closing.
(f) BROKERS AND INTERMEDIARIES. Purchaser has not employed any
broker, finder, advisor or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to a broker's, finder's
or similar fee or commission in connection therewith or upon the consummation
thereof.
(g) SOLVENCY. Purchaser is not now insolvent nor will it be rendered
insolvent at Closing after giving effect to the transactions contemplated
hereby. As used in this section "insolvent" means the inability of Seller to pay
its liabilities as they become due in the usual course of its business.
ARTICLE V
COVENANTS
Section 5.1 AFFIRMATIVE COVENANTS OF THE SHAREHOLDERS. The Shareholders
hereby covenant and agree that prior to the Closing Date, unless otherwise
expressly contemplated by this Agreement or consented to in writing by
Purchaser, the Shareholders shall:
(a) cause the Consolidated Companies to operate the Business
in the usual and ordinary course consistent with their
past practices;
(b) use reasonable efforts to preserve substantially intact
the Consolidated Companies' business organization and
goodwill, maintain the Consolidated Companies' rights
and franchises, retain the services of the Consolidated
Companies' respective officers and key employees and
maintain the Consolidated Companies' relationships with
their customers and suppliers;
(c) cause the Consolidated Companies to maintain and keep
their properties and tangible Assets in as good repair
and condition as at present, ordinary wear and tear
excepted, and maintain supplies in quantities consistent
with their customary business practice;
41
(d) use reasonable best efforts to keep in full force and
effect insurance in amount and scope of coverage to that
currently maintained;
(e) comply promptly with all requirements with respect to
the transactions contemplated by this Agreement, and
cooperate promptly with, and furnish information to,
Purchaser in connection with any such requirements;
(f) use their reasonable efforts to obtain (and to cooperate
with Purchaser in obtaining) any consent, authorization
or approval of, or exemption by, any Person required to
be obtained or made by the Shareholders in connection
with the transactions contemplated by this Agreement;
(g) use their reasonable efforts to bring about the
satisfaction of the conditions precedent to Closing set
forth in Section 3.2 of this Agreement; and
(h) promptly advise Purchaser orally and within ten (10)
business days thereafter, in writing of any change in
the Business or condition that has had or is likely to
have a Material Adverse Effect upon the business,
operations, condition (financial or otherwise) of the
Consolidated Companies.
Section 5.2 AFFIRMATIVE COVENANTS OF THE SHAREHOLDERS RELATING TO DUE
DILIGENCE AND THE AUDIT. From the Effective Date and until the Closing Date, the
Shareholders hereby covenant and agree to cause the Consolidated Companies to
afford Purchaser and its Representatives, including its designated accountants
in connection with the Audit, reasonable access to the properties and facilities
of the Consolidated Companies, and cause the Consolidated Companies to make
available to Purchaser and its Representatives, all books and records relating
to the Consolidated Companies and to the Business and shall cooperate and
provide reasonable support to such auditors to the extent reasonably required
for such auditors to promptly complete the Audit. The rights of access and
investigation provided for in this Section 5.2 shall be conducted during normal
business hours, upon reasonable prior notice and in such manner as not to
interfere unreasonably with the operation of the Business. The Shareholders
authorize Purchaser to disclose to such banks, lenders, potential investors and
investors, as well as Purchaser's attorneys, accountants and other financial
advisors, all financial statements and other information of the Consolidated
Companies reasonably required by such persons to evaluate an investment in
Purchaser. In the event that Purchaser is requested to provide audited financial
statements to Purchaser's banks, lenders or investors, the Corporation shall use
best efforts to provide Purchaser with such audited financial statements, at
Purchaser's expense.
Section 5.3 NEGATIVE COVENANTS OF THE SHAREHOLDERS. The Shareholders
hereby covenant and agree that prior to the Closing, unless otherwise expressly
contemplated by this
42
Agreement or consented to in writing by Purchaser, the Shareholders shall not
permit the Consolidated Companies to do any of the foregoing:
(a) except as set forth on SCHEDULE 5.3(a), (i) increase the
compensation payable to or to become payable to any director, officer or
employee, unless such increase results from the operation of written
compensation agreements or past practices in effect prior to the date
hereof; (ii) grant any severance or termination pay (other than pursuant
to the normal severance policy of the Consolidated Companies as in effect
on the date of this Agreement) to, or enter into or amend any employment
or severance agreement with, any director, officer or employee; (iii)
establish, adopt or enter into any employee benefit plan or arrangement;
or (iv) except as may be required by applicable law, amend in any material
respect, or take any other actions with respect to, any of the Employee
Benefit Plans or any of the plans, programs, agreements, policies or other
arrangements described in Section 4.1(t) of this Agreement.
(b) take any willful action for the primary purpose of causing any
condition to Closing (as set forth in Article III hereof) to be materially
delayed or fail to be satisfied;
(c) sell, transfer, license, lease or otherwise dispose of, or
suffer or cause the encumbrance by any lien upon any of its properties or
assets, tangible or intangible, or any interest therein other than in the
Ordinary Course of Business; and provided ,that any such sale, transfer or
disposition which would otherwise be in the Ordinary Course of Business is
nevertheless not inconsistent with this Agreement or the transactions
contemplated hereby;
(d) make or commit to make any capital expenditures exceeding in the
aggregate Twenty-Five Thousand Dollars ($25,000);
(e) except as listed on SCHEDULE 5.3(e), enter into any agreement
which would be a Material Agreement, or amend or terminate any existing
Material Agreement, which is outside the Ordinary Course of Business. With
respect to the foregoing, the Corporation shall provide Purchaser with a
complete list of any such Material Agreements not entered into in the
Ordinary Course of Business between the Effective Date hereof and the
Closing Date;
(f) except as set forth on SCHEDULE 5.3(f), enter into any
commitment or transaction other than in the Ordinary Course of Business
consistent with past practices;
(g) change any of the Consolidated Companies' accounting principles,
methods, records or practices;
(h) create, incur or assume any liability or indebtedness, except
indebtedness incurred in the Ordinary Course of Business and not exceeding
Twenty-Five Thousand Dollars ($25,000) in the aggregate, excluding all
legal expenses for the services of outside legal counsel and accounting
expenses of Citrin ▇▇▇▇▇▇▇▇▇;
43
(i) become subject to any Guaranty;
(j) (i) amend any of the Consolidated Companies' Articles of
Incorporation or By-laws; (ii) acquire by merging or consolidating with,
or agreeing to merge or consolidate with, or purchase substantially all of
the stock or assets of, or otherwise acquire, any business or any
corporation, partnership, association or other business organization or
division thereof, (iii) enter into any partnership or joint venture, (iv)
declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock or purchase or redeem, directly or
indirectly, any shares of its capital stock, (v) issue or sell any shares
of its capital stock of any class or any options, warrants, conversion or
other rights to purchase any such shares or any securities convertible
into or exchangeable for such shares, (vi) reclassify any of its capital
stock, or (vii) liquidate or dissolve or obligate itself to do so;
(k) except as set forth on SCHEDULE 5.3(k), redeem, purchase or
otherwise acquire, directly or indirectly, any shares of their capital
stock or any option, warrant or other right to purchase or acquire any
such capital stock;
(l) terminate or modify, or commit or cause or suffer to be
committed any act that will result in material breach or violation of any
term of or (with or without notice or passage of time, or both) constitute
a default under or otherwise give any Person a basis for non-performance
under, any indenture, mortgage, deed of trust, loan or credit agreement,
lease, license or other agreement, instrument, arrangement or
understanding, written or oral, other than in the Ordinary Course of
Business;
(m) apply any Assets to the direct or indirect payment, discharge,
satisfaction or reduction of any amount payable directly or indirectly to
or for the benefit of the Shareholders or any Affiliate of the
Shareholders or any Related Party or to the prepayment of any such
amounts, other than expenses payable in the Ordinary Course of Business
and scheduled lease payments under leases set forth on SCHEDULES 4.1(o)
AND 4.1(r)(i);
(n) do any act, or omit to do any act or omission to act which would
cause a violation or breach of any of the representations, warranties or
covenants of the Shareholders or the Corporation set forth in this
Agreement or cause any representation or warranty set forth herein, or in
any certificate or other document delivered in connection herewith, to be
untrue on the Closing Date;
(o) take any action which has or could have a Material Adverse
Effect;
(p) except as set forth on SCHEDULE 5.3(p), alter in any manner any
of the Consolidated Companies' existing working capital facilities, or
prepay any debt other than a mandatory prepayment in the Ordinary Course
of Business;
(q) except as set forth on SCHEDULE 5.3(q), transfer, directly or
indirectly, in any way, any cash, cash equivalents, securities, or other
assets to a Shareholder, or for the
44
benefit of a Shareholder, including, but not limited to, by way of
dividend, loan, repayment of indebtedness, payment of fees, or other
distribution or transfer; or
(r) agree, whether in writing or otherwise, to do any of the
foregoing.
Section 5.4 AFFIRMATIVE COVENANTS OF PURCHASER. Purchaser hereby covenants
and agrees that, unless otherwise expressly contemplated by this Agreement or
consented to in writing by the Shareholders, Purchaser will and hereby agrees
to:
(a) comply promptly with all requirements with respect to the
transactions contemplated by this Agreement, and furnish information to
the Shareholders in connection with any such requirement;
(b) use its reasonable efforts to obtain any consent, authorization
or approval of, or exemption by, any Person required to be obtained or
made by Purchaser in connection with the transactions contemplated by this
Agreement;
(c) not take any willful action for the primary purpose of causing
any condition to Closing (as set forth in Article III hereof) to be
materially delayed or to fail to be satisfied;
(d) use its commercially reasonable efforts to obtain financing to
consummate the transactions contemplated by this Agreement, and to provide
reports or updates from time to time to the Shareholders as to the status
of such financing;
(e) use its reasonable efforts to bring about the satisfaction of
the conditions precedent to Closing set forth in Section 3.3 of this
Agreement;
(f) following the Closing allow the Shareholders to participate in
the preparation of any Tax returns required to be filed by the
Consolidated Companies for the fiscal year ending January 31, 2003 and any
short year from February 1, 2003 through Closing or such earlier date as
may be required; and
(g) following the Closing, maintain the offices of the Corporation
at ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (▇) for at least two (2)
years on the 7th floor of such premises after the Closing Date and (ii) at
least one (1) year on the 4th floor of such premises after the Closing
Date.
Section 5.5 NOTIFICATION. Each party to this Agreement shall promptly
notify the other party in writing of the occurrence, or pending or threatened
occurrence, of any event that would constitute a breach or violation of this
Agreement by any party or that would cause any representation or warranty made
by the notifying party in this Agreement to be false or misleading in any
respect (including without limitation, any event or circumstance which would
have been required to be disclosed on any schedule to this Agreement had such
event or circumstance occurred or existed on or prior to the Effective Date of
this Agreement). Any such notification shall not limit or alter any of the
representations, warranties or covenants of the
45
parties set forth in this Agreement nor any rights or remedies that a party may
have with respect to a breach of any representation, warranty or covenant.
Section 5.6 CONFIDENTIALITY. The parties hereto hereby agree to treat all
of the information required to be disclosed or exchanged in connection with this
Agreement and any other confidential information a party hereto receives from
another party hereto as confidential, to not directly or indirectly use any of
such information except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, to keep such information
confidential and within ten (10) business days after termination of this
Agreement for any reason, to return to such other party all tangible embodiments
(and all copies) of such information which are in its possession. The parties
hereto may disclose on a confidential basis the transactions contemplated hereby
and any information which such party may obtain from another party hereto to
their respective Boards of Directors, senior management personnel, attorneys,
accountants, financial advisors, prospective investors in Purchaser or any
Affiliates or other professionals to the extent necessary to obtain their
services in connection with the transactions contemplated hereby. Purchaser
shall have no obligation to treat as confidential (i) information that was
already in Purchaser's or any of its employees' possession prior to disclosure
by the Consolidated Companies and/or the Shareholders; (ii) information then
generally known or available to the public or that later becomes publicly
available other than through Purchaser; or (iii) information disclosed to
Purchaser by a third party who was not bound by an obligation of confidentiality
to the Consolidated Companies and/or the Shareholders. The obligation to
maintain the confidentiality of information shall also not apply to any
information disclosed or disclosures made in response to a valid subpoena or
similar process or to an order of a court of competent jurisdiction, provided
that the disclosing party shall have used its reasonable best efforts to notify
the other party hereto to whom the confidential information belongs in time to
afford such party an opportunity to contest such process or order.
Section 5.7 FURTHER ASSURANCES. At any time, and from time to time,
whether before or after the Closing Date, each party shall execute such
additional instruments, documents, certifications and other assurances and take
such actions as may be reasonably requested by any other party to confirm or
perfect or otherwise to carry out the intent and purposes of this Agreement.
Section 5.8 COVENANT NOT TO COMPETE. Subject to the Closing of the
transactions contemplated by this Agreement, the Shareholders severally covenant
and agree as follows:
(a) During the five (5) year period that begins on the Closing Date,
the Shareholders shall not, whether for their own account or for the
account of any other party other than the Consolidated Companies or
Purchaser or its Affiliates, directly or indirectly engage or have any
financial interest in, own, manage, operate, finance, control or
participate in the ownership, management, operation, financing or control
of, be employed by, associated with or in any manner connected with, lend
their name to or any similar name to, lend their credit to or render
services or advice to, any organization or activity which in any manner
competes with (A) the Consolidated Companies with respect to Business or
(B) the Purchaser or its Affiliates with respect to Purchaser's Business.
For purposes of this Section 5.8, the term "compete" shall mean with
respect to the Consolidated Companies or the Purchaser and its Affiliates:
(i) with respect to or in
46
connection with conducting any Business or Purchaser's Business, calling
on, soliciting, taking away, or accepting as a client or customer or
attempting to call on, solicit, take away or accept as a client or
customer, any individual, person, partnership, corporation, association or
other entity or enterprise that is or was a client or customer of the
Consolidated Companies or the Purchaser or its Affiliates on or within two
(2) years of the Closing Date; (ii) with respect to any business reason
other than in connection with the Business or Purchaser's Business,
calling on, soliciting, taking away, or accepting as a client or customer
or attempting to call on, solicit, take away or accept as a client or
customer, any individual, person, partnership, corporation, association or
other entity or enterprise that is or was a client or customer of the
Consolidated Companies or the Purchaser or its Affiliates on or within two
(2) years of the Closing Date without the prior written consent of the CEO
of the Purchaser in each instance, which consent will not be unreasonably
delayed or withheld; (iii) soliciting, taking away or attempting to
solicit or take away, employ or otherwise engage as an employee,
independent contractor or otherwise, any person who is or was an employee
of the Consolidated Companies or the Purchaser or its Affiliates on or
within one (1) year of the Closing Date, on behalf of any individual,
person, partnership, corporation, association or other entity or
enterprise conducting Business or Purchaser's Business; (iv) inducing or
attempting to induce any employee of the Consolidated Companies or the
Purchaser and its Affiliates to terminate employment with the Consolidated
Companies or the Purchaser and its Affiliates, as the case may be; (v)
entering into or attempting to enter into any business similar to or
competing in any way with the Business or the Purchaser's Business. For
purposes of this Section 5.8(a), the words "directly or indirectly" as
they modify the word "compete" shall mean (i) acting as an agent,
representative, consultant, officer, director, manager, independent
contractor or employee of any individual, person, partnership,
corporation, association, limited liability corporation, limited liability
partnership or other entity or enterprise which competes with the
Consolidated Companies, the Business or Purchaser's Business, (ii)
participating in any such competing entity or enterprise as an owner,
member, partner, limited partner, joint venturer, creditor or stockholder
(except as a stockholder holding less than a one percent (1 %) interest in
a corporation whose shares are actively traded on a regional or national
securities exchange or have been registered under Section 12(g) of the
Securities and Exchange Act of 1934, as amended); and (iii) communicating
to any such competing entity or enterprise the names or addresses or any
other information concerning any past, present or identified prospective
client or customer.
(b) during the five (5) year period that begins on the Closing Date,
the Shareholders shall not interfere with any of the Consolidated
Companies', the Purchaser's or Purchaser's Affiliates' relationships with
any party, including any party who, during the one year period ending on
the Closing Date, was an employee, contractor, supplier or customer of any
of the Consolidated Companies, the Purchaser, or Purchaser's Affiliates'.
The Shareholders shall not make public statements which may negatively
impact any of the Consolidated Companies, the Purchaser or Purchaser's
Affiliates, or any of its shareholders, directors, officers, employees or
agents with respect to the customers, suppliers, products, personnel or
business of Purchaser, Purchaser's Affiliates, and any of the Consolidated
Companies. For purposes of this Section 5.8(b),
47
"interfere" shall mean intentional or grossly negligent acts or conduct
that is reasonably likely to hamper, hinder or disturb the relationships
between the Consolidated Companies, the Purchaser or Purchaser's
Affiliates and any applicable party.
(c) the Shareholders shall not at any time, directly or indirectly,
use or purport to authorize any Person to use any name, ▇▇▇▇, copyright,
logo, a trade dress or other identifying words or images which are the
same as or similar to those used currently or in the past by Purchaser or
the Consolidated Companies, in connection with any product or service,
whether or not such use would be in a business competitive with that of
Purchaser or the Consolidated Companies.
(d) The parties acknowledge and agree that so long as such
Shareholder is not employed by the Consolidated Companies, employment of a
Shareholder by a current or former customer or client of the Consolidated
Companies (a "Restricted Customer") will not, in and of itself, result in
a breach of this Agreement provided that such Shareholder does not conduct
any work for such customer or client, except as may be allowed pursuant to
Section 5.8(d)(ii) hereof, in any field relating to market research and
analysis or market data collection ("Market Research") and further
provided that all of the following conditions are met:
(i) such Shareholder's employment with a Restricted Customer is not,
at the time of the commencement of such employment, reasonably
likely to negatively impact the Consolidated Companies' relationship
with such Restricted Customer, including its business with such
Restricted Customer;
(ii) such Shareholder's Market Research activities relate only to
the internal requirements of such Restricted Customer, and are not
provided in connection with a Restricted Customer's sale of Market
Research to third parties;
(iii) The Consolidated Companies' aggregate sales to such Restricted
Customer and its Affiliates were less than $250,000 during the last
twelve months of the such Shareholder's employment with the
Corporation, unless the Chief Executive Officer ("CEO") of Purchaser
shall have waived such requirement in writing;
(iv) such Shareholder provides such Restricted Customer with a
written copy of this Section 5.8 in its entirety, and such
Restricted Customer acknowledges to Company receipt thereof in
writing prior to such Shareholder's employment with such Restricted
Customer; and
(v) such Shareholder is otherwise in compliance with each of the
covenants and agreements set forth in this Section 5.8.
(e) The Shareholders hereby acknowledges that a breach of the
provisions of Sections 5.8(a)-(d) cannot reasonably or adequately be
compensated in damages in an action at law; and that a breach of any of
the provisions contained in Sections 5.8(a)-(d) will cause the
Consolidated Companies irreparable injury and damage. By reason thereof,
48
the Shareholders hereby agree that the Consolidated Companies shall be
entitled, in addition to any other remedies it may have under this
Agreement or otherwise, to preliminary, temporary and permanent injunctive
and other equitable relief to prevent or curtail any actual breach of
Sections 5.8(a)-(d) by the Shareholders; provided, however, that no
specification in this Agreement of a specific legal or equitable remedy
shall be construed as a waiver or prohibition against the pursuing of
other legal or equitable remedies in the event of such a breach.
(f) The Shareholders acknowledge that (a) the business of the
Consolidated Companies is national and international in scope and its
products are marketed throughout the United States and in other countries,
territories and possessions; (b) the Consolidated Companies compete with
other businesses that are or could be located in any part of the United
States and in other countries, territories and possessions; and (c) the
provisions of this Section 5.8 are reasonable and necessary to protect the
business of the Consolidated Companies and will not restrict the
Shareholders from earning a livelihood.
(g) In the event that the Purchaser fails to make the payments to a
Shareholder under the terms of this Agreement (other than a failure of
Purchaser to fulfill its obligations to repurchase the Consideration
Shares pursuant to Section 2.6 hereof so long as DW purchases or arranges
for the purchase of the Exercise Shares in accordance with Section 2.6
hereof and such Consideration Shares are so repurchased) or his respective
then-current Employment Agreement, which failure continues for more than
twenty (20) business days after written notice thereof to the CEO of
Purchaser (except that if two such prior notices have been received by the
CEO of Purchaser within the past twelve months, no further notice shall be
required) and either (a) such Shareholder terminates such Employment
Agreement for Good Reason (as defined in such Shareholder's Employment
Agreement) or (b) the Corporation has terminated such Shareholder's
Employment Agreement other than For Cause (as defined in such
Shareholder's Employment Agreement), the restrictions imposed by Section
5.8 hereof with respect to such Shareholder shall no longer be in force or
effect; provided, that in the event that the Purchaser or such Shareholder
have a dispute as to whether such termination was effected (a) other than
"For Cause" or (b) for "Good Reason", as the case may be, if Purchaser
pays to the Escrow Agent when due such amounts as may be due to such
Shareholder on the assumption that such termination was effected (a) other
than "For Cause" or (b) for "Good Reason" under such Shareholder's
Employment Agreement (which amounts shall be held by the Escrow Agent, in
an interest bearing account or ▇▇▇▇ account, subject to the final
determination of an arbitrator or court pursuant to the terms of Section
8.6 of this Agreement), the restrictions imposed by Section 5.8 of this
Agreement shall remain in full force and effect until the final
determination of an arbitrator or order of a court pursuant to the terms
of Section 8.6 of this Agreement. Any party or parties awarded a final
determination or order in their favor by an arbitrator or court pursuant
to Section 8.6 hereof shall be entitled to recover from the party or
parties against whom such final determination or order is given all
reasonable costs and expenses, including reasonable attorneys' fees,
incurred by the prevailing party or parties with respect to such
arbitration
49
or court proceeding, such award of costs and expenses to be determined by
such arbitrator or court.
Section 5.9 ACQUISITION PROPOSALS: NO SOLICITATION. In consideration of
the substantial expenditure of time, effort, and expense undertaken by Purchaser
in connection with the negotiation and execution of this Agreement, the
Shareholders agree that unless this Agreement has been terminated by the mutual
agreement of the parties, neither the Shareholders, nor their respective
Affiliates, representatives, employees or agents (collectively, "Agents") will,
between the Effective Date hereof and the Closing, directly or indirectly, (i)
assist, solicit, encourage, negotiate, receive, or accept any proposal (whether
solicited or unsolicited) (an "Acquisition Proposal"), for, or execute any
agreement relating to, a sale of all or any part of the Shares, the Consolidated
Companies, or their respective assets or a sale of any equity or debt security
of the Consolidated Companies or any merger, consolidation, combination,
recapitalization, sale of any material assets or other transaction involving any
of the Consolidated Companies with any other party (collectively, a
"Transaction"), or (ii) provide any information regarding any of the
Consolidated Companies to any third party for the purpose of soliciting,
encouraging or negotiating an Acquisition Proposal (it being understood that
nothing contained in clauses (i) or (ii) above shall restrict the Shareholders
or any of the Agents from providing information as required by legal process).
In addition, the Shareholders shall promptly notify Purchaser in writing of any
third party's Acquisition Proposal, or communication in connection with any
potential Acquisition Proposal, to the Shareholders or any of the Consolidated
Companies, together with all relevant terms and conditions thereof.
Section 5.10 SUBSIDIARY SHAREHOLDERS. At or prior to Closing, the
Shareholders shall cause each of the Subsidiary Shareholders to transfer to the
Corporation all of the Subsidiary Shareholders' right title and interest in and
to their equity interests in and to the Subsidiaries free and clear of
Encumbrances.
Section 5.11 TAX COVENANTS. (a) ▇▇▇▇▇▇▇▇▇ and La Terra, severally, and not
jointly, each agree to be responsible for, and shall pay or cause to be paid,
and shall indemnify and hold the Consolidated Companies, Purchaser, and their
Affiliates and successors (the "Purchaser Indemnified Parties") harmless from
and against fifty percent (50%) of any and all Taxes on an After-Tax Basis that
may be imposed on or assessed against the Purchaser Indemnified Parties on
account of Taxes imposed upon the Consolidated Companies or their assets (i)
with respect to (A) all taxable periods ended on or prior to the Closing Date
and (B) any taxable period commencing prior to the Closing Date up to and
including the Closing Date, if and to the extent, but only to the extent, that
the liability for such Taxes exceeds the liabilities or accruals taken into
account in SCHEDULE 5.11 annexed hereto for Taxes relating to such periods; (ii)
with respect to any Person other than any of the Consolidated Companies arising
under Reg. Section 1.1502-6 (or any similar provision or state, local, or
foreign law), or as a transferee or successor or by contract or otherwise; (iii)
with respect to any and all Taxes allocated to the Shareholders pursuant to
Section 5.11(c) hereof; (iv) with respect to any Taxes incurred by or imposed
upon any of the Shareholders in connection with the transactions contemplated
hereby; (v) with respect to Tax liabilities of the Shareholders arising after
the Closing Date, or (vi) arising from any misrepresentation or breach of
warranty contained in Section 4.1 hereof. The Shareholders shall also pay or
cause to be paid and shall indemnify and hold harmless the Purchaser Indemnified
Parties from and against all losses, damages and reasonable third party costs
and
50
expenses (including reasonable attorney, accountant and expert witness fees and
disbursements) ("Related Costs") incurred in connection with the Taxes for which
the Shareholders indemnify the Purchaser Indemnified Parties pursuant to this
Section 5.11 (or any asserted deficiency, claim demand or assessment, including
the defense or settlement thereof) or the enforcement of this Section 5.11. Any
payment required to made by the Shareholders pursuant to this Section 5.11 shall
be made within 30 days after written notice from Purchaser.
(b) Purchaser shall be responsible for, and shall pay or cause to be paid,
and shall indemnify and hold the Shareholders harmless from and against, any and
all Taxes that may be imposed on or assessed against the Shareholders on account
of Taxes imposed on any of the Consolidated Companies or their assets (i) with
respect to Taxes for any taxable periods ended on or prior to the Closing Date,
if and to the extent, but only to the extent, that the liability for such Taxes
does not exceed the liabilities or accruals taken into account on SCHEDULE 5.11
for Taxes relating to such periods; (ii) with respect to taxable periods of the
Consolidated Companies and the Company Subsidiaries beginning after the Closing
Date and (iii) any and all Taxes allocated to the Purchaser pursuant to this
Section 5.11 hereof. The Purchaser shall also pay or cause to be paid and shall
indemnify and hold harmless the Shareholders from and against all Related Costs
of the Shareholders incurred in connection with the Taxes for which the
Purchaser indemnifies the Shareholders pursuant to this Section 5.11 (or any
asserted deficiency, claim, demand or assessment, including the defense or
settlement thereof) or the enforcement of this Section 5.11. Any payment
required to be made by the Purchaser pursuant to this Section 5.11 shall be made
within 30 days of written notice from the Shareholders.
(c) The Shareholders and Purchaser shall cause the Consolidated Companies
to close the taxable period of the Consolidated Companies on the Closing Date,
unless such action is prohibited by law. In any case where Applicable Law
prohibits any of the Consolidated Companies from closing its taxable year on the
Closing Date, then Taxes, if any, attributable to the taxable period of such
Person beginning before and ending after the Closing Date shall be allocated (i)
to Shareholders for the period up to and including the Closing Date, and (ii) to
Purchaser for the period subsequent to the Closing Date. For purposes of this
Section 5.11(c), Taxes for the period up to and including the Closing Date
("Shareholders' Taxes") shall be determined on the basis of an interim closing
of the books as of the end of the day on the day before the Closing Date;
provided, however, that in the case of any Tax not based on income or receipts,
such Taxes shall be equal to the amount of such Tax for the taxable year
multiplied by a fraction, the numerator of which shall be the number of days
from the beginning of the taxable year through the Closing Date, and the
denominator of which shall be the number of days in the taxable year.
(d) The Shareholders shall be responsible for filing or causing to be
filed all tax returns required to be filed by or on behalf of the Consolidated
Companies on or before the Closing Date, which tax returns shall be filed within
45 days after the Closing Date or such later date as may be allowed by
Applicable Law. Shareholders shall provide to Purchaser, for review and
approval, a copy of each such tax return at least two (2) weeks prior to the end
of such 45 day period or later date. Purchaser's approval shall not be
unreasonably withheld or delayed, and in no event shall this section operate to
cause any such return to be filed after the due date (including any extension
thereof) for the filing of such return. Purchaser shall be responsible for
51
filing or causing to be filed all tax returns required to be filed by or on
behalf of the Consolidated Companies after the Closing Date. With respect to
returns for periods that begin before but end after the Closing Date ("Straddle
Returns"), Purchaser shall pay or cause to be paid all Taxes to which such
returns relate for all periods covered by such returns; provided, however, that
the Shareholders shall pay to Purchaser the amount determined pursuant to
Section 5.11(c) hereof, but only to the extent the Shareholders have an
obligation to indemnify Purchaser for such amounts pursuant to Section 5.11(a)
hereof, not later than fifteen (15) days before the due date for payment of
Taxes with respect to such tax returns. To the extent any Taxes shown due on
Straddle Returns are indemnifiable by the Shareholders, Straddle Returns shall
be prepared in a manner consistent with prior practice, unless otherwise
required by Applicable Law, as solely determined by the Consolidated Companies'
then current independent accountants in its reasonable discretion, upon notice
to the Shareholders. Purchaser shall provide the Shareholders with a statement
setting forth in reasonable detail the amount, if any, payable pursuant to this
Section 5.11(d).
(e) The Shareholders and Purchaser shall cooperate fully with each other
and make available to each other in a timely fashion such Tax data and other
information and personnel as may be reasonably required for the payment of any
estimated Taxes and the preparation of any tax returns required to be prepared
hereunder. The Shareholders and Purchaser shall make available to the other, as
reasonably requested, all information, records or documents in their possession
relating to Tax liabilities of the Consolidated Companies for all taxable
periods thereof ending on, before or including the Closing Date and shall
preserve all such information, records and documents until the expiration of any
applicable Tax statute of limitations or extensions thereof; provided, however,
that in the event a proceeding has been instituted for which the information,
records or documents are required prior to the expiration of the applicable
statute of limitations such information, records or documents shall be retained
until there is a final determination with respect to such proceeding.
(f) Purchaser and the Shareholders shall promptly notify each other in
writing upon receipt by the Purchaser or the Shareholders, as the case may be,
of any notice of any tax audits of or assessments against any of the
Consolidated Companies or the Company Subsidiaries for taxable periods ending on
or before the Closing Date. The failure of one party promptly to notify the
other party of any such audit or assessment shall not forfeit the right to
indemnity except to the extent that the Shareholders are materially prejudiced
as a result. Purchaser shall have the sole right to represent the Consolidated
Companies' and the Company Subsidiaries' interests in any tax proceeding
relating to such tax audits or assessments and to employ counsel of its choice
at its expense; provided, however, that Shareholders shall have the right to
consult with Purchaser regarding any tax audit or assessment relating to any
taxable period beginning before but ending after the Closing Date and provided
further that any settlement or other disposition of any such tax audit or
assessment relating to any taxable period beginning before but ending after the
Closing Date that would result in an indemnity payment by the Shareholders to
Purchaser shall be made subject to the consent of the Shareholders, which
consent shall not be unreasonably withheld or delayed. Purchaser, on the one
hand, and the Shareholders, on the other, each agree to cooperate fully with the
other and its or their respective counsel in the defense against or compromise
of any claim in any tax proceeding.
52
(g) The Shareholders and Purchaser agree that any payments made pursuant
to this Article V (whether made directly to a party or to another indemnitee)
will be treated by the parties as an adjustment to the Purchase Price.
(h) All obligations under this Section 5.11 shall survive the Closing
hereunder and continue until 10 days following the expiration of the statute of
limitations on assessment of the relevant Tax. Notwithstanding the foregoing,
any claim for indemnification hereunder shall survive such termination date if,
prior to the termination date, the party making the claim shall have advised the
other party in writing of facts that may constitute or give rise to an alleged
claim for indemnification, specifying in reasonable detail the basis under this
Agreement for such claim.
(i) Notwithstanding any provision of this Section 5.11 to the contrary,
▇▇▇▇▇▇▇▇▇ and La Terra shall be entitled to the benefit of $288,000 towards any
of their liabilities under this Section 5.11, if any, to the extent of the
benefits actually received and realized by the Consolidated Companies and/or
Purchaser or its Affiliates from the $320,000 adjustment resulting from the
audit by Deloitte and Touche.
ARTICLE VI
TERMINATION
Section 6.1 TERMINATION BY PURCHASER. This Agreement may be terminated by
Purchaser as follows:
(a) at any time prior to the Closing in the event that as a result of due
diligence examination Purchaser shall have determined that the assets,
liabilities, revenues, projections, operations, and other business matters
are not as set forth herein;
(b) upon a breach of any material representation, warranty, covenant or
agreement on the part of the Shareholders set forth in this Agreement, or
if any material representation or warranty of the Shareholders shall have
become untrue, in either case such that the conditions set forth in
Section 3.2 of this Agreement would be incapable of being satisfied by the
Shareholders on or prior to the Closing; provided, that in any case, a
willful breach shall be deemed to cause such conditions to be incapable of
being satisfied for purposes of this Section 6.1(b), and further provided
that such breach or untrue misrepresentation or warranty, other than a
breach of Section 5.9, is not cured within ten (10) days after notice
thereof;
(c) any legal proceeding is commenced or threatened by any Governmental
Entity or other Person directed against the consummation of the Closing or
any other transaction contemplated hereby, and Purchaser reasonably and in
good ▇▇▇▇▇ ▇▇▇▇▇ it impractical or inadvisable to proceed in view of such
legal proceeding or threat thereof; or
53
(d) at any time after thirty (30) days from the date hereof if the
transactions contemplated by this Agreement have not closed within such
thirty day period.
Section 6.2 TERMINATION BY THE SHAREHOLDERS. This Agreement may be
terminated by the Shareholders as follows:
(a) upon a breach of any material representation, warranty, covenant or
agreement on the part of Purchaser set forth in this Agreement, or if any
material representation or warranty of Purchaser shall have become untrue,
in either case such that the conditions set forth in Section 3.3 of this
Agreement would be incapable of being satisfied by Purchaser on or prior
to the Closing; provided, that in any case, a willful breach shall be
deemed to cause such conditions to be incapable of being satisfied for
purposes of this Section 6.2, and further provided that such breach or
untrue misrepresentation or warranty is not cured within ten (10) days
after notice thereof; or
(b) at any time after thirty (30) days from the date hereof if the
transactions contemplated by this Agreement have not closed within such
thirty day period.
Section 6.3 REMEDIES FOR FAILURE TO CLOSE. (a) Notwithstanding anything to
the contrary in Section 6.3(c), in the event that (i) the Shareholders or the
Corporation or any of their Agents breach Section 5.9 of this Agreement, (ii)
the Closing does not occur, other than as a result of the Shareholders
termination pursuant to Section 6.2(a) above, and (iii) within six (6) months of
termination of this Agreement, the Shareholders or the Corporation enter into an
agreement to consummate a Transaction, notwithstanding any other provision set
forth in this Agreement, the Shareholders shall promptly pay to Purchaser and
Purchaser shall be entitled to receive, within three (3) days after the closing
of the Transaction:
(x) Up to $150,000 of the Purchaser's out of pocket costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including, without
limitation, the fees of all their advisers (including
accountants, attorneys, financial advisors, and tax
consultants and the expenses of such advisers billable to
Purchaser), and travel expenses ("Purchaser Transaction
Expenses"); and
(y) the sum of three percent (3%) of the consideration paid to the
Corporation, the Shareholders, or their respective successors,
pursuant to a Transaction (the "Liquidated Damages Amount").
(b) Payment by Shareholders of the Purchaser Transaction Expenses and the
Liquidation Damages Amount, as required by paragraph (a) above, shall be in lieu
of, and shall fully satisfy and discharge, any claims for damages by Purchaser
in connection with such matters, excluding damages in connection with a claim of
fraud.
(c) Notwithstanding anything to the contrary in Section 8.1 of this
Agreement, in the event that (i) the Purchaser elects to terminate this
Agreement pursuant to Section 6.1 (other than as a result of a breach of Section
5.9 hereof that results in a payment pursuant to Section 6.3(a) hereof) or (ii)
the Shareholders elect to terminate this Agreement pursuant to Section 6.2, then
54
Purchaser, the Shareholders and the Consolidated Companies will bear their
respective expenses incurred in connection with this Agreement and the
transactions contemplated hereby and the terms of this Section 6.3(c) shall be
in lieu of, and shall fully satisfy and discharge, any claims for damages by the
Purchaser, the Shareholders and the Consolidated Companies in connection with
such matters, excluding damages in connection with a claim of fraud.
Section 6.4 NOTICE OF TERMINATION. A party shall provide each of the other
parties with at least ten (10) days' notice prior to termination under Sections
6.1 and 6.2 hereof and the opportunity to cure any such deficiency or, if not
capable of being cured in such ten (10) day period, then to commence cure and
proceed to complete same diligently and in any event within thirty (30) days of
such notice.
ARTICLE VII
INDEMNIFICATION
Section 7.1 SURVIVAL OF THE REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Shareholders and the Purchaser set forth
in this Agreement and the Ancillary Agreements shall survive the Closing Date
and remain in full force and effect only until February 28, 2005; provided,
however, that the representations and warranties set forth in Sections 4.1(c),
4.1(d), 4.1(h), 4.1(i), 4.1(m), 4.1(t), and 4.1(cc) shall survive the Closing
Date and remain in effect until thirty days after the expiration of the
applicable statute of limitations.
Section 7.2 INVESTIGATION. The representations, warranties, covenants and
agreements set forth in this Agreement shall not be affected or diminished in
any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. All statements contained herein or in any
schedule, certificate, exhibit, list or other document delivered pursuant
hereto, shall be deemed to be representations and warranties for purposes of
this Agreement except to the extent otherwise qualified.
Section 7.3 INDEMNIFICATION GENERALLY.
(a) BY THE SHAREHOLDERS. (i) ▇▇▇▇▇▇▇▇▇ and La Terra severally, and not
jointly, each agree to be responsible for and shall pay and indemnify and hold
harmless Purchaser and its directors, officers, employees and agents from,
against and in respect of, fifty percent (50%) of the amount of any and all
liabilities, damages, claims, deficiencies, fines, assessments, losses, Taxes,
penalties, interest (collectively, "Losses"), costs and expenses, including,
without limitation, reasonable fees and disbursements of counsel arising from,
in connection with, or incident to (i) any breach or violation of any of the
representations, warranties, covenants (other than the covenants set forth in
Sections 5.1, 5.2 and 5.3) or agreements of the Shareholders contained in this
Agreement or any agreement, document or other writing referred to herein and
delivered pursuant hereto; (ii) effective upon Closing, any breach or violation
of any of the covenants set forth in Sections 5.1, 5.2 and 5.3 from and after
the Effective Date; (iii) any liability resulting from any litigation involving
any of the Consolidated Companies, regardless of whether or not such litigation
was disclosed by the Shareholders on SCHEDULE 4.1(m) or otherwise in this
Agreement or in any other schedule or exhibit hereto; (iv) any and all Taxes
55
and related penalties, interest or other charges for any unaccrued or unreported
Tax liabilities with respect to any of the Consolidated Companies for all
periods prior to or including the Closing Date; (v) any and all claims arising
at or prior to Closing relating to, resulting from or caused (whether in whole
or in part) by any Liability arising (a) from or under any Employee Benefit Plan
(except to the extent that such Liability has been accrued on the Financial
Statements or Additional Financial Statements) or (b) from the Consolidated
Companies' failure to fully perform under and comply with the requirements of
ERISA with respect to any Employee Benefit Plan of the Consolidated Companies
(vi) any and all claims arising out of, relating to, resulting from or caused
(whether in whole or in part) by any transaction, event, condition, occurrence
or situation in any way relating to any of the Consolidated Companies at any
time or the conduct of their respective businesses arising or occurring on or
prior to the Closing Date without regard to whether such claim exists on the
Closing Date or arises at any time thereafter (except as disclosed in the
Consolidated Financial Statements or any schedule annexed hereto); (vii) any
success fee, indemnity payment or other payment or reimbursement that NEBEX is
entitled to receive pursuant to any agreement (including those annexed to
Schedule 4.1(bb) hereto) or understanding that the Shareholders or any of the
Consolidated Companies have entered into with NEBEX on or prior to the date
hereof; and (viii) any and all actions, suits, proceedings, demands, assessments
or judgments, costs and expenses incidental to any of the foregoing. For
purposes of clarity, no Shareholder shall be responsible for more than fifty
percent (50%) of Losses pursuant to the terms hereof as aforesaid, but payment
by either of them of any amount of Losses shall not release or diminish the
amount required to be paid hereunder by the other Shareholder such that
Purchaser shall at all times be entitled to receive one hundred percent (100%)
of the Losses.
(b) BY PURCHASER. Purchaser agrees to indemnify and hold harmless the
Shareholders from, against and in respect of, the full amount of any and all
Losses, costs and expenses, including, without limitation, reasonable fees and
disbursements of counsel arising from, in connection with, or incident to (i)
any breach or violation of any of the representations, warranties, covenants or
agreements of Purchaser contained in this Agreement or any agreement referred to
herein and delivered at or prior to the Closing; (ii) any and all actions,
suits, proceedings, demands, assessments or judgments, costs and expenses
incidental to any of the foregoing; and (iii) claims arising out of conduct of
the business of the Consolidated Companies occurring after the Closing Date to
the extent not caused by the willful misconduct or gross negligence of the
Shareholders as Employees of the Corporation.
(c) BY THE CORPORATION. Solely during the period commencing on the
Effective Date through and including the Closing Date, the Corporation agrees to
be responsible for and shall pay and indemnify and hold harmless Purchaser and
its directors, officers, employees and agents from, against and in respect of
the amount of any and all liabilities, damages, claims, deficiencies, fines,
assessments, losses, Taxes, penalties, interest (collectively, "Losses"), costs
and expenses, including, without limitation, reasonable fees and disbursements
of counsel arising from, in connection with, or incident to, any breach or
violation by the Shareholders or the Corporation of the covenants set forth in
Sections 5.1, 5.2 and 5.3.
(d) INDEMNITY PROCEDURE. A party or parties hereto agreeing to be
responsible for or to indemnify against any matter pursuant to this Agreement is
referred to herein as the
56
"Indemnifying Party" and the other party or parties claiming indemnity is
referred to as the "Indemnified Party".
(i) An Indemnified Party under this Agreement shall, with respect to
claims asserted against such party by any third party, give written
notice to the Indemnifying Party of any liability which might give
rise to a claim for indemnity under this Agreement, to the extent
reasonably possible, not later than eight (8) days prior to the date
any answer or responsive pleading is due, and with respect to other
matters for which the Indemnified Party may seek indemnification,
give prompt written notice to the Indemnifying Party of any
liability which might give rise to a claim for indemnity; provided,
however, that any failure to give such notice will not waive any
rights of the Indemnified Party, except to the extent the rights of
the Indemnifying Party are materially prejudiced.
(ii) The Indemnifying Party shall have the right, at its election,
to take over the defense or settlement of such claim by giving
written notice to the Indemnified Party at least four (4) days prior
to the time when an answer or other responsive pleading or notice
with respect thereto is required. If the Indemnifying Party makes
such election, it may conduct the defense of such claim through
counsel of its choosing (subject to the Indemnified Party's approval
of such counsel, which approval shall not be unreasonably withheld),
shall be solely responsible for the expenses of such defense and
shall be bound by the results of its defense or settlement of the
claim. The Indemnifying Party shall not settle any such claim
without prior notice to and consultation with the Indemnified Party,
and no such settlement involving any equitable relief or which might
have an adverse effect on the Indemnified Party may be agreed to
without the written consent of the Indemnified Party (which consent
shall not be unreasonably withheld). So long as the Indemnifying
Party is diligently contesting any such claim in good faith, the
Indemnified Party may pay or settle such claim only at its own
expense and the Indemnifying Party will not be responsible for the
fees of separate legal counsel to the Indemnified Party, unless the
named parties to any proceeding include both parties and
representation of both parties by the same counsel would be
inappropriate in the reasonable opinion of the Indemnified Party. If
the Indemnifying Party does not make such election, or having made
such election does not, in the reasonable opinion of the Indemnified
Party proceed diligently to defend such claim, then the Indemnified
Party may (after written notice to the Indemnifying Party), at the
expense of the Indemnifying Party, elect to take over the defense of
and proceed to handle such claim in its discretion and the
Indemnifying Party shall be bound by any defense or settlement that
the Indemnified Party may make in good faith with respect to such
claim. In connection therewith, the Indemnifying Party will fully
cooperate with the Indemnified Party should the Indemnified Party
elect to take over the defense of any such claim.
(iii) The parties agree to cooperate in defending such third party
claims and the Indemnified Party shall provide such cooperation and
such access to its books,
57
records and properties as the Indemnifying Party shall reasonably
request with respect to any matter for which indemnification is
sought hereunder; and the parties hereto agree to cooperate with
each other in order to ensure the proper and adequate defense
thereof.
(iv) With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall be
paid by the Indemnifying Party upon the earlier to occur of: (i) the
entry of a judgment against the Indemnified Party and the expiration
of any applicable appeal period, or if earlier, five (5) days prior
to the date that the judgment creditor has the right to execute the
judgment; (ii) the entry of an unappealable judgment or final
appellate decision against the Indemnified Party; or (iii) a
settlement of the claim. Notwithstanding the foregoing, provided
that there is no good faith dispute as to the applicability of
indemnification, the reasonable expenses of counsel to the
Indemnified Party shall be reimbursed on a current basis by the
Indemnifying Party if such expenses are a liability of the
Indemnifying Party. With regard to other claims for which
indemnification is payable hereunder, such indemnification shall be
paid promptly by the Indemnifying Party upon demand by the
Indemnified Party.
(e) LIMITATIONS ON INDEMNIFICATION. Anything in this Agreement to the
contrary notwithstanding, no indemnification payment shall be made to Purchaser,
or their respective directors, officers, employees and agents pursuant to this
Agreement, until the amounts which Purchaser would otherwise be entitled to
receive as indemnification under this Agreement aggregate at least $25,000, and
to the extent that such aggregate amount exceeds $25,000, then only those
amounts that exceed $25,000 shall be payable. The indemnification provisions set
forth in Section 7.3(a)(i) with respect to Sections 4.1(c), 4.1(d), 4.1(h),
4.1(i), 4.1(m), 4.1(t), 4.1(bb), 4.1(cc), 5.8, 5.10 and 5.11, Section
7.3(a)(iii), Section 7.3(a)(iv), Section 7.3(a)(vii), Section 8.1 or with
respect to a claim of fraud or willful misconduct by the Shareholders shall not
be subject to the limitations set forth in this Section 7.3(e).
Section 7.4 OBLIGATION. Subject to the limitations set forth in Section
7.3, all representations, warranties, covenants, agreements, and liabilities of
the Shareholders under this Agreement shall be the obligation of the
Shareholders and are only for the benefit of Purchaser and its successors.
Subject to the limitations set forth in Section 7.3, in the case of any breach
or other violation of any of the terms and provisions of this Agreement,
Purchaser may seek to enforce any remedy against any or both of the Shareholders
as Purchaser shall determine in its sole discretion. None of the provisions of
this Agreement shall give rise to any right of action by or for the
Shareholders, and the Shareholders shall not have any rights against any of the
Consolidated Companies if a remedy is sought or obtained against the
Shareholders because any one or more of the Consolidated Companies breaches any
representation, warranty, covenant or agreement set forth herein.
58
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 EXPENSES. Except as otherwise expressly provided for in this
Agreement, Purchaser will bear its expenses incurred in connection with the
preparation, execution, and performance of this Agreement, and the Shareholders
will bear its expenses and the expenses of the Corporation and the Consolidated
Companies incurred prior to and after the Closing in connection with the
preparation, execution, and performance of this Agreement; provided, however,
that all legal fees and expenses of the Shareholders and the Consolidated
Companies incurred in connection with the Agreement shall be borne by the
Corporation in an amount up to $55,000 plus all sums up to $120,000 in the
aggregate paid by the Consolidated Companies or the Shareholders on or before
the date hereof.
Section 8.2 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
agreements to be fully performed within such State.
Section 8.3 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing (including telecopier communication) and
be delivered by personally or by overnight courier (with written receipt
requested) or telecopied (with confirmed receipt), to the following addresses
(or such other address as any party shall have designated from time to time by
notice to the other party):
If to the Shareholders or the Corporation to:
▇▇. ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
and
Mr. ▇▇▇▇▇▇ La Terra
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
Wormser, Kiely, Galef & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
59
If to Purchaser or to DW, to:
FIND/SVP, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇, P.C.
1350 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
All such notices and other communications shall be effective upon written
confirmation of delivery or if sent by facsimile, upon confirmed receipt of
transmission.
Section 8.4 PRESS RELEASES, ETC. No public announcement or other publicity
regarding this the Agreement or the transactions contemplated hereby shall be
made prior to Closing without the prior written consent of Purchaser and the
Shareholders as to form, content, timing and manner of distribution.
Notwithstanding the foregoing, nothing in this Agreement shall preclude the
Purchaser from making any public announcement required, in the reasonable
opinion of Purchaser's counsel, in connection with any federal or state
securities laws or stock exchange rules.
Section 8.5 NO WAIVER OF REMEDIES, ETC. No failure on the part of any
party to exercise, and no delay of any party in exercising, any right or remedy
available hereunder or by law shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right or remedy by any party preclude any
other or further exercise thereof or the exercise of any other right by such
party. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
Section 8.6 ARBITRATION. Except in the event of the need for immediate
equitable relief from a court of competent jurisdiction to prevent irreparable
harm pending arbitration relief, and except for enforcement of a party's
remedies to the extent such enforcement must be pursuant to court authorization
or order under applicable law, any dispute between the parties hereto or under
any other document, instrument or writing executed pursuant to this Agreement
shall be settled, by arbitration before three arbitrators pursuant to the
Commercial Arbitration Rules of the American Arbitration Association (the
"Rules") in New York, New York or such other location as may be agreed upon by
the parties. For purposes of this Agreement, the parties consent to jurisdiction
in New York for any arbitration proceeding or any action to enforce an
arbitration award. The arbitrators shall be selected by a joint agreement of the
parties; provided that if they do not so agree within twenty (20) business days
of the date of the request for arbitration, the selection shall be made pursuant
to the Rules. Nothing in this Agreement shall
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prevent the parties hereto from settling any dispute by mutual agreement at any
time. Any party or parties awarded a final determination or order in their favor
by an arbitrator or court pursuant to this Section 8.6 shall be entitled to
recover from the party or parties against whom such final determination or order
is given all reasonable costs and expenses, including reasonable attorneys'
fees, incurred by the prevailing party or parties with respect to such
arbitration or court proceeding, such award of costs and expenses to be
determined by such arbitrator or court.
Section 8.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed an original of this
Agreement and all of which together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement, and delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement to be executed and
delivered hereunder shall be effective as delivery of a manually executed
counterpart thereof, provided, however, that in each instance an original
executed counterpart shall be promptly delivered to the other parties by hand or
overnight courier.
Section 8.8 SECTION AND OTHER HEADINGS. The sections and other headings
contained in this Agreement are for reference purposes only and shall not
define, limit or extend the meaning or interpretation of this Agreement.
Section 8.9 ENTIRE AGREEMENT; INCORPORATION BY REFERENCE. All Schedules
and Exhibits attached hereto and all certificates, documents and other
instruments contemplated to be delivered hereunder are hereby expressly made a
part of this Agreement as fully as though set forth herein, and all references
to this Agreement herein or in any of such writings shall be deemed to refer to
and include all of such writings. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
Section 8.10 BINDING EFFECT. This Agreement shall inure to the benefit of
and be binding upon the parties and their respective heirs, executors, personal
representatives, successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to confer on any Person other than the parties,
or their respective successors or permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
Section 8.11 AMENDMENT OR MODIFICATION. This Agreement may not be amended,
supplemented or otherwise modified by the Parties in any manner, except by an
instrument in writing signed by each of the Shareholders and an authorized
officer of Purchaser.
Section 8.12 WAIVER. Any of the conditions precedent to the Closing set
forth in Section 3.2 and Section 3.3 of this Agreement may be waived in writing
at any time prior to or at the Closing by the party entitled to the benefit
thereof, and any failure of any party to comply with any of its obligations
hereunder may be waived by the other party. The failure of any party to enforce
at any time any of the provisions of this Agreement shall in no way be construed
to be a waiver of any such provision, nor in any way to affect the validity of
this Agreement or any part thereof or the right of any party thereafter to
enforce each and every such provision, and the
61
single or partial exercise of any right hereunder by any party shall not
preclude any other or further exercise of such right or any other right by such
party or the other party.
Section 8.13 SEVERABILITY. If any provision of this Agreement shall be
determined by a court or an arbitrator selected pursuant to Section 8.6 of this
Agreement to be invalid or unenforceable in any jurisdiction, such determination
shall not affect the validity or enforceability of the remaining provisions of
this Agreement in such jurisdiction. If any provision of this Agreement, or the
application thereof to any Person or entity or any circumstance, is found to be
invalid or unenforceable in any jurisdiction, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid or enforceable, the unenforceable provision and (b) the remainder of this
Agreement and the application of such provision to other Persons, entities or
circumstances shall not be affected by such invalidity or unenforceability, nor
shall such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.
Section 8.14 ASSIGNMENT. This Agreement may not be assigned by any party
without the written consent of the other party; provided, that Purchaser may
assign this Agreement to a corporation, partnership, or limited liability
company of which Purchaser maintains majority control.
Section 8.15 GUARANTY OF THE CORPORATION. Solely during the period
commencing on the Effective Date through and including the Closing Date, the
Corporation absolutely, unconditionally and irrevocably guarantees to the
Purchaser the performance of the Shareholders hereunder and the punctual payment
when due, whether as scheduled or on any date of a required prepayment or by
acceleration, demand or otherwise, of all obligations of the Shareholders now or
hereafter existing under or in respect to this Agreement including, without
limitation, any extensions, modifications, substitutions or amendments thereto.
Section 8.16 SHAREHOLDER MANAGEMENT POSITION. For a period of two years
commencing after the Closing Date, the Shareholders shall be entitled to appoint
one of the Shareholders as representative to Purchaser's Operating Management
Group for so long as such Shareholder is an employee of Purchaser. If such
representative shall resign or be terminated prior to the expiration of such two
year period, the other Shareholder may be substituted and serve in his place.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
SHAREHOLDERS: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ La Terra
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▇▇▇▇▇▇ La Terra
PURCHASER: FIND/SVP, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
GUIDELINE RESEARCH
CORPORATION (SOLELY WITH
RESPECT TO SECTIONS 2.3, 2.4, 5.3(e)
7.3(c) and 8.1 HEREOF): GUIDELINE RESEARCH CORP.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman
▇▇▇▇▇ ▇▇▇▇▇ (SOLELY WITH
RESPECT TO SECTIONS
2.6(c), (d), and (h) HEREOF): /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇
