ASSET PURCHASE AGREEMENT
BY AND AMONG
KOPPLE & XXXXXXXX, LLP
EACH OF THE MEMBERS OF KOPPLE & XXXXXXXX, LLP
KG BUSINESS SERVICES, INC.
AND
COLONIAL DIRECT FINANCIAL GROUP, INC.
JANUARY 1, 2000
TABLE OF CONTENTS
PAGE
ARTICLE I - PURCHASE AND SALE; CONSIDERATION
1.1 Purchase and Sale of the Included Assets .............................................................1
1.2 Assumption of Included Liabilities ...................................................................2
1.3 Purchase Price .......................................................................................2
1.4 Allocation of Consideration Paid .....................................................................2
1.5 Xxxx of Sale; Assignment and Assumption Agreement ....................................................2
1.6 Included Assets and Included Liabilities Not Transferred at the Closing ..............................3
1.7 Excluded Assets and Liabilities ......................................................................3
ARTICLE II - CERTAIN RELATED AGREEMENTS
2.1 Administrative Services Agreement ....................................................................3
2.2 Separate Practice Agreement ..........................................................................3
2.3 Restrictive Covenants ................................................................................3
2.4 Related Agreements Defined ...........................................................................4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER
3.1 Organization, Etc ....................................................................................4
3.2 Interests in the Seller ..............................................................................4
3.3 Subsidiaries and Identified Affiliates ...............................................................4
3.4 Authorization; Enforceability ........................................................................5
3.5 No Violation .........................................................................................5
3.6 Governmental Authorities; Licensure ..................................................................6
3.7 Financial Statements .................................................................................6
3.8 No Undisclosed Liabilities ...........................................................................6
3.9 Absence of Certain Changes Subsequent to October 31, 1998 ............................................7
3.10 Contracts ...........................................................................................7
3.11 True and Complete Copies ............................................................................8
3.12 Title and Related Matters ...........................................................................8
3.13 Litigation ..........................................................................................9
3.14 Tax Matters ........................................................................................10
3.15 Compliance with Law ................................................................................11
3.16 ERISA and Related Employee Benefit Matters .........................................................12
3.17 Insurance ..........................................................................................14
3.18 Capital Expenditures ...............................................................................14
3.19 Dealings with Affiliates ...........................................................................14
3.20 Competition ........................................................................................15
3.21 Bank Accounts ......................................................................................15
3.22 Compensation .......................................................................................15
3.23 Clients ............................................................................................15
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3.24 Intellectual Property ..............................................................................15
3.25 Outside Financial Interests ........................................................................16
3.26 Guarantees .........................................................................................16
3.27 Books and Records ..................................................................................16
3.28 Indebtedness to and from Partners, Officers, Directors and others ..................................16
3.29 Seller's Files .....................................................................................17
3.30 Year 2000 Compliance ...............................................................................17
3.31 Consultants, Brokers and Finders ...................................................................17
3.32 Affiliate and Network Relationships ................................................................17
3.33 Peer Review.........................................................................................17
3.34 Disclosure..........................................................................................17
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE BUYER
4.1 Corporate Organization ..............................................................................18
4.2 Authorization; Enforceability .......................................................................18
4.3 No Violation ........................................................................................18
4.4 Governmental Authorities ............................................................................18
4.5 Consultants, Brokers and Finders ....................................................................18
ARTICLE V CERTAIN PRECLOSING COVENANTS OF THE SELLER
5.1 Operation of the Business ...........................................................................18
5.2 Preservation of Business ............................................................................20
5.3 Insurance and Maintenance of Property ...............................................................20
5.4 Full Access .........................................................................................20
5.5 Books, Records and Financial Statements .............................................................20
5.7 Tax Matters .........................................................................................21
5.8 Releases Regarding Liens on Included Assets .........................................................21
5.9 Seller's Release ....................................................................................22
5.10 Excluded Liabilities ...............................................................................22
5.11 Notification .......................................................................................22
5.12 No Negotiation .....................................................................................22
5.13 No Amendments ......................................................................................22
5.14 Employment Agreements ..............................................................................22
ARTICLE VI CERTAIN OTHER COVENANTS OF THE SELLER
6.1 Further Assurances ..................................................................................22
6.2 Confidentiality .....................................................................................22
6.3 Ownership of Assets .................................................................................23
6.4 Licensure of the Seller; Compliance with Laws .......................................................23
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ARTICLE VII COVENANTS OF THE BUYER
7.1 Confidentiality .....................................................................................23
7.2 Further Assurances ..................................................................................23
7.3 Benefit Plans .......................................................................................23
ARTICLE VII OTHER AGREEMENTS
8.1 Agreement to Defend .................................................................................24
8.2 Adverse Regulatory Action ...........................................................................24
8.3 Media Relations .....................................................................................24
8.4 Income Tax Reporting ................................................................................24
ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF THE BUYER
9.1 Representations and Warranties; Performance .........................................................25
9.2 General Consents and Approvals ......................................................................25
9.3 Licensure in the Jurisdictions ......................................................................25
9.4 Lease Consents ......................................................................................25
9.5 Indebtedness ........................................................................................25
9.6 No Adverse Change ...................................................................................25
9.7 No Proceeding or Litigation .........................................................................25
9.8 No Restrictions .....................................................................................25
9.9 Consents ............................................................................................25
9.10 Documents ..........................................................................................26
9.11 Seller Closing Deliveries ..........................................................................26
9.12 Due Diligence ......................................................................................26
9.13 Regulatory Analysis ................................................................................26
ARTICLE X CONDITIONS TO THE OBLIGATIONS OF THE SELLER
10.1 Representations and Warranties; Performance ........................................................26
10.2 No Proceeding or Litigation ........................................................................26
10.3 Buyer Closing Deliveries ...........................................................................27
10.4 General Consents and Approvals .....................................................................27
10.5 Lease Consents .....................................................................................27
10.6 Consents ...........................................................................................27
10.7 Documents ..........................................................................................27
ARTICLE XI THE BUYER'S CLOSING DELIVERIES
11.1 Purchase Price .....................................................................................27
11.2 Documents to the Seller ............................................................................27
ARTICLE XII THE SELLERS' CLOSING DELIVERIES .....................................................................28
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ARTICLE XIII CLOSING; TERMINATION
13.1 Closing ............................................................................................28
13.2 Termination ........................................................................................28
ARTICLE XIV INDEMNIFICATION
14.1 Indemnification by the Seller ......................................................................29
ARTICLE XV MISCELLANEOUS PROVISIONS
15.1 Amendment and Modification .........................................................................30
15.2 Waiver of Compliance; Consents .....................................................................30
15.3 Expenses ...........................................................................................30
15.4 Investigations; Survival of Representations, Warranties and Indemnification Obligations ............30
15.5 Notices ............................................................................................30
15.6 Definition of Laws and the Seller's Knowledge ......................................................31
15.7 Assignment .........................................................................................31
15.8 Counterparts .......................................................................................32
15.9 Neutral Interpretation .............................................................................32
15.10 Headings ..........................................................................................32
15.11 Governing Law .....................................................................................32
15.12 Entire Agreement ..................................................................................32
LIST OF SCHEDULES
Included Assets
Included Liabilities
Excluded Assets/Liabilities
Jurisdictions
Membership Interests/Obligations
Subsidiaries/Affiliates
Consents/Authorizations
Violations
Licensure
Financial Statements
Undisclosed Liabilities
Subsequent Changes
Contracts
Permitted Liens
Tax Matters
Compliance with Laws
Benefit Plans
Insurance
Capital Expenditures/Commitments
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Contracts with Affiliates
Competition
Bank Accounts
Compensation for Members and Employees
Intellectual Property
Outside Interests
Guarantees
Indebtedness to Members
Records/Files Not Provided to Buyer
Accounting Firm Affiliates
Peer Review
Buyer's Qualifications to do Business
LIST OF EXHIBITS
Xxxx of Sale
Assignment and Assumption Agreement
Administrative Services Agreement
Separate Practices Agreement
Sellers' Release
Form of Employment Agreement
Sellers' Certificate
Buyer's Certificate
Buyer's Counsel Opinion
Sellers' Counsel Opinion
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of January 1,
2000, is made by and among KOPPLE & XXXXXXXX, LLP (the "Seller"), a Pennsylvania
limited liability partnership, EACH OF THE MEMBERS OF SELLER (the "Seller's
Members"), KG BUSINESS SERVICES, INC., a Pennsylvania corporation (the "Buyer")
and COLONIAL DIRECT FINANCIAL GROUP, INC., a Delaware corporation ("CDFG").
RECITALS
WHEREAS, the Seller desires to sell, and the Buyer desires to purchase,
certain assets of the Seller, the Seller desires to assign to the Buyer, and the
Buyer desires to assume, certain liabilities of the Seller, and the parties
desire to enter into certain other arrangements, pursuant to the terms and
conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual premises and the
covenants, representations and warranties herein contained, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
PURCHASE AND SALE; CONSIDERATION
1.1 Purchase and Sale of the Included Assets. Subject to the terms and
conditions contained herein, at the Closing (as defined below) and in the manner
herein provided, the Seller shall sell, convey, transfer and deliver to the
Buyer, free and clear of all Liens (as defined below) except Permitted Liens (as
defined below), all right, title and interest of the Seller in and to all of the
assets of the Seller which are used or are useful in the operation of the
businesses of the Seller as conducted on the Closing Date (as defined in Section
13.1) excluding only (a) those assets identified on Schedule 1.1 hereto, which
Schedule shall include, without limitation, cash and cash equivalents of the
Seller, (b) those business records, working papers, and any agreements or
engagements of the Seller to the extent they relate to the performance of public
accounting services which the Buyer is not permitted to perform (because it is
not a licensed and/or certified public accounting firm or otherwise) pursuant to
applicable laws and regulations of, or enforced by (i) the United States
Securities and Exchange Commission (the "SEC") or (ii) state accountancy boards
or agencies having competent jurisdiction in locations where the Seller
maintains offices or performs such services ("Public Accounting Services"); and
(c) client relationships to the extent they exclusively relate to the provision
of Public Accounting Services. The assets identified on Schedule 1.7 are
sometimes referred to herein as the "Excluded Assets." The assets identified on
Schedule 1.1 being sold to the Buyer hereunder are sometimes referred to herein
as the "Included Assets."
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1.2 Assumption of Included Liabilities.
(a) Subject to the terms and conditions contained herein, at the
Closing, the Seller shall assign and transfer to the Buyer and the Buyer shall
assume only those liabilities identified on Schedule 1.2 (the "Included
Liabilities").
(b) The Buyer shall not, and does not assume or agree to, become
liable for or successor to any liabilities other than the Included Liabilities.
Any and all other obligations of the Seller, or any Member whether known or
unknown, liquidated or unliquidated, accrued or contingent, asserted or
unasserted or due or not due, which are not Included Liabilities and thus
specifically assumed by the Buyer herein (collectively, the "Excluded
Liabilities"), shall be and remain the sole obligations and liabilities of the
Seller, and/or such Member(s), as the case may be, and the Buyer shall not be
obligated in any respect therefor. The Seller hereby indemnifies and holds
harmless the Buver from and against any and all Damages relating to or arising
from Excluded Liabilities.
1.3 Purchase Price. Subject to the terms and conditions of this
Agreement and in reliance on the covenants, representations and warranties of
the Seller herein contained, and in consideration of the sale, conveyance,
transfer and delivery of the Included Assets and other premises provided for in
this Agreement, the Buyer agrees to pay to the Seller an aggregate purchase
price as set forth in this Section 1.3 (the "Purchase Price"), as follows:
(a) Purchase Price. The aggregate amount of One Million Five
Hundred Thousand and No/l00 Dollars ($1,500,000), payable in the form
of 166,667 shares of the Common Stock of CDFG, representing 4.17
percent of the issued and outstanding shares of the Common Stock of
CDFG as of the date hereof, and which will represent not less than
3.15 percent of the issued and outstanding shares of the Common Stock
of CDFG after the completion of an Initial Public Offering,
(b) Manner of Making Payment. The Buyer and CDFG shall deliver the
Purchase Price at the Closing.
1.4 Allocation of Consideration Paid. For purposes of the parties'
respective financial accounting and tax reporting:
(a) The payment of the Purchase Price, plus any Included
Liabilities, shall be allocated specifically to the sale of fixed
assets and other tangible property to the extent of the book value of
such fixed assets and other tangible property (other than accounts
receivable and work in process), with any remainder allocated to the
sale of intangible assets.
1.5 Xxxx of Sale; Assignment and Assumption Agreement. In connection
with the purchase and sale of the Included Assets and assumption of the Included
Liabilities, the Seller
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shall provide to the Buyer a Xxxx of Sale, substantially in the form attached
hereto as Exhibit 1.5(a), and the Seller shall enter into with the Buyer an
Assignment and Assumption Agreement, substantially in the form attached hereto
as Exhibit 1.5(b).
1.6 Included Assets and Included Liabilities Not Transferred at the
Closing. In the event that an assignment or transfer of any contract, obligation
or instrument which is either an Included Asset or an Included Liability could
cause a breach thereof and if any required consent to such assignment or
transfer has not been obtained by the Closing Date, then at the Buyer's election
and in its sole discretion, such contract, obligation or instrument shall not be
then assigned or transferred, but the Seller shall act as agent or
representative for the Buyer, at the request and pursuant to the instructions of
the Buyer, in order to obtain for the Buyer the rights and benefits under such
obligation or instrument, to the extent permitted by applicable law and until a
valid and permitted assignment or transfer to the Buyer (or the Buyer's nominee)
after the Closing Date (if so elected by the Buyer in its sole discretion) has
been made.
1.7 Excluded Assets and Liabilities. It is expressly understood and
agreed that the following (collectively, the "Excluded Assets"), as detailed in
Schedule 1.7, are specifically excepted from the assets being transferred to
Buyer pursuant to the terms and conditions hereof:
(a) all cash and cash equivalents generated by or arising out of
the operation of Seller as of the Closing Date, including but not
limited to all cash in bank accounts and xxxxx cash;
(b) all accounts receivable and notes receivable generated by or
arising out of operation of Seller before the Closing Date, including
but not limited to, all unbilled work in progress due and owing before
the Closing Date; and
(c) all bank debt and loans or promissory notes between the Seller
and/or any of its Members and any bank or other lending institution,
existing as of the Closing Date.
CERTAIN RELATED AGREEMENTS
2.1 Administrative Services Agreement. At the Closing, the Seller and
the Buyer shall execute and deliver an Administrative Services Agreement
substantially in the form attached hereto as Exhibit 2.1 (the "Administrative
Services Agreement").
2.2 Separate Practice Agreement. At the Closing, the Seller and the
Buyer shall execute and deliver a Separate Practice Agreement substantially in
the form attached hereto as Exhibit 2.2 (the Operations Agreement").
2.3 Restrictive Covenants. The Seller acknowledges and agrees that in
exchange for the consideration paid to the Seller pursuant to this Agreement,
the Seller agrees to certain restrictive
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covenants, including but not limited to non-competition and non-solicitation
covenants which restrictive covenants are set forth in the various agreements.
2.4 Related Agreements Defined. For purposes of this Agreement,
"Related Agreements", shall mean the Assignment and Assumption Agreement,
Employment Agreements, Administrative Services Agreement and the Separate
Practices Agreement.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows, each of
which representations and warranties is true and correct on the date hereof.
3.1 Organization, Etc. The Seller is a Pennsylvania limited liability
partnership, duly organized, validly existing and in good standing under the
laws of the State of Pennsylvania with all requisite legal power and authority
to carry on its business as it is now being conducted and to own, operate and
lease its respective properties and assets. Schedule 3.1 lists each of the
jurisdictions in which the Seller maintains an office or is otherwise required
to be licensed or authorized as a limited liability partnership (the
"Jurisdictions"). The Seller has provided the Buyer complete and correct copies
of its (a) Articles of Limited Liability Partnership, (b) Seller Membership
Agreement, and (c) certificates of authority and public accounting licenses for
the Jurisdictions, each as amended to date.
The Seller has all federal, state, local and foreign licenses, permits
or other approvals required for the operation of its businesses as now being
conducted (without giving effect to the Acquisition). Specifically, but not by
way of limitation, the Seller is appropriately licensed, as required, as a
certified public accounting firm in the State of Pennsylvania and each of the
other Jurisdictions. The Jurisdictions are the only states where the Seller is
required to obtain a license to practice Public Accounting Services due to the
operations of the Seller as of the Closing Date, except for de minimis
exceptions where the aggregate effect of such exceptions does not breach any
other representation or warranty herein.
3.2 Interests in the Seller. The persons who own any interest in the
Seller and their designation (Equity Member, Member or principals) and
respective percentage interests (equity, income and voting) (each a "Member" and
collectively the "Members") are as set forth on Schedule 3.2. The retired
members and terminated members to whom the Seller still owes any payment
obligations, and a description (including amounts, if applicable) of such
obligations, are as set forth on Schedule 3.2 (the "Retired Member
Obligations"). No person or entity other than the Members owns any equity,
investment, ownership or similar interest of any kind in the Seller.
3.3 Subsidiaries and Identified Affiliates. Except as set forth on
Schedule 3.3, the Seller does not currently have, nor since January 1, 1996 has
the Seller had, any:
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(a) subsidiaries (wholly-owned or otherwise);
(b) Identified Affiliates (as defined below);
(c) equity or financial investments in any other entity or business
operation (except as represented by accounts receivable arising in the
ordinary course of business and investments of excess cash in
certificates of deposit, money market accounts or marketable
securities).
The term "Identified Affiliate" shall mean any corporation, company,
partnership, trusts or other entity in which the Seller or, to the Seller's
Knowledge, any Member is a controlling person, as that term is defined in Rule
12b-2 promulgated under the Securities Exchange Act of 1934, as amended, but not
including those entities which (i) are not, and are not affiliated with,
clients, vendors or suppliers of the Seller, (ii) represent personal estate
planning devices, such as trusts or partnerships, of a Member in passive
investments, or (iii) are not, and not affiliated with firms or companies
engaged in the accounting profession or the business of financial services,
mortgage lending or brokerage, or tax return preparation.
3.4 Authorization; Enforceability. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized, approved and ratified by all necessary action on the part of
the Seller. To the Seller's Knowledge, each Member has duly, competently and
validly executed and delivered this Agreement, intending to be bound thereby.
Certified copies of all required resolutions, authorizations, consents,
approvals and/or ratifications are attached as Schedule 3.4 hereto and no such
resolution, authorization, consent or approval has been altered, amended,
rescinded, repealed or revoked in whole or in part. Pursuant to such
resolutions, authorizations, consents, approvals and/or ratifications, and
otherwise, the Seller (and to the Seller's Knowledge, the Members) have full
authority to enter into and deliver this Agreement, to perform their respective
obligations hereunder, and to consummate the transactions contemplated hereby.
Assuming the due execution and delivery hereof by the Buyer, this Agreement is
the legal, valid and binding obligation of the Seller (and to the Seller's
Knowledge, the Members), and is enforceable against the Seller (and to the
Seller's Knowledge, the Members) according to its terms, except to the extent
that (i) its enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditor's rights
generally, (ii) the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any such
proceeding may be brought and (iii) restrictions of public policy apply.
3.5 No Violation. Except as set forth on Schedule 3.5, the Seller (and,
to the Seller's Knowledge, the Members) are not subject to or obligated under
any (i) agreement, article or certificate of incorporation or organization,
bylaw, partnership agreement, operating agreement, (ii) Law (as defined in
Section 15.7), or (iii) agreement, instrument, license, franchise or permit,
which could be breached or violated in any respect material thereto by the
execution, delivery and performance by the Seller (or to the Seller's Knowledge,
by any Member) of this Agreement
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or of any agreement referred to herein. Neither the execution, delivery, nor
performance of this Agreement or of any agreement referred to herein will
violate or result in a breach of any Contract (as defined below), agreement,
instrument, license, franchise, obligation or permit by which the Seller
(or, to the Seller's Knowledge, any Member) is bound.
3.6 Governmental Authorities; Licensure. To the Seller's Knowledge,
neither the Seller, nor, to the Seller's Knowledge, any Member is required to
submit any notice, report or other filing with, or obtain any consent, approval
or authorization from, any governmental or regulatory authority, including but
not limited to the authority which licenses public accountants in any of the
Jurisdictions, in connection with the execution, delivery, consummation or
performance of this Agreement or the transactions contemplated hereby. The
Seller and, to the Seller's Knowledge, each Member and any employee of the
Seller who is required by Law to obtain and maintain a public accounting license
in any of the Jurisdictions has obtained a license in each Jurisdiction where
same is required, which license is in full force and effect. A copy of each such
license issued to the Seller and to each such Member or employee has been made
available to the Buyer. Except as set forth on Schedule 3.6, neither the Seller,
any Member nor any employee of the Seller is subject to any restrictions on the
scope of practice imposed by the SEC or any governmental, regulatory or
self-regulatory authority.
3.7 Financial Statements. Except as set forth on Schedule 3.7, the
Seller has provided the Buyer complete and accurate copies of the Seller's
statements of financial position as of December 31 for each of the years 1997
and 1998 and statements of income, cash flows and partner's equity for the
fiscal years 1997 and 1998, and statements of financial position as of July 31,
1999 and statements of income, cash flows and partner's equity for the three (3)
months then ended (collectively, the "Financial Statements"). The Financial
Statements have not been audited. Except as set forth on Schedule 3.7, the
Financial Statements fairly present the financial position of the Seller as of
the respective dates thereof, and the results of operations for the periods
therein referred to, all in accordance with GAAP consistently applied throughout
the periods indicated (except as stated therein). The statement of financial
position of the Seller as of December 31, 1998, is referred to as the "Balance
Sheet." July 31, 1999, is referred to as the "Financial Statement Date."
3.8 No Undisclosed Liabilities. To the Seller's Knowledge, it has no
liabilities, asserted or unasserted, liquidated or unliquidated, accrued,
absolute, contingent, or otherwise of a nature or amount that should be
reflected in the Financial Statements or a balance sheet prepared at the Closing
Date in accordance with GAAP consistently applied. To the Seller's knowledge
there is no basis for any claim against the Seller for any such liability except
for liabilities (a) properly reflected or reserved against in the Balance Sheet,
(b) set forth on Schedule 3.8, or (c) incurred in the ordinary course of
business consistent with past practices since the Financial Statement Date, none
of which such liabilities, individually or in the aggregate, has or would likely
have an adverse effect upon the assets, business, prospects, condition
(financial or otherwise), earnings or operations of the business of the Seller
greater than Fifty Thousand Dollars ($50,000).
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3.9 Absence of Certain Changes Subsequent to July 31, 1999. Except as
set forth on Schedule 3.9, since the Financial Statement Date there has not been
any (a) adverse change (amounting to or involving more than Fifty Thousand
Dollars ($50,000) in aggregate with other changes) in the business, prospects,
condition (financial or otherwise), earnings or operations of the Seller's
business; (b) damage, destruction or loss, whether covered by insurance or not,
adversely affecting the Seller's properties comprising Included Assets or
necessary for the conduct of the Seller's business; (c) increase in the
compensation payable or to become payable by the Seller to its directors,
officers, employees, Affiliates or any Partner or any adoption of, or increase
in, any bonus, insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any such individual other than changes in the
ordinary course of business consistent with past practice and not material to
the item changed; (d) entry by the Seller into any commitment or transaction,
including, without limitation, any borrowing or capital expenditure other than
in accordance with Schedule 3.19; (e) change by the Seller in accounting
methods, practices or principles; (f) to the Seller's Knowledge, adoption of any
Law, statute, rule, regulation or order which adversely affects or would likely
adversely affect the Seller; (g) termination or waiver of any rights of value to
the business of the Seller, not including accounts receivable compromised by the
Seller consistent with its ordinary course of business and which do not, in the
aggregate, constitute a material portion of the accounts receivable of the
Seller; (h) other transaction or event other than in the ordinary course of the
Seller's business; (i) transaction or conduct of a material or significant
nature or amount inconsistent with the Seller's past business practices; (j)
adoption or amendment of any collective bargaining, bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation, or other
plan, agreement, trusts, fund or arrangement for the benefit of employees except
for the termination of such plans which are provided for in this Agreement; or
(k) agreement or understanding made or entered into to do any of the foregoing.
The term "Affiliate" shall mean (i) any Identified Affiliate, (ii) each partner,
principal, manager, officer and Significant Employee of the Seller, (iii) the
respective Family Members of each person identified in clause (ii). The term
"Significant Employee" shall mean any employee of the Seller who has annual
salary and bonus compensation (or partner draws) in excess of One Hundred
Thousand Dollars ($100,000). The term "Family Member" shall include the parents,
siblings, spouses and children of the person identified, whether such
relationship arises by blood, adoption or marriage.
3.10 Contracts. Schedule 3.10 identifies (including the type of
agreement, parties and effective date) all Contracts (as defined below) to which
the Seller is a party. Schedules 3.10(a), (b), (c), and (d) are true and
complete copies of the form of the Seller's engagement letters for audit,
review, business valuations and consulting, respectively. The term "Contracts"
shall mean all oral (which shall be summarized on Schedule 3.10) and written (i)
contracts, agreements, agency agreements, loan agreements, mortgages,
indentures, deeds of Trusts, guarantees, binding commitments, joint venture
agreements, purchase and/or sale agreements, collective bargaining, union,
consulting and/or employment contracts, leases of real or personal property,
easements, distribution or dealer agreements, service agreements, license
agreements and advertising agreements to the extent that the Seller's
obligations or benefits exceed One Hundred Thousand Dollars ($100,000) in any
twelve (12) month period or to the extent that the term of such contract
7
extends for more than twelve (12) months past the Closing and (ii) all contracts
material to the operation of the business of the Seller. The Seller is not in
default or alleged to be in default under any Contract nor is the Seller aware
of any default by any other party to any Contract, and there exists no event,
condition or occurrence which, after notice or lapse of time, or both, could
constitute a default under any Contract. All of the Contracts are in full force
and effect and constitute legal, valid and binding obligations of the Seller
and, to the Seller's Knowledge, the other parties thereto in accordance with
their terms, and neither this execution, delivery and performance of this
Agreement nor the Acquisition will violate any of the provisions of the
Contracts.
3.11 True and Complete Copies. Copies of all agreements, Contracts and
documents delivered and to be delivered hereunder by the Seller or received by
the Buyer as part of the Buyer's due diligence are and will be true and complete
copies of such agreements, Contracts and documents. All written summaries of
oral Contracts are and will be true and complete.
3.12 Title and Related Matters.
(a) General. Except as set forth on Schedule 3.12, the Seller
has good and marketable title to all of the Included Assets (for which
one can have good and marketable title) free and clear of all
mortgages, security interests, liens, pledges, claims, escrows,
options, rights of first refusal, indentures, easements, licenses,
security agreements or other agreements, arrangements, contracts,
charges or encumbrances of any kind or character (collectively "Liens")
except for liens securing Included Liabilities to the extent such liens
are so identified on Schedule 3.12 ("Permitted Liens"). The Seller owns
or leases, directly or indirectly, all of the Included Assets, and is a
party to all licenses and other agreements presently used to carry on
the business or operations of the Seller as presently conducted. To the
Seller's Knowledge, no Partner owns all or any portion of any asset,
tangible or intangible, which is (i) used in the operations of the
Seller or the Trusts and (ii) of a type which is owned generally in the
industry by the accounting firm and not the individual Partner.
(b) Real Property.
(i) The Seller does not own any interest in any land,
buildings or improvements, except as described on Schedule
3.12.
(ii) The Seller is not a tenant under any lease(s) of
real property used by the Seller except as described on
Schedule 3.12. With respect to the leased real property
described on Schedule 3.12 and except as set forth on Schedule
3.12: (A) all such leases are in full force and effect and
constitute valid and binding obligations of the Seller and, to
the Seller's Knowledge, the other parties thereto; (B) there
have not been and there currently are not any defaults
thereunder by the Seller; (C) there have not been (within the
past twelve months) nor are there
8
currently any defaults thereunder by any lessor thereof, (D)
no event has occurred which (whether with or without notice,
lapse of time or the happening or occurrence of any other
event) could constitute a default thereunder entitling the
lessor to terminate the lease or modify the terms thereof, and
(E) neither the execution, delivery and performance of this
Agreement nor the Acquisition will violate any provisions of
such leases under the current rentals and other current terms
thereof ((A) through (E) are hereinafter collectively referred
to as "Lease Restrictions").
(iii) Except as shown on Schedule 3.12, each parcel
of real property, building, structure and improvement, leased
or otherwise utilized pursuant to easement, license, profit,
covenant or similar agreement or right by the Seller
(collectively, the "Premises") conforms in all material
respects to all applicable Laws, including zoning regulations,
none of which prohibits the use of such properties, buildings,
structures or improvements, for the purposes for which they
are now utilized. The Premises are in good condition and
working order, reasonable wear and tear excepted, are adequate
for their intended purposes and to the Seller's Knowledge have
no structural or other substantial deficiencies.
(c) Personal Property. The personal property of the Seller
included in the Included Assets is in the aggregate is in good
condition and working order, and each individual item of personal
property is in good condition and working order, reasonable wear and
tear excepted. Except as set forth on Schedule 3.12 and with respect to
office equipment leased in the ordinary course, none of the personal
property is subject to any (i) contracts of sale or lease; or (ii)
Liens of any kind or character, except for Permitted Liens. Except as
set forth on Schedule 3.12, there are no Lease Restrictions with
respect to the personal property leased by the Seller.
(d) No Disposition of Assets. There has not been since the
Financial Statement Date any sale, lease, license or any other
acquisition, disposition or distribution by the Seller of any of its
assets or properties or any other assets now or hereafter owned by it,
except transactions in the ordinary and regular course of business
consistent with past practices of the Seller or as otherwise consented
to by the Buyer.
3.13 Litigation. Except as previously provided by the Seller to the
Buyer, there is no suit, action, claim, investigation or proceeding pending for
which service of process or other written notice has been made or, to the
Seller's Knowledge, threatened or otherwise pending against the Seller or any
Member which could adversely affect (in an amount greater than One Hundred
Thousand Dollars ($100,000)) the business, prospects, operations, earnings,
properties or the condition, financial or otherwise, of the Seller, nor is there
any judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against the Seller or, to the Seller's Knowledge, any Member having, or which,
insofar as can be reasonably foreseen, in the future may have, any such effect.
There is
9
no suit, action, claim or proceeding now pending for which service of process or
other written notice has been made or, to the Seller's Knowledge, threatened or
otherwise pending, before any court, grand jury, administrative or regulatory
body, Government agency, arbitration or mediation panel or similar body
involving the Seller or, to the Seller's Knowledge, any Member which could
prevent or delay the consummation of the transactions contemplated by this
Agreement. The document entitled "Litigation" previously provided by the Seller
to the Buyer contains a complete list of all suits, claims, actions,
investigations and proceedings (including those settled or otherwise resolved)
filed or otherwise asserted in writing against the Seller or, to the Seller's
Knowledge, any Member since January 1, 1997 before any court, grand jury,
administrative or regulatory body, Government agency, arbitration or mediation
panel or similar body.
3.14 Tax Matters. The term "Taxes" means all net income, capital gains,
gross income, gross receipts, sales, use, transfer, ad valorem, franchise,
profits, license, capital, withholding, payroll, employment, excise, goods and
services, severance, stamp, occupation, premium, property, windfall profits,
customs, duties or other taxes, fees or assessments, or other governmental
charges of any kind whatsoever, together with any interest, fines and any
penalties, additions to tax or additional amounts incurred or accrued under
applicable Law or assessed, charged or imposed by any governmental authority,
domestic or foreign, provided that any interest, penalties, additions to tax or
additional amounts that relate to Taxes for any taxable period (including any
portion of any taxable period ending on or before the Closing Date) shall be
deemed to be Taxes for such period, regardless of when such items are incurred,
accrued, assessed or imposed. For the purposes of this Section 3.14, the Seller
shall be deemed to include any predecessor of the Seller or any person or entity
from which the Seller incurs a liability for Taxes as a result of any transferee
liability.
(a) For the past five (5) years, except as provided in
Schedule 3.14, the Seller has duly and timely filed (and prior to the
Closing Date will duly and timely file) true, correct and complete tax
returns, prepared in accordance with applicable Laws, for all years and
periods (and portions thereof) and for all jurisdictions (whether
federal, state, local or foreign) in which any such returns are or were
due. All Taxes shown as due and payable on such returns have been paid,
and there is no current liability for any Taxes due and payable in
connection with any such returns. All known taxes of the Seller not yet
due and payable have been fully accrued on the books of the Seller.
Accruals and reserves for Taxes provided for on the financial
statements delivered or to be delivered pursuant to Section 3.7 are
adequate, and there are no unpaid assessments for additional Taxes
(greater than $100,000) for any period (nor is there any basis
therefor).
(b) The Seller is not, and never has been, a member of any
consolidated, combined or unitary group for federal, state, local or
foreign tax purposes.
(c) Except as provided in Schedule 3.14, for the past five (5)
years, the Seller has (i) withheld all required amounts from its
employees, agents, contractors and
10
nonresidents and remitted such amounts to the proper agencies; (ii)
paid all employer contributions and premiums; and (iii) filed all
federal, state, local and foreign returns and reports with respect to
employee income tax withholding, and social security and unemployment
taxes and premiums, all in compliance with the withholding tax
provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), as in effect for the applicable year or any prior provision
thereof and other applicable Laws.
(d) Except as described in Schedule 3.14, for the past five
(5) years no deficiencies or reassessments for any Taxes have been
proposed, asserted or assessed against the Seller by any federal,
state, local or foreign taxing authority. Schedule 3.14 describes the
status of any federal, state, local or foreign tax audits or other
administrative proceedings, discussions or court proceedings that are
presently pending with regard to any Taxes or tax returns of the Seller
(including a description of all issues raised by the taxing authorities
in connection with any such audits or proceedings), and no additional
issues are being asserted against the Seller in connection with any
existing audits or proceedings.
(e) Except as set forth on Schedule 3.14, for the past five
(5) years the Seller has not executed or filed any agreement or other
document extending the period for assessment, reassessment or
collection of any Taxes, except for normal extensions of time within
which to file the Seller's returns, and no power of attorney granted by
the Seller with respect to any Taxes is currently in force.
(f) Except as set forth on Schedule 3.14, the Seller has not
entered into any closing or other agreement with any taxing authority
which affects any taxable year of the Seller ending after the Closing
Date. The Seller is not a party to any tax sharing agreement or similar
arrangement now in effect for the sharing of tax liabilities or
benefits.
(g) The Seller has not agreed to nor is it required to make
any adjustment by reason of a change in accounting methods that affects
any taxable year ending after the Closing Date. The IRS has not
proposed to the Seller any such adjustment or change in accounting
methods that affects any taxable year ending after the Closing Date.
The Seller does not have an application pending with any taxing
authority requesting permission for any changes in accounting methods
that relate to its business or operations and that affects any taxable
year ending after the Closing Date.
3.15 Compliance with Law. Except as set forth on Schedule 3.15, neither
the Seller nor, to the Seller's Knowledge, any Member is currently failing to
comply (in all respects material thereto) with any applicable Laws relating to
the operation of the business of the Seller except for such noncompliance which
does not involve any of the following: (i) any criminal incarceration, penalty
or fine, (ii) any injunction, cease and desist order, restraining order,
revocation of license or qualification; (iii) any equitable remedy or
enforcement that limits the business conduct of the
11
Seller or a Partner; or (iii) civil fine, lien, penalty or judgment greater
than, in the aggregate for all noncompliance, One Hundred Thousand Dollars
($100,000). In particular, but without limiting the generality of the foregoing,
the Seller and, to the Seller's Knowledge, each Member are in compliance with
all applicable Laws and licensing requirements (in all material respects
thereto) relating in any way to the conduct of their business, anti-competitive
practices, price fixing, to health and safety, environmental, employment or
discrimination matters. There are no proceedings of record and no proceedings
are pending in either case for which service of process or written notice has
been made on the Seller or, to the knowledge of the Seller, any Member, or to
the Seller's Knowledge, otherwise pending or threatened, nor has the Seller or,
the Seller's Knowledge, any Member received any notice regarding any violation
of any Law, including, without limitation, any requirement of OSHA or any
pollution or environmental control agency (including air and water).
3.16 ERISA and Related Employee Benefit Matters.
(a) Welfare Benefit Plans. Schedule 3.16 lists each "employee
welfare benefit plan" (within the meaning of Section 3(l) of the
Employee Retirement Income Security Act of 1974 ("ERISA")) maintained
by the Seller or to which the Seller contributes or is required to
contribute, including any multi-employer plan ("Welfare Benefit Plan"),
lists all plan documents, determination letters and reporting and
disclosure filings required under ERISA or the Code for the last three
(3) years for each Welfare Benefit Plan and sets forth as of the most
recent valuation date (i) the amount of any liability of the Seller for
payments due with respect to any Welfare Benefit Plan, (ii) the amount
of any payment made and to be made, stated separately, by the Seller
with respect to any Welfare Benefit Plan for the plan year during which
the Closing is to occur, and (iii) with respect to any Welfare Benefit
Plan to which Code Section 505 applies, a statement of assets and
liabilities for such Welfare Benefit Plan as of the most recent
valuation date. Without limiting the foregoing, Schedule 3.16 discloses
any obligations of the Seller to provide retiree health benefits to
current or former employees of the Seller.
(b) Pension Benefit Plans. Schedule 3.16 lists each "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA)
maintained by the Seller or to which the Seller contributes or is
required to contribute, including any multi-employer plan ("Pension
Benefit Plan") and lists all plan documents, determination letters and
reporting and disclosure filings required under ERISA or the Code for
the last three (3) years for each Pension Benefit Plan. All costs of
the Pension Benefit Plans have been provided for on the basis of
consistent methods and, if applicable, in accordance with sound
actuarial assumptions and practices that are acceptable under ERISA.
With respect to each Pension Benefit Plan that is not subject to Title
I, Part 3 of ERISA, Schedule 3.16 sets forth as of the valuation date
(A) the amount of any liability of the Seller for any contributions due
with respect to such Pension Benefit Plan, and (B) the amount of any
contribution paid and to be paid, stated separately, by the Seller with
respect to such Pension Benefit Plan for the plan year during which the
Closing is to occur.
12
(c) Compliance with Applicable Law. Each of the Welfare
Benefit Plans, Pension Benefit Plan, any related Trusts agreements,
annuity contracts, and other funding instruments, comply with the
provisions of ERISA and the Code and all other statutes, orders,
governmental rules and regulations applicable to such Welfare Benefit
Plans and Pension Benefit Plans. The Seller has performed all of its
obligations currently required to have been performed under all Welfare
Benefit Plans and Pension Benefit Plans. There are no actions, suits or
claims (other than routine claims for benefits) pending or threatened
against or with respect to any Welfare Benefit Plans, Pension Benefit
Plans or the assets of such plans, and no facts exist that could give
rise to any actions, suits or claims (other than routine claims for
benefits) against such plans or the assets of such plans. Each Pension
Benefit Plan is qualified in form and operation under Code Section
401(a). No event has occurred that will or could give rise to a
disqualification of any Pension Benefit Plan under Code Section 401(a).
No event has occurred that will or could subject any Welfare Benefit
Plan or Pension Benefit Plan to tax under Code Section 511.
(d) Administration of Plans. Each Welfare Benefit Plan and
each Pension Benefit Plan has been administered to date in compliance
with the requirements of ERISA and the Code. No plan fiduciary of any
Welfare Benefit Plan or Pension Benefit Plan has engaged in (i) any
transaction in violation of Section 406(a) or (b) of ERISA, or (ii) any
"prohibited transaction" (within the meaning of Section 4975(c)(1) of
the Code or Section 406 of ERISA) for which no exemption exists under
Section 408 of ERISA or Section 4975(d) of the Code.
(e) Title IV Plans. There is no Pension Benefit Plan which is
subject to the provisions of Title IV of ERISA in which the Seller (for
purposes of this Section the Seller shall include each trade or
business, whether or not incorporated, which is a member of a group of
which the Seller is a member and which is under common control within
the meaning of Code Section 414 and the regulations thereunder)
participates or has participated.
(f) Other Employee Benefit Plans and Agreements. Schedule 3.16
lists each fringe benefit, profit sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retainer, consulting,
retirement, welfare, or other incentive plan or agreement or employment
agreement not terminable on 30 days or less written notice, and any
other employee benefit plan, agreement, arrangement, or commitment not
previously listed on Schedule 3.16 that is maintained by the Seller or
to which the Seller contributes or is required to contribute, together
with a list of all plan documents, determination letters and reporting
and disclosure filings required under ERISA or the Code for the last
three (3) years for each such plan. Schedule 3.16 also contains a
complete list of all employees of the Seller and the amount of vacation
pay currently accrued to each such employee.
13
(g) Continuation Coverage Requirements for Health Plans. All
group health plans of the Seller (including any plans of Affiliates of
the Seller that must be taken into account under Code Section 4980B)
have been operated in compliance with the group health plan
continuation coverage requirements of Section 4980B of the Code and
Title I, Part 6 of ERISA. The Seller shall remain solely responsible
for compliance with Section 4980B of the Code and Title I, Part 6 of
ERISA for all group health plans of the Seller.
(h) Valid Obligations. All Welfare Benefit Plans, Pension
Benefit Plans, related Trusts agreements, annuity contracts or other
funding instruments, and all plans, agreements, arrangements and
commitments referred to in Subsection (f) of this Section are legal,
valid and binding and in full force and effect, and there are no
defaults thereunder. Except as specified on Schedule 3.16, none of the
rights of the Seller thereunder will be impaired by the consummation of
the transactions contemplated by this Agreement without the consent or
agreement of any other party other than consents and agreements
specifically listed on Schedule 3.16.
(i) Severance; Non-Deductible Payments. Except as set forth on
Schedule 3.16, the consummation of the transactions contemplated by
this Agreement will not (A) entitle any current or former employee of
the Seller to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement, (B) except as
provided on Schedule 3.16, accelerate the time of payment or vesting,
or increase the amount of compensation due to any such employee or
former employee, (C) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption
is not available.
3.17 Insurance. Schedule 3.17 lists all of the Seller's existing
insurance policies, the premiums therefor, and the coverage and term of each
policy. Such policies and the amount of coverage and the risks insured are, in
the aggregate, reasonably sufficient to protect and insure the Seller against
perils which good business practice demands be insured against or which are
normally insured against by other industry members similarly situated, and will
remain in full force and effect up to and through the Closing Date, unless
otherwise agreed to by the parties.
3.18 Capital Expenditures. The Seller has outstanding commitments for
capital expenditures as set forth on Schedule 3.18, which Schedule also
includes a schedule of substantially all monies disbursed on account of capital
expenditures made by the Seller between the Financial Statement Date and the
date hereof.
3.19 Dealings with Affiliates. Schedule 3.19 sets forth a complete list
(including the parties) and a detailed summary in the case of an oral Contract,
of all oral or written Contracts, arrangements or other agreements between the
Seller and any Affiliate at any time from January 1, 1997, to the date hereof.
14
3.20 Competition. Except as set forth on Schedule 3.20, neither the
Seller nor, to the Seller's Knowledge, any Member is a party to any agreement,
Contract or covenant limiting the Seller or such Member from competing in any
line of business or with any person or other entity in any geographic area.
3.21 Bank Accounts. Schedule 3.21 is a list of all bank accounts, lock
boxes, post office boxes and safe deposit boxes maintained in the name of or
controlled by the Seller and the names of the persons having access thereto.
3.22 Compensation. Schedule 3.22 lists the job title and total
remuneration (including without limitation, salary, commissions and bonuses) for
each Member and for each officer, manager, principal, director, employee,
consultant, agent or independent contractor of the Seller (i) as of the
Financial Statement Date and (ii) as of the most recent practicable date.
3.23 Clients. The Seller has previously furnished to the Buyer a
complete and accurate listing setting forth the identity of the clients of the
Seller, except for clients for which the Seller performs solely attest work,
whose names will not, for confidentiality reasons, be disclosed or identified to
Buyer, (i) generating annual xxxxxxxx of at least Fifty Thousand Dollars
($50,000) during the period from January 1997, through the Financial Statement
Date, or (ii) reasonably expected to generate such level of xxxxxxxx for the
calendar year 1999, and with respect to such clients, the nature of the
engagement for each client and whether services are being provided to such
client at the date hereof.
3.24 Intellectual Property.
(a) Schedule 3.24 contains a true, complete and accurate list
of all the Intellectual Property (as hereinafter defined) owned by or
licensed to the Seller. Schedule 3.24 accurately identifies, where
appropriate, one or more of the following for each item of the
Intellectual Property: filing date, issue date, classification of
invention or goods covered, country of origin, licensor, license date
and licensed subject matter. Schedule 3.24 contains a complete and
accurate list of all property and licenses and other rights granted by
or to the Seller to or from any third party with respect to any item of
the Intellectual Property, other than licenses associated with sales of
products to customers in the ordinary course of business.
(b) (i) The Intellectual Property is valid and encompasses all
proprietary rights necessary for the operation of the Seller's business
as presently conducted or proposed to be conducted (in each case free
and clear of all Liens except Permitted Liens); (ii) the Seller has
good and lawful title to all of its Intellectual Property (where such
title is possible); (iii) the Seller has taken all actions necessary to
maintain and protect its Intellectual Property; (iv) the owners of the
Intellectual Property licensed to the Seller have, to the Seller's
Knowledge, taken all actions necessary or desirable to maintain and
protect the Intellectual Property subject to such licenses; (v) there
has been no claim
15
made against the Seller asserting the invalidity, misuse or
unenforceability of any of the Intellectual Property or challenging the
Seller's right to use or ownership of any of the Intellectual Property,
and to the Seller's Knowledge there are no grounds for any such claim
or challenge; (vi) to the Seller's Knowledge, there is no infringement
or misappropriation of any of the Intellectual Property or of any facts
raising a possibility of infringement or misappropriation; (vii)
subject to obtaining the consents referenced on Schedule 3.5 or
Schedule 3.6, the conduct of the business of the Seller has not
infringed or misappropriated, and does not infringe or misappropriate,
any intellectual property or proprietary right of any other person or
entity; (viii) no loss of any of the Intellectual Property is pending
or to the Seller's Knowledge, threatened or reasonably foreseeable; and
(ix) the consummation of the transactions contemplated by this
Agreement will not alter, impair or extinguish any of the Intellectual
Property.
(c) For purposes of this Agreement, "Intellectual Property"
shall mean all of the following (in whatever form or medium) which are
owned by or licensed to the Seller: (i) patents, trademarks, service
marks and copyrights and (ii) applications for patents and for
registration of trademarks, service marks and copyrights.
3.25 Outside Financial Interests. Except as set forth on Schedule 3.25,
to the Seller's Knowledge, no Member, director or officer of the Seller has any
direct or indirect financial interest in any competitor with, or supplier or
customer of, the Seller; provided, however, that for this purpose ownership of
corporate securities having no more than five percent (5%) of the outstanding
voting power of any competitor, supplier or customer, which securities are
listed on any national securities exchange or authorized for quotation on the
Nasdaq National Market or the Nasdaq Small Cap Market, shall not be deemed to be
such a financial interest, provided that such Member, director or officer has no
other connection or relationship with such competitor, supplier or customer.
3.26 Guarantees. Except as set forth on Schedule 3.26, the Seller is
not a guarantor, indemnitor, surety or accommodation party or otherwise liable
for any indebtedness of any other person, firm or corporation, except as
endorser of checks received and deposited in the ordinary course of business.
3.27 Books and Records. The books of account and other partnership or
corporate records, if any, delivered by the Seller to the Buyer at Closing are
true, complete and accurate, have been maintained in accordance with good
business practices, and the matters contained therein are accurately reflected
on the Financial Statements, to the extent appropriate.
3.28 Indebtedness to and from Members, Officers, Directors and Others.
Except as set forth on Schedule 3.28, (a) the Seller is not indebted to any
Member, director, officer, employee, agent or independent contractor of the
Seller except for amounts due as normal salaries, wages, employee benefits and
bonuses and in reimbursement of ordinary expenses on a basis consistent with the
past practices of the Seller, and (b) no partner, director, officer, employee,
agent or
16
independent contractor of the Seller is indebted to the Seller, except for
advances for ordinary business expenses on a current basis consistent with the
past practices of the Seller.
3.29 Seller's Files. To the extent consistent with Laws, the Buyer and
its representatives have been given access to all books, records and files
relating to the Seller (other than files and workpapers relating to the Public
Accounting Services or which contain information the disclosure to the Buyer of
which is prohibited by the terms of a binding client agreement, applicable law,
or applicable accounting rules and regulations) and its business, property
rights, assets and liabilities. Schedule 3.29 identifies any records, etc. to
which the Buyer has not been given access and the reasons therefor.
3.30 Year 2000 Compliance. The Seller has performed a good faith
assessment of the extent to which the Seller is Year 2000 Compliant, and the
Seller has disclosed to the Buyer such assessment. For the Seller to be Year
2000 Compliant future expenditures shall not be greater than Twenty-Five
Thousand Dollars ($25,000).
3.31 Consultants, Brokers and Finders. Neither the Seller nor, to the
Seller's Knowledge, any Member has retained any consultant, broker or finder in
connection with the transactions contemplated by this Agreement to whom or which
any commission is payable by any party to this Agreement.
3.32 Affiliate and Network Relationships. Attached hereto as Schedule
3.32 is a list of the name, address, phone number and contact person for each
accounting, consulting or other firm with which the Seller has an affiliate or
"network" relationship. A copy of the form(s) of agreement evidencing such
relationship has/have been provided by the Seller to the Buyer.
3.33 Peer Review. Attached hereto as Schedule 3.33 is a true and
correct copy of the most recent peer review prepared by Xxxxxxxx & Company, P.C.
Any suggestions contained in any of such reports for changes in practices or
methods of the Seller or, to the Seller's Knowledge, any Member are being
complied with by the Seller and the Member.
3.34 Disclosure. No representation or warranty made by the Seller or,
to the Seller's Knowledge, any Member in this Agreement or in any agreement,
instrument, document, certificate, statement or letter furnished to the Buyer,
by or on behalf of the Seller or any Member in connection with any of the
transactions contemplated by this Agreement, contains any untrue statement of
material fact or omits to state a material fact necessary in order to make the
statements herein or therein not misleading in light of the circumstances in
which they are made.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby makes the following representations and warranties to
the Seller.
17
4.1 Corporate Organization. The Buyer is duly organized, validly
existing and in good standing under the laws of the State of Pennsylvania. The
Buyer is qualified to do business as a foreign corporation in the states
detailed in Schedule 4.1. Certified copies of the Buyer's Certificate of
Incorporation, Bylaws, and certificate of qualification as a foreign corporation
have been provided to the Seller. The Buyer has all federal, state, local or
foreign licenses, permits or other approvals by any governmental entity for the
performance by the Buyer of its obligations hereunder.
4.2 Authorization; Enforceability. The Buyer has full corporate power
and authority to enter into this Agreement and to perform its obligations
thereunder. Assuming the due execution and delivery hereof by the Seller, this
Agreement is the legal, valid and binding obligation of the Buyer and is
enforceable against the Buyer, according to its terms, except to the extent that
(i) its enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditor's rights
generally, and (ii) the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any such
proceeding may be brought and (iii) restrictions of public policy apply.
4.3 No Violation. The Buyer is not subject to or obligated under (i)
its Certificate of Incorporation, Bylaws, or any agreement or instrument, or any
license, franchise or permit or (ii) to the knowledge of the Buyer, any Law that
would be breached or violated by the execution, delivery or performance of this
Agreement (provided, however, that no representations or warranties are made
with respect to the effect or implementation of any SEC, AICPA, ISB, or state
public accounting regulatory provision, regulation or Law).
4.4 Governmental Authorities. Except for the foreign qualification
referred to in Section 4.1 above, and any foreign qualifications which may be
required in any other of the Jurisdictions, the Buyer is not required to submit
any notice, report or other filing with and no consent, approval or
authorization is required by any governmental or regulatory authority in
connection with the Buyer's execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby.
4.5 Consultants, Brokers and Finders. The Buyer has not retained any
consultant, broker or finder in connection with the transactions contemplated by
this Agreement to whom or which any commission is payable by any party to this
Agreement.
CERTAIN PRECLOSING COVENANTS OF THE SELLER
The Seller covenants and agrees with the Buyer that, from and after the
date of this Agreement and until the Closing Date, the Seller will conduct the
business of the Seller in the ordinary course and subject to the following
provisions and limitations:
5.1. Operation of the Business. Without the prior written consent of
the Buyer, the Seller will not:
18
(a) grant any increase in the rate of pay of any Member or any
of its employees, in an amount greater than ten (10% percent), grant
any increase in the salaries of any Partner, officer, employee or
agent, enter into or increase the benefits provided under any bonus,
profit-sharing, incentive compensation, pension, retirement, medical,
hospitalization, life insurance or other insurance plan or plans, or
other contracts or commitments, or in any other way increase in any
amount the benefits or compensation of any such officer, employee or
agent except, however, (i) the ordinary profit distributions payable to
Members consistent with past practice and (ii) ordinary merit increases
not unusual in character or amount made in the ordinary course of the
business to employees who are not Members;
(b) enter into any employment contract (except for renewals or
extensions of existing contracts, or new employment contracts involving
wage or member compensation less than One Hundred Fifty Thousand
Dollars ($150,000) per annum. provided the term of such contract is not
longer than 1 year) or collective bargaining agreement;
(c) enter into any contract or commitment or engage in any
transaction which is not in the ordinary course of the business or
which is inconsistent with past practices;
(d) sell or dispose of or encumber any assets outside of the
Seller's ordinary course of business;
(e) make, or enter into any contract for, any capital
expenditure or enter into any lease of capital equipment or real
estate, except for leasing of photocopiers and telephone systems used
in the ordinary course of business, provided, Buyer will notify Seller
in writing in advance of any such leasing commitment;
(f) enter into any contract, whether for the purchase or sale
of inventory, supplies, other products or services or otherwise, and
whether in the ordinary course of the business or otherwise (other than
contracts for providing services), involving more than Twenty Five
Thousand Dollars ($25,000) or enter into any series of such contracts
with one party or affiliated group of parties involving more than
Twenty Five Thousand Dollars ($25,000) in the aggregate;
(g) create, assume, incur or guarantee any indebtedness other
than (i) in the ordinary course of the business and with a maturity
date of less than one year or (ii) incurred pursuant to existing
Contracts disclosed in the Schedules delivered pursuant hereto;
(h) make or institute any unusual or novel method of
transacting business or change any accounting procedures or practices
or its financial structure;
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(i) make any amendments to or changes in its organization
documents or agreements;
(j) perform any act, or attempt to do any act, or permit any
act or omission to act, which could cause a breach of any contract,
commitment or obligation to which the Seller is a party; or
(k) take any action which, if taken or incurred prior to the
date of this Agreement, would be required to be disclosed on any
Schedule hereto.
5.2. Preservation of Business. The Seller shall utilize its best
efforts to carry on the business diligently and substantially in the same manner
as heretofore conducted and shall use its best efforts to keep its business
organizations intact, including its present employees and present relationships
with suppliers, clients and customers and others having business relations with
the Seller.
5.3. Insurance and Maintenance of Property. The Seller shall keep in
full force and effect insurance covering the Included Assets and the Seller's
business not less in amount and coverage than that now maintained by the Seller
but in no event less than prudent industry standards and will operate, maintain
and repair all of such property in a careful, prudent and efficient manner.
5.4. Full Access. Representatives of the Buyer shall have full access
at all reasonable times to all premises, properties, books, records, contracts,
tax records, personnel and documents of the Seller. Such examination and
investigation by the Buyer, and any discovery of facts resulting therefrom,
shall not affect the warranties and representations of the Seller contained in
this Agreement.
5.5. Books, Records and Financial Statements. The Seller shall prepare
its financial statements in accordance with GAAP consistently applied, and on a
basis consistent with the past practices of the Seller. Said financial
statements shall fairly and accurately reflect the operations of the business.
The Seller shall furnish to the Buyer promptly, as available, monthly financial
statements and operating reports applicable to the Seller, all of which shall be
prepared in accordance with GAAP consistently applied and shall present fairly
the financial position and results of operations of the Seller at the dates and
for the periods indicated.
5.6. Other Governmental Filings. The Seller will cooperate with the
Buyer in making, as soon as practicable following the execution hereof, all
filings required by any government agency in connection with the transactions
contemplated by this Agreement. All information provided by the Seller in
connection with such filings will be true, accurate and complete and will comply
with all applicable Laws.
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