Exhibit 10.142
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made as of July 24,
2002, by and among ASSOCIATED SOCIAL RESOURCES, INC., a California corporation
with its principal place of business located at 11835 West Olympic Boulevard,
Suite 1090 East Tower, Los Angeles, California ("Seller"), the Persons set forth
on the Schedule of Stockholders attached hereto (collectively, the
"Stockholders" and each, individually, a "Stockholder"), and ASSOCIATED STAFFING
RESOURCES, INC., a California corporation which is a wholly owned subsidiary of
OptimumCare Corporation with its principal place of business located at 0000
Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxxxx 00000 and assigns ("Buyer"). Seller, the
Stockholders and Buyer shall be collectively referred to herein as the "Parties"
or individually as a "Party." Certain capitalized terms used herein are defined
in Article 11 hereof.
On the terms and subject to the conditions set forth in this Agreement,
Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, all
of the assets and properties (operating as a going concern) of Seller, excepting
only Seller's cash and accounts receivable created up until the last full
business day prior to the Closing Date (the "Purchase").
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
1. PURCHASE AND SALE OF THE BUSINESS
1.1 Purchase of Assets and Liabilities.
(a) Purchase of the Assets. On the terms and subject to the
conditions contained in this Agreement, at the Closing (as defined below),
Seller shall (and the Stockholders shall cause Seller to) sell, convey, assign,
transfer and deliver to the Buyer or its assignee(s), free and clear of all
Liens, excepted Permitted Liens, by appropriate warranty deeds, warranty bills
of sale, assignments and other instruments satisfactory to Buyer and its
counsel, all right, title and interest of every kind and nature in the assets
and property owned or leased by Seller excepting only Seller's cash and accounts
receivable created up until the last full business day prior to the Closing Date
(including indirect and other forms of beneficial ownership) as of the Closing
whether tangible, intangible, real or personal and wherever located and by
whomever possessed, and including all related goodwill, including, without
limitation, all of the following assets of Seller (the "Business Assets"):
(i) all accounts and notes receivable generated after the
last full business day before the Closing Date;
(ii) all prepayments, prepaid expenses and all interests in
insurance policies (including, without limitation, life insurance policies but
specifically excluding any employee benefit plans maintained pursuant to
insurance policies);
(iii) all equipment, fixtures, leasehold improvements, trade
fixtures, computers and related software and documentation, furniture, vehicles,
supplies and other tangible personal property;
(iv) all office and production supplies, spare parts, other
miscellaneous supplies and other tangible property of any kind wherever located;
(v) all of the proprietary and intellectual rights
(including, without limitation, the Proprietary Rights (as defined in Section
4.12 below)) and all of Seller's other intangible property;
(vi) subject to the provisions of Section 2.1(c)(ii) below,
all rights under contracts, agreements, licenses, leases (for both real and
personal property), and other legally binding arrangements, including, but not
limited to, hospital contracts, whether oral or written, (A) that are listed or
described on Contract Schedule attached hereto and (B) if not so listed or
described, that are otherwise owned or held by Seller (collectively, the
"Business Contracts"), and all rights under commitments and orders for services
(including professionals, advertising, maintenance and other incidental
services) relating to the Business (collectively, the "Purchase Orders" and
together with the Business Contracts, the "Contracts"); provided that, rights
under the Business Contracts set forth in Clause B above and rights under the
Purchase Orders shall be included in the Business Assets if and only if so
elected by Buyer (at its sole discretion) at any time;
(vii) all rights to receive and retain mail, payments of
accounts receivable, and other communications created after the last full
business day prior to the Closing Date;
(viii) all lists and records pertaining to customers,
Employees, suppliers, distributors, personnel and agents and all other books,
ledgers, files, documents, Pricing Schedules (as defined below), employee and
contractor lists, manuals, correspondence, drawings and specifications, computer
programs, software and business records of every kind and nature;
(ix) all creative materials (including, without limitation,
photographs, films, art work, color separations and the like), recruiting
processes, advertising and promotional materials and all other printed or
written materials;
(x) all claims, refunds, credits, rights of recovery and
rights of set-off of every kind and nature which are attributable to events
which occur following the Closing;
(xi) all real property owned or leased by Seller and all of
Seller's rights to buildings and other improvements located on such owned or
leased property, and all of Seller's right, title and interest in and to all
easements, rights of way and all of Seller's right, title and interest in and to
all appurtenances to such owned or leased property; and,
(xii) the name "Associated Social Resources" and all goodwill
as a going concern of Seller, all goodwill associated with the name and the
items in clauses (v) and (viii) above and all other intangible property of
Seller, free and clear of all Liens.
(b) Liabilities. Buyer will not assume or in any way become
liable for, and Stockholders shall undertake responsibility for, any of Seller's
debts, liabilities or
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obligations of any nature whatsoever, whether accrued, absolute or contingent,
whether known or unknown, whether disclosed or undisclosed, whether due or to
become due and whether related to the Business Assets or otherwise, any
underestimates of insurance premiums or insurance audit amounts due, which
liabilities arose in whole or in part prior to the Closing Date.
1.2 Purchase Price. The consideration paid by Buyer to Seller for the
Business Assets (the "Purchase Price") will be:
(a) Delivery on the Closing Date of a check in the amount of one
hundred fifty thousand dollars ($150,000.00) payable to NABCO Assignments, Ltd.
for the purchase of an annuity from Allstate Insurance Company which provide for
periodic guaranteed payments of $1,929.64 per month beginning January 15, 2015
for twenty years and a guaranteed payment of $150,000 on December 15, 2034
("Annuity") together with a Non-Qualified Assignment and Release assigning the
Annuity to Seller as payment for the Non-Compete Agreement (as hereinafter
defined);
(b) Fifty thousand dollars ($50,000.00) in immediately available
funds payable on August 31, 2003 (the "Hold Back") as payment for the tangible
and intangible assets of Seller other than goodwill; and
(c) Eighty two thousand five hundred dollars ($82,500.00) in
contingent payments (the "Earn Out") as payment for the goodwill of Seller, due
as follows:
(i) $25,000 payable on August 31, 2003 ("First Year Earn
Out") contingent upon Net Sales for the first 1-year following the Closing
meeting or exceeding $3,010,713.95;
(ii) $27,500 payable on August 31, 2004 ("Second Year Earn
Out") contingent upon Net Sales for the second 1-year following the Closing
meeting or exceeding $3,161,249.65; and
(iii) $30,000 payable on August 31, 2005 ("Third Year Earn
Out") contingent upon Net Sales for the third 1-year following the Closing
meeting or exceeding $3,319,312.13.
For purposes of this Agreement, Net Sales means gross sales less returns and
allowances and cash discounts allowed.
1.3 Closing.
(a) Subject to the conditions contained in this Agreement, the
closing of the transactions contemplated by this Section 1 (the "Closing") will
occur at the offices of Xxxxxxxxxxx Xxxxx & Xxxxxxxx, LLP on July 29, 2002 (the
"Closing Date").
(b) Subject to the conditions contained in this Agreement, the
parties agree to consummate the following deliveries on the Closing Date:
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(i) Buyer will assign the Annuity and pay the Hold Back and
Earn Out when due;
(ii) There shall be delivered to Buyer, Seller and the
Stockholders, as the case may be, the opinions, certificates and other documents
and instruments to be delivered under Article 2 hereof; and
(iii) Seller shall (and the Stockholders shall cause Seller
to) deliver or cause to be delivered to Buyer such appropriately executed
instruments of sale, assignment, transfer and conveyance in form and substance
reasonably satisfactory to Buyer and its counsel evidencing and effecting the
sale and transfer to Buyer of the Business Assets, as set forth on Schedule 1.3.
2. CONDITIONS TO CLOSING
2.1 Conditions to Buyer's Obligations at the Closing. The obligation
of Buyer to consummate the transactions contemplated by Article 1 of this
Agreement is subject to the satisfaction of the following conditions on or
before the Closing Date:
(a) the representations and warranties set forth in Articles 4
and 5 hereof and all other representations and warranties of Seller and the
Stockholders set forth in this Agreement will be true and correct in all
material respects at and as of the Closing Date as though then made and, subject
to appropriate adjustment for matters that are in whole or in part dependent
upon the passage of time, as though the Closing Date were substituted for the
date of this Agreement throughout such representations and warranties (without
taking into account any disclosures made by Seller or the Stockholders to Buyer
pursuant to Section 4.22 or Section 5.5 hereof);
(b) the Stockholders and Seller will have performed and complied
in all material respects with all of the covenants and agreements required to be
performed by them under this Agreement prior to the Closing;
(c) Seller shall have obtained consents, approvals and licenses
(i) from all governmental agencies that are required for the consummation of the
transactions contemplated hereby or the other agreements contemplated hereby and
(ii) from those third parties required (for the consummation of the transactions
contemplated hereby or other agreements contemplated hereby) in order to prevent
a breach of, default under or a termination, change in terms or conditions or
modification of, any of the Contracts or any other instrument, contract, lease,
license or other agreement to which Seller or any of its Subsidiaries are a
party;
(d) no material adverse change shall have occurred since October
31, 2001 in the business, operations or condition, financial or otherwise, of
Seller or the Business, and no event shall have occurred since October 31, 2001,
which could reasonably be expected to have a material adverse effect on the
business, operations or condition, financial or otherwise, of Seller or the
Business;
(e) no suit, action or other proceeding, injunction, final
judgment, order or decree relating thereto, will be pending or threatened before
any court or any
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governmental or regulatory body or authority which is reasonably likely to
restrain or prohibit the transactions contemplated hereby or to result in
material damages in connection with the transactions contemplated hereby or
which could have a materially adverse effect on such transactions or the
business, financial condition, operating results, assets, operations or business
prospects of Seller or the Business; no investigation that could result in any
such suit, action or proceeding shall be pending nor threatened and no such
judgment, order or decree will have been entered and not subsequently dismissed
with prejudice;
(f) on or prior to the Closing Date, the Stockholders will have
delivered to Buyer all of the following:
(i) a certificate from the Stockholders in the form set forth
in Exhibit D attached hereto, dated the Closing Date, stating that the
preconditions specified in Sections 2.1(a)-(e), inclusive, have been satisfied;
(ii) a certificate from Seller in the form set forth in
Exhibit E attached hereto, dated the Closing Date, stating that the
preconditions specified in Sections 2.1(a)-(e), inclusive, have been satisfied;
(iii) copies of all lien releases, third party and
governmental consents, approvals, licenses, permits and filings to be obtained
by Seller in connection with the consummation of the transactions contemplated
herein in form reasonably satisfactory to Buyer and its counsel;
(iv) certified copies of the resolutions of Seller' board of
directors and stockholders or members approving the transactions contemplated by
this Agreement;
(v) executed employment agreement ("Employment Agreement")
between Buyer and Xxxxx X. Xxxxx which will require Xx. Xxxxx to devote a
minimum of 20 and no more than 30 hours per week to the Business, for a 3-year
term, automatically extended renewable thereafter on a month-to-month basis
unless notice is given by either party to the other party that the agreement
will not be extended, with compensation, including any and all benefits to be
$102,000 in the first year, $107,000 in the second and $112,000 in the third
year and which shall provide for the grant to Xx. Xxxxx of stock options on
100,000 shares of the common stock of OptimumCare Corporation. The stock option
will be five (5) year options exercisable at the greater of (i) fifty cents
($0.50) or (ii) market value as of the Closing Date. On the first anniversary of
the Closing Date, the stock options will begin vesting in increments of 50,000
every 1-year;
(vi) executed non-compete agreement ("Non-Compete Agreement")
which shall be effective during the two year period following the termination of
the employment of Xxxxx Xxxxx by Buyer but no longer that the five (5) year
period following the Closing covering the territory within a 10-mile radius of
any of the clients that have been served by Seller or will be served by Buyer;
and
(vii) such other documents or instruments as Buyer reasonably
requests to effect the transactions contemplated by this Agreement.
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(g) Seller and the Stockholders shall have delivered or cause to
be delivered to Buyer such appropriately executed instruments of sale,
assignment, transfer and conveyance in form and substance reasonably
satisfactory to Buyer and its counsel evidencing and effecting the sale and
transfer to Buyer of the Business Assets;
(h) all proceedings to be taken by Seller and the Stockholders in
connection with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to be delivered
by Seller and the Stockholders to effect the transactions contemplated hereby
reasonably requested by Buyer will be satisfactory in form and substance to
Buyer and its counsel.
Any condition specified in this Section 2.1 may be waived by Buyer;
provided that no such waiver will be effective unless it is set forth in a
writing executed by Buyer.
2.2 Conditions to Seller's and Stockholders' Obligations at the
Closing. The obligation of Seller and the Stockholders to consummate the
transactions contemplated by Section 1 is subject to the satisfaction of the
following conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article 6
hereof will be true and correct in all material respects at and as of the
Closing Date as though then made and as though the Closing Date were substituted
for the date of this Agreement throughout such representations and warranties
(without taking into account any disclosures made by the Buyer to the
Stockholders or Seller pursuant to Section 6.7 hereof);
(b) Buyer will have performed and complied in all material
respects with all of the covenants and agreements required to be performed by it
under this Agreement prior to the Closing;
(c) Buyer shall have obtained consents and approvals (i) from all
governmental agencies that are required for the consummation of the transactions
contemplated hereby or the other agreements contemplated hereby and (ii) from
those third parties required in order to prevent a breach of, default under or a
termination, change in terms or conditions or modifications of, any instrument,
contract, lease, license or other agreement to which the Buyer or any of its
Subsidiaries is a party;
(d) no suit, action or other proceeding, injunction, final
judgment, order or decree relating thereto, will be pending or threatened before
any court or any governmental or regulatory body or authority which is
reasonably likely to restrain or prohibit the transactions contemplated hereby
or to result in material damages in connection with the transactions
contemplated hereby or which could have a materially adverse effect on such
transactions or the business, financial condition, operating results, assets,
operations or business prospects of the Buyer; no investigation that could
result in any such suit, action or proceeding shall be pending nor threatened
and no such judgment, order or decree will have been entered and not
subsequently dismissed with prejudice;
(e) on or prior to the Closing Date, Buyer will have delivered to
Seller all of the following:
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(i) certificates from Buyer in the form set forth in Exhibit
H attached hereto, dated the Closing Date, stating that the preconditions
specified in Sections 2.2(a) - (d), inclusive, have been satisfied; and
(ii) certified copies of the resolutions of Buyer's board of
directors approving the transactions contemplated by this Agreement;
(iii) such other documents or instruments as Seller
reasonably requests to effect the transactions contemplated hereby;
(iv) executed Employment Agreement; and
(v) executed Non-Compete Agreement.
(f) all proceedings to be taken by Buyer in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to be delivered by Buyer to
Seller to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Seller and its counsel.
Any condition specified in this Section 2.2 may be waived by Seller
and the Stockholders; provided that no such waiver will be effective unless it
is set forth in a writing executed by Seller and the Stockholders.
3. COVENANTS PRIOR TO CLOSING
3.1 Affirmative Covenants of Seller and the Stockholders. Prior to
the Closing, except as otherwise expressly provided herein, Seller will (and, in
the case of clauses (h) and (i) hereof, in addition to Seller, each Stockholder
will):
(a) conduct the Business (including, without limitation, its cash
management practices, the collection of receivables, payment of payables and
incurrence of capital expenditures) only in the usual and ordinary course of
business in accordance with past custom and practice and keep its organization
and properties intact, including its present business operations, physical
facilities, working conditions and employees and its present contracts and
relationships with lessors, licensors and customers);
(b) use its best efforts to preserve present business
relationships with all material customers of Seller, to the extent such
relationships are beneficial to the Business;
(c) maintain its books, accounts and records in accordance with
past custom and practice as used in the preparation of the Financial Statements
(as defined in Section 4.5);
(d) maintain in full force and effect the existence of all
Proprietary Rights (as defined in Section 4.12);
(e) encourage Seller's professionals and other employees to
continue their employment with Seller before the Closing and with Buyer after
the Closing;
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(f) comply with all legal requirements and contractual
obligations applicable to the operations of the Business and pay all applicable
Taxes;
(g) promptly inform Buyer in writing of any variances from the
representations and warranties contained anywhere in this Agreement or any
breach of any covenant hereunder by any of Seller or any Stockholder;
(h) cooperate with Buyer and use best efforts to cause the
conditions to Buyer's obligation to close specified in Section 2.1 above to be
satisfied and execute and deliver such further instruments of conveyance and
transfer and take such additional action as Buyer may reasonably request to
effect, consummate, confirm or evidence the transactions contemplated by this
Agreement;
(i) permit Buyer and its employees, agents, and accounting and
legal representatives that have executed confidentiality agreements to have
reasonable access, upon reasonable notice, to its books, records, key personnel,
independent accountants, legal counsel, facilities, equipment and other things
reasonably related to Seller or the Business; and
(j) use its best efforts to support Buyer's efforts to retain the
Business' professionals and customers including, without limitation, requiring
its directors, officers and key employees to attend meetings and participate in
discussions with Buyer and the Business' customers to retain such customers and
professionals.
3.2 Negative Covenants of Seller and the Stockholders. Prior to the
Closing, without Buyer's prior written consent, the Stockholders will not permit
Seller to, and Seller will not:
(a) take any action that would require disclosure under Section
4.7 below;
(b) redeem or otherwise acquire, any shares of its capital stock,
or make any loan or enter into any transaction with or distribute any assets or
property to any of its officers, directors, stockholders or Affiliates;
(c) sell, lease, license or otherwise dispose of any interest in
any of the Business Assets, other than sales of its products and other property
in the ordinary course of business consistent with past practice, or permit,
allow or suffer any of the assets to be subjected to any Lien, other than
Permitted Liens;
(d) terminate or modify any of the Contracts or any other
material contract or any government license, permit or other authorization,
outside the ordinary course of business;
(e) enter into any new, or amend any existing, material
contracts, agreements or commitments, outside the ordinary course of business;
(f) institute any material change in the conduct of its business,
or any change in its methods of purchase, sale, lease, management, marketing,
operation or accounting; or
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(g) take or omit to take any action, outside the ordinary course
of business, which could be reasonably anticipated to cause a material adverse
change prior to Closing in Seller's or Business's assets or financial condition.
3.3 Exclusivity. Unless this Agreement is previously terminated by
Seller and Stockholders or by Buyer on account of the failure of a material
condition or for the default of the other, for thirty (30) days after the
execution of this Agreement, neither Seller nor any Stockholder nor any
representative of the foregoing Stockholder or Seller shall, directly or
indirectly, through any officer, director, employee, agent or otherwise,
solicit, initiate or participate in any discussions or negotiations regarding,
or furnish to any other Person any information with respect to, or otherwise
cooperate in any way with, any proposal or offer from any Person (including any
of such Person's officers, directors, employees, agents or other
representatives) relating to any sale, liquidation, dissolution,
recapitalization, restructuring or refinancing of Seller or the Business or any
acquisition of the issued or unissued capital stock or other securities of
Seller or any substantial portion of the Business Assets (including any
acquisition structured as a merger, consolidation or share exchange) (each of
the foregoing an "Acquisition Proposal"). Seller and the Stockholders represent
and warrant that they have terminated all contacts, discussions and negotiations
with all third parties regarding any Acquisition Proposal. Seller and the
Stockholders will promptly notify Buyer if any Acquisition Proposal, or any
inquiry or contact with any Person with respect thereto (whether or not in
writing), is made, and will apprise Buyer as to all of the terms and details of
such Acquisition Proposal or inquiry or contact.
3.4 Covenants of Buyer. Prior to the Closing, Buyer will:
(a) inform Seller in writing of any material variances from the
representations and warranties contained in Article 6 hereof or any breach of
any covenant hereunder by Buyer; and
(b) cooperate with Seller and the Stockholders and use best
efforts to cause the conditions precedent to Seller's and the Stockholder's
obligation to close specified in Section 2.2 above to be satisfied.
4. REPRESENTATIONS AND WARRANTIES OF WITH RESPECT TO THE COMPANY
As a material inducement to Buyer to enter into this Agreement,
Seller and each of the Stockholders, jointly and severally, hereby represent and
warrant that:
4.1 Organization and Corporate Power. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and is qualified to do business and is in good standing in every
jurisdiction in which the nature of its business or its ownership of property
requires it to be qualified, which jurisdictions are set forth on Schedule 4.1
hereto. Seller has all requisite corporate power and authority and all licenses,
permits and authorizations necessary to own and operate its properties and to
conduct its business as presently conducted and as proposed to be conducted. The
copies of Seller's articles of incorporation and by-laws which have been
furnished to Buyer reflect all amendments made
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thereto at any time prior to the date of this Agreement and are correct and
complete in all respects. Seller has no Subsidiaries.
4.2 Authorization of Transactions. Seller has all requisite corporate
power and authority to deliver this Agreement and to consummate the transactions
contemplated hereby. The board of directors and the stockholders of Seller have
duly approved this Agreement and have duly authorized the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby.
No other corporate proceedings on the part of Seller are necessary to approve
and authorize the execution and delivery of this Agreement. This Agreement and
the other documents contemplated hereby to which Seller is a party have been
duly executed and delivered by Seller and constitute the valid and binding
agreement of Seller, enforceable against Seller in accordance with its terms.
4.3 Absence of Conflicts. Except as set forth on Schedule 4.3 hereto,
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby (including, without limitation, the sale
and transfer of the Business Assets to Buyer) do not and will not (a) conflict
with or result in any breach of any of the provisions of, (b) constitute a
default under, (c) result in a violation of, (d) give any third party or
governmental authority the right to terminate or to accelerate any obligation
under, (e) result in the creation of any Lien, security interest, charge or
encumbrance upon Seller's capital stock or Business Assets under, or (f) require
any authorization, consent, approval, exemption or other action by or notice to
or filing with any court or other governmental body under, the provisions of the
articles of incorporation or by-laws of Seller or any contract or any other
indenture, mortgage, material lease, loan agreement or other material agreement
or instrument to which Seller (or the Business) are bound or affected, or any
law, statute, rule or regulation or any judgment, order or decree to which
Seller (or the Business) are subject.
4.4 Capitalization. Schedule 4.4 attached hereto accurately sets
forth the authorized and outstanding capital stock of Seller and the name and
number of shares of capital stock held by each stockholder of Seller. All of the
issued and outstanding shares of Seller's capital stock have been duly
authorized, are validly issued, fully paid and nonassessable, are not subject
to, nor were they issued in violation of, any preemptive rights, and are owned
of record by the Stockholders, as fully described on Schedule 4.4. Except for
this Agreement and as set forth in the stockholders agreements described on
Schedule 4.4, there are no outstanding or authorized options, warrants, rights,
contracts, calls, puts, rights to subscribe, conversion rights or other
agreements or commitments to which Seller or any Stockholder is a party or which
are binding upon Seller or any Stockholder providing for the issuance,
disposition or acquisition of any of Seller's capital stock or for the sharing
of proceeds received in connection with the sale or disposition of any of
Seller's capital stock. There are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to Seller. There are
no voting trusts, proxies or any other agreements or understandings with respect
to the voting of the capital stock of Seller. Seller is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock.
4.5 Financial Statements. Seller has furnished Buyer with copies
(attached hereto as Schedule 4.5) of its balance sheets as of October 31, 2001,
2000 and 1999 and the related statements of income for the years ended October
31, 2001, 2000 and 1999 (including in
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all cases the notes thereto, if any). Each of the foregoing financial statements
(collectively, the "Financial Statements") is consistent with the books and
records of Seller and presents fairly the Business's financial position and
results of operations as of and for the periods referred to therein, all in
accordance with generally accepted accounting principles ("GAAP"). Seller shall
furnish monthly statements of income and cash flow in accordance with GAAP for
every month end until the month ending immediately prior to Closing.
4.6 Absence of Undisclosed Liabilities. Seller and the Business have
no obligations or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known, whether due or to become due
and regardless of when or by whom asserted) arising out of transactions entered
into at or prior to the Closing, or any action or inaction at or prior to the
Closing, or any state of facts existing at or prior to the Closing, except (i)
obligations under contracts or commitments described on Schedule 4.11 hereto or
any other Schedule hereto or under contracts and commitments entered into in the
ordinary course of business which are not required to be disclosed thereon (but,
in either case, not liabilities for breaches thereof), (ii) liabilities
reflected on the balance sheet for the most recent month furnished to Buyer in
accordance with Section 4.5 ("Latest Balance Sheet"), (iii) liabilities which
have arisen after the date of the Latest Balance Sheet in the ordinary course of
business or otherwise in accordance with the terms and conditions of this
Agreement (none of which is a liability for breach of contract, breach of
warranty, tort or infringement, or a claim, lawsuit or environmental liability),
and (iv) liabilities otherwise expressly set forth on Schedule 4.6 hereto.
4.7 Absence of Certain Developments. Except as: (i) set forth on
Schedule 4.7; (ii) expressly contemplated by this Agreement and (iii) heretofore
disclosed to Buyer in writing, since October 31, 2001, Seller, its Subsidiaries
and the Business have not:
(a) suffered a material adverse change in the business, financial
condition, operating results, earnings, assets, customer, supplier or employee
relations or business condition of Seller or the Business;
(b) redeemed or purchased, directly or indirectly, any shares of
its capital stock;
(c) borrowed any amount or issued or exchanged any notes or other
evidences of any Indebtedness for Borrowed Money or incurred or become subject
to any obligations or liabilities (whether absolute or contingent), except
current liabilities incurred in the ordinary course of business consistent with
past practice and liabilities under contracts entered into in the ordinary
course of business consistent with past practice;
(d) discharged or satisfied any Lien or encumbrance, or paid any
obligation or liability, other than liabilities paid in the ordinary course of
business, or prepaid any amount of Indebtedness for Borrowed Money, except as
set forth on Schedule 4.7(d);
(e) mortgaged, pledged or subjected to any Lien, charge or any
other encumbrance, any portion of its properties or assets, except Liens for
current taxes and assessments not yet due and payable;
(f) sold, leased, assigned or transferred (including, without
limitation,
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transfers to stockholders or any employees or Affiliates of any Stockholder) any
tangible assets or Proprietary Rights or other intangible assets, except in the
ordinary course of business consistent with past practice, or canceled without
fair consideration any debts or claims owing to or held by it, or disclosed any
proprietary confidential information to any Person;
(g) suffered any theft, damage, destruction, casualty loss or
other extraordinary loss to its tangible assets exceeding $5,000, whether or not
covered by insurance;
(h) entered into, amended or terminated any material lease,
contract, agreement or commitment, or taken any other action or entered into any
other transaction other than in the ordinary course of business and in
accordance with past custom and practice, or entered into any transaction with
any Insider (as defined in Section 4.20 below) other than in the ordinary course
of business and in accordance with past custom and practice, or entered into any
other transaction, other than in the ordinary course of business and in
accordance with past custom and practice, except as set forth on Schedule
4.7(h);
(i) entered into or renegotiated any employment contract or
collective bargaining agreement, written or oral, or made or granted any
increase in any employee benefit plan or arrangement, or amended or terminated
any existing employee benefit plan or arrangement or adopted any new employee
benefit plan or arrangement, confidentiality/nondisclosure and non-competition
agreement with Seller prior to the Closing Date;
(j) changed the employment terms for any employee or agent or
made or granted any bonus or any wage, salary or compensation increase to any
director, officer, employee or sales representative, group of employees or
consultant, other than in the ordinary course of business and in accordance with
past custom and practice, except as set forth on Schedule 4.7(j);
(k) conducted the Business (including, without limitation,
pricing, incurrence of capital expenditures, credit practices and maintenance
and repair of assets) other than in the ordinary course of business in
accordance with past custom and practice;
(l) made any capital expenditures (or commitments therefore) in
excess of $5,000, either individually or in the aggregate;
(m) made any loans or advances to, or guarantees for the benefit
of, any Persons in excess of $5,000; or
(n) entered into any lease of capital equipment or real estate
involving rental in excess of $2,500 per annum.
4.8 Assets.
(a) Owned Real Properties. Seller does not and has never owned
any U.S. real property and foreign real property.
(b) Leased Properties. Schedule 4.8 sets forth a list of all of
the leases
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and subleases ("Leases") and each leased and subleased parcel of real property
in which Seller has a leasehold and subleasehold interest (the "Leased Real
Property"). Each of the Leases is in full force and effect and Seller has a
valid and existing leasehold or subleasehold interest under each of the Leases.
Seller has delivered to Buyer complete and accurate copies of each of the Leases
described in the Schedule 4.8. With respect to each Lease listed on the Schedule
4.8: (i) the Lease is legal, valid, binding, enforceable and in full force and
effect; (ii) the Lease will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the Closing; (iii)
neither Seller nor, to the knowledge of Seller and the Stockholders, any other
party to the Lease is in breach or default, and no event has occurred which,
with notice or lapse of time, would constitute such a breach or default or
permit termination, modification or acceleration under the Lease; (iv) no party
to the Lease has repudiated in writing any provision thereof; (v) there are no
disputes, oral agreements, or forbearance programs in effect as to the Lease;
(vi) the Lease has not been modified in any respect, except to the extent that
such modifications are disclosed by the documents delivered to Buyer; (vii)
Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the Lease; and (viii) the Lease is fully assignable
to Buyer without the necessity of any consent or Seller shall obtain all
necessary consents prior to the Closing.
(c) Personal Property. Except as set forth on Schedule 4.8,
Seller has good and marketable title to, or a valid leasehold interest in, the
personal properties and assets, tangible or intangible, used by it, or shown on
the Latest Balance Sheet or acquired thereafter, free and clear of all Liens,
except for properties and assets disposed of in the ordinary course of business
since the date of the Latest Balance Sheet and except for Liens disclosed on the
Latest Balance Sheet (including any notes thereto) and Liens for current
property taxes not yet due and payable.
(d) Condition of Assets. Buildings and all material components of
all buildings, structures and other improvements included within the Real
Property and all of Seller's machinery, equipment and other tangible assets and
personal property used by Seller in the conduct of the Business are in good
condition and repair, except for ordinary wear and tear not caused by neglect,
and are useable in the ordinary course of business.
(e) Title to Business Assets. Seller owns good and marketable
title to, a valid leasehold interest in or license to use all of the Business
Assets, free and clear of all Liens, except Permitted Liens. At the Closing,
Seller shall (and the Stockholders shall cause Seller to) convey or transfer or
cause to be conveyed or transferred to Buyer good and marketable title or
license to the Business Assets.
4.9 Environmental and Safety Matters.
(a) Except as set forth in Schedule 4.9, Seller, its Subsidiaries
and the Business have complied and are in compliance with all Environmental and
Safety Requirements (as defined in Section 4.9(i) below).
(b) Without limiting the generality of the foregoing, Seller
(with respect to the Business) have obtained and complied with, and are in
compliance with, all permits, licenses and other authorizations that may be
required pursuant to Environmental and
13
Safety Requirements for the occupation of its facilities and the operation of
its Business; a list of all such permits, licenses and other authorizations is
set forth on Schedule 4.9 attached hereto.
(c) Seller has not received any written or oral notice, report or
other information regarding any actual or alleged violation of Environmental and
Safety Requirements or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to Seller or its
facilities and arising under Environmental and Safety Requirements.
(d) Except as set forth on Schedule 4.9, to the best of the good
faith knowledge of Seller none of the following exists at any property or
facility leased or used by Seller or the Business: (i) underground storage
tanks; (ii) asbestos-containing material in any form or condition; (iii)
materials or equipment containing polychlorinated biphenyls; or (iv) landfills,
surface impoundments, or other disposal areas.
(e) Seller has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any substance,
including without limitation any hazardous or biological substance, medical
waste, or owned or operated any property or facility (and no such property or
facility is contaminated by any such substance) in violation of applicable law
or in a manner that has given or could give rise to liabilities of Seller or the
Business, including any liability for corrective action costs, personal injury,
property damage, response costs, natural resources damages or attorney fees
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), or the Resource Conservation and Recovery
Act, as amended ("RCRA"), or any other Environmental and Safety Requirements.
(f) Except as set forth in Schedule 4.9, no facts, events or
conditions relating to the past or present facilities, properties or operations
of Seller or the Business will prevent, hinder or limit continued compliance
with Environmental and Safety Requirements, give rise to any investigatory,
remedial or corrective obligations pursuant to Environmental and Safety
Requirements, or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental and Safety
Requirements, including, without limitation, any relating to onsite or offsite
releases or threatened releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.
(g) Neither this Agreement nor the consummation of the
transactions that are the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to, or consent
of, government agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental and
Safety Requirements.
(h) Seller (with respect to the Business) has not, either
expressly or by operation of law, assumed or undertaken any liability,
including, without limitation, any obligation for corrective or remedial action,
of any other Person relating to Environmental and Safety Requirements.
(i) "Environmental and Safety Requirements" means all applicable
14
federal, state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including, without limitation, all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as
now in effect.
4.10 Taxes.
(a) Seller has filed all Tax Returns (or has filed valid
extensions with respect to such Tax Returns) which it is required to file under
applicable laws and regulations and all such Tax Returns are complete and
correct in all material respects and have been prepared in compliance with all
applicable laws and regulations in all material respects; Seller has paid all
Taxes due and owing by it (whether or not such Taxes are required to be shown on
a Tax Return) and has withheld and paid over to the appropriate taxing authority
all Taxes which they are required to withhold from amounts paid or owing to any
employee, equity holder, creditor, independent contractor or other third party.
Seller, has not waived any statute of limitations with respect to any Taxes or
agreed to any extension of time with respect to any Tax assessment or
deficiency. Seller has not incurred any liability for Taxes other than in the
ordinary course of business. The assessment of any additional Taxes for periods
for which Tax Returns has been filed by Seller shall not exceed the recorded
liability therefore on the most recent balance sheet of Seller (excluding any
amount recorded which is attributable solely to timing differences between book
and Tax income). Except as set forth in Schedule 4.10 hereto, no foreign,
federal, state or local tax audits or administrative or judicial proceedings are
pending or being conducted with respect to Seller, no information related to Tax
matters has been requested by any foreign, federal, state or local taxing
authority and no written notice indicating an intent to open an audit or other
review has been received by Seller from any foreign, federal, state or local
taxing authority. Seller is not currently the beneficiary of any extension of
time within which to file any Tax Returns; and there are no material unresolved
questions or claims concerning Seller's tax liability.
(b) Seller has not made an election under Code Section 341(f).
Seller is not liable for the Taxes of another Person under (a) Treasury
Regulation Section 1.1502-6 (or comparable provisions of state, local or foreign
law), (b) as a transferee or successor, (c) by contract or indemnity or (d)
otherwise. Seller is not a party to any tax sharing agreement or "tax
allocation" agreement. Seller has disclosed on its federal income Tax Returns
any position taken for which substantial authority (within the meaning of Code
Section 6662(d)(2)(B)(i)) did not exist at the time the return was filed. Seller
has not made any payments, are not obligated to make payments or are a party to
an agreement that could obligate them to make any payments that would be
deductible under Code Section 280G.
(c) No claim has ever been made by a taxing authority in a
jurisdiction where Seller does not file tax returns that Seller is or may be
subject to taxes assessed by such jurisdiction.
15
(d) There are no liens for Taxes (other than for current Taxes
not yet due and payable) upon the Business Assets or any other assets of Seller.
(e) Except as set forth in Schedule 4.10 hereto, Seller will not
be required (i) as a result of a change in method of accounting for a taxable
period ending on or prior to the Closing Date, to include any adjustment in
taxable income for any taxable period (or any portion thereof) or (ii) as a
result of any "closing agreement," as described in Code Section 7121 (or any
corresponding provision of state, local or foreign income Tax law), to include
any item of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date.
(f) Seller has not been a member of an Affiliated Group or filed
or been included in a combined, consolidated or unitary income Tax Return, other
than one filed by Seller.
4.11 Contracts and Commitments.
(a) Except as specifically contemplated by this Agreement or as
set forth on any Schedule attached to this Agreement, neither Seller nor any of
its Subsidiaries is a party to or bound by, whether written or oral, any (with
respect to the Business): (i) collective bargaining agreement or contract with
any labor union, whether formal or informal; (ii) contract for the employment of
any officer, individual employee or group of employees or other person on a
full-time, part-time or consulting basis or any severance agreements; (iii)
agreement or indenture relating to the borrowing of money or to mortgaging,
pledging or otherwise placing a Lien on any of the Business Assets; (iv)
agreements with respects to the lending or investing of funds; (v) guaranty of
any Indebtedness for Borrowed Money or otherwise, other than endorsements made
for collection; (vi) license, sublicense or royalty agreements; (vii) lease or
agreement under which Seller is lessee of, or holds or operates, any personal
property owned by any other party for which annual rental exceeds $2,500; (viii)
lease or agreement under which Seller is lessor of or permits any third party to
hold or operate any property, real or personal, owned or controlled by it for
which annual rental exceeds $2,500; (ix) contract or group of related contracts
with the same party for the purchase or sale of raw materials, commodities,
supplies, products or other personal property or for the furnishing or receipt
of services which either calls for performance over a period of more than
3-months or involves a sum in excess of $2,500 or which may not be terminable
with less than 3-months notice; (x) contract relating to the distribution,
marketing or sales of its products or services (including contracts to provide
advertising allowances or promotional services) involving more than $2,500; (xi)
franchise agreements; (xii) contract which prohibits them from freely engaging
in business anywhere in the world; (xiii) agreements, contracts or
understandings pursuant to which Seller subcontracts work to third parties; or
(xiv) any other agreement material to Seller or the Business, whether or not
entered into in the ordinary course of business.
(b) Except for this Agreement, any schedule hereof and the
transactions contemplated hereby, Seller is not a party to or bound by any
agreement, whether written or oral, pertaining to any sale, liquidation,
dissolution, recapitalization, restructuring or refinancing of Seller or any
acquisition of the issued or unissued capital stock or other securities of
Seller or any substantial portion of the Business Assets (including any
acquisition structured
16
as a merger, consolidation or share exchange).
(c) Except as specifically contemplated by this Agreement, or
disclosed on Schedule 4.11, (i) no contract or commitment required to be
disclosed on Schedule 4.11 has been, to the knowledge of the Stockholders' and
Seller, breached or canceled by the other party, (ii) no material customer or
supplier has advised Seller in writing that it will stop or decrease the rate of
business done with Seller, and (iii) Seller has performed all of the obligations
required to be performed by Seller in connection with the contracts or
commitments required to be disclosed on Schedule 4.11, and is not in receipt of
any written claim of default under any contract or commitment required to be
disclosed on the Schedule 4.11.
(d) Seller has provided Buyer with a true and correct copies of
all written contracts which are referred to on Schedule 4.11, together with all
amendments, waivers or other changes thereto. Schedule 4.11 also contains a
summary description of all material terms of all oral contracts referred to
therein.
4.12 Proprietary Rights.
(a) "Proprietary Rights" shall mean all patents, patent
applications and patent disclosures; all inventions (whether or not patentable
and whether or not reduced to practice); all trademarks, service marks, trade
dress, trade names and corporate names and all the goodwill associated
therewith; all registered and unregistered statutory and common law copyrights;
all registrations, applications and renewals for any of the foregoing; and all
trade secrets, confidential information, ideas, know-how, technology, research
information, drawings, specifications, designs, improvements, technical and
computer data, documentation and software, financial business and marketing
plans and materials, customer and supplier lists and related information and all
the goodwill associated therewith;, and all other proprietary rights.
(b) Schedule 4.12 hereto contains a complete and accurate list
of all patented and registered Proprietary Rights owned by Seller and all
pending patent applications and applications for the registration of other
Proprietary Rights owned by Seller. Schedule 4.12 also contains a complete and
accurate list of all trade names and unregistered trademarks and service marks
owned by Seller; all computer software owned and/or used by Seller and all
licenses granted by Seller to any third party with respect to Proprietary Rights
and all such licenses granted by any third party to Seller. Seller has delivered
to Buyer correct and complete copies of all documents embodying such licenses.
Except as set forth on Schedule 4.12, (A) Seller owns and possess all rights,
title and interest in and to, or has a valid and enforceable written license to
use, all of the Proprietary Rights necessary for the operation of the Business
as presently conducted; (B) Seller is not in breach of any license or other
grant of rights with respect to Proprietary Rights; (C) Seller has received no
written notice of any claim by any third party contesting the validity,
enforceability, use or ownership of any Proprietary Rights owned or used by
Seller; (D) Seller has not received any information as to any infringement or
misappropriation by, or conflict with, any third party with respect to the
Proprietary Rights of Seller, nor has Seller received any claims alleging
infringement or misappropriation, or other conflict with, any Proprietary Rights
of any third party; (E) Seller has not infringed, misappropriated or otherwise
conflicted with any Proprietary Rights of any third party, nor will continued
conduct of the Business as currently conducted or as proposed to be conducted
17
infringe, misappropriate or otherwise conflict with the Proprietary Rights of
any third party; and (F) all Proprietary Rights owned or used by Seller
immediately prior to the Closing will be owned or available for use by Buyer on
identical terms and conditions immediately subsequent to the Closing.
(c) The Proprietary Rights comprise all of the proprietary or
intellectual property rights used in the operation of the Business as currently
conducted and as proposed to be conducted. Seller has taken all reasonable
actions to maintain and protect the Proprietary Rights which they own and use
and will continue to maintain and protect the Proprietary Rights prior to the
Closing so as to not adversely affect the validity or enforceability of the
Proprietary Rights. To the knowledge of Seller and the Stockholders, the owners
of any Proprietary Rights licensed to Seller has taken all necessary actions to
maintain and protect the Proprietary Rights which are subject to such licenses.
The Proprietary Rights owned or used by Seller immediately prior to the Closing
hereunder will be transferred to Buyer for use on identical terms and conditions
immediately subsequent to the Closing hereunder.
(d) Except as disclosed on Schedule 4.12, all of the computer
software, computer firmware, computer hardware (whether general or special
purpose), and other similar or related items of automated, computerized, and/or
software system(s) that are sold, licensed, rendered, or otherwise provided by
Seller in the conduct of the Business: (a) will not malfunction, will not cease
to function, will not generate incorrect data, and will not produce incorrect
results when processing, providing, and/or receiving (i) date-related data into
and between the twentieth and twenty-first centuries, and (ii) date-related data
in connection with any valid date in the twentieth and twenty-first centuries;
and (b) will be owned or available for use, as the case may be, by Buyer on
identical terms and conditions immediately subsequent to the Closing.
(e) Stockholders and Seller will turn over to Buyer at Closing
all written material and electronically stored data maintained off Seller's
premises, which material or data contains financial, proprietary or other
sensitive information regarding Seller. Seller and Stockholders will erase from
off premise computers all such data after copying same for delivery to Buyer.
4.13 Litigation; Proceedings. Except as set forth on Schedule 4.13
hereto, there are no material actions, suits, proceedings, orders, claims or
investigations pending or, to the knowledge of Seller and Stockholders,
threatened against or affecting the Business or Seller, or to which Seller or
the Business may be bound or affected, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign.
4.14 Brokerage. Except as set forth on Schedule 4.14 hereto, there
are no claims for brokerage commissions, finders' fees, investment bankers' fees
or similar compensation in connection with the transactions contemplated by this
Agreement, based on any arrangement or agreement made by or on behalf of Seller.
4.15 Governmental Licenses and Permits. Schedule 4.15 hereto contains
a complete listing and summary description of all permits, licenses, franchises,
certificates,
18
approvals and other authorizations of foreign, federal, state and local
governments or authorities or other similar rights owned, possessed or used by
the Business and the ownership and use of the Real Property (collectively, the
"Licenses"). Except as indicated on Schedule 4.15, Seller owns or possesses
(prior to the Closing) and Buyer shall be authorized to own, possess or obtain
(after the Closing) all right, title and interest in and to all of the Licenses,
and the Licenses constitute all permits, licenses, franchises, certificates,
approvals and other authorizations used in the conduct of the Business,
providing Buyer complies with all statutes, rules and requirement necessary to
effect such authorization. Seller is in compliant in all material respects with
the terms and conditions of such Licenses and has received no written notices
that they are in violation of any of the terms or conditions of such Licenses.
No loss or expiration of any License is pending or, to the knowledge of Seller
and the Stockholders, threatened or reasonably foreseeable, other than
expiration in accordance with the terms thereof.
4.16 Employees.
(a) "Employees" shall mean all current full and part-time
professionals and other employees of Seller (with respect to the Business).
Schedule 4.16 hereto sets forth a complete and accurate list of all Employees as
of the Closing Date, their permanent classifications, if applicable, their
hourly rates of compensation or base salaries, as applicable, and their dates of
employment. In addition, to the extent any Employees are on leaves of absence,
Schedule 4.16 shall indicate the nature of each such leave of absence and each
such Employee's anticipated date of return to active employment. Schedule 4.16
hereto sets forth a complete and accurate list of all employees, their dates of
employment and hours worked during 2001 and for each month to date during 2002.
(b) No key Employee and no group of professionals or other
Employees of the Business has delivered any notice to Seller or the Stockholders
of any plans to terminate his, her or their employment with Seller. Seller has
complied in all material respects with all applicable laws relating to the
employment of labor, including provisions relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes. Except as set forth in Schedule 4.16 hereto, within the past five years,
Seller has not experienced any strikes, grievances, unfair labor practices
claims or other employee disputes and there are no material labor relations
disputes with Employees of Seller nor are such disputes or attempts to organize,
to the knowledge of Seller and the Stockholders, being undertaken or threatened.
4.17 Employee Benefit Plans.
(a) Schedule 4.17(a) hereto contains an accurate and complete
list of (i) each "employee benefit plan" (as such term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) at any time contributed to, maintained or sponsored by Seller, or
with respect to which Seller has any liability or potential liability; and (ii)
each other retirement, savings, thrift, deferred compensation, severance, stock
ownership, stock purchase, stock option, performance, bonus, incentive, vacation
or holiday pay, travel, fringe benefit, hospitalization or other medical,
disability, life or other insurance, and any other written welfare benefit
policy, trust, understanding or arrangement contributed to, maintained or
sponsored by any of the Stockholders for the benefit of any present or former
19
employee, officer or director of Seller, or with respect to which Seller has any
liability or potential liability. Each item listed on Schedule 4.17(a) is
referred to herein as a "Benefit Plan."
(b) Except as set forth on Schedule 4.17(a) hereto, Schedule
4.17(b) hereto contains an accurate and complete list of each collective
bargaining agreement and each other written agreement, arrangement, commitment,
understanding, plan, or policy pursuant to the terms of which Seller is now or
may in the future be obligated to make any payment or provide any benefits to,
with or for the benefit of any current or former employee, officer, director or
consultant of Seller (including, without limitation, each employment,
compensation, termination or consulting agreement or arrangement). Each item
listed on Schedule 4.17(b) is referred to herein as a "Compensation Commitment."
(c) Each Benefit Plan that is intended to be qualified within
the meaning of Section 401(a) of the Code and each trust which forms a part of
any such Benefit Plan (i) has received a determination from the Internal Revenue
Service that such Benefit Plan is qualified under Section 401(a) of the Code and
that such related trust is exempt from taxation under Section 501(a) of the
Code, and nothing has occurred since the date of such determination that could
materially adversely affect the qualification of such Benefit Plan or the
exemption from taxation of such related trust; and (ii) is in compliance with
the requirements of Sections 401(a)(4) and 410(b) of the Code for each plan year
of such Benefit Plan commencing on or before the Closing Date.
(d) Except as set forth on Schedule 4.17(d) hereto, Seller does
not currently contribute to, maintain, sponsor or have any liability with
respect to any "employee pension benefit plan" (as such term is defined in
Section 3(2) of ERISA) that is subject to Section 302 of ERISA or Section 412 of
the Code, and none of the Stockholders has contributed to, maintained or
sponsored or has any liability with respect to any such employee pension benefit
plan for any time during the six-year period immediately preceding the Closing
Date.
(e) Except as set forth on Schedule 4.17(e) hereto, none of the
Benefit Plans or Compensation Commitments obligates Seller to pay any
separation, severance, termination or similar benefit solely as a result of any
transaction contemplated by this Agreement or solely as a result of a change in
control or ownership within the meaning of Section 280G of the Code.
(f) Except as set forth on Schedule 4.17(f) hereto, (i) each
Benefit Plan and any related trust, insurance contract or fund has been
maintained, funded and administered in compliance, in all material respects,
with its respective terms and the terms of any applicable collective bargaining
agreements and in compliance with all applicable laws and regulations,
including, but not limited to, ERISA and the Code; (ii) there has been no
application for or waiver of the minimum funding standards imposed by Section
412 of the Code with respect to any Benefit Plan, and neither Seller nor any
Stockholder is aware of any facts or circumstances that would materially change
the funded status of any such Benefit Plan; (iii) no asset of Seller that is to
be acquired by the Buyer, directly or indirectly, pursuant to this Agreement is
subject to any lien under ERISA or the Code; (iv) Seller has not incurred any
liability under Title IV of ERISA (other than for contributions not yet due) or
to the Pension Benefit Guaranty Corporation (other than for payment of premiums
not yet due); and (v) there
20
are no pending or, to the knowledge of the Stockholders and Seller, threatened
actions, suits, investigations or claims with respect to any Benefit Plan or
Compensation Commitment (other than routine claims for benefits) which could
result in liability to Seller (whether direct or indirect), and neither Seller
nor any Stockholder has any knowledge of any facts which could give rise to (or
be expected to give rise to) any such actions, suits, investigations or claims.
(g) Except as set forth on Schedule 4.17(g) hereto, (i) Seller
has complied with the health care continuation requirements of Part 6 of Title I
of ERISA; and (ii) Seller has no obligation under any Benefit Plan or otherwise
to provide health benefits to former employees of Seller or any other person,
except as specifically required by Part 6 of Title I of ERISA.
(h) Except as set forth on Schedule 4.17(h) hereto, (i) Seller
has not incurred any liability on account of a "partial withdrawal" or a
"complete withdrawal" (within the meaning of Sections 4205 and 4203,
respectively, of ERISA) from any Benefit Plan subject to Title IV of ERISA which
is a "multiemployer plan" (as such term is defined in Section 3(37) of ERISA) (a
"Multiemployer Plan"), no such liability has been asserted, and there are no
events or circumstances which could result in any such partial or complete
withdrawal; and (ii) Seller is not bound by any contract or agreement or has any
obligation or liability described in Section 4204 of ERISA. To the best
knowledge of Seller, each Multiemployer Plan complies in form and has been
administered in accordance with the requirements of ERISA and, where applicable,
the Code; and each Multiemployer Plan is qualified under Section 401(a) of the
Code as amended to the date hereof.
(i) Except as set forth on Schedule 4.17(i), the actions
contemplated by this Agreement will not give rise to any liability with respect
to any "employee welfare benefit plan" (as such term is defined in Section 3(1)
of ERISA) that is a "multiemployer plan" (as such term is defined in Section
3(37) of ERISA).
(j) Seller does not have any liability with respect to any
"employee benefit plan" as defined in Section 3(3) of ERISA) solely by reason of
being treated as a single employer under Section 414 of the Code with any other
trade, business or entity.
(k) Except as set forth on Schedule 4.17(k) hereto, Seller does
not contribute to, maintain or sponsor or have any liability with respect to any
employee benefit plan, agreement or arrangement applicable to employees of
Seller located outside the United States (the "Foreign Plans"). Each Foreign
Plan set forth on Schedule 4.18(k) is in compliance in all material respects
with all laws applicable thereto and the respective requirements of such Foreign
Plan's governing documents. There are no actions, suits or claims (other than
routine claims for benefits) with respect to any Foreign Plan, and no
circumstances exist which could give rise to any such actions, suits or claims.
(l) With respect to each Benefit Plan and each Compensation
Commitment, Seller has provided the Buyer with true, complete and correct copies
of (to the extent applicable) (i) all documents pursuant to which the Benefit
Plan or Compensation Commitment is maintained, funded and administered, (ii) the
most recent annual report (Form 5500 series) filed with the IRS (with applicable
attachments), (iii) the most recent financial
21
statement, (iv) the most recent actuarial valuation of benefit obligations, and
(v) the most recent determination letter received from the IRS and the most
recent application to the IRS for such determination letter.
4.18 Insurance. Schedule 4.18 hereto lists and accurately describes
each insurance policy maintained by Seller and its Subsidiaries. All of such
insurance policies are in full force and effect, and Seller is not in default
with respect to its obligations under any such insurance policies. Any premium
adjustments on account of periods prior to Closing requiring the payment of
additional premiums after Closing is the liability and responsibility of
Stockholders and Seller.
4.19 Officers and Directors. Schedule 4.19 hereto lists all of
Seller's officers and directors thereof.
4.20 Affiliate Transactions. Except as set forth on Schedule 4.20
hereto, no officer, director, stockholder or employee of Seller or any person
related by blood or marriage to any such Person in which any such person owns
any beneficial interest (collectively, "Insiders"), is a party to any agreement,
contract, commitment or transaction with Seller or which pertains to Seller or
has any interest in any property, whether real, personal or mixed, or tangible
or intangible, relating to Seller or the Business.
4.21 Compliance with Laws.
(a) Except as set forth on Schedule 4.21 hereto, Seller and its
officers, directors, agents and employees have complied in all material respects
with all applicable laws and regulations of foreign, federal, state and local
governments and all agencies thereof which affect the business, business
practices (including, but not limited to, Seller's sales and distribution of its
products and services), the Business Assets or other assets of Seller or to
which Seller or the Business may be subject, and no claims, complaints, suits,
proceedings, investigations or hearings have been commenced or, to the knowledge
of Seller's and the Stockholders, threatened against Seller's alleging a
violation of any such laws or regulations.
(b) Seller has not given or agreed to give any money, gift or
similar benefit (other than incidental gifts of articles of nominal value) to
any actual or potential customer, supplier, governmental employee, Insider or
any other person in a position to assist or hinder Seller in connection with any
actual or proposed transaction concerning the Business.
4.22 Closing Date. All of the representations and warranties
contained in this Article 4 and elsewhere in this Agreement and all information
delivered in any Schedule, attachment or Exhibit hereto or in any writing
delivered to Buyer are true and correct on the date of this Agreement and will
be true and correct on the Closing Date, except to the extent that Seller has
advised Buyer otherwise in writing prior to the Closing and subject to
appropriate adjustment for matters that are in whole or in part dependent upon
the passage of time.
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5. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE STOCKHOLDERS
As a material inducement to Buyer to enter into this Agreement, each
of the Stockholders severally and jointly represent and warrant to Buyer that:
5.1 Authorization of Transactions. Each Stockholder has all requisite
power and authority to enter into this Agreement and the other documents
contemplated hereby to which such member or Stockholder is a party, and to
perform its obligations hereunder and thereunder. This Agreement and the other
documents contemplated hereby to which each Stockholder is a party have been
duly executed and delivered by such Stockholder and constitute the valid and
binding agreements of such Stockholder, enforceable in accordance with their
terms.
5.2 Absence of Conflicts. Neither the execution and the delivery of
this Agreement and the other documents contemplated hereby to which any
Stockholder is a party, nor the consummation of the transactions contemplated
hereby and thereby, will (a) conflict with, result in a breach of any of the
provisions of, (b) constitute a default under, (c) result in the violation of,
(d) give any third party or governmental authority the right to terminate or to
accelerate any obligation under, (e) result in the creation of any Lien,
security interest or charge or encumbrance upon the Business Assets or Seller's
capital stock under, or (f) require any authorization, consent, approval,
execution or other action by or notice to any court or other governmental body
under, the provisions of any of the Contracts or any other indenture, mortgage,
lease, loan agreement or other material agreement or instrument to which such
Stockholder is bound or affected, or any statute, regulation, rule, judgment,
order, decree or other restriction of any government, governmental agency or
court to which such Stockholder is subject. No notice to, filing with or
authorization, consent or approval of any government or governmental agency by
any Stockholder is necessary for the consummation of the transactions
contemplated by this Agreement and the other documents contemplated hereby to
which any Stockholder is a party.
5.3 Shares. The Stockholders, in the aggregate, hold of record and
beneficially own all of the issued and outstanding shares of Seller's capital
stock, free and clear of Liens or any other restrictions on transfer (other than
any restrictions under the Securities Act of 1933, as amended, and state
securities laws). No Stockholder is a party to any option, warrant, right,
contract, call, put or other agreement or commitment providing for the
disposition or acquisition of any capital stock of Seller (other than this
Agreement and the stockholders agreements set forth on Schedule 4.5). No
Stockholder is a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of Seller, except
the stockholders agreements set forth on Schedule 4.5.
5.4 Brokerage. Except as set forth on Schedule 4.15 hereto, there are
no claims for brokerage commissions, finders' fees, investment bankers' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of any
Stockholder.
5.5 Closing Date. All of the representations and warranties
concerning the Stockholders contained in this Article 5 and elsewhere in this
Agreement and all information delivered in any Schedule, attachment or Exhibit
hereto or in any writing delivered to Buyer are, to the best of the knowledge of
the of the Stockholders, true and correct on the date of this
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Agreement and will be true and correct on the Closing Date, except to the extent
that the Stockholders have advised Buyer otherwise in writing prior to the
Closing and subject to appropriate adjustment for matters that are in whole or
in part dependent upon the passage of time.
6. REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to the Stockholders to enter into this
Agreement, Buyer hereby represents and warrants that:
6.1 Organization and Corporate Power. Buyer is a Corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with all requisite corporate power and authority to enter into this
Agreement and the other agreements contemplated hereby and perform its
obligations hereunder and thereunder.
6.2 Authorization. Buyer has all requisite power and authority to
deliver this Agreement and to consummate the transactions contemplated hereby to
which it is a party. The Board of Directors of Buyer have duly approved this
Agreement and have duly authorized the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby to which Buyer is a
party. No other proceedings on the part of Buyer are necessary to approve and
authorize the execution and delivery of this Agreement. This Agreement and the
other documents contemplated hereby to which Buyer is a party have been duly
executed and delivered by Buyer and constitute the valid and binding agreement
of Buyer, enforceable against Buyer in accordance with its terms.
6.3 No Violation. Buyer is not subject to or obligated under its
certificate of organization, its operating agreement, any applicable law, or
rule or regulation of any governmental authority, or any agreement or
instrument, or any license, franchise or permit, or subject to any order, writ,
injunction or decree, which would be breached or violated by its execution,
delivery or performance of this Agreement or the other agreements contemplated
hereby.
6.4 Governmental Authorities and Consents. Buyer is not required to
submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of this Agreement or the
consummation of the transactions contemplated hereby except any reports required
to be filed following the Closing pursuant to the Securities Exchange Act of
1934. No consent, approval or authorization of any governmental or regulatory
authority or any other party or Person is required to be obtained by Buyer in
connection with its execution, delivery and performance of this Agreement and
the other agreements contemplated hereby or the transactions contemplated hereby
or thereby.
6.5 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Buyer except for Buyer's arrangement with Seabury Securities, LLC
for which Buyer shall be solely responsible.
6.6 Litigation. There are no actions, suits, proceedings, orders or
investigations pending or, to the best of Buyer's knowledge, threatened against
or affecting
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Buyer at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect Buyer's
performance under this Agreement or the other agreements contemplated hereby or
the consummation of the transactions contemplated hereby or thereby.
6.7 Closing Date. All of the representations and warranties contained
in this Article 6 and elsewhere in this Agreement and all information delivered
in any Schedule, attachment or Exhibit hereto or in any writing delivered to
Seller or the Stockholders are true and correct on the date of this Agreement
and will be true and correct on the Closing Date, except to the extent that
Buyer has advised the Stockholders otherwise in writing prior to the Closing.
7. TERMINATION
7.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent of Buyer and Seller; and
(b) by either Buyer, on the one hand, or Seller, on the other, if
there has been a material misrepresentation in or substantive breach of the
representations and warranties or covenants set forth in this Agreement on the
part of the Stockholders or Seller (in the case of Buyer's right to terminate)
or Buyer (in the case of Seller's right to terminate) or if events have occurred
which have made it impossible to satisfy a material condition precedent to the
terminating party's obligation to consummate the transactions contemplated
hereby, unless such terminating party's breach of this Agreement has caused such
condition to be unsatisfied;
In the event of termination by Seller or Buyer pursuant to this
Section 7.1, written notice thereof (describing in reasonable detail the basis
therefore) shall promptly be delivered to the other party.
7.2 Effect of Termination. In the event of termination of this
Agreement by Seller or the Buyer as provided in Section 7.1, this Agreement will
forthwith become void and there will be no liability on the part of any party
hereto to any other party hereto or its shareholders, directors or officers in
respect thereof, except for the obligations of the parties hereto in Sections
8.2, 9.5 and 9.6, and except that nothing herein will relieve any party from any
breach of this Agreement prior to such termination.
8. SURVIVAL; INDEMNIFICATION
8.1 Survival. All representations, warranties, covenants and
agreements set forth in this Agreement or in any writing delivered in connection
with this Agreement will survive the Closing Date and the consummation of the
transactions contemplated hereby and will not be affected by any examination
made for or on behalf of any Party or the knowledge of any Party's officers,
directors, stockholders, employees or agents, or the acceptance of any
certificate or opinion.
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8.2 Indemnification.
(a) Each of the Stockholders and Seller, jointly and severally,
agree to indemnify Buyer and (other than the Stockholders or Seller) Buyer's
Affiliates, officers, directors, stockholders, employees, agents,
representatives, attorneys, successors and permitted assigns (collectively, the
"Buyer Parties") and hold each of them harmless against and pay on behalf of or
reimburse such Buyer Parties in respect of any loss, liability, demand, claim,
legal action, cost, damage, deficiency, tax, penalty, fine or expense, whether
or not arising out of third party claims (including, without limitation,
reasonable attorneys' fees and expenses and all amounts paid in investigation,
defense or settlement of any of the foregoing) (collectively, "Losses") which
any such Buyer Party may suffer or become subject to, as a result of, in
connection with, relating or incidental to or by virtue of a breach of any
representation, warranty, covenant, or agreement by Seller or the Stockholders.
(b) Buyer agrees to indemnify Seller and the Stockholders and
Seller's Affiliates, officers, directors, stockholders, employees, agents,
representatives, successors and permitted assigns (collectively, the "Seller
Parties") and hold each of them harmless against and pay on behalf of or
reimburse such Seller Parties in respect of any Losses which any such Seller
Party may suffer, sustain or become subject to, as a result of, in connection
with, relating or incidental to or by virtue of a breach of any representation,
warranty, covenant, or agreement by the Buyer in this Agreement.
(c) If a party hereto seeks indemnification under this Section
8.2, such party (the "Indemnified Party") shall give written notice to the other
party (the "Indemnifying Party") of the facts and circumstances giving rise to
the claim. In that regard, if any suit, action, claim, liability or obligation
shall be brought or asserted by any third party which, if adversely determined,
would entitle the Indemnified Party to indemnity pursuant to this Section 8.2,
the Indemnified Party shall promptly notify the Indemnifying Party of the same
in writing, specifying in detail the basis of such claim and the facts
pertaining thereto and the Indemnifying Party, if it so elects, shall assume and
control the defense thereof (and shall consult with the Indemnified Party with
respect thereto), including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of all necessary expenses. If the
Indemnifying Party elects to assume and control the defense, the Indemnified
Party shall have the right to employ counsel separate from counsel employed by
the Indemnifying Party in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel employed by the Indemnified
Party shall be at the expense of the Indemnified Party unless (i) the employment
thereof has been specifically authorized by the Indemnifying Party in writing,
or (ii) the Indemnifying Party has failed to assume the defense and employ
counsel, in which case the fees and expenses of the Indemnified Party's counsel
shall be paid by the Indemnifying Party. The Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected without the
written consent of the Indemnifying Party, however, if there shall be a final
judgment for the plaintiff in any such action, the Indemnifying Party agrees to
indemnify and hold harmless the Indemnified Party from and against any loss or
liability by reason of such judgment.
(d) The Indemnifying Party shall pay the Indemnified Party in
immediately available funds promptly after the Indemnified Party provides the
Indemnifying
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Party with written notice of a claim hereunder and the parties reasonably agree
that there is a reasonable basis for such claim or a final judgment with respect
to the claim entered by a court of competent jurisdiction.
9. ADDITIONAL AGREEMENTS
9.1 Press Releases and Announcements. Prior to the Closing Date,
press releases related to this Agreement and the transactions contemplated
herein, or other announcements to the employees, customers or suppliers of the
Business or Seller will be prepared jointly by Seller and Buyer and none will be
issued without the mutual approval of Seller and Buyer, except any public
disclosure which is required by law or regulation (in which case the disclosure
shall be prepared by Buyer). After the Closing Date, no press releases related
to this Agreement or the transactions contemplated hereby and the transactions
contemplated herein, or other announcements to the employees, customers or
suppliers of the Business will be issued without Buyer's consent.
9.2 Further Transfers.
(a) Stockholders and Seller shall: (i) execute and deliver such
further instruments of conveyance and transfer and take such additional action
as Buyer may reasonably request (including assisting Buyer in the collection of
receivables) to effect, consummate, confirm or evidence the sale and transfer to
Buyer the Business Assets, (ii) execute such documents and take all other
actions as may be necessary to assist Buyer in preserving or perfecting its
rights in the Business Assets, and (iii) without limiting the foregoing, execute
and deliver such further instruments and take such additional actions as Buyer
may reasonably request to effect, consummate, confirm or evidence the assumption
by Buyer of the Contracts and other agreements, leases, contracts, and other
commitments assumed pursuant to Section 1.1(a)(vi). In the event that Seller or
any of Stockholders receive any payments, remittances or other amounts (whether
in cash or otherwise) in respect of any Business Asset (including, without
limitation, in respect of accounts receivable), such recipient shall immediately
remit such amounts to Buyer in the identical form received.
(b) Without limiting the foregoing, to the extent that the
assignment by Seller to Buyer of any Contract (as set forth in Section
1.1(a)(vi) above) is not permitted or is prohibited by any Governmental Entity
or is not permitted without the consent of or notice to any other party to such
Contract, neither this Agreement nor any other agreement contemplated hereunder
(including, without limitation, any xxxx of sale or assumption agreement) shall
be deemed to constitute an assignment of any such Contract if such consent or
notice is not given or if such assignment otherwise would constitute a breach
of, or cause a loss of contractual benefits under, any such Contract, and Seller
will take such provisions as to ensure that Buyer shall not assume or be liable
for any obligations or liabilities under any such Contract. Seller shall (and
the Stockholders shall cause Seller to) use its reasonable efforts to advise
Buyer promptly in writing with respect to any such Contract which Seller or any
Stockholder knows or has reason to believe will or may not be subject to
assignment to Buyer. If any consent or notice with respect to any Contract is
not obtained or given, as the case may be, or if such assignment is not
permitted irrespective of consent and the Closing hereunder is consummated,
Seller shall (and the Stockholders shall cause Seller to) cooperate with Buyer
following the Closing Date in any
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reasonable arrangement designed to provide Buyer with the rights and benefits
(subject to the obligations) under any such Contract, including enforcement for
the benefit of Buyer of any and all rights of Seller against any other party
arising out of any breach or cancellation of any such Contract by such other
party and, if requested by Buyer, acting as an agent on behalf of Buyer or as
Buyer shall otherwise reasonably require. If by the Closing Date, assignment
permission is refused or otherwise not granted by customers which provided more
than five percent (5%) of Seller's combined revenue in the year 2001, then Buyer
may terminate this Agreement and no Party shall have any ongoing obligations
hereunder.
9.3 Sales and Transfer Taxes, etc. Seller shall pay all Taxes, duties
or expenses that may be imposed as a result of the sale and transfer of the
Business Assets, and all filing fees that may be required to be paid in
connection with the consummation of the transactions contemplated hereby,
together with any and all penalties, interest and additions to tax with respect
thereto, and Seller, the Stockholders, and Buyer shall cooperate (and the
Stockholders shall cause Seller to cooperate) in timely making all filings,
returns, reports and forms as may be required to comply with the provisions of
such laws. Buyer, Seller and the Stockholders shall also cooperate in providing
each other with appropriate resale exemption certifications and other similar
tax and fee documentation. Irrespective of the foregoing, any sales taxes due
and payable upon the purchase in excess of $1,000 will be paid by Buyer.
9.4 Transition Assistance. Neither Seller nor the Stockholders will
in any manner take any action which is designed, intended, or might be
reasonably anticipated to have the effect of discouraging customers, suppliers,
lessors, licensors and other business associates from maintaining the same
business relationships with Buyer after the date of this Agreement as were
maintained with Seller and the Business prior to and at the date of this
Agreement.
9.5 Investigation and Confidentiality.
(a) Prior to the Closing Date, Buyer may make or cause to be made
such investigation of Seller or the Business as it deems necessary or advisable
to familiarize itself therewith. Each Stockholder will cause Seller to, and
Seller will cause its officers, directors, employees and agents (including
attorneys and accountants) (the "Seller's Agents") to, at reasonable times
during normal business hours, permit Buyer and its employees, agents, accounting
and legal representatives and lenders (and such lenders' audit staff) and their
representatives to have full and complete access (with respect to the Business),
at all reasonable times, to Seller's facilities and to Seller's books, records,
invoices, contracts, leases, personnel, facilities, equipment and other data and
information. Each Stockholder will cause Seller to, and Seller will cause
Seller's Agents to, at reasonable times during normal business hours, permit
Buyer to inspect the facilities and to discuss the affairs, finances and
accounts of Seller (with respect to the Business) with the directors, officers,
independent accountants, key employees, key customers, key sales representatives
and key suppliers of the Business.
(b) If the transactions contemplated by this Agreement are not
consummated, Buyer will use its best efforts to maintain the confidentiality of
all information and materials reasonably designated by Seller as confidential,
except as required by law or legal process, and Buyer and its representatives
will return to Seller originals of and destroy copies of all materials obtained
from Seller in connection with the transactions contemplated by this
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Agreement. Whether or not the transactions contemplated hereby are consummated,
the Stockholders and Seller will use its reasonable best efforts to maintain the
confidentiality of all information and materials regarding Buyer and its
Affiliates reasonably designated by Buyer as confidential, except as required by
law or legal process, and Buyer and its representatives will return to Seller
originals of and destroy copies of all materials obtained from Seller in
connection with the transactions contemplated by this Agreement. If the
transactions contemplated by this Agreement are consummated, each Stockholder
and Seller agrees to use their reasonable best efforts to maintain the
confidentiality of all proprietary and other non-public information regarding
the Business, except as required to file tax returns and as required by law or
legal process, and to turn over to Buyer at the Closing all such materials (and
all copies thereof) that they have in their possession. In the event of the
breach of any of the provisions of this Section 9.5, the non-breaching party, in
addition and supplementary to other rights and remedies existing in its favor,
may apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive or other relief (without the posting of bond or
other security) in order to enforce or prevent any violations of the provisions
hereof.
(c) In the event that any party reasonably believes after
consultation with counsel that it is required by law to disclose any
confidential information described in this Section 9.5, the disclosing party
will (i) provide the other party with prompt notice before such disclosure in
order that such other party may attempt to obtain a protective order or other
assurance that confidential treatment will be accorded such confidential
information and (ii) cooperate with the other party in attempting to obtain such
order or assurance. The provisions of this Section 9.5 shall not apply to any
information, documents or materials which are, as shown by appropriate written
evidence, in the public domain or, as shown by appropriate written evidence,
shall come into the public domain, other than by reason of default by the
applicable party bound hereunder or its Affiliates.
9.6 Expenses. Except as otherwise provided herein, each party shall
pay all of its own expenses and fees (including fees and expenses of its legal
counsel, investment bankers, or other representatives and consultants and
appraisal fees and expenses) incurred in connection with the negotiation of this
Agreement and the other agreements contemplated hereby and the performance of
its or their obligations hereunder and thereunder, and the consummation of the
transactions contemplated hereby and thereby.
9.7 Employee and Related Matters.
(a) Buyer Employees. As of the Closing Date, Buyer shall offer
employment to all Employees of Seller actively employed in the Business as of
the Closing Date (the "Business Employees"); provided, however, Buyer shall have
no obligation to offer employment to any Employee of Seller who, as of the
Closing Date, is absent from active employment with Seller for any reason
(including, without limitation, as a result of layoff, leave of absence, illness
or injury). The Business Employees who, on or immediately after the Closing
Date, become employees of Buyer shall be referred to herein as the "Buyer
Employees." Seller and the Stockholders acknowledge that it is possible that not
all Business Employees to whom Buyer offers employment pursuant to this Section
9.8(a) shall accept Buyer's offer of employment, and Stockholders and Seller
agree that Buyer shall have no liability or obligation whatsoever (including,
without limitation, under Section 4980B of the Code or the Worker Adjustment and
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Retraining Notification Act) with respect to any Business Employee who is
offered employment but who does not become a Buyer Employee. Except as provided
in the immediately preceding sentence, Buyer shall not assume any liability
whatsoever for, and Seller shall retain, bear and discharge, all liabilities and
obligations with respect to all employees and former employees of Seller who do
not become Buyer Employees (including, but not limited to, liabilities or
obligations under Section 4980B of the Code or the Worker Adjustment and
Retraining Notification Act).
(b) Employee Benefit Plans. The Stockholders and Seller shall be
responsible and retain all liability for all liabilities, obligations and
commitments relating to: (i) compensation of the Buyer Employees for periods
prior to the Closing Date and arising as a result of the transactions
contemplated by this Agreement, including, but not limited to, severance
compensation and bonus payments; (ii) payments attributable to any accrued and
unpaid vacation, holidays and sick days to which Buyer Employees are entitled
with respect to all periods of service prior to the Closing Date, under any
vacation, holiday, sick day or similar policy or practice of Seller; (iii) any
extraordinary liability under any Benefit Plan not fully accrued for or covered
by insurance; and (iv) COBRA or state continuation coverage under all Benefit
Plans. Business Employees who become Buyer Employees immediately after the
Closing Date shall cease participation in all Benefit Plans as of the Closing
Date, except where such participation otherwise may be required by law with
respect to COBRA or state continuation coverage.
(c) Workers' Compensation. Buyer shall have no liability
whatsoever and Seller shall retain, bear and discharge all liabilities and
obligations (whether absolute, contingent or otherwise) relating to workers'
compensation claims made by (i) any Buyer Employee filed or presented before the
Closing Date, (ii) any Buyer Employee filed or presented after the Closing Date
but relating to claims and/or injuries first arising before the Closing Date and
(iii) any employee or former employee of Seller who does not become a Buyer
Employee. On or before the Closing Date, Buyer will obtain workers' compensation
insurance which will cover the Buyer Employees.
(d) Mutual Cooperation. Seller shall provide promptly to Buyer,
at Buyer's request, any information or copies of personnel records (including,
but not limited to, addresses, dates of birth, dates of hire, dependent
information and plan loan information) relating to the Buyer Employees or
relating to the service of Buyer Employees with Seller (and predecessors of
Seller, as applicable) prior to the Closing Date. Seller, the Stockholders and
Buyer shall each cooperate with the other and shall provide to the other such
documentation, information and assistance as is reasonably necessary to effect
the provisions of this Section 9.7
9.8 Accounts Receivable Collection. In order to assist Seller and
Stockholders as well as Buyer in the collection of their respective accounts
receivable, Stockholders will work with employees of Buyer to effect an orderly
collection of the accounts receivables of Seller ("Old Accounts"), while Buyer
similarly collects accounts receivable created on and after the date of Closing
("New Accounts"). The Parties will always attempt to identify the account being
paid by receipts and will be governed by any voucher or similar designation by
customers as to the identity of the account being paid by each remittance.
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(a) Receipts for payment of Old Accounts shall be deposited in
Seller's account.
(b) Receipts for payment of both Old Accounts and New Accounts
shall be deposited in Buyer's account and Buyer shall promptly remit the portion
pertaining to the Old Accounts to Seller.
(c) Receipts for payment of New Accounts shall be deposited in
Buyer's account.
(d) Receipts which do not identify whether they are paying Old
Accounts or New Accounts shall be treated as if paying the oldest accounts
first.
Seller agrees to provide Buyer with copies of all checks received in payment of
Old Accounts and detailed reported of deposits. Should Seller have a collection
issue or problem with a customer which remains a customer of Buyer (or its
assignee or designee) after Closing, Seller agrees to adjust such matter in the
same courteous manner it would have if he was still the owner of the Business.
Upon reasonable notice, during normal business hours, Seller shall have the
right to inspect the books and records of Buyer with respect to the application
of payments received from customer.
9.9 Change of Corporate Name. Within 120 days following the Closing,
Seller will and Stockholders will cause Seller to, change its corporate and
other formal names to names that are dissimilar and do not appear to evidence
the offer of services in the health care industry. It is the responsibility of
Seller and Stockholders to cause the appropriate documents to be filed at their
expense at the California State Department of Corporations in order to carry out
this obligation.
9.10 Buy-Back. In the event Buyer decides to sell the Business
acquired from Seller in a transaction which does not involve the sale or
transfer whether by sale, merger or other means, of any other assets or the
assets or securities of any Affiliates of Seller, then Seller shall give Owner
the right to purchase the Business for cash in an amount equal to 9.4% of Net
Sales payable as follows:
(a) An amount equal to 5% of Net Sales payable upon closing;
(b) An amount equal to 1.6% of Net Sales payable thirteen months
following the closing;
(c) An amount equal to 0.9% of Net Sales payable thirteen months
following the closing provided Net Sales for the 1st year following the closing
are not less than the Net Sales for the twelve month period prior to closing;
(d) An amount equal to 0.9% of Net Sales payable twenty-five (25)
months following the closing provided Net Sales for the 2nd year following the
closing have increased by not less than 5% over the Net Sales for the twelve
month period prior to closing; and
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(e) An amount equal to 1.0% of Net Sales payable thirty-seven
(37) months following the closing provided Net Sales for the 3rd year following
the closing have increased by not less than 10% over the Net Sales for the
twelve month period prior to closing.
9.11 Recision. In the event Buyer files for protection under Chapter
11 of the Bankruptcy Code within ninety-one (91) days following the Closing
Date, Seller shall have the right for thirty (30) days following notice of such
filing to rescind the transactions contemplated by this Agreement and to
terminate the Employment Agreement and Non-Compete Agreement.
10. MISCELLANEOUS
10.1 Amendment and Waiver. This Agreement may be amended and any
provision of this Agreement may be waived; provided, that any such amendment or
waiver will be binding upon a party only if such amendment or waiver is set
forth in a writing executed by the Buyer, Seller and the Stockholders. No course
of dealing between or among any Persons having any interest in this Agreement
will be deemed effective to modify, amend or discharge any part of this
Agreement or any rights or obligations of any party under or by reason of this
Agreement. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver.
10.2 Notices. All notices, demands and other communications given or
delivered under this Agreement will be in writing and will be deemed to have
been given when personally received, whether delivered by hand, mailed by first
class mail (return receipt requested), delivered by a reputable express courier
service or transmitted by facsimile or telecopy. Notices, demands and
communications to the Stockholders and Seller and the Buyer will, unless another
address is specified in writing, be sent to the addresses indicated below:
Notices to Seller or any of the Stockholders:
Associated Social Resources, Inc.
11835 West Olympic Boulevard
Suite 0000 Xxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Xxxxx X. Xxxxx
11835 West Olympic Boulevard
Suite 0000 Xxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
with a copy to:
T. Xxxx Xxxxxx
11835 West Olympic Boulevard
Suite 0000 Xxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
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Notices to Buyer:
Associated Staffing Resources, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
with a copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx, LLP
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
10.3 Binding Agreement; Assignment. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, except that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned or delegated by Seller or any Stockholder without the prior
written consent of Buyer; provided, however, that Buyer may assign it rights
hereunder but not its obligations without the written consent of the
Stockholders.
10.4 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
10.5 No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
collective mutual intent, and no rule of strict construction shall be applied
against any person. The term "including" as used herein shall be by way of
example and shall not be deemed to constitute a limitation of any term of
provision contained herein.
10.6 Captions and Headings. The captions and headings used in this
Agreement are for convenience of reference only and do not constitute a part of
this Agreement and will not be deemed to limit, characterize or in any way
affect any provision of this Agreement, and all provisions of this Agreement
will be enforced and construed as if no caption had been used in this Agreement.
10.7 Entire Agreement. This Agreement and the documents referred to
herein and therein contain the entire agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way.
10.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which taken
together will constitute one and the same instrument.
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10.9 Governing Law. The internal laws of the State of California
shall govern all questions concerning the construction, validity, interpretation
and enforceability of this agreement and the exhibits and schedules hereto, and
the performance of the obligations imposed by this agreement, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of California or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of California.
10.10 No Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended to confer on any Person other than the parties
and their respective successors, assigns, personal representatives and heirs any
rights or remedies under or by virtue of this Agreement, as permitted hereunder.
11. CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person, whether through the ownership of
voting securities, contract or otherwise.
"Affiliated Group" means an affiliated group as defined in Section
1504 of the Code (or any analogous combined, consolidated or unitary group under
state, local or foreign income Tax law) of which Seller is or has been a member.
"Business" the business currently carried on by Seller which
primarily consist of developing, designing, marketing and developing nursing and
medical employment services.
"Code" means the Internal Revenue Code of 1986, as amended.
"GAAP" means generally accepted accounting principles consistently
applied in the United States of America.
"Governmental Entity" means any foreign or domestic government,
agency, governmental department, commission, board, bureau, court, arbitration
panel or instrumentality or any state or other political subdivision thereof
(whether now or hereafter constituted and/or existing) and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Indebtedness for Borrowed Money" shall mean, with respect to any
Person at any date, without duplication: (i) all obligations of such Person for
borrowed money or in respect of loans or advances; (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments; (iii)
all obligations in respect of letters of credit, whether or not drawn, and
bankers' acceptances issued for the account of such Person (except (a) to the
extent such obligations have been issued with respect to liabilities reflected
on the balance sheet of such Person and (b) to the extent set forth on
Indebtedness Schedule); (iv) all capitalized lease liabilities of such Person;
(v) all interest rate protection agreements of such Person (valued on a
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market quotation basis); (vi) all obligations of such Person secured by a
contractual lien; (vii) all guarantees of such Person in connection with any of
the foregoing (except to the extent such obligations have been issued with
respect to liabilities reflected on the balance sheet of such Person); (viii)
all financial penalties imposed, whether or not such penalties have been paid,
on Seller as a consequence of a prepayment of outstanding indebtedness made by
Seller on the Closing Date; and (ix) all income taxes payable.
"Liens" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Business, Seller or any Stockholder, any
Affiliate of Seller or such Stockholder, any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar
statute other than to reflect ownership by a third party of property leased to
the Business, Seller or any Stockholder under a lease which is not in the nature
of a conditional sale or title retention agreement, or any subordination
arrangement in favor of another Person (other than any subordination arising in
the ordinary course of business).
"Permitted Liens" means:
(i) tax Liens with respect to taxes not yet due and payable or
which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been
established in accordance with GAAP;
(ii) deposits or pledges made in connection with, or to secure
payment of, utilities or similar services, workers' compensation,
unemployment insurance, old age pensions or other social security
obligations;
(iii) interests or title of a lessor under any lease set forth on
Schedule 4.9;
(iv) mechanics', materialmen's or contractors' Liens or
encumbrances or any similar Lien or restriction arising in the
ordinary course of business for amounts not yet due and payable;
and
(v) easements, rights-of-way, restrictions and other similar
charges and encumbrances of record not interfering with the
ordinary conduct of the Business or materially detracting from
the value of the Business Assets.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability Seller, a joint stock Seller, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Pricing Schedules" means current billing rates and pricing to
hospitals under contract, whether written or oral.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
35
or indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"Tax" or "Taxes" means any (i) federal, state, local or foreign
income, gross receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, capital stock,
social security, unemployment, disability, payroll, license, employee or other
withholding, or other tax, of any kind whatsoever, including any interest,
penalties or additions to tax or additional amounts in respect of the foregoing;
(ii) liability of Seller for the payment of any amounts of the type described in
clause (i) arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included (or required to be included) in any Tax
Return relating thereto); and (iii) liability of Seller for the payment of any
amounts of the type described in clause (i) as a result of any express or
implied obligation to indemnify or otherwise assume or succeed to the liability
of any other Person.
[Continued on the following page]
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"Tax Returns" means returns, declarations, reports, claims for
refund, information returns or other documents (including any related or
supporting schedules, statements of information) filed or required to be filed
in connection with the determination, assessment or collection of Taxes of any
party of the administration of any laws, regulations or administrative
requirements relating to any Taxes.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
ASSOCIATED STAFFING RESOURCES, INC.
/s/ XXXXXX X. XXXXXXX
--------------------------------------
By: Xxxxxx X. Xxxxxxx
Its: Chief Executive Officer
STOCKHOLDERS
/s/ XXXXX X. XXXXX
--------------------------------------
XXXXX X. XXXXX
ASSOCIATED SOCIAL RESOURCES, INC.
/s/ XXXXX X. XXXXX
--------------------------------------
By: Xxxxx X. Xxxxx
Its: President
37
