Exhibit 2.1
STOCK PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 30, 1998
By and Between
ALLIN COMMUNICATIONS CORPORATION
and
LIGHTHOUSE HOLDINGS, INC.
TABLE OF CONTENTS
-----------------
Page
---
PREAMBLE............................................................. 1
ARTICLE 1
SALE OF STOCK........................................................ 1
ARTICLE 2
CONSIDERATION AND MANNER OF PAYMENT.................................. 1
2.1 Purchase Price............................................ 1
2.2 Payment of Purchase Price................................. 2
2.3 Unearned Revenue Adjustment............................... 2
2.4 Closing Expenses and Related Taxes........................ 3
ARTICLE 3
SELLER'S REPRESENTATIONS AND WARRANTIES.............................. 4
3.1 Seller's Authority........................................ 4
3.2 Organization and Qualification of the Company............. 4
3.3 Subsidiaries.............................................. 4
3.4 Articles of Incorporation, By-Laws, Officers and Directors 4
3.5 Capital Stock, Title to the Shares........................ 4
3.6 Options, etc.............................................. 5
3.7 Financial Statements...................................... 5
3.8 Absence of Undisclosed Liabilities........................ 5
3.9 Accounts Receivable and Accounts Payable.................. 6
3.10 Taxes..................................................... 6
3.11 Material Contracts........................................ 8
3.12 Real Property............................................. 8
3.13 Personal Property......................................... 9
3.14 Litigation................................................ 9
3.15 Compliance with Applicable Laws........................... 9
3.16 Intellectual Property..................................... 10
3.17 Transaction Not a Breach.................................. 10
3.18 Conduct of Business....................................... 11
3.19 Insurance Policies........................................ 12
3.20 Bank Accounts, Powers of Attorney......................... 12
3.21 Licenses and Permits...................................... 12
3.22 Employee Benefit Plans.................................... 13
3.23 Interest of the Company in Customers, etc................. 14
3.24 Health, Safety and Environment............................ 14
3.25 Salaries.................................................. 15
3.26 Personnel Agreements, Plans and Arrangements.............. 15
3.27 Workers Compensation...................................... 16
3.28 Customers................................................. 16
3.29 Affiliate Transactions.................................... 16
3.30 Independent Contractors................................... 16
3.31 Brokers................................................... 17
3.32 No Misrepresentation...................................... 17
i
ARTICLE 4
BUYER'S REPRESENTATIONS AND WARRANTIES............................... 17
4.1 Organization.............................................. 17
4.2 Authorization............................................. 17
4.3 Transaction Not a Breach.................................. 17
4.4 Acquisition of Shares for Investment...................... 18
4.5 No Misrepresentation...................................... 18
ARTICLE 5
CLOSING.............................................................. 18
5.1 Time and Place............................................ 18
5.2 Deliveries of Seller...................................... 18
5.3 Deliveries of Buyer....................................... 20
ARTICLE 6
COVENANTS AFTER CLOSING.............................................. 21
6.1 Liability for Taxes....................................... 21
6.2 Indemnification........................................... 22
6.3 Restrictive Covenants..................................... 26
6.4 Other Contracts and Permits............................... 28
ARTICLE 7
MISCELLANEOUS........................................................ 29
7.1 Notices, Consents, etc.................................... 29
7.2 Public Announcements...................................... 30
7.3 Severability.............................................. 30
7.4 Amendment and Waiver...................................... 30
7.5 Documents................................................. 30
7.6 Counterparts.............................................. 30
7.7 Expenses.................................................. 30
7.8 Construction.............................................. 30
7.9 Headings.................................................. 30
7.10 Assignment................................................ 31
7.11 Definitions............................................... 31
7.12 Entire Agreement.......................................... 32
7.13 Third Parties............................................. 32
7.14 Interpretative Matters.................................... 33
7.15 Knowledge................................................. 33
7.16 No Strict Construction.................................... 33
SCHEDULES............................................................ 35
EXHIBITS............................................................. 34
ii
GLOSSARY OF DEFINED TERMS
"Accountants"........................................................ Section 2.3
"Affiliate".......................................................... Section 7.11
"Affiliate Transactions"............................................. Section 3.29
"Affiliated Group"................................................... Section 7.11
"Agreement".......................................................... Introduction
"Business"........................................................... Preamble
"Buyer".............................................................. Introduction
"Buyer Indemnified Party"............................................ Section 6.2.1
"Buyer Taxes"........................................................ Section 6.1
"Closing"............................................................ Section 5.1
"Closing Date"....................................................... Section 5.1
"Code"............................................................... Section 7.11
"Company"............................................................ Preamble
"Confidential Information"........................................... Section 6.3.4
"Defense Counsel".................................................... Section 6.2.3
"Defense Notice"..................................................... Section 6.2.3
"Direct Claims"...................................................... Section 6.2.4
"Employee Benefit Plans"............................................. Section 3.22
"Environmental and Safety Requirements".............................. Section 3.24
"ERISA".............................................................. Section 7.11
"Financial Statements"............................................... Section 3.7
"GAAP"............................................................... Section 7.11
"Hazardous Wastes"................................................... Section 7.11
"Indefinite Claim"................................................... Section 6.2.6
"Indemnified Party".................................................. Section 6.2.3
"Independent Contractors"............................................ Section 3.30
iii
"Indemnifying Party"................................................. Section 6.2.3
"Liens".............................................................. Section 7.11
"Losses"............................................................. Section 6.2.1
"Material Contracts"................................................. Section 3.11
"Note".............................................................. Section 2.2
"Permits"........................................................... Section 3.21
"Person"........................................................... Section 7.11
"Plan Affiliate"................................................... Section 3.22
"Proprietary Rights"............................................... Section 7.11
"Protest Notice"................................................... Section 2.3
"Purchase Price"................................................... Section 2.1
"Real Property".................................................... Section 3.12
"Restricted Period"................................................ Section 6.3.2
"Rules"............................................................ Section 3.17
"Seller"........................................................... Introduction
"Seller Indemnified Party"......................................... Section 6.2.2
"Seller Taxes"..................................................... Section 6.1
"Shares"........................................................... Preamble
"Special Claim".................................................... Section 6.2.6
"Tax".............................................................. Section 7.11
"Tax Returns"...................................................... Section 7.11
"Territory"........................................................ Section 6.3.2
"Third Party Claim"................................................ Section 6.2.3
"Transaction Documents"............................................ Section 7.11
"Transition Services Agreement".................................... Section 5.2
"Unaudited Financial Statements"................................... Section 3.7
iv
"Unearned Revenue Adjustment"...................................... Section 2.3
"Unearned Revenue Amount".......................................... Section 2.3
"Unearned Revenue Schedule"........................................ Section 2.3
v
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of September 30, 1998,
by and among ALLIN COMMUNICATIONS CORPORATION, a Delaware corporation
("Seller"), and LIGHTHOUSE HOLDINGS, INC., a Delaware corporation ("Buyer").
PREAMBLE
--------
A. Sportswave, Inc. d/b/a International Sports Marketing, a
Pennsylvania corporation (the "Company"), is engaged in the business of sports
marketing and promotion (the "Business").
B. Seller owns all of the issued and outstanding capital stock of
the Company (the "Shares") and, accordingly, controls the business and
operations of the Company.
C. Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, the Shares on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants of the parties as
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1
---------
SALE OF STOCK
-------------
Seller, in reliance upon the representations and warranties of Buyer contained
herein and on the terms and conditions herein set forth, hereby agrees to sell,
assign, transfer, convey and deliver to Buyer at the Closing all of its right,
title and interest in and to all of the Shares. Buyer, in reliance upon the
representations and warranties of Seller contained herein and on the terms and
conditions herein set forth, hereby agrees to purchase the Shares from Seller at
the Closing for a purchase price as provided in Article 2 hereof.
ARTICLE 2
---------
CONSIDERATION AND MANNER OF PAYMENT
-----------------------------------
2.1 Purchase Price. The aggregate purchase price for the Shares
--------------
(the "Purchase Price") is $3,500,000, payable in accordance with Section 2.2 and
subject to adjustment as set forth in Section 2.3. The Purchase Price shall be
allocated to the assets of the Company by Buyer and Seller, in accordance with
applicable requirements of the Code and reflecting the fair market value of the
various Company assets, within 30 days after the Closing Date. These
allocations shall be binding on all parties for Federal and State income tax
purposes in connection with this Agreement, and shall be consistently reflected
by each party on its Tax Returns. Such allocation of the Purchase Price shall
be included herein as Schedule 2.1.
------------
2.2 Payment of Purchase Price. The Purchase Price shall be payable
-------------------------
at the Closing as follows:
(a) Buyer shall pay to Seller, by wire transfer of immediately available funds
to an account of Seller at a bank or banks specified by Seller, an amount
equal to $3,000,000 less the Estimated Adjustment to the extent it is a
decrease to the Purchase Price or plus the Estimated Adjustment to the
extent it is an increase to the Purchase Price.
(b) Buyer shall deliver the duly executed Promissory Note, in substantially the
form of Exhibit A attached hereto (the "Note"), in the original principal
---------
amount of $500,000.
2.3 Unearned Revenue Adjustment. Notwithstanding anything to the
---------------------------
contrary contained herein, the Purchase Price shall be (a) reduced on a dollar
for dollar basis to the extent that the Unearned Revenue Amount of the Company
as of the Closing Date is less than $56,488, determined as set forth below, or
(b) increased on a dollar for dollar basis to the extent that the Unearned
Revenue Amount is greater than $56,488 (either such adjustment, the "Unearned
Revenue Adjustment").
(a) Definition. For purposes of this Agreement, the term "Unearned Revenue
----------
Amount" shall be determined as of the Closing Date in a manner consistent
with Exhibit B, and shall include all accounts for which unearned revenue
---------
is currently recorded on the books of the Company.
(b) Estimated Adjustment. Within seven business days prior to the Closing, but
--------------------
in no event less
than three business days prior to the Seller, Seller shall deliver to the
Buyer a certificate of the chief financial officer of the Company which contains
Seller's good faith best estimate of the Unearned Revenue Amount and any
resulting Unearned Revenue Adjustment expected on the Closing Date ("Estimated
Adjustment"), which Estimated Adjustment shall be reasonably acceptable to
Buyer.
(c) Unearned Revenue Schedule. As soon as practicable, but not later than 90
-------------------------
days after the Closing Date, the Company shall prepare and deliver to
Seller a schedule setting forth the Company's Unearned Revenue Amount and
the Unearned Revenue Adjustment, if any (the "Unearned Revenue Schedule").
(d) Protest Notice. Within 10 days of the delivery of the Unearned Revenue
--------------
Schedule, Seller may deliver written notice (the "Protest Notice") to Buyer
of any objections, and the basis therefor, which Seller may have to the
Unearned Revenue Schedule. The failure of Seller to deliver such Protest
Notice within the prescribed time period will constitute Seller's
acceptance of the Unearned Revenue Schedule as determined by Buyer. Upon
receipt of the Unearned Revenue Schedule, Seller and its representatives
shall be given unrestricted access to all of the Company's books and
records during reasonable business hours for the purpose of verifying the
Unearned Revenue Schedule.
(e) Resolution of Seller's Protest. If Seller and Buyer are unable to resolve
------------------------------
any disagreements with respect to the Unearned Revenue Schedule within 20
days following Buyer's receipt of the Protest Notice, then the items in
dispute will be referred to Xxxxxx Xxxxxxxx L.L.P. (the "Accountants") for
final determination within 45 days, which determination shall be final and
binding on both Buyer and Seller. Seller, on the one hand, and Buyer, on
the other hand, shall bear the fees and expenses of the Accountants
equally.
(f) Payment. Within 10 days of the final determination of the Unearned Revenue
-------
Adjustment, payment of the Unearned Revenue Adjustment shall be paid as
follows: (i) in the event of a Unearned Revenue Adjustment that is a
decrease to the Purchase Price, Seller shall pay Buyer an amount equal to
such Unearned Revenue Adjustment, to be paid by Seller in immediately
available funds within ten days of the final determination of the Unearned
Revenue Adjustment or (ii) in the event of a Unearned Revenue Adjustment
that is an increase to the Purchase Price, Buyer shall pay Seller an amount
equal to such Unearned Revenue Adjustment, to be paid by Buyer in
immediately available funds within ten days of the final determination of
the Unearned Revenue Adjustment.
(g) Cooperation of Auditors. Seller and Seller's accountants and other
-----------------------
representatives shall fully cooperate with Buyer and Xxxxxx Xxxxxxxx,
L.L.P. and other representatives of the Company in preparation of the
Unearned Revenue Schedule, including, without limitation, by providing
access to workpapers relevant to the Closing Unearned Revenue Schedule as
well as the books and records related thereto (subject to providing any
"hold harmless" letters or similar agreements requested by such
representatives).
2.4 Closing Expenses and Related Taxes. Seller shall pay at the
----------------------------------
Closing any stamp or other sales, transfer or transaction tax imposed under the
laws of the United States or any state, county, municipality or other
subdivision thereof on the sale of the Shares by Seller to Buyer.
2
ARTICLE 3
---------
SELLER'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
Seller represents and warrants to Buyer as follows:
3.1 Seller's Authority. Seller has full power, right and authority
------------------
to enter into and perform its obligations under this Agreement and each of the
Transaction Documents to which it is a party. This Agreement and each of the
Transaction Documents to which Seller is a party have been duly executed and
delivered by Seller and constitute the valid and binding obligations of Seller
and are enforceable against Seller in accordance with their respective terms.
Except as set forth on Schedule 3.1, no permits, approvals or consents of or
------------
notifications to (a) any governmental entities or (b) any other Persons are
necessary in connection with the execution, delivery and performance by Seller
of this Agreement and the Transaction Documents and the consummation by Seller
of the transactions contemplated hereby and thereby.
3.2 Organization and Qualification of the Company. The Company is a
---------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of Pennsylvania. The Company has full power and authority to
carry on its business as it is now being conducted and to own or hold under
lease the properties and assets it now owns or holds under lease. The Company
is duly qualified to do business and is in good standing as a foreign
corporation in the jurisdictions listed on Schedule 3.2 and there are no other
------------
jurisdictions in which its conduct of the Business or its ownership of assets
requires such qualification under applicable law.
3.3 Subsidiaries. The Company has no subsidiaries and does not own,
------------
directly or indirectly, any stock, partnership interest, joint venture interest
or other equity interest in any other Person.
3.4 Articles of Incorporation, By-Laws, Officers and Directors.
----------------------------------------------------------
Complete and correct copies of the Company's charter documents and all
amendments thereof to date, certified by the Secretary of State of Pennsylvania,
and the by-laws as amended to date, certified by an officer of the Company have
been delivered to Buyer. Schedule 3.4 contains a complete and correct list of
------------
all of the officers and directors of the Company. The minute books of the
Company contain complete and correct copies of the minutes of each meeting and
each action by written consent of its Board of Directors or shareholders and the
stock ledger of the Company contains a complete and correct record of all
issuances and transfers of capital stock of the Company.
3.5 Capital Stock, Title to the Shares. Schedule 3.5 sets forth the
---------------------------------- ------------
entire authorized capital stock and the total number of issued and outstanding
shares of capital stock of the Company. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and non-assessable
and are owned, beneficially and of record, by Seller and no Shares are subject
to, nor have been issued in violation of preemptive rights. All issuances,
sales and repurchases by the Company of its Shares have been effected in
compliance with all applicable laws, including, without limitation, applicable
federal and state securities laws. Seller has good and marketable title to the
Shares, free and clear of any Liens whatsoever. Upon consummation of the
transactions provided for in this Agreement in accordance with the terms hereof,
Seller will deliver good and marketable title to all of the Shares, free and
clear of any Liens whatsoever, other than transfer restrictions under federal
and state securities laws.
3.6 Options, etc The Company does not have outstanding any stock or
------------
other securities convertible into or exchangeable for shares of its capital
stock or containing profit participation features, and the Company does not have
outstanding any options, warrants or rights to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable for
its capital stock. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any warrants, options or other rights to acquire its capital
stock. There are no voting agreements, voting trusts or other agreements
(including, without limitation, contractual or statutory preemptive rights or
cumulative voting rights), commitments or understandings with respect to the
voting or transfer of the capital stock of the Company.
3.7 Financial Statements. Schedule 3.7 contains the following
-------------------- ------------
financial statements of the Company (the "Financial Statements"):
3
(a) the audited consolidated balance sheet of the Company as of December 31,
1997, 1996 and 1995 and the related statements of income and cash flows for
the fiscal years then ended and the auditor's reports and opinions thereon;
and
(b) the unaudited consolidated balance sheet of the Company as of August 31,
1998 and the related statement of income for the eight months, then ended
(the "Unaudited Financial Statement").
Each of the Financial Statements is complete and correct in all material
respects, is consistent with the books and records of the Company (which, in
turn, are accurate and complete in all material respects) and fairly presents
the Company's financial condition, assets and liabilities as of its respective
date and the results of operations and cash flows for the period related thereto
in accordance with GAAP consistently applied throughout the period covered
thereby, except that the Unaudited Financial Statements lack the footnote
disclosure and normal recurring accruals otherwise required by GAAP, none of
which, if provided, would reflect a material adverse change in the operations or
financial condition of the Company. Copies of all items that relate to the
Business in the management letters received by the Company from its certified
public accountant in connection with each of the audits for the years ended
December 31, 1995, 1996 and 1997 have been provided to Buyer.
3.8 Absence of Undisclosed Liabilities. The Company does not have
----------------------------------
any material debts, liabilities or obligations of any nature (whether accrued,
absolute, contingent, direct, indirect, perfected, inchoate, unliquidated or
otherwise and whether due or to become due) arising out of transactions entered
into, at or prior to the Closing, or any transaction, series of transactions,
action or inaction at or prior to the Closing, or any state of facts or
condition existing at or prior to the Closing (regardless of when such liability
or obligation is asserted), including, without limitation, liabilities or
obligations on account of Taxes or governmental charges or penalties, interest
or fines thereon or in respect thereof, except (a) to the extent specifically
reflected and accrued for or reserved against in the Financial Statements, (b)
for liabilities specifically delineated on Schedule 3.8, or (c) for liabilities
------------
and obligations which have arisen after August 31, 1998 in the ordinary course
of business consistent with past custom and practice (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit).
3.9 Accounts Receivable and Accounts Payable
----------------------------------------
(a) All of the Company's accounts receivable reflected on the Financial
Statements have arisen in bona-fide arms length transactions in the
ordinary course of business and, except for immaterial amounts, are valid
and binding obligations of the account debtors, subject to the allowance
for doubtful accounts on such Financial Statements, and are collectible in
the ordinary course of business.
(b) Except for intercompany payables which will be discharged at or prior to
the Closing, all of the Company's accounts payable reflected on the
Financial Statements have arisen in bona-fide arms length transactions in
the ordinary course of business and, prior to Closing, the Company has been
paying its accounts payable in the ordinary course, consistent with past
practice.
3.10 Taxes.
-----
I. Filing of Returns. Except as set forth in Schedule 3.10 (although such
----------------- -------------
exceptions shall be indemnifiable hereunder), the Company has properly
completed and filed on a timely basis and in correct form all Tax Returns
required to be filed on or prior to the date hereof. As of the time of
filing, the foregoing Tax Returns reflected, in all material respects, the
facts regarding the income, business, assets, operations, activities,
status, or other matters of the Company or any other information required
to be shown thereon. In particular, the foregoing returns are not subject
to penalties under Section 6662 of the Code, relating to accuracy-related
penalties (or any corresponding provision of the state, local or foreign
Tax law) or any predecessor provision of law. An extension of time within
which to file any Tax Return that has not been filed has not been requested
or granted.
(b) Payment of Taxes. With respect to all amounts in respect of Taxes imposed
----------------
on the Company or for which the Company is or could be liable, whether to
taxing authorities (as, for example, under law) or to
4
other persons or entities (as, for example, under tax allocation
agreements), with respect to all taxable periods or portions of periods
ending on or before the Closing Date, except as set forth on Schedule 3.10
-------------
(although such exceptions are indemnifiable hereunder) all applicable tax
laws and agreements have been fully complied with, and all such amounts
required to be paid by the Company to taxing authorities or others on or
before the date hereof have been paid.
(c) Audit History. No issues have ben raised (and are currently pending) by
-------------
any taxing authority in connection with any of the Tax Returns. No waivers
of statutes of limitation with respect to the Tax Returns have been given
by or requested from the Company. All deficiencies asserted or assessments
made as a result of any examinations have been fully paid or settled.
(d) Liens. There are no liens for Taxes (other than for current Taxes not yet
-----
due and payable) on the assets of the Company.
(e) Tax-Sharing or Allocation Agreements. The Company is not a party to or
------------------------------------
bound by (nor will the Company become a party to or bound by) any tax-
indemnity, tax-sharing, or tax-allocation agreement.
(f) Prior Affiliated Groups. Except for the Affiliated Group of which Seller
-----------------------
is presently a member, the Company has never been a member of an Affiliated
Group.
(g) Tax Elections. All material elections with respect to Taxes affecting the
-------------
Company as of the date hereof are set forth in Schedule 3.10.
-------------
(h) Section 341(f) Consent. The Company has not filed a consent pursuant to
----------------------
the collapsible corporation provisions of Section 341(f) of the Code (or
any corresponding provision of state, local, or foreign income tax law) or
agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local, or foreign income tax law) apply to any
disposition of any asset owned by it.
(i) Safe Harbor Lease Property. None of the assets of the Company is property
--------------------------
that the Company is required to treat as being owned by any other person
pursuant to the "safe harbor lease" provisions of former Section 168(f)(8)
of the Code.
(j) Adjustments Under Section 481. The Company has not agreed to make nor is
-----------------------------
it required to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise.
(k) Parachute Payment. The Company is not a party to any agreement, contract,
-----------------
arrangement, or plan that has resulted or would result, separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
(l) U.S. Real Property Holding Corporation. The Company is not and has not
--------------------------------------
been a United States real property holding corporation (as defined in
Section 897(c)(2) of the Code) during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(m) Foreign Person. The Seller is not a person other than a United States
--------------
person within the meaning of the Code, and is not subject to withholding
under Section 1445 of the Code.
(n) No Withholding. The transaction contemplated herein is not subject to the
--------------
tax withholding provisions of Section 3406 of the Code, or of Subchapter A
of Chapter 3 of the Code, or of any other provision of law.
(o) Permanent Establishment. The Company does not have and has not had a
-----------------------
permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and such
foreign country.
5
(p) Existing Partnerships. The Company is not a party to any joint venture,
---------------------
partnership, or other arrangement or contract that could be treated as a
partnership for federal income tax purposes.
(q) Section 338(h)(10) Election. Seller represents that it filed a
---------------------------
consolidated federal income tax return with the Company for the taxable
year immediately preceding the current taxable year and that Seller is
eligible to make an election under Section 338(h)(10) of the Code (and any
comparable election under state or local tax law) with respect to the
Company.
3.11 Material Contracts. Schedule 3.11 is a correct and complete
------------------ -------------
list of every material contract, agreement, relationship or commitment, written
or oral, to which the Company is a party or by which it is bound which (i)
requires aggregate future payments in excess of $50,000, (ii) has a term or
effective period longer than one year in duration or (iii) contains non-
competition or non-solicitation covenants or similar restrictions of the Company
(collectively, the "Material Contracts"), correct and complete copies of which
previously have been furnished to Buyer. The Company is not in default, nor has
any event occurred which with the giving of notice or the passage of time or
both would constitute a default, under any Material Contract or any other
material obligation owed by the Company, and, to the knowledge of Seller, no
event has occurred which with the giving of notice or the passage of time or
both would constitute a default by any other party to any such Material Contract
or obligation. Each of the Material Contracts is in full force and effect, is
valid and enforceable in accordance with its terms and is not subject to any
claims, charges, set-offs or defenses. Each Material Contact was effected on
market terms in arms-length negotiations.
3.12 Real Property. The Company does not own any real property. The
-------------
Company has valid leasehold interests in all of the real property which they
hold under the leases described in Schedule 3.12 (collectively, the "Real
-------------
Property"), in each case free and clear of all Liens, except as set forth on
Schedule 3.12. The Real Property constitutes all real properties used or
-------------
occupied by the Company in connection with the Business or reflected on the
Financial Statements. With respect to the Real Property: (a) the Company has
all easements and rights necessary to conduct the Business; (b) no portion
thereof is subject to any pending or, to the knowledge of Seller, threatened
condemnation proceeding or proceeding by any public authority; (c) the
buildings, plants and structures, including, without limitation, heating,
ventilation and air conditioning systems, roof, foundation and floors, are in
good operating condition and repair, subject only to ordinary wear and tear, and
are not in violation of any zoning or other Rules; (d) there are no leases,
subleases, licenses, concessions or other agreements, written or oral, granting
to any party or parties the right of use or occupancy of any portion of any
parcel of Real Property; and (e) the Real Property is supplied with utilities
and other services necessary for the operation of such facilities.
3.13 Personal Property. Except for such liens the discharges of
-----------------
which will be delivered at the Closing, the Company has good and marketable
title to, or a valid leasehold interest all tangible and intangible assets,
property and rights used by the Company in connection with the Business or shown
on the Unaudited Financial Statements (except to the extent that assets have
after the date hereof been disposed of in the ordinary course of business), in
each case, free and clear of any Liens. As of the Closing, except as set forth
on Schedule 3.13, the assets and leasehold interests owned by the Company will
-------------
include all tangible and intangible assets, properties and rights used in, or
reasonably necessary for, or material to, the operation of the Business as
currently conducted, as conducted during the previous twelve months and as
currently proposed to be conducted. All items of tangible personal property
used by the Company are in good condition and repair and none of such personal
property requires any repair or replacement except for maintenance in the
ordinary course of business. Except as set forth on Schedule 3.13, none of the
-------------
personal property of the Company is held under any lease, security agreement,
conditional sales contract or other title retention or security arrangement or
is located other than on the premises of the Company.
3.14 Litigation. There is no suit, action, proceeding,
----------
investigation, claim or order pending or, to the knowledge of Seller, threatened
against the Company (or pending or, threatened against any of the officers,
directors or key employees of the Company with respect to their business or
proposed business activities), or to which the Company is otherwise a party,
which if adversely determined would adversely affect the Company, its assets or
the Business, before any court, or before any governmental department,
commission, board, agency, or instrumentality, nor, is there any reasonable
basis for any such action, proceeding or investigation. The Company is not
subject to any judgment, order or decree of any court or governmental agency,
neither the Company nor Seller has received any opinion or memorandum or legal
advice from legal counsel retained by the Company or Seller to the effect that
either such party is exposed, from a legal standpoint, to any liability which
may be material to its business, and the Company has not
6
engaged in any legal action to recover monies due it or for damages sustained by
it. Schedule 3.14 sets forth all closed litigation matters with respect to the
-------------
Company to which the Company was a party during the five years preceding the
date hereof, the date such litigation was commenced and concluded, and the
nature of the resolution thereof (including amounts paid in settlement or
judgment).
3.15 Compliance with Applicable Laws. The Company is not in
-------------------------------
violation of any law, regulation or requirement applicable to it or the conduct,
ownership, use, occupancy or operation of the Business or the Real Property, nor
has the Company or Seller received notice (written or oral) of any such
violation.
3.16 Intellectual Property. Schedule 3.16 contains a complete and
--------------------- -------------
correct list of all patented and registered Proprietary Rights owned by the
Company and all pending applications for the registration of other Proprietary
Rights owned or filed by the Company. Schedule 3.16 also contains a complete
-------------
and correct list of all trade or corporate names used by the Company and a
complete and correct list of all licenses and other rights granted by the
Company to any third party with respect to Proprietary Rights and licenses and
other rights granted by any third party to the Company. Except as set forth on
Schedule 3.16, (a) the Company owns and possesses all right, title and interest
-------------
in and to, or has a valid license to use, all of the Proprietary Rights
necessary for the operation of the Business as presently conducted and none of
such Proprietary Rights has been abandoned; (b) no claim by any third party
contesting the validity, enforceability, use or ownership of any such
Proprietary Rights has been made, is currently outstanding or, to the knowledge
of Seller, threatened, and, to the knowledge of Seller, there is no reasonable
basis for any such claim; (c) neither the Company nor Seller nor any registered
agent of the Company or Seller has received any notices of, nor has any
knowledge of any reasonable basis for an allegation of, any infringement or
misappropriation by, or conflict with, any third party with respect to such
Proprietary Rights, nor has the Company, Seller or any registered agent of the
Company or Seller received any claims of infringement or misappropriation of or
other conflict with any Proprietary Rights of any third party; and (d) the
Company has not infringed, misappropriated or otherwise violated any Proprietary
Rights of any third parties, and neither the Company nor Seller has any
knowledge of infringement, misappropriation or conflict which will occur as a
result of the continued operation the Company's Business as presently conducted
or as currently proposed by the Company to be conducted.
3.17 Transaction Not a Breach. Neither the execution and delivery of
------------------------
this Agreement and the Transaction Documents by Seller nor the performance by it
of the transactions contemplated hereby or thereby will:
(a) violate or conflict with or result in a breach of any provision of any law,
statute, rule, regulation, order, permit, judgment, injunction, decree or
other decision (collectively, "Rules") of any court or other tribunal or
any governmental entity or agency binding on Seller or the Company or their
respective properties, or conflict with or result in the breach of any of
the terms, conditions or provisions thereof;
(b) constitute a default under the charter documents or the by-laws of the
Company or of any Material Contract;
(c) constitute an event which would permit any party to terminate, or
accelerate the maturity of any indebtedness or other obligation under, any
Material Contract;
(d) result in the creation or imposition of any Lien upon any of the Company's
capital stock or assets;
(e) require any authorization, consent, approval, exemption or other action by,
or notice to, any court or administrative or governmental body pursuant to
the charter or by-laws of any of the Company or any Rules; or
(f) create an obligation on the part of the Company or Seller to pay any bonus,
transaction fee or other amount to any Person.
3.18 Conduct of Business.
-------------------
7
(a) Conduct of Ordinary Course. Except as set forth on Schedule 3.18
-------------------------- -------------
or as otherwise provided in this Agreement, since July 31, 1998, the
Company has conducted its business only in the ordinary course of business
consistent with past custom and practice, and has incurred no liabilities
other than in the ordinary course of business consistent with past custom
and practice and there has been no material adverse change in the assets,
condition (financial or otherwise), operating results, employee or customer
relations, business activities or business prospects of the Company.
Without limitation of the foregoing and except as set forth on Schedule
--------
3.18, since July 31, 1998, the Company has not:
----
(i) sold, assigned or transferred any of the assets of the
Business or mortgaged, pledged or subjected them to any Lien, charge
or other restriction, except for Liens for current property taxes not
yet due and payable;
(ii) sold, assigned, transferred, abandoned or permitted to
lapse any licenses or permits which, individually or in the aggregate,
are material to the Business or any portion thereof, or any of the
Proprietary Rights or other intangible assets, or disclosed any
material proprietary confidential information to any person, granted
any license or sublicense of any rights under or with respect to any
Proprietary Rights;
(iii) made or granted any increase in, or amended or
terminated, any existing plan, program, policy or arrangement,
including, without limitation, any Employee Benefit Plan or
arrangement or adopted any new Employee Benefit Plan or arrangement,
or entered into any new collective bargaining agreement or
multiemployer plan;
(iv) conducted their cash management customs and practices
(including the timing of collection of receivables and payment of
payables and other current liabilities) and maintained its books and
records other than in the usual and ordinary course of business
consistent with past custom and practice;
(v) made any loans or advances to, or guarantees for the
benefit of, or entered into any transaction with any employee, officer
or director;
(vi) suffered any extraordinary loss, damage, destruction or
casualty loss to the Business or waived any rights of material value,
whether or not covered by insurance and whether or not in the ordinary
course of business;
(vii) received notification that any material customer will
stop or decrease in any material respect the rate of business done
with the Company;
(viii) declared, set aside or paid any dividend or
distribution of cash or other property to any shareholder or
purchased, redeemed or otherwise acquired any shares of its capital
stock, or made any other payments to any shareholder; provided,
however, that, notwithstanding any such distributions set forth in
Schedule 3.18, on the Closing Date, the Company shall cash sufficient
-------------
to cover all outstanding checks, drafts or other withdrawals on the
Company's accounts;
(ix) amended or authorized the amendment of its charter
documents or by-laws;
(x) entered into any other material transaction, other than
in the ordinary course of business consistent with past custom and
practice; or
(xi) committed to any of the foregoing.
(b) No Illegal Payments. The Company has not at any time made, or
-------------------
committed to make, any payments for illegal political contributions or made
any bribes, kickback payments or other illegal payments to any of their
customers, employees, agents, representatives or any other Person.
8
3.19 Insurance Policies. Schedule 3.19 is a correct and complete list and
------------------ -------------
description, including policy numbers, coverage, and deductibles, of all
insurance policies and binders owned by the Company, correct and complete copies
of which policies or binders have previously been delivered to Buyer. Such
policies are in full force and effect, and the Company is not in default under
any of them. The Company has not received any notice of cancellation or intent
to cancel or increase or intent to increase premiums with respect to such
insurance policies nor, to the knowledge of Seller, is there any basis for any
such action. Schedule 3.19 also contains a list of all pending claims with any
-------------
insurance company and any instances within the previous three years of a denial
of coverage of the Company by any insurance company.
3.20 Bank Accounts, Powers of Attorney. Schedule 3.20 is a complete and
--------------------------------- -------------
correct list of each bank in which the Company has an account or safe deposit
box, the number of each such account or box and the names of all persons
authorized to draw thereon or to have access thereto. Schedule 3.20 also
-------------
includes a complete and correct list of all outstanding powers of attorney
executed on behalf of the Company.
3.21 Licenses and Permits. The Company holds all the permits, licenses,
--------------------
franchises and approvals of governmental authorities and agencies necessary or
material for the current conduct, ownership, use, occupancy or operation of the
Business or the Real Property, all of which are identified on Schedule 3.21
-------------
("Permits"). The Company is in compliance in all material respects with such
Permits, all of which are in full force and effect, and neither the Company nor
Seller has received any notices (written or oral) to the contrary.
3.22 Employee Benefit Plans.
----------------------
(a) Except as set forth in Schedule 3.22, neither the Company nor any
-------------
current or former Plan Affiliate has maintained, sponsored, adopted, made
contributions to or obligated itself to make contributions to or to pay any
benefits or grant rights under or with respect to any "employee pension
benefit plan" (as defined in Section 3(2) of ERISA), "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), "multi-employer plan"
(as defined in Section 3(37) of ERISA), plan of deferred compensation,
medical plan, life insurance plan, long-term disability plan, dental plan
or welfare plan, personnel policy (including, without limitation, vacation
time, holiday pay, bonus programs, moving expense reimbursement programs
and sick leave), excess benefit plan, bonus or incentive plan (including,
but not limited to, stock options, restricted stock, stock bonus and
deferred bonus plans), salary reduction agreement, change-of-control
agreement, employment agreement, consulting agreement or any other benefit,
program or contract (collectively, "Employee Benefit Plans"), whether or
not written or pursuant to a collective bargaining agreement, which could
give rise to or result in the Company having any debt, liability, claim or
obligation of any kind or nature, whether accrued, absolute, contingent,
direct, indirect, known or unknown, perfected or inchoate or otherwise and
whether or not due or to become due.
(b) Seller has delivered to Buyer with respect to each written
Employee Benefit Plan a complete and accurate copy of: (i) each plan
document and summary plan description; (ii) each Form 5500 Annual Report,
if applicable, for the three (3) most recent years; (iii) each material
letter, ruling or notice issued by a governmental entity or agency,
including the most recent letter of determination from the Internal Revenue
Service; and (iv) the latest financial statements and latest prepared
actuarial reports for any employee pension benefit plans.
(c) To the extent required by ERISA and the Code, each Employee
Benefit Plan: (i) has been and currently complies in form and in operation
in all respects with all applicable requirements of ERISA and the Code, all
Rules and its terms (except as otherwise required by law); (ii) has been
and is operated in compliance with applicable Rules in such a manner as to
qualify, when appropriate, for both Federal and state purposes, for income
tax exclusion to its participants, tax-exempt income for its funding
vehicle, and the allowance of deductions and credits with respect to
contributions thereto; and (iii) where appropriate, has received a
favorable letter of determination from the Internal Revenue Service on
which it may rely.
(d) With respect to each Employee Benefit Plan, there are no suits,
actions proceedings, investigations, claims or orders pending or, to the
knowledge of Seller, threatened with respect to the assets thereof, and, to
the knowledge of Seller, there are no facts which could reasonably be
expected to give rise to
9
any liability, suit, action, proceeding or claim against any Employee
Benefit Plan, any fiduciary or plan administrator or other Person dealing
with any Employee Benefit Plan or the assets of such plan. No "prohibited
transaction" as defined in Section 4975 of the Code and Section 406 of the
Code has occurred (except a prohibited transaction to which any exemption
is applicable).
(e) All contributions, payments, premiums, expenses, reimbursements or
accruals for all periods ending prior to or as of the Closing for each
Employee Benefit Plan shall have been made to the extent required by such
Employee Benefit Plan or accrued on the Closing Balance Sheet to the extent
required by GAAP and no such plan otherwise has (and could not reasonably
be expected to have) any unfunded liability (including for periods from the
first day of the current plan year to the Closing) which is not reflected
on the Financial Statements.
(f) Neither the Company nor any Plan Affiliate has at any time
participated in, made contributions to or had any other liability with
respect to any Employee Benefit Plan which (i) is or was a "multiemployer
plan" as defined in Section 4001 of ERISA, a "multiemployer plan" within
the meaning of Section 3(37) of ERISA, a "multiple employer plan" within
the meaning of Section 413(c) of the Code or a "multiple employer welfare
arrangement" within the meaning of Section 3(40) of ERISA, (ii) otherwise
is or was an "employee pension benefit plan" (as such term is defined in
Section 3(2) of ERISA) that is subject to Title IV of ERISA, or (iii)
provides medical, health or life insurance for or on behalf of current or
future retirees or former employees (except for limited continued medical
benefit coverage required to be provided under Section 4980 of the Code and
Part 6 of Subtitle B of Title I of ERISA). As used herein, "Plan
Affiliate" shall refer to any trade or business, whether or not
incorporated, under common control with the Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.
3.23 Interest of the Company in Customers, etc Except as set forth on
-----------------------------------------
Schedule 3.23, none of the Company, Seller or any of their respective
-------------
Affiliates has any direct or indirect interest in any competitor or
customer of the Business or in any Person from whom or to whom the Company
leases any real or personal property or in any other Person with whom the
Company has any business relationship.
3.24 Health, Safety and Environment.
------------------------------
(a) The Company is in compliance with all applicable Federal, state
and local laws, rules, regulations, ordinances and requirements relating to
public health and safety, worker health and safety and pollution and
protection of the environment, all as amended or hereafter amended
("Environmental and Safety Requirements"), and the Company possesses all
permits, licenses and certificates, and have filed all notices or
applications, required thereby.
(b) The Company has never generated, transported, treated, stored, or
disposed of any Hazardous Wastes at any site, location or facility and no
such Hazardous Wastes are present on, in or under the Real Property, and
the Real Property does not contain (including, without limitation,
containment by means of any underground storage tank) any Hazardous Waste.
(c) The Company has not been subject to, or received any notice
(written or oral) of any private, administrative or judicial action, or any
notice (written or oral) of any intended private, administrative, or
judicial action relating to the presence or alleged presence of Hazardous
Wastes in, under or upon any Real Property owned or used by the Company,
and, to the knowledge of Seller, there is no reasonable basis for any such
notice or action, and there are no pending or threatened actions or
proceedings (or notices of potential actions or proceedings) from any
governmental agency or any other entity regarding any matter relating to
health, safety or protection of the environment.
(d) No facts, events or conditions with respect to the past or present
operations or facilities of the Company or the Business exist which could
reasonably be expected to interfere with or prevent continued compliance
with, or could give rise to any common law or statutory liability or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation against or involving the Company or the Business under
10
any Environmental and Safety Requirement based on any such fact, event or
circumstance, including, without limitation, liability for cleanup costs,
personal injury or property damage.
3.25 Salaries. Schedule 3.25 is a true, complete and correct list setting
-------- -------------
forth as of August 31, 1998 (i) the names and current compensation rate and
compensation of all individuals employed by the Company on a salaried basis,
(ii) the names and current compensation rate of all individuals employed by the
Company on an hourly or piecework basis and (iii) the names and total annual
compensation for all independent contractors who render services on a regular
basis to the Company whose current annual compensation is in excess of $20,000.
Except as set forth in Schedule 3.25, no person listed thereon will have
--------------
received any bonus or increase in compensation since August 31, 1998, and there
has been no "general increase" in the compensation or rate of compensation
payable to any employees of the Company since August 31, 1998, nor since that
date has there been any promise to the employees listed on Schedule 3.25 orally
-------------
or in writing of any bonus or increase in compensation, whether or not legally
binding, except for increases in the ordinary course of business consistent with
the Company's past compensation practices and obligations incurred under
existing bonus, insurance, pension or other employee benefit plans described on
Schedule 3.22.
-------------
3.26 Personnel Agreements, Plans and Arrangements. Except as set forth on
--------------------------------------------
Schedule 3.26, the Company is not a party to or obligated in connection with the
-------------
Business with respect to any (a) outstanding contracts with current or former
employees, agents, consultants, advisers, salespersons, sales representatives,
distributors, sales agents, independent contractors, or dealers, or (b)
collective bargaining agreements or contracts with any labor union or other
representative of employees or any employee benefits provided for by any such
agreement, correct and complete copies of which previously have been furnished
to Buyer. No strike, union organizational activity, allegation, charge or
complaint of employment discrimination or other similar occurrence has occurred
or is pending or, to the knowledge of Seller, threatened against the Company nor
does the Company or Seller know any basis for any such allegation, charge, or
complaint. To the knowledge of Seller, the Company has complied with all
applicable laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining,
sexual harassment, employment discrimination and the payment of social security
and other taxes and no officer, director, shareholder, or other agent or
representative of the Company has taken any action that could give rise to a
cause of action against the Company under such laws. There are no
administrative charges or court complaints pending or, to the knowledge of
Seller, threatened against the Company before the U.S. Equal Employment
Opportunity Commission or any state or federal court or agency concerning
alleged employment discrimination or any other matters relating to the
employment of labor.
3.27 Workers Compensation. Schedule 3.27 sets forth all expenses,
-------------------- -------------
obligations, duties and liabilities relating to any claims by employees and
former employees (including dependents and spouses) of the Company or Plan
Affiliate (or predecessors) made since December 31, 1996, and the extent of any
specific accrual on or reserve therefor set forth on the Financial Statements,
for costs, expenses and other liabilities under any workers compensation laws,
regulations, requirements or programs. No claims, injuries, fact, event or
condition exists which would give rise to a material claim by employees and
former employees (including dependents and spouses) of the Company or Plan
Affiliates under any workers compensation laws, regulations, requirements or
programs or for any other medical costs and expenses.
3.28 Customers. Schedule 3.28 is a complete and correct list of the ten
--------- -------------
largest customers of the Company (in terms of the dollar volume of each of the
Company's sales made or services provided to such customers during the twelve
months ended August 31, 1998). In the last twelve months, no such customer has
cancelled or otherwise terminated or threatened to cancel or terminate, its
contract, agreement or arrangement (written or oral) with the Company. Except
as set forth on Schedule 3.28, the Company has not received any notice, nor does
-------------
Seller have any knowledge, that any such customer intends to cancel or otherwise
modify its relationship with the Company.
3.29 Affiliate Transactions. Schedule 3.29 sets forth the parties to and
---------------------- -------------
the date, nature and amount of each transaction involving the transfer of any
cash, property or rights to or from the Company from, to or for the benefit of
any Affiliate or former Affiliate of the Company ("Affiliate Transactions")
during the period commencing January 1, 1997 through the date hereof and any
existing commitments of the Company to engage in the future in any Affiliate
Transactions. Each Affiliate Transaction was effected on terms equivalent to
those which would have been established in an arms-length negotiation.
11
3.30 Independent Contractors. The Company has never treated any of its
-----------------------
independent contractors ("Independent Contractors") as an employee for any
period and has never been required to file any federal tax returns for any of
its Independent Contractors.
3.31 Brokers None of Seller, the Company and any Affiliate thereof has
-------
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses in connection with the
transactions contemplated by this Agreement.
3.32 No Misrepresentation. None of the representations and warranties of
--------------------
Seller set forth in this Agreement, in any of the certificates, schedules,
lists, documents, exhibits, or other instruments delivered, or to be delivered,
to Buyer as contemplated by any provision hereof (including, without limitation,
the Transaction Documents), contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading. There is no material fact which has not been
disclosed to Buyer which materially adversely affects or could reasonably be
anticipated to materially adversely affect the Business or Seller's ability to
consummate the transactions contemplated hereby.
ARTICLE 4
---------
BUYER'S REPRESENTATIONS AND WARRANTIES
--------------------------------------
Buyer hereby represents and warrants to Seller as follows:
4.1 Organization. Buyer is a corporation duly organized, validly existing
------------
and in good standing under the laws of the State of Delaware.
4.2 Authorization. Buyer has full power, right and authority to enter
-------------
into and perform its obligations under this Agreement and each of the
Transaction Documents to which it is a party. The execution, delivery and
performance of this Agreement and each of the Transaction Documents to which it
is a party by Buyer have been duly and properly authorized by all requisite
company action in accordance with applicable law and with the Certificate of
Incorporation and the by-laws of Buyer. This Agreement and the Transaction
Documents to which Buyer is a party have been duly executed and delivered by
Buyer and are the valid and binding obligation of Buyer and are enforceable
against Buyer in accordance with their respective terms. No permits, approvals
or consents of or notifications to (i) any governmental entities or (ii) any
other Persons are necessary in connection with the execution, delivery and
performance by Buyer of this Agreement and the Transaction Documents and the
consummation by Buyer of the transactions contemplated hereby or thereby.
4.3 Transaction Not a Breach. Neither the execution and delivery of this
------------------------
Agreement and the Transaction Documents to which Buyer is a party nor the
performance by Buyer of its obligations hereunder or thereunder will: (i)
violate or conflict with or result in a breach of any provision of any Rules of
any court or other tribunal or any governmental entity or agency binding on
Buyer or conflict with or result in the breach of any of the terms, conditions
or provisions thereof; (ii) constitute a default under the Certificate of
Incorporation or by-laws of Buyer or any material contract, agreement, mortgage,
note, bond, license or other instrument or obligation of any nature to which
Buyer is a party or by which Buyer, its assets or property is bound; (iii)
constitute an event which would permit any party to terminate, or accelerate the
maturity of any indebtedness or other obligation under, any material contract,
agreement, indenture, mortgage, note, bond, license or other instrument to which
Buyer is a party or by which Buyer or Buyer's properties is bound or subject;
(iv) result in the creation or imposition of any Lien upon Buyer's capital stock
or assets; or (v) require any authorization, consent, approval, exemption or
other action by or notice to any court or administrative or governmental body
pursuant to the Certificate of Incorporation and the bylaws of Buyer. No
permits, approvals or consents of or notifications to any persons or
governmental entities (other than to any state's securities commission or
division as to Seller) are necessary in connection with the execution and
delivery by Buyer of this Agreement or the Transaction Documents to which Buyer
is a party or the payment by Buyer of the Purchase Price, it being understood
that Buyer makes no representation or warranty with respect to permits,
approvals or consents necessary to operate the Company or conduct the Business
on or after the Closing.
12
4.4 Acquisition of Shares for Investment. Buyer is acquiring the Shares
------------------------------------
for investment and not with a view toward, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the Shares. Buyer agrees that the Shares may not be sold, transferred, offered
for sale, pledged, hypothecated or otherwise disposed of (i) without
registration under the Securities Act of 1933, as amended, except pursuant to an
exemption from such registration under such Act and (ii) except in accordance
with any applicable provisions of state securities laws.
4.5 No Misrepresentation. None of the representations and warranties of
--------------------
Buyer set forth in this Agreement or in any of the certificates, schedules,
lists, documents, exhibits, or other instruments delivered, or to be delivered,
to Seller as contemplated by any provision hereof (including, without
limitation, the Transaction Documents), contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE 5
---------
CLOSING
-------
5.1 Time and Place. The closing of the transactions that are the subject
--------------
of this Agreement (the "Closing") shall occur at the offices of Xxxxxx Xxxxxx &
Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000 at 10:00 a.m.
on September 30, 1998, or at such other time and date as the parties mutually
agree (the "Closing Date").
5.2 Deliveries of Seller. At the Closing, Seller will execute and
--------------------
deliver, or cause to be executed and delivered, to Buyer:
(a) Stock Certificates. Certificates representing the Shares,
------------------
endorsed over to Buyer or accompanied by duly executed stock powers;
(b) Resolutions. A copy of a resolution of the Board of Directors of
-----------
Seller, certified by the secretary thereof as having been duly and validly
adopted and being in full force and effect, authorizing execution and
delivery of this Agreement and performance of the transactions contemplated
hereby by Seller;
(c) Corporate Documents. The charter documents of the Company,
-------------------
certified by the Secretary of State of Pennsylvania, as of a date not more
than ten days prior to the Closing Date, and the by-laws of the Company,
certified in each case by the secretary of the Company as in effect at the
Closing;
(d) Certificates of Good Standing. Certificates of Good Standing,
-----------------------------
dated not more than 15 days prior to the Closing Date, with respect to the
Company, issued by the Secretary of State of Pennsylvania and by the
Secretary of State of each jurisdiction in which the Company is qualified
to do business as a foreign corporation as set forth in Schedule 3.2;
------------
(e) Books and Records. All of the minutes books, stock ledgers and
-----------------
similar corporate records of the Company;
(f) Evidence of Lien Discharge. Evidence of the release or discharge
--------------------------
of such financing statements, judgments, or other Liens on or against the
Company and outstanding guarantees by the Company as Buyer directs, in form
and substance satisfactory to Buyer at the Closing.
(g) Consents. Evidence that all consents, approvals, or
--------
authorizations of or notifications to any third parties (including
governmental agencies), if any, required to sell and assign the Shares and
to consummate the transactions contemplated hereby have been obtained by
Seller (including, without limitation, those consents, approvals or
authorizations set forth on Schedule 3.1).
------------
(h) Opinion of Counsel. An opinion of counsel for Seller, dated as of
------------------
the Closing Date, substantially in the form of Exhibit C;
---------
13
(i) Transition Services Agreement. Transition Services Agreement
-----------------------------
between Buyer and Seller ("Transition Services Agreement"), substantially
in the form of Exhibit D, duly executed by Seller;
---------
(j) Resignations of Officers and Directors. Instruments evidencing
--------------------------------------
the resignation of each director and officer of the Company, duly executed
by each such individual;
(k) Satisfaction of Seller Obligations Under Employment Contracts.
-------------------------------------------------------------
Evidence of full and complete pay-out under 1997 Stock Plan of Seller
pursuant to all outstanding employment agreements of the Company, in form
and substance satisfactory to Buyer; and
(l) Other Documents. Such other documents and instruments as Buyer or
---------------
its counsel reasonably shall deem necessary to consummate the transactions
contemplated hereby.
All documents delivered to Buyer shall be in form and substance reasonably
satisfactory to Xxxxxx Xxxxxx & Xxxxx, counsel for Buyer.
5.3 Deliveries of Buyer. At the Closing, Buyer will deliver to Seller
-------------------
simultaneously with delivery of the items referred to in Section 5.2:
(a) Payment of the Purchase Price. Bank wire transfers as provided in
-----------------------------
Section 2.2 and the Note;
(b) Resolutions. A copy of a resolution of the Board of Directors of
-----------
Buyer, certified by the secretary thereof as having been duly and validly
adopted and being in full force and effect, authorizing execution and
delivery of this Agreement and performance of the transactions contemplated
hereby by Buyer;
(c) Company Documents. The Articles of Incorporation of Buyer,
-----------------
certified by the Secretary of State of Delaware, as of a date not more than
15 days prior to the Closing Date, certified by the secretary of Buyer as
in effect at the Closing;
(d) Good Standing Certificate. A Certificate of Good Standing dated
-------------------------
not more than 15 days prior to the Closing Date, with respect to Buyer,
issued by the Secretary of State of Delaware;
(e) Opinion of Counsel. An opinion of counsel for Buyer dated as of
------------------
the Closing Date, substantially in the form of Exhibit E;
---------
(f) Transition Services Agreement. Transition Services Agreement,
-----------------------------
duly executed by Buyer; and
(g) Other Documents. Such other documents and instruments as Seller
---------------
or its counsel reasonably shall deem necessary to consummate the
transactions contemplated hereby.
All documents delivered to Seller shall be in form and substance reasonably
satisfactory to Eckert, Seamans, Xxxxxx & Xxxxxxx, LLC, counsel for Seller.
14
ARTICLE 6
---------
COVENANTS AFTER CLOSING
-----------------------
6.1 Liability for Taxes. The following provisions shall govern the
-------------------
allocation of responsibility as between Buyer and Seller for certain tax matters
following the Closing Date:
(a) Allocation of Taxes. Notwithstanding anything herein to the
-------------------
contrary, Seller shall be responsible for all Taxes imposed on the Company
or any Affiliated Group in which the Company is or was a member for all
taxable periods, or portions of taxable periods, ending before or as of the
close of business on the Closing Date including, without limitation, any
Taxes resulting from the election under Section 338(h)(10) of the Code (the
"Seller Taxes"). Buyer shall be responsible for all Taxes imposed on the
Company or any Affiliated Group in which the Company is a member for all
taxable periods, or portions of taxable periods, beginning the day after
the Closing Date (the "Buyer Taxes"). Whenever in accordance with this
Section 6.1, Buyer shall be required to pay Seller the Buyer Taxes or
Seller shall be required to pay Buyer the Seller Taxes, subject to the
parties' right to dispute the amount of such Taxes in good faith with the
appropriate taxing authority, such payments shall be made the later of ten
days after requested or ten days before the requesting party is required to
pay or cause to be paid the related Tax liability and the parties shall
treat any such payments as a purchase price adjustment for tax purposes.
Where the Seller Taxes are calculated on the basis of a period which
includes the day after the Closing Date, such Seller Taxes shall be
calculated on the basis of the taxable income of the Company as though the
taxable year of the Company terminated at the close of business on the
Closing Date.
(b) Returns for Tax Periods Ending Before or as of the Closing Date.
---------------------------------------------------------------
Buyer shall file (or cause to be filed) any Tax Returns of the Company for
Tax periods ending before or as of the Closing Date for which Tax Returns
shall not have been filed before the Closing Date. Such Tax Returns shall
be prepared on a basis consistent with past practice to the extent such
past practice is consistent with all federal, state, local and foreign Tax
laws, rules and regulations. Seller shall be entitled to receive copies
of, and have its accountants review, such Tax Returns prior to their
filing.
(c) Returns for Tax Periods Beginning Before and Ending After the
-------------------------------------------------------------
Closing Date. Buyer shall file (or cause to be filed) any Tax Returns of
------------
the Company for Tax periods which begin before the Closing Date and end
after the Closing Date. Such Tax Returns shall be prepared on a basis
consistent with past practice to the extent such past practice is
consistent with all federal, state, local and foreign Tax laws, rules and
regulations.
(d) Retention of Records. Each of Buyer, the Company and Seller shall
--------------------
retain all books, records and other data pertaining to Tax matters for all
open periods through the Closing Date. In particular, Seller, the Company
and Buyer shall retain all Tax Returns, schedules and work papers, and all
material records and other documents relating thereto with respect to the
operations of the Company prior to the Closing Date, until the expiration
of the statute of limitations (and, to the extent notified by Buyer or
Seller, any extensions thereof) of the respective Tax periods.
(e) Code Section 338(h)(10). Seller agrees to cooperate with Buyer,
-----------------------
at Buyer's written request, in making an election under Section 338(h)(10)
of the Code and making any corresponding elections under any State or local
income tax law.
(f) Cooperation. Buyer covenants and agrees that subsequent to the
-----------
Closing, upon reasonable notice and during normal business hours, Buyer
will give Seller and its representatives information relevant to the
Company to the extent necessary to enable Seller to prepare its Tax
Returns, and to secure any information which it requires in connection with
the audit of any Tax Return filed by it.
6.2 Indemnification.
---------------
15
6.2.1 Indemnification by Seller. From and after the Closing, Seller
-------------------------
agrees to indemnify, defend and save Buyer and the Company and their respective
Affiliates and Plan Affiliates, and each of their respective officers,
directors, employees, agents, Employee Benefit Plans, and fiduciaries, plan
administrators or other parties dealing with any such plans (each, a "Buyer
Indemnified Party"), forever harmless from and against, and to promptly pay to a
Buyer Indemnified Party or reimburse a Buyer Indemnified Party for, any and all
liabilities (whether contingent, fixed or unfixed, liquidated or unliquidated,
or otherwise), obligations, deficiencies, demands, claims, suits, actions, or
causes of action, assessments, losses, costs, expenses, interest, fines,
penalties, actual or punitive damages or costs or expenses of any and all
investigations, proceedings, judgments, environmental analyses, remediations,
settlements and compromises (including fees and expenses of attorneys,
accountants and other experts) (individually and collectively, the "Losses")
actually sustained or incurred by any Buyer Indemnified Party relating to,
resulting from, arising out of or otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in the Transaction Documents by Seller, or non-compliance
with or breach by Seller of any of the covenants or agreements contained in
this Agreement or the Transaction Documents to be performed by Seller or
any of its Affiliates;
(b) any violations of, or obligations under, Environmental and Safety
Requirements or Rules relating to acts, omissions, circumstances or
conditions existing on or prior to the Closing Date, whether or not such
acts, omissions, circumstances or conditions constituted a violation of
Environmental and Safety Requirements or Rules, as the case may be, as then
in effect;
(c) any action, demand, proceeding, investigation or claim (whenever
made) by any third party (including governmental agencies) against or
affecting Buyer or the Company which, if successful, would give rise to or
evidence the existence of or relate to a misrepresentation or breach of any
of the representations, warranties or covenants of Seller;
(d) any claim for payment of fees and/or expenses as a broker or
finder in connection with the origin, negotiation, execution or
consummation of this Agreement based upon any alleged agreement between the
claimant and Seller;
(e) any claim for payment of Taxes against Buyer for which Seller is
liable pursuant to Section 6.1(a); or
(f) any claim relating to (i) Section 3(f) of that certain Employment
Agreement, dated as of June 1, 1997, by and between the Company and Xxxxxxx
Zabrow, (ii) Section 3(g) of that certain Employment Agreement, dated as of
April 21, 1997, by and between the Company and Xxxxxx Xxxxxx, and (iii)
that certain Employment Agreement, dated as of December 11, 1997, by and
between Seller and Xxxxxxx Xxxxxxx.
6.2.2 Indemnification by Buyer. From and after the Closing, Buyer
------------------------
and the Company, jointly and severally, agree to indemnify, defend and save
Seller and its Affiliates, and their respective officers, directors, employees
and agents (each, a "Seller Indemnified Party") forever harmless from and
against, and to promptly pay to a Seller Indemnified Party or reimburse a Seller
Indemnified Party for, any and all Losses actually sustained or incurred by any
Seller Indemnified Party relating to, resulting from, arising out of or
otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in the Transaction Documents by Buyer, or non-compliance
with or breach by Buyer of any of the covenants or agreements contained in
this Agreement or the Transaction Documents to be performed by Buyer or any
of its Affiliates;
(b) any action, demand, proceeding, investigation or claim (whenever
made) by any third party (including governmental agencies) against or
affecting Seller which, if successful, would give rise to or evidence the
existence of or relate to a misrepresentation or breach of any of the
representations, warranties or covenants of Buyer;
16
(c) any claim for payment of fees and/or expenses as a broker or
finder in connection with the origin, negotiation, execution or
consummation of this Agreement based upon any alleged agreement between the
claimant and Buyer; or
(d) any claim for payment of Taxes against Seller for which Buyer is
liable pursuant to Section 6.1(a).
6.2.3 Indemnification Procedure for Third Party Claims. In the event
------------------------------------------------
that subsequent to the Closing any person or entity entitled to indemnification
under this Agreement (an "Indemnified Party") asserts a claim for
indemnification or receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity that is not a party to
this Agreement or an Affiliate of a party to this Agreement (including, but not
limited to any domestic or foreign court or governmental authority, federal,
state or local) (a "Third Party Claim") against such Indemnified Party, against
which a party to this Agreement is required to provide indemnification under
this Agreement (an "Indemnifying Party"), the Indemnified Party shall give
written notice together with a statement of any available information regarding
such claim to the Indemnifying Party within 60 days after learning of such claim
(or within such shorter time as may be necessary to give the Indemnifying Party
a reasonable opportunity to respond to such claim). The Indemnifying Party
shall have the right, upon written notice to the Indemnified Party (the "Defense
Notice") within 30 days after receipt from the Indemnified Party of notice of
such claim, which notice by the Indemnifying Party shall specify the counsel it
will appoint to defend such claim ("Defense Counsel"), to conduct at its expense
the defense against such claim in its own name, or if necessary in the name of
the Indemnified Party; provided, however, that the Indemnified Party shall have
the right to approve the Defense Counsel, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within ten days after the
Defense Notice is provided, then the Indemnifying Party shall propose an
alternate Defense Counsel, which shall be subject again to the Indemnified
Party's approval. If the parties still fail to agree on Defense Counsel, then,
at such time, they shall mutually agree in good faith on a procedure to
determine the Defense Counsel.
(a) In the event that the Indemnifying Party shall fail to give the
Defense Notice, it shall be deemed to have elected not to conduct the
defense of the subject claim, and in such event the Indemnified Party shall
have the right to conduct such defense in good faith and to compromise and
settle the claim without prior consent of the Indemnifying Party and the
Indemnifying Party will be liable for all costs, expenses, settlement
amounts or other Losses paid or incurred in connection therewith.
(b) In the event that the Indemnifying Party does deliver a Defense
Notice and thereby elects to conduct the defense of the subject claim, the
Indemnified Party will cooperate with and make available to the
Indemnifying Party such assistance and materials as it may reasonably
request, all at the expense of the Indemnifying Party, and the Indemnified
Party shall have the right at its expense to participate in the defense
assisted by counsel of its own choosing, provided that the Indemnified
Party shall have the right to compromise and settle the claim only with the
prior written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed.
(c) Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive or other equitable relief
would be imposed against the Indemnified Party, or (ii) such settlement or
cessation would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder.
(d) The Indemnifying Party shall not be entitled to control, and the
Indemnified Party shall be entitled to have sole control over, the defense
or settlement of any claim to the extent that claim seeks an order,
injunction or other equitable relief against the Indemnified Party which,
if successful, could materially interfere with the business, operations,
assets, condition (financial or otherwise) or prospects of the Indemnified
Party (and the cost of such defense shall constitute an amount for which
the Indemnified Party is entitled to indemnification hereunder).
17
(e) If a firm decision is made to settle a Third Party Claim, which
offer the Indemnifying Party is permitted to settle under this Section
6.2.3, and the Indemnifying Party desires to accept and agree to such
offer, the Indemnifying Party will give written notice to the Indemnified
Party to that effect. If the Indemnified Party fails to consent to such
firm offer within 15 calendar days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim
and, in such event, the maximum liability of the Indemnifying Party as to
such Third Party Claim will not exceed the amount of such settlement offer,
plus costs and expenses paid or incurred by the Indemnified Party through
the end of such 15-day period.
(f) Any judgment entered or settlement agreed upon in the manner
provided herein shall be binding upon the Indemnifying Party, and shall
conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
6.2.4 Direct Claims. It is the intent of the parties hereto that all
-------------
direct claims by an Indemnified Party against a party hereto not arising out of
Third Party Claims ("Direct Claims") shall be subject to and benefit from the
terms of this Section 6.2. Any Direct Claim under this Section 6.2 by an
Indemnified Party for indemnification other than indemnification against a Third
Party Claim will be asserted by giving the Indemnifying Party reasonably prompt
written notice thereof, and the Indemnifying Party will have a period of 30
calendar days within which to satisfy such Direct Claims. If the Indemnifying
Party does not so respond within such 30 calendar day period, the Indemnifying
Party will be deemed to have rejected such claim, in which event the Indemnified
Party will be free to pursue such remedies as may be available to the
Indemnified Party under this Section 6.2 or otherwise, at law or in equity. Any
claim by an Indemnified Party arising out of a claim by an entity that is not a
party to this Agreement or an Affiliate of a party to this Agreement shall in
the first instance be dealt with as a Third Party Claim pursuant to the
procedures set forth in Section 6.2.3.
6.2.5 Failure to Give Timely Notice. A failure by an Indemnified
-----------------------------
Party to give timely, complete or accurate notice as provided in this Section
6.2 will not affect the rights or obligations of any party hereunder except and
only to the extent that, as a result of such failure, any party entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise directly and materially damaged
as a result of such failure to give timely notice.
6.2.6 Survival of Representations, Warranties and Covenants; Time
-----------------------------------------------------------
Limits on Indemnification Obligations. Notwithstanding any right of Buyer to
-------------------------------------
fully investigate the affairs of Seller and the Business, and notwithstanding
any knowledge of facts determined or determinable by Buyer pursuant to such
investigation or right of investigation, Buyer has the right to rely fully upon
the representations, warranties, covenants and agreements of Seller contained in
this Agreement or in any certificate delivered pursuant to any of the foregoing.
All such representations, warranties, covenants and agreements shall survive the
execution and delivery of this Agreement and the Closing hereunder for a period
of 18 months from the Closing Date; provided that (i) Indefinite Claims will
survive indefinitely, (ii) Special Claims will survive until the date that all
claims against any Buyer Indemnified Party which could give rise to a Special
Claim are barred by all applicable statutes of limitations and (iii) any
covenants or Transaction Document specifying a time period for such covenant or
Transaction Document, shall survive in accordance with its terms; provided that
any claim asserted by an Indemnified Party on or prior to the expiration of the
applicable period specified above under Section 6.2.3 hereof shall survive
indefinitely.
(a) "Indefinite Claim" means any claim hereunder whether
indemnification or otherwise based upon, arising out of or otherwise in
respect of any breach of any representation, warranty, covenant or
agreement of Seller contained in Sections 3.1, 3.2, 3.5 or 3.6.
(b) "Special Claim" means any claim hereunder whether indemnification
or otherwise based upon, arising out of or otherwise in respect of (i) any
inaccuracy or omission in or any breach of any representation, warranty,
covenant or agreement of Seller contained in Sections 3.10, 3.18(a)(iv),
3.18(a)(viii), 3.22, 3.24 or 3.31 or otherwise concerning Taxes, or (ii)
indemnification under Section 6.2.1(b), (d) or (f).
6.2.7 Limitation on Seller's Indemnification Obligations.
--------------------------------------------------
Notwithstanding any other provision contained herein, Seller shall have no
indemnification obligation hereunder for Losses until such time as the aggregate
value of such Losses equals or exceeds $75,000, at which xxxx Xxxxxx shall be
liable for all such Losses up to a maximum
18
indemnification obligation for such Losses hereunder equal to the Purchase
Price. Notwithstanding the foregoing, the limitations contained in this Section
6.2.7 shall not apply to Indefinite Claims and Special Claims.
6.2.8 Fraud. In the case of fraud by Seller in the making of
-----
representations and warranties or in the failure of covenants herein, Buyer
shall have all remedies available at law and at equity without giving effect to
any of the limitations set forth in Section 6.2.6 or Section 6.2.7.
6.3 Restrictive Covenants.
---------------------
6.3.1 Seller's Acknowledgement. Seller agrees and acknowledges that
------------------------
in order to assure Buyer that the Company will retain its value and that of the
Business as a going concern, it is necessary that Seller undertakes not to
utilize its special knowledge of the Business and their relationships with
customers to compete with Buyer.
6.3.2 Non-Compete. Seller hereby agrees that for a period commencing
-----------
on the date hereof and ending five years from the Closing Date (the "Restricted
Period"), Seller will not, directly or indirectly, as employee, agent,
consultant, stockholder, director, manager, co-partner or in any other
individual or representative capacity, own, operate, manage, control, engage in,
invest in or participate in any manner in, act as a consultant or advisor to,
render services for (alone or in association with any person, firm, corporation
or entity), or otherwise assist any person or entity that engages in or owns,
invests in, operates, manages or controls any venture or enterprise that
directly or indirectly engages or proposes to engage in the Business anywhere in
United States (the "Territory"). With respect to the Territory, Seller
specifically acknowledges that the Business has heretofore been conducted
throughout the United States.
6.3.3 Non-Solicitation. Without limiting the generality of the
----------------
provisions of Section 6.3.2 above, Seller hereby agrees that, during the
Restricted Period, it shall not, directly or indirectly, solicit, or participate
as employee, agent, consultant, stockholder, director, manager, partner or in
any other individual or representative capacity in any business which solicits,
business from any person, firm, corporation or other entity which is or was a
customer of the Business during the two year period preceding the date of such
solicitation, or from any successor in interest to any such person, firm,
corporation or other entity for the purpose of securing business or contracts
related to the Business.
6.3.4 Confidential Information. During the term of this Agreement
------------------------
and thereafter, Seller shall keep secret and retain in strictest confidence, and
shall not, without the prior written consent of Buyer or as otherwise required
pursuant to law, furnish, make available or disclose to any third party or use
for the benefit of itself or any third party, any Confidential Information. As
used in this Section 6.3.4, "Confidential Information" shall mean any
information relating to the business or affairs of Buyer, the Company or the
Business, including but not limited to information relating to financial
statements, customer identities, potential customers, employees, servicing
methods, equipment, programs, strategies and information, analyses, profit
margins or other proprietary information used by Buyer or the Company in
connection with the Business; provided, however, that Confidential Information
shall not include any information which is in the public domain or becomes
generally known in the industry through no wrongful act on the part of Seller.
Seller acknowledges that the Confidential Information is vital, sensitive,
confidential and proprietary to the Company.
6.3.5 Interference with Relationships. During the Restricted Period,
-------------------------------
Seller shall not, directly or indirectly, as employee, agent, consultant,
stockholder, director, co-partner or in any other individual or representative
capacity: (i) without the prior written consent of Buyer, employ, or engage,
recruit or solicit for employment or engagement, any person who is (or was
within six months of the date such employment, engagement or solicitation
commences or occurs, as the case may be) employed or engaged by the Company or
Buyer, or otherwise seek to influence or alter any such person's relationship
with the Company or Buyer; provided, however, that if the Company is relocated
outside the greater Pittsburgh metropolitan area during the Restricted Period,
this restriction shall not apply, or (ii) solicit or encourage any present or
future customer of the Company or Buyer to terminate or otherwise alter his, her
or its relationship with Buyer.
6.3.6 Blue-Pencil. If any court of competent jurisdiction shall at
-----------
any time deem the term of any particular restrictive covenant contained in this
Section 6.3 too lengthy or the Territory too extensive, the other provisions of
this Section 6.3 shall nevertheless stand, the Restricted Period shall be deemed
to be the longest period permissible by law under the circumstances and the
Territory shall be deemed to comprise the largest territory
19
permissible by law under the circumstances. The court in each case shall reduce
the Restricted Period and/or Territory to permissible duration or size.
6.3.7 Property of the Business. All memoranda, notes, lists, records
------------------------
and other documentation or papers (and all copies thereof except as may be
necessary to retain for purposes related solely to consolidated structure of
Seller), including such items stored in computer memories, or microfiche or by
any other means, which will become Buyer's property (after the consummation of
transactions contemplated by this Agreement), are and shall be Buyer's property
and shall be delivered to Buyer promptly on the request of Buyer.
6.3.8 Remedies. Seller acknowledges and agrees that the covenants
--------
set forth in this Section 6.3 hereof are reasonable and necessary for the
protection of Buyer's business interests, that irreparable injury will result to
Buyer if Seller breaches any of the terms of this Section 6.3, and that in the
event of Seller's actual or threatened breach of any of the provisions contained
in this Section 6.3, Buyer will have no adequate remedy at law. Seller
accordingly agrees that in the event of any actual or threatened breach by it of
any of the provisions contained in this Section 6.3, Buyer shall be entitled to
such injunctive and other equitable relief, without the necessity of showing
actual monetary damages, as may be deemed necessary or appropriate by a court of
competent jurisdiction. Nothing contained herein shall be construed as
prohibiting Buyer from pursuing any other remedies available to it for such
breach or threatened breach, including the recovery of any damages which it is
able to prove.
6.4 Other Contracts and Permits. To the extent that any contracts or
---------------------------
permits that relate to the Business or the Company are not in the name of the
Company or do not otherwise inure to the benefit of the Company but are in the
name of Seller or any Affiliate of Seller or otherwise inure to the benefit of
Seller or any Affiliate of Seller and without in any way limiting Seller's
obligations pursuant to this Agreement, Seller shall (i) use its best efforts to
ensure that such contracts or permits are transferred to the Company, (ii)
cooperate with Buyer and the Company in any arrangement designed to provide the
Company and Buyer with the rights and benefits of such contracts and permits and
(iii) enforce such contracts on behalf of the Company and Buyer.
20
ARTICLE 7
---------
MISCELLANEOUS
-------------
7.1 Notices, Consents, etc Any notices, consents or other communication
----------------------
required to be sent or given hereunder by any of the parties shall in every case
be in writing and shall be deemed properly served if (a) delivered personally,
(b) sent by registered or certified mail, in all such cases with first class
postage prepaid, return receipt requested, (c) delivered by a recognized
overnight courier service, or (d) sent by facsimile transmission to the parties
at the addresses as set forth below or at such other addresses as may be
furnished in writing.
(a) If to Seller:
Allin Communications Corporation
000 Xxxxxxxxx Xxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx, Chairman
Facsimile No.: (000) 000-0000
with a copy to:
Eckert, Seamans, Xxxxxx & Xxxxxxx, LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxx Xxxxxxxx
Facsimile No.: (000) 000-0000
(b) If to Buyer:
Lighthouse Holdings, Inc.
000 X. Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Xxxxx Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Date of service of such notice shall be (w) the date such notice is personally
delivered, (x) three days after the date of mailing if sent by certified or
registered mail, (y) one day after date of delivery to the overnight courier if
sent by overnight courier or (z) the next succeeding business day after
transmission by facsimile.
7.2 Public Announcements. Unless otherwise required by law, no party
--------------------
shall make any public announcement or filing with respect to the transactions
provided for herein without the prior consent of the other party hereto. To the
extent reasonably feasible, any press release or other announcement or notice
regarding the transactions contemplated by this Agreement shall be made jointly
by the parties.
21
7.3 Severability. The unenforceability or invalidity of any provision of
------------
this Agreement shall not affect the enforceability or validity of any other
provision.
7.4 Amendment and Waiver This Agreement may be amended, or any provision
----------------------
of this Agreement may be waived, provided that any such amendment or waiver will
be binding on Buyer only if such amendment or waiver is set forth in a writing
executed by Buyer, and provided that any such amendment or waiver will be
binding upon Seller only if such Amendment or waiver is set forth in a writing
executed by Seller. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any other
breach.
7.5 Documents. Each party will execute all documents and take such other
---------
actions as any other party may reasonably request in order to consummate the
transactions provided for herein and to accomplish the purposes of this
Agreement.
7.6 Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties hereto and
delivered to the other.
7.7 Expenses. Except as paid prior to the date hereof or otherwise
--------
specifically provided herein, each of the parties shall pay all costs and
expenses incurred or to be incurred by it, him or her, as the case may be, in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement.
7.8 Construction. This Agreement shall be construed and enforced in
------------
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the State of Illinois, without giving effect to provisions thereof regarding
conflict of laws.
7.9 Headings. The subject headings of Articles and Sections of this
--------
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
7.10 Assignment. This Agreement will be binding upon and inure to the
----------
benefit of the parties hereto and their respective successors and permitted
assigns, but will not be assignable or delegable by Seller without the prior
written consent of Buyer. Buyer may assign its rights and delegate its
responsibilities, liabilities and obligations under this Agreement.
7.11 Definitions. For purposes of this Agreement, the following terms have
-----------
the meaning set forth below:
"Affiliate" means an affiliate as defined in Rule 405 under the
Securities Act of 1933, as amended, and includes any past and present
Affiliate of a Person.
"Affiliated Group" means an affiliated group as defined in Section
1504 of the Code (or analogous combined, consolidated or unitary group
defined under state, local or foreign income Tax law).
"Code" means the Internal Revenue Code of 1986, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or any
successor authority) that are applicable as the date of determination,
consistently applied.
22
"Hazardous Wastes" means (A) hazardous materials, hazardous
substances, extremely hazardous substances or hazardous wastes, as those
terms are defined by the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. (S)9601 et seq., the Resource Conservation
-- ----
and Recovery Act, 42 U.S.C. (S)6901 et seq., and any other Environmental
-- ----
and Safety Requirements; (B) petroleum, including without limitation, crude
oil or any fraction thereof which is liquid at standard conditions of
temperature and pressure (60 degrees Fahrenheit and 14.7 pounds per square
inch absolute); (C) any radioactive material, including, without
limitation, any source, special nuclear, or by-product material as defined
in 42 U.S.C. (S)2011 et seq.; (D) asbestos in any form or condition; and
-- ----
(E) any other material, substance or waste to which liability or standards
of conduct may be imposed under any Environmental and Safety Requirements.
"Liens" means any claims, liens, charges, restrictions, options,
preemptive rights, mortgages, hypothecations, assessments, pledges,
encumbrances or security interests of any kind or nature whatsoever.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity or
government (whether Federal, state, county, city or otherwise, including,
without limitation, any instrumentality, division, agency or department
thereof).
"Proprietary Rights" means all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not
reduced to practice); all trademarks, service marks, trade dress, trade
names and corporate names; all registered and unregistered statutory and
common law copyrights; all registrations, applications and renewals for any
of the foregoing; all trade secrets, confidential information, ideas,
formulae, compositions, know-how, manufacturing and production processes
and techniques, research and development information, drawings,
specifications, designs, plans, improvements, proposals, technical and
computer data, documentation and software, financial, business and
marketing plans, and franchisee, customer and supplier lists and related
information and all other proprietary rights.
"Tax" means any 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; the foregoing shall include any transferee or secondary
liability for a Tax and any liability assumed by agreement or 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).
"Tax Returns" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
Schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of any Taxes of
any party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Transaction Documents" means all agreements and instruments
contemplated by and being delivered pursuant to or in connection with this
Agreement.
7.12 Entire Agreement. This Agreement, the preamble, the schedules and the
----------------
exhibits attached to this Agreement (all of which shall be deemed incorporated
in the Agreement and made a part hereof) set forth the entire understanding of
the parties with respect to the subject matter hereof, and shall not be modified
or affected by any offer, proposal, statement or representation, oral or
written, made by or for any party in connection with the negotiation of the
terms hereof, and may be modified only by instruments signed by all of the
parties hereto.
7.13 Third Parties. Nothing herein expressed or implied is intended or
-------------
shall be construed to confer upon or give to any person or entity, other than
the parties to this Agreement and their respective permitted successors and
assigns, any rights or remedies under or by reason of this Agreement.
23
7.14 Interpretative Matters. Unless the context otherwise requires, (a) all
----------------------
references to Articles, Sections or Schedules are to Articles, Sections or
Schedules in this Agreement, (b) each accounting term not otherwise defined in
this Agreement has the meaning assigned to it in accordance with GAAP, and (c)
words in the singular or plural include the singular and plural and pronouns
stated in either the masculine, the feminine or neuter gender shall include the
masculine, feminine and neuter.
7.15 Knowledge. Where any representation or warranty of Seller contained
---------
in this Agreement is expressly qualified by reference "to the knowledge of," it
refers to the knowledge of Seller and all officers, directors and managers of
the Company as to the existence or absence of facts that are the subject of such
representations and warranties, it being understood that such parties have not
made any other independent investigation or consulted with any outside third
parties, other than the Company's accountants and legal counsel; provided that
where such phase is used to qualify representations and warranties regarding any
Rules, Seller shall be deemed to know all material Rules applicable to the
Company and the Business.
7.16 No Strict Construction. The language used in this Agreement will be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
SELLER:
ALLIN COMMUNICATIONS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
-------------------
Title: CEO/Chairman
------------
BUYER:
LIGHTHOUSE HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
25
SCHEDULES
---------
Schedule 2.1 -- Schedule of Allocation of Purchase Price
Schedule 3.1 -- Schedule of Consents
Schedule 3.2 -- Schedule of States of Qualification
Schedule 3.4 -- Schedule of Officers and Directors
Schedule 3.5 -- Schedule of Capital Stock
Schedule 3.7 -- Schedule of Financial Statements
Schedule 3.8 -- Schedule of Undisclosed Liabilities
Schedule 3.10 -- Schedule of Certain Tax Matters
Schedule 3.11 -- Schedule of Material Contracts
Schedule 3.12 -- Schedule of Real Property
Schedule 3.13 -- Schedule of Personal Property Leases
Schedule 3.14 -- Schedule of Closed Litigation Matters
Schedule 3.16 -- Schedule of Intellectual Property
Schedule 3.18 -- Schedule of Conduct of Ordinary Business
Schedule 3.19 -- Schedule of Insurance Policies and Claims
Schedule 3.20 -- Schedule of Bank Accounts and Powers of Attorney
Schedule 3.21 -- Schedule of Licenses and Permits
Schedule 3.22 -- Schedule of Employee Benefit Plans
Schedule 3.23 -- Schedule of Certain Interests of the Company
Schedule 3.25 -- Schedule of Salaries
Schedule 3.26 -- Schedule of Personnel Arrangements
Schedule 3.27 -- Schedule of Workers Compensation
Schedule 3.28 -- Schedule of Customers
Schedule 3.29 -- Schedule of Affiliate Transactions
26
EXHIBITS
--------
Exhibit A - Form of Promissory Note
Exhibit B - Unearned Revenue Amount
Exhibit C - Form of Opinion of Seller's Counsel
Exhibit D - Form of Transition Services Agreement
Exhibit E - Form of Opinion of Buyer's Counsel
(Pursuant to Regulation S-K, Item 601(b)(2), Registrant agrees to furnish
supplementally a copy of the schedules and exhibits to this agreement to the
Securities Exchange Commission upon request.)
27
