ASSET PURCHASE AGREEMENT
dated as of
December 16, 1998,
by and among
COMPUTER OUTSOURCING SERVICES, INC.,
COSI ACQUISITION CORP.,
ENTERPRISE TECHNOLOGY GROUP, INCORPORATED
and
CERTAIN STOCKHOLDERS OF ENTERPRISE
TECHNOLOGY GROUP, INCORPORATED
TABLE OF CONTENTS
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Page
ARTICLE I
DEFINITIONS .............................................. 1
1.1 Defined Terms ....................................... 1
1.2 Use of Defined Terms ................................ 9
1.3 Accounting Terms .................................... 9
1.4 Sections, Exhibits and Schedules ................... 10
1.5 Miscellaneous Terms ................................ 10
ARTICLE II
ACQUISITION AND TRANSFER OF ASSETS ...................... 10
2.1 Acquisition and Transfer of Assets ................. 10
2.2 Excluded Assets .................................... 11
2.3 Liabilities transferred ............................ 12
2.4 Directors and Officers of the Company .............. 14
2.5 Board of Directors of Parent ....................... 14
2.6 ETG Action ......................................... 14
2.7 Parent Action ...................................... 14
2.8 Non-Assignable Assets .............................. 14
ARTICLE III
PURCHASE PRICE .......................................... 15
3.1 Purchase Price ..................................... 15
3.2 Allocation of Closing Purchase Price ............... 16
3.3 Additions to Closing Purchase Price ................ 16
3.4 Payment of Post-Closing Adjustments ................ 19
3.5 December Statement ................................. 21
3.6 Listing of Shares .................................. 21
3.7 The Closing ........................................ 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ETG ................... 24
4.1 Organization, Standing, Power and Qualification .... 24
4.2 Capitalization ..................................... 24
4.3 Subsidiaries ....................................... 25
4.4 No Conflict ........................................ 25
4.5 Consents; Transferability .......................... 26
4.6 Financial Statements ............................... 26
4.7 Absence of Certain Developments .................... 27
4.8 Taxes .............................................. 27
4.9 Insurance .......................................... 28
4.10 Material Contracts ................................. 29
4.11 Real Property ...................................... 30
4.12 Tangible Property .................................. 31
4.13 Intangible and Other Property ...................... 32
4.14 ERISA Matters; Employee Benefit Plans .............. 33
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4.15 Employees .......................................... 35
4.16 Accounts Receivable ................................ 36
4.17 Intentionally Omitted .............................. 36
4.18 Compliance With Laws ............................... 36
4.19 Licenses and Permits ............................... 36
4.20 Legal Proceedings .................................. 36
4.21 Absence of Certain Practices ....................... 37
4.22 Interested Persons ................................. 37
4.23 No Brokers ......................................... 37
4.24 Books and Records .................................. 37
4.25 Disclosure ......................................... 37
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PARENT AND THE COMPANY .................................. 38
5.1 Organization, Standing, Power and Qualification .... 38
5.2 No Conflict ........................................ 38
5.3 Consents ........................................... 38
5.4 Financial Ability to Perform ....................... 39
5.5 Capitalization ..................................... 39
5.6 Financial Statements ............................... 39
5.7 Compliance With Laws ............................... 40
5.8 Legal Proceedings .................................. 41
5.9 SEC Reports ........................................ 41
5.10 Subsidiaries ....................................... 41
5.11 Disclosure ......................................... 42
ARTICLE VI
COVENANTS AND OTHER AGREEMENTS .......................... 42
6.1 Covenants of ETG ................................... 42
6.2 Exclusivity ........................................ 43
6.3 Access to Information .............................. 43
6.4 Consents ........................................... 44
6.5 Further Assurances ................................. 44
6.6 Notification of Certain Matters .................... 44
6.7 Litigation Prior to Effective Time ................. 44
6.8 Supplements to Schedules ........................... 44
6.9 No Inconsistent Actions ............................ 44
6.10 Offer of Employment ................................ 45
6.11 Options ............................................ 45
6.12 Tax Matters ........................................ 45
6.13 COSI Common Stock .................................. 45
6.14 Dissolution of ETG ................................. 45
6.15 Name of the Company ................................ 45
6.16 Investor Agreements ................................ 46
6.17 Tax Notices ........................................ 46
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ARTICLE VII
CONDITIONS PRECEDENT TO PARENT AND THE COMPANY'S
OBLIGATIONS ............................................. 46
7.1 Accuracy of Representations and Warranties of ETG .. 46
7.2 Performance by ETG ................................. 46
7.3 Consents ........................................... 46
7.4 Changes in the Business ............................ 46
7.5 Absence of Litigation .............................. 47
7.6 Compliance with Laws ............................... 47
7.7 Stockholder Approval ............................... 47
7.8 Employment Agreements .............................. 47
7.9 Non-Competition Agreements ......................... 47
7.10 Absence of Fraud ................................... 47
7.11 Proceedings and Documents .......................... 47
ARTICLE VIII
CONDITIONS PRECEDENT TO ETG'S OBLIGATIONS ............... 47
8.1 Accuracy of the Representations and Warranties
of Each of Parent and the Company .................. 48
8.2 Performance by Parent and the Company .............. 48
8.3 Absence of Litigation .............................. 48
8.4 Employment Agreements .............................. 48
8.5 Registration Rights Agreement ...................... 48
8.6 Absence of Fraud ................................... 48
8.7 Proceedings and Documents .......................... 48
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION ......................................... 48
9.1 Survival of Representations, Warranties,
Covenants and Agreements ........................... 48
9.2 General Indemnity .................................. 49
9.3 ERISA and Tax Indemnification ...................... 51
9.4 Reimbursement ...................................... 51
9.5 Claims ............................................. 51
9.6 Notice ............................................. 52
9.7 Right of Offset .................................... 52
ARTICLE X
TERMINATION ............................................. 53
10.1 Right to Terminate ................................. 53
10.2 Obligations to Cease ............................... 53
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ARTICLE XI
MISCELLANEOUS ............................................ 53
11.1 Legal and Accounting Expenses ...................... 53
11.2 Publicity .......................................... 54
11.3 Headings ........................................... 54
11.4 Notices ............................................ 54
11.5 Assignment and Successors .......................... 55
11.6 Binding Effect ..................................... 55
11.7 Governing Law; Forum; Process ...................... 55
11.8 Entire Agreement ................................... 55
11.9 Counterparts ....................................... 56
11.10 Severability ....................................... 56
11.11 No Prejudice ....................................... 56
11.12 Parties in Interest ................................ 56
11.13 Amendment and Modification ......................... 56
11.14 Waiver ............................................. 56
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ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT is made and entered into as of
December 16, 1998, by and among Computer Outsourcing Services,
Inc., a New York corporation ("Parent" or "COSI"), COSI
Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Parent (the "Company"), Enterprise Technology
Group, Incorporated, a New Jersey corporation ("ETG") and certain
stockholders of ETG set forth on Annex A annexed hereto.
WHEREAS, ETG, among other things, is engaged in the business
of information services consulting;
WHEREAS, upon the terms and subject to the conditions set
forth in this Agreement, the Company desires to purchase from ETG
and ETG desires to sell to the Company, certain assets of ETG, as
more particularly described herein, in consideration for the
payments from the Company as set forth herein (the "Asset
Purchase"); and
WHEREAS, the respective Boards of Directors of each of ETG,
Parent and the Company and all of the stockholders of ETG have
duly approved the Asset Purchase.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants contained herein, and for other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto, each intending
to be legally bound, do hereby agree as follows:
ARTICLE I
---------
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the following terms,
whether capitalized or not, shall have the meanings set forth
respectively after each such term:
Affiliate: Any director, officer, or greater than ten
percent (10%) stockholder of a Person or any of its Subsidiaries
and any member of the immediate family of any such director or
officer and any other Person which directly or indirectly
controls, is controlled by, or is under common control with such
Person or any of its Subsidiaries.
Agreed December Expenses: The aggregate amount of
ordinary expenses incurred by ETG and the Company in December
which both parties agree should be included in the calculation of
expenses for such month.
Agreed December Revenue: The aggregate revenue of ETG
and the Company in December which both parties agree should be
included in the calculation of revenue for such month.
Agreement: This Asset Purchase Agreement, including
the Exhibits and Schedules annexed hereto.
Allocation: As defined in Section 3.2.
Assets: As defined in Section 2.1.
Asset Purchase: As defined in the prologue to the
Agreement.
Assumed Liabilities: As defined in Section 2.3(a).
Balance Sheets: As defined in Section 4.6.
Benefit Plans: As defined in Section 4.14.
Books and Records: As defined in Section 2.1(c).
Business: The business of information services
consulting as conducted by ETG.
Business Day: Any day of the year on which banks are
not required or authorized to be closed in the State of New York.
Cash Purchase Price: As defined in Section 3.1.
Closing: As defined in Section 3.8.
Closing Date: December 18, 1998.
Closing Price: With respect to the COSI Common Stock,
the reported closing price on a Trading Day on the Nasdaq
National Market. In the event that no reported closing price is
quoted on a Trading Day, the average of the reported closing bid
and asked prices on the Nasdaq National Market on such Trading
Day.
Closing Purchase Price: As defined in Section 3.1.
Code: Internal Revenue Code of 1986, as amended.
Company: As defined in the prologue to the Agreement.
Consents: All Governmental Authority and third party
consents, permits, approvals, orders, authorizations,
qualifications, waivers and exemptions necessary for the
consummation of the transactions contemplated by this Agreement,
or that thereafter may be necessary for the Company or its
respective Subsidiaries to continue to have an interest,
Page 2 of 57
materially equivalent to the interest of ETG immediately prior to
the Effective Date, in any Contract, License and Permit or other
license, permit, approval, order, authorization, qualification or
waiver.
Consideration: The Closing Purchase Price plus
additions to consideration, if any, pursuant to the terms of this
Agreement.
Contract: Any material contract, agreement, mortgage,
deed of trust, bond, indenture, lease, license, note, franchise,
certificate, option, warrant, right, instrument or other similar
document and or agreement, whether written or oral.
COSI Common Stock: Common Stock, par value $.01 per
share, of Parent.
Cumulative Catch Up: As defined in Section 3.2(c)(iii).
Cumulative First Year PTI Shortfall: As defined in
Section 3.2(c)(iii).
Dollars or "$": The legal currency of the United
States of America.
EBIT: Earnings before interest and taxes of the
Company, calculated in accordance with GAAP, as shown on the
consolidating financial statements of the Parent, and consistent
with past practice, excluding any extraordinary transactions and
any corporate allocations of the Parent.
Employee Benefit Plan: The meaning given such term in
Section 3(3) of ERISA.
Environmental Claim: With respect to any Person, any
written or oral notice, claim, demand or other communication by
any other Person alleging or asserting such Person's liability
for investigatory costs, cleanup costs, Governmental Authority
response costs, damages to natural resources or other property,
personal injuries, fines or penalties arising out of, based on or
resulting from (a) the presence, or release into the environment,
of any hazardous material at any location, whether or not owned
by such Person, or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law. The
term "Environmental Claim" shall include any claim by any
Governmental Authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence of
hazardous materials or arising from alleged injury or threat of
injury to health, safety or the environment.
Page 3 of 57
Environmental Laws: Any laws relating to the
regulation or protection of human environmental health,
environmental safety or the environment or natural resources or
to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes into the environment (including
ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances.
ERISA: The Employee Retirement Income Security Act of
1974, as amended and the rules and regulations promulgated
thereunder.
ERISA Affiliate: Any trade or business, whether or not
incorporated, which together with ETG would be deemed, at any
time through the Closing, a single employer within the meaning of
Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the
Code.
ETG: As defined in the prologue to the Agreement.
ETG Advisory Board Members: Those Persons selected by
the President of the Company from time to time, subject to the
prior written approval by the Board of Directors of the Company,
who refer potential business and clients to the Company in return
for consideration, a current list of which Persons are set forth
on 'Schedule 1.1' annexed hereto.
ETG Channel Partners: Those Persons selected by the
President of the Company who meet twice annually to advise the
Company from time to time, subject to the prior written approval
by the Board of Directors of the Company, on marketing, customer
relations and other matters, a current list which Persons are set
forth on 'Schedule 1.1' annexed hereto.
ETG Common Stock: Common Stock, par value $0.01 per
share, of ETG.
ETG December Fraction: As defined in Section 3.5.
ETG Employees: Xxxxxx Xxxxxx and the employees of the
Company after the Effective Time.
ETG Expenses: As defined in Section 3.5.
Excess First Year PTI: As defined in Section
3.3(b)(iv).
Excess Second Year PTI: As defined in Section
3.3(c)(iv).
Page 4 of 57
Exchange Act: As defined in Section 5.6(a).
Excluded Assets: As defined in Section 2.2.
Excluded Liabilities: As defined in Section 2.3(b).
Financial Statements: As defined in Section 4.6.
First Post-Closing Adjustments: As defined in Section
3.3(a).
First Year Catch Up: As defined in Section
3.3(b)(iii).
First Year PTI: As defined in Section 3.3(a)(i).
First Year PTI Shortfall: As defined in Section
3.3(b)(iii).
GAAP: 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, applied on a consistent basis, as in effect on the date
hereof.
Governmental Authority: Any United States or foreign
governmental authority, including all agencies, bureaus,
commissions, authorities or bodies of the federal government or
any state, county, municipal or local government, including any
court, judge, justice or magistrate.
Independent Accounting Firm: As defined in Section
3.4(d).
Indemnified Parties: As defined in Section 9.3.
Insurance: As defined in Section 4.9.
Intangible and Other Property: All Contracts,
certificates of deposit, bank accounts, securities, partnership
or other ownership interests, rights to receive money or property
by assignment, future interests, claims and rights against third
parties, accounts receivable, notes receivable, prepaid expenses,
acquisition costs, patents, trademarks, trademark rights, trade
names, product designations, service marks, copyrights (and
applications for any of the foregoing), software and other
related material and other intangible property of any nature
owned, leased, licensed, used or held for use, directly or
indirectly, by, on behalf of or for the account of a Person.
Judgment: Any judgment, writ, order, injunction,
determination, award or decree of or by any court, judge, justice
or magistrate, including any bankruptcy court or judge, and any
order of or by a Governmental Authority.
Page 5 of 57
Law: Any statute, ordinance, code, rule, regulation or
order enacted, adopted, promulgated, applied or followed by any
Governmental Authority.
Licenses and Permits: All licenses, permits,
certificates, approvals, franchises, registrations,
accreditations or authorizations (i) required by Law or (ii)
issued to a Person or any of its Subsidiaries by a Governmental
Authority and used in their respective businesses, as currently
conducted or as proposed to be conducted which will have an
impact on the transactions contemplated hereby or on the
operations of ETG as currently conducted.
Lien: Any security agreement, financing statement
(whether or not filed), security or other interest, conditional
sale or other title retention agreement, lease, consignment or
bailment given for security purposes, lien, charge, restrictive
agreement, mortgage, deed of trust, indenture, pledge, option,
encumbrance, limitation, restriction, adverse interest,
constructive or other trust, claim, charge, attachment, exception
to or defect in title or other ownership interest (including
reservations, rights of entry, possibilities or reverter,
encroachments, easements, rights of way, restrictive covenants
and licenses) of any kind, whether direct, indirect, accrued or
contingent except, as the case may be, statutory liens or other
liens which by operation of law or the passage of time may attach
without notice and prior to any payments being due and owing.
Xxxxxx Lawsuit: The current arbitration proceeding
between Xxxxxx Computer Services Inc. and ETG.
Material Adverse Effect: Any event, circumstance or
condition that, individually or when aggregated with all other
similar events, circumstances or conditions could reasonably be
expected to have, or has had, a material adverse effect on: (i)
the business, property, operations, condition (financial or
otherwise), results of operations or prospects of a Person or its
Subsidiaries, (ii) the Assets of a Person or its Subsidiaries;
(iii) the ability of a Person to consummate the transactions
contemplated hereunder; or (iv) the ability of the Company or
Parent to perform and conduct the Business of ETG after the
consummation of the transactions contemplated by this Agreement
in a manner substantially similar to the manner conducted prior
to the consummation of such transactions.
Multiemployer Plan: A Multiemployer plan, as defined
in Sections 3(37) and 4001(a)(3) of ERISA.
NJBCA: New Jersey Business Corporations Act.
Non-Assignable Assets: As defined in Section 2.8.
Options: As defined in Section 6.11.
Page 6 of 57
Parent: As defined in the prologue of the Agreement..
Parent SEC Reports: As defined in Section 5.9.
Person: Any individual, trustee, corporation, general
or limited partnership, limited liability company, joint venture,
joint stock company, bank, firm, Governmental Agency, trust,
association, organization or unincorporated entity of any kind or
nature whatsoever.
Plan Liability: As defined in Section 9.1.
Principal Stockholders: Xxxxxx Xxxxxx and M. Xxxxx
Xxxxxx.
Prohibited Transaction: A transaction that is
prohibited under Section 4975 of the Code or Section 406 of ERISA
and not exempt under Section 4975 of the Code or Section 408 of
ERISA, respectively.
PTI: EBIT, provided that costs related to the Asset
Purchase shall not be included in the calculation of PTI either
as an expense, depreciation or amortization. Parent shall
maintain a separate income statement and balance sheet for the
business acquired from ETG as a result of the Asset Purchase for
the purpose of determining the post-closing additions to the
Closing Purchase Price. In calculating PTI all amounts in (c)
and (d) of the definition of Revenue shall be included in PTI
(without double counting). When calculating PTI, one percent
(1%) of sales of the Company shall be allocated to the Company
representing that portion of the overhead of Parent and all of
its Subsidiaries allocable to the Company (Overhead shall include
costs of the Parent and all of its Subsidiaries not directly
attributable to the Company such as general corporate legal fees,
fees related to operating as a public company, including
accounting fees, SEC filing fees and investor relations fees, and
fees associated with corporate officers and employees, among
others. A portion of shared expenses which are directly
chargeable to the Company (rent with respect to space actually
used by the Company, data processing actually used by the Company
and communications charges actually used by the Company and other
expenses the parties mutually agree upon) shall not be included
in overhead but shall be included in the calculation of EBIT).
Real Property: All realty, fixtures, easements,
rights-of-way and other interests (excluding Tangible Property)
in real property, buildings, improvements and construction-in-
progress owned directly or indirectly, by or on behalf of a Person.
Real Property Leases: As defined in Section 4.11.
Retirement Plan: The ETG 401(k) Plan.
Page 7 of 57
Revenue: Revenue shall include: (a) all sales relating
to the Business, including sales from customers of ETG prior to
the Closing Date ("Existing Customers") and new customers of the
Company acquired on or after the Closing Date ("New Customers");
(b) 10% of (i) new sales (i.e., sales to new customers of Parent
and incremental sales to existing customers of Parent) relating
to the sales efforts of ETG Employees regardless of the division
of Parent or any of its Subsidiaries, other than the Company, in
which the sales are made and (ii) sales resulting from leads
generated by ETG Channel Partners and ETG Advisory Board Members,
regardless of the division of Parent or any of its Subsidiaries,
other than the Company, in which the sales are made; (c) 50% of
the amount by which ETG Employees increase the profitability of
any Parent outsourcing contracts by ideas, technologies,
methodologies or approaches suggested by ETG Employees and as
such amount is mutually agreed upon, which amount shall be added
to Revenue 25% in the first year and 25% in the second year after
implementation, such amount to be decreased pro rata to the
extent such savings have not begun over the first year after the
closing date (for example, if ETG Employees increase the
profitability of a Parent outsourcing contract by $100 per year,
commencing June 1, 1999, Revenue will be increased by $12.50 for
the first year, $25.00 for the second year and $12.50 for the
third year and if ETG Employees increase the profitability of a
Parent outsourcing contract by $100 per year, commencing June 1,
2001, Revenue will be increased by $12.50 for the third year only
(assuming a closing of December 1, 1998)); and (d) in the event
Parent utilizes any of the ETG Employees in divisions of Parent
or any of its Subsidiaries other than the Company, for reasons
other than sales activities described in (b) above or
profitability enhancement services described in (c) above (except
to the extent authorized by Parent in advance of providing
services). Parent shall, for internal accounting purposes and for
purposes of calculating Revenue, allocate an amount to be agreed
upon on a case by case basis by Xx. Xxxxxx and Parent, applicable
to such employees, multiplied by the amount of time Parent or any
of its Subsidiaries utilized such ETG Employees. All of the
foregoing calculations shall be computed without double counting;
provided, however, that the President of the Company shall have
the right to designate the subsection to be utilized in the
calculation of Revenue where only one of subsections (a) through
(d) must be chosen to avoid double counting. Revenue shall not
include any sales resulting from the accounts receivable on the
balance sheet of ETG at the Closing Date.
Schedule Amendment: As defined in Section 7.1.
Second Post-Closing Adjustment. As defined in Section
3.3(b).
Second Year PTI: As defined in Section 3.3(b)(i).
Securities Exchange Commission: As defined in Section
5.6(a).
Page 8 of 57
Stock Purchase Price. As defined in Section 3.1.
Stockholders: All of the Stockholders of ETG.
Subsidiary: With respect to any Person, any
corporation, association or other business entity of which more
than 50% of the issued and outstanding stock or equivalent
thereof having ordinary voting power is owned or controlled by
such Person, by one or more Subsidiaries or by such Person and
one or more Subsidiaries.
Survival Period: As defined in Section 9.1.
Tangible Property: All furnishings, machinery,
equipment, computer systems, supplies, inventories, vehicles,
books and records and other tangible personal property and
facilities of any nature owned, leased, used or held for use,
directly or indirectly, by or on behalf of a Person.
Tangible Property Lease: As defined in Section 4.12..
Tax Liability: As defined in Section 9.1.
Tax Returns: As defined in Section 4.8.
Taxes: As defined in Section 4.8.
10-KSB: As defined in Section 5.6(a).
10-QSB: As defined in Section 5.6(a).
Third Post-Closing Adjustment: As defined in Section
3.3(c).
Third Year PTI. As defined in Section 3.3(c)(i).
Trading Day: A day on which the Nasdaq National Market
is open for the transaction of business.
Welfare Plan: Any employee welfare benefit plan, as
defined in Section 3(1) of ERISA.
1.2 USE OF DEFINED TERMS. Any defined term used in the
plural shall refer to all members of the relevant class, and any
defined term used in the singular shall refer to any one or more
of the members of the relevant class. The use of any gender
shall be applicable to all genders.
1.3 ACCOUNTING TERMS. All accounting terms not otherwise
defined in this Agreement shall be construed in conformity with,
and all financial data required to be submitted by this Agreement
shall be prepared in conformity with, GAAP, except as expressly
permitted by this Agreement or as provided in schedules hereto.
Page 9 of 57
1.4 SECTIONS, EXHIBITS AND SCHEDULES. References in this
Agreement to Sections, Exhibits and Schedules are to Sections,
Exhibits and Schedules of and to this Agreement. The Exhibits and
Schedules to this Agreement are hereby incorporated hereby by this
reference as if fully set forth hereby.
1.5 MISCELLANEOUS TERMS. The term "or" shall not be
exclusive. The terms "herein," "hereof," "hereto," "hereunder"
and other terms similar to such terms shall refer to this Agreement
as a whole and not merely to the specific article, section,
paragraph or clause where such terms may appear. The term
"including" shall mean "including, but not limited to."
ARTICLE II
----------
ACQUISITION AND TRANSFER OF ASSETS
2.1 ACQUISITION AND TRANSFER OF ASSETS. Upon the terms
and subject to the conditions hereinafter set forth, ETG shall sell,
assign, transfer, convey and deliver to the Company, and the
Company shall purchase, acquire and accept from ETG, free and
clear of all liens, claims, charges and encumbrances (subject to
only those liens for liabilities which the Company specifically
agrees in writing to assume or as otherwise set forth in Section
2.3(a)), all of ETG's right, title and interest in and to all of
the assets, properties, rights, Contracts and claims used or held
for use in or related to the Business (except as otherwise set
forth in Section 2.2 hereof), of every kind, character and
description, wherever located, whether tangible or intangible,
whether real, personal or mixed, whether accrued, contingent or
otherwise as the same shall exist as of the Closing (such rights,
title and interest in and to all such assets, properties, rights,
Contracts and claims, being collectively referred to herein as, the
"Assets"). Except as disclosed in Section 2.2 hereof, the Assets
shall include all of the ETG's rights, title and interest in and
to the assets, properties, rights, Contracts and claims described
in the following paragraphs (a) through (i) used or held for use
in or related to the Business as of the Closing:
(a) Licenses and Permits. All right, title and
interest of ETG in and to the Licenses and Permits (to the
extent permitted by applicable law to be transferred)
related to the Business which are specified on Schedule
2.1(a) annexed hereto (collectively, "Licenses and
Permits");
(b) Intangible and Other Property. All Intangible
and Other Property, wherever located, of ETG related to the
Business and all registrations and applications for
registration of any of the foregoing which are specified on
Schedule 2.1(b) annexed hereto;
Page 10 of 57
(c) Books and Records. All books, accounting,
financial and other related records and documents,
correspondence, manuals, production records, employment
records, standard operating procedures, customer lists,
supplier lists and any other confidential or proprietary
information pertaining to the Business and Assets purchased
hereunder (collectively, the "Books and Records"). ETG
shall be entitled to retain copies of its Books and Records
for tax purposes;
(d) Real Property. All of the ETG's right, title
or interest in the leased Real Property set forth on Schedule
2.1(d) annexed hereto;
(e) Tangible Property. All Tangible Property,
wherever located, of ETG related to the Business, set forth
in Schedule 2.1(e) annexed hereto;
(f) Contracts. All rights and interests of ETG in, to
and under the Contracts related to the Business as listed on
Schedule 2.1(f) annexed hereto together with receivables
relating to such Contracts which receivables are not listed
on Schedule 4.16;
(g) Claims. Claims, prepayments, refunds (other than
income tax refunds), causes of action, cases in action and
rights of offset or recoupment related to the Assets;
(h) Goodwill. All goodwill relating to any of the
Assets; and
(i) Revenue. The portion of the Agreed December
Revenue attributable to the Company as calculated in
accordance with Section 3.5.
2.2 EXCLUDED ASSETS. Notwithstanding anything to the
contrary contained in this Agreement, ETG and the Company expressly
understand and agree that ETG is not hereunder selling, assigning,
transferring, conveying or delivering to the Company the following
assets, properties, rights, contracts and claims (collectively,
the "Excluded Assets"):
(a) all cash and cash equivalents, whether on hand, in
banks or elsewhere, of ETG;
(b) tax refunds, if any, due to ETG;
(c) all accounts receivable, notes receivable and
other receivables (whether short-term or long-term) from
third parties and all deposits with third parties, if any,
together with any unpaid interest accrued thereon and other
amounts due with respect thereto from the respective
obligors and any security or collateral therefor, including
recoverable deposits except for any such item relating to
the Contracts listed on Schedule 2.1(f) which items have not
been disclosed on Schedule 4.16;
Page 11 of 57
(d) copies of the ETG's tax records consisting of the
ETG's tax returns, general ledgers and supporting documents;
(e) the Benefit Plans;
(f) the Contracts listed on Schedule 2.2(f) annexed
hereto; and
(g) all rights and recoveries under the Xxxxxx
Lawsuit;
(h) all insurance claims relating to the insurance
policies of ETG;
(i) any and all claims relating to items that accrue
prior to the Closing or to the Excluded Assets;
(j) the portion of the Agreed December Revenue
attributable to ETG as calculated in accordance with Section
3.5; and
(k) the VSE Investment set forth in the Financial
Statements.
2.3 LIABILITIES TRANSFERRED.
(a) Notwithstanding anything to the contrary in this
Agreement, the Company shall not assume any liabilities of
ETG whether accrued, absolute, or contingent, recorded or
unrecorded or otherwise, other than the following
("Assumed Liabilities"):
(i) the Company will assume the performance of
all obligations that accrue after the Closing Date
with respect to the Contracts specified in
Schedule 2.1(f) annexed hereto;
(ii) the Company will assume all obligations that
accrue with respect to the Assets after the Closing
Date;
(iii) the portion of the Agreed December Expenses
attributable to the Company as calculated in accordance
with Section 3.5; and
(iv) any accrued vacation with respect to the ETG
Employees in excess of $30,000.
(b) ETG shall be responsible for all obligations and
liabilities of ETG, other than the Assumed Liabilities,
including but not limited to the following (the "Excluded
Liabilities"):
Page 12 of 57
(1) liabilities or obligations of ETG for
indebtedness to any of its stockholders or other equity
owners or to any Person affiliated or associated
therewith;
(2) except as otherwise specifically provided
herein, liabilities or obligations of ETG with respect
to this Agreement or any of the transactions
contemplated hereunder including, without limitation,
legal and accounting fees;
(3) liabilities or obligations which may arise
by reason of or with respect to the dissolution of ETG;
(4) liabilities or obligations for any severance
or post-termination benefits or other payments or
awards (including, without limitation, disability
payments and workers compensation awards) owed to or
incurred on behalf of any employee of ETG terminated
prior to or at the Closing, including, without
limitation, any obligations under COBRA;
(5) subject to Sections 9.1 and 9.2 hereof,
liabilities or obligations incurred by ETG regardless
of when such obligation or liability is discovered
which violate or breach any representation, warranty,
covenant or agreement of ETG included herein or made
in connection herewith;
(6) all accounts payable, accrued expenses, and
Taxes of ETG and its Stockholders, and pertaining to,
the Business, including but not limited to, the
foregoing and the payment of employee salaries,
benefits, vacation, sick pay, and severance and
termination payments that accrue on or prior to the
Closing, provided that liability with respect to
accrued vacation in an amount up to $30,000 in the
aggregate;
(7) subject to Sections 9.1 and 9.2 hereof, all
liabilities or obligations incurred prior to the
Closing Date regardless of when such obligation or
liability is discovered that are not Assumed
Liabilities (including, without limitation,
all amounts payable in respect of the termination of
any Benefit Plans or insurance policy covering the
Assets as of the Closing); and
(8) the portion of the Agreed December Expenses
attributable to ETG as calculated in accordance with
Section 3.5.
Page 13 of 57
2.4 DIRECTORS AND OFFICERS OF THE COMPANY. As of the
Closing Date, the board of directors of the Company shall consist
of one (1) member who shall be designated by Parent in writing prior
to the Closing Date. The director so designated shall hold office
in accordance with the Certificate of Incorporation and Bylaws of
the Company until his or her respective successors are duly elected
or appointed and qualified. The board of directors of the Company
shall elect the officers of the Company subject to the terms and
conditions of that certain employment agreement to be entered
into between Xxxxxx Xxxxxx and the Company as of the Closing
Date.
2.5 BOARD OF DIRECTORS OF PARENT. As of the Closing Date
and subject to the approval of the Board of Directors of Parent, the
board of directors of Parent shall expand such board by one member
and appoint Xxxxxx Xxxxxx to fill such vacancy. Parent shall
nominate Xxxxxx Xxxxxx as a member of the Board of Directors of
Parent to be elected at the Annual Meeting of Stockholders of Parent
held during each of the three (3) years following the Closing so
long as Xx. Xxxxxx is an employee of the Company, Parent or any of
its Subsidiaries. Xx. Xxxx Xxxxxxxx and Xx. Xxxxxx Xxxxxxx agree
to vote their respective shares of COSI Common Stock in favor of
Xx. Xxxxxx at the Annual Meeting of stockholders of Parent held
during each of such three (3) years so long as Xx. Xxxxxx is an
employee of the Company, Parent or any of its Subsidiaries.
2.6 ETG ACTION. ETG represents and warrants that (i) the
Board of Directors of ETG has duly approved the execution of this
Agreement, including the Asset Purchase, and has resolved to
recommend approval of the Asset Purchase by the Stockholders,
(ii) according to ETG's stock record book, the Stockholders own,
of record, an aggregate of seven hundred eighty (780) issued and
outstanding shares of ETG Common Stock, which represents all of the
issued and outstanding shares of ETG Common Stock. The Stockholders
have voted all shares of ETG Common Stock held, beneficially or of
record, by them in favor of the approval and adoption of this
Agreement, the Asset Purchase and the transactions contemplated
hereby.
2.7 PARENT ACTION. Each of Parent and the Company
represents and warrants that its respective Board of Directors has
duly approved the execution of this Agreement, the Asset Purchase
and the transactions contemplated hereby.
2.8 NON-ASSIGNABLE ASSETS. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement or an attempted agreement to transfer,
sublease or assign the Contracts set forth on Schedule 2.8 annexed
hereto to the extent such Contracts, or any claim or right of any
benefit arising thereunder or resulting therefrom if any such
attempted transfer, sublease or assignment thereof, without the
consent of any other party thereto, would constitute a breach
thereof or in any way affect the rights of the Company thereunder
Page 14 of 57
(the "Non-Assignable Assets"). ETG shall, if requested by the
Company after the Closing Date, use its reasonable efforts to obtain
any such consent. If any such consent is not obtained, or if any
attempted assignment thereof would be ineffective or would affect
the rights of ETG thereunder such that the Company would not in
fact receive all such rights, on and after the Closing Date, each
such Non-Assignable Asset shall be held by ETG in trust for the
Company, and ETG shall perform such agreement for the account of
the Company or otherwise cooperate with the Company in any
arrangement necessary or desirable to provide for the Company the
benefits under any such agreement, including, without limitation,
enforcement for the benefit of the Company of any and all rights
of ETG against the other party thereto arising out of the breach,
termination or cancellation of such agreement by such other party
or otherwise. ETG will take or cause to be taken such action in
ETG's name or otherwise as the Company may reasonably request, at
the Company's expense, so as to provide the Company with the
benefits of the Non-Assignable Assets and to effect collection of
money or other consideration to become due and payable under the
Non-Assignable Assets and ETG shall promptly pay over to the
Company all money or other consideration received by it or its
Affiliates in respect of Non-Assignable Assets. As and from the
Closing, ETG authorizes the Company, to the extent permitted by
applicable law and the terms of the Non-Assignable Assets, at the
Company's expense, to perform all of the obligations and receive
all of the benefits under the Non-Assignable Assets and appoint
the Company its attorney-in-fact to act in its name and on its
behalf with respect thereto. Notwithstanding the foregoing, this
Agreement shall not constitute an agreement by ETG to assign or
delegate, or by the Company to assume and agree to pay, perform
or otherwise discharge, any Non-Assignable Asset if an attempted
assignment, delegation or assumption thereof without the consent
of a third Person would constitute a breach thereof unless and
until such consent is obtained. The foregoing shall not limit,
waive or otherwise affect the Company's right to not close the
transactions contemplated by this Agreement to the extent the
receipt of any consent to the transfer, sublease or assignment of
any contract, license, lease, commitment, sales order, purchaser
order or other agreement is a condition to the obligation of the
Company to close hereunder.
ARTICLE III
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PURCHASE PRICE
3.1 PURCHASE PRICE. The aggregate purchase price for the
Assets shall be equal to the sum of seven million ($7,000,000)
dollars, of which $4,000,000 shall be payable in cash at the
Closing (the "Cash Purchase Price"), and the remainder of which
shall be payable in 300,000 shares of COSI Common Stock (the "Stock
Purchase Price"). The Cash Purchase Price and the Stock Purchase
Price shall be referred to herein collectively as the "Closing
Purchase Price."
Page 15 of 57
3.2 ALLOCATION OF CLOSING PURCHASE PRICE. The Closing
Purchase Price shall be allocated among the Assets being sold
hereunder in the manner required by Treasury Regulations 1.1060-IT
as reasonably determined by the Company. The Company will submit to
ETG a proposed allocation (the "Allocation") within ninety (90) days
from the Closing Date. The Company and ETG agree that: except as
otherwise required by law (i) the Allocation shall be binding on
the Company and ETG for all federal, state and local Tax (as
defined herein) purposes, (ii) the Company and ETG shall each
execute a writing memorializing the Allocation, and (iii) the
Company and ETG shall file with their respective federal income
Tax Returns consistent IRS Forms 8594-Asset Acquisition
Statements under Section 1060, including any required amendment
thereto which shall reflect the allocations set forth in the
Allocation. The parties acknowledge that the allocation of the
Closing Purchase Price provided for in the Allocation will be
based upon the book value of each component of the Assets, up to
$50,000 will be allocated to the non-competition agreements
executed pursuant to Section 7.9 hereof and any remainder shall
be allocated to goodwill.
3.3 ADDITIONS TO CLOSING PURCHASE PRICE.
(a) First Anniversary Post-Closing Adjustment. The
Closing Purchase Price shall increase by an amount which
shall not be more than the sum of $1,712,000 payable in
cash and 100,000 shares of COSI Common Stock calculated
as follows (the "First Post-Closing Adjustment"):
(i) If PTI during the period from January 1,
1999 through December 31, 1999 (the "First Year PTI")
is equal to or greater than $5,000,000, the First
Post-Closing Adjustment shall be equal to the sum of
$1,500,000 in cash and 100,000 shares of COSI Common
Stock;
(ii) If First Year PTI is greater than $3,200,000
but less than $5,000,000, the First Post-Closing
Adjustment shall be equal to the sum of (x) cash in an
amount equal to the product of (A) $1,500,000 and (B)
the result of a fraction, the numerator of which is the
difference between First Year PTI and $3,200,000 and the
denominator of which is $1,800,000 and (y) the number of
shares of COSI Common Stock equal to the product of (A)
100,000 and (B) the result of the fraction in Section
3.3(a)(ii)(x)(B) hereof;
(iii) If First Year PTI (without any adjustments
pursuant to this Section 3.3) is greater than $3,200,000,
the cash portion of the First Post-Closing Adjustment
shall be increased by $212,000 (which includes interest
at the rate of 6% per annum).
Page 16 of 57
(b) Second Anniversary Post-Closing Adjustment. The
Closing Purchase Price shall increase by an amount which
shall not be more than the sum of $1,724,000 in cash and
85,714 shares of COSI Common Stock calculated as follows
(the "Second Post-Closing Adjustment"), provided, however,
that ETG shall be entitled to the First Year Catch Up, if
any, as described in Section 3.3(b)(iii) hereof:
(i) If PTI during the period from January 1, 2000
through December 31, 2000 (as adjusted in accordance
with Sections 3.3(b)(iii) or (iv) hereof) (the "Second
Year PTI") is equal to or greater than $6,000,000, the
Second Post-Closing Adjustment shall be equal to the sum
of $1,500,000 in cash and 85,714 shares of COSI Common
Stock;
(ii) If Second Year PTI is greater than $5,000,000
but less than $6,000,000, the Second Post-Closing
Adjustment shall be equal to the sum of (x) cash in an
amount equal to the product of (A) $1,500,000 and (B)
the result of a fraction, the numerator of which is the
difference between Second Year PTI and $5,000,000 and the
denominator of which is $1,000,000 and (y) the number of
shares of COSI Common Stock equal to the product of
85,714 and the result of the fraction in Section
3.3(b)(ii)(x)(B) hereof;
(iii) For purposes of calculating the Second Post
Closing Adjustment, to the extent that First Year PTI
is less than $5,000,000 and Second Year PTI exceeds
$3,200,000, Second Year PTI shall be reduced (to the
extent that such reduction shall not result in Second
Year PTI falling below $3,200,000) by the difference
between $5,000,000 and First Year PTI (the "First Year
PTI Shortfall"), and such portion (the "First Year
Catch Up") of Second Year PTI shall be applied to First
Year PTI until such time as the First Post- Closing
Adjustment is earned in full, and any portion of Second
Year PTI applied to the First Year PTI shall not be
double counted when calculating the Second Post-Closing
Adjustment;
(iv) For purposes of calculating the Second Post-
Closing Adjustment, in the event that First Year PTI is
greater than $5,000,000, the difference between First
Year PTI and $5,000,000 (the "Excess First Year PTI")
shall be added to Second Year PTI;
(v) If Second Year (without any adjustments
pursuant to this Section 3.3) PTI is greater than
$3,200,000, the cash portion of the Second Year
Post-Closing Adjustment shall be increased by $224,000
(which includes interest at the rate of 6% per annum).
Page 17 of 57
(c) Third Anniversary Post-Closing Adjustment. The
Closing Purchase Price shall increase by an amount which
shall not be more than the sum of $1,000,000 in cash and
57,143 shares of COSI Common Stock calculated as follows
(the "Third Post-Closing Adjustment"), provided, however,
that ETG shall be entitled to the Cumulative Catch Up, if
any, as described in Section 3.3(c)(iii) hereof.
(i) If PTI during the period from January 1,
2001 through December 31, 2001 (as adjusted in
accordance with Sections 3.3(c)(iii) or (iv) hereof)
(the "Third Year PTI") is equal to or greater than
$7,500,000, the Third Post-Closing Adjustment shall
be equal to the sum of $1,000,000 in cash and 57,143
shares of COSI Common Stock;
(ii) If Third Year PTI is greater than $6,000,000
but less than $7,500,000, the Third Post-Closing
Adjustment shall be equal to (x) cash in an amount equal
to the product of (A) $1,000,000 and (B) the result of a
fraction, the numerator of which is the difference
between Third Year PTI and $6,000,000 and the denominator
of which is $1,500,000 and (y) shares of COSI Common
Stock equal to the product of 57,143 and the result of
the fraction in Section 3.3(c)(ii)(x)(B) hereof; (iii)
For purposes of calculating the Third Post-Closing
Adjustment, to the extent that Second Year PTI (after
taking into account adjustments pursuant Section 3.3(b)
(iii) or (iv) hereof) is less than $6,000,000, First Year
PTI (after taking into account adjustments pursuant
Section 3.3(b)(iii) hereof) is less than $5,000,000 and
Third Year PTI exceeds $3,200,000, Third Year PTI shall
be reduced (to the extent that such reduction shall not
result in Third Year PTI falling below $3,200,000) by (A)
the difference between $5,000,000 and First Year PTI
(after taking into account adjustments pursuant
Section 3.3(b)(iii) hereof) (the "Cumulative First
Year PTI Shortfall") and (B) the difference between
$6,000,000 and Second Year PTI (after taking into
account adjustments pursuant Sections 3.3(b)(iii)
and 3.3(b)(iv) hereof), and such portion (the "Cumulative
Catch Up") of Third Year PTI shall be applied first to
First Year PTI (after taking into account adjustments
pursuant Section 3.3(b)(iii) hereof) until such time as
the First Post-Closing Adjustment is earned in full and
then to Second Year PTI (after taking into account
adjustments pursuant Sections 3.3(b)(iii) and 3.3(b)(iv)
hereof) until such time as the Second Post-Closing
Adjustment is earned in full, and any portion of Third
Year PTI applied to First Year PTI and Second Year PTI
shall not be double counted when calculating the Third
Post-Closing Adjustment;
Page 18 of 57
(iv) For purposes of calculating the Third
Post-Closing Adjustment, in the event that Second
Year PTI (after taking into account the adjustments
made in accordance with Sections 3.3(b)(iii) or
3.3(b)(iv), if any) is greater than $6,000,000, the
difference between Second Year PTI and $6,000,000
(the "Excess Second Year PTI") shall be applied
to Third Year PTI.
(d) In calculating any payments due in this
Section 3.3, all losses must be offset by earnings in
subsequent years before any post closing adjustments are due.
(e) Attached hereto as Schedule 3.3(e) are examples of
formula calculations relating to Sections 3.3(b) and 3.3(c)
hereof.
3.4 PAYMENT OF POST-CLOSING ADJUSTMENTS.
(a) First Post-Closing Adjustment. The First Post-
Closing Adjustment shall be paid to ETG on or before March 1,
2000. The cash portion of the First Post-Closing Adjustment
plus an amount equal to dividends, on a per share basis, paid
by Parent during the period beginning January 1, 2000 through
the date of issuance of the COSI Common Stock pursuant to this
Section 3.4(a) shall be paid to ETG by delivery of a certified
or official bank check to ETG and Parent shall deliver to its
transfer agent irrevocable letters of instructions which
direct the transfer agent to issue certificates representing
that number of COSI Common Stock constituting the stock
portion of the First Post-Closing Adjustment to be delivered
to ETG.
(b) Second Post-Closing Adjustment. The Second Post-
Closing Adjustment (and the First Year Catch Up, if any) shall
be paid to ETG on or before March 1, 2001. The cash portion
of the Second Post-Closing Adjustment (and the First Year
Catch Up, if any) plus an amount equal to dividends, on a per
share basis, paid by Parent during the period beginning
January 1, 2001 through the date of issuance of the COSI
Common Stock pursuant to this Section 3.4(b) shall be paid
to ETG by delivery of a certified or official bank check to
ETG and Parent shall deliver to its transfer agent irrevocable
letters of instruction which direct the transfer agent to
issue certificates representing that number of COSI Common
Stock constituting the stock portion of the Second
Post-Closing Adjustment (and the First Year Catch Up, if
any) to be delivered to ETG.
Page 19 of 57
(c) Third Post-Closing Adjustment. The Third Post-
Closing Adjustment (and the Cumulative Catch Up, if any)
shall be paid to the ETG on or before March 1, 2002. The cash
portion of the Third Post-Closing Adjustment (and Cumulative
Catch Up, if any) plus an amount equal to the dividends, on a
per share basis, paid by Parent during the period beginning
January 1, 2002 through the date of issuance of the COSI
Common Stock pursuant tot his Section 3.4(c) shall be paid to
ETG by delivery of a certified or official bank check to ETG
and Parent shall deliver to its transfer agent irrevocable
letters of instruction which direct the transfer agent to
issue certificates representing that number of COSI Common
Stock constituting the stock portion of the Third
Post-Closing Adjustment (and Cumulative Catch Up, if any)
to be delivered to ETG.
(d) Resolution of Disputes Regarding Additions to the
Closing Purchase Price. ETG and its independent accountants
shall have the right to review the books and records and
supporting work papers of Parent's independent accountants for
the purpose of verifying the calculation of the First Post-
Closing Adjustment, the Second Post-Closing Adjustment (and
the First Year Catch Up or Excess First Year PTI, if any) and
the Third Post-Closing Adjustment (and the Cumulative Catch Up
or Excess Second Year PTI, if any or the Excess Second Year
PTI). ETG shall have a period of sixty (60) days after
receipt of the payment of each of the First Post-Closing
Adjustment, the Second Post-Closing Adjustment (and the First
Year Catch Up or Excess First Year PTI, if any) and the Third
Post-Closing Adjustment (and the Cumulative Catch Up, if any)
to present in writing to Parent any objections thereto, which
writing shall set forth each specific item to which each such
objection relates and the specific basis for each such
objection. Each of the First Post-Closing Adjustment, the
Second Post-Closing Adjustment (and the First Year Catch Up
or Excess First Year PTI, if any) and the Third Post-Closing
Adjustment (and the Cumulative Catch Up or Excess Second
Year PTI, if any) shall be deemed to be acceptable to ETG
and shall become final and binding on the parties, except
to the extent that ETG shall have made a specific written
objection thereto within such sixty (60) day period. If ETG
shall raise any such objection within such sixty (60) day
period, then ETG and Parent shall attempt in good faith to
resolve any dispute concerning the item(s) subject to such
objection. Upon failure to resolve any such dispute, within
forty five (45) days of Parent's receipt of ETG's objections,
such dispute shall be submitted to a regionally recognized
firm of independent public accountants in the New York
metropolitan area, then having no significant ongoing
relationship with Parent or ETG, as shall be mutually
acceptable to Parent and ETG (the "Independent Accounting
Firm"). The Independent Accounting Firm shall be instructed
to use its best efforts to render a decision as to all
Page 20 of 57
items in dispute within thirty (30) days of submission, and
the parties agree to cooperate with each other and each
other's authorized representatives and with the Independent
Accounting Firm in order that any and all items in dispute
shall be resolved as soon as practicable. The determination
of the Independent Accounting Firm concerning any item in
dispute shall be final and binding on the parties without
further right of appeal. The fees and expenses of the
Independent Accounting Firm incurred in the resolution of
such dispute shall be allocated between ETG and Parent in
the same proportion that the aggregate dollar amount or
value of the items unsuccessfully disputed by each such
party (as finally determined by the Independent Accounting
Firm) bears to the total dollar amount or value of all
disputed items submitted by both parties to the Independent
Accounting Firm.
3.5 DECEMBER STATEMENT. No later than January 15, 1999,
ETG and the Company shall determine the Agreed December Revenue and
Agreed December Expenses. ETG shall be entitled to aggregate revenue
in December equal to the product of the Agreed December Revenue and
the result of a fraction the numerator of which is the number of days
elapsed in December through the day preceding the Closing Date and
the denominator of which is thirty-one (31) (the "ETG December
Fraction"). The Company shall be entitled the difference between
the Agreed December Revenue and the amount attributable to ETG in
the previous sentence. ETG shall also be responsible for an
aggregate amount of expenses in December equal to the product of
the Agreed December Expenses and the ETG December Fraction (the
"ETG Expenses"). The Company shall be responsible for the
difference between the Agreed December Expenses and the ETG
Expenses. Each of ETG and the Company agree that to the extent
such calculations result in one of the parties owing money to the
other party, such party shall pay the amount owed to the other
party promptly after such sums are agreed upon.
3.6 LISTING OF SHARES. Parent shall cause the COSI Common
Stock to be issued in connection with the Asset Purchase to be listed
on Nasdaq National Market or any other national securities exchange
or quotation system, if any, upon which the COSI Common Stock is
trading or is being quoted at the Effective Time.
3.7 THE CLOSING.
(a) Subject to the terms and conditions of this
Agreement, the closing (the "Closing") of this Agreement and
the Asset Purchase shall take place at the offices of Xxxxxxx
Berlin Shereff Xxxxxxxx, LLP at 10:00 a.m., local time, on
the date which is three (3) Business Days after the
satisfaction or waiver of all other conditions to
consummation of the transactions contemplated hereby or at
such other time and place as Parent, the Company and ETG
shall mutually agree upon.
Page 21 of 57
(b) At the Closing, ETG shall deliver to Parent and
the Company the following:
(1) the certificates required by Sections 8.1 and
8.2 hereof;
(2) a balance sheet of ETG as of the day
immediately prior to the Closing Date;
(3) resolutions duly adopted by the Board of
Directors and the Stockholders authorizing the
transactions which are the subject of this Agreement,
certified by the Secretary of ETG;
(4) certificates issued by appropriate
Governmental Authorities evidencing, as of a recent
date, the corporate good standing and tax status of
ETG in the jurisdiction in which ETG is incorporated
and in those jurisdictions in which ETG is qualified
to do business and, as of a date not more than two
Business Days prior to the Closing, telegrams, if
available, issued by the appropriate Governmental
Authorities with respect to the corporate good
standing and tax status of ETG in the jurisdiction
in which ETG is incorporated and in those
jurisdictions in which ETG is qualified or required
to be qualified to do business;
(5) a copy of the Certificate of Incorporation
and all amendments thereto of ETG certified by the
Secretary of State of the State of New Jersey;
(6) copy of the by-laws, including all amendments
thereto, of ETG certified by the Secretary of ETG;
(7) certificates of the Secretary of ETG to the
effect that there have been no amendments to the charter
documents referred to in Sections 3.7(b)(5) and (6)
hereof since the date of the certifications referred to
in such subsection;
(8) the Consent of any third party required for
the consummation by ETG of the transactions contemplated
hereby listed on Schedule 4.5;
(9) Financial Statements of ETG as of November 30,
1998;
(10) all original books and records of ETG
including without limitation, the minute books, stock
books, and stock ledgers of ETG; and
Page 22 of 57
(11) the corporate seal of ETG, such other
documents, records, keys and other items as shall be
necessary for the operating of the Business of ETG.
(c) At the Closing, Parent shall deliver to ETG the
following:
(1) Closing Purchase Price as set forth in
Section 3.1 hereof;
(2) the certificates required by Section 9.1 and
Section 9.2 hereof;
(3) resolutions adopted by the Board of Directors
of each of Parent and the Company authorizing the
transactions contemplated hereby, certified by their
respective Secretaries;
(4) the Consent of any third party required for the
consummation by each of Parent and the Company of the
transactions contemplated hereby as listed on Schedule
6.3;
(5) employment agreements required by Section 8.9
hereof;
(6) certificates issued by appropriate
Governmental Authorities evidencing, as of a recent date,
the corporate good standing status of each of Parent and
the Company in the respective jurisdictions in which each
of Parent and the Company is incorporated and in those
jurisdictions in which each of Parent and the Company is
qualified to do business and, as of a date not more than
two Business Days prior to the Closing, telegrams, if
available, issued by the appropriate Governmental
Authorities with respect to the corporate good standing
of each of Parent and the Company in the respective
jurisdictions in which each of the Parent and the
Company is incorporated and in those jurisdictions
in which each of Parent and the Company is qualified or
required to be qualified to do business;
(7) a copy of the Certificate of Incorporation
and all amendments thereto of each of Parent and the
Company certified by the Department of State of the
State of New York and the Secretary of State of the
State of Delaware, respectively;
(8) a copy of the by-laws, including all
amendments thereto, of each of Parent and the Company
certified by the Secretary of each of Parent and the
Company; and
Page 23 of 57
(9) certificates of the Secretary of each of
Parent and the Company to the effect that there have
been no amendments to the charter documents referred to
in Sections 3.7(c)(7) and (8) hereof since the date of
the certifications referred to in such subsection.
(d) Each of the parties hereto shall deliver all other
documents and instruments required to be delivered by either
of them at or prior to the Closing pursuant to this Agreement
or as otherwise required herein.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF ETG
ETG hereby represents and warrants to Parent and the Company
as follows:
4.1 ORGANIZATION, STANDING, POWER AND QUALIFICATION. ETG
is a corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey, and has all necessary
corporate power and authority to carry on its business as now
conducted, to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions
contemplated hereby. ETG is duly qualified as a foreign
corporation to do business, and is in good standing, in each
other jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such
qualification necessary. Except as listed on Schedule 4.1
annexed hereto, such jurisdictions are set forth in Schedule 4.1
annexed hereto. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of ETG.
This Agreement has been duly executed and delivered by ETG, and
assuming due authorization, execution and delivery by each of
Parent, the Company and the Principal Stockholders, this
Agreement constitutes a legal, valid and binding obligation of
ETG enforceable against ETG in accordance with its terms.
4.2 CAPITALIZATION.
(a) The authorized capital stock of ETG consists of
1,000 shares of ETG Common Stock. As of the date of this
Agreement, there are (x) 780 shares of ETG Common Stock
issued and outstanding and (y) such shares of ETG Common
Stock issuable upon exercise of outstanding options or
warrants as set forth on Schedule 4.2 annexed hereto.
Except as set forth on Schedule 4.2, all of the issued
and outstanding shares of ETG Common Stock have been duly
authorized and validly issued and are fully paid,
Page 24 of 57
nonassessable and free of preemptive rights with no personal
liability attaching to the ownership thereof. Except as set
forth on Schedule 4.2, ETG does not have and is not bound by
any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the
purchase or issuance of any shares of ETG Common Stock or any
other equity security of ETG or any securities representing
the right to purchase or otherwise receive any shares of ETG
Common Stock or any other equity security of ETG other than
as provided for in this Agreement. There are no bonds,
debentures, notes or other indebtedness of ETG having the
right to vote (or convertible into, or exchangeable for
securities having the right to vote) on any matters on which
stockholders of ETG may vote.
(b) Except as contemplated herein or disclosed on
Schedule 4.2, there are no Contracts, agreements or
understandings with respect to the voting of any shares of
ETG Common Stock or which restrict the transfer of such
shares, to which ETG is a party and there are no such
Contracts, agreements or understandings to which ETG is a
party with respect to the voting of any such shares or which
restrict the transfer of such shares, other than applicable
Laws.
(c) All dividends on ETG Common Stock which have been
declared prior to the date of this Agreement have been paid in
full.
4.3 SUBSIDIARIES. ETG has no direct or indirect
Subsidiaries. There are no Persons in which ETG owns, or has the
right to acquire, any direct or indirect equity interest. ETG is
not, directly or indirectly, a participant in any joint venture,
partnership or other entity.
4.4 NO CONFLICT. The execution and delivery of this
Agreement do not, and the consummation of the transactions described
herein will not, result in or constitute (a) a default, breach or
violation of the Certificate of Incorporation or the By-laws of ETG
or any Contract to which ETG is a party; (b) subject to the receipt
of the Consents required as set forth on Schedule 4.5 annexed hereto,
an event which (with notice or lapse of time or both) would permit
any Person to terminate, accelerate the performance required by, or
accelerate the maturity of any indebtedness or obligation of ETG under
any Contract to which ETG is a party; (c) the creation or imposition
of any Lien on any property of ETG, under any Contract to which
ETG is a party; or (d) a violation of any Law or Judgment of any
court or other Governmental Authority or any other restriction of
any kind or character by which ETG is bound, except, in each
case, for such defaults, breaches, violations, events, Liens or
restrictions as would not prevent ETG from performing any of its
material obligations under this Agreement or have a Material
Adverse Effect on ETG.
Page 25 of 57
4.5 CONSENTS; TRANSFERABILITY.
(a) Other than as set forth in Schedule 4.5 annexed
hereto, no notice to, filing with, or Consent of, any Person
is necessary for the consummation by ETG of the transactions
contemplated by this Agreement.
(b) Subject to obtaining the Consents set forth in
Schedule 4.5, the interest of ETG in all claims, Contracts,
Licenses and Permits, leases and commitments and all of the
other Assets in which ETG has an interest shall not, upon the
consummation of the transactions contemplated in this
Agreement, be terminated or subject to termination in any
manner whatsoever by said consummation, and such claims,
Contracts, Licenses and Permits, leases, commitments and
Assets shall be the property of the Company immediately
thereafter, and the Company shall have all of the right,
title and interest which ETG had available to it prior to
the consummation of the Asset Purchase in and to such claims,
Contracts, Licenses and Permits, leases, commitments and
Assets. The interest of ETG in all claims, Contracts,
Licenses and Permits, leases, commitments and Assets is
sufficient to allow the Company to operate the Business of
ETG, as currently conducted.
4.6 FINANCIAL STATEMENTS. ETG has delivered to Parent
complete and correct copies of the financial statements of ETG for
the three (3) years ended December 31, 1997, of which the financial
statements for the two (2) years ended December 31, 1997 shall be
audited, and the nine month period ended September 30, 1998 (the
"Financial Statements"), the balance sheets for the three (3) years
ended December 31, 1997 and the nine month period ended September 30,
1998 (the "Balance Sheets"), and the related statements of income,
stockholders' equity and cash flows for the three (3) years ended
December 31, 1997 and the nine month period ended September 30, 1998.
Except as set forth in Schedule 4.6 annexed hereto, the Financial
Statements and the Balance Sheets are true and accurate, have been
prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto)
and fairly present in accordance with applicable requirements of GAAP
(subject, in the case of the unaudited statements, to normal,
recurring audit adjustments and the absence of footnotes) the
financial position of ETG and the results of operations and the cash
flows of ETG for the periods then ended, except that the Financial
Statements and the Balance Sheet for the year ended December 31, 1995
have not been audited or prepared in accordance with GAAP. All of the
financial books and records of ETG have been made available to Parent
and such books and records completely and fairly record ETG's
financial affairs which would normally be recorded in financial books
and records.
Page 26 of 57
4.7 ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed on
Schedule 4.7 annexed hereto or in any pre-closing amendment to
Schedule 4.7 since September 30, 1998, ETG has operated its business
only in the ordinary course and in a manner consistent with past
practice and there has not been any:
(a) event which has had or is reasonably likely,
individually or in the aggregate (together with the items set
forth in Schedule 4.7 annexed hereto), to have a Material
Adverse Effect on ETG;
(b) transactions not in the ordinary course of business,
which transactions have a value individually in excess
of $10,000 or in excess of $25,000 in the aggregate;
(c) material damage, destruction or loss, whether or
not insured, (i) affecting the business of ETG as currently
conducted or as proposed to be conducted, or (ii) to the
Assets of ETG;
(d) failure to maintain in full force and effect
adequate Insurance coverage for destruction, damage to, or
loss of any of its Assets;
(e) change in accounting principles, methods or
practices or investment practices including such changes
as were necessary to conform with GAAP and, with respect
to all changes whether or not necessary to conform with
GAAP, which would have an effect in excess of $50,000 in
the aggregate in any fiscal year;
(f) declaration, setting aside, or payment of a
dividend or other distribution in respect of its capital
stock, or any direct or indirect redemption, purchase or
other acquisition of any shares of its capital stock except
as authorized by this Agreement;
(g) issuance or sale of any shares of its capital
stock or of any other equity security or of any security
convertible into or exchangeable for its equity securities;
(h) amendment to its organizational documents;
(i) agreement or understanding legally obligating it
to take any of the actions described above in this Section
4.7.
4.8 TAXES.
(a) For purposes of this Agreement, the terms "Tax"
and "Taxes" shall mean any and all taxes, charges, fees,
levies or other assessments, including, without limitation,
all net income, gross income, gross receipts, premium, sales,
Page 27 of 57
use, ad valorem, value added, transfer, franchise, profits,
license, withholding, payroll, employment, excise, estimated,
severance, stamp, occupation, property or other taxes, fees,
assessments or charges of any kind whatsoever, together with
any interest and any penalties (including penalties for
failure to file in accordance with applicable information
reporting requirements), and additions to tax by any
authority, whether federal, state, or local or domestic or
foreign. The term "Tax Return" shall mean any report, return,
form, declaration or other document or information required
to be supplied to any authority in connection with Taxes.
(b) ETG is, and has been for each year for which the
assessment of Taxes of ETG is not barred by the applicable
statute of limitations, qualified as an S Corporation for both
federal and state tax purposes. ETG has timely filed all of
its Tax Returns with the appropriate Tax authority that were
required to be filed under all applicable laws. All such Tax
Returns were when filed, and continue to be, correct and
complete in all respects. All Taxes due and payable by ETG
(whether or not shown on any Tax Return) have been timely
paid. ETG currently is not the beneficiary of any extension
of time within which to file any Tax Return. No claim has ever
been made against ETG by a Tax authority in a jurisdiction
where ETG does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no liens
with respect to Taxes on any of the assets or property of ETG,
except for liens with respect to Taxes not yet payable.
(c) Except as indicated on Schedule 4.8 hereto, ETG
has not agreed to make, nor is it required to make, any
adjustments under Section 481(a) of the Code by reason of a
change in accounting method or otherwise. ETG has not been a
United States real property holding corporation within the
meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). Except as
indicated on Schedule 4.8 annexed hereto, there are no
material differences between the book basis and Tax basis of
any assets that are not accounted for by an accrual on the
Financial Statements.
4.9 INSURANCE. ETG has made available to Parent true and
complete copies of all binders or policies of insurance of ETG
currently in effect. Schedule 4.9 annexed hereto sets forth an
accurate and complete list and summary description (including the
name of the insurer, coverage, premium and expiration date) of all
binders or policies of fire, liability, product liability, workers
compensation, vehicular, unemployment and other insurance, self
insurance programs and fidelity bonds (collectively, "Insurance")
maintained by ETG. To ETG's knowledge, all Insurance has been issued
under valid and enforceable policies or binders for the benefit of
ETG, and all such policies or binders are in full force and effect
and none of the premiums therefor are past due and ETG has not
Page 28 of 57
received any notice of cancellation with respect thereto. ETG is in
compliance with the terms of all such policies and binders. All
claims under any binder or policy have been duly and timely
filed. As of the date hereof, there are no pending or, to the
knowledge of ETG, asserted claims outstanding against any
Insurance carrier as to which any insurer has denied liability,
and there are no pending or, to the knowledge of ETG, asserted
claims outstanding under any Insurance binder or policy that have
been disallowed or improperly filed. ETG has not been refused
any Insurance with respect to its Assets and operations, nor has
its coverage been limited by any insurance carrier to which it
has applied for any such Insurance or with which it has carried
Insurance during the last five (5) years.
4.10 MATERIAL CONTRACTS. Schedule 4.10 sets forth an
accurate and complete list of the following Contracts to which ETG
is a party or bound, or pursuant to which ETG is a beneficiary:
(a) Real Property Leases, Tangible Property Leases,
Intangible and Other Property, Insurance, Employee Benefit
Plans, Benefit Arrangements and Licenses and Permits;
(b) Any Contract for capital expenditures or for the
purchase of Tangible Property or services by ETG which
involves consideration payable by ETG in excess of $5,000
in any fiscal year;
(c) Any Contract evidencing any indebtedness in excess
of $5,000 or obligation for the deferred purchase price of
Assets in excess of $5,000 (excluding normal trade payables)
or guaranteeing any indebtedness, obligation or liability;
(d) Any Contract (including any cooperative Contract)
with a purchaser that participates in any of the membership
programs of ETG;
(e) Any Contract with a manufacturer that participates
in any program of ETG;
(f) Any Contract concerning non-competition (other
than the Letter of Intent dated October 6, 1998 between ETG
and Parent (the "LOI");
(g) Any Contract (other than the LOI) concerning
confidentiality, except in the ordinary course of business;
(h) Any joint venture, partnership, cooperative
arrangement or any other Contract involving a sharing of
profits;
(i) Any Contract with any Governmental Authority;
(j) Any power of attorney, proxy or similar
instrument;
Page 29 of 57
(k) The Certificate of Incorporation (as amended or
restated), By-laws (as amended or restated) and other
organizational and constitutive documents of ETG;
(l) Any stockholder agreements;
(m) Any other Contract related to the business of ETG
as currently or as proposed to be conducted which (i) provides
for payment or performance by any party thereto having an
aggregate value of $10,000 or more, (ii) provides for a period
of performance which extends beyond twelve (12) months from
the date hereof, or (iii) is between an Affiliate and ETG; and
(n) Any proposed arrangement or Contract which ETG
reasonably believes to be near consummation and of a type that
if entered into would be a Contract described in subsections
(a) through (m) above.
Accurate and complete copies of each written Contract and
written summaries of each oral Contract described in this
Section 4.10 have been made available by ETG to the Parent.
Each Contract described in this Section 4.10 is in full force
and effect. ETG has complied with all material commitments
and obligations on its part to be performed or observed
pursuant to each Contract described in this Section 4.10.
No event has occurred which is or, after the giving of notice
of passage of time or both, would constitute a default under
or a breach of any Contract described in this Section 4.10 by
ETG. ETG has not received any notice of a default, offset or
counterclaim under or any notice of cancellation of, or intent
to cancel, notice to make a material modification or intent to
make a material modification in, any Contract described in this
Section 4.10. ETG knows of no material change in its prospects
as it relates to its current Contracts including the revenues
and profits derived therefrom, other than changes made in the
ordinary course of business.
4.11 REAL PROPERTY.
(a) Schedule 4.11 annexed hereto sets forth an accurate
and complete list of all Real Property leased or subleased by
ETG (collectively, "Real Property Leases"). ETG does not own
Real Property.
(b) Each of the Real Property Leases (and leases and
subleases underlying such Real Property Leases) is in full
force and effect and contains no terms other than the terms
contained in the copies heretofore delivered to the Parent.
ETG has complied with all material commitments and obligations
on its part to be performed or observed under each of the Real
Property Leases. ETG has not received any notice of a
default, offset or counterclaim under any of the Real
Page 30 of 57
Property Leases (or leases and subleases underlying such Real
Property Leases) and, to the knowledge of ETG, no event or
condition has happened or presently exists which constitutes
a default or, after notice or lapse of time or both, would
constitute a default under any of the Real Property Leases
(or leases and subleases underlying such Real Property
Leases). There is no Lien upon any leasehold interest
of ETG under any of the Real Property Leases.
(c) There are no pending or, to the knowledge of ETG,
threatened actions or proceedings (including condemnation and
foreclosure) which could affect the Real Property against ETG.
There are no violations of any Law affecting the Real Property
leased or subleased by ETG.
(d) To the knowledge of ETG, there are no defaults by
the landlords under any of the Real Property Leases (or
leases and subleases underlying such Real Property Leases)
and such landlords have performed all of their obligations
thereunder to the extent that such performance was to be
completed heretofore. ETG has not waived any obligation of
any such landlord or any right under any of the Real Property
Leases (or leases and subleases underlying such Real Property
Leases). There are no pending or, to the knowledge of ETG,
threatened actions or proceedings which are reasonably likely
to affect adversely or materially disrupt the use by ETG of
any of the Real Property Leases against ETG and there are no
such actions or proceedings against other parties.
(e) Except as set forth on Schedule 4.11(e) annexed
hereto, each of ETG and, to the knowledge of ETG, the
landlords under any of the Real Property Leases at all times
have been in compliance with all applicable Environmental
Laws. Neither ETG nor, to the knowledge of ETG, the landlords
under any of the Real Property Leases have received any notice
of any violation of Environmental Law relating to the Real
Property or the operations of the Business. No Environmental
Claims have been asserted or assessed against ETG or, to the
knowledge of ETG, the landlords under any of the Real Property
Leases relating to the Real Property or the operations of the
Business, and to the knowledge of ETG, no Environmental Claims
are pending or threatened against ETG or the landlords under
any of the Real Property Leases relating to the Real Property
or the operations of the Business.
4.12 TANGIBLE PROPERTY.
(a) Annexed hereto as Schedule 2.1(e) is an accurate and
complete list of Tangible Property owned by ETG to be
purchased by the Company other than Tangible Property with a
fair market value individually of less than $1,000. Except
as set forth on Schedule 2.1(e) annexed hereto, ETG has good
and clear title to all of the Tangible Property to be
Page 31 of 57
purchased by the Company owned by ETG, free and clear of all
Liens. All Tangible Property to be purchased by the Company
that is in use by ETG is in good operating condition and
repair (reasonable wear and tear excepted), is suitable for
the purposes for which it is presently being used and is
adequate to meet all present requirements of the business of
ETG, as currently conducted, provided that ETG makes no
representation or warranty as to the fitness of Tangible
Property which may develop Year 2000 problems and would
thereby be rendered unusable. ETG has been in peaceable
possession of the Tangible Property to be purchased by the
Company covered by each Tangible Property to be purchased by
the Company lease or sublease (each, a "Tangible Property
Lease") since the commencement of the term thereof.
(b) Each of the Tangible Property Leases is in full
force and effect. ETG has complied with all commitments and
obligations on its part to be performed or observed under each
of the Tangible Property Leases. To the knowledge of ETG,
each party to each of the Tangible Property Leases other than
ETG has complied with all commitments and obligations on its
part to be performed or observed thereunder. ETG has not
received any notice of a default, offset or counterclaim under
any of the Tangible Property Leases, and no event or condition
has happened or presently exists which constitutes a default
or, after notice or lapse of time or both, would constitute a
default under any of the Tangible Property Leases. Except as
set forth on Schedule 2.1(e), there is no Lien upon any
leasehold interest of ETG under any of the Tangible Property
Leases.
4.13 INTANGIBLE AND OTHER PROPERTY.
(a) Schedule 2.1(b) annexed hereto sets forth an
accurate and complete list as of the date hereof of all
material items of Intangible and Other Property to be
purchased by the Company used in the Business of ETG as
presently conducted or as proposed to be conducted. ETG has
not been known by or done business under any name other than
as listed in Schedule 2.1(b).
(b) ETG owns, is licensed or has the sole and exclusive
right to use all Intangible and Other Property used in the
business of ETG, as presently conducted or as proposed to be
conducted.
(c) The use of the Intangible and Other Property by ETG
does not infringe upon or otherwise violate the rights of any
third party in or to such Intangible and Other Property, and
no claim has been asserted with respect thereto. ETG is not
aware of any claim which can be asserted by any Person against
ETG with respect to the use of any item of Intangible and
Other Property challenging or questioning the validity or
Page 32 of 57
effectiveness of such use of any such item. No employee of
ETG or any other person has a right to receive a royalty or
similar payment, or has any other monetary rights, in respect
of any item of Intangible and Other Property of ETG. ETG has
taken reasonable measures to protect the proprietary nature of
each item of Intangible and Other Property, and to maintain
the confidentiality of all confidential information, that it
owns or uses. ETG is not a licensor with respect to
Intangible and Other Property.
4.14 ERISA MATTERS; EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.14 sets forth an accurate, correct and
complete list of all pension, profit sharing, bonus, deferred
compensation, incentive compensation, stock option, health,
welfare, dental, cafeteria, death benefit, retirement,
savings, tuition reimbursement, dependent care assistance,
legal assistance and fringe benefit (cash and non cash) plans,
agreements, commitments, practices, policies and arrangements
of any type (including, but not limited to, plans described in
Section 3(3) of ERISA), whether funded or unfunded, or whether
qualified or nonqualified, established or maintained or to
which contributions were made or required to be made by ETG or
any of the ERISA Affiliates at any time during the current
calendar year or the prior five (5) calendar years (all such
plans, agreements, commitments, practices, policies and
arrangements are collectively referred to hereby as the
"Benefit Plans"). For each Benefit Plan, Schedule 4.14 will
identify the name of the plan, the employee class covered
thereunder. There are no benefit plans, agreements,
commitments, practices, policies or arrangements of any type
providing benefits to any directors, officers, employees,
consultants of ETG or any of the ERISA Affiliates other than
the Benefit Plans. All Benefit Plans and any related trust
contracts or annuity contracts (or any other funding
instruments) are in full force and effect. Except as set
forth on Schedule 4.14, no Benefit Plan which had previously
been in effect has been terminated.
(b) All contributions to, and payments under, the
Benefit Plans that were required to be made in accordance with
the terms of the Benefit Plans or applicable law were so made
in a timely manner, except that all such contributions and
payments which are required to be made for any period ending
before the Closing Date, but which are not yet due as of the
Closing Date, shall be properly accrued on the ETG Financial
Statements and are set forth in Schedule 4.14.
(c) All reports, notices, Returns and similar documents
with respect to each Benefit Plan required to be filed, since
the establishment such Benefit Plan, with any Government
Authority or distributed to any Benefit Plan participant or
beneficiary have been duly and timely filed or distributed
(after taking into account all extensions and deferral
Page 33 of 57
rights). There are no investigations by any Governmental
Authority, termination proceedings or other claims (except
claims for benefits payable in the normal operation of the
Benefit Plans), suits or proceedings against or involving any
Benefit Plan or asserting any rights or claims to benefits
under any Benefit Plan pending or, to the best knowledge of
ETG, threatened that could give rise to any liability to ETG
or any ERISA Affiliate, or the directors, officers or
employees of ETG or any ERISA Affiliate, or a trustee,
administrator or other fiduciary of any Benefit Plan. Each
Benefit Plan has been administered and enforced in accordance
with its terms and all applicable laws, including, without
limitation, the Code and ERISA.
(d) None of the Benefit Plans is, and neither ETG nor
any of the ERISA Affiliates has ever established or maintained
or made any contributions to, any plan which is subject to Part
3 of Title I of ERISA, Title IV of ERISA or Section 412 of the
Code. No Benefit Plan is a "multiemployer plan" (within the
meaning of Section 3(37) or Section 4001(a)(3) of ERISA) or a
"multiple employer plan" (within the meaning of Section 4064 of
ERISA or Section 413(c) of the Code). Neither ETG nor any
ERISA Affiliate has any current or potential liability or
obligation, whether direct or indirect, with respect to any
multiemployer plan or multiple employer plan.
(e) With respect to each Benefit Plan, ETG has delivered
to Parent true and complete copies of: (i) any and all plan
documents, including amendments, and trust or other funding
agreements or arrangements, (ii) any and all material employee
communications (including all summary plan descriptions and
material modifications thereto), (iii) the most recent annual
report, if applicable, (iv) the two most recent annual and
periodic accountings of plan assets, if applicable, (v) the
most recent determination letter received from the Internal
Revenue Service, and the application filed with the Internal
Revenue Service to obtain such determination letter, if
applicable, and (vi) the most recent actuarial valuation, if
applicable.
(f) With respect to each Benefit Plan: (i) if intended
to qualify under Section 401(a) or 403(a) of the Code, such
plan so qualifies, and its trust, if applicable, is exempt
from taxation under Section 501(a) of the Code; (ii) no breach
of fiduciary duty has occurred with respect to which ETG, or
any ERISA Affiliate, or any Benefit Plan, may be liable or
otherwise damaged; (iii) no "prohibited transaction" (within
the meaning of Section 4975 of the Code or 406 of ERISA) has
occurred with respect to which ETG or any ERISA Affiliate, or
any Benefit Plan, may be liable or otherwise damaged; (iv)
all contributions made or required to be made under each
Benefit Plan meet the requirements for deductibility under
the Code; (v) ETG has expressly reserved in itself the right
Page 34 of 57
to amend, modify or terminate such plan, or any portion of it,
without liability to itself; (vi) no such plan requires ETG to
continue to employ any employee, director or consultant; and
(ix) no such plan has invested in (1) insurance or annuity
contracts issued by an insurance company with an A.M. Best
Company, Inc. rating of claims-paying ability below A++ or
(2) employer securities or employer real property.
(g) With respect to each Benefit Plan which provides
welfare benefits of the type described in Section 3(1) of
ERISA: (i) no such plan provides medical or death benefits
with respect to current or former employees, managers,
directors or consultants of ETG beyond their termination or
employment, other than coverage mandated by Sections 601-608
of ERISA and 4980B of the Code; (ii) each such plan has been
administered in compliance with Sections 601-608 of ERISA and
4980B of the Code and no tax payable on account of Section
4980B of the Code has been or is expected to be incurred; and
(iii) no such plan has reserves, assets, surpluses or prepaid
premiums, except as disclosed in the ETG Financial Statements.
(h) The consummation of the transactions contemplated
by this Agreement will not (i) entitle any individual to
severance pay, or (ii) accelerate the time of payment or
vesting, or increase the amount, of compensation due to any
individual. No payment made or contemplated under any Benefit
Plan constitutes an "excess parachute payment" within the
meaning of Section 280G of the Code.
4.15 EMPLOYEES.
(a) Compensation. Schedule 4.15(a) annexed hereto sets
forth an accurate and complete list of all employees of ETG
as of the date hereof, including name, title or position, the
present annual compensation (including bonuses, commissions
and deferred compensation), years of service, accrued vacation
and sick pay and any interests in any incentive compensation
plan. Except as set forth on Schedule 4.15(a) annexed hereto,
no employee of ETG has received, or been promised by senior
management of ETG, any increase in his or her annual
compensation since January 1, 1998. Except as set forth on
Schedule 4.15(a) annexed hereto, ETG is not a party to any
employment agreements.
(b) Disputes. Since January 1, 1998, ETG has not
terminated the employment of any of its employees, except as
set forth on Schedule 4.15(b) annexed hereto. No employees
terminated since January 1, 1998 are entitled to any
severance, termination allowance or similar payments as a
result of their termination. There are no controversies
pending or, to the knowledge of ETG, threatened involving any
group of employees (including any employees terminated since
January 1, 1998) and there are no collective bargaining or
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other union contracts involving ETG. ETG has not suffered or
sustained any work stoppage and no such work stoppage is
threatened. ETG is not a party to any collective bargaining
or other similar labor agreement.
4.16 ACCOUNTS RECEIVABLE. Schedule 4.16 annexed hereto sets
forth a complete and accurate list of all accounts receivable of ETG.
4.17 INTENTIONALLY OMITTED.
4.18 COMPLIANCE WITH LAWS. Except as set forth in Schedule
4.18, ETG, its business and its Assets complies with, and is not in
conflict with or in default or violation of, all Laws applicable to
ETG, its business and its Assets, except for such noncompliance which
is not reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on ETG. ETG neither knows of, nor has
received notice of, any material violations of such Laws. As of the
date hereof, there are no Judgments applicable to ETG, its business
and its Assets. ETG is in compliance with all Judgments applicable
to ETG, its business and its Assets.
4.19 LICENSES AND PERMITS. Schedule 4.19 annexed hereto
contains an accurate and complete list (including the name of the
licensor, a summary of the license and the date of expiration or
renewal) of any Licenses and Permits issued to ETG and used in and
material to the business of ETG. All Licenses and Permits are valid
and in full force and effect and there are no pending or threatened
proceedings which could result in the termination, revocation,
limitation or impairment of any of such Licenses and Permits.
Except as set forth on Schedule 4.19 annexed hereto, the Licenses
and Permits are sufficient to enable ETG to own and conduct its
business as currently conducted. Except as set forth on Schedule
4.19 annexed hereto, consummation of the transactions contemplated
hereby will not adversely affect any of the Licenses and Permits of
ETG.
4.20 LEGAL PROCEEDINGS. ETG is not engaged in or a party to
or, to the knowledge of ETG, threatened with any action, suit,
proceeding, complaint, charge, investigation or arbitration or other
method of settling disputes or disagreements, except for those
specified on Schedule 4.20 annexed hereto. Neither ETG nor any of
its Assets are subject to any Judgment or other agreement which, among
other things, restricts the ability of ETG from operating its
business, as it is currently conducted, which is reasonably likely to
have a Material Adverse Effect on ETG or which restricts the ability
of ETG from consummating the transactions contemplated by this
Agreement. There is no action, suit, proceeding, complaint, charge,
investigation or arbitration or other method of settling disputes or
disagreements by or before any Governmental Authority which questions
the validity of this Agreement or any action taken or to be taken by
ETG in connection with the transactions contemplated hereby.
Page 36 of 57
4.21 ABSENCE OF CERTAIN PRACTICES. Neither ETG nor any
director, officer, agent, employee or other Person acting on its
behalf has given or agreed to give any gift or similar benefit of
more than nominal value to any customer, supplier or governmental
employee or official or any other Person who is or may be in a
position to help or hinder ETG in connection with any proposed
transaction involving ETG. Neither ETG nor any director, officer,
agent, employee or other Person acting on behalf of ETG has (i) used
any corporate or other funds for unlawful contributions, payments,
gifts, or entertainment, or made any unlawful expenditures relating to
political activity to, or on behalf of, government officials or
others; (ii) accepted or received any unlawful contributions,
payments, gifts or expenditures or (iii) had any transaction or
payment which was not recorded in its accounting books and
records or disclosed on its financial statements.
4.22 INTERESTED PERSONS. Except as described on Schedule 4.22
annexed hereto, neither ETG nor any officer, director or employee of
ETG, nor any Affiliate, spouse, child, or other relative of any of the
foregoing persons or entities, have any interest in, directly or
indirectly, or any contractual relationship with, any member, customer
or supplier of ETG, or with ETG (other than in such person's capacity
as an officer, director, or employee or stockholder of ETG).
4.23 NO BROKERS. ETG has not entered into any Contract,
arrangement or understanding with any Person which may result in the
obligation of any party hereto to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the transactions
contemplated hereby.
4.24 BOOKS AND RECORDS. Except as set forth on Schedule 4.24
annexed hereto, the books of account and other financial records of
ETG are accurate and complete in all material respects. The minute
books of ETG contain accurate and complete records of the charter (as
amended or restated) and By-laws (as amended or restated) and of all
meetings, and accurately reflect all other material corporate action
of the stockholders, the Board of Directors and the committees of the
board of directors of ETG.
4.25 DISCLOSURE. As of the date of this Agreement, no
representation, warranty or statement made by ETG in this Agreement or
the Exhibits and Schedules annexed hereto contains or will contain at
the time of any modification of the Schedule Amendment any untrue
statement of a material fact, or omits or will omit at the time of any
modification of the Schedule Amendment to state a material fact
required to be stated herein or therein or necessary to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading.
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ARTICLE V
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REPRESENTATIONS AND WARRANTIES OF
PARENT AND THE COMPANY
Each of the Parent and the Company, jointly and severally,
hereby represents and warrants to ETG as follows:
5.1 ORGANIZATION, STANDING, POWER AND QUALIFICATION. Each of
Parent and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all necessary power and authority to carry on
its business as now conducted, to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and the Company, and assuming due
authorization, execution and delivery by ETG and the Principal
Stockholders, this Agreement constitutes a legal, valid and binding
obligation of each of Parent and the Company enforceable against each
of Parent and the Company in accordance with its terms.
5.2 NO CONFLICT. The execution and delivery of this
Agreement does not, and the consummation of the transactions described
herein will not, result in or constitute (a) a default, breach or
violation of the Certificate of Incorporation or the By-laws of either
Parent or the Company or any Contract to which either Parent or the
Company is a party or by which any of their respective Assets are
bound; (b) subject to the consents required as set forth in Schedule
5.3 annexed hereto, an event which (with notice or lapse of time or
both) would permit any Person to terminate, accelerate the performance
required by, or accelerate the maturity of any material indebtedness
or obligation of the Parent or the Company under any contract to which
either Parent or the Company is a party; (c) the creation or
imposition of any Lien on any property of Parent or the Company, under
any material contract to which Parent or the Company is a party; and
(d) violation of any Law or Judgment of any court or other
Governmental Authority or any other restriction of any kind or
character by which either Parent or the Company or any of their
respective Assets are bound, except, in each case, for such defaults,
breaches, violations, events, Liens or restrictions as would not
prevent either Parent or the Company from performing any of its
material obligations under this Agreement or have a Material Adverse
Effect on the Parent or the Company.
5.3 CONSENTS. Except for the consents set forth on Schedule
5.3 annexed hereto, the execution and delivery of this Agreement by
each of Parent and the Company do not, and the performance of this
Agreement by each of Parent and the Company will not, require any
consent, except where failure to obtain such consent is not reasonably
likely to prevent either Parent or the Company from performing any of
its material obligations under this Agreement or have a Material
Adverse Effect on the Parent or the Company. Prior to the Closing,
Parent and the Company shall have given all notices, made all filings
and obtained all consents set forth in Schedule 5.3 annexed hereto.
Page 38 of 57
5.4 FINANCIAL ABILITY TO PERFORM. Parent represents it has
sufficient funds to pay the aggregate Cash Per Share Price and has
reserved the maximum amount of shares of COSI Common Stock that may be
issued pursuant to this Agreement.
5.5 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of
10 million shares of COSI Common Stock and 1 million shares of
preferred stock, $0.01 par value per share. As of the date of
this Agreement, there are (x) 4,292,415 shares of COSI Common
Stock issued and outstanding and (y) such shares of COSI
Common Stock issuable upon exercise of outstanding options or
warrants as set forth on Schedule 5.5 annexed hereto. Except
as set forth on Schedule 5.5, all of the issued and
outstanding shares of COSI Common Stock have been duly
authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights with no personal
liability attaching to the ownership thereof. Except as set
forth on Schedule 5.5, Parent does not have and is not bound
by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the
purchase or issuance of any shares of COSI Common Stock or
any other equity security of Parent or any securities
representing the right to purchase or otherwise receive any
shares of COSI Common Stock or any other equity security of
Parent other than as provided for in this Agreement. There
are no bonds, debentures, notes or other indebtedness of
Parent having the right to vote (or convertible into, or
exchangeable for securities having the right to vote) on any
matters on which stockholders of Parent may vote.
(b) Except as contemplated herein or disclosed on
Schedule 5.5, there are no Contracts, agreements or
understandings with respect to the voting of any shares of
COSI Common Stock or which restrict the transfer of such
shares, to which Parent is a party and there are no such
Contracts, agreements or understandings to which Parent is
a party with respect to the voting of any such shares or
which restrict the transfer of such shares, other than
applicable Laws.
5.6 FINANCIAL STATEMENTS.
(a) Parent has previously delivered to ETG copies of
the audited balance sheets of Parent as of October 31, 1996
and October 31, 1997, and the related statements of income,
changes in stockholders' equity and cash flows for the fiscal
years 1996 through 1997, inclusive, included in Parent's
Annual Report on Form 10-KSB for the fiscal year ended
October 31, 1997 the ("10-KSB") filed with the Securities
Exchange Commission ("SEC") under the Securities Exchange Act
of 1934, as amended ("Exchange Act"). Parent has also
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previously delivered to ETG copies of the unaudited balance
sheets of Parent as of July 31, 1998, and the related
unaudited consolidated statements of income and cash flows
for the quarter ended July 31, 1998, included in Parent's
Quarterly Report on Form 10-QSB for the quarter ended July 31,
1998 (the "10-QSB") filed with the SEC under the Exchange Act.
The audited financial statements and unaudited interim
financial statements of Parent included in the 10-KSB and
10-QSB have been prepared in accordance with GAAP consistently
applied during the periods involved (except as may be
indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-QSB), complied
as of their respective dates in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, and fairly
present the financial position of Parent as of the dates
thereof and the income and retained earnings and sources and
applications of funds for the periods then ended (subject, in
the case of any unaudited interim financial statements, to the
absence of footnotes required by GAAP and normal year-end
adjustments).
(b) Except for liabilities incurred since July 31, 1998
in the ordinary course of business consistent with past
practice or as set forth on Schedule 5.9 annexed hereto, Parent
does not have any liabilities or obligations of any nature
whatsoever (whether absolute, accrued, contingent or
otherwise) which are not adequately reserved or reflected on
the balance sheet of Parent included in its Quarterly Report
on Form 10-QSB for the quarter ended July 31, 1998, except
for liabilities or obligations which in the aggregate do not
exceed $100,000, and there do not exist any circumstances that
could reasonably be expected to result in such liabilities or
obligations.
5.7 COMPLIANCE WITH LAWS. Except as set forth in Schedule
5.7 annexed hereto, Parent, its Subsidiaries, and their respective
businesses and assets comply with, and are not in conflict with or in
default or violation of, all Laws applicable to Parent, its
Subsidiaries, and their respective businesses and assets, except for
such noncompliance which is not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on Parent or its
Subsidiaries taken as a whole. Neither Parent nor the Company knows
of, nor has received notice of, any material violations of such Laws.
As of the date hereof, there are no Judgments applicable to Parent,
its Subsidiaries, or their respective businesses and assets. Each of
Parent and its Subsidiaries is in compliance with all Judgments
applicable to Parent, its Subsidiaries, and their respective
businesses and assets.
Page 40 of 57
5.8 LEGAL PROCEEDINGS. Neither Parent nor any of its
Subsidiaries is engaged in or a party to or, to the knowledge of
Parent, threatened with any action, suit, proceeding, complaint,
charge, investigation or arbitration or other method of settling
disputes or disagreements, in an amount in excess of $50,000.
Neither Parent nor its Subsidiaries nor any of their respective
assets are subject to any Judgment or other agreement which, among
other things, restricts the ability of Parent or its Subsidiaries
from operating their respective businesses, as they are currently
conducted, which is reasonably likely to have a Material Adverse
Effect on Parent or its Subsidiaries taken as a whole or which
restricts the ability of Parent or the Company from consummating the
transactions contemplated by this Agreement. There is no action,
suit, proceeding, complaint, charge, investigation or arbitration or
other method of settling disputes or disagreements by or before
any Governmental Authority which questions the validity of this
Agreement or any action taken or to be taken by Parent or the
Company in connection with the transactions contemplated hereby.
5.9 SEC REPORTS. Parent has previously delivered to ETG a
copy of each (a) final registration statement and prospectus of
Parent filed since January 1, 1997 with the SEC pursuant to the
Exchange Act or the Securities Act, (b) definitive proxy statement
for the year ended October 31, 1998, Form 10-KSB for the fiscal year
ended October 31, 1997, Forms 10-QSB for the first three quarters of
fiscal 1998, including all amendments thereto, filed with the SEC,
and (c) all Forms 8-K of Parent since July 31, 1998, including all
amendments thereto, filed with the SEC (collectively, the "Parent
SEC Reports"). Parent has timely filed (either by the required
filing date or pursuant to Rule 12b-25 promulgated under the Exchange
Act) all Parent SEC Reports and other documents required to be filed
by it under the Securities Act and the Exchange Act and, as of their
respective dates, all Parent SEC Reports complied with all of the
rules and regulations of the SEC with respect thereto. As of their
respective dates, no such Parent SEC Reports or communications
contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances in which
they were made, not misleading. Parent has made available to ETG true
and complete copies of all amendments and modifications to all
agreements, documents and other instruments which previously had been
filed with the SEC by Parent and which are currently in effect.
Except as set forth on Schedule 5.9 annexed hereto, since July 31,
1998, there has not been any Material Adverse Effect on Parent.
5.10 SUBSIDIARIES. Except as set forth on Schedule 5.10
annexed hereto, neither Parent nor the Company has any direct or
indirect Subsidiaries.
Page 41 of 57
5.11 DISCLOSURE. As of the date of this Agreement, no
representation, warranty or statement made by Parent or the Company
in this Agreement or the Exhibits and Schedules annexed hereto
contains or will contain at the time of modification to the Schedule
Amendment any untrue statement of a material fact, or omits or will
omit at the time of modification to the Schedule Amendment to state
a material fact required to be stated herein or therein or necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE VI
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COVENANTS AND OTHER AGREEMENTS
The parties hereto covenant and agree as follows:
6.1 COVENANTS OF ETG.
(a) Except as otherwise expressly contemplated by this
Agreement or as specifically consented to in writing by
Parent, from and after the date of this Agreement until the
Closing, ETG will use its best efforts to: (i) preserve its
present business organization intact; (ii) keep available the
services of its present employees; (iii) preserve its present
relationships with Persons having business dealings with ETG;
(iv) operate its business in the ordinary and regular course
consistent with its prior practices (including the payment of
trade and accounts payables and the collection of accounts
receivables); (v) maintain its books and records in accordance
with good business practices, on a basis consistent with its
prior practices; (vi) maintain its Assets in their current
condition, normal wear and tear excepted; (vii) conduct its
business in accordance with all applicable Laws; (viii)
maintain its corporate existence, good standing, and
qualifications to do business; (ix) perform in all material
respects all of its obligations under its Contracts and not
take any action to terminate or modify the terms thereof
except in the ordinary course of business and (x) maintain
all Insurance, certificates and Licenses and Permits
necessary for the conduct of its business as currently
conducted.
(b) In addition, during such period, except as otherwise
expressly provided in this Agreement or as otherwise consented
to by Parent in writing, ETG will not: (i) make any capital
expenditure or dispose of any Assets other than in the
ordinary course of business; (ii) amend its charter or
By-laws; (iii) make any material change in its business; (iv)
issue or sell any amount of its capital stock or grant any
Page 42 of 57
options, warrants or other rights to acquire its capital
stock; (v) pay any dividend or other distributions to the
Stockholders or make any stock split or reclassification in
respect of ETG's outstanding capital stock; (vi) acquire any
other business or interest therein; (vii) enter into, amend
in any material respect or terminate any Contract to which
it is a party; (viii) enter into any Contract with any
officer, director or employee, increase the compensation of,
or benefits accruing, payable or paid to, any director,
officer or employee for periods from and after the Closing or
hire any Persons in executive positions; (ix) waive any right
of substantial value other than for fair consideration; (x)
change the accounting principles, methods or practices, except
for such changes as are necessary to conform with GAAP and are
disclosed to Parent; (xi) incur any obligation (not part of
normal, continuing obligations, such as payroll and Taxes) in
excess of $2,500 individually or $10,000 in the aggregate;
(xii) enter into any other transaction that would be required
to be set forth in Schedule 4.8 annexed hereto if such
transaction had occurred prior to the date hereof;, or (xiii)
agree or commit orally or in writing to do any of the
foregoing.
6.2 EXCLUSIVITY. Until the Closing or the termination of
this Agreement, except as mutually agreed in writing by the parties,
ETG or any of its respective officers, directors, employees,
representatives or agents shall not, directly or indirectly, solicit,
encourage, initiate or induce the making of any inquiries or proposals
for the acquisition of any of the capital stock, Assets or business
of, or the merger with, or any similar transaction concerning, ETG, or
furnish information to, or engage in negotiations relating to the
foregoing or otherwise cooperate in any way with, or accept any
proposal relating to the foregoing from, any Person or group other
than Parent and its officers, employees, representatives or agents,
and ETG shall restrict any such officer, director, employee,
representative or agent from doing any of the foregoing.
6.3 ACCESS TO INFORMATION. From the date hereof, Parent and
its counsel, accountants, representatives and agents shall have full
access, upon reasonable notice and during normal business hours, to
the employees and the financial, legal and other representatives of
ETG with knowledge of the business of ETG, offices, properties,
books and records of ETG and, upon reasonable notice, shall be
furnished all relevant documents, records and other information
concerning the business, finances and properties of ETG that they
may reasonably request. Each of Parent and the Company agrees
not to contact any employees (other than the Key Employees and
the aforementioned counsel, accountants, representatives and
agents), personnel or customers without the prior approval of
ETG, which approval will not be unreasonably withheld. Any
information obtained pursuant to this Section 6.3 shall be held
in strict confidence and shall be used solely in connection with
the reason for which it was requested.
Page 43 of 57
6.4 CONSENTS. Each of the parties hereto will use its best
efforts and shall fully cooperate with each other party to make
promptly all registrations, filings and applications, give all notices
and obtain all consents necessary for the consummation of the
transactions contemplated by this Agreement and the Asset Purchase.
6.5 FURTHER ASSURANCE. Subject to the terms and conditions
hereof, the parties agree that after the Closing they will execute and
deliver such documents to each other of the parties as any of such
parties may reasonably request in order to consummate the transactions
contemplated hereby and the Asset Purchase.
6.6 NOTIFICATION OF CERTAIN MATTERS. The parties hereto
each agree to give prompt notice to the other of (i) the occurrence,
or failure to occur, of any event which occurrence or failure to
occur is reasonably likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Closing, and
(ii) any material failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied
by it hereunder.
6.7 LITIGATION PRIOR TO EFFECTIVE TIME. Each party shall
advise the other in writing promptly of the assertion, commencement
or threat of any claim, litigation, proceeding or investigation that
arises between the date hereof and the Closing where a restraining
order, injunction, or preliminary injunction is sought or the
amount claimed is in excess of $5,000 with respect to ETG and
$50,000 with respect to each of Parent and the Company, in which
the party is or may be made a party or by which its assets or the
business of such party may be affected or which relates to or may
affect the transactions contemplated hereby.
6.8 SUPPLEMENTS TO SCHEDULES. Prior to the Closing, the
parties hereto will supplement or amend the Schedules hereto with
respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required
to be set forth or described in such Schedules.
6.9 NO INCONSISTENT ACTIONS. Prior to the Effective Time,
except as otherwise permitted by this Agreement, no party will enter
into any transaction or make any agreement or commitment and will use
reasonable efforts not to permit any event to occur, which could
reasonably be anticipated to result in the imposition of any condition
or requirement that would materially adversely affect the economic
or business benefits to the Company of the transactions
contemplated by this Agreement.
Page 44 of 57
6.10 OFFER OF EMPLOYMENT. Parent covenants that it will
offer employment to the employees of ETG listed on Schedule 6.10
annexed hereto as of January 1, 1999, which offer shall be at the
same level of base and monetary compensation paid by ETG immediately
prior to the Closing as set forth on Schedule 6.10 annexed hereto
and shall provide for other employee benefits that are substantially
similar to those currently provided by Parent.
6.11 OPTIONS. Parent shall, at the next regularly scheduled
meeting of the Board of Directors, cause the issuance of options (the
"Options") to purchase 80,000 shares of COSI Common Stock to the
employees and in the amounts set forth on Schedule 6.11 annexed
hereto. The Options shall be issued pursuant to Parent's 1992 Stock
Option and Stock Appreciation Rights Plan. The Options shall be
exercisable at the Closing Price of the COSI Common Stock at the
Closing. For all such employees who have been employed by ETG for one
(1) year or greater, Options shall vest in equal installments over a
four year period with the first 20% vesting on the Closing. For all
such employees who have been employed by ETG for less than one (1)
year, such employees Options shall vest in equal installments over a
four (4) year period with the first 20% vesting on the one (1) year
anniversary of such employee's date of employment with ETG.
6.12 TAX MATTERS. Any transfer, documentary, sales, use,
stamp and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including,
without limitation, any gain, transfer or similar Tax imposed by any
state, municipal or local Governmental Authority), shall be paid
one-half by ETG and one-half by Parent when due, and ETG will, prepare
all necessary Tax Returns and other documentation with respect to all
such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and, if required by applicable Law, Parent will, and
will cause its Affiliates to, join in the execution of any such Tax
Returns and other documentation and the expenses related to such Tax
Returns shall be paid one-half by ETG one-half by Parent.
6.13 COSI COMMON STOCK. The shares of COSI Common Stock
issued pursuant to this Agreement shall be fully paid and
nonassessable.
6.14 DISSOLUTION OF ETG. ETG shall not dissolve its
corporate status in the State of New Jersey until the sooner to occur
of (i) an agreement between ETG and Parent to permit such dissolution
or (ii) the Consideration is paid in full.
6.15 NAME OF THE COMPANY. The Company shall file a
Certificate of Amendment to the Company's Certificate of Incorporation
with the Secretary of State of the State of Delaware on or after the
Closing Date which amendment shall change the name of the Company to
"Enterprise Technology Group, Inc.", subject to the availability of
the use of such name in the State of Delaware. The Company shall
qualify to do business as a foreign corporation in the states that
Page 45 of 57
the Company deems it necessary and ETG agrees to execute any and all
documents necessary to permit the Company to use such name in such
states. ETG shall change its name no later than three (3) months
after the Closing Date to a name which does not include "Enterprise
Technology Group."
6.16 INVESTOR AGREEMENTS. ETG shall use its best efforts to
get each of the Stockholders to execute investor agreements in
substantially the form set forth as Exhibit D.
6.17 TAX NOTICES. The Company shall file the notices
required by N.J.S.A. 54:11A-15 and N.J.S.A. 54:32B-22(c) with the New
Jersey Division of Taxation as soon as reasonably practicable.
ARTICLE VII
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CONDITIONS PRECEDENT TO PARENT
AND THE COMPANY'S OBLIGATIONS
The obligations of Parent and the Company are subject to the
satisfaction, at or before the Closing, of the conditions set out
below. The benefit of these conditions is for each of Parent and
the Company only and may be waived in writing by Parent and the
Company at any time in their sole discretion.
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES OF ETG. The
representations and warranties of ETG shall be true and correct as of
the date when made and as of Closing except as may be noted in any
amendment to the Schedules (the "Schedule Amendment") as though made
at that time, and each of Parent and the Company shall have received
certificates attesting thereto signed by duly authorized officers of
ETG.
7.2 PERFORMANCE BY ETG. ETG shall have performed, satisfied
and complied in all material respects with all covenants and
agreements required by this Agreement and each of Parent and the
Company shall have received certificates attesting thereto signed by
duly authorized officers of ETG.
7.3 CONSENTS. ETG shall have obtained all Consents which
are required for the consummation of the purchase, sale and transfer
contemplated by this Agreement.
7.4 CHANGES IN THE BUSINESS. Since the date of this
Agreement, there shall have occurred no event which would have a
Material Adverse Effect on ETG.
Page 46 of 57
7.5 ABSENCE OF LITIGATION. There shall not have been issued
and be in effect any order of any court or tribunal of competent
jurisdiction which (i) prohibits or makes illegal the transactions
contemplated hereby, (ii) would require the divestiture by the Company
of all or a material portion of the Assets or the Business as a result
of the transactions contemplated hereby, or (iii) would impose
limitations on the ability of the Company to effectively exercise
full rights of ownership of the Assets, or of a material portion
of the business as a result of the transactions contemplated hereby.
7.6 COMPLIANCE WITH LAWS. ETG shall not be in violation of
any Law, which such violation may have a Material Adverse Effect on
ETG.
7.7 STOCKHOLDER APPROVAL. The requisite approval of all
stockholders of ETG.
7.8 EMPLOYMENT AGREEMENTS. The employees listed on
Schedule 7.8 annexed hereto shall have executed non-competition and
employment agreements with the Parent, in substantially the form
annexed hereto as Exhibit A.
7.9 NON-COMPETITION AGREEMENTS. ETG, Xxxxxx Xxxxxx and
Xxxxx Xxxxxx shall have executed non-competition agreements with the
Parent and the Company, in substantially the form annexed hereto as
Exhibit B.
7.10 ABSENCE OF FRAUD. Parent shall not have discovered any
omissions or misstatements in the Schedules attached hereto or the
Schedule Amendment or any fraud or circumstances which have not been
disclosed that would have or would be reasonably likely to give rise
to an indemnification event hereunder or have a Material Adverse
Effect on the ability of the Company to continue to run the Business
as previously conducted.
7.11 PROCEEDINGS AND DOCUMENTS. All legal and corporate
proceedings in connection with the Asset Purchase and transactions
contemplated by this Agreement shall be in form and substance
reasonably satisfactory to Parent and its counsel, and Parent shall
have received all such counterpart originals or certified or other
copies of such documents and proceeding in connection with such
transactions as Parent reasonably request, in form and substance as
to certification and otherwise reasonably satisfactory to Parent and
its counsel.
ARTICLE VIII
--------------
CONDITIONS PRECEDENT TO ETG'S OBLIGATIONS
The obligations of ETG are subject to the satisfaction, at
or before the Closing, of the conditions set out below. The benefit
of these conditions is for ETG only and may be waived by ETG in
writing at any time in its sole discretion.
Page 47 of 57
8.1 ACCURACY OF THE REPRESENTATIONS AND WARRANTIES OF EACH
OF PARENT AND THE COMPANY. The representations and
warranties of Parent and the Company shall be true and correct as of
the date when made and as of the Closing, as though made at that time,
and ETG shall have received certificates attesting thereto signed by
duly authorized officers of Parent and the Company, respectively.
8.2 PERFORMANCE BY PARENT AND THE COMPANY. Parent and the
Company shall have performed, satisfied and complied with all
covenants and agreements required by this Agreement and ETG shall have
received certificates of duly authorized officers of each of Parent
and the Company to such effect.
8.3 ABSENCE OF LITIGATION. There shall not have been issued
and be in effect any Judgment or order of any court or tribunal of
competent jurisdiction which makes the Asset Purchase illegal as a
result of the transactions contemplated hereby.
8.4 EMPLOYMENT AGREEMENTS. The Company shall have executed
the non-competition and the employment agreements set forth in
Section 7.8 hereof.
8.5 REGISTRATION RIGHTS AGREEMENT. Parent shall have
executed a registration rights agreement substantially in the form
attached hereto as Exhibit C.
8.6 ABSENCE OF FRAUD. ETG shall not have discovered any
omissions or misstatements in the Schedules attached hereto or any
fraud or circumstances which have not been disclosed that would or
would be reasonably likely to give rise to an indemnification event
hereunder or have a Material Adverse Effect on the Company or Parent.
8.7 PROCEEDINGS AND DOCUMENTS. All legal and corporate
proceedings in connection with the Asset Purchase and the transactions
contemplated by this Agreement shall be in form and substance
reasonably satisfactory to ETG and its counsel, and ETG shall have
received all such counterpart originals or certified or other copies
of such documents and proceeding in connection with such transactions
as ETG reasonably requests, in form and substance as to certification
and otherwise reasonably satisfactory to ETG and counsel to ETG.
ARTICLE IX
------------
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Except as otherwise specifically provided for
herein, the representations, warranties, covenants and agreements
of the parties hereto included or provided for herein, or in
other instruments or agreements specifically delivered or to be
Page 48 of 57
delivered in accordance with this Agreement as modified by the
Schedule Amendment, shall survive for a period ending one year
after the due date for the payment of the Third Post-Closing
Adjustment (if any). Notwithstanding the foregoing, (a) there
shall be no limit on the survival of the indemnification
obligations of the Stockholders specifically provided in Section
9.2(a)(iii), and (b) that to the extent any breach of a
representation, warranty, covenant or agreement involves any
loss, damage, liability or claim in each case relating to or for
(i) Taxes as described in Section 9.3 ("Tax Liability"), (ii)
ERISA, employee benefit plans or employee matters as described in
Sections 4.14 and 4.15 ("Plan Liability"), the right to assert
such claims and any indemnity obligation shall survive until the
expiration of the applicable statute of limitations relating to
such Tax Liability or Plan Liability, as the case may be (such
period as provided in this Section 9.1 or as otherwise
specifically provided elsewhere herein being referred to as the
"Survival Period"); provided further, however, that if, prior to
the expiration of the Survival Period, any party hereto shall
have been notified of a claim for indemnity hereunder and such
claim shall not have been finally resolved before the expiration
of the Survival Period, any representation, warranty, covenant or
agreement that is the basis for such claim with respect to such
issue shall remain a basis for indemnity as to such claim until
such claim is finally resolved. The respective representations
and warranties contained herein shall not be deemed waived or
otherwise affected by any investigation made by any party hereto
or any amendment or supplement to the schedules or exhibits
hereto occurring after the signing of this Agreement; provided
that in the event any party discovers through investigation or
otherwise, prior to the Closing, that any representation or
warranty of the other party is not accurate, such party shall
notify the other of such discovery.
9.2 GENERAL INDEMNITY.
(a) ETG and the Principal Stockholders, jointly and
severally, (except that liability as between the Principal
Shareholders shall be severally and not jointly (with respect
to (i), (ii), (iv) and (v) and (vi) as it relates to (i),
(ii), (iv) and (v) of this Section 9.2(a)), and severally
and jointly (with respect to (iii) and (vi) as it relates
to (iii) of this Section 9.2(a))), agree to indemnify and
hold harmless Parent, the Company and their respective
stockholders, directors, officers, employees, Affiliates and
agents and their respective successors and assigns against
(i) any and all damage, loss, claim, expense, deficiency or
cost resulting from the breach by ETG of any representation
or warranty made by ETG hereunder for the periods provided
in Section 9.1 except as such representations and warranties
may have been modified as set forth on the Schedule Amendment
prior to Closing; (ii) any and all damage, loss, claim,
expense, deficiency or cost resulting from the failure to
Page 49 of 57
comply in any material respect with any covenant made by ETG
hereunder (including the covenants set forth in Article 6
hereof); (iii) any and all damage, loss, claim, expense,
deficiency or cost resulting from any of the Contracts listed
on Schedule 9.2(a)(iii); (iv) any and all damage, loss, claim,
expense, deficiency or cost relating to an Excluded Asset or
Excluded Liability; (v) any liabilities incurred by the
Company (other than Assumed Liabilities) as a result of the
failure of the Company to receive revenue clearance from the
New Jersey Division of Taxation prior to Closing; and (vi)
any and all actions, suits, proceedings, demands, assessments,
Judgments, costs, costs of collection and legal and other
expenses incident to any of the foregoing. To the extent
that a breach of a representation or warranty made by ETG
occurred without the knowledge of ETG, neither ETG nor any
Stockholder will have any liability for consequential damages
for such breach.
(b) Each of Parent and the Company, jointly and
severally, hereby covenants and agrees to indemnify and hold
harmless ETG and its respective stockholders, directors,
officers, employees, Affiliates and agents and their
respective successors and assigns against (i) any and all
damage, loss, claim, expense, deficiency or cost resulting
from the breach by Parent or the Company of any representation
or warranty made by Parent or the Company hereunder, (ii) any
and all damage, loss, claim, expense, deficiency or cost
resulting from the failure to comply in any material respect
with any covenant made by Parent or the Company hereunder,
(iii) any and all damage, loss, claim or cost relating to the
Assets or any assets created by the Company after the Closing
or Assumed Liabilities or any other liability arising after
the Closing; and (iii) any and all actions, suits,
proceedings, demands, assessments, Judgments, costs, costs of
collection and legal and other expenses incident to any of the
foregoing. To the extent that a breach of a representation or
warranty made by Parent or the Company without the knowledge
of Parent, neither Parent nor the Company will have any
liability for consequential damages for such breach.
(c) The indemnification obligations of ETG and the
Principal Stockholders pursuant to Sections 9.2(a)(i), (ii),
(iv), (v), and (v) and (vi), as it relates to Sections
9.2(a)(i), (ii), (iv) and (v), shall be limited to the
amount of Consideration. The indemnification obligations
of ETG and the Principal Stockholders pursuant to the last
sentence of Section 3.7 and Sections 9.2(a)(iii), and (vi) as
it relates to Section 9.2(a)(iii), and Section 9.3 shall have
no limitation.
Page 50 of 57
9.3 ERISA AND TAX INDEMNIFICATION. ETG and the Principal
Stockholders shall be responsible, severally and jointly, for, and
shall pay, or shall cause to be paid, and shall indemnify and hold
the Parent and the Company and their respective Affiliates (the
"Indemnified Parties") harmless against Plan Liability any and all
Taxes imposed on any of the Indemnified Parties in respect of the
income, business, property or operations of ETG and for any costs
or expenses with respect to Taxes and Plan Liability indemnified
hereunder.
9.4 REIMBURSEMENT.
(a) Subject to Section 9.5, ETG and the Principal
Stockholders jointly and severally (except that liability as
between the Principal Stockholders shall be severally but not
jointly), agree to reimburse Parent and the Company on demand
for any payment made by Parent or the Company for any loss,
damage, cost or expense suffered by Parent or the Company at
any time after the date hereof in respect of any matter to
which the indemnity referred to in the last sentence of
Section 3.7, Section 9.2(a) or Section 9.3 relates.
(b) Subject to Section 10.5 hereof, each of Parent and
the Company agree to reimburse ETG on demand for any payment
made by ETG for any loss, damage, cost or expense suffered by
ETG at any time after the date hereof in respect of any matter
to which the indemnity referred to in Section 9.2(b) relates.
9.5 CLAIMS.
(a) In the event that at any time a claim is made by
any Person not a party to this Agreement with respect to any
matter to which the indemnity provided for by the last
sentence of Section 3.7, Section 9.2(a), or Section 9.3
relates, Parent or the Company, on not less than twenty (20)
days' notice to ETG, Xxxxxx Xxxxxx and Xxxxx Xxxxxx, may make
settlement of such claim and such settlement shall be binding
upon them; provided, however, that ETG, Xxxxxx Xxxxxx and
Xxxxx Xxxxxx shall have the option, to be exercised by notice
to Parent and the Company within ten (10) days after such
first mentioned notice shall have been given, to assume the
contest and defense of such claim. If ETG, Xxxxxx Xxxxxx and
Xxxxx Xxxxxx shall exercise such option, ETG, Xxxxxx Xxxxxx
and Xxxxx Xxxxxx shall have control over such contest and
defense and over the payment, settlement or compromise of
such claim, and each of Parent and the Company agrees to
cooperate fully with it and its attorneys with respect to
such contest and defense. If ETG, Xxxxxx Xxxxxx and Xxxxx
Xxxxxx shall not exercise such option, Parent or the Company
may, but shall not be obligated to, assume the contest and
defense of such claim. Any payment or settlement resulting
from such contest, together with the total expenses thereof,
including but not limited to attorneys' fees, shall be
binding upon ETG, Xxxxxx Xxxxxx and Xxxxx Xxxxxx, Parent and
the Company.
Page 51 of 57
(b) In the event that at any time a claim is made by
any Person not a party to this Agreement with respect to any
matter to which the indemnity provided for by Section 9.2(b)
relates, ETG, on not less than twenty (20) days' notice to
each of Parent and the Company, may make settlement of, such
claim and such settlement shall be binding upon each of
Parent and the Company; provided, however, that each of Parent
and the Company shall have the option, to be exercised by
notice to ETG within ten (10) days after such first mentioned
notice shall have been given, to assume the contest and
defense of such claim. If either Parent or the Company shall
exercise such option, Parent or the Company, as the case may
be, shall have control over such contest and defense and over
the payment, settlement or compromise of such claim, ETG
agrees to cooperate fully with each of Parent and the Company
and its attorneys with respect to such contest and defense.
If either Parent or the Company shall not exercise such
option, ETG may, but shall not be obligated to, assume the
contest and defense of such claim and shall have control over
such contest and defense and over the payment, settlement or
compromise of such claim. Any payment or settlement
resulting from such contest, together with the total expenses
thereof, including but not limited to attorneys' fees, shall
be binding upon ETG, Parent and the Company.
9.6 NOTICE.
(a) Any claims for any loss, damage, cost or expense
suffered by Parent or the Company at any time after the date
hereof made with respect to any matter to which the indemnity
referred to in the last sentence of Section 3.7, Section
9.2(a) and Section 9.3 relates shall be made in writing to
each of ETG, Xxxxxx Xxxxxx and Xxxxx Xxxxxx within one (1)
year of the discovery of such claim by Parent. In the event
such notice is not made with respect to a claim pursuant to
this Section 9.6(a), Parent shall waive its right to
indemnification of such claim.
(b) Any claims for any loss, damage, cost or expense
suffered by ETG at any time after the date hereof made with
respect to any matter to which the indemnity referred to in
Section 9.2(b) relates shall be made in writing to Parent
within one (1) year of the discovery of such claim by ETG and
the Stockholders. In the event such notice is not made with
respect to a claim pursuant to this Section 9.6(b), ETG shall
waive its right to indemnification of such claim.
9.7 RIGHT OF OFFSET. ETG acknowledges and agrees that Parent
and the Company shall be entitled to offset any claims that it may
have against ETG under this Article 9 against any and all amounts
payable by Parent and the Company from time to time under this
Agreement, including, but not limited to, the First Post-Closing
Adjustment, the Second Post-Closing Adjustment (including the First
Year Catch Up, if any) and the Third Post-Closing Adjustment
(including the Cumulative Catch Up, if any), provided that Parent and
the Company shall offset the cash portion of such payments prior to
offsetting the stock portion of such payments.
Page 52 of 57
ARTICLE X
-----------
TERMINATION
10.1 RIGHT TO TERMINATE. Notwithstanding anything to the
contrary set forth in this Agreement, this Agreement may be
terminated and the Asset Purchase abandoned at any time prior to the
Closing:
(a) by mutual consent of the parties hereto;
(b) by either Parent, the Company or ETG if a court of
competent jurisdiction shall have issued a Judgment
permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement, and such
order, decree, ruling or other action shall have become final
and nonappealable;
(c) by ETG, if Parent or the Company (x) breaches its
representations and warranties and fails to cure such breach
within ten (10) days of written notice of such breach, or (y)
fails to comply with any of its covenants or agreements
contained herein;
(d) by Parent or the Company if ETG (x) breaches its
representations and warranties and fails to cure such breach
within ten (10) days of written notice of such breach, or (y)
fails to comply with any of its covenants or agreements
contained herein; or
(e) by either party giving written notice to the other
if without fault on the terminating party's part, the Closing
does not occur prior to January 31, 1999.
10.2 OBLIGATIONS TO CEASE. In the event that this Agreement
shall be terminated pursuant to Section 11.1 hereof, all obligations
of the parties hereto under this Agreement shall terminate and there
shall be no liability of any party hereto to any other party except
for the obligations set forth in Section 12.1 hereof. Nothing herein
will relieve any party from liability for any breach of this
Agreement.
ARTICLE XI
------------
MISCELLANEOUS
11.1 LEGAL AND ACCOUNTING EXPENSES. Except as otherwise
provided in this Agreement, (a) Parent shall bear its own legal and
accounting expenses, and any finder's fee, broker's or agent's
commission or similar payments incurred by Parent and (b) ETG shall
be responsible for the legal and accounting expenses, and any
finder's fee, broker's or agent's commission or similar payment
incurred by ETG in connection with the transactions contemplated by
this Agreement.
Page 53 of 57
11.2 PUBLICITY. At all times from the date hereof to the
Closing, the parties shall agree with each other as to timing and
content prior to issuing any announcement, press release, public
statement or other information to the press or any third party with
respect to this Agreement or the transactions contemplated hereby;
provided, however, that nothing hereby shall prohibit any party to
this Agreement from making any public disclosure regarding this
Agreement and the transactions contemplated hereby if, in the
opinion of counsel to such party, such disclosure is required by Law
or by valid judicial process.
11.3 HEADINGS. Subject headings are included for convenience
only and shall not affect the interpretation of any provisions of this
Agreement.
11.4 NOTICES. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing (including
telecopier or facsimile or similar writing) and shall be deemed to
have been duly given on the date of service if personally served or
on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered, return receipt
requested, postage prepaid and addressed or on the date sent if sent
by telecopier, to the parties at the following addresses or
telecopier numbers (or at such other address or telecopier number
for a party as shall be specified by like notice):
If to ETG to:
Enterprise Technology Group, Incorporated
0 Xxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxx
Fax No.: (000) 000-0000
If to the Principal Stockholders, at the addresses set
forth on the signature pages annexed hereto.
in each case with a copy to:
Goldberg, Kohn, Bell, Black, Xxxxxxxxxx & Moritz, Ltd.
00 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
If to Parent, to:
Computer Outsourcing Services, Inc.
0 Xxxxxxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: President
Fax No.: (000) 000-0000
Page 54 of 57
If to the Company, to:
COSI Acquisition Corp.
0 Xxxxxxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Chief Financial Officer
Fax No.: (000) 000-0000
in each case with a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
11.5 ASSIGNMENT AND SUCCESSORS. None of the parties hereto
shall assign any rights or delegate any duties hereunder without the
prior written consent of the others.
11.6 BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and the successors and
assigns of the parties.
11.7 GOVERNING LAW; FORUM; PROCESS. This Agreement shall be
construed in accordance with, and governed by, the laws of the State
of New York without regard to principles of conflicts of law. Each
of the parties hereto hereby irrevocably and unconditionally submits
to the exclusive jurisdiction of any court of the State of New Jersey
or any federal court sitting in the State of New Jersey for purposes
of any suit, action or other proceeding arising out of this Agreement
(and agrees not to commence any action, suit or proceedings relating
hereto except in such courts). Each of the parties hereto agrees
that service of any process, summons, notice or document by U.S.
registered mail at its address set forth herein shall be effective
service of process for any action, suit or proceeding brought against
it in any such court. Each of the parties hereto hereby irrevocably
and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement, which
is brought by or against it, in the courts of the State of New Jersey
or any federal court sitting in the State of New Jersey and hereby
further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an
inconvenient forum.
11.8 ENTIRE AGREEMENT. This Agreement, including the
Exhibits and Schedules hereto, sets forth the entire understanding
and agreement and supersedes any and all other understandings,
negotiations or agreements among the parties hereto relating to the
sale and purchase of the Assets.
Page 55 of 57
11.9 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of
which together shall constitute a single agreement.
11.10 SEVERABILITY. In the event that any one or more of
the immaterial provisions contained in this Agreement shall for any
reason be held to be invalid, illegal or unenforceable the same shall
not affect any other provision of this Agreement, but this Agreement
shall be construed in a manner which, as nearly as possible, reflects
the original intent of the parties.
11.11 NO PREJUDICE. This Agreement has been jointly
prepared by the parties hereto and the terms hereof shall not be
construed in favor of or against any party on account of its
participation in such preparation.
11.12 PARTIES IN INTEREST. Nothing expressed or implied in
this Agreement is intended or shall be construed to confer upon or give
to any Person (including the employees of ETG) other than the parties
hereto any rights or remedies under or by reason of this Agreement or
any transaction contemplated hereby.
11.13 AMENDMENT AND MODIFICATION. This Agreement may be
amended or modified only by written agreement executed by all parties
hereto.
11.14 WAIVER. At any time prior to the Closing, each of the
parties hereto may (i) extend the time for the performance of any of
the obligations or other acts of any other party hereto, (ii) waive
any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, or (iii) waive
compliance with any of the agreements or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in
writing signed by the party granting such waiver but such waiver
or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or future failure..
Page 56 of 57
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date set forth above.
COMPUTER OUTSOURCING SERVICES, INC.
By:/s/ Xxxxxx Xxxxxxx
-------------------------------
Xxxxxx Xxxxxxx, President
COSI ACQUISITION CORP.
By:/s/ Xxxxxx Xxxxxxx
-------------------------------
Xxxxxx Xxxxxxx, President
ENTERPRISE TECHNOLOGY GROUP,
INCORPORATED
By:/s/ Xxxxxx Xxxxxx
-------------------------------
Xxxxxx Xxxxxx, President
Agreed and Acknowledged with
respect to Article 10:
/s/ Xxxxxx Xxxxxx
----------------------------------
Xxxxxx Xxxxxx
Address:
/s/ Xxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxx
Address:
