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EXHIBIT 10.12
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF FEBRUARY 1, 1996
BY AND AMONG
ABR INFORMATION SERVICES, INC.
("BUYER"),
TOTAL COBRA SERVICES
("TCS"), AND
XXXX X. XXXXXXX
("SHAREHOLDER").
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TABLE OF CONTENTS
1. TRANSFER AND ISSUANCE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. Floor Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. SECURITIES ACT PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1. Restrictions on Disposition of Buyer Shares . . . . . . . . . . . . . . . . 3
2.2. Evidence of Compliance with Private Offering Exemption . . . . . . . . . . . 3
2.3. Notice of Limitation Upon Disposition . . . . . . . . . . . . . . . . . . . 3
3. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF
TCS AND THE SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1. Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2. The Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6. Accounts Receivable and COBRA Payables . . . . . . . . . . . . . . . . . . . 7
3.7. Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8. Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . 9
3.9. No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.10. Compliance With Laws and Orders . . . . . . . . . . . . . . . . . . . . . . 9
3.11. Title to and Condition of Properties . . . . . . . . . . . . . . . . . . . . 11
3.12. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.13. Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.15. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.16. Employment Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.17. Trade Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.18. Major Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.19. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.20. Shareholder Affiliates' Relationships to TCS . . . . . . . . . . . . . . . . 19
3.21. No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.22. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . 19
4.1. Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.3. No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.5. Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6. Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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5. POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1. Noncompetition; Confidentiality . . . . . . . . . . . . . . . . . . . . . . 20
5.2. Confidentiality of Shareholder Information . . . . . . . . . . . . . . . . . 22
5.3. Income Tax Returns and Allocation of Tax . . . . . . . . . . . . . . . . . . 22
5.4. Resale Restriction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5. Rule 144 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1. By the Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2. By Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.3. Indemnification of Third-Party Claims . . . . . . . . . . . . . . . . . . . 23
6.4. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.5. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.6. Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . 24
6.7. Indemnification - Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . 25
7. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1. Documents Delivered by TCS and the Shareholders . . . . . . . . . . . . . . 26
7.2. Documents Delivered by Buyer . . . . . . . . . . . . . . . . . . . . . . . . 26
8. RESOLUTION OF DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.2. Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3. Procedures; No Appeal . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.4. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.5. Entry of Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.6. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.7. Continued Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.8. Tolling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.1. Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2. Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.3. Disclosures and Announcements . . . . . . . . . . . . . . . . . . . . . . . 28
9.4. Assignment; Parties in Interest . . . . . . . . . . . . . . . . . . . . . . 29
9.5. Law Governing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.6. Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.7. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.8. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.9. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.11. Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.13. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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DISCLOSURE SCHEDULES
Schedule 3.1.(c) - Foreign Corporation Qualification
Schedule 3.1.(e) - Director/Officer List
Schedule 3.3 - Violation, Conflict, Default
Schedule 3.5.(c) - Tax Returns (Exceptions to Representations)
Schedule 3.5.(d) - Tax Audits
Schedule 3.6 - Accounts Receivable (Aged Schedule)
Schedule 3.7 - Certain Changes
Schedule 3.8 - Off-Balance Sheet Liabilities
Schedule 3.9 - Litigation Matters
Schedule 3.10.(a) - Non-Compliance with Laws
Schedule 3.10.(b) - Licenses and Permits
Schedule 3.10.(c) - Environmental Matters (Exceptions to Representations)
Schedule 3.11.(a) - Liens
Schedule 3.11.(c) - Real Property Occupied
Schedule 3.12 - Insurance
Schedule 3.13.(b) - Personal Property Leases
Schedule 3.13.(c) - Sales Commitments
Schedule 3.13.(e) - Powers of Attorney
Schedule 3.13.(f) - Collective Bargaining Agreements
Schedule 3.13.(g) - Loan Agreements, etc.
Schedule 3.13.(h) - Guarantees
Schedule 3.13.(k) - Material Contracts
Schedule 3.14 - Labor Matters
Schedule 3.15.(a) - Employee Plans/Agreements
Schedule 3.17 - Trade Rights
Schedule 3.18 - Major Customers
Schedule 3.19 - Bank Accounts
Schedule 5.1.(d) - Business of TERS
Schedule 7.1.(g) - Closing Date Balance Sheet
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") dated as
of February 1, 1996, is by and among ABR INFORMATION SERVICES, INC, a Florida
corporation ("Buyer"), TOTAL COBRA SERVICES, a California corporation ("TCS"),
and XXXX X. XXXXXXX (the "Shareholder").
RECITALS
1. Prior to December 11, 1995, TCS was known as "Total
Employee Relations Services, Inc." and was engaged in the business of providing
COBRA compliance services, retiree billing services and automatic check
clearing services (the "COBRA Business") and employee relations consulting
services, membership services, unemployment insurance services and personnel
forms administration (the "Consulting Business").
2. On December 11, 1995, TCS amended its Articles of
Incorporation to change its name from "Total Employee Relations Services, Inc."
to "Total COBRA Services."
3. In connection with the name change, TCS formed a
wholly-owned subsidiary, Total Employee Relations Services, Inc., a California
corporation ("TERS"), and transferred all of the assets and liabilities
associated with the Consulting Business to TERS. Thereafter, TCS transferred
all of the outstanding capital stock of TERS to the Shareholder in a tax free
spin-off (the "Spin-off") within the meaning of Section 355 of the Internal
Revenue Code of 1986, as amended (the "Code").
4. Following the transfer of the Consulting Business,
TCS is engaged solely in the COBRA Business ("TCS's Business").
5. The Shareholder owns all of the issued and
outstanding shares of capital stock of TCS (the "TCS Shares").
6. Buyer desires to acquire the TCS Shares from the
Shareholder solely in exchange for shares of voting common stock, $.01 par
value per share, of Buyer (the "Common Stock"), upon the terms and conditions
herein set forth.
7. For federal income tax purposes, it is intended that
the transactions contemplated hereby will constitute a reorganization within
the meaning of Section 368(a)(1)(B) of the Code.
8. For financial accounting purposes, it is intended
that the transactions contemplated hereby be accounted for as a "purchase."
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AGREEMENT
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. TRANSFER AND ISSUANCE OF SHARES
1.1. Transfer of Shares. Subject to the terms and conditions of
this Agreement, at the Closing (as defined in Section 7), the Shareholder shall
transfer to Buyer all of the Shareholder's right, title and interest in and to
all of the TCS Shares.
1.2. Issuance of Shares. At the Closing and in exchange for the
TCS Shares, Buyer shall issue and deliver to the Shareholder a number of
validly issued, fully paid and nonassessable shares of Common Stock which, when
multiplied by the average closing per share sales price of the Common Stock for
the thirty (30) trading days prior to the day before the Closing Date (as
defined herein) (the "Issue Price"), results in an aggregate price of
$3,800,000 (the "Buyer Shares"), subject to adjustment as provided in Section
1.3. In the event that the issued and outstanding shares of Common Stock shall
have been changed into a different number of shares as a result of a stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
reorganization, merger or other similar transaction with a record date within
the 30-day period described above, the average closing per share sales price to
calculate the Issue Price shall be adjusted accordingly in order for the Buyer
Shares, if delivered after such record date, to be adjusted accordingly. Any
fractional shares resulting from such computation shall be eliminated by
rounding upward to the nearest whole share.
1.3. Floor Price Adjustment. In the event the greater of (i) the
closing sales price of the Common Stock on the second anniversary date of this
Agreement or (ii) the average closing sales price of the Common Stock for the
thirty (30) trading days immediately following the second anniversary date of
this Agreement (the greater value shall be referred to as the "Anniversary
Price") is less than 75% of the Issue Price (the "Floor Price"), Buyer shall
issue to the Shareholder an aggregate number of additional validly issued,
fully paid and nonassessable shares of Common Stock equal to the product
obtained by multiplying (i) the number of Buyer Shares held by the Shareholder
at the end of the 30-day period described above by (ii) the difference between
the Floor Price and the Anniversary Price (which difference, however, shall be
offset by any gain realized upon the sale of any of the Buyer Shares prior to
such 30-day period). Buyer shall issue and deliver to the Shareholder such
additional shares, if any, within fifteen (15) days after the end of the 30-day
period. In the event that the issued and outstanding shares of Common Stock
shall have been changed into a different number of shares or into shares of a
different corporation as a result of a stock split, reverse stock split, stock
dividend, recapitalization, reclassification, reorganization, merger or other
similar transaction from the Closing Date to the date of the floor price
adjustment described in this Section 1.3, the Floor Price shall be adjusted
accordingly in order for such additional shares, if any, to be adjusted
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accordingly. Any fractional shares resulting from such computation shall be
eliminated by rounding upward to the nearest whole share.
2. SECURITIES ACT PROVISIONS
2.1. Restrictions on Disposition of Buyer Shares. The Shareholder
covenants and warrants that the Buyer Shares to be received pursuant to this
Agreement are acquired for his own account and not with the present view
towards the distribution thereof and he will not dispose of the Buyer Shares
except (i) pursuant to an effective registration statement under the Securities
Act of 1933, as amended, or (ii) in any other transaction which, in the opinion
of counsel acceptable to Buyer, is exempt from registration under the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. In order to effectuate the
covenants of this subsection 2.1, an appropriate endorsement will be placed on
the certificate evidencing the Buyer Shares at the time of distribution of such
shares by Buyer pursuant to this Agreement, and stop transfer instructions
shall be placed with the transfer agent for the securities.
2.2. Evidence of Compliance with Private Offering Exemption. The
Shareholder represents to Buyer that the Shareholder has the financial
sophistication to assess the merits and risks of the transaction contemplated
hereby and agrees to supply Buyer with such other items as counsel for Buyer
may require in order to evidence the private offering character of the
distribution of the Buyer Shares made pursuant to this Agreement.
2.3. Notice of Limitation Upon Disposition. The Shareholder is
aware that the Buyer Shares distributed to him will not have been registered
pursuant to the Securities Act of 1933, as amended; and, therefore, under
current interpretations and applicable rules, he will be required to retain
such shares for a period of at least two (2) years following the Closing Date
and, at the expiration of such two (2) year period, sales of the Buyer Shares
may be confined to brokerage transactions of limited amounts requiring certain
notification filings with the Securities and Exchange Commission and such
disposition may be available only if Buyer is current in its filings with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, and the other limitations imposed thereby on the disposition of the
Buyer Shares.
3. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF TCS AND THE
SHAREHOLDER
TCS and the Shareholder make the following representations and
warranties to Buyer with respect or related to, or concerning, TCS, each of
which is true and correct on the date hereof, is or shall be unaffected by any
investigation heretofore or hereafter made by Buyer, or any of Buyer's agents
or representatives, or any knowledge of Buyer, its agents or representatives
other than as specifically disclosed in the Disclosure Schedules delivered to
Buyer at the time of the execution of this Agreement, and shall survive the
Closing of the transactions provided for herein. The representations and
warranties of TCS and the Shareholder hereunder
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shall be joint and several except for the representations in Section 3.2. with
respect solely to the Shareholder, and any representations to the "knowledge"
of TCS or the Shareholder, which shall be deemed made separately by TCS or the
Shareholder, as the case may be. For purposes of this Agreement and except as
specified in the following sentence, each of TCS and the Shareholder shall be
deemed to have knowledge of the subject matter of any representation or
warranty if the Shareholder has actual knowledge thereof or, after adequate
investigation, should reasonably be expected to have knowledge thereof.
3.1. Corporate.
3.1.(a) Organization. TCS is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California.
3.1.(b) Corporate Power; Validity. TCS has all requisite
corporate power and authority to own, operate and lease its properties
and to carry on TCS's Business as and where such is now being
conducted. TCS has full power, legal right and authority to enter
into, execute and deliver this Agreement and the other agreements,
instruments and documents contemplated hereby and delivered on the
date hereof (such other documents are sometimes referred to herein as
"Ancillary Instruments"), and to carry out the transactions
contemplated hereby and thereby. This Agreement and each Ancillary
Instrument that provides for its execution by TCS has been duly and
validly executed and delivered by TCS.
3.1.(c) Qualification. TCS is duly licensed or qualified to
do business as a foreign corporation, and is in good standing, in each
jurisdiction wherein the character of the properties owned or leased
by it, or the nature of TCS's Business, makes such licensing or
qualification necessary except where failure to be so qualified or
licensed would not have a material adverse effect on the financial
condition or results of operations of TCS. The states in which TCS is
licensed or qualified to do business are listed in Schedule 3.1.(c).
3.1.(d) No Subsidiaries. TCS does not own, directly or
indirectly, any capital stock or other equity securities of any
corporation or maintain any direct or indirect equity or other
ownership interest in any entity or business.
3.1.(e) Corporate Documents, etc. The copies of the articles
or certificate of incorporation and bylaws of TCS, as amended or
restated (hereinafter, "Certificate of Incorporation" and "Bylaws,"
respectively), which have been delivered by the Shareholder to Buyer
are true, correct and complete copies of such instruments as presently
in effect. The corporate minute books and stock record books of TCS
which have been furnished to Buyer for inspection are true, correct
and complete and accurately reflect all meetings held of, and
corporate action taken by, the shareholders and Board of Directors of
TCS. The duly elected and qualified directors and officers of TCS are
listed in Schedule 3.1.(e).
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3.1.(f) Capitalization. The authorized capital stock of TCS
consists entirely of 100,000 shares of Common Stock. No shares of
such capital stock are issued or outstanding except for 10,000 shares
of Common Stock which are owned of record and beneficially by the
Shareholder. All such shares of capital stock of TCS are validly
issued, fully paid and nonassessable. There are no (a) securities
convertible into or exchangeable for any of TCS's capital stock or
other securities, (b) options, warrants or other rights to purchase or
subscribe to capital stock or other securities of TCS or securities
which are convertible into or exchangeable for capital stock or other
securities of TCS, or (c) contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance,
sale or transfer of any capital stock or other equity securities of
TCS, any such convertible or exchangeable securities or any such
options, warrants or other rights.
3.2. The Shareholder.
3.2.(a) Power. The Shareholder has full power, legal right
and authority to enter into, execute and deliver this Agreement and
the Ancillary Instruments to which the Shareholder is a party and to
carry out the transactions contemplated hereby and thereby.
3.2.(b) Validity. This Agreement and each Ancillary
Instrument that provides for its execution by the Shareholder has been
duly and validly executed and delivered by the Shareholder and is the
legal, valid and binding obligation of the Shareholder, enforceable in
accordance with its terms, subject to the limitations contained
herein, and except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
3.2.(c) Title. The Shareholder is transferring, good and
valid title to the TCS Shares to be transferred by the Shareholder
hereunder, free and clear of all Liens (as defined in Section 3.12),
including, without limitation, voting trusts or agreements, proxies,
marital or community property interests.
3.3. No Violation. Except as set forth on Schedule 3.3, neither
the execution and delivery of this Agreement or the Ancillary Instruments nor
the consummation by TCS and the Shareholder of the transactions contemplated
hereby and thereby (a) to the best knowledge of the Shareholder, violates any
currently existing statute, law, ordinance, rule or regulation (collectively,
"Laws") or any currently existing order, writ, injunction, judgment, plan or
decree (collectively, "Orders") of any court, arbitrator, department,
commission, board, bureau, agency, authority, instrumentality or other body,
whether federal, state, municipal, foreign or other (collectively, "Government
Entities"), (b) to the best knowledge of the Shareholder, requires any
authorization, consent, approval, exemption or other action by or notice to any
Government Entity (including, without limitation, under any "plant-closing" or
similar law assuming, for this purpose, that Buyer will cause TCS after Closing
not to take any action that would result in a violation of such law), or (c)
subject to obtaining the consents referred to in
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Schedule 3.3, violates or conflicts with, or constitutes a default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under, or results in the termination of, or accelerates the performance
required by, or results in the creation of any Lien upon any of the assets of
TCS (or the TCS Shares) under, any term or provision of the Certificate of
Incorporation or Bylaws of TCS, or of any material contract, commitment,
understanding, arrangement, agreement or restriction of any kind or character
to which TCS or the Shareholder is a party or by which TCS or the Shareholder
or any of its, his or her assets or properties may be bound or affected.
3.4. Financial Statements. True and complete copies have been
delivered to Buyer of the financial statements of TCS consisting of the balance
sheets on a modified cash basis of TCS as of December 31, 1995, 1994, 1993,
1992 and 1991, (the December 31, 1995 balance sheet is referred to herein as
the "TCS Recent Balance Sheet"), and the related statement of income on a
modified cash basis for each of the years then ended (including the notes
contained therein or annexed thereto), all of which financial statements have
been compiled by independent accountants for TCS for such years and periods.
All of such TCS financial statements (including all notes and schedules
contained therein or annexed thereto) and the Closing Balance Sheet (as
required pursuant to Section 7.1.(i) hereof), have been prepared in accordance
with statements on standards for accounting and review services issued by the
American Institute of CPA's, have been prepared in accordance with the books
and records of TCS, and fairly present, in accordance with statements on
standards for accounting and review services issued by the American Institute
of CPA's, the financial position, the results of operations and cash flows of
TCS as of the dates and for the years and periods indicated. True and correct
copies have been delivered to Buyer of all written reports submitted to TCS or
the Shareholder by TCS's accountants related to the books and records of TCS.
3.5. Tax Matters.
3.5.(a) Spin-Off. The Spin-off qualifies as a tax-free
transaction within the meaning of Section 355 of the Code.
3.5.(b) Provision For Taxes. The provision made for taxes on
the Closing Balance Sheet is sufficient for the payment of all
federal, state, foreign, county, local and other income, ad valorem,
excise, profits, franchise, occupation, property, payroll, sales, use,
gross receipts and other taxes (and any interest and penalties) and
assessments ("Taxes"), whether or not disputed, that were unpaid and
owed by TCS as of the date of the Closing Balance Sheet. Since the
date of the Closing Balance Sheet and excluding the effect of the
transactions contemplated herein, TCS has not incurred any taxes other
than taxes incurred in the ordinary course of business consistent in
type and amount with past practices.
3.5.(c) Tax Returns Filed. Except as set forth on Schedule
3.5.(c), all federal, state, foreign, county, local and other tax
returns required to be filed by or on behalf of TCS have been timely
filed and when filed were true and correct, and the taxes
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shown as due thereon were paid or adequately accrued. True and
complete copies of all tax returns or reports filed by TCS for each of
its three (3) most recent tax years have been delivered to Buyer. TCS
has duly withheld and paid all Taxes which it was required to withhold
and pay in connection with amounts heretofore paid to any employee,
independent contractor, creditor or shareholder of TCS.
3.5.(d) No Tax Audits. Except as set forth on Schedule
3.5.(d), the federal and state income tax returns of TCS have not been
audited by the Internal Revenue Service or any state taxing
authorities, and neither TCS nor the Shareholder has received from the
Internal Revenue Service or from the tax authorities of any state,
county, local or other jurisdiction any notice of underpayment of
taxes by TCS or other deficiency with respect to TCS's taxes which has
not been paid nor any objection to any return or report filed by TCS.
There are no outstanding agreements or waivers extending the statutory
period of limitations applicable to any tax return or report.
3.5.(e) No Consolidated Group. TCS has never been a member
of an affiliated group of corporations that filed a consolidated tax
return.
3.5.(f) Other. TCS has not (i) filed any consent or
agreement under Section 341(f) of the Code, (ii) applied for any tax
ruling, (iii) entered into a closing agreement with any taxing
authority, (iv) filed an election under Section 338(g) or Section
338(h)(10) of the Code (nor has a deemed election under Section 338(e)
of the Code occurred), except as contemplated hereby, or (v) been a
party to any tax allocation or tax sharing agreement. TCS is not a
"United States real property holding company" within the meaning of
Section 897 of the Code.
3.6. Accounts Receivable and COBRA Payables. All accounts
receivable of TCS reflected on the Closing Balance Sheet and as incurred in the
normal course of business since the date thereof, represent arm's length sales
actually made in the ordinary course of business. To the best knowledge of the
Shareholder, no portion of the accounts receivable is or will be subject to
counterclaim or set-off or is or will be otherwise in dispute. All of the
accounts receivable are and as of the Closing Date will be good and collectible
in full (less an allowance of 1% for doubtful accounts receivable) within 120
days following the Closing Date. Schedule 3.6 contains an estimated aged
schedule of accounts receivable included in the Closing Balance Sheet. The
cash and cash equivalents held by TCS related to insurance premiums collected
on behalf of customers as of the Closing Date are equal to or greater than any
insurance premiums payable relating to the COBRA Business.
3.7. Absence of Certain Changes. Except as and to the extent set
forth in Schedule 3.7, or as reflected in the Closing Balance Sheet and
excluding the transactions contemplated herein, since December 31, 1995 there
has not been:
3.7.(a) No Adverse Change. Any material adverse change in
the financial condition, assets, liabilities, business or operations
of TCS;
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3.7.(b) No Damage. Any material loss, damage or destruction,
whether covered by insurance or not, affecting TCS's Business or the
properties of TCS;
3.7.(c) No Increase in Compensation. Any increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of TCS (including, without limitation, any increase
or change pursuant to any bonus, pension, profit sharing, retirement
or other plan or commitment), or any bonus or other employee benefit
granted, made or accrued, other than in the ordinary course of
business;
3.7.(d) No Labor Disputes. Any labor dispute or disturbance,
other than routine individual grievances which are not material to
TCS's Business, financial condition or the results of operations of
TCS;
3.7.(e) No Commitments. Any loan commitment or related
financial transaction by TCS (including, without limitation, any
borrowing or capital expenditure) other than in the ordinary course of
business consistent with past practice;
3.7.(f) No Dividends. Any declaration, setting aside, or
payment of any dividend or any other distribution in respect of the
capital stock of TCS; any redemption, purchase or other acquisition by
TCS of any shares of its capital stock, or any security relating
thereto; or any other payment to any shareholder of TCS as such a
shareholder;
3.7.(g) No Disposition of Property. Any sale, lease or other
transfer or disposition of any properties or assets of TCS;
3.7.(h) No Indebtedness. Any indebtedness for borrowed money
incurred, assumed or guaranteed by TCS;
3.7.(i) No Liens. Any mortgage, pledge, lien or
encumbrance made on any of the properties or assets of TCS;
3.7.(j) No Amendment of Contracts. Any amendment or
termination of any contract or agreement of TCS, or any waiver of
material rights thereunder, other than in the ordinary course of
business which would have a material adverse effect on the Business,
financial condition or results of operations of TCS;
3.7.(k) Loans and Advances. Any loan or advance (other than
advances to employees in the ordinary course of business for travel
and entertainment in accordance with past practice) from TCS to any
person including, but not limited to, any Shareholder Affiliate; or
3.7.(l) Credit. Any grant of credit from TCS to any
customer on terms or in amounts more favorable than those which have
been extended to such customer in
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the past, any other change in the terms of any credit heretofore
extended, or any other change of policies or practices with respect to
the granting of credit.
3.8. Absence of Undisclosed Liabilities. Except as and to the
extent specifically disclosed in the Closing Balance Sheet, or in Schedule 3.8,
TCS has no liabilities (secured or unsecured, and whether accrued, absolute,
contingent, direct, indirect or otherwise, and whether known or unknown), other
than liabilities incurred since the date of the Closing Balance Sheet in the
ordinary course of business and consistent with past practice and liabilities
which will not have a material adverse effect on the Business, financial
condition or results of operations of TCS.
3.9. No Litigation. Except as set forth in Schedule 3.9, there is
no action, suit, arbitration, proceeding, investigation or inquiry, whether
civil, criminal or administrative ("Litigation"), pending or, to the best
knowledge of the Shareholder, threatened, against TCS, its officers and
directors (in such capacity), TCS's Business or any of its assets. Except as
set forth in Schedule 3.9, neither TCS nor the Shareholder has been notified
that TCS, TCS's Business or its assets is subject to any Order of any
Government Entity.
3.10. Compliance With Laws and Orders.
3.10.(a) Compliance. Except as set forth in Schedule
3.10.(a), to the best knowledge of the Shareholder, TCS (including its
operations, practices, properties and assets) is in compliance with
all applicable material Laws and Orders of all Government Entities,
including, without limitation, those applicable to discrimination in
employment, occupational safety and health, trade practices,
competition and pricing, zoning, building and sanitation, employment,
retirement and labor relations, product advertising and the
Environmental Laws (as hereinafter defined). Except as set forth in
Schedule 3.10.(a), TCS has not received notice of any violation or
alleged violation of, any Laws or Orders. All reports and returns
required to be filed by TCS with any Government Entity have been
filed, and were accurate and complete when filed. Without limiting
the generality of the foregoing:
(i) TCS has made all required payments to its
unemployment compensation reserve accounts with the
appropriate governmental departments of the states where it is
required to maintain such accounts; and
(ii) TCS has not received any report for the past
five (5) years required under the federal Occupational Safety
and Health Act of 1970, as amended, and under all other
applicable health and safety laws and regulations.
3.10.(b) Licenses and Permits. TCS has all material
licenses, permits, approvals, authorizations and consents of all
Government Entities and all certifications required for the conduct of
TCS's Business (as presently conducted) and operation of any of the
facilities at which TCS's Business is conducted. All such licenses,
permits,
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approvals, authorizations and consents are described in Schedule
3.10.(b), are in full force and effect and will not be affected or
made subject to loss, limitation or any obligation to reapply as a
result of the transactions contemplated hereby. Except as set forth
in Schedule 3.10.(b), TCS (including its operations, practices,
properties and assets) is and has been in compliance with all such
permits and licenses, approvals, authorizations and consents. No
governmental approval or filing with any federal, state or local
agency is required of TCS in order to consummate the transactions
contemplated hereby.
3.10.(c) Environmental Matters. The applicable Laws
relating to pollution or protection of the environment, including Laws
relating to emissions, discharges, generation, storage, releases or
threatened releases of pollutants, contaminants, chemicals or
industrial, toxic, hazardous or petroleum or petroleum-based
substances or wastes ("Waste") into the environment (including,
without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Waste including, without
limitation, the Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act and
the Comprehensive Environmental Response Compensation Liability Act
("CERCLA"), as amended, and their state and local counterparts (the
"Environmental Laws"). Without limiting the generality of the
foregoing provisions of this Section 3.10, TCS is in full compliance
with all material limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulations,
code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder. Except as
set forth in Schedule 3.10.(c), there is no Litigation nor any demand,
claim, hearing or notice of violation pending or threatened against
TCS relating in any way to the Environmental Laws or any Order issued,
entered, promulgated or approved thereunder. Except as set forth in
Schedule 3.10.(c), there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions, omissions or
plans which will interfere with or prevent compliance or continued
compliance with the Environmental Laws or with any Order issued,
entered, promulgated or approved thereunder, or which will give rise
to any liability, including, without limitation, liability under
CERCLA or similar state or local Laws, or otherwise form the basis of
any Litigation, hearing, notice of violation, study or investigation,
based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, of any
Waste.
3.10.(d) COBRA Compliance. With respect to the
conduct of the COBRA Business, TCS has not received notice of, nor has
TCS (through its acts or omissions) created circumstances which would
give rise to, a claim against TCS for the failure to comply with the
provisions of any law related to the continuation of health care
coverage, including, without limitation, the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended.
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3.11. Title to and Condition of Properties.
3.11.(a) Title. TCS has good and valid title to all
of its assets and properties that it purports to own, including,
without limitation, all such properties (tangible and intangible)
reflected in the Closing Balance Sheet (except for assets held under
capitalized leases and property sold since the date of the Closing
Balance Sheet in the ordinary course of business), free and clear of
all mortgages, liens, (statutory or otherwise) security interests,
claims, pledges, licenses, equities, options, conditional sales
contracts, assessments, levies, easements, covenants, reservations,
restrictions, rights-of-way, exceptions, limitations, charges or
encumbrances of any nature whatsoever (collectively, "Liens"), except
those Liens that are described in Schedule 3.11(a). Except as
described in Schedule 3.11(a), TCS's assets or properties are not
subject to any restrictions with respect to the transferability
thereof.
3.11.(b) Condition. All tangible personal property
and assets owned or utilized by TCS are in satisfactory operating
condition, and have been maintained consistent with the standards
generally followed in the industry.
3.11.(c) Real Property. TCS does not own any real
property. Schedule 3.11.(c) sets forth all real property used or
occupied by TCS (the "Real Property"). Schedule 3.11.(c) also sets
forth, with respect to each parcel of Real Property which is leased,
the material terms of such lease. There are no oral terms or past
practice inconsistent with the written terms thereof. All such leases
are valid and binding agreements, enforceable in accordance with their
respective terms, and are in full force and effect. TCS has performed
all obligations required to be performed by it to date under each such
lease and is not in breach or default in any respect thereunder, and
there has been no event which, with the giving of notice or the lapse
of time or both, would become a breach or default thereunder. To the
best knowledge of TCS and the Shareholder, no lessor or landlord to
any of such leases is in breach or default thereunder. To the best
knowledge of the Shareholder, there are now in full force and effect
duly issued certificates of occupancy permitting the Real Property and
improvements located thereon to be legally used and occupied by TCS as
the same are now constituted.
3.12. Insurance. Set forth in Schedule 3.12 is a complete and
accurate list and description of all policies of fire, liability, professional
liability, general liability, business interruption, workers compensation,
health and other forms of insurance presently in effect with respect to TCS's
Business and the properties of TCS, true and correct copies of which have
heretofore been delivered to Buyer. Schedule 3.12 includes, without
limitation, the carrier, the description of coverage, the limits of coverage,
retention or deductible amounts, amount of annual premiums, date of expiration
and the date through which premiums have been paid with respect to each such
policy, and any pending claims in excess of $5,000, whether or not covered by
insurance. Schedule 3.12 indicates each policy as to which (a) the coverage
limit has been reached or (b) the total incurred losses to date equal 75% or
more of the coverage limit. No
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notice of cancellation or termination has been received with respect to any
such policy. Each policy is in full force and effect and all premiums with
respect thereto covering all periods up to and including the date hereof have
been paid. TCS has not been refused any insurance with respect to any aspect
of the operations of its Business nor has its coverage been limited by any
insurance carrier to which it has applied for insurance or with which it has
carried insurance during the last three (3) years. TCS has not received any
written notice from or on behalf of any insurance carrier issuing any such
policy that insurance rates therefor will hereafter be substantially increased
(except to the extent that insurance rates may be increased for all similarly
situated risks) or that there will hereafter be a cancellation or an increase
in a deductible (or an increase in premiums in order to maintain an existing
deductible) or nonrenewal of any such policy. Such policies are sufficient in
all material respects for compliance by TCS with all requirements of all
contracts to which TCS is a party. None of such policies will in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
hereby.
3.13. Contracts and Commitments.
3.13.(a) Real Property Leases. Except as set forth in
Schedule 3.11.(a), TCS has no leases of real property.
3.13.(b) Personal Property Leases. Except as set
forth in Schedule 3.13.(b), TCS has no leases of personal property
involving consideration or other expenditure in excess of $5,000.
3.13.(c) Sales Commitments. Except as set forth in
Schedule 3.13.(c), TCS has no sales or service contracts or
commitments to customers which aggregate in excess of the amounts set
forth on Schedule 3.18 to any one customer (or group of affiliated
customers). True and complete copies of all contracts or commitments
with respect to those customers set forth on Schedule 3.18 have been
delivered by TCS to Buyer. TCS has no sales contracts or commitments
except those made in the ordinary course of business, at arm's length.
3.13.(d) Contracts With Affiliates and Certain Others.
Except as set forth in Schedule 3.13.(d) and except for this Agreement
and the Ancillary Instruments, TCS has no agreement, understanding,
contract or commitment (written or oral) with any Shareholder
Affiliate (as defined herein) or any employee, agent, consultant,
dealer or franchisee that is not cancelable by TCS, on notice of not
longer than 30 days without liability, penalty or premium of any
nature or kind whatsoever. For purposes of this Agreement,
"Shareholder Affiliate" shall mean and include the Shareholder, the
Shareholder's spouse, any person who would be the heir or descendant
of any such person if he or she were not living, and any entity in
which any of the foregoing has a direct or indirect interest, except
through the ownership of less than 5% of the outstanding shares of any
entity whose securities are listed on a national securities exchange
or traded in the national over-the-counter market.
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3.13.(e) Powers of Attorney. Except as set forth on
Schedule 3.13.(e), TCS has not given a power of attorney, which is
currently in effect, to any person, firm or corporation for any
purpose whatsoever.
3.13.(f) Collective Bargaining Agreements. Except as
set forth in Schedule 3.13.(f), TCS is not a party to any collective
bargaining agreements with any unions, guilds, shop committees or
other collective bargaining groups.
3.13.(g) Loan Agreements. Except as set forth in
Schedule 3.13.(g), TCS is not obligated under any loan agreement,
promissory note, letter of credit, or other evidence of indebtedness
as a signatory, guarantor or otherwise. Copies of all such agreements
have heretofore been delivered by TCS to Buyer.
3.13.(h) Guarantees. Except as set forth in Schedule
3.13.(h) and except for indemnification undertakings set forth in
TCS's agreements with its customers, TCS has not guaranteed the
payment or performance of any person, firm or corporation, agreed to
indemnify any person or act as a surety, or otherwise agreed to be
contingently or secondarily liable for the obligations of any person.
3.13.(i) Contracts Subject to Renegotiation. TCS is
not a party to any contract with any governmental body which is
subject to renegotiation.
3.13.(j) Burdensome or Restrictive Agreements. TCS is
not a party to nor is it bound by any agreement requiring it to assign
any interest in any trade secret or proprietary information, or
prohibiting or restricting it from competing in any business or
geographical area or soliciting customers or otherwise restricting it
from carrying on TCS's Business anywhere in the world.
3.13.(k) Other Material Contracts. Except as set
forth in Schedule 3.13.(k), TCS is not a party or subject to any
lease, contract or commitment of any nature involving consideration or
other expenditure in excess of $5,000.
3.13.(l) No Default. TCS is not in default under any
lease, contract or commitment to which it is a party or is otherwise
bound, nor has any event or omission occurred which through the
passage of time or the giving of notice, or both, would constitute a
default thereunder or cause the acceleration of any of TCS's
obligations or result in the creation of any Lien on any of the assets
owned, used or occupied by TCS.
3.14. Labor Matters. Except as set forth in Schedule 3.14, within
the last five (5) years TCS has not experienced any labor disputes, union
organization attempts or any work stoppage due to labor disagreements in
connection with its Business. Except to the extent set forth in Schedule 3.14,
(a) TCS is in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice; (b) there is no unfair labor
practice charge or complaint
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actually pending or threatened against TCS; (c) there is no labor strike,
dispute, request for representation, slowdown or stoppage actually pending or
threatened against or affecting TCS nor any secondary boycott with respect to
products of TCS; (d) no question concerning representation has been raised or
is threatened respecting the employees of TCS; (e) no grievance which might
have a material adverse effect on TCS, nor any arbitration proceeding arising
out of or under collective bargaining agreements, is pending and no such claim
therefor exists; and (f) there are no administrative charges or court
complaints against TCS concerning alleged employment discrimination or other
employment related matters pending or threatened before the U.S. Equal
Employment Opportunity Commission or any Government Entity.
3.15. Employee Benefit Plans.
3.15.(a) Disclosure. Schedule 3.15.(a) sets forth all
pension, thrift, savings, profit sharing, retirement, incentive bonus
or other bonus, medical, dental, life, accident insurance, employee
welfare, disability, group insurance, stock purchase, stock option,
stock appreciation, stock bonus, executive or deferred compensation,
hospitalization and other similar fringe or employee benefit plans,
programs and arrangements, and any employment or consulting contracts,
collective bargaining agreements, severance agreements or plans,
vacation and sick leave plans, programs, arrangements and policies,
including, without limitation, all "employee benefit plans" (as
defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), all employee manuals, and all written
statements of policies, practices or understandings relating to
employment, which are provided to, for the benefit of, or relate to,
any persons employed by TCS. The items described in the foregoing
sentence are hereinafter sometimes referred to collectively as
"Employee Plans/Agreements," and each individually as an "Employee
Plan/Agreement." True and correct copies of all the Employee
Plans/Agreements, including all amendments thereto, have heretofore
been provided by TCS to Buyer. Each of the Employee Plans/Agreements
is identified on Schedule 3.15.(a), to the extent applicable, as one
or more of the following: an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA), a "defined benefit plan" (as
defined in Section 414 of the Code), an "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA), and/or as a plan intended
to be qualified under Section 401 of the Code. No Employee
Plan/Agreement is a "multiemployer plan" (as defined in Section 4001
of ERISA), and TCS has never contributed nor been obligated to
contribute to any such multiemployer plan.
3.15.(b) Terminations, Proceedings, Penalties, etc.
With respect to each Employee Plan/Agreement that is subject to the
provisions of Title IV of ERISA and with respect to which TCS, or any
of its assets may, directly or indirectly, be subject to any
Liability, contingent or otherwise, or the imposition of any Lien
(whether by reason of the complete or partial termination of any such
plan, the funded status of any such plan, any "complete withdrawal"
(as defined in Section 4203 of ERISA) or "partial withdrawal" (as
defined in Section 4205 of ERISA) by any person from any such plan, or
otherwise):
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(i) no such plan has been terminated so as to
subject, directly or indirectly, any assets of TCS to any
liability, contingent or otherwise, or the imposition of any
lien under Title IV of ERISA;
(ii) no proceeding has been initiated or
threatened by any person (including the Pension Benefit
Guaranty Corporation ("PBGC")) to terminate any such plan;
(iii) no condition or event currently exists or
currently is expected to occur that could subject, directly or
indirectly, any assets of TCS to any liability, contingent or
otherwise, or the imposition of any lien under Title IV of
ERISA, whether to the PBGC or to any other person or otherwise
on account of the termination of any such plan;
(iv) if any such plan were to be terminated as of
the Closing Date, no assets of TCS would be subject, directly
or indirectly, to any liability, contingent or otherwise, or
the imposition of any lien under Title IV of ERISA;
(v) no "reportable event" (as defined in Section
4043 of ERISA) has occurred with respect to any such plan;
(vi) no such plan which is subject to Section 302
of ERISA or Section 412 of the Code has incurred any
"accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code, respectively), whether or
not waived; and
(vii) no such plan is a multiemployer plan or a
plan described in Section 4064 of ERISA.
3.15.(c) Prohibited Transactions, etc. To the best of
the knowledge of the Shareholder, there have been no "prohibited
transactions" within the meaning of Section 406 of ERISA or Section
4975 of the Code for which a statutory or administrative exemption
does not exist with respect to any Employee Plan/Agreement, and to the
best of the knowledge of the Shareholder, no event or omission has
occurred in connection with which TCS or its assets or any Employee
Plan/Agreement, directly or indirectly, could be subject to any
material liability under ERISA, the Code or any other Law or Order
applicable to any Employee Plan/Agreement, or under any agreement,
instrument, Law or Order pursuant to or under which TCS has agreed to
indemnify or is required to indemnify any person against liability
incurred under any such Law or Order.
3.15.(d) Full Funding. The funds available under each
Employee Plan/Agreement which is intended to be a funded plan equal or
exceed the amounts required to be paid, or which would be required to
be paid if such Employee Plan/Agreement were terminated, on account of
rights vested or accrued as of the
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Closing Date (using the actuarial methods and assumptions then used by
TCS in connection with the funding of such Employee Plan/Agreement).
3.15.(e) Controlled Group; Affiliated Service Group;
Leased Employees. Other than TCS and TERS, no organization is or has
been: (i) a member of a controlled group of corporations as defined in
Section 414(b) of the Code, of which TCS was a member, or (ii) under
common control, as determined under Section 414(c) of the Code, with
TCS. TCS has never been a member of an "affiliated service group"
within the meaning of Section 414(m) of the Code. There are not and
never have been any leased employees within the meaning of Section
414(n) of the Code who perform services for TCS.
3.15.(f) Payments and Compliance. With respect to
each Employee Plan/Agreement, (i) all payments due from TCS to date
have been made and all amounts properly accrued to date as liabilities
of TCS which have not been paid have been properly recorded on the
books of TCS (as appropriate) and, to the extent such liabilities were
due and payable but were not paid as of the date of the Closing
Balance Sheet, are reflected in the Closing Balance Sheet; (ii) TCS
has complied with, and each such Employee Plan/Agreement conforms in
form and operation to, all applicable laws and regulations, including
but not limited to ERISA and the Code, in all material respects and
all reports and information relating to such Employee Plan/Agreement
required to be filed with any governmental entity have been timely
filed; (iii) all reports and information relating to each such
Employee Plan/Agreement required to be disclosed or provided to
participants or their beneficiaries have been timely disclosed or
provided; (iv) each such Employee Plan/Agreement which is intended to
qualify under Section 401 of the Code has received a favorable
determination letter from the Internal Revenue Service with respect to
such qualification, its related trust has been determined to be exempt
from taxation under Section 501(a) of the Code, and nothing has
occurred since the date of such letter that has or is likely to
adversely affect such qualification or exemption; (v) there are no
actions, suits or claims pending (other than routine claims for
benefits) or threatened with respect to such Employee Plan/Agreement
or against the assets of such Employee Plan/Agreement; and (vi) no
Employee Plan/Agreement is a plan which is established and maintained
outside the United States primarily for the benefit of individuals
substantially all of whom are nonresident aliens.
3.15.(g) Post-Retirement Benefits. Other than such
continuation of benefit coverage under group health plans as is
required by applicable law, TCS does not maintain and has not
maintained retiree life or retiree health plans providing for
continuing coverage for any employee or any beneficiary of an employee
after the employee's termination of employment.
3.15.(h) No Triggering of Obligations. The
consummation of the transactions contemplated by this Agreement will
not (i) entitle any current or former employee of TCS to severance
pay, unemployment compensation or any other payment,
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except as expressly provided in this Agreement or in any of the
Ancillary Instruments, (ii) accelerate the time of payment or vesting,
or increase the amount of compensation due to any such employee or
former employee or (iii) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for
which an exemption is not available.
3.15.(i) Delivery of Documents. There has been
delivered to Buyer, with respect to each Employee Plan/Agreement:
(i) a copy of the annual report, if required
under ERISA, with respect to each such Employee Plan/Agreement
for the last two years;
(ii) a copy of the summary plan description,
together with each summary of material modifications, required
under ERISA with respect to such Employee Plan/Agreement, all
material employee communications relating to such Employee
Plan/Agreement, and, unless the Employee Plan/Agreement is
embodied entirely in an insurance policy to which TCS is a
party, a true and complete copy of such Employee
Plan/Agreement;
(iii) if the Employee Plan/Agreement is funded
through a trust or any third party funding vehicle (other than
an insurance policy), a copy of the trust or other funding
agreement and the latest financial statements thereof; and
(iv) the most recent determination letter received
from the Internal Revenue Service with respect to each
Employee Plan/Agreement that is intended to be a "qualified
plan" under Section 401 of the Code.
With respect to each Employee Plan/Agreement for which an annual
report has been filed and delivered to Buyer pursuant to clause (i) of
this Section 3.15.(i), no material adverse change has occurred with
respect to the matters covered by the latest such annual report since
the date thereof.
3.15.(j) Future Commitments. TCS has no announced
plan or legally binding commitment to create any additional Employee
Plans/Agreements or to amend or modify any existing Employee
Plan/Agreement except as contemplated herein or in the Employment and
Noncompetition Agreements.
3.16. Employment Compensation. A true and correct list has been
provided to Buyer of all employees to whom TCS is paying compensation, and, in
the case of salaried employees, such list identifies the current annual rate of
compensation for each employee and, in the case of hourly or commission
employees, identifies certain reasonable ranges of rates and the number of
employees falling within each such range.
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3.17. Trade Rights. Schedule 3.17 lists all Trade Rights (as
defined below) in which TCS now has any interest, specifying whether such Trade
Rights are owned, controlled, used or held (under license or otherwise) by TCS,
and also indicating which of such Trade Rights are registered. All Trade
Rights shown as registered in Schedule 3.17 have been properly registered, all
pending registrations and applications have been properly made and filed and
all annuity, maintenance, renewal and other fees relating to registrations or
applications are current. In order to conduct its Business, as such is
currently being conducted, TCS does not require any Trade Rights that it does
not already have. TCS is not infringing and has not infringed any Trade Rights
of another in the operation of its Business, nor to the best of the knowledge
of TCS or the Shareholder is any other person infringing the Trade Rights of
TCS. TCS has not granted any license or made any assignment of any Trade Right
listed on Schedule 3.17, nor does TCS pay any royalties or other consideration
for the right to use any Trade Rights of others. There is no Litigation
pending or threatened to challenge TCS's right, title and interest with respect
to its continued use and right to preclude others from using any Trade Rights
of TCS. The consummation of the transactions contemplated hereby will not
alter or impair any Trade Rights owned or used by TCS. As used herein, "Trade
Rights" shall mean and include: (i) all trademark rights, business
identifiers, trade dress, service marks, trade names and brand names, all
registrations thereof and applications therefor and all goodwill associated
with the foregoing; (ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the foregoing and the
underlying works of authorship; (iii) all patents and patent applications, and
all international proprietary rights associated therewith; (iv) all contracts
or agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; (v) all inventions, mask works
and mask work registrations, know-how, discoveries, improvements, designs,
trade secrets, shop and royalty rights, employee covenants and agreements
respecting intellectual property and non-competition and all other types of
intellectual property; and (vi) all claims for infringement or breach of any of
the foregoing.
3.18. Major Customers. Schedule 3.18 contains a list of the fifteen
(15) largest customers of TCS for each of the two (2) most recent fiscal years
(determined on the basis of the total dollar amount of net revenues
attributable thereto) showing the total dollar amount of net revenues
attributable thereto during each such year. Neither TCS nor the Shareholder
has any knowledge or information of any facts indicating, nor any other reason
to believe, that any of the customers listed on Schedule 3.18 will not continue
to be customers of TCS after the Closing at substantially the same level as
heretofore.
3.19. Bank Accounts. Schedule 3.19 sets forth the names and
locations of all banks, trust companies, savings and loan associations and
other financial institutions at which the TCS maintains a safe deposit box,
lock box or checking, savings, custodial or other account of any nature, the
type and number of each such account and the signatories therefore, a
description of any compensating balance arrangements, and the names of all
persons authorized to draw thereon, make withdrawals therefrom or have access
thereto.
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3.20. Shareholder Affiliates' Relationships to TCS. No Shareholder
Affiliate has any direct or indirect interest in (i) any entity which does
business with TCS (except for TERS) or is competitive with TCS's Business, or
(ii) any property, asset or right which is used by TCS in the conduct of its
Business.
3.21. No Brokers or Finders. Neither TCS nor any of its directors,
officers, employees, the Shareholder or agents have retained, employed or used
any broker or finder in connection with the transaction provided for herein or
in connection with the negotiation thereof.
3.22. Disclosure. No representation or warranty by TCS and/or the
Shareholder in this Agreement, nor any certificate, schedule, document or
exhibit hereto furnished or to be furnished by or on behalf of TCS or the
Shareholder pursuant to this Agreement contains any untrue statement of
material fact or omits a material fact necessary to make the statements
contained therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to the
Shareholder, each of which is true and correct on the date hereof, is or shall
be unaffected by any investigation heretofore or hereafter made by the
Shareholder or any notice to the Shareholder, and shall survive the Closing of
the transactions provided for herein.
4.1. Corporate.
4.1.(a) Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Florida.
4.1.(b) Corporate Power. Buyer has all requisite corporate
power to enter into this Agreement and the Ancillary Instruments and
to carry out the transactions contemplated hereby and thereby.
4.2. Authority. The execution and delivery of this Agreement and
each Ancillary Instrument that provides for its execution by Buyer and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of Buyer. No other corporate act or
proceeding on the part of Buyer or its shareholders is necessary to authorize
this Agreement or the Ancillary Instruments or the consummation of the
transactions contemplated hereby and thereby. This Agreement and each
Ancillary Instrument that provides for its execution by Buyer is the legal,
valid and binding obligation of Buyer, enforceable in accordance with their
respective terms, subject to the limitations contained herein, except as such
may be limited by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and by general equitable principles.
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4.3. No Brokers or Finders. Except for the engagement of Broadview
Associates, L.P. by Buyer, neither Buyer nor any of its directors, officers,
employees or agents have retained, employed or used any broker or finder in
connection with the transaction provided for herein or in connection with the
negotiation thereof. Buyer has agreed to pay all fees and expenses of
Broadview Associates, L.P. in connection with the transactions contemplated
hereby.
4.4. Disclosure. No representation or warranty by Buyer in this
Agreement, nor any statement, certificate, schedule, document or exhibit hereto
furnished or to be furnished by or on behalf of Buyer pursuant to this
Agreement or in connection with transactions contemplated hereby, contains any
untrue statement of material fact or omits a material fact necessary to make
the statements contained therein not misleading.
4.5. Investment Intent. The TCS Shares are being acquired by Buyer
for investment only and not with the view to resale or other distribution.
4.6. Approvals and Filings. No governmental approval or filing
with any federal, state or local agency is required of Buyer in order to
consummate the transactions contemplated herein; provided, however, that Buyer
shall comply with the applicable Federal securities laws and regulations of the
Securities and Exchange Commission or The Nasdaq Stock Market with respect to
the public disclosure of the consummation of these transactions and any related
filings.
5. POST-CLOSING COVENANTS
5.1. Noncompetition; Confidentiality. As an inducement to Buyer to
execute this Agreement and complete the transactions contemplated hereby, and
in order to preserve the goodwill associated with TCS's Business being acquired
pursuant to this Agreement, and in addition to and not in limitation of any
covenants contained in any agreement executed and delivered pursuant to Section
7.1.(c) hereof, the Shareholder hereby covenants and agrees as follows:
5.1.(a) Covenant Not to Compete. For a period of five (5)
years from the Closing Date, the Shareholder will not directly or
indirectly:
(i) engage in, continue in or carry on any
business which competes with, or intends to compete with, TCS
or Buyer in any aspect with respect to TCS's Business or is
substantially similar thereto, including owning or controlling
any financial interest in any person, corporation,
partnership, firm or other form of business organization which
is so engaged (a "Competing Business");
(ii) consult with, advise or assist in any way,
whether or not for consideration, any Competing Business,
including, but not limited to, advertising or otherwise
endorsing the products of any Competing Business; soliciting
customers or otherwise serving as an intermediary for any
Competing Business;
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loaning money or rendering any other form of financial
assistance to or engaging in any form of business transaction
on other than an arm's length basis with any Competing
Business;
(iii) offer employment to or solicit the employment
of an employee of TCS or Buyer, without the prior written
consent of Buyer; or
(iv) engage in any practice the purpose of which
is to evade the provisions of this covenant not to compete or
to commit any act which adversely affects TCS's Business;
provided, however, that the foregoing shall not prohibit the ownership
of securities of corporations which are listed on a national
securities exchange or traded in the national over-the-counter market
in an amount which shall not exceed 5% of the outstanding shares of
any such corporation. The parties agree that the geographic scope of
this covenant not to compete shall extend to all areas in which TCS or
Buyer conducts TCS's Business. The parties agree that Buyer may sell,
assign or otherwise transfer this covenant not to compete, in whole or
in part, to any Business that purchases all or part of TCS's Business
or Buyer.
5.1.(b) Covenant of Confidentiality. The Shareholder shall
not at any time after the Closing, except as explicitly requested by
Buyer or required by applicable Law or Order, and except in the course
of employment by TCS, (i) use for any purpose, (ii) disclose to any
person, or (iii) keep or make copies of documents, tapes, discs or
programs containing, any Confidential Information concerning TCS. For
purposes of this Agreement, "Confidential Information" shall mean and
include, without limitation, all Trade Rights in which TCS has an
interest, all customer lists and customer information, and all other
information concerning the finances, operations, processes, apparatus,
equipment, packaging, services, marketing and distribution methods of
TCS not previously disclosed to the public directly by TCS. This
covenant shall not preclude the Shareholder from disclosing to his
advisors or Government Entities financial information of TCS necessary
to prepare, file or defend any tax return or report of TCS or the
Shareholder. The parties agree that this covenant of confidentiality
shall have no geographic or temporal limitations.
5.1.(c) Equitable Relief for Violations. The Shareholder
agrees that the provisions and restrictions contained in this Section
5.1 are necessary to protect the legitimate continuing interests of
Buyer in acquiring the TCS Shares, and that any violation or breach of
these provisions will result in irreparable injury to Buyer for which
a remedy at law would be inadequate and that, in addition to any
relief at law which may be available to Buyer for such violation or
breach and regardless of any other provision contained in this
Agreement, Buyer shall be entitled to injunctive and other equitable
relief as a court may grant after considering the intent of this
Section 5.1.
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5.1.(d) Total Employee Relations Services, Inc. For purposes
of this Section 5.1, the business of Total Employee Relations
Services, Inc., as described on Schedule 5.1.(d), shall not be deemed
to be in competition with TCS, Buyer or TCS's Business.
5.2. Confidentiality of Shareholder Information. Buyer shall
promptly after Closing return to the Shareholder all originals and copies of
the personal financial statements and tax returns of the Shareholder in its
possession. Buyer has not given a copy of such statements or returns, or
disclosed the contents thereof, to any third party (other than Buyer's
independent accountants) and will continue to hold all information disclosed
thereon as strictly confidential.
5.3. Income Tax Returns and Allocation of Tax. The Shareholder
shall be responsible for the payment by TCS of all Taxes of TCS due on the cash
basis on or before the Closing Date. Buyer shall be responsible for the
payment by TCS of all Taxes of TCS accruing after the Closing Date. The
Shareholder shall cause to be prepared and timely and properly filed on behalf
of the Shareholder and TCS, all returns and filings with respect to federal,
California Taxes, or any other state with respect to which a return or filing
is required under applicable law accruing on or before the Closing Date
consistent with this Agreement. Such Taxes, returns, and filings shall be
determined by closing TCS's books and records as of and including the Closing
Date, or if the allocation of an item of income, loss, deduction, or credit
cannot be definitely allocated to an ascertainable date, such item shall be pro
rated on a daily basis. The Shareholder, TCS and Buyer shall cooperate, and
shall cause their respective affiliates, officers, employees, agents, auditors
and representatives to cooperate, in preparing and filing all returns, reports,
and forms relating to Taxes, including maintaining and making available to each
other all records necessary in connection with Taxes and in resolving all
disputes and audits with respect to all taxable periods relating to Taxes.
5.4. Resale Restriction. For a period of two (2) years after the
Closing Date, the Shareholder shall not, directly or indirectly, offer, sell,
transfer, pledge, contract to sell, transfer or pledge, or cause or in any way
permit to be sold, transferred, pledged or otherwise disposed of, any of the
Buyer Shares without the prior written consent of Buyer. In connection
herewith, the Shareholder agrees that during the two (2) year period, the Buyer
may place stop transfer instructions with the Company's transfer agent for the
securities.
5.5. Rule 144 Compliance. Buyer shall file such information,
documents and reports as shall hereafter be required by the Securities and
Exchange Commission as a condition to the availability of Rule 144 under the
Securities Act of 1933, as amended, with respect to the Buyer Shares.
6. INDEMNIFICATION
6.1. By the Shareholder. Subject to the terms and conditions of
this Article 6, the Shareholder hereby agrees to indemnify, defend and hold
harmless Buyer, its directors, officers and employees (hereinafter "Buyer's
Affiliates") and TCS, its directors, officers and employees
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from and against all Claims (as hereinafter defined) asserted against,
resulting to, imposed upon, or incurred by Buyer, Buyer's Affiliates or TCS,
directly or indirectly, by reason of, arising out of or resulting from (a) the
inaccuracy or breach of any representation or warranty of the Shareholder
contained in this Agreement, (b) the breach of any covenant by the Shareholder
contained in this Agreement, (c) any dispute involving, or Claim made by, any
current or former shareholder of TCS (other than the Shareholder), or (d) any
matter disclosed in Schedule 3.9. As used in this Article 6, "Claim" shall
mean and include (i) all debts, liabilities and obligations; (ii) all losses,
damages (but excluding consequential damages), judgments, awards, settlements,
costs and expenses (including, without limitation, interest (including
prejudgment interest in any litigated matter), penalties, court costs and
attorneys' fees and expenses); and (iii) all demands, claims, suits, actions,
costs of investigation, causes of action, proceedings and assessments, in each
case after deduction of any insurance recovery that is remitted to the
Indemnified Party (as hereinafter defined) as a result of any of the foregoing.
6.2. By Buyer. Subject to the terms and conditions of this Article
6, Buyer hereby agrees to indemnify, defend and hold harmless the Shareholder
and his heirs and personal representatives from and against all Claims asserted
against, resulting to, imposed upon or incurred by any such person, directly or
indirectly, by reason of or resulting from (a) the inaccuracy or breach of any
representation or warranty of Buyer contained in or made pursuant to this
Agreement, or (b) the breach of any covenant of Buyer contained in this
Agreement.
6.3. Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other under this Article 6 with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
6.3.(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will give
the party or parties from whom indemnification is sought (whether one
or more, the "Indemnifying Party") prompt written notice of any Claim,
and the Indemnifying Party will have the right to undertake the
defense thereof by representatives chosen by it. The Indemnified
Party shall make available to the Indemnifying Party or its
representatives all records and other materials required by the
Indemnifying Party in connection with such Claim and in the possession
or under the control of the Indemnified Party, for the use of the
Indemnifying Party and its representatives in prosecuting the defense
of any such Claim, and the Indemnified Party shall be entitled to
participate in the defense of such Claim. Subject to the provisions
of Sections 6.3.(b) and 6.3.(c) hereof, if the defense of such Claim
is assumed by the Indemnifying Party, and (except for a Claim based
upon any matter disclosed in Schedule 3.9 in which case no such
approval shall be necessary) upon approval by the Indemnified Party of
counsel selected by the Indemnifying Party, the Indemnifying Party
shall have no liability for any compromise or settlement of such Claim
without its written consent.
6.3.(b) Failure to Defend. If the Indemnifying Party, within
a reasonable time after notice of any such Claim, fails to assume the
defense of such Claim actively
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and in good faith, the Indemnified Party will (upon further notice)
have the right to undertake the defense, compromise or settlement of
such Claim or consent to the entry of a judgment with respect to such
Claim, on behalf of and for the account of and risk of the
Indemnifying Party, and the Indemnifying Party shall thereafter have
no right to challenge the Indemnified Party's defense, compromise,
settlement or consent to judgment therein.
6.3.(c) Indemnified Party's Rights. Anything in this Article
6 to the contrary notwithstanding, (i) except for a Claim based upon
any matter disclosed in Schedule 3.9, if there is a reasonable
probability that a Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other
money payments, the Indemnified Party shall have the right to defend
and, with the consent of the Indemnifying Party (which shall not be
unreasonably withheld), to compromise or settle such Claim, and (ii)
the Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Claim or consent to the
entry of any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnified
Party of a release from all liability in respect of such Claim.
6.4. Payment. The Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this Article 6. Upon judgment,
determination, settlement or compromise of any third party Claim, the
Indemnifying Party shall pay promptly on behalf of the Indemnified Party,
and/or to the Indemnified Party in reimbursement of any amount theretofore
required to be paid by it, the amount so determined by judgment, determination,
settlement or compromise and all other Claims of the Indemnified Party with
respect thereto, unless in the case of a judgment an appeal is made from the
judgment, provided that any such amount is required to be paid by the
Indemnifying Party under this Article 6. If the Indemnifying Party desires to
appeal from an adverse judgment, then the Indemnifying Party shall post and pay
the cost of the security or bond to stay execution of the judgment pending
appeal. Upon the payment in full by the Indemnifying Party of such amounts,
the Indemnifying Party shall succeed to the rights of such Indemnified Party,
to the extent not waived in settlement, against the third party who made such
third party Claim.
6.5. No Waiver. The closing of the transactions contemplated by
this Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of condition
constituting the basis of the Claim at or before the Closing.
6.6. Limitations on Indemnification. Except for any willful and
knowing breach or misrepresentation, as to which a claim for indemnification
hereunder may be brought without limitation as to time or amount:
6.6.(a) Time Limitation. No claim for indemnification shall
be brought under Section 6.1 of this Article 6 for the inaccuracy or
breach of a representation or warranty,
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or the breach of any covenant, contained in or made pursuant to this
Agreement unless the nature of such claim for indemnification has been
described in reasonable detail in a written notice provided by an
Indemnified Party to an Indemnifying Party prior to the second
anniversary of the Closing Date; provided, however, that with respect
to any Claim that arises out of or is related to any dispute involving,
or Claim made by, any current or former shareholder of TCS (other than
the Shareholder), or Sections 3.1 (Corporate), 3.2 (The Shareholder),
3.5 (Tax Matters), 3.9 (Litigation), 3.15 (Employee Benefit Plans), 5.1
(Noncompetition; Confidentiality) and 5.3 (Income Tax Returns and
Allocation of Tax) hereof, such time shall extend to the expiration of
the applicable statute of limitations for any such Claim, and with
respect to any Claim that arises out of or is related to Section
3.10(c) (Environmental Matters), such Claim shall be made or described
in reasonable detail in a written notice provided by an Indemnified
Party to an Indemnifying Party prior to the fifth anniversary of the
Closing Date.
6.6.(b) Amount Limitation. An Indemnified Party shall be
entitled to indemnification under Section 6.1 of this Article 6 for the
inaccuracy or breach of a representation or warranty, or breach of a
covenant, contained in or made pursuant to this Agreement, unless the
aggregate of all of the Indemnifying Parties' indemnification
obligations to the Indemnified Party pursuant to this Article 6 (but
for this Section 6.6.(b)) exceeds $40,000; provided, that in the event
of aggregate indemnification obligations in excess of such amount, the
Indemnified Party shall be entitled to indemnification in full under
this Agreement, and provided, further, that any indemnification payment
made with respect to any dispute involving, or Claim made by, any
current or former shareholder of TCS (other than the Shareholder) or
any matter disclosed in Schedule 3.9 shall not be included in such
$40,000 threshold. Notwithstanding the preceding sentence, the
limitation on indemnification under this Section 6.6.(b) shall not
apply to any dispute involving, or Claim made by, any current or former
Shareholder of TCS (other than the Shareholder), or matter disclosed in
Schedule 3.9.
6.6.(c) Aggregate Amount Limitation for the Shareholder.
Notwithstanding any provision of this Article 6 to the contrary, the
aggregate amount of the indemnification obligations of the Shareholder
pursuant to Section 6.1 of this Article 6 shall not exceed the
lesser of (i) $3,800,000 or (ii) the Buyer Shares including, if sold,
the proceeds received from the sale of the Buyer Shares.
6.7. Indemnification - Exclusive Remedy. The provisions of this
Article 6 shall constitute the exclusive remedy for any claim based upon the
subject matter of the indemnification undertakings in Section 6.1 and 6.2.
7. CLOSING
The closing of this transaction ("xxx Xxxxxxx") shall occur concurrent
with the execution of this Agreement effective as of 12:01 A.M. on February 1,
1996. Such date is referred to in this Agreement as the "Closing Date".
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7.1. Documents Delivered by TCS and the Shareholders. At the
Closing, TCS and the Shareholder shall deliver to Buyer the following
documents, in each case duly executed or otherwise in proper form:
7.1.(a) Stock Certificates. Stock certificates representing
the TCS Shares, duly endorsed for transfer or with duly executed stock
powers attached.
7.1.(b) Opinion of Counsel. A written opinion of Joy &
Associates, counsel to TCS and the Shareholder, dated as of the
Closing Date, addressed to Buyer.
7.1.(c) Certified Resolutions. Certified copies of the
resolutions of the Board of Directors and the shareholders of TCS,
authorizing and approving this Agreement and the Ancillary
Instruments, and the consummation of the transactions contemplated
hereby and thereby.
7.1.(d) Articles; Bylaws. A copy of the Bylaws of TCS
certified by its secretary, and a copy of the Certificate of
Incorporation of TCS, certified as of a recent date by the Secretary
of State of the state of incorporation of TCS, and good standing
certificates, certified as of a recent date by the Secretary of State
of such state and all other states in which TCS is qualified to do
business.
7.1.(e) Incumbency Certificate. Incumbency certificates
relating to each person executing (as a corporate officer or otherwise
on behalf of another person) any document executed and delivered to
Buyer pursuant to the terms hereof.
7.1.(f) Estoppel Certificates. An estoppel
certificate from the landlord under each lease of Real Property which
estoppel certificate certifies that: (i) the lease is valid and in
full force and effect; (ii) the amounts payable by TCS under the lease
and the date to which the same have been paid; (iii) whether there
are, to the knowledge of said landlord, any defaults thereunder, and,
if so, specifying the nature thereof; and (iv) a statement that the
transactions contemplated by this Agreement will not constitute a
default under the lease.
7.1.(g) Closing Date Balance Sheet. A balance sheet of TCS
as of the Closing Date indicating that (i) the net worth of TCS set
forth on Schedule 7.1.(g) based on the accrual method of accounting is
at least $139,400, (ii) the cash in the general checking account is at
least $4,200, (iii) the liabilities of TCS associated with COBRA
payables are equal to or less than the cash and cash equivalents of
TCS, and (iv) the Shareholder and any Shareholder Affiliate do not
have any outstanding indebtedness owed to TCS.
7.2. Documents Delivered by Buyer. At the Closing, Buyer shall
deliver to the Shareholder the following, in each case duly executed or
otherwise in proper form:
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7.2.(a) Stock Certificates. A letter addressed to the
Buyer's Transfer Agent authorizing the Transfer Agent to issue and
deliver the Buyer Shares to the Shareholder.
7.2.(b) Opinion of Counsel. A written opinion of Xxxxx &
Lardner, counsel to Buyer, dated as of the Closing Date, addressed to
TCS.
7.2.(c) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Buyer authorizing and
approving this Agreement and the consummation of the transactions
contemplated hereby.
7.2.(d) Incumbency Certificate. Incumbency certificates
relating to each person executing any document executed and delivered
to TCS or the Shareholder by Buyer pursuant to the terms hereof.
8. RESOLUTION OF DISPUTES
8.1. Arbitration. Any dispute, controversy or claim arising out of
or relating to this Agreement, any Ancillary Instrument or any contract or
agreement entered into pursuant hereto, or arising out of or relating to the
performance by the parties of its or their terms, shall be settled by binding
arbitration held in the county and state of the party defending any such action
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect, except as specifically otherwise provided in this
Article 8. Notwithstanding the foregoing, Buyer may, in its discretion, apply
to a court of competent jurisdiction for equitable relief from any violation or
threatened violation of the covenants of the Shareholder under Article 5 of
this Agreement, or any covenants not to compete contained in the Consulting and
Noncompetition Agreement.
8.2. Arbitrators. The panel to be appointed shall consist of three
neutral arbitrators.
8.3. Procedures; No Appeal. The arbitrators shall allow such
discovery as the arbitrators determine appropriate under the circumstances and
shall resolve the dispute as expeditiously as practicable, and if reasonably
practicable, within 120 days after the selection of the arbitrators. The
arbitrators shall give the parties written notice of the decision, with the
reasons therefor set out, and shall have 30 days thereafter to reconsider and
modify such decision if any party so requests within 10 days after the
decision. Thereafter, the decision of the arbitrators shall be final, binding,
and nonappealable with respect to all persons, including (without limitation)
persons who have failed or refused to participate in the arbitration process.
8.4. Authority. The arbitrators shall have authority to award
relief under legal or equitable principles, including interim or preliminary
relief. Unless the arbitrators find that exceptional circumstances require
otherwise, the arbitrators will include in the award the prevailing party's
costs of arbitration and reasonable attorneys' fees.
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8.5. Entry of Judgment. Judgment upon the award rendered by the
arbitrators may be entered in any court having in personam and subject matter
jurisdiction. Buyer and the Shareholder hereby submit to the in personam
jurisdiction of the Federal and State courts in California and Florida, for the
purpose of confirming any such award and entering judgment thereon.
8.6. Confidentiality. All proceedings under this Article 8, and
all evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties.
8.7. Continued Performance. The fact that the dispute resolution
procedures specified in this Article 8 shall have been or may be invoked shall
not excuse any party from performing its obligations under this Agreement and
during the pendency of any such procedure all parties shall continue to perform
their respective obligations in good faith.
8.8. Tolling. All applicable statutes of limitation shall be
tolled while the procedures specified in this Article 8 are pending. The
parties will take such action, if any, required to effectuate such tolling.
9. MISCELLANEOUS
9.1. Disclosure Schedule. The Schedules described herein have been
compiled in a bound volume (the "Disclosure Schedule"), executed by TCS and the
Shareholder and dated and delivered to Buyer on the Closing Date. The
Disclosure Schedule includes a table of contents and/or index to all of the
information and documents contained therein. The Disclosure Schedule shall not
vary, change or alter the language of the representations and warranties
contained in this Agreement and, to the extent the language in the Disclosure
Schedule does not conform in every respect to the language of such
representations and warranties, such language in the Disclosure Schedule shall
be disregarded and be of no force or effect.
9.2. Further Assurance. From time to time, at Buyer's request and
without further consideration, TCS and the Shareholder will execute and deliver
to Buyer such documents and take such other action as Buyer may reasonably
request in order to consummate more effectively the transactions contemplated
hereby.
9.3. Disclosures and Announcements. Announcements concerning the
transactions provided for in this Agreement by Buyer, TCS or the Shareholder
shall be subject to the approval of the other parties in all essential
respects, except that approval of TCS or the Shareholder shall not be required
as to any statements and other information which Buyer may submit to the
Securities and Exchange Commission, The Nasdaq Stock Market ("Nasdaq") or
Buyer's shareholders as required pursuant to any rule or regulation of the
Securities and Exchange Commission, Nasdaq or applicable law.
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9.4. Assignment; Parties in Interest.
9.4.(a) Assignment. Except as expressly provided herein, the
rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the
other parties. Notwithstanding the foregoing, Buyer may, without
consent of any other party, cause one or more subsidiaries of Buyer to
carry out all or part of the transactions contemplated hereby;
provided, however, that Buyer shall, nevertheless, remain liable for
all of its obligations, and those of any such subsidiary, to the
Shareholder hereunder.
9.4.(b) Parties in Interest. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the respective
successors and permitted assigns of the parties hereto. Nothing
contained herein shall be deemed to confer upon any other person
(besides the parties hereto) any right or remedy under or by reason of
this Agreement.
9.5. Law Governing Agreement. This Agreement may not be modified
or terminated orally, and shall be construed and interpreted according to the
laws of the State of Florida, excluding its conflicts of law rules.
9.6. Amendment and Modification. Buyer and the Shareholder may
amend, modify and supplement this Agreement in such manner as may be agreed
upon in writing between Buyer and the Shareholder.
9.7. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a)
personally delivered; (b) sent by telecopier, facsimile transmission or other
electronic means of transmitting written documents; or (c) sent to the parties
at their respective addresses indicated herein by registered or certified U.S.
mail, return receipt requested and postage prepaid, or by private overnight
mail courier service. The respective addresses to be used for all such
notices, demands or requests are as follows:
(a) If to Buyer, to:
ABR Information Services, Inc.
00000 X.X. Xxxxxxx 00, Xxxxx
Xxxx Xxxxxx, XX 00000-0000
Attention: Xx. Xxxxxxx Xxxxxxxxx,
Senior Vice President and
Chief Financial Officer
Facsimile: (000) 000-0000
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(with a copy to)
Xxxxx & Lardner
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other person or address as Buyer shall furnish to the Shareholder in
writing.
(b) If to the Shareholder, to:
Xxxx X. Xxxxxxx
00000 Xxxxxxx Xxx
Xxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
(with a copy to)
Joy & Associates
00000 Xxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxx, Esq.
Facsimile: (000) 000-0000
or to such other person or address as the Shareholder shall designate in
writing.
(c) If to TCS, to Buyer as specified above.
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent
by overnight courier pursuant to this paragraph, such communication shall be
deemed delivered upon receipt; and if sent by U.S. mail pursuant to this
paragraph, such communication shall be deemed delivered as of the date of
delivery indicated on the receipt issued by the relevant postal service, or, if
the addressee fails or refuses to accept delivery, as of the date of such
failure or refusal. Any party to this Agreement may change its address for the
purposes of this Agreement by giving notice thereof in accordance with this
Section.
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9.8. Expenses.
9.8.(a) Brokerage. Except as provided in Section 4.3 hereof,
the Shareholder and Buyer each represent and warrant to each other
that there is no broker involved or in any way connected with the
transfer provided for herein on their behalf respectively (and the
Shareholder represents and warrants that there is no broker involved
on behalf of TCS) and each agrees to hold the other harmless from and
against all other claims for brokerage commissions or finder's fees in
connection with the execution of this Agreement or the transactions
provided for herein.
9.8.(b) Expenses to be Paid by the Shareholder. The
Shareholder shall pay, and shall indemnify, defend and hold Buyer and
TCS harmless from and against, each of the following:
(i) Transfer Taxes. Any sales, use, excise,
transfer or other similar tax imposed with respect to the
transactions provided for in this Agreement, and any interest
or penalties related thereto.
(ii) Professional Fees. All fees and expenses of
his own, as well as TCS's, legal, accounting, investment
banking and other professional counsel in connection with the
transactions contemplated hereby; provided, however, that TCS
and Buyer shall be obligated to pay fees incurred by the
Shareholder's professional advisors up to $9,000 in the
aggregate.
9.8.(c) Other. Except as otherwise provided herein, each of
the parties shall bear its own expenses and the expenses of its
counsel and other agents in connection with the transactions
contemplated hereby.
9.8.(d) Costs of Litigation or Arbitration. The parties
agree that (subject to the discretion, in an arbitration proceeding,
of the arbitrators as set forth in Section 8.4) the prevailing party
in any action brought with respect to or to enforce any right or
remedy under this Agreement shall be entitled to recover from the
other party or parties all reasonable costs and expenses of any nature
whatsoever incurred by the prevailing party in connection with such
action, including, without limitation, reasonable attorneys' fees and
prejudgment interest.
9.9. Entire Agreement. This instrument embodies the entire
agreement between the parties hereto with respect to the transactions
contemplated herein, and there have been and are no prior or contemporaneous
agreements, representations or warranties between the parties other than those
set forth or provided for herein.
9.10. Severability. In the event that any provision of this
Agreement shall be held to be invalid or unenforceable for any reason by a
court of competent jurisdiction, the remaining provisions of this Agreement
shall continue in full force and effect as though the invalid or
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unenforceable provisions had not been included herein. Notwithstanding the
foregoing, in the event that any provision relating to the duration or scope of
any covenant or restriction contained herein shall be declared by a court of
competent jurisdiction to exceed the maximum time period and/or scope of
restriction, such provision shall be deemed to become, and thereafter shall be
equal to, the maximum duration and/or scope of restriction deemed enforceable
by said court.
9.11. Gender. Whenever the context requires, words used in the
singular shall be construed to mean or include the plural and vice versa, and
pronouns of any gender shall be deemed to include and designate the masculine,
feminine or neuter gender.
9.12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.13. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
BUYER:
ABR INFORMATION SERVICES, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------------
Xxxxxxx Xxxxxxxxx,
Senior Vice President and
Chief Financial Officer
THE SHAREHOLDER:
/s/ Xxxx X. Xxxxxxx
------------------------------------------
Xxxx X. Xxxxxxx
TCS:
TOTAL COBRA SERVICES
By: /s/ Xxxx X. Xxxxxxx
------------------------------------------
Xxxx X. Xxxxxxx
President
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