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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 18, 1996
MAY & SPEH, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-27872 36-2992650
(Commission File Number) (I.R.S. Employer Identification No.)
1501 Opus Place, Downers Grove, Illinois 60515
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 964-1501
(Former name or former address, if changed since last report)
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This Current Report on Form 8-K contains certain forward-looking statements
that involve risks and uncertainties that could cause actual results to differ
materially from those anticipated, including, but not limited to, renewal of
customer and supplier contracts by GIS (as defined below) as they expire on
terms and conditions favorable to the Registrant and GIS, integration of
operations of the Registrant and GIS, changes in technology, and the risks and
uncertainties described in reports and other documents filed by the Registrant
with the Securities and Exchange Commission, including the Prospectus dated
March 26, 1996 included in the Registrant's Registration Statement on Form S-1
(File No. 33-98302).
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 18, 1996, the Registrant completed the acquisition of all of the
outstanding capital stock of GIS Information Systems, Inc. ("GIS"), a provider
of data processing outsourcing services based in Oak Brook, Illinois. The
Registrant acquired the stock of GIS from Faneuil, Inc. ("Faneuil"), a Boston
based direct marketing services company and a wholly owned subsidiary of Faneuil
ISG, Inc. ("Faneuil ISG"), pursuant to a Stock Purchase Agreement effective July
1, 1996 by and between the Registrant, Faneuil and Faneuil ISG (the "Stock
Purchase Agreement").
The purchase price paid by the Registrant included (i) $16,148,513 in cash
at the closing (including $61,813 of interest from July 1, 1996 through July 18,
1996), (ii) certain deferred payments described below, and (iii) warrants to
acquire Registrant common stock as described below. The cash amount paid at
closing is subject to adjustment following closing based on the Final Net Worth
(as defined in the Stock Purchase Agreement) of GIS as of June 30, 1996. A
portion of the proceeds from the Registrant's initial public offering completed
in April 1996 were used to fund the cash portion of the purchase price. The
deferred portion of the purchase price includes (i) a payment of $0.5 million on
each of the first two anniversaries of the closing date, and (ii) a contingent
payment pursuant to which the Registrant has agreed to pay to Faneuil $1.05
million if Calculated Revenue meets or exceeds 95% of the Revenue Base (as such
terms are defined in the Stock Purchase Agreement) for the 12 month period
beginning July 1, 1996 (the "First Measuring Period"), and an additional $1.05
million if Calculated Revenue meets or exceeds 90% of the Revenue Base for the
12 month period beginning July 1, 1997 (the "Second Measuring Period"). If
Calculated Revenue is between 90% and 95% of the Revenue Base in the First
Measuring Period, the Registrant will pay a pro rata portion of the $1.05
million (for example, if Calculated Revenue for the First Measuring Period were
92.5% of the Revenue Base, the contingent payment would be one-half of $1.05
million). Similarly, if Calculated Revenue is between 85% and 90% in the Second
Measuring Period, the Registrant will pay a pro rata portion of the additional
$1.05 million (for example, if Calculated Revenue for the Second Measuring
Period were 87.5% of the Revenue Base, the contingent payment would be one-half
of $1.05 million). The amount of consideration paid by the Registrant was
determined based on arms-length negotiations.
At the closing, the Registrant delivered to Faneuil a warrant to
purchase 180,000 shares of the Registrant's common stock, par value $.01 per
share, at an exercise price of $16.51 per share (the "Warrant").
The Stock Purchase Agreement includes various representations, warranties
and covenants of the Registrant and Faneuil, as well as reciprocal
indemnification obligations between Faneuil and Faneuil ISG, on the one hand,
and the Registrant. Subject to certain exceptions set forth in the Stock
Purchase Agreement, the indemnification obligations are subject to a limit of $8
million. The Registrant has the right to set off against any deferred or
contingent payment any indemnification obligation of Faneuil or Faneuil ISG.
The Registrant will account for the acquisition of GIS for financial
reporting purposes under the purchase method. The Registrant and Faneuil have
entered into a Disaffiliation Tax Sharing Agreement dated July 1, 1996 pursuant
to which they have agreed to elect to treat the acquisition as
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an asset acquisition for federal income tax purposes under Section 338(h)(10) of
the Internal Revenue Code of 1986, as amended.
The Registrant and Faneuil also have entered into a Services Agreement
dated July 1, 1996 (the "Services Agreement") pursuant to which the Registrant
will provide direct marketing and outsourcing services to Faneuil and its
affiliates during the five year period ending June 30, 2001.
The foregoing is qualified in its entirety by reference to the Stock
Purchase Agreement, the Warrant and the Services Agreement, copies of which are
filed herewith as Exhibits.
ITEM 5. OTHER EVENTS
On July 18, 1996, the Registrant issued a press release announcing the
acquisition of GIS and the Services Agreement. The foregoing is qualified in
its entirety by reference to the press release, a copy of which is filed
herewith as Exhibit 2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The financial information required to be filed as a part of this report is
not yet available. Such information will be filed by amendment as soon as
practicable and in any event within 60 days of the date this report is required
to be filed.
(c) Exhibits
Exhibit 1 Stock Purchase Agreement dated July 1, 1996 by and between
the Registrant, Faneuil, Inc. and Faneuil ISG, Inc.,
including the following Exhibits: 2.5(a)(iii) Form of
Opinions of Seller's Counsel; 2.5(a)(iv) Form of
Disaffiliation Tax Sharing Agreement; 2.5(b)(ii) Form of
Warrant; 2.5(b)(iv) Form of Opinion of Registrant's
Counsel; 2.5(b)(v) Form of Services Agreement; 2.5(c) Form
of Employment Agreement; 2.5(d) Form of Stock Option
Agreement; 10.8 Form of Set-Off Escrow Agreement
Exhibit 2 Press release issued July 18, 1996 by the Registrant
Exhibit 3 Third Amendment to the Term Loan Agreement between the
Registrant and Harris Trust and Savings Bank, dated July
17, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MAY & SPEH, INC.
Date: July 24, 1996 /s/ Robert C. Early
------------------------------------
By: Robert C. Early
Title: Executive Vice President and
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibit Page
<S> <C> <C>
1 Stock Purchase Agreement dated July 1, 1996 by and between the
Registrant, Faneuil, Inc. and Faneuil ISG, Inc., including the
following Exhibits: 2.5(a)(iii) Form of Opinions of Seller's Counsel;
2.5(a)(iv) Form of Disaffiliation Tax Sharing Agreement; 2.5(b)(ii)
Form of Warrant; 2.5(b)(iv) Form of Opinion of Registrant's Counsel;
2.5(b)(v) Form of Services Agreement; 2.5(c) Form of Employment
Agreement; 2.5(d) Form of Stock Option Agreement; 10.8 Form of Set-Off
Escrow Agreement
2 Press release issued July 18, 1996 by the Registrant
3 Third Amendment to the Term Loan Agreement between the
Registrant and Harris Trust and Savings Bank, dated July 17, 1996
</TABLE>
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EXHIBIT 1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of July 1, 1996, by
and between May & Speh, Inc., a Delaware corporation ("Buyer"), and Faneuil,
Inc., a Delaware corporation ("Seller"), and, for purposes of Sections 10, 11,
and 13.5 of this Agreement, Faneuil ISG, Inc., a Canadian corporation
("Faneuil").
RECITALS
1. Buyer is in the business of providing computer-based information
management services, direct marketing services, and data processing outsourcing
services to customers.
2. Seller owns all of the issued and outstanding shares of capital stock
of GIS Information Systems, Inc., an Illinois corporation (the "Company"), which
is in the business of providing data processing outsourcing services to
customers, and Faneuil owns all of the issued and outstanding shares of capital
stock of Seller.
3. Seller desires to sell, and Buyer desires to purchase, all of the
issued and outstanding shares of capital stock of the Company, for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties,
intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
APPLICABLE CONTRACT: any Contract (a) under which the Company has any
rights, (b) under which the Company has any obligation or liability, or (c) by
which the Company or any of the assets owned or used by it is bound.
BEST EFFORTS: the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible; provided, however, that an obligation to use Best
Efforts under this Agreement does not require the Person subject to that
obligation to pay consent fees or other amounts outside the ordinary course of
business, to waive existing contractual rights outside the ordinary course of
business or to take actions that would result in a material adverse change in
the benefits to such Person of this Agreement and the Contemplated Transactions
or to waive any rights under this Agreement.
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BUYER: is defined in the first paragraph of this Agreement.
BUYER STOCK: the common stock, par value $.01 per share, of the Buyer.
CALCULATED REVENUE: with respect to any period, the gross revenues of the
Buyer, the Company and their Subsidiaries for such period, determined in
accordance with GAAP and consistent with the Financial Statements (as defined in
Section 3.4), derived from data processing outsourcing and direct marketing
services performed by the Buyer, the Company or any of their Subsidiaries, and
revenues of any type generated pursuant to the Services Agreement, for (i) any
Person listed as a customer on Schedule 2(a) hereto to whom the Company provided
services at any time during the thirty-six calendar months ending June 30, 1996,
(ii) any of the Persons listed as prospects on Schedule 2(b) hereto, subject to
the exclusions set forth on Schedule 2(b) with respect to certain revenues of
certain prospects, and (iii) any Person whom the Seller identifies in writing to
the Buyer between July 1, 1996 and June 30, 1998 as a prospect for services of
the Buyer, the Company or any of their Subsidiaries; provided that, with respect
to revenues generated pursuant to the Services Agreement, Calculated Revenue
shall include only (i) for the First Measuring Period (as defined in Section
2.3(a)), (A) the first $150,000 in revenues from data processing outsourcing and
(B) all revenues generated in excess of $1,000,000, without including the
$150,000 in data processing outsourcing revenues already included pursuant to
clause (A), and (ii) for the Second Measuring Period (as defined in Section
2.3(a)), (A) all revenues from data processing outsourcing and (B) all revenues
generated in excess of $1,000,000, without including the data processing
outsourcing revenues already included pursuant to clause (A).
CLOSING: the consummation of the transactions described in Section 2.5.
CLOSING AMOUNT: is defined in Section 2.2.
CLOSING DATE: the date and time as of which the Closing actually takes
place.
COMPANY: is defined in the Recitals of this Agreement.
CONFIDENTIAL INFORMATION: any Trade Secrets or other confidential
information, whether patentable or not, of the Company, including but not
limited to technical or non-technical data, a formula, pattern, compilation,
program, device, method, technique, drawing, process, financial data, or list of
actual or potential customers or suppliers.
CONSENT: any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
CONTEMPLATED TRANSACTIONS: all of the transactions contemplated by this
Agreement.
CONTINGENT AMOUNT: is defined in Section 2.3.
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CONTRACT: any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied).
DAMAGES: is defined in Section 10.2.
DEFERRED AMOUNT: is defined in Section 2.2.
EMPLOYMENT AGREEMENTS: the employment agreements in substantially the form
of Exhibit 2.5(c) between the Company and each of the individuals identified as
a "Key Employee" on Schedule 3.20.
ENCUMBRANCE: any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
ENVIRONMENTAL LAW: all applicable foreign, federal, state, regional,
county or local, statutes, laws, regulations, ordinances, codes, rules,
judgments, orders, decrees, permits, concessions, grants, agreements, licenses
or other requirements or restrictions of law pertaining to protection of the
indoor or outdoor environment, health, safety of persons, management or use of
natural resources, protection or use of surface water and groundwater,
conservation, wildlife, waste management, Hazardous Materials or pollution
(including, without limitation, regulation of releases and disposal to air,
land, water and groundwater) now in effect, and includes, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. (S)(S) 9601 et seq., Solid Waste Disposal Act, as amended by the Resource
Conversation and Recovery Act of 1986 and Hazardous and Solid Waste Amendments
of 1984, 42 U.S.C. (S)(S) 6901 et seq., Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1977, 33 U.S.C. (S)(S) 1251 et seq., Clean Air
Act of 1966, as amended, 42 U.S.C. (S)(S) 7401 et seq., Toxic Substances Control
Act of 1976, 15 U.S.C. (S)(S) 2601 et seq., Hazardous Materials Transportation
Act, 49 U.S.C. App. (S)(S) 1801 et seq., Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. (S)(S) 651 et seq., Oil Pollution Act of 1990, 33
U.S.C. (S)(S) 2701 et seq., Emergency Planning and Community Right-to-Know Act
of 1986, 42 U.S.C. (S)(S) 11001 et seq., National Environmental Policy Act of
1969, 42 U.S.C. (S)(S) 4321 et seq., Safe Drinking Water Act of 1974, as
amended, 42 U.S.C. (S)(S) 300(f) et seq. and any similar or implementing state
law.
ERISA: the Employee Retirement Income Security Act of 1974, and
regulations and rules issued pursuant to that Act.
EXCLUDED BUSINESS: the assets and liabilities on the Company's books of
account that are related to the Seller's headquarters in Boston and referred to
in Section 12.2.
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FACILITIES: any real property, leaseholds, or other real property
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures, or fixtures currently or formerly located
thereon.
FINAL NET WORTH: the Company's total assets minus the Company's total
liabilities, each of which is determined in accordance with GAAP and consistent
with the Financial Statements, except that there will be no reserve for
uncollectible or doubtful accounts receivable, and without including any
intercompany accounts between the Company and Seller or any other affiliate of
the Company or any amounts attributable to goodwill.
GAAP: generally accepted accounting principles in the United States.
GOVERNMENTAL AUTHORIZATION: any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
GOVERNMENTAL BODY: any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
HAZARDOUS MATERIALS: any substance, chemical, compound, product, solid,
gas, liquid, waste, byproduct, pollutant, contaminant, condition, object or
material which is or may be hazardous to human health or safety or the
environment due to its ignitability, corrosivity, reactivity, explosiveness,
toxicity, carcinogenicity, infectiousness, radioactivity or other harmful or
potentially harmful properties or effects, including, without limitation, all of
those substances, chemicals, compounds, products, solids, gases, liquids,
wastes, byproducts, pollutants, contaminants, conditions, objects and materials
and combination thereof which are now or hereafter listed or defined as
hazardous or toxic, or are regulated, pursuant to Environmental Laws, including,
without limitation, petroleum products and asbestos.
INDEMNIFIED PERSONS: is defined in Section 10.2.
INTELLECTUAL PROPERTY: is defined in Section 3.22.
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INTELLECTUAL PROPERTY ASSETS: is defined in Section 3.22.
IRC: the Internal Revenue Code of 1986, and regulations issued by the IRS
pursuant to the Internal Revenue Code.
IRS: the United States Internal Revenue Service, and, to the extent
relevant, the United States Department of the Treasury.
KNOWLEDGE: the Seller and the Company will be deemed to have "Knowledge" of
a particular fact or other matter if:
(a) any of William B. Blakey, Frank J. Burns, Jason A. Cenicola,
Jeffrey B. Finestone, Michael J. Geisen, or G. Dennis O'Brien is actually aware
of such fact or other matter; or
(b) any of the individuals listed in (a) above could reasonably be
expected to discover or otherwise become aware of such fact or other matter in
the course of conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
As used in this Agreement, "Knowledge of Seller" or "Seller's Knowledge" is
deemed to include Knowledge of the Company.
LEGAL REQUIREMENT: any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
MATERIAL ADVERSE EFFECT: any change, event or effect that is materially
adverse to the business, assets, liabilities, financial condition, results of
operations, or prospects of the Company.
ORDER: any award, decision, injunction, judgment, order, ruling,
settlement, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.
ORDINARY COURSE OF BUSINESS: an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; and
(b) such action is not required by any Legal Requirement or
Organizational Documents to be authorized by the board of directors of such
Person (or by any Person or group of Persons exercising similar authority) and
is not required to be specifically authorized by the parent company (if any) of
such Person.
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ORGANIZATIONAL DOCUMENTS: (a) the articles or certificate of incorporation
and the bylaws of a corporation; (b) the partnership agreement and any statement
of partnership of a general partnership; (c) the limited partnership agreement
and the certificate of limited partnership of a limited partnership; (d) any
charter or similar document adopted or filed in connection with the creation,
formation, or organization of a Person; and (e) any amendment to any of the
foregoing.
PERSON: any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
PLAN: is defined in Section 3.13.
PRIME RATE: the rate of interest which at any time, and from time to time,
shall be the rate of interest then most recently announced by the Harris Trust
and Savings Bank, Chicago, Illinois, as its prime rate (which may not be its
lowest or best rate).
PROCEEDING: any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before any Governmental
Body or arbitrator.
RECENT BALANCE SHEET: is defined in Section 3.4.
RELEASE: any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing of Hazardous
Material into the indoor or outdoor environment.
REPRESENTATIVE: with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
REVENUE BASE: the amount of the Company's gross revenues, determined in
accordance with GAAP and consistent with the Financial Statements, for the
twelve (12) calendar months ended June 30, 1996.
SECURITIES ACT: the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
SELLER: is defined in the first paragraph of this Agreement.
SERVICES AGREEMENT: an agreement between Buyer and Seller, in substantially
the form of Exhibit 2.5(b)(v), pursuant to which Seller will agree to purchase
from Buyer and Buyer will agree to provide to Seller direct marketing and data
processing outsourcing services.
SHARES: is defined in Section 3.3.
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STOCK OPTION AGREEMENTS: the Stock Option Agreements, in the form of
Exhibit 2.5(d), pursuant to the 1995 Key Employee Stock Option Plan of the
Buyer.
SUBSIDIARY: with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
TAX: any tax (including any income tax, capital gains tax, value-added
tax, sales tax, property tax, gift tax, or estate tax), levy, assessment,
tariff, duty (including any customs duty), deficiency, or other fee, and any
related charge or amount (including any fine, penalty, interest, or addition to
tax), imposed, assessed, or collected by or under the authority of any
Governmental Body or payable pursuant to any tax-sharing agreement or any other
Contract relating to the sharing or payment of any such tax, levy, assessment,
tariff, duty, deficiency, or fee.
TAX RETURN: any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
THREATENED: a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
WARRANT: a warrant to purchase shares of Buyer Stock in substantially the
form of Exhibit 2.5(b)(ii).
WARRANT SHARES: the shares of Buyer Stock issuable upon conversion of the
Warrant.
2. SALE AND TRANSFER OF COMPANY SHARES; CLOSING
2.1 SHARES. Subject to the terms and conditions of this Agreement, at the
Closing, Seller will sell, transfer, convey, assign and deliver the Shares to
Buyer, and Buyer will purchase the Shares from Seller.
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2.2 PURCHASE PRICE. The aggregate cash purchase price (the "Purchase
Price") for the Shares will be the sum of the following:
(i) $16,086,700 (the "Closing Amount"), payable on the Closing Date, as
adjusted pursuant to Section 2.6;
(ii) $1 million (the "Deferred Amount"), payable $500,000 on the first
anniversary of the Closing Date and $500,000 on the second anniversary of
the Closing Date, without interest and subject to any set-off pursuant to
Section 10.8;
(iii) the Contingent Amount referred to in Section 2.3 below;
(iv) interest on the Closing Amount accrued at the Prime Rate per annum
for the period from and including July 1, 1996 to but not including the
Closing Date (the "Closing Interest"); and
(v) the Warrant to be delivered to Seller pursuant to Section
2.5(b)(ii).
2.3 EARN-OUT. (a) Subject to the set-off rights granted to Buyer pursuant
to Section 10.8, as part of the Purchase Price, the Buyer shall pay to the
Seller up to $2.1 million (the "Contingent Amount"). $1,050,000 shall be paid to
the Seller in the event that the Calculated Revenue for the twelve (12) calendar
months ended June 30, 1997 (the "First Measuring Period") meets or exceeds the
amount that is equal to 95% of the Revenue Base. In the event that the
Calculated Revenue is between 90% and 95% of the Revenue Base, the Buyer shall
pay the Seller a pro rata portion of $1,050,000 (for example, if the Calculated
Revenue for the First Measuring Period were 92.5% of the Revenue Base, the Buyer
would pay the Seller one-half of $1,050,000). $1,050,000 shall be paid to the
Seller in the event that the Calculated Revenue for the twelve (12) calendar
months ended June 30, 1998 (the "Second Measuring Period") meets or exceeds the
amount that is equal to 90% of the Revenue Base. In the event that the
Calculated Revenue is between 85% and 90% of the Revenue Base, the Buyer shall
pay the Seller a pro rata portion of $1,050,000 (for example, if the Calculated
Revenue for the Second Measuring Period were 87.5%, the Buyer would pay the
Seller one-half of $1,050,000). The two payments referred to above are referred
to below as the "Contingent Payments".
(b) Attached to this Agreement as Schedule 2.3 is a calculation of the
Revenue Base for the twelve months ended June 30, 1996. If the Buyer believes
that the Seller's calculation of the Revenue Base is inconsistent with the
definition thereof set forth in Section 1, within thirty (30) days after the
Closing Date the Buyer shall notify the Seller of its disagreement. The Buyer
and the Seller shall promptly meet to resolve any disputes. If they are unable
to resolve any disputes, such disputes shall be resolved pursuant to the
mechanism described in subsection (e) below. The calculation of the Revenue
Base, as finally determined pursuant to this subsection (b), is referred to
herein as the "Revenue Base Calculation".
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(c) Each of the First Measuring Period and the Second Measuring Period
(collectively, the "Measuring Periods") shall be treated separately, such that a
payment of the Contingent Payment allocable to a particular Measuring Period
will be made in respect of such Measuring Period only if the Calculated Revenue
for such Measuring Period equals or exceeds the percentage of the Revenue Base
specified in subsection (a) above for such Measuring Period, regardless of the
Calculated Revenue for any prior or subsequent period. Each Contingent Payment
made in accordance with this Section 2.3 shall be made not later than sixty (60)
days after the close of the applicable Measuring Period. Any Contingent Payment
not made on or before the 60th day after the close of the applicable Measuring
Period shall bear interest at the Prime Rate plus three percent (3%) per annum
from such 60th day until the date such Contingent Payment is made ("Default
Interest"); provided, however, that (i) if any Contingent Payment is placed in
escrow pursuant to Section 10.8 pending resolution of a dispute with respect to
indemnification and set-off, Default Interest shall be due on such escrowed
Contingent Payment only with respect to the amount of such escrowed Contingent
Payment which is finally determined to have been wrongfully retained by the
Buyer and to be due to the Seller; and (ii) the amount of Default Interest owed
by the Buyer with respect to any escrowed Contingent Payment shall be decreased
by the amount of interest earned on such escrowed amount to the extent such
amount is paid over to the Seller.
(d) The Buyer hereby agrees that until July 1, 1998, in the event of a
sale, lease or other transfer of all or substantially all of the business of the
Company or the Buyer (whether through the sale or other disposal of stock,
assets or otherwise), Buyer shall cause such transferee to be bound by and
assume the obligations of Buyer with respect to this Section 2.3, to the extent
such obligations are then unperformed. The parties hereby agree that violations
of this Section 2.3(d) by the Company or the Buyer will result in irreparable
injury to the Seller, that the remedy at law alone will be an inadequate remedy
for such breach and that, in addition to any other remedy they may have,
following written notice to the Company and the Buyer specifying such material
violation and failure to cure the same within 10 business days after receipt of
such notice, the Seller shall be entitled to enforce the specific performance of
this Section 2.3(d) by the breaching party and to seek both temporary and
permanent injunctive relief (to the extent permitted by law).
(e) The Buyer will deliver to the Seller, within thirty (30) days after
the close of any calendar quarter in a Measuring Period (other than any calendar
quarter ending on June 30), a statement of the Calculated Revenue for such
calendar quarter, including a breakdown of each of the three components set
forth in the definition of Calculated Revenue. At the request of Seller,
representatives of Buyer and Seller will meet to discuss and review such
statement. As soon as practicable, but within sixty (60) days after the closing
of each Measuring Period, the Buyer shall deliver to the Seller a computation of
the Calculated Revenue for such Measuring Period (a "Contingent Payment
Statement"). Each Contingent Payment Statement shall be accompanied by a report
of Price Waterhouse LLP or another accounting firm of national reputation (in
each case, the "Buyer Auditors") to the effect that the Contingent Payment
therein was calculated on a basis consistent with the Revenue Base Calculation
and otherwise in accordance with the provisions of this Section 2.3. At the
request of the Seller, Deloitte & Touche or another accounting firm of national
reputation (in each case, the "Seller Auditors") shall be given access at
reasonable times
<PAGE>
to the books and records of the Company and the Buyer to the extent reasonably
necessary to verify that the Contingent Payment Statement was prepared on a
basis consistent with the Revenue Base Calculation and otherwise in conformity
with the provisions of this Section 2.3. Any information obtained by the Seller
and the Seller Auditors shall be kept confidential and shall not be used by them
other than in connection with the enforcement of the provisions of this
Agreement. Within thirty (30) days after the receipt by the Seller of a
Contingent Payment Statement, the Seller may propose any adjustments thereto
which it deems to be appropriate. The parties shall promptly cooperate in good
faith for the purpose of resolving any proposed adjustment, which resolution, if
achieved, shall be binding upon the Seller and the Buyer and not subject to
dispute or review. If the parties and their respective auditors are unable to
resolve a dispute with respect to the amount of any Contingent Payment, the
Buyer and the Seller, after consulting with their respective auditors, shall
appoint an independent accounting firm of national reputation reasonably
acceptable to them, whose determination of the amount of the disputed Contingent
Payment shall be final and binding on all parties hereto and not subject to
dispute or review. The fees and expenses of the third accounting firm shall be
paid by the party (i.e., the Buyer or the Seller) whose last proposed offer for
the settlement of the relevant dispute is farther from the Contingent Payment as
finally determined pursuant to this paragraph.
2.4 CLOSING. The Closing will take place at the offices of Freeborn &
Peters, 311 South Wacker Drive, Suite 3000, Chicago, Illinois, 60606, at 10:00
a.m. (local time) on the second business day after all of the conditions set
forth in Section 7 are satisfied or waived by the Buyer. Subject to the
provisions of Section 9 and notwithstanding the provisions of Section 13.13,
failure to consummate the Contemplated Transactions on the date and time and at
the place determined pursuant to this Section 2.4 will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement.
2.5 CLOSING OBLIGATIONS. At the Closing:
(a) Seller will deliver to Buyer:
(i) stock certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers) for transfer to Buyer;
(ii) a certificate executed by Seller representing and warranting
to Buyer that each of Seller's representations and warranties in this
Agreement was accurate in all material respects as of the date of this
Agreement and is accurate in all material respects (without giving
duplicative effect to any materiality qualification contained in such
representation or warranty) as of the Closing Date as if made on the
Closing Date;
(iii) the written opinions of Bingham, Dana & Gould LLP, counsel
to Seller, and of Thompson Dorfman Sweatman, counsel to Faneuil, each dated
as of the Closing Date and in substantially the form of Exhibit
2.5(a)(iii);
<PAGE>
(iv) a Disaffiliation Tax Sharing Agreement, in the form of
Exhibit 2.5(a)(iv) (the "Tax Sharing Agreement"), signed by the Seller;
(v) a Services Agreement, signed by the Seller; and
(vi) a release from Original Research II Corporation, Equitel
Corp. and New Service, Inc. (the "Co-Guarantors") of the Company from all
obligations or liabilities the Company may have as a co-obligor or
otherwise to the Co-Guarantors under each of (A) the Subsidiary Guaranty I
dated August 22, 1994 among the Company and the Co-Guarantors in favor of
Toronto-Dominion (New York), Inc., and (B) the Subsidiary Guaranty II dated
August 22, 1994 among the Company and the Co-Guarantors in favor of
Toronto-Dominion Bank.
(b) Buyer will deliver to Seller:
(i) the Closing Amount, by wire transfer or such other form of
same day funds as Seller shall have designated in writing to Buyer at least
24 hours prior to the Closing Date;
(ii) the Warrant;
(iii) a certificate executed by Buyer representing and warranting
to Seller that each of Buyer's representations and warranties in this
Agreement was accurate in all material respects as of the date of this
Agreement and is accurate in all material respects (without giving
duplicative effect to any materiality qualification contained in such
representation or warranty) as of the Closing Date as if made on the
Closing Date;
(iv) the written opinion of Freeborn & Peters, counsel to Buyer,
dated as of the Closing Date, substantially in the form of Exhibit
2.5(b)(iv);
(v) the Tax Sharing Agreement, signed by Buyer; and
(v) a Services Agreement, signed by the Buyer.
.
(c) Buyer will deliver to the individuals identified as key employees
on Schedule 3.20 the duly executed Employment Agreements in substantially the
form of Exhibit 2.5(c).
(d) Buyer will deliver the duly executed Stock Option Agreements to
the individuals and for the number of shares of Buyer Stock designated on
Schedule 2.5(d).
<PAGE>
2.6 ADJUSTMENT.
(a) Within forty-five (45) days after the Closing Date, the Seller
shall prepare and deliver to the Buyer a balance sheet of the Company as of June
30, 1996 (the "Closing Balance Sheet"), prepared in accordance with GAAP and
consistent with the Financial Statements, except that the Closing Balance Sheet
will not contain the footnote disclosure required by GAAP. At the time it
delivers the Closing Balance Sheet, the Seller will also deliver an income
statement of the Company for the period from January 1, 1996 to June 30, 1996,
prepared in accordance with GAAP (except that such income statement will not
contain the footnote disclosure required by GAAP) and consistent with the
Financial Statements. The Buyer agrees to provide the Seller and its
accountants access to the Buyer's books and records and the use of and access to
the Company's employees (at no charge to the Seller) to the extent reasonably
necessary for the preparation of the Closing Balance Sheet and the related
income statement.
(b) When the Seller delivers the Closing Balance Sheet and related
income statement to the Buyer, the Seller shall also deliver copies of all work
papers, schedules and calculations used in the preparation thereof and
certificates of Seller's President and Chief Financial Officer certifying (i)
that the Closing Balance Sheet was prepared in accordance with GAAP (except for
the lack of footnote disclosure) and consistent with the Financial Statements,
and (ii) as to the amount of Final Net Worth (with such determination of the
Final Net Worth referred to herein as the "Seller's Proposed Valuation"). After
the delivery of the Closing Balance Sheet and related income statement and
certificates, the Seller shall make available appropriate representatives to
discuss with the Buyer and its representatives the Closing Balance Sheet and the
Seller's Proposed Valuation. Within forty-five (45) days after receipt of the
Closing Balance Sheet and related income statement and the accompanying
certificates, the Buyer shall notify the Seller of its agreement or disagreement
with the accuracy of the Closing Balance Sheet and the Seller's Proposed
Valuation and, in the event of any disagreement, the Buyer shall furnish the
Seller with a written statement, in reasonable detail, describing the basis for
such disagreement. If the Buyer disputes any aspect of the Seller's Proposed
Valuation within such forty-five (45) day period, the parties shall promptly
cooperate in good faith for a period not to exceed thirty (30) days for the
purpose of resolving any dispute regarding any aspect of the Seller's Proposed
Valuation, which resolution, if achieved, shall be binding upon the Seller and
the Buyer and not subject to dispute or review. If the parties and their
respective auditors, after negotiating in good faith during such negotiation
period, still disagree about the Seller's Proposed Valuation and Seller does not
accept Buyer's proposed valuation of the Final Net Worth (the "Buyer's Proposed
Valuation"), the Buyer and the Seller, after consulting with their respective
auditors, shall appoint an independent accounting firm of national reputation
reasonably acceptable to them to conduct a review and test of the Closing
Balance Sheet. After such review and test, such arbitrating accounting firm
shall be required to select, on or before the 30th day after being retained by
the Seller and the Buyer, as the final valuation of the Final Net Worth, either
the Buyer's Proposed Valuation or the Seller's Proposed Valuation or an amount
that falls between the two (with the final valuation prepared by such
arbitrating accounting firm referred to below as the "Final Valuation") based on
such arbitrating accounting firm's assessment of the Final Net Worth consistent
with the definition thereof. Each of the Seller and the Buyer shall be bound by
<PAGE>
such determination of the Final Valuation. The fees and expenses of such
arbitrating accounting firm shall be paid one-half by the Seller and one-half by
the Buyer.
(c) At the time the Seller delivers the Closing Balance Sheet as
provided in paragraph (a) above, it will also pay to the Buyer the amount of any
Final Adjustment (as defined below) that the Closing Balance Sheet indicates
will be payable by the Seller to the Buyer. At the time the Buyer indicates its
disagreement with the Seller's Proposed Valuation as contemplated by paragraph
(b) above, the Buyer will pay to the Seller any undisputed portion of the Final
Adjustment that the Buyer's Proposed Valuation indicates will be payable by the
Buyer to the Seller.
(d) Upon the determination of the Final Net Worth pursuant to
paragraph (b) of this Section 2.6, in the event that the Final Net Worth is
greater than $1,500,000, the Buyer shall pay the amount of such difference to
the Seller; in the event that the Final Net Worth is less than $1,500,000, the
Seller shall pay the amount of such difference to the Buyer. Any such payment:
shall be accompanied by interest accrued at the Prime Rate per annum from and
including the Closing Date to but excluding the date of payment; shall be
treated for purposes of this Agreement as an adjustment to the Closing Amount;
and shall be referred to in this Agreement as the "Final Adjustment". Any such
payment shall be made by wire transfer within three business days after the
final determination of the Final Net Worth.
2.7 EFFECTIVE DATE. The effective date of the Contemplated Transactions
shall be July 1, 1996.
2.8 CASH ADJUSTMENT. The Seller and the Buyer have agreed to make a net
cash payment to reflect (i) cash put by the Seller into the Company and (ii)
cash taken by the Seller from the Company:
(a) During the period from and including July 1, 1996 to and
including the Closing Date (the "Interim Period"), the Seller shall advance
to the Company its cash requirements in accordance with past practices and
shall pay in the ordinary course, consistent with past practice, all checks
written on behalf of the Company.
(b) The total amount of cash advanced by the Seller during the
Interim Period, other than with respect to the Excluded Business, is
referred to as the "Advanced Cash" and the total amount of cash withdrawn
by the Seller during the Interim Period, other than with respect to the
Excluded Business, is referred to as the "Withdrawn Cash", and the net
amount of the Advanced Cash and the Withdrawn Cash is referred to as the
"Net Transferred Cash".
(c) Within thirty days after the Closing Date, the Seller shall
deliver to the Buyer a statement of the Net Transferred Cash. The Seller
agrees to give the Buyer and its accountants access to the Seller's books
and records, but only to the extent necessary in order to verify the
statement of the amount of Net Transferred Cash. The Buyer shall
<PAGE>
notify the Seller of any disagreement with such statement within 30 days of
receipt. If there is any disagreement, the Seller and the Buyer shall meet
to resolve any discrepancies. In the event the Seller and the Buyer are
unable to agree on the amount of Net Transferred Cash, the Buyer and the
Seller, after consulting with their respective auditors, shall appoint an
independent accounting firm of national reputation reasonably acceptable to
them to make a final determination of Net Transferred Cash, which
determination shall be made within 30 days of the such appointment and
shall be final and binding on the Buyer and the Seller. Fees of such
arbitrating accounting firm shall be paid one-half by the Seller and one-
half by the Buyer.
(d) After resolving any such disagreement, the Seller or the Buyer
will make a payment based on the Net Transferred Cash. In the event that
the amount of Advanced Cash exceeds the amount of Withdrawn Cash (i.e., the
Seller transferred net cash into the Company), the Buyer shall pay to the
Seller the amount of such Net Transferred Cash. In the event that the
amount of Withdrawn Cash exceeds the amount of Advanced Cash (i.e. the
Seller withdrew net cash from the Company), the Seller shall pay to the
Buyer the amount of such Net Transferred Cash. Any such payment shall also
include interest on such amount from the Closing Date to the date preceding
the date of payment, calculated at the Prime Rate per annum. Any such
payment shall be made in same day funds by wire transfer to account(s)
designated by the Seller or the Buyer, as applicable .
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Seller is a corporation duly organized, validly existing, and in good
standing under the laws of its state of incorporation. Seller has full
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder and to consummate the Contemplated Transactions to be
consummated by it, including, without limitation, to own, hold, sell, transfer
and deliver the Shares.
(b) Schedule 3.1 identifies the Company's jurisdiction of incorporation and
each other jurisdiction in which it is authorized to do business as a foreign
corporation. The Company is a corporation duly organized, validly existing, and
in good standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted and to own or use the properties and assets that it purports to own or
use. The Company has no Subsidiaries and does not otherwise have, own or
control, directly or indirectly, any equity interest in or loans to any
corporation, partnership, limited liability company or other business entity.
The Company is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which the
failure to so qualify would have a Material Adverse Effect.
<PAGE>
(c) Seller has delivered to Buyer correct and complete copies of the
Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
the Seller, enforceable against the Seller in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, or other similar Legal
Requirements affecting the enforcement of creditors' rights generally and except
that the availability of equitable remedies is subject to the discretion of the
court before which any proceeding therefor may be brought. The Seller has all
requisite corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder, and to consummate and perform the
Contemplated Transactions.
(b) Except as set forth on Schedule 3.2(b), neither the execution and
delivery of this Agreement by the Seller and Faneuil, nor the consummation or
performance by Seller of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Company or the Seller,
or (B) any resolution adopted by the board of directors or the stockholders
of the Company or the Seller;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any
relief under, any Legal Requirement or any Order to which the Company or
the Seller, or any of the assets owned or used by the Company or the
Seller, may be subject, except for any contravention, conflict, violation,
right or exercise that would not have a Material Adverse Effect;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company, other than
any of the foregoing that would not have a Material Adverse Effect;
(iv) except for income taxes becoming payable by the Company and
the Seller in connection with the sale of the capital stock of the Company
to the Buyer and the Section 338(h)(10) Election referred to in the Tax
Sharing Agreement, cause Buyer or the Company to become subject to, or to
become liable for the payment of, any Tax;
(v) except for the increase in valuation of the Company's assets
resulting from the Section 338(h)(10) Election referred to in the Tax
Sharing Agreement, cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
<PAGE>
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any of the Applicable
Contracts; or
(vii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by the Company.
(c) Except as set forth in Schedule 3.2(c) and except for any notices or
Consents already obtained or made, neither the Seller nor the Company is or will
be required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION.
(a) The authorized equity securities of the Company consist of 2,000
shares of common stock, no par value per share, 1,000 shares of which are issued
and outstanding (the "Shares"). Except as set forth in Schedule 3.3(a), Seller
is and will be on the Closing Date the sole record and beneficial owner and
holder of the Shares, free and clear of all Encumbrances. Except as set forth in
Schedule 3.3(a), no legend or other reference to any purported Encumbrance
appears upon any certificate representing the Shares. All of the Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
(b) Except as set forth in Schedule 3.3(b), other than the Shares,
there are no authorized or outstanding equity securities or other securities of
the Company, and there are no options, warrants, calls, conversion rights,
commitments or agreements of any kind to which the Company or Seller is a party
or by which the Company or Seller may be bound that obligate or may obligate the
Company to issue, deliver or transfer, or otherwise cause to be issued,
delivered or transferred, additional shares of equity securities or other
securities of the Company or that obligate or may obligate the Company to grant,
extend or enter into any such option, warrant, call, conversion right,
commitment or agreement. Except as set forth in Schedule 3.3(b), there are no
outstanding arrangements, agreements, commitments or understandings of any kind
to which the Seller or the Company is a party which affect or relate to the
voting, issuance, purchase, redemption, repurchase or transfer of any of the
Shares, except for the Contemplated Transactions. Except as set forth in
Schedule 3.3(b), other than the Contemplated Transactions, each of the Company
and Seller has not, and prior to the Closing will not, become party to or
subject to any Contract wherein any Person has a right or option to purchase or
acquire any rights in any securities of the Company. The Company does not own,
and has no arrangement, commitment or agreement to acquire, any equity
securities or other securities of any Person or any direct or indirect equity or
ownership interest in any other business.
3.4 FINANCIAL STATEMENTS. Schedule 3.4 sets forth the unaudited financial
statements of the Company for the four months ended December 31, 1994 and the
fiscal year ended December 31, 1995, the unaudited balance sheet of the Company
as at May 31, 1996 (the
<PAGE>
"Recent Balance Sheet"), and the related statements of income, changes in
stockholders' equity, and cash flow (the Recent Balance Sheet and such other
financial statements are referred to collectively as the "Financial
Statements"). The Financial Statements fairly present the financial condition
and the results of operations, changes in stockholders' equity, and cash flow of
the Company as at the respective dates of and for the periods referred to
therein, all in accordance with GAAP, consistently applied, subject to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, have a Material Adverse Effect) and the absence of notes and
except that none of the Financial Statements include any assets, liabilities,
results of operations or cash flows constituting the Excluded Business.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Company, all of which have been or prior to the
Closing will be made available to Buyer, are complete and correct in all
material respects and have been maintained in all material respects in
accordance with sound business practices. The minute books of the Company
contain accurate and complete records, in all material respects, of all meetings
held of, and corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of the Company, and no
meeting of any such stockholders, Board of Directors, or committee has been held
since August 25, 1994 for which minutes have not been prepared and are not
contained in such minute books. Within five business days after the Closing
Date, all of those books and records will be in the possession of the Company or
delivered to the Buyer.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) Schedule 3.6 sets forth a true and complete list of all real
property leased by the Company. The Company does not own any real property.
Schedule 3.6 includes a list of all material improvements, additions and
alterations made to the premises leased by the Company in Oak Brook, Illinois
since the beginning of the term of the lease relating thereto.
(b) Except as set forth on Schedule 3.6(b), the Company has good and
valid title to, or, in the case of leased properties and assets, valid leasehold
interest in, all of its tangible properties and assets, real, personal and
mixed, material to its business, free and clear of any Encumbrances (other than
liens for taxes that are not yet due and payable), except as reflected in the
Financial Statements and except for such imperfections of title and
Encumbrances, if any, which are not substantial in character, amount or extent,
and which do not materially detract from the value, or materially interfere with
the present use, of the property subject thereto or affected thereby.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. Except as set forth on Schedule
3.7, the machinery and equipment currently owned or operated by the Company and
the real property leasehold in Oak Brook, Illinois and any buildings, plants,
structures, or fixtures currently located thereon are, in all material respects,
(i) adequate for the continued conduct of the Company's business after the
Closing in substantially the same manner as conducted prior to the Closing, (ii)
suitable for the uses to which they are currently employed, (iii) in good
operating
<PAGE>
condition and repair, and (iv) not obsolete. The Uninterrupted Power Supply
system that is currently not in use (as reflected on Schedule 3.7) would cost no
more than $16,000 to return to use.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are
reflected on the Recent Balance Sheet or on the accounting records of the
Company as of June 30, 1996 (collectively, the "Accounts Receivable") represent
or will represent valid obligations arising from sales actually made or services
actually performed by the Company in the Ordinary Course of Business. Unless
paid prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date collectible. Each of the Accounts Receivable either has been or is
collectible in full, without any set-off or recoupment, within one hundred
twenty days after the day on which it first becomes due and payable. To Seller's
Knowledge and except as set forth in Schedule 3.8, as of the date of this
Agreement, there is no contest, claim, or right of set-off or recoupment, other
than returns in the Ordinary Course of Business, under any Contract with any
obligor of an Account Receivable relating to the amount or validity of such
Account Receivable, and, to Seller's Knowledge, there are no specific facts or
circumstances (whether asserted or unasserted) that could give rise to any such
contest, claim or right. Except as set forth in Schedule 3.8, none of the
Accounts Receivables is contingent upon the performance by the Company of any
obligation or Contract. Except as set forth in Schedule 3.8, no Person has a
lien on any of the Accounts Receivable and no agreement for deduction or
discount has been made with respect to any of the Accounts Receivable. Schedule
3.8 contains a complete and accurate list of all Accounts Receivable as of June
30, 1996 and sets forth the aging of such Accounts Receivable in the aggregate
and by customer (0-30 days, 31-60 days, 61-90 days and greater than 90 days).
3.9 INVENTORY. The Company has no inventory, except for office supplies
which are, in all material respects, usable in the Ordinary Course of Business.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 3.10, the
Company has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise), including
"pass-through" obligations (i.e., an obligation of the Company to a vendor which
is passed through on the same terms by the Company to its applicable customer)
except for liabilities or obligations reflected or reserved against in the
Recent Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the date thereof which are not, individually or in the aggregate,
material to the Company.
3.11 TAXES
(a) Except as set forth in Schedule 3.11, all Tax Returns that are or
were required to be filed by or with respect to the Company prior to the date
hereof, either separately or as a member of a group of corporations, with
respect to any taxable period ending on or before the Closing Date, have been or
will be filed when due or are subject to a valid extension (and will be filed
when due) except as set forth in Schedule 3.11. The Company has paid, or made
provision for the payment of, all Taxes that have or may have become due, or
pursuant to any assessment
<PAGE>
received by Seller or the Company, except such Taxes, if any, as are listed in
Schedule 3.11 and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in the Recent
Balance Sheet.
(b) Except as set forth in Schedule 3.11, the United States federal
and state income Tax Returns of the Company are closed by the applicable statute
of limitations for all taxable years through December 31, 1991. Except as set
forth in Schedule 3.11, no Governmental Body is currently auditing, or given
notice of any proposed audit, for any Tax relating to the Company. Schedule 3.11
describes all adjustments assessed or proposed in writing to the United States
federal income Tax Returns filed with respect to the Company or any group of
corporations including the Company for all taxable years ending after December
31, 1991, and the resulting deficiencies proposed by the IRS. Except as set
forth in Schedule 3.11, neither the Seller nor the Company has given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of the Company or for which the Company may be liable.
(c) Except as set forth in Schedule 3.11, no consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by the Company. Except as
set forth in Schedule 3.11, all Taxes that the Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Body or
other Person.
(d) Except for the Tax Sharing Agreement, there is no tax sharing
agreement that will require any payment by the Company after the Closing Date.
(e) The Buyer acknowledges that all of the foregoing representations
and warranties in this Section 3.11, to the extent they relate to periods ending
on or before August 24, 1994, are made to the best of Seller's Knowledge.
3.12 NO MATERIAL ADVERSE CHANGE. To Seller's Knowledge, except as set
forth on Schedule 3.12, since May 31, 1996, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of the Company.
3.13 EMPLOYEE BENEFITS. Schedule 3.13 contains a complete and accurate
list of all employee compensation, incentive or benefit plans, programs,
policies, commitments or other arrangements (whether or not in writing)
maintained by the Company for the benefit of any active, former or retired
employee or independent contractor of the Company, or with respect to which the
Company has any material liability (the "Plans"). To the extent applicable, the
Plans comply with the requirements of ERISA and the IRC, and any Plan intended
to be qualified under Section 401(a) of the IRC has either obtained from the IRS
a favorable determination letter as to its qualified status or still has a
remaining period of time under applicable IRC regulations or IRS pronouncements
in which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination. Seller has delivered to Buyer
copies of the most
<PAGE>
recent IRS letters and Forms 5500 with respect to any such Plan. No Plan is
covered by Title IV of ERISA or Section 412 of the IRC. Neither the Company nor
any officer or director of the Company has incurred any liability or penalty
under Section 4975 through 4980B of the IRC or Title 1 of ERISA with respect to
any Plan. Each Plan has been maintained and administered in all material
respects in compliance with its terms and with all applicable Legal
Requirements. No suit, action or other litigation has been brought, or to
Seller's Knowledge, is Threatened, against any such Plan or against the Company
in respect of any such Plan. All contributions and premium payments required to
be made as of the date hereof to the Plans have been made. Except as set forth
on Schedule 3.13, the consummation of the Contemplated Transactions will not
result in the payment, vesting, or acceleration of any benefit under any of the
Plans.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Schedule 3.14(a):
(i) the Company is, and at all times has been, in full compliance
in all material respects with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
(ii) to Seller's Knowledge, no event has occurred or circumstance
exists that (with or without notice or lapse of time) may constitute or
result in a violation by the Company of, or a failure on the part of the
Company to comply with, any Legal Requirement, other than any violation or
failure to comply that would not have a Material Adverse Effect; and
(iii) the Company has not received, at any time, any notice or
other communication (whether oral or written) from any Governmental Body or
any other Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any Legal Requirement on the part
of the Company.
(b) Schedule 3.14(b) contains a complete and accurate list of each
material Governmental Authorization that is held by the Company. Each
Governmental Authorization listed or required to be listed in Schedule 3.14(b)
is valid and in full force and effect. Except as set forth in Schedule 3.14(b):
(i) the Company is, and at all times has been, in full compliance
in all material respects with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in
Schedule 3.14(b);
(ii) to Seller's Knowledge, no event has occurred or circumstance
exists that may reasonably be expected to (with or without notice or lapse
of time) (A) constitute or result directly or indirectly in a material
violation of or a material failure to comply with any term or requirement
of any Governmental Authorization listed or required to be listed in
Schedule 3.14(b), or (B) result directly or indirectly in the revocation,
withdrawal,
<PAGE>
suspension, cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in Schedule
3.14(b);
(iii) the Company has not received, at any time, any notice or
other communication (whether oral or written) from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any
Governmental Authorization, except with respect to violations or failures
that would not have a Material Adverse Effect, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed in
Schedule 3.14(b) have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other material filings required to
have been made by the Company with respect to such Governmental
Authorizations have been duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Schedule 3.14(b) collectively
constitute all of the material Governmental Authorizations necessary to permit
the Company to lawfully conduct and operate its business in the manner it
currently conducts and operates such business and to permit the Company to own
and use its assets in the manner in which it currently owns and uses such
assets.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Schedule 3.15(a), there is no pending
Proceeding:
(i) that has been commenced by or against the Company or that
otherwise relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Seller, (1) no such Proceeding has been Threatened
since August 25, 1994, and (2) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding. Seller has delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in
Schedule 3.15(a). The Proceedings listed in Schedule 3.15(a) will not have a
Material Adverse Effect.
<PAGE>
(b) Except as set forth in Schedule 3.15(b):
(i) there is no Order to which the Company, or any of the assets
owned or used by the Company, is subject; and
(ii) to the Knowledge of Seller, no officer, director, agent, or
employee of the Company is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of the Company.
(c) Except as set forth in Schedule 3.15(c):
(i) the Company is, and at all times has been, in full compliance
in all material respects with all of the terms and requirements of each
Order to which it, or any of the assets owned or used by it, is or has been
subject;
(ii) to Seller's Knowledge, no event has occurred or circumstance
exists that may reasonably be expected to constitute or result in (with or
without notice or lapse of time) a violation of or failure to comply with
any term or requirement of any Order to which the Company, or any of the
assets owned or used by it, is subject; and
(iii) the Company has not received, at any time, any notice or
other communication (whether oral or written) from any Governmental Body or
any other Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of any
Order to which the Company, or any of the assets owned or used by the
Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 3.16, since May 31, 1996, the Company has conducted its business only
in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of the Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
the Company of any shares of any such capital stock; or declaration or payment
of any dividend or other distribution or payment in respect of shares of capital
stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer,
<PAGE>
or employee, except as provided for in the Company's budget for fiscal 1996
attached to Schedule 3.16(c);
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, other than any damage,
destruction, or loss that would not have a Material Adverse Effect;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to the Company of at least $5,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any Encumbrance on any material asset or
property of the Company (including any of the Intellectual Property Assets)
outside of the Ordinary Course of Business;
(h) cancellation or waiver of any claims or rights with a value to the
Company in excess of $10,000;
(i) change in the accounting methods used by the Company;
(j) except to the extent reflected in the Company's budget for fiscal
1996 attached to Schedule 3.16(c), change in or request by the Company for any
change in, or any request or threat by any other party thereto for any change
in, the terms of any of the Company's relationships with the customers
identified on Schedule 3.23 which change or changes, whether considered
individually or in the aggregate, would exceed $50,000 in revenue to the Company
in fiscal 1996; or
(k) agreement, whether oral or written, by the Company to do any of
the foregoing.
3.17 CONTRACTS; NO DEFAULTS.
(a) Schedule 3.17(a) contains a complete and accurate list, and Seller
has delivered to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company;
<PAGE>
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an amount or
value in excess of $25,000;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of
the Company in excess of $25,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold
or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements with
aggregate payments of less than $25,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets, but not including any licenses for commonly
available software programs;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a
group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of the Company or Seller or
limit the freedom of the Company or Seller to engage in any line of
business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments
for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures in excess
of $25,000;
(xiii) each written warranty, guaranty, or other similar
undertaking with respect to contractual performance extended by the Company
other than in the Ordinary Course of Business; and
<PAGE>
(xiv) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
Except as set forth in Schedule 3.17(a), each Contract identified or
required to be identified in Schedule 3.17(a) is, in all material respects, in
full force and effect and valid and enforceable by the Company in accordance
with its terms, and each oral Contract identified as a customer Contract on
Schedule 3.17(a) has such terms and conditions as are comparable in all material
respects to the Company's standard Agreement for Computer Services, except as
noted on Schedule 3.17(a).
(b) Except as set forth in Schedule 3.17(b):
(i) Neither Seller nor any officer or director of Seller or the
Company has or may acquire any rights under, and Seller has not and may not
become subject to any obligation or liability under, any Contract that
relates to the business of, or any of the assets owned or used by the
Company; and
(ii) to the Knowledge of Seller, no officer, director, agent,
employee, consultant, or contractor of the Company is bound by any Contract
that purports to limit the ability of such officer, director, agent,
employee, consultant, or contractor to (A) engage in or continue any
conduct, activity, or practice relating to the business of the Company, or
(B) assign to the Company or to any other Person any rights to any Trade
Secrets.
(c) Except as set forth in Schedule 3.17(c):
(i) the Company is, and at all times has been, in full compliance
in all material respects with all terms and requirements of each Contract
under which it has or had any obligation or liability or by which it or any
of the assets owned or used by it is or was bound;
(ii) to Seller's Knowledge, each other Person that has or had any
obligation or liability under any Contract under which the Company has or
had any rights is, and at all times has been, in full compliance in all
material respects with all applicable terms and requirements of such
Contract;
(iii) to Seller's Knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
reasonably be expected to contravene, conflict with, or result in a
violation or breach of, or give the Company or other Person the right to
declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
<PAGE>
(iv) the Company has not given to or received from any other
Person, at any time, any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Contract.
(d) Except as set forth on Schedule 3.17(d), there are no
renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate
any material amounts paid or payable to the Company under current or completed
Contracts with any Person and, to the Knowledge of Seller, no such Person has
made written demand for such renegotiation.
(e) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into by the
Company in the Ordinary Course of Business and without the commission of any act
of the Company, alone or in concert with any other Person, or any consideration
having been paid or promised, that is or would be in violation of any Legal
Requirement.
3.18 INSURANCE. Schedule 3.18 lists all insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, their termination dates and
the amounts of coverage under each such policy and bond. Since August 25, 1994,
the Company has not been refused any requested coverage. All premiums payable
under all such policies and bonds have been paid and the Company is otherwise in
full compliance in all material respects with the terms of such policies and
bonds (or other policies and bonds providing substantially similar insurance
coverage). Except for the Seller's intention to terminate, as of the Closing,
those insurance policies maintained by the Seller for the benefit of the
Company, Seller has no Knowledge of any threatened termination of or material
premium increase with respect to any of such policies or bonds.
3.19 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.19 and
except where any of the following would not have a Material Adverse Effect (a)
the Company, its operations, processes, practices, equipment and activities and
all real property owned, leased, occupied or operated by the Company ("Real
Property") comply with applicable Environmental Laws; (b) the Company has timely
obtained all permits, licenses, registrations and other governmental approvals
and authorizations and has timely filed all reports and other documents required
by applicable Environmental Laws; (c) the Company has not, and to the Seller's
knowledge no other Person has, caused any Release or threatened Release of any
Hazardous Material at the Real Property and the Real Property is not adversely
affected by any Release or threatened Release of a Hazardous Material; (d) there
are no conditions or circumstances at the Real Property which pose a risk to the
environment or health or safety of persons; (e) the Company has not received
notice and is not aware of any actual or potential violation, claim, demand,
litigation, proceeding or governmental investigation (whether pending or
threatened) arising from applicable Environmental Laws relating to the Company,
the Real Property or Hazardous Materials which are or were present on, in or
under the Real Property; and (f) there are no past or present events,
conditions, circumstances, activities, practices, incidents, actions, or plans
that could interfere with or prevent compliance or continued compliance in all
material respects with applicable Environmental Laws or which may give rise to
any material legal liability
<PAGE>
(whether statutory or common law) of the Company or which may otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing, notice of
violation, study or investigation based on or related to the generation,
manufacture, processing, distribution, use, presence, treatment, storage,
disposal, transport or handling or the Release or threatened Release of any
Hazardous Material.
3.20 EMPLOYEES.
(a) Schedule 3.20 contains a complete and accurate list of the
following information for each current officer, director, and employee of the
Company, including each such individual on leave of absence or layoff status:
name; age; job title; current compensation (including commission arrangements)
paid or payable and any change in compensation in the twelve months prior to the
date of this Agreement; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under any of the Company's pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, or any other employee benefit plan or any director benefit plan.
(b) To Seller's Knowledge, none of the individuals identified on
Schedule 3.20 is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such employee and any other Person ("Proprietary
Rights Agreement") that in any way materially adversely affects or will
materially adversely affect (i) the performance of such individual's duties to
or on behalf of the Company, or (ii) the ability of the Company to conduct its
business, including any Proprietary Rights Agreement with Seller or the Company
by any such individual. To Seller's Knowledge, none of such individuals has
indicated that he or she intends to terminate employment with the Company.
(c) Except as set forth on Schedule 3.20, no payment that is owed or
may become due to any director, officer, employee, or agent of the Company will
be non-deductible to the Company or subject to tax under IRC (S)280G or (S)4999;
nor will the Company be required to "gross up" or otherwise compensate any such
person because of the imposition of any excise tax on a payment to such person.
3.21 LABOR RELATIONS; COMPLIANCE. The Company is in compliance in all
material respects with all applicable Legal Requirements respecting employment,
discrimination in employment, terms and conditions of employment and wages and
hours and occupational safety and health and employment practices, and is not
engaged in any unfair labor practice. The Company has not received any notice
from any Governmental Body, and there has not been asserted before any
Governmental Body, any claim, action or proceeding to which the Company is a
party or involving the Company, and there is neither pending nor, to Seller's
Knowledge, Threatened any investigation or hearing concerning the Company
arising out of or based upon any such laws, regulations or practices.
<PAGE>
3.22 INTELLECTUAL PROPERTY.
(a) Schedule 3.22 hereto sets forth a complete and accurate list of:
(i) all patents and applications therefor ("Patents"); (ii) all registered and
unregistered trademarks, service marks, and trade names, and applications
therefor ("Marks"); and (iii) all copyrights registered in the name of the
Company, owned, used, or proposed to be used by the Company (including any such
Patents, Copyrights, and Marks to which the Company is licensee or otherwise has
the right to use, except with respect to any license agreement for commonly
available software programs).
(b) Except to the extent set forth in Schedule 3.22, the Company owns
or has the right in all material respects to use: (i) all Patents, Marks, and
copyrights necessary for the operation of the Company's business, whether
published or unpublished and registered or unregistered, and applications
therefor ("Copyrights") and (ii) all proprietary models, customer lists and
similar data bases, technology, know-how, processes, techniques, documentation,
trade secrets, confidential information, software, and data ("Trade Secrets")
used or necessary in any material respect for the conduct of the Company's
business (all of the foregoing property interests and assets listed under this
Section 3.22 (b)(i) and (ii), collectively, the "Intellectual Property Assets"),
and the consummation of the Contemplated Transactions will not alter or impair
any such right in any material respect. Except to the extent set forth in
Schedule 3.22, there are no Patents, Marks, Copyrights, Trade Secrets or other
intellectual property used by the Company in the operation of its business which
is owned by or licensed to the Seller or any affiliate of the Seller (other than
the Company).
(c) To Seller's Knowledge, no obligor under any Applicable Contract
(including license agreements) relating to any of the Intellectual Property
Assets which are material to the operation of the Company's business is in
breach thereof. No claims have been asserted against the Company by any Person
regarding the use of any Marks, Copyrights, Patents, or Trade Secrets, or
challenging or questioning the validity or effectiveness of any license or
agreement relating thereto, and, to Seller's Knowledge, no such claim is
Threatened. To Seller's Knowledge, use by the Company of any of the
Intellectual Property Assets does not infringe on the rights of any Person in
any material respect.
(d) Except as set forth in Schedule 3.22, all current employees of
the Company have signed a confidentiality agreement in the form attached as part
of Schedule 3.22. To Seller's Knowledge, no employee of the Company has entered
into any Contract that limits the scope or type of work in which such employee
may be engaged or requires the employee to transfer, assign, or disclose
information concerning his or her work to anyone other than the Company.
(e) Seller and the Company have taken reasonable precautions to
protect the secrecy, confidentiality, and value of the Trade Secrets material to
the operation of the Company's business.
<PAGE>
3.23 VENDORS AND CUSTOMERS.
(a) Schedule 3.23 sets forth the Company's (i) 25 largest vendors (in
terms of dollar volume of purchases by the Company) during each of calendar
years 1994 and 1995 and (ii) customers responsible for, in the aggregate, 95% of
Company sales revenue for each of calendar year 1995 and the first calendar
quarter of 1996.
(b) None of the Persons identified on Schedule 3.23 has given notice
that it intends to cancel or otherwise modify materially and adversely its
relationship with the Company or to decrease materially or limit materially its
services, supplies, or materials to the Company or its usage or purchases of the
services or products of the Company, and, except as provided in Schedule 3.23 or
to the extent reflected in the Company's budget for fiscal 1996 attached to
Schedule 3.16(c), the Seller is not otherwise aware of any event or circumstance
(other than general economic or competitive conditions or the general desire of
Seller's customers to obtain more favorable economic terms in their contractual
arrangements with the Company) that could reasonably be expected to result in
any such cancellation, modification, decrease or limit by any of such Persons.
(c) Except as provided in Schedule 3.23 and except to the extent
reflected in the Company's budget for fiscal 1996 attached to Schedule 3.16(c),
the Seller has no Knowledge that the consummation of the Contemplated
Transactions will materially adversely affect the relationship of the Company
with such Persons.
3.24 BANKING FACILITIES. Schedule 3.24 contains an accurate and complete
list of:
(a) the name and address of each bank and safety deposit facility in
which the Company has an account or safety deposit box and the account numbers
therefor; and
(b) the names of all Persons authorized to draw on, or control access
to or disbursements from, each such account or to have access to any such safety
deposit box facility, together with a description of the authority (and
conditions thereof, if any) of each such Person with respect thereto.
3.25 CORPORATE NAMES. The Company has not used any corporate or fictitious
name other than those identified on Schedule 3.25 during the past five years and
is not currently using any other corporate or fictitious name.
3.26 CERTAIN PAYMENTS. Except for entertainment expenses incurred in the
Ordinary Course of Business and in compliance with applicable Legal
Requirements, neither the Company nor any director, officer, agent, or employee
of the Company, or, to Seller's Knowledge, any other Person associated with or
acting for or on behalf of the Company, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for
<PAGE>
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of the Company or
any affiliate of the Company, or (iv) in violation of any Legal Requirement, or
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Company.
3.27 DISCLOSURE. No representation or warranty of Seller or Faneuil in
this Agreement and no statement of Seller or Faneuil in any schedule hereto
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements of Seller or Faneuil herein or therein, in
light of the circumstances in which they were made, not misleading.
3.28 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth on Schedule
3.28, none of the employees, officers or directors of Seller or the Company, or
any of their spouses, children or affiliates, has any interest, either direct or
indirect, in any property (real or personal, tangible or intangible) used in or
pertaining to the business of the Company, except for rights as a stockholder
and except for rights under any Plan. No employee, stockholder, officer or
director of Seller or the Company, or their spouses, children, or affiliates, is
indebted to the Company, and the Company is not indebted to any of them.
3.29 BROKERS OR FINDERS. Neither the Company nor Seller has incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.30 INVESTMENT INTENT. Seller is acquiring the Warrant and the Warrant
Shares for its own account and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the delivery by Buyer of the Closing Amount, and the execution and delivery
by Buyer of the Warrant, Employment Agreements and the Stock Option Agreements
(collectively, the "Buyer's Closing Documents"), such documents will constitute
the legal, valid, and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, or other similar Legal Requirements affecting the
enforcement of
<PAGE>
creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought. Buyer has all requisite corporate power and authority
to execute and deliver this Agreement and the Buyer's Closing Documents and to
perform its obligations under this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will give any Person the right to prevent, delay, or
otherwise interfere with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which Buyer may
be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required
to obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act.
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.5 BROKERS OR FINDERS. Buyer has incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
4.6 CAPITALIZATION. The authorized capital of the Buyer consists of
52,000,000 shares of Buyer Stock, 24,934,154 shares of which are issued and
outstanding on the date hereof. All of such outstanding shares of Buyer Stock
are validly issued and outstanding, fully paid and nonassessable. The Warrant
Shares have been duly reserved for issuance, and when issued upon exercise of
the Warrant in accordance with its terms will be duly authorized, validly
issued, fully paid and nonassessable. Except as set forth on Schedule 4.6, as
of the date hereof Buyer is neither a party to nor is bound by any outstanding
subscriptions, options, warrants, calls,
<PAGE>
commitments or agreements (other than this Agreement) of any character calling
for Buyer to issue, deliver or sell, or cause to be issued, delivered or sold,
any shares of Buyer Stock or any other equity security of Buyer or any
securities convertible into, exchangeable for or representing the right to
subscribe for, purchase or otherwise receive any shares of Buyer Stock or any
other equity security of Buyer or obligating Buyer to grant, extend or enter
into any such subscriptions, options, warrants, calls, commitments or
agreements. Except as set forth on Schedule 4.6, as of the date hereof there
are no outstanding contractual obligations of Buyer to repurchase, redeem or
otherwise acquire any shares of capital stock of Buyer.
4.7 LAWFUL ISSUANCE. The Warrant and, upon issuance in compliance with the
terms of the Warrant, the Warrant Shares will be issued in conformity with all
applicable provisions of the Securities Act and applicable state securities
laws, and all rules and regulations thereunder, and neither the issuance of the
Warrant nor the Warrant Shares will require registration pursuant to the
registration requirements of the Securities Act.
4.8 DUE DILIGENCE. Buyer acknowledges that it is undertaking its own due
diligence investigation with respect to the Company. In addition, Buyer
acknowledges that it is entering into this Agreement in reliance only on the
representations and warranties of the Seller contained in Section 3 hereof. The
Buyer further acknowledges that upon consummation of the transactions
contemplated hereby, it will have no further recourse against the Seller with
respect to the Shares except as provided in Section 10 hereof.
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and the
Closing Date, Seller will, and will cause the Company and its Representatives
to, (a) afford Buyer and its Representatives full and free access to the
Company's personnel, properties, Contracts, books and records, and other
documents and data, (b) furnish Buyer and its Representatives with copies of all
such Contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Representatives
with such additional financial, operating, and other data and information as
Buyer may reasonably request. In utilizing such access, the Buyer will not
cause any unreasonable disruption of the Company's business.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY. Between the date of this
Agreement and the Closing Date, Seller will, and will cause the Company to:
(a) conduct the business of the Company only in the Ordinary Course of
Business;
(b) use Best Efforts to preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees, and agents of the Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with the Company;
<PAGE>
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status of
the business, operations, and finances of the Company.
5.3 FINANCIAL INFORMATION. After the Closing Date, Seller shall cooperate
with Buyer and Buyer's Representatives, including providing necessary unaudited
financial information, in Buyer's preparation of financial statements,
schedules, records, work papers and other information relating to the Company as
may be required by Buyer or its Representatives in preparation of any
registration statement under the Securities Act or current or periodic report
under the Securities Exchange Act of 1934.
5.4 NEGATIVE COVENANT. Except as set forth on Schedule 5.4, and except as
otherwise expressly permitted by this Agreement, between the date of this
Agreement and the Closing Date, Seller will not, and will cause the Company not
to, without the prior consent of Buyer, take any affirmative action, or fail to
take any reasonable action within its control, as a result of which any of the
changes or events listed in Section 3.16 is likely to occur.
5.5 REQUIRED APPROVALS. As promptly as practicable after the date of this
Agreement, Seller will, and will cause the Company to, make all filings required
by Legal Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Seller
will, and will cause the Company to, (a) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining all consents identified in Schedule 4.2.
5.6 NOTIFICATION. Between the date of this Agreement and the Closing Date,
Seller will promptly notify Buyer in writing if Seller becomes aware of any fact
or condition that causes or constitutes a breach of any of the representations
and warranties as of the date of this Agreement contained in Section 3 hereof,
or if Seller becomes aware of the occurrence after the date of this Agreement of
any fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. During the same period, Seller will
promptly notify Buyer of the occurrence of any breach of any covenant of Seller
in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 impossible or unlikely.
5.7 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Seller will not, and will cause the Company
and each of their Representative not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets (other than in
the Ordinary Course of
<PAGE>
Business) of the Company, or any of the capital stock of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company.
5.8 BEST EFFORTS. Between the date of this Agreement and the Closing Date,
Seller will use its Best Efforts to cause the conditions in Sections 7 and 8 to
be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after the
date of this Agreement, Buyer will make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will cooperate
with Seller with respect to all filings that Seller or the Company is required
by Legal Requirements to make in connection with the Contemplated Transactions,
and (ii) cooperate with Seller in obtaining all consents identified in Schedule
3.2(c); provided that this Agreement will not require Buyer to dispose of or
make any change in any portion of its business or to incur any other burden to
obtain a Governmental Authorization.
6.2 BEST EFFORTS. Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, Buyer will use its Best
Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. Each of Seller's representations and
warranties in this Agreement must have been accurate in all material respects
(without giving duplicative effect to any materiality qualification contained in
such representation or warranty) as of the date of this Agreement, and must be
accurate in all material respects (without giving duplicative effect to any
materiality qualification contained in such representation or warranty) as of
the Closing Date as if made on the Closing Date.
7.2 SELLER'S PERFORMANCE.
(a) Each of the covenants and obligations that Seller is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
must have been duly performed and complied with in all material respects.
<PAGE>
(b) Each document required to be delivered pursuant to Section 2.5
must have been delivered.
7.3 CONSENTS. Each of the Consents identified in Schedule 3.2(c), and each
Consent identified in Schedule 4.2, must have been obtained and must be in full
force and effect.
7.4 ADDITIONAL DOCUMENTS. Each of the following documents must have been
delivered to Buyer:
(a) an estoppel certificate executed on behalf of DuPage National
Bank, not personally, but as Trustee under Trust #1570 and Plum Tree National,
Ltd.
(b) such other documents as Buyer may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 2.5(b), (ii) evidencing the accuracy of Seller's representations and
warranties, (iii) evidencing the performance by Seller of, or the compliance by
Seller with, any covenant or obligation required to be performed or complied
with by Seller, (iv) evidencing the satisfaction of any condition referred to in
this Section 7, or (v) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions;
(c) the written resignations, dated as of the Closing Date, of all of
the members of the Board of Directors of the Company;
(d) the Employment Agreements; and
(e) satisfactory evidence of the termination of the authority of all
Persons, other than employees of the Company listed on Schedule 3.20, to write
checks, transfer funds or exercise any other control over the bank accounts set
forth on Schedule 3.24.
7.5 NO PROCEEDINGS. Since the date of this Agreement, there must not have
been commenced or Threatened against Buyer, or against any Person affiliated
with Buyer, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must not
have been made or Threatened by any Person any claim asserting that such Person
(a) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in, the Company, or (b) is entitled to all or any portion of
the Purchase Price payable for the Shares.
7.7 NO INJUNCTION. There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the sale of the Shares by
Seller to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
<PAGE>
7.8 BANK RELEASE. Toronto-Dominion Bank ("TD") shall have delivered to
Seller a pay-off letter reflecting the release of by TD of the Company from the
Seller's and Faneuil's financing arrangements with TD, and shall have delivered
UCC lien releases in appropriate form and the Shares.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Shares and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS. Each of Buyer's representations and
warranties in this Agreement must have been accurate in all material respects
(without giving duplicative effect to any materiality qualification contained in
such representation or warranty) as of the date of this Agreement and must be
accurate in all material respects (without giving duplicative effect to any
materiality qualification contained in such representation or warranty) as of
the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE.
(a) Each of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
must have been performed and complied with in all material respects.
(b) Buyer must have delivered each of the items required to be
delivered by Buyer pursuant to Section 2.5.
8.3 CONSENTS. Each of the Consents identified in Schedule 3.2(c) and
Schedule 4.2 must have been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS. Buyer must have caused to be delivered to Seller
such documents as Seller may reasonably request for the purpose of (i) enabling
its counsel to provide the opinion referred to in Section 2.5(a), (ii)
evidencing the accuracy of any representation or warranty of Buyer, (iii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (iv)
evidencing the satisfaction of any condition referred to in this Section 8, or
(v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8.5 NO INJUNCTION. There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the sale of the Shares by
Seller to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
<PAGE>
8.6 BANK RELEASE. Toronto-Dominion Bank ("TD") shall have delivered to
Seller a pay-off letter reflecting the release by TD of the Company from the
Seller's and Faneuil's financing arrangements with TD, and shall have delivered
UCC lien releases in appropriate form and the Shares.
9. TERMINATION
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or at
the Closing, be terminated:
(a) by either Buyer or Seller if a material breach of any provision
(without giving duplicative effect to any materiality qualification contained in
any representation or warranty provision) of this Agreement has been committed
by the other party and such breach has not been waived or is not cured within
ten days following receipt of notice of the breach;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Seller, if any of the conditions in Section
8 has not been satisfied as of the Closing Date and Seller has not waived such
condition on or before the Closing Date;
(c) by mutual consent of Buyer and Seller; or
(d) by Buyer if the Closing has not occurred (other than through the
failure of Seller to comply fully with its obligations under this Agreement) on
or prior to July 31, 1996 or by Seller if the Closing has not occurred (other
than through the failure of Buyer to comply fully with its obligations under
this Agreement) on or prior to July 31, 1996, or such later dates as the parties
may agree upon.
9.2 EFFECT OF TERMINATION. Each party's right of termination under Section
9.1 is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 9.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Sections 13.1 and 13.3 will survive; provided, however, that if
this Agreement is terminated by a party because of the breach of the Agreement
by the other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
<PAGE>
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations, warranties, covenants, and obligations in this Agreement, the
schedules hereto, and the certificates delivered pursuant to Section 2.5(a)(ii)
and 2.5(b)(iii) will survive the Closing. The right to indemnification, payment
of Damages or other remedy against a party hereto based on such representations,
warranties, covenants, and obligations will not be affected by any investigation
conducted with respect to, or any Knowledge acquired (or capable of being
acquired) by the other party hereto at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER AND FANEUIL -
GENERAL. The Seller and Faneuil will, jointly and severally, indemnify and hold
harmless Buyer, the Company, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental, consequential, multiple or punitive damages
awarded to a third party but otherwise limited as provided in Section 13.16) or
expense (including costs of investigation and defense and reasonable attorneys'
fees), whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by Seller in
this Agreement, the schedules hereto, or the certificate delivered by Seller
pursuant to Section 2.5(a)(ii);
(b) any breach by Seller of any covenant or obligation of Seller in
this Agreement;
(c) any claim of any customer or other third party arising out of
services provided by the Company prior to the Closing Date;
(d) any breach by Seller of any covenant or obligation of Seller in
the Tax Sharing Agreement;
(e) any liabilities relating to the Excluded Business;
(f) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Seller or the Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions;
<PAGE>
(g) any liabilities relating to the Proceedings disclosed on Schedule
3.15(a) (the "Proceedings"); or
(h) any breach by Seller of any covenant or obligation of Seller in
the Services Agreement.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER AND FANEUIL -
ENVIRONMENTAL MATTERS. The Seller and Faneuil will, jointly and severally,
indemnify and hold harmless Buyer, the Company, and the other Indemnified
Persons for, and will pay to Buyer, the Company, and the other Indemnified
Persons the amount of, any Damages (including costs of cleanup, containment, or
other remediation) arising, directly or indirectly, from or in connection with:
(a) any cost, damages, expense, liability, obligation, or other
responsibility arising from or under any Environmental Law (which defined term
includes, for purposes of this Section 10, all successor statutes, amendments,
rules, orders, directives and regulations promulgated thereunder) arising out of
or relating to: (i) (A) the ownership, operation, or condition at any time on
or prior to the Closing Date of the Facilities or any other properties and
assets (whether real, personal, or mixed and whether tangible or intangible) in
which Seller or the Company has or had an interest, or (B) any Hazardous
Materials or other contaminants that were present on the Facilities or such
other properties and assets at any time on or prior to the Closing Date; or (ii)
(A) any Hazardous Materials or other contaminants, wherever located, that were,
or were allegedly, generated, transported, stored, treated, Released, or
otherwise handled by Seller or the Company or by any other Person for whose
conduct they are or may be held responsible at any time on or prior to the
Closing Date, or (B) any distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater on or prior to the Closing Date) of Hazardous Materials in,
on, under, about, or from the Facilities or any part thereof into the
environmental (each a "Hazardous Activity") that were, or were allegedly,
conducted by Seller or the Company or by any other Person for whose conduct they
are or may be held responsible; or
(b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or manifested
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property), or other damage
of or to any Person, including any employee or former employee of Seller or the
Company or any other Person for whose conduct they are or may be held
responsible, in any way arising from or allegedly arising from any Hazardous
Activity conducted or allegedly conducted with respect to the Facilities or the
operation of the Company prior to the Closing Date, or from Hazardous Material
that was (i) present or suspected to be present on or before the Closing Date on
or at the Facilities (or present or suspected to be present on any other
property, if such Hazardous Material emanated or allegedly emanated from any of
the Facilities and was present or suspected to be present on any of the
Facilities on or prior to the Closing Date) or (ii) Released or allegedly
Released by Seller or the Company or any other Person for whose
<PAGE>
conduct they are or may be held responsible, at any time on or prior to the
Closing Date. The procedure described in Section 10.9 will apply to any claim
relating to a matter covered by this Section 10.3.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will indemnify
and hold harmless Seller and Faneuil, and will pay to Seller and Faneuil the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any breach of any representation or warranty made by Buyer in this
Agreement, or in the certificate delivered by Buyer pursuant to Section
2.5(b)(iii) of this Agreement, (b) any breach by Buyer of any covenant or
obligation of Buyer in this Agreement, (c) any breach by Buyer of any covenant
or obligation of Buyer in the Tax Sharing Agreement, (d) any breach of any
representation or warranty made by Buyer, or any breach by Buyer of any covenant
or obligation of Buyer, in the Warrant, and (e) any breach by Buyer of any
covenant or obligation of Buyer in the Services Agreement.
10.5 TIME LIMITATIONS. If the Closing occurs, Seller and Faneuil will have
no liability, for indemnification or otherwise, with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date (other than those in Sections 3.3, 3.11,
3.13, 3.19, 10.3, the Tax Sharing Agreement, the Services Agreement, or with
respect to the Excluded Business or the Proceedings) unless within 24 months of
the Closing Buyer notifies Seller of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Buyer; a claim with
respect to Section 3.3, 3.11, 3.13, 3.19, 10.3, the Tax Sharing Agreement, the
Services Agreement, the Excluded Business, the Proceedings, or a claim for
indemnification or reimbursement based upon any covenant or obligation to be
performed and complied with after the Closing Date, may be made at any time,
subject to any applicable statute of limitations. If the Closing occurs, Buyer
will have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, other than those with respect to the
Warrant, the Tax Sharing Agreement, and the Services Agreement, unless within 24
months of the Closing Seller or Faneuil notifies Buyer of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Seller or Faneuil; a claim with respect to the Warrant, the Tax Sharing
Agreement or the Services Agreement may be made at any time, subject to any
applicable statute of limitations.
10.6 LIMITATIONS ON AMOUNT--SELLER AND FANEUIL. Seller and Faneuil will
have no liability (for indemnification or otherwise) with respect to the matters
described in clause (a) (except for any claim with respect to Section 3.3),
clause (b) to the extent relating to any failure to perform or comply prior to
the Closing Date, or clause (c) of Section 10.2 until the total of all Damages
with respect to such matters exceeds $100,000, and then only for the amount by
which such Damages exceed $100,000. The total amount payable under this Section
10 by the Seller and Faneuil shall not exceed $8,000,000, except (i) in the case
of fraud, any intentional misrepresentation by Seller or Faneuil with respect to
any statement made by Seller or Faneuil in this Agreement or in the certificate
delivered by Seller pursuant to Section 2.5(a)(ii) of this Agreement, or any
intentional breach by Seller or Faneuil of any covenant or obligation, (ii) for
any claim under the Tax Sharing Agreement or the Services Agreement, and (iii)
for any claim
<PAGE>
with respect to Section 3.3, Section 10.2(e), Section 10.2(g), or Section 10.3,
and, in each such case, Seller and Faneuil will be liable for all Damages with
respect thereto.
10.7 LIMITATIONS ON AMOUNT--BUYER. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a), clause (b) to the extent relating to any failure to perform or comply prior
to the Closing Date, or clause (c) of Section 10.4 until the total of all
Damages with respect to such matters exceeds $100,000, and then only for the
amount by which such Damages exceed $100,000. The total amount payable under
this Section 10 by the Buyer shall not exceed $8,000,000, except (i) in the case
of fraud, any intentional misrepresentation by Buyer with respect to any
statement made by Buyer in this Agreement or in the certificate delivered by
Buyer pursuant to Section 2.5(b)(iii) of this Agreement, or any intentional
breach by Buyer of any covenant or obligation, and (ii) for any claim under the
Tax Sharing Agreement, the Services Agreement, or the Warrant, and, in each
such case, Buyer will be liable for all Damages with respect thereto.
10.8 RIGHT OF SET-OFF; ESCROW.
(a) Any indemnity payable pursuant to this Section 10 shall be paid
within the later of (a) twenty (20) days after the indemnified party's request
thereof (in the case of claims not involving a third party) or (b) ten (10) days
prior to the date on which the Damages upon which the indemnity is based are
required to be satisfied by the indemnified party. In order to satisfy any
indemnification obligations of the Seller and Faneuil pursuant to this
Agreement, the Services Agreement or the Tax Sharing Agreement, the Seller and
Faneuil hereby grant to the Buyer the right (in addition to collecting directly
from the Seller or Faneuil) of set-off against any Deferred Amount or Contingent
Amount otherwise due to the Seller pursuant to Section 2.3 hereof, as provided
in this Section 10.8. In the event that there is any dispute between the
parties regarding Buyer's set-off rights, the parties shall promptly cooperate
in good faith for the purpose of resolving such dispute, which resolution, if
achieved, shall be binding upon the parties and not subject to dispute or
review.
(b) If: (i) the Buyer shall have failed to give written notice of the
relevant Damages promptly after assertion of a written claim by any third party
or the discovery of facts upon which the claim is based, which notice specified
in reasonable detail the amount, nature and source of the Damages; (ii) the
Buyer shall have failed to respond to reasonable requests of the Seller for
information with respect to the relevant claim; or (iii) the Seller or Faneuil
shall have denied the claim or, in the case of third party claims, chosen to
contest the claim in legal proceedings which have not yet been finally resolved,
and if the parties do not resolve, within the applicable time period specified
in subsection (a), any dispute they have regarding the Buyer's right to exercise
its set-off right, then the Buyer shall not be entitled to exercise its right of
set-off.
(c) In the event the Buyer is not entitled to exercise its right of
set-off as provided in subsection (b) above, the Buyer shall have the right,
instead of making any of such payments in accordance with Section 2 hereof, to
deposit in escrow an amount reasonably necessary to cover the Damages that can
be reasonably expected to result from disputed or contested claims for
<PAGE>
indemnification. Any such deposit into escrow shall be pursuant to a Set-Off
Escrow Agreement, substantially in the form of Exhibit 10.8 hereto, with an
escrow agent reasonably satisfactory to the Buyer and the Seller. Any portion
of the Deferred Amount or Contingent Amount which is not set-off by the Buyer or
deposited into escrow by the Buyer in accordance with this Section 10.8 shall be
paid in accordance with Section 2 hereof. No set-off by the Buyer shall
constitute a waiver of the Seller's and Faneuil's right to contest the validity
of the Buyer's underlying claims for indemnity pursuant to Section 10.
10.9 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section 10.2,
10.3, or Section 10.4 of notice of the commencement of any Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnified party's failure
to give such notice.
(b) If any Proceeding referred to in Section 10.9(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 10 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (A) there is
no finding or admission of any violation of Legal Requirements or any violation
of the rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and (ii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within 20 days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
<PAGE>
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) In the event that the indemnified party elects to retain the
defense of any Proceeding pursuant to paragraph (b) or (c) above, the
indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which
shall not be unreasonably withheld).
(e) Any third-party claims relating to Taxes shall be defended as
provided in the Tax Sharing Agreement.
10.10 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
10.11 SCOPE OF LIABILITY. The parties acknowledge that their sole remedy
against one another for any matter arising out of the Contemplated Transactions
is as set forth in this Section 10.
10.12 WAIVER OF CERTAIN STATUTORY CLAIMS. The Buyer hereby waives and
releases the Seller and Faneuil from any and all Damages, known or unknown, it
may have under any Environmental Law or any other statutes relating to
environmental matters now or hereafter in effect or any other statute or
regulation applicable to the sale of the Shares or the Company's business if the
assertion of a right under such statute would circumvent the intended effect of
Section 10.11. The Seller and Faneuil hereby waive and release the Buyer from
any and all Damages, known or unknown, it may have under any Environmental Law
or any other statutes relating to environmental matters now or hereafter in
effect or any other statute or regulation applicable to the sale of the Shares
or the Company's business if the assertion of a right under such statute would
circumvent the intended effect of Section 10.11.
11. RESTRICTIVE COVENANTS
---------------------
(a) Seller and Faneuil acknowledge and agree that all Confidential
Information, known or obtained by Seller and Faneuil, whether before or after
the date hereof, is the property of the Company. Therefore, Seller and Faneuil
agree that they will not, at any time, disclose to any unauthorized Persons or
use for its own account or for the benefit of any third party any Confidential
Information without Buyer's written consent, unless and to the extent that the
Confidential Information is or becomes generally known to and available for use
by the public
<PAGE>
other than as a result of Seller's fault or the fault of any other Person bound
by a duty of confidentiality to Buyer or the Company.
(b) For a period of five years after the Closing:
(i) Seller and Faneuil will not, directly or indirectly, engage
or invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be associated
with, or in any manner connected with, lend Seller's name or any similar
name to, lend Seller's credit to, or render services or advice to, any
business engaged in the provision of general data center outsourcing,
facilities management, computer time sharing, or remote computer processing
services to third parties (the "Restricted Business"), anywhere within the
United States; provided, however, that (i) Seller and Faneuil may purchase
or otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any
national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934, (ii) Faneuil and the
Seller and their Subsidiaries may engage in the business of building data
bases and/or models and/or targeting systems and/or direct marketing
systems for themselves and their clients on their own computers and those
of their clients; these services can be provided through facilities
management, computer time sharing or through virtual computer networks,
(iii) Faneuil and the Seller and their Subsidiaries may provide to any
Person computer consulting or other value-added computer services, (iv)
Faneuil and the Seller and their Subsidiaries may provide bona fide arms-
length sale of products or provision of services that do not themselves
constitute a Restricted Business or that otherwise would be permitted under
this Section 11 to any Person engaged in a Restricted Business, and (v)
Faneuil and the Seller and their Subsidiaries may acquire any Person
engaged in a Restricted Business, as long as the Restricted Business
operated by such Person did not represent more than 25% of such Person's
revenues in the most recent fiscal year, Faneuil uses reasonable efforts to
cause the sale of such Restricted Business and Faneuil completes the sale
or other disposition of such Restricted Business within eighteen (18)
months after such acquisition. Seller and Faneuil agree that this covenant
is reasonable with respect to its duration, geographical area, and scope.
(ii) Seller and Faneuil will not, directly or indirectly, either for
themselves or any other Person, (A) induce or attempt to induce any
employee of the Company to leave the employ of the Company, (B) in any way
interfere with the relationship between the Company and any employee of the
Company, (C) employ, or otherwise engage as an employee, independent
contractor, or otherwise, any employee of the Company, or (D) induce or
attempt to induce any customer, supplier, licensee, or business relation of
the Company to cease doing business with the Company, or in any way
interfere with the relationship between any customer, supplier, licensee,
or business relation of the Company.
<PAGE>
(iii) Seller and Faneuil will not, directly or indirectly, either
for themselves or any other Person, solicit the business of any Person
known to Seller or Faneuil to be a customer of the Company, whether or not
Seller or Faneuil had personal contact with such Person, with respect to
products, services or activities constituting part of the Restricted
Business.
(c) In the event of a breach by Seller or Faneuil of any covenant set
forth in this Section 11, the term of such covenant will be extended by the
period of the duration of such breach.
(d) If Seller or Faneuil breaches the covenants set forth in this
Section 11, in addition to all other rights and remedies it may have pursuant to
this Agreement or otherwise, Buyer and the Company will be entitled to obtain
injunctive or other equitable relief to restrain any breach or threatened breach
or otherwise to specifically enforce the provisions of this Section 11, it being
agreed that money damages alone would be inadequate to compensate the Buyer and
the Company and would be an inadequate remedy for such breach.
12. TRANSITIONAL MATTERS AND CERTAIN OTHER MATTERS
----------------------------------------------
12.1 USE OF NAME. For a period not to exceed six months following the
Closing Date, the Company and the Buyer shall have the right to use the name
"Faneuil" when conducting any business endeavor. Thereafter, Buyer agrees that
it will cause the Company to cease using such name, including in connection with
the use of existing supplies of labels, signs, letterhead and other printed
materials, and during such six month period it will sticker or otherwise
indicate on all such printed materials (other than any materials used internally
only), so as to indicate that the Company is no longer affiliated with Faneuil
or the Seller or their Affiliates.
12.2 TRANSFER OF ASSETS. The Buyer acknowledges that prior to the Closing
the Seller intends to cause the Company to dividend or otherwise transfer to the
Seller the assets relating to the Excluded Business which are described on
Schedule 12.2, and the Seller agrees that at such time it will assume and agree
to perform the liabilities described on Schedule 12.2. Seller shall assume and
pay all costs, fees, expenses and other charges relating to the dividend or
other transfer of the assets relating to the Excluded Business. The Seller
represents and warrants that, except as provided in Schedule 12.2, the assets
described on Schedule 12.2 (i) are not used in the business of the Company, and
(ii) do not, individually or in the aggregate, generate revenue for the Company.
Except for the representation and warranty of Seller in this Section 12.2, the
Buyer agrees that such transfer and assumption will not constitute a breach of
any representation or warranty or covenant in this Agreement.
12.3 RETURN OF EQUIPMENT. To the extent not completed prior to the
Closing, as promptly as is practicable after the Closing Date, the Buyer shall
cause the Company to return to the Seller the equipment listed on Schedule 12.3
which is owned by the Seller but located at the Company's facility in Oak Brook,
Illinois. Seller shall assume and pay all costs and expenses
<PAGE>
relating to the removal, packaging, storage and transportation of the equipment
listed on Schedule 12.3.
12.4 CCC SERVICE AGREEMENT.
(a) After the Closing, the Seller may deliver to the Buyer a form of
amendment to the Computer Services Agreement, dated as of August 24, 1994 (the
CCC Agreement"), between the Company and CCC Information Services, Inc., a
Delaware corporation ("CCC"), to delete the provisions of Section 4.03(b) of the
CCC Agreement in their entirety from the CCC Agreement, in a form reasonably
acceptable to the Buyer (the "Amendment"). The Buyer shall cause the Company to
execute the Amendment.
(b) Until the Amendment is executed and delivered by both the Company
and CCC, the Buyer agrees to indemnify the Seller against and hold the Seller
harmless with respect to any and all claims, liabilities and obligations
asserted against the Seller arising from the performance of the CCC Agreement
after the Closing.
12.5 MEDICAL BENEFITS.
(a) Commencing as of July 1, 1996 (the "Benefits Closing Date"), the
Buyer shall provide the Company's employees and dependents and beneficiaries
thereof (the "Eligible Individuals") medical and dental coverage on the same
terms as offered to the Buyer's own employees and without application of any
exclusion for a pre-existing condition (other than conditions excluded or
excludable as of the Benefits Closing Date as pre-existing conditions under the
applicable medical and dental coverage of the Company with respect to Eligible
Individuals who have not met the requirements for coverage with respect to such
pre-existing conditions) and taking into account for purposes of any annual co-
payment, deductible and limitation on benefits, the payments made under the
applicable comparable employee benefit plan in respect of the Eligible
Individuals for otherwise eligible medical and dental services in the current
calendar year through the Benefits Closing Date. Nothing in this paragraph (a)
shall be construed to require the Buyer to, nor is the Buyer under an obligation
to, extend any such medical or dental benefit coverage (either for an employee
or any other applicable Eligible Individual) subsequent to an employee's
termination of employment (except for continuation coverage required under Title
I, Part 6 of ERISA), on account of retirement or otherwise.
(b) The Buyer shall be responsible for, and shall indemnify the Seller
with respect to, all claims and liabilities incurred with respect to medical and
dental benefits of the Eligible Individuals on and after the Benefits Closing
Date. The Seller shall remain responsible for, and shall indemnify the Company
and the Buyer with respect to, all claims and liabilities incurred with respect
to medical and dental benefits of the Eligible Individuals prior to the Benefits
Closing Date.
(c) Nothing in this Agreement will limit or restrict in any way the
rights of the Buyer or the Seller, to modify, amend, terminate or establish
employee plans or arrangements in
<PAGE>
whole or in part at any time after the Closing Date. This Section 12.5 shall
not, in any way or at any time, create any third party beneficiary rights for or
on behalf of any person or persons.
13. GENERAL PROVISIONS
------------------
13.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. Seller will cause the Company not to
incur any out-of-pocket expenses in connection with this Agreement. In the
event of termination of this Agreement, the obligation of each party to pay its
own expenses will be subject to any rights of such party arising from a breach
of this Agreement by another party.
13.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer determines and Seller
approves (which consent shall not be unreasonably withheld). Unless consented
to by Buyer in advance or required by Legal Requirements, prior to the Closing
Seller shall, and shall cause the Company to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person
other than Representatives that agree to keep the Agreement confidential. Seller
and Buyer will consult with each other concerning the means by which the
Company's employees, customers, and suppliers and others having dealings with
the Company will be informed of the Contemplated Transactions, and Buyer will
have the right to be present for any such communication.
13.3 CONFIDENTIALITY. Between the date of this Agreement and the Closing
Date, Buyer, Faneuil and Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, and not use to the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
valuation, consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings, provided that the
non-disclosing party is given prior notice and a reasonable opportunity to
contest the requirement of, or to minimize the scope of, any such disclosure.
If the Contemplated Transactions are not consummated, then each party
hereby agrees that it shall be bound by its obligations under the
Confidentiality and Non-Solicitation Agreement dated June 12, 1996, by and
between Buyer and Seller.
13.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by
<PAGE>
hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
Seller: The Faneuil Group
2 Faneuil Hall South, Third Floor
Boston, MA 02109-1605
Attention: Jeffrey B. Finestone
Facsimile: (617) 742-9595
With a copy to: Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110-1726
Attention: John R. Utzschneider
Facsimile: (617) 951-8736
Buyer: May & Speh, Inc.
1501 Opus Place
Downers Grove, Illinois 60515
Attention: Robert C. Early
Facsimile: (708) 964-1747
With a copy to: Freeborn & Peters
311 South Wacker Drive, Suite 3000
Chicago, Illinois 60606
Attention: Robert A. McWilliams
Facsimile: (312) 360-6570
13.5 ARBITRATION.
(a) All disputes or claims arising under or in any way relating to
this Agreement or to the acquisition of the Shares by the Buyer shall be settled
by arbitration before a panel of three arbitrators (with one designated by the
Buyer and one designated by the Seller, and the third arbitrator designated by
the first two) pursuant to the rules of the American Arbitration Association.
Any arbitrator designated by the Buyer or the Seller must be an "Independent
Person." For the purpose of this Section 13.5, an "Independent Person" shall be
an individual who is not and has not been (i) a director, officer, employee,
agent or shareholder (either as a holder of a legal or a beneficial interest) of
any party hereto, (ii) a consultant to any party hereto, (iii) a person with a
direct or indirect financial interest in any contract with any party
<PAGE>
hereto, (iv) a director, officer or key employee of a company at a time when
such company was party to a contract with any party hereto, or (v) a relative of
any person referred to in clauses (i), (ii), (iii) or (iv) above. As used in
the immediately preceding sentence, the term "any party hereto" shall be deemed
to include any affiliates of the parties hereto. Any such arbitration commenced
by the Buyer shall take place in Boston, Massachusetts. Any such arbitration
commenced by the Seller or Faneuil shall take place in Chicago, Illinois. Any
arbitration may be commenced at any time by either the Buyer or the Seller
giving written notice to the other party hereto that such dispute has been
referred to arbitration under this Section 13.5. The third arbitrator shall be
selected as prescribed above, but if the first two arbitrators do not so agree
with in 30 days after the date of the notice referred to above, the selection
shall be made pursuant to the rules of the American Arbitration Association from
the Commercial Arbitration Panel maintained by such Association. Any award
rendered by the arbitrators shall be conclusive and binding upon the parties
hereto; provided, however, that any such award shall be accompanied by a written
opinion of the arbitrators giving the reasons for the award. In making such
award, the arbitrators shall be authorized to award interest on any amount
awarded. This provision for arbitration shall be specifically enforceable by the
Seller, the Buyer and Faneuil and the decision of the arbitrators in accordance
herewith shall be final and binding and there shall be no right of appeal
therefrom. Each of the Seller, the Buyer and Faneuil shall pay its own expenses
of arbitration and the expenses of the arbitrators shall be equally shared (one-
half by the Buyer and one-half by the Seller and Faneuil); provided, however,
that if in the opinion of the arbitrators any claim for indemnification or any
defense or objection thereto was frivolous or in bad faith, the arbitrators may
assess, as part of the award, all or any part of the arbitration expenses of the
other party (including reasonable attorneys' fees) and of the arbitrators
against the party raising such unreasonable claim, defense or objection.
(b) To the extent that arbitration may not be legally permitted
hereunder and the Seller and Faneuil and the Buyer do not at the time of such
dispute or claim mutually agree to submit such dispute or claim to arbitration
either the Seller and Faneuil or the Buyer may commence a civil action in a
court of appropriate jurisdiction to solve disputes or claims hereunder.
Nothing contained in this Section 13.5 shall prevent the Seller and Faneuil and
the Buyer from settling any dispute or claim by mutual agreement at any time.
(c) No party shall be precluded hereby from seeking, from the courts
of any jurisdiction, provisional or equitable remedies of a type not available
in arbitration, including without limitation, temporary restraining orders and
preliminary or permanent injunctions, nor shall the pursuit of such provisional
or equitable relief constitute a waiver or modification of such party's right
and obligation to arbitrate any related or unrelated dispute which is otherwise
subject to arbitration under this Agreement, unless such waiver is expressed in
writing and signed by such party. In the event any person not a party to this
Agreement shall commence any interpleader or similar action which either
directly or indirectly raises issues which are subject to arbitration hereunder,
the Seller and Faneuil and the Buyer shall seek a stay of such proceedings
pending arbitration in accordance with this Agreement.
(d) In the event of any third party claim where the Indemnifying Party
does not assume the defense of such third party claim, nothing in this Section
13.5 shall prevent the
<PAGE>
Indemnified Party from impleading the Indemnifying Party or otherwise joining
the Indemnifying Party to any litigation relating to such third party claim.
13.6 FURTHER ASSURANCES. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
13.7 WAIVER. The rights and remedies of the parties to this Agreement
under this Agreement are cumulative and not alternative. Neither the failure
nor any delay by any party in exercising any right, power, or privilege under
this Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
13.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment. EXCEPT
AS SET FORTH IN THIS AGREEMENT, SELLER AND FANEUIL MAKE NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SALE OF THE SHARES
HEREUNDER.
13.9 SCHEDULES
(a) For purposes of this Agreement, with respect to any matter that is
clearly disclosed in a schedule to this Agreement in response to the information
called for by the corresponding section of this Agreement in such a way as to
make its relevance to the information called for by another section of this
Agreement clearly apparent (whether through an appropriate cross-reference or
otherwise), such matter shall be deemed to have been included in the schedule
corresponding to such other section.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the schedules to this Agreement (other than
an exception expressly set
<PAGE>
forth as such in the schedules with respect to a specifically identified
representation or warranty), the statements in the body of this Agreement will
control.
13.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No party may
assign any of its rights under this Agreement without the prior consent of all
other parties, which will not be unreasonably withheld; provided, however, that
no consent of any other party shall be required for any change in control of
Buyer or the Company (including but not limited to any merger of the Company
with Buyer) or any change in control of the Seller or Faneuil (including but not
limited to any merger of the Seller with Faneuil). Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
13.11 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
13.12 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
13.13 TIME OF ESSENCE. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
13.14 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Illinois without regard to conflicts of laws principles.
13.15 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
13.16 WAIVER OF CERTAIN DAMAGES. EACH OF THE SELLER, FANEUIL AND THE BUYER
TO THE FULLEST EXTENT PERMITTED BY LAW, IRREVOCABLY WAIVES ANY RIGHTS THAT IT
MAY HAVE TO PUNITIVE OR MULTIPLE OR CONSEQUENTIAL DAMAGES BASED UPON, OR ARISING
OUT OF, THIS
<PAGE>
AGREEMENT OR ANY COURSE OR CONDUCT, COURSE OF DEALING, STATEMENTS OR ACTIONS OF
ANY OF THEM RELATING THERETO.
13.17 HART-SCOTT-RODINO FILING. The Buyer hereby represents and warrants to
Seller and Faneuil that it is not a "person" which has total assets or annual
net sales of $100,000,000 or more (determined in accordance with the rules
promulgated pursuant to 15 U.S.C. (S)18(a) (the "HSR Rules") and it has no
stockholder that constitutes the "ultimate parent entity" of the Buyer for
purposes of the HSR Rules.
The Seller and Faneuil hereby represent and warrant to the Buyer that
Faneuil is the "ultimate parent entity" of the Company for purposes of the HSR
Rules and Faneuil is not a "person" which has total assets or annual net sales
of $100,000,000 or more (determined in accordance with the HSR Rules).
13.18 SPECIAL COVENANT REGARDING ACCOUNTS RECEIVABLE. From and after the
Closing Date, the Buyer shall cause the Company to undertake to collect the
Accounts Receivable (as defined in Section 3.8). Such collection efforts shall
be in a manner consistent with the Company's past collection practices, and all
cash receipts shall be applied to the oldest outstanding receivable. The Buyer
will provide monthly statements to the Seller as to the status of the collection
efforts, and shall meet with the Seller as requested to discuss collections. If
any Accounts Receivable have not been collected by the 61st day after the
Closing Date, at the request of the Seller the Buyer will cause the Company to
commence litigation against the applicable account debtor. Promptly after the
120th day after the Closing Date, the Buyer will deliver to the Seller a
statement showing all Accounts Receivable still uncollected. Within five (5)
days after delivery of such statements the Buyer shall thereupon cause the
Company to sell to the Seller, and the Seller shall thereupon repurchase from
the Company, that portion of such outstanding Accounts Receivable exceeding the
unused portion of the $100,000 deductible set forth in Section 10.6, at a price
equal to the face value thereof, without discount, payable promptly upon such
transfer. To the extent that the Company is ordered by a court of competent
jurisdiction to refund, as a voidable preference, fraudulent conveyance, or
similar improper payment, any amount previously paid to the Company as a payment
on any of the Accounts Receivable, Seller shall reimburse the Company for such
amount, after giving effect to the deductible amount referred to above.
Thereafter, the Buyer shall provide, and cause the Company to provide, the
Seller with reasonable assistance in connection with the collection of such
Accounts Receivable.
IN WITNESS WHEREOF, the parties have executed and delivered this Stock
Purchase Agreement as of the date first written above.
MAY & SPEH, INC., a Delaware corporation
By: /s/ Lawrence J. Speh
--------------------
Its: President
-------------------
<PAGE>
FANEUIL, INC., a Delaware corporation
By: /s/ Jeffrey B. Finestone
----------------------------------
Its: Executive Vice President and Chief
Financial Officer
----------------------------------
FANEUIL ISG, INC., a Canadian corporation
By: /s/ Jeffrey B. Finestone
----------------------------------
Its: Executive Vice President and Chief
Financial Officer
----------------------------------
<PAGE>
LIST OF SCHEDULES
The Stock Purchase Agreement filed herewith does not contain the schedules
listed below that are part of such agreement. The Registrant agrees to furnish
supplementally a copy of any omitted schedule to the Securities and Exchange
Commission upon request.
2(a) Prospects
2(b) Customers in Prior 36 Months
2.3 Base Revenues
3.1 Jurisdiction of Incorporation and Foreign Qualifications
3.2(c) Required Consents
3.3(a) Stock Encumbrances; Legends
3.3(b) Additional Stock Arrangements
3.4 Financial Statements
3.6 Title to Property; Encumbrances
3.7 Condition and Sufficiency of Assets
3.8 Accounts Receivable
3.10 Undisclosed Liabilities
3.11 Taxes
3.12 Possible Adverse Changes
3.13 Employee Benefit Plans
3.14(a) Legal Requirements
3.14(b) Governmental Authorizations
3.15(a) Legal Proceedings
3.15(b) Orders
3.15(c) Compliance with Orders
3.16 Absence of Certain Changes and Events
3.17(a) Applicable Contracts
3.17(b) Certain Contracts
3.17(d) Renegotiation of Contracts
3.18 Insurance
3.19 Environmental Matters
3.20(a) Employees
3.20(c) Parachute Payments
3.22 Intellectual Property
3.23 Vendors & Customers
3.24 Banking Facilities
3.25 Corporate Name
3.26 Certain Payments
3.28 Relationships With Related Persons
12.2 Assets and Liabilities to be transferred
12.3 Returned Equipment
<PAGE>
LIST OF EXHIBITS
2.5(a)(iii) Written Opinions of Bingham, Dana & Gould and Thompson Dorfman
Sweatman
2.5(a)(iv) Form of Disaffiliation Tax Sharing Agreement
2.5(b)(ii) Form of Warrant
2.5(b)(iv) Written Opinion of Freeborn & Peters
2.5(b)(v) Form of Services Agreement
2.5(c) Form of Employment Agreement
2.5(d) Form of Stock Option Agreement
10.8 Form of Set-Off Escrow Agreement
<PAGE>
Exhibit 2.5(a)(iii)
Form of
Opinion of Bingham, Dana & Gould LLP
July ___, 1996
May & Speh, Inc.
1501 Opus Place
Downers Grove, IL 60515
RE: GIS INFORMATION SYSTEMS, INC.
-----------------------------
Ladies and Gentlemen:
We have acted as special counsel to Faneuil, Inc., a Delaware corporation
(the "Seller"), in connection with the transactions contemplated by the Stock
Purchase Agreement, dated as of July 1, 1996 (the "Stock Purchase Agreement"),
by and among May & Speh, Inc., a Delaware corporation (the "Buyer"), the Seller,
and, for certain purposes, Faneuil ISG, Inc., a Canadian corporation
("Faneuil"), pursuant to which the Buyer has agreed to purchase all of the
outstanding capital stock of GIS Information Systems, Inc., an Illinois
corporation ("GIS"). This opinion is being delivered to you pursuant to
Sections 2.5(a)(iv) and 7.2(b) of the Stock Purchase Agreement. All capitalized
terms that are used herein without definition have the meanings set forth for
such terms in the Stock Purchase Agreement.
In connection with the rendering of this opinion, we have reviewed
originals or copies of each of the Stock Purchase Agreement, the Tax Sharing
Agreement, the Warrant, the Set-Off Escrow Agreement and the Services Agreement
(referred to hereinafter collectively as the "Acquisition Agreements"), copies
of the charter documents and by-laws of the Seller, resolutions of the Board of
Directors of the Seller authorizing and/or ratifying the transactions
contemplated by the Acquisition Agreements and such other documents as we have
deemed necessary or appropriate for purposes of this opinion.
As to all matters of fact (including factual conclusions and
characterizations and descriptions of purpose, intention or other states of
mind), we have relied entirely upon representations made to us by officers of
each of the Seller and GIS and have assumed, without independent inquiry, the
accuracy of such representations. We have no knowledge that the information
supplied therein is inaccurate in any material respect.
As to any opinion below relating to the organization, existence,
qualification or standing of the Seller and GIS in any jurisdiction, our opinion
relies entirely upon and is limited by those certificates of public officials
attached hereto as Exhibit 1.
<PAGE>
We have assumed the genuineness of all signatures, the conformity to the
originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form
and the legal competence of each individual executing any document.
When an opinion set forth below is given to the best of our knowledge, or
to our knowledge, or with reference to matters of which we are aware or which
are known to us, or with another similar qualification, the relevant knowledge
or awareness is limited to the actual knowledge or awareness that attorneys
currently in the firm who have provided legal representation to the Seller since
its formation have gained through our representation of the Seller and without
any special or additional investigation undertaken for the purposes of this
opinion.
Each opinion set forth below relating to the enforceability of any
agreement or instrument against the Seller is subject to the following general
qualifications:
(i) as to any agreement to which the Seller is a party, we assume that
such agreement is the binding obligation of each other party thereto;
(ii) as to any agreement or instrument to which the Seller is a party,
we assume that the Seller has received the agreed-to consideration
therefor;
(iii) the enforceability of any obligation of the Seller may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, marshaling or other laws and rules of law affecting the
enforcement generally of creditors' rights and remedies (including such as
may deny giving effect to waivers of debtors' or guarantors' rights);
(iv) no opinion is given herein as to the availability of any special
or equitable relief of any kind;
(v) no opinion is given herein as to the enforceability of Section 11
of the Stock Purchase Agreement or Section 11(h) of the Warrant; and
(vi) the enforcement of any of your rights may in all cases be subject
to an implied duty of good faith and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding at
law or in equity).
We express no opinion as to the applicability of the antitrust laws of the
United States of America or of any state, including but not limited to the H-S-R
Act, or the applicability of federal or state securities laws, to any of the
transactions contemplated by the Stock Purchase Agreement.
Subject to the limitations set forth above and below, we have made such
examination of law as we have deemed necessary for purposes of this opinion.
This opinion is limited solely to the laws of the Commonwealth of Massachusetts
as applied by courts located therein, the General Corporation Law of the State
of Delaware as applied by courts located in Delaware (the "DGCL"),
<PAGE>
and the federal laws of the United States of America, to the extent that the
same may apply to or govern such transactions. In this regard, we note that
certain of the Acquisition Agreements contain provisions to the effect that the
laws of a jurisdiction other than those recited in the preceding sentence are
intended to be governing. For purposes of our opinion herein we have assumed,
with your permission and without any independent investigation, that the laws of
any such jurisdiction that may govern the Acquisition Agreements are identical
in all relevant respects to the laws of the Commonwealth of Massachusetts.
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
Based upon the foregoing, we are of the opinion that:
1. The Seller is a corporation duly organized, validly existing and in
corporate good standing under the laws of the State of Delaware.
2. The Seller has the corporate power to enter into the Acquisition
Agreements and to consummate the transactions contemplated thereby. The
execution and delivery by the Seller of the Acquisition Agreements and the
consummation of the transactions contemplated thereby have been duly authorized
by all required corporate action on the part of the Seller. GIS is a
corporation validly existing and in good standing under the laws of the State of
Illinois.
3. Each of the Stock Purchase Agreement, the Tax Sharing Agreement and
the Services Agreement has been duly executed and delivered by the Seller and
constitutes, and the Set-Off Escrow Agreement, when duly executed and delivered
by the Seller will constitute, a legal, valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms.
4. Neither the execution nor the delivery by the Seller of any of the
Acquisition Agreements nor the consummation by the Seller of the transactions
contemplated thereby will constitute a violation of, or be in conflict with,
constitute or create, with or without the passage of time or the giving of
notice, a default under, or result in the creation or imposition of any liens
upon any property of either the Seller or GIS pursuant to: (i) the Certificate
of Incorporation or By-Laws of the Seller, in each case amended to date; (ii)
under the provisions of any judgment, writ, decree or order known to us or, to
our knowledge and except as set forth in Schedule 3.2(c) to the Stock Purchase
Agreement, any agreement or commitment to which either the Seller or GIS is a
party or by which either the Seller or GIS or any of their properties is bound
or to which either the Seller or GIS or any of their properties is subject; or
(iii) any Delaware, Massachusetts or federal statute or regulation or rule
relating to either the Seller or GIS.
5. Except for (i) the filings and approvals referred to in Schedule
3.2(c) to the Stock Purchase Agreement, or (ii) any filing required under the
H-S-R Act, and (iii) any filing and recording of documents normally required in
connection with the conveyance of title to personal and real property or
Intellectual Property, no approval or consent or other action by, and no filing
or registration with, any agency, authority or other unit of the Commonwealth of
Massachusetts, State of Delaware (under the DGCL) or of the federal government
of the United States of America is required under existing law or regulations as
a condition to the valid execution, delivery and
<PAGE>
performance by the Seller of the Acquisition Agreements to which it is a party
or the effectiveness of the transactions contemplated thereby.
6. To our knowledge, GIS has no Subsidiaries, and does not otherwise
have, own or control, directly or indirectly, any direct or indirect equity or
ownership interest in or loans to any other business.
7. To our knowledge, except as disclosed in Schedule 3.3(b) to the Stock
Purchase Agreement and except for any preemptive rights arising under Illinois
law, there are no options, warrants, calls, conversion rights, commitments or
agreements of any kind to which the Seller or GIS is a party or by which the
Seller or GIS may be bound that obligate or may obligate GIS to issue, deliver
or transfer, or otherwise cause to be issued, delivered or transferred,
additional shares of equity securities or other securities of GIS or that
obligate or may obligate GIS to grant, extend or enter into any such option,
warrant, call, conversion right, commitment or agreement. To our knowledge and
except as disclosed in Schedule 3.3(b) to the Stock Purchase Agreement, there
are no outstanding arrangements, agreements, commitments or understandings of
any kind to which the Seller is a party which affect or relate to the voting,
issuance, purchase, redemption, repurchase or transfer of any of the Shares,
except for the Contemplated Transactions.
8. To our knowledge, except as disclosed in Schedule 3.15(a) to the Stock
Purchase Agreement, there are no actions, suits, proceedings, or investigations
pending or threatened against the Seller or GIS. To our knowledge, neither the
Seller nor GIS is subject to any order, writ, injunction, or decree of any court
or federal, state, municipal, or other governmental department, commission,
board, agency or instrumentality, domestic or foreign.
This opinion has been delivered solely for your use in connection with the
transactions contemplated by the Stock Purchase Agreement and may not be
referred to or used for any other purpose or relied upon by any other person,
except with our prior consent. The opinions expressed herein are given as of
the date hereof and we undertake no obligation hereby and disclaim any
obligation to advise you of any change after the date hereof pertaining to any
matter referred to herein.
Very truly yours
<PAGE>
Form of
Opinion of Thompson Dorfman Sweatman
July __, 1996
May & Speh, Inc.
1501 Opus Place
Downers Grove, IL 60515
Re: GIS Information Systems, Inc.
Our Matter #0036065
We have acted as Canadian counsel for Faneuil ISG Inc., a Canadian corporation
("Faneuil"), in connection with the transactions contemplated by the Stock
Purchase Agreement, dated as of July 1, 1996 (the "Stock Purchase Agreement"),
by and among May & Speh, Inc., a Delaware corporation (the "Buyer"), Faneuil,
Inc., a Delaware corporation (the "Seller"), and for certain purposes, Faneuil,
pursuant to which the Buyer has agreed to purchase all of the outstanding
capital stock of GIS Information Systems, Inc., an Illinois corporation ("GIS").
This opinion is being delivered to you pursuant to Sections 2.5(a)(iii) and
7.2(b) of the Stock Purchase Agreement. All capitalized terms that are used
herein without definition have the meanings set forth for such terms in the
Stock Purchase Agreement.
In connection with the rendering of this opinion, we have reviewed originals or
copies of each of the Stock Purchase Agreement, the Warrant and the Set-Off
Escrow Agreement (referred to hereinafter collectively as the "Acquisition
Agreements"), copies of the charter documents and by-laws of Faneuil,
resolutions of the Board of Directors of Faneuil authorizing and/or ratifying
the transactions contemplated by the Stock Purchase Agreement, and such other
documents as we have deemed necessary or appropriate for purposes of this
opinion.
As to all matters of fact (including factual conclusions and characterizations
and descriptions of purpose, intention or other states of mind), we have relied
entirely upon the representations made to us by officers of Faneuil and have
assumed, without independent inquiry, the accuracy of such representations.
Although we have not taken any additional action to confirm the accuracy of the
matters represented to us, nothing has come to our attention that leads us to
question the accuracy of the information supplied to us.
As to any opinion below relating to the existence of Faneuil in any
jurisdiction, our opinion relies entirely upon and is limited by a Certificate
of Compliance dated June 25, 1996, and issued by the Deputy Director under the
Canada Business Corporations Act, a copy of which is attached hereto as Exhibit
1.
We have assumed the genuineness of all signatures, the conformity to the
originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form
and the legal competence of each individual executing any document.
<PAGE>
When an opinion set forth below is given to the best of our knowledge, or to our
knowledge, or with reference to matters of which we are aware or which are known
to us, or with another similar qualification, the relevant knowledge or
awareness is limited to our action knowledge or awareness we have gained through
our representation of Faneuil and without any special or additional
investigation undertaken for the purposes of this opinion.
Each opinion set forth below relating to the enforceability of any agreement or
instrument against Faneuil is subject to the following general qualifications:
(i) as to any agreement to which Faneuil is a party, we assume that such
agreement is the binding obligation of each other party thereto;
(ii) as to any agreement or instrument to which Faneuil is a party, we
assume that Faneuil has received the agreed-to consideration
therefor;
(iii) the enforceability of any obligation of Faneuil may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, marshaling or other laws and rules of law affecting the
enforcement generally of creditors' rights and remedies (including
such as may deny giving effect to waivers of debtors' or guarantors'
rights);
(iv) no opinion is given herein as to the availability of any special or
equitable relief of any kind;
(v) no opinion is given herein as to the enforceability of Section 11 of
the Stock Purchase Agreement; and
(iv) the enforcement of any of your rights may in all cases be subject to
an implied duty of good faith and to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding at law or in equity).
Subject to the limitations set forth above and below, we have made such
examination of law as we have deemed necessary for purposes of this opinion.
This opinion is limited solely to the laws of the Province of Manitoba and to
the laws of Canada applicable therein, to the extent that same may apply to the
subject matter of our opinion. This opinion is limited to the matters expressly
stated herein and no opinion is implied or may be inferred beyond the matters so
stated. No opinion is given herein as to the choice of law or internal
substantive rules of law which any tribunal may apply to the transactions
referred to herein. In this regard, we note that certain of the Acquisition
Agreements contain provisions to the effect that the laws of a jurisdiction
other than those recited in the preceding sentence are intended to be governing.
For purposes of our opinion herein we have assumed, with your permission and
without any independent investigation, that the laws of any such jurisdiction
that may govern the Acquisition Agreements are identical in all relevant
respects to the laws of the Province of Manitoba.
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
<PAGE>
Based upon the foregoing, we are of the opinion that:
1. Faneuil is a corporation incorporated and organized and is existing under
the laws of Canada.
2. Faneuil has the corporate power to enter into the Stock Purchase Agreement
and to consummate the transactions contemplated thereby. The execution and
delivery to the Stock Purchase Agreement by Faneuil and the consummation of
the transactions contemplated thereby have been duly authorized by all
required corporate action on the part of Faneuil.
3. The Stock Purchase Agreement constitutes a legal, valid and binding
obligation of Faneuil, enforceable against Faneuil in accordance with its
terms.
4. Neither the execution nor the delivery of the Stock Purchase Agreement by
Faneuil nor the consummation by Faneuil of the transactions contemplated
thereby will constitute a violation of, or be in conflict with, constitute
or create a default under, or result in the creation or imposition of any
liens upon any property of Faneuil pursuant to: (i) the Articles or By-Laws
of Faneuil, each as amended to date; (ii) to our knowledge, any agreement
or commitment to which Faneuil is a party or by which Faneuil or any of its
properties is bound or to which Faneuil or any of its properties is
subject; or (iii) any Canadian or Manitoba statute or any regulation or
rule of any governmental authority relating to Faneuil.
This opinion has been delivered solely for your use in connection with the
transactions contemplated by the Stock Purchase Agreement and may not be
referred to or used for any other purpose or relied upon by any other person,
except with our prior consent. The opinions expressed herein are given as of
the date hereof and we undertake no obligations hereby and disclaim any
obligation to advise you of any change after the date hereof pertaining to any
matter referred to herein.
Yours truly,
<PAGE>
Exhibit 2.5(a)(iv)
Form of
Disaffiliation Tax Sharing Agreement
------------------------------------
The parties to this agreement, dated as of __________, 1996 (this
"Agreement"), are Faneuil, Inc., a Delaware corporation (the "Seller"), and May
& Speh, Inc., a Delaware corporation (the "Buyer").
The parties have entered into a Stock Purchase Agreement dated as of
________, 1996 (the "Stock Purchase Agreement"), pursuant to which Seller will
sell to the Buyer, and the Buyer will purchase from the Seller, all of the
issued and outstanding shares of the capital stock of GIS Information Systems,
Inc., an Illinois corporation ("GIS"). The parties desire to enter into this
Disaffiliation Tax Sharing Agreement pursuant to the Stock Purchase Agreement in
order to address certain matters relating to their respective Tax liabilities
and the Tax liabilities of GIS.
Article 1
---------
Defined Terms
-------------
(a) Capitalized terms used in this Agreement and not otherwise defined
have the respective meanings given those terms in the Stock Purchase Agreement.
(b) "Affiliated Group" means an affiliated group as defined in Section
1504 of the Code (or any analogous combined, consolidated or unitary group
defined under state, local or foreign Income Tax law).
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Faneuil Affiliated Group" means an Affiliated Group of which both
Faneuil and GIS are members.
(e) "Income Taxes" means any Taxes based upon or relating to income,
including without limitation any Taxes calculated in whole or in part based on
gross receipts or net revenues.
(f) "Non-Income Taxes" means any Taxes other than Income Taxes.
(g) "Tax" or "Taxes" means any federal, state, local, or foreign
income, gross receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, capital stock,
intangibles, social security, unemployment, disability, payroll, license,
employee, or other tax or levy, of any kind whatsoever, including any interest,
penalties, or additions to tax in respect of the foregoing.
<PAGE>
(h) "Tax Return" means any return, declaration, report, claim for
refund, information return, or other document (including any attached or related
or supporting estimates, elections, schedules, statements, or information) filed
or required to be filed in connection with the determination, assessment, or
collection of any Tax or the administration of any laws, regulations, or
administrative requirements relating to any Tax.
Article 2
---------
Responsibility for Taxes
------------------------
2.1. Income Taxes.
(a) The Seller shall be responsible for (and shall hold the Buyer
harmless against) all U.S. federal Income Taxes, and U.S. state Income Taxes for
those states that substantially follow the federal Income Tax treatment of
elections under Code Section 338(h)(10), of GIS (or any Affiliated Group which
includes GIS) attributable to any Tax period ending on or prior to the Closing
Date (including any Taxes attributable to the Section 338(h)(10) election
referred to in Article 4). The Seller shall prepare (or cause to be prepared)
and file (or cause to be filed) on a timely basis any U.S. federal or such state
Tax Returns of GIS for Tax periods ending on or prior to the Closing Date that
are due (including all applicable extensions) or may be filed after the Closing
Date. The Seller shall pay (or cause to be paid) all Taxes shown or required to
be shown to be due on such Tax Returns. To the extent that a reserve exists for
any such U.S. federal or such state Income Taxes on the Closing Balance Sheet,
the Buyer shall transfer the amount of such reserve to the Seller within five
(5) business days of receipt of notice of payment by the Seller.
(b) With respect to any U.S. state (other than those states referred
to in paragraph (a) above) and U.S. local and foreign national, state and local
Income Taxes of GIS (or any group which includes GIS) attributable to any Tax
period that either ends on or prior to June 30, 1996 or includes but does not
end on June 30, 1996, (i) with respect to Tax periods that end on or prior to
June 30, 1996, the Seller shall be responsible for (and shall hold the Buyer
harmless against) all such Income Taxes (subject to any reserve on the Closing
Balance Sheet as described below) and (ii) with respect to Tax periods that
include but do not end on June 30, 1996, the Seller shall be responsible for
(and shall hold the Buyer harmless against) all such Income Taxes attributable
to the Tax period prior to July 1, 1996, such portion to be based on the net
book income of GIS during that portion of the Tax period prior to July 1, 1996,
as determined by the Closing Balance Sheet and the related income statement
delivered pursuant to Section 2.6 of the Stock Purchase Agreement, as compared
to its net book income for the entire applicable Tax period (determined in a
manner consistent with the Closing Balance Sheet and such income statement), and
after giving effect to any reserve on the Closing Balance Sheet as described
below. Except for any consolidated, combined, or unitary foreign or U.S. state
or local Tax Return of the Seller which includes GIS (which Tax Return shall be
subject to the Buyer's prior review and consent, such consent not to be
unreasonably withheld, conditioned or delayed; provided, that the failure to
provide a reasonable opportunity to review or a lack of consent shall not excuse
the Buyer from its indemnification obligations except to the extent the Buyer
can demonstrate it was prejudiced thereby), the Buyer shall prepare (or cause to
be prepared) and file (or cause to be filed) on a timely basis any applicable
Tax Returns of GIS for applicable Income Tax
<PAGE>
periods that include but do not end on June 30, 1996. Such Tax Returns shall be
prepared on a basis consistent with all applicable Income Tax laws, rules and
regulations. The Buyer shall pay (or cause to be paid) all Taxes shown to be
due on such Tax Returns. To the extent that the Seller is responsible for any
portion of such Income Taxes pursuant to the first sentence of this paragraph
(b), the Seller shall be liable for and reimburse the Buyer for that portion of
such Income Taxes in excess of any reserve for such U.S. state or foreign
national, state or local Income Taxes set forth on the Closing Balance Sheet.
Any such reimbursement shall occur within five (5) business days of receipt of
notice of payment by the Buyer.
(c) The Seller shall be entitled to all refunds of Income Taxes of the
type and for all Tax periods referred to in paragraph (a) above or paragraph (b)
above, except with respect to any Tax Return for which the Buyer has paid a
portion of the relevant Income Taxes as provided in paragraph (b) above, in
which case the Buyer shall be entitled to a pro rata portion of such refund
based on the proportion of applicable Income Taxes paid by the Buyer.
2.2. Non-Income Taxes.
(a) The Seller shall be responsible for (and shall hold the Buyer
harmless against) all Non-Income Taxes of GIS attributable to any Tax period
ending on or before June 30, 1996. The Seller shall also be responsible for
(and shall hold the Buyer harmless against) a portion of any Non-Income Taxes of
GIS attributable to any Tax period that ends after June 30, 1996, determined by
allocating such Tax liability to the Buyer or the Seller by reference to the
specific asset, activity or payment producing such Tax liability, and if the Tax
liability cannot practically be so allocated, then pro rata based on the number
of days in the applicable Tax period prior to July 1, 1996 as compared to the
number of days in the Tax period after June 30, 1996, or based on some other
method determined jointly by the Buyer and the Seller to be more appropriate.
(b) The Buyer shall prepare (or cause to be prepared) and file (or
cause to be filed) on a timely basis any Tax Returns for Non-Income Taxes of GIS
that are due (including all applicable extensions) or may be filed after the
Closing Date. Such Tax Returns shall be prepared on a basis consistent with all
applicable federal, state, local and foreign Tax laws, rules and regulations.
The Buyer shall pay (or cause to be paid) all Non-Income Taxes shown or required
to be shown to be due on such Tax Returns. The Seller shall be liable for and
shall reimburse the Buyer for that portion of such Taxes for which the Seller is
responsible pursuant to paragraph (a) above and for which a reserve did not
exist on the Closing Balance Sheet. Any such reimbursement shall occur within
five (5) business days of receipt of notice of payment by the Buyer.
(c) The Seller shall be entitled to all refunds of Non-Income Taxes of
the type and for the Tax periods referred to in paragraph (a) above, except with
respect to any Tax Return for which the Buyer has paid a portion of the relevant
Non-Income Taxes as provided in paragraph (b) above, in which case the Buyer
shall be entitled to a pro rata portion of such refund based on the proportion
of applicable Non-Income Taxes paid by the Buyer.
Article 3
---------
<PAGE>
Cooperation on Tax Matters; Conduct of Proceedings
--------------------------------------------------
(a) The Buyer and the Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
preparation and filing of Tax Returns pursuant to Article 2 and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to such preparation and
filing and to any audit, litigation or other proceeding relating thereto and
making employees reasonably available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. Prior
to filing any Tax Returns of GIS for which the Seller has agreed to indemnify
the Buyer pursuant to Article 2, the Buyer shall provide the Seller with a
reasonable opportunity to review the applicable Tax Returns and obtain the prior
consent of the Seller, not to be unreasonably withheld, conditioned or delayed;
provided, that the failure to provide a reasonable opportunity to review or a
lack of consent shall not excuse the Seller from its indemnification obligations
except to the extent the Seller can demonstrate it was prejudiced thereby.
(b) The Seller shall be responsible for defending any audit,
litigation or other proceeding with respect to Taxes of the Seller or GIS
attributable to any period prior to the Closing Date, in the case of those Taxes
referred to in Section 2.1(a), or June 30, 1996, in the case of all other Taxes
(with the Closing Date and June 30, 1996 referred to as the "Applicable Cut-Off
Dates") and shall have the authority to negotiate, compromise and settle any
such audit, litigation or other proceeding. The Seller shall keep the Buyer
reasonably informed as to the progress of any such audit, litigation or other
proceeding with respect to Taxes of the Seller or GIS, and shall, if the Buyer
so requests, permit the Buyer at its expense to participate in any such audit,
litigation or other proceeding; provided, that the Seller shall not settle any
such audit, litigation, or other proceeding without the Buyer's consent (not to
be unreasonably withheld, conditioned or delayed) if such settlement would
increase the Tax liabilities of Buyer or any of its affiliates (including GIS)
for any period after the Applicable Cut-Off Date. If, as a result of any such
audit, litigation or proceeding the Seller or GIS is required to pay any
additional Taxes, within five (5) business days after receipt of notice of
payment, the Buyer shall reimburse the Seller for that portion of such Taxes for
which it is responsible under Article 2.
Article 4
---------
Section 338(h)(10) Election
---------------------------
The Seller and the Buyer will join in making an election under Section
338(h)(10) of the Code (a "Section 338(h)(10) Election") with respect to the
purchase of the stock of GIS pursuant to the Stock Purchase Agreement. As a
result, to the extent not inconsistent with applicable law or this Agreement,
the Buyer will be responsible for preparing and filing all documents and
materials necessary in connection with making the Section 338(h)(10) Election.
Each of the Seller and the Buyer agree to cooperate with each other in
connection therewith (including, without limitation, signing and returning any
documents sent to such party for its signature in connection therewith within
fifteen (15) days of its receipt of such documents). The Buyer and the Seller
agree that for purposes of the Section 338(h)(10) Election they will agree to
the valuation, or method of valuation,
<PAGE>
of the assets of GIS within four (4) months after the Closing Date, and will
reflect such agreement in a written supplement to this Agreement. In preparing
such allocation both the Buyer and the Seller will act in a reasonable manner.
The Buyer and the Seller will file all Tax Returns in a manner consistent with
the Section 338(h)(10) Election and the valuation of the assets determined as
provided above.
Article 5
---------
Adjustments Affecting Timing: Refunds
----------- --------- ------ -------
(a) "Adjustment" means any change in an item of income, gain, loss,
deduction or credit, including, but not limited to, changes attributable to any
amended Tax Returns, deficiencies asserted by any taxing authority,
overpayments, claims for refund, audit, examination, proceedings or litigation
resulting from any of the foregoing events.
(b) Timing Adjustments: Buyer's Tax Decrease. If there is an
Adjustment to any item reported on a Tax Return filed with respect to the Seller
or any Affiliate of the Seller (including GIS) for a period ending on or before
the Applicable Cut-Off Date (a "Prior Period") that results in an increase in
the Tax liabilities of the Seller or an Affiliate of the Seller (including GIS
to the extent the Seller is liable for such Tax liabilities under this
Agreement) and such Adjustment results in a corresponding Adjustment to items
reported on a Tax Return filed by or with respect to the Buyer or GIS or any
Affiliate for a period beginning after the Applicable Cut-Off Date, with the
result that the Tax liabilities of the Buyer, GIS, or such Affiliate with
respect to such period are reduced, then the Buyer shall pay to the Seller an
amount equal to such increase in Taxes of the Seller or Seller's Affiliate, such
payment being limited to the decrease in the Tax liabilities of the Buyer and
its Affiliates.
(c) Timing Adjustments: Buyer' Tax Increase. If there is an Adjustment
to any item reported on a Tax Return filed with respect to the Seller or any
Affiliate of the Seller (including GIS) for a Prior Period that results in a
decrease in the Tax liabilities of the Seller or an Affiliate of the Seller
(including GIS to the extent the Seller are liable for such Tax liabilities
under this Agreement) and such Adjustment results in a corresponding Adjustment
to items reported on a Tax Return filed by or with respect to the Buyer, GIS or
any Affiliate for a period beginning after the Applicable Cut-Off Date, with the
result that the Tax liabilities of the Buyer, GIS, or such Affiliate with
respect to such period are increased, then the Seller shall pay to the Buyer an
amount equal to such increase in Taxes of the Buyer or Buyer's Affiliate, such
payment being limited to the decrease in the Tax liabilities of the Seller and
its Affiliates.
(d) Payments: Buyer's Tax Decrease. Any payment by the Buyer under
this Article 5 shall be due within thirty (30) days after the realization of the
Tax decrease. Any such payment shall bear interest computed at the rate and in
the manner provided by Section 6621 of the Code for a period commencing on the
thirtieth (30) day after the realization of the Tax decrease.
(e) Payments: Buyer's Tax Increase. Any payment by the Seller under
this Article 5 shall be due within thirty (30) days after the payment of such
Tax increase. Any such
<PAGE>
payment shall bear interest computed at the rate and in the manner provided by
Section 6621 of the Code for a period commencing on the thirtieth (30) day after
the realization of the Tax increase.
Article 6
---------
Miscellaneous
-------------
This Agreement, together with the Stock Purchase Agreement and the other
agreements entered into pursuant thereto, contains the entire understanding of
the parties relating to the subject matter hereof, supersedes all prior
agreements and understandings relating thereto, and shall not be amended except
by a written instrument hereafter signed by all of the parties hereto. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rule of strict construction will
be applied against any party. The headings of sections and subsections are for
reference only and shall not limit or control the meaning thereof. Any notices,
requests, payments, instructions, or other documents to be given hereunder shall
be given in the manner provided by Section 13.4 of the Stock Purchase Agreement.
This Agreement shall be governed by and construed and enforced in accordance
with the internal laws (and not the choice-of-law rules) of the State of
Illinois. Any dispute under this Agreement shall be resolved pursuant to the
arbitration provisions of Section 13.5 of the Stock Purchase Agreement. This
Agreement may be executed by the parties in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as
an instrument under seal as of the day and year first written above.
FANEUIL, INC.
By:
MAY & SPEH, INC.
By:
<PAGE>
Exhibit 2.5(b)(ii)
THIS WARRANT AND THE SHARES OF COMMON STOCK OF MAY & SPEH, INC. TO BE ISSUED
UPON ANY EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SECURITIES REPRESENTED BY
THIS CERTIFICATE OR THOSE ISSUED UPON EXERCISE HEREOF MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT MADE UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS ACCEPTABLE TO THE COMPANY.
JULY __, 1996
WARRANT TO PURCHASE UP TO AN AGGREGATE OF
________ SHARES OF THE COMMON STOCK OF
MAY & SPEH, INC., A DELAWARE CORPORATION
For value received, May & Speh, Inc., a Delaware corporation (the "Company"),
hereby certifies that Faneuil, Inc., a Delaware corporation, or its permitted
assigns as set forth in Section 5 herein (the "Holder"), is entitled to
purchase, subject to the provisions of this Warrant, from the Company up to an
aggregate of _______ duly authorized, validly issued, fully paid and
nonassessable shares of the Company's Common Stock, with par value of $.01 per
share, at a purchase price of $_____ per share (the "Exercise Price"), all
subject to the terms, conditions and adjustments set forth in this Warrant. The
shares of Common Stock deliverable upon such exercise, and as adjusted from time
to time, are hereinafter sometimes referred to as "Warrant Stock." This Warrant
was originally issued in connection with the execution and delivery of a Stock
Purchase Agreement, dated as of July __, 1996 (the "Stock Purchase Agreement"),
pursuant to which the Company purchased from the original Holder hereof all of
the outstanding shares of GIS Information Systems, Inc.
Section 1. Exercise of Warrant.
-------------------
(a) Manner of Exercise. Subject to the provisions hereof, this Warrant
may be exercised, in whole or in part, but not as to a fractional share, at any
time or from time to time on or after the date hereof and on or before the fifth
anniversary of the date of this Warrant (the "Expiration Date"), by presentation
and surrender hereof to the Company, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the full Exercise Price for the number of
shares specified in such Form, together with all federal and state taxes
applicable upon such exercise that are required to be withheld by the Company.
The Exercise Price for the number of Warrant Stock specified in the Election to
Purchase Form shall be payable either (i) in United States Dollars by certified
or official bank check payable to the order of the Company or by wire transfer
of immediately available funds to an account specified by the Company for that
purpose or (ii) by the surrender of the Holder of its rights to a number of
shares of Warrant Stock having a Fair Market Value (as defined below) equal to
or greater than the required aggregate Exercise Price, in which case the Holder
would receive the number of shares of Warrant Stock to which it would otherwise
be entitled upon such exercise, less the surrendered
<PAGE>
shares. As used herein, the term "Fair Market Value" means, as of any date,
either (a) if the Common Stock is then listed on a stock exchange or quoted
through the NASDAQ National Market System or any successor thereto, the average
of the closing prices of the Common Stock on the ten trading days preceding such
date or (b) if the Common Stock is then quoted through NASDAQ (but not on the
National Market System) or otherwise publicly traded, the average of the closing
bid and asked prices on the ten trading days preceding such date or (c) if the
Common Stock is not then publicly traded, as determined in good faith by the
Company's Board of Directors.
(b) Partial Exercise. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the shares purchasable hereunder.
(c) Effective Date of Exercise. Upon receipt by the Company of this Warrant
at the office or agency of the Company, with the completed Purchase Form, and
upon receipt by the Company of payment of the Exercise Price, the Holder shall
be deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock shall not then actually be delivered to the Holder.
(d) Transfer Restriction Legend. Each certificate representing shares
initially issued upon exercise of this Warrant (and subsequently issued if
appropriate), unless at the time of exercise such shares have been sold pursuant
to an effective registration statement under the Securities Act, shall bear the
following legend (and any additional legend required by applicable securities
laws or any securities exchange or NASDAQ at the time of such exercise) on the
face thereof:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state and may not be sold, transferred, hypothecated or otherwise
assigned except pursuant to a registration statement with respect to
such securities which is effective under such act and under any
applicable state securities laws unless, in the opinion of counsel
reasonably satisfactory to the Company, an exemption from the
registration requirements of such act and state securities laws is
available."
Any certificate issued at any time upon transfer of, or in exchange for or
replacement of, any certificate bearing such legend (except a new certificate
issued upon completion of a public distribution of the securities represented
thereby pursuant to a registration under the Securities Act) shall also bear
such legend unless, in the opinion of counsel for the registered holder thereof
reasonably acceptable to the Company, the shares represented thereby need no
longer be subject to the restrictions in this Section 1(d). The provisions of
this Section 1(d) shall be binding upon all subsequent holders of certificates
bearing the above legend, and shall also be applicable to all subsequent holders
of this Warrant.
<PAGE>
Section 2. Reservation of Shares. The Company hereby agrees that at all
times before the expiration of this Warrant, it will reserve a sufficient number
of shares of Common Stock to be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereon, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current value of such fractional share, determined in
accordance with Section 3 below.
Section 3. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current value of such fractional share, determined as follows:
the current value shall be an amount, no less than book value per share,
determined in such reasonable manner as may be prescribed by the Board of
Directors of the Company, such determination to be final and binding on the
Holder.
Section 4. Substitution of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and (i) in the case of any such loss, theft or destruction of any
Warrant, upon delivery of indemnity reasonably satisfactory to the Company, or
(ii) in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the principal office of the Company, the Company at its expense
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
Section 5. Restrictions on Transfer.
(a) General Restrictions. Except to the extent approved by the Board
of Directors of the Company, and other than by means of a public offering
registered in accordance with Section 11 hereof, the Holder shall not sell,
assign, transfer, pledge or dispose of all or any portion of the Warrant or the
Warrant Stock. Notwithstanding the foregoing, the Holder may transfer this
Warrant or all or any portion of the Warrant Stock after providing written
notice to the Company of the Holder's intention to effect such transfer,
describing in reasonable detail the proposed transfer, and delivery to the
Company of the opinion of counsel referred to in, and to the effect described
in, Section 5(b) below. Notwithstanding the foregoing, the Holder shall be
permitted to transfer the Warrant only in its entirety so that there shall be at
all times only one Holder under this Warrant, and it is expressly agreed and
acknowledged that the registration rights provided in Section 11 hereof shall
only accrue to such Holder.
(b) Statement of Intention to Transfer; Opinion of Counsel. Except for
any transfer pursuant to Section 11 hereof, at least 28 days prior to any
transfer of this Warrant or any transfer of the related Warrant Stock, the
Holder of this Warrant will deliver a statement to the Company, describing in
reasonable detail the proposed transfer, together with a signed copy of the
opinion of such Holder's counsel as to the permissibility of the transfer or
assignment under the terms of this Warrant and under applicable securities laws,
which opinion shall be reasonably satisfactory in form and substance to the
Company. If, in the opinion of such Holder's counsel, the proposed transfer of
this Warrant or the proposed transfer of such Warrant Stock may be effected
under the terms of this Warrant and under applicable securities laws, and, in
the case of the transfer of the Warrant in its entirety, if the proposed
transferee of the Warrant agrees in writing to be bound by
<PAGE>
the terms and conditions set forth in this Warrant, then such Holder shall be
entitled to transfer this Warrant (and such transferee shall become a "Holder"
as used herein), or to transfer such Warrant Stock in accordance with the
intended method of disposition specified in the statement delivered by such
Holder to the Company. Any Warrant or Warrant Stock issued in connection with
such transfer shall bear the restrictive legend required by Section 1(d).
Section 6. Rights of the Holder. The Holder shall not, by virtue hereof,
be entitled to any rights of a shareholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
Section 7. Adjustments.
(a) Adjustment of Number of Shares. Anything in this Section 7 to the
contrary notwithstanding, in case the Company shall at any time issue Common
Stock by way of dividend or other distribution on the Common Stock of the
Company or subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall be proportionately decreased in the case of such issuance
(on the day following the date fixed for determining shareholders entitled to
receive such dividend or other distribution) or decreased in the case of such
subdivision or increased in the case of such combination (on the date that such
subdivision or combination shall become effective). Notwithstanding the
foregoing, in no event will the Exercise Price ever be reduced below the par
value per share of the Warrant Stock.
(b) No Adjustment for Small Amounts. Anything in this Section 7 to the
contrary notwithstanding, the Company shall not be required to give effect to
any adjustment in the Exercise Price unless and until the net effect of one or
more adjustments, determined as above provided, shall have required a change of
the Exercise Price by at least one cent, but when the cumulative net effect of
more than one adjustment so determined shall be to change the actual Exercise
Price by at least one cent, such change in the Exercise Price shall thereupon be
given effect.
(c) Number of Shares Adjusted. Upon any adjustment of the Exercise
Price, the Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of this Warrant by
the Exercise Price in effect on the date hereof and dividing the product so
obtained by the new Exercise Price.
(d) Common Stock Defined. Whenever reference is made in this Section 7
to the issue or sale of shares of Common Stock, the term "Common Stock" shall
mean the common stock of the Company of the class authorized as of the date
hereof and any other class of stock ranking on a parity with such Common Stock.
However, subject to the provisions of Section 10 hereof, shares issuable upon
exercise hereof shall include only shares of the class designated as Common
Stock of the Company as of the date hereof.
<PAGE>
Section 8. Officer's Certificate. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section 7 hereof, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office, an officer's certificate showing the adjusted Exercise Price
determined as herein provided and setting forth in reasonable detail the facts
requiring such adjustment. Each such officer's certificate shall be made
available at all reasonable times for inspection by the Holder, and the Company
shall, forthwith after each such adjustment, deliver a copy of such certificate
to the Holder.
Section 9. Notices to Warrant Holders. As long as this Warrant shall be
outstanding and unexercised (i) if the Company shall pay any dividend or make
any distribution upon the Common Stock, or (ii) if the Company shall offer to
the holders of Common Stock for subscription or purchase by them any shares of
stock of any class or any other rights, or (iii) if any capital reorganization
of the Company in which the Company is not the surviving entity,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, conveyance or lease of all or
substantially all of the Company's assets, or voluntary or involuntary
dissolution, liquidation or winding up of the Company shall be effected, then,
in any such case, the Company shall cause to be delivered to the Holder, at
least ten days prior to the dates set forth in (x) and (y) below, as the case
may be, a notice containing a brief description of the proposed action and
stating the date (x) of record to be set for the purpose of such dividend,
distribution or rights, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any, is to be fixed as of which the holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
Section 10. Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale or conveyance to another corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, the Company shall cause effective provisions to be made so that the
Holder shall have the right thereafter, through the exercise of this Warrant, to
purchase the kind and amount of shares of stock and other securities and
property receivable upon such reclassification, capital reorganization or other
change, consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments provided for in this Warrant. The foregoing
provisions of this Section 10 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that in any such capital reorganization or reclassification, consolidation,
merger, sale or conveyance, additional shares of Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for or of a
security of the Company other than Common Stock, any such issue shall be treated
as an issue of Common Stock
<PAGE>
covered by the provisions of Section 7(a) hereof with the amount of the
consideration received upon the issue thereof being determined by the Board of
Directors of the Company, such determination to be final and binding on the
Holder.
Section 11. Registration Rights. The Holder shall have registration rights
as provided in this Section 11 with respect to the shares of Warrant Stock (the
"Registrable Shares").
(a) Whenever securities of the Company are to be registered under the
Securities Act, other than pursuant to a registration statement on Form S-4 or
Form S-8, and the registration form to be used may be used for the registration
of the Registrable Shares (a "Piggyback Registration"), the Company will give
prompt written notice to the Holder of its intention to effect such a
registration and will include in such registration all Registrable Shares with
respect to which the Company has received written requests for inclusion therein
within 21 days after the Company's notice has been given.
(b) If a Piggyback Registration is an underwritten primary registration on
behalf of the Company, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such offering in the registration creates a substantial risk that the price
per share of the Company's Common Stock will be reduced, the Company will
include in such registration (i) first, the securities the Company proposes to
sell, (ii) second, the Registrable Shares requested to be included in such
registration which in the opinion of such underwriters can be sold in such
offering without creating such a risk, and (iii) third, other securities
requested to be included in such registration.
(c) If a Piggyback Registration is an underwritten secondary registration on
behalf of holders of the Company's securities, and the managing underwriters
advise the Company in writing that in their opinion the inclusion of the number
of securities requested to be included in such offering creates a substantial
risk that the price per share of the Company's Common Stock will be reduced, the
Company will include in such registration the Registrable Shares requested to be
included in such registration and the securities requested to be included
therein by the holders of the Company's securities requesting such registration
(all such Registrable Shares and other securities requested to be included in
such registration being collectively referred to as the "Secondary Shares")
which in the opinion of such underwriters can be sold in such offering without
creating such a risk, pro rata among the holders of such Secondary Shares on the
basis of the number of Secondary Shares owned or deemed to be owned by such
holders, with further successive pro rata allocations among the holders of
Secondary Shares if any such holder of Secondary Shares has requested the
registration of less than all such Secondary Shares such person or entity (a
"Person") is entitled to register.
(d) In the event that not all of the Registrable Shares have been registered
on or prior to October 31, 1997, the Holder may request at any time on or after
November 1, 1997, the registration under the Securities Act of all or part of
their Registrable Shares on Form S-3 or any similar short-form registration
("Short-Form Registration"), if available, so as to permit the resale thereof
(which shall not be through an underwritten public offering). The Holder will be
entitled to request
<PAGE>
one Short-Form Registration. The Company will use its Best Efforts to make the
Short-Form Registration available for the sale of Registrable Shares. Subject to
the following sentence, if the Company is unable to make the Short-Form
Registration available for the sale of Registrable Shares within 90-days of
Holder's request, the Company shall cause the registration of the Registrable
Shares on Form S-1 or S-2 or any similar long-form registration so as to permit
the resale thereof (which shall not be through an underwritten public offering).
If the Holder makes a request for a Short-Form Registration during the Company's
first fiscal quarter, or if as a result of the immediately preceding sentence a
Short-Form Registration would be required to become effective during the
Company's first fiscal quarter, then the Company shall be permitted to postpone
the effectiveness of such Short-Form Registration until the Company has filed
with the SEC its Form 10-K with respect to the immediately preceding fiscal
year. In such case, the Company shall use its Best Efforts to effect such Short-
Form Registration as soon as practicable following the filing of such Form 10-K.
By way of illustration, if the Holder requests a Short-Form Registration on or
after November 1, 1997 but prior to December 31, 1997, the Company would use its
Best Efforts to effect such Short-Form Registration as soon as practicable
following the filing of the Company's Form 10-K with respect to its fiscal year
ended September 30, 1997.
(e) The Company may postpone for a reasonable period not to exceed 90 days
the filing or the effectiveness of a registration statement for a Demand
Registration if the Board of Directors of the Company determines reasonably and
in good faith that such filing would require a disclosure of a material fact
that would have a material adverse effect on the Company or any plan by the
Company or any of its Subsidiaries to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or other significant transaction.
(f) The Company will pay all registration expenses incurred in connection
with the filing of the registration statements provided for in this Section 11,
including all registration and filing fees, fees and expenses of compliance with
federal, state and foreign securities laws, printing expenses, and fees and
disbursements of counsel for the Company and its independent certified public
accountants, underwriters, and other Persons retained by the Company, but
excluding discounts and commissions attributable to the Registrable Shares. The
Holder will be responsible for the fees and expenses of its own counsel.
(g) The Company agrees to use reasonable efforts to effect the
registration of the Registrable Shares in accordance with the intended method of
disposition thereof, and pursuant thereto the Company will as expeditiously as
possible:
(i) prepare and file with the Commission such amendments and
supplements to any registration statement filed pursuant to subsection (d)
hereof and the prospectus used in connection therewith as may be necessary to
keep any such registration statement effective until the sixtieth (60th) day
following the effective date with respect thereto, or such earlier time as all
of the Registrable Shares covered by any such registration statement have been
sold, and to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by any such registration statement
during such effective period in accordance with the intended methods of
disposition by the Holder set forth in any such registration statement;
<PAGE>
(ii) furnish to the Holder such number of copies of any
registration statement filed pursuant to this Section 11, each amendment and
supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as the Holder
may reasonably request in order to facilitate the disposition of the Registrable
Shares;
(iii) use reasonable efforts to register or qualify the Registrable
Shares under such other securities or blue sky laws of such states of the United
States as the Holder reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable the Holder to
consummate the disposition in such jurisdictions of the Registrable Shares owned
by the Holder; provided that the Company will not be required (A) to qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subsection (g)(iii), (B) to subject itself to
taxation in any such jurisdiction or (C) to consent to general service of
process in any such jurisdiction;
(iv) notify the Holder, at any time when a prospectus relating to
any registration statement filed pursuant to this Section 11 is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and, at the request of the Holder, the Company will
promptly prepare (and, when completed, give notice to each seller of Registrable
Shares) a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Shares, such prospectus will not
contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading; provided that upon such
notification by the Company, the Holder will not offer or sell Registrable
Shares until the Company has notified the Holder that it has prepared a
supplement or amendment to such prospectus and delivered copies of such
supplement or amendment to each such seller;
(v) cause all the Registrable Shares to be listed on each
securities exchange on which shares of the Company's Common Stock are then
listed; and
(vi) in the event of the issuance of any stop order suspending the
effectiveness of any registration statement filed pursuant to this Section 11,
or of any order suspending or preventing the use of any related prospectus or
suspending the qualification of any Registrable Shares included in such
registration statement for sale in any jurisdiction, the Company will use
reasonable efforts promptly to obtain the withdrawal of such order.
(h) Indemnification.
(i) The Company agrees to indemnify the Holder, its officers and
directors and each Person who controls the Holder (within the meaning of the
Securities Act) against all losses, claims, damages and liabilities caused by
any untrue or alleged untrue statement of material fact contained in any
registration statement filed pursuant to this Section 11, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are (A) caused by or contained in any information furnished to the Company
by
<PAGE>
the Holder for use therein, (B) caused by the Holder's failure to deliver a copy
of any such registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished the Holder with a sufficient
number of copies of the same, or (C) caused by the Holder's sale of Registrable
Shares in violation of the proviso to subsection (g)(iv) hereof.
(ii) In connection with any registration statement filed pursuant
to this Section 11, the Holder will furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus and will indemnify
the Company, its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages
and liabilities resulting from any untrue or alleged untrue statement of
material fact contained in any such registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue or alleged untrue statement or omission or alleged omission is
attributable to the information furnished by the Holder to the Company in
writing expressly for use in such registration statement or prospectus or
supplement thereto.
(iii) Any Person entitled to indemnification hereunder will (A) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (B) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim. Subject to the foregoing terms and provisions of this subsection
(h)(iii), each indemnifying party hereunder will reimburse the person entitled
to indemnification hereunder for all legal and other expenses reasonably
incurred in connection with investigating and defending the action or claim for
which such indemnified party seeks indemnification, as such expenses are
incurred.
(iv) The indemnification provided for under this subsection (h)
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and will survive the transfer of securities.
Section 12. Applicable Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of Delaware, excluding its
choice of law rules.
Date: July __, 1996 MAY & SPEH, INC.
<PAGE>
By:
-----------------------------------
Robert C. Early, Executive Vice
President and Chief Financial Officer
<PAGE>
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the Warrant to the
extent of purchasing ____________ shares of Common Stock of __________________
and hereby makes payment of $ _________ payable to ________________ by personal
or cashier's check or certified funds in payment of the full Exercise Price.
Date: _________________________ _____________________________________
(Signature as name appears on p. 1 of
Warrant)
_____________________________________
(Print Name, and title if applicable)
_____________________________________
(Address)
_____________________________________
(Address)
_____________________________________
(Social Security or Taxpayer
Identification No.)
<PAGE>
Exhibit 2.5(b)(iv)
Form of
Opinion of Freeborn & Peters
July __, 1996
Faneuil ISG, Inc.
Faneuil, Inc
c/o The Faneuil Group
2 Faneuil Hall South, Third Floor
Boston, MA 02109-1605
Ladies and Gentlemen:
We have acted as counsel for May & Speh, Inc., a Delaware corporation (the
"Company") in connection with the Stock Purchase Agreement dated as of July __,
1996 (the "Stock Purchase Agreement") by and between Faneuil ISG Inc., a
Canadian corporation ("Faneuil"), Faneuil, Inc., a Delaware corporation
("Seller"), and the Company. Capitalized terms used and not otherwise defined in
this opinion have the meanings given them in the Stock Purchase Agreement. We
deliver this opinion pursuant to Section 2.5(b)(iv) and 8.2(b) of the Stock
Purchase Agreement.
In rendering the opinions expressed below, we have examined originals or
copies of each of the Stock Purchase Agreement, the Tax Sharing Agreement, the
Warrant, the Set-Off Escrow Agreement, and the Services Agreement (referred to
hereinafter collectively as the "Acquisition Agreements"), copies of the
Certificate of Incorporation and By-Laws of the Company, and such other
instruments and records and inquired into such other factual matters and matters
of law as we have deemed necessary or pertinent to the formulation of the
opinions hereinafter expressed.
Subject to the foregoing and to the limitations set forth below, we are of the
opinion that:
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
2. The Company has all requisite corporate power and authority to enter into
the Acquisition Agreements and to consummate the transactions contemplated
thereby. The execution and delivery by the Company of the Acquisition
Agreements and the consummation of the transactions contemplated thereby have
been duly authorized by all required corporate action on the part of the
Company.
3. Each of the Stock Purchase Agreement, the Tax Sharing Agreement, the
Warrant, and the Services Agreement has been executed and delivered by the
Company and constitutes, and the Set-Off Escrow Agreement, when duly executed
and delivered by the Company will constitute, the legal, valid and binding
obligations of the Company, enforceable against it in accordance with its terms.
<PAGE>
4. Neither the execution and delivery of the Acquisition Agreements, nor the
consummation of the transactions contemplated thereby, will constitute a default
under, or an event that would, with notice or lapse of time or both, constitute
a default under or a violation or breach of (i) the Company's Certificate of
Incorporation or By-Laws, (ii) any Contractual Obligation (as such term is
defined below) or, to our knowledge, any other material contract or agreement to
which the Company is a party or by which any of its assets are bound, or (iii)
any statute, rule or regulation of Federal or Illinois law, or, to our
knowledge, any judgment or order of any court, arbitrator or governmental body
to which the Company is a party or to which the assets of the Company may be
bound. "Contractual Obligation," as used herein, means any of the agreements
filed as exhibits to the Company's Registration Statement on Form S-1 and the
Company's most recently filed interim report on Form 10-Q.
5. Except for the filings and approvals referred to in Schedule 4.2 to the
Stock Purchase Agreement, and except with respect to filings and registrations
contemplated in connection with the registration of the Warrant Stock under
Section 11 of the Warrant, no approval or consent or other action by, and no
filing or registration with, any agency, authority or other unit of the State of
Illinois, State of Delaware (under the DGCL) or of the federal government of the
United States of America is required under existing law or regulations as a
condition to the valid execution, delivery and performance by the Seller of the
Acquisition Agreements to which it is a party or the effectiveness of the
transactions contemplated thereby.
6. The issuance and delivery of the Warrant and the Warrant Shares issuable
pursuant thereto are exempt from the registration requirements of the Securities
Act of 1933, as amended.
7. The Warrant Shares to be issued and sold by the Company pursuant to the
Warrant Agreement have been duly authorized, and when issued and delivered to
the Holder against payment therefor as provided by the Warrant Agreement, will
have been validly issued and will be fully paid and non-assessable. The
execution and delivery of the Warrant and the issuance of the Warrant Shares
pursuant thereto will not conflict with or trigger any statutory or, to our
knowledge, contractual preemptive rights.
8. To the best of our knowledge, there are no actions, suits, proceedings, or
investigations pending or threatened against the Company. To the best of our
knowledge, the Company is not subject to any order, writ, injunction, or decree
of any court or federal, state, municipal, or other governmental department,
commission, board, agency, or instrumentality, domestic or foreign.
The foregoing opinions are subject to the following qualifications:
(i) As to any opinion relating to the organization, existence, qualification
or standing of the Company in any jurisdiction, our opinion relies entirely upon
and is limited by those certificates of public officials attached hereto as
EXHIBIT A.
(ii) Our opinions stated in paragraph 3 with respect to the validity and
enforceability of the Acquisition Agreements are subject to:
<PAGE>
a. Applicable bankruptcy, insolvency, reorganization, rehabilitation,
moratorium or other laws now or hereafter in effect affecting creditors'
rights generally; and
b. General principles of equity, whether enforcement is considered at
law or in equity, and to the discretion of the court before which any
proceeding therefor may be brought.
(iii) No opinion is given herein as to the enforceability of Section 11(h) of
the Warrant.
(iv) As to questions of fact relevant to the opinions stated herein, we have
relied upon certificates of the officers of the Company, and, with your
permission, we have assumed, without independent investigation, the accuracy of
such information. Although we have not taken any additional action to confirm
the accuracy of the matters represented to us in the certificates, nothing has
come to our attention that leads us to question the accuracy of the information
supplied therein.
(v) When an opinion set forth below is given to the best of our knowledge, or
to our knowledge, or with reference to matters which we are aware or which are
known to us, or with another similar qualification, the relevant knowledge or
awareness is limited to our actual knowledge or awareness. We expressly disclaim
any knowledge that may be imputed to this firm based solely on knowledge imputed
to, and not actually known by, Peter I. Mason in his capacity as a director of
the Company.
(v) Our opinions expressed in paragraph 7 with respect to the existence of
actions, suits, proceedings, and investigations, and orders, writs, injunctions
and decrees, affecting the Company are based solely on statements contained in
certificates of the executive officers of the Company. Although we have not
taken any additional action to confirm the accuracy of the matters represented
to us in the certificates, nothing has come to our attention that leads us to
question the accuracy of the information supplied therein.
(vi) We are members of the Bar of the State of Illinois and the opinions
expressed above are limited to the laws of the State of Illinois, the General
Corporation Law of the State of Delaware, and the federal laws of the United
States of America to the extent such laws are applicable to the transactions or
the documents referred to herein.
(vii) We express no opinion as to the applicability of the antitrust laws of
the United States of America or of any state, including but not limited to
the H-S-R Act, or, except as provided in paragraph 6 above, the applicability of
federal or state securities laws to any of the transactions contemplated by the
Stock Purchase Agreement.
(viii) In examining all documents and agreements examined by us in connection
with our opinions herein expressed, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity with the originals of all documents submitted to us as copies, and
the due execution and delivery of all documents where due execution and delivery
are a prerequisite to the effectiveness thereof. In making our examination of
documents executed by entities other than the Company, we have assumed that each
other entity had the power
<PAGE>
to enter into and perform all of its obligations thereunder and we also have
assumed the due authorization by each such other entity of all requisite actions
and the due execution and delivery of such documents by each such other entity.
(ix) For purposes of this opinion, we have assumed that you have all requisite
power and authority and have taken any and all necessary corporate action to
execute and deliver the Acquisition Agreements required to be executed and
delivered by you, and we have assumed that the representations and warranties
made by you under the Stock Purchase Agreement are true and correct.
This opinion is rendered as of the date first written above solely for the
benefit in connection with the Purchase Agreement and may not be delivered to,
quoted or relied upon by any person other than you, or for any other purpose,
without our prior written consent. We assume no obligation to advise you of
facts, circumstances, events or developments which hereafter may be brought to
our attention and which may alter, affect or modify the opinions expressed
herein.
Sincerely,
<PAGE>
Exhibit 2.5(b)(v)
Form of
SERVICES AGREEMENT
This Services Agreement ("Agreement") is made as of ________, 1996, by and
between May & Speh, Inc., a Delaware corporation ("May & Speh"), and Faneuil,
Inc., a Delaware corporation ("Faneuil").
RECITALS
1. May & Speh is in the business of providing, among other services, direct
marketing services.
2. Pursuant to a Stock Purchase Agreement, dated effective as of ________,
1996 (the "Stock Purchase Agreement"), between May & Speh and Faneuil, May &
Speh has acquired from Faneuil all of the stock of GIS Information Systems,
Inc., an Illinois corporation ("GIS"), a provider of data processing outsourcing
services.
AGREEMENTS
In consideration of the foregoing and the agreements set forth herein, the
parties, intending to be legally bound, agree as follows:
Article 1
---------
Sales and Services
------------------
1.1. Provision of Services. During the five year period ending June 30, 2001
(the "Service Period"), with any twelve-month period in the Service Period
ending June 30 referred to as a "Service Year"), Faneuil agrees to purchase
services and sales from May & Speh, and May & Speh agrees to provide services
and sales to Faneuil and its affiliates, on the terms provided in this
Agreement. May & Speh may provide these sales and services either directly or
through GIS.
1.2. Scope of Services. At the request of Faneuil or any of its affiliates, if
May & Speh or GIS, as applicable, has the physical capacity (e.g., data center
capacity and human resources capacity) to provide the required services then May
& Speh will provide any standard services that May & Speh or GIS regularly
provide to their other customers ("Standard Services"). Standard Services may
include the outsourcing of data processing or direct marketing services. In
addition, at the request of Faneuil or any of its affiliates, May & Speh will
consider providing non-standard services to Faneuil or its affiliates ("Non-
Standard Services", and, together with Standard Services, the "Applicable
Services"). May & Speh will not be under any obligation to provide Non-Standard
Services, which will remain at its sole discretion until it has accepted a
request for Non-Standard Services. At the request of Faneuil or its affiliates,
any of such Applicable Services will be made
<PAGE>
directly by May & Speh to customers of Faneuil or its affiliates (subject to May
& Speh's decision to provide any Non-Standard Services), and any such services
will be considered Applicable Services for purposes of this Agreement.
1.3. Scope of Applicable Sales. In addition to the provision of Applicable
Services, Faneuil or its affiliates may from time to time request that May &
Speh sell to them computer hardware or software products ("Applicable Sales").
May & Speh may, at its discretion, agree to make Applicable Sales; provided that
May and Speh will not unreasonably refuse requests for Applicable Sales. At the
request of Faneuil or its affiliates, any of such sales will be made directly to
customers of Faneuil or its affiliates (subject to May & Speh's decision to
accept such sales) and any of such sales will be considered Applicable Sales for
purposes of this Agreement.
Article 2
---------
Pricing; Minimum Revenues
-------------------------
2.1. Pricing. At no time will Faneuil or its affiliates be charged for any
Standard Services at rates greater than rates charged to any other customer of
May & Speh or GIS of similar or lesser resource consumption levels and service
consumption levels. The pricing for Non-Standard Services and Applicable Sales
will be agreed to at the time May & Speh elects to provide such Non-Standard
Services or Applicable Sales, but will be intended to create a 25% operating
margin for May & Speh and, to the extent applicable, will be consistent with May
& Speh's pricing for Standard Services. For purposes of this Agreement, all
Standard Services, and all Non-Standard Services and Applicable Services
accepted for performance by May and Speh, shall be deemed to have generated an
operating margin for May & Speh of 25% (the "Presumed Operating Margin").
2.2. Minimum Gross Revenues. (a) For purposes of determining the amount of
revenues generated in any Service Year from Applicable Services and Applicable
Sales, Faneuil will receive a credit for the amount of revenues that would have
been generated from Standard Services requested pursuant to Section 1.1 at a
time when May & Speh or GIS, as applicable, had the physical capacity to provide
such Standard Services but declined to do so.
(b) In the event that May & Speh's aggregate consolidated gross
revenues derived from all Applicable Services and Applicable Sales
(after giving effect to the credit referred to in (a) above) performed
in a Service Year is less than $1,000,000, May & Speh will provide
written notice thereof to Faneuil. Such notice shall be delivered to
Faneuil within 21 days following the end of such Service Year and
shall include a calculation describing (i) the amount of actual
consolidated gross revenues (excluding "pass-through" items) that were
recognized by May & Speh as a result of such Applicable Services and
Applicable Sales (after giving effect to the credit, if any, referred
to in (a) above) ("Total Gross Revenues") and (ii) the resulting
shortfall between such Total Gross Revenues and $1,000,000 (a "Gross
Revenue Shortfall"). Except as provided in paragraph (c) below, within
15 days after receipt of such notice, Faneuil will pay to May & Speh
the amount representing the difference between (i) $250,000 and (ii)
the Presumed Operating Margin resulting from multiplying the
<PAGE>
Total Gross Revenues for the applicable Service Year by 25% (an
"Operating Margin Payment"); provided, however, that Faneuil may,
commencing with any Gross Revenue Shortfall with respect to the
Service Year ending June 30, 1998, elect to defer the payment of up to
$100,000 in Operating Margin Payments until December 31 of the
subsequent Service Year. The amount of the deferred Operating Margin
Payment due on such December 31 will be reduced by 25% of the Total
Gross Revenues (including credits as described in (a) above and
excluding "pass-through" items as described above) for the first six
months of such subsequent Service Year. Any Total Gross Revenues
generated in such six-month period that reduce deferred Operating
Margin Payments from the prior Service Year will not be included in
the calculation of Total Gross Revenues for the current Service Year
to determine whether the $1,000,000 target for such Service Year has
been met, but will be included in the cumulative Total Gross Revenues
as provided in paragraph (c) below.
(c) Notwithstanding the provisions of paragraph (b) above, Faneuil
will not be required to make an Operating Margin Payment with respect
to any Service Year if, at the end of such Service Year, the
cumulative Total Gross Revenues (including credits as provided in
paragraph (a) above but excluding "pass-through" items as provided in
paragraph (b) above) through the Service Period to the end of such
Service Year exceed the following targets:
<TABLE>
<CAPTION>
End of Cumulative Target
------ -----------------
<S> <C>
Second Service Year $2,000,000
Third Service Year $3,000,000
Fourth Service Year $4,000,000
Fifth Service Year $5,000,000
</TABLE>
Article 3
---------
Terms; Audit Rights; Termination
--------------------------------
3.1. Terms of Applicable Services and Sales. At no time will Standard
Services be furnished pursuant to terms and conditions less favorable than terms
and conditions offered to any other customer of May & Speh or GIS of similar or
lesser resource consumption levels and service consumption levels. If requested
by Faneuil, promptly after such request May & Speh will furnish a standard set
of terms and conditions to Faneuil for Standard Services, which Faneuil and May
and Speh will modify as required on a case by case basis to reflect the
particular nature of any particular Standard Services. Non-Standard Services and
Applicable Sales will be made pursuant to terms and conditions mutually
satisfactory to Faneuil and May & Speh.
3.2. Operating Reports; Audit Rights. May & Speh will provide Faneuil with
quarterly written reports, in reasonable detail and showing the Standard
Services, Non-Standard Services and Applicable Sales performed during such
quarter and the Total Gross Revenues generated. Faneuil
<PAGE>
shall be entitled, upon reasonable prior notice and during business hours, to
cause a "Big Six" accounting firm to review the books and records of May & Speh
and GIS to the extent required to verify compliance by May & Speh with this
Agreement.
3.3. Termination of Obligations. Faneuil's obligation to purchase
Applicable Services and Applicable Sales, and May & Speh's obligation to
provide, or cause GIS to provide, Applicable Services and Applicable Sales, will
terminate at the time Faneuil and its affiliates and customers have generated a
total of $5,000,000 in Total Gross Revenues (including credits as provided in
Section 2.2(a) above).
Article 4
---------
Miscellaneous
-------------
This Agreement, together with the Stock Purchase Agreement and the other
agreements entered into pursuant thereto, contains the entire understanding of
the parties relating to the subject matter hereof, supersedes all prior
agreements and understandings relating thereto, and shall not be amended except
by a written instrument hereafter signed by all of the parties hereto. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rule of strict construction will
be applied against any party. The headings of sections and subsections are for
reference only and shall not limit or control the meaning thereof. Any notices,
requests, payments, instructions, or other documents to be given hereunder shall
be given in the manner provided by Section 13.4 of the Stock Purchase Agreement.
This Agreement shall be governed by and construed and enforced in accordance
with the internal laws (and not the choice-of-law rules) of the State of
Illinois. Any dispute under this Agreement shall be resolved pursuant to the
arbitration provisions of Section 13.5 of the Stock Purchase Agreement. This
Agreement may be executed by the parties in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as
an instrument under seal as of the day and year first written above.
FANEUIL, INC.
By:
MAY & SPEH, INC.
By:
<PAGE>
Exhibit 2.5(c)
Form of
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of the ___ day
of July, 1996, by and between GIS Information Systems, Inc., an Illinois
corporation (the "Company"), and ________ ("Employee").
RECITALS
1. May & Speh, Inc., a Delaware corporation ("M&S"), has entered into a
Stock Purchase Agreement pursuant to which it has agreed to purchase from
Faneuil, Inc., a Delaware corporation, all of the issued and outstanding shares
of capital stock of the Company.
2. The Company is in the business of providing data processing outsourcing
services to customers (the "Business").
3. The Employee is a key employee of the Company and has substantial
knowledge, skills and experience in the Business.
4. Each of M&S and the Company desires that the Company continue to obtain
the benefit of Employee's knowledge, skills and experience and assure itself of
the ongoing right to Employee's services from and after the date hereof on the
terms and conditions set forth in this Agreement.
5. Employee is willing and able to render services to the Company, from and
after the date hereof, on the terms and conditions set forth in this Agreement.
AGREEMENTS
In consideration of the foregoing and the mutual covenants herein
contained, the Company and Employee agree as follows:
1. Employment.
(a) Employment. The Company hereby employs Employee and Employee hereby
accepts employment by the Company, subject to the terms of this Agreement.
(b) Employment Term. The term of Employee's employment under this Agreement
("Employment Term") shall begin on July ___, 1996, and shall continue until
________ unless terminated sooner in accordance with this Agreement.
(c) Title and Duties. Employee shall report to __________________ or such
other officer as such officer may direct (the "Reporting Officer"). Employee's
initial title shall be Vice
<PAGE>
President, Technical Support of the Company. Employee's duties shall consist of
such duties as the Reporting Officer shall determine from time to time, provided
that such duties shall relate to the operations of the Company and shall be
consistent with Employee's qualifications and the best interests of the Company.
Employee shall justly and faithfully discharge his duties and responsibilities
subject to and in observance of such reasonable rules, regulations, policies,
directions and restrictions as may be established from time to time by the
Company and M&S.
(d) Performance. Throughout the Employment Term, Employee shall devote
substantially his full business time, attention, knowledge and skills,
faithfully, diligently and to the best of his ability, to the active performance
of his duties and responsibilities hereunder, and do such traveling as may
reasonably be required in connection with the performance of such duties and
responsibilities.
2. Compensation and Related Matters.
(a) Base Salary. For services rendered by Employee to the Company during
the Employment Term, the Company shall pay Employee an annual base salary equal
to $_________ (the "Base Salary"), payable in periodic installments every other
week less income tax withholdings and other normal employee deductions. The Base
Salary shall be fixed during the term of this Agreement but may, at the sole
discretion of the Company, from time to time be increased by an amount which the
Company deems appropriate.
(b) Performance Based Bonus. Each year during the Employment Term, a fiscal
year budget for the Company shall be prepared by or on behalf of the Employee
and approved by the Board of Directors of the Company (the "Budget"). In the
event that the actual results for a fiscal year meet or exceed the targeted
results set forth in the Budget for such fiscal year, then the Company shall pay
to Employee a performance bonus for such fiscal year in an amount determined by
the Company. The parties agree that in the event that the Company's 1996
calendar year pre-tax income equals or exceeds $___________, the Employee shall
be paid a performance bonus for fiscal year 1996 in an amount equal to ____% of
Employee's Base Salary.
(c) Stock Option Plan. The Employee shall be granted options ("Stock
Options") pursuant to M&S's Key Employee Stock Option Plan to purchase
__________ shares of M&S's common stock at $_____ per share. The Stock Options
shall vest and become exercisable annually over a period of _____ years in ____
equal annual installments, with the first installment to become fully vested and
exercisable at the end of Employee's first full year of employment by the
Company.
(d) Vacation. Employee shall be entitled to reasonable paid vacation in
accordance with the policy of the Company in effect, to be taken at times
reasonably agreeable to both the Employee and the Company.
(e) Fringe Benefits. Employee shall be eligible to participate in and
receive coverage and benefits under all group insurance and other employee
benefit plans, programs and arrangements of the Company and M&S which are now or
hereafter adopted by the Company or M&S for the benefit of the employees of the
Company and M&S subsidiaries generally, subject to and on a basis
<PAGE>
consistent with the terms, conditions and overall administration of such plans,
programs and arrangements.
(f) Business Expenses. The Company shall reimburse Employee for the
reasonable and necessary business expenses incurred by Employee in connection
with the performance of his duties and obligations as set forth herein. Such
expenses shall include, but are not limited to, all expenses of travel and
living expenses while away from home on business or at the request of and in the
service of the Company, provided that such expenses are incurred and accounted
for in accordance with the policies and procedures established by the Company.
3. Termination.
(a) Cause. The Employment Term may be terminated at any time at the option
of the Company "for cause" (as such term is hereinafter defined), effective upon
the giving of written notice of termination to Employee. As used herein, the
term "for cause" shall mean and be limited to: (i) any felony conviction, (ii)
the willful misconduct or gross negligence in connection with the performance of
Employee's duties, responsibilities, agreements and covenants hereunder, as
determined by the Board of Directors of the Company in a hearing at which
Employee shall be allowed to participate, (iii) the refusal to comply with
reasonable rules, regulations, policies, directions and restrictions as may be
established from time to time by the Board and of which Employee is notified in
writing, whereby such refusal continues for 30 days after the receipt of notice
from the Company, or which conduct is not curable with the passage of time, (iv)
any illegal use of narcotics or other controlled substances, or (v) any other
material breach of this Agreement which shall continue for 30 days after the
receipt of notice from the Company, or which conduct is not curable with the
passage of time.
(b) Death. The Employment Term shall terminate automatically upon the death
of Employee.
(c) Disability. In the event the Company determines that Employee is unable
to perform the essential functions of his employment position due to a
disability of Employee that cannot be reasonably accommodated by the Company,
the Employment Term shall terminate effective upon notice from the Company.
(d) Without Cause. The Employment Term may be terminated by the Company
without cause or reason upon 365 days prior written notice to the Employee of
the proposed termination date.
(e) Termination by Employee. Employee may terminate the Employment Term for
any reason upon 30 days prior written notice to the Company of the proposed
termination date.
(f) Notice of Termination. Any termination of the Employment Term by the
Company or by Employee (other than termination pursuant to Subsection (b)
(death) of this Section 3) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts
<PAGE>
and circumstances claimed to provide a basis for termination of the Employment
Term under the Section and Subsection so indicated.
4. Compensation Upon Termination or During Disability.
(a) Compensation Upon Termination for Cause, Death, or Disability. If the
Employment Term shall be terminated (i) "for cause," as provided in Section
3(a), or (ii) upon Employee's death, or (iii) because Employee becomes disabled
as provided in Section 3(c), the Company shall have no further liability under
this Agreement except to pay Employee (a) the value of any accrued salary, or
other compensation due to Employee pursuant to Section 2 herein, upon the date
of delivery of Notice of Termination to Employee (or in the case of death, upon
the date of Employee's death), at the rate in effect at such time, and (b) any
benefits payable under all employee benefit plans, programs and arrangements of
the Company and M&S in which Employee is a participant on the date of delivery
of Notice of Termination (or in the case of death, upon the date of Employee's
death).
(b) Compensation Upon Termination by the Company Without Cause. If the
Employment Term shall be terminated by the Company for any reason other than as
provided in Sections 3(a), (b) or (c), the Company shall have no further
liability under this Agreement except to pay Employee the value of any accrued
salary, or other compensation due to Employee pursuant to Section 2 herein, upon
the date that is 365 days after delivery of Notice of Termination to Employee,
at the rate in effect at such time, and any benefits payable under all employee
benefit plans, programs and arrangements of the Company and M&S in which
Employee is a participant on the date of delivery of Notice of Termination
(c) Compensation Upon Termination by Employee. If the Employment Term shall
be terminated by the Employee for any reason, the Company shall have no further
liability under this Agreement except to pay Employee the value of any accrued
salary, or other compensation due to Employee pursuant to Section 2 herein, upon
the date that is 30 days after delivery of Notice of Termination to the Company,
at the rate in effect at such time, and any benefits payable under all employee
benefit plans, programs and arrangements of the Company and M&S in which
Employee is a participant on the date of delivery of Notice of Termination.
(d) Compensation During Disability. During any period that Employee fails
to perform his duties hereunder as a result of disability, his Base Salary shall
be reduced by the sum of the amounts, if any, payable to Employee prior to or
during this period, as the result of such disability, under any disability
benefit plan of the Company or M&S in which Employee participates.
5. Confidential Information.
(a) Disclosure and Use. For purposes of this Section 5, the term "M&S"
shall include subsidiaries (including the Company) of M&S. Employee shall not
disclose or use at any time, either during or subsequent to the Employment Term,
any material trade secrets or other confidential information of M&S of which
Employee is or becomes informed or aware of prior to or during the Employment
Term, except (i) as may be required for Employee to perform his duties and
obligations
<PAGE>
under this Agreement, (ii) to the extent such information has been disclosed to
Employee by a third party who is not affiliated with M&S or otherwise becomes
generally available to the public, (iii) information which must be disclosed as
a result of a subpoena or other legal process, or (iv) unless Employee shall
first secure M&S's prior written authorization. This Subsection shall survive
the termination of the Employment Term, whether by lapse of time or otherwise,
and shall remain in effect and be enforceable against Employee for the five year
period immediately following the date of termination of the Employment Term.
Employee shall execute additional agreements and confirmations of his
obligations to M&S concerning such non-disclosure of trade secrets and other
confidential information as M&S may require from time to time, provided that the
execution of such additional agreements and confirmations are (i) reasonable and
(ii) are required of other employees of M&S under similar circumstances.
(b) Return of Materials. Upon termination of the Employment Term, Employee
(or in the event of termination due to Employee's death, his estate or devisee,
legatee or other designee, as applicable) shall promptly deliver to M&S all
materials of a secret or confidential nature relating to M&S's business, which
are in the possession or under the control of Employee.
6. Inventions and Discoveries. Employee hereby assigns to the Company all
of Employee's rights, title and interest in and to all inventions, discoveries,
processes, designs and other intellectual property (hereinafter referred to
collectively as the "Inventions"), and all improvements on existing Inventions
made or discovered by Employee during the term of Employee's employment by the
Company. Promptly upon the development or making of any such Invention or
improvement thereon, Employee shall disclose the same to the Company and shall
execute and deliver to the Company such reasonable documents as the Company may
request to confirm the assignment of Employee's rights therein and, if requested
by the Company, shall assist the Company in applying for and prosecuting any
patents which may be available in respect thereof. The Company acknowledges and
hereby notifies Employee that this Section 6 does not apply to an Invention for
which no equipment, supplies, facility or trade secret information of the
Company was used and which was developed entirely on Employee's own time, unless
(a) the Invention relates to (i) the business of the Company, or (ii) the
Company's actual or demonstrably anticipated research or development, or (b) the
Invention results from any work performed by Employee for the Company.
7. Restrictive Covenant.
(a) Restriction on Competition During Employment Term. During the
Employment Term, Employee shall not, without the prior written authorization of
the Board of Directors of the Company, directly or indirectly render services of
a business, professional or commercial nature (whether for compensation or
otherwise) to any person or entity competitive or adverse to M&S's business
welfare or engage in any activity whether alone, as a partner, or as an officer,
director, employee, consultant, independent contractor, or stockholder in any
other corporation, person, or entity which is competitive with or adverse to
M&S's business welfare. This Section 7(a) shall not, however, prohibit Employee
from investing in the publicly traded securities issued by any such competitive
or adverse corporation, provided the holdings thereof by Employee do not
constitute more that two percent (2%) of any one class of such securities.
<PAGE>
(b) Restriction on Competition Following Termination. During the ______
period following the Employment Term (the "Non-Compete Period"), Employee shall
not:
(i) attempt in any manner to solicit from any customer or prospect
business of the type performed by M&S or to persuade any customer or
prospect of M&S to cease doing business or to reduce the amount of business
which any such customer or prospect has customarily done or contemplates
doing with M&S whether or not the relationship between M&S and such
customer or prospect was originally established in whole or in part through
Employee's efforts; or
(ii) employ or attempt to employ or assist anyone else to employ any
person who is at such time, or at any time during the preceding _____ was,
an employee of or consultant to M&S, provided that this clause shall not
restrict Employee from employing a third party vendor who supplies generic
services to the industry or his spouse; or
(iii) render to or for any customer of M&S any services of the type
rendered by M&S.
As used in this Section 7, the verb "employ" shall include its variations, for
example, retain, engage or conduct business with; the term "M&S" shall include
subsidiaries (including the Company) of M&S; the term "customer" shall mean
anyone who is a customer of M&S as of the date immediately prior to or at any
time during the Non-Compete Period; and the term "prospect" shall mean any
prospective customer of M&S (including but not limited to the prospects
identified on Exhibit B attached hereto) which is being actively pursued by M&S
during the year immediately prior to the Non-Compete Period. "Actively pursued"
means that M&S has been "short-listed" to receive a request for proposal
("RFP"), has received an RFP, is in the process of developing a proposal in
response to an RFP, or has a proposal outstanding.
(c) Acknowledgment. The parties acknowledge that the time, scope, and other
provisions of this Agreement have been specifically negotiated by the parties
and agree that all such provisions are reasonable under the circumstances and
are given as an integral and essential part of Employee's employment hereunder.
In the event that any covenant contained in this Agreement shall be determined
by any court of competent jurisdiction to be unenforceable by reason of its
extending for too great a period of time or over too great a geographical area
or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable and/or over the maximum geographical area as to which it may be
enforceable and/or to the maximum intent in all other respects as to which it
may be enforceable, all as determined by such court in such action.
8. Severability. If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed (i) modified
only to the extent necessary to render the same valid, or (ii) not applicable to
given circumstances, or (iii) excised from this Agreement, as the situation may
require, and this Agreement shall be construed and enforced as if such provision
had been included herein as so modified in scope or application, or had not been
included herein, as the case may be.
<PAGE>
9. Enforcement. The Company will be entitled to institute proceedings and
avail itself of all remedies at law or in equity to recover damages occasioned
by a breach or threatened breach of any of the provisions of this Agreement by
Employee and shall have the right to pursue one or more of such proceedings and
remedies simultaneously or from time to time. Employee hereby acknowledges that
the Company and M&S would suffer irreparable injury if the provisions of
Sections 5, 6, and 7 herein, which shall survive the termination of this
Agreement, were breached and that the Company's remedies at law would be
inadequate in the event of such breach or threatened breach. Accordingly,
Employee hereby agrees that any such breach or threatened breach may, in
addition to any and all other available remedies, be preliminarily and
permanently enjoined by the Company without bond.
10. Legal Fees and Expenses. In the event of litigation under this
Agreement, both the Company and Employee shall pay their own attorneys' fees and
other legal expenses; provided, however, that (i) Employee shall pay the
reasonable attorneys' fees and legal expenses of the Company in connection with
an evidentiary hearing where Employee is enjoined either preliminarily or
permanently due to his breach or threatened breach of any provision of this
Agreement, or (ii) the Company shall pay Employee's reasonable attorneys' fees
and legal expenses in connection with an evidentiary hearing which results in a
court refusing to issue a preliminary or permanent injunction against Employee
due to his breach or threatened breach of any provision of this Agreement.
Such fees and expenses shall be paid in cash within ten days after the
submission to the Company's corporate secretary, and any inquiry into the
reasonableness of such fees and expense shall not delay such payment.
11. General Provisions.
(a) Notices. Any notice, request, demand or other communication required or
permitted to be given hereunder shall be in writing and personally delivered or
sent by registered or certified mail, return receipt requested, or by a
facsimile, telegram or telex followed by a confirmation letter sent by
registered or certified mail, return receipt requested, addressed as follows:
To the Company: c/o May & Speh, Inc.
1501 Opus Place
Downers Grove, Illinois 60515
Attention: President
Telephone: (708) 964-1501
Fax: (708) 964-1747
with a copy to: Peter I. Mason
Freeborn & Peters
311 South Wacker Drive
Suite 3000
Chicago, Illinois 60606
Telephone: (312) 360-6505
Fax: (312) 360-6573
<PAGE>
To Employee: ________________________
________________________
Telephone:
Facsimile:
Either the Company or Employee may, at any time, by notice to the other,
designate another address for service of notice on such party. When the letter,
facsimile, telegram or telex is dispatched as provided for above, the notice
shall be deemed to be made when the addressee receives the letter, facsimile,
telegram or telex, or within three days after it is sent, whichever is earlier.
(b) Amendments. Neither this Agreement nor any of the terms or conditions
hereof may be waived, amended or modified except by means of a written
instrument duly executed by the party to be charged therewith.
(c) Captions and Headings. The captions and Section headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
(d) Governing Law. This Agreement, and all matters or disputes relating to
the validity, construction, performance or enforcement hereof, shall be
governed, construed and controlled by and under the laws of the State of
Illinois without regard to principles of conflicts of law.
(e) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original hereof, but all of
which together shall constitute one and the same instrument.
(g) Entire Agreement. Except as otherwise set forth or referred to in this
Agreement, this Agreement constitutes the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior discussions, agreements and understandings of every kind
and nature between them as to such subject matter.
(h) Reliance by Third Parties. This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit therefrom absent the express written consent of the
party to be charged with such reliance or benefit.
IN WITNESS WHEREOF, the parties have caused this Employment Agreement to be
duly executed as of the day and year first above written.
<PAGE>
GIS INFORMATION SYSTEMS, INC.
By:
------------------------------
Its:
------------------------------
EMPLOYEE
-----------------------------------
<PAGE>
Exhibit 2.5(d)
Form of
MAY & SPEH, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") made as of this ____ day of ____________,
____ by and between May & Speh, Inc., a Delaware corporation (the
"Corporation"), and ________, an employee of the Corporation (the "Optionee");
W I T N E S S E T H:
WHEREAS, the Corporation has adopted the 1995 Key Employee Stock Option
Plan of May & Speh, Inc. (the "Plan"); and
WHEREAS, a copy the Plan has been provided to the Optionee and is hereby
incorporated by reference with the same effect as if fully recited herein:
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
1. Grant of Option. The Corporation hereby grants to the Optionee the
right and option (the "Option") to purchase all or any part of ________ shares
of common stock, par value $.01 per share, of the Corporation on the terms and
conditions set forth in the Plan and herein (such number being subject to
adjustment in accordance with the Plan) (the "Option Shares"). This Option shall
be a nonqualified stock option within the meaning of the Internal Revenue Code
of 1986, as amended, or any successor thereto.
2. Purchase Price. The purchase price of the Option Shares shall be
$________ per share.
3. Term of Option. The term of the Option (the "Option Term") shall be
for a period of 10 years from the date hereof (the "Issue Date"), subject to
earlier termination as provided in the Plan. In no event shall the Option be
exercised after the Option Term.
4. Exercise of Option.
(a) Within the foregoing limitations provided herein and in the Plan,
the Options shall vest and become exercisable in the four equal annual
installments commencing one year from the Issue Date. The Optionee shall
exercise his right to purchase shares under the Option by delivering written
notice to the Corporation in accordance with Section 5 hereof, together with a
copy of this Agreement and payment for such shares in accordance with Section 11
of the Plan.
<PAGE>
(b) If at any time the Committee shall determine, in its sole
discretion, that (i) the listing, registration, or qualification of the Option
Shares upon any securities exchange or under any state or federal law, (ii) the
consent or approval of any governmental regulatory body, or (iii) obtaining an
investment intent representation or other undertaking from the Optionee is
necessary or desirable as a condition of, or in connection with, the exercise of
an Option hereunder, such Option may not be exercised in whole or in part unless
and until such listing, registration, qualification, consent, approval,
representation or undertaking shall have been effected or obtained free of any
conditions not acceptable by the Committee.
5. Method of Exercising Option.
(a) Subject to the terms and conditions of this Agreement and the
Plan, the Option must be exercised by delivering notice to the Corporation,
which must be in writing and personally delivered or sent by registered or
certified mail, return receipt requested, to the Secretary of the Corporation at
1501 Opus Place, Downers Grove, Illinois 60515. The notice shall be deemed to be
made when the Corporation or its successor in interest receives the letter or
within three days after it is sent by certified or registered mail, return
receipt requested, whichever is earlier.
(b) Such notice shall state the election to exercise the Option, the
number of shares in respect of which it is being exercised, and the name or
names of the person or persons in whose name or names the stock certificates are
to be issued. The notice shall be signed by the person or persons exercising the
Option and shall include such person or persons' address for receipt of a
certificate or certificates representing such shares. The notice shall be
accompanied by a photocopy of this Agreement and payment of the full purchase
price of such shares.
(c) In the event the Option shall be exercised by any person or
persons other than the Optionee, such notice shall be accompanied by appropriate
proof, as determined by the Committee in its sole discretion, of the right of
such person or persons to exercise the Option.
(d) All shares that shall be purchased upon the exercise of the
Option, as provided herein, shall be fully paid and nonassessable.
6. General. At all times during the Option Term, the Corporation shall
reserve and keep available such number of shares of common stock as will be
sufficient to satisfy the requirements of this Agreement, shall pay all original
issue and transfer taxes with respect to the issue and transfer of shares
pursuant hereto and all other fees and expenses necessarily incurred by the
Corporation in connection therewith, and will, from time to time, use its best
efforts to comply with all state and federal laws and regulations which, in the
opinion of legal counsel for the Corporation, shall be applicable thereto.
7. Interpretation of Agreement and Plan.
(a) All determinations and interpretations made by the Committee with
regard to any questions arising hereunder or under the Plan shall be binding and
conclusive on the Optionee and his or her successors, legal representatives and
beneficiaries.
<PAGE>
(b) The Option granted herein is subject to:
(i) All the terms and conditions of the Plan, as amended, now or
hereafter in effect; and
(ii) All the terms and conditions of this Agreement, now in
effect or hereafter amended at the sole discretion of the Committee, which
conform with the terms and conditions of the Plan, as amended from time to time.
(c) The Optionee acknowledges receipt of a copy of the Plan,
represents and warrants that he has read the Plan and agrees that the Option
shall be subject to all of the terms and conditions of this Agreement and the
Plan, as amended from time to time, now or hereafter in effect.
8. Binding on Successors and Assigns: Nontransferability. This Agreement
shall bind and inure to the benefit of the successors and assigns of the
Corporation. Except to the extent permitted under the Plan, as amended from time
to time, the rights of the Optionee under this Agreement shall not be
transferable and all options granted hereunder may be exercised during the
lifetime of the Optionee only by him.
9. Counterparts. This Agreement may be executed in two counterparts, each
of which shall be deemed an original and both of which constitute one and the
same document.
10. Assignment. This Agreement shall not be assignable by the Optionee or
the Optionee's executors, administrators, successors and heirs.
11. Section Headings. The Section headings of this Agreement are inserted
for convenience of reference only and shall not be deemed to be a part thereof
or used in the construction or interpretation thereof.
12. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without violating the remainder of this
Agreement.
13. Governing Law. The validity, meaning and effect of this Agreement
shall be determined in accordance with the laws of the State of Illinois.
14. Final Agreement. This Agreement constitutes the final agreement of the
parties concerning the matters referred to herein and supersedes all prior
agreements and understandings.
IN WITNESS WHEREOF, the Corporation and the Optionee have executed this
Agreement as of the day and year first above written.
<PAGE>
MAY & SPEH, INC.
ATTEST:
By: By:
----------------------------- -----------------------------
Title: Title:
--------------------------- ---------------------------
OPTIONEE:
---------------------------------
<PAGE>
Exhibit 10.8
Form Of
SET-OFF ESCROW AGREEMENT
------- ------ ---------
This SET-OFF ESCROW AGREEMENT, dated as of ________________, 199__, is
among May & Speh, Inc., a Delaware corporation (hereinafter referred to as
"Buyer"), and Faneuil, Inc., a Delaware corporation (hereinafter referred to as
the "Seller"), and [___________________________], as Escrow Agent.
WHEREAS, Buyer, Seller and, for certain purposes, Faneuil ISG, Inc., a
Canadian corporation, have entered into a Stock Purchase Agreement dated as of
July 1, 1996 (the "Purchase Agreement"), pursuant to which Buyer purchased from
Seller all of the outstanding capital stock of GIS Information Systems, Inc. an
Illinois corporation;
WHEREAS, Section 10.8 of the Purchase Agreement provides that the parties
shall enter into this Agreement in the event that Buyer is required to make a
payment into escrow under such Section; and
WHEREAS, Buyer desires to make a payment into escrow pursuant to Section
10.8 of the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth in this Agreement, the parties hereto hereby agree as follows, with all
capitalized terms used herein without definition having the meanings assigned to
such terms in the Purchase Agreement:
1. ESTABLISHMENT OF ESCROW. At any time Buyer shall have the right to
deposit with the Escrow Agent amounts in accordance with Section 10.8 of the
Purchase Agreement and the Escrow Agent shall acknowledge receipt of each such
deposited amount by delivering a receipt certificate contemporaneously with such
deposit. Such amounts, together with interest and dividends thereon, less
amounts distributed from time to time in accordance with Section 3 hereof, shall
be referred to herein as the "Escrowed Funds." The Escrowed Funds shall be
segregated from the other assets of the Escrow Agent and held in trust for the
benefit of Buyer and Seller pursuant hereto.
2. INVESTMENT OF ESCROWED FUNDS. Until the release of all of the Escrowed
Funds pursuant to Section 3 hereof, the Escrow Agent shall, at the joint written
direction of Seller and Buyer, invest and reinvest the Escrowed Funds solely in
(a) marketable obligations of, or obligations guaranteed by, the United States
of America, (b) in U.S. Money Market Funds (as defined below) and/or (c) other
mutually agreed upon safe investments. The initial written direction of Seller
and Buyer is attached hereto as Schedule 1. In the event that Buyer and Seller
do not give written directions to the Escrow Agent in a timely manner, the
Escrow Agent shall invest and reinvest the Escrowed Funds in instruments of the
type set forth above in clauses (a) or (b) of the first sentence of this Section
2. The Escrow Agent shall have no liability to Seller or Buyer arising, directly
or indirectly, from any investment made pursuant to this Section 2. As used
herein, the term "U.S. Money Market Funds" means interests in any open-end or
closed-end management type
<PAGE>
investment company or investment trust registered under the Investment Company
Act of 1940, as from time to time amended, the portfolio of which is limited to
obligations of, or obligations guaranteed by, the United States or any agency
thereof and to agreements to repurchase such obligations, which agreements, with
respect to principal and interest, are at least 100% collateralized by such
obligations marked to market on a daily basis and the investment company or
investment trust shall take delivery of such obligations either directly or
through an independent custodian designated in accordance with the Investment
Company Act of 1940, as from time to time amended.
3. DISTRIBUTION OF ESCROWED FUNDS.
(a) Distributions. If at any time Seller concedes liability in whole
or in part with respect to any claim for indemnification in respect of which
Buyer has deposited funds in accordance with Section 10.8 of the Purchase
Agreement, the Escrow Agent shall, within five (5) days following receipt of
notice of such concession from Seller, pay the amount of the claim to Buyer from
the Escrowed Funds to the extent of the liability conceded by Seller, subject to
subsection (c) hereof. Such payment shall be made in accordance with subsection
(b) hereof and equal to the amount of such claim so payable. As long as Seller
denies or disputes liability in whole or in part with respect to any claim for
indemnification or advises that the matters with respect to any such claim are,
or will be, subject to contest or legal proceedings not yet finally resolved,
then the Escrow Agent shall make no distribution from the Escrowed Funds (except
for the amount of any conceded liability payable as set forth above) with
respect to such claim unless and until: (i) the Escrow Agent receives joint
written instructions from Buyer and Seller directing it to make a distribution
from the Escrowed Funds, indicating the amount of such distribution and the
recipient thereof, or (ii) the Escrow Agent is directed by a final order of a
court of competent jurisdiction to pay the amount of such claim, subject to
subsection (c) hereof (after all appeals or, if no appeal is taken, after all
time to appeal has expired as certified by counsel to the Escrow Agent). All
payments to Buyer out of the Escrowed Funds for which Seller is obligated to
provided indemnification under the Purchase Agreement shall be deemed to have
been made by Seller.
(b) Liquidation of Investments. If necessary to satisfy any
distributions under this Agreement, including distributions for the Escrow
Agent's fees and expenses, the Escrow Agent may sell or liquidate, in its sole
discretion, any one or more investments prior to maturity and the Escrow Agent
shall not be liable to Seller or Buyer for any loss or penalties resulting from
or relating to such sale or liquidation, provided however the party or parties
entitled to a particular distribution pursuant to this section may in their sole
discretion extend any period for the distribution of such funds in order to
avoid any loss of income or principal from a premature liquidation of an escrow
investment. All releases of Escrowed Funds shall be made by delivery to the
appropriate party at the address set forth for such party in Section 8 hereof of
a bank check in the amount of such release, or in such other manner as agreed to
between the appropriate party and the Escrow Agent.
(c) Conditions to Payment of Claims; Settlement. Notwithstanding any
other provisions of this Agreement, all payments made from the Escrowed Funds
shall be subject to and in accordance with the terms of Section 10 of the
Purchase Agreement. All parties hereto agree that they will use their best
efforts promptly to resolve all denied or disputed claims for indemnification in
respect of which deposits are made by Buyer into the Escrowed Funds.
<PAGE>
4. ESCROW LEDGER. The Escrow Agent shall maintain, and make available to
Seller upon request, a ledger setting forth: (i) with respect to each claim for
indemnification for which Buyer deposits cash in to the Escrowed Funds, the
amount of such deposit and a brief description of the denied or disputed claim
underlying such deposit; (ii) the amount of the Escrowed Funds attributable to
capital appreciation, if any, of the securities in which the Escrowed Funds are
invested; (iii) the amount of the Escrowed Funds attributable to interest and
other income accumulation in respect to the Escrowed Funds; and (iv) the amount
of each distribution made from the Escrowed Funds and the denied or disputed
claim for indemnification to which such distribution relates.
5. TERMINATION. This Agreement shall terminate on the earlier of (i) the
date on which the entire amount of the Escrowed Funds have been distributed
pursuant to the terms hereof, or (ii) the date on which all obligations of
Seller for indemnification under the Purchase Agreement have terminated or have
been fully satisfied.
6. RESPONSIBILITY OF ESCROW AGENT. The Escrow Agent shall not be
responsible for the genuineness of any signature or document presented to it
pursuant to this Agreement and may rely conclusively upon and shall be protected
in acting upon any judicial order or decree, certificate, notice, request,
consent, statement, instruction or other instrument believed by it in good faith
to be genuine or to be signed or presented by the proper person hereunder, or
duly authorized by such person or properly made. Notwithstanding anything to the
contrary in this Agreement, prior to taking any action hereunder, the Escrow
Agent may, if in doubt regarding its duties and obligations, seek instructions
from Buyer and Seller, and if such instructions are in conflict, the Escrow
Agent may seek instructions or other relief (including but not limited to
interpleader) from a court of competent jurisdiction, and further may request
such evidence, documents, certificates or opinions as it may deem appropriate.
The Escrow Agent shall be entitled to retain counsel both to advise it and in
connection with any court action, and such counsel's reasonable attorneys' fees
shall be charged to the Escrowed Funds. The Escrow Agent shall be entitled to
act in reliance upon the advice of its counsel in all matters pertaining to this
Agreement, and shall not be liable for any action taken or omitted by it in good
faith in accordance with such advice. The Escrow Agent shall not be responsible
for any of the agreements contained herein except the performance of its duties
as expressly set forth herein. The duties and obligations of the Escrow Agent
hereunder shall be governed solely by the provisions of this Agreement, and the
Escrow Agent shall have no duties other than the duties expressly imposed herein
and shall not be required to take any action other than in accordance with the
terms hereof. The Escrow Agent shall not be bound by any notice of, or demand
with respect to, any waiver, modification, amendment, termination, cancellation,
rescission or supersession of this Agreement, unless in writing and signed by
Buyer, Seller and the Escrow Agent. In the event of any controversy or dispute
hereunder or with respect to any question as to the construction of this
Agreement, or any action to be taken by the Escrow Agent hereunder, the Escrow
Agent shall incur no liability for any action taken or suffered in good faith,
its liability hereunder to be limited solely to gross negligence or willful
misconduct on its part. Buyer and Seller agree to indemnify and hold the Escrow
Agent harmless, and further to protect and defend the Escrow Agent against any
losses, liabilities and damages incurred by the Escrow Agent as a consequence of
any action taken or omitted to be taken by it in the performance of its
obligations hereunder (including, without limitation, the reasonable fees and
disbursements
<PAGE>
of counsel), with the exception of any losses, liabilities and damages arising
from the Escrow Agent's gross negligence or willful misconduct. The
representations and obligations of Seller and Buyer to the Escrow Agent in this
Agreement shall survive the termination of this Agreement and shall be
applicable whether or not [_____________________________] is serving as Escrow
Agent.
7. FEES OF ESCROW AGENT. The Escrow Agent shall receive a one-time fee
of $________ in consideration for its services hereunder. Such fee and any
expenses of the Escrow Agent (including the Escrow Agent's reasonable attorneys'
fees) shall be shared equally by the Seller and the Buyer. Should Buyer fail to
pay such fee within sixty (60) days, the Escrow Agent shall be entitled to
deduct such fee from the Escrowed Funds and such obligation shall constitute a
priority over amounts due Seller or Buyer from the Escrowed Funds. In the event
the Escrow Agent deducts any such amount from the Escrowed Funds, Buyer shall
reimburse Seller for such amount.
8. NOTICES AND COMMUNICATIONS. Any notice or other communication under
this Agreement shall be deemed to have been duly given or made on the earlier of
(i) the date of receipt, or (ii) three (3) days after the date when the same
shall have been posted by registered mail, return receipt requested, in any post
office in the United States of America, postage prepaid, and addressed to the
party to whom such notice or other communication is to be given, or made at such
party's address set forth below or to such other address as such party shall
designate by written notice to the other parties, as follows:
If to Seller, to:
Jeffrey P. Finestone, Chief Financial Officer
Faneuil, Inc.
2 Faneuil Hall South, 3rd Floor
Boston, MA 02109-1605
with a copy sent contemporaneously to:
John R. Utzschneider, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110-1726
If to Buyer, to:
Robert C. Early
May & Speh, Inc.
1501 Opus Place
Downers Grove, IL 60515
with a copy sent contemporaneously to:
Robert A. McWilliams, Esq.
<PAGE>
Freeborn & Peters
311 South Wacker Drive, Suite 3000
Chicago, IL 60606-6677
If to the Escrow Agent, to:
[____________________]
[____________________]
[____________________]
[____________________]
9. ESCROW ACCOUNT. All payments into escrow shall be made by wire
transfer to the account specified on Schedule 2 hereto.
10. AMENDMENTS; SUCCESSORS. Except as otherwise provided herein, this
Agreement may be amended only as provided in Section 6 hereof, and shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same instrument. In making proof of this Agreement
it shall be necessary to produce or account for only one such counterpart signed
by or on behalf of the party sought to be charged herewith.
12. SUCCESSOR ESCROW AGENT. The Escrow Agent may resign on 30 days
written notice to Buyer and Seller. Upon the resignation of the Escrow Agent,
Buyer and Seller shall appoint a successor escrow agent or otherwise provide for
the disposition of funds held by the Escrow Agent by notice in writing to the
Escrow Agent. The Escrow Agent shall pay over the Escrowed Funds, less its
unpaid fees and expenses, as provided in said notice.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby. No prior agreement, either written or oral, shall be construed to
change, amend, alter, repeal or invalidate this Agreement.
14. REPRESENTATIONS OF BUYER AND SELLER. Each of Buyer and Seller
represents and warrants to the Escrow Agent that it has the power and authority
to enter into this Agreement and to carry out its obligations hereunder, that it
has duly authorized, executed and delivered this Agreement, and this Agreement
is its valid and binding obligation.
15. GOVERNING LAW. The validity, enforceability and construction of this
Agreement shall be governed by the laws of the [insert jurisdiction of Escrow
Agent], without reference to its conflict of law rules.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as an
instrument under seal as of the day and year first written above.
BUYER:
-----
MAY & SPEH, INC.
By:
Name:
Title:
SELLER:
------
FANEUIL, INC.
By:
Name:
Title:
ESCROW AGENT:
------------
[________________________________,
as Escrow Agent]
By:
Name:
Title:
<PAGE>
EXHIBIT 2
NEWS RELEASE
CONTACT: ROBERT EARLY
MAY & SPEH/ 708-964-1501
FOR IMMEDIATE RELEASE
---------------------
MAY & SPEH ANNOUNCES ACQUISITION AGREEMENT AND MULTI-YEAR SERVICES AGREEMENT
WITH THE FANEUIL GROUP
DOWNERS GROVE, IL - JULY 18, 1996 -- May & Speh, Inc. (NASDAQ: SPEH), announced
two separate agreements with Faneuil, Inc., a Boston based direct marketing
services company and wholly-owned subsidiary of Faneuil ISG, Inc., a Canadian
corporation ("The Faneuil Group"). Pursuant to a stock purchase agreement, May &
Speh acquired GIS Information Systems, Inc., a wholly-owned subsidiary of
Faneuil, for approximately $19 million cash plus additional consideration as
described below. GIS is a provider of data processing outsourcing services and
operates principally under the name "Faneuil Systems". In addition, May & Speh
entered into a multi-year services agreement with The Faneuil Group to provide
direct marketing and outsourcing services to The Faneuil Group through the year
2001.
The Services Agreement provides for the purchase by The Faneuil Group of up to
$5 million of services from May & Speh. The Faneuil Group is a knowledge-based
direct marketing services company with its principal U.S. location in Boston,
Massachusetts. It provides integrated telemarketing services which help its
clients attract, understand, acquire and service their customers through
improved information efficiency.
In making the announcement, May & Speh's President Lawrence J. Speh, said: "The
Services Agreement with The Faneuil Group exemplifies our commitment to long-
term contractual client relationships. Further, it reflects a business
partnership, where May & Speh's complementary value-added services will be
offered to The Faneuil Group's clients."
Dennis O'Brien, Chairman and CEO of The Faneuil Group said: "We are confident
that May & Speh's extensive information management services will enhance our
ability to provide a wider and more complete scope of services to our clients."
Mr. Speh also stated that he was extremely pleased with the acquisition of
Faneuil Systems (GIS), which will complement its existing outsourcing services
business. Based in Oak Brook, Illinois, Faneuil Systems is a provider of data
processing outsourcing. In 1995, Faneuil Systems' annual revenues exceeded $12
million. The acquisition agreement, effective July 1, 1996, provides for May &
Speh to pay Faneuil, Inc. a purchase price of approximately $19 million ($16
million in cash at closing plus $3.1 million in future payments, subject to
adjustment), plus a warrant to acquire
<PAGE>
180,000 shares of May & Speh common stock. After the closing, Faneuil Systems
will operate as GIS Information Systems, Inc., a subsidiary of May & Speh.
Commenting on the acquisition, Mr. Speh noted that "Faneuil Systems has been a
strong local competitor led by a seasoned and highly regarded management team.
We are especially excited about the people of Faneuil Systems -- their talent
and commitment to client service will be invaluable to our continued growth in
the outsourcing industry. We expect the acquisition to contribute positively to
our planned revenue and earnings growth."
Frank J. Burns, President of Faneuil Systems, stated: "We are a particularly
good fit with May & Speh because of our similar business cultures, as
illustrated in our long-term client relationships and our long-tenured
employees."
The acquisition will allow May & Speh to further leverage its use of large
state-of-the-art data centers, increasing the economy of scale of its
operations by adding 240 MIPS of processing capability.
In addition to its outsourcing services, May & Speh is a leading provider of
information management services primarily for clients with significant database
marketing requirements. The company provides direct marketing services,
including database creation, data warehousing, modeling and analysis, list
processing and data enhancement to clients in a range of industries, including
financial services, consumer products, insurance and retail.
<PAGE>
EXHIBIT 3
May & Speh, Inc.
Third Amendment to Term Loan Agreement
Harris Trust and Savings Bank
Chicago, Illinois
Ladies and Gentlemen:
Reference is hereby made to that certain Term Loan Agreement dated as of
March 30, 1995, as heretofore amended (as so amended, the "Loan Agreement")
between the undersigned, May & Speh, Inc., a Delaware corporation (the
"Borrower") and you (the "Bank"). All capitalized terms used herein without
definition shall have the same meanings herein as such terms have in the Loan
Agreement.
The Borrower has requested that the Bank permit the Borrower to acquire all
of the issued and outstanding capital stock of GIS Information Systems, Inc., an
Illinois corporation, and the Bank is willing to do so under the terms and
conditions set forth in this Amendment.
1. Amendments.
Upon your acceptance hereof in the space provided for that purpose below,
the Loan Agreement shall be and hereby is amended as follows:
(a) Section 6.2 of the Loan Agreement shall be amended in its
entirety and as so amended shall be restated to read as follows:
"Section 6.2. Subsidiaries. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or organized, as the case may
be, has full and adequate power to own its property and conduct its
business as now conducted, and is duly licensed or qualified and in
good standing in each jurisdiction in which the nature of the business
conducted by it or the nature of the property owned or leased by it
requires such licensing or qualifying. Schedule 6.2 hereto identifies
each Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and
outstanding shares of each class of its capital stock or other equity
interests owned by the Borrower and the Subsidiaries and, if such
percentage is not 100% (excluding directors' qualifying shares as
required by law), a description of each class of its authorized
capital stock and other equity interests and the number of shares of
each class issued and outstanding. All of the outstanding shares of
capital stock and other equity interests of each Subsidiary are
validly issued and outstanding and fully paid and nonassessable and
all such shares and other equity interests indicated on Schedule 6.2
as owned by the Borrower or a Subsidiary are owned, beneficially and
of record, by the Borrower or such Subsidiary free and clear of all
liens. There are no outstanding commitments or other obligations of
any Subsidiary to issue, and no
<PAGE>
options, warrants or other rights of any Person to acquire, any shares
of any class of capital stock or other equity interests of any
Subsidiary."
(b) Section 7.1 of the Loan Agreement shall be amended by adding the
following sentence to the end thereof:
"Notwithstanding the foregoing, the Borrower may merge GIS Information
Systems, Inc. with and into the Borrower as permitted under Section
7.15 hereof without violating this Section 7.1 or requiring the
consent of the Bank."
(c) Section 7.14 of the Loan Agreement shall be amended by (i)
deleting the word "and" appearing at the end of subsection (b) thereof;
(ii) deleting the period appearing at the end of subsection (e) thereof and
substituting therefor a semicolon and the word "and"; and (iii) adding the
following subsection (f) to the end thereof:
"(f) the acquisition of all of the issued and outstanding capital
stock of GIS Information Systems, Inc."
(d) The first sentence of Section 7.15 of the Loan Agreement shall
be amended in its entirety and as so amended shall be restated to read as
follows:
"Neither the Borrower nor any of its Subsidiaries shall be a party to
any merger or consolidation, or sell, transfer, lease or otherwise
dispose of all or any substantial part of its property, including any
disposition of property as part of a sale leaseback transaction, or in
any event sell or discount (with or without recourse) any of its notes
or accounts receivables; provided, however, that this Section shall
not apply to nor operate to prevent (i) the Borrower from selling its
inventory in the ordinary course of its business and (ii) the Borrower
from merging GIS Information Systems, Inc. with and into the Borrower,
so long as the Borrower is the surviving entity in such merger."
(e) Section 7.19 of the Loan Agreement shall be amended in its
entirety and as so amended shall be restated to read as follows:
"Section 7.19. Formation of Subsidiaries. Except for existing
Subsidiaries designated on Schedule 6.2 hereto, the Borrower shall
not, nor shall it permit Subsidiary to, form or acquire any Subsidiary
without the prior written consent of the Bank."
(f) Subsections 9.1(f), (g), (h), (l) and (m) of the Loan Agreement
shall be amended by deleting the word "Borrower" wherever it appears
therein and substituting therefor the phrase "Borrower or any Subsidiary".
(g) Subsection 9.1 (i) of the Loan Agreement shall be amended in its
entirety and as so amended shall be restated to read as follow:
"(i) dissolution or termination of the existence of the Borrower
(other than the merger of GIS Information Systems, Inc. into the
Borrower as permitted by Section 7.15 of the Loan Agreement); or"
<PAGE>
(h) The Loan Agreement shall be amended by adding a new Schedule 6.2
to the end thereof, which Schedule 6.2 shall read as set forth on Schedule
6.2 attached hereto.
2. Applicability of Covenants to Subsidiaries.
The Borrower hereby covenants and agrees that it shall cause each of its
Subsidiaries (including, without limitation, GIS Information Systems, Inc.) to
do, or refrain from doing, as the case may be, any act which the Borrower has
heretofore agreed to do, or refrain from doing, as the case may be, pursuant to
Section 7 of the Loan Agreement. Notwithstanding the generality of the
foregoing, the Borrower further covenants and agrees that all of the financial
statements delivered by the Borrower to the Bank pursuant to Section 7.3 of the
Loan Agreement (including, without limitation, the audited financial statements
delivered to the Bank pursuant to Section 7.3(b) of the Loan Agreement) shall
include a consolidated balance sheet and consolidated statements of income,
retained earnings and cash flows for the Borrower and its Subsidiaries, all of
the financial covenants set forth in Sections 7.8, 7.9, 7.10 and 7.11 of the
Loan Agreement shall be calculated on a consolidated basis, and the restrictions
set forth in Sections 7.13(c) and 7.15 of the Loan Agreement shall apply to the
Borrower and its Subsidiaries taken as a whole.
3. Conditions Precedent.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
(a) The Borrower and the Bank shall have executed and delivered this
Amendment.
(b) The Bank shall have received copies (executed or certified, as
may be appropriate) of all legal documents or proceedings taken in
connection with the execution and delivery of this Amendment to the extent
the Bank or its counsel may reasonably request.
(c) Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Bank and its counsel.
4. Representations.
In order to induce the Bank to execute and deliver this Amendment, the
Borrower hereby represents to the Bank that as of the date hereof, (i) the
representations and warranties set forth in Section 6 of the Loan Agreement
(excluding Section 6.2 thereof) are and shall be and remain true and correct
(except that the representations contained in Section 6.4 shall be deemed to
refer to the most recent financial statements of the Borrower delivered to the
Bank), (ii) upon completion of the Borrower's acquisition of GIS Information
Services, Inc., the representations and warranties set forth in Section 6 of the
Loan Agreement are and shall be and remain true and correct as to GIS
Information Systems, Inc., (iii) the Borrower is in full compliance with all of
the terms and conditions of the Loan Agreement and (iv) no Default or Event of
Default has occurred and is continuing under the Loan Agreement or shall result
after giving effect to this Amendment.
5. Miscellaneous.
(a) The Borrower has heretofore executed and delivered to the Bank that
certain Mortgaged Security Agreement with Assignment of Rents dated as of March
30, 1995, as heretofore supplemented (as so supplemented, the "Mortgage") and
the Borrower hereby acknowledges and agrees that, notwithstanding the execution
and delivery of this Amendment, the Mortgage remains in full force and effect
and the rights and remedies of the Bank thereunder, the obligations of the
<PAGE>
Borrower thereunder and the liens and security interests created and provided
for thereunder remain in full force and effect and shall not be affected,
impaired or discharged hereby. Nothing herein contained shall in any manner
affect or impair the priority of the liens and security interests created and
provided for by the Mortgage as to the indebtedness which would be secured
thereby prior to giving effect to this Amendment.
(b) Except as specifically amended herein, the Loan Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Loan Agreement, the
Note, or any other instrument or document executed in connection therewith, or
in any certificate, letter or communication issued or made pursuant to or with
respect to the Loan Agreement, any reference in any of such items to the Loan
Agreement being sufficient to refer to the Loan Agreement as amended hereby.
(c) The Borrower agrees to pay on demand all costs and expenses of or
incurred by the Bank in connection with the negotiation, preparation, execution
and delivery of this Amendment, including the fees and expenses of counsel for
the Bank.
(d) This Amendment may be executed in any number of counterparts, and by
the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.
Dated as of July 17, 1996.
May & Speh, Inc.
By: /s/ Robert C. Early
Its: Executive Vice President
Accepted and agreed to in Chicago, Illinois as of the date and year last
above written.
Harris Trust And Savings Bank
By: /s/ Mary C. Baskin
