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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): AUGUST 13, 1999
METRO INFORMATION SERVICES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 000-22035 54-1112301
(State of incorporation) (Commission File No.) (I.R.S. Employer
Identification Number)
POST OFFICE BOX 8888, VIRGINIA BEACH, VIRGINIA 23450
(Address of principal executive office) (Zip Code)
(757) 486-1900
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OF ASSETS
(a) Pursuant to the terms of a Membership Interest Purchase
Agreement, dated as of August 13, 1999 (the "Agreement"), by and among Acuity
Technology Services, LLC, a Virginia limited liability company ("ATS") and
Acuity Technology Services of Dallas, LLC, a Virginia limited liability
company ("ATS-Dallas," collectively with "ATS" and individually, as the
context requires, the "Company"), Michael Berkman ("Berkman"), W. Braun
Jones, Jr. ("Jones"), Mark Scofield ("Scofield"), Mark M. Brahms ("Brahms")
and Rod Rohrer ("Rohrer") (collectively the "Sellers" and sometimes
individually the "Seller"), Metro Information Services - ATS, Inc., a
Virginia corporation (the "Buyer") and Metro Information Services, Inc., a
Virginia corporation ("Metro"), the Buyer acquired from the Sellers one
hundred percent (100%) of all the membership and equity interests in ATS for
a purchase price of $40,000,000 plus or minus a net worth adjustment and an
earnout to be calculated after closing. The net worth adjustment is the
amount by which the closing book value of the Company is greater than or less
than $4,000,000. At closing we paid the Sellers $36,750,000 in cash and
delivered another $2,250,000 to an escrow agent to be held and distributed
pursuant to an escrow agreement. We paid the $1,000,000 balance of the
purchase price at closing by delivering a negotiable promissory note
payable to the order of the Sellers, bearing interest at 5% per annum, due
and payable on November 20, 1999. The period for which the earnout amount
shall be calculated is the twelve-month period commencing on September 1,
1999 and ending August 31, 2000, and will be based on the earnings of the
Buyer before interest, income taxes and amortization of goodwill for that
time period. The earnout is payable within ten days from the date on which
the Buyer receives an accepted earnout report from the Seller.
The purchase price was determined by arms-length negotiation of the
parties and was financed through borrowings from Metro's line of credit. At the
time of the acquisition, there was no material relationship between the Company
(including its officers, directors and members) and the Buyer or Metro or any of
Metro's affiliates, or any director or officer of Metro, or any associate of any
such director or officer of Metro.
(b) At the time of the acquisition, the Company operated an information
technology consulting services and personnel staffing business located in
McLean, Virginia, Baltimore, Maryland and Dallas, Texas. The Buyer intends to
continue to engage in the same business in substantially the same manner.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pursuant to the instructions to Item 7 of Form 8-K, the financial
information required by Item 7 (a) will be filed by Amendment within 60
days after the date this report on Form 8-K is required to be filed.
(b) Pursuant to the instructions to Item 7 of Form 8-K, the pro forma
financial information required by Item 7 (b) will be filed by Amendment
within 60 days after the date this report on Form 8-K is required to be
filed.
(c) Exhibits required by Item 601 of Regulation S-K:
(i) 2 Membership Interest Purchase Agreement, dated as of August
13, 1999, by and among Acuity Technology Services, LLC and
Acuity Technology Services of Dallas, LLC and Michael Berkman,
W. Braun Jones, Jr., Mark Scofield, Mark H. Brahms, and Rod
Rohrer and Metro Information Services - ATS, Inc. and Metro
Information Services, Inc.*
(ii) 99 Press release of Metro Information Services, Inc., dated
August 19, 1999.
* Pursuant to Item 601(b)(2) of Regulation S-K, the exhibits and
schedules to this Membership Interest Purchase Agreement have been omitted.
These exhibits and schedules will be filed supplementally with the Securities
and Exchange Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Metro Information Services, Inc. has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Metro Information Services, Inc.
Date Signed: AUGUST 30, 1999 By /s/ Robert J. Eveleigh
--------------------------------
Robert J. Eveleigh
PRINCIPAL FINANCIAL OFFICER
<PAGE>
EXHIBIT 2
MEMBERSHIP INTEREST PURCHASE AGREEMENT
By and Among
ACUITY TECHNOLOGY SERVICES, LLC
and
ACUITY TECHNOLOGY SERVICES OF DALLAS, LLC
(collectively, the "Company")
and
MICHAEL BERKMAN, W. BRAUN JONES, JR., MARK SCOFIELD, MARK H. BRAHMS,
and ROD ROHRER
(the "Sellers")
and
METRO INFORMATION SERVICES - ATS, INC.
(the "Buyer")
and
METRO INFORMATION SERVICES, INC.
("Metro")
Dated as of August 13, 1999
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TABLE OF CONTENTS
Page
ARTICLE 1 PURCHASE AND SALE OF INTERESTS...............................1
1.1 INTERESTS AND ASSETS.........................................1
--------------------
1.1.1 TANGIBLE PERSONAL PROPERTY........................2
--------------------------
1.1.2 REAL PROPERTY.....................................2
-------------
1.1.3 CONTRACTS.........................................2
---------
1.1.4 ACCOUNTS RECEIVABLE...............................2
-------------------
1.1.5 INTANGIBLE PROPERTY...............................3
-------------------
1.1.6 FILES AND RECORDS.................................3
-----------------
1.1.7 CLAIMS............................................3
------
1.1.8 PREPAID ITEMS.....................................3
-------------
1.1.9 GOODWILL..........................................3
--------
1.1.10 BIDS -REQUESTS FOR PROPOSALS......................3
----------------------------
1.1.11 FRANCHISES, PERMITS...............................3
-------------------
1.1.12 CASH AND CASH EQUIVALENTS.........................3
-------------------------
1.1.13 CORPORATE RECORDS.................................4
-----------------
1.2 EXCLUDED ASSETS..............................................4
---------------
1.2.1 INSURANCE.........................................4
---------
1.2.2 DUPLICATE RECORDS.................................4
-----------------
1.2.3 EMPLOYEE PERSONAL PROPERTY........................4
--------------------------
1.2.4 CASH AND INVESTMENTS..............................4
--------------------
1.2.5 ACCOUNTS RECEIVABLE...............................4
-------------------
1.2.6 VEHICLES..........................................4
--------
1.3 LIABILITIES..................................................4
-----------
1.3.1 SECURITY INTERESTS................................4
------------------
1.3.2 CONTINUING LIABILITIES............................5
----------------------
1.3.3 EXCLUDED LIABILITIES..............................5
--------------------
1.3.4 ASSUMED OBLIGATIONS OF THE COMPANY................6
----------------------------------
1.4 PURCHASE PRICE, PAYMENT, AND ALLOCATION......................6
---------------------------------------
1.4.1 PURCHASE PRICE....................................6
--------------
1.4.2 METHOD OF PAYMENT.................................9
-----------------
1.4.3 ALLOCATION OF PURCHASE PRICE......................9
----------------------------
1.4.4 COMPUTATION OF EARN OUT..........................10
-----------------------
1.4.5 MATTERS RESERVED FOR JOINT DECISION..............15
-----------------------------------
1.5 CLOSING.....................................................15
-------
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS...............15
2.1 INTERESTS; STATUS OF THE COMPANY............................16
--------------------------------
2.2 NO OPTIONS..................................................16
----------
2.3 CORPORATE ACTION............................................16
----------------
2.4 NO DEFAULTS.................................................16
-----------
2.5 CONTRACTS, LEASES, AGREEMENTS AND OTHER COMMITMENTS.........17
---------------------------------------------------
2.6 BREACH......................................................17
------
2.7 FINANCIAL INFORMATION.......................................17
---------------------
2.7.1 FINANCIAL STATEMENTS.............................17
--------------------
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TABLE OF CONTENTS (CONTINUED)
Page
2.7.2 ACCOUNTS RECEIVABLES.............................18
--------------------
2.8 LIABILITIES.................................................18
-----------
2.9 TAXES.......................................................18
-----
2.10 LICENSES....................................................19
--------
2.11 BUSINESS OPERATIONS.........................................19
-------------------
2.12 APPROVALS AND CONSENTS......................................19
----------------------
2.13 CONDITION OF ASSETS.........................................20
-------------------
2.13.1 ALL ASSETS.......................................20
----------
2.13.2 TANGIBLE PERSONAL PROPERTY.......................20
--------------------------
2.13.3 GOOD TITLE.......................................20
----------
2.14 LEASED REAL PROPERTY........................................20
--------------------
2.14.1 LEASES...........................................20
------
2.14.2 INTERESTS........................................20
---------
2.14.3 ALL LEASES.......................................20
----------
2.14.4 GOOD TITLE.......................................21
----------
2.15 ENVIRONMENTAL MATTERS.......................................21
---------------------
2.15.1 ENVIRONMENTAL STUDIES............................21
---------------------
2.16 COMPLIANCE WITH LAW AND REGULATIONS.........................21
-----------------------------------
2.17 INSURANCE...................................................22
---------
2.18 LABOR, EMPLOYMENT CONTRACTS AND BENEFIT PROGRAMS............22
------------------------------------------------
2.18.1 WORK AGREEMENTS..................................22
---------------
2.18.2 EMPLOYEE MANUALS.................................23
----------------
2.18.3 COMPLIANCE.......................................23
----------
2.18.4 EMPLOYEE PLANS...................................23
--------------
2.18.5 ERISA COMPLIANCE.................................23
----------------
2.18.6 NO MULTI-EMPLOYER PLANS..........................24
-----------------------
2.18.7 EMPLOYEES........................................24
---------
2.18.8 INDEPENDENT CONTRACTORS..........................24
-----------------------
2.19 LITIGATION..................................................24
----------
2.20 INTANGIBLE PROPERTY.........................................25
-------------------
2.21 BROKERS.....................................................25
-------
2.22 CONFLICTING INTERESTS.......................................25
---------------------
2.23 MATTERS ARISING AFTER THE INTERIM BALANCE SHEET DATE........25
----------------------------------------------------
2.24 YEAR 2000 COMPLIANCE........................................26
--------------------
2.25 IMMIGRATION MATTERS.........................................26
-------------------
2.26 DISCLOSURE..................................................26
----------
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BUYER AND METRO.......27
3.1 STATUS......................................................27
------
3.2 NO DEFAULTS.................................................27
-----------
3.3 CORPORATE ACTION............................................27
----------------
3.4 BROKERS.....................................................27
-------
3.5 LITIGATION..................................................28
----------
3.6 CONSENTS....................................................28
--------
3.7 COMPLIANCE WITH LAWS........................................28
--------------------
3.8 FULL DISCLOSURE.............................................28
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TABLE OF CONTENTS (CONTINUED)
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3.9 FINANCIAL CAPABILITY........................................28
--------------------
ARTICLE 4 COVENANTS OF THE COMPANY AND THE SELLERS PENDING THE
CLOSING.....................................................28
4.1 OPERATIONS OF THE BUSINESS..................................28
--------------------------
4.1.1 BEST EFFORTS.....................................28
------------
4.1.2 CURRENT STATEMENTS...............................29
------------------
4.1.3 PRESERVE BUSINESS................................29
-----------------
4.1.4 ASSETS IN GOOD REPAIR............................29
---------------------
4.2 PROHIBITED ACTIONS..........................................29
------------------
4.3 NO DISTRIBUTIONS OR PAYMENTS................................30
----------------------------
4.4 ACCESS TO FACILITIES, FILES AND RECORDS.....................30
---------------------------------------
4.5 REPRESENTATIONS AND WARRANTIES..............................31
------------------------------
4.6 CONSENTS....................................................31
--------
4.7 NOTICE OF PROCEEDINGS.......................................31
---------------------
4.8 CONSUMMATION OF AGREEMENT...................................31
-------------------------
ARTICLE 5 COVENANTS OF THE BUYER AND METRO PENDING THE CLOSING........32
5.1 REPRESENTATIONS AND WARRANTIES..............................32
------------------------------
5.2 CONSUMMATION OF AGREEMENT...................................32
-------------------------
5.3 NOTICE OF PROCEEDINGS.......................................32
---------------------
5.4 CONTRACTS NOT TO BE ASSUMED.................................32
---------------------------
ARTICLE 6 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE
SELLERS.....................................................32
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS...................33
-----------------------------------------
6.1.1 REPRESENTATIONS TRUE.............................33
--------------------
6.1.2 BUYER AND METRO COMPLIANCE.......................33
--------------------------
6.1.3 CERTIFICATE OF THE BUYER.........................33
------------------------
6.1.4 OTHER DOCUMENTS..................................33
---------------
6.2 PROCEEDINGS.................................................33
-----------
6.2.1 NO INJUNCTION....................................33
-------------
6.2.2 POSTPONEMENT.....................................33
------------
6.3 DELIVERIES..................................................33
----------
6.4 OTHER CONSENTS..............................................33
--------------
ARTICLE 7 CONDITIONS TO THE OBLIGATIONS OF THE BUYER AND METRO........34
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS...................34
-----------------------------------------
7.1.1 REPRESENTATIONS TRUE.............................34
--------------------
7.1.2 SELLERS AND COMPANY'S PERFORMANCE................34
---------------------------------
7.1.3 SELLERS AND COMPANY'S CERTIFICATES...............34
----------------------------------
7.1.4 OTHER DOCUMENTS..................................34
---------------
7.2 PROCEEDINGS.................................................34
-----------
7.2.1 NO INJUNCTION....................................34
-------------
7.2.2 POSTPONEMENT.....................................34
------------
7.3 LIENS RELEASED..............................................34
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TABLE OF CONTENTS (CONTINUED)
Page
7.4 DELIVERIES..................................................35
----------
7.5 OPINIONS OF COUNSEL.........................................35
-------------------
7.6 OTHER CONSENTS..............................................35
--------------
7.7 REVISED SCHEDULES...........................................35
-----------------
7.8 NO MATERIAL CHANGE IN BUSINESS OR ASSETS....................35
----------------------------------------
7.9 PRELIMINARY CLOSING BALANCE SHEET...........................35
---------------------------------
7.10 SINGLE MEMBER LLC...........................................35
-----------------
ARTICLE 8 ITEMS TO BE DELIVERED AT THE CLOSING........................36
8.1 DELIVERIES BY THE COMPANY...................................36
-------------------------
8.1.1 ASSIGNMENT OF INTERESTS..........................36
-----------------------
8.1.2 MEMBER RESOLUTIONS...............................36
------------------
8.1.3 OFFICER'S CERTIFICATE............................36
---------------------
8.1.4 OPINIONS.........................................36
--------
8.1.5 NONCOMPETITION AGREEMENTS........................36
-------------------------
8.1.6 MANAGEMENT AGREEMENTS............................36
---------------------
8.1.7 CONTINUING LIABILITIES SCHEDULE..................36
-------------------------------
8.1.8 ACCOUNTS RECEIVABLE..............................36
-------------------
8.2 DELIVERIES BY THE BUYER.....................................37
-----------------------
8.2.1 PURCHASE PRICE...................................37
--------------
8.2.2 RESOLUTIONS......................................37
-----------
8.2.3 OFFICERS' CERTIFICATE............................37
---------------------
8.2.4 NONCOMPETITION AGREEMENTS........................37
-------------------------
8.2.5 MANAGEMENT AGREEMENTS............................37
---------------------
8.2.6 STOCK OPTION PLAN................................37
-----------------
ARTICLE 9 SURVIVAL; INDEMNIFICATION; EMPLOYEES........................37
9.1 SURVIVAL....................................................37
--------
9.2 BASIC PROVISION.............................................38
---------------
9.2.1 BUYER INDEMNITEES................................38
-----------------
9.2.2 SELLER INDEMNITEES...............................38
------------------
9.3 DEFINITION OF DEFICIENCIES..................................38
--------------------------
9.3.1 DEFICIENCIES FOR THE BUYER.......................38
--------------------------
9.3.2 DEFICIENCIES FOR THE SELLERS.....................39
----------------------------
9.4 PROCEDURES FOR ESTABLISHMENT OF DEFICIENCIES................39
--------------------------------------------
9.4.1 CLAIM ASSERTED...................................39
--------------
9.4.2 NOTICE...........................................40
------
9.4.3 AGREEMENT........................................40
---------
9.5 PAYMENT OF DEFICIENCIES.....................................40
-----------------------
9.6 LIMITATION ON DEFICIENCIES..................................40
--------------------------
9.7 LEGAL EXPENSES..............................................41
--------------
ARTICLE 10 MISCELLANEOUS...............................................41
10.1 TERMINATION OF AGREEMENT....................................41
------------------------
10.2 LIABILITIES ON TERMINATION OR BREACH........................41
------------------------------------
10.3 EXPENSES....................................................42
--------
10.4 REMEDIES CUMULATIVE.........................................42
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TABLE OF CONTENTS (CONTINUED)
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10.5 PRESERVATION OF RECORDS.....................................42
-----------------------
10.6 TAX RETURNS.................................................43
-----------
10.7 FURTHER ASSURANCES..........................................43
------------------
10.8 RISK OF LOSS................................................43
------------
10.9 EMPLOYEES...................................................43
---------
10.10 CLOSING DATE TO COMMENCEMENT OF EARNOUT PERIOD..............44
----------------------------------------------
ARTICLE 11 GENERAL PROVISIONS..........................................44
11.1 SUCCESSORS AND ASSIGNS......................................44
----------------------
11.2 AMENDMENTS; WAIVERS.........................................44
-------------------
11.3 NOTICES.....................................................45
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11.4 CAPTIONS....................................................46
--------
11.5 GOVERNING LAW...............................................46
-------------
11.6 ENTIRE AGREEMENT............................................46
----------------
11.7 EXECUTION: COUNTERPARTS AND FACSIMILE......................46
--------------------------------------
11.8 GENDER AND NUMBER...........................................46
-----------------
11.9 THIRD-PARTY BENEFICIARIES...................................47
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<PAGE>
MEMBERSHIP INTEREST PURCHASE AGREEMENT
This MEMBERSHIP INTEREST PURCHASE AGREEMENT (the "Agreement") is entered
into as of August 13, 1999, by and among ACUITY TECHNOLOGY SERVICES, LLC a
Virginia limited liability company ("ATS") and ACUITY TECHNOLOGY SERVICES OF
DALLAS, LLC, a Virginia limited liability company ("ATS-Dallas," collectively
with "ATS" and individually, as the context requires, the "Company"), MICHAEL
BERKMAN ("Berkman"), W. BRAUN JONES, JR. ("Jones"), MARK SCOFIELD ("Scofield"),
MARK M. BRAHMS ("Brahms") and ROD ROHRER ("Rohrer") (collectively the "Sellers"
and sometimes individually the "Seller"), METRO INFORMATION SERVICES - ATS,
INC., a Virginia corporation (the "Buyer") and METRO INFORMATION SERVICES, INC.,
a Virginia corporation ("Metro").
RECITALS
A. The Company owns and operates an information technology consulting
services and personnel staffing business (the "Business") located in McLean,
Virginia, Baltimore, Maryland and Dallas, Texas.
B. The Company owns certain assets used or held for use in connection with
the operation of the Business.
C. The Sellers own all of the issued and outstanding membership interests
of ATS and ATS owns all of the issued and outstanding membership interests of
ATS-Dallas.
D. Metro owns all of the issued and outstanding shares of capital stock of
the Buyer.
E. The Sellers desire to sell, assign and transfer to the Buyer one
hundred percent (100%) of all the membership and equity interests in ATS
("Interests"), the Buyer desires to purchase, from the Sellers, the Interests
and Metro desires to guarantee the performance of the Buyer's obligations
hereunder, all under the terms and conditions described herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises,
representations, warranties and covenants herein contained, the parties agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF INTERESTS
1.1 INTERESTS AND ASSETS. The Sellers agree to sell to the Buyer and the
Buyer agrees to purchase all of the Interests in ATS which are listed on
SCHEDULE 1.1 and constitute one hundred percent (100%) of the membership and
equity interests in ATS. The Buyer's purchase of the Interests is based on
Sellers' representation that the Company owns or leases (if and to the
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extent property is currently leased) all properties and assets, real, personal
and mixed, tangible and intangible, of every type and description, wherever
located (except for Excluded Assets as defined in Section 1.2) that are used or
held for use in the Business, including, without limitation, the property and
assets which are acquired by the Company between the date hereof and the Closing
Date (collectively, the "Assets"). Without limiting the foregoing, the Assets
shall include the following, except to the extent that any of the following are
included within the Excluded Assets:
1.1.1 TANGIBLE PERSONAL PROPERTY. All equipment, electrical devices,
computers and computer equipment, furniture, fixtures, office materials and
supplies, hardware, tools, spare parts and other tangible personal property
owned or leased by the Company, including, without limitation the tangible
personal property described on SCHEDULE 1.1.1 attached (collectively, the
"Tangible Personal Property").
1.1.2 REAL PROPERTY. All interests in the leaseholds, licenses,
rights-of-way and other interests of every kind and description in and to real
property, buildings thereon and improvements thereto used or held for use by the
Company in the Business, including, without limitation, the real estate
interests listed and described on SCHEDULE 1.1.2 attached (collectively, the
"Leased Real Property").
1.1.3 CONTRACTS. All Contracts (as defined below) to which the
Company is a party with clients or customers of the Business and its operations
or pursuant to which the Company may generate revenue are Material Contracts (as
defined below) and are listed and described on SCHEDULE 1.1.3-1 attached (the
"Client Contracts") all Contracts to which the company is a party with
third-party vendors or other persons from which the Company receives goods or
services listed and described on SCHEDULE 1.1.3-2 attached (the "Vendor
Contracts") and all other Contracts to which the Company is a party listed and
described on SCHEDULE 1.1.3-3 attached and Work Agreements (as defined below)
with employees and independent contractors listed and described on SCHEDULE
2.18.1 attached (the "Other Contracts"). As used in this Agreement, the term
"Material Contract" means any unexpired agreement, arrangement, commitment or
understanding, written or oral, to which the Company is a party or by which the
Company is bound and which (a) is a Client Contract, (b) is a Work Agreement
with an Information Technology Consultant, (c) is not terminable without penalty
on thirty (30) days' notice or less or (d) involves aggregate payments after
Closing to or by the Buyer in excess of $2,500. All other contracts are
"Non-Material Contracts" and shall be included in the Assets, provided the
aggregate liability to the Buyer under all such Contracts shall not exceed
$25,000. Except as disclosed on SCHEDULE 1.1.3-1, SCHEDULE 1.1.3-2 or SCHEDULE
1.1.3-3 (collectively the "Contract Schedules"), each Contract will be
enforceable after the Closing and sale of the Interests to the Buyer without the
consent of any party. The Client Contracts, Vendor Contracts, Other Contracts
and Non-Material Contracts included in the Assets under this Section 1.1.3 shall
be collectively called the "Contracts" and individually a "Contract."
1.1.4 ACCOUNTS RECEIVABLE. All accounts and notes receivable, billed
and unbilled notes receivable, other receivables, uninvoiced contract fees and
work in progress of the Company (collectively the "Accounts Receivable").
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<PAGE>
1.1.5 INTANGIBLE PROPERTY. ATS owns 100% of the membership and
equity interests in ATS-Dallas. The names "Acuity Technology Services, LLC" and
"Acuity Technology Services of Dallas, LLC" and all trademarks, trade names,
service marks, copyrights, franchises, patents, telephone numbers, jingles,
slogans, logotypes and other intangible rights, data bases, electronic
information, software (whether purchased or developed by the Company), software
licenses, owned or licensed and used or held for use by the Company as of the
date of this Agreement, including, without limitation, all of those listed and
described on SCHEDULE 1.1.5 attached (collectively, the "Intangible Property").
1.1.6 FILES AND RECORDS. All files and other records of the Company
relating to the Business (other than duplicate copies of such files, hereinafter
"Duplicate Records") including, without limitation, all books, files,
correspondence, studies, reports, projections, schematics, blueprints,
engineering data, customer, client, consultant and candidate lists, reports,
specifications, projections, statistics, creative materials, mats, plates,
negatives and other advertising, marketing or related materials, and all other
business, technical and financial information regardless of the media on which
stored.
1.1.7 CLAIMS. Any and all of the Company's claims and rights against
third parties relating to the Business, including, without limitation, all
rights under manufacturers' and vendors' warranties, and all deposits, refunds,
rights to recovery and rights of setoff and recoupment (collectively, the
"Claims").
1.1.8 PREPAID ITEMS. All of the Company's prepaid expenses and
prepaid AD VALOREM taxes (which shall be prorated, if applicable, as provided in
Section 1.4.1.4) and rent and utility deposits.
1.1.9 GOODWILL. All of the Company's and the Sellers' goodwill in,
and going concern value of, the Business.
1.1.10 BIDS - REQUESTS FOR PROPOSALS. All rights of the Company
under any bids, requests for proposals or similar rights ("Proposals"), whether
such Proposals are made by or to the Company. SCHEDULE 1.1.10 contains a list of
all Proposals as of the date of this Agreement. The Company shall not make or
accept any Proposal other than in the ordinary course of the Business on a time
and materials basis after the date of this Agreement without the written consent
of the Buyer.
1.1.11 FRANCHISES, PERMITS. All of the Company's franchises,
approvals, licenses, orders, registrations, certificates, variances and similar
rights obtained from governments and governmental agencies.
1.1.12 CASH AND CASH EQUIVALENTS. Cash on hand or in bank accounts
and other cash equivalents, but only as necessary, in the opinion of Company, to
attain a Closing Book Value of at least Four Million Dollars ($4,000,000).
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<PAGE>
1.1.13 CORPORATE RECORDS. The minute books, certificate ledgers,
member lists and similar records of the Company.
1.2 EXCLUDED ASSETS. The following assets of the Company, to the extent in
existence on the Closing Date (collectively, the "Excluded Assets"), shall be
transferred by the Company to the Sellers before the Closing:
1.2.1 INSURANCE. All contracts of life insurance on the lives of
Berkman or Jones, including any cash surrender value or prepaid premiums with
respect thereto; provided, however, Berkman or Jones, with respect to his
policy, shall assume liability and remain liable for any loans against the
insurance policies distributed to each of them.
1.2.2 DUPLICATE RECORDS. All Duplicate Records.
1.2.3 EMPLOYEE PERSONAL PROPERTY. Any personal property which is
listed on SCHEDULE 1.2.3 attached which is located at the Company's offices but
is owned by any employee of the Company.
1.2.4 CASH AND INVESTMENTS. All of the Company's cash on hand or in
bank accounts and any other cash equivalents including, without limitation,
certificates of deposit, commercial paper, treasury bills, or money market
accounts, except as necessary to attain a Closing Book Value of not less than
Four Million Dollars ($4,000,000).
1.2.5 ACCOUNTS RECEIVABLE. All receivables of ATS or ATS-Dallas due
from any Seller or any Affiliate, hereinafter defined, of any Seller or any
current or former officer, employee, member, manager or director of the Company
and any notes or written obligations reflecting any obligation of any such
related party to the Company as of the Closing Date (the "Related Party
Receivables").
1.2.6 VEHICLES. All vehicles owned or leased by the Company.
1.3 LIABILITIES.
1.3.1 SECURITY INTERESTS. The Sellers, jointly and severally,
represent, warrant and covenant that at Closing, the Assets shall be owned by
the Company free and clear of all mortgages, liens, deeds of trust, security
interests, pledges, restrictions, prior assignments, charges, claims, defects in
title and encumbrances of any kind or type whatsoever (collectively, the
"Security Interests") except for: (a) the Security Interests disclosed on
SCHEDULE 1.3.1, all of which will be paid in full by the Company and released at
or before Closing unless otherwise indicated on SCHEDULE 1.3.1; (b) liens for
taxes, other than state, federal or local income taxes and other taxes of the
Company that do not relate to the Assets, not yet due and payable, accruing
before the Closing Date, (c) the obligations of the Company arising after
Closing (other than Excluded Liabilities, defined below), under the Contracts
described in Section 1.1.3; and (d) the Continuing Liabilities described in
Section 1.3.2. The Security Interests referred to in the foregoing clauses
(a)-(d) are collectively referred to herein as "Permitted Encumbrances."
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1.3.2 CONTINUING LIABILITIES. Except as otherwise provided herein
and subject to the terms and conditions of this Agreement, the Company shall
have no liabilities at Closing except the following which are approved by the
Buyer:
1.3.2.1 all liabilities and obligations of the Company which
are accrued or reserved against on the Interim Balance Sheet (defined below) and
which remain unpaid as of the Closing to the extent of any remaining reserve or
accrual on the Closing Balance Sheet;
1.3.2.2 all liabilities and obligations of the Company which
are incurred in the ordinary course of the Business, consistent with past
practice, subsequent to the Interim Balance Sheet Date and through the Closing
Date, which remain unpaid as of the Closing and are accrued or reserved against
in the Closing Balance Sheet, but only to the extent of such reserve or accrual;
1.3.2.3 the liabilities for accrued and unused paid vacation
and sick days of the Company's employees who remain in the employ of the Company
after the Closing, but, with respect to vacation days, only to the extent such
liabilities are accrued or reserved against on the Closing Balance Sheet, and
only to the extent of such reserve or accrual;
1.3.2.4 any liability or obligation arising before the
Closing under the Work Agreements but only to the extent of any reserve or
accrual on the Closing Date Balance Sheet and all liabilities and obligations
arising after the Closing (other than with respect to the Company's
obligations for severance and termination compensation and benefits) under
the Work Agreements; and
1.3.2.5 any liability or obligation arising before the Closing
under the Contracts but only to the extent of any reserve or accrual on the
Closing Date Balance Sheet and all liabilities and obligations arising after the
Closing under the Contracts (collectively the "Continuing Liabilities").
1.3.3 EXCLUDED LIABILITIES. Except for the Continuing Liabilities,
at or before the Closing, the Sellers shall assume and hold the Company harmless
for the following liabilities and obligations:
1.3.3.1 any liability or obligation of any Seller or the
Company arising out of any Contract not included in the Contract Schedules or
accepted by the Buyer under Sections 2.5 or 5.4 and any liability arising under
Contracts before Closing except to the extent of any reserve or accrual therefor
in the Closing Date Balance Sheet;
1.3.3.2 any liability or obligation of any Seller or the
Company arising out of or relating to any pension, 401(k), retirement or profit
sharing plan or trust, except to the extent shown as a liability on the Closing
Balance Sheet;
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1.3.3.3 any liability or obligation of any Seller or the
Company arising out of or relating to any consulting agreement with an
information technology consultant or employment agreement, written or oral, any
severance pay or other liability relating to any employee or information
technology consultant of the Company not specifically accepted by the Buyer;
1.3.3.4 any liability or obligation of any Seller or the
Company arising out of or relating to any litigation, proceeding or claim by any
person or entity relating to the Sellers, the Company, the Business, the Assets
or the Interests before the Closing Date, whether such litigation, proceeding or
claim is pending, threatened or asserted before, on or after the Closing Date;
1.3.3.5 other than the Continuing Liabilities, any and all
other liabilities, obligations, debts or commitments of any Seller or the
Company whatsoever, whether accrued now or hereafter, whether fixed or
contingent, whether known or unknown, or any claims asserted against any Seller
or the Company, any employee of the Company, the Business or any of the
Interests or the Assets or other items owned by the Company at the Closing
relating to any event (whether by act or omission) before the Closing Date,
including, without limitation, the payment of all taxes, including, without
limitation, any income, franchise, sales, use, business and occupation taxes;
and
1.3.3.6 subject to the full execution by the Company and the
sublandlord of a sublease for the 14th floor, 1750 Tysons Boulevard, Tysons II,
McLean, Virginia, any and all liability, obligation, cost or expense of the
Company under the sublease dated November 9, 1998 with Condor Technology
Solutions, Inc. for 1650 Tysons Boulevard, Suite 600, ("Extended Lease")
accruing or ending after November 30, 1999.
1.3.4 ASSUMED OBLIGATIONS OF THE COMPANY. The Sellers shall assume
and pay, satisfy, discharge, perform and fulfill all such obligations and
liabilities not expressly approved by Buyer as Continuing Liabilities under
Section 1.3.2, including, without limitation those described in Section 1.3.3
above (the "Excluded Liabilities"), as they become due, without any charge or
cost to the Buyer or the Company.
1.4 PURCHASE PRICE, PAYMENT, AND ALLOCATION.
1.4.1 PURCHASE PRICE.
1.4.1.1 AMOUNT. The "Purchase Price" for the Membership
Interests shall be Forty Million Dollars ($40,000,000), plus or minus, as the
case may be, the Net Worth Adjustment (defined below). At the Closing, Two
Million Two Hundred Fifty Thousand Dollars ($2,250,000) (the "Escrow Amount")
will be held and distributed pursuant to the Escrow Agreement in the form of
attached EXHIBIT A (the "Escrow Agreement") and the balance of the Purchase
Price will be paid to the Sellers, as provided in Section 1.4.2 below. The
"Closing Amount" is defined as the Purchase Price less the Escrow Amount.
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1.4.1.2 NET WORTH ADJUSTMENT. The "Net Worth Adjustment" means
the amount by which the Closing Book Value (defined below) is greater than
(which shall be a positive number) Four Million Dollars ($4,000,000) or less
than (which shall be a negative number) Four Million Dollars ($4,000,000).
1.4.1.3 CLOSING BOOK VALUE. "Closing Book Value" (whether or
not positive) means (a) the net book value, on a combined basis, of the Assets,
excluding the Excluded Assets, minus the Continuing Liabilities at the Closing,
as determined in accordance with generally accepted accounting principles,
applied on a consistent basis ("GAAP"), MINUS (b) the recorded value of any
goodwill or (except as noted above in this Section 1.4.1.3) any other intangible
asset, MINUS (c) a reserve for any specific Accounts Receivable of the Company
which is not collected by the Company by the date the Closing Date Balance Sheet
is prepared and is not deemed by KPMG LLP ("KPMG") as collectable by the Company
within one hundred eighty days (180) after the Closing Date, MINUS (d) the
amount which the Company or Buyer is required to pay after the Closing for any
liability or obligation of the Company paid by the Buyer or the Company except
the Continuing Liabilities, MINUS (e) an accrual of an employer match
contribution consistent with Company's 1998 contribution percentage under the
Company's 401(k) plan, MINUS (f) one-third of the costs necessary to obtain all
necessary software licenses for software used by the Company. In determining
Closing Book Value, the operation of the Business and the income and normal
operating expenses attributable thereto through 11:59 p.m. on August 13, 1999
(the "Effective Time") shall be reflected in the Closing Book Value. Further,
Closing Book Value shall be reduced by a general reserve for uncollectible
Accounts Receivable of the Company in the amount of $30,000 and for a reserve
for unused vacation leave for employees notwithstanding the Company's "use or
lose" policy, as if the Company does not have such a policy. Revenues from
clients and expenses for goods or services received both before and after the
Effective Time, power and utilities charges, frequency discounts, prepaid cash
sales, bonuses, wages, payroll taxes and rents and similar prepaid and deferred
items shall be prorated as of the Effective Time and so reflected in the Closing
Book Value. All revenues earned by the Company and all expenses incurred by the
Company in the ordinary course of business ("Interim Expenses") between the
Effective Time and the Closing Date ("Interim Period") shall increase Assets but
not Closing Book Value, in the case of such revenues, and decrease Assets or
increase Continuing Liabilities but not Closing Book Value, in the case of
Interim Expenses. Provided, however, Interim Expenses shall not include any
income taxes or any sales or similar taxes on the transaction contemplated by
this Agreement or any interest. All special assessments and similar charges or
liens imposed against any of the Assets on or before the Effective Time, whether
payable in installments or otherwise, shall be reflected in Closing Book Value.
If KPMG writes off any specific Account Receivable of the Company in preparing
the Closing Balance Sheet, which is (x) in addition to the Company's reserve for
bad debts set forth in the Preliminary Closing Balance Sheet (as defined below)
and (y) not reversed in whole or in part pursuant to the dispute resolution
provisions of SECTION 1.4.1.4, then any such Account Receivable shall be an
Excluded Asset and shall be distributed to the Sellers pursuant to the
provisions of Section 1.2.
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1.4.1.4 CLOSING BALANCE SHEET. Not later than August 18, 1999,
the Sellers will prepare and deliver to the Buyer a combined balance sheet of
the Company (the "Preliminary Closing Balance Sheet") reflecting the Sellers'
best estimate of the Closing Book Value as of the Effective Time. Based on the
foregoing, the Sellers shall prepare and deliver a certificate (the "Sellers'
Adjustment Certificate") to the Buyer certifying that the Preliminary Closing
Balance Sheet fairly represents the Closing Book Value in accordance with GAAP,
as modified in accordance with Section 1.4.1.3. If the Sellers' Adjustment
Certificate shows a Closing Book Value of less than Four Million Dollars
($4,000,000), the Sellers shall credit the Buyer a dollar amount against the
principal amount of the Note (defined below), and the Purchase Price shall
decrease, by an amount equal to Four Million Dollars ($4,000,000) minus the
Closing Book Value ("Deficit"). If the amount of the Deficit exceeds One Million
Dollars ($1,000,000), the Sellers shall credit the Buyer with the excess
deficiency as a reduction in the Closing Amount. If Seller's Adjustment
Certificate shows a Closing Book Value of more than Four Million Dollars
($4,000,000), the Purchase Price and the Closing Amount shall increase by the
excess of the Closing Book Value over Four Million Dollars ($4,000,000) Within
ninety (90) days after the Closing, the Buyer will cause KPMG to review, at the
Buyer's Expense, the Preliminary Closing Balance Sheet in accordance with
generally accepted auditing standards to determine that the Preliminary Closing
Balance Sheet was prepared in accordance with GAAP as modified in accordance
with Section 1.4.1.3 and make any appropriate adjustments thereto. Within ninety
(90) days after the Closing Date, KPMG shall deliver to the Buyer and the
Sellers the "Closing Balance Sheet," notes thereto and KPMG's report thereon.
Within thirty (30) days of receipt of the Closing Balance Sheet, the Sellers
will either accept the Closing Balance Sheet or provide the Buyer with written
objections to the accounting treatment of items included in or omitted from the
Closing Balance Sheet. If the Sellers accept the Closing Balance Sheet as
presented or fail to object within the thirty- (30-) day period, then the
Closing Balance Sheet will be deemed final and binding on the parties and shall
be subject only to the Indemnification provisions of Article 9 below and the
Buyer or the Sellers, as the case may be, shall, within five (5) business days
thereafter, pay by increasing or decreasing the principal balance of the Note by
the amount of the excess or deficit, as the case may be, of the amount of
Closing Book Value in the Closing Balance Sheet minus the Closing Book Value in
the Preliminary Closing Balance Sheet. If the Closing Book Value in the
Preliminary Closing Date Balance Sheet exceeds the Closing Book Value in the
Closing Date Balance Sheet by more than the then principal balance of the Note,
the Sellers shall pay the Buyer the excess with interest at five percent (5%)
per annum from the Closing Date. Any increase or decrease in the principal
balance of the Note due to a difference in the Closing Book Value from the
Preliminary Closing Balance Sheet shall be deemed made as of the Closing Date so
that no interest shall accrue on any reduction in the principal balance and
interest shall accrue on any increase in the principal balance of the Note. Any
disagreement between the Buyer and the Seller that cannot be resolved by the
parties within thirty (30) days after receipt of the Seller's written
objections, will be resolved by the Seller and Buyer selecting an independent
firm of certified public accountants of national reputation ("Second
Accountants") to resolve the dispute. If the Seller and the Buyer are unable to
agree on the choice of Second Accountants, they will select a "Big 5" accounting
firm by lot (after excluding KPMG and their respective regular outside
accounting firms) as Second Accountants. The parties shall have an opportunity
to present their position to the Second Accountants and shall cooperate with the
Second Accountants in making available to them any
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records or work papers requested by the Second Accountants. The decision of the
Second Accountants ("Decision") shall be set forth in writing and will be
conclusive and binding on the parties and subject to judicial enforcement and
the Buyer or the Seller, as the case may be, shall, within five (5) business
days of receipt of the Decision, pay by wire transfer to the other any amounts
needed to reflect any increases or decreases from the Closing Book Value made
from the Seller's Adjustment Certificate caused by the Closing Balance Sheet as
so determined. Each party shall bear one-half (1/2) of the cost of the Second
Accountants.
1.4.1.5 AUDIT. The Sellers acknowledge that the Buyer is a
reporting company under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and that as a result of this transaction, certain audited and
unaudited financial information regarding the Company must be filed with the
Securities and Exchange Commission within seventy-five (75) days after the
Closing Date. The Company and the Sellers shall fully cooperate, at the Buyer's
expense, with KPMG in any such audit and with the Buyer in making its required
disclosures. This cooperation will extend to, among other things, making the
Company's personnel and records reasonably available to the Buyer before and
after the Closing as well as providing the cooperation required by Section 4.4
to allow the Buyer to make its required disclosures and KPMG to perform the
required work.
1.4.2 METHOD OF PAYMENT.
1.4.2.1 The Closing Amount shall be paid by the Buyer to the
Sellers as follows: (a) $1,000,000 shall be paid by the Buyer's execution and
delivery of a negotiable promissory note made payable to the order of the
Sellers in the principal amount of $1,000,000, bearing interest at five percent
(5%) per annum and due and payable as provided in attached EXHIBIT B (the
"Note") and (b) the Buyer shall pay the balance of the Closing Amount
("Balance") by wire transfer (pursuant to the instructions of the Sellers
delivered to the Buyer at least two (2) days before Closing).
1.4.2.2 The Escrow Amount (defined below) shall be paid by the
Buyer to the Escrow Agent by wire transfer pursuant to the instructions of the
Escrow Agent at the Closing and will be held and paid to the Sellers or the
Buyer as provided in the Escrow Agreement.
1.4.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price will be
allocated among the Assets as provided in SCHEDULE 1.4.3 in accordance with the
requirements of Section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code"). Effective as of the completion of Closing, the Company will be a
disregarded entity for income tax purposes and the transactions contemplated
under this Agreement will be treated as a sale of assets by the Company to Buyer
and the Company will cease to qualify to use the cash method of accounting for
income tax purposes. Sellers shall be responsible for the income tax costs from
any gain in the "deemed" asset sale and conversion of the Company's accounting
method from the cash to accrual basis.
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1.4.4 COMPUTATION OF EARNOUT. In addition to the Purchase Price, the
Buyer shall pay to the Sellers an Earnout amount (the "Earnout Payment"), which
payment shall be treated as additional purchase price paid to the Sellers for
the Interests and shall be calculated in accordance with the terms of this
Section. The Buyer and the Sellers agree that the Earnout Payment that is
required pursuant to this Section shall be payable to the Sellers as provided
below. The Buyer, at its sole option, may remain as the sole member of the
Company during the Earnout Period or cause the Company to merge with the Buyer.
Notwithstanding any provision to the contrary, any reference to Buyer's
financial performance or the Buyer in Sections 1.4.4 and 1.4.5 shall include the
Company unless the context clearly provides otherwise.
1.4.4.1 EARNOUT PERIOD. The period for which the Earnout
Payment shall be calculated is the twelve-month period commencing on September
1, 1999 and ending August 31, 2000 (the "Earnout Period").
1.4.4.2 EARNOUT PAYMENT. The Earnout Payment shall be
calculated as (i) seven ("Earnout Multiple") multiplied by the amount, if any,
by which the EBIT (defined below) of the Buyer exceeds the Buyer's Target, plus
(ii) the Earnout Multiple multiplied by the amount, if any, by which the IFO
(defined in Section 1.4.2.2.3 below) of Metro's Dallas/Fort Worth Professional
Services Division ("DFPSD") during the Earnout Period exceeds the DFPSD's Target
(but in no case can the amount of the Earnout Payment be less than zero). The
"Buyer's Target" is $5,290,300 and the "DFPSD's IFO" is $544,580. For example,
if the Buyer's EBIT is $7,290,300 and the DFPSD's IFO is $500,000, then the
Earnout Payment will be seven times $2,000,000, which equals the Buyer's EBIT of
$7,290,300 minus $5,290,300, or $14,000,000. No Earnout Payment will be paid
with respect to DFPSD because its IFO is under the DFPSD Target.
1.4.4.2.1 ADJUSTMENT OF EARNOUT MULTIPLE. The amount of
the Earnout Multiple shall not be affected by the gross profit or the IFO of the
DFPSD.
(a) If (i) the Buyer's Gross Profit during the
Earnout Period is less than thirty-two percent (32%) ("Minimum Gross Profit
Percentage") of the Buyer's revenues (to the nearest one-thousandths of a
percent) during such period (Gross Profits to revenues, expressed as a
percentage, is "Gross Profit Percentage"), or (ii) the Buyer's EBIT is less than
eleven point seven percent (11.7%) ("Minimum EBIT Percentage") of the Buyer's
revenues (to the nearest one-thousandths of a percent) (EBIT to revenues,
expressed as a percentage, is "EBIT Percentage") during the Earnout Period, then
the Earnout Multiple shall be multiplied by the lesser of the ratio of the Gross
Profit Percentage to the Minimum Gross Profit Percentage or the ratio of the
EBIT Percentage to the Minimum EBIT Percentage. For example, if Buyer's Gross
Profit Percentage is thirty point forty-eight one-thousandths percent (30.048%)
during the Earnout Period and Buyer's EBIT Percentage is eleven point one
hundred eighty-two one-thousandths percent (11.182%) during the Earnout Period,
the Earnout Multiple shall be 6.573 (30.048/32 x 7). (The ratio of 30.048% to
32% is .939 which is less than the ratio of 11.182% to 11.7% which is .956.) As
a second example, if the Buyer's Gross Profit Percentage is thirty-two point
twenty-two one-thousandths percent (32.022%) during the Earnout Period and the
Buyer's EBIT Percentage is eleven point six hundred thirty-two one-thousandths
percent
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(11.632%), during the Earnout Period, the Earnout Multiple shall be 6.958
(11.632/11.7 x 7). (The ratio of 11.632% to 11.7% is .994 which is less than the
ratio of 32.022% to 32% which is 1.001.) If Clause 1.4.4.2.1(a) does not apply,
Clause 1.4.4.2.1(b) or (c) shall apply.
(b) If (i) the Buyer's Gross Profit Percentage is
greater than thirty-six percent (36%) ("Adjusted Gross Profit Percentage")
during the Earnout Period (the amount of the excess Gross Profit Percentage over
the Adjusted Gross Profit Percentage is the "Excess Gross Profit Percentage"),
and (ii) the Buyer's EBIT Percentage is greater than thirteen point one percent
(13.1%) ("Adjusted EBIT Percentage") during the Earnout Period, then the Earnout
Multiple shall be multiplied by the lesser of the ratio of the Gross Profit
Percentage to the Adjusted Gross Profit Percentage or the ratio of the EBIT
Percentage to the Adjusted EBIT Percentage. For example, if Buyer's Gross Profit
Percentage is thirty-seven point forty-eight one-thousandths percent (37.048%)
during the Earnout Period and Buyer's EBIT Percentage is fourteen point one
hundred eighty-two one-thousandths percent (14.182%) during the Earnout Period,
the Earnout Multiple shall be 7.203 (37.048/36 x 7). (The ratio of 37.048% to
36% is 1.029 which is less than the ratio of 14.182% to 13.1% which is 1.083.)
As a second example, if the Buyer's Gross Profit Percentage is thirty-six point
seven hundred twenty-two one-thousandths percent (36.722%) during the Earnout
Period and the Buyer's EBIT Percentage is thirteen point three hundred
thirty-two one-thousandths percent (13.332%), during the Earnout Period, then
the Earnout Multiple shall be 7.126 (13.332/13.1 x 7). (The ratio of 13.332% to
13.1% is 1.018 which is less than the ratio of 36.722% to 36% which is 1.020.)
As a final example, if Buyer's Gross Profit Percentage is thirty-seven point two
one-thousandths percent (37.002%) during the Earnout Period and Buyer's EBIT is
thirteen point ninety-nine one-thousandths percent (13.099%) during the Earnout
Period, then the Earnout Multiple would be 7.
(c) If neither Clause 1.4.4.2.1(a) nor Clause
1.4.4.2.1(b) applies, then the Earnout Multiple shall be 7.
1.4.4.2.2 COMPUTATION OF EBIT. "EBIT" means earnings
of the Buyer during the Earnout Period before interest, income taxes and
amortization of goodwill as determined in accordance with GAAP applied in a
manner consistent with SCHEDULE 1.4.4.2.1 and employing proper prorations at the
beginning and end of the Earnout Period similar to those required in preparing
the Closing Balance Sheet under Section 1.4.1.3. In computing the earnings of
the Buyer, there shall not be taken into account:
(a) any revenues for placement fees to the extent
such revenues exceed three-quarters of one percent (0.75%) of the Buyer's gross
revenues for the period in question and any commissions paid to obtain such
excess revenues;
(b) the dollar amount of any items of expense for
which the Buyer receives payment from any Seller as a result of his
indemnification obligations under Article 9, and the payment from any Seller
will likewise not constitute revenue;
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(c) any fees, costs and other expenses paid or
incurred by the Sellers subsequent to Closing, including bonuses paid to former
key employees of the Company;
(d) the depreciation and amortization expenses of
the Buyer relating to the step-up in basis from the basis of goodwill and other
Assets of the Buyer acquired from the Company pursuant to the purchase of
Interests and the Buyer becoming the sole member of the Company, as required by
purchase accounting and federal tax laws;
(e) the costs to install and implement the
necessary equipment and telecommunications connection to allow the Buyer to
benefit from the Metro Staff Sourcing Network ("Network") and other software,
hardware and communications equipment of Metro and the monthly operational costs
(including, without limitation, depreciation, maintenance and telephone costs)
of the Network and the required software and equipment in excess of the monthly
operational costs (adjusted for growth in revenues and upgrades in equipment and
software) currently incurred by the Company;
(f) the costs for the installation, implementation
and the overhead costs of the operation of Metro financial, payroll, human
resources, time billing and other proprietary systems services and personnel
costs related thereto in excess of the costs currently incurred by the Company
for similar systems services and personnel costs;
(g) any costs of the Buyer which are of the type
and amount not reasonably consistent with the costs provided in SCHEDULE
1.4.4.2.1, unless such expenses are approved by the Sellers or are reasonably
necessary (i) to increase revenues throughout the Earnout Period and thereafter,
(ii) to respond to competitive challenges in the marketplace, (iii) to fund
losses suffered from fire or other casualty not covered by insurance
(deductible, excess liability, uninsured loss, etc.), (iv) for attendance by
Buyer's employees at Metro Division Directors Meetings and Leadership
Development Workshops, (v) to comply with Buyer's obligations as tenant under
the new Real Property Lease dated August ___, 1999 for the Real Property at 1750
Tysons Boulevard, Tysons II, 14th Floor, attached as part of SCHEDULE 1.1.3-2
("McLean Lease"), (vi) to book any reserve for bad debts as a result of the
specific charge-off of any Account Receivable in excess of $30,000, (vii) to
relocate the Company's office in McLean, Virginia from 1650 Tysons Boulevard,
Suites 400 and 600 to 1750 Tysons Boulevard, Tysons II, 14th Floor, including,
without limitation, leasehold improvements, moving expenses, telephone and
computer removal and installation and similar expenses, except to the extent any
such expense is properly capitalized in accordance with GAAP, (viii) for
depreciation and amortization of expenses which are capitalized under Clause
1.4.4.2.2(g)(vii), or (ix) to comply with the Letter (as defined in Section
1.4.5) or laws (including, without limitation, the amortization over three years
of two-thirds of the costs necessary to obtain all necessary software licenses
for software used by the Company) or the Company's obligations under the
Contracts; provided, however, that any routine, normal or recurring operating
expenses of the Buyer that occur during the Earnout Period shall be included as
an expense of the Buyer, whether or not any amounts or funds were expended for
such purposes by the Company during the twelve-month period immediately
preceding the Closing Date. For
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example, if the Company did not incur any expenditures for computer maintenance
or repair during the twelve-month period immediately preceding the Closing Date,
but the Buyer does incur an expenditure for computer maintenance or repair
during the Earnout Period, the cost of such maintenance or repair shall be an
expense of the Buyer for the purposes of determining the EBIT of the Buyer;
(h) general corporate overhead, provided that
Metro may charge Buyer, at cost, for specific services or products, such as
insurance, provided to Buyer by Metro that are (i) not in excess of Buyer's
current costs for such products and services (adjusted for growth), or (ii) are
approved by Buyer, not to be unreasonably withheld; and
(i) any revenues from the sale of computer
hardware or software during the Earnout Period and any costs of goods sold
incurred in earning such excess revenues.
1.4.4.2.3 IFO OF DFPSD. On or before September 1, 1999,
the assets, liabilities and operations of ATS-Dallas shall be consolidated with
Metro's Dallas/Fort Worth assets, liabilities and operations and shall
constitute the DFPSD. The "IFO" means the income from operations of the DFPSD,
less the management incentive bonuses as determined by Metro using GAAP in
accordance with Metro's historical practices of computing income from
operations, except that the provisions of Section 1.4.4.2.2 shall apply with
respect to the income and expenses which are credited or chargeable to the IFO.
Provided, however, management incentive bonuses for the DFPSD for the third
quarter of 1999 shall equal one-third of the management incentive bonuses
accrued by Metro for said period and management incentive bonuses for the third
quarter of 2000 shall equal two-thirds of the management incentive bonuses for
the DFPSD accrued by Metro for said period.
1.4.4.3 TIME AND MANNER OF EARNOUT PAYMENT. The Earnout
Payment, or any undisputed portion thereof, shall be paid by the Buyer to the
Sellers within ten (10) days from the date on which the Buyer receives the
notice described in Section 1.4.4.5. All payments due and payable pursuant to
this Section shall be made by wire transfer of immediately available funds to an
account designated by the Sellers. With respect to any disputed portion of the
Earnout Payment, such amount, to the extent determined to be due under the
provisions of Section 1.4.4.5 below, shall be paid by the Buyer to the Sellers
within five (5) business days following the final determination of the amount
due.
1.4.4.4 DELIVERY OF EARNOUT REPORT. On or before November 15,
2000, the Buyer shall deliver to the Sellers a report (the "Earnout Report")
which computes the amount of the Earnout Payment, which shall be accompanied by
(a) a copy of the financial statement for the Earnout Period from which the
computations were derived; and (b) a signed statement of the Buyer stating that
the computations have been prepared in accordance with the definition of EBIT in
this Agreement (subject only to such exceptions thereto as agreed upon by the
Buyer and the Sellers). The Buyer will make the work papers and back-up
materials used in computing the Earnout payment available to the Sellers and
their accountants and other
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representatives at reasonable times and upon reasonable notice at any time
during: (x) the review by the Sellers of the Earnout Report; and (y) the
resolution by the parties of any objections thereto.
1.4.4.5 OBJECTION PROCEDURES. Within thirty (30) days after
the Buyer delivers the Earnout Report to the Sellers, the Sellers shall notify
the Buyer that either they accept such Report, or they dispute one or more items
set forth in the computation of the Earnout Payment or the financial statements
on which the computation of the Earnout Payment was based, describing in
reasonable detail the amount or item disputed and the basis for the dispute. If
the Sellers do not accept the Report, the Buyer and the Sellers shall attempt in
good faith to resolve the dispute. If the parties do not obtain a final
resolution within ten (10) business days after the Buyer has received the
statement of objections, the parties will select an accounting firm mutually
acceptable to them to resolve any remaining objections (the "Referee"). If the
parties are unable to agree on the choice of a Referee, they will select a "Big
5" accounting firm by lot (after excluding their respective regular outside
accounting firms) as the Referee. The determination of any Referee so selected
will be set forth in writing and will be conclusive and binding upon the
parties. The parties shall have an opportunity to present their position to the
Referee and shall cooperate with the Referee in making available to the Referee
any records or work papers requested by the Referee.
1.4.4.6 CONDUCT OF BUSINESS. From September 1, 1999 until
August 31, 2000, the Buyer and the Company will conduct their operations as
follows:
1.4.4.6.1 INDEPENDENT ORGANIZATION. The Buyer shall be
the sole member of the Company and report the Company's revenues, expenses and
results of operations on its books for tax and accounting purposes and for
purposes of this Agreement. At the Buyer's option, the Buyer may cause the
Company to be merged with the Buyer at any time after the Closing. The Buyer and
the Company shall be operated by the Buyer's management and the Buyer's and the
Company's books, records and financial statements shall be maintained on a
consolidated basis but otherwise on an unconsolidated basis with any other
Affiliate, for purposes of this Agreement, consistent with past practices.
Neither the Buyer nor the Company will change any of the accounting principles
utilized by the Company for purposes of computing EBIT, PROVIDED, that, such
accounting principles of the Company are in compliance with GAAP. Neither the
Buyer nor the Company shall acquire, commence or operate any business other than
the Business before or during the Earnout Period. For purposes of this
Agreement, the Buyer and the Company shall be operated as one entity after
Closing.
1.4.4.6.2 BOARD OF DIRECTORS. The Board of Directors
will be comprised of no less than five and no more than eight people, two of
whom shall be Berkman and Lewis Waters ("Waters"), or if Berkman or Waters is
unable to serve, Mark Scofield shall replace him (Berkman, Waters and the
replacement of either are hereinafter referred to as "Seller Directors") through
August 31, 2000. A quorum for any meeting of the Board of Directors shall
include the presence, in person or by proxy or conference telephone call at such
meeting of at least one Seller Director, provided, however, if the Seller
Directors shall fail or refuse to attend in person or by conference telephone
call or proxy a meeting after two adjournments thereof of at least three (3)
days each with at least two (2) days notice of the date and time of the
adjourned meeting to each
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Director (with reasonable efforts to reschedule the meeting at a time when at
least one Seller Director is available), the meeting may proceed and all proper
actions in accordance with the notice of the meeting may be taken by the Board.
In such event, the Seller Directors shall be deemed to have consented to the
action of the majority.
1.4.4.6.3 OFFICERS. Berkman shall serve as President of
the Buyer through August 31, 2000. If Berkman is unable to serve as President
until August 31, 2000, for any reason, then Waters shall complete his term.
1.4.5 MATTERS RESERVED FOR JOINT DECISION. The day-to-day management
of the Buyer shall be the responsibility of its President, who shall operate the
Buyer consistent with the normal duties of the President of a similar sized
corporation and discretion reasonably afforded to him by the Board; provided,
however, the President must exercise this discretion and act reasonably and in
good faith and in accordance with the historical business practices of the
Company. The President shall, as appropriate and customary, report to the Board
of Directors of the Company. The President shall act in accordance with that
certain letter dated August 18, 1999 from John Fain, attached as EXHIBIT C (the
"Letter"). The President shall consult as appropriate with the Chairman of the
Board in managing the business, and with other Metro Senior Executives to
facilitate a smooth transition of the Business. Any action taken by the
President that is not in the ordinary course of business shall first be approved
by the Board; provided, however, that during the Earnout Period, without the
unanimous consent of the Board, the Board may not liquidate or dissolve the
Buyer or transfer any assets of the Buyer outside the ordinary course of
business, or take any action outside the ordinary course of business as to which
a Seller Director notifies the Buyer in advance is likely to have a material
adverse impact on the Earnout Payment, or modify or change the Company's
compensation plans without the consent of a Seller Director; provided, however,
the Board shall determine the bonuses of Berkman, Scofield, Brahms and Rohrer
under paragraphs 3(b) of the Management Agreements (as defined in Section 8.1.6
below), subject to the limitations set forth in such paragraphs.
1.5 CLOSING. The consummation of the transactions provided for in this
Agreement (the "Closing") shall take place at (a) the offices of Greenberg
Traurig, McLean, Virginia, on August 19, 1999 or (b) such other place, time or
date as the parties may agree on in writing. The date on which the Closing is to
occur is referred to herein as the "Closing Date."
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, jointly and severally, represent and warrant to the Buyer as
follows:
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2.1 INTERESTS; STATUS OF THE COMPANY. ATS is a limited liability company
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and ATS-Dallas is a limited liability company duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and each is duly qualified to transact business in
every state in which the failure to be qualified would have a material adverse
effect on the Business. The Company has the requisite power to carry on its
business as it is now being conducted and to own and operate the Business, and
each of the Sellers and the Company has the requisite power (corporate,
financing and other) to enter into and complete the transactions contemplated by
this Agreement. The Company has no business other than the operation of the
Business. The Sellers own and will convey to the Buyer at Closing, free and
clear of all pledges, liens, hypothecations, restrictions and encumbrances, all
of the issued and outstanding Membership interests of ATS as provided in
SCHEDULE 1.1 and ATS owns or by Closing, will own, free and clear of all
pledges, liens, hypothecations, restrictions and encumbrances, all of the issued
and outstanding Membership interests of ATS-Dallas. No person has any option or
right to acquire from the Sellers or the Company any Membership interests or
other equity of ATS or ATS-Dallas. The Interests and the membership interests in
ATS-Dallas and ATS are validly issued and fully paid and nonassessable. Berkman
serves as the Managing Member of ATS. Berkman, Jones, Scofield, Brahms, and
Rohrer are the only members of ATS and ATS is the only member of ATS-Dallas.
Attached as SCHEDULE 2.1 are the Articles of Organization and Operating
Agreements and all amendments thereto of ATS and ATS-Dallas.
2.2 NO OPTIONS. No Affiliate of any member of the Company or any Seller
or any other person (as defined in Section 11.8) has an interest in, or
option to acquire, any of the Assets or any property used in the operation of
the Business. For purposes of this Agreement, an "Affiliate" of any person
means (a) any person that owns or controls, is owned or controlled by, or
under common control with, such person, (b) any person that is an officer,
director, general partner, manager, member, or trustee of, or serves in a
similar capacity with the specified person, or for which the specified person
is an officer, director, general partner, manager, member, or trustee, or
serves in a similar capacity or (c) any member of the immediate family of the
specified person.
2.3 CORPORATE ACTION. All corporate, trust and other actions and
proceedings necessary to be taken by or on the part of any Seller or the Company
in connection with the performance, execution and delivery of this Agreement
have been duly and validly taken and this Agreement has been duly and validly
authorized, executed, and delivered by the Company and the Sellers and
constitutes the legal, valid and binding obligation of the Company and the
Sellers enforceable against each in accordance with and subject to its terms.
2.4 NO DEFAULTS. Neither the execution, delivery and performance by the
Company and the Sellers of this Agreement nor the consummation by the Company
and the Sellers of the transactions contemplated hereby is an event that, of
itself or with the giving of notice or the passage of time or both, will: (a)
violate or conflict with any provision of the Articles of Organization or
Operating Agreement of ATS or ATS-Dallas; (b) assuming that the consents: (i)
referred to in Section 4.6, (ii) required in connection with any of the
Contracts or (iii) otherwise contemplated by this Agreement are obtained,
constitute a violation of, conflict with or result in any
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breach of or any default under, result in any termination or modification of, or
cause any acceleration of any obligation of any Seller or the Company under any
contract, mortgage, indenture, agreement, lease or other instrument to which
either the Company or the Sellers or any or all of them are party or by which
any or all are bound or result in the creation of any Security Interest on the
Assets or the Interests which violation, conflict, breach or default would have
a material adverse effect on the Company, any Seller, the Business, the Assets,
the Interests or the ability of the Company or the Sellers or any or all of them
to enter into this Agreement or consummate the transactions contemplated hereby;
(c) violate any judgment, decree, order, statute, law, rule or regulation of any
court, arbitrator or government or regulatory body applicable to the Company,
the Sellers, the Business or the Assets which violation would have a material
adverse effect on the Company, the Sellers, the Business, the Assets, the
Interests or the ability of the Company or the Sellers to enter into this
Agreement or consummate the transactions contemplated hereby; or (d) result in
the creation or imposition of any lien, charge or encumbrance against the
Business, the Assets or the Interests.
2.5 CONTRACTS, LEASES, AGREEMENTS AND OTHER COMMITMENTS. The Company is
not a party to nor is it bound by any written or oral contract, agreement,
lease, power of attorney, guaranty, surety arrangement or other commitment,
including, but not limited to, any contract or agreement for the purchase or
sale of merchandise or for programming or software of the Company or for the
rendition of services, except for the Contracts listed and described on the
Contract Schedules and the Non-Material Contracts (subject to the $25,000
limitation provided in Section 1.1.3) and the Sellers have listed and described
all Material Contracts on the Contract Schedules and provided to the Buyer or
its representatives complete and correct copies of all written Contracts and all
amendments, modifications, extensions and renewals thereof and written summaries
of all oral Contracts. No change in any term or provision of any Contract will
occur as a result of the acquisition of the Interests by the Buyer or the
consummation of the transactions contemplated herein.
2.6 BREACH. Except as set forth on SCHEDULE 2.6, the Company is not in
violation or breach of any of the terms, conditions or provisions of either
Company's Articles of Organization or Operating Agreement, or any court order,
judgment, arbitration award or decree to which the Company is a party or by
which it is bound and is not in material violation or breach of any of the
terms, conditions or provisions of any Real Estate Leases or Contracts or any
indenture, mortgage or deed of trust or other instrument, court order, judgment,
arbitration award or decree relating to or affecting the Business or the Assets
to which the Company is a party or by which it is bound. All accrued and
currently payable amounts due from the Company under the Contracts have been
paid. To the best of the Company's and the Sellers' knowledge, no other party
thereto is in material default or breach under any of the Contracts.
2.7 FINANCIAL INFORMATION.
2.7.1 FINANCIAL STATEMENTS. Attached to this Agreement as SCHEDULE
2.7.1 are true and correct copies (collectively, the "Financial Statements") of
the audited balance sheets of ATS at December 31, 1998 (the "Balance Sheet
Date") and December 31, 1997 and the audited
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statements of operations for each of the years then ended (the "Income
Statements"), together with the unaudited balance sheet (the "Interim Balance
Sheet") of each Company at July 31, 1999 (the "Interim Balance Sheet Date") and
the unaudited statement of operations of each Company for the period then ended
(the "Interim Income Statement," collectively, the Interim Balance Sheet and
Income Statement are the "Interim Financial Statements"). The Financial
Statements: (a) have been prepared in accordance with GAAP (except for the
absence of footnotes in the Interim Financial Statements and as set forth on
SCHEDULE 2.7.1) and (b) present fairly the financial position of each Company as
of their respective dates and the results of operations for the periods
indicated in accordance with GAAP. There is no information and there are no
disclosures as of December 31, 1998, July 31, 1999 or the Closing Date which
normally would be included in footnotes to audited financial statements that are
not disclosed in the Schedules to this Agreement.
2.7.2 ACCOUNTS RECEIVABLES. Attached to this Agreement as SCHEDULE
2.7.2 are true and correct copies of the Company's accounts receivable aging
reports, dated as of July 31, 1999 for each Company, showing, among other
things, a complete aging of the Accounts Receivables and any reserve for
non-collectible Accounts Receivables as of the date indicated. Except to the
extent of the reserve for non-collectible Accounts Receivables shown on the
Interim Balance Sheet, all Accounts Receivables are collectible in cash in the
ordinary course of business and in all events, the Accounts Receivables, net of
the reserve for non-collectible Accounts Receivables on the Closing Date Balance
Sheet will be collected within six (6) months of the Closing Date. The Company
has no knowledge that any Accounts Receivable listed on SCHEDULE 2.7.2 will not
be paid before or after the Closing. The identity of any client entitled to a
volume or other similar discount and the terms of such discount are set forth on
SCHEDULE 2.7.2.
2.8 LIABILITIES. There are no liabilities or obligations of the Company
accruing or arising before the date of this Agreement, whether arising under
Contracts, related to tax or non-tax matters, known or unknown as of the date of
this Agreement due or not yet due, liquidated or unliquidated, fixed, contingent
or otherwise, including penalty, acceleration or forfeiture clauses in any
Contract, that should be reflected in the Interim Balance Sheet in accordance
with GAAP that are not so reflected, except as otherwise listed and described on
SCHEDULE 2.8 hereto, and except liabilities that arise in the ordinary course of
business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract or warranty, tort,
infringement or violation of law) between the date of the Interim Balance Sheet
and the Closing Date, which liabilities will be reflected in the Closing Balance
Sheet.
2.9 TAXES.
2.9.1 All federal, state and local returns, reports, estimates and
other statements ("Returns") required to have been filed with any jurisdiction
with respect to the Company and the operation of its business with respect to
any income, franchise, property, sales, value-added, payroll, withholding,
excise, assessment, levy, capital and all other taxes, duties, penalties,
assessments or deficiencies of every nature and description (collectively,
"Taxes") have been duly and timely filed by the Company. Except as set forth in
SCHEDULE 2.9 attached, each such Return correctly reflects the amount of Taxes
required to be reported and/or paid. The
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Company has paid all Taxes due and payable which it is required to pay, incur or
accrue before the date hereof, except to the extent that such amounts will be
reserved for in the Closing Balance Sheet. There are no Taxes which are past
due. No consent extending the applicable statute of limitations has been filed
by or with respect to the Company with respect to any of such Taxes for any
years. All material elections, consents and agreements made by the Company or to
which the Company is a party with respect to any Taxes are described in SCHEDULE
2.9.
2.9.2 The Company has withheld amounts from its employees working in
its business in accordance with applicable law. With respect to such employees,
the Company has filed all Returns required to be filed and paid all required
Taxes with respect to employee income tax withholding, social security, Medicare
and unemployment taxes and other similar taxes and charges, in compliance with
the tax withholding provisions of the Code and other applicable federal, state
and local laws.
2.10 LICENSES. As of the date of this Agreement, the Company is the holder
of the licenses, permits or authorizations of any governmental or
quasi-governmental authority required for the operation of the Business and all
of such licenses, permits and authorizations are listed on SCHEDULE 2.10.
2.11 BUSINESS OPERATIONS. Except as set forth on SCHEDULE 2.11, the only
business the Company has conducted since its formation is the Business. The
Company has never engaged in the business of selling goods from inventory, of
leasing tangible personal property or of developing, selling, licensing or
sublicensing software, software licenses or any other Intangible Property.
SCHEDULE 2.11 lists all business addresses, trade names and names of predecessor
entities used by the Company since January 1, 1992. Except as set forth on
SCHEDULE 2.11, the Company has not been a party to a merger, consolidation,
liquidation, recapitalization or other business combination since January 1,
1992.
2.12 APPROVALS AND CONSENTS. The only material approvals or consents of
persons or entities not a party to this Agreement that are legally or
contractually required to be obtained by the Company in connection with the
consummation of the transactions contemplated by this Agreement are those which
are listed on SCHEDULE 4.6 ("Consents"). Any approvals under the Contracts, Real
Estate Leases or with any governmental division, regulatory authority or agency
are material for purposes of this Section. Because of the size of the Company
and its ultimate parent as defined by the Hart-Scott-Rodino Antitrust
Improvements Act of 1978 ("HSR"), no pre-Closing filing by the parties under HSR
is required. No permit, license, consent, approval or authorization of, or
filing with, any governmental regulatory authority or agency is required of any
Seller or the Company in connection with the execution, delivery and performance
of this Agreement or the consummation of the transactions contemplated hereby.
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2.13 CONDITION OF ASSETS.
2.13.1 ALL ASSETS. The Assets constitute all of the assets used or
necessary to conduct the present operations of the Business.
2.13.2 TANGIBLE PERSONAL PROPERTY. SCHEDULE 1.1.1 contains a true
and complete list as of the date hereof of all items of Tangible Personal
Property of every kind or description owned by the Company, except office
materials and supplies (which office supplies or any replacements thereof shall
be part of the Assets). Any Tangible Personal Property that is leased by the
Company, whether as lessor or lessee, is separately designated on SCHEDULE 1.1.1
and all related lease agreements are described on SCHEDULE 1.1.3-3.
2.13.3 GOOD TITLE. Except as listed and described on SCHEDULE
2.13.3: (a) the Company has and, at the Closing will have, good, valid and
marketable title to or the unrestricted right to use all of the Assets owned,
leased or licensed by it, in each case, free and clear of all Security Interests
of every kind or character (other than Permitted Encumbrances); (b) the Company
is the owner, lessee or licensee of all of the Tangible Personal Property listed
on the Schedules to this Agreement and of all Tangible Personal Property not
listed on the Schedules to this Agreement which is of a material nature to the
Business; and (c) all Tangible Personal Property, including equipment and
electrical devices, is in good operating condition and repair, reasonable wear
and tear excepted, and has been maintained in accordance with industry
standards.
2.14 LEASED REAL PROPERTY.
2.14.1 LEASES. Attached to SCHEDULE 1.1.3-2 are true and complete
copies of all real property lease agreements, including all amendments and
modifications thereto, and all other leases or licenses or other rights to
possession of any real property used or held by the Company (the "Real Property
Leases").
2.14.2 INTERESTS. The Company's interest in the Leased Real Property
is as follows: the Company leases, as a tenant, the premises at 1650 Tysons
Building, Suites 400 and 600, McLean, Virginia and 13355 Noel Road, Suite 1345
Dallas, Texas. Except as listed on SCHEDULE 1.1.3-2, the Leased Real Property
and all of the fixtures and improvements thereon owned by the Company
(collectively, the "Owned Improvements") are in good operating condition and
repair, reasonable wear and tear excepted, and have been maintained in
accordance with industry standards. The Company has not received any notice in
writing alleging that the Leased Real Property or the Owned Improvements fail to
comply with applicable zoning laws or the building, health, fire and
environmental protection codes of applicable governmental jurisdictions.
2.14.3 ALL LEASES. The Real Property Leases constitute all the real
property leases to which the Company is lessee and the Leased Real Property is
the only real property now used by the Company in the conduct of the Business as
it is presently being conducted.
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2.14.4 GOOD TITLE. With respect to the Real Property Leases, on the
Closing Date, the Company will have good title to its leasehold interest in such
real property and the Owned Improvements, in each case, free and clear of all
liens, claims and encumbrances, except for the liens, claims and encumbrances
identified in such leases or as specifically stated on SCHEDULE 1.1.3-2. With
respect to each such lease, except as otherwise disclosed on SCHEDULE 1.1.3-2,
(a) the leases are in full force and effect, (b) all accrued and currently
payable rents and other payments required by such leases to be paid by the
Company have been paid, (c) the Company entered into such leases in the ordinary
course of business and the Company has been in peaceable possession since the
beginning of the original term of any such lease, (d) the Company or, to the
best of the Company's and the Sellers' knowledge, any other party thereto is not
in material default under any such lease, (e) the Company has neither given nor
received any notice of default or termination, and, to the best of the Company's
and the Sellers' knowledge, no condition exists and no event has occurred that,
with the giving of notice, the lapse of time or the happening of any further
event would become a default or permit early termination under any such lease
and (f) subject to obtaining the Consents described on SCHEDULE 4.6, the
validity or enforceability of any such lease will in no way be affected by the
transactions contemplated herein. Except as set forth on SCHEDULE 4.6, no
third-party consent or approval is required for the transactions contemplated
herein.
2.15 ENVIRONMENTAL MATTERS. Except as provided in SCHEDULE 2.15, with
respect to the ownership and operation of the Business, to the best of the
Company's and the Sellers' knowledge: (a) the Company is in compliance in all
material respects with all federal, state and local laws and regulations
relating to pollution and the discharge of materials into the environment
("Environmental Laws"); (b) the Company holds no permits or licenses for the
current use, occupancy or operation of the Business under applicable
Environmental Laws; and (c) to the best of the Company's and the Sellers'
knowledge, there are no underground or aboveground storage tanks on any of the
Real Property. Hazardous or toxic substances have not, during the Company's
ownership of the Business, been released, discharged or disposed of on any of
the Leased Real Property in Regulated Quantities (as defined below) by the
Company, with the Company's permission, or to the Company's and the Sellers'
knowledge. No litigation or proceeding relating to Environmental Laws or any
release, discharge or disposal of hazardous or toxic substances is pending or,
to the Company's and the Sellers' knowledge, threatened, against the Business or
the Company in connection with the Business. For purposes hereof, "Regulated
Quantity" shall mean that quantity which is sufficient to serve as a basis for a
requirement for cleanup, removal or remedial action or the imposition of
penalties or fines under Environmental Laws.
2.15.1 ENVIRONMENTAL STUDIES. The Company and the Sellers have no
environmental reports, studies or analyses relating to the Leased Real Property
or the operation of the Business concerning hazardous or toxic substances or
compliance with applicable Environmental Laws or Environmental Permits, if any.
2.16 COMPLIANCE WITH LAW AND REGULATIONS. The Business, the Assets and the
Company are, in all material respects, in compliance with all requirements of
federal and state law and all material requirements of local law and all
requirements of all federal and state governmental bodies or agencies and the
material requirements of all local governmental bodies or agencies
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having jurisdiction over any of them, the operations of the Business, the use of
the Company's properties and assets (including the Assets) and the Leased Real
Property. Without limiting the foregoing, the Company has paid all monies and
obtained all material licenses, permits, certificates and authorizations needed
or required for its operations and the use of the Leased Real Property. The
Company has properly filed all reports and other documents required to be filed
with any federal, state or local government or subdivision or agency thereof.
The Company has not received any notice from any federal, state or municipal
authority or any insurance or inspection body that any of its properties,
facilities, equipment or business procedures or practices fails to comply with
any applicable law, ordinance, regulation, building or zoning law or requirement
of any public authority or body.
2.17 INSURANCE. A summary of current insurance coverage of the Company is
attached hereto as SCHEDULE 2.17. The Company maintains and will continue to
maintain in full force and effect through the Closing Date insurance policies
covering it and the Assets in amounts and insuring against hazards in the
amounts set forth on SCHEDULE 2.17. All of such policies are in full force and
effect and the Company is not in default of any material provision thereof. The
Company has not received notice from any issuer of any such policies of its
intention to cancel, terminate or refuse to renew any policy issued by it.
2.18 LABOR, EMPLOYMENT CONTRACTS AND BENEFIT PROGRAMS.
2.18.1 WORK AGREEMENTS. There are no collective bargaining
agreements or written or oral agreements relating to the terms and conditions of
employment or termination of employment covering any employees, consultants or
agents of the Company, except as listed and described on SCHEDULE 2.18.1 (the
"Work Agreements"). The description of each Work Agreement listed on SCHEDULE
2.18.1 contains the material terms and conditions of such employment,
consultancy, or agency on August 1, 1999 ("Measurement Date"), including where
applicable and without limitation, bill rate, the date of the Work Agreement,
any start date or projected end date for the work to be performed, and the
client(s) serviced or to be serviced, all as evidenced under the terms of the
Work Agreement and/or any work order attachment or other similar attachment
thereto. The Work Agreements, as listed on SCHEDULE 2.18.1, were in effect on
the Measurement Date, are binding on the parties thereto, and to the knowledge
of the Sellers and the Company, will be enforceable by the Company after
Closing. Except as listed and described on SCHEDULE 2.18.1, all employees of the
Company are employees-at-will and are full-time employees. The Company is not
engaged in any unfair labor practice or other unlawful employment practice and
there are no unfair labor practice charges or other employee-related complaints,
grievances or arbitrations against the Company pending or, to the best of the
Company's or the Sellers' knowledge, threatened before the National Labor
Relations Board, the Equal Employment Opportunity Commission, the Occupational
Safety and Health Administration, the Department of Labor, any arbitration
tribunal or any other federal, state, local or other governmental authority.
There is no strike, picketing, slowdown or work stoppage by or concerning such
employees pending against or involving the Company. No representation question
is pending or, to the best of the Company's or the Sellers' knowledge,
threatened respecting any of the Business's employees.
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2.18.2 EMPLOYEE MANUALS. All handbooks and material written policies
and procedures relating to employment by the Company, including, but not limited
to, compensation, benefits, equal employment opportunity and safety are listed
and described on SCHEDULE 2.18.2 attached and the Company has delivered true and
complete copies thereof to the Buyer.
2.18.3 COMPLIANCE. The Company has complied with in the past, and is
now in compliance with, all labor and employment laws including, without
limitation, federal, state, local and other applicable laws, rules, regulations,
ordinances, orders and decrees concerning collective bargaining, unfair labor
practices, payments of employment taxes, occupational safety and health,
worker's compensation, the payment of wages and overtime, equal employment
opportunity and discrimination (collectively, "Employment Laws"). The Company is
not liable for any arrears for wages, benefits, taxes, damages or penalties for
failing to comply with any law, rule, regulation, ordinance, order or decree
relating in any way to labor or employment. Neither the Company nor any Seller
has received any notice from any federal, state or municipal authority that the
Company or any independent contractor of the Company or any practice or
procedure of the Company fails to comply with any of the Employment Laws.
2.18.4 EMPLOYEE PLANS. Except as listed and described on SCHEDULE
2.18.4, the Company has no pension plan, profit sharing plan, deferred
compensation plan, stock option or stock bonus plan, savings plan, welfare plan
or other benefit plan or arrangement, policy, practice, procedure or contract
concerning employee benefits or fringe benefits of any kind, whether or not
governed by the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), relating to or covering any employees of the Company (a "Benefit
Plan"). Except as listed on SCHEDULE 2.18.4, the Company does not maintain,
sponsor or contribute to any "employee benefit plan" (within the meaning of
Section 3(3) of ERISA) or any other plan, program, practice, agreement or
arrangement covering the Business, whether written or oral, of employee
compensation, deferred compensation, severance pay, retiree benefit or fringe
benefit. The Company has furnished the Buyer with true, complete and accurate
copies of all summary plan descriptions of the Company's current Benefit Plans.
2.18.5 ERISA COMPLIANCE. Each of the Benefit Plans is in compliance
in all material respects with all applicable requirements of ERISA, the Code and
other applicable law. Each of the Benefit Plans has been administered in all
material respects in accordance with its terms and with applicable legal
requirements. All "employee pension plans" (within the meaning of Section 3(2)
of ERISA) have been determined by the Internal Revenue Service (the "IRS") to be
qualified under Section 401(a) of the Code and no action or proceeding has been
instituted or, to the best of the Company's or the Sellers' knowledge,
threatened which would affect the qualification of any pension plan of the
Business or of the Company. The Company has never had a Benefit Plan which is a
"defined benefit plan" (within the meaning of Section 3(35) of ERISA). There has
not been any reportable event with respect to any pension plan of the Business
or of the Company. The Company has not engaged in a "prohibited transaction" or
breach of fiduciary responsibility with respect to any Benefit Plan.
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2.18.6 NO MULTIEMPLOYER PLANS. The Company (a) has never contributed
to a multi-employer pension plan; and (b) has never incurred any liability under
Title IV of ERISA to the PBGC or to a multi-employer pension plan.
2.18.7 EMPLOYEES. SCHEDULE 2.18.1 lists the names and job titles of
all employees of the Company as of the Measurement Date, the current salary,
compensation, pay rate or hourly rate for each, per diem and other allowances
and vacation, sick days for each (or paid days off in lieu thereof) assuming no
vacation has been taken and the actual days off taken by each employee through
the Measurement Date and all anticipated increases in any of the foregoing. Each
employee's length of service, employment commencement date and all relevant
terms of their employment, including, without limitation, whether the employee
is full or part time, salaried or hourly and the benefits received by such
employee is set forth on SCHEDULE 2.18.1.
2.18.8 INDEPENDENT CONTRACTORS. Except as described in SCHEDULE
2.18.8, since the Measurement Date, the Company has not engaged or hired any
individual or entity to perform information technology services or custom
software development services as an independent contractor. All individuals
engaged to perform such services since the Measurement Date have been employees
of the Company. All written or oral agreements relating to the terms and
conditions of the engagement of any independent contractor, whether an
individual or entity, to perform information technology services or custom
software development services are listed and described on SCHEDULE 2.18.1.
2.19 LITIGATION. Except as set forth on SCHEDULE 2.19, there are no suits,
arbitrations, administrative charges or other legal proceedings, claims or
governmental investigations pending against the Company or the Sellers. To the
best of the Company's and the Sellers' knowledge, except as set forth on
SCHEDULE 2.19, there are no suits, arbitrations, administrative charges or other
legal proceedings, claims or governmental investigations threatened against the
Company or the Sellers with respect to the Business or Assets or the Sellers
with respect to the Interests nor, to the best of the Company's and the Sellers'
knowledge, is there any basis for any such suit, arbitration, administrative
charge or other legal proceedings, claim or governmental investigation which
would have a material adverse effect on the Interests or the condition of the
Business or any of the Assets or on the ability of the Company and the Sellers
to enter into this Agreement or consummate the transactions contemplated hereby.
The Company and the Sellers have not been operating under or subject to, or in
default with respect to, any order, writ, injunction or decree relating to the
Interests, the Business or the Assets of any court or federal, state, municipal
or other governmental department, commission, board, agency or instrumentality
which would have an adverse effect on the condition of the Business or any of
the Assets or on the ability of the Company or the Sellers to enter into this
Agreement or consummate the transactions contemplated hereby.
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2.20 INTANGIBLE PROPERTY. Except as set forth on SCHEDULE 2.20, the
Company has all right, title and interest in and to valid, fully paid licenses
of all Intangible Property used in the conduct of the Business as presently
operated. The Company has not received notice of any claim against it involving
any conflict or claim of conflict of any of the items listed on SCHEDULE 2.20,
and, to the best of the Company's and the Sellers' knowledge, there is no basis
for any such claim of conflict. No service provided by the Company or any
program, software or other material used or disseminated by it or the Business
infringes on any copyright, patent or trademark of any other party. The Company
has not received any notice of any claim of infringement of any third-party's
copyright, patent, trademark, service mark, logotype, license or other
proprietary right. The Company owns or possesses adequate licenses or other
rights to use all programs, software copyrights, patents, trademarks, service
marks, trade names, logotypes and other intangible rights used to operate the
Business.
2.21 BROKERS. Except for Updata Capital, Inc., there is no broker or
finder or other person who would have any valid claim through any Seller or the
Company against any of the parties to this Agreement for a commission or
brokerage fee or payment in connection with this Agreement or the transactions
contemplated hereby as a result of any agreement of, or action taken by, the
Company or the Sellers. The Sellers will pay all fees due Updata Capital, Inc.
as a result of the transactions contemplated by this Agreement.
2.22 CONFLICTING INTERESTS. Except as disclosed on SCHEDULE 2.22, none of
the Company, the Sellers nor any Affiliate of any of the foregoing, has any
financial interest in any supplier, lessor, advertiser or customer of the
Company or in any other business enterprise with which the Business or the
Company engages in business or with which the Business or the Company is in
competition. The ownership of less than one percent (1%) of the outstanding
capital stock of a publicly-held corporation shall not be deemed to be a
violation of this representation and warranty.
2.23 MATTERS ARISING AFTER THE INTERIM BALANCE SHEET DATE. Except as set
forth in SCHEDULE 2.23 attached, between the Interim Balance Sheet Date and the
date of this Agreement:
2.23.1 There has not been any material adverse change in the
financial condition or business of the Company, uncured default by the Company
under the terms of the leases for the Leased Real Property or any Contract or
any material physical damage or loss to any of the Assets, whether leased or
owned by the Company (except where such damage or loss was covered by insurance
and repair or replacement of the damaged or lost assets has been completed);
2.23.2 The Company has not taken any action outside of the ordinary
and usual course of business, except as related to the transactions contemplated
hereby;
2.23.3 The Company has maintained its books, accounts and records in
the usual, customary and ordinary manner and has not changed any of its
accounting practices; and
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2.23.4 The Company has preserved its business organization intact
and has used its best efforts to keep available the services of its employees
and to preserve relationships with its clients, customers, suppliers and others
with whom it deals.
2.24 YEAR 2000 COMPLIANCE. Except as provided in attached SCHEDULE 2.24,
to the best of the Company's and the Sellers' knowledge, the Company's
Information Technology (defined below) is designed to be used prior to, during,
and after the calendar year 2000, and such Information Technology used during
such time period will accurately receive, provide and process date/time data
(including calculating, comparing and sequencing) from, into and between the
20th and 21st centuries, including the years 1999 and 2000, and leap year
calculations and will not malfunction, cease to function, or provide invalid or
incorrect results as a result of date/time data, to the extent that other
Information Technology, used in combination with the Company's Information
Technology, properly exchanges date/time data with it. "Information Technology"
means computer software, computer firmware, computer hardware (whether general
or specific purpose) and other similar or related items of automated,
computerized and/or software systems.
2.25 IMMIGRATION MATTERS.
(i) With respect to all employees (as defined in Section 274a.1(g) of
Title 8, Code of Federal Regulations) of Company, Company has materially
complied with the Immigration Reform and Control Act of 1986, as amended, and
all regulations promulgated thereunder ("IRCA") with respect to the completion,
maintenance and other documentary requirements of Forms I-9 (Employment
Eligibility Verification Forms) for all current and former employees and the
reverification of the employment status of any and all employees whose
employment authorization documents indicated a limited period of employment
authorization.
(ii) SCHEDULE 2.25 attached contains a true and complete list of all
employees of Company who are not citizens of the United States of America and
who are not permanent residents of the United States of America, together with a
true and complete list of the visa status and visa expiration dates of such
employee.
(iii) Company has employed only individuals authorized to work in the
United States, Company has not received any written notice of any inspection or
investigation relating to its alleged noncompliance with or violation of IRCA,
nor has it been warned, fined, or otherwise penalized by reason of any failure
to comply with IRCA.
(iv) The consummation of the transactions contemplated by this Agreement
will not, (i) give rise to any liability for the failure to properly complete
and update Forms I-9, or (ii) give rise to any liability for the employment of
individuals not authorized to work in the United States.
2.26 DISCLOSURE. No material provision of this Agreement relating to the
Company, the Business or the Assets or any other document, Schedule, Exhibit or
other information furnished by the Company or the Sellers to the Buyer in
connection with the execution, delivery and
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performance of this Agreement, or the consummation of the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact required to be stated to
make the statement, in light of the circumstances in which it is made, not
materially misleading. All Schedules attached hereto are accurate and complete
as of the date hereof or the date specified on the Schedule.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND METRO
The Buyer and Metro, jointly and severally, represent and warrant to the
Sellers and the Company as follows:
3.1 STATUS. The Buyer and Metro are corporations duly organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia and
by Closing, the Buyer will be qualified to conduct business in the State of
Texas. Each of Metro and the Buyer has the requisite power to enter into and
complete the transactions contemplated by this Agreement.
3.2 NO DEFAULTS. Neither the execution, delivery and performance by the
Buyer or Metro of this Agreement nor the consummation by the Buyer or Metro of
the transactions contemplated hereby is an event that, of itself or with the
giving of notice or the passage of time or both, will: (a) violate or conflict
with any provision of the Articles of Incorporation or Bylaws of the Buyer or
Metro, (b) constitute a violation of, conflict with or result in any breach of
or any default under, result in any termination or modification of, or cause any
acceleration of any obligation under any contract, mortgage, indenture,
agreement, lease or other instrument to which the Buyer is a party or by which
it is bound or its assets are bound, or by which it may be affected, (d) violate
any judgment, decree, order, statute, law, rule or regulation of any court,
arbitrator or government or regulatory body applicable to the Buyer or the
assets of the Buyer or (e) result in the creation or imposition of any lien,
charge or encumbrance against the Business or the Assets, except for liens,
charges or encumbrances relating to the financing of the transactions
contemplated by this Agreement.
3.3 CORPORATE ACTION. All actions and proceedings necessary to be taken by
or on the part of the Buyer and Metro or their directors in connection with the
performance, execution and delivery of this Agreement have been duly and validly
taken, and this Agreement has been duly and validly authorized, executed and
delivered by the Buyer and Metro and constitutes the legal, valid and binding
obligation of the Buyer and Metro, enforceable against the Buyer and Metro in
accordance with and subject to its terms.
3.4 BROKERS. There is no broker or finder or other person who would have
any valid claim through the Buyer against any of the parties to this Agreement
for a commission or
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brokerage fee or payment in connection with this Agreement or the transactions
contemplated hereby as a result of any agreement of or action taken by the
Buyer.
3.5 LITIGATION. There are no suits, arbitrations, administrative charges
or other legal proceedings, claims or governmental investigations of any nature
pending or, to the knowledge of the Buyer, threatened against or affecting it
that would affect its ability to enter into this Agreement or carry out the
transactions contemplated by this Agreement, nor to the best knowledge of the
Buyer, is there any basis for any such suit, arbitration, administrative charge,
or other legal proceeding, claim or governmental investigation.
3.6 CONSENTS. There are no approvals or consents of persons or entities
not a party to this Agreement that are legally or contractually required to be
obtained by the Buyer in connection with the consummation of the transactions
contemplated by this Agreement.
3.7 COMPLIANCE WITH LAWS. The Buyer is not in violation of any federal,
state or local law, ordinance, requirement, regulation or any judgment, order,
injunction or decree, which violation would, in the aggregate with other such
violations, have a material adverse effect on the ability of the Buyer to enter
into this Agreement or to consummate the transactions contemplated hereby.
3.8 FULL DISCLOSURE. No material provision of this Agreement relating to
the Buyer or any other document, Schedule, Exhibit or other information
furnished by the Buyer to the Company in connection with the execution, delivery
and performance of this Agreement, or the consummation of the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact required to be stated to
make the statement, in light of the circumstances in which it is made, not
materially misleading.
3.9 FINANCIAL CAPABILITY. The Buyer has adequate financial resources
available to it to fulfill its financial obligations under this Agreement.
ARTICLE 4
COVENANTS OF THE COMPANY AND THE SELLERS PENDING THE CLOSING
The Company and the Sellers covenant and agree that, from the date hereof
until the completion of the Closing:
4.1 OPERATIONS OF THE BUSINESS.
4.1.1 BEST EFFORTS. The Company will use its best efforts to carry
on the Business and keep its books and accounts, records and files in the usual
and ordinary manner in which the Business has been conducted in the past,
including, but not limited to, spending amounts on advertising, promotions and
marketing of the Business between the date of this Agreement and the Closing
Date comparable to the amounts the Company spent for the comparable period in
1998.
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The Company shall operate the Business in compliance in all material respects
with all applicable laws, rules and regulations.
4.1.2 CURRENT STATEMENTS. The Company shall cause its Interim
Financial Statements to be reviewed by its current firm of certified public
accountants and provide the Buyer with (a) a copy of such reviewed report, even
if it is not finished before the Closing, and (b) copies of its monthly internal
balance sheets and related statements of operations for the monthly accounting
periods between the Interim Balance Sheet Date and the Closing Date by the 15th
day of each month for the preceding calendar month, which shall present fairly
the financial position of the Company and the results of operations for the
period indicated in accordance with GAAP, except for the absence of footnotes.
Such monthly statements shall show: (x) the current month's and prior year's
actual results for such month and the current month's budget, each by line item,
(y) items of non-recurring income and expense separately, and (z) 1999
year-to-date information for each of the foregoing, all of which shall be
presented fairly and in accordance with GAAP, except for the absence of
footnotes. In addition, the Company shall provide to the Buyer simultaneously
with the delivery of these monthly financial statements, financial information
to permit the Buyer to compute readily the income from operations of the
Business for such month and the year-to-date.
4.1.3 PRESERVE BUSINESS. The Company shall use its best efforts to
preserve (a) its business organization intact, retaining substantially as at
present the Company's employees, consultants and agents and (b) the goodwill of
the Company's clients, suppliers, advertisers, customers and others having
business relations with it. At Closing, the Company will not have less than
three hundred fifty (350) Consultants, as defined in Section 7.8, working on
client projects on billable assignments with an average bill rate of at least
$69 per hour and an average gross margin of at least thirty-two percent (32%).
4.1.4 ASSETS IN GOOD REPAIR. The Company shall keep all Tangible
Personal Property and Leased Real Property in good operating condition and
repair, reasonable wear and tear excepted, and maintain adequate and usual
supplies of office supplies, spare parts and other materials as have been
customarily maintained in the past. The Company shall use its best efforts to
preserve intact the Assets and shall maintain in effect the casualty and
liability insurance on the Assets heretofore in force.
4.2 PROHIBITED ACTIONS. Before the Closing Date, the Company shall not,
without the prior written consent of the Buyer:
4.2.1 Sell, lease or transfer or agree to sell, lease or transfer,
any Assets except for incidental sales or leases, in the ordinary course of
business, of Assets which are being replaced by assets of comparable or superior
kind, condition and value;
4.2.2 Except as may be required by applicable law or existing
written plans or agreements (which written plans and agreements are included in
the Schedules hereto or have otherwise been provided to the Buyer), grant any
raises to any of its employees or consultants, establish or modify any severance
plan, pay any substantial bonuses, enter into any contract of
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employment with any employee or employees of the Company, change any benefits to
employees or consultants or enter into any independent contractor agreement for
the performances of information technology services;
4.2.3 Renew, renegotiate, modify, amend or terminate any existing
Contracts, except in the ordinary course of business;
4.2.4 Enter into, renew or amend any other Contract, except as
provided in Section 5.4 in the ordinary course of business;
4.2.5 Except as provided in SCHEDULE 4.2.5, make any change in the
Business's buildings, leasehold improvements or fixtures except in the ordinary
course of business;
4.2.6 Enter into any Contracts with Affiliates of the Company with
respect to the Business or the Assets; or
4.2.7 Accelerate in any way collections of the accounts receivable
or provide any incentive of any kind for early payment thereof, other than
consistent with past practice.
4.3 NO DISTRIBUTIONS OR PAYMENTS. The Company shall make no distributions
to its Members with respect to membership interests in the Company of any kind
or nature, except it shall distribute the Excluded Assets to its Members before
the Closing.
4.4 ACCESS TO FACILITIES, FILES AND RECORDS. At the reasonable request of
the Buyer and on reasonable advance notice, the Company shall, from time to
time, promptly give or cause to be given to the officers, employees,
accountants, counsel, agents, consultants and representatives of the Buyer full
access during normal business hours to: (a) all facilities, properties,
accounts, books, deeds, title papers, insurance policies, agreements, contracts,
commitments, records and files of every character, including, without
limitation, the Company's minute book, equipment, machinery, fixtures,
furniture, vehicles, notes and accounts payable and receivable of the Company
relating to the Business; and (b) all such other information concerning the
Business as the Buyer may reasonably request. Any investigation or examination
by the Buyer in connection with the foregoing shall not in any way diminish or
obviate any representations or warranties of the Sellers and the Company made in
this Agreement, the Exhibits, Schedules and documents delivered pursuant to this
Agreement. Any and all information, disclosures, knowledge or facts regarding
the Company, the Business and its operations and properties derived from or
resulting from the Buyer's acts or conduct (including, without limitation, acts
or conduct of the Buyer's officers, employees, accountants, counsel, agents,
consultants or representatives, or any of them (collectively, the
"Representatives")) under the provisions of this Section or otherwise obtained
by the Buyer (or its Representatives) pursuant to or in connection with this
Agreement shall be confidential and shall not be divulged, disclosed or
communicated to any other person, firm, corporation or entity, except as
required by law and to the Buyer's directors, officers, attorneys, accountants,
investment bankers, investors and lenders, and their respective attorneys for
the purpose of consummating the transactions contemplated by this Agreement and
the Buyer shall be responsible for any breach of confidentiality by any such
person. The Company shall cause its
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accountants and any agent of the Company in possession of the Company's books
and records to cooperate with the Buyer's requests for information pursuant to
this Agreement and shall request its accountants to provide the Buyer access to
all of the accountants' audit and tax work papers with respect to the Company.
If this Agreement terminates before Closing, the Buyer shall return promptly any
information obtained regarding the Company, the Business or the Assets and the
Buyer shall instruct its Representatives also to return any such information
regarding the Company, the Business or the Assets.
4.5 REPRESENTATIONS AND WARRANTIES. The Sellers and the Company shall give
detailed written notice to the Buyer promptly on learning of the occurrence of
any event that would cause or constitute a breach, or that would have caused a
breach had such event occurred or been known to the Sellers and the Company on
or before the date of this Agreement, of any of the Sellers and the Company's
representations or warranties contained in this Agreement or in any Schedule
attached hereto.
4.6 CONSENTS. The Company shall use its best efforts to obtain the consent
or approval of any third person required under any Real Property Leases and any
Contract listed on the Contract Schedules to consummate the transactions
contemplated by the Agreement. The Buyer has designated certain of these
consents as material to the operations of the Business as noted in SCHEDULE 4.6
(a "Material Consent").
4.7 NOTICE OF PROCEEDINGS. The Sellers and the Company will promptly
notify the Buyer in writing on: (a) receiving notice of any order or decree or
any complaint praying for an order or decree restraining or enjoining the
consummation of this Agreement or the transactions contemplated hereunder; or
(b) receiving any notice from any governmental department, court, agency or
commission of its intention (i) to institute an investigation into, or institute
a suit or proceeding to restrain or enjoin, the consummation of this Agreement
or such transactions, or (ii) to nullify or render ineffective this Agreement or
such transactions if consummated.
4.8 CONSUMMATION OF AGREEMENT. The Sellers and the Company shall, and the
Sellers shall cause the Company to, fulfill and perform all conditions and
obligations on its part to be fulfilled and performed under this Agreement and
use its best efforts to cause the transactions contemplated by this Agreement to
be fully carried out.
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ARTICLE 5
COVENANTS OF THE BUYER AND METRO PENDING THE CLOSING
The Buyer and Metro covenant and agree that from the date of this
Agreement until the completion of the Closing:
5.1 REPRESENTATIONS AND WARRANTIES. The Buyer shall give detailed written
notice to the Sellers and the Company promptly on learning of the occurrence of
any event that would cause or constitute a breach, or would have caused a breach
had such event occurred or been known to the Buyer before the date of this
Agreement, of any of the representations and warranties of the Buyer contained
in this Agreement.
5.2 CONSUMMATION OF AGREEMENT. Subject to the provisions of Section 10.1
of this Agreement, the Buyer shall fulfill and perform all conditions and
obligations on its part to be fulfilled and performed under this Agreement and
to cause the transactions contemplated by this Agreement to be fully carried
out.
5.3 NOTICE OF PROCEEDINGS. The Buyer will promptly notify the Sellers and
the Company in writing on: (a) becoming aware of any order or decree or any
complaint praying for an order or decree restraining or enjoining the
consummation of this Agreement or the transactions contemplated hereunder; or
(b) receiving any notice from any governmental department, court, agency or
commission of its intention (i) to institute an investigation into, or institute
a suit or proceeding to restrain or enjoin, the consummation of this Agreement
or such transactions, or (ii) to nullify or render ineffective this Agreement or
such transactions if consummated.
5.4 CONTRACTS NOT TO BE ASSUMED. From time to time following the date of
this Agreement, the Sellers and the Company may request that the Buyer permit
additional Contracts to be added to the Schedules to this Agreement. These
Contracts may be accepted or rejected by the Buyer (except for those entered
into in the ordinary course of business pursuant to Section 2.5, subject to the
limitations set forth in Section 2.5) at the Buyer's sole discretion. The Buyer
must provide the Sellers and the Company with written notice within five (5)
business days after receipt of a written notice from the Sellers and the Company
regarding additional Contracts which are proposed to be added to the Schedules
of its election to either accept or reject such Contracts. If the Buyer fails to
timely notify the Sellers and the Company in writing of its election, the Buyer
shall be deemed to have made the election to accept the Contract.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE SELLERS
The obligations of the Company and the Sellers under this Agreement are,
at their option, subject to the fulfillment of the following conditions before
or on the Closing Date:
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6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1.1 REPRESENTATIONS TRUE. Each of the representations and
warranties of the Buyer and Metro contained in this Agreement shall have been
true and correct as of the date when made and shall be deemed to be made again
on and as of the Closing Date and shall then be true and correct in all material
respects except to the extent changes are permitted or contemplated pursuant to
this Agreement;
6.1.2 BUYER AND METRO COMPLIANCE. The Buyer and Metro shall have
performed and complied in all material respects with each and every covenant and
agreement required by this Agreement to be performed or complied with by either
or both of them before or on the Closing Date;
6.1.3 CERTIFICATE OF THE BUYER. The Sellers shall be furnished with
a certificate, dated the Closing Date and duly executed by the President or a
Vice President of the Buyer and Metro to the effect that, to the best knowledge
of the Buyer and Metro, the conditions set forth in Sections 6.1.1 and 6.1.2
have been satisfied; and
6.1.4 OTHER DOCUMENTS. The Sellers shall be furnished with such
certified resolutions, certificates, documents or instruments with respect to
the Buyer and Metro as the Sellers may have reasonably requested before the
Closing to carry out the intent and purposes of this Agreement.
6.2 PROCEEDINGS.
6.2.1 NO INJUNCTION. No party shall be subject to any restraining
order or injunction restraining or prohibiting the consummation of the
transactions contemplated hereby.
6.2.2 POSTPONEMENT. In the event such a restraining order or
injunction is in effect, this Agreement may not be terminated by the Sellers
pursuant to this Section 6.2 before the Final Closing Date (as described in
Section 10.1 hereof) but the Closing shall be delayed during such period. This
Agreement may be terminated after the Final Closing Date if such restraining
order or injunction remains in effect.
6.3 DELIVERIES. The Buyer and Metro shall have complied with each and
every one of their obligations set forth in Section 8.2.
6.4 OTHER CONSENTS. The Buyer shall have obtained all consents, approvals
and waivers of other persons or parties as may be required for the consummation
of the transactions contemplated by this Agreement.
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ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF THE BUYER AND METRO
The obligations of the Buyer and Metro under this Agreement are, at their
option, subject to the fulfillment of the following conditions before or on the
Closing Date:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
7.1.1 REPRESENTATIONS TRUE. Each of the representations and
warranties of the Company and the Sellers contained in this Agreement shall have
been true and correct as of the date when made; and each of such representations
and warranties shall be deemed to be made again on and as of the Closing Date
and shall then be true and correct in all material respects except to the extent
changes are permitted or contemplated pursuant to this Agreement.
7.1.2 SELLERS AND COMPANY'S PERFORMANCE. The Company and the Sellers
shall have performed and complied in all material respects with each and every
covenant and agreement required by this Agreement to be performed or complied
with by them before or on the Closing Date;
7.1.3 SELLERS AND COMPANY'S CERTIFICATES. The Sellers and the
Company shall have furnished the Buyer with certificates, dated the Closing Date
and duly executed by the Managing Member of the Company, to the effect that, to
the best of the Sellers and Company's knowledge, the conditions set forth in
Sections 7.1.1 and 7.1.2 have been satisfied; and
7.1.4 OTHER DOCUMENTS. There are no information technology
consultants who are not currently subject to written Work Agreements as provided
on SCHEDULE 2.18.1. The Buyer shall be furnished with such certified
resolutions, certificates, documents or instruments with respect to the Company
and the Sellers as the Buyer may have reasonably requested before the Closing to
carry out the intent and purposes of this Agreement.
7.2 PROCEEDINGS.
7.2.1 NO INJUNCTION. No party shall be subject to any restraining
order or injunction restraining or prohibiting the consummation of the
transactions contemplated hereby.
7.2.2 POSTPONEMENT. In the event such a restraining order or
injunction is in effect, this Agreement may not be terminated by the Buyer
pursuant to this Section 7.2.2 before the Final Closing Date, but the Closing
shall be delayed during such period. This Agreement may be terminated after such
date if such restraining order or injunction remains in effect.
7.3 LIENS RELEASED. All Security Interests pertaining to the Assets shall
be released of record and there shall be no liens in respect of the Assets,
except Permitted Encumbrances, those which will arise as a result of the Buyer's
actions in the consummation of the Closing and those in favor of the Buyer.
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7.4 DELIVERIES. The Company and the Sellers shall have complied with each
and every one of their respective obligations set forth in Section 8.1.
7.5 OPINIONS OF COUNSEL. The Buyer shall have received an opinion of
counsel for the Company and the Sellers, dated the Closing Date, in form and
substance reasonably acceptable to the Buyer.
7.6 OTHER CONSENTS. The Company shall have obtained all Material Consents,
including, without limitation, all approvals and waivers of governmental
agencies as are required for the consummation of the transactions contemplated
by this Agreement.
7.7 REVISED SCHEDULES. The Sellers shall have delivered to the Buyer such
revised forms of each of the Schedules or updated information for addition to or
inclusion in the Schedules as are necessary to reflect changes in such Schedules
as of the Closing Date; provided, however, that, except for changes that are
permitted by the terms of this Agreement, no change in any Schedule will be
binding on the Buyer without its prior written consent, which consent may be
withheld by the Buyer for any or no reason. The Buyer agrees to use its best
efforts to notify the Sellers of the acceptance of any revised Schedule and all
supporting documentation within five (5) business days of delivery to the Buyer
of a revised Schedule. The failure of the Buyer to notify the Sellers of its
refusal to consent to a revised Schedule shall be deemed to be an acceptance by
the Buyer of such revised Schedule. Notwithstanding the Buyer's failure to
accept a revised Schedule, such a revised Schedule shall be deemed accepted by
the Buyer if Closing occurs.
7.8 NO MATERIAL CHANGE IN BUSINESS OR ASSETS. There shall not have been a
material adverse change in Business or Assets nor shall there have been an
uncured or continuing default by the Company under any Contract, including any
reductions in the three hundred forty (340) full time consultants employed as
employees, including salaried employees (and not those paid by the hour) on the
bench, or independent contractors by the Company and providing services on
behalf of the Company to Company's clients ("Consultant" or "Consultants") on
the Measurement Date and there shall be at least three hundred fifty (350)
Consultants working on client projects on billable assignments on the Closing
Date, in both cases (Measurement Date and Closing Date) with an average rate of
at least $69 per hour and average gross margin of at least thirty-two percent
(32%).
7.9 PRELIMINARY CLOSING BALANCE SHEET NO MATERIAL CHANGE IN CERTAIN
ASSETS. The Preliminary Closing Balance Sheet to be delivered to the Buyer under
Section 1.4.1.4 shall reflect a Closing Book Value of at least Three Million
Seven Hundred Thousand Dollars ($3,700,000).
7.10 SINGLE MEMBER LLC. The Company shall have closed on the purchase of
Dale Scofield's Membership interests in ATS-Dallas and ATS-Dallas shall be a
single-member limited liability company with ATS as its sole member. In
addition, ATS-Dallas shall have completed the purchase of the option owned by
Michael Nadeau ("Nadeau") pursuant to the terms of that certain agreement dated
August 4, 1999. Any payments to Scofield or Nadeau in order that
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ATS becomes the sole member of ATS-Dallas will be paid by the Sellers at Closing
and neither the Company nor Buyer shall have any responsibility therefor.
ARTICLE 8
ITEMS TO BE DELIVERED AT THE CLOSING
8.1 DELIVERIES BY THE COMPANY. At the Closing, the Company and the Sellers
shall deliver to the Buyer, duly executed by the Company, the Sellers or such
other signatory as may be required by the nature of the document:
8.1.1 ASSIGNMENT OF INTERESTS. Assignments of Interests and other
good and sufficient instruments of sale, conveyance, transfer and assignment, in
form and substance satisfactory to the Buyer, sufficient to sell, convey,
transfer and assign to the Buyer all right, title and interest of the Sellers in
and to the Interests, free and clear of all liens and encumbrances of any nature
whatsoever.
8.1.2 MEMBER RESOLUTIONS. Certified copies of resolutions, duly
adopted by the Members of ATS and ATS-Dallas, which shall be in full force and
effect at the time of the Closing, authorizing the execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby;
8.1.3 OFFICER'S CERTIFICATE. The certificate referred to in Section
7.1.2;
8.1.4 OPINIONS. The opinions of counsel referred to in Section 7.5;
8.1.5 NONCOMPETITION AGREEMENTS. The Noncompetition, Nonsolicitation
and Confidentiality Agreements between each of the Sellers, the Company and the
Buyer in the forms of EXHIBITS D-1 THROUGH EXHIBIT D--5 attached (the
"Noncompetition Agreements");
8.1.6 MANAGEMENT AGREEMENTS. Employment Agreements between ATS and
each of Berkman, Scofield, Brahms and Rohrer in the form of EXHIBITS E-1 THROUGH
E-4 attached (the "Management Agreements");
8.1.7 CONTINUING LIABILITIES SCHEDULE. A schedule of the Continuing
Liabilities as of the Effective Time; and
8.1.8 ACCOUNTS RECEIVABLE. SCHEDULE 8.1.8 attached identifies each
Account Receivable of the Company as of the Effective Time, which schedule is
true, correct and represents money due from customers of the Business arising
from the ordinary course of business occurring before the Effective Time. Within
ten (10) days after the Closing Date, a Schedule identifying each Account
Receivable of the Company as of the Effective Time and the Closing Date,
certified by the Company as being true, correct and representing monies due from
customers
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of the Business arising from the ordinary course of business occurring before
the Closing Date shall be delivered to the Buyer.
8.1.9 OPERATING AGREEMENTS. Amended and Restated Operating
Agreements of ATS and ATS-Dallas in the form of EXHIBITS F-1 AND F-2 attached.
8.2 DELIVERIES BY THE BUYER. At the Closing, the Buyer and Metro shall
deliver to the Sellers, duly executed by the Buyer, Metro or such other
signatory as may be required by the nature of the document:
8.2.1 PURCHASE PRICE. The Purchase Price, which shall be paid in the
manner specified in Section 1.4;
8.2.2 RESOLUTIONS. Certified copies of resolutions, duly adopted by
the Boards of Directors of the Buyer and Metro, which shall be in full force and
effect at the time of the Closing, authorizing the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Buyer and Metro;
8.2.3 OFFICERS' CERTIFICATE. The certificates referred to in Section
6.1.3;
8.2.4 NONCOMPETITION AGREEMENTS. The Noncompetition Agreements;
8.2.5 MANAGEMENT AGREEMENTS. The Management Agreements; and
8.2.6 STOCK OPTION PLAN. The grant of stock options for 75,000
shares of Metro common stock to be allocated among the Management Group as set
forth on SCHEDULE 8.2.6 attached pursuant to Metro's 1997 Incentive Stock Option
Plan ("Metro Plan") previously delivered to the Sellers. The Metro Plan provides
a five-year vesting schedule (20% per year). The Buyer and the Sellers agree
that the option price of the options granted pursuant to this Section shall be
based upon the market value of Metro's stock at the end of the day on the
Closing Date.
ARTICLE 9
SURVIVAL; INDEMNIFICATION; EMPLOYEES
9.1 SURVIVAL. All representations, warranties, covenants and agreements
contained in this Agreement, or in any Exhibit, Schedule, certificate, agreement
or statement delivered pursuant hereto, shall survive the Closing, any
investigation conducted by any party hereto and any information which any party
may receive, until eighteen (18) months after the Closing Date whereupon all
such representations, warranties, covenants and agreements shall expire and
terminate and shall be of no further force or effect; provided, however, any
Deficiency with respect to a Tax matter, a representation or warranty in
Sections 1.3, 2.1, 2.2, 2.8, 2.18.3 or 2.20 or a matter described in Sections
9.3.1.2 or 9.3.2.2 may be asserted at any time on or before the expiration of
the limitations period under applicable law and if a Deficiency (as defined in
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Section 9.3) is asserted by either party, before the expiration of the survival
or limitations period, such asserted Deficiency shall survive until the
existence of such Deficiency has been finally established and the Deficiency is
resolved as provided below.
9.2 BASIC PROVISION.
9.2.1 BUYER INDEMNITEES. The Sellers (each Seller an "Indemnifying
Party") hereby, jointly and severally, agree to indemnify and hold harmless the
Buyer, the Company (after Closing) and their respective members, shareholders,
directors, officers, agents and employees and all persons which directly or
indirectly, through one or more intermediaries, control, are controlled by, or
are under common control with the Buyer or the Company, and their respective
successors and assigns (collectively, the "Buyer Indemnitees") from, against and
in respect of, and to reimburse the Buyer Indemnitees for the amount of any and
all Deficiencies (as defined in Section 9.3.1) and the costs reasonably incurred
by the Buyer or the Company to make Company's Information Technology Year 2000
compliant in the reasonable opinion of the Buyer.
9.2.2 SELLER INDEMNITEES. The Buyer and Metro, jointly and severally
(each an "Indemnifying Party"), hereby agree to indemnify and hold harmless the
Sellers and their agents, employees and all persons which directly or
indirectly, through one or more intermediaries, control, are controlled by, or
are under common control with any Seller, and their heirs, fiduciaries,
successors and assigns (collectively, the "Seller Indemnitees") from, against
and in respect of, and to reimburse the Seller Indemnitees for the amount of any
and all Deficiencies (as defined in Section 9.3.2).
9.3 DEFINITION OF "DEFICIENCIES".
9.3.1 DEFICIENCIES FOR THE BUYER. As used in this Article 9, the
term "Deficiencies" when asserted by the Buyer Indemnitees or arising out of a
third party claim against the Buyer Indemnitees shall mean any and all losses,
fines, damages, liabilities and claims sustained by the Buyer Indemnitees and
arising out of, based on or resulting from:
9.3.1.1 Any misrepresentation, breach of warranty or any
non-fulfillment of any representation, warranty, covenant, obligation or
agreement on the part of the Company or any Seller contained in or made in this
Agreement or in an Exhibit, Schedule, certificate, agreement or statement
delivered pursuant to this Agreement;
9.3.1.2 Any failure by the Sellers to pay or discharge any
Excluded Liability, including, without limitation, the Extended Lease after
November 30, 1999 as provided in Section 1.3.3.6, or any other liability of (i)
the Seller Indemnitees, direct or contingent, or (ii) the Company in the case of
liabilities arising before the Closing, direct or contingent, that is not a
Continuing Liability;
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9.3.1.3 Any litigation, proceeding or claim by any third party
to the extent relating to the business or operations of or incurred by the
Company, or the Business before the Closing Date, other than with respect to the
Continuing Liabilities;
9.3.1.4 Any severance pay or other payment required to be paid
by the Company with respect to any employee or Consultant of the Company
terminated by the Company on or before the Closing Date or incurred by the
Sellers or the Company in connection with the transactions contemplated by this
Agreement, which is not part of the Continuing Liabilities; and
9.3.1.5 Any and all acts, suits, proceedings, demands,
assessments and judgments and all reasonable fees, costs and expenses of any
kind, related or incident to any of the foregoing (including, without
limitation, any and all Legal Expenses (as defined below)).
9.3.2 DEFICIENCIES FOR THE SELLERS. As used in this Article 9, the
term "Deficiencies" when asserted by the Seller Indemnitees or arising out of a
third party claim against the Seller Indemnitees shall mean any and all losses,
damages, liabilities and claims sustained by the Seller Indemnitees and arising
out of, based on or resulting from:
9.3.2.1 Any misrepresentation, breach of warranty or any
non-fulfillment of any representation, warranty, covenant, obligation or
agreement on the part of the Buyer or Metro contained in or made in this
Agreement or in an Exhibit, Schedule, certificate, statement or agreement
delivered pursuant to this Agreement;
9.3.2.2 Any failure by the Buyer to pay or discharge any
Continuing Liability or any other liability arising after Closing that is
expressly assumed by the Buyer pursuant to the provisions of this Agreement;
9.3.2.3 Any litigation, proceeding or claim by any third party
to the extent relating to the business or operations of the Buyer or the
Business after the Closing Date; and
9.3.2.4 Any and all acts, suits, proceedings, demands,
assessments and judgments and all fees, costs and expenses of any kind, related
or incident to any of the foregoing (including, without limitation, any and all
Legal Expenses (as defined below)).
9.4 PROCEDURES FOR ESTABLISHMENT OF DEFICIENCIES.
9.4.1 CLAIM ASSERTED. In the event that any claim shall be asserted
by any third party against the Buyer Indemnitees or the Seller Indemnitees (the
Buyer Indemnitees or the Seller Indemnitees, as the case may be, hereinafter,
the "Indemnitees"), which, if sustained, would result in a Deficiency, then the
Indemnitees, promptly and in all events within fifteen (15) days after learning
of such claim, shall notify the Indemnifying Party of such claim and the
Indemnitees shall permit the Indemnifying Party to defend against such claim, at
the Indemnifying Party's sole expense and through legal counsel reasonably
acceptable to the Indemnitees, provided that the Indemnifying Party proceeds in
good faith, expeditiously and diligently. The Indemnitees shall, at
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their option and expense, have the right to participate in any defense
undertaken by the Indemnifying Party with legal counsel of their own selection
and at their expense. The parties will cooperate fully in any such action and
shall make available to each other any books or records useful for the defense
of such claim. No settlement or compromise of any claim which may result in a
Deficiency may be made by the Indemnifying Party without the prior written
consent of the Indemnitees unless: (a) before such settlement or compromise, the
Indemnifying Party acknowledges in writing its obligation to pay in full the
amount of the settlement or compromise and all associated expenses and (b) the
Indemnitees are furnished with security reasonably satisfactory to the
Indemnitees that the Indemnifying Party will in fact pay such amount and
expenses or the Indemnifying Party obtains a release of the Indemnitees from all
liability in respect of such claim.
9.4.2 NOTICE. In the event that the Indemnitees assert the existence
of any Deficiency against the Indemnifying Party, such Indemnitee shall give
written notice to the Indemnifying Party of the nature and amount of the
Deficiency asserted. If the Indemnifying Party within a period of thirty (30)
days after the giving of the Indemnitees' notice, shall not give written notice
to the Indemnitees announcing its intent to contest such assertion of the
Indemnitees (such notice by the Indemnifying Party being hereinafter referred to
as the "Contest Notice"), such assertion of the Indemnitees shall be deemed
accepted and the amount of the Deficiency shall be deemed established. If,
however, a Contest Notice is given to the Indemnitees within such 30-day period,
then the contested assertion of a Deficiency shall be judicially resolved.
9.4.3 AGREEMENT. The Indemnitees and the Indemnifying Party may
agree in writing, at any time, as to the existence and amount of a Deficiency,
and, on the execution of such agreement such Deficiency shall be deemed
established.
9.5 PAYMENT OF DEFICIENCIES. The Indemnifying Party hereby agrees to pay
the amount of established Deficiencies within thirty (30) days after the
establishment thereof. The amount of established Deficiencies shall be paid in
cash. Any amounts not paid by the Indemnifying Party when due under this Section
shall bear interest from and after the due date thereof until the date paid at a
rate equal to the lesser of: (a) twelve percent (12%) per annum and (b) the
highest legal rate permitted by applicable law. At the option of the
Indemnitees, the Indemnitees may offset any Deficiency or any portion thereof
that has not been paid by the Indemnifying Party to the Indemnitees against any
obligation the Indemnitees, or any other Party to the Indemnitees against any
obligation the Indemnitees, or any of them, may have to the Indemnifying Party
arising out of a Deficiency established pursuant to Section 9.4 hereof.
9.6 LIMITATION ON DEFICIENCIES. Notwithstanding any other provision of
this Agreement, an Indemnifying Party shall not be required to pay any
established Deficiency resulting from the breach of any warranty or
representation until the aggregate of all established Deficiencies owed by that
Indemnifying Party exceeds One Hundred Thousand Dollars ($100,000) and then the
Indemnifying Party shall be required to pay established Deficiencies in excess
of One Hundred Thousand Dollars ($100,000) up to a limit of liability or any
party's aggregate liability for Deficiencies resulting from the breach of any
warranties or representations of Four Million Dollars
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($4,000,000) ("Deficiency Cap"), except that the $100,000 basket and maximum
shall not apply to a claim for any breach of the Company's and the Sellers'
representations and warranties under Sections 2.1, 2.2, 2.8, 2.9, 2.18.3 and
2.20 or to any Deficiency under Sections 9.3.1.2 or 9.3.2.2 and the $100,000
basket shall not apply to any claims for the costs incurred by the Buyer or the
Company to make the Company's Information Technology Year 2000 compliant.
9.7 LEGAL EXPENSES. As used in this Article 9, the terms "Legal Expenses"
shall mean any and all fees (whether of attorneys, accountants or other
professionals), costs and expenses of any kind reasonably incurred by any person
identified herein and its counsel in investigating, preparing for, defending
against, or providing evidence, producing documents or taking other action with
respect to any threatened or asserted claim.
ARTICLE 10
MISCELLANEOUS
10.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at any
time on or before the Closing Date: (a) by the mutual consent of the Sellers and
the Buyer; (b) by the Buyer as provided in Section 10.8; (c) by the Buyer if, on
or before the Final Closing Date, the Sellers have not fulfilled the conditions
set forth in Section 7.4; (d) by either party hereto if the Closing has not
taken place by September 13, 1999 (the "Final Closing Date"); (e) by the Buyer
on or after September 13, 1999 if the Sellers have not satisfied the conditions
set forth in Article 7 and the Buyer has satisfied or is prepared and able (but
for Sellers' defaults) to satisfy the conditions of Article 6; or (f) by the
Sellers on or after September 13, 1999 if the Buyer has not satisfied the
conditions set forth in Article 6 and the Sellers have satisfied or is prepared
and able (but for Buyer's defaults) to satisfy the conditions of Article 7. A
termination pursuant to this Section 10.1 shall not relieve any party of any
liability it would otherwise have for a willful breach of this Agreement. In the
event this Agreement is terminated rightfully pursuant to this Section 10.1, all
further obligations of the parties hereunder shall terminate, except that all
obligations for confidentiality under Section 4.4 shall survive such termination
for a period of three (3) years.
10.2 LIABILITIES ON TERMINATION OR BREACH. The parties acknowledge that
the Business is of a special, unique and extraordinary character. In the event
of a material breach by the Company and the Sellers of their representations,
warranties, covenants and agreements under this Agreement, the Buyer shall be
entitled to an injunction restraining any such breach or threatened breach or to
enforcement of this Agreement by a decree or decrees of specific performance
requiring the Company and the Sellers to fulfill their obligations under this
Agreement. In the event of a material breach by the Buyer of its
representations, warranties, covenants and agreements under this Agreement, the
Company and the Sellers shall be entitled to an injunction restraining any such
breach or threatened breach or to endorsement of this Agreement by a decree or
decrees of specific performance requiring the Buyer to fulfill its obligation
under this Agreement.
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10.3 EXPENSES. Each party hereto shall bear all of its expenses incurred
in connection with the transactions contemplated by this Agreement including,
without limitation, accounting and legal fees incurred in connection herewith;
provided, however, the Sellers shall be responsible for one hundred percent
(100%) of any sales or transfer taxes arising from the transfer of the Interests
to the Buyer and the fees and expenses of Updata Capital, Inc.
10.4 REMEDIES CUMULATIVE. The remedies provided in this Agreement shall be
cumulative and shall not preclude the assertion by any party hereto of any other
rights or the seeking of any other remedies against the other party hereto.
10.5 PRESERVATION OF RECORDS. The Buyer and the Company will preserve and
make available (including the right to inspect and copy) to the Sellers, their
attorneys and accountants, for three (3) years after the Closing Date and during
normal business hours, such of the books, records, files, correspondence,
memoranda and other documents of the Company as the Sellers may reasonably
require in connection with any legitimate purpose, including, but not limited
to, the preparation of tax reports and returns and the preparation of financial
statements. During the three-year period, the Buyer will not dispose of or
destroy any such books, records, files, correspondence, memoranda or other
documents without giving thirty (30) days' prior written notice to the Sellers,
to permit the Sellers, at their expense, to examine, duplicate or take
possession of all or part thereof.
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10.6 TAX RETURNS. Sellers shall prepare or cause to be prepared and file
or cause to be filed all Tax Returns for the Company for all periods ending on
or prior to the Closing Date which are filed after the Closing Date. Sellers
shall permit Buyer to review and comment on each such Tax Return described in
the preceding sentence prior to filing and shall make such revisions to such Tax
Returns as are reasonably requested by Sellers. Sellers shall pay the costs of
preparing the Tax Returns and all taxes, interest and penalties due with respect
thereto and such costs, taxes, interest and penalties shall not be a Continuing
Liability.
10.7 FURTHER ASSURANCES. From time to time before, on and after the
Closing Date, each party hereto will execute all such instruments and take all
such actions as any other party, being advised by counsel, shall reasonably
request, without payment of further consideration, in connection with carrying
out and effectuating the intent and purpose hereof and all transactions and
things contemplated by this Agreement including, without limitation, the
execution and delivery of any and all confirmatory and other instruments in
addition to those to be delivered on the Closing Date, and any and all actions
which may reasonably be necessary or desirable to complete the transactions
contemplated hereby. The parties shall cooperate fully with each other and with
their respective counsel and accountants in connection with any steps required
to be taken as part of their respective obligations under this Agreement.
10.8 RISK OF LOSS. The risk of loss, damage or destruction to any of the
Assets from fire or other casualty or cause shall be borne by the Sellers and
the Company at all times prior to the Closing. In the event of any such loss,
damage or destruction, the proceeds of any claim for any loss, payable under any
insurance policy with respect thereto, shall be used to repair, replace or
restore any such property to its former condition, subject to the conditions
stated below. It is expressly understood and agreed that, in the event of any
loss or damage to any of the Assets from fire, casualty or other causes before
the Closing, the Company or the Sellers shall notify the Buyer of same in
writing immediately. Such notice shall specify with particularity the loss or
damage incurred, the cause thereof (if known or reasonably ascertainable) and
the insurance coverage. In the event that the damaged property is not completely
repaired, replaced or restored on or before the Closing Date, the Buyer at its
sole option: (a) may elect to postpone Closing until such time as the property
has been completely repaired, replaced or restored to the reasonable
satisfaction of the Buyer if the repair, replacement or restoration can be
accomplished within one (1) month following the date of the loss or damage or
the Final Closing Date, whichever is the earlier and (b) may elect to consummate
the Closing and accept the property in its then condition, in which event the
Company shall retain all proceeds of insurance the right to any unpaid proceeds;
or (c) terminate this Agreement without liability to any party.
10.9 EMPLOYEES. Except as provided otherwise in this Section 10.9, the
Sellers shall pay the Company's employees and information technology consultants
any bonuses or other compensation due them as a result of the transactions
contemplated by this Agreement and neither the Buyer nor the Company, after
Closing, shall have any liability therefor, except to the extent any such cost
is reflected as a liability on the Closing Date Balance Sheet and constitutes a
Continuing
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Liability. The Sellers acknowledge and agree that neither the Company nor the
Buyer is required to continue to employ any employee for any specific periods of
time after the Closing Date other than as specifically provided otherwise in the
Management Agreements with respect to Berkman, Scofield, Brahms and Rohrer. The
Company will continue to give its employees who continue to be employed by the
Company after Closing credit for accrued vacation leave to the extent such costs
are reserved as a liability in the Closing Date Balance Sheet or treated by the
parties as a reduction to the Closing Book Value under Clause 1.4.1.3(d). The
Company shall furnish 1999 W-2s to its employees for 1999 earnings from the
Company (paid before or after the Closing Date), provided that the Sellers shall
cause the Company to provide the Buyer with accurate payroll and withholding
records. Further, the Sellers shall cause the Company to withhold all amounts
required by law from its employees and pay all required payroll taxes (FICA,
FUTA, Medicare, income tax and the like) for the compensation it pays such
employees during 1999 and file all returns due for any period before the Closing
Date with respect to employee income tax withholding, social security, Medicare,
unemployment taxes and other similar taxes and charges, in compliance with the
tax withholding provisions of the Code and other applicable federal, state and
local laws.
10.10 CLOSING DATE TO COMMENCEMENT OF EARNOUT PERIOD. From the Closing
Date to the commencement of the Earnout Period ("Stub Period") Berkman or his
successor shall report to the Chairman of the Board and shall manage the Buyer
and the Company in the ordinary course of business consistent with the past
practices of the Company, shall not take any action or fail to take any action
to distort the revenues or expenses of the Stub Period and shall make no payment
or contractually binding commitment on behalf of the Company or the Buyer to any
officer, director or Member of the Company (before Closing), or any Affiliate of
any such person, except payment of salary and benefits to employees in
accordance with SCHEDULE 2.18.1.
ARTICLE 11
GENERAL PROVISIONS
11.1 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, this Agreement shall be binding on and inure to the benefit of the
parties hereto, and their respective representatives, successors and assigns.
Neither the Company nor the Sellers may assign any of their rights or delegate
any of their duties hereunder without the prior written consent of the Buyer.
The Buyer may freely assign some or all of its rights and obligations hereunder
to any entity controlled by or under common control with the Buyer, as long as
the Buyer and Metro remain fully obligated hereunder.
11.2 AMENDMENTS; WAIVERS. The terms, covenants, representations,
warranties and conditions of this Agreement may be changed, amended, modified,
waived, discharged or terminated only by a written instrument executed by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision of this Agreement shall in no manner affect
the right of such party at a later date to enforce the same. No waiver by any
party of any condition or the breach of any provision, term, covenant,
representation or warranty contained
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in this Agreement, whether by conduct or otherwise, in any one or more instances
shall be deemed to be or construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
11.3 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing (which shall
include notice by telex or facsimile transmission) and shall be deemed to have
been duly made and received when personally served, or when delivered by Federal
Express or a similar overnight courier service, expenses prepaid, or, if sent by
telex, graphic scanning or other facsimile communications equipment, delivered
by such equipment, addressed as set forth below:
(a) If to the Company (before Closing) or the Sellers, then to:
Mr. Michael Berkman
Managing Member
Acuity Technology Services, LLC
1650 Tysons Blvd., Suite 400
McLean, VA 22102
with a copy, given in the manner prescribed above, to:
Greenberg Traurig
1750 Tysons Boulevard, Suite 1200
McLean, VA 22102
Telecopy Number: (703) 749-1362
Attn: Lee R. Marks, Esquire and Timothy J. Jessell, Esquire
(b) If to the Company (after Closing) or the Buyer then to:
Metro Information Services -- ATS, Inc.
Reflections II, Third Floor
200 Golden Oak Court
Virginia Beach, Virginia 23452
Telecopy Number: (757) 306-0251
Attn: Robert J. Eveleigh, Vice President
Page 45
<PAGE>
with a copy, given in the manner prescribed above, to:
Williams, Mullen, Clark & Dobbins, P.C.
Suite 900
One Columbus Center
Virginia Beach, Virginia 23462
Telecopy Number: (757) 473-0395
Attn: Thomas R. Frantz, Esquire
Any party may alter the address to which communications are to be sent by giving
notice of such change of address in conformity with the provisions of this
Section providing for the giving of notice.
11.4 CAPTIONS. The captions of Articles and Sections of this Agreement are
for convenience only and shall not control or affect the meaning or construction
of any of the provisions of this Agreement.
11.5 GOVERNING LAW. THIS AGREEMENT AND ALL QUESTIONS RELATING TO ITS
VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.
11.6 ENTIRE AGREEMENT. This Agreement and the Schedules hereto and thereto
and the other documents delivered hereunder constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and supersede all prior agreements, understandings,
inducements or conditions, express or implied, oral or written, relating to the
subject matter hereof. The express terms hereof control and supersede any course
of performance and/or usage of trade inconsistent with any of the terms hereof.
11.7 EXECUTION: COUNTERPARTS AND FACSIMILE. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
as against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile shall be as effective as delivery of a manually executed
counterpart of this Agreement.
11.8 GENDER AND NUMBER. Where appropriate to the context, pronouns of
other terms expressed in one number or gender will be deemed to include all
other numbers or genders. The word "person" will include one or more
individuals, corporations, firms, partnerships, entities or associations. The
use of a word in one tense will include the other tenses, where appropriate to
the context.
Page 46
<PAGE>
11.9 THIRD-PARTY BENEFICIARIES. This Agreement is intended to benefit only
the parties to this Agreement, their successors and permitted assigns. No other
person, entity, enterprise or association is an intended or incidental
beneficiary of this Agreement.
Page 47
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Membership Interest
Purchase Agreement to be duly executed by their duly authorized signatories, all
as of the day and year first above written.
COMPANY:
ACUITY TECHNOLOGY SERVICES, LLC,
a Virginia limited liability company
By: /s/ MICHAEL BERKMAN
------------------------------
Its: MANAGING MEMBER
ACUITY TECHNOLOGY SERVICES OF DALLAS, LLC,
a Virginia limited liability company
By: /s/ MICHAEL BERKMAN
------------------------------
Its: MANAGING MEMBER
SELLERS:
/s/ MICHAEL BERKMAN
----------------------------------
MICHAEL BERKMAN
/s/ W. BRAUN JONES, JR.
----------------------------------
W. BRAUN JONES, JR.
/s/ MARK SCOFIELD
----------------------------------
MARK SCOFIELD
/s/ MARK M. BRAHMS
----------------------------------
MARK M. BRAHMS
/s/ ROD ROHRER
----------------------------------
ROD ROHRER
Page 48
<PAGE>
BUYER:
METRO INFORMATION SERVICES - ATS,
INC.,
a Virginia corporation
By: /s/ R. J. EVELEIGH
------------------------------
Its: PRESIDENT
METRO:
METRO INFORMATION SERVICES, INC.,
a Virginia corporation
By: /s/ JOHN H. FAIN
------------------------------
Its: PRESIDENT
Page 49
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
TO MEMBERSHIP INTERST PURCHASE AGREEMENT
DATED AS OF 8/13/99
BY AND AMONG
ACUITY TECHNOLOGY SERVICES, LLC
AND
ACUITY TECHNOLOGY SERVICES OF DALLAS, LLC
(COLLECTIVELY, THE "COMPANY")
AND
MICHAEL BERKMAN, W. BRAUN JONES, JR., MARK SCOFIELD, MARK H.
BRAHMS, AND ROD ROHRER
(THE "SELLERS")
AND
METRO INFORMATION SERVICES - ATS, INC.
(THE "BUYER")
AND
METRO INFORMATION SERVICES, INC.
("METRO")
Schedule 1.1 Interests
Schedule 1.1.1 Tangible Personal Property
Schedule 1.1.2 Leased Real Property
Schedule 1.1.3-1 Client Contracts
Schedule 1.1.3-2 Vendor Contracts
Schedule 1.1.3-3 Other Contracts
Schedule 1.1.5 Intangible Property
Schedule 1.1.10 Proposals
Schedule 1.2.3 Employee Personal Property
Schedule 1.3.1 Security Interests
Schedule 1.4.3 Allocation of Purchase Price
<PAGE>
Schedule 1.4.4.2.1 Gross Profit Computation
Schedule 2.1 Articles of Organization and Operating Agreements
Schedule 2.6 Breach
Schedule 2.7.1 Financial Statements
Schedule 2.7.2 Accounts Receivable Aging Reports
Schedule 2.8 Liabilities
Schedule 2.9 Taxes
Schedule 2.10 Licenses
Schedule 2.11 Business Operations
Schedule 2.13.3 Good Title
Schedule 2.15 Environmental Matters
Schedule 2.17 Insurance
Schedule 2.18.1 Work Agreements
Schedule 2.18.2 Employee Manuals
Schedule 2.18.4 Employee Plans
Schedule 2.18.8 Independent Contractors
Schedule 2.19 Litigation
Schedule 2.20 Intangible Property
Schedule 2.22 Conflicting Interests
Schedule 2.23 No Material Adverse Change
Schedule 2.24 Year 2000 Compliance
<PAGE>
Schedule 2.25 Immigration
Schedule 4.2.5 Changes in Buildings, Leasehold Improvements or Fixtures
Schedule 4.6 Material Consents
Schedule 8.1.8 Accounts Receivable
Schedule 8.2.6 Allocation of Stock Options
Exhibit A Escrow Agreement
Exhibit B Note
Exhibit C Letter from Mr. Fain
Exhibit D-1 Noncompetition Agreement
Exhibit D-2 Noncompetition Agreement
Exhibit D-3 Noncompetition Agreement
Exhibit D-4 Noncompetition Agreement
Exhibit D-5 Noncompetition Agreement
Exhibit E-1 Management Agreement
Exhibit E-2 Management Agreement
Exhibit E-3 Management Agreement
Exhibit E-4 Management Agreement
Exhibit F-1 Amended and Restated Operating Agreement
Exhibit F-2 Amended and Restated Operating Agreement
<PAGE>
EXHIBIT 99
For Immediate Release
Contact: Patrice Bryan
Investor Relations
(757) 306-0299
[email protected]
METRO INFORMATION SERVICES ACQUIRES ACUITY TECHNOLOGY SERVICES
VIRGINIA BEACH, VA, AUGUST 19, 1999 /PRNEWSWIRE/ -- METRO INFORMATION SERVICES,
INC. (NASDAQ: MISI - NEWS) today announced it has acquired Acuity Technology
Services, LLC and Acuity Technology Services of Dallas, LLC information
technology consulting businesses with offices serving the Washington, DC,
Baltimore and Dallas markets. This acquisition adds more than 370 consultants to
Metro, primarily in the Washington and Baltimore markets. Acuity's revenue for
the 12 months ended June 30, 1999 exceeded $39 million.
While transaction terms were not announced, Metro expects the acquisition to
increase earnings in 2000. Metro will account for the transaction as a purchase
of assets for cash.
John H. Fain, Metro's CEO said, "The addition of Acuity to the Metro family of
companies strengthens our presence in Washington, Baltimore and Dallas. Acuity
has a demonstrated ability to grow rapidly and is particularly strong in the
client server area. In addition, 72% of Acuity's consultants are salaried with
benefits, making them an excellent fit with Metro's salary based operating
model."
Michael Berkman, Acuity's President said, "Joining Metro gives us access to the
systems and processes that will continue to fuel our growth. Metro's range of
services, salaried consultant base and philosophy towards the information
technology services business is a great fit with Acuity. We are excited about
our future with Metro."
Metro has offices in 42 metropolitan markets providing a wide range of
information technology consulting and software development services and has more
than 2,800 consultants and a total staff of more than 3,400. Metro's services
include application systems development and maintenance, information technology
architecture and engineering, systems consulting, project outsourcing and
general support services. Information about Metro is available via the
Internet's World Wide Web at HTTP://WWW.METROIS.COM and through Metro's Investor
Relations Department.
<PAGE>
Certain matters discussed in this news release are forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995. All statements
made in this news release, other than those consisting solely of historical
facts, that address events or developments that the company expects or
anticipates will or may occur in the future, the prospects for new business, and
references to business strategy, future success, the potential for additional
earnings from the reported transaction and other events, are forward-looking
statements. These forward-looking statements are subject to a number of known
and unknown risks and uncertainties, including the company's ability to
integrate and operate successfully acquired businesses and the risks associated
with such businesses; uncertainty as to the future profitability of acquired
businesses; competition; and other factors. Other factors and assumptions not
identified above were also involved in the derivation of these forward-looking
statements, and the failure of such other assumptions to be realized as well as
the risks and uncertainties discussed above and other factors may cause actual
results to differ materially from those projected. The company assumes no
obligation to update these forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting such
forward-looking statements. Please refer to a discussion of these and other
factors in the company's most recent Form 10-K, Form 10-Q and other documents
filed with the Securities and Exchange Commission.
<PAGE>
CORPORATE HEADQUARTERS
200 Golden Oak Court
Reflections II, 3rd Floor
Virginia Beach, VA 23452
ARIZONA NORTH CAROLINA
Phoenix Charlotte
Greensboro/Winston-Salem
CALIFORNIA Raleigh/Durham
Irvine
Los Angeles OHIO
Palo Alto/Silicon Valley Cincinnati
San Francisco Columbus
COLORADO OREGON
Denver Portland
DISTRICT OF COLUMBIA PENNSYLVANIA
Washington Altoona
Harrisburg
FLORIDA Philadelphia
Ft. Lauderdale Pittsburgh
Jacksonville
Orlando PUERTO RICO
Tallahassee San Juan
Tampa
SOUTH CAROLINA
GEORGIA Columbia
Atlanta Greenville
ILLINOIS TENNESSEE
Chicago Memphis
Nashville
KANSAS/MISSOURI
Kansas City TEXAS
St. Louis Austin
Dallas/Ft. Worth
MARYLAND Houston
Hagerstown
Baltimore VIRGINIA
Richmond
MINNESOTA Roanoke
Minneapolis Virginia Beach/Norfolk
WASHINGTON
Seattle
SOURCE: METRO INFORMATION SERVICES, INC.
