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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): FEBRUARY 1, 1999
METRO INFORMATION SERVICES, INC.
(Exact name of registrant as specified in its charter)
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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)
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(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 an Asset Purchase Agreement, dated as of
February 1, 1999 (the "Agreement"), by and among The Professionals - Computer
Management & Consulting, Inc., a California corporation ("PCM") and Krystal
Solutions, Inc., a California corporation ("KSC," collectively with "PCM" and
individually, the "Seller"), Theodore Schindler ("Ted"), Cathy Schindler
("Cathy") and The Schindler Family 1996 Trust (the "Trust") of Laguna Niguel,
California (collectively the "Owners" and sometimes individually the "owner"),
Metro Information Services, Inc., a Virginia corporation ("Metro") and Metro
Information Services of Orange County, Inc., a wholly-owned subsidiary of Metro
(the "Buyer"), the Buyer acquired the Seller's business and substantially all of
the assets used therein for a purchase price of $17,976,082 plus or minus a net
worth adjustment and an earn out to be calculated after closing. The net worth
adjustment will be the amount by which the closing book value of the Seller is
greater than or less than $2,500,000. At closing the Buyer paid the Seller
$16,476,082 in cash and another $1,000,000 will be held and distributed pursuant
to an escrow agreement. The $500,000 balance of the purchase price due at
closing was paid by the delivery of a negotiable promissory note made payable to
the order of the Seller, bearing interest at 5% per annum, due and payable
within three days after the date the preliminary closing balance sheet is
delivered to Metro, but in no case later than February 23, 1999. The period for
which the earn out amount shall be calculated is the twelve-month period
commencing on February 1, 1999 and ending January 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 earn out is payable within ten days from the
date on which the Buyer receives an accepted earn out report from the Seller.
The purchase price was determined by arms-length negotiation of the
parties and was financed through available cash and borrowings from the
Company's line of credit. At the time of the acquisition, there was no material
relationship between the Seller (including its officers, directors and
shareholders) 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 Seller operated an information
technology consulting services and personnel staffing business with offices in
Irvine, California and San Bruno, California. The Buyer intends to continue to
engage in the same business in substantially the same manner.
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.
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(c) Exhibits required by Item 601 of Regulation S-K:
(i) 2 Asset Purchase Agreement, dated as of February 1, 1999,
by and among The Professionals - Computer Management &
Consulting, Inc. and Krystal Solutions, Inc. and Theodore
Schindler and Cathy Schindler and The Schindler Family
1996 Trust and Metro Information Services, Inc. and
Metro Information Services of Orange County, Inc.*
(ii) 99 Press release of Metro Information Services, Inc.,
dated February 1, 1999.
* Pursuant to Item 601(b)(2) of Regulation S-K, the exhibits and
schedules to this Asset 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,
the Company has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Metro Information Services, Inc.
Date Signed: February 16, 1999 By /s/ Robert J. Eveleigh
-------------------- --------------------------------
Robert J. Eveleigh
PRINCIPAL FINANCIAL OFFICER
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EXHIBIT 2
ASSET PURCHASE AGREEMENT
By and Among
THE PROFESSIONALS - COMPUTER MANAGEMENT & CONSULTING, INC.
and
KRYSTAL SOLUTIONS, INC.
(collectively, the "Seller")
and
THEODORE SCHINDLER, CATHY SCHINDLER and
THE SCHINDLER FAMILY 1996 TRUST
(the "Owners")
and
METRO INFORMATION SERVICES OF ORANGE COUNTY, INC.
(the "Buyer")
and
METRO INFORMATION SERVICES, INC.
("Metro")
Dated as of February 1, 1999
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TABLE OF CONTENTS
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ARTICLE 1 PURCHASE AND SALE OF PROPERTIES AND ASSETS..............................................................1
1.1 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..........................................................................2
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
1.2 EXCLUDED ASSETS.........................................................................................3
1.2.1 INSURANCE....................................................................................4
1.2.2 DUPLICATE RECORDS............................................................................4
1.2.3 CORPORATE RECORDS............................................................................4
1.2.4 EMPLOYEE PERSONAL PROPERTY...................................................................4
1.2.5 CASH AND INVESTMENTS.........................................................................4
1.2.6 ACCOUNTS RECEIVABLE..........................................................................4
1.3 LIABILITIES.............................................................................................4
1.3.1 SECURITY INTERESTS...........................................................................4
1.3.2 ASSUMED LIABILITIES..........................................................................4
1.3.3 EXCLUDED LIABILITIES.........................................................................5
1.3.4 RETAINED OBLIGATIONSOF THE SELLER............................................................6
1.4 PURCHASE PRICE, PAYMENT, AND ALLOCATION.................................................................6
1.4.1 PURCHASE PRICE...............................................................................6
1.4.2 METHOD OF PAYMENT............................................................................8
1.4.3 ALLOCATION OF PURCHASE PRICE.................................................................9
1.4.4 COMPUTATION OF EARN OUT......................................................................9
1.4.5 MATTERS RESERVED FOR JOINT DECISION.........................................................13
1.5 CLOSING................................................................................................13
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE OWNERS............................................13
2.1 CORPORATE STATUS.......................................................................................13
2.2 NO OPTIONS.............................................................................................14
2.3 CORPORATE ACTION.......................................................................................14
2.4 NO DEFAULTS............................................................................................14
2.5 CONTRACTS, LEASES, AGREEMENTS AND OTHER COMMITMENTS....................................................15
2.6 BREACH.................................................................................................15
2.7 FINANCIAL INFORMATION..................................................................................15
2.7.1 FINANCIAL STATEMENTS........................................................................15
2.7.2 ACCOUNTS RECEIVABLES........................................................................16
2.8 LIABILITIES............................................................................................16
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2.9 TAXES..................................................................................................16
2.10 LICENSES...............................................................................................17
2.11 BUSINESS OPERATIONS....................................................................................17
2.12 APPROVALS AND CONSENTS.................................................................................17
2.13 CONDITION OF ASSETS....................................................................................17
2.13.1 ALL ASSETS..................................................................................17
2.13.2 TANGIBLE PERSONAL PROPERTY..................................................................17
2.13.3 GOOD TITLE..................................................................................18
2.14 LEASED REAL PROPERTY...................................................................................18
2.14.1 LEASES......................................................................................18
2.14.2 INTERESTS...................................................................................18
2.14.3 ALL LEASES..................................................................................18
2.14.4 GOOD TITLE..................................................................................18
2.15 ENVIRONMENTAL MATTERS..................................................................................19
2.15.1 ENVIRONMENTAL STUDIES.......................................................................19
2.16 COMPLIANCE WITH LAW AND REGULATIONS....................................................................19
2.17 INSURANCE..............................................................................................20
2.18 LABOR, EMPLOYMENT CONTRACTS AND BENEFIT PROGRAMS.......................................................20
2.18.1 NO COLLECTIVE BARGAINING AGREEMENTS.........................................................20
2.18.2 EMPLOYEE MANUALS............................................................................20
2.18.3 COMPLIANCE..................................................................................20
2.18.4 EMPLOYEE PLANS..............................................................................21
2.18.5 ERISA COMPLIANCE............................................................................21
2.18.6 NO MULTI-EMPLOYER PLANS.....................................................................21
2.18.7 EMPLOYEES...................................................................................21
2.18.8 INDEPENDENT CONTRACTORS.....................................................................22
2.19 LITIGATION.............................................................................................22
2.20 INTANGIBLE PROPERTY....................................................................................22
2.21 BULK SALES.............................................................................................22
2.22 BROKERS................................................................................................22
2.23 CONFLICTING INTERESTS..................................................................................23
2.24 MATTERS ARISING AFTER THE INTERIM BALANCE SHEET DATE...................................................23
2.25 YEAR 2000 COMPLIANCE...................................................................................23
2.26 DISCLOSURE.............................................................................................24
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BUYER AND METRO..................................................24
3.1 STATUS.................................................................................................24
3.2 NO DEFAULTS............................................................................................24
3.3 CORPORATE ACTION.......................................................................................24
3.4 BROKERS................................................................................................25
3.5 LITIGATION.............................................................................................25
3.6 CONSENTS...............................................................................................25
3.7 COMPLIANCE WITH LAWS...................................................................................25
3.8 FULL DISCLOSURE........................................................................................25
3.9 FINANCIAL CAPABILITY...................................................................................25
ARTICLE 4 COVENANTS OF THE SELLER AND THE OWNERS PENDING THE CLOSING.............................................25
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4.1 OPERATIONS OF THE BUSINESS.............................................................................25
4.1.1 BEST EFFORTS................................................................................25
4.1.2 CURRENT STATEMENTS..........................................................................26
4.1.3 PRESERVE BUSINESS...........................................................................26
4.1.4 ASSETS IN GOOD REPAIR.......................................................................26
4.2 PROHIBITED ACTIONS.....................................................................................26
4.3 NO DISTRIBUTIONS OR PAYMENTS...........................................................................27
4.4 ACCESS TO FACILITIES, FILES AND RECORDS................................................................27
4.5 REPRESENTATIONS AND WARRANTIES.........................................................................28
4.6 CONSENTS...............................................................................................28
4.7 NOTICE OF PROCEEDINGS..................................................................................28
4.8 CONSUMMATION OF AGREEMENT..............................................................................28
ARTICLE 5 COVENANTS OF THE BUYER AND METRO PENDING THE CLOSING...................................................29
5.1 REPRESENTATIONS AND WARRANTIES.........................................................................29
5.2 CONSUMMATION OF AGREEMENT..............................................................................29
5.3 NOTICE OF PROCEEDINGS..................................................................................29
5.4 CONTRACTS NOT TO BE ASSUMED............................................................................29
ARTICLE 6 CONDITIONS TO THE OBLIGATIONS OF THE SELLER AND THE OWNERS.............................................30
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................................30
6.1.1 REPRESENTATIONS TRUE........................................................................30
6.1.2 BUYER AND METRO COMPLIANCE..................................................................30
6.1.3 CERTIFICATE OF THE BUYER....................................................................30
6.1.4 OTHER DOCUMENTS.............................................................................30
6.2 PROCEEDINGS............................................................................................30
6.2.1 NO INJUNCTION...............................................................................30
6.2.2 POSTPONEMENT................................................................................30
6.3 DELIVERIES.............................................................................................30
6.4 OTHER CONSENTS.........................................................................................31
ARTICLE 7 CONDITIONS TO THE OBLIGATIONS OF THE BUYER AND METRO...................................................31
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................................31
7.1.1 REPRESENTATIONS TRUE........................................................................31
7.1.2 SELLER'S PERFORMANCE........................................................................31
7.1.3 SELLER'S CERTIFICATES.......................................................................31
7.1.4 OTHER DOCUMENTS.............................................................................31
7.2 PROCEEDINGS............................................................................................31
7.2.1 NO INJUNCTION...............................................................................31
7.2.2 POSTPONEMENT................................................................................32
7.3 LIENS RELEASED.........................................................................................32
7.4 DELIVERIES.............................................................................................32
7.5 OPINIONS OF COUNSEL....................................................................................32
7.6 OTHER CONSENTS.........................................................................................32
7.7 REVISED SCHEDULES......................................................................................32
7.8 NO MATERIAL CHANGE IN BUSINESS OR ASSETS...............................................................32
7.9 PRELIMINARY CLOSING BALANCE SHEET......................................................................32
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ARTICLE 8 ITEMS TO BE DELIVERED AT THE CLOSING...................................................................33
8.1 DELIVERIES BY THE SELLER...............................................................................33
8.1.1 BILLS OF SALE...............................................................................33
8.1.2 BOARD RESOLUTIONS...........................................................................33
8.1.3 OFFICER'S CERTIFICATE.......................................................................33
8.1.4 OPINIONS....................................................................................33
8.1.5 NONCOMPETITION AGREEMENTS...................................................................33
8.1.6 MANAGEMENT AGREEMENTS.......................................................................33
8.1.7 ASSUMED LIABILITIES SCHEDULE................................................................33
8.1.8 ACCOUNTS RECEIVABLE.........................................................................33
8.2 DELIVERIES BY THE BUYER................................................................................34
8.2.1 PURCHASE PRICE..............................................................................34
8.2.2 ASSUMPTION AGREEMENTS.......................................................................34
8.2.3 RESOLUTIONS.................................................................................34
8.2.4 OFFICERS' CERTIFICATE.......................................................................34
8.2.5 NONCOMPETITION AGREEMENTS...................................................................34
8.2.6 MANAGEMENT AGREEMENTS.......................................................................34
8.2.7 STOCK OPTION PLAN...........................................................................34
ARTICLE 9 SURVIVAL; INDEMNIFICATION; EMPLOYEES...................................................................34
9.1 SURVIVAL...............................................................................................34
9.2 BASIC PROVISION........................................................................................35
9.2.1 BUYER INDEMNITEES...........................................................................35
9.2.2 SELLER INDEMNITEES..........................................................................35
9.3 DEFINITION OF DEFICIENCIES.............................................................................35
9.3.1 DEFICIENCIES FOR THE BUYER..................................................................35
9.3.2 DEFICIENCIES FOR THE SELLER.................................................................36
9.4 PROCEDURES FOR ESTABLISHMENT OF DEFICIENCIES...........................................................36
9.4.1 CLAIM ASSERTED..............................................................................36
9.4.2 NOTICE......................................................................................37
9.4.3 AGREEMENT...................................................................................37
9.5 PAYMENT OF DEFICIENCIES................................................................................37
9.6 LIMITATION ON DEFICIENCIES.............................................................................37
9.7 LEGAL EXPENSES.........................................................................................38
ARTICLE 10 MISCELLANEOUS..........................................................................................38
10.1 TERMINATION OF AGREEMENT...............................................................................38
10.2 LIABILITIES ON TERMINATION OR BREACH...................................................................38
10.3 EXPENSES...............................................................................................39
10.4 REMEDIES CUMULATIVE....................................................................................39
10.5 PRESERVATION OF RECORDS................................................................................39
10.6 NON-ASSIGNABLE CONTRACTS...............................................................................39
10.7 FURTHER ASSURANCES.....................................................................................39
10.8 RISK OF LOSS...........................................................................................40
10.9 EMPLOYEES..............................................................................................40
ARTICLE 11 GENERAL PROVISIONS.....................................................................................41
11.1 SUCCESSORS AND ASSIGNS.................................................................................41
11.2 AMENDMENTS; WAIVERS....................................................................................41
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11.3 NOTICES................................................................................................41
11.4 CAPTIONS...............................................................................................42
11.5 GOVERNING LAW..........................................................................................42
11.6 ENTIRE AGREEMENT.......................................................................................43
11.7 EXECUTION: COUNTERPARTS AND FACSIMILE.................................................................43
11.8 GENDER AND NUMBER......................................................................................43
11.9 THIRD-PARTY BENEFICIARIES..............................................................................43
11.10 SELLER'S NAME..........................................................................................43
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is entered
into as of February 1, 1999, by and among THE PROFESSIONALS - COMPUTER
MANAGEMENT & CONSULTING, INC. a California corporation ("PCM") and KRYSTAL
SOLUTIONS, INC., a California corporation ("KSC," collectively with "PCM" and
individually, as the context requires, the "Seller"), THEODORE SCHINDLER
("Ted"), CATHY SCHINDLER ("Cathy") and THE SCHINDLER FAMILY 1996 TRUST (the
"Trust") of Laguna Niguel, California (collectively the "Owners" and sometimes
individually the "Owner"), METRO INFORMATION SERVICES OF ORANGE COUNTY, INC., a
Virginia corporation (the "Buyer") and METRO INFORMATION SERVICES, INC., a
Virginia corporation ("Metro"). The Owners and the Seller shall be collectively
referred to as the "Seller Group."
RECITALS
A. The Seller owns and operates an information
technology consulting services and personnel staffing business (the "Business")
located in Irvine, California, and San Bruno, California;
B. The Seller owns certain assets used or held for use
in connection with the operation of the Business;
C. The Owners own all of the issued and outstanding
shares of capital stock of PCM and KSC;
D. Metro owns all of the issued and outstanding shares
of capital stock of the Buyer; and
E. The Seller desires to sell, assign and transfer to
the Buyer the Business and all of the assets used therein, the Buyer desires to
purchase from the Seller the Business and all of the assets used therein 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 PROPERTIES AND ASSETS
1.1 ASSETS. The Seller agrees to sell to the Buyer and the Buyer
agrees to purchase 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
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owned or leased by the Seller and used or held for use in the Business,
including, without limitation, the property and assets which are acquired by the
Seller 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 Seller, 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 the Seller's 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,
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) with
clients or customers of the Business and its operations or pursuant to which the
Seller 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 with third-party vendors or other persons from which the Seller
receives goods or services listed and described on SCHEDULE 1.1.3-2 attached
(the "Vendor Contracts") and all other Contracts to which the Seller is a party
listed and described on SCHEDULE 1.1.3-3 attached and Work Agreements 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 Seller is a party or by which the
Seller 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 may be assigned
by the Seller 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 the "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 (collectively the "Accounts Receivable").
1.1.5 INTANGIBLE PROPERTY. The names "The Professionals -
Computer Management & Consulting, Inc." and "Krystal Solutions, Inc." and all
trademarks, trade names, service marks, copyrights, franchises, patents,
jingles, slogans, logotypes and other intangible rights, data bases, electronic
information, software (whether purchased or developed by the Seller),
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software licenses, owned or licensed and used or held for use by the Seller 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
Seller 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 Seller'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 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 Seller's and the Owners' goodwill
in, and going concern value of, the Business.
1.1.10 BIDS - REQUESTS FOR PROPOSALS. All rights of the
Seller under any bids, requests for proposals or similar rights ("Proposals"),
whether such Proposals are made by or to the Seller; provided, however, the
Buyer is under no obligation to accept or assume any Proposal made to the Seller
and not accepted by the Seller, as of the Closing. SCHEDULE 1.1.10 contains a
list of all Proposals as of the date of this Agreement. The Seller shall not
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 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
Seller, to attain a Closing Book Value of at least Two Million Three Hundred
Thousand Dollars ($2,300,000).
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 retained by the Seller or transferred to the Owners:
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1.2.1 INSURANCE. All contracts of life insurance on the lives
of Ted or Cathy, including any cash surrender value or prepaid premiums with
respect thereto; provided, however, the Owners shall remain liable for any loans
against any insurance policies.
1.2.2 DUPLICATE RECORDS. All Duplicate Records.
1.2.3 CORPORATE RECORDS. The minute books, stock books,
shareholder lists and similar corporate records of the Seller.
1.2.4 EMPLOYEE PERSONAL PROPERTY. Any personal property which
is listed on SCHEDULE 1.24 attached which is located at the Seller's offices but
is owned by any employee of the Seller.
1.2.5 CASH AND INVESTMENTS. All of the Seller'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 Two Million Three Hundred Thousand Dollars ($2,300,000).
1.2.6 ACCOUNTS RECEIVABLE. All receivables of PCM or KSC due
from any Owner, the other Seller or any Affiliate, hereinafter defined, of
either Seller or any current or former officer, employee or director of the
Seller and any notes or written obligations reflecting any obligation of any
such related party to the Seller as of the Closing Date (the "Related Party
Receivables").
1.3 LIABILITIES.
1.3.1 SECURITY INTERESTS. The Assets shall be sold and
conveyed to the Buyer 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 Seller 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
Seller that do not relate to the Assets, not yet due and payable, accruing
before the Closing Date, (c) the obligations of the Seller arising after Closing
which the Buyer has agreed to assume under the Contracts described in Section
1.1.3; and (d) the Assumed 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."
1.3.2 ASSUMED LIABILITIES. Except as otherwise provided
herein and subject to the terms and conditions of this Agreement, simultaneously
with the sale, transfer, conveyance and assignment to the Buyer of the Assets,
the Buyer shall assume, and hereby agrees to perform and discharge when due:
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1.3.2.1 except liabilities on notes payable to City
National Bank ("Bank Debt"), which will be paid in full at or before Closing,
all liabilities and obligations of the Seller 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
Seller 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 Assumed Employees defined in Section 10.9
below, to the extent such costs are accrued or reserved against on the
Closing Balance Sheet, but only to the extent of such exercise or accrual; and
1.3.2.4 all liabilities and obligations arising or
to be performed after the Closing under the Contracts that are effectively
assigned and transferred to the Buyer including any Contracts the benefits
and burdens of which are assigned to the Buyer under Section 10.6
(collectively the "Assumed Liabilities").
1.3.3 EXCLUDED LIABILITIES. Except for the Assumed
Liabilities, the Buyer shall not assume or be liable for, and does not
undertake or attempt to assume or discharge:
1.3.3.1 any liability or obligation of any Owner or
Seller arising out of any Contract not included in the Contract Schedules or
assumed 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 therefor
in the Closing Date Balance Sheet;
1.3.3.2 any liability or obligation of any Owner or
Seller 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;
1.3.3.3 any liability or obligation of any Owner or
Seller 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 Seller not specifically accepted by the Buyer;
1.3.3.4 any liability or obligation of any Owner or
Seller arising out of or relating to any litigation, proceeding or claim by
any person or entity relating to the Owners, the Seller, the Business or the
Assets before the Closing Date, whether such litigation, proceeding or claim
is pending, threatened or asserted before, on or after the Closing Date; and
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1.3.3.5 other than the Assumed Liabilities, any and
all other liabilities, obligations, debts or commitments of any Owner or
Seller whatsoever, whether accrued now or hereafter, whether fixed or
contingent, whether known or unknown, or any claims asserted against any
Owner or Seller, any employee of the Seller, the Business or any of the
Assets or other items owned by the Seller at the Closing relating to any
event (whether act or omission) before the Closing Date, including, without
limitation, the payment of all taxes, including, without limitation, any
corporate income, franchise, sales, use, business and occupation taxes.
1.3.4 RETAINED OBLIGATIONS OF THE SELLER. The Seller
retains and shall hereafter pay, satisfy, discharge, perform and fulfill all
such obligations and liabilities not expressly assumed by Buyer hereunder,
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. The Seller and the Owners, jointly and severally, agree to
indemnify and hold the Buyer and its successors and assigns harmless from and
against any and all such liabilities in accordance with the terms of Article
9 below.
1.4 PURCHASE PRICE, PAYMENT, AND ALLOCATION.
1.4.1 PURCHASE PRICE.
1.4.1.1 AMOUNT. The "Purchase Price" for the Assets and
Business shall be Seventeen Million Nine Hundred Seventy-six Thousand Eighty-two
Dollars ($17,976,082), plus or minus, as the case may be, the Net Worth
Adjustment (defined below). At the Closing, One Million Dollars ($1,000,000)
(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 Seller, as provided in Section
1.4.2 below. The "Closing Amount" is defined as the Purchase Price less the
Escrow Amount.
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) Two Million Five Hundred
Thousand Dollars ($2,500,000) or less than (which shall be a negative number)
Two Million Five Hundred Thousand Dollars ($2,500,000).
1.4.1.3 CLOSING BOOK VALUE. "Closing Book Value" means
(a) the net book value on a combined basis of the Assets, excluding the Excluded
Assets, minus the Assumed Liabilities at the Closing (whether or not positive),
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 Accounts Receivable of the Seller which are not
collected by the Buyer by the date the Closing Date Balance Sheet is prepared
and are not deemed by KPMG Peat Marwick LLP ("KPMG") (defined below) as
collectable by the Buyer within one hundred eighty days (180) after the Closing
Date, MINUS (d) the amount which the Buyer is required to pay after the Closing
for any liability or obligation of the Seller paid by the Buyer except the
Assumed Liabilities. In determining Closing Book Value, the operation of the
Business and the income and
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normal operating expenses attributable thereto through 12:01 a.m. on February 1,
1999 (the "Effective Date") shall be reflected in the Closing Book Value.
Revenues from clients and expenses for goods or services received both before
and after the Effective Date, 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 Date and so reflected
in the Closing Book Value. All special assessments and similar charges or liens
imposed against any of the Assets on or before the Effective Date, whether
payable in installments or otherwise, shall be reflected in Closing Book Value.
If KPMG writes off any specific Account Receivable of the Seller in preparing
the Closing Balance Sheet, which is (x) in addition to the Seller's reserve for
bad debts set forth in the Preliminary Closing Balance Sheet (as defined below);
(y) not reversed in whole or in part pursuant to the dispute resolution
provisions of SECTION 1.4.1.4; and (z) subsequently collected by the Buyer, then
the amount of such collection shall be paid by the Buyer to the Seller upon
receipt.
1.4.1.4 CLOSING BALANCE SHEET. Not later than February
20, 1999, the Seller will prepare and deliver to the Buyer a combined balance
sheet of the Seller (the "Preliminary Closing Balance Sheet") reflecting the
Seller's best estimate of the Closing Book Value as of the Effective Date. Based
on the foregoing, the Seller shall prepare and deliver a certificate (the
"Seller's 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 Seller's
Adjustment Certificate shows a Closing Book Value of less than Two Million Five
Hundred Thousand Dollars ($2,500,000), the Seller shall credit the Buyer a
dollar amount against the principal balance of the Note (defined below), and the
Purchase Price shall decrease, by an amount equal to Two Million Five Hundred
Thousand Dollars ($2,500,000) minus the Closing Book Value ("Deficit"). If the
amount of the Deficit exceeds the remaining principal balance of the Note, the
Seller shall pay the Buyer the excess deficiency with interest at five percent
(5%) per annum from the Closing Date. If Seller's Adjustment Certificate shows a
Closing Book Value of more than Two Million Five Hundred Thousand Dollars
($2,500,000), the Purchase Price and the amount of the Note shall increase by
the excess of the Closing Book Value over Two Million Five Hundred Thousand
Dollars ($2,500,000). Any such increase or decrease shall be deemed made as of
the Closing Date so that no interest shall accrue on any decreased amount and
interest shall accrue on any increased amount from the Closing Date. 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 Seller
the "Closing Balance Sheet," notes thereto and KPMG's report thereon. Within
thirty (30) days of receipt of the Closing Balance Sheet, the Seller 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 Seller accepts the Closing Balance Sheet as presented or
fails 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
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of Article 9 below and the Buyer or the Seller, as the case may be, shall,
within five (5) business days thereafter, pay by wire transfer to the other any
amounts needed to reflect the changes made from the Seller's Adjustment
Certificate caused by the Closing Balance Sheet as so reviewed by KPMG. 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, Ernst & Young ("E&Y") 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 records or
work papers requested by the Second Accountants. The decision of the Second
Accountants 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 thereafter, 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 Owners 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 Seller must be filed with the
Securities and Exchange Commission within seventy-five (75) days after the
Closing Date. The Seller and the Owners shall fully cooperate, at the Buyer's
expense, with KPMG in such audit and with the Buyer in making its required
disclosures. This cooperation will extend to, among other things, making the
Seller'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 conduct the
required audit.
1.4.2 METHOD OF PAYMENT.
1.4.2.1 The Closing Amount shall be paid by the Buyer
to the Seller as follows: (a) $500,000 shall be paid by the Buyer's execution
and delivery of a negotiable promissory note made payable to the order of the
Seller in the principal amount of $500,000, 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 Seller
delivered to the Buyer at least two (2) days before Closing).
1.4.2.2 The Escrow Amount 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 Seller or the Buyer as
provided in the Escrow Agreement.
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1.4.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price will
be allocated 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").
1.4.4 COMPUTATION OF EARN OUT. In addition to the Purchase
Price, the Buyer shall pay to the Seller an earn out amount (the "Earn Out
Payment"), which payment shall be treated as additional purchase price paid to
the Seller for the Assets and shall be calculated in accordance with the terms
of this Section. The Buyer and the Seller agree that the Earn Out Payment that
is required pursuant to this Section shall be payable to the Seller as provided
below.
1.4.4.1 EARN OUT PERIOD. The period for which the Earn
Out Payment shall be calculated is the twelve-month period commencing on
February 1, 1999 and ending January 31, 2000 (the "Earn Out Period").
1.4.4.2 EARN OUT PAYMENT. The Earn Out Payment shall be
calculated as five ("Earn Out Multiple") multiplied by the amount, if any, by
which the EBIT of the Buyer during the Earn Out Period exceeds the Target (but
in no case can the amount of the Earn Out Payment be less than zero). The
"Target" is $2,579,347. For example, if the EBIT of the Buyer during the Earn
Out Period is $3,710,000, then the Earn Out Payment will be five times
$1,130,653, which equals the EBIT of $3,710,000 minus $2,579,347, or $5,653,265.
1.4.4.2.1 ADJUSTMENT OF EARN OUT MULTIPLE BASED
ON GROSS PROFIT.
(a) If the Buyer's Gross Profit is less
than twenty point ninety one-thousandths percent (20.090%) ("Minimum Gross
Profit Percentage") of the Buyer's revenues (to the nearest one-thousandths of a
percent) (Gross Profits to revenues, expressed as a percentage, is "Gross Profit
Percentage") during the Earn Out Period, then the Earn Out Multiple (to the
nearest one-thousandths of a percent) shall equal five multiplied by the ratio
of the Gross Profit Percentage to the Minimum Gross Profit Percentage. For
example, if the actual Gross Profit Percentage is nineteen point forty-eight
one-thousandths percent (19.048%), the Earn Out Multiple will be reduced to
4.741 (19.048/20.090 x 5). "Gross Profit" means gross revenues less discounts
and direct costs similar to those costs utilized in computing Gross Profit as
shown on SCHEDULE 1.4.4.2.1 attached ("Direct Costs") and determined in
accordance with GAAP applied in a manner consistent with the Seller's prior
practices for the twelve-month period preceding the Closing Date.
(b) If (i) the Buyer's Gross Profit
Percentage is greater than the Minimum Gross Profit Percentage during the Earn
Out Period (the amount of the excess Gross Profit Percentage over the Minimum
Gross Profit Percentage is the "Excess Gross Profit Percentage"), and (ii) the
Buyer's EBIT is greater than eleven point four hundred and one one-thousandths
percent (11.401%) 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 Earn Out Period by an amount, expressed as a percentage of the
Buyer's revenues, that equals or
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exceeds the Excess Gross Profit Percentage, then the Earn Out Multiple shall be
multiplied by the ratio of the Gross Profit Percentage to the Minimum Gross
Profit Percentage. For example, if Buyer's Gross Profit Percentage is
twenty-three point one hundred twenty-two one-thousandths percent (23.122%)
during the Earn Out Period and Buyer's EBIT Percentage is fifteen point two
hundred one-thousandths percent (15.200%) during the Earn Out Period, then the
Earn Out Multiple shall be 5.755 (23.122/20.090 x 5). As another example, if
Buyer's Gross Profit Percentage is twenty-three point one hundred twenty-two
percent (23.122%) during the Earn Out Period and Buyer's EBIT Percentage is
fourteen point four hundred thirty-two one-thousandths percent (14.432%) during
the Earn Out Period, then the Earn Out Multiple shall be 5.
1.4.4.2.2 COMPUTATION OF EBIT. "EBIT" means
earnings of the Buyer during the Earn Out 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 Earn Out 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 one-half of one percent (0.5%) 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 the Seller or any Owner as a
result of their indemnification obligations under Article 9, and the payment
from the Seller or any Owner will likewise not constitute revenue;
(c) any fees, costs and other expenses
paid or incurred by the Seller subsequent to Closing, including bonuses paid to
former key employees of the Seller;
(d) the depreciation and amortization
expenses of the Buyer relating to the step-up in basis from the basis on the
Closing Date Balance Sheet of goodwill and other Assets of the Buyer purchased
from the Seller as required by purchase accounting;
(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 and other software, hardware and
communications equipment of Metro other than the monthly operational costs
(including, without limitation, depreciation, maintenance and telephone costs)
of the Network and the required software and equipment, which shall not exceed
$150,000 in the aggregate during the Earn Out Period;
(f) the costs for the installation,
implementation and the overhead costs of the operation of Metro financial,
payroll, human resources, time billing and
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other proprietary systems services and personnel costs related thereto in
excess of the costs currently incurred by the Seller for similar systems
services and personnel costs;
(g) any costs of the Buyer in excess of
$500 individually not to exceed $10,000 in the aggregate which are of the type
and amount not reasonably consistent with the costs of the Seller in calculating
EBIT of the Seller as provided in SCHEDULE 1.4.4.2.1 for the twelve-month period
ending December 31, 1998, unless such expenses are approved by the Seller or are
reasonably necessary (i) to increase revenues by thirty percent (30%) per year,
(ii) to respond to competitive challenges in the marketplace in the reasonable
exercise of the President's fiduciary duty to the Company and its shareholders,
(iii) to fund losses suffered from fire or other casualty not covered by
insurance (deductible, excess liability, uninsured loss, etc.) or (iv) to comply
with the Letter (as defined in Section 1.4.4.6.4) or laws or the Seller's
obligations under the Contracts; provided, however, that any routine, normal or
recurring operating expenses of the Buyer that occur during the Earn Out Period
shall be included as an expense of the Buyer, whether or not any amounts or
funds were expended for such purposes by the Seller during the twelve-month
period immediately preceding the Closing Date. For example, if the Seller 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 Earn Out
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; and
(h) general corporate overhead charged
by any Affiliate except that Metro shall charge $25,000 per month for the first
three months of the Earn Out Period and $10,000 per month for the last nine
months of the Earn Out Period for back office administrative support and Metro
shall charge direct general and administrative costs paid by Metro at cost, such
as insurance.
1.4.4.3 TIME AND MANNER OF EARN OUT PAYMENT. The
Earn Out Payment, or any undisputed portion thereof, shall be paid by the
Buyer to the Seller 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 Seller. With
respect to any disputed portion of the Earn Out 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 Seller within five (5) business days
following the final determination of the amount due.
1.4.4.4 DELIVERY OF EARN OUT REPORT. On or before
April 15, 2000, the Buyer shall deliver to the Seller a report (the "Earn Out
Report") which computes the amount of the Earn Out Payment, which shall be
accompanied by (a) a copy of the financial statement for the Earn Out 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 Seller). The Buyer will make the work
papers and back-up materials used in computing the Earn Out payment available
to the Seller and its accountants and other representatives at reasonable
times and
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upon reasonable notice at any time during: (x) the review by the Seller of the
Earn Out 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 Earn Out Report to the Seller, the Seller
shall notify the Buyer that either it accepts such Report, or it disputes one
or more items set forth in the computation of the Earn Out Payment or the
financial statements on which the computation of the Earn Out Payment was
based, describing in reasonable detail the amount or item disputed and the
basis for the dispute. If the Seller does not accept the Report, the Buyer
and the Seller 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 E&Y and 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 DURING EARN OUT
PERIOD. From February 1, 1999 until January 31, 2000, the Buyer will conduct its
operations as follows:
1.4.4.6.1 INDEPENDENT ORGANIZATION. The Buyer
shall be operated by its own management and its books, records and financial
statements shall be maintained on an unconsolidated basis, for purposes of this
Agreement, consistent with past practices. The Buyer will not change any of the
accounting principles utilized by the Seller, PROVIDED, that, such accounting
principles of the Seller are in compliance with GAAP and the requirements of the
Securities and Exchange Commission. The Buyer shall not acquire, commence or
operate any business other than the Business before or during the Earn Out
Period.
1.4.4.6.2 BOARD OF DIRECTORS. The Board of
Directors will be comprised of no less than three and no more than six people,
one of which shall be Ted, or if he is unable to serve, Cathy ("Owner Director")
through January 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 the Owner Director, while either Ted or Cathy is serving as a
Director, provided, however, if the Owner Director 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 Director (with
reasonable efforts to reschedule the meeting at a time when the Owner 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 Owner
Director shall be deemed to have consented to the action of the majority.
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1.4.4.6.3 OFFICERS. Ted shall serve as
President of the Buyer through January 31, 2000.
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 in good
faith to incur such expenses on behalf of the Buyer as are reasonably
necessary, including, without limitation, those which are due to the Buyer's
twin goals of increasing revenues of the Business by thirty percent (30%) per
year and enhancing profits in accordance with sound business practices. The
President shall, as appropriate and customary, report to the Board of
Directors of the Company; and the Buyer's obligations to perform under the
Contracts and any new contracts with clients and to maintain and improve the
goodwill of the Business, during the Earn Out Period. The President shall act
in accordance with that certain letter dated 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. The President
shall act reasonably and in good faith in hiring and firing consultants and
employees and shall act promptly in accordance with sound business practices
to replace any employee or consultant whose employment or consultancy
terminates during the Earn Out Period. Any action taken by President that is
not in the ordinary course of business shall first be approved by the Board;
provided, however, that during the Earn Out 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 the Owner
Director notifies the Buyer in advance is likely to have a material adverse
impact on the Earn Out Payment.
1.5 CLOSING. The consummation of the transactions provided
for in this Agreement (the "Closing") shall take place at (a) the offices of
CLARK & STANT, P.C., VIRGINIA BEACH, VIRGINIA, on February 1, 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 SELLER AND THE OWNERS
The Seller and the Owners, jointly and severally, represent and
warrant to the Buyer as follows:
2.1 CORPORATE STATUS. PCM and KSC are each corporations duly
organized, validly existing and in good standing under the laws of the State
of California 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 Seller has the requisite corporate power to carry on its
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business as it is now being conducted and to own and operate the Business, and
each of the Seller and the Owners has the requisite power (corporate, financing
and other) to enter into and complete the transactions contemplated by this
Agreement. The Seller has no business other than the operation of the Business.
The Owners own, free and clear of all pledges, liens, hypothecations and
encumbrances, all of the issued and outstanding shares of the Seller and no
person has any right to acquire from the Seller or the Owners any shares or
other equity of the Seller. Ted serves as the President, Cathy serves as the
Vice President and Ted and Cathy are the only members of the Boards of Directors
of PCM and KSC. Attached as SCHEDULE 2.1 are the Articles of Incorporation and
Bylaws and all amendments thereto of PCM and KSC.
2.2 NO OPTIONS. No Affiliate of any member of any Seller or
Owner (collectively, the Seller and the Owners are the "Seller Group") 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 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 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
Owner 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 Seller and the Owners
and constitutes the legal, valid and binding obligation of the Seller and the
Owners enforceable against each in accordance with and subject to its terms.
2.4 NO DEFAULTS. Neither the execution, delivery and
performance by the Seller and the Owners of this Agreement nor the
consummation by the Seller and the Owners 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 PCM or KSC or the trust agreement
of the Trust; (b) assuming that the consents: (i) referred to in Section 4.6,
(ii) required in connection with any assignment to the Buyer of the Contracts
or (iii) otherwise contemplated by this Agreement are obtained, 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 of any Seller or Owner under any contract, mortgage,
indenture, agreement, lease or other instrument to which either the Seller or
the Owners 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 which
violation, conflict, breach or default would have a material adverse effect
on the Seller, the Business, the Assets or the ability of the Seller or the
Owners 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 Seller, the Owners, the Business
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or the Assets which violation would have a material adverse effect on the
Seller, the Owners, the Business, the Assets or the ability of the Seller or the
Owners 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 or the Assets.
2.5 CONTRACTS, LEASES, AGREEMENTS AND OTHER COMMITMENTS. The
Seller 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 Seller
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 Seller has
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 Assets by the Buyer or the assignment by the Seller of
such Contract to the Buyer. Other than the Client Contract with Metropolitan
Waste District, which was awarded to the Seller in 1994, none of the Client
Contracts were awarded to PCM or KSC because of their status as a minority
owned business enterprise ("MBE"), woman owned business enterprise ("WBE") or
other disadvantaged person business enterprise ("DBE") nor were any Client
Contracts awarded to PCM or KSC because of their agreement to use a MBE, WBE
or DBE as a subcontractor.
2.6 BREACH. Except as set forth on SCHEDULE 2.6, the Seller is
not in violation or breach of any of the terms, conditions or provisions of
the Seller's Articles of Incorporation or Bylaws, any 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 Seller is a party or by which it is bound. All
accrued and currently payable amounts due from the Seller under the Contracts
have been paid. To the best of the Seller's and the Owner's 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 reviewed balance sheets of each Seller at December 31, 1997
(the "Balance Sheet Date") and December 31, 1996 and the reviewed statements of
operations of each Seller for each of the years then ended (the "Income
Statements"), together with the unaudited balance sheet (the "Interim Balance
Sheet") of each Seller at December 31, 1998 (the "Interim Balance Sheet Date")
and the unaudited statement of operations of each Seller for the twelve months
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 and as set forth on SCHEDULE 2.7.1) and (b) present
fairly the financial position of the Seller 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
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December 31, 1998 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 Seller's accounts
receivable aging reports, dated as of January 21, 1999 (KSC) and January 25,
1999 (PCM), 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 collectible
within six (6) months of the Closing Date. The Seller 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 Seller 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 Seller 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 Seller. 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 Seller has paid
all Taxes due and payable which it is required to pay, incurred or accrued
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 Seller with respect to any of such Taxes for
any years. PCM and KSC have been electing S corporations since April 1, 1996
and May 1, 1996, respectively.
2.9.2 The Seller has withheld amounts from its employees
working in its business in accordance with applicable law. With respect to
such employees, the Seller has
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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 Seller 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 Seller has conducted since its formation is the
Business. The Seller 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 Seller since January 1, 1992. Except as set
forth on SCHEDULE 2.11, the Seller 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 Seller 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 or
with any governmental division, regulatory authority or agency are material for
purposes of this Section. Because of the size of the Seller 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 Owner in connection
with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
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 Seller, 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 Seller, 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.
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2.13.3 GOOD TITLE. Except as listed and described on
SCHEDULE 2.13.3: (a) the Seller 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 Seller 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 1.1.3-3 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 Seller (the "Real Property
Leases").
2.14.2 INTERESTS. The Seller's interest in the Leased
Real Property is as follows: the Seller leases, as a tenant, the premises at 20
Corporate Park, Suite 285, Irvine, California and 1250 Bayhill Drive, Suite 201,
San Bruno, California 94066. Except as listed on SCHEDULE 1.1.3-3, the Leased
Real Property and all of the fixtures and improvements thereon owned by the
Seller (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 Seller 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 Seller is lessee and the Leased Real
Property is the only real property now used by the Seller in the conduct of the
Business as it is presently being conducted.
2.14.4 GOOD TITLE. With respect to the Real Property
Leases, on the Closing Date, the Seller 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
1.1.3-3. With respect to each such lease, except as otherwise disclosed on
SCHEDULE 1.1.3-3, (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 Seller have been paid, (c) the Seller entered into such leases in
the ordinary course of business and the Seller has been in peaceable possession
since the beginning of the original term of any such lease, (d) the Seller or,
to the best of the Seller's and the Owners' knowledge, any other party thereto
is not in material default under any such lease, (e) the Seller has neither
given nor received any notice of default or termination, and, to the best of the
Seller's and the Owners' 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
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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 sale of the Assets or the other transactions
contemplated herein. Except as set forth on SCHEDULE 4.6, no third-party consent
or approval is required for the assignment of the Real Property Leases to the
Buyer or for the consummation of 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 knowledge of the Seller: (a) the Seller 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 Seller holds all the material permits, licenses and approvals
of governmental authorities necessary for the current use, occupancy or
operation of the Business under applicable Environmental Laws ("Environmental
Permits"); (c) the Seller is in compliance with such Environmental Permits;
(d) such Environmental Permits are transferable to the Buyer without the
consent of any governmental authority; and (e) there are no underground or
aboveground storage tanks on any of the Real Property. Hazardous or toxic
substances have not, during the Seller'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 Seller, with the Seller's
permission, or to the Seller's and the Owners' knowledge. No litigation or
proceeding relating to Environmental Laws, Environmental Permits or any
release, discharge or disposal of hazardous or toxic substances is pending
or, to the knowledge of the Seller and the Owners, threatened, against the
Business or the Seller 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 Seller has given the
Buyer all environmental reports, studies or analyses in the possession of the
Seller or the Business 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 Seller 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 having jurisdiction over any of them, the operations of the
Business, the use of the Seller's properties and assets (including the
Assets) and the Leased Real Property. Without limiting the foregoing, the
Seller 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 Seller 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 Seller 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
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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
Seller is attached hereto as SCHEDULE 2.17. The Seller 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 Seller is not in default of any material
provision thereof. The Seller 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 NO COLLECTIVE BARGAINING 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 Seller, 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 January 27, 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 will be
assigned to Buyer at Closing. Except as listed and described on SCHEDULE
2.18.1, all employees of the Seller are employees-at-will and are full-time
employees. The Seller 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
Seller pending or, to the best of the Seller's or the Owners' 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 Seller. No representation question is pending or, to the best
of the Seller's or the Owners' knowledge, threatened respecting any of the
Business's employees.
2.18.2 EMPLOYEE MANUALS. All handbooks and material
written policies and procedures relating to employment by the Seller,
including, but not limited to, compensation, benefits, equal employment
opportunity and safety are listed and described on SCHEDULE 2.18.2 attached
and the Seller has delivered true and complete copies thereof to the Buyer.
2.18.3 COMPLIANCE. The Seller 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,
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worker's compensation, the payment of wages and overtime, equal employment
opportunity and discrimination (collectively, "Employment Laws"). The Seller 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. The Seller has not received any
notice from any federal, state or municipal authority that the Seller or any
independent contractor of the Seller or any practice or procedure of the Seller
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 Seller 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
Seller (a "Benefit Plan"). Except as listed on SCHEDULE 2.18.4, the Seller
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 Seller has furnished the Buyer with true,
complete and accurate copies of all summary plan descriptions of the Seller'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
Seller's or the Owners' knowledge, threatened which would affect the
qualification of any pension plan of the Business or of the Seller. No
unfunded liabilities, based on the Pension Benefit Guarantee Corporation (the
"PBGC") rates currently in effect for plan terminations, exist with respect
to any 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 Seller. The Seller has not
engaged in a "prohibited transaction" or breach of fiduciary responsibility
with respect to any Benefit Plan.
2.18.6 NO MULTIEMPLOYER PLANS. The Seller (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 Seller 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 December 31, 1998 and all anticipated increases in any
of the foregoing. Each
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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. 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
Seller. To the Seller's and the Owners' best 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 Seller with respect to the Business or Assets nor, to the best of
the knowledge of the Seller or the Owners, 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
condition of the Business or any of the Assets or on the ability of the
Seller and the Owners to enter into this Agreement or consummate the
transactions contemplated hereby. The Seller and the Owners have not been
operating under or subject to, or in default with respect to, any order,
writ, injunction or decree relating to 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 Seller or the Owners to enter into this Agreement or
consummate the transactions contemplated hereby.
2.20 INTANGIBLE PROPERTY. The Seller 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 Seller 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
knowledge of the Seller and the Owners, there is no basis for any such claim
of conflict. No service provided by the Seller 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 Seller 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 Seller 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 BULK SALES. Neither the sale and transfer of the Assets
pursuant to this Agreement, nor the Buyer's possession and use of the Assets
from and after Closing because of such sale and transfer, will be subject to
any law pertaining to bulk sales or transfers or to the effectiveness of bulk
sales or transfers as against creditors of the Seller.
2.22 BROKERS. Except for Hillas & Nocera, there is no broker
or finder or other person who would have any valid claim through any Seller
or Owner against any of the parties to
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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 Seller or the Owners. Seller will pay all
fees due Hillas & Nocera as a result of the transactions contemplated by this
Agreement.
2.23 CONFLICTING INTERESTS. Except as disclosed on SCHEDULE
2.23, none of the Seller, the Owners nor any Affiliate of any of the foregoing,
has any financial interest in any supplier, lessor, advertiser or customer of
the Seller or in any other business enterprise with which the Business or the
Seller engages in business or with which the Business or the Seller is in
competition. The ownership of less than one percent of the outstanding capital
stock of a publicly-held corporation shall not be deemed to be a violation of
this representation and warranty.
2.24 MATTERS ARISING AFTER THE INTERIM BALANCE SHEET DATE.
Between the Interim Balance Sheet Date and the date of this Agreement:
2.24.1 There has not been any material adverse change in the
financial condition or business of the Seller, uncured default by the Seller
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 Seller (except where such damage or loss was covered by insurance
and repair or replacement of the damaged or lost assets has been completed);
2.24.2 The Seller has not taken any action outside of the
ordinary and usual course of business, except as related to the transactions
contemplated hereby;
2.24.3 The Seller has maintained its books, accounts and
records in the usual, customary and ordinary manner and has not changed any of
its accounting practices; and
2.24.4 The Seller 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.
2.25 YEAR 2000 COMPLIANCE. Except as provided in attached SCHEDULE
2.25, to the Seller's and Owners' best knowledge, the Seller'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 Seller'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.
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2.26 DISCLOSURE. No material provision of this Agreement relating
to the Seller, the Business or the Assets or any other document, Schedule,
Exhibit or other information furnished by the Seller to the Buyer 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. 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
3.1 STATUS. The Buyer and Metro, jointly and severally, represent
and warrant to the Seller as follows: 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 do
business in the State of California. 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.
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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 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 Seller 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 SELLER AND THE OWNERS PENDING THE CLOSING
The Seller and the Owners 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 Seller 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
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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 Seller spent for the comparable period in 1997 or, in the case of
January 1999, 1998. The Seller shall operate the Business in compliance in all
material respects with all applicable laws, rules and regulations.
4.1.2 CURRENT STATEMENTS. The Seller 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 Seller 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) 1998 and 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 Seller 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 Seller shall use its best efforts
to preserve (a) its business organization intact, retaining substantially as at
present the Seller's employees, consultants and agents and (b) the goodwill of
the Seller's clients, suppliers, advertisers, customers and others having
business relations with it. The Seller will not have less than one hundred forty
(140) consultants working on client projects on billable assignments with an
average rate of $71 and a gross margin of twenty percent (20%).
4.1.4 ASSETS IN GOOD REPAIR. The Seller 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 Seller 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 Seller 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
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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 employment with any employee or employees of
the Seller, 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 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 Seller
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 Seller shall make no
distributions to its shareholders with respect to stock in the Seller of any
kind or nature, except it may distribute the Excluded Assets.
4.4 ACCESS TO FACILITIES, FILES AND RECORDS. At the reasonable
request of the Buyer and on reasonable advance notice, the Seller 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 Seller's minute book, equipment, machinery, fixtures, furniture,
vehicles, notes and accounts payable and receivable of the Seller 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 Seller made in this Agreement, the
Exhibits, Schedules and documents delivered pursuant to this Agreement. Any and
all information, disclosures, knowledge or facts regarding the Seller, 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
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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 Seller shall cause its accountants
and any agent of the Seller in possession of the Seller'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 Seller. If this
Agreement terminates before Closing, the Buyer shall return promptly any
information obtained regarding the Seller, the Business or the Assets and the
Buyer shall instruct its Representatives also to return any such information
regarding the Seller, the Business or the Assets.
4.5 REPRESENTATIONS AND WARRANTIES. The Seller 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 Seller on or before the date of this
Agreement, of any of the Seller's representations or warranties contained in
this Agreement or in any Schedule attached hereto.
4.6 CONSENTS. The Seller shall use its best efforts to obtain the
consent or approval of any third person required under any Contract listed on
the Contract Schedules to assign any such contract from the Seller to the Buyer.
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"). The Buyer shall
not be obligated to accept the assignment of any Contract or any liability under
such Contract for which a Material Consent is not obtained and, if such consent
is obtained after the Closing, the Buyer will not be required to assume any
liability under such Contract until such consent is obtained.
4.7 NOTICE OF PROCEEDINGS. The Seller 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 Seller shall, and the Owners
shall cause the Seller 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 Seller 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
Seller 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 Seller may request that the Buyer permit additional
Contracts to be added to the Schedules to this Agreement and to be assigned to
and assumed by the Buyer at the Closing. 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 Seller
with written notice within five (5) business days after receipt of a written
notice from the Seller 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 Seller in writing of its
election, the Buyer shall be deemed to have made the election to accept the
Contract.
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ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF THE SELLER AND THE OWNERS
The obligations of the Seller and the Owners under this Agreement
are, at their option, subject to the fulfillment of the following conditions
before or on the Closing Date:
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 Seller 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 Seller shall be furnished with such
certified resolutions, certificates, documents or instruments with respect to
the Buyer and Metro as the Seller 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 Seller
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 such 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.
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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.
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 Seller and the Owners 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 SELLER'S PERFORMANCE. The Seller and the Owners 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 SELLER'S CERTIFICATES. The Seller shall have furnished
the Buyer with certificates, dated the Closing Date and duly executed by the
President of the Seller, to the effect that, to the best knowledge of the
Seller, the conditions set forth in Sections 7.1.1 and 7.1.12 have been
satisfied; and
7.1.4 OTHER DOCUMENTS. The Buyer shall be furnished with fully
signed Work Agreements on terms reasonably satisfactory to the Buyer between the
Seller and each information technology consultant who is 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 Seller and the Owners 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.
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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 7.1.4 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.
7.4 DELIVERIES. The Seller and the Owners 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 Seller and the Owners, dated the Closing Date, in form and
substance reasonably acceptable to the Buyer.
7.6 OTHER CONSENTS. The Seller 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 Seller 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 Seller 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 Seller 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 Seller under any Contract, including any
reductions in the one hundred sixty (160) full time consultants employed as
employees or independent contractors by the Seller and providing services on
behalf of the Seller to Seller's clients ("Consultant" or "Consultants") on the
Measurement Date to less than one hundred forty (140) Consultants working on
client projects on billable assignments with an average rate of $71 per hour and
average gross margin of twenty percent (20%).
7.9 PRELIMINARY CLOSING BALANCE SHEET NO MATERIAL CHANGE IN CERTAIN
ASSETS. The Preliminary Closing Balance Sheet to be delivered by the Seller
under Section 1.4.1.4 shall
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reflect a Closing Book Value of at least Two Million Three Hundred Thousand
Dollars ($2,300,000).
ARTICLE 8
ITEMS TO BE DELIVERED AT THE CLOSING
8.1 DELIVERIES BY THE SELLER. At the Closing, the Seller and the
Owners shall deliver to the Buyer, duly executed by the Seller, the Owners or
such other signatory as may be required by the nature of the document:
8.1.1 BILLS OF SALE. Bills of sale, certificates of title,
endorsements, assignments 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 Seller in and to the Assets and to quiet the Buyer's
title thereto.
8.1.2 BOARD RESOLUTIONS. Certified copies of resolutions, duly
adopted by the Boards of Directors of PCM and KSC, and if required by applicable
law, the shareholders of PCM and KSC, which shall be in full force and effect at
the time of the Closing, authorizing the execution, delivery and performance by
the Seller 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 Ted and Cathy and
the Buyer in the form of EXHIBITS D-1 AND D-2 attached (the "Noncompetition
Agreements");
8.1.6 MANAGEMENT AGREEMENTS. Employment Agreements with Ted and
Cathy in the form of EXHIBITS E-1 AND E-2 attached (the "Management
Agreements");
8.1.7 ASSUMED LIABILITIES SCHEDULE. A schedule of the Assumed
Liabilities as of two (2) days before the Closing Date; and
8.1.8 ACCOUNTS RECEIVABLE. Within ten (10) days after the
Closing Date, a Schedule identifying each Receivable of the Seller as of the
Effective Date, certified by the Seller as being true, correct and representing
monies due from customers of the Business arising from the ordinary course of
business occurring before the Effective Date.
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8.2 DELIVERIES BY THE BUYER. At the Closing, the Buyer shall
deliver to the Seller, 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 ASSUMPTION AGREEMENTS. An instrument or instruments of
assumption of the Work Agreements, the Contracts and Real Property Leases to be
assumed by the Buyer pursuant to this Agreement, in form and substance
satisfactory to the Seller;
8.2.3 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;
8.2.4 OFFICERS' CERTIFICATE. The certificates referred to in
Section 6.1.3;
8.2.5 NONCOMPETITION AGREEMENTS. The Noncompetition Agreements;
8.2.6 MANAGEMENT AGREEMENTS. The Management Agreements; and
8.2.7 STOCK OPTION PLAN. The grant of stock options for 25,000
shares of Metro common stock to be allocated among the Management Group as set
forth on SCHEDULE 8.2.7 attached pursuant to Metro's 1997 Incentive Stock Option
Plan ("Metro Plan") previously delivered to the Seller. The Metro Plan provides
a five-year vesting schedule (20% per year). The Buyer and the Seller 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 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 Section 9.3) is asserted by either party, before
the expiration of the survival or limitations period, such asserted Deficiency
shall
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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 Seller and the Owners (each Seller
and Owner an "Indemnifying Party") hereby, jointly and severally, agree to
indemnify and hold harmless the Buyer, its 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, and its 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 not to exceed $100,000 in the aggregate reasonably incurred
by the Buyer to make Seller'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 agrees to indemnify and hold
harmless the Seller and its shareholders, directors, officers, agents, employees
and all persons which directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with the
Seller, and its 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 any Seller or Owner 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 Seller to pay or
discharge any Excluded Liability or any other liability of the Seller and the
Seller Indemnitees, direct or contingent, that is not expressly assumed by
the Buyer pursuant to the provisions of this Agreement;
9.3.1.3 Any litigation, proceeding or claim by any
third party to the extent relating to the business or operations of the
Seller, the Business before the Closing Date, other than with respect to the
Assumed Liabilities;
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9.3.1.4 Any severance pay or other payment
required to be paid by the Seller with respect to any employee or information
technology consultant of the Seller terminated by the Seller on or before the
Closing Date, which is not part of the Assumed 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 SELLER. 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 Assumed 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 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
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
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<PAGE>
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. In the
event, however, that 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 Fifty Thousand Dollars ($50,000) and then the
Indemnifying Party shall be required to pay established Deficiencies in excess
of Fifty Thousand Dollars ($50,000) up to a limit of liability or any party's
aggregate liability for Deficiencies resulting from the breach of any warranties
or representations of Five Million Five Hundred Fifty Thousand Dollars
($5,550,000) ("Deficiency Cap"), except that the $50,000 basket and maximum
shall not apply to a claim for any breach of the Seller's and the Owners'
representations and warranties under Section 2.9 and the $50,000 basket shall
not apply to any claims for the costs incurred by the Buyer to make the Seller's
Information Technology Year 2000 compliant. Notwithstanding any other provision
of this Section 9.6 to the contrary, the Deficiency Cap shall be
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reduced to Three Million Seven Hundred Thousand Dollars ($3,700,000) for
Deficiencies resulting from breach of warranties and representations asserted
for the first time after August 1, 1999 and shall be further reduced to Two
Million Dollars ($2,000,000) for Deficiencies resulting from any breach of
representations and warranties asserted for the first time after the thirtieth
day following the completion and delivery of the audit of the Buyer's financial
statements for the period ending December 31, 1999 by a firm of certified public
accountants appointed by the Buyer, provided, however, the reduction in the
Deficiency Cap shall not apply to a Deficiency with respect to a Tax matter.
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 Seller
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 Seller has not fulfilled the
conditions set forth in Section 7.4; (d) by either party hereto if the Closing
has not taken place by February 28, 1999 (the "Final Closing Date"); (e) by the
Buyer on or after February 28, 1999 if the Seller has not satisfied the
conditions set forth in Article 7 and the Buyer has satisfied or is prepared and
able (but for Seller's defaults) to satisfy the conditions of Article 6; or (f)
by the Seller on or after February 28, 1999 if the Buyer has not satisfied the
conditions set forth in Article 6 and the Seller has 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 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 Seller and the Owners 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 Seller and the Owners 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 Seller shall be entitled to an
injunction restraining any such breach or threatened
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<PAGE>
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.
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 Seller shall be responsible for one hundred
percent (100%) of any sales or transfer taxes arising from the transfer of the
Assets to the Buyer.
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 will preserve and make
available (including the right to inspect and copy) to the Seller and the
Owners, 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 transferred pursuant to this
Agreement as the Seller or the Owners 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 Seller and the Owners, to permit
the Seller and the Owners, at their expense, to examine, duplicate or take
possession of all or part thereof.
10.6 NON-ASSIGNABLE CONTRACTS. Nothing contained in this Agreement
shall be construed as an assignment or an attempted assignment of any Contract
which is by law non-assignable without the consent of the other party or parties
thereto, unless such consent shall be given. The Seller and the Owners shall use
their best efforts (and the Buyer shall assist the Seller and the Owners) both
after and prior to the Closing to obtain such consents to the assignment or
transfer of Contracts to vest in the Buyer all of the Seller's right, title and
interest in such Contracts, in all cases in which such consent is required for
assignment or transfer. If such consent is not obtained, the Seller and the
Owners shall cooperate with the Buyer in any arrangements necessary or
desirable, on commercially reasonable terms, to provide for the Buyer and
benefits and to have the Buyer assume the burdens arising after the closing
thereunder, including, without limitation, enforcement for the benefit of the
Buyer, and assumption by the Buyer of the costs of enforcing, any and all rights
of the Seller thereunder against the other party thereto arising out of the
cancellation thereof by such other party or otherwise.
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
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<PAGE>
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 Seller
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
Seller 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 Seller shall pay to the Buyer all
proceeds of insurance and assign to the Buyer 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 Seller shall terminate all of its employees and information technology
consultants on the Closing Date and pay all termination and severance costs in
connection with such termination, except to the extent any such cost is
reflected as a liability on the Closing Date Balance Sheet and constitutes an
Assumed Liability. The Buyer presently intends to offer employment to all of the
employees and information technology consultants of the Seller that are so
designated on SCHEDULE 2.18.1 ("Assumed Employees") on the Closing Date as
employees or information technology consultants, as the case may be, to be
offered employment by the Seller. The Seller acknowledges and agrees that the
foregoing representation by the Buyer does not require the Buyer to continue to
employ any such Assumed Employee for any specific periods of time after the
Closing Date other than as specifically provided otherwise in the Management
Agreements with respect to Ted and Cathy. The Buyer will give the Seller's
employees who are employed by the Buyer credit for accrued vacation and sick
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 Buyer shall furnish 1999 W-2s to the Seller's
employees who are employed by the Buyer for the combined 1999 earnings from the
Seller (paid before the Closing Date) and the Buyer, provided that the Seller
shall provide the Buyer with accurate payroll and withholding records. Further,
the Seller shall 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
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<PAGE>
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.
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 Seller nor the Owners 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 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 Seller or the Owners, then to:
Mr. Theodore Schindler
20 Corporate Park, Suite 285
Irvine, California 92606
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<PAGE>
with a copy, given in the manner prescribed above, to:
Greenberg Traurig
8180 Greensboro Drive, Suite 850
McLean, VA 22102
Telecopy Number: (703) 749-1362
Attn: Lee R. Marks, Esquire and Timothy J. Jessell,
Esquire
(b) If to the Buyer then to:
Metro Information Services of Orange County, Inc.
Reflections II, Third Floor
200 Golden Oak Court
Virginia Beach, Virginia 23452
Telecopy Number: (757) 306-0251
Attn: Robert J. Eveleigh, Vice President
with a copy, given in the manner prescribed above, to:
Clark & Stant, 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.
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<PAGE>
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.
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.
11.10 SELLER'S NAME. Immediately after the Closing, PCM and KSC
shall adopt and file with the California Secretary of State Amendments to their
respective Articles of Incorporation changing their names to other names
approved by the Buyer, which approval will not be unreasonably withheld.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Asset Purchase
Agreement to be duly executed by their duly authorized signatories, all as of
the day and year first above written.
SELLER:
THE PROFESSIONALS - COMPUTER
MANAGEMENT & CONSULTING, INC.,
a California corporation
By: /s/ Theodore Schindler
-----------------------------
Its: Chairman
-------------------
KRYSTAL SOLUTIONS, INC., a California
corporation
By: /s/ Cathy Schindler
---------------------------------
Its: Pres.
-------------------
OWNER:
/s/ Theodore Schindler
-------------------------------------
THEODORE SCHINDLER
/s/ Cathy Schindler
-------------------------------------
CATHY SCHINDLER
THE SCHINDLER FAMILY 1996 TRUST
By: /s/ Theodore Schindler
---------------------------------
Its: Trustee
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<PAGE>
BUYER:
METRO INFORMATION SERVICES
OF ORANGE COUNTY, 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 45
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
TO ASSET PURCHASE AGREEMENT
DATED AS OF 2/1/99
BY AND AMONG
THE PROFESSIONALS - COMPUTER MANAGEMENT & CONSULTING, INC.
AND
KRYSTAL SOLUTIONS, INC.
(COLLECTIVELY, THE "SELLER")
AND
THEODORE SCHINDLER, CATHY SCHINDLER AND
THE SCHINDLER FAMILY 1996 TRUST
(THE "OWNERS")
AND
METRO INFORMATION SERVICES OF ORANGE COUNTY, INC.
(THE "BUYER")
AND
METRO INFORMATION SERVICES, INC.
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 1.2.4 Employee Personal Property
Schedule 1.3.1 Security Interests
Schedule 1.4.4.2.1 EBIT Calculation
Schedule 1.4.3 Allocation of Purchase Price
Schedule 2.1 Articles of Incorporation and Bylaws of Sellers
Schedule 2.6 Breach
<PAGE>
Schedule 2.7.1 Financial Statements
Schedule 2.7.2 Accounts Receivable
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 2.18.7 Employees
Schedule 2.18.8 Independent Contractors
Schedule 2.19 Litigation
Schedule 2.20 Intangible Property
Schedule 2.23 Conflicting Interests
Schedule 2.25 Year 2000 Compliance
Schedule 4.6 Consents
Schedule 8.2.7 Allocation of Stock Options
<PAGE>
Exhibit 99
FOR IMMEDIATE RELEASE
Contact: Julann Oppasser Donnelly
Investor Relations
(757) 306-0299
[email protected]
Dean Dranias
Dresner Corp. Services
(312) 726-3200
METRO INFORMATION SERVICES TO ADD TWO MORE CALIFORNIA LOCATIONS:
ACQUIRES THE PROFESSIONALS COMPUTER MANAGEMENT CONSULTANTS AND KRYSTAL SOLUTIONS
VIRGINIA BEACH, VA, FEBRUARY 1, 1999 /PRNEWSWIRE/ -- METRO INFORMATION SERVICES,
INC. (NASDAQ: MISI - NEWS) today announced it has acquired The Professionals
Computer Management Consultants and Krystal Solutions both of Irvine and San
Bruno, California. The Irvine office serves the Los Angeles market while the San
Bruno office serves the San Francisco market. Both companies provide information
technology consultants and software engineers to a variety of clients. Together
the acquisitions bring more than 150 consultants to Metro. Revenue for these
companies exceeded $22 million in 1998.
While transaction terms were not announced, Metro expects both acquisitions to
increase 1999 earnings. Metro will account for each transaction as a purchase of
assets for cash.
John H. Fain, Metro's CEO said, "These acquisitions expand our presence in
California. Together with our December 1998 acquisition of The Avery Group of
Menlo Park, California, and January 1999 acquisition of D.P. Specialists, Inc.
of El Segundo, California, Metro has added more than 300 California-based
consultants in the past two months and is positioned to play a significant role
in major California markets."
Ted Schindler, The Professionals' CEO said, "Metro's presence in the Midwest
allows us to better serve existing clients and creates new opportunities to
serve national clients within our existing markets."
Cathy Thompson, Krystal Solutions' CEO said, "Metro's culture of excellent
treatment of its Staff and the potential to improve opportunities and benefits
for our Staff led us to select Metro."
Metro now has 38 offices providing a wide range of information technology
consulting and software development services and has more than 2,300 consultants
and a total staff of more than 2,750. 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.
<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
<TABLE>
<S> <C>
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 Philadelphia
Pittsburgh
FLORIDA
Ft. Lauderdale PUERTO RICO
Jacksonville San Juan
Orlando
Tallahassee SOUTH CAROLINA
Tampa Columbia
Greenville
GEORGIA
Atlanta TENNESSEE
Memphis
ILLINOIS Nashville
Chicago
TEXAS
KANSAS/MISSOURI Austin
Kansas City Dallas/Ft. Worth
St. Louis Houston
MARYLAND VIRGINIA
Baltimore Richmond
Roanoke
MINNESOTA Virginia Beach/Norfolk
Minneapolis
WASHINGTON
Seattle
</TABLE>
SOURCE: METRO INFORMATION SERVICES, INC.
