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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): JANUARY 1, 1999
METRO INFORMATION SERVICES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 000-22035 54-1112301
(State of incorporation) (Commission File No.) (I.R.S. Employer
Identification Number)
POST OFFICE BOX 8888, VIRGINIA BEACH, VIRGINIA 23450
(Address of principal executive office) (Zip Code)
(757) 486-1900
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OF ASSETS
(a) Pursuant to the terms of an Asset Purchase Agreement, dated as
of January 1, 1999 (the "Agreement"), by and among D.P. Specialists, Inc., a
California corporation and D.P. Specialists Learning Center, LLC, a
California limited liability company (collectively, the "Seller"), Edward N.
Myers, Jr. and DeeAnn C. Myers, of El Segundo, California (the "Owner"),
Metro Information Services, Inc., a Virginia corporation ("Metro") and Metro
Information Services of Los Angeles, 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 $10,000,000 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 $1,000,000. At closing the Buyer paid
the Seller $9,250,000 in cash and another $500,000 will be held and
distributed pursuant to an escrow agreement. The $250,000 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 on January 20, 1999. The period for which the
earn out amount shall be calculated is the twelve-month period commencing on
January 1, 1999 and ending December 31, 1999, 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 partially with proceeds remaining from Metro's initial
public offering of common stock on January 29, 1997. The remainder of the
purchase price was financed with Metro's cash on hand. 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
El Segundo, California and Woodbridge, New Jersey. The Buyer intends to continue
to engage in the same business in substantially the same manner.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) No financial statements are required to be filed in connection with
the reported acquisition.
(b) No proforma financial information is required to be filed in
connection with the reported acquisition.
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(c) Exhibits required by Item 601 of Regulation S-K:
(i) 2 Asset Purchase Agreement, dated as of January 1, 1999,
by and among D.P. Specialists, Inc. and D.P. Specialists
Learning Center, LLC and Edward N. Myers, Jr. and
DeeAnn C. Myers and Metro Information Services of Los
Angeles, Inc. and Metro Information Services, Inc.*
(ii) 99 Press release of Metro Information Services, Inc.,
dated January 13, 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: January 15, 1999 By /s/ Robert J. Eveleigh
------------------ --------------------------------
Robert J. Eveleigh
PRINCIPAL FINANCIAL OFFICER
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EXHIBIT 2
ASSET PURCHASE AGREEMENT
By and Among
D. P. SPECIALISTS, INC.
and
D. P. SPECIALISTS LEARNING CENTER, LLC
(collectively, the "Seller")
and
EDWARD N. MYERS, JR. and
DEEANN C. MYERS
(the "Owner")
and
METRO INFORMATION SERVICES OF LOS ANGELES, INC.
(the "Buyer")
and
METRO INFORMATION SERVICES, INC.
("Metro")
Dated as of January 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
1.2 Excluded Assets...................................................................................3
1.2.1 Insurance..............................................................................3
1.2.2 Certain Assets.........................................................................3
1.2.3 Duplicate Records......................................................................4
1.2.4 Corporate Records......................................................................4
1.2.5 Employee Personal Property.............................................................4
1.2.6 Cash and Investments...................................................................4
1.2.7 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 Obligations of the Seller.....................................................6
1.4 Purchase Price, Payment, and Allocation...........................................................6
1.4.1 Purchase Price.........................................................................6
1.4.2 Method of Payment......................................................................9
1.4.3 Allocation of Purchase Price...........................................................9
1.4.4 Computation of Earn Out................................................................9
1.4.5 Matters Reserved for Joint Decision...................................................13
1.5 Closing..........................................................................................14
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND
THE OWNERS.......................................................................................14
2.1 Corporate Status.................................................................................14
2.2 No Options.......................................................................................15
2.3 Corporate Action.................................................................................15
2.4 No Defaults......................................................................................15
2.5 Contracts, Leases, Agreements and Other Commitments..............................................16
2.6 Breach...........................................................................................16
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2.7 Financial Information............................................................................16
2.7.1 Financial Statements..................................................................16
2.7.2 Accounts Receivables..................................................................16
2.8 Liabilities......................................................................................17
2.9 Taxes............................................................................................17
2.10 Licenses.........................................................................................17
2.11 Business Operations..............................................................................18
2.12 Approvals and Consents...........................................................................18
2.13 Condition of Assets..............................................................................18
2.13.1 All Assets............................................................................18
2.13.2 Tangible Personal Property............................................................18
2.13.3 Good Title............................................................................18
2.14 Leased Real Property.............................................................................19
2.14.1 Leases ..............................................................................19
2.14.2 Interests.............................................................................19
2.14.3 All Leases............................................................................19
2.14.4 Good Title............................................................................19
2.15 Environmental Matters............................................................................19
2.15.1 Environmental Studies.................................................................20
2.16 Compliance with Law and Regulations..............................................................20
2.17 Insurance........................................................................................20
2.18 Labor, Employment Contracts and Benefit Programs.................................................21
2.18.1 No Collective Bargaining Agreements...................................................21
2.18.2 Employee Manuals......................................................................21
2.18.3 Compliance............................................................................21
2.18.4 Employee Plans........................................................................22
2.18.5 ERISA Compliance......................................................................22
2.18.6 No Multi-employer Plans...............................................................22
2.18.7 Employees.............................................................................22
2.18.8 Independent Contractors...............................................................22
2.19 Litigation.......................................................................................23
2.20 Intangible Property..............................................................................23
2.21 Bulk Sales.......................................................................................23
2.22 Brokers..........................................................................................23
2.23 Conflicting Interests............................................................................24
2.24 Matters Arising After the Interim Balance Sheet Date.............................................24
2.25 Year 2000 Compliance.............................................................................24
2.26 Disclosure.......................................................................................24
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BUYER AND
METRO............................................................................................25
3.1 Status...........................................................................................25
3.2 No Defaults......................................................................................25
3.3 Corporate Action.................................................................................25
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3.4 Brokers..........................................................................................25
3.5 Litigation.......................................................................................25
3.6 Consents.........................................................................................26
3.7 Compliance with Laws.............................................................................26
3.8 Full Disclosure..................................................................................26
3.9 Financial Capability.............................................................................26
ARTICLE 4 COVENANTS OF THE SELLER AND THE OWNERS PENDING THE CLOSING.......................................26
4.1 Operations of the Business.......................................................................26
4.1.1 Best Efforts..........................................................................26
4.1.2 Current Statements....................................................................26
4.1.3 Preserve Business.....................................................................27
4.1.4 Assets in Good Repair.................................................................27
4.2 Prohibited Actions...............................................................................27
4.3 No Distributions or Payments.....................................................................28
4.4 Access to Facilities, Files and Records..........................................................28
4.5 Representations and Warranties...................................................................29
4.6 Consents.........................................................................................29
4.7 Notice of Proceedings............................................................................29
4.8 Consummation of Agreement........................................................................29
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............................................................................30
5.4 Contracts Not to be Assumed......................................................................30
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..............................................................31
6.1.4 Other Documents.......................................................................31
6.2 Proceedings......................................................................................31
6.2.1 No Injunction.........................................................................31
6.2.2 Postponement..........................................................................31
6.3 Deliveries.......................................................................................31
6.4 Other Consents...................................................................................31
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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..................................................................32
7.1.3 Seller's Certificates.................................................................32
7.1.4 Other Documents.......................................................................32
7.2 Proceedings......................................................................................32
7.2.1 No Injunction.........................................................................32
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.........................................................33
7.9 Preliminary Closing Balance Sheet................................................................33
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.............................................................34
8.1.6 Management Agreements.................................................................34
8.1.7 Assumed Liabilities Schedule..........................................................34
8.1.8 Accounts Receivable...................................................................34
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 Agreement..................................................................34
8.2.7 Stock Option Plan.....................................................................34
ARTICLE 9 SURVIVAL; INDEMNIFICATION; EMPLOYEES.............................................................35
9.1 Survival.........................................................................................35
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
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9.4 Procedures for Establishment of Deficiencies.....................................................36
9.4.1 Claim Asserted........................................................................37
9.4.2 Notice................................................................................37
9.4.3 Agreement.............................................................................37
9.5 Payment of Deficiencies..........................................................................37
9.6 Limitation on Deficiencies.......................................................................38
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...............................................................................40
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
11.3 Notices..........................................................................................41
11.4 Captions.........................................................................................42
11.5 GOVERNING LAW....................................................................................43
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
January 1, 1999, by and among D. P. SPECIALISTS, INC., a California corporation
("DPSI") and D. P. SPECIALISTS LEARNING CENTER, LLC, a California limited
liability company ("DPSLLC", collectively with DPSI, the "Seller"), EDWARD N.
MYERS, JR., of El Segundo, California ("Ed"), DEEANN C. MYERS of El Segundo,
California ("DeeAnn," collectively with Ed, the "Owners" and sometimes
individually, the "Owner"), METRO INFORMATION SERVICES OF LOS ANGELES, 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 El Segundo,
California and Woodbridge, New Jersey;
B. The Seller owns certain assets used or held for use in connection
with the operation of the Business;
C. Ed owns all of the issued and outstanding shares of capital stock
of DPSI and the Owners own all of the issued and outstanding membership
interests in DPSLLC;
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 owned or leased by the
Seller and used or held for use in the Business, including, without limitation,
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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 SCHEDULES 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 as listed and described in 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 the Non-Material Contracts included in the Assets under this
Section 1.1.3 shall be collectively called the "Contracts" and individually the
"Contracts."
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 "D. P. Specialists, Inc. and
D. P. Specialists Learning Center, LLC" 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), software licenses, owned or licensed and
used or held for use by the Seller as of the date of this Agreement, including,
without
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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.
1.2 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:
1.2.1 INSURANCE. All contracts of life insurance on the life of
the Owners, 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 CERTAIN ASSETS. Pension, 401(k), profit sharing and savings
plans and trusts and any assets thereof.
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1.2.3 DUPLICATE RECORDS. All Duplicate Records.
1.2.4 CORPORATE RECORDS. The minute books, stock books,
shareholder lists and similar corporate records of the Seller.
1.2.5 EMPLOYEE PERSONAL PROPERTY. Any personal property which is
listed on SCHEDULE 1.2.5 attached which is located at the Seller's office but is
owned by any employee of the Seller.
1.2.6 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
Nine Hundred Thousand Dollars ($900,000).
1.2.7 ACCOUNTS RECEIVABLE. All receivables of DPSI or DPSLLC due
from either 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:
1.3.2.1 all liabilities and obligations of the Seller,
including, without limitation, notes payable to Union Bank of California, N.A.
("Bank Debt"), which will be paid in full at or before Closing, 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;
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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;
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 (a) for any bonus accrued at or before Closing to
Carole Schlocker or Suresh Kothapalli pursuant to bonus agreements entered into
between each of them and Seller in connection with the Closing; and
(b) 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 assumed by the Buyer under Sections 2.5
or 5.4 of this Agreement or except to the extent such costs are accrued or
reserved against on the Closing Date Balance Sheet;
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, 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, except in the case of any such tax to the
extent accrued and reserved against in the Closing Date Balance Sheet.
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 Ten Million Dollars ($10,000,000) plus or minus, as the case
may be, the Net Worth Adjustment (defined below) provided there are at least 99
full-time consultants employed as employees or independent contractors by Seller
and providing services on behalf of Seller to Seller's clients ("Consultant" or
"Consultants") on January 11, 1999 ("Measurement Date" and the number of
Consultants employed by Seller on such date is "Measurement Date Consultants")
and at least 98 Consultants employed by Seller on the Closing Date. If Seller
does not employ at least 99 Consultants on the Measurement Date and at least 98
Consultants on the Closing Date, then the "Purchase Price" for the Assets and
Business shall be Ten Million Dollars ($10,000,000) (a) minus $280,000
multiplied by the amount by which 100 exceeds the number, if any, of Consultants
employed by Seller on the Measurement Date, (b) minus $280,000 multiplied by the
amount by which the lesser of 100 or the number of Measurement Date Consultants
exceeds the number of Consultants employed by the Seller on the Closing Date;
provided, however, that no adjustment shall be made under this Clause 1.4.1.1(b)
if the difference in the number of Consultants under this Clause is three or
less and (c) plus or minus, as the case may be, the Net Worth Adjustment. At the
Closing, Five Hundred Thousand Dollars ($500,000) of the Purchase Price (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
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positive number) One Million Dollars ($1,000,000) or less than (which shall be a
negative number) One Million Dollars ($1,000,000).
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 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 (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 normal operating expenses attributable thereto
through 12:01 a.m. on January 1, 1999 (the "Adjustment Date") shall be reflected
in the Closing Book Value. Revenues from clients and expenses for goods or
services received both before and after the Adjustment 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
Adjustment Date and so reflected in the Closing Book Value. All revenues earned
by the Seller and all expenses incurred by the Seller in the ordinary course of
business ("Interim Expenses") between the Adjustment Date and the Closing Date
("Interim Period") shall accrue to the benefit of and increase Assets, in the
case of such revenues, and be a charge against and decrease Assets or increase
Assumed Liabilities, in the case of Interim Expenses. Provided, however, Interim
Expenses shall not include any income taxes, any sales or similar taxes on the
transaction contemplated by this Agreement or any interest. All revenues earned
by the Seller and all Interim Expenses incurred by the Seller during the Interim
Period shall increase and decrease, respectively, EBIT as defined in Section
1.4.4.2.2 during the Earn Out Period notwithstanding any other provision of this
Agreement to the contrary. All special assessments and similar charges or liens
imposed against any of the Assets on or before the Adjustment 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 January 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 Adjustment 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 Seller's Adjustment
Certificate shows a Closing Book Value of less than One Million Dollars
($1,000,000), Seller shall credit Buyer a dollar amount against the principal
balance of the Note (defined below) and the Purchase Price shall decrease by an
amount
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equal to One Million Dollars ($1,000,000) 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 One Million
Dollars ($1,000,000), the Purchase Price and the amount of the Note shall
increase by the excess of the Closing Book Value over One Million Dollars
($1,000,000). Any such increase or credit shall be deemed made as of the Closing
Date so that no interest shall accrue on any credited 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 Peat Marwick LLP ("KPMG") to audit,
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 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 audited 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 Buyer are
unable to agree on the choice of Second Accountants, they will select a "Big 5"
accounting firm by lot (after excluding KPMG and their respective regular
outside accounting firms) as Second Accountants. The parties shall have an
opportunity to present their position to the Second Accountants and shall
cooperate with the Second Accountants in making available to them any 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 may be filed with the
Securities and Exchange Commission. 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
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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) $250,000 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 $250,000, 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.
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 January 1,
1999 and ending December 31, 1999 (the "Earn Out Period").
1.4.4.1 EARN OUT PAYMENT. The Earn Out Payment shall be
calculated as six ("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 $1,428,600 minus $40,000 multiplied by the total Purchase Price
reduction under Clauses 1.4.1.1(a) and (b), if any, divided by $280,000. For
example, if the EBIT of the Buyer during the Earn Out Period is $2,048,600 and
the Purchase Price is reduced by $560,000 under Clauses 1.4.1.1(a) and (b), then
the Earn Out Payment will be six times $700,000, which equals the EBIT of
$2,048,600 minus $1,348,600 ($1,428,600 reduced by $80,000 for two, which is the
quotient of $560,000 divided by $280,000), or $4,200,000.
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1.4.4.1.1 ADJUSTMENT OF EARN OUT MULTIPLE BASED ON
GROSS PROFIT. The Earn Out Multiple is subject to adjustment (to the nearest
one-thousandth of a percent) as set forth in the following Clauses 1.4.4.2.1(a)
through (d). The Clauses must be applied in order from (a) to (d). If a Clause
applies, it will be used to determine any adjustment to the Earn Out Multiple
and the other Clauses will not apply.
(a) If (i) the Buyer's Gross Profits expressed
as a percentage (to the nearest one-thousandth of a percent) of the Buyer's
revenues ("Gross Profit Percentage") during the Earn Out Period are in the range
of thirty percent (30%) to thirty-two percent (32%) and (ii) the Buyer's EBIT
expressed as a percentage of the Buyer's revenues ("EBIT Percentage") during the
Earn Out Period is in excess of ten percent (10%), the Earn Out Multiple will be
six. "Gross Profit" means gross revenues less discounts and direct costs similar
to those costs utilized in computing Gross Profit as shown on SCHEDULE 1.4.4.1.1
("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 the Buyer's Gross Profit Percentage
during the Earn Out Period is less than thirty percent (30%) or the Buyer's EBIT
Percentage during the Earn Out Period is less than ten percent (10%), then the
Earn Out Multiple shall equal six multiplied by the ratio of the Gross Profit
Percentage, not to exceed thirty-one percent (31%), to thirty-one percent (31%).
For example, if the Buyer's Gross Profit Percentage is twenty-nine point
forty-eight one-thousandth percent (29.048%), the Earn Out Multiple shall be
reduced to 5.622 (29.048/31 x 6). As another example, if the Gross Profit
Percentage is thirty-one point five hundred fifty one-thousandth percent
(31.555%) but the Buyer's EBIT Percentage is nine point eight hundred ninety
one-thousandth (9.890%), the Earn Out Multiple shall be six.
(c) If the Buyer's Gross Profit Percentage
during the Earn Out Period is greater than thirty-two percent (32%), and the
Buyer's EBIT Percentage during the Earn Out Period exceeds ten percent (10%) by
an amount of percentage equal to or greater than the excess of the Buyer's Gross
Profit Percentage during the Earn Out Period over thirty-one percent (31%), then
the Earn Out Multiple shall equal six multiplied by the ratio of the Gross
Profit Percentage to thirty-one percent (31%). For example, if Buyer's Gross
Profit Percentage during the Earn Out Period is thirty-two point five hundred
forty-nine one-thousandth percent (32.549%) and Buyer's EBIT Percentage during
the Earn Out Period is eleven point eight hundred thirty-two one-thousandths
percent (11.832%), the Earn Out Multiple shall be 6.300 (32.549/31 x 6).
(d) If (i) the Buyer's Gross Profit Percentage
during the Earn Out Period does not exceed thirty-two percent (32%) or (ii) the
Buyer's EBIT Percentage during the Earn Out Period does not exceed ten percent
(10%) by at least the same amount of percentage that the Buyer's Gross Profit
Percentage during the Earn Out Period exceeds thirty-one percent (31%), the Earn
Out Multiple shall be six. For example, if the Buyer's Gross Profit Percentage
is thirty-two point five hundred forty-nine one-thousandth percent (32.549%) and
the Buyer's EBIT Percentage during the Earn Out Period is ten point nine hundred
eighty-two one-thousandth percent (10.982%), the Earn Out Multiple shall be six.
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1.4.4.1.2 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 the Seller's prior practices for the twelve-month period
preceding the Closing Date 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 but using the account classification on
SCHEDULE 1.4.4.1.1. In computing the earnings of the Buyer, there shall not be
taken into account:
(a) any revenues for placement fees to the
extent such revenues exceed three percent (3.0%) 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 either Owner as a result
of their indemnification obligations under Article 9 and the payment from the
Seller or either 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, implement and maintain
the necessary equipment and telecommunications connection to allow the Buyer to
benefit from the Metro Staff Sourcing Network of Metro other than the monthly
operational cost of the Network, which shall not exceed $30,000 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 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 from the Income Statements for the twelve-month period
immediately preceding the Closing Date, 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
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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 for direct general and administrative costs paid by Metro and
charged to the Buyer 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 February
10, 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 1999 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 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 their respective regular outside
accounting firms) as the Referee. The determination of any Referee
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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 the
date of this Agreement until December 31, 1999, 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 Ed, or if he is unable to serve, DeeAnn ("Owner Director")
through December 31, 1999. 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 Ed or DeeAnn 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.
1.4.4.6.3 OFFICERS. Ed shall serve as President of the
Buyer through December 31, 1999.
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
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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 Holthouse,
Carlin & Van Tright, LLP, 11845 West Olympic Boulevard, Suite 1177 West Tower,
Los Angeles, California, on January 13, 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. DPSI is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, DPSLLC
is a limited liability company 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 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 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. Except as described on SCHEDULE 2.1, Ed
owns, free and clear of all pledges, liens, hypothecations and encumbrances, all
of the issued and outstanding shares of DPSI and no person has any right to
acquire from the Seller or Ed any shares or other equity of DPSI. The Owners
own, free and clear of all pledges, liens, hypothecations and encumbrances, all
of the issued and outstanding membership interests of DPSLLC and no person has
any right to acquire from the Seller or either Owner any membership interests or
other equity of DPSLLC. Ed serves as the President, DeeAnn serves as the Chief
Financial Officer and the Owners are the only members of the Board of Directors
of DPSI. The Owners are the only members of DPSLLC. The managers, directors and
officers of DPSLLC are the Owners. Attached as SCHEDULE 2.1 are the Articles of
Incorporation and Bylaws and all amendments thereto of DPSI and the Articles of
Organization and Operating Agreement and all amendments thereto of DPSLLC.
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2.2 NO OPTIONS. No Affiliate of any member of 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 and other actions and proceedings
necessary to be taken by or on the part of the Seller Group 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 Owner 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 Owner of this Agreement nor the consummation by the Seller
and the Owner 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 DPSI or the Articles of Organization or Operating Agreement of DPSLLC;
(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 the Seller or
either 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
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.
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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.
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 Owners' 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 unaudited balance sheets of each Seller at December 31, 1997
(the "Balance Sheet Date") and December 31, 1996 and the unaudited 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 November 30, 1998 (the "Interim Balance Sheet Date")
and the unaudited statement of operations of each Seller for the eleven 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.
SCHEDULE 2.7.1 includes information and disclosures as of November 30, 1998
normally, included in footnotes to audited financial statements.
2.7.2 ACCOUNTS RECEIVABLES. Attached to this Agreement as
SCHEDULE 2.7.2 is a true and correct copy of the Seller's accounts receivable
aging report, dated on the Adjustment Date, showing, among other things, a
complete aging of the Accounts Receivables and any reserve for non-collectible
Accounts Receivables. 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
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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 hereof 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 are reserved for in the
Interim 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. DPSI has
been an electing S corporation since July 1, 1995 and DPSLLC is, and since its
inception has been, taxed as a partnership.
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 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.
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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 contemplated by Section 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 the Seller or either 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.
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.
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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 2141
Rosecrans, Suite 5100, El Segundo, California and Metro Corporate Campus I, Wood
Avenue South, Woodbridge, New Jersey. 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 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
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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 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.
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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
Agreements listed on SCHEDULE 2.18.1 contains the material terms and conditions
of such employment, consultancy, or agency, 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
and 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 full time
employees. All information technology consultants employed by the Seller on the
Measurement Date are listed on SCHEDULE 2.18.1. 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,
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.
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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
the Measurement Date and all anticipated increases in any of the foregoing. Each
employee's length of service, employment commencement date and all relevant
terms of their employment, including, without limitation, whether the employee
is full or part time, salaried or hourly and the benefits received by such
employee is set forth on SCHEDULE 2.18.1.
2.18.8 INDEPENDENT CONTRACTORS. Except as described in SCHEDULE
2.18.8, since January 1, 1996, the Seller has not engaged or hired any
individual or entity to perform
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information technology services or custom software development services as an
independent contractor and all individuals performing such services have been
employees of the Seller. 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 to enter into this Agreement or consummate the
transactions contemplated hereby. The Seller has 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 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. There is no broker or finder or other person who would
have any valid claim through the Seller or either Owner 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 Seller or the Owners.
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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 the 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.
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
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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, 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.
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
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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 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 provide the Buyer with
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
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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: (a) the current month's and prior year's actual
results for such month and the current month's budget, each by line item, (b)
items of non-recurring income and expense separately, and (c) 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 (90) consultants
working on client projects on billable assignments with an average rate of $72
and a gross margin of thirty-one percent (31%).
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 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 5.3 in the ordinary course of business;
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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 shareholder with respect to his 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 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.
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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 Section 2.12 or by making a notation to the effect
on the applicable schedule (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 Owner 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.
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
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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.
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;
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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 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
Article 10 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.
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.
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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 7.1.2 have been
satisfied; and
7.1.4 OTHER DOCUMENTS. 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.
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 Buyer.
7.6 OTHER CONSENTS. The Buyer and 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
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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 current one hundred (100) Consultants to less than ninety (90)
Consultants working on client projects on billable assignments with an average
rate of $72 per hour and average gross margin of thirty-one percent (31%).
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 reflect a Closing Book Value of at least Nine
Hundred Thousand Dollars ($900,000).
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 Board of Directors of DPSI, and if required by applicable law,
the sole shareholder of DPSI, certified copies of resolutions, duly adopted by
the Managers of DPSLLC, and if required by applicable law, the Members of
DPSLLC, 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 opinion of counsel referred to in Section 7.5;
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8.1.5 NONCOMPETITION AGREEMENTS. The Noncompetition,
Nonsolicitation and Confidentiality Agreements between each Owner and the Buyer
in the form of EXHIBITS D-1 AND D-2 attached (the "Noncompetition Agreements");
8.1.6 MANAGEMENT AGREEMENT. Employment Agreement with Ed in the
form of EXHIBIT E attached (the "Management Agreement");
8.1.7 ASSUMED LIABILITIES SCHEDULE. A schedule of the Assumed
Liabilities as of two (2) days before the Closing Date;
8.1.8 ACCOUNTS RECEIVABLE. Within ten (10) days after the Closing
Date, the Seller shall give the Buyer a schedule similar to SCHEDULE 2.7.2
identifying and certifying the Receivables of the Seller at the Closing Date.
8.2 DELIVERIES BY THE BUYER. At the Closing, the Buyer shall deliver
to the Seller, duly executed by the Buyer or 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 AGREEMENT. The Management Agreement; and
8.2.7 STOCK OPTION PLAN. The grant of stock options for 30,000
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.
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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 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 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 $25,000 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:
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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;
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.
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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 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.
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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 One Million Dollars ($1,000,000), 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 Seller's Information Technology Year 2000 compliant.
9.7 LEGAL EXPENSES. As used in this Article 9, the terms "Legal
Expenses" shall mean any and all fees (whether of attorneys, accountants or
other professionals), costs and expenses of any kind reasonably incurred by any
person identified herein and its counsel in investigating, preparing for,
defending against, or providing evidence, producing documents or taking other
action with respect to any threatened or asserted claim.
ARTICLE 10
MISCELLANEOUS
10.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at any
time on or before the Closing Date: (a) by the mutual consent of the 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 January 31, 1999 (the "Final Closing Date"); (e) by the Buyer on
or after January 31, 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 January 31, 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 Article 10 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 Article 10, 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
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<PAGE>
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 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 each Owner 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.
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<PAGE>
10.7 FURTHER ASSURANCES. From time to time before, on and after the
Closing Date, each party hereto will execute all such instruments and take all
such actions as any other party, being advised by counsel, shall reasonably
request, without payment of further consideration, in connection with carrying
out and effectuating the intent and purpose hereof and all transactions and
things contemplated by this Agreement including, without limitation, the
execution and delivery of any and all confirmatory and other instruments in
addition to those to be delivered on the Closing Date, and any and all actions
which may reasonably be necessary or desirable to complete the transactions
contemplated hereby. The parties shall cooperate fully with each other and with
their respective counsel and accountants in connection with any steps required
to be taken as part of their respective obligations under this Agreement.
10.8 RISK OF LOSS. The risk of loss, damage or destruction to any of
the Assets from fire or other casualty or cause shall be borne by the 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 listed
on SCHEDULE 2.18.1 ("Assumed Employees") on the Closing Date as employees or
information technology consultants, as the case may be. 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 Agreement with respect to Ed. 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
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<PAGE>
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 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:
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(a) If to the Seller or the Owners, then to:
Edward N. Myers, Jr.
2141 Rosecrans, Suite 5100
El Segundo, CA 90245
Telecopy Number: (310) 416-9003
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 Jessell, Esquire
(b) If to the Buyer then to:
Metro Information Services of Los Angeles, 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.
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11.5 GOVERNING LAW. THIS AGREEMENT AND ALL QUESTIONS RELATING TO ITS
VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.
11.6 ENTIRE AGREEMENT. This Agreement and the Schedules hereto and
thereto and the other documents delivered hereunder constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and supersede all prior agreements, understandings,
inducements or conditions, express or implied, oral or written, relating to the
subject matter hereof. The express terms hereof control and supersede any course
of performance and/or usage of trade inconsistent with any of the terms hereof.
11.7 EXECUTION: COUNTERPARTS AND FACSIMILE. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile shall be as effective as delivery of a manually executed
counterpart of this Agreement.
11.8 GENDER AND NUMBER. Where appropriate to the context, pronouns of
other terms expressed in one number or gender will be deemed to include all
other numbers or genders. The word "person" will include one or more
individuals, corporations, firms, partnerships, entities or associations. The
use of a word in one tense will include the other tenses, where appropriate to
the context.
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, DPSI shall adopt
and file with the California Secretary of State an Amendment to its Articles of
Incorporation and DPSLLC shall adopt and file with the California Secretary of
State an Amendment to its Articles of Organization 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:
D. P. SPECIALISTS, INC., a California
corporation
By: /s/ Edward N. Myers, Jr.
-----------------------------------
Its: PRESIDENT
D. P. SPECIALISTS LEARNING CENTER,
LLC, a California limited liability
company
By: /s/ Edward N. Myers, Jr.
-----------------------------------
Edward N. Myers, Jr., Member
By: /s/ DeeAnn C. Myers
-----------------------------------
DeeAnn C. Myers, Member
OWNERS:
/s/ Edward N. Myers, Jr.
-----------------------------------
EDWARD N. MYERS, JR.
/s/ DeeAnn C. Myers
-----------------------------------
DEEANN C. MYERS
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<PAGE>
BUYER:
METRO INFORMATION SERVICES
OF LOS ANGELES, INC.
By: /s/ Robert J. Eveleigh
--------------------------------
Its: PRESIDENT
METRO:
METRO INFORMATION SERVICES, INC.
By: /s/ John H. Fain
--------------------------------
Its: PRESIDENT
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<PAGE>
LIST OF SCHEDULES AND EXHIBITS
TO ASSET PURCHASE AGREEMENT
DATED AS OF 1/1/99
BY AND AMONG
D. P. SPECIALISTS, INC.
AND
D.P. SPECIALISTS LEARNING CENTER, LLC
(COLLECTIVELY, THE "SELLER")
AND
EDWARD N. MYERS, JR. AND DEEANN C. MYERS
("OWNER")
AND
METRO INFORMATION SERVICES OF LOS ANGELES, INC.
("BUYER")
AND
METRO INFORMATION SERVICES, INC.
1. Schedule 1.1.1 Tangible Personal Property
2. Schedule 1.1.2 Leased Real Property
3. Schedule 1.1.3-1 Client Contracts
4. Schedule 1.1.3-2 Vendor Contracts
5. Schedule 1.1.3-3 Other Contracts
6. Schedule 1.1.5 Intangible Property
7. Schedule 1.1.10 Proposals
8. Schedule 1.2.5 Employee Personal Property
9. Schedule 1.3.1 Security Interests
10. Schedule 1.4.3 Allocation of Purchase Price
11. Schedule 1.4.4.2.1 Direct Costs
12. Schedule 2.1 Articles of Incorporation and Bylaws of DPSI and Articles
of Organization and Operating Agreement of DPSLLC
13. Schedule 2.6 Breach
14. Schedule 2.7.1 Financial Statements
<PAGE>
15. Schedule 2.7.2 Accounts Receivable
16. Schedule 2.8 Liabilities
17. Schedule 2.9 Taxes
18. Schedule 2.10 Licenses
19. Schedule 2.11 Business Operations
20. Schedule 2.13.3 Good Title
21. Schedule 2.15 Environmental Matters
22. Schedule 2.17 Insurance
23. Schedule 2.18.1 Work Agreements
24. Schedule 2.18.2 Employee Manuals
25. Schedule 2.18.4 Employee Plans
26. Schedule 2.18.8 Independent Contractors
27. Schedule 2.19 Litigation
28. Schedule 2.20 Intangible Property
29. Schedule 2.23 Conflicting Interests
30. Schedule 2.25 Year 2000 Compliance
31. Schedule 8.2.7 Allocation of Stock Options
32. Exhibit A Escrow Agreement
33. Exhibit B Note
34. Exhibit C Letter from Mr. Fain
35. Exhibit D-1 Noncompetition Agreement with Edward N. Myers, Jr.
36. Exhibit D-2 Noncompetition Agreement w/ DeeAnn C. Myers
37. Exhibit E Management Agreement
<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 ENTERS LOS ANGELES MARKET:
ACQUIRES D.P. SPECIALISTS, INC.
VIRGINIA BEACH, VIRGINIA, JANUARY 13, 1999 - METRO INFORMATION SERVICES, INC.
(NASDAQ-MISI) today announced it has acquired D.P. Specialists, Inc. of El
Segundo, California. D.P. Specialists provides information technology
consultants and software engineers to clients in the greater Los Angeles area.
The acquisition adds more than 90 consultants to Metro. D.P. Specialists'
revenue for 1998 exceeded $13 million.
While transaction terms were not announced, Metro expects the acquisition to be
accretive to 1999 earnings. Metro will account for the transaction as a purchase
of assets for cash.
John H. Fain, Metro's CEO said, "The acquisition of D.P. Specialists marks our
first entry into the dynamic Southern California market and our second
acquisition in California. We look forward to supporting the staff and clients
of D.P. Specialists and the prospects for new business in this market."
Continuing, Fain said, "This acquisition together with our December 1998
acquisition of The Avery Group of Menlo Park, California indicates our intention
to be a significant player in major California markets."
Ed Myers, founder and President of D.P. Specialists said, "We selected Metro
because its culture is similar to ours and Metro had no existing presence in our
market. We look forward to being part of a nationwide provider of information
technology services with the resources to offer more opportunities to our staff
and having a greater ability to serve our clients nationwide with the high
quality services they have come to expect from D.P.
Specialists."
Metro now has 35 offices providing a wide range of information technology
consulting and software development services and has more than 2,100 consultants
and a total staff of more than 2,500. 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 in
the Southern California market, and references to business strategy, future
success 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
Palo Alto/Silicon Valley
Los Angeles OHIO
Cincinnati
COLORADO Columbus
Denver
PENNSYLVANIA
DISTRICT OF COLUMBIA Philadelphia
Washington Pittsburgh
FLORIDA PUERTO RICO
Ft. Lauderdale San Juan
Jacksonville
Orlando SOUTH CAROLINA
Tallahassee Columbia
Tampa Greenville
GEORGIA TENNESSEE
Atlanta Memphis
Nashville
ILLINOIS
Chicago TEXAS
Austin
KANSAS/MISSOURI Dallas/Ft. Worth
Kansas City Houston
St. Louis
VIRGINIA
MARYLAND Richmond
Baltimore Roanoke
Virginia Beach/Norfolk
MINNESOTA
Minneapolis WASHINGTON
Seattle
</TABLE>
