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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 8-K
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 23, 1998
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INFOCURE CORPORATION
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(exact name of registrant as specified in chapter)
Delaware 001-12799 58-2271614
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(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1765 The Exchange, Suite 450, Atlanta, GA 30339
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(Address of principal executive office) (zip code)
Registrant's telephone number, including area code: 770-221-9990
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Former Address
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(2970 Clairmont Rd, Suite 950, Atlanta, GA 30329)
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Contents
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Item 2: Acquisition or Disposition of Assets............... 3
Item 7: Financial Statements and Exhibits.................. 3
Signatures.................................................. 4
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Item 2. Acquisition or Disposition of Assets.
On February 6, 1998, InfoCure Corporation ("InfoCure or the "Company"), acquired
all of the outstanding capital stock of PACE Financial Corporation ("PACE"), an
Ohio corporation. PACE markets IBM AS/400 based practice management systems to
medical clinics and hospitals and is headquartered in Cincinnati, Ohio. The
transaction was effective November 1, 1997 for certain accounting, operational
and other purposes. The aggregate consideration paid by the Company in
connection with the acquisition consisted of approximately $6,000,000 in cash
subject to adjustment for certain net worth requirements and the delivery of
warrants to the PACE selling shareholders for the purchase of an aggregate
186,000 shares of Infocure common stock at an exercise price of $9.13 per share
and exercisable in whole or in part at any time on or before February 7, 2008.
An additional payment of up to $4,650,000 will be paid contingent upon
achievement of divisional operating income targets during the 36 month period
commencing November 1, 1997.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of InfoCure Corporation
Financial Statements for InfoCure prepared in accordance with
Regulation S-B and required to be filed pursuant to this section are
not available at this time. Such financial statements will be filed by
InfoCure as soon as practicable by an amended Current Report on Form
8-K which will be filed within 60 days after the filing of this
Current Report on Form 8-K.
(b) Pro Forma Financial Information
The pro forma financial statements of InfoCure required to be filed
pursuant to this section are not available at this time. Such pro
forma financial information will be filed by InfoCure as soon as
practicable by an amended current report on Form 8-K which will be
filed within 60 days after the filing of this Current Report on Form
8-K.
(c) Exhibits
The following exhibits are filed herewith:
Exhibits Number Description
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2.1 Stock Purchase Agreement Among InfoCure Corporation, John
M. Black and Todd J. Humphrey dated January 29, 1998.
99.1 Press Release dated February 9, 1998.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
InfoCure Corporation
/s/ Frederick L. Fine
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Date: February 23, 1998 Frederick L. Fine
Chairman, President and
Chief Executive Officer
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EXECUTION COPY
STOCK PURCHASE AGREEMENT
ENTERED INTO
JANUARY 29, 1998, BUT EFFECTIVE AS OF NOVEMBER 1, 1997
BETWEEN
INFOCURE CORPORATION,
BUYER
AND
JOHN M. BLACK AND TODD J. HUMPHREY,
SELLERS
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TABLE OF CONTENTS
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1. DEFINITIONS...................................................................... 1
2. SALE AND TRANSFER OF SHARES; CLOSING............................................. 7
2.1. Shares............................................................... 7
2.2. Purchase Price....................................................... 7
2.3. Closing.............................................................. 12
2.4. Closing Obligations.................................................. 12
2.5. Adjustment Amount.................................................... 13
2.6. Adjustment Procedure................................................. 13
3. REPRESENTATIONS AND WARRANTIES OF SELLERS........................................ 15
3.1. Organization and Good Standing....................................... 15
3.2. Authority; No Conflict............................................... 15
3.3. Capitalization; No Affiliate......................................... 16
3.4. Financial Statements................................................. 17
3.5. Books and Records.................................................... 17
3.6. Title to Properties; Encumbrances.................................... 18
3.7. Condition and Sufficiency of Assets.................................. 18
3.8. Accounts Receivable.................................................. 19
3.9. Inventory............................................................ 19
3.10. No Undisclosed Liabilities........................................... 19
3.11. Taxes................................................................ 20
3.12. No Material Adverse Change........................................... 21
3.13. Employee Benefits.................................................... 21
3.14. Compliance With Legal Requirements; Governmental Authorizations...... 25
3.15. Legal Proceedings; Orders............................................ 26
3.16. Absence of Certain Changes and Events................................ 28
3.17. Contracts; No Defaults............................................... 29
3.18. Insurance............................................................ 30
3.19. Environmental Matters................................................ 32
3.20. Employees............................................................ 33
3.21. Labor Relations; Compliance.......................................... 33
3.22. Intellectual Property Rights of the Acquired Company................. 34
3.23. Certain Payments..................................................... 40
3.24. Disclosure........................................................... 41
3.25. Relationships With Related Persons................................... 41
3.26. Brokers or Finders................................................... 41
4. REPRESENTATIONS AND WARRANTIES OF BUYER.......................................... 42
4.1. Organization and Good Standing....................................... 42
4.2. Authority; No Conflict............................................... 42
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4.3. Investment Intent.................................................... 42
4.4. Certain Proceedings.................................................. 42
4.5. Brokers or Finders................................................... 43
4.6. Pending or Threatened Litigation..................................... 43
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE....................................... 43
5.1. Access and Investigation............................................. 43
5.2. Operation of the Businesses of the Acquired Company.................. 43
5.3. Negative Covenant.................................................... 44
5.4. Required Approvals................................................... 44
5.5. Notification......................................................... 44
5.6. Payment of Indebtedness by Related Persons........................... 44
5.7. No Negotiation....................................................... 44
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE......................................... 45
6.1. Approvals of Governmental Bodies..................................... 45
6.2. Notification......................................................... 45
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.............................. 45
7.1. Accuracy of Representations.......................................... 45
7.2. Sellers' Performance................................................. 46
7.3. Consents............................................................. 46
7.4. Additional Documents................................................. 46
7.5. No Proceedings....................................................... 46
7.6. No Claim Regarding Stock Ownership or Sale Proceeds.................. 46
7.7. No Prohibition....................................................... 47
7.8. Approval of Buyer's Lender........................................... 47
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE............................. 47
8.1. Accuracy of Representations.......................................... 47
8.2. Buyer's Performance.................................................. 47
8.3. Consents............................................................. 47
8.4. Additional Documents................................................. 47
8.5. No Injunction........................................................ 48
9. TERMINATION...................................................................... 48
9.1. Termination Events................................................... 48
9.2. Effect of Termination................................................ 49
10. INDEMNIFICATION; REMEDIES....................................................... 49
10.1. Survival; Right to Indemnification Not Affected by Knowledge......... 49
10.2. Indemnification and Payment of Damages by Sellers.................... 49
10.3. Indemnification and Payment of Damages by Sellers; Environmental
Matters........................................................... 50
10.4. Indemnification and Payment of Damages by Buyer...................... 51
10.5. Time Limitations..................................................... 51
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10.6. Limitations on Amount - Sellers..................................... 51
10.7. Limitations on Amount - Buyer....................................... 52
10.8. Escrow; Right of Set-Off............................................ 52
10.9. Procedure for Indemnification - Third Party Claims.................. 52
10.10. Procedure for Indemnification - Other Claims........................ 54
11. GENERAL PROVISIONS.............................................................. 54
11.1. Expenses............................................................ 54
11.2. Public Announcements................................................ 54
11.3. Confidentiality..................................................... 54
11.4. Notices............................................................. 55
11.5. Jurisdiction; Service of Process.................................... 56
11.6. Further Assurances.................................................. 56
11.7. Waiver.............................................................. 56
11.8. Entire Agreement and Modification................................... 56
11.9. Disclosure Letter................................................... 57
11.10. Assignments, Successors and No Third-Party Rights................... 57
11.11. Severability........................................................ 57
11.12. Section Headings; Construction...................................... 57
11.13. Time of Essence..................................................... 57
11.14. Governing Law....................................................... 57
11.15. Counterparts........................................................ 57
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INFOCURE - PACE FINANCIAL
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into on this 29th
day of January, 1998, but effective as of November 1, 1997, by INFOCURE
CORPORATION, a Delaware corporation ("Buyer"), JOHN M. BLACK, a resident of the
State of Florida ("Black") and TODD J. HUMPHREY, a resident of the State of
Minnesota ("Humphrey" and, collectively with Black, "Sellers").
RECITALS:
Sellers desire to sell, and Buyer desires to purchase, all of the issued
and outstanding shares (the "Shares") of capital stock of Pace Financial
Corporation, an Ohio corporation (the "Company"), for the consideration and on
the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.:
"ACQUIRED COMPANY" - the Company.
"ADJUSTMENT AMOUNT" - as defined in Section 2.5.
"APPLICABLE CONTRACT" - any Contract which provides for consideration to be
paid or received by the Acquired Company having a fair market value of at least
Five Thousand and No/100 Dollars ($5,000.00) during the term thereof (i) under
which the Acquired Company has or may acquire any rights; (ii) under which the
Acquired Company has or may become subject to any obligation or liability or
(iii) by which the Acquired Company or any of the assets owned or used by it is
or may become bound.
"BALANCE SHEET" - as defined in Section 3.4.
"BEST EFFORTS" - the efforts that a prudent Person desirous of achieving a
result would reasonably use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
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to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions.
"BREACH" - a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been (i) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other
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provision or (ii) occurrence or circumstance that is or was inconsistent with
such representation, warranty, covenant, obligation, or other provision.
"BUYER" - as defined in the first paragraph of this Agreement.
"CLOSING" - as defined in Section 2.3.
"CLOSING DATE" - the date and time as of which the Closing actually takes
place.
"COMPANY" - as defined in the Recitals of this Agreement.
"CONSENT" - any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" - all of the transactions contemplated by this
Agreement, including:
A. The sale of the Shares by Sellers to Buyer;
B. The execution, delivery and performance of the Employment
Agreement, the Restrictive Covenant Agreements, the Sellers' Releases, the
Employee Covenant Agreements and the Escrow Agreement;
C. The performance by Buyer and Sellers of their respective covenants
and obligations under this Agreement;
D. Buyer's acquisition and ownership of the Shares and exercise of
control over the Acquired Company; and
E. Payment of Purchase Price by Buyer to Sellers.
"CONTRACT" - any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"DAMAGES" - as defined in Section 10.2.
"DISCLOSURE LETTER" - the disclosure letter delivered by Sellers to Buyer
concurrently with the execution and delivery of this Agreement.
"EMPLOYMENT AGREEMENTS" - as defined in Section 2.4.A.(iii).
"ENCUMBRANCE" - any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
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"ENVIRONMENT" - soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES" - any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law.
"ENVIRONMENTAL LAW" - any Legal Requirement that requires or relates to:
A. Advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities that could have significant impact on the Environment;
B. Preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment; or
C. Assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of.
"ERISA" - the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGREEMENT" - as defined in Section 2.4.C.
"FACILITIES" - any real property, leaseholds, or other interests currently
or formerly owned or operated by the Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by the Acquired Company.
"GAAP" - generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4. were prepared.
"GOVERNMENTAL AUTHORIZATION" - any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" - any:
A. Nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
B. Federal, state, local, municipal, foreign, or other government;
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C. Governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
D. Multi-national organization or body; or
E. Body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"INTERIM BALANCE SHEET" - as defined in Section 3.4.
"IRC" - the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" - the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
A. Such individual is actually aware of such fact or other matter; or
B. A prudent individual given his position with the Company could be
expected to discover or otherwise become aware of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer within the last five (5) years, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"OCCUPATIONAL SAFETY AND HEALTH LAW" - any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER" - any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" - an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
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A. Such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
B. Such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
C. Such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" - (i) the Articles or Certificate of
Incorporation and the Bylaws of a corporation; (ii) the partnership agreement
and any statement of partnership of a general partnership; (iii) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (iv) the operating agreement and articles of organization of any
limited liability company; (v) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person and (vi)
any amendment to any of the foregoing.
"PERSON" - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" - as defined in Section 3.13.
"PROCEEDING" - any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"RELATED PERSON" - with respect to a particular individual:
A. Each other member of such individual's Family;
B. Any Person that is directly or indirectly controlled by such
individual or one (1) or more members of such individual's Family;
C. Any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
D. Any Person with respect to which such individual or one (1) or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
A. Any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
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B. Any Person that holds a Material Interest in such specified
Person;
C. Each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
D. Any Person in which such specified Person holds a Material
Interest;
E. Any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
F. Any Related Person of any individual described in clause B. or C.
For purposes of this definition, (i) the "Family" of an individual includes
(1) the individual; (2) the individual's spouse and former spouses; (3) the
natural or legal children, siblings or parents of such individual and (4) any
other natural person who resides with such individual and (2) "Material
Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-
3 under the Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least five percent (5%) of the outstanding
voting power of a Person or equity securities or other equity interests
representing at least five percent (5%) of the outstanding equity securities or
equity interests in a Person.
"REPRESENTATIVE" - with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"RESTRICTIVE COVENANT AGREEMENTS" - as defined in Section 2.4.A.(iv).
"SECURITIES ACT" - the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS" - as defined in the first paragraph of this Agreement.
"SELLERS' RELEASES" - as defined in Section 2.4.
"SHARES" - as defined in the Recitals of this Agreement.
"SUBSIDIARY" - with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one (1) or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"TAX RETURN" - any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination,
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assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"THREATENED" - a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
2. SALE AND TRANSFER OF SHARES; CLOSING.
2.1. SHARES. Subject to the terms and conditions of this Agreement, at the
Closing, Sellers will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Sellers.
2.2 PURCHASE PRICE.
A. The purchase price (the "Purchase Price") for the Shares will be
paid:
(i) In cash (the "Cash Purchase Price");
(ii) By delivery of warrants for one hundred eighty-six thousand
(186,000) shares of Buyer's stock (the "Warrant Shares) (the "Warrant Purchase
Price"); and
(iii) By means of an earnout which, if earned, will be paid by
Buyer in cash, in stock, or both in cash and stock (the "Earnout"), as the Buyer
may elect.
B. The Cash Purchase Price is $6,000,000.00 subject to dollar-for-
dollar adjustment by the Adjustment Amount. The procedure for determining the
Adjustment Amount and the procedure for making the adjustment in the Cash
Purchase Price is set out in Sections 2.5. and 2.6. below. Regardless of the
amount of the Cash Purchase Price, $600,000.00 of that price will be paid to the
Escrow Agent at Closing as provided in Section 2.4. below and the balance shall
be paid to the Sellers.
C. The Warrant Purchase Price will be paid by the Buyer delivering a
Warrant Agreement in the form of EXHIBIT A attached hereto to Black for the
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purchase of one hundred sixty-four thousand (164,000) shares of the Buyer's
$0.001 par value voting common stock (the "Buyer Stock") and by delivering to
Humphrey a comparable Warrant Agreement in the form of EXHIBIT B attached hereto
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for the purchase of twenty-two thousand (22,000) shares of the Buyer Stock,
together with a registration rights agreement for the benefit of both of them,
in the form of EXHIBIT C attached hereto (the "Registration Rights Agreement")
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duly executed by Buyer. The Warrant exercise price will be the lesser of: the
average closing price of the Buyer Stock during the five (5) trading days ending
January 28, 1998, and such price during the five (5) trading days ending January
29, 1998.
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D. If it is earned, the Earnout will be determined and paid as
follows:
Buyer will pay to Recipients (as defined below) an additional amount not to
exceed $4,650,000.00, if the Division Income from the Enterprise Division for
the twenty-four (24) month period (such twenty-four (24) month period, or if
extended an additional twelve (12) months as provided in this Section 2.2.
below, such thirty-six (36) period hereinafter referred to as the "Earnout
Period") beginning November 1, 1997 exceeds $3,600,000.00. For purposes of this
Agreement, the Enterprise Division will consist of the Acquired Company, Health
Care Division, Inc. ("HCD") and Millard-Wayne, Inc. ("MWI").
"Division Income" of the Enterprise Division will be the consolidated
"Operating Income" of the Enterprise Division.
"Operating Income" means net income before extraordinary items and income
taxes and after all other charges except:
(i) Unless otherwise approved by John M. Black, any general and
administrative expense (i.e., allocation of Buyer's general corporate overhead)
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attributable to the Buyer and all Subsidiaries of Buyer (including those within
the Enterprise Division); provided, however, Operating Income shall include
reimbursement by the Enterprise Division of expenses at a fair market price
mutually agreed to by Buyer and John M. Black for expenses previously incurred
by the Buyer's Subsidiaries making up the Enterprise Division, but that have for
administrative convenience or efficiency reasons been centralized with the
Buyer; and
(ii) Any amortization of goodwill of Buyer and all Subsidiaries of
Buyer (including those within the Enterprise Division).
In addition, for purposes of calculating the Earnout, Operating Income
shall be INCREASED by the amount by which the Patch Expenses (as defined below)
exceeds the Patch Revenues (as defined below). For purposes hereof, "Patch
Expenses" shall mean the total costs realized by the Enterprise Division during
the Earnout Period for the time incurred by existing employed software
consultants (which time shall be deemed valued at $125.00 per hour) to correct
the existing software utilized by the HCD and MWI AS400 customer base as of
November 1, 1997 (the "MWI/HCD Customer Base"), so as to make such software
Millennium Compliant (as such term is defined in this Agreement) (such software
as corrected hereinafter referred to as the "Patch"). Any costs associated with
improvements in such software that are not directly related solely to causing
such software to become Millennium Compliant shall not be included within the
meaning of "Patch Expenses." For purposes hereof, "Patch Revenues" shall mean
the gross revenues realized by the Enterprise Division during the Earnout Period
with respect to the sale of Patches to the MWI/HCD Customer Base.
In addition, for purposes of calculating the Earnout, Operating Income
shall be FURTHER INCREASED by one hundred percent (100%) of the "Windows Upgrade
Software Revenues" realized by other Subsidiaries of the Buyer which are not
otherwise included in arriving at the Operating Income of the Enterprise
Division during the Earnout Period, but which are originated and consummated by
Enterprise Division sales employees. For purposes hereof, "Windows
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Upgrade Software Revenues" shall mean the total gross revenues from the sale of
the Buyer's offered general medical Windows based software product (the "Windows
Upgrade") to an AS400 customer of Pace, MWI or HCD existing as of November 1,
1997 (all of which customers hereinafter referred to as the "Existing Enterprise
Customer Base").
In addition, for purposes of calculating the Earnout, Operating Income
shall be FURTHER INCREASED by the product of (i) fifteen percent (15%)
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multiplied by (ii) the gross revenues realized during the Earnout Period from
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new service bureau transactions that are originated and consummated by
Enterprise Division sales employees, but referred for servicing to a non-
Enterprise Division Subsidiary of Buyer.
In addition, for purposes of calculating the Earnout, Operating Income
shall be FURTHER INCREASED by one hundred percent (100%) of the "Non-Shared
Medical Affiliated PMS POLCI Operating Income" realized by Polci Acquisition,
Inc. ("Polci") during the Earnout Period. For purposes hereof, "Non-Shared
Medical Affiliated PMS POLCI Operating Income" shall mean the product of (i) the
----------
total gross revenues realized from the sale by Polci of practice management
systems ("Non-Shared Medical Affiliated PMS Systems") to physicians and
physician clinic groups that do not have a relationship (e.g., through a local
----
Hospital sponsored management company or network, etc.) with a Shared Medical
related system at the time such practice management system is installed and that
are not as of November 1, 1997, included in the Enterprise Division Customer
Base multiplied by (ii) a fraction, the numerator of which is the aggregate net
-------------
income before income taxes (whether or not realized from the sale of Non-Shared
Medical Affiliated PMS Systems) realized by Polci during the Earnout Period and
the denominator of which is the total gross revenues (from all sources and
whether or not derived from the sale of Shared Medical Affiliated PMS Systems)
realized by Polci during the Earnout Period.
In addition, for purposes of calculating the Earnout, Operating Income
shall be FURTHER DECREASED by fifty percent (50%) of the "Shared Medical
Affiliated PMS Enterprise Division Operating Income" realized by the Enterprise
Division during the Earnout Period. For purposes hereof, "Shared Medical
Affiliated PMS POLCI Operating Income" shall mean the product of (i) the total
----------
gross revenues realized from the sale by Polci of practice management systems
("Shared Medical Affiliated PMS Systems") to physicians and physician clinic
that have a relationship (e.g., through a local Hospital sponsored management
----
company or network, etc.) with a Shared Medical related system at the time such
practice management system is installed and are not as of November 1, 1997,
included in the Enterprise Division Customer Base multiplied by (ii) a fraction,
----------
the numerator of which is the aggregate net income before income taxes (whether
or not realized from the sale of Shared Medical Affiliated PMS Systems) realized
by Polci during the Earnout Period and the denominator of which is the total
gross revenues (from all sources and whether or not derived from the sale of
Shared Medical Affiliated PMS Systems) realized by Polci during the Earnout
Period.
In addition, for purposes of calculating the Earnout, Operating Income
shall be FURTHER DECREASED by fifty percent (50%) of the "Shared Medical
Affiliated PMS Enterprise Division Operating Income" realized by the Enterprise
Division during the Earnout Period. For purposes
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<PAGE>
hereof, "Shared Medical Affiliated PMS Enterprise Division Operating Income"
shall mean the product of (i) the total gross revenues realized from the sale by
----------
the Enterprise Division of practice management systems ("Shared Medical
Affiliated PMS Systems") to physicians and physician clinic groups that have a
relationship (e.g., through a local Hospital sponsored management company or
----
network, etc.) with a Shared Medical related system at the time such practice
management system is installed and are not as of November 1, 1997, included in
the Enterprise Division Customer Base multiplied by (ii) a fraction, the
-------------
numerator of which is the aggregate net income before income taxes (whether or
not realized from the sale of Shared Medical Affiliated PMS Systems) realized by
the Enterprise Division during the Earnout Period and the denominator of which
is the total gross revenues (from all sources and whether or not derived from
the sale of Shared Medical Affiliated PMS Systems) realized by the Enterprise
Division during the Earnout Period.
Notwithstanding the foregoing, the parties agree that any revenues
generated by the sale of practice management systems by Polci to Asanti or to
Lourdes Hospital (provided the Lourdes Hospital deal is consummated by Polci no
later than ninety (90) days from the Closing Date) will not be attributable to
the Enterprise Division and not included in calculating the Earnout under this
Agreement.
The computation of Operating Income for each of HCD and MWI for the fiscal
year ending January 31, 1997, and the nine (9) month period ending October 31,
1997, is attached hereto as EXHIBIT D. John M. Black will be named president of
---------
the Enterprise Division pursuant to the employment agreement discussed below,
which agreement shall include among other provisions, the grant of general day-
to-day authority and profit and loss responsibility over the management and
operation of the Enterprise Division, including, without limitation, the right
to hire and fire in accordance with standard Buyer policy employees whose
salaries or wages are charged to the Enterprise Division. Buyer will not cause
or allow any material changes in the operation of the Enterprise Division during
the Earnout Period unless approved by John M. Black or, if without his approval,
such material change is required in the view of Buyer for a legitimate business
purpose.
If Division Income does exceed $3,600,000.00 for the Earnout Period, then
for each One and No/100 Dollar ($1.00) of such excess the Recipients will be
paid an additional Five and No/100 Dollars ($5.00) of purchase price. This
amount will be paid no later than one hundred twenty (120) days after the end of
the twenty-four (24) month Earnout Period. Buyer agrees to pay or to cause the
Company to pay the Earnout to each of the following persons listed below (each
such person hereinafter referred to as a "Recipient") and in the following
portions set forth below if and only if (i) John M. Black is employed full-time
by the Company, the Buyer or a Subsidiary of Buyer throughout the entire term of
the Earnout Period and (ii) such Recipient is employed full-time by the Company,
Buyer or a Subsidiary of Buyer throughout the entire term of the Earnout Period.
If the Recipient is John M. Black and he is not so employed, then his portion
shall nevertheless be paid to him if his full-time employment is terminated by
death, disability, or by the Company, Buyer or a Subsidiary of Buyer other than
for cause. In addition, if the Recipient is someone other than John M. Black,
and such Recipient fails to remain employed throughout the Earnout Period as
provided above, then such Recipient's portion of the
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<PAGE>
Earnout shall nevertheless be paid to him or her if (i) John M. Black is also
entitled pursuant to this Agreement to receive his portion of the Earnout Period
and (ii) such Recipient's full-time employment is terminated by death,
disability, or by the Company, Buyer or Subsidiary of Buyer other than for
cause. If John M. Black's employment is terminated, or if such Recipient's
employment is terminated by him or her, either voluntarily or for cause by the
Company, Buyer or a Subsidiary of Buyer prior to the end of the Earnout Period,
then such Recipient shall not be entitled to receive any portion of the Earnout
payable to him or her.
The above limitations do not apply to Todd Humphrey's entitlement to nine
percent (9%) of the twelve percent (12%) of the Earnout allocated to him. Such
entitlement is based only on Todd Humphrey not being terminated for cause or
voluntarily terminating his employment prior to the end of the Earnout Period.
If he is terminated for cause or voluntarily terminates he forfeits his
entitlement to the Earnout and the nine percent (9%) otherwise allocable to him
is not reallocated to any other Recipient.
For the purposes of this provision, the Earnout Period shall be twenty-four
(24) months from the date hereof unless extended by Sellers to thirty-six (36)
months as provided above. "Disability" shall be defined in the same manner as
disability is defined for purposes of obtaining a social security benefit for
total disability and "cause" shall have the same definition as it has in John M.
Black's employment contract with the Company dated of even date herewith.
The portion of the Earnout to be paid and the individuals entitled to
receive such payment if the foregoing conditions are met are:
Tom Taylor 7%
Rick Lane 2%
Charlie Dison 2%
Shirley Black 2%
Dawn Balow 2%
Karen Jones 2%
Paul Kreiser 2%
Todd Humphrey 12%
John M. Black 69%
Should any one of the foregoing forfeit his right to receive part of the
Earnout, then the amount forfeited shall be paid to John M. Black, if John M.
Black has not forfeited his right to his Earnout, and if John M. Black has
forfeited such right, then all amounts of the Earnout forfeited hereunder shall
become the property of the Company.
Notwithstanding the foregoing, Sellers may jointly elect, by delivering
written notice to Buyer at least thirty (30) days prior to the expiration of the
twenty-four (24) month Earnout Period, to extend the Earnout Period for
determining the amount of earnout to be paid to them from twenty-four (24)
months to thirty-six (36) months. If the Earnout Period is extended to thirty-
six (36) months, then Division Income for the thirty-six (36) month period
following closing must exceed $5,400,000.00 for any monies to be due Sellers
from the Earnout. If the thirty-six (36) month period is elected by Sellers,
then amounts, if any, due them under the
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<PAGE>
Earnout would be paid no later than one hundred twenty (120) days after the end
of the thirty-six (36) month period.
The amount, if any, due the Recipients under the Earnout will be paid in
cash, Buyer Stock or any combination of cash and stock at the election of the
Buyer and, if paid in stock, the stock will be valued at the average of the
closing price per share of the Buyer Stock for the five (5) trading days on
which such stock is traded immediately preceding the last day of the Earnout
Period (i.e., October 31, 1999, or, if the Earnout Period is extended as
----
provided above, October 31, 2000).
Any Buyer Stock issued in payment of the Earnout will have the benefit of
the Registration Rights Agreement.
2.3 CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Morris, Manning & Martin, L.L.P.,
Buyer's counsel, at 1600 Atlanta Financial Center, 3343 Peachtree Road, N.E.,
Atlanta, Georgia 30326, at 10:00 a.m. (local time) on February ___, 1998, or at
such other time and place as the parties may agree.
Except as otherwise provided in Section 9., failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.3. will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement.
The parties agree to use their best efforts to cause all conditions to
Closing to occur on or before February 6, 1998, and, if that is done, then the
shares shall be deemed to have been transferred as of the beginning of business
on November 1, 1997, and the twenty-four (24) or thirty-six (36) month periods
referenced in Section 2.2.D. above shall be deemed to have begun on November 1,
1997, and the balance sheet contained in the Measurement Date Financial
Statements shall be dated December 31, 1997, but all documents shall be dated
the date the Closing actually occurs and all representations, warranties and
covenants shall extend to that date.
2.4. CLOSING OBLIGATIONS. At the Closing:
A. Sellers will deliver to Buyer:
(i) Certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures guaranteed by a
commercial bank or by a member firm of the New York Stock Exchange, for transfer
to Buyer;
(ii) Releases in the form of EXHIBIT E executed by Sellers
---------
(collectively, "Sellers' Releases");
(iii) Employment Agreement in the form of EXHIBIT F, executed by
---------
Black (the "Restrictive Covenant Agreement");
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<PAGE>
(iv) Restrictive Covenant Agreements in the form of EXHIBIT G and
---------
EXHIBIT H, executed by Sellers, respectively (collectively, the "Restrictive
- ---------
Covenant Agreements");
(v) Employee Covenants Agreements, executed by Humphrey, Tom
Taylor, Rick Lane, Charlie Dison, Shirley Black, Dawn Balow, Karen Jones and
Paul Kreiser, respectively, in the forms of EXHIBITS I through P, respectively;
---------- -
and
(vi) A certificate executed by Sellers representing and
warranting to Buyer that each of Sellers' representations and warranties in this
Agreement was accurate in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on the Closing Date
(giving full effect to any supplements to the Disclosure Letter that were
delivered by Sellers to Buyer prior to the Closing Date in accordance with
Section 5.5.).
B. Buyer will deliver to Sellers:
(i) The following amounts by wire transfer to accounts specified
by Black and Humphrey, respectively, which amounts represent the relative
ownership (ninety-one percent (91%) versus nine percent (9%)) which the Sellers
have with respect to the Shares: $4,914,000.00 to Black and $486,000.00 to
Humphrey as their respective proportion of the $6,000,000.00; and $257,927.00 to
Black and $25,509.00 to Humphrey as an estimate of their proportion of the
Adjustment Amount;
(ii) The Warrant Agreements and the Registration Rights
Agreements;
(iii) The sum of $600,000.00 to the Escrow Agent referred to in
Section 2.4.C. by wire transfer;
(iv) A certificate executed by Buyer to the effect that, except
as otherwise stated in such certificate, each of Buyer's representations and
warranties in this Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date as if made on
the Closing Date; and
(v) The Employment Agreement, executed by Buyer.
C. Buyer and Sellers will enter into an escrow agreement having a
term of one (1) year in the form of EXHIBIT Q (the "Escrow Agreement") with
---------
SunTrust Bank, Atlanta (the "Escrow Agent").
2.5 ADJUSTMENT AMOUNT. The Adjustment Amount (which may be a positive or
negative number) will be equal to (i) the stockholders' equity of the Acquired
Company as of October 31, 1997, determined in accordance with GAAP minus (ii)
$1,600,000.00 and computed as otherwise agreed by Buyer and Sellers.
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<PAGE>
2.6. ADJUSTMENT PROCEDURE.
A. Sellers will cooperate with BDO Seidman, L.L.P., the Buyer's
certified public accountants, in the preparation of audited financial statements
("Measurement Date Financial Statements") of the Acquired Company as of October
31, 1997, and for the period from the date of the Balance Sheet through October
31, 1997, including a computation of consolidated stockholders' equity as of
October 31, 1997. The cost of this audit will be paid by Buyer and BDO Seidman,
L.L.P. shall complete the Measurement Date Financial Statements no later than
March 31, 1998, and deliver the statements to Sellers.
Sellers shall review the Measurement Date Financial Statements with Buyer
and attempt to resolve any objections. If within thirty (30) days following
their receipt of the Measurement Date Financial Statements, John M. Black, on
behalf of Sellers, has not given Buyer final notice of his objection to the
Measurement Date Financial Statements (such final notice must contain a
statement of the basis of Sellers' objection and that the notice is "final"),
then the consolidated stockholders' equity reflected in the Measurement Date
Financial Statements will be used in computing the Adjustment Amount.
If Sellers give such notice of objection, then the issues in dispute will
be submitted to Deloitte & Touche, certified public accountants (the
"Accountants"), for resolution. If issues in dispute are submitted to the
Accountants for resolution:
(i) Each party will furnish to the Accountants such work papers and
other documents and information relating to the disputed issues as the
Accountants may request and are available to that party or its Subsidiaries (or
its independent public accountants) and will be afforded the opportunity to
present to the Accountants any material relating to the determination and to
discuss the determination with the Accountants;
(ii) The determination (which shall be made within sixty (60) days
following delivery of such notice of objection) by the Accountants, as set forth
in a notice delivered to both parties by the Accountants, will be binding and
conclusive on the parties; and
(iii) Buyer and Sellers will each bear fifty percent (50%) of the
fees of the Accountants for such determination.
B. On the tenth (10th) business day following the final determination
of the Adjustment Amount, if the Adjustment Amount is greater than $283,436.00
Buyer will pay the difference to Sellers, and if the Adjustment Amount is less
than $283,436.00, Sellers will pay the difference to Buyer.
All payments will be made together with simple interest at the Wall Street
Journal prime rate on the Closing Date beginning on the Closing Date and ending
on the date of payment. Payments must be made in immediately available funds.
Payments to Sellers must be made in the manner and will be allocated in the
proportions set forth in Section 2.4.B.(i). Payments to Buyer must be made by
wire transfer to such bank account as Buyer will specify in accordance with
Section 11.4.
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<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers represent and warrant to Buyer as follows:
3.1. ORGANIZATION AND GOOD STANDING.
A. PART 3.1 of the Disclosure Letter contains a complete and accurate
list for the Acquired Company of its name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each stockholder and the number of
shares held by each).
The Acquired Company is a corporation duly organized, validly existing, and
in good standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts.
Except as provided in PART 3.1 of the Disclosure Letter, the Acquired
Company is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
B. Sellers have delivered to Buyer copies of the Organizational
Documents of the Acquired Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT.
A. This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms.
Upon the execution and delivery by Sellers of the Escrow Agreement, the
Employment Agreements, the Sellers' Releases, the Employee Covenants Agreements
and the Restrictive Covenant Agreement (collectively, the "Sellers' Closing
Documents"), the Sellers' Closing Documents will constitute the legal, valid,
and binding obligations of Sellers, enforceable against Sellers in accordance
with their respective terms.
Sellers have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the Sellers' Closing
Documents and to perform their obligations under this Agreement and the Sellers'
Closing Documents.
B. Except as set forth in PART 3.2 of the Disclosure Letter, neither
the execution and delivery of this Agreement nor the consummation or performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) Contravene, conflict with, or result in a violation of (1) any
provision of the Organizational Documents of the Acquired Company or (2) any
resolution adopted by the board of directors or the stockholders of the Acquired
Company;
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<PAGE>
(ii) Contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Acquired Company or either
Seller, or any of the assets owned or used by the Acquired Company, may be
subject;
(iii) Contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Acquired Company or that otherwise relates to
the business of, or any of the assets owned or used by, the Acquired Company;
(iv) Contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(v) Result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the Acquired Company.
Except as set forth in PART 3.2 of the Disclosure Letter, neither Seller
nor the Acquired Company is or will be required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
C. Except as set forth in PART 3.2 of the Disclosure Letter, Sellers
are acquiring the Warrants for their own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act. Each
Seller is an "accredited investor" as such term is defined in Rule 501(a) under
the Securities Act.
3.3 CAPITALIZATION; NO AFFILIATE. The authorized equity securities of the
Company consist of seven hundred fifty (750) shares of common stock, no par
value, of which two hundred (200) shares are issued and outstanding and
constitute the Shares.
Sellers are and will be on the Closing Date the record and beneficial
owners and holders of the Shares, free and clear of all Encumbrances. Black
owns one hundred eighty-two (182) of the Shares and Humphrey owns eighteen (18)
of the Shares.
All of the outstanding equity securities of the Acquired Company has been
duly authorized and validly issued and are fully paid and nonassessable. There
are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of the Acquired Company. PART 3.3 of the
Disclosure Letter describes such Contracts that have been canceled.
None of the outstanding equity securities or other securities of the
Acquired Company was issued in violation of the Securities Act or any other
Legal Requirement. Except as set forth
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<PAGE>
in PART 3.3 of the Disclosure Letter, the Acquired Company does not own, or have
any Contract to acquire, any equity securities or other securities of any Person
or any direct or indirect equity or ownership interest in any other business.
3.4. FINANCIAL STATEMENTS. Sellers have delivered to Buyer, all of which
are attached hereto as PART 3.4 of the Disclosure Letter:
A. Unaudited balance sheets of the Acquired Company as of September
30 in each of the years 1996 through 1997, and the related statements of income,
changes in stockholders' equity, and cash flow for each of the fiscal years then
ended, together with the report thereon of Munninghoff, Lange & Company,
Certified Public Accountants, independent certified public accountants;
B. An unaudited balance sheet of the Acquired Company as of December
31, 1997 (the "Interim Balance Sheet"), and the related consolidated statements
of income, changes in stockholders' equity, and cash flow for the three (3)
months then ended, together with the report thereon of Munninghoff, Lange &
Company, Certified Public Accountants; and
C. An audited balance sheet of the Acquired Company as of September
30, 1997 (the "Balance Sheet"), and the related unaudited consolidated
statements of income, changes in stockholders' equity, and cash flow for the
fiscal year then ended, including in each case the notes thereto.
Such financial statements and notes fairly present the financial condition
and the results of operations, changes in stockholders' equity, and cash flow of
the Acquired Company as at the respective dates of and for the periods referred
to in such financial statements, all in accordance with GAAP, subject, in the
case of interim financial statements, to normal recurring year-end adjustments
(the effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in the Balance Sheet).
The financial statements referred to in this Section 3.4. reflect the
consistent application of such accounting principles throughout the periods
involved.
3.5. BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Acquired Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices.
The minute book of the Acquired Company contains accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Acquired Company, and no meeting of any such stockholders, Board of
Directors, or committee has been held for and no material action has been taken
at any meeting for which minutes have not been prepared and are not contained in
such minute book. At the Closing, all of these books and records will be in the
possession of the Acquired Company.
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<PAGE>
3.6. TITLE TO PROPERTIES; ENCUMBRANCES. PART 3.6 of the Disclosure Letter
contains a complete and accurate list of all real property, leaseholds, or other
interests therein owned by the Acquired Company. Sellers have delivered or made
available to Buyer copies of the deeds and other instruments (as recorded) by
which the Acquired Company acquired such real property and interests, and copies
of all title insurance policies, opinions, abstracts, and surveys in the
possession of Sellers or the Acquired Company and relating to such property or
interests.
The Acquired Company owns (with good and marketable title in the case of
real property, subject only to the Encumbrances permitted by this Section) all
the properties and assets (whether real, personal, or mixed and whether tangible
or intangible) that it purports to own located in the facilities owned or
operated by the Acquired Company or reflected as owned in the books and records
of the Acquired Company, including all of the properties and assets reflected in
the Balance Sheet and the Interim Balance Sheet (except for assets held under
capitalized leases disclosed or not required to be disclosed in PART 3.6 of the
Disclosure Letter and personal property sold since the date of the Balance Sheet
and the Interim Balance Sheet, as the case may be, in the Ordinary Course of
Business).
The Acquired Company owns (with good and marketable title in the case of
real property, subject only to the Encumbrances permitted by this Section) all
of the properties and assets purchased or otherwise acquired by the Acquired
Company since the date of the Balance Sheet (except for personal property
acquired and sold since the date of the Balance Sheet in the Ordinary Course of
Business and consistent with past practice), which subsequently purchased or
acquired properties and assets (other than inventory and short-term investments)
are listed in PART 3.6 of the Disclosure Letter.
The Acquired Company owns no real property. All material properties and
assets reflected in the Balance Sheet and the Interim Balance Sheet are free and
clear of all Encumbrances except, with respect to all such properties and
assets:
A. Mortgages or security interests shown on the Balance Sheet or the
Interim Balance Sheet as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists;
B. Mortgages or security interests incurred in connection with the
purchase of property or assets after the date of the Interim Balance Sheet (such
mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists; and
C. Liens for current taxes not yet due.
3.7. CONDITION AND SUFFICIENCY OF ASSETS. The buildings, plants,
structures, and equipment of the Acquired Company are structurally sound, are in
good operating condition and repair, and are adequate for the uses to which they
are being put, and none of such buildings, plants, structures, or equipment is
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The building, plants,
structures, and equipment of the Acquired Company are sufficient for the
continued conduct of the
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Acquired Company's businesses after the Closing in substantially the same manner
as conducted prior to the Closing.
3.8. ACCOUNTS RECEIVABLE. All accounts receivable of the Acquired Company
that are reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Acquired Company as of the Closing Date (collectively,
the "Accounts Receivable") represent or will represent valid obligations arising
from sales actually made or services actually performed in the Ordinary Course
of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will
be as of the Closing Date current and collectible net of the respective reserves
shown on the Balance Sheet or the Interim Balance Sheet or on the accounting
records of the Acquired Company as of the Closing Date (which reserves are
adequate and calculated consistent with past practice and, in the case of the
reserve as of the Closing Date, will not represent a greater percentage of the
Accounts Receivable as of the Closing Date than the reserve reflected in the
Interim Balance Sheet represented of the Accounts Receivable reflected therein
and will not represent a material adverse change in the composition of such
Accounts Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been
or will be collected in full, without any set-off, within one hundred fifty
(150) days after the day on which it first becomes due and payable. To the
Knowledge of Sellers, there is no contest, claim, or right of set-off, other
than returns in the Ordinary Course of Business, under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Buyer agrees to assign to Sellers any Accounts Receivable
that is not collected within the foregoing one hundred fifty (150) day period.
PART 3.8 of the Disclosure Letter contains a complete and accurate list of
all Accounts Receivable as of the date of the Interim Balance Sheet, which list
sets forth the aging of such Accounts Receivable.
3.9. INVENTORY. All inventory of the Acquired Company, whether or not
reflected in the Balance Sheet or the Interim Balance Sheet, consists of a
quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Balance Sheet or
the Interim Balance Sheet or on the accounting records of the Acquired Company
as of the Closing Date, as the case may be.
The quantities of each item of inventory (whether raw materials, work-in-
process, or finished goods) are not excessive, but are reasonable in the present
circumstances of the Acquired Company.
3.10. NO UNDISCLOSED LIABILITIES. Except as set forth in PART 3.10 of the
Disclosure Letter, the Acquired Company has no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Balance Sheet or the Interim Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the respective dates thereof.
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3.11. TAXES.
A. The Acquired Company has filed or caused to be filed (on a timely
basis since inception) all Tax Returns that are or were required to be filed by
or with respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. Sellers have delivered
or made available to Buyer copies of, and PART 3.11 of the Disclosure Letter
contains a complete and accurate list of, all such Tax Returns relating to
income or franchise taxes filed after December 31, 1993.
The Acquired Company has paid, or made provision for the payment of, all
Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Sellers or any Acquired
Company, except such Taxes, if any, as are listed in PART 3.11 of the Disclosure
Letter and are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Balance Sheet and
the Interim Balance Sheet.
B. The United States federal and state income Tax Returns of the
Acquired Company subject to such Taxes have been audited by the IRS or relevant
state tax authorities or are closed by the applicable statute of limitations for
all taxable years through September 30, 1993. PART 3.11 of the Disclosure
Letter contains a complete and accurate list of all audits of all such Tax
Returns, including a reasonably detailed description of the nature and outcome
of each audit.
All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in PART 3.11 of the Disclosure
Letter, are being contested in good faith by appropriate proceedings. PART 3.11
of the Disclosure Letter describes all adjustments to the United States federal
income Tax Returns filed by the Acquired Company or any group of corporations
including the Acquired Company for all taxable years ending after 1992, and the
resulting deficiencies proposed by the IRS. Except as described in PART 3.11 of
the Disclosure Letter, no Seller or the Acquired Company has given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of the Acquired Company or for which the Acquired
Company may be liable.
C. The charges, accruals, and reserves with respect to Taxes on the
respective books of the Acquired Company are adequate (determined in accordance
with GAAP) and are at least equal to that Acquired Company's liability for
Taxes. There exists no proposed tax assessment against the Acquired Company
except as disclosed in the Balance Sheet or in PART 3.11 of the Disclosure
Letter.
No consent to the application of Section 341(f)(2) of the IRC has been
filed with respect to any property or assets held, acquired, or to be acquired
by the Acquired Company. All Taxes that the Acquired Company is or was required
by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Body or other Person.
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D. All Tax Returns filed by (or that include on a consolidated
basis) the Acquired Company are true, correct, and complete. There is no tax
sharing agreement that will require any payment by the Acquired Company after
the date of this Agreement. No Acquired Company is, or within the five (5) year
period preceding the Closing Date has been, an "S" corporation.
3.12. NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet,
there has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Acquired Company, and no
event has occurred or circumstance exists that may result in such a material
adverse change.
3.13. EMPLOYEE BENEFITS.
A. As used in this Section 3.13., the following terms have the
meanings set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit Obligation
owed, adopted, or followed by the Acquired Company or an ERISA Affiliate of the
Acquired Company.
"COMPANY PLAN" means all Plans of which an Acquired Company or an
ERISA Affiliate of the Acquired Company is or was a Plan Sponsor, or to which
the Acquired Company or an ERISA Affiliate of the Acquired Company otherwise
contributes or has contributed, or in which the Acquired Company or an ERISA
Affiliate of the Acquired Company otherwise participates or has participated.
All references to Plans are to Company Plans unless the context requires
otherwise.
"COMPANY VEBA" means a VEBA whose members include employees of the
Acquired Company or any ERISA Affiliate of the Acquired Company.
"ERISA AFFILIATE" means, with respect to the Acquired Company, any
other person that, together with the Company, would be treated as a single
employer under IRC (S) 414.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA (S) 3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, or agents, other than obligations, arrangements, and
practices that are Plans. Other Benefit Obligations include consulting
agreements under which the compensation paid does not depend upon the amount of
service rendered, sabbatical policies, severance payment policies, and fringe
benefits within the meaning of IRC (S) 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
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"PENSION PLAN" has the meaning given in ERISA (S) 3(2)(A).
"PLAN" has the meaning given in ERISA (S) 3(3).
"PLAN SPONSOR" has the meaning given in ERISA (S) 3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to meet the
requirements of IRC (S) 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to Title
IV of ERISA, 29 U.S.C. (S) 1301 et seq., other than Multi-Employer Plans.
-- ---
"VEBA" means a voluntary employees' beneficiary association under
IRC (S) 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA (S) 3(1).
B. (i) PART 3.13(I) of the Disclosure Letter contains a complete
and accurate list of all Company Plans, Company Other Benefit Obligations and
identifies as such all Company Plans that are Qualified Plans.
(ii) PART 3.13(II) of the Disclosure Letter contains a complete
and accurate list of (1) all ERISA Affiliates of the Acquired Company and (2)
all Plans of which any such ERISA Affiliate is or was a Plan Sponsor, in which
any such ERISA Affiliate participates or has participated, or to which any such
ERISA Affiliate contributes or has contributed.
(iii) PART 3.13(III) of the Disclosure Letter sets forth the
financial cost of all obligations owed under any Company Plan or Company Other
Benefit Obligation that is not subject to the disclosure and reporting
requirements of ERISA.
C. Sellers have delivered to Buyer, or will deliver to Buyer within
ten (10) days of the date of this Agreement:
(i) All documents that set forth the terms of each Company
Plan, Company Other Benefit Obligation and of any related trust, including (1)
all plan descriptions and summary plan descriptions of Company Plans for which
Sellers or the Acquired Company are required to prepare, file, and distribute
plan descriptions and summary plan descriptions and (2) all summaries and
descriptions furnished to participants and beneficiaries regarding Company Plans
and Company Other Benefit Obligations for which a plan description or summary
plan description is not required;
(ii) All personnel, payroll, and employment manuals and
policies;
(iii) All collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including both pension and
welfare benefits) by the Acquired Company and the ERISA Affiliates of the
Acquired Company, and all
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collective bargaining agreements pursuant to which contributions are being made
or obligations are owed by such entities;
(iv) A written description of any Company Plan or Company
Other Benefit Obligation that is not otherwise in writing;
(v) All registration statements filed with respect to any
Company Plan;
(vi) All insurance policies purchased by or to provide
benefits under any Company Plan;
(vii) All contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors that relate
to any Company Plan, Company Other Benefit Obligation;
(viii) All reports submitted within the three (3) years
preceding the date of this Agreement by third party administrators, actuaries,
investment managers, consultants, or other independent contractors with respect
to any Company Plan or Company Other Benefit Obligation;
(ix) All notifications to employees of their rights under
ERISA (S) 601 et seq. and IRC (S) 4980B;
-- ---
(x) The Form 5500 filed in each of the most recent three (3)
plan years with respect to each Company Plan, including all schedules thereto
and the opinions of independent accountants;
(xi) All notices that were given by any Acquired Company or
any ERISA Affiliate of an Acquired Company or any Company Plan to the IRS, the
PBGC, or any participant or beneficiary, pursuant to statute, within the three
(3) years preceding the date of this Agreement, including notices that are
expressly mentioned elsewhere in this Section 3.13.;
(xii) All notices that were given by the IRS, the PBGC, or the
Department of Labor to any Acquired Company, any ERISA Affiliate of the Acquired
Company, or any Company Plan within the three (3) years preceding the date of
this Agreement; and
(xiii) With respect to Qualified Plans, the most recent
determination letter for each Plan of the Acquired Company that is a Qualified
Plan.
D. Except as set forth in PART 3.13(IV) of the Disclosure Letter:
(i) Neither the Acquired Company nor any ERISA Affiliates of
the Acquired Company has ever established, maintained, contributed to or
otherwise participated in or had an obligation to maintain, contribute to, or
otherwise participate in any Company VEBA, Multi-Employer Plan, Title IV Plan,
defined benefit plan (as defined in ERISA (S) 3(35)), or Welfare Plan that
provides post-retirement or retiree health benefits.
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(ii) The Acquired Company has performed all of its obligations
under all Company Plans and Company Other Benefit Obligations. The Acquired
Company has made appropriate entries in its financial records and statements for
all obligations and liabilities under such Plans and Obligations that have
accrued, but are not due.
(iii) No statement, either written or oral, has been made by
the Acquired Company to any Person with regard to any Plan or Other Benefit
Obligation that was not in accordance with the Plan or Other Benefit Obligation
and that could have an adverse economic consequence to the Acquired Company or
to Buyer.
(iv) To the Knowledge of Sellers, the Acquired Company, with
respect to all Company Plans and Company Other Benefits Obligations, are, and
each Company Plan and Company Other Benefit Obligation is, in material
compliance with ERISA, the IRC, and other applicable Laws including the
provisions of such Laws expressly mentioned in this Section 3.13., and with any
applicable collective bargaining agreement.
To the Knowledge of Sellers:
(1) No transaction prohibited by ERISA (S) 406 and no
"prohibited transaction" under IRC (S) 4975(c) have occurred with respect to any
Company Plan.
(2) No Seller or Acquired Company has any liability to
the IRS with respect to any Plan, including any liability imposed by Chapter 43
of the IRC.
(3) No Seller or Acquired Company has any liability to
the PBGC with respect to any Plan or has any liability under ERISA (S) 502.
(4) All filings required by ERISA and the IRC as to each
Plan have been timely filed, and all notices and disclosures to participants
required by either ERISA or the IRC have been timely provided.
(5) All contributions and payments made or accrued with
respect to all Company Plans and Company Other Benefit Obligations are
deductible under IRC (S) 162 or (S) 404. No amount, or any asset of any Company
Plan, is subject to tax as unrelated business taxable income.
(v) Each Company Plan can be terminated within thirty (30)
days, without payment of any additional contribution or amount not otherwise
provided for under the terms of the Company Plan.
(vi) [INTENTIONALLY LEFT BLANK].
(vii) To the Knowledge of Sellers, no event has occurred or
circumstance exists that could currently result in a material increase in
premium costs of Company Plans and Company Other Benefit Obligations that are
insured, or a material increase in benefit costs of such Plans and Obligations
that are self-insured.
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(viii) Other than claims for benefits submitted by participants
or beneficiaries, no claim against, or legal proceeding involving, any Company
Plan or Company Other Benefit Obligation is pending or, to Sellers' Knowledge,
is Threatened.
(ix) [INTENTIONALLY LEFT BLANK].
(x) To the Knowledge of Sellers, each Qualified Plan of the
Acquired Company is qualified in form and operation under IRC (S) 401(a); each
trust for each such Plan is exempt from federal income tax under IRC (S) 501(a).
No event has occurred or circumstance exists that will or could give rise to
disqualification or loss of tax-exempt status of any such Plan or trust.
(xi) No Acquired Company or any ERISA Affiliate of the
Acquired Company has adopted any amendment to treat a Plan as terminated.
(xii) Sellers and the Acquired Company have complied with the
provisions of ERISA (S) 601 et seq. and IRC (S) 4980B.
-- ---
(xiii) No payment that is owed or may become due to any
director, officer, employee, or agent of the Acquired Company will be non-
deductible to the Acquired Company or subject to tax under IRC (S) 280G or (S)
4999; nor will the Acquired Company be required to "gross up" or otherwise
compensate any such Person because of the imposition of any excise tax on a
payment to such Person not otherwise provided for under the terms of a Company
Plan.
(xiv) The consummation of the Contemplated Transactions will
not result in the payment, vesting, or acceleration of any benefit not otherwise
provided for under the terms of a Company Plan.
3.14. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
A. Except as set forth in PART 3.14 of the Disclosure Letter:
(i) To the Knowledge of each Seller, after due inquiry, the
Acquired Company is, and at all times since December 31, 1992, has been, in full
compliance with each Legal Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or use of any of its
assets;
(ii) To the Knowledge of each Seller, after due inquiry, no
event has occurred or circumstance exists that (with or without notice or lapse
of time) (1) may constitute or result in a violation by the Acquired Company of,
or a failure on the part of the Acquired Company to comply with, any Legal
Requirement or (2) may give rise to any obligation on the part of the Acquired
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
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(iii) The Acquired Company has not received, at any time since
December 31, 1992, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (1) any actual,
alleged, possible, or potential violation of, or failure to comply with, any
Legal Requirement or (2) any actual, alleged, possible, or potential obligation
on the part of the Acquired Company to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature, the failure in either case of
which would have a material adverse effect on the Acquired Company or its
assets.
B. PART 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the Acquired
Company or that otherwise relates to the business of, or to any of the assets
owned or used by, the Acquired Company. Each Governmental Authorization listed
or required to be listed in PART 3.14 of the Disclosure Letter is valid and in
full force and effect. Except as set forth in PART 3.14 of the Disclosure
Letter:
(i) The Acquired Company is, and at all times since December
31, 1992, has been, in full compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be identified in PART
3.14 of the Disclosure Letter;
(ii) No event has occurred or circumstance exists that may
(with or without notice or lapse of time) (1) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any Governmental Authorization listed or required to be listed in PART 3.14
of the Disclosure Letter or (2) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or any modification to,
any Governmental Authorization listed or required to be listed in PART 3.14 of
the Disclosure Letter;
(iii) The Acquired Company has not received, at any time since
December 31, 1992, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (1) any actual,
alleged, possible, or potential violation of or failure to comply with any term
or requirement of any Governmental Authorization or (2) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) All applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
PART 3.14 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in PART 3.14 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit the Acquired Company to lawfully conduct and operate its business in
the manner it currently conducts and operates such business and to permit the
Acquired Company to own and use its assets in the manner in which it currently
owns and uses such assets.
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3.15. LEGAL PROCEEDINGS; ORDERS.
A. Except as set forth in PART 3.15 of the Disclosure Letter, there
is no pending Proceeding:
(i) That has been commenced by or against the Acquired
Company or that otherwise relates to or may affect the business of, or any of
the assets owned or used by, the Acquired Company; or
(ii) That challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Sellers and the Acquired Company, (i) no such
Proceeding has been Threatened and (ii) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding. Sellers have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in PART
3.15 of the Disclosure Letter. The Proceedings listed in PART 3.15 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of the Acquired Company.
B. Except as set forth in PART 3.15 of the
Disclosure Letter:
(i) There is no Order to which any of the Acquired Company,
or any of the assets owned or used by the Acquired Company, is subject;
(ii) Neither Seller is subject to any Order that relates to
the business of, or any of the assets owned or used by, the Acquired Company;
and
(iii) No officer, director, agent, or employee of the Acquired
Company is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Acquired Company.
C. Except as set forth in PART 3.15 of the Disclosure Letter:
(i) The Acquired Company is, and at all times since December
31, 1992, has been, in full compliance with all of the terms and requirements of
each Order to which it, or any of the assets owned or used by it, is or has been
subject;
(ii) No event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which the
Acquired Company, or any of the assets owned or used by the Acquired Company, is
subject; and
(iii) The Acquired Company has not received, at any time since
December 31, 1992, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding any actual, alleged,
possible, or potential
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violation of, or failure to comply with, any term or requirement of any Order to
which the Acquired Company, or any of the assets owned or used by the Acquired
Company, is or has been subject.
3.16. ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in PART
3.16 of the Disclosure Letter, since the date of the Balance Sheet, the Acquired
Company has conducted its business only in the Ordinary Course of Business and
there has not been any:
A. Change in the Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
the Acquired Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Acquired Company of any shares of any such capital
stock; or declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock;
B. Amendment to the Organizational Documents of the Acquired
Company;
C. Payment by the Acquired Company of any bonuses or increases in
salaries or other compensation to any stockholder, director, officer, or (except
in the Ordinary Course of Business) employee or entry into any employment,
severance, or similar Contract with any director, officer, or employee;
D. Adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Acquired Company;
E. Damage to or destruction or loss of any asset or property of the
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Acquired Company, taken as a whole;
F. Entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement or (ii) any Contract or transaction
involving a total remaining commitment by or to the Acquired Company of at least
Five Thousand and No/100 Dollars ($5,000.00);
G. Sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Acquired
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Acquired Company, including the sale,
lease, or other disposition of any of the Software and Intangibles;
H. Cancellation or waiver of any claims or rights with a value to
the Acquired Company in excess of Five Thousand and No/100 Dollars ($5,000.00);
I. Material change in the accounting methods used by the Acquired
Company; or
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J. Agreement, whether oral or written, by the Acquired Company to
do any of the foregoing.
3.17. CONTRACTS; NO DEFAULTS.
A. PART 3.17(A) of the Disclosure Letter contains a complete and
accurate list, and Sellers have previously delivered to Buyer (or will deliver
to Buyer upon request), true and complete copies of each Applicable Contract
and:
(i) Each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Software and Intangibles;
(ii) Each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
(iii) Each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Acquired Company with any other Person;
(iv) Each power of attorney that is currently effective and
outstanding;
(v) Each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Acquired
Company other than in the Ordinary Course of Business; and
(vi) Each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
B. Except as set forth in PART 3.17(B) of the Disclosure Letter:
(i) Neither Seller (and no Related Person of either Seller)
has or may acquire any rights under, and neither Seller has or may become
subject to any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, the Acquired Company; and
(ii) To the Knowledge of Sellers and the Acquired Company, no
officer, director, agent, employee, consultant, or contractor of the Acquired
Company is bound by any Contract that purports to limit the ability of such
officer, director, agent, employee, consultant, or contractor to (1) engage in
or continue any conduct, activity, or practice relating to the business of the
Acquired Company or (2) assign to the Acquired Company or to any other Person
any rights to any invention, improvement, or discovery.
C. Except as set forth in PART 3.17(D) of the Disclosure Letter,
each Contract identified or required to be identified in PART 3.17(A) of the
Disclosure Letter is in full force and effect and is valid and enforceable in
accordance with its terms.
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D. Except as set forth in PART 3.17(D) of the Disclosure Letter:
(i) The Acquired Company is in material compliance with all
applicable terms and requirements of each Contract under which the Acquired
Company has or had any obligation or liability or by which the Acquired Company
or any of the assets owned or used by the Acquired Company is or was bound;
(ii) Each other Person that has or had any obligation or
liability under any Contract under which the Acquired Company has or had any
rights is in material compliance with all applicable terms and requirements of
such Contract;
(iii) To the Knowledge of Sellers, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give the
Acquired Company or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
(iv) The Acquired Company has not given to or received from
any other Person any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach of, or
default under, any Contract that has not been fully resolved.
E. There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Acquired Company under current or completed Contracts with any Person and no
such Person has made written demand for such renegotiation.
F. The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Acquired Company has been entered into
in the Ordinary Course of Business and has been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation of
any Legal Requirement.
3.18. INSURANCE.
A. Sellers have delivered to Buyer:
(i) True and complete copies of all policies of insurance to
which the Acquired Company is a party or under which the Acquired Company, or
any director of the Acquired Company, is or has been covered at any time within
the two (2) years preceding the date of this Agreement;
(ii) True and complete copies of all pending applications for
policies of insurance; and
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(iii) Any statement by the auditor of the Acquired Company's
financial statements with regard to the adequacy of such entity's coverage or of
the reserves for claims.
B. PART 3.18(B) of the Disclosure Letter describes:
(i) Any self-insurance arrangement by or affecting the
Acquired Company, including any reserves established thereunder;
(ii) Any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Acquired Company; and
(iii) All obligations of the Acquired Company to third parties
with respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
C. PART 3.18(C) of the Disclosure Letter sets forth, by year, for
the current policy year and each of the two (2) preceding policy years:
(i) A summary of the loss experience under each policy
exceeding Five Thousand and No/100 Dollars ($5,000.00).
(ii) A statement describing each claim under an insurance
policy for an amount in excess of Five Thousand and No/100 Dollars ($5,000.00),
which sets forth:
(1) The name of the claimant;
(2) A description of the policy by insurer, type of
insurance, and period of coverage; and
(3) The amount and a brief description of the claim.
(iii) A statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of such claims.
D. Except as set forth on PART 3.18(D) of the Disclosure Letter:
(i) All policies to which the Acquired Company is a party or
that provide coverage to either Seller, the Acquired Company, or any director or
officer of the Acquired Company:
(1) Are valid, outstanding, and enforceable;
(2) Taken together, in the reasonable judgment of
Sellers, provide adequate insurance coverage for the assets and the operations
of the Acquired Company for all risks to which the Acquired Company is normally
exposed;
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(3) Are sufficient for compliance with all Legal
Requirements and Contracts to which the Acquired Company is a party or by which
any of them is bound;
(4) Will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(5) Do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of the Acquired
Company.
(ii) Neither Seller nor the Acquired Company has received (1)
any refusal of coverage or any notice that a defense will be afforded with
reservation of rights or (2) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
(iii) The Acquired Company has paid all premiums due, and have
otherwise performed all of their respective obligations, under each policy to
which the Acquired Company is a party or that provides coverage to the Acquired
Company or director thereof.
(iv) The Acquired Company has given notice to the insurer of
all claims that may be insured thereby.
3.19. ENVIRONMENTAL MATTERS. Except as set forth in PART 3.19 of the
Disclosure Letter:
A. To the Knowledge of Sellers and the Acquired Company, the
Acquired Company is, and at all times has been, in material compliance with, and
is not in material violation of or liable under, any Environmental Law.
B. To the Knowledge of Sellers and the Acquired Company, there are
no pending or Threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which Sellers or the Acquired Company has or had an
interest.
C. Neither Seller nor the Acquired Company have Knowledge of any
basis to expect, nor has any of them received, any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to any
alleged, actual, or potential violation or failure to comply with any
Environmental Law.
D. The representations and warranties set forth in this Section
3.20 are Seller's and the Acquired Company's sole and exclusive representations
and warranties with respect to Environmental Laws and Environmental, Health and
Safety Liabilities and all other representations and warranties contained in
Section 3. of this Agreement shall not apply to environmental matters,
Environmental Laws or Environmental, Health and Safety Liabilities.
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3.20. EMPLOYEES.
A. PART 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee or director of the
Acquired Company, including each employee on leave of absence or layoff status:
employer; name; original date of hire; job title; current compensation and any
change in compensation since December 31, 1996; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under the
Acquired Company's pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other Employee Pension Benefit
Plan or Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
B. No employee or director of the Acquired Company is, to Sellers'
Knowledge, a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition, or proprietary rights agreement,
between such employee or director and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects or will affect (i) the performance
of his duties as an employee or director of the Acquired Company or (ii) the
ability of the Acquired Company to conduct its business, including any
Proprietary Rights Agreement with Sellers or the Acquired Company by any such
employee or director. To Sellers' Knowledge, no director, officer, or other key
employee of the Acquired Company intends to terminate his employment with the
Acquired Company.
C. PART 3.20 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee or director
of the Acquired Company, or its dependents, receiving benefits or scheduled to
receive benefits in the future: name, pension benefit, pension option election,
retiree medical insurance coverage, retiree life insurance coverage and other
benefits.
3.21. LABOR RELATIONS; COMPLIANCE. Since December 31, 1992, no Acquired
Company has been or is a party to any collective bargaining or other labor
Contract. Since December 31, 1992, there has not been, there is not presently
pending or existing, and to Sellers' Knowledge there is not Threatened any
Proceeding against or affecting the Acquired Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee with the Equal
Employment Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting the Acquired Company or its premises.
The Acquired Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and health
and plant closing.
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The Acquired Company is not liable for the payment of any compensation,
damages, taxes, fines, penalties, or other amounts, however, designated, for
failure to comply with any of the foregoing Legal Requirements.
3.22. INTELLECTUAL PROPERTY RIGHTS OF THE ACQUIRED COMPANY.
A. Definitions. As used in this Agreement, and in addition to any
-----------
other terms defined in this Agreement, the following terms shall have the
following meanings.
(i) "Software" means any computer program, operating system,
--------
applications system, firmware or software of any nature, whether operational,
under development or inactive, including all object code, source code, technical
manuals, compilation procedures, execution procedures, flow charts, programmers
notes, user manuals and other documentation thereof, whether in machine-readable
form, programming language or any other language or symbols and whether stored,
encoded, recorded or written on disk, tape, film, memory device, paper or other
media of any nature.
(ii) "Owned Software" means all Software owned by the Acquired
--------------
Company, whether purchased from a third party, developed by or on behalf of the
Acquired Company, currently under development or otherwise.
(iii) "Customer Software" means all Software, other than the
-----------------
Owned Software, that is, directly or through Distributors, either (x) offered or
provided to customers of the Acquired Company or (y) used by the Acquired
Company to provide information or services to customers of the Acquired Company
for a fee.
(iv) "Acquired Company Software" means the Owned Software and
-------------------------
the Customer Software.
(v) "Other Software" means all Software, other than the
--------------
Acquired Company Software, that is licensed by the Acquired Company from third
parties or otherwise used by the Acquired Company for any purpose whatsoever.
(vi) "Distributor" means the Acquired Company, any value added
-----------
reseller, original equipment manufacturer, distributor, or similar entity.
(vii) "Distributor Agreement" means a license agreement or
---------------------
other written or oral agreement or permission between the Acquired Company and a
Distributor.
(viii) "Customer License Agreement" means a license agreement or
--------------------------
other written or oral agreement or permission, other than a Distributor
Agreement, by which the Acquired Company has granted to any third party any
rights regarding the Acquired Company Software or any Intangibles thereof.
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(ix) "Supplier License Agreement" means a license agreement or
--------------------------
other written or oral agreement or permission by which a third party has granted
to the Acquired Company any rights regarding any Software or any Intangibles
thereof.
(x) "Registration" means any governmental filing, whether
------------
federal, state, local, foreign or otherwise, related to Software or any
Intangible, including, without limitation, all registrations of patents,
copyrights, trademarks, service marks, trade names, and maskworks, and all re-
issues, divisions, continuations, renewals, extensions and continuations-in-part
thereof.
(xi) "Intangible" means:
----------
(1) Patents, patent applications, patent disclosures,
all re-issues, divisions, continuations, renewals, extensions and continuation-
in-parts thereof and improvements thereto;
(2) Trademarks, service marks, trade dress, logos, trade
names, and corporate names and registrations and applications for Registration
thereof and all goodwill associated therewith;
(3) Copyrights, Registrations thereof and applications
for Registration thereof;
(4) Maskworks, Registrations thereof and applications
for Registration thereof;
(5) Trade secrets and confidential business information
(including ideas, formulas, compositions, inventions, whether patentable or
unpatentable and whether or not reduced to practice, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, flow charts, processes, ideas, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing, and
business data, pricing and cost information, business and marketing plans, and
customer and supplier lists and information);
(6) Other proprietary rights;
(7) All income, royalties, damages and payments due at
Closing or thereafter with respect to the Owned Software, Customer Software,
Other Software, or other Intangibles and all other rights thereunder including,
without limitation, damages and payments for past, present or future
infringements or misappropriations thereof, the right to sue and recover for
past, present or future infringements or misappropriations thereof;
(8) All rights to use all of the foregoing forever; and
(9) All other rights in, to, and under the foregoing in
all countries.
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B. Identification.
--------------
(i) PART 3.22(B)(I) of the Disclosure Letter contains an
accurate and complete list and description (including a name, product
description, the language in which it is written and the type of hardware
platform(s) on which it runs) of the following:
(1) All Owned Software.
(2) All Customer Software.
(3) All Other Software.
(ii) PART 3.22(B)(II) also:
(1) Contains a complete list of each Registration of the
Acquired Company;
(2) Identifies each pending Registration of the Acquired
Company;
(3) Identifies each application for or Registration
regarding the Intangibles and Software of the Acquired Company which has been
withdrawn, abandoned, or have lapsed or been denied; and
(4) Specifies any advice to the Acquired Company with
respect to each such Registration or protectability of the Intangibles and
Software, summarizing such advice. PART 3.22 indicates the Acquired Company's
ownership of such items or the source of the Acquired Company's right to use
such items.
(iii) PART 3.22(B)(III) also identifies each Customer License
Agreement, together with the term thereof, and each source code escrow agreement
entered into by the Acquired Company and relating to any Intangibles and
Software identified in such Customer License Agreement.
(iv) PART 3.22(B)(IV) also identifies each Distributor
Agreement, together with the term thereof, and each source code escrow agreement
entered into by the Acquired Company and relating to any Intangibles and
Software identified in such Distributor Agreement.
(v) PART 3.22(B)(V) also identifies each Supplier License
Agreement, together with the term thereof, all royalties or other amounts due
thereon, and each source code escrow agreement entered into by the provider or
licensor thereof running to the benefit of the Acquired Company and relating to
any Intangibles and Software identified in such Supplier License Agreement.
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C. Ownership and Right to License.
------------------------------
(i) Except as set forth in PART 3.22(C) of the Disclosure
Letter, the Acquired Company has good and marketable title to the Owned Software
and Intangibles attributable to the Owned Software, and have the full right to
use all of the Customer Software and Other Software, and Intangibles
attributable thereto, as used or required to operate the Acquired Company's
business as currently conducted and as contemplated in the future in accordance
with the Acquired Company's written business plans, free and clear of any liens,
claims, charges or encumbrances which would affect the use of such Software in
connection with the operation of the Acquired Company's business as currently
conducted and as contemplated in the future in accordance with the Acquired
Company's written business plans.
(ii) No rights of any third party not previously obtained are
necessary to market, license, sell, modify, update, and/or create derivative
works for any Acquired Company Software.
(iii) None of the Software or Intangibles listed in PART 3.22
of the Disclosure Letter, or their respective past or current uses by or through
the Acquired Company has violated or infringed upon, or is violating or
infringing upon, any Software, patent, copyright, trade secret or other
Intangible of any Person. Except as set forth on PART 3.22(C), the Acquired
------------
Company has adequately maintained all trade secrets and copyrights with respect
to such Software.
The Acquired Company has performed all obligations imposed upon it with
regard to the Customer Software and Other Software which are required to be
performed by it on or prior to the date hereof, and none of the Acquired Company
nor, to the Knowledge of Sellers and the Acquired Company, any other party, is
in breach of or default thereunder in any respect, nor to the Sellers' Knowledge
or the Knowledge of the Acquired Company, is there any event which with notice
or lapse of time or both would constitute a default thereunder.
(iv) To the Knowledge of Sellers and the Acquired Company, no
Person is violating or infringing upon, or has violated or infringed upon at any
time, any of the Acquired Company's rights to any of the Software or Intangibles
listed in PART 3.22.
(v) None of the Software or Intangibles listed in PART 3.22
are owned by or registered in the name of Sellers, any current or former owner,
shareholder, partner, director, executive, officer, employee, salesman, agent,
customer, or contractor of Sellers or the Acquired Company, nor does any such
Person have any interest therein or right thereto, including, but not limited
to, the right to royalty payments. Except as set forth in PART 3.22, none of the
Acquired Company has granted any third party any exclusive rights related to any
Owned Software.
(vi) No litigation is pending and no claim has been made
against the Acquired Company or, to the Knowledge of Sellers and the Acquired
Company, is threatened, which contests the right of the Acquired Company to sell
or license to any Person or entity or use any of the Owned Software, Customer
Software or Other Software. No former employer of any
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employee or consultant of the Acquired Company has made a claim against the
Acquired Company or, to the Knowledge of Sellers and the Acquired Company
against any other Person, that the Acquired Company or such employee or
consultant is misappropriating or violating the Intangibles of such former
employer.
(vii) The Acquired Company is not a party to or bound by and,
upon the consummation of the transactions contemplated by this Agreement, Buyer
will not be a party to or bound by (as a result of any acts or agreements of the
Acquired Company), any license or other agreement requiring the payment by the
Acquired Company or its assigns of any royalty or license payment, excluding
such agreements relating to the Customer Software or Other Software to the
extent such royalty or license payment is expressly set forth in PART 3.22.
(viii) [INTENTIONALLY LEFT BLANK].
(ix) No Software other than the Owned Software, Customer
Software and Other Software is required to operate the business of the Acquired
Company as currently conducted and as contemplated in the future in accordance
with the written business plans of the Acquired Company.
(x) The Acquired Company has supplied Buyer, or will upon
request supply, with correct and complete copies of all Customer License
Agreements, Distributor Agreements and Supplier License Agreements.
(xi) PART 3.22(C) identifies all presently employed
individuals compensated at an annual rate in excess of $60,000.00 who have
contributed to the development of the Owned Software.
D. Performance.
-----------
(i) Except as set forth in PART 3.22(D)(I) of the Disclosure
Letter, the Owned Software:
(1) Performs in all material respects in accordance with
all published specifications for the Owned Software;
(2) Complies in all material respects with all other
published documentation, descriptions and literature with respect to the Owned
Software; and
(3) Complies in all material respects with all
representations, warranties and other requirements specified in all Customer
License Agreements and Distributor Agreements.
Except as set forth in PART 3.22(D)(I), no claim has been made or, to the
Knowledge of the Acquired Company and the Sellers, is Threatened, that the
Acquired Company Software fails to perform as set forth in the immediately
preceding sentence.
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<PAGE>
(ii) Except as set forth in PART 3.22(D)(II), the Acquired
Company has complied with all Customer License Agreements, Distributor
Agreements and Supplier License Agreements, and to the Knowledge of the Acquired
Company and the Sellers, except as set forth in PART 3.22, all other parties to
such agreements have complied with all provisions thereof and no default or
event of default exists under any of the Customer License Agreements,
Distributor Agreements and Supplier License Agreements.
(iii) Except as set forth in PART 3.22(D)(III), with respect to
the Owned Software:
(1) The Acquired Company maintains machine-readable
master-reproducible copies, reasonably complete technical documentation and/or
user manuals for the most current releases or versions thereof and for all
earlier releases or versions thereof currently being supported by the Acquired
Company.
(2) In each case, the machine-readable copy
substantially conforms to the corresponding source code listing.
(3) Such Owned Software is written in the language set
forth in PART 3.22, for use on the hardware set forth in PART 3.22 with standard
operating systems.
(4) Such Acquired Company Software can be maintained and
modified by reasonable competent programmers familiar with such language,
hardware and operating systems.
E. Millennium Compliance. Except as set forth in PART 3.22(E), the
---------------------
Owned Software and to the Knowledge of the Acquired Company and the Sellers, the
Customer Software and Other Software, are "Millennium Compliant." For the
purposes of this Agreement "Millennium Compliant" means:
(i) The functions, calculations, and other computing
processes of the Owned Software, Customer Software and Other Software
(collectively, "Processes") perform in an accurate manner regardless of the date
in time on which the Processes are actually performed and regardless of the date
input to the Owned Software, Customer Software, and Other Software, whether
before, on, or after January 1, 2000, and whether or not the dates are affected
by leap years;
(ii) The Owned Software, Customer Software, and Other Software
accept, store, sort, extract, sequence, and otherwise manipulate date inputs and
date values, and return and display date values, in an accurate manner
regardless of the dates used, whether before, on, or after January 1, 2000;
(iii) The Owned Software, Customer Software, and Other Software
will function without interruptions caused by the date in time on which the
Processes are actually performed or by the date input to the Owned Software,
Customer Software, and Other Software, whether before, on, or after January 1,
2000;
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(iv) The Owned Software, Customer Software, and Other Software
accept and respond to two (2) digit year and four (4) digit year date input in a
manner that resolves any ambiguities as to the century in a defined,
predetermined, and accurate manner;
(v) The Owned Software, Customer Software, and Other Software
display, print, and provide electronic output of date information in ways that
are unambiguous as to the determination of the century; and
(vi) The Owned Software, Customer Software, and Other Software
have been tested by the Acquired Company to determine whether the Owned
Software, Customer Software, and Other Software are Millennium Compliant. The
Acquired Company shall notify Buyer immediately of the results of any tests or
any claim or other information that indicates the Owned Software, Customer
Software, and Other Software are not Millennium Compliant.
F. Trade Secrets and Confidential Information. Without limiting any
------------------------------------------
of the foregoing representations and warranties contained in the preceding
subparagraphs of this Section 3.22., to the Knowledge of the Acquired Company
and the Sellers, no current or former owner, shareholder, partner, director,
executive, officer, employee, salesman, agent, customer, or contractor of the
Acquired Company or the Sellers has disclosed to (without proper obligation of
confidentiality) or otherwise used or utilized on behalf of any Person other
than the Acquired Company, any trade secrets or proprietary information,
including, without limitation, the source codes for the Acquired Company
Software.
All Customer License Agreements, Distributor Agreements, software
development agreements, and any other written agreement between the Acquired
Company and any third party in which trade secrets or confidential information
of the Acquired Company, the Acquired Company's customers, agents, or suppliers
are disclosed binds the recipient thereof to take reasonable steps to protect
the proprietary rights of the Acquired Company and its customers, agents, and
suppliers in such trade secrets and confidential information.
3.23. CERTAIN PAYMENTS. Since December 31, 1992, neither the Acquired
Company nor any director, officer, agent, or employee of the Acquired Company,
or to Sellers' Knowledge any other Person associated with or acting for or on
behalf of the Acquired Company, has directly or indirectly:
A. Made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business; (ii) to pay for favorable treatment for business
secured; (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Acquired Company or any Affiliate of the
Acquired Company or (iv) in violation of any Legal Requirement.
B. Established or maintained any fund or asset that has not been
recorded in the books and records of the Acquired Company.
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3.24. DISCLOSURE.
A. No representation or warranty of Sellers in this Agreement and
no statement in the Disclosure Letter omits to state a material fact necessary
to make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
B. No notice given pursuant to Section 5.5. will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
C. There is no fact known to either Seller that has specific
application to either Seller or the Acquired Company (other than general
economic or industry conditions) and that materially adversely affects the
assets, business, prospects, financial condition, or results of operations of
the Acquired Company that has not been set forth in this Agreement or the
Disclosure Letter.
3.25. RELATIONSHIPS WITH RELATED PERSONS. Except as set forth in PART 3.25
of the Disclosure Letter, no Seller or any Related Person of Sellers or of the
Acquired Company has, or since December 31, 1992, has had, any interest in any
property (whether real, personal, or mixed and whether tangible or intangible),
used in or pertaining to the Acquired Company's businesses.
Except as set forth in PART 3.25 of the Disclosure Letter, no Seller or any
Related Person of Sellers or of the Acquired Company is, or since December 31,
1992, has owned (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in, a Person that has:
A. Had business dealings or a material financial interest in any
transaction with the Acquired Company; or
B. Engaged in competition with the Acquired Company with respect to
any line of the products or services of the Acquired Company (a "Competing
Business") in any market presently served by the Acquired Company except for
less than one percent (1%) of the outstanding capital stock of any Competing
Business that is publicly traded on any recognized exchange or in the over-the-
counter market.
Except as set forth in PART 3.25 of the Disclosure Letter, no Seller or any
Related Person of Sellers or of the Acquired Company is a party to any Contract
with, or has any claim or right against, the Acquired Company.
3.26. BROKERS OR FINDERS. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Sellers as follows:
4.1. ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
4.2. AUTHORITY; NO CONFLICT.
A. This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Escrow Agreement and the
Employment Agreements (collectively, the "Buyer's Closing Documents"), the
Buyer's Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents.
B. Except as set forth in SCHEDULE 4.2, neither the execution and
------------
delivery of this Agreement by Buyer nor the consummation or performance of any
of the Contemplated Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) Any provision of Buyer's Organizational Documents;
(ii) Any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) Any Legal Requirement or Order to which Buyer may be
subject; or
(iv) Any Contract to which Buyer is a party or by which Buyer
may be bound.
Except as set forth in SCHEDULE 4.2, Buyer is not and will not be required
------------
to obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3. INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
4.4. CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
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4.5. BROKERS OR FINDERS. Buyer and its officers and agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Sellers harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
4.6. PENDING OR THREATENED LITIGATION. There is no Proceeding, Order or
litigation pending or, except for potential claims arising as a result of
software developed or licensed by the Buyer or a Subsidiary of the Buyer which
is not Millennium Compliant (as defined in Section 3.22.E., but giving effect to
such software of the Buyer or its Subsidiary rather than the Owned Software,
Customer Software or Other Software referenced therein), Threatened against
Buyer or any Subsidiary of Buyer that would have a material adverse effect on
its business, results of operations or financial condition.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE.
5.1. ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Sellers will, and will cause the Acquired Company and its
Representatives to:
A. Afford Buyer and its Representatives and prospective lenders and
their Representatives (collectively, "Buyer's Advisors") full and free access to
the Acquired Company's personnel, properties (including subsurface testing),
contracts, books and records, and other documents and data, provided Buyer
provides prior reasonable notice and conducts such investigation during regular
business hours;
B. Furnish Buyer and Buyer's Advisors with copies of all such
contracts, books and records, and other existing documents and data as Buyer may
reasonably request; and
C. Furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information as Buyer may reasonably
request.
5.2. OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANY. Between the
date of this Agreement and the Closing Date, Sellers will, and will cause the
Acquired Company to:
A. Conduct the business of the Acquired Company only in the
Ordinary Course of Business;
B. Use their Best Efforts to preserve intact the current business
organization of the Acquired Company, keep available the services of the current
officers, employees, and agents of the Acquired Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Acquired
Company;
C. Confer with Buyer concerning operational matters of a material
nature; and
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D. Otherwise report periodically to Buyer concerning any material
changes in the business, operations, and finances of the Acquired Company.
5.3. NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, and will cause the Acquired Company not to, without the prior consent of
Buyer, take any affirmative action, or fail to take any reasonable action within
their or its control, as a result of which any of the changes or events listed
in Section 3.16. is likely to occur.
5.4. REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Sellers will, and will cause the Acquired Company to, make all
filings required by Legal Requirements to be made by them in order to consummate
the Contemplated Transactions. Between the date of this Agreement and the
Closing Date, Sellers will, and will cause the Acquired Company to:
A. Cooperate with Buyer with respect to all filings that Buyer
reasonably elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions; and
B. Cooperate with Buyer in obtaining all consents identified in
SCHEDULE 4.2.
- ------------
5.5. NOTIFICATION. Between the date of this Agreement and the Closing
Date, each Seller will promptly notify Buyer in writing if such Seller or the
Acquired Company becomes aware of any fact or condition that causes or
constitutes a Breach of any of Sellers' representations and warranties as of the
date of this Agreement, or if such Seller or the Acquired Company becomes aware
of the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition.
Should any such fact or condition require any change in the Disclosure
Letter if the Disclosure Letter were dated the date of the occurrence or
discovery of any such fact or condition, Sellers will promptly deliver to Buyer
a supplement to the Disclosure Letter specifying such change. During the same
period, each Seller will promptly notify Buyer of the occurrence of any Breach
of any covenant of Sellers in this Section 5. or of the occurrence of any event
that may make the satisfaction of the conditions in Section 7. impossible or
unlikely.
5.6. PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Sellers will cause all indebtedness owed to the
Acquired Company by either Seller or any Related Person of either Seller to be
paid in full prior to Closing.
5.7. NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9., Sellers will not, and will cause the Acquired
Company and each of their Representatives not to, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to
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any transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of the Acquired Company, or any of the capital
stock of the Acquired Company, or any merger, consolidation, business
combination, or similar transaction involving the Acquired Company.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1. APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after
the date of this Agreement, Buyer will, and will cause each of its Related
Persons to, make all filings required by Legal Requirements to be made by them
to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will, and
will cause each Related Person to:
A. Cooperate with Sellers with respect to all filings that Sellers
are required by Legal Requirements to make in connection with the Contemplated
Transactions; and
B. Cooperate with Sellers in obtaining all consents identified in
PART 3.2 of the Disclosure Letter; provided that this Agreement will not require
Buyer to dispose of or make any change in any portion of its business or to
incur any other burden to obtain a Governmental Authorization.
6.2. NOTIFICATION. Between the date of this Agreement and the Closing
Date, Buyer will promptly notify each Seller in writing if Buyer becomes aware
of any fact or condition that causes or constitutes a Breach of any of Buyer's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition.
Prior to Closing, Buyer will promptly notify each Seller of the occurrence
of any Breach of any covenant of Buyer in this Section 6. or of the occurrence
of any event that may make the satisfaction of the conditions in Section 8.
impossible or unlikely.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1. ACCURACY OF REPRESENTATIONS. All of Sellers' representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Disclosure Letter.
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7.2. SELLERS' PERFORMANCE.
A. All of the covenants and obligations that Sellers are required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
B. Each document required to be delivered pursuant to Section 2.4.
must have been delivered, and each of the other covenants and obligations in
Sections 5.4. and 5.8. must have been performed and complied with in all
respects.
C. The Acquired Company shall have generated $1,300,000.00 or more
of net income before taxes and employee bonuses for the twelve (12) month period
ending September 30, 1997.
7.3. CONSENTS. Each of the Consents identified in PART 3.2 of the
Disclosure Letter, and each Consent identified in SCHEDULE 4.2, must have been
------------
obtained and must be in full force and effect.
7.4. ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:
A. An opinion of Thompson, Hine & Flory, L.L.P., dated the Closing
Date, in the form of EXHIBIT R; and
---------
B. Such other documents as Buyer may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4.A.; (ii) evidencing the accuracy of any of Sellers' representations
and warranties; (iii) evidencing the performance by either Seller of, or the
compliance by either Seller with, any covenant or obligation required to be
performed or complied with by such Seller; (iv) evidencing the satisfaction of
any condition referred to in this Section 7.; (v) evidencing compliance with
applicable securities laws or (vi) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
7.5. NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (i) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated Transactions
or (ii) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the Contemplated Transactions.
7.6. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must not
have been made or Threatened by any Person any claim asserting that such Person
(i) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in, any of the Acquired Company or (ii) is entitled to all or
any portion of the Purchase Price payable for the Shares.
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7.7. NO PROHIBITION. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (i) any applicable Legal
Requirement or Order or (ii) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
7.8. APPROVAL OF BUYER'S LENDER. FINOVA Capital Corporation or such
other institution that is acting as the senior lender to Buyer at the time the
Closing is scheduled shall have approved the Contemplated Transactions and shall
have loaned to the Buyer and its Affiliates sufficient money to fund the Cash
Purchase Price and shall have agreed to lend to the Buyer sufficient money to
fund the Earnout, subject to usual and customary conditions imposed on the Buyer
in order to draw-down funds on the Buyer's line of credit.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE.
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
8.1. ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2. BUYER'S PERFORMANCE.
A. All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
B. Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4. and must have made the cash payments
required to be made by Buyer pursuant to Sections 2.4.B.(i) and 2.4.B.(ii).
8.3. CONSENTS. Each of the Consents identified in PART 3.2 of the
Disclosure Letter must have been obtained and must be in full force and effect.
8.4. ADDITIONAL DOCUMENTS. Buyer must have caused the following
documents to be delivered to Sellers:
A. An opinion of Morris, Manning & Martin, a Limited Liability
Partnership, dated the Closing Date, in the form of EXHIBIT S;
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B. Delivery by Buyer of documentation to the satisfaction of
Sellers that Tom Taylor has been granted a fully vested incentive stock option
to purchase fourteen thousand (14,000) shares of Buyer's stock; and
C. Such other documents as Sellers may reasonably request for the
purpose of:
(i) Enabling their counsel to provide the opinion referred to
in Section 7.4.A.;
(ii) Evidencing the accuracy of any representation or warranty
of Buyer;
(iii) Evidencing the performance by Buyer of, or the compliance
by Buyer with, any covenant or obligation required to be performed or complied
with by Buyer;
(iv) Evidencing the satisfaction of any condition referred to
in this Section 8.; or
(v) Otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.5. NO INJUNCTION. There must not be in effect any Legal Requirement or
any injunction or other Order that (i) prohibits the sale of the Shares by
Sellers to Buyer and (ii) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
9. TERMINATION.
9.1. TERMINATION EVENTS.
This Agreement may, by notice given prior to or at the Closing, be
terminated:
A. By either Buyer or Sellers if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived;
B. (i) By Buyer if any of the conditions in Section 7. has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or
(ii) By Sellers, if any of the conditions in Section 8. has
not been satisfied of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Sellers to comply with
their obligations under this Agreement) and Sellers have not waived such
condition on or before the Closing Date;
C. By mutual consent of Buyer and Sellers; or
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D. By either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before February
15, 1998, or such later date as the parties may agree upon.
9.2. EFFECT OF TERMINATION. Each party's right of termination under
Section 9.1. is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 9.1., all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 11.1. and 11.3. will survive; provided,
however, that if this Agreement is terminated by a party because of the Breach
of the Agreement by the other party or because one (1) or more of the conditions
to the terminating party's obligations under this Agreement is not satisfied as
a result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES.
10.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations, warranties, covenants, and obligations in this Agreement, the
Disclosure Letter, the supplements to the Disclosure Letter, the certificate
delivered pursuant to Section 2.4.A.(v), and any other certificate or document
delivered pursuant to this Agreement will survive the Closing.
The right to indemnification, payment of Damages or other remedy based on
such representations, warranties, covenants, and obligations will not be
affected by any investigation conducted with respect to, or any Knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation.
The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of Damages, or
other remedy based on such representations, warranties, covenants, and
obligations, except in the event of the delivery on or before Closing by an
officer of Buyer of a written waiver of such condition or compliance with such
covenant.
10.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Sellers, jointly
and severally, will indemnify and hold harmless Buyer, the Acquired Company, and
their respective successors and assigns (collectively, the "Indemnified
Persons") for, and will pay to the Indemnified Persons the amount of, any loss,
liability, claim, damage (including incidental and consequential damages),
expense (including costs of investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
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A. Any Breach of any representation or warranty made by Sellers in
this Agreement (without giving effect to any supplement to the Disclosure
Letter), the Disclosure Letter, the supplements to the Disclosure Letter, or any
other certificate or document delivered by Sellers pursuant to this Agreement;
B. Any Breach of any representation or warranty made by Sellers in
this Agreement as if such representation or warranty were made on and as of the
Closing Date without giving effect to any supplement to the Disclosure Letter,
other than any such Breach that is disclosed in a supplement to the Disclosure
Letter and is expressly identified in the certificate delivered pursuant to
Section 2.4.A.(v) as having caused the condition specified in Section 7.1. not
to be satisfied;
C. Any Breach by either Seller of any covenant or obligation of
such Seller in this Agreement;
D. Any product shipped or manufactured by, or any services provided
by, the Acquired Company prior to the Closing Date;
E. Any failure of the Acquired Company to have qualified to do
business in the twenty-two (22) states referenced in PART 3.1 of the Disclosure
Schedule; or
F. Any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with either Seller or the Acquired
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.2. will not be exclusive of or
limit any other remedies that may be available to Buyer or the other Indemnified
Persons.
10.3. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS; ENVIRONMENTAL
MATTERS.
In addition to the provisions of Section 10.2., Sellers, jointly and
severally, will indemnify and hold harmless Buyer, the Acquired Company, and the
other Indemnified Persons for, and will pay to Buyer, the Acquired Company, and
the other Indemnified Persons the amount of, any Damages (including costs of
clean-up, containment, or other remediation required by a third party) arising,
directly or indirectly, from or in connection with:
A. Any Release (as defined in 42 U.S.C. (S) 9601(22) of any
Hazardous Substances (as defined in 42 U.S.C. (S) 9601(14)) on, to, in, under or
from the Facilities which occurred on or before the Closing Date and which was
caused by Sellers or the Acquired Company.
B. Any act or omission of Sellers or the Acquired Company occurring
on or before the Closing Date which creates liability under Environmental Laws.
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C. The assertion of off-site liabilities under Environmental Laws
whose cause originates as a result of action, omissions, or conditions caused by
the Acquired Company or Sellers on or before the Closing Date.
Sellers are entitled to control any Clean-up, any related Proceeding, and,
except as provided in the following sentence, any other Proceeding with respect
to which indemnity may be sought under this Section 10.3. The procedure
described in Section 10.9. will apply to any claim solely for monetary damages
relating to a matter covered by this Section 10.3.
10.4. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers, and will pay to Sellers the amount of any
Damages arising, directly or indirectly, from or in connection with:
A. Any Breach of any representation or warranty made by Buyer in
this Agreement or in any certificate delivered by Buyer pursuant to this
Agreement;
B. Any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement; or
C. Any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
10.5. TIME LIMITATIONS. If the Closing occurs, Sellers will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, other than those in Sections 3.3. (Capitalization), 3.11.
(Taxes), 3.13. (Employee Benefits) and 3.19. (Environmental Matters), unless on
or before December 31, 1999, Buyer notifies Sellers of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Buyer.
A claim with respect to Section 3.3., 3.11., 3.13. or 3.19., or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to the
Closing Date, may be made at any time.
If the Closing occurs, Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before December 31, 1999, Sellers notify Buyer of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Sellers.
10.6. LIMITATIONS ON AMOUNT - SELLERS. Sellers will have no liability
(for indemnification or otherwise) with respect to the matters described in
clause A. clause B. or, to the extent relating to any failure to perform or
comply prior to the Closing Date, clause C. of Section 10.2. until the total of
all Damages with respect to such matters exceeds $37,500.00, and
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in no event shall the aggregate liability of Sellers under Section 10 exceed the
total Purchase Price.
Sellers will have no liability (for indemnification or otherwise) with
respect to the matters described in clause D. of Section 10.2. until the total
of all Damages with respect to such matters exceeds $37,500.00, and in no event
shall the aggregate liability of Sellers under Section 10. exceed the total
Purchase Price.
However, this Section 10.6. will not apply to any Breach of any of Sellers'
representations and warranties of which either Seller had Knowledge at any time
prior to the date on which such representation and warranty is made or any
intentional Breach by either Seller of any covenant or obligation, and Sellers
will be jointly and severally liable for all Damages with respect to such
Breaches.
10.7. LIMITATIONS ON AMOUNT - BUYER. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in clause A.
or B. of Section 10.4. until the total of all Damages with respect to such
matters exceeds $37,500.00.
However, this Section 10.7. will not apply to any Breach of any of Buyer's
representations and warranties of which Buyer had Knowledge at any time prior to
the date on which such representation and warranty is made or any intentional
Breach by Buyer of any covenant or obligation, and Buyer will be liable for all
Damages with respect to such Breaches.
10.8. ESCROW; RIGHT OF SET-OFF. Upon notice to Sellers specifying in
reasonable detail the basis for such set-off, Buyer may give notice of a Claim
in such amount under the Escrow Agreement. Neither the exercise of nor the
failure to give a notice of a Claim under the Escrow Agreement will constitute
an election of remedies or limit Buyer in any manner in the enforcement of any
other remedies that may be available to it.
10.9. PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
A. Promptly after receipt by an indemnified party under Section
10.2., 10.4. or (to the extent provided in the last sentence of Section 10.3.),
Section 10.3. of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
B. If any Proceeding referred to in Section 10.9.A. is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate or (ii) the indemnifying party fails to
provide reasonable
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assurance to the indemnified party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10. for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation.
If the indemnifying party assumes the defense of a Proceeding:
(i) It will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification;
(ii) No compromise or settlement of such claims may be effected by
the indemnifying party without the indemnified party's consent unless (1) there
is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (2) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and
(iii) The indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent.
If notice is given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within ten (10) days after the
indemnified party's notice is given, give notice to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
be bound by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
C. Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
D. Sellers hereby consent to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on Sellers with respect to such a claim anywhere in the
world.
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10.10. PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
11. GENERAL PROVISIONS.
11.1. EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
Sellers will cause the Acquired Company to incur any out-of-pocket expenses
in connection with the Contemplated Transactions, all of which shall be paid on
or prior to Closing, and if paid or incurred after December 31, 1997, the
Measurement Date Financial Statements shall reflect the amount of such
liability. In the event of termination of this Agreement, the obligation of each
party to pay its own expenses will be subject to any rights of such party
arising from a breach of this Agreement by another party.
11.2. PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer determines. Unless consented
to by Buyer in advance or required by Legal Requirements, prior to the Closing
Sellers shall, and shall cause the Acquired Company to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person.
Sellers and Buyer will consult with each other concerning the means by
which the Acquired Company's employees, customers, and suppliers and others
having dealings with the Acquired Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
11.3. CONFIDENTIALITY. Between the date of this Agreement and the Closing
Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Acquired
Company to maintain in confidence, and not use to the detriment of another party
or the Acquired Company any written, oral, or other information obtained in
confidence from another party or the Acquired Company in connection with this
Agreement or the Contemplated Transactions, unless:
A. Such information is already known to such party or to others not
bound by a duty of confidentiality or such information becomes publicly
available through no fault of such party;
B. The use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions; or
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C. The furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, Sellers waive, and
will upon Buyer's request cause the Acquired Company to waive, any cause of
action, right, or claim arising out of the access of Buyer or its
representatives to any trade secrets or other confidential information of the
Acquired Company except for the intentional competitive misuse by Buyer of such
trade secrets or confidential information.
11.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (i) delivered by hand (with written confirmation of receipt); (ii)
sent by telecopier (with written confirmation of requested or (iii) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
Sellers: John M. Black
634 Summer Place
Ponte Vedra Beach, Florida 32082
Todd J. Humphrey
R.R. 2, Box 163
Kasson, Minnesota 55944
With a copy to: Thompson, Hine & Flory, L.L.P.
312 Walnut Street
14th Floor
Cincinnati, Ohio 45202-4929
Attention: Michael H. Neumark, Esq.
Facsimile No.: (513) 241-4771
Buyer: InfoCure Corporation
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Attention: James K. Price
Facsimile No.: (770) 857-1300
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With a copy to: Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326-1044
Attention: Richard L. Haury, Jr., Esq.
Facsimile No.: (404) 365-9532
11.5. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Georgia, County of DeKalb, or, if it has or can acquire jurisdiction, in the
United States District Court for the Northern District of Georgia, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
11.6. FURTHER ASSURANCES. The parties agree (i) to furnish upon request
to each other such further information; (ii) to execute and deliver to each
other such other documents and (iii) to do such other acts and things, all as
the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
11.7. WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege.
To the maximum extent permitted by applicable law:
A. No claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one (1) party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by the other party;
B. No waiver that may be given by a party will be applicable except
in the specific instance for which it is given; and
C. Notice to or demand on one (1) party will not be deemed to be a
waiver of any obligation of either party to take any further actions without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
11.8. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated September 24,
1997) and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement
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<PAGE>
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by all the parties hereto.
11.9. DISCLOSURE LETTER. In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
11.10. ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, which will not be unreasonably withheld, except that Buyer
may assign any of its rights under this Agreement to any Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement (and other than the
Recipients with respect to Section 2.2. above) any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
11.11. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.12. SECTION HEADINGS; CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.13. TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.14. GOVERNING LAW. This Agreement will be governed by the laws of the
State of Georgia without regard to conflicts of laws principles.
11.15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER: SELLER:
InfoCure Corporation
By:___________________________________ ___________________________(SEAL)
John M. Black
Title:________________________________
Date:_________________________________ Date:____________________________
___________________________(SEAL)
Todd J. Humphrey
Date:____________________________
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[LETTERHEAD OF INFOCURE APPEARS HERE]
NEWS RELEASE
------------
FOR IMMEDIATE RELEASE
INFOCURE CORPORATION COMPLETES ACQUISITION OF
PACE FINANCIAL CORPORATION
Atlanta, Georgia - February 9, 1998 - InfoCure Corporation (AMEX:INC) announced
today that it has completed the acquisition of Pace Financial Corporation
("Pace") for a combination of cash and stock.
Pace, with offices in Rochester and Minneapolis, Minnesota and Cincinnati, Ohio,
has annual revenues of approximately $5.4 million and develops, sells, and
supports the computerized medical office information system "Ideal". The system
operates on an IBM AS/400 platform and is sold nationally to large clinics and
hospitals that provide management services to their clinics. In conjunction with
"Ideal," Pace also offers medical software products that include a multiple
resource scheduler for hospital diagnostic scheduling, an occupational medicine
program, and a physical therapy occupational and speech module.
John Black, President and founder of Pace said, "The opportunities for growth at
InfoCure have started to materialize because of our substantial AS/400 market
share and the popularity of our "Ideal" software product. We are very excited
about our new alliance with InfoCure and look foward to a bright future."
Jim Price, Executive Vice President of InfoCure stated that, "With InfoCure's
strategy of acquiring key companies in niche markets, Pace will be integrated
into our Enterprise Division which provides practice management software to
high-end practices, clinics, and MSOs operating on the IBM AS/400 platform. The
addition of Pace further reinforces InfoCure's leadership position in offering
IBM AS/400-based software to the practice management information segment of the
HCIS industry."
Frederick L. Fine, President and CEO of InfoCure stated, "The addition of Pace
brings to InfoCure not only a tremendous product offering for IBM AS/400 users,
but a seasoned and well respected management and technical team."
InfoCure Corporation develops, markets and supports practice management software
products and related services for healthcare practices of varying size and
specialty, including multi-provider Management Service Organizations (MSOs),
Independent Physician Alliances (IPAs) and solo practitioners. InfoCure has an
installed customer base of over 24,000 healthcare providers that practice in all
50 states.
Certain statements in this release, including statements related to the
anticipated growth of Pace and the popularity of its "Ideal" software, are
forward-looking. Although InfoCure believes that its expectations are based on
reasonable assumptions within the boundaries of its knowledge of its business,
there can be no assurance that actual results will not differ materially from
its expectations. A discussion of certain risk factors that may cause results to
differ from these foward-looking statements can be found in the Registration
Statement for InfoCure on file with the SEC.
###
Contact: Susan M. Gustafson
Investor Relations
(770) 221-9990
