SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
April 15, 1998
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Date of Report (Date of earliest event reported)
PRT GROUP INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-23315 13-3914972
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(State or other jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
342 Madison Avenue, 11th Floor, New York, New York 10173
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(Address of Principal Executive Offices) (Zip Code)
(212) 922-0800
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Registrant's telephone number, including area code
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition and Disposition of Assets.
As of April 15, 1998, PRT Group Inc. (the "Company") entered into
an Asset Purchase Agreement ("Purchase Agreement") with the Institute for
Software Process Improvement, Inc. ("ISPI"), a Pennsylvania corporation.
Pursuant to the Purchase Agreement, the Company purchased substantially all
of the business and assets of ISPI for an aggregate purchase price of
approximately $2.5 million in cash, subject to post-closing adjustments.
In addition, pursuant to the terms of the Purchase Agreement and subject to
applicable law, the owners of all of the equity of ISPI have agreed to
purchase $200,000 worth of shares of Company common stock, in the
aggregate, on the Nasdaq National Market over a period of 120 days after
the closing and to hold such shares for a period of one year from the
purchase date. A press release (the "Press Release") describing the
transaction was released on April 16, 1998.
The Purchase Agreement and Press Release are attached hereto as
Exhibits 99.1 and 99.2, respectively, and each is incorporated herein by
reference in its entirety. The foregoing discussion is qualified in its
entirety by reference to such Exhibits.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
It was impracticable to provide the audited financial statements
required in this Form 8-K report. The required audited financial
statements will be filed with the Securities and Exchange Commission (the
"Commission") not later than 60 days after the date of filing of this Form
8-K report.
(b) Pro Forma Financial Information.
It was impracticable to provide pro forma financial information
required pursuant to Article 11 of Regulation S-X relative to an acquired
business in this Form 8-K report. The required pro forma financial
information will be filed with the Commission not later than 60 days after
the date of filing of this Form 8-K report.
(c) Exhibits.
99.1 Asset Purchase Agreement, dated as of April 15, 1998, by and
among the Company, Institute for Software Process Improvement,
Inc., a Delaware corporation and a newly formed wholly owned
subsidiary of the Company, Timothy C. Kasse and Jeffery R.
Perdue and ISPI.
99.2 Press Release issued by the Company, dated April 16, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: April 30, 1998
PRT GROUP INC.
By: /S/ LOWELL W. ROBINSON
--------------------------------
Name: Lowell W. Robinson
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
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99.1 Asset Purchase Agreement, dated as of April 15, 1998, by
and among the Company, Institute for Software Process
Improvement, Inc., a Delaware corporation and a newly
formed wholly owned subsidiary of the Company, Timothy C.
Kasse and Jeffery R. Perdue and ISPI.
99.2 Press Release issued by the Company, dated April 16, 1998.
Exhibit 99.1
ASSET PURCHASE AGREEMENT
DATED AS OF APRIL 15, 1998
BY AND AMONG
PRT GROUP INC.,
("PRT")
INSTITUTE FOR SOFTWARE PROCESS IMPROVEMENT, INC.,
A WHOLLY-OWNED SUBSIDIARY OF PRT
("BUYER")
TIMOTHY C. KASSE,
JEFFERY R. PERDUE
AND
INSTITUTE FOR SOFTWARE PROCESS IMPROVEMENT, INC.,
("SELLER")
TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE OF ASSETS.................1
Section 1.1 Purchase and Sale...........................1
Section 1.2 Closing.....................................2
Section 1.3 Deliveries at the Closing...................3
Section 1.4 Purchase Price Adjustment...................3
ARTICLE II RELATED MATTERS.............................5
Section 2.1 Books and Records of Seller.................5
Section 2.2 Allocation of Purchase Price/Tax Filings....6
Section 2.3 Assignment of Contracts, Rights, Etc........6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE SELLER SHAREHOLDERS.................7
Section 3.1 Organization................................7
Section 3.2 Authorization...............................7
Section 3.3 Consents and Approvals; No Violations.......8
Section 3.4 Financial Statements........................9
Section 3.5 Absence of Material Adverse Effect..........9
Section 3.6 Title, Ownership and Related Matters.......10
Section 3.7 Intellectual Property......................10
Section 3.8 Litigation.................................12
Section 3.9 Compliance with Applicable Law.............12
Section 3.10 Certain Contracts and Arrangements.........13
Section 3.11 Employee Benefit Plans; ERISA..............13
Section 3.12 Certain Fees...............................15
Section 3.13 Environmental Protection...................15
Section 3.14 Absence of Undisclosed Liabilities.........16
Section 3.15 Employees and Independent
Contractors..............................16
Section 3.16 Related Party Transactions.................16
Section 3.17 Customers and Suppliers....................17
Section 3.18 Taxes......................................17
Section 3.19 Receivables................................19
Section 3.20 Disclosure.................................19
Section 3.21 Insurance..................................20
Section 3.22 Bank Accounts..............................20
Section 3.23 Warranties.................................20
Section 3.24 Proprietary Information of Third
Parties..................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
PRT AND BUYER..............................22
Section 4.1 Organization and Authority of PRT
and Buyer...............................22
Section 4.2 Consents and Approvals; No Violations......22
Section 4.3 Litigation.................................23
Section 4.4 Availability of Funds......................23
Section 4.5 Certain Fees...............................23
ARTICLE V COVENANTS..................................24
Section 5.1 Conduct of the Business....................24
Section 5.2 Access to Information......................25
Section 5.3 Consents; Assignment of Certain
Contracts................................26
Section 5.4 Commercially Reasonable Efforts............26
Section 5.5 Covenant to Satisfy Conditions.............27
Section 5.6 Covenant to Purchase Shares................27
Section 5.7 Employees; Employee Benefits...............27
Section 5.8 Supplemental Disclosure....................29
Section 5.9 Covenant Not to Compete....................30
Section 5.10 Nondisclosure..............................31
Section 5.11 Trademark Registrations, Corporate
Names....................................32
Section 5.12 Certain Tax Matters........................32
ARTICLE VI CONDITIONS TO OBLIGATIONS OF THE
PARTIES....................................35
Section 6.1 Conditions to Each Party's
Obligation.................................35
Section 6.2 Conditions to Obligations of Seller........36
Section 6.3 Conditions to Obligations of Buyer.........36
ARTICLE VII ASSUMPTION OF CERTAIN LIABILITIES AND
OBLIGATIONS................................37
Section 7.1 Assumed Liabilities........................37
Section 7.2 Non-Assumed Liabilities....................38
ARTICLE VIII TERMINATION; AMENDMENT; WAIVER.............39
Section 8.1 Termination................................39
Section 8.2 Procedure and Effect of Termination........40
Section 8.3 Amendment, Modification and Waiver.........41
ARTICLE IX SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION............................41
Section 9.1 Survival of Representations, Warranties
and Agreements...........................41
Section 9.2 Seller's Agreement to Indemnify............42
Section 9.3 PRT and Buyer's Agreement to Indemnify.....43
Section 9.4 Third Party Indemnification................44
Section 9.5 Indemnification Funds......................45
ARTICLE X MISCELLANEOUS..............................46
Section 10.1 Fees and Expenses..........................46
Section 10.2 Further Assurances.........................46
Section 10.3 Notices....................................47
Section 10.4 Severability...............................48
Section 10.5 Binding Effect; Assignment.................48
Section 10.6 No Third Party Beneficiaries...............49
Section 10.7 Interpretation.............................49
Section 10.8 Jurisdiction and Consent to Service........50
Section 10.9 Entire Agreement...........................50
Section 10.10 Governing Law..............................50
Section 10.11 Specific Performance.......................50
Section 10.12 Counterparts...............................51
Section 10.13 Waivers....................................51
Section 10.14 Bulk Sales Laws............................51
INDEX OF DEFINED TERMS
Defined Term Section
Acquisition Proposal..............................................5.1
Adjustment Amount.................................................1.4
Affected Employees and Independent
Contractors.................................................5.8
Affiliate........................................................10.7
Agreement....................................................Preamble
Assets............................................................1.1
Allocation........................................................2.2
Assigned Contracts................................................5.3
Assumed Liabilities...............................................7.1
Audits...........................................................3.18
Bulk Sales......................................................10.14
Business..........................................................1.1
Buyer........................................................Preamble
Buyer Damages.....................................................9.2
Buyer Indemnitees.................................................9.2
Cases.............................................................3.8
Claim.............................................................9.4
Code..............................................................2.2
Confidentiality Agreement.........................................5.2
Closing...........................................................1.2
Closing Date......................................................1.2
Final Closing Payment.............................................1.4
Disclosure Schedule...............................................1.1
Employee Plan....................................................3.11
Employment Agreements.............................................6.2
Environmental Laws...............................................3.13
Environmental Permits............................................3.13
ERISA............................................................3.11
ERISA Affiliate..................................................3.11
Escrow Agent......................................................1.1
Escrow Agreement..................................................1.1
Escrow Amount.....................................................1.1
Excluded Assets...................................................1.1
Excluded Liabilities..............................................7.2
Indemnity Period..................................................9.1
Instrument of Transfer............................................1.1
Intellectual Property.............................................3.7
Intellectual Property Rights......................................3.7
IRS...............................................................2.2
Knowledge........................................................10.7
Lease.............................................................3.6
Legal Requirement.................................................3.9
INDEX OF DEFINED TERMS
Defined Term Section
License Agreement.................................................3.7
License Agreement Rights..........................................3.7
Liens.............................................................3.3
Material Adverse Effect...........................................3.1
PBGC.............................................................3.11
Person...........................................................10.7
Plans............................................................3.11
Pre-Closing Period...............................................5.12
Projections......................................................3.20
PRT..........................................................Preamble
Purchase Price....................................................1.1
Purchased Shares..................................................5.8
Regulations.......................................................2.2
Related Parties..................................................3.16
Security Interest.................................................3.6
Seller.......................................................Preamble
Seller Damages....................................................9.3
Seller Financial Statements.......................................3.4
Seller Indemnitees................................................9.3
Seller Shareholders..........................................Preamble
Shareholder Notes.................................................1.4
Single Employer..................................................3.11
Straddle Period..................................................5.12
Tangible Net Worth................................................1.4
Tax..............................................................3.18
Tax Claim........................................................5.12
Taxes............................................................3.18
Tax Indemnified Party............................................5.12
Tax Indemnifying Party...........................................5.12
Tax Return.......................................................3.18
Transfer Taxes...................................................5.12
Unadjusted Closing Payment........................................1.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement"), dated as of
April 15, 1998, is made by and among PRT Group Inc., a Delaware corporation
("PRT"), Institute for Software Process Improvement, Inc., a Delaware
corporation and a newly formed, wholly owned subsidiary of PRT
("Buyer"),Institute for Software Process Improvement, Inc., a Pennsylvania
corporation ("Seller") and Timothy C. Kasse and Jeffery R. Perdue (the
"Seller Shareholders").
Buyer desires to purchase certain assets of Seller, and Seller
desires to sell such assets to Buyer, on the terms and conditions
hereinafter set forth.
Accordingly, in consideration of the premises and of the
respective covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale. On the terms and
subject to the conditions set forth in this Agreement
(a) Seller shall sell to Buyer, and Buyer shall purchase from
Seller, all of the accounts receivable, inventory, intellectual property
and other assets, as set forth in Section 1.1(b)(i) hereof, of Seller for
an aggregate unadjusted purchase price of $2,500,000, as set forth in
Section 1.1(b)(ii) hereof, subject to adjustment as provided in Section 1.4
hereof (the "Purchase Price"); and
(b) at the Closing referred to in Section 1.2 hereof:
(i) Seller shall sell, assign, transfer and
deliver to Buyer the assets, business, cash, accounts receivable,
intellectual property including Intellectual Property Rights and
License Agreement Rights (as each is defined in Section 3.7(a)
hereof), contracts and rights owned by Seller of every kind and
nature, tangible and intangible, wherever located and whether or not
on the books of Seller, as set forth on the instrument of transfer
(the "Instrument of Transfer") in the form attached hereto as Exhibit
A and made a part hereof, all as shall exist as of the Closing Date
referred to in Section 1.2 hereof (collectively, the "Assets", and
the software development process evaluation and certification
business carried on using the Assets, the "Business"); provided, that
the Assets shall not include any assets specifically described on
Section 1.1 of the Disclosure Schedule being delivered by Seller to
Buyer herewith (the "Disclosure Schedule") as excluded assets (the
"Excluded Assets"); and
(ii) PRT shall cause Buyer to accept and
purchase the Assets and the Business from Seller and in payment
therefor PRT shall, or PRT shall cause Buyer to,
(A) assume the liabilities and obligations of
Seller specified in Section 7.1 hereof; and
(B) deliver to Seller an amount equal to
$2,100,000, as adjusted pursuant to Section 1.4 hereof, to be
paid in cash by wire transfer to a bank account designated by
Seller upon three days' prior written notice to Buyer or by
certified or official bank check in federal or other
immediately available funds at the Closing; (the amount being
so delivered to the Seller under this clause (B) being referred
to herein as the "Unadjusted Closing Payment"); and
(C) deliver to the escrow agent (the "Escrow
Agent") named in the escrow agreement (the "Escrow Agreement")
attached hereto as Exhibit B an amount equal to $400,000 (the
"Escrow Amount") to be paid in cash by wire transfer to a bank
account designated by the Escrow Agent upon three days' prior
written notice to Buyer and which shall be disbursed as set
forth in the Escrow Agreement. All fees of the Escrow Agent
shall be borne by the Buyer and all interest or other earnings
accrued on the Escrow Amount shall be the property of the
Seller.
Section 1.2 Closing. Subject to the conditions set forth in
this Agreement, the purchase and sale of the Assets and the Business and
the other transactions pursuant to Section 1.1 of this Agreement (the
"Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher
& Flom LLP, 919 Third Avenue, New York, New York at 10 a.m. on (a) April
15, 1998 subject to the satisfaction (or, if permissible, waiver) of the
conditions set forth in Article VI hereof, or (b) such other date, time and
place which is agreed to by Buyer and Seller. The date on which the Closing
is to occur is herein referred to as the "Closing Date" and the Closing
shall be deemed to be effective as of the opening of business on the
Closing Date.
Section 1.3 Deliveries at the Closing. Subject to the
conditions set forth in this Agreement, at the Closing:
(a) Seller shall deliver to Buyer:
(i) the Instrument of Transfer;
(ii) any other documents that are necessary
to transfer to Buyer good title to all the Assets, including, without
limiting the foregoing, assignments of leases (together with
landlord's consents, if required by the respective lease, and
estoppels, if Seller is entitled to obtain an estoppel from the
landlord under the terms of the applicable lease, each in a form as
is required under such lease) constituting a part of the Assets; and
(iii) all opinions, certificates,
undertakings and other instruments and documents required to be
delivered by Seller at or prior to the Closing or otherwise required
in connection herewith.
(b) PRT or Buyer shall deliver and pay,
or cause to be delivered or paid, to Seller:
(i) the Unadjusted Closing Payment (as
defined in Section 1.4 hereof); (ii) the Undertaking, a form of which
is attached hereto as Exhibit C, pursuant to which Buyer shall assume
certain liabilities of Seller as set forth in Section 7.1 hereof; and
(ii) the Undertaking, a form of which is
attached hereto as Exhibit C, pursuant to which Buyer shall assume
certain liabilities of Seller as set forth in Section 7.1 hereof; and
(iii) all opinions, certificates,
undertakings and other instruments and documents required to be
delivered by Buyer at or prior to the Closing or otherwise required
in connection herewith.
Section 1.4 Purchase Price Adjustment.
(a) On the Closing Date, Seller shall determine the Tangible Net
Worth (as defined herein) of the Business as of March 31, 1998. Buyer shall
review Seller's determination of the Tangible Net Worth as of March 31,
1998 on or prior to May 1, 1998 and the parties shall make an adjustment to
the Unadjusted Closing Payment (the "Adjustment Amount") as follows:
(i) if the actual amount of the Tangible Net Worth
on the Closing Date is greater than $0 the Unadjusted Closing Payment
shall be increased, dollar for dollar, by the amount of such
difference; or
(ii) if the actual amount of the Tangible Net Worth
on the Closing Date is less than $0 the Unadjusted Closing Payment
shall be decreased, dollar for dollar, by the amount of such
difference;
(iii) if the actual amount of the Tangible Net
Worth on the Closing Date is equal to $0 the Unadjusted Closing
Payment shall not be increased or decreased
and, in each case, the Unadjusted Closing Payment as so adjusted shall be
the "Final Closing Payment."
(b) The term "Tangible Net Worth" as used herein shall be
equal to the difference between (i) the sum of Seller's cash; accounts
receivable; property, plant and equipment net of depreciation and
amortization; and other current assets, including, without limitation,
accrued revenue from work in process, and (ii) the sum of Seller's accounts
payable; accrued salary and wages; accrued sales and other tax liabilities;
bank revolver and term loans (excluding notes payable to the Selling
Shareholders (the "Shareholder Notes") and any fees payable to Kirkpatrick
& Lockhart LLP); and equipment leases payable, in each case as of the March
31, 1998. Calculation of Net Tangible Worth shall take into account any
reserves, including, without limitation, reserves for uncollectible
accounts receivable. The actual Tangible Net Worth shall be determined
conclusively by agreement of Seller and PRT prior to the Closing Date.
(c) The Tangible Net Worth as of March 31, 1998 shall be
determined by Seller and reviewed by Buyer and/or Buyer's independent
certified public accountants, in accordance with Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants and in the same manner as appears on the Seller
Financial Statements previously supplied by Seller to Buyer. Seller has
reviewed and discussed with Buyer the accounting methods employed in
calculating the Tangible Net Worth and Buyer agrees that such methods are
appropriate under the circumstances. To the extent that there is any
difference (positive or negative), in the aggregate, in the calculation of
Tangible Net Worth as determined by each party, (x) if the amount of such
difference is less than $25,000, the Tangible Net Worth shall be deemed to
be the mean of the amounts calculated by the parties, (y) if the amount of
such difference is greater than $25,000, the parties shall attempt to
resolve such difference and, failing to reach such a resolution, a
certified public accountant with whom neither of the parties have had
business dealings in the last five years shall be jointly appointed by the
parties within five (5) business days to resolve any such difference within
thirty (30) days after appointment; any such resolution shall be final and
binding on the parties hereto. The cost of retaining any such certified
public accountant to resolve any such difference shall be borne exclusively
by Buyer. Any Adjustment Amount required under this Section 1.4 shall be
paid promptly upon final determination of the Tangible Net Worth of the
Business as of March 31, 1998, plus simple interest accruing on such
Adjustment Amount from the Closing Date at the prime rate of interest at
The Chase Manhattan Bank as of the Closing Date.
ARTICLE II
RELATED MATTERS
Section 2.1 Books and Records of Seller. Seller agrees to make
available to Buyer prior to the Closing, as requested by Buyer, all books
and records of Seller (including, but not limited to, contracts, orders,
correspondence, memoranda, books of account, personnel and payroll records
and the like) and copies, as requested by Buyer, of any income tax forms or
Tax Returns, and all materials related or relating thereto. Any books,
records, forms and returns of Seller which are not delivered to Buyer
hereunder will be preserved by Seller for a period of at least six (6)
years following the Closing and Seller will permit Buyer and its authorized
representatives to have reasonable access to, and examine and make copies
of, all such books, records, forms and returns as reasonably requested by
Buyer. All books, records, forms and returns delivered by Seller to Buyer
will be preserved by Buyer for a period of at least six (6) years
following the Closing and Buyer will permit Seller and its authorized
representatives to have reasonable access to, and examine and make copies
of, all such books, records, forms and returns as reasonably requested by
Seller.
Section 2.2 Allocation of Purchase Price/Tax Filings. The
Purchase Price (including the liabilities expressly assumed by Buyer under
this Agreement) shall be allocated among the Assets as set forth in Exhibit
D hereto (the "Allocation") in the manner required on Internal Revenue
Service ("IRS") Form 8594 in compliance with Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code") and the Treasury Regulations
promulgated thereunder. Any post-Closing adjustment to (the "Regulations")
the Purchase Price shall be reflected proportionately in the final
allocation of the Purchase Price among the Assets in a manner consistent
with Section 1060 of the Code and the Regulations thereunder. Buyer and
Seller shall (i) timely file all forms and tax returns required to be filed
in connection with the Allocation, (ii) be bound by the Allocation for
purposes of determining taxes, (iii) prepare and file, and cause its
affiliates to prepare and file, its tax returns on a basis consistent with
the Allocation and (iv) take no position, and cause its affiliates to take
no position, inconsistent with the Allocation on any applicable tax return,
in any proceeding before any taxing authority, in any report made for
financial accounting purposes, or otherwise. In the event that the
Allocation is disputed by any taxing authority, the party receiving notice
of the dispute shall promptly notify the other parties hereto concerning
resolution of the dispute. Buyer agrees to permit Seller or the Seller
Shareholders to have reasonable access to any records required in order for
the Seller Shareholders or the Seller Shareholders to prepare any tax
returns or forms to be filed by Seller or the Seller Shareholders after the
Closing.
Section 2.3 Assignment of Contracts, Rights, Etc. Anything in
this Agreement or any document contemplated hereby or executed in
furtherance hereof notwithstanding, neither this Agreement nor any such
document shall constitute an agreement to assign any right, title or
interest in, to or under any contract, license, lease, commitment, sales
order, purchase order, task order or other agreement or any claim or right
to any benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without the consent of a third party thereto, would
constitute a breach thereof or in any way adversely affect the rights of
Seller or Buyer thereunder. Seller and the Seller Shareholders shall use
their commercially reasonable efforts to obtain, and Buyer agrees to
cooperate with Seller and the Seller Shareholders in their efforts to
obtain, the consent of such third party to the assignment or transfer
thereof to Buyer in all cases in which consent is required for assignment
or transfer; provided, however, that Buyer's obligations under this
Agreement shall not be conditioned upon the procurement of any such third
party consent or consents. If such consent is not obtained, the Seller
Shareholders and Buyer shall cooperate in any reasonable arrangements
designed to provide to Buyer the benefits thereunder, including, without
limitation, enforcement for the benefit of Buyer of any and all rights of
Seller against such third party arising out of the cancellation or
termination by such third party or otherwise.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE SELLER SHAREHOLDERS
Each of Seller and the Seller Shareholders represents and
warrants to PRT and Buyer as follows:
Section 3.1 Organization. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and Seller has all requisite corporate and
other power and corporate authority to own, lease and operate its
properties and to carry on the Business and its operations as now being
conducted, except where any such failure to be so organized, existing and
in good standing or to have such power and authority would not have a
material adverse effect (taken in the aggregate) on the business,
operations, Assets, liabilities, results of operations, cash flows,
prospects or financial condition of the Business (a "Material Adverse
Effect"). Seller is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except in any such jurisdictions where the failure
to be so duly qualified or licensed and in good standing would not have a
Material Adverse Effect. Seller has heretofore delivered to Buyer complete
and correct copies of Seller's certificate of incorporation and by-laws, as
currently in effect.
Section 3.2 Authorization. Seller has the corporate power and
corporate authority to execute and deliver this Agreement and consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors and shareholders
of Seller and no other corporate proceedings on the part of Seller are
necessary to authorize the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby. All
of the shareholders of Seller are named on the signature page hereof and
there are no persons or entities having the right to acquire or dispose of
the "beneficial ownership" (as such term is defined under the rules and
regulations promulgated under the Securities Exchange Act of 1934) of, or
control the vote of, any equity securities of Seller, whether by
subscription, pre-emptive right, option, contractual agreement or
arrangement, convertible instrument or security or otherwise. This
Agreement has been duly executed and delivered by Seller and the Seller
Shareholders and constitutes, and, when executed and delivered, each of the
other agreements, documents and instruments to be executed and delivered by
Seller and/or the Seller Shareholders, as the case may be, pursuant hereto
will constitute, a valid and binding agreement of Seller and/or the Seller
Shareholders, as the case may be, enforceable against Seller and/or the
Seller Shareholders, as the case may be, in accordance with its terms,
except that (a) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws,
now or hereafter in effect, relating to or limiting creditors' rights
generally and (b) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought.
Section 3.3 Consents and Approvals; No Violations. Except as
set forth in Section 3.3 of the Disclosure Schedule, neither the execution,
delivery or performance of this Agreement nor the consummation by Seller of
the transactions contemplated hereby will (a) conflict with or result in
any breach or violation of any provision of the certificate of
incorporation or by-laws of Seller; (b) require any filing or registration
with, or notice or declaration to, or the obtaining of any permit, license,
authorization, consent or approval of, any federal or state governmental or
regulatory authority; (c) violate, conflict with or result in a default (or
any event which, with notice or lapse of time or both, would constitute a
default) under, or result in any termination, cancellation or acceleration
or give rise to any such right of termination, cancellation or acceleration
under, any of the terms, conditions or provisions of any note, mortgage,
other evidence of indebtedness or guarantee to which Seller is a party or
by which the Business, Seller or any of the Assets are subject or by which
any of them may be bound; (d) violate any order, injunction, decree,
statute, rule or regulation applicable to the Business, Seller, or any of
their respective assets or properties, (e) result in the creation or
imposition of any liens, pledges, mortgages, charges, claims or other
encumbrances ("Liens") upon any properties, assets or business of Seller or
the Business, or (f) violate any existing third party Security Interest (as
defined in Section 3.6 hereof) in any of the Assets or the Business,
excluding from the foregoing clauses (b), (c), (d), (e) and (f) such
requirements, conflicts, defaults, rights, Liens or violations which would
not individually or in the aggregate have a Material Adverse Effect and
would not adversely affect the ability of Seller to consummate the
transactions contemplated by this Agreement.
Section 3.4 Financial Statements. (a) Seller previously has
delivered to Buyer true and complete copies of the balance sheets of Seller
as of [December 31, 1996 and 1997] and the related statements of income for
the years then ended(collectively, the "Seller Financial Statements"). The
statements of income included in the Seller Financial Statements do not
contain any special or nonrecurring items except as expressly specified
therein, and the balance sheets included in the Seller Financial Statements
do not reflect any write-up or revaluation increasing the book value of any
assets. The Seller Financial Statements fully and fairly reflect, in all
material respects, the financial condition of Seller and there is no
condition, development or contingency of any kind existing which, so far as
can be foreseen at this time, would be reasonably likely to result in a
Material Adverse Effect.
Section 3.5 Absence of Material Adverse Effect. Except to the
extent set forth in Section 3.5 of the Disclosure Schedule, and except to
the extent reflected or reserved against in the Seller Financial
Statements, since December 31, 1997 there has not been (i) any Material
Adverse Effect with respect to Seller, the Business or the Assets,
properties, prospects, financial position or results of operations or cash
flows of the Business; (ii) any damage or destruction or property loss not
covered by insurance constituting a Material Adverse Effect on the Assets
or the operation of the Business; (iii) any increase in the compensation or
bonus, incentive compensation, profit sharing, retirement, insurance,
medical reimbursement or other employee benefit plan or arrangement payable
or owed or to become payable or owed by Seller or the Business, other than
increases made in the ordinary course of business consistent with past
practice, compensation increases attendant to promotions and falling within
the normal range for the new position and scheduled increases; (iv) any
sale or other disposition of any capital asset of Seller or the Business
having net book value in excess of $10,000, other than sales or
dispositions of Excluded Assets; (v) any entry by Seller into any material
contract, lease, license, obligation, indebtedness, commitment, purchase or
sale, or transaction (including, without limitation, any borrowing or
capital expenditure), other than those contemplated by or within the limits
permitted by this Agreement; (vi) any settlement, release or waiver of any
material litigation, right or claim of Seller or the Business with respect
to any contract, lease, license or permit; (vii) any material mortgage or
pledge or imposition of a material lien or other material encumbrance on
any of the Assets or the Business; or (viii) any material change by Seller
in accounting principles or methods.
Section 3.6 Title, Ownership and Related Matters
(a) Except as set forth in Section 3.6 of the Disclosure
Schedule, the assets, properties and rights included in the Assets comprise
substantially all of the assets, properties, and rights of every type and
description, real, personal and mixed, tangible and intangible, used by
Seller in, and necessary to or desirable in, the conduct and operation of
the Business as presently conducted and operated. The sale of the Assets by
Seller pursuant hereto will convey to Buyer the Business, including all
tangible and intangible assets and properties thereof(excepting any such
Assets or properties leased or licensed from third parties), free and clear
of any security interest, pledge, lien, charge, option or restriction on
transfer ("Security Interest").
(b) Seller has no ownership or leasehold interests in
real property.
Section 3.7 Intellectual Property.
(a) Section 3.7 of the Disclosure Schedule identifies
each material agreement pertaining to the licensed use of Intellectual
Property (as hereonafter defined)in the Business and listing, in each case,
whether Seller is the licensor or licensee thereunder, the subject matter
of the license, and whether the rights granted are exclusive or non-
exclusive (the "License Agreements").
As used herein, "Intellectual Property" shall mean all
U.S. and foreign patents, copyrights, trademarks, service marks, trade
dress, logos, tradenames and similar business identifiers, including, in
each case, all registrations and applications therefor and unregistered
rights therein, and the goodwill of the business symbolized by any of the
foregoing, confidential or proprietary technical and business information,
know-how and trade secrets, formulae, processes, inventions (whether
patentable or unpatentable) and other technical information. As used
herein, "Intellectual Property Rights" shall mean all rights to, and
interests in, Intellectual Property that Seller has the right to sell,
transfer, assign or convey to Buyer without infringing upon, violating or
conflicting with the rights of any other person or entity. As used herein,
"License Agreement Rights" shall mean all rights and obligations under the
License Agreements that Seller has the rights to sell, transfer, assign or
convey to Buyer without infringing upon, violating or conflicting with the
rights of any other person or entity.
(b) Except as set forth in Section 3.7 of the Disclosure
Schedule, Seller owns all material Intellectual Property or possesses
adequate licenses or other valid right to the material Intellectual
Property used in or necessary to conduct the Business as currently
conducted, in each case without the payment of any royalties except under
the agreements set forth on Section 3.7(b) of the Disclosure Schedule.
(c) To the knowledge of Seller, the activities, products
and services of Seller do not infringe upon, violate or conflict with the
Intellectual Property rights of any other person or entity. There are no
claims or suits pending for which notice has been provided or, to the
knowledge of Seller, threatened (i) alleging that Seller's activities or
products infringe upon or constitute the unauthorized use of a third
party's Intellectual Property rights or (ii) challenging Seller's ownership
of, right to use, or the validity or enforceability of any Intellectual
Property owned or used by Seller. To the knowledge of Seller, there are no
infringements by third parties of any Intellectual Property owned by
Seller. Seller has not entered into any consent, indemnification,
forbearance to sue, or settlement agreement with any third party relating
to Intellectual Property.
(d) To the knowledge of Seller, and with the exception of
events arising out of this Agreement, Seller is not in breach of or default
under the License Agreements nor has an event or condition occurred (or is
alleged by any other party to have occurred) which, with or without due
notice or lapse of time or both, would constitute a breach or event of
default on the part of Seller or would provide a basis for a valid claim,
acceleration or termination by any other party under the License
Agreements. To the knowledge of Seller, no other party is in breach of or
default under the License Agreements nor has any event or condition
occurred (or is alleged by any other party to have occurred) which, with or
without due notice or lapse of time or both, would constitute a breach or
event of default on the part of such other party under the License
Agreements. Except as disclosed in Section 3.7(b) of the Disclosure
Schedule, Seller is not a party to any technology license agreement or
sales agency or distributorship agreement that limits in any material
manner the ability of Seller to compete or to conduct any significant line
of business or compete with any person or entity in any geographic area or
during any period of time exceeding one year from the date hereof.
(e) Computer Software. Seller has such title to or the
right to use, by license or other agreement, all material computer software
programs used by Seller as are necessary to permit Seller to conduct the
Business as currently conducted, without any known conflict with the rights
of others or any known use by others which conflicts, in any material
respect, with the rights of Seller.
Section 3.8 Litigation. Set forth in Section 3.8 of the
Disclosure Schedule is a list of all material actions, suits,
administrative, arbitration or other proceedings and governmental
investigations and inquiries pending or, to the knowledge of Seller,
threatened (collectively "Cases") against Seller or any of its properties,
assets, Plans (as defined in Section 3.11 hereof) and business operations,
as of the date hereof, whether at law or in equity or by or before any
court, governmental or regulatory authority or by any third party. No such
Cases are pending or, to the knowledge of Seller, threatened which, if
adversely determined, would be likely to have a Material Adverse Effect on
the Assets, the Business, or the properties, financial position, prospects
or results of operations of Seller and Seller is not subject to any
judgment, consent, award, order or decree having or which is likely to have
such a Material Adverse Effect; nor is there outstanding any writ, order,
award, decree or injunction applicable to Seller that (i) calls into
question Seller's authority or right to enter into this Agreement and
consummate the transactions contemplated hereby, or (ii) would otherwise
prevent or delay the transactions contemplated by this Agreement.
Section 3.9 Compliance with Applicable Law. Seller is, and
conducts the Business, in compliance with all applicable laws, ordinances,
codes, rules, regulations, standards, judgments, decrees, writs, rulings,
injunctions, orders and other requirements, including, without limitation,
all applicable building, zoning, environmental and other land use laws, of
all governmental, administrative and judicial entities (collectively,
"Legal Requirements") of any federal, state, local or foreign governmental
authority applicable to Seller and its operations, except for violations,
if any, which would not have a Material Adverse Effect on the Business. No
notice of any claim, suit, action, or inquiry has been issued and served
upon or delivered to Seller, and no investigation or review is pending with
respect to any alleged violation by Seller of any Legal Requirements in
connection with the Assets or operations of the Business.
Section 3.10 Certain Contracts and Arrangements. Except as set
forth in Section 3.10 of the Disclosure Schedule, as of the date hereof,
Seller is not a party to any written (a) employment agreement, consulting
agreement, independent contractor agreement, personal service or similar
agreement; (b) indenture, mortgage, note, installment obligation, agreement
or other instrument relating to the borrowing of money by Seller, or the
guaranty by Seller of any obligation for the borrowing of money; (c) other
contract or agreement, including without limitation, any purchase order, or
any enforceable oral agreement, which individually, or together with
related agreements with the same or related parties, involves the receipt
or payment after the date hereof of more than $50,000 on an annual basis or
over the remaining term thereof, (d) fixed price contract under which
Seller is obligated to provide over $20,000 in services, or (e) contract
related to year 2000 computer software or hardware compliance, analysis,
renovation, testing or the like. To the knowledge of Seller, all such
agreements are valid, binding and enforceable in accordance with their
terms and neither Seller nor, to the knowledge of Seller, any other party
thereto is in default under any of the aforesaid agreements. Neither Seller
nor the Seller Shareholders nor any employee, director, officer or
independent contractor of Seller is a party to any agreement, arrangement
or understanding which prohibits or limits in any material way the Seller,
any employees, director, officer or independent contractor of Seller, or
the Business from competing in any business anywhere in the world.
Section 3.11 Employee Benefit Plans; ERISA.
(a) Section 3.11(a) of the Disclosure Schedule lists each
"employee plan" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all other employee
benefit, bonus and fringe benefit plans, programs, agreements, policies,
arrangements or understandings sponsored or maintained for the benefit of,
or contributed to by Seller or any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that, together with Seller would be
deemed a "single employer" within the meaning of Section 4001 of ERISA, for
the benefit of any employee or former employee of Seller (the "Plans").
(b) Each of the Plans is in material compliance with its terms.
Each of the Plans that is subject to ERISA materially complies with ERISA
and the applicable provisions of the Code. Each of the Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code has been
determined by the IRS to be so qualified and Seller knows of no fact or set
of circumstances that would adversely affect such qualification for events
taking place prior to the Closing. Except as set forth in Section 3.11 of
the Disclosure Schedule, no "reportable event", as such term is defined in
Section 4043(c) of ERISA for which the thirty day notice requirement to the
Pension Benefit Guaranty Corporation ("PBGC") has not been waived, has
occurred or will occur as a result of the Closing with respect to any Plan.
There is no "accumulated funding deficiency" as such term is defined in
Section 412 of the Code, whether or not waived with respect to any Plan.
There are no pending or, to the knowledge of Seller, threatened material
claims (other than routine claims for benefits) by, on behalf of or against
any of the Plans or any trusts related thereto. Seller and its ERISA
Affiliates do not contribute, are not required to contribute and have not
been required, within the preceding six years, to contribute, to any
"multiemployer plans" as such term is defined in Section 4001(a)(3) of
ERISA. Seller has not received written notice of, and there are no, claims
or defaults, nor, to Seller's knowledge, are there any facts or conditions
which if continued, or on notice, will result in, a default under any of
the Plans. Seller has not engaged in any prohibited transaction with
respect to any Plan.
(c) As to any Plan, except as set forth Section 3.11 of the
Disclosure Schedule, all of the following are true: (i) all amounts due as
contributions, insurance premiums and benefits to the date hereof have been
fully funded and paid by Seller; (ii) all applicable requirements of law
have been observed with respect to the operation thereof and all material
reporting and disclosure requirements have been timely satisfied; and (iii)
there are no claims pending, and Seller has received no written notice of
claims by, and to Seller's knowledge there are no claims threatened by, any
taxing authority for taxes or penalties, which have not been satisfied in
full except those pending payment or satisfaction in the ordinary course of
business. With respect to all of the Plans, Seller has made available to
Buyer complete copies of each Plan, each Plan's summary plan description
and all other material employee communications, the most recent valuation
reports prepared by the enrolled actuary for each Plan, the two most recent
annual reports for each Plan as filed with the IRS, and the most recent
reviewed financial statements of the Plan. No liability under Title IV or
section 302 of ERISA has been incurred by Seller or any ERISA Affiliate
that has not been satisfied in full, and no condition exists that presents
a material risk to Seller or any ERISA Affiliate of incurring any such
liability, other than liability for premiums due the PBGC (which premiums
have been paid when due). Insofar as the representation made in this
Section 3.11(c) applies to sections 4064, 4069 or 4204 of Title IV of
ERISA, it is made with respect to any employee benefit plan, program,
agreement or arrangement subject to Title IV of ERISA to which Seller or
any ERISA Affiliate made, or was required to make, contributions during the
five (5)-year period ending on the last day of the most recent plan year
ended prior to the Closing Date.
(d) No amounts payable under any Plan will fail to be
deductible for federal income tax purposes by virtue of section 280G of the
Code.
(e) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event, (i)
entitle any current or former employee or officer of Seller or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement, or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due any such
employee or officer.
Section 3.12 Certain Fees. None of Seller or any of its
affiliates has employed any financial advisor or finder or incurred any
liability for any financial advisory or finders' fees in connection with
this Agreement or the transactions contemplated hereby.
Section 3.13 Environmental Protection.
(a) Seller or its affiliates have obtained, with respect
to the Business and the real property owned or leased by Seller, all
material permits, licenses, and other authorizations which are required
under federal, state and local statutes, ordinances, and other laws
relating to pollution or protection of the environment ("Environmental
Permits"), including laws and regulations relating to emissions,
discharges, releases, threatened releases, investigations or remediation of
pollutants, contaminants, chemicals, or industrial, hazardous, or toxic
materials or waste into the environment (including, without limitation,
ambient air, surface water, ground water, land surface, sediments, building
materials or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, hazardous,
or toxic materials or wastes, or any regulation, rule, code, plan, judicial
order, decree, judgment, injunction, or notice issued, entered,
promulgated, or approved thereunder ("Environmental Laws").
(b) There is no pending civil, administrative or criminal
investigation, litigation, material notice of violation, or administrative
proceeding relating, with respect to the Business or the real property
owned or leased by Seller, in any way to Environmental Laws.
Section 3.14 Absence of Undisclosed Liabilities. Other than as
set forth in Section 3.14 of the Disclosure Schedule, there are no material
liabilities or obligations of Seller, accrued, contingent or otherwise,
other than (i) the Excluded Liabilities (as defined in Section 7.2 hereof),
(ii) the liabilities or obligations reflected in the Seller Financial
Statements and the notes thereto, and (iii) liabilities incurred in the
ordinary course of business subsequent to the date thereof and reflected in
the calculation of Net Tangible Worth.
Section 3.15 Employees and Independent Contractors. Section
3.15 of the Disclosure Schedule sets forth a list of all employees and
independent contractors of Seller, the date of hire of each and the present
wage rate of each.
Section 3.16 Related Party Transactions. No current or former
employee, officer, director or stockholder of Seller or member of his or
her immediate family (collectively, the "Related Parties") has any direct
or indirect ownership interest in any firm or corporation with which the
Business is affiliated or with which Seller has a business relationship, or
any firm or corporation that competes with Seller, the Business or Buyer,
except that such Related Parties may own stock in publicly traded companies
that may compete with Seller, the Business or Buyer. No Related Party is
directly or indirectly interested in any material contract or agreement
with Seller other than employment contracts with employees disclosed or
made available to Buyer.
Section 3.17 Customers and Suppliers. Section 3.17 of the
Disclosure Schedule sets forth a complete and correct list of (i) the names
of the ten largest customers (by revenues generated) of the Business and
the approximate amount of revenues generated by each such customer in the
year ended December 31, 1997 and (ii) the names of suppliers to whom Seller
paid more than $50,000 in the year ended December 31, 1997. There have been
no material adverse changes in the relationships between Seller and its
customers and suppliers since December 31, 1997. Seller has not been
provided with any notice that any material supplier, manufacturer or
customer intends to cease doing business with the Business or Seller. To
the knowledge of Seller, there are no facts or circumstances that could
reasonably be expected to have an adverse affect on Seller's relationships
with its customers and suppliers.
Section 3.18 Taxes. (a) Except as set forth as Section 3.18 of
the Disclosure Schedule:
(i) Giving effect to all extensions obtained, Seller has (x)
duly and timely filed, within the time and in the manner prescribed by law,
(or there has been filed on its behalf) with the appropriate governmental
authorities all Tax Returns (as hereafter defined) required to be filed by
it, and all such Tax Returns are true, correct and complete in all material
respects and (y) timely paid all Taxes (as hereafter defined), within the
time and in the manner prescribed by law, or for which notification of a
claim has been received by Seller from any taxing authority;
(ii) There are no Liens for Taxes upon the Assets or any of the
properties of the Business except for statutory Liens for current Taxes not
yet due as are reserved for and properly reported on the Seller Financial
Statements;
(iii) Seller has not requested any extension of time within
which to file any Tax Return that has not since been filed and no
outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Tax Returns has been
given by or on behalf of Seller;
(iv) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings ("Audits") exist or have
been initiated with regard to any Taxes or Tax Returns of Seller, and
Seller has not received any notice that such an Audit is pending or
threatened with respect to any Taxes due from or with respect to Seller or
any Tax Return filed by or with respect to Seller;
(v) All Tax deficiencies which have been claimed, proposed or
asserted against Seller have been fully paid or finally settled, and no
issue has been raised in any examination by any taxing authority which, by
application of similar principles, could be expected to result in the
proposal or assertion of a Tax deficiency for any other year not so
examined;
(vi) Other than this Agreement, Seller is not a party to, is
not bound by, and has no obligation under, any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement. Seller is not
aware of any potential liability or obligation to any person as a result
of, or pursuant to, any such agreement, contract or arrangement;
(vii) Seller has not filed a consent pursuant to Section 341(f)
of the Code (or any predecessor provision) or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by Seller;
(viii) The reserves for Taxes reflected in the December 31,
1997 balance sheet comprising a part of the Seller Financial Statements are
adequate for the payment of all Taxes incurred or which may be incurred by
Seller through the date hereof for all periods covered thereby or prior
thereto. Since the date of such Seller Financial Statements, Seller has not
incurred any liability for Taxes other than in the ordinary course of
business;
(ix) Seller is not and has never been a member of an affiliated
group within the meaning of Section 1504 of the Code (or similar state or
local filing group);
(x) Except as set forth in Section 3.18 of the Disclosure
Schedule, no property of Seller is property that is required to be treated
as owned by another person pursuant to the provisions of Section 168(f)(8)
of the Code prior to its amendment by the Tax Reform Act of 1986 or is
"tax-exempt use property" within the meaning of Section 168(h) of the Code;
(xi) None of the Assets directly or indirectly secures any debt
the interest on which is tax exempt under Section 103(a) of the Code; and
(xii) Seller is, and for all times since its incorporation has
been, a properly organized and operating Subchapter S corporation for which
an election with regard to such status has been properly in effect in
accordance with the provisions of Section 1362 of the Code.
(b) All material elections with respect to Taxes required to be
specifically described on a Tax Return listed in Section 3.18 of the
Disclosure Schedule including affecting Seller are set forth in Section
3.18 of the Disclosure Schedule.
(c) Seller has previously delivered or made available to Buyer
complete and accurate copies of (i) all audit reports, letter rulings,
technical advice memoranda and similar documents issued by a governmental
authority relating to the United States federal, state, local or foreign
Taxes due from or with respect to Seller, (ii) the United States federal,
and any state, local and foreign income Tax Returns filed by Seller and
(iii) any closing agreements entered into by Seller with any taxing
authority in each case existing on the date hereof. The Seller Shareholders
agree to deliver to Buyer all materials with respect to the foregoing for
all matters arising after the date hereof.
(d) For purposes of this Agreement, (i) "Taxes" (including,
with correlative meaning, the term "Tax") shall mean all taxes, charges,
fees, levies, penalties or other assessments of any kind whatsoever imposed
by any federal, state, local or foreign taxing authority, including, but
not limited to, income, gross receipts, excise, property, sales, transfer,
franchise, payroll, withholding, social security or other taxes, including
any interest, penalties or additions attributable thereto and (ii) "Tax
Return" shall mean any return, report, information return or other document
(including any related or supporting information) required to be filed with
a governmental taxing authority with respect to Taxes.
Section 3.19 Receivables. Except to the extent of any reserves
reflected in the Seller Financial Statements, all of the receivables
reflected in the Seller Financial Statements are bona fide accounts
receivable accrued in the ordinary course of the Business and to the best
knowledge of Seller none of such account receivables are subject to
set-offs, counterclaims, or disputes existing or asserted with respect
thereto or subject to any Lien. The reserves on the Seller Financial
Statements are reasonable and prudent with respect to the Business in light
of the historical accounts receivable collections results of the Business.
Section 3.20 Disclosure. Seller has not knowingly failed to
disclose to Buyer any material facts relating to Seller, the Business or
the results of operations, assets, liabilities financial condition and
prospects of the Business. No representation or warranty of Seller in this
Agreement, and no statement by Seller in any other document delivered to
Buyer or its representatives or agents or referred to herein (including the
Disclosure Schedule), contains any untrue statement of a material fact or
omits to state any material fact necessary, in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. All projections and any forward looking statements
(collectively "Projections") provided to Buyer in connection with this
Agreement have been prepared and presented in good faith by or on behalf of
Seller, but all such Projections are furnished to Buyer without any
representations or warranties, either express or implied.
Section 3.21 Insurance. Section 3.21(a) of the Disclosure
Schedule sets forth a complete and correct list as of the Closing Date of
all primary, excess and umbrella policies, bonds and other forms of
insurance, and renewals thereof, owned or held by or on behalf of Seller,
copies of which have previously been made available to Buyer. All of such
insurance policies are in full force and effect, all premiums currently
payable or previously due have been paid, no notice of cancellation or
termination has been received with respect to any such policy and no
assignment of proceeds or Liens exist with respect to the proceeds of any
such policy. Except as and to the extent set forth on Section 3.21(b) of
the Disclosure Schedule, there are no pending claims against such policies.
Section 3.22 Bank Accounts. Section 3.22 of the Disclosure
Schedule sets forth a complete and correct list of (i) the names and
locations of all financial institutions at which the Seller maintains a
checking account, deposit account, securities account, safety deposit box
or other deposit or safekeeping arrangement, (ii) the number or other
identification of all such accounts and arrangements and (iii) the names of
all persons authorized to draw thereon or have access thereto.
Section 3.23 Warranties. Section 3.23 of the Disclosure
Schedule sets forth a complete and correct list of all material express
written warranties with respect to any products or services (including,
without limitation, Year 2000 software and computer system compliance,
renovation, testing and related services) created, sold, distributed,
rendered or licensed by Seller, including warranties in customer contracts.
Except as and to the extent set forth on Section 3.23(a) of the Disclosure
Schedule, there are no material express or implied warranties outstanding
with respect to any products or services created, sold, distributed,
rendered or licensed by Seller (other than those imposed by applicable
law).
Section 3.24 Proprietary Information of Third Parties. To
Seller's knowledge, no third party has claimed that any person employed by
or under the control of Seller, including, without limitation, Seller's
independent contractors, has (i) violated or may be violating any of the
material terms or conditions of his employment, independent contractor,
non-competition or non-disclosure agreement with such third party, (ii)
disclosed or may be disclosing or utilized or may be improperly utilizing
any trade secret or proprietary information or documentation of such third
party or (iii) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees and to Seller's knowledge, no third party has requested
information from Seller which suggests that such a claim might be
contemplated. To Seller's knowledge, none of the execution or delivery of
this Agreement, or the carrying on of the Business by any officer,
director, independent contractor, or employee of Seller, or the conduct of
the Business, will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such person is obligated. To
Seller's knowledge, no person employed by or under the control of Seller
has, in connection with such person's performance of any employment or
other services rendered to Seller, employed any material trade secret or
any information or documentation proprietary to any former employer, and to
Seller's knowledge, no person employed by or under the control of Seller
has, in connection with such person's performance of any employment or
other services rendered to Seller, violated any material confidentiality
obligation which such person may have owed to any third party.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PRT AND BUYER
PRT and Buyer represent and warrant to Seller as follows:
Section 4.1 Organization and Authority of PRT and Buyer.
(a) PRT and Buyer are corporations duly organized,
validly existing and in good standing under the laws of the State of
Delaware. PRT and Buyer have the corporate power and corporate authority to
execute and deliver this Agreement and consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Boards of Directors of PRT and Buyer and no other
corporate proceeding on the part of PRT or Buyer is necessary to authorize
the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered
by PRT and Buyer and constitutes, and, when executed and delivered, each of
the other agreements, documents and instruments to be executed and
delivered by Buyer or PRT pursuant hereto will constitute, a valid and
binding agreement of Buyer or PRT, enforceable against Buyer or PRT in
accordance with its terms, except that (i) such enforcement may be subject
to any bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws, now or hereafter in effect, relating to or limiting
creditors' rights generally, and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.2 Consents and Approvals; No Violations. Neither the
execution, delivery or performance of this Agreement nor the consummation
by PRT or Buyer of the transactions contemplated hereby will (a) conflict
with or result in any breach or violation of any provision of the
certificate of incorporation or by-laws of PRT or Buyer; (b) require any
filing or registration with, or notice or declaration to, or the obtaining
of any permit, license, authorization, consent or approval of, any
governmental or regulatory authority; (c) violate, conflict with or result
in a default (or any event which, with notice or lapse of time or both,
would constitute a default) under, or result in any termination,
cancellation or acceleration, or give rise to any such right of
termination, cancellation or acceleration under, any of the terms,
conditions or provisions of any note, mortgage, other evidence of
indebtedness or guarantee to which PRT or Buyer is a party or by which PRT
or Buyer or any of its assets is subject or by which it may be bound; (d)
violate any order, injunction, decree, statute, rule or regulation
applicable to PRT or Buyer, (e) result in the creation or imposition of any
Lien upon any properties, assets or business of PRT or Buyer, or (f)
violate any existing third party Security Interest, excluding from the
foregoing clauses (b), (c), (d), (e) and (f) such requirements, conflicts,
defaults, rights, Liens, or violations which would not materially adversely
affect the ability of PRT or Buyer to consummate the transactions
contemplated by this Agreement or which become applicable as a result of
any acts or omissions by, or the status of or any facts pertaining to,
Seller.
Section 4.3 Litigation. There is no claim, action, suit,
administrative, arbitration or other proceeding or governmental
investigation or inquiry pending against PRT or Buyer, by or before any
court, governmental or regulatory authority or by any third party which
challenges the validity of this Agreement.
Section 4.4 Availability of Funds. PRT or Buyer currently has
sufficient funds and will have at the Closing sufficient immediately
available funds, in cash, to pay the Purchase Price, to provide the
Business with sufficient working capital and to pay any other amounts
payable pursuant to this Agreement and to effect the transactions
contemplated hereby.
Section 4.5 Certain Fees. Neither PRT, Buyer nor any of its
affiliates has employed any financial advisor or finder or incurred any
liability for any financial advisory or finders' fees in connection with
this Agreement or the transactions contemplated hereby.
ARTICLE V
COVENANTS
Section 5.1 Conduct of the Business. If the date hereof shall
not also be the Closing Date, Seller agrees that, during the period from
the date of this Agreement to the Closing, except as otherwise contemplated
by this Agreement or consented to in writing by Buyer:
(a) Seller shall conduct the Business and its operations
only in the ordinary course consistent with past practice and Seller will
use its best efforts to preserve the organization of Seller and the
Business, the services of the present officers, employees, independent
contractors and agents thereof and to continue business relationships with
suppliers, customers and clients of Seller and to properly maintain the
leased real property Assets; and
(b) Seller shall not, except in the ordinary course of
business consistent with past practice (i) sell or dispose of any of the
material properties of Seller; (ii) terminate or materially amend any
material contracts, leases or licenses of Seller; (iii) enter into any new
material agreement (iv) enter into any employment agreement with any
employee or independent contractor agreement with any independent
contractor or make any material change in the terms of employment of any
employee or independent contractor or increase in any manner the
compensation of any of the officers or other employees or independent
contractors of Seller, except for such increases as are granted in the
ordinary course of business in accordance with its customary practices
(which shall include normal periodic performance reviews and related
compensation and benefit increases); (v) adopt, grant, extend or increase
the rate or terms of any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such officers
or employees of Seller, except increases required by any applicable law,
rule or regulation; (vi) make any change in any of the present accounting
methods and practices of Seller, except as approved by Buyer; or (vii)
enter into or assume any mortgage, pledge, conditional sale or other title
retention agreement, or permit any material lien, encumbrance or charge to
be placed upon any of the Assets (other than liens, encumbrances or charges
arising by operation of law).
(c) Seller will use its commercially reasonable efforts
to keep and maintain all improvements to real property, machinery and
equipment used in the Business in good repair and working order (ordinary
wear and tear excepted) in accordance with the past practices of Seller and
Seller will duly observe and conform to all material terms and conditions
of the Leases.
(d) Seller will maintain in full force and effect in all
material respects all insurance coverage currently in effect.
(e) Seller shall not (nor will it permit any of its
executive officers, representatives, directors, agents or any other person)
directly or indirectly solicit, initiate, facilitate or encourage any
inquiries regarding any Acquisition Proposal (as hereinafter defined), or
participate in any negotiations concerning, or knowingly provide any
information to any person known to be making or proposing to make (or any
other person acting on behalf of or in conjunction with such person) any
Acquisition Proposal; nor shall Seller enter into any contract, agreement,
arrangement or understanding, or participate in discussions or
negotiations, relating to an Acquisition Proposal. As used herein an
"Acquisition Proposal" shall mean any proposal for the merger,
amalgamation, consolidation, sale, transfer or other conveyance of all or
any part of Seller, the Business or the Assets, directly or indirectly, to
any person, other than the sale of inventory in the ordinary course of
business of Seller; provided, however, an Acquisition Proposal shall not
include any of the foregoing transactions involving Buyer or any affiliate
of Buyer.
Section 5.2 Access to Information.
(a) If the date hereof shall not also be the Closing
Date, between the date of this Agreement and the Closing, Seller shall (i)
give Buyer and its authorized representatives reasonable access to all
employees, officers and independent contractors of Seller, and to all
books, records, offices and other facilities and properties of Seller; (ii)
permit Buyer and its authorized representatives to make such inspections
thereof as any of them may reasonably request; and (iii) cause the officers
of Seller to furnish Buyer and its authorized representatives with such
financial and operating data and other information with respect to Seller
and properties of Seller as any of them may from time to time reasonably
request; provided, that any such investigation shall be conducted during
normal business hours under the supervision of Seller's personnel and in
such a manner as to maintain the confidentiality of this Agreement and the
transactions contemplated hereby and not interfere unreasonably with the
business operations of Seller or the Business, except as otherwise
contemplated by this Agreement.
(b) All information concerning Seller furnished or
provided by Seller to Buyer or its representatives (whether furnished
before or after the date of this Agreement) shall be held confidential
pursuant to the provisions of the confidentiality letter (the
"Confidentiality Agreement"), dated January 13, 1998, between Seller and
Buyer.
Section 5.3 Consents; Assignment of Certain Contracts. (a) Each
of Seller and Buyer shall cooperate, and use their commercially reasonable
efforts, to make all filings and obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental
authorities and other third parties necessary to consummate the
transactions contemplated by this Agreement. In addition to the foregoing,
PRT or Buyer agrees to provide such assurances as to financial capability,
resources and creditworthiness as may be reasonably requested by any third
party whose consent or approval is sought hereunder. Notwithstanding the
foregoing, nothing herein shall obligate or be construed to obligate Seller
or Buyer to make any payment to any third party in order to obtain the
consent or approval of such third party.
(b) Seller is the named party to certain contracts and
agreements which are currently being performed by Seller. If the date
hereof shall not also be the Closing Date, prior to the Closing, and if the
date hereof is the Closing Date, promptly after the Closing, Seller shall
use commercially reasonable efforts to assign such contracts and agreements
to the Buyer (subject, where necessary, to the consent to such assignment
of the other party or parties to such contracts and agreements) and Seller
and Buyer shall cooperate in obtaining all consents necessary to any such
assignment (as so assigned, the "Assigned Contracts"); provided, however,
that Buyer's obligations under this Agreement shall not be conditioned upon
the procurement of any such third party consent or consents.
Section 5.4 Commercially Reasonable Efforts. Except as
otherwise specifically set forth herein, each of Seller, PRT and Buyer
shall cooperate, and use its commercially reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations
to consummate the transactions contemplated by this Agreement, including,
without limitation, the satisfaction of the conditions to the Closing of
the transactions contemplated herein.
Section 5.5 Covenant to Satisfy Conditions. Seller will use its
commercially reasonable efforts to ensure that the conditions set forth in
Article VI hereof are satisfied, insofar as such matters are within its
control, and PRT and Buyer will use their commercially reasonable efforts
to ensure that the conditions set forth in Article VI hereof are satisfied,
insofar as such matters are within their control. Seller, PRT and Buyer
further covenant and agree, with respect to a threatened or pending
preliminary or permanent injunction or other order, decree or ruling or
statute, rule, regulation or executive order that would adversely affect
the ability of the parties hereto to consummate the transactions
contemplated hereby, to use all commercially reasonable efforts to prevent
or lift the entry, enactment or promulgation thereof, as the case may be.
Section 5.6 Covenant to Purchase Shares. Subject to applicable
law, each of Timothy C. Kasse and Jeffery R. Perdue (i) shall purchase an
aggregate of $100,000 worth of shares of PRT common stock (the "Purchased
Shares") on the NASDAQ Stock Market at such Purchased Shares' then current
market value within 120 days after the Closing Date, and (ii) agree not to
sell, dispose of, hypothecate or otherwise terminate "beneficial ownership"
(as such term is defined under the rules and regulations promulgated under
the Securities Exchange Act of 1934, as amended) of their respective
Purchased Shares until the first anniversary of the purchase of the
Purchased Shares, the termination, for any reason, of such Seller
Shareholder's employment by Buyer or its successor, or the occurrence of a
change of control of the Buyer (as such term is defined in each Seller
Shareholder's Employment Agreement), whichever comes first.
Section 5.7 Employees; Employee Benefits.
(a) (i) On the Closing Date, each person who is an
employee or independent contractor of Seller immediately prior to the
Closing (the "Affected Employees and Independent Contractors") shall cease
to be an employee or independent contractor of Seller, and (ii) for at
least a [one-month] period following the Closing Date, Buyer shall cause
the Business to continue to employ each such Affected Employee and
Independent Contractor in a position substantially similar to that held
with Seller as of the Closing Date and at the same location, with salaries
or wages substantially equivalent to those provided as of such date, except
for employees or independent contractors who (x) shall be terminated "for
cause," (y) voluntarily terminate their employment, or (z) prior to the
Closing were employed for a contractually specified time period and are
terminated upon expiration of that time period. Following the Closing Date,
Buyer shall, or shall cause the Business to, provide each Affected Employee
and Independent Contractor with benefits that are substantially comparable
in the aggregate to the benefits provided at Buyer's option either to
similarly situated employees and independent contractors of Buyer or to
each such Affected Employee or Independent Contractor immediately prior to
the Closing Date. Except as provided in Section 5.7(b), Buyer, in providing
such substantially comparable benefits, shall not be required to provide or
maintain any particular plan or benefit which was provided to or maintained
for Affected Employees and Independent Contractors prior to the Closing
Date. Prior to the Closing, Seller will furnish Buyer with a list of the
length of service with Seller or its Affiliates for each of the Affected
Employees and Independent Contractors.
(b) After the Closing Date, PRT and Buyer shall be
responsible for, and shall indemnify and hold harmless Seller and its
Affiliates and their respective officers, directors, employees, affiliates
and agents and the fiduciaries (including plan administrators) of the
Plans, from and against, any and all claims, losses, damages, costs and
expenses (including, without limitation, attorneys' fees and expenses) and
other liabilities and obligations relating to or arising out of (i) the
liabilities assumed by Buyer under this Section 5.7 or any failure by Buyer
to comply with the provisions of this Section 5.7, (ii) any claims of, or
damages or penalties sought by, any Affected Employee or Independent
Contractor, or any governmental entity on behalf of or concerning any
Affected Employee or Independent Contractor, with respect to any act or
failure to act by Buyer to the extent arising from the employment,
discharge, layoff or termination of any Affected Employee or Independent
Contractor who becomes an employee of Buyer after the Closing Date, and
(iii) all Plan obligations and employment relationships in existence on or
after the Closing Date which are assumed by Buyer.
(c) Notwithstanding anything contained in this Section
5.7 to the contrary, Seller and its Affiliates shall remain responsible
for, and shall indemnify and hold harmless PRT and Buyer and its respective
officers, directors, employees, affiliates and agents from and against any
and all claims, losses, damages, costs and expenses (including, without
limitation, attorneys' fees and expenses) and other liabilities relating to
or arising out of (i) any plans or obligations thereunder not assumed by
Buyer pursuant to this Section 5.7, (ii) coverage of any and all claims for
medical, dental or other coverage of Affected Employees or Independent
Contractors and their dependents occurring on or prior to the Closing Date
and continuing on or after the Closing Date so long as such continuing
claim relates to an occurrence prior to the Closing Date within the meaning
of the applicable welfare plan of Seller as in effect on the date of this
Agreement, (iii) any disability, workers' compensation claims or welfare
claims (including medical, dental, life and disability insurance claims)
for disabled Affected Employees and Independent Contractors and their
dependents, and/or for disabled dependents of Affected Employees and
Independent Contractors, occurring on or prior to the Closing Date which
continue thereafter, and (iv) coverage under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, which commenced on or prior
to the Closing Date for the remainder of any required period under such
law.
(d) PRT agrees to grant an aggregate of 30,000 options to
purchase shares of PRT Common Stock in accordance with PRT's Amended and
Restated 1996 Stock Incentive Plan to employees of Seller on or prior to
March 15, 1998.
Section 5.8 Supplemental Disclosure. In the event that any of
the parties hereto shall become aware of any breach of any warranty,
representation or covenant hereunder, such party shall promptly give notice
of such breach to the other parties hereto. Seller, on the one hand, and
Buyer, on the other hand, shall from time to time prior to the Closing
supplement or amend its respective Disclosure Schedule with respect to any
matter hereafter arising or discovered which if existing or known at the
date of this Agreement would have been required to be set forth or
described in such Disclosure Schedule. No such supplemental or amended
disclosure shall be deemed to have cured any breach of any representation
or warranty made in this Agreement constituting a Material Adverse Effect
on Seller, the Business or the Assets unless consented to in writing by
Buyer, in which case such supplemental or amended Disclosure Schedule will
be deemed to have cured any such breach made in this Agreement and to have
been disclosed as of the date of this Agreement for purposes of determining
whether or not the conditions set forth in Article VI hereof have been
satisfied.
Section 5.9 Covenant Not to Compete.
(a) In furtherance of the sale to Buyer of the Assets and
the Business, Seller shall not, and the Seller Shareholders shall not,
directly or indirectly, through equity ownership or otherwise anywhere in
the world:
(i) compete with PRT or Buyer in any business in
which PRT, Buyer or the Business competes, including, without
limitation, the software development process evaluation and
certification business and the information technology solutions
and projects business, for a period of one year following the
termination, for any reason, of any the Seller Shareholder's
employment by PRT, Buyer or its successor; subject to the
following exceptions:
(A) The Seller Shareholders shall be free to engage
in the improvement process consulting business at any
time following such termination, except that such right
to consult shall not extend to customers or identified
customer prospects of PRT, Buyer or the Business;
(B) The Seller Shareholders shall be entitled to a
royalty-free, non exclusive, non-transferable license to
the manuals and course materials and other proprietary
information transferred by Seller to Buyer pursuant to
this Agreement, except that such license shall not extend
to customers or identified customer prospects of PRT,
Buyer or the Business and that PRT and Buyer shall only
be required to grant such license to the Selling
Shareholders to the extent that the grant of such license
does not violate the contractual rights of any third
parties; and
(C) Notwithstanding the foregoing, the Seller
Shareholders shall not be prevented from owning, at any
time, as an investment, up to 1% of a class of equity
securities issued by any competitor of PRT or Buyer that
is publicly traded;
(ii) for a period of two (2) years following the
termination, for any reason, of any Seller Shareholder's
employment by Buyer or its successor, communicate with or
contact any customers of the Business, PRT or Buyer and one (1)
year following the termination, for any reason, of any Seller
Shareholder's employment by the Buyer or its successor,
communicate with or contact any employees of the Business, PRT
or the Buyer, in each case for the purpose of soliciting such
customers or employees to purchase any goods, products or
services of the type being rendered, offered or sold by the
Business, PRT or Buyer or to work for any other entity; nor
(iii) use or disclose to others any of the
Intellectual Property, or any trade secrets or other
confidential information of PRT and Buyer, including the names,
addresses and any other information relating to the aforesaid
customers, and confirm that such information shall constitute
exclusive property of PRT or Buyer and agrees that any such
property shall not be used by Seller or the Seller Shareholders
or disclosed to other persons or business enterprises for any
reason or purpose.
(b) The parties intend that the covenant contained in the
preceding Section 5.9(a) shall be construed as a series of separate
covenants, one for each area of business and country, county and city
included within each state and, except for business and geographic
coverage, each such separate covenant shall be deemed identical. The
parties agree that the covenants included in this Section 5.9 are, taken as
a whole, reasonable in their business scope, geographic scope and duration
and no party shall raise any issue of the reasonableness of the scope or
duration of the covenants in any proceeding to enforce any such covenants.
If, in any judicial proceeding, a court shall refuse to enforce any of the
separate covenants deemed included in this Section 5.9, then the
unenforceable covenant shall be deemed eliminated from these provisions for
the purpose of those proceedings to the extent necessary to permit the
remaining separate covenants to be enforced.
Section 5.10 Nondisclosure. If this Agreement and the
transactions provided for herein shall be terminated or abandoned for any
reason whatsoever, each party shall (a) return to the other party any and
all information and data furnished to such party in connection herewith and
(b) hold in confidence its knowledge of any and all proprietary,
confidential and secret information or data and not disclose or publish the
same directly or indirectly (i) without the prior written consent of such
other party or (ii) until the same has been theretofore publicly disclosed
by such other party or otherwise ceased to be secret or confidential as
evidenced by general public knowledge; provided, however, that each party
shall have the right to disclose such information, without consent, to the
extent that such party is required by law to do so. The foregoing
provisions are intended to supplement and not supersede the provisions of
the Confidentiality Agreement.
Section 5.11 Trademark Registrations, Corporate Names. As of
the Closing Date, if any of the Intellectual Property to be transferred to
Buyer hereunder is in the process of registration or renewal, or is
entitled to be as of the Closing, but has not been, registered with the
U.S. Patent and Trademark Office, U.S. Copyright Office, or similar U.S. or
foreign patent, trademark or copyright authorities, Seller shall, at the
request of Buyer, reasonably assist Buyer in pursuing and securing any and
all such registrations in the name of Buyer. Such assistance by Seller
shall not include any requirement on Seller to engage in litigation with,
or make any payments to, third parties, including (without limitation),
governmental agencies and entities.
Section 5.12 Certain Tax Matters.
(a) Certain Definitions. As used in this Agreement:
(i) "Pre-Closing Period" means any taxable
period which ends on or before the Closing Date.
(ii) "Straddle Period" means any taxable
period that includes (but does not end on) the Closing Date.
(b) Seller shall be responsible for the timely payment of, and
shall hold harmless PRT and Buyer against, all sales (including, without
limitation, bulk sales), use, transfer, recording, ad valorem and other
similar Taxes and fees ("Transfer Taxes"), arising out of or in connection
with or attributable to the transactions effected pursuant to this
Agreement. Seller shall further be solely responsible for any federal,
state, provincial, local or foreign income or gains tax assessed as the
result of the transactions contemplated hereby. Seller shall prepare and
timely file all Tax Returns required to be filed in respect of Transfer
Taxes (including, without limitation, all notices required to be given with
respect to bulk sales taxes), except that Buyer shall be permitted to
prepare any such Tax Returns that are the primary responsibility of Buyer
under applicable law.
(c) Each of Buyer and Seller shall provide the other with such
assistance as may reasonably be requested by any of them in connection with
the preparation of any Tax Return, any audit or other examination by any
taxing authority, or any judicial or administrative proceedings relating to
liability for Taxes, and each will retain and provide the requesting party
with any records or information which may be relevant to such return, audit
or examination, proceedings or determination and the Seller shall
specifically provide Buyer the information necessary for Buyer to satisfy
the requirements (if applicable) of Section 41(f)(3)(A) of the Code. Any
information obtained pursuant to this Section 5.15(c) or pursuant to any
other Section hereof providing for the sharing of information or the review
of any Tax Return or other schedule relating to Taxes shall be kept
strictly confidential by the parties hereto.
(d) No new tax elections with respect to Taxes, or any changes
in current elections with respect to Taxes, affecting the Business or any
of the Assets thereof, shall be made after the date of this Agreement
without the prior written consent of Buyer.
(e) Seller shall retain all records not included within the
books and records related to Taxes or Tax Returns of the Business until
such time as the applicable statute of limitations with respect to such
Taxes or Tax Returns shall expire.
(f) Tax Indemnification.
(iii) Notwithstanding anything in this
Agreement to the contrary, Seller and the Seller Shareholders shall,
jointly and severally, indemnify, defend and hold harmless PRT and
Buyer and its affiliates, from and against any liability for Taxes
of the Seller for all taxable periods or of the Business for the
Pre-Closing Period or the portion of the Straddle Period prior to
and including the Closing Date (including, without limitation,
Transfer Taxes). The indemnity provided for in this Section shall be
independent of and in addition to any other indemnity provision of
this Agreement and shall not be subject to any monetary limitations
or time bars.
(iv) Notwithstanding anything in this
Agreement to the contrary, PRT and Buyer shall indemnify, defend and
hold harmless Seller and the Seller Shareholders, from and against
any liability for Taxes related to the Business (exclusive of
Transfer Taxes) for all taxable periods beginning after the Closing
Date and that portion of the Straddle Period beginning after the
Closing Date.
(v) If a claim for Taxes shall be made by any
taxing authority in writing, which, if successful, might result in
an indemnity payment pursuant to this Section 5.12, the party
seeking indemnification (the "Tax Indemnified Party") shall promptly
notify the other party (the "Tax Indemnifying Party") in writing of
such claim (a "Tax Claim") within a reasonably sufficient period of
time to allow the Tax Indemnifying Party effectively to contest such
Tax Claim, and in reasonable detail to apprise the Tax Indemnifying
Party of the nature of the Tax Claim, and provide copies of all
correspondence and documents received by it from the relevant taxing
authority. Failure to give prompt notice of a Tax Claim hereunder
shall not affect the Tax Indemnifying Party's obligation under this
Section except to the extent that the Tax Indemnifying Party is
prejudiced by such failure to give prompt notice.
(vi) With respect to any Tax Claim which
might result in an indemnity payment to PRT or Buyer pursuant to
this Section 5.12(f), Seller or the Seller Shareholders shall
control all proceedings taken in connection with such Tax Claim and,
without limiting the foregoing, may in their sole discretion and at
their sole expense pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with any taxing
authority with respect thereto, and may, in their sole discretion,
either pay the Tax claimed and sue for a refund where applicable law
permits such refund suits or contest such Tax Claim. PRT or Buyer
shall not under any circumstances settle or otherwise compromise any
Tax Claim referred to in the preceding sentence without Seller's and
the Seller Shareholders' prior written consent; provided, that, if
PRT or Buyer does so settle or otherwise compromise such a Tax
Claim, Seller and the Seller Shareholders shall not indemnify PRT or
Buyer for any such Taxes. In connection with any proceeding taken in
connection with such Tax Claim, (A) Seller and the Seller
Shareholders shall keep PRT and Buyer informed of all material
developments and events relating to such Tax Claim if involving a
material liability for Taxes and (B) PRT or Buyer shall have the
right, at its sole expense, to participate in any such proceedings;
provided, that, the final decision with respect to any settlement or
compromise of any such Tax Claims shall be that of Seller and the
Seller Shareholders. Buyer shall cooperate with Seller and the
Seller Shareholders in contesting such Tax Claim, which cooperation
shall include, without limitation, the retention and the provision
to Seller and the Seller Shareholders of records and information
which are reasonably relevant to such Tax Claim, and making
employees available to Seller and the Seller Shareholders to provide
additional information or explanation of any material provided
hereunder or to testify at proceedings relating to such Tax Claim.
The Seller Shareholders shall reimburse PRT and Buyer for reasonable
out-of-pocket expenses incurred by PRT and Buyer in providing such
assistance to the Seller Shareholders.
(vii) With respect to any Tax Claim which
might result in an indemnity payment to Seller or the Seller
Shareholders pursuant hereto, PRT and Buyer shall control all
proceedings in accordance with provisions that are parallel to those
in Section 5.12(f) hereof.
(d) Any Indemnification payment made pursuant to this Section
5.12 shall be treated by the parties hereto as an adjustment to the
Purchase Price for federal, state, local and foreign tax purposes and
appropriate adjustments to the tax basis of the Assets in accordance with
Section 1060 of the Code and the Regulations shall be made.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 6.1 Conditions to Each Party's Obligation. The
respective obligation of each party to consummate the transactions
contemplated herein is subject to the satisfaction at or prior to the
Closing of the following conditions:
(a) No statute, rule or regulation shall have been
enacted, entered, promulgated or enforced by any court or governmental
authority which prohibits or restricts the consummation of the transactions
contemplated hereby;
(b) There shall not be in effect any judgment, order,
injunction or decree of any court of competent jurisdiction enjoining the
consummation of the transactions contemplated hereby; and
(c) There shall not be any suit, action, investigation,
inquiry or other proceeding instituted, pending or threatened by any
governmental or other regulatory or administrative agency or commission
which seeks to enjoin or otherwise prevent consummation of the transactions
contemplated hereby.
Section 6.2 Conditions to Obligations of Seller. The
obligations of Seller to consummate the transactions contemplated hereby
are further subject to the satisfaction (or waiver) at or prior to the
Closing of the following conditions:
(a) The representations and warranties of PRT and Buyer
contained in this Agreement shall be true and correct at the date hereof
and as of the Closing as if made at and as of such time, except for changes
permitted or contemplated hereby and except for representations which are
as of a specific date;
(b) PRT and Buyer shall have performed in all material
respects its obligations under this Agreement required to be performed by
it at or prior to the Closing pursuant to the terms hereof;
(c) If the date hereof shall not also be the Closing
Date, PRT and Buyer shall have delivered to Seller a certificate
substantially in the form annexed as Exhibit E hereto, dated as of the
Closing executed by an appropriate officer of PRT and Buyer;
(d) PRT and Buyer shall have delivered to Seller those
items set forth in Section 1.3 hereof;
(e) Seller shall have received an opinion of PRT's
general counsel, dated the Closing Date, substantially in the form annexed
as Exhibit F hereto; and
(f) PRT or Buyer shall have entered into the employment
agreements, forms of which are attached hereto as Exhibits G and H
(collectively, the "Employment Agreements"), with the Seller Shareholders.
Section 6.3 Conditions to Obligations of Buyer. The obligations
of PRT and Buyer to consummate the transactions contemplated hereby are
further subject to the satisfaction (or waiver) at or prior to the Closing
of the following conditions:
(a) The representations and warranties of Seller
contained in this Agreement shall be true and correct at the date hereof
and as of the Closing as if made at and as of such time, except for changes
permitted or contemplated hereby and except for representations which are
as of a specific date;
(b) Seller shall have performed, in all material respects
its obligations under this Agreement required to be performed by it at or
prior to the Closing pursuant to the terms hereof;
(c) If the date hereof shall not also be the Closing
Date, Seller shall have delivered to PRT and Buyer a certificate
substantially in the form annexed as Exhibit I hereto, dated as of the
Closing and executed by an appropriate officer of Seller;
(d) Seller shall have delivered to PRT and Buyer those
items set forth in Section 1.3 hereof;
(e) PRT and Buyer shall have received an opinion of
Seller's legal counsel, dated the Closing Date, substantially in the form
annexed as Exhibit J hereto;
(f) The Seller Shareholders shall have entered into the
Employment Agreements, with Buyer.
ARTICLE VII
ASSUMPTION OF CERTAIN LIABILITIES AND OBLIGATIONS
Section 7.1 Assumed Liabilities. Subject to Section 7.2 of this
Agreement, Buyer shall assume and be responsible on the Closing Date for
only the following liabilities and obligations of Seller (such liabilities
and obligations being hereinafter referred to collectively as the "Assumed
Liabilities"):
(a) all liabilities, contingencies, and obligations
reflected in the calculation of Net Tangible Worth, other than any amounts
due to the Seller Shareholders; and
(b) all liabilities, obligations and duties to perform
any and all Assigned Contracts and all commitments of any kind entered into
by Seller of a type and amount consistent with those found on the Seller
Financial Statements on or prior to the Closing Date in the ordinary course
of business consistent with past practice which relate directly to the
Business or the Assets, including, without limitation, the Plans identified
in Section 3.11 of this Agreement. At the Closing, Buyer will deliver to
Seller the Undertaking whereby Buyer will assume and agree to pay and
discharge the Assumed Liabilities.
At the Closing, Buyer will deliver to Seller the Undertaking
whereby Buyer will assume and agree to pay and discharge the Assumed
Liabilities.
Section 7.2 Non-Assumed Liabilities. (a) Except for the Assumed
Liabilities, Buyer does not assume or agree to pay, satisfy, discharge or
perform, and shall not be deemed by virtue of the execution and delivery of
this Agreement, or of any instrument, paper or document delivered by it
pursuant to this Agreement, or as a result of the consummation of the
transactions contemplated by this Agreement, to have assumed or become a
successor to, or to have agreed to pay, satisfy, discharge or perform, any
liability, obligation or indebtedness (whether absolute, accrued, or
contingent, whether filed or asserted prior to or after the Closing Date)
all of which, except for the Assumed Liabilities, Seller agrees to pay,
satisfy, discharge and perform (the "Excluded Liabilities"). The Excluded
Liabilities shall include, without limitation, those liabilities,
obligations and contingencies set forth on Section 7.2 of the Disclosure
Schedule.
(b) Any instruments, papers and documents which shall be
executed and delivered by Buyer in connection with the assumption of the
Assumed Liabilities shall contain express and specific provisions to the
effect that in respect of any Assumed Liabilities:
(i) Buyer shall have the right to resist, contest, defend
against, litigate, compromise and/or otherwise dispose of any and all
Assumed Liabilities to such extent and in such manner as Buyer, in
its sole discretion, shall deem desirable, advisable and for its best
interests, and Buyer shall be deemed to have performed its
obligations under and pursuant to such instruments, papers and
documents notwithstanding such resistance, contest, defense against,
litigation, compromise or other disposition, so long as, and to the
extent that, neither Seller nor its affiliates shall be required to
pay, satisfy, discharge or perform any of the Assumed Liabilities;
and
(ii) Nothing in any such instrument, paper or document,
or in this Agreement, contained is intended to be construed, or shall
be construed, as enlarging or extending in any manner, or to any
extent, the period of limitations prescribed by any statute of
limitations applicable to any of the Assumed Liabilities, or as
enlarging or extending to any extent, or in any manner whatsoever,
the rights which any owner, holder or obligee of any of the Assumed
Liabilities has had, now has, or hereafter can, shall or may have in
respect thereto against Seller, or as rendering valid, or
enforceable, against Buyer any of the Assumed Liabilities which, for
any reason whatsoever, would not have been valid and enforceable
against Seller and/or its affiliates and that any of the Assumed
Liabilities which would have been valid or enforceable, against
Seller and/or its affiliates only partially, conditionally,
contingently or to a limited extent, or in a limited manner, shall be
valid and enforceable against Buyer to no greater extent, and in no
different manner, than the Assumed Liabilities would have been valid
and enforceable against Seller and/or its affiliates.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1 Termination. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written consent of Seller and
Buyer;
(b) at any time on or after May 1, 1998, by either
Seller, on the one hand, or Buyer, on the other hand, if the Closing shall
not have occurred on or prior to such date and if the terminating party is
not then in default of any of its representations, warranties, covenants or
obligations;
(c) by Buyer or Seller if any court of competent
jurisdiction or other governmental body shall have issued an order, decree
or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such
order, decree, ruling or other action shall have become final and
non-appealable;
(d) by Buyer, if there has been any violation or breach
by Seller in any material respect of any material representation, warranty,
covenant or obligation contained in this Agreement or upon the occurrence
of a Material Adverse Effect upon Seller, the Assets or the Business and
such violation, breach or Material Adverse Effect has not been waived by
Buyer; or
(e) by Seller, if there has been a violation or breach by
PRT or Buyer in any material respect of any material representation,
warranty, covenant or obligation contained in this Agreement or upon the
occurrence of a Material Adverse Effect upon Buyer or PRT and such
violation, breach or Material Adverse Effect has not been waived by Seller.
If Buyer or Seller shall terminate this Agreement pursuant to the
provisions hereof, such termination shall be effected by notice to the
other parties specifying the provision hereof pursuant to which such
termination is made.
Section 8.2 Procedure and Effect of Termination. In the event
of the termination of this Agreement and the abandonment of the
transactions contemplated hereby pursuant to Section 8.1 hereof, written
notice thereof shall forthwith be given by the party so terminating to the
other party hereto and this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned, without further action by Seller,
on the one hand, or Buyer, on the other hand. If this Agreement is
terminated pursuant to Section 8.1 hereof:
(a) each party shall redeliver all documents, work papers
and other materials of the other parties relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to the party furnishing the same, and all confidential information
received by any party hereto with respect to the other party shall be
treated in accordance with the applicable provisions of the Confidentiality
Letters;
(b) all filings, applications and other submissions made
pursuant hereto shall, at the option of the filing party, and to the extent
practicable, be withdrawn from the agency or other person to which made;
and
(c) there shall be no liability or obligation hereunder
on the part of Seller, PRT or Buyer or any of their respective directors,
officers, employees, affiliates, controlling persons, agents or
representatives, except that Seller, PRT or Buyer, as the case may be, may
have liability to the other party if the basis of termination is a willful,
material breach by Seller, PRT or Buyer, as the case may be, of one or more
of the provisions of this Agreement, and except that the obligations
provided for in Sections 8.2(a), 8.2(b) and 10.3 hereof shall survive any
such termination.
Section 8.3 Amendment, Modification and Waiver. This Agreement
may be amended, modified or supplemented at any time by written agreement
of the parties hereto. Any failure of Seller, on the one hand, or PRT or
Buyer, on the other hand, to comply with any term or provision of this
Agreement may be waived, with respect to PRT or Buyer, by Seller and, with
respect to Seller, by Buyer, by an instrument in writing signed by or on
behalf of the appropriate party, but such waiver or failure to insist upon
strict compliance with such term or provision shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure to comply.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 9.1 Survival of Representations, Warranties and
Agreements. The representations and warranties of Seller, the Seller
Shareholders, PRT, and Buyer made in this Agreement shall survive the
Closing until the first anniversary of the Closing Date (the "Indemnity
Period") but, except as provided in Section 8.2(c) hereof, shall not
survive any termination of this Agreement and except that the
representations and warranties contained in Section 3.18 hereof shall
survive until the expiration of the applicable statute of limitations
(including extensions thereto); provided, that, if a claim for
indemnification of Buyer Damages (as defined below) is made during the
Indemnity Period, the representation or warranty that is the subject matter
of such claim shall survive until the settlement or satisfaction of such
claim. The Indemnity Period shall not apply to Buyer Damages arising out of
a breach of any covenant or obligation contained in this Agreement or
arising pursuant to Sections 9.2(a)(ii) or (iii) hereof. This Section 9.1
shall not limit any covenant or agreement of the parties which contemplates
performance after the Closing, including, without limitation, the covenants
and agreements set forth in Sections 5.7, 5.12 and 10.2 hereof.
Section 9.2 Seller's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein,
from and after the Closing, Seller, or if Seller shall be wound-up and
dissolved or shall otherwise cease to exist or shall otherwise fail to
satisfy its obligations hereunder, the Seller Shareholders, shall indemnify
and hold harmless PRT and Buyer and its directors, officers, employees,
affiliates, controlling persons, agents and representatives and their
successors and assigns (collectively, the "Buyer Indemnities") from and
against all liability, demands, claims, actions or causes of action,
assessments, losses, damages, costs and expenses (including, without
limitation, reasonable attorneys' and accountant's fees and expenses)
(collectively "Buyer Damages") asserted against or incurred by any Buyer
Indemnitee as a result of, relating to or arising out of the following:
(i) a breach of any representation, warranty, obligation,
covenant or agreement contained in this Agreement when made or at and
as of the Closing as though such representations, warranties,
obligations, covenant or agreement were made at and as of the
Closing;
(ii) any of the Excluded Assets or the Excluded
Liabilities or any other liability or obligation of Seller not
expressly assumed by PRT or Buyer under this Agreement regardless of
whether or not such events constitute a breach of a representation or
warranty hereunder; and
(iii) any event, fact or condition relating to or arising
from the ownership, control, management or operation of the Business
or the real property leased by the Business or the other assets of
Seller or otherwise arising or occurring prior to the Closing Date
regardless of whether Seller, PRT, or Buyer had knowledge or was
aware thereof, and regardless of whether or not such events
constitute a breach of a representation or warranty hereunder, on or
prior to the Closing Date
provided, that in no case shall the provisions of this Section 9.2 relieve
Buyer of its obligations to assume, discharge and pay the Assumed
Liabilities.
(b) Seller's obligations (or, if Seller shall be wound-up
and dissolved or shall otherwise cease to exist or shall otherwise fail to
satisfy its obligations hereunder, the Seller Shareholders' obligations) to
indemnify the Buyer Indemnities pursuant to clause (i) of Section 9.2(a)
hereof with respect to a breach of a representation, warranty, obligation
or covenant contained in this Agreement are subject to the following
limitations:
(i) Seller shall be obligated to indemnify the
Buyer Indemnities only for those claims giving rise to Buyer
Damages as to which the Buyer Indemnities have given Seller
written notice thereof prior to the end of the Indemnity Period
in the event that the Indemnity Period applies to such Buyer
Damages. Any written notice delivered by a Buyer Indemnitee to
Seller with respect to Buyer Damages shall set forth with as
much specificity as is reasonably practicable the basis of the
claim for Buyer Damages and, to the extent reasonably
practicable, a reasonable estimate of the amount thereof;
(ii) Except as otherwise expressly provided herein,
no indemnification shall be made by Seller or the Seller
Shareholders unless the aggregate amount of Buyer Damages
exceeds $50,000 and, in such event, indemnification shall be
made by Seller and the Seller Shareholders for all Buyer Damage
in excess of $50,000; and
(iii) Except in the case of actual fraud, the
aggregate liability of Seller and the Seller Shareholders with
respect to Buyer Damages shall in no event exceed $500,000.
(c) In the event of any conflict or inconsistency between
any of the provisions this Article IX and any other Article or Section of
this Agreement, on the one hand and Section 5.12 on the other hand, the
provisions of Section 5.12 will control.
(d) The Seller Shareholders agree to each bear their
pro-rata share of any Buyer Damages indemnified based on the proportion of
the Purchase Consideration received by such Seller hereunder; provided,
that, the Seller Shareholders shall be jointly and severally liable for all
Buyer Damages.
Section 9.3 PRT and Buyer's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein,
from and after the Closing, PRT and Buyer, shall indemnify and hold
harmless Seller and its directors, officers, employees, affiliates,
controlling persons, agents and representatives and their successors and
assigns (collectively, the "Seller Indemnities") from and against all
liability, demands, claims, actions or causes of action, assessments,
losses, damages, costs and expenses (including, without limitation,
reasonable attorneys' and accountant's fees and expenses) (collectively
"Seller Damages") asserted against or incurred by any Seller Indemnitee as
a result of, relating to or arising out of a breach of any representation,
warranty, obligation, covenant or agreement contained in this Agreement
when made or at and as of the Closing as though such representations,
warranties, obligations, covenant or agreement were made at and as of the
Closing.
(b) PRT or Buyer's obligations to indemnify the Seller
Indemnities pursuant to Section 9.3(a) hereof with respect to a breach of a
representation, warranty, obligation or covenant contained in this
Agreement are subject to the following limitations:
(i) PRT and Buyer shall be obligated to indemnify
the Seller Indemnities only for those claims giving rise to
Seller Damages as to which the Seller Indemnities have given
PRT and Buyer written notice thereof prior to the end of the
Indemnity Period in the event that the Indemnity Period applies
to such Seller Damages. Any written notice delivered by a
Seller Indemnitee to PRT or Buyer with respect to Seller
Damages shall set forth with as much specificity as is
reasonably practicable the basis of the claim for Seller
Damages and, to the extent reasonably practicable, a reasonable
estimate of the amount thereof; and
(ii) Except as otherwise expressly provided herein,
no indemnification shall be made by PRT and Buyer unless the
aggregate amount of Seller Damages exceeds $50,000 and, in such
event, indemnification shall be made by PRT and Buyer for all
Seller Damages in excess of $50,000.
(c) In the event of any conflict or inconsistency between
any of the provisions this Article IX and any other Article or Section of
this Agreement, on the one hand and Section 5.12 on the other hand, the
provisions of Section 5.12 will control.
Section 9.4 Third Party Indemnification. The obligations of
Seller (or, if Seller shall be wound-up and dissolved or shall otherwise
cease to exist or shall otherwise fail to satisfy its obligations
hereunder, the obligations of the Seller Shareholders) to indemnify the
Buyer Indemnities under Section 9.2 hereof on the one hand, or PRT and
Buyer to Indemnify the Seller Indemnities or the Seller Shareholders under
Section 9.3 hereof with respect to Buyer Damages or Seller Damages, as the
case may be, resulting from the assertion of liability by third parties (a
"Claim"), will be subject to the following terms and conditions:
(a) Any party against whom any Claim is asserted will
give the party required to provide indemnity hereunder written notice of
any such Claim promptly after learning of such Claim, and the indemnifying
party may at its option undertake the defense thereof, at its own expense,
by representatives of its own choosing. Failure to give prompt notice of a
Claim hereunder shall not affect the indemnifying party's obligations under
this Section 9.3, except to the extent the indemnifying party is materially
prejudiced by such failure to give prompt notice. If the indemnifying
party, within 30 days after notice of any such Claim, or such shorter
period as is reasonably required, fails to assume the defense of such
Claim, the Buyer Indemnitee or Seller Indemnitee, as the case may be,
against whom such claim has been made will (upon further notice to the
indemnifying party) have the right to undertake the defense, compromise or
settlement of such claim on behalf of and for the account and risk, and at
the expense, of the indemnifying party, subject to the right of the
indemnifying party to assume the defense of such Claim at any time prior to
settlement, compromise or final determination thereof.
(b) Anything in this Section 9.4 to the contrary
notwithstanding, the indemnifying party shall not enter into any settlement
or compromise of any action, suit or proceeding or consent to the entry of
any judgment (i) which does not include as an unconditional term thereof
the delivery by the claimant or plaintiff to the Buyer Indemnitee or Seller
Indemnitee, as the case may be, of a written release from all liability in
respect of such action, suit or proceeding or (ii) for other than monetary
damages to be borne by the indemnifying party without the prior written
consent of the Buyer Indemnitee or Seller Indemnitee, as the case may be,
which consent shall not be unreasonably withheld.
Section 9.5 Indemnification Funds. Any Buyer Damages to be
indemnified hereunder shall be first satisfied by payment from the Escrow
Amount pursuant to the Escrow Agreement and, if the Escrow Amount is
insufficient to satisfy such Buyer Damages in full, by the Seller
Shareholders, who shall be jointly and severally liable for the entire
amount of such Buyer Damages.
Section 9.6 Exclusive Remedy. (a) Except to the extent provided
in subparagraph (b) below, the indemnification provisions contained in this
Article IX will constitute the sole and exclusive recourse and remedy of
the parties for monetary damages with respect to any breach of any of the
representations or warranties contained in this Agreement. The provisions
of this Article IX will not restrict the right of any party to seek
specific performance or other equitable remedies in connection with any
breach of any of the covenants contained in this Agreement.
(b) Tax Matters. Section 5.12 shall govern all matters relating
to taxes to the extent Section 5.12 is inconsistent with this Article IX.
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses. Whether or not the transactions
contemplated herein are consummated pursuant hereto, except as otherwise
provided herein, each of Seller, on the one hand, and PRT and Buyer, on the
other hand, shall pay all fees and expenses incurred by, or on behalf of,
such party in connection with, or in anticipation of, this Agreement and
the consummation of the transactions contemplated hereby. Each of Seller,
on the one hand, and PRT and Buyer, on the other hand, shall indemnify and
hold harmless the other party from and against any and all claims or
liabilities for financial advisory and finders' fees incurred by reason of
any action taken by such party or otherwise arising out of the transactions
contemplated by this Agreement by any person claiming to have been engaged
by such party.
Section 10.2 Further Assurances. From time to time after the
Closing Date, at the request of another party hereto and at the expense of
the party so requesting, each of the parties hereto shall execute and
deliver to such requesting party such documents and take such other action
as such requesting party may reasonably request in order to consummate more
effectively the transactions contemplated hereby.
Section 10.3 Notices. All notices, requests, demands, waivers
and other communications required or permitted to be given under this
Agreement shall be in writing and may be given by any of the following
methods: (a) personal delivery; (b) facsimile transmission; (c) registered
or certified mail, postage prepaid, return receipt requested; or (d)
overnight delivery service. Notices shall be sent to the appropriate party
at its address or facsimile number given below (or at such other address or
facsimile number for such party as shall be specified by notice given
hereunder):
If to PRT or Buyer, to:
PRT Group Inc.
342 Madison Avenue
New York, New York 10173
Fax No. (212) 922-0806
Attention: Leonard P. Ciriello, Esq.
with a copy to:
Skadden, Arps, Slate,
Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-9931
Fax No. (212) 735-2001
Attention: Mark N. Kaplan, Esq.
If to Seller, to:
Institute for Software Process
Improvement, Inc.
15 North Collinwood Drive
Pittsburgh, Pennslyvania 15215
Fax No.: 412-781-0805
Attention: Jeffery R. Perdue
With copies to:
Timothy C. Kasse
Leopoldslei 90
2930 Brasschaat
Belgium
Fax No.: 011-323-653-1192
and
Kirkpatrick & Lockhart, LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Fax No.: 412-355-6501
Attention: Robert P. Zinn, Esq.
All such notices, requests, demands, waivers and communications shall be
deemed received (i) if delivered personally, upon actual receipt thereof by
the addressee, (ii) if delivered by overnight delivery service, on the day
after actual delivery thereof to the delivery service, (iii) if delivered
by mail, upon receipt of the return receipt, or (iv) in the case of a
facsimile transmission, upon transmission thereof by the sender and
issuance by the transmitting machine of a confirmation slip that the number
of pages constituting the notice have been transmitted without error. In
the case of notices sent by facsimile transmission, the sender shall (x)
call to confirm receipt of the facsimile transmission, and (y)
contemporaneously mail a copy of the notice to the addressee at the address
provided for above. However, such mailing shall in no way alter the time at
which the facsimile notice is deemed received.
Section 10.4 Severability. Should any provision of this
Agreement for any reason be declared invalid or unenforceable, such
decision shall not affect the validity or enforceability of any of the
other provisions of this Agreement, which remaining provisions shall remain
in full force and effect and the application of such invalid or
unenforceable provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall be valid and enforced to
the fullest extent permitted by law.
Section 10.5 Binding Effect; Assignment. This Agreement and all
of the provisions hereof shall be binding upon and shall inure to the
benefit of the parties hereto and upon the Seller Shareholders, jointly and
severally, and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned, directly or indirectly, including, without limitation,
by operation of law, by any party hereto without the prior written consent
of the other party hereto, except that Buyer shall have the right to assign
this Agreement (and the rights, interests and obligations hereunder) to any
subsidiary or affiliate of Buyer without the prior written consent of
Seller; provided, that the Buyer shall continue to remain liable to Seller
for any amounts or obligation owing to Seller hereunder.
Section 10.6 No Third Party Beneficiaries. This Agreement is
solely for the benefit of Seller and the Seller Shareholders and their
respective successors and permitted assigns with respect to the obligations
of PRT and Buyer under this Agreement, and for the benefit of PRT and Buyer
and its respective successors and permitted assigns with respect to the
obligations of Seller or the Seller Shareholders under this Agreement, and
this Agreement shall not be deemed to confer upon or give to any other
third party any remedy, claim liability, reimbursement, cause of action or
other right.
Section 10.7 Interpretation.
(a) The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
(b) As used in this Agreement, the term "person" shall
mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or
any department or agency thereof.
(c) As used in this Agreement, the term "affiliate" shall
have the meaning set forth in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
(d) As used in this Agreement, any provision referring to
the "knowledge" of Seller shall mean the actual knowledge of either Timothy
C. Kasse and Jeffery R. Perdue, or both.
(e) The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event of any ambiguity
with respect to, or question of intent or interpretation of, any provision
of this Agreement or any document to be executed or delivered hereunder
(other than the Disclosure Schedule prepared exclusively by Seller and the
Seller Shareholders), such provision shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any
provision of this Agreement or document.
Section 10.8 Jurisdiction and Consent to Service. Without
limiting the jurisdiction or venue of any other court, Seller, PRT and
Buyer (a) agree that any suit, action or proceeding arising out of or
relating to this Agreement may be brought solely in the state or federal
courts of New York; (b) consents to the exclusive jurisdiction of each such
court in any suit, action or proceeding relating to or arising out of this
Agreement; (c) waives any objection which it may have to the laying of
venue in any such suit, action or proceeding in any such court; and (d)
agrees that service of any court paper may be made in such manner as may be
provided under applicable laws or court rules governing service of process.
Section 10.9 Entire Agreement. This Agreement, the
Confidentiality Agreement, the Disclosure Schedules, and the Exhibits and
other documents referred to herein or delivered pursuant hereto which form
a part hereof constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties
or any of them with respect to the subject matter hereof.
Section 10.10 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
(regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof) as to all matters, including but
not limited to matters of validity, construction, effect, performance and
remedies.
Section 10.11 Specific Performance. The parties acknowledge and
agree that any breach of the terms of this Agreement would give rise to
irreparable harm for which money damages would not be an adequate remedy
and accordingly the parties agree that, in addition to any other remedies,
each shall be entitled to enforce the terms of this Agreement by a decree
of specific performance without the necessity of proving the inadequacy of
money damages as a remedy.
Section 10.12 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 10.13 Waivers. Any condition to a party's obligation
hereunder may only be waived in writing by such party. The waiver by any
party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
Section 10.14 Bulk Sales Laws. PRT and Buyer hereby waives
compliance with the "bulk sales" provisions of Article 6 of the Uniform
Commercial Code as it is in effect in the states where Seller owns Assets
to be conveyed to PRT or Buyer hereunder and Seller and the Seller
Shareholders agree to indemnify PRT and Buyer with respect to any
non-compliance by Seller with such bulk sales provisions.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
PRT: PRT GROUP INC.
By: /s/ GREGORY S. MELLINGER
____________________________
Name: Gregory S. Mellinger
Title: Chief Operating
Officer & Secretary
BUYER: INSTITUTE FOR SOFTWARE
PROCESS DEVELOPMENT, INC.
By: /s/ GREGORY S. MELLINGER
_______________________________
Name: Gregory S. Mellinger
Title: Vice President &
Secretary
THE SELLER SHAREHOLDERS:
/s/ TIMOTHY C. KASSE
_____________________________
Timothy C.Kasse
/s/ JEFFERY R. PERDUE
_____________________________
Jeffery R. Perdue
SELLER:INSTITUTE FOR SOFTWARE
PROCESS DEVELOPMENT, INC.
By: /s/ JEFFERY R. PERDUE
__________________________
Name: Jeffery R. Perdue
Title: President
Exhibit 99.2
FOR: PRT Group Inc.
342 Madison Avenue
New York, New York 10173
CONTACT: Lowell W. Robinson
Executive Vice President &
Chief Financial Officer
212-922-0800
FOR IMMEDIATE RELEASE
Michele Katz/Libby Marshall
Jonathan Rebell
Morgen-Walke Associates
Press: Lee Foley/Elizabeth Pieroni
212-850-5600
PRT GROUP ACQUIRES INSTITUTE FOR SOFTWARE PROCESS IMPROVEMENT (ISPI)
* EXPANDS QUALITY JOURNEY(TM) CONSULTING PRACTICE
New York, NY April 16, 1998 -- PRT Group Inc. (NASDAQ: PRTG), a leading
provider of onshore and nearshore information technology consulting and
software engineering solutions today announced the acquisition of the
Institute for Software Process Improvement (ISPI). Headquartered in
Pittsburgh, PA, ISPI's staff of 20 experienced consultants are leading
providers of software engineering process improvement consulting and
training based on the Software Engineering Institutes' Capability Maturity
Model (SEI/CMM) to internationally located Fortune 500-sized companies.
The acquisition involves the purchase of all of ISPI's assets for
approximately $2.5 million in cash and is expected to be non-dilutive to
1998 earnings.
The Software Engineering Institute, established in 1984 at Carnegie Mellon
University by the U.S. Department of Defense, developed the Capability
Maturity Model in 1987. The CMM is a process-based framework that assists
organizations in delivering high quality software in a more predictable,
repeatable, and reliable manner. Two of ISPI's employees served on the
original authoring team that created the CMM. As an organization
consistently applies the processes and improves them, its abilities mature
and it produces higher quality software results at reduced system life
cycle costs. The model consists of five levels of maturity, which measure
increasing predictability, control and effectiveness of assessed
organizations. PRT has been assessed at Level 3, known as Defined, by
external assessors at its Barbados Software Engineering Center in November
1997.
Srinivasan Viswanathan, President of PRT, commented, "Many large and medium
sized companies are realizing that the application of software engineering
principals is the key to getting more mileage from technology budgets.
With the addition of ISPI into PRT's existing Quality Journey(TM) Consulting
Practice, we will now offer a more complete range of software engineering
consulting, training, and delivery solutions to our customers. In
addition, this acquisition positions PRT as one of the leading process
improvement companies in the marketplace."
Douglas Mellinger, Chairman and CEO of PRT, said, "The addition of ISPI is
part of our overall acquisition strategy to build and enhance existing
practice areas such as PRT's Quality Journey(TM) Practice as well as to add
new Fortune 500-sized customers. ISPI enjoys an international reputation
as a premier provider of software engineering process improvement
consulting services. PRT's recent SEI-CMM Level 3 assessment combined with
ISPI's software engineering consulting expertise will form one of the few
companies that are recognized software engineering practitioners as well as
teachers of the model. PRT and ISPI will immediately be able to work
together to bring higher quality consulting and software solutions to
customers."
Tim Kasse, CEO of ISPI said, "I am extremely pleased to strategically align
our company with PRT. We are very happy to join the PRT family and help in
building its internal and external Quality Journey(TM) Consulting Practice.
Our mutual interest and commitment to software engineering principles based
on the SEI-CMM will provide our clients with enhanced Quality Journey(TM)
solutions for their processes and software products."
"We expect the union to expand the breadth of our services to our clients,"
concluded Mellinger. "We wanted to add an organization to our Quality
Journey(TM) Practice that would blend well with our employees and corporate
culture. This synergistic opportunity will allow us to capitalize on our
strengths and achievements."
PRT Group Inc. was founded in 1989 to provide information technology
consulting and Software Engineering solutions and services globally,
primarily to Fortune 500-sized companies. Headquartered in New York, New
York with over 950 personnel in 11 offices worldwide, PRT provides its
clients a comprehensive range of software engineering offerings, including
Strategic Consulting, Project Solutions and Professional Services.
This press release includes certain "forward-looking statements" for
purposes of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties that
could cause actual results to differ materially. Such statements are based
upon, among other things, assumptions made by, and information currently
available to management, including management's own knowledge and
assessment of the company's industry and competition.
Quality Journey(TM) is a PRT trademark. SEI and CMM are service marks of
Carnegie Mellon University
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