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
Date of Report (Date of earliest event reported): MARCH 1, 2000
TECHNISOURCE, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 000-24391 59-2786227
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(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification
incorporation) No.)
1901 WEST CYPRESS CREEK ROAD
SUITE 202
FORT LAUDERDALE, FLORIDA 33309
(Address of principal executive offices)
954-493-8601
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 1, 2000 (the "Closing Date"), TSRC.net, Inc., a Florida
corporation ("TSRC.net"), and a wholly-owned subsidiary of Technisource, Inc.
(the "Company"), completed the purchase of substantially all of the assets of
PRISM Group, LLC, a California limited liability company ("PRISM Group"), and
PRISM Group Consulting, LLC, a California limited liability company ("PRISM
Group Consulting"), pursuant to the terms of an Asset Purchase Agreement dated
as of March 1, 2000 among PRISM Group, PRISM Group Consulting, the Gus Gonzalez
and Nancy E. Agatiello Revocable Inter-Vivos Trust, Barbara S. Berk, Nancy
Agatiello and TSRC.net (the "Purchase Agreement"). PRISM Group and PRISM Group
Consulting are referred to herein as "Sellers".
Pursuant to the terms of the Purchase Agreement, the assets acquired by
TSRC.net include: (i) all of Sellers' cash and cash equivalents; (ii) all of
Sellers' receivables existing as of the Closing Date, including all trade
account receivables arising from the provision of services, sale of inventory,
notes receivable and insurance proceeds receivable; (iii) all of Sellers'
furniture, motor vehicles, computer hardware and software, equipment, supplies
and other fixed assets; (iv) all of Sellers' business as a going concern; (v)
all of Sellers' licenses and permits; (vi) all of Sellers' contracts; (vii) all
of Sellers' insurance policies; (viii) all of Sellers' franchises and their
right, title and interest in and to the use of their corporate names and
derivatives or combinations of such names and in and to intellectual property,
including all rights to sue for past infringement; (ix) all of Sellers' causes
of action, judgments, claims and demands of whatever nature; (x) all of Sellers'
rights of offset and credits of all kinds; (xi) all of Sellers' files, papers,
books and records, including customers' lists and all other data relating to the
Contracts, assets, businesses or properties being acquired by TSRC.net; (xii)
Sellers' books of account and related accounting records and Sellers' accounts
payable, payroll processing and general accounting systems; and (xiii) all other
assets, businesses and properties of Sellers.
The purchase price for the assets consisted of cash consideration of
$3,750,000, which will be adjusted by the difference between the Sellers'
adjusted net worth on the Closing Date and $500,000; the assumption of certain
liabilities of Sellers in the amount of $604,146; and the delivery by TSRC.net
of a promissory note in the principal amount of $1,000,000, which is due on
February 28, 2001 and bears interest at the rate of 6.45% per annum until
maturity. As of the Closing Date, the adjustment to the purchase price was
estimated to be an increase of $724,675. The purchase price was arrived at
through arm's length negotiations between the parties. The source of funds for
the purchase price was the Company's previously established line of credit with
NationsBank, N.A., a national banking association, dated as of January 29, 1999,
as amended.
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Sellers provide information technology services, including IT
consulting professionals and permanent placements, to companies in the Northern
California area. Barbara S. Berk, the former Chief Executive Officer of Sellers,
and Nancy E. Agatiello, the former President of the Sellers, will serve as Vice
Presidents of TSRC.net and will be responsible for managing TSRC.net's and the
Company's branch offices in the Northern California area.
The Company currently intends to continue to operate the businesses
formerly conducted by the Sellers with the purchased assets for the foreseeable
future. The foregoing statement of the Company's intention is a forward looking
statement within the meaning of Section 21E of the Securities Exchange Act of
1934, and is based on certain assumptions, including among others, general
economic conditions, management's expectations regarding the operating results
of the Company and its subsidiaries, the capital requirements of continuing
Sellers' current businesses and others. Should these assumptions change, or
prove to be inaccurate, the Company's actual future conduct of Sellers'
businesses could differ materially from the intention stated.
The above description of the Purchase Agreement does not purport to be
complete and is qualified in its entirety by the full text of such document
which is attached as an Exhibit hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
It is not practicable to provide the financial statements
required to be filed on account of the acquisition of assets described in Item 2
hereof (the "Financial Statements") on the date that this report is being filed
with the Securities and Exchange Commission. The Company expects to file the
Financial Statements by an amendment to this Form 8-K no later than May 15,
2000.
(b) PRO FORMA FINANCIAL INFORMATION.
The Company expects to file Pro Forma Financial Information,
together with the Financial Statements required by Item 7(a), by an amendment to
this Form 8-K no later than May 15, 2000.
(c) EXHIBITS.
2 Asset Purchase Agreement, dated as of March 1, 2000,
among PRISM Group, LLC, PRISM Group Consulting, LLC,
Gus Gonzalez and Nancy E. Agatiello Revocable
Inter-Vivos Trust, Barbara S. Berk, Nancy E.
Agatiello and TSRC.net, Inc. (Filed without exhibits
or schedules which will be furnished supplementally
to the Commission upon request).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TECHNISOURCE, INC.
By: /s/ JOSEPH COLLARD
-----------------------------
Joseph Collard
Chief Executive Officer
Dated: March 16, 2000
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EXHIBIT INDEX
2 Asset Purchase Agreement, dated as of March 1, 2000,
among PRISM Group, LLC, PRISM Group Consulting, LLC,
Gus Gonzalez and Nancy E. Agatiello Revocable
Inter-Vivos Trust, Barbara S. Berk, Nancy E.
Agatiello and TSRC.net, Inc. (Filed without exhibits
or schedules which will be furnished supplementally
to the Commission upon request).
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EXHIBIT 2
Execution Copy
ASSET PURCHASE AGREEMENT
among
PRISM GROUP, LLC
PRISM GROUP CONSULTING, LLC
GUS GONZALEZ AND NANCY E. AGATIELLO
REVOCABLE INTER-VIVOS TRUST
BARBARA S. BERK
NANCY AGATIELLO
and
TSRC.NET, INC.
Dated: March 1, 2000
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TABLE OF CONTENTS
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PAGE
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AGREEMENT......................................................................................................1
SUMMARY OF TRANSACTION.........................................................................................1
ARTICLE I - SALE OF ASSETS AND TERMS OF PAYMENT................................................................1
1.01 Purchase and Sale of Assets............................................................................1
1.02 Excluded Assets........................................................................................2
1.03 Liabilities............................................................................................2
(a) Assumed Liabilities...........................................................................3
(b) Excluded Liabilities..........................................................................3
1.04 Purchase Price.....................................................................................4
1.05 Adjustment of Purchase Price.......................................................................4
1.06 Allocation of the Purchase Price...................................................................5
1.07 Absolute Sale......................................................................................5
1.08 Bulk Sales Laws....................................................................................5
1.09 Proration of Certain Items.........................................................................6
ARTICLE II - RELATED AGREEMENTS................................................................................6
2.01 Employment Agreements..............................................................................6
2.02 Bill of Sale.......................................................................................6
2.03 Assignment and Assumption Agreement................................................................7
2.04 Real Property Lease Assignment.....................................................................7
2.04 Real Property Lease Assignment.....................................................................7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE MEMBERS....................................7
3.01 Organization and Good Standing; No Investments.....................................................7
3.02 Authorization; Compliance with Other Instruments and Law...........................................8
(a) Authorization of Sellers......................................................................8
(b) Authorization of Members......................................................................9
3.03 Financial Statements...............................................................................9
3.04 Operation of the Business in the Ordinary Course...................................................9
3.05 Tax Matters.......................................................................................12
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3.06 Material Contracts and Commitments................................................................13
3.07 Licenses, Permits and Authorizations..............................................................14
3.08 Title to Purchased Assets.........................................................................14
3.09 Proprietary Rights................................................................................15
3.10 Employee Benefit Plans; Labor Matters.............................................................15
3.11 Litigation and Other Claims.......................................................................17
3.12 No Material Adverse Change........................................................................17
3.13 Accounts Receivable...............................................................................17
3.14 Compliance with Laws..............................................................................17
3.15 Real Property.....................................................................................18
3.16 Condition of Purchased Assets.....................................................................18
3.17 Environmental Matters.............................................................................18
3.18 Computer and Other Systems........................................................................20
3.19 Insurance.........................................................................................20
3.20 Affiliated Transactions...........................................................................20
3.21 Guarantees........................................................................................20
3.22 Compensation of Employees.........................................................................21
3.23 Employee Relations................................................................................21
3.24 Labor Agreements..................................................................................21
3.25 Commitments and Warranties........................................................................21
3.26 Significant Customers.............................................................................22
6.36 Bank and Other Accounts...........................................................................22
3.27 Full Disclosure...................................................................................22
ARTICLE IV - REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER...............................................22
4.01 Organization and Good Standing....................................................................22
4.02 Due Authorization.................................................................................23
ARTICLE V - THE CLOSING.......................................................................................23
5.01 Time and Place of Closing.........................................................................23
5.02 Instruments of Transfer, Etc......................................................................23
(a) Sellers......................................................................................23
(b) Buyer........................................................................................24
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(c) Members......................................................................................24
ARTICLE VI - EMPLOYEES........................................................................................24
ARTICLE VII - WORKERS COMPENSATION, PRODUCT LIABILITY RESPONSIBILITY........................................24
ARTICLE VIII - POST CLOSING COVENANTS.........................................................................25
8.01 Expenses..........................................................................................25
8.02 Further Assurances................................................................................25
8.03 Commissions and Fees..............................................................................25
8.04 Sales, Transfer and Use Taxes.....................................................................25
8.05 Nondisclosure.....................................................................................26
8.06 Indemnification...................................................................................26
(a) By Sellers and Members.......................................................................26
(b) By Buyer.....................................................................................27
(c) Survival.....................................................................................27
(d) Set-Off......................................................................................27
8.07 Defense of Claims.................................................................................28
8.08 Access to Records.................................................................................29
8.09 Non-competition Covenant of Members...............................................................29
8.10 Cessation of Business of Sellers..................................................................29
8.11 Tax Returns.......................................................................................30
ARTICLE IX - MISCELLANEOUS....................................................................................30
9.01 Binding Effect....................................................................................30
9.02 No Assignment.....................................................................................30
9.03 Counterparts......................................................................................30
9.04 Governing Law.....................................................................................30
9.05 Arbitration; Venue; Attorney's Fees...............................................................30
9.06 Survival..........................................................................................31
9.07 Notices...........................................................................................31
(a) To Buyer.....................................................................................31
(b) To Sellers and Members........................................................................32
9.08 Amendment and Modification........................................................................32
9.09 Waiver of Compliance..............................................................................32
9.10 Interpretation....................................................................................33
9.11 Entire Agreement..................................................................................33
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9.12 Severability......................................................................................33
PROMISSORY NOTE................................................................................................1
RECITALS.......................................................................................................1
AGREEMENT......................................................................................................2
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PAGE/SECTION
SCHEDULE DESCRIPTION REFERENCE
- --------------------------------------------------------------------------------
1.01(d) Tangible Personal Property 2 [1.01(d)]
1.01(g) Assigned Contracts 2 [1.01(g)]
1.03(b) Excluded Loans 3 [1.03(b)]
1.06 Allocation of Purchase Price 5 [1.06]
3.01A Organizational Documents 7 [3.01]
3.01B Qualified Jurisdictions 7 [3.01]
3.01C Fictitious Names 7 [3.01]
3.03A Financial Statements 9 [3.03]
3.03B Most Recent Financial Statements 9 [3.03]
3.03C Undisclosed Liabilities 9 [3.03]
3.05(a) Jurisdiction where Tax Returns Filed 11 [3.05(a)]
3.06 Material Contracts and Commitments 13 [3.06]
3.07 Licenses, Permits and 14 [3.07]
Authorizations
3.08 Title Exceptions 14 [3.08]
3.09 Proprietary Rights 14 [3.09]
3.10 Employee Benefit Plans;
Labor Matters 15 [3.10]
3.11 Litigation 16 [3.11]
3.15 Real Property 17 [3.15]
3.17 Environmental Matters 18 [3.17]
3.19 Insurance 20 [3.19]
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3.20 Affiliated Transactions 20 [3.20]
3.21 Guarantees 20 [3.21]
3.22 Compensation of Employees 20 [3.22]
3.23 Employee Relations 20 [3.23]
3.25 Commitments and Warranties 21 [3.25]
3.26 Significant Customers 21 [3.26]
3.27 Bank and Other Accounts 21 [3.27]
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PAGE/SECTION
EXHIBIT DESCRIPTION REFERENCE
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A Form of Promissory Note
B Form of Employment Agreement for Berk
C Form of Employment Agreement for Agatiello
D Form of Bills of Sale
E Form of Assignment and Assumption Agreements
F Form of Real Property Lease Assignment
G Non-competition Agreements
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of March 1st, 2000 among PRISM GROUP, LLC, a
California limited liability company ("Prism"); PRISM GROUP CONSULTING , LLC., a
California limited liability company ("Prism Consulting"), GUS GONZALEZ AND
NANCY E. AGATIELLO INTER-VIVOS TRUST (the "Trust"), BARBARA S. BERK ("Berk"),
NANCY E. AGATIELLO ("Agatiello") and TSRC.NET, INC., a Florida Corporation
("Buyer"). PRISM and PRISM Consulting shall each be referred to herein as a
"Seller," and collectively as, "Sellers". The Trust, Berk and Agatiello shall
each be referred to herein as a "Principal," and collectively as, "Principals".
SUMMARY OF TRANSACTION
Sellers wish to sell and Buyer wishes to purchase substantially all of
the assets of Sellers. To effect such transaction and in consideration of the
mutual covenants, representations, warranties and agreements hereinafter set
forth, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
SALE OF ASSETS AND TERMS OF PAYMENT
1.01 PURCHASE AND SALE OF PURCHASED ASSETS. On and subject to the terms
and conditions of this Agreement, the Buyer agrees to purchase from the Sellers,
and the Sellers agree to sell, transfer and deliver to the Buyer, all of the
Purchased Assets, free and clear of all claims, liens and encumbrances, at the
Closing for the consideration specified below in Section 1.04. The Purchased
Assets shall include, without limitation, all of the following assets other than
the Excluded Assets:
(a) All of Seller's cash and cash equivalents;
(b) All of Seller's receivables existing as of the Closing Date,
including all trade account receivables arising from the provision of services,
sale of inventory, notes receivable and insurance proceeds receivable
(collectively, "Accounts Receivable");
(c) All of the right, title and interest of PRISM in, to and under the
lease (the "Real Property Lease") concerning the leased premises located at 475
Sansone Street, Suite 1850, San Francisco, California 94111 (the "Leased
Premises") and all of the right, title and interest of Seller in and to all
leasehold improvements in or on the Leased Premises;
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(d) All of Seller's furniture, motor vehicles, computer hardware and
software, equipment, supplies and other fixed assets, including, without
limitation, the assets listed on Schedule 1.01(d);
(e) All of Seller's business as a going concern;
(f) All of Seller's licenses and permits;
(g) All of Seller's contracts listed on Schedule 1.01(g) ("Assigned
Contracts");
(h) All of Seller's insurance policies;
(i) All of Seller's franchises and its right, title and interest in and
to the use of its corporate name and any derivatives or combinations of such
name and in and to Intellectual Property, including all rights to sue for past
infringement;
(j) All of Seller's causes of action, judgments, claims and demands of
whatever nature;
(k) All of Seller's rights of offset and credits of all kinds,
including the security deposit for the Leased Premises in the amount of
$9,665.33;
(l) All of Seller's files, papers, books and records, including
customers' lists and all other data relating to the Contacts, assets, businesses
or properties being acquired by Buyer;
(m) Seller's books of account and related accounting records and
Seller's accounts payable, payroll processing and general accounting systems;
and
(n) All other assets, businesses and properties of Sellers.
1.02 EXCLUDED ASSETS. The following assets of Sellers are not purchased
or sold under this Agreement ("Excluded Assets") and are not considered
Purchased Assets:
(i) The rights of Sellers under this Agreement; and
(ii) Seller's charter, seals, minute book, membership interest records
and other records having to do exclusively with the organization and
capitalization of Sellers.
1.03 LIABILITIES.
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(a) ASSUMED LIABILITIES. Upon and subject to the terms and conditions
contained in this Agreement, at the Closing, Buyer shall assume the obligations
of Sellers as of the date of the Closing with respect to the "Assumed
Liabilities", which shall consist solely of:
(i) obligations and liabilities of PRISM accruing or arising
after the Closing Date under the Real Property Lease;
(ii) accounts payable reflected on the Most Recent Balance
Sheets (as hereafter defined) which are outstanding on the date of the Closing
and accounts payable which were incurred by Sellers in the ordinary course of
business subsequent to the date of the Most Recent Balance Sheets which are
outstanding on the date of the Closing;
(iii) customer refunds payable reflected on the Most Recent
Balance Sheets which are outstanding on the date of the Closing and customer
refunds payable which were incurred by Sellers in the ordinary course of
business subsequent to the date of the Most Recent Balance Sheets which are
outstanding on the date of the Closing;
(iv) accrued wages and commissions reflected on the Most
Recent Balance Sheets which are outstanding on the date of the Closing and
accrued wages and commissions which were incurred by Sellers in the ordinary
course of business subsequent to the date of the Most Recent Balance Sheets
which are outstanding on the date of the Closing;
(v) accrued expenses reflected on the Most Recent Balance
Sheets which are outstanding on the date of the Closing and accrued expenses
incurred by Sellers in the ordinary course of business subsequent to the date of
the Most Recent Balance Sheets which are outstanding on the date of the Closing;
and
(vi) obligations and liabilities of Sellers under the Assigned
Contracts, all as assigned to Buyer at the Closing, but only such obligations
and liabilities which accrue by the terms of the Assigned Contracts from and
after the Closing.
(b) EXCLUDED LIABILITIES. All liabilities and obligations of Sellers,
other than the Assumed Liabilities, are "Excluded Liabilities". Excluded
Liabilities include, without limitation, (i) accrued employee benefit plan
contributions payable or liabilities; (ii) amounts payable for or in respect of
workmen's compensation; (v) all Taxes (as hereafter defined); (iii) all
liabilities of Sellers to any of the Principals or any of their Affiliates (as
hereafter defined); (iv) all liabilities to employees and officers under any
incentive stock option plans or other employee benefit plans; (v)
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all environmental liabilities and claims; (vi) all obligations and liabilities
of Sellers under the indebtedness listed in Schedule 1.03(b)(vii) ("Excluded
Loans"); and (viii) all unknown and contingent liabilities. Sellers shall pay
and discharge all of Sellers' liabilities and obligations which are Excluded
Liabilities or not Assumed Liabilities on or before 30 days following the
Closing Date; provided, however, that the Excluded Loans shall be paid in full
on the Closing Date from the proceeds of Closing.
1.04 PURCHASE PRICE. In consideration for the purchase of the Purchased
Assets, the Buyer agrees to pay, or cause to be paid, to Sellers, subject to any
adjustment set forth in Section 1.05 below, the aggregate purchase price
("Purchase Price") as follows:
(i) cash in the amount of Three Million Seven Hundred Fifty
Thousand United States Dollars ($3,750,000) (the "Cash Consideration")
which shall be paid at Closing to Sellers via wire transfer in
immediately available funds;
(ii) a promissory note in the original principal amount of One
Million United States Dollars ($1,000,000) (the "Note"), which Note
shall be in the form attached hereto as Exhibit "A"; and
(ii) assumption of the Assumed Liabilities.
1.05 ADJUSTMENT OF PURCHASE PRICE.
(a) Sellers shall cause Stonefield Josephson, Inc., its independent
public accountants to prepare the unaudited balance sheet of each Seller dated
as at the Closing Date (collectively, the "Proposed Closing Balance Sheet") and
related statement of operations of each Seller for the period from January 1,
2000 through the Closing Date (collectively, the "Proposed Closing Financial
Statements"), in each case prepared in accordance with GAAP and certified by the
principal financial officer of each Seller as presenting fairly in all material
respects the financial condition and results of operations of such Seller for
the period then ended. Sellers will deliver the Proposed Closing Financial
Statements to Buyer within 30 days after the Closing Date. If within 30 days
following delivery of the Proposed Closing Financial Statements to Buyer, Buyer
has not given written notice to Sellers of its objection to the Proposed Closing
Financial Statements (which notice must contain a statement of the basis of
Buyer's objection), then the Proposed Closing Financial Statements shall be
deemed to constitute the actual financial statements of Sellers as at the
Closing Date for purposes of this Section (the "Actual Closing Financial
Statements"). If Buyer gives such notice of objection to Sellers, then Buyer and
Sellers will use reasonable efforts to resolve any such objections. If Buyer and
Sellers do not obtain a final resolution within ten days after the Sellers have
received the notice of objection, however, Buyer and Sellers will submit the
issues in
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dispute to a South Florida office of Deloitte and Touche, certified public
accountants (the "Appointed Accountants"), or such other independent certified
public accountants mutually agreed upon in writing by Sellers and Buyer, for
resolution. The determination of the Appointed Accountants shall be set forth in
writing and will be conclusive and binding upon Buyer, Sellers and the
Principals. The Proposed Closing Financial Statements will be revised as
appropriate to reflect the resolution of any objections pursuant to this Section
and such revised financial statements shall constitute the Sellers' Actual
Closing Financial Statements. The Actual Closing Financial Statements shall
conclusively establish Sellers' combined adjusted net worth as of the Closing
Date ("Actual Net Worth"). As used herein, "adjusted net worth" means Sellers'
(i) total assets, minus (ii) Assumed Liabilities.
(b) In the event the Actual Net Worth is less than $500,000 ("Minimum
Net Worth"), Buyer shall deduct the amount of such difference from the principal
balance due under the Note. In the event that the Actual Net Worth is greater
than Minimum Net Worth, Buyer shall promptly pay in cash the amount of such
excess to Sellers as additional purchase price within ten business days
following the determination of Actual Net Worth as set forth in this Section
1.05.
(c) In the event any unresolved objections are submitted to the
Appointed Accountants for resolution as provided in this Section 1.05, (A) any
expenses relating to the engagement of the Appointed Accountants shall be paid
equally by Buyer and Sellers; (B) each of Buyer and Sellers will make available
to the Appointed Accountants such work papers and other documents and
information relating to the disputed issues as the Appointed Accountants may
request and are available to that party (or its independent public accountants),
and (C) each of Buyer and Sellers will be afforded the opportunity to present to
the Appointed Accountants any material relating to the determination and to
discuss the determination with the Appointed Accountants.
1.06 ALLOCATION OF THE PURCHASE PRICE. Sellers and Buyer agree to
allocate the Purchase Price for the Purchased Assets as set forth in Schedule
1.06 hereto. The foregoing allocation of the Purchase Price shall be binding on
the parties and shall be used by the parties for all tax reporting purposes.
1.07 ABSOLUTE SALE. Sellers agrees that the Purchased Assets shall be
sold, conveyed, transferred and delivered to Buyer free and clear of all title
defects, liabilities, obligations, liens, encumbrances, charges and claims of
any kind, except the Assumed Liabilities.
1.08 BULK SALES LAWS. Sellers and Buyer hereby waive compliance with
the provisions of any applicable bulk sales law; provided, however, that Sellers
and the Principals, with respect to the Excluded Liabilities, and Buyer, with
respect to Assumed Liabilities, mutually agree to pay and discharge when due or
to contest or
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litigate all claims of creditors which are asserted against Buyer or Sellers or
the Purchased Assets by reason of such noncompliance, to indemnify, defend and
hold harmless the other party from and against any and all such claims in the
manner provided in Section 8.06 hereof, and with respect to the Sellers and the
Principals, to take promptly all necessary action to remove any lien or
encumbrance which is placed on the Purchased Assets by reason of such
noncompliance.
1.09 PRORATION OF CERTAIN ITEMS. Sellers shall pay at Closing all
applicable transfer, sales, use, bulk sales and other taxes, and all
documentary, filing, recording and vehicle registration fees payable as a result
of the transfer of the Purchased Assets. All ad valorem and property taxes, and
any similar assessment based upon or measured by Sellers' ownership interest in
the Purchased Assets, shall be prorated between Sellers and Buyer as of the
Closing Date based upon such taxes assessed against the Purchased Assets for the
tax period in question, or if there is insufficient information for such tax
period, based upon taxes assessed for the immediately preceding tax period. All
such taxes shall be prorated on the basis of a 365-day year. Sellers shall be
charged for all such taxes and assessments based upon or measured by Seller's
ownership prior to the Closing Date and Buyer shall be charged for all such
taxes and assessments based upon or measured by Buyer's ownership on or after
the Closing Date. There shall be apportioned among Sellers and Buyer as of the
Closing Date all rent, utility charges, equipment lease payments and all other
charges customarily apportioned in connection with a transfer of leased property
as well as such payments and obligations received after the Closing Date by both
the Sellers and Buyer as necessary to accurately reflect the terms of this
Agreement. All such prorations and payments shall be made at the Closing.
ARTICLE II
RELATED AGREEMENTS
Simultaneously with the Closing hereunder, the following agreements
(the "Related Agreements") will be executed and delivered:
2.01 EMPLOYMENT AGREEMENTS. An employment agreement between Buyer and
each of Berk and Agatiello in the form of Exhibits "B" and "C", respectively,
providing for the employment by Buyer of the Principals (collectively, the
"Employment Agreements").
2.02 BILL OF SALE. A bill of sale in the form of Exhibit "D" attached
hereto from each of the Sellers in favor of Buyer (collectively, the "Bills of
Sale").
2.03 ASSIGNMENT AND ASSUMPTION AGREEMENT. An assignment and assumption
agreement between Buyer and each Seller, respectively, each in the
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form of Exhibit "E" hereto (collectively, the "Assignment and Assumption
Agreements").
2.04 REAL PROPERTY LEASE ASSIGNMENT. An assignment of lease from PRISM
to Buyer in the form of Exhibit "F" hereto ("Lease Assignment").
2.05 NON-COMPETITION AGREEMENTS. A non-competition agreement between
Buyer and each of Berk and Agatiello in the form of Exhibit "G" hereto
(collectively, the "Non-competition Agreements").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS AND THE MEMBERS
When reference is made to the Sellers' or Principals' knowledge in this
Article III, such knowledge means and includes (a) actual knowledge of any of
the Sellers or any of the Principals, including in the case of any of them that
is not an individual, the actual knowledge of any of the members, managers,
officers or directors of such Seller or Principal; and (b) that knowledge which
a prudent businessperson could have obtained in the management of her business
after making due inquiry, and after exercising due diligence, with respect
thereto. When reference is made in this Article III to the Sellers, such term
shall include the Sellers and their subsidiaries. The Sellers and the
Principals, jointly and severally, as a material inducement to Buyer to enter
into this Agreement and consummate the transactions contemplated hereby,
represent and warrant to, and covenant with, Buyer that as of the Closing Date:
3.01 ORGANIZATION AND GOOD STANDING; NO INVESTMENTS. Each of the
Sellers is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of California and has the power and
authority to own, lease and operate its properties and assets (including the
Purchased Assets) and to conduct its business as it is now being conducted. Each
of the Sellers is duly qualified to do business in California and in all other
jurisdictions in which such Seller owns, leases or operates property or
otherwise conducts business. Schedule 3.01A consists of the correct and complete
articles of organization and limited liability company operating agreement of
each Seller. Schedule 3.01B sets forth all jurisdictions in which each Seller is
qualified to conduct business as a foreign entity. Schedule 3.01C sets forth a
list of all names under which each Seller has done business since January 1,
1995. Each Seller has fully complied with all of the requirements of any statute
governing the use and registration of fictitious names, and has the legal right
to use the names under which it operates its businesses. Except as set forth on
3.01C, each Seller has not changed its name or used any assumed or fictitious
name other than those listed on Schedule 3.01C, or been the
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surviving entity in a merger, acquired any businesses or changed its principal
place of business or chief executive office, in each case, since the date of its
organization. There is no pending or threatened proceeding for the dissolution,
liquidation, insolvency or rehabilitation of any Seller. No Seller has any
equity or similar investment, direct or indirect, in any corporation,
partnership, association, joint venture or other entity.
3.02 AUTHORIZATION; COMPLIANCE WITH OTHER INSTRUMENTS AND LAW.
(a) AUTHORIZATION OF SELLERS. Each Seller has full power and authority
to enter into this Agreement, the Related Agreements and any other agreements
and documents to be executed and delivered by it at Closing as contemplated
hereby (collectively, the "Closing Documents"), to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Closing Documents and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary action on the part of
each Seller. This Agreement has been duly executed and delivered by each Seller,
and is a valid and binding obligation of each Seller enforceable in accordance
with its terms and the Closing Documents will, when executed and delivered by
each Seller at Closing, constitute valid and binding obligations of each Seller
enforceable in accordance with their terms.
The execution, delivery and performance of this Agreement and the
Closing Documents will not (i) conflict with or result in a breach or violation
of any provision of the articles of organization or limited liability company
operating agreement of any Seller or of any order, writ, injunction, judgment,
decree, law, statute, rule or regulation to which any Seller is a party or by
which any Seller or the Purchased Assets may be bound or affected; or (ii)
result in a default (or give rise to any right of termination, cancellation or
acceleration) or result in the creation of any lien, encumbrance, security
agreement, charge, pledge, equity or other claim or right of any person in or to
the Purchased Assets under the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other instrument or obligation
to which any Seller is a party or by which any Seller or the Purchased Assets
may be bound. All necessary authorizations of the transactions contemplated by
this Agreement required to be obtained by Sellers from any Federal, state, local
or foreign government or agency or other person or entity shall have been
obtained and delivered to Buyer prior to the Closing, and any filings,
notifications or disclosures required by law or regulation of any such
government or agency shall have been made in such form as is acceptable as
filed. Buyer shall cooperate with Sellers with respect to the aforesaid filings,
notifications or disclosures to the extent necessary to obtain said
authorizations. Each Seller will deliver to Buyer at the Closing true and
complete copies of all resolutions of its managers and members by which the
execution, delivery and performance of this
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Agreement and the Closing Documents and the consummation of the transactions
contemplated hereby and thereby were authorized, certified by the managers of
each Seller as of the Closing Date.
(b) AUTHORIZATION OF PRINCIPALS. This Agreement is (and, when executed
and delivered, each agreement, document or instrument to be executed and
delivered in connection with the transactions contemplated hereby will be) valid
and binding upon each Principal, and enforceable against each Principal in
accordance with respective terms except to the extent that enforcement thereof
may be limited by applicable bankruptcy, reorganization, insolvency or
moratorium laws, or other laws affecting the enforcement of creditors' rights or
by the principles governing the availability of equitable remedies.
3.03 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.03A are true
and correct copies of (i) the respective balance sheets of Sellers as at
December 31, 1997, 1998 and 1999; and (ii) the related statements of income of
Sellers for the years ended December 31, 1997, 1998 and 1999 ("Year End
Financial Statements"). Attached hereto as Schedule 3.03B are true and correct
copies of (i) the respective balance sheets of Sellers for the period from
January 1, 2000 through February 24, 2000 (collectively, the "Most Recent
Balance Sheets"); and (ii) the related statements of income of Sellers for such
interim period (the "Most Recent Financial Statements"; and collectively with
the Year End Financial Statements, the "Financial Statements"). The balance
sheets included in the Financial Statements (including the related notes
thereto) present fairly the financial position of each Seller as of their
respective dates, and the related statements of income included in the Financial
Statements present fairly the results of operations of each Seller for the
periods then ended, all in conformity with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis. The Financial
Statements accurately reflect the transactions, assets, and liabilities of each
Seller, as applicable, as of the dates and for the periods presented. Except as
set forth in the Most Recent Financial Statements or on Schedule 3.03C hereto,
each Seller has no debts, liabilities or obligations, whether direct or
indirect, accrued, absolute, contingent, matured, known, unknown or otherwise,
and whether or not of a nature required to be reflected or reserved against in a
balance sheet in accordance with GAAP. Neither any Seller nor any Principal is
aware of any basis for the assertion of any claims or liabilities of any nature
which are not fully reflected or reserved against in the Most Recent Financial
Statements or otherwise disclosed in 3.03C hereto.
3.04 OPERATION OF THE BUSINESS IN THE ORDINARY COURSE.
(a) Since the close of business on the date of the Most Recent Balance
Sheet, each Seller's business has been operated, in the ordinary course, except
to the extent that Buyer has otherwise agreed in writing or as is expressly
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contemplated by this Agreement; and Sellers have used all reasonable efforts
consistent with normal business practices to preserve and promote such business
and to avoid any act that might have a material adverse effect upon the value of
such business as a going concern or upon the Purchased Assets. No event has
occurred to prevent any Seller's business from operating in a normal and usual
manner and in substantially the same manner as heretofore operated.
(b) Since the date of the Most Recent Balance Sheet, no Seller has
entered into any transaction and there has not occurred any event which is not
in the usual and ordinary course of business, except to the extent that Buyer
has otherwise agreed in writing, including without limitation:
(i) any casualty losses, whether insured or uninsured,
and whether or not in the control of the Company, in
excess of Ten Thousand ($10,000) in the aggregate;
(ii) any amendment or other agreement with any employee or
agent;
(iii) any amendment of any Material Contract (as hereunder
defined);
(iv) any obligation or liability, absolute or contingent,
except in the ordinary course of business;
(v) any (i) increase (other than normal merit or
cost-of-living increases in the ordinary course of
business and consistent with past practices) or
material change: (y) in compensation or bonuses
payable to or to become payable by any Seller to its
officers, employees or agents, or (z) in any
insurance, pension or other benefit plan, payment or
arrangement made to, for or with any of such
officers, employees or agents, or (ii) any other
material change in the employment terms of any
officer, employee or agent of any Seller;
(vi) any sale, transfer or other disposition of any
tangible or intangible asset, or real or personal
property or interest therein, or any mortgage, lien
or encumbrance placed thereon;
(vii) any capital expenditures, capital additions, capital
improvements or charitable contributions made, or
committed to be made involving, individually or in
the aggregate, $5,000 or more;
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(viii) any failure to maintain any Seller's books, accounts
and records in the usual, regular and ordinary manner
and in accordance with good business practices and
consistent with past practice;
(ix) any action taken or omitted to be taken by any Seller
which could cause (with or without the giving of
notice or the passage of time, or both) the breach,
default, acceleration, amendment, termination or
waiver of or under any Material Contract (as
hereinafter defined) or the imposition of any lien,
encumbrance, mortgage or other claim or charge
against the Purchased Assets;
(x) any contracts, agreements, commitments, indentures,
mortgages, notes, bonds, license, real or personal
property leases or other obligations of the type
required to be disclosed in Schedule 3.06 hereto that
are not otherwise disclosed herein;
(xi) any capital investment in, any loan to, or any
acquisition of the securities or assets of any person
or entity;
(xii) any change made or authorized in the articles of
organization or limited liability company operating
agreement of any Sellers;
(xiii) any issuance, sale or other disposition of any of its
membership interests or granted any options, warrants
or other rights to purchase or obtain any of its
membership interests;
(xiv) any dividend or any distribution with respect to its
membership interests (whether in cash or in kind) or
any redemption, purchase or other acquisition of any
of its membership interests;
(xv) any loan to, or entered into any other transaction
with, any of its members, managers, officers or
employees;
(xvi) any other event or condition of any character which,
individually or in the aggregate, has had or could
reasonably be expected to have a material adverse
effect on the Purchased Assets or on the business,
financial condition or operations of any Seller; or
(xvii) any commitment to do any of the foregoing.
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3.05 TAX MATTERS.
(a) Each Seller has timely filed all Tax Returns (as hereafter defined)
that it was required to file prior to the date hereof and will have timely filed
all Tax Returns that it will have been required to file prior to the Closing
Date. All such Tax Returns were correct and complete in all respects. All Taxes
owed by each Seller (whether or not shown on any Tax Return) have been paid or
are fully and adequately accrued and adequately disclosed on the Most Recent
Balance Sheet. No Seller is currently the beneficiary of any extension of time
within which to file any Tax Return. Schedule 3.05(a) sets forth all
jurisdictions in which each Seller has filed or is required to file returns and
reports for Taxes and lists the type of Tax covered by each such filing. No
claim has ever been made by an authority in a jurisdiction where a Seller does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of any Seller
that arose in connection with any failure (or alleged failure) to pay any Tax.
No Seller has any liability for Taxes with respect to any period subsequent to
the periods covered by the Tax Returns other than Taxes incurred in the ordinary
course of business which are reflected on the Most Recent Balance Sheet. Each
Seller has timely paid any estimated Taxes which it was required to pay.
(b) Each Seller has withheld and paid when due all Taxes required to
have been withheld and/or paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(c) No Seller or Principal has knowledge that any authority expects to
assess any additional Taxes for any period for which Tax Returns have been
filed. There is no action, suit or proceeding, investigation, dispute or claim
now pending or, to any Seller's or Principal's knowledge, threatened, concerning
any tax liability of any Seller or proposed adjustment to the taxable income of
any Seller either (A) claimed or raised by any authority in writing or (B) as to
which any Seller or Principal has knowledge based upon personal contact with any
agent of such authority. There are no facts or state of facts existing that
(with or without the giving of notice or the passage of time or both) could form
the basis for any such action or proceeding. Each Seller has made available to
the Buyer correct and complete copies of all Tax Returns of each Seller,
examination reports, and statements of deficiencies assessed against or agreed
to by each Seller since January 1, 1994.
(d) No Seller has waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency.
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(e) The unpaid Taxes of each Seller (A) did not, as of the date of the
Most Recent Balance Sheet, exceed the reserve for Tax liability set forth on the
face of the Most Recent Balance Sheet and (B) do not, and will not as of the
Closing Date, exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Seller
in filing its Tax Returns.
(f) As used in this Agreement, the term "Tax" means each federal,
state, local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code ss. 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not, and any obligations under any agreements or arrangements with
respect to any of the foregoing. As used in this Agreement, the term "Tax
Return" means any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
3.06 MATERIAL CONTRACTS AND COMMITMENTS.
(a) Schedule 3.06 includes a true, correct and complete list of all
material contracts, agreements, commitments, indentures, mortgages, notes,
bonds, licenses, real and personal property leases and other obligations
(whether oral or written) to which each Seller is a party, by which either any
Seller or its assets or properties are bound or, to the knowledge of any Seller
or Principal, may be affected or which, to the knowledge of any Seller or
Principal, otherwise relate to any Seller's business (the "Material Contracts").
Without limiting the generality of the foregoing, the term Material Contracts
includes: (a) any lease or license with respect to any Purchased Assets, whether
any Seller is tenant, landlord, licensor or licensee thereunder; (b) any
agreement, contract, indenture or other instrument to which any Seller is a
party relating to the borrowing of money or the guarantee of any obligation or
the deferred payment of the purchase price of any Purchased Assets; (c) any
agreement to which any Seller is a party concerning a partnership or joint
venture; (d) any agreements between any Seller on the one hand and any of its
respective members, managers, officers or employees on the other; (e) any
agreement to which any Seller is a party relating to confidentiality or
noncompetition; (f) any preferential purchase right, right of first refusal or
similar agreement to which any Seller is a party; (g) any agreement entered into
outside of the ordinary course of business to which any Seller is a party; (h)
any other agreement (or group of related agreements) to which any Seller is a
party which could involve expenditures (in cash or in kind) by any Seller in
excess of $5,000 or
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which has a remaining term, as of the date hereof, of over three months in
length; or (i) any lease, license or other agreement or arrangement of any
nature to which any Seller is a party relating to Intellectual Property (as
hereafter defined). Except as indicated on Schedule 3.06, no Seller is in breach
or violation of, or in default under, any of the Material Contracts and no
occurrence or circumstance exists which constitutes (with or without the giving
of notice or the passage of time or both) such a breach, violation or default;
the execution of this Agreement and the consummation of the transactions
contemplated hereby will not constitute a default or breach under or result in
the acceleration of the performance of any obligations or indebtedness under any
of the Material Contracts. All of the contracts listed on Schedule 3.06 are
valid, binding and enforceable in accordance with their terms, are in full force
and effect and have not been modified or amended in any material respect, except
as set forth on Schedule 3.06. No part of any Seller's rights or benefits under
any Material Contract has been assigned, transferred or in any manner
encumbered. Except as specifically indicated in Schedule 3.06, neither the
execution of this Agreement nor the consummation of the transactions
contemplated hereby will give rise to any consent requirement under any of the
Material Contracts ("Required Consents"). Except as otherwise indicated on
Schedule 3.06, all Required Consents have been obtained.
3.07 LICENSES, PERMITS AND AUTHORIZATIONS. Each Seller has all
approvals, authorizations, consents, licenses, franchises, orders, certificates
and other permits of, and has made all filings with, any governmental authority,
whether foreign, Federal, state or local, ("Permits") which are required for the
ownership of the Purchased Assets or the conduct of each Seller's business as
presently conducted. All such Permits are in full force and effect and no
suspension or cancellation of such Permits is threatened. All such Permits shall
continue in full force and effect on behalf of Buyer following consummation of
the transactions contemplated in this Agreement. A complete list of all such
Permits is included in Schedule 3.07 hereto.
3.08 TITLE TO THE PURCHASED ASSETS. Each Seller has legal title to the
Purchased Assets and shall at the Closing deliver to Buyer legal title to the
Purchased Assets free and clear of all title defects, liabilities, obligations,
liens, mortgages, security interests, encumbrances, claims or similar adverse
interests of any kind or character except the title exceptions listed in
Schedule 3.08 hereto. All leases pursuant to which each Seller leases any of the
Purchased Assets are valid and binding in accordance with their respective
terms. Except as described in Schedule 3.08 hereto, upon consummation of the
transactions contemplated hereby, Sellers will have transferred to Buyer good,
marketable and unencumbered title to the Purchased Assets (or with respect to
any real or personal property leases included in the Purchased Assets, a valid
leasehold interest therein), free and clear of all mortgages, security
interests, liens, claims, encumbrances, title defects, pledges, charges,
assessments, encroachments and burdens of any kind or nature whatsoever. The
Purchased Assets constitute all of the assets that are used in
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connection with, necessary for, or beneficial to the operation of each Seller's
business.
3.09 PROPRIETARY RIGHTS. Schedule 3.09, sets forth a true and complete
list of all patents, technology, computer software, software licenses,
franchises, know-how licenses, brand names, trade names, trademarks, copyrights,
inventions, service marks, trademark registrations and applications, service
mark registrations and applications, and copyright registrations and
applications, trade secrets or other confidential proprietary information in
which each Seller has exclusive rights or which are used in the operation of
each Seller's business ("Intellectual Property"). The Intellectual Property
listed in Schedule 3.09 is owned by each Seller with the sole and exclusive
right to use the same in connection with such Seller's business as presently
being conducted or contemplated to be conducted. No other Person has any
ownership rights, claims or rights to use the Intellectual Property. The conduct
of the business by each Seller does not infringe upon the Intellectual Property
of any Person.
3.10 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Except as set forth in Schedule 3.10 hereto, each Seller does not
maintain, administer or otherwise contribute to any bonus, incentive pay, stock
option, stock ownership or "employee benefit plan," as defined in section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
whether or not such plan is subject to any of the provisions of ERISA, which
covers any employee or beneficiary of any employee or director of a Seller,
whether or not active (any such plan being herein referred to as an "Employee
Plan"). Except as set forth in Schedule 3.10 hereto, none of such Employee Plans
is intended to be qualified under Section 401 of the Internal Revenue Code of
1986, as from time to time amended (the "Code"), nor has any Employee Plan been
at any time within the five year period prior to the Closing Date a plan subject
to title IV of ERISA. No Seller has any commitment to create any additional
Employee Plans.
(b) True and complete copies of each Employee Plan, including all
amendments thereto and related trust or other funding agreements and the latest
financial statements thereof, have been heretofore delivered to Buyer, together
with (i) a true and complete copy of the three most recent annual reports (if
required by law) for each such plan including any and all schedules, opinions
and attachments thereto prepared in connection with any such reports, and (ii) a
copy of the most recent summary plan description and summary of material
modifications, or similar descriptive materials, of each such plan. To each
Seller's knowledge, none of the Sellers, any Employee Plan or any "party in
interest", as defined in section 3(14) of ERISA, has engaged in a "prohibited
transaction", as defined in section 406 of ERISA, which could subject any of
them or Buyer to liability under section 409 or 502(i) of ERISA.
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(c) Each Seller, and each fiduciary for each of the Employee Plans, is
in compliance with the terms of the Employee Plans and with the requirements of
any and all laws, statutes, orders, decrees, rules and regulations, including
but not limited to ERISA, applicable to each such plan. No Seller has failed to
make any contribution to, or to pay any amount due and owing, as required by
applicable law or by the terms of any Employee Plan as of the last day of the
most recent fiscal year of each of such plans ended prior to the Closing Date,
other than the contribution owed for calendar year 1999 under Sellers'
respective 401k plans, which contribution shall be paid by Sellers on or before
the due date therefor.
(d) There is no pending or, to the best of each Seller's and
Principal's knowledge, threatened legal action, proceedings or investigations
against any Seller or any Employee Plan with respect to any such plan, other
than routine claims for benefits, which could result in liability to any such
plan, or to any Seller, and there is no basis for any such legal action or
proceeding.
(e) Except as set forth in Schedule 3.10, (i) each Seller is in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice; (ii) there is no unfair labor practice
complaint against any Seller pending before the National Labor Relations Board
or any other tribunal; (iii) there is no labor strike, dispute, slowdown or
stoppage actually pending or, to the best of each Seller's and Principal's
knowledge, threatened against or affecting any Seller; (iv) no Seller has
received notice that any representation or petition respecting any of its
employees has been filed with the National Labor Relations Board; (v) no
grievance or any arbitration proceeding arising out of or under any collective
bargaining agreements is pending against any Seller; and (vi) no Seller has
experienced any strike or work stoppage or other industrial dispute involving
its employees in the past five years.
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3.11 LITIGATION AND OTHER CLAIMS. Except as described in Schedule 3.11,
there are no actions, suits, arbitration proceedings, claims or proceedings
related to the business of any Seller or relating to any of the Purchased Assets
pending or, to the knowledge of any Seller or Principal, threatened before any
foreign, Federal, state, municipal or other court, department, commission,
arbitration panel, board, bureau, agency, body or instrumentality against any
Seller or affecting any Seller's property or assets (including the Purchased
Assets) at law or in equity. There are no facts or state of facts existing that
(with or without the giving of notice or the passage of time or both) could form
the basis for any such action, suit, proceeding a claim. No Seller is a party to
and no Seller or any of its assets are subject to the provisions of any order,
writ, injunction, decree or judgment of any court or foreign, Federal, state,
municipal or other governmental or administrative body, department, commission,
board, bureau, any securities exchange or other agency or instrumentality in
connection with the ongoing operations of any Seller except as set forth in
Schedule 3.11. No Seller is engaged in any arbitration nor has either submitted
any disputed matter to an arbitrator in connection with the ongoing operations
of such Seller except as set forth in Schedule 3.11.
3.12 NO MATERIAL ADVERSE CHANGE. Since the close of business on the
date of the Most Recent Balance Sheet, there has been no material adverse change
in the financial condition, results of operations, business or prospects of any
Seller.
3.13 ACCOUNTS RECEIVABLE. All of the Accounts Receivable of each Seller
are valid and legally binding and represent bona fide transactions and arose in
the ordinary course of business of each Seller consistent with past practices.
All of the Accounts Receivables of each Seller are good and collectible
receivables, and to the knowledge of each Seller and Principal, will be
collected in full in accordance with the terms of such receivables (and in any
event within 6 months from the Closing Date), without set off or counterclaims,
subject to the allowance for doubtful accounts, if any, set forth on the
Proposed Closing Financial Statement and subject to reductions or offsets solely
as a result of customer changes.
3.14 COMPLIANCE WITH LAWS. Neither the Purchased Assets nor the
operations of any Seller's business, as conducted on or prior to the date
hereof, violate any foreign, Federal, state or local law, ordinance, rule or
regulation, the violation of which would be detrimental to the Buyer, any
Seller's business or the Purchased Assets. No Seller has received any formal or
informal notice, advice, claim or complaint alleging that such Seller has
violated or may have violated any law, regulation, ordinance or order and, to
each Seller's and Principal's knowledge, no such notice, advice, claim or
complaint of any type is threatened. Each Seller has at all times complied and
presently comply with all applicable federal, state, local and foreign laws,
rules and regulations respecting occupational safety and health standards and no
Seller has received complaints from any employee or any federal, state, local or
foreign agency alleging any violation of any federal, state,
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local or foreign laws respecting occupational safety and health standards. To
the knowledge of each Seller and Principal, neither any Seller nor any officer,
director or employee of any Seller has made any bribes, kickbacks or other
improper payments on behalf of any Sellers or received any such payments.
3.15 REAL PROPERTY. Schedule 3.15 lists and describes briefly all real
property owned or leased by each Seller. Sellers have delivered to the Buyer
correct and complete copies of the leases listed in Schedule 3.15 (as amended to
date). With respect to each lease and sublease listed in Schedule 3.15.
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect and will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby;
(ii) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iii) no party to the lease or sublease has repudiated any
provision thereof and there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(iv) no Seller has received a notice from the lessor
indicating that the lease will not be renewed at the end of its current term for
any additional terms provided for in the lease;
(v) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iv) above are true and correct
with respect to the underlying lease.
3.16 CONDITION OF PURCHASED ASSETS. The Purchased Assets are in good
repair and working condition, normal wear and tear excepted, are suited for the
uses intended, and are in conformity with all applicable laws, ordinances, rules
and regulations. Each tangible asset owned by each Seller has been maintained in
accordance with normal industry practice and is suitable for the purposes for
which it presently is used and presently is proposed to be used.
3.17 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.17
hereto:
(a) Each Seller is in compliance with all environmental laws,
regulations, permits and orders applicable to it, and with all laws,
regulations, permits and orders governing or relating to asbestos removal or
abatement. No Seller has received nor is any Seller the subject of any
Environmental Claim with respect to its business.
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(b) There are no laws, regulations, ordinances, licenses, permits or
orders relating to environmental or worker safety matters requiring any work,
repairs, construction or capital expenditures with respect to the assets or
properties of any Seller or otherwise required to be performed by any Seller
with respect to any properties or facilities owned, leased, managed or operated
by any Seller.
(c) Schedule 3.17 identifies (i) all environmental audits, assessments
or occupational health studies undertaken by each Seller or its agents or by any
governmental agencies with respect to the business or properties of such Seller;
(ii) the results of any groundwater, soil, air or asbestos monitoring undertaken
by or known to each Seller and Principal with respect to any real property owned
or leased by any Seller; (iii) all written communications of each Seller with
environmental agencies; and (D) all citations issued with respect to each Seller
under the Occupational Safety and Health Act (29 U.S.C. Sections 651 ET SEQ.).
(d) No Hazardous Substance has been spilled, released, deposited or
discharged on any Seller's owned or leased real property, no such real property
has been used as a landfill or waste disposal site, and such real property is
free from Hazardous Substances;
(e) For the purposes of this Agreement, "Environmental Claim" shall
mean any demand, claim, governmental notice or threat of litigation or the
actual institution of any action, suit or proceeding at any time by a person or
entity which asserts that an Environmental Condition constitutes a violation of
or otherwise may give rise to any liability or obligation under, any statute,
ordinance, regulation, or other governmental requirement or the common law,
including, any such statute, ordinance, regulation, or other governmental
requirement relating to the emission, discharge, or release of any Hazardous
Substance into the environment or the generation, treatment, storage,
transportation, or disposal of any Hazardous Substance. "Environmental
Condition" shall mean the presence at any premises demised to any Seller in real
property lease to be assigned to Buyer on the Closing Date, or at any time prior
to the Closing Date of any storage, treatment, disposal or Release, whether
discovered or undiscovered on the Closing Date, in surface water, ground water,
drinking water supply, land surface, subsurface strata or ambient air or any
other location, of any pollutant, contaminant, industrial solid waste or
Hazardous Substance, (i) arising out of the operations or other activities of
Sellers, or of any predecessor in interest or line of business of any Seller,
conducted or undertaken prior to the Closing Date or (ii) in, on or emanating
from any property or facility owned, leased, managed or operated by any Seller,
except for any storage, treatment, disposal or Release that is in compliance
with all federal, state and local laws regulating same. "Hazardous Substance"
shall mean any substance defined in the manner set forth in Section 101(14) of
the U.S. Comprehensive
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Environment Response, Compensation and Liability Act of 1980, as amended, and
shall include any additional substances designated under Section 102(a) thereof
or any other substance which is or contains asbestos in any form, urea
formaldehyde foam insulation, methane, petroleum, gasoline, diesel fuel or
another petroleum hydrocarbon product, transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated biphenyl in excess
of 50 parts per million, or any other chemical material or substance which is
regulated as toxic or hazardous or exposure to which is prohibited, limited, or
regulated by federal, state, local or other governmental authority or which,
even if not so regulated, may or could pose a hazard to the health or safety of
the occupants of any property or facility at which a release thereof occurs or
the owners or occupants of any property or facility adjacent thereto.
3.18 COMPUTER AND OTHER SYSTEMS. The computer systems and other
business systems (including but not limited to telephone and voice mail systems)
and associated and peripheral equipment, computer software, technical and other
documentation currently used by each Sellers constitute all such items necessary
for the operation of such Seller's business as currently conducted and are, in
all respects, year 2000 compliant. Each Seller has valid licenses for all
software used by it for which licenses are required.
3.19 INSURANCE. Schedule 3.19 contains a true and correct list of all
insurance policies maintained by each Seller with respect to the Seller's
business or the Purchased Assets. Except as set forth in Schedule 3.19, all such
policies of insurance are in force and shall remain in force as of the Closing
Date and will not lapse or terminate by reason of the transaction contemplated
hereby. All outstanding claims with respect to such insurance are set forth in
Schedule 3.19.
3.20 AFFILIATED TRANSACTIONS. Except as set forth on Schedule 3.20, (i)
none of the Principals or their affiliates has been involved in any business
arrangement or relationship with any Seller within the 12 months immediately
preceding the date of this Agreement; (ii) none of the Principals or their
affiliates owns any asset, tangible or intangible, which is used in the business
of any Seller; and (iii) no Seller is indebted to any member, manager, officer
or employee of any Seller for any liability or obligation. No member, manager,
officer or employee of any Seller is indebted to any Seller for any liability or
obligation.
3.21 GUARANTEES Except as set forth in Schedule 3.21 attached hereto,
neither any Seller's business nor any of the Purchased Assets is or will be at
the Closing, directly or indirectly, (i) liable, by guarantee or otherwise, upon
or with respect to, (ii) obligated, by discount or repurchase agreement or in
any other way, to provide funds in respect of, or (iii) obligated to guarantee
or assume, any debt, dividend or other obligation of any person, corporation,
association, partnership or other entity (including, without limitation, any
Seller or any of its affiliates).
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3.22 COMPENSATION OF EMPLOYEES. Schedule 3.22 contains a complete and
accurate list of all current officers, employees and consultants of each Seller,
together with the current job title, aggregate remuneration rate (bonus,
commission and salary) and accrued but untaken vacation for each such
individual.
3.23 EMPLOYEE RELATIONS. Each Seller is not delinquent in payments to
any of its employees or consultants for any wages, salaries, commissions,
bonuses or other direct compensation for any services performed by them or for
amounts required to be reimbursed to such employees. Except as set forth on
Schedule 3.23A upon termination of the employment of any of its employees, no
Seller will by reason of anything done prior to the Closing, be liable to any of
its employees or consultants for severance pay or any other payments (other than
accrued salary, vacation or sick pay in accordance with such Seller's normal
policies). Except as set forth on Schedule 3.23B, no Seller has any contracts of
employment with any employees or any legal responsibility for the employees of
any other entity.
3.24. LABOR AGREEMENTS. There are no contracts with labor unions
binding upon any Seller and no Seller has agreed to recognize any union or other
collective bargaining unit nor has any union or other collective bargaining unit
been certified as representing any employees of any Seller. None of the Sellers
or Principals has any knowledge of any organization effort currently being made
or threatened by or on behalf of any labor union with respect to employees of
any Seller.
3.25 COMMITMENTS AND WARRANTIES. All services provided by each Seller
have been performed in conformity with all applicable contractual commitments
(written or oral) and all express and implied warranties (written or oral), and
no Seller has any liability and, to the knowledge of each Seller and Principal,
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against either of them giving
rise to any liability in connection with any such services. Schedule 3.25
includes copies of the forms of agreement entered into between each Seller and
its customers. No Seller has entered into any written or oral agreements with
any of its customers that include guaranties, warranties, or indemnity
provisions other than those included in the agreements included as part of
Schedule 3.25.
3.26 SIGNIFICANT CUSTOMERS. Schedule 3.26 contains a true and correct
list of all the customers of each Seller and revenues therefrom for the twelve
(12) month period ending December 31, 1999. None of the significant customers of
any Seller have cancelled or substantially reduced or, to the knowledge of each
Seller and Principal, are currently attempting or threatening to cancel or
contract or reduce utilization of the services provided to or by any Seller.
3.27 BANK AND OTHER ACCOUNTS. Schedule 3.27 sets forth a true and
complete list of all bank, savings, brokerage and other accounts of each Seller,
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including the name of the depositary, the account number and the persons
authorized to make deposits and withdrawals or to effect transactions in such
accounts.
3.28 FULL DISCLOSURE. All information furnished by or on behalf of
Sellers and Principals to Buyer in accordance herewith is, and as of the Closing
Date shall be, correct and complete in all respects. No representation or
warranty of Sellers or Principals and no information, schedule, certificate or
document furnished or to be furnished by or on behalf of Sellers or Principals
to Buyer, its affiliates or its agents pursuant to or in connection with this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact known to any of the Sellers or
Principals necessary in order to make the statement contained herein or therein
not misleading.
ARTICLE IV
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BUYER
When reference is made to the Buyer's knowledge in this Article IV,
such knowledge means and includes (a) actual knowledge of Buyer or any of the
officers or directors of Buyer; and (b) that knowledge which a prudent
businessperson could have obtained in the management of his business after
making due inquiry, and after exercising due diligence, with respect thereto.
The Buyer, as a material inducement to Sellers and the Principals to enter into
this Agreement and consummate the transactions contemplated hereby, represents
and warrants to, and covenants with, Sellers and the Principals that as of the
Closing Date:
4.01 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as currently and as proposed
to be conducted.
4.02 DUE AUTHORIZATION. Buyer has full corporate power and authority to
enter into this Agreement, the Related Agreements and any other agreements and
documents to be executed and delivered by it at Closing as contemplated hereby
(collectively, the "Closing Documents"), to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Closing Documents and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement has been duly executed and delivered by Buyer, and
the Related Agreements will, when executed and delivered by Buyer at Closing, be
valid
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and binding obligations of Buyer enforceable in accordance with their respective
terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, reorganization, insolvency or moratorium laws, or other
laws affecting the enforcement of creditors' rights or the principles governing
the availability of equity remedies. Buyer will deliver to Sellers at the
Closing true and complete copies of all resolutions of its board of directors by
which the execution, delivery and performance of this Agreement and the Closing
Documents and the consummation of the transactions contemplated hereby and
thereby were authorized, certified by the Secretary or Assistant Secretary of
Buyer as of the Closing Date.
ARTICLE V
THE CLOSING
5.01 TIME AND PLACE OF CLOSING. Upon the terms and conditions of this
Agreement, the Closing of the transactions contemplated hereby (the "Closing")
shall take place, at 10:00 a.m., Pacific Standard Time, on or before March 1,
2000 ("Closing Date") at the offices of Epstein & Friedman LLP, located at 33
New Montgomery Street, Suite 1400, San Francisco, California or at such other
time and place as the parties hereto may agree in writing.
5.02 INSTRUMENTS OF TRANSFER, ETC. At the Closing, Sellers will deliver
to Buyer such deeds, bills of sale, instruments of assignment and other good and
sufficient instruments of transfer, executed by Sellers and in a form reasonably
satisfactory to Buyer, as Buyer may reasonably require to vest in Buyer all
right, title and interest of Sellers in and to the Purchased Assets, and Buyer
shall pay the Cash Consideration to Sellers by bank check or wire transfer and
shall also deliver to Sellers the other documents and instruments required of it
at the Closing. Without limiting the foregoing, the documents to be delivered by
the parties at the Closing shall include the following:
(a) SELLERS. Each Seller, as applicable, shall execute and deliver (i)
this Agreement, (ii) an Assignment and Assumption Agreement, (iii) a Bill of
Sale, (iv) the Lease Assignment, (v) the Managers' Certificate contemplated by
Section 3.02 hereof, (vi) an opinion of Sellers' counsel in form and substance
acceptable to Buyer and Buyer's counsel, (vii) releases of lien satisfactory to
Buyer from all lenders under the Excluded Loans, and (viii) such other
instruments as may reasonably be required of it at the Closing pursuant to the
terms of this Agreement.
(b) BUYER. Buyer shall execute and deliver (i) this Agreement, (ii) the
Employment Agreements, (iii) the Assignment and Assumption Agreements (iv) the
Lease Assignment, (v) the Secretary's Certificate contemplated by Section 4.02
hereof, (vi) the Non-Competition Agreements; (vii) an opinion of Buyer's counsel
in form and substance acceptable to Sellers and Sellers' counsel, (viii) a
guaranty of
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Technisource, Inc. of Buyer's obligations under the Note; and (ix) such other
instruments and documents as may reasonably be required of it at the Closing
pursuant to the terms of this Agreement.
(c) PRINCIPALS. Each of Berk and Agatiello shall execute and deliver to
Buyer (i) this Agreement, (ii) an Employment Agreement; and (iii) a
Non-Competition Agreement.
Sellers shall deliver to Buyer at the Closing possession of the Purchased Assets
being sold pursuant to this Agreement and the entire right, title and interest
of Sellers in and to such Purchased Assets shall pass to Buyer at the Closing.
Buyer shall deliver to Seller at the Closing the Purchase Price.
ARTICLE VI
EMPLOYEES
At or prior to the Closing, Sellers shall pay to its employees or
accrue on its Proposed Closing Balance Sheets all amounts owing to such
employees for wages and other compensation, earned vacation, sick leave and
other benefits (i.e., all vacation, sick leave and other benefits through the
date of the Closing) in accordance with Seller's current policies. It is
specifically agreed that Buyer shall not be responsible or liable for, or
otherwise assume, any liability, obligation or benefit arising under or payable
from any employee benefit plan, program or arrangement sponsored, maintained or
administered by Sellers (including without limitation, any plan, program or
arrangement providing post-retirement medical benefits, severance pay, bonuses,
incentive pay or deferred compensation).
ARTICLE VII
WORKERS COMPENSATION, PRODUCT
LIABILITY RESPONSIBILITY
It is understood and agreed that Buyer does not assume any liability
for, and shall not otherwise be responsible for, any product liability or
warranty claims (including warranty claims for injury to person or property),
relating to the business of Sellers and arising from services performed on or
prior to the Closing Date. Sellers and the Principals agree to indemnify Buyer
for all costs and expenses attributable to claims made with respect to services
rendered prior to the Closing Date in accordance with Section 8.06.
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ARTICLE VIII
POST-CLOSING COVENANTS
8.01 EXPENSES. Except as otherwise provided herein, Sellers and
Principals, on the one hand, and Buyer, on the other hand, shall each bear their
own costs and expenses incurred in connection with this Agreement, the Related
Agreements and the transactions contemplated hereby and thereby, including,
without limitation, fees, commissions, expenses and reimbursements incurred by
or required to be paid to their respective professional advisors.
8.02 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use their best 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 and make effective the sale of the Purchased Assets and the other
transactions contemplated by this Agreement and the Related Agreements. From
time to time after the date hereof (including after the Closing Date if
requested), Sellers and their affiliates will, at their own expense and without
further consideration, execute and deliver such documents to Buyer as Buyer may
reasonably request in order more effectively to vest in Buyer good title to the
Purchased Assets and to more effectively consummate the transactions
contemplated by this Agreement and the Related Agreements.
8.03 COMMISSIONS AND FEES. Each of the Sellers and Buyer represents and
warrants to the other that no broker, finder, financial adviser or other person
is entitled to any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated hereby by reason of any action taken by the
party making such representation, other than De Bellas & Company which shall be
compensated by Sellers from their respective funds. Sellers and Buyer will pay
to the other or otherwise discharge, and will indemnify and hold the other
harmless from and against, any and all claims or liabilities for all brokerage
fees, commissions and finder's fees incurred by reason of any action taken by
such party.
8.04 SALES, TRANSFER AND USE TAXES. All sales, transfer and use taxes
incurred in connection with this Agreement and the Related Agreements and the
transactions contemplated hereby and thereby will be borne by Sellers, and
Sellers will, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such sales, transfer and use taxes.
8.05 NONDISCLOSURE. Each Seller agrees not to use or disclose at any
time after consummation of the transactions contemplated hereby, except with the
prior written consent of an officer authorized to act in the matter by the board
of directors of Buyer, any trade secrets, proprietary information, or other
information that
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Buyer considers confidential (or which Sellers has previously treated as or
claimed to be confidential) relating to designs, suppliers, subcontractors,
inventions, operations, marketing, bidding information, cost and pricing data,
master files or customer lists utilized by Sellers prior to the Closing or by
Buyer or any of its affiliates (the "Buyer Group"), or the skills, abilities and
compensation of the Buyer Group's employees, and all other similar information
material to the conduct of the Buyer Group's business, which is not presently
generally known or available to the public; PROVIDED, HOWEVER, that this
provision shall not preclude Sellers from (i) the use or disclosure of such
information which presently is known generally to the public or which
subsequently comes into the public domain, other than by way of disclosure in
violation of this Agreement or in any other unauthorized fashion, or (ii)
disclosure of such information required by law or court order, provided that
prior to such disclosure required by law or court order the undersigned will
give Buyer three business days' written notice (or, if disclosure is required to
be made in less than three business days, then such notice shall be given as
promptly as practicable after determination that disclosure may be required) of
the nature of the law or order requiring disclosure and the disclosure to be
made in accordance therewith. Sellers acknowledge that any breach of the
foregoing will give rise to irreparable injury that is not compensable in
damages and agree that Buyer may seek and obtain equitable relief in the form of
specific enforcement, temporary restraining order, temporary or permanent
injunction, or any other equitable remedy that may then be available to such
party against the breach or threatened breach of such covenants, in addition to
any other legal remedies which may be available
8.06 INDEMNIFICATION.
(a) BY SELLERS AND PRINCIPALS. Sellers and the Principals, jointly and
severally, agree to save, defend and indemnify Buyer, and its officers,
directors, employees and agents and Buyer's parent and its officers, directors,
employees and agents (each a "Buyer's Indemnitee"), against and hold them
harmless from any and all claims, liabilities, losses, damages, deficiencies,
costs and expenses, of every kind, nature and description, fixed or contingent
(including, without limitation, interest, penalties, costs of investigation and
counsel's fees and expenses) ("Losses"), asserted against, resulting to, imposed
upon or incurred by Buyer or any Buyer's Indemnitee, directly or indirectly,
arising out of (i) any breach of any representation, warranty, covenant or
agreement made by Sellers or the Principals under this Agreement, the Related
Agreements or any agreement or instrument executed or delivered in connection
with the transactions contemplated hereby or thereby; (ii) any Excluded
Liability (including, without limitation, any liability arising under the
matters described in Schedule 3.11) or any Environmental Claim; (iii) any
failure of Sellers to qualify to do business in a jurisdiction outside of
California or make any payment to a taxing authority in such jurisdiction; (iv)
any liability of the Sellers for unpaid Taxes with respect to any Tax year
beginning before and ending after the Closing Date to the extent allocable to
the portion of
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such period beginning before and ending on the Closing Date; and (v) any Account
Receivable which is not collected within 120 days following the due date
therefor (provided, that if indemnification is awarded to Buyer pursuant to a
claim described in this subsection (v), Buyer, simultaneously with payment of
the applicable indemnification amounts shall assign the uncollected Account
Receivable to the Sellers and/or Principals for collection).
(b) BY BUYER. Buyer agrees to save, defend and indemnify Sellers, the
Principals and Seller's members, managers, officers, employees and agents (each
a "Seller's Indemnitee") against and hold them harmless from any and all Losses
asserted against, resulting to, imposed upon or incurred by Sellers or Seller's
Indemnitee arising solely out of (i) any breach of any representation, warranty,
covenant or agreement made by Buyer under this Agreement or the Related
Agreements, or (ii) any activity of Buyer after the Closing Date (except to the
extent caused by the intentional act of any Principal which is outside the scope
of Principal's employment).
(c) SURVIVAL. The representations, warranties, covenants, indemnities
and agreements of the parties to this Agreement contained herein shall survive
the Closing, PROVIDED, HOWEVER, that the representations, warranties and
indemnities of the parties contained in Articles III and IV of this Agreement
and in this Section 8.06 (other than the indemnities contained in Sections 3.01,
3.02, 3.05, 3.08, 3.17 and 8.06(a)(ii), (iii), (iv) and (v) and 8.06(b)(ii)
hereof which shall continue in force without any time limit) shall only survive
until the second anniversary of the Closing Date and no claim may be brought by
any party in respect thereof unless notice of such claim is properly given on or
prior to such date; PROVIDED, HOWEVER, that in cases of fraud or intentional
misrepresentation all of the representations and warranties shall survive the
consummation of the Closing and shall not expire.
(d) SET-OFF. Buyer shall have the right to set-off (i) any amounts
which may become due to Sellers under this Agreement (including, without
limitation, any amounts due under the Note) or under any other agreement between
Buyer and Sellers; and/or (ii) any amounts which may become due to Principals
under the Employment Agreements or any other agreement between Principals and
Buyer, against any indemnification amounts to be paid by Sellers or Principals
pursuant to Section 8.06(a).
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8.07 DEFENSE OF CLAIMS.
(a) Should any claim, action or proceeding by or involving a third
party arise after the Closing Date for which a party hereto (the "Indemnifying
Party") has an indemnification obligation under the terms of this Agreement, the
other party (the "Indemnified Party") shall notify the Indemnifying Party within
a reasonable time after such claim, action or proceeding arises and is known to
the Indemnified Party (provided that the failure to give timely notice shall not
affect the right to indemnification hereunder except to the extent that the
Indemnifying Party is actually damaged or prejudiced by such delay).
The expenses of all proceedings, contests or lawsuits with respect to
such claims or actions shall be borne by the Indemnifying Party. The
Indemnifying Party shall assume the defense of such claim or action, it shall
give written notice to the Indemnified Party stating that it intends to assume
such defense within 15 days after notice from the Indemnified Party of such
claim or action (unless the claim or action reasonably requires a response in
less than 15 days after the notice is given to the Indemnifying Party, in which
event it shall notify the Indemnified Party at least five days prior to such
reasonably required response date), and the Indemnifying Party shall thereafter
assume the defense of any such claim or liability, through counsel reasonably
satisfactory to the Indemnified Party, provided that the Indemnified Party may
participate in such defense at its own expense. The Indemnified Party shall
afford the Indemnifying Party's counsel designated by it and other authorized
representatives reasonable access during normal business hours to all books,
records, offices and other facilities and properties of the Indemnified Party,
and to the personnel of the Indemnified Party, and shall otherwise use all
reasonable efforts to cooperate with the Indemnifying Party, such counsel and
such other authorized representatives in connection with the exercise of the
rights of the Indemnifying Party pursuant to this Section 8.07. The Indemnifying
Party shall not settle or compromise any claim or action without the written
consent of the Indemnified Party (which consent shall not be unreasonably
withheld), unless an unconditional release of the Indemnified Party has been
obtained.
(b) If the Indemnifying Party does not assume the defense of, or if
after so assuming it shall fail to actively defend, any such claim or action:
(i) the Indemnified Party, after giving written notice to the Indemnifying
Party, may defend against any such claim or action in such manner as it may deem
appropriate, and (ii) the Indemnified Party may settle such claim or litigation
on such terms as it may deem appropriate (but not sooner than 15 days after
notifying the Indemnifying Party of such proposed settlement and the terms
thereof), and the Indemnifying Party promptly shall reimburse the Indemnified
Party for the amount of such settlement and for all expenses, legal and
otherwise, reasonably and necessarily incurred by the Indemnified Party in
connection with the defense
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against and settlement of such claim or action. If no settlement of such claim
or litigation is made, the Indemnifying Party shall satisfy any judgment
rendered with respect to such claim or in such action, before the Indemnified
Party is required to do so, and pay all expenses, legal or otherwise, reasonably
and necessarily incurred by the Indemnified Party in the defense against such
claim or litigation.
(c) If a judgment is rendered against an Indemnified Party in any
action covered by the indemnification hereunder, or any lien attaches to any of
the assets of an Indemnified Party, the Indemnifying Party, immediately upon
such entry or attachment, shall pay such judgment in full or discharge such lien
unless, at the Indemnifying Party's expense and direction, an appeal is taken
under which the execution of the judgment or satisfaction of the lien is stayed.
If and when a final judgment is rendered in any such action, the Indemnifying
Party shall forthwith pay such judgment or discharge such lien before the
Indemnified Party is compelled to do so.
8.08 ACCESS TO RECORDS. For a period of seven years after the Closing
Date, Buyer shall retain the books of account and other financial and accounting
records relating to the conduct of the Seller's business which are transferred
to it on and as of the Closing Date. At least 30 days prior to the end of such
period, or any subsequent retention period, Principals shall notify Buyer in
writing whether it desires the further retention of any such records for any
longer period, and, in the event it desires any of such records to be retained
for any longer period, such records, at the option of Buyer, shall either be
retained by Buyer (in which case Buyer shall notify Principals of the proposed
retention period), or promptly be shipped to Principals at the Principals'
expense. Buyer shall permit Principals, from time to time, to inspect and copy
such books of account and other records at reasonable times and after providing
written notice to Buyer of its desire to so inspect.
8.09 NON-COMPETITION. In order to assure that Buyer realizes the
benefits of the transaction contemplated herein, each of Berk and Agatiello
agrees to fully comply with the terms and conditions of her respective
Non-Competition Agreement.
8.10 CESSATION OF BUSINESS OF SELLERS. Sellers and the Principals
covenant and agree that as of the date immediately following the Closing Date,
Sellers shall permanently cease all business activity of any kind, except for
the dissolution and winding up of its business, and shall, on or before March 1,
2001, consummate Seller's liquidation and dissolution. Sellers covenant and
agree that during the winding up of its business, Sellers shall not, directly or
indirectly, whether as principal, agent, trustee or through the agency of any
corporation, partnership, association or agent engage in a similar business as
that of Buyer or its affiliates within any jurisdiction in which Buyer or any of
its affiliates conducts business.
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8.11 TAX RETURNS. Each Seller shall prepare and timely file all of its
required Tax Returns for periods ending prior to the Closing Date. Each Seller
shall be responsible for the payment of all Taxes due in connection with its
operations prior to the Closing Date.
8.12 CONSENTS TO ASSIGNMENT OF ASSIGNED CONTRACTS. Seller shall use its
best efforts to obtain such consents as may be necessary or appropriate to vest
in Buyer all of Seller's right, title and interest in and to all of the
Purchased Assets, including, without limitation, the Required Consents, within
sixty days following the Closing.
ARTICLE IX
MISCELLANEOUS
9.01 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
9.02 NO ASSIGNMENT. This Agreement may not be assigned by either party
hereto without the prior written consent of the other party, provided, however,
that Buyer may assign its rights hereunder, in whole or in part, to any
corporation or other entity controlled by, controlling, or under common control
with Buyer, and Buyer or its assignee may assign their rights hereunder, in
whole or in part, to any purchaser of substantially all of the assets or
business of Buyer or Sellers. Any attempted or purported assignment by either
party other than in accordance with this Section 9.02 shall be null and void.
9.03 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by any party on separate counterparts, each of which as so
executed and delivered shall be deemed an original but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any party, hereto to produce or account for
more than one such counterpart executed and delivered by such party.
9.04 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal substantive laws of the State of Florida
(without regard to conflict of laws principles thereof) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies.
9.05 ARBITRATION; VENUE; ATTORNEY'S FEES. Any dispute, controversy or
claim arising out of or relating to this Agreement, or the breach, termination
or invalidity thereof, shall be settled by arbitration in accordance with the
Commercial
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Arbitration Rules of the American Arbitration Association. The arbitrators shall
have the power to deliver both legal and equitable remedies. The place of
arbitration shall be Miami-Dade County, Florida. Judgement on the award may be
entered in any court having jurisdiction. Notwithstanding the provisions of this
Section 9.05, if the dispute, controversy or claim relates to the subject matter
of Sections 8.05 or 8.10 of this Agreement, Buyer shall the option of seeking
relief through a court of competent jurisdiction located in Miami-Dade County,
Florida and each of the parties hereto expressly agrees to be bound by such
selection of jurisdiction and venue for purposes of such adjudication. Each
party (i) waives any objection which it may have that such court is not a
convenient forum for any such adjudication, (ii) agrees and consents to the
personal jurisdiction of such court with respect to any claim or dispute arising
out of or relating to this Agreement or the transactions contemplated hereby and
(iii) agrees that process issued out of such court or in accordance with the
rules of practice of such court shall be properly served if served personally or
served by certified mail or other form of substituted service, as provided under
the rules of practice of such court. In the event of any suit, action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby the prevailing party thereunder shall be entitled to recover
reasonable attorneys' and paralegals' fees (for negotiations, trials, appeals
and collection efforts) and court costs incurred in connection therewith in
addition to any other relief to which such party may be entitled. The prevailing
party shall be the party that prevails on its claim whether or not an award or
judgement is entered in its favor.
9.06 SURVIVAL. Except as otherwise expressly set forth herein, the
representations, warranties, covenants, indemnities and agreements of the
parties to this Agreement contained herein or in any document delivered pursuant
to or in connection herewith shall survive the Closing and shall survive any
investigation by the other party.
9.07 NOTICES. All notices, consents, requests, instructions, approvals
and other communications provided for herein and all legal process in regard
hereto shall be in writing and shall be deemed to have been duly given: when
delivered by hand; when delivered by facsimile (if written confirmation of
receipt of the facsimile is obtained from the party to be charged with notice);
five (5) days after being deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid; or on the second
business day after being sent (prepaid for next day delivery), via Federal
Express, DHL or other nationally recognized delivery service, as follows:
(a) TO BUYER. If to Buyer addressed to:
TSRC.net, Inc.
1901 West Cypress Creek Road
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Suite 201
Fort Lauderdale, FL 33309
Attn: Joseph Collard, CEO
with a copy to:
Holland & Knight
701 Brickell Avenue
Miami, FL 33131
Attention: Rodney H. Bell, Esq.
Telecopier No.: 305-789-7799
(b) TO SELLERS AND THE PRINCIPALS If to Sellers and/or Principals
addressed to:
Barbara S. Berk and Nancy E. Agatiello
105 Bulkley Avenue
Sausalito, CA 94965
Telecopier No.:
-------------------
with a copy to:
Epstein and Freidman
33 New Montgomery
Suite 1400
San Francisco, CA 94105
Attention: Mark Epstein
Telecopier No.: (415) 896-2994
Either party may designate a change in address at any time upon written
notice to the other party.
9.08 AMENDMENT AND MODIFICATION. The Agreement may be amended, modified
or supplemented only by a written instrument executed by the party against whom
such amendment, modification or supplement is sought to be enforced.
9.09 WAIVER OF COMPLIANCE. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party or parties
entitled to the benefits thereof only by a written instrument signed by the
party or parties granting such waiver, but any such waiver or the failure to
insist upon strict compliance with any obligation, covenant, agreement or
condition herein, shall not
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operate as a waiver of, or estoppel with respect to, any subsequent or other
failure or breach.
9.10 INTERPRETATION. The table of contents and 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. 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 or a governmental entity or
any department or agency thereof. As used in this Agreement, the term
"subsidiary", when used in reference to any other person, shall mean any
corporation of which outstanding securities having ordinary voting power to
elect a majority of the board of directors of such corporation are owned
directly or indirectly by such other person. As used in this Agreement, the term
"affiliate" of a person means any person directly or indirectly owning,
controlling or holding with power to vote ten (10%) or more of the outstanding
voting securities of such other person; (ii) any person ten (10%) or more of
whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote, by such other person; (iii) any person
directly or indirectly controlling, controlled by, or under common control with
such other person; (iv) any officer, director, trustee or general partner of
such other person; (v) if such other person is an officer, director, trustee or
general partner, any person for which such other person acts in any such
capacity; and (vi) the spouse of such other person, or any parent, grandparent,
brother, sister, niece or nephew of such other person, or any lineal descendant
of such other person, or the spouse of any such parent, grandparent, brother,
sister, niece, nephew or lineal descendant, or any entity controlled by any of
the foregoing. When used herein, the masculine, feminine or neuter gender and
the singular or plural number shall each be deemed to include the others
whenever the context so indicates or permits.
9.11 ENTIRE AGREEMENT. This Agreement and the Related Agreements,
including the schedules, exhibits, documents, certificates and instruments
referred to herein and therein, embody the entire agreement and understanding of
the parties hereto in respect of any transactions contemplated by this Agreement
and the Related Agreements and supersede all prior agreements and understandings
between the parties with respect thereto.
9.12 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses, sections or subsections contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or
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words, phrase or phrases, sentence or sentences, clause or clauses, section or
sections, or subsection or subsections had not been inserted.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the parties have duly executed this Asset Purchase
Agreement as of the date first above written.
BUYER:
TSRC.NET, INC.
By: /s/ Thomas Hoshko
--------------------------------
Thomas Hoshko
President
SELLERS:
PRISM GROUP, LLC., a California
corporation
By: /s/ Barbara S. Berk
--------------------------------
Barbara S. Berk
Manager
By: /s/ Nancy E. Agatiello
--------------------------------
Nancy E. Agatiello
Manager
PRISM GROUP CONSULTING, LLC., a
California corporation
By: /s/ Barbara S. Berk
--------------------------------
Barbara S. Berk
Manager
By: /s/ Nancy E. Agatiello
--------------------------------
Nancy E. Agatiello
Manager
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PRINCIPALS:
GUS GONZALEZ AND NANCY E.
AGATIELLO INTER-VIVOS TRUST
By: /s/ Gus Gonzalez
--------------------------------
Gus Gonzalez, Co-Trustee
By: /s/ Nancy E. Agatiello
--------------------------------
Nancy E. Agatiello, Co-Trustee
/s/ Barbara S. Berk
-----------------------------------
BARBARA S. BERK
/s/ Nancy E. Agatiello
-----------------------------------
NANCY E. AGATIELLO
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