<PAGE> 1
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):
SEPTEMBER 1, 1999
CLARK/BARDES HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 000-24769 52-2103926
(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation or
organization)
102 S. WYNSTONE PARK DRIVE, SUITE 200
NORTH BARRINGTON, IL 60010
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code:
(847) 304-5800
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 1, 1999, Clark/Bardes, Inc. ("CBI"), wholly owned
subsidiary of Clark/Bardes Holdings, Inc. ("CBH"), entered into and consummated
an asset and stock purchase agreement to acquire substantially all the assets
and assume certain liabilities of The Wamberg Organization, Inc., whose sole
shareholder was W.T. Wamberg, CBH's chairman, and to purchase all of the
outstanding stock of Wamberg Financial Corporation, whose sole shareholder was
also W.T. Wamberg. CBI acquired certain operating assets, all of the remaining
renewal commission not previously acquired and some liabilities, principally
accounts payable and employee benefits, of The Wamberg Organization. Wamberg
Financial Corporation owns an airplane and related debt of approximately $3.8
million and engaged in leasing the airplane to The Wamberg Organization. The
other assets acquired under the purchase agreement include cash, receivables,
equipment, intangible assets, intellectual property, customer and supplier
lists, insurance, and all rights under existing contracts, leases, agreements
and permits.
The Wamberg Organization has historically been CBI's largest
independent producer. In light of the relationship between The Wamberg
Organization, Wamberg Financial Corporation, W.T. Wamberg and CBH, CBH's board
of directors appointed a special committee of the board comprised of
independent, non-employee directors to review the terms of this transaction and
negotiate on behalf of CBH. The special committee also retained U.S. Bancorp
Piper Jaffray Inc. to issue a fairness opinion with respect to this acquisition.
After analyzing the matter and considering all relevant issues, the special
committee recommended that CBH's board approve the acquisition.
The purchase agreement provides for, among other things:
o cash payment to The Wamberg Organization of approximately $12.0
million, of which $360,000 was held in escrow pending final
determination of liabilities;
o payment to The Wamberg Organization of up to an additional $11.9
million through December 31, 2002, which amount may be reduced if
CBH does not achieve revenue objectives set forth in the purchase
agreement;
o a cash payment to W.T. Wamberg of $50,000 for his shares of Wamberg
Financial Corporation; and
o the direct payment of $1.5 million by CBI of an outstanding loan of
The Wamberg Organization.
The liabilities assumed under the purchase agreement include CBH's
continued performance under The Wamberg Organization's executory vendor
contracts, and accrued payroll, vacation and other benefits of its employees
generated in the ordinary course of business. The $13.6 million cash portion of
the purchase price was paid from available CBH cash balances. Closing costs and
fees connected with the transaction are estimated to be $500,000. Concurrent
with the acquisition, W.T. Wamberg was appointed chief executive officer of CBH.
Melvin G. Todd remains president of CBH.
2
<PAGE> 3
ITEM 7. PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENT OF BUSINESS ACQUIRED
The required audited Financial Statements will be filed by an
amendment not later than 60 days after the date that the initial
report on Form 8-K must be filed.
The following unaudited financial statements of The Wamberg
Organization and Wamberg Financial Corporation are included
herein:
(i) Balance Sheet as of June 30, 1999; and
(ii) Statement of Income for the six months ended June 30, 1999.
(b) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements of CBH
are included herein:
(i) Unaudited Pro Forma Balance Sheets as of June 30, 1999 and
December 31, 1998; and
(ii) Unaudited Pro Forma Statements of Income for the six months
ended June 30, 1999 and year ended December 31, 1998.
(c) EXHIBITS
The following Exhibits are filed herewith:
3
<PAGE> 4
2.1 Asset and Stock Purchase Agreement, dated September 1, 1999,
by and among Clark/Bardes, Inc. and The Wamberg
Organization, Inc. and W.T. Wamberg.
99.1 Press release dated September 2, 1999.
FORWARD LOOKING STATEMENTS
All statements other than statements of historical fact included in the
press release attached hereto as Exhibit 99.1 are forward-looking statements.
Words such as "anticipate," "believe," "estimate," "expect," "intend," and
similar expressions included in such press release as they relate to CBH or its
management identify forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Such forward-looking statements are based on the beliefs of CBH's
management as well as assumptions made by and information currently available to
CBH's management. Actual results could differ materially from those contemplated
by the forward-looking statements as a result of certain factors, including
difficulties associated with changes in tax legislation, dependence on key
producers, CBH's dependence on persistency of existing business, credit risk
related to renewal revenue, acquisition risks, competitive factors and pricing
pressures, dependence on certain insurance companies, changes in legal and
regulatory requirements and general economic conditions. Such statements reflect
the current views of CBH's management with respect to future events and are
subject to these and other risks, uncertainties and assumptions relating to the
operations, results of operations, growth strategy and liquidity of CBH. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, expected or projected. All subsequent written and oral
forward-looking statements attributable to CBH or persons acting on its behalf
are expressly qualified in their entirety by this paragraph.
4
<PAGE> 5
THE WAMBERG ORGANIZATION INC.
BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
As of
June 30, 1999
-------------
<S> <C>
ASSETS
Current Assets
Cash $ 3,243,962
Receivables - employees 106,411
Prepaid expenses --
------------
Total Current Assets 3,350,373
Property and Equipment - net 546,276
------------
Total Assets $ 3,896,651
============
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities
Accrued expenses $ 84,159
------------
Stockholder's Equity
Common stock - $.01 par value authorized
100,000 shares; issued - 100 shares 1
Additional Paid in Capital 999
Retained Earnings 3,811,492
------------
Total Stockholder's Equity 3,812,492
------------
Total Liabilities & Stockholder's Equity $ 3,896,651
============
</TABLE>
THE WAMBERG ORGANIZATION INC.
STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999
----------------
<S> <C>
Revenue - New and renewal commissions $ 5,463,916
------------
Operating Expenses
Selling 857,917
General and Administrative 2,829,394
------------
Total 3,687,311
------------
Income from Operations 1,776,605
Interest Income 9,873
------------
Income before taxes 1,786,477
Income Taxes
------------
Net Income $ 1,786,477
============
</TABLE>
<PAGE> 6
WAMBERG FINANCIAL CORPORATION
BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
As of
June 30, 1999
-------------
<S> <C>
ASSETS
Current Assets
Cash $ 3,991
------------
Fixed Assets
Airplane 2,976,150
------------
Accumulated Depreciation
Net 2,976,150
Other Assets 533
------------
Total Assets $ 2,980,675
============
LIABILITIES & EQUITY
Current Liabilities
Current portion of long-term debt $ 157,973
------------
Long-term debt 3,617,581
------------
Total Liabilities 3,775,554
------------
Stockholders' Deficit
Common stock - no par value: authorized
1,000 shares; issued - 100 shares 140,000
Accumulated deficit (934,879)
------------
Total Stockholders' Deficit (794,879)
------------
Total Liabilities & Equity $ 2,980,675
============
</TABLE>
WAMBERG FINANCIAL CORPORATION
STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999
----------------
<S> <C>
Rental Income $ 572,736
Operating Expenses 356,526
------------
Gain from Rental Activity 216,209
Interest Expense 64,507
------------
Net Income $ 151,702
============
</TABLE>
<PAGE> 7
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following table sets forth unaudited pro forma financial
information of Clark/Bardes Holdings, Inc. (the "Company") for the periods ended
and as indicated. The unaudited pro forma financial information of the Company
set forth below was derived from the audited and unaudited financial statements
of the Company, The Wamberg Organization, Inc. and Wamberg Financial
Corporation.
The unaudited pro forma balance sheets and income statements have
been prepared to give effect to the acquisition of The Wamberg Organization,
Inc. and Wamberg Financial Corporation as if such transaction had occurred as of
the beginning of each period presented. The unaudited pro forma financial
information of the Company set forth below is based upon available information
and certain assumptions that the Company believes are reasonable. The unaudited
pro forma financial information of the Company set forth below does not purport
to represent either what the Company's financial position or results of
operations actually would have been if the transactions had actually occurred as
of such dates or what such results will be for any future periods.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31,1998
(in thousands)
ASSETS
<TABLE>
<CAPTION>
THE WAMBERG PRO FORMA
THE WAMBERG FINANCIAL PRO FORMA AS
COMPANY ORGANIZATION CORPORATION ADJUSTMENTS ADJUSTED
-------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 12,102 $ -- $ -- $(14,059) $ (1,957)
Accounts and notes receivable - net 8,076 59 -- -- 8,135
Other current assets 59 -- -- -- 59
-------- -------- -------- --------
20,237 59 -- -- 6,237
EQUIPMENT AND LEASEHOLD IMPROVEMENTS - NET 1,178 335 995 -- 2,508
INTANGIBLE ASSETS - NET 45,209 -- -- 14,516 59,725
DEFERRED TAX ASSET 607 -- -- -- 607
OTHER ASSETS 262 -- -- -- 262
-------- -------- -------- -------- --------
TOTAL ASSETS $ 67,493 $ 394 $ 995 $ 457 $ 69,339
======== ======== ======== ======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,925 $ 403 $ 70 $ -- $ 3,398
Commissions and fees payable 2,634 -- 2,634
Income taxes 528 -- 528
Accrued liabilities 2,651 60 -- 2,711
Current portion of long term debt 4,344 -- 103 -- 4,447
-------- -------- -------- --------
13,082 463 173 -- 13,718
-------- -------- -------- --------
LONG TERM DEBT 24,713 -- 1,210 -- 25,923
STOCKHOLDERS' EQUITY -- --
Preferred stock - Authorized 1,000,000 shares -- -- -- -- --
$.01 par value; none issued -- -- -- -- --
Common stock - Authorized 20,000,000 shares -- -- -- -- --
$.01 par value: 9,628,749 issued 82 -- -- -- 82
Paid in capital 26,274 -- -- -- 26,274
Retained earnings 3,342 -- -- -- 3,342
-------- -------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 29,698 -- -- -- 29,698
-------- -------- -------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 67,493 $ 463 $ 1,383 $ -- $ 69,339
======== ======== ======== ======== ========
</TABLE>
<PAGE> 8
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THE WAMBERG PRO FORMA
THE WAMBERG FINANCIAL PRO FORMA AS
COMPANY ORGANIZATION CORPORATION ADJUSTMENTS ADJUSTED
-------- ------------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
TOTAL REVENUE $ 74,766 $ 9,538 $ 631 $ -- 84,935
Commission and fee expense 46,111 -- -- -- 46,111
-------- -------- -------- -------- --------
GROSS PROFIT 28,655 9,538 631 -- 38,824
-------- -------- -------- -------- --------
General and administrative expense 19,616 5,464 514 -- 25,594
Amortization of intangibles 1,232 -- -- 1,006 2,238
Non-recurring operating expenses 4,800 -- -- -- 4,800
-------- -------- -------- -------- --------
INCOME FROM OPERATIONS 3,007 4,074 117 (1,006) 6,192
-------- -------- -------- -------- --------
Interest income 565 17 -- -- 582
Interest expense (3,166) (3) (112) (1,051) (4,332)
-------- -------- -------- -------- --------
(2,601) 14 (112) (1,051) (3,750)
-------- -------- -------- -------- --------
INCOME BEFORE TAXES 406 4,088 5 (2,057) 2,442
Income taxes 817 88 -- (654) 251
-------- -------- -------- -------- --------
NET INCOME $ (411) $ 4,000 $ 5 $ (1,403) $ 2,191
======== ======== ======== ======== ========
PER SHARE INFORMATION:
Basic earnings per share $ (0.08) $ 0.44
======== ========
Diluted earnings per share $ (0.08) $ 0.39
======== ========
</TABLE>
<PAGE> 9
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30,1999
(in thousands)
ASSETS
<TABLE>
<CAPTION>
THE WAMBERG PRO FORMA
THE WAMBERG FINANCIAL PRO FORMA AS
COMPANY ORGANIZATION CORPORATION ADJUSTMENTS ADJUSTED
--------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 10,302 $ -- $ -- $ (14,059) $ (3,757)
Accounts and notes receivable - net 9,644 59 -- -- 9,703
Other current assets 351 -- -- -- 351
--------- --------- --------- --------- ---------
20,297 59 -- (14,059) 6,297
EQUIPMENT AND LEASEHOLD IMPROVEMENTS - NET 3,105 546 2,976 1,532 8,160
INTANGIBLE ASSETS - NET 81,948 -- -- 13,221 95,169
DEFERRED TAX ASSET 422 -- -- -- 422
OTHER ASSETS 1,278 -- -- -- 1,278
--------- --------- --------- --------- ---------
TOTAL ASSETS $ 107,050 $ 605 $ 2,976 $ 695 $ 111,326
========= ========= ========= ========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,953 $ 304 $ -- $ -- $ 3,257
Commissions and fees payable 3,827 -- -- -- 3,827
Income taxes 1,856 -- -- -- 1,856
Accrued liabilities 4,811 196 -- -- 5,007
Current portion of long term debt 6,212 -- 158 -- 6,370
--------- --------- --------- --------- ---------
19,659 500 158 -- 20,317
--------- --------- --------- --------- ---------
LONG TERM DEBT 32,012 -- 3,618 -- 35,630
STOCKHOLDERS' EQUITY -- -- -- -- --
Preferred stock - Authorized 1,000,000 shares -- -- -- -- --
$.01 par value; none issued -- -- -- -- --
Common stock - Authorized 20,000,000 shares -- -- -- -- --
$.01 par value: 9,628,749 issued 96 -- -- -- 96
Paid in capital 48,988 -- -- -- 48,988
Retained earnings 6,295 -- -- -- 6,295
--------- --------- --------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 55,379 -- -- -- 55,379
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 107,050 $ 500 $ 3,776 $ -- $ 111,326
========= ========= ========= ========= =========
</TABLE>
<PAGE> 10
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THE WAMBERG PRO FORMA
THE WAMBERG FINANCIAL PRO FORMA AS
COMPANY ORGANIZATION CORPORATION ADJUSTMENTS ADJUSTED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
TOTAL REVENUE $ 53,776 $ 5,464 $ 573 $ 59,813
Commission and fee expense 27,216 -- -- -- 27,216
------------ ------------ ------------ ------------ ------------
GROSS PROFIT 26,560 5,464 573 -- 32,597
------------ ------------ ------------ ------------ ------------
General and administrative expense 18,457 3,687 357 192 22,693
Amortization of intangibles 1,772 -- -- 442 2,214
------------ ------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 6,331 1,777 216 (634) 7,690
------------ ------------ ------------ ------------ ------------
Interest income 158 10 -- -- 168
Interest expense (1,577) -- (65) (525) (2,167)
------------ ------------ ------------ ------------ ------------
(1,419) 10 (65) (525) (1,999)
------------ ------------ ------------ ------------ ------------
INCOME BEFORE TAXES 4,912 1,787 151 (1,159) 5,691
Income taxes 2,005 -- -- 291 2,296
------------ ------------ ------------ ------------ ------------
NET INCOME $ 2,907 $ 1,787 $ 151 $ (1,450) $ 3,395
============ ============ ============ ============ ============
Per share information:
Basic earnings per share $ 0.34 $ 0.40
============ ============
Diluted earnings per share $ 0.33 $ 0.39
============ ============
</TABLE>
<PAGE> 11
NOTES TO PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AS AT AS AT
31-DEC-98 30-JUN-99
--------- ---------
<S> <C> <C>
1. Purchase price
Cash paid at closing $ 13,559 $ 13,559
Closing costs (estimated) 500 500
-------- --------
Total $ 14,059 $ 14,059
======== ========
2. Assets acquired and (liabilities assumed)
Accounts receivable $ 59 $ 59
Equipment and leasehold improvements
at book value (approximates fair value) 759 546
at appraised value 4,509
Other assets 55
Accounts payable (473) (304)
Accrued liabilities (60) (196)
Note payable - aircraft
current (103) (378)
long term (1,265) (3,398)
-------- --------
$ (1,028) $ 838
======== ========
3. Excess purchase price $ 15,087 $ 13,221
======== ========
4. The Wamberg Organization's revenue for the period ended June 30,
1999 was $12,984 and included a payment of $7,504 by The Company
for the purchase of a $14.2 million renewal revenue over a ten year
period starting January 4, 1999. In order to present the gross
revenues of The Wamberg Organization, this item has been eliminated.
5. Additional depreciation on acquired assets $ 192
========
6. Interest on the cash portion of the purchase price at 7.75% $ 1,051 $ 525
======== ========
7. Amortization of the excess purchase price over 15 years $ 1,006 $ 442
========
8. Income tax benefit of adjustments #5 - #7 $ 654 $ 291
======== ========
</TABLE>
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLARK/BARDES HOLDINGS, INC.
/s/ MELVIN G. TODD
----------------------------------
Melvin G. Todd
President
Date: September 16, 1999
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
2.1 Asset and Stock Purchase Agreement, dated September 1, 1999,
by and among Clark/Bardes, Inc. and The Wamberg Organization,
Inc. and W.T. Wamberg.
99.1 Press release dated September 2, 1999.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
================================================================================
ASSET AND STOCK PURCHASE AGREEMENT
by and among
CLARK/BARDES, INC.
and
THE WAMBERG ORGANIZATION, INC.,
and W.T. WAMBERG
================================================================================
September 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 PURCHASE AND SALE OF ASSETS AND STOCK...................................................................1
1.1 Purchased Assets.......................................................................1
1.2 Excluded Assets........................................................................4
1.3 Assumption of Liabilities..............................................................4
1.4 Excluded Liabilities...................................................................4
1.5 Purchase and Sale of Shares............................................................5
1.6 Purchase of Stock of Clark/Bardes, Inc.................................................5
ARTICLE 2 CONSIDERATION FOR THE PURCHASED ASSETS AND STOCK........................................................5
2.1 Purchase Price.........................................................................5
2.2 Required Cash Amount Adjustment........................................................6
2.3 Procedures for Final Determination of Required Cash Amount.............................6
2.4 Required Cash Amount Definition........................................................7
2.5 Earn-Out Payment.......................................................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER REGARDING SELLER AND PURCHASED ASSETS..........11
3.1 Organization and Power................................................................11
3.2 Subsidiaries..........................................................................11
3.3 Authorization; No Breach..............................................................11
3.4 Financial Statements..................................................................12
3.5 Absence of Undisclosed Liabilities....................................................12
3.6 No Material Adverse Changes...........................................................12
3.7 Absence of Certain Developments.......................................................12
3.8 Title and Condition of Properties.....................................................14
3.9 Tax Matters...........................................................................15
3.10 Contracts and Commitments.............................................................16
3.11 Proprietary Rights....................................................................18
3.12 Litigation; Proceedings...............................................................18
3.13 Brokerage.............................................................................18
3.14 Governmental Consent, etc.............................................................18
3.15 Employees.............................................................................19
3.16 Employee Benefit Plans................................................................19
3.17 Insurance.............................................................................21
3.18 Affiliated Transactions...............................................................21
3.19 Compliance with Laws; Permits; Certain Operations.....................................21
3.20 Environmental Health and Safety.......................................................22
3.21 Product and Warranty Claims; Warranties...............................................23
3.22 Disclosure............................................................................23
3.23 Closing Date..........................................................................23
3.24 Name Change...........................................................................23
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER..........................................................23
4.1 Organization of WFC...................................................................23
4.2 Capital Stock of WFC..................................................................24
4.3 Consents and Approvals................................................................24
4.4 Assets Used in or Necessary in the Business of WFC....................................24
4.5 Compliance with Laws; Ability to Conduct Business.....................................25
4.6 Federal, State and Local Taxes........................................................25
4.7 Title to Assets.......................................................................26
4.8 Litigation............................................................................26
4.9 Insurance.............................................................................26
4.10 Liabilities...........................................................................27
4.11 Governmental Authorizations...........................................................27
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER............................................................27
5.1 Corporate Organization and Power......................................................27
5.2 Authorization.........................................................................27
5.3 No Violation..........................................................................27
5.4 Litigation............................................................................28
5.5 Closing Date..........................................................................28
5.6 Brokerage.............................................................................28
5.7 Governmental Consent, etc.............................................................28
5.8 Disclosure............................................................................28
ARTICLE 6 CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE..........................................................28
6.1 Conditions to Purchaser's Obligation..................................................28
ARTICLE 7 CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.............................................................30
7.1 Conditions to the Seller's Obligations................................................30
ARTICLE 8 CLOSING TRANSACTIONS...................................................................................31
8.1 The Closing...........................................................................31
8.2 Action to Be Taken at the Closing.....................................................31
8.3 Closing Documents.....................................................................31
8.4 Nonassignable Contracts...............................................................33
ARTICLE 9 INDEMNIFICATION........................................................................................34
9.1 Indemnification by Seller and Shareholder.............................................34
9.2 Indemnification by Purchaser..........................................................34
9.3 Method of Asserting Claims............................................................34
9.4 Survival; Limitations on Liability....................................................35
9.5 Escrow Amount.........................................................................36
ARTICLE 10 TERMINATION...........................................................................................36
10.1 Termination...........................................................................36
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
10.2 Effect of Termination.................................................................36
10.3 Effect of Closing.....................................................................36
ARTICLE 11 ADDITIONAL AGREEMENTS.................................................................................37
11.1 Survival..............................................................................37
11.2 Mutual Assistance.....................................................................37
11.3 Press Release and Announcements.......................................................37
11.4 Expenses..............................................................................37
11.5 Further Transfers.....................................................................37
11.6 Transition Assistance.................................................................37
11.7 Confidentiality.......................................................................38
11.8 Remittances...........................................................................38
11.9 Best Efforts to Consummate Closing Transactions.......................................38
11.10 Employees and Agents of Seller........................................................38
ARTICLE 12 MISCELLANEOUS.........................................................................................39
12.1 Amendment and Waiver..................................................................39
12.2 Notices...............................................................................40
12.3 Assignment............................................................................41
12.4 Severability..........................................................................41
12.5 No Third Party Beneficiaries..........................................................41
12.6 No Strict Construction................................................................41
12.7 Captions..............................................................................41
12.8 Complete Agreement....................................................................41
12.9 Counterparts..........................................................................41
12.10 Governing Law.........................................................................42
12.11 Remedies Cumulative...................................................................42
12.12 Use of the Wamberg Name...............................................................42
</TABLE>
iii
<PAGE> 5
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit A -- Form of Escrow Agreement
Exhibit B -- Allocation of Purchase Price
Exhibit C -- Officer's Certificate of Seller
Exhibit D -- Officer's Certificate of Purchaser
</TABLE>
iv
<PAGE> 6
DISCLOSURE SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 1.1(a) -- Required Cash Amount Schedule
Schedule 1.1(b) -- Accounts Receivable Schedule
Schedule 1.1(e) -- Wamberg Real Estate Schedule
Schedule 1.1(f) -- Tangible Property Schedule
Schedule 1.1(g) -- Assumed Insurance Schedule
Schedule 1.1(i) -- Intellectual Property Schedule
Schedule 1.1(m) -- Customer List Schedule
Schedule 1.2 -- Excluded Asset Schedule
Schedule 1.3(a) -- Excluded Contracts Schedule
Schedule 3.1 -- Qualifications Schedule
Schedule 3.7 -- Developments Schedule
Schedule 3.8(b) -- Leases Schedule
Schedule 3.9 -- Tax Matters Schedule
Schedule 3.10(a) -- Contracts Schedule
Schedule 3.10(d) -- Customer Contracts Schedule
Schedule 3.11 -- Proprietary Rights Schedule
Schedule 3.12 -- Litigation Schedule
Schedule 3.14 -- Consents Schedule
Schedule 3.16 -- Employee Benefits Schedule
Schedule 3.17 -- Insurance Schedule
Schedule 3.18 -- Affiliated Transactions Schedule
Schedule 3.19(a) -- Compliance Schedule
Schedule 3.19(b) -- Permits Schedule
Schedule 3.21 -- Claims Schedule
Schedule 4.1 -- Organization Schedule
Schedule 4.2 -- Capitalization Schedule
Schedule 4.3 -- WFC Consents Schedule
Schedule 4.4 -- WFC Assets Schedule
Schedule 4.5 -- WFC Compliance with Laws Schedule
Schedule 4.6 -- WFC Tax Matters Schedule
Schedule 4.7 -- WFC Permitted Encumbrances Schedule
Schedule 4.9 -- WFC Insurance Schedule
Schedule 4.10 -- WFC Liabilities Schedule
Schedule 4.11 -- WFC Government Authorization Schedule
</TABLE>
v
<PAGE> 7
ASSET AND STOCK PURCHASE AGREEMENT
THIS ASSET AND STOCK PURCHASE AGREEMENT is entered into as of September
1, 1999 (this "Agreement") by and among CLARK/BARDES, INC., a Delaware
corporation ("Purchaser"), THE WAMBERG ORGANIZATION, INC., an Illinois
corporation ("Seller"), and W.T. WAMBERG (the "Shareholder").
W I T N E S S E T H
WHEREAS, Seller is engaged in the business of marketing life insurance
policies, and related compensation, salary and benefit plans to large
corporations and financial institutions (the "Business");
WHEREAS, Wamberg Financial Corporation, Inc. ("WFC") owns an airplane
which is used in the Business;
WHEREAS, on the terms and subject to the conditions of this Agreement,
Purchaser desires to acquire from Seller and Seller desires to sell to
Purchaser, substantially all of the assets, properties and Business of the
Seller as a going concern; and
WHEREAS, on the terms and subject to the conditions of this Agreement,
Purchaser desires to acquire from the Shareholder and Shareholder desires to
sell to Purchaser all of the outstanding shares of WFC (the "Shares").
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS AND STOCK
1.1 Purchased Assets. On the terms and subject to the conditions of
this Agreement, on the Closing Date (as defined in Section 8.1), Purchaser shall
purchase from Seller, and Seller shall sell, convey, assign, transfer and
deliver to Purchaser all properties, assets, rights and interests of every kind
and nature, whether real or personal, tangible or intangible, and wherever
located and by whomever possessed, of Seller as of the Closing Date related to
or used in, or otherwise associated with, the Business, including, without
limitation, all of the following assets (but excluding all Excluded Assets as
defined in Section 1.2 hereof):
(a) cash, cash equivalents and marketable securities having the
aggregate value equal to the amounts provided for on Schedule 1.1(a) (the
"Required Cash Amount");
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<PAGE> 8
(b) all accounts and notes receivable (whether current or
noncurrent), a list, description and aging of which as of the date hereof are
set forth on Schedule 1.1(b) which are due and payable on or prior to December
31, 2018;
(c) all prepayments, prepaid expenses (including, without
limitation, prepaid insurance premiums except for professional liability,
fiduciary, fidelity crime and errors and omissions coverage policies to be
retained by Seller), deferred charges, advance payments and security deposits as
of the Closing Date;
(d) all inventories and related supplies located at facilities, in
transit to or from Seller's facilities or which otherwise relate to the Business
(the "Inventory");
(e) all interests in real estate (including, without limitation,
land, buildings and improvements pursuant to that certain Lease Agreement dated
as of December 30, 1993 between Sunningdale Partners, Inc. and Seller (as
amended, the "Lease Agreement")), whether owned in fee, leased or otherwise,
including but not limited to, the interests listed on Schedule 1.1(e)
(collectively, the "Wamberg Real Estate") and all licenses, permits, approvals
and qualifications relating to the Wamberg Real Estate;
(f) all interests in machinery and equipment, fittings, furniture,
tools, fixtures, spare parts and supplies and other tangible personal property,
whether owned, leased or otherwise (including, without limitation, items which
have been fully depreciated or expensed), including, without limitation, such
items as set forth on Schedule 1.1(f);
(g) all insurance, insurance reserves and deposits, including,
without limitation, such items as set forth on Schedule 1.1(g) (except as
provided for in Section 1.1(c));
(h) all office furnishings and related assets;
(i) all intangible assets and intellectual property (including,
without limitation, registered and unregistered trademarks, service marks and
trade names, trade dress and other names, marks and slogans, including the right
to use the name "The Wamberg Organization, Inc." and all variations and
permutations thereof; provided, however, Purchaser shall have no right to, and
shall not use, the "Wamberg" name except in connection with the insurance and
financial service related businesses and W. Thomas Wamberg shall be free to use
the "Wamberg" name in any business pursuits (subject to the terms of the
Non-Compete Agreement (as hereinafter defined))), all publishing and
distribution rights, and all associated goodwill; all statutory, common law and
registered copyrights; all patents, inventions, shop rights, know-how and trade
secrets; all registration applications for any of the foregoing; and all
interests in and to telephone numbers and all listings pertaining to Seller in
all telephone books and other directories; together with all rights to use all
of the foregoing forever and all other rights in, to, and under the foregoing in
all countries, including, without limitation, such items as set forth on
Schedule 1.1(i);
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<PAGE> 9
(j) all discoveries, improvements, processes, data, confidential
information, specifications and ideas, whether patentable or not, all licenses
and other similar agreements, and all drawings, records, books or other indicia,
however evidenced, of the foregoing, and all rights in and to any products or
other intellectual property rights under research or development prior to or on
the Closing Date related to the Business; (1)
(k) all rights existing under sales contracts which accrue to the
parties thereto prior to December 31, 2018, leases, licenses, permits, supply
and distribution arrangements, sales and purchase agreements and orders,
employee benefit plans, trusts and other arrangements, employment and consulting
agreements, consignment arrangements, warranties, consents, orders,
registrations, privileges, franchises, memberships, certificates, approvals or
other similar rights and all other agreements, arrangements and understandings,
including, without limitation, all rights existing under the contracts listed on
the Contracts Schedule and Customer Contracts Schedule (as defined in Section
3.10 hereto);
(l) the right to receive all mail and other communications
addressed to The Wamberg Organization, Inc. (including, without limitation, mail
and communications from customers, suppliers, distributors, agents and others
and accounts receivable payments), provided that Purchaser agrees to forward any
such mail and communications and accounts receivable payments that are not
related to the Business or are related to the Excluded Assets or are of a
personal nature to any officer or employee of Seller to which such item pertains
promptly after receipt;
(m) all lists, records and files pertaining to present customers
referenced in Schedule 1.1(m) and all past customers;
(n) all lists, records, books, ledgers, files, documents,
correspondence, business analyses, illustrations, proposals and records of every
kind and nature pertaining to suppliers, distributors, personnel, customers and
agents related to the Business;
(o) all business and marketing plans and proposals and pricing and
cost information;
(p) all computer software and systems, including licenses related
thereto, proprietary or otherwise, including related source codes, data and
documentation;
(q) all creative materials (including, without limitation,
photographs, films, art work, color separations and the like), advertising and
promotional materials and all other printed or written materials;
(r) all goodwill associated with The Wamberg Organization, Inc.
name and all other intangible property except such goodwill or other intangible
property as described on Schedule 1.2 hereto; and
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<PAGE> 10
(s) all other property not referred to above which is either
represented on Seller's balance sheet dated December 31, 1998 or acquired by
Seller thereafter (except for Excluded Assets or such property which has been
sold or otherwise disposed of in the ordinary course of business) related to the
Business.
For purposes of this Agreement, the term "Purchased Assets" means all
properties, assets and rights which Seller shall convey to Purchaser or shall be
obligated to convey to Purchaser under this Agreement.
1.2 Excluded Assets. Notwithstanding the foregoing, the following
assets (the "Excluded Assets") are expressly excluded from the purchase and sale
contemplated hereby and, as such, are not included in the Purchased Assets:
(a) cash and marketable securities other than the Required Cash
Amount;
(b) income tax credits and refunds;
(c) those certain assets listed on Schedule 1.2 hereto;
(d) all tax returns and related workpapers and correspondence;
(e) the Benefit Plans (as hereinafter defined);
(f) all financial and accounting records and related workpapers and
correspondence; and
(g) the minute books, capital stock records, articles of
incorporation, by-laws and corporate seal of Seller, together with annual and
other corporate reports filed with the State of Illinois and other states in
which the Seller is qualified to do business, and other documents and
correspondence that relate to Seller's corporate organization and maintenance
thereof.
1.3 Assumption of Liabilities. Subject to the conditions specified in
this Agreement, on the Closing Date, Purchaser shall assume and agree to pay,
defend, discharge and perform as and when due only the following liabilities and
obligations of Seller (the "Assumed Liabilities"):
(a) Seller's obligations and liabilities under the contracts listed
on the Contracts Schedule (Schedule 3.10(a)), except for those contracts listed
on Schedule 1.3(a), and on the Customer Contracts Schedule (Schedule 3.10(d))
for any activity following the Closing Date;
(b) obligations of continued performance under executory vendor
purchase orders for the purchase of supplies, equipment or services entered into
in the ordinary course of business and under which the supplies, equipment or
services subject thereto have not been received by the Seller prior to the
Closing Date (the "Vendor Orders"); and
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<PAGE> 11
(c) accrued payroll vacation and other benefits of employees of the
Seller generated in the ordinary course of business to the extent reflected on
the Required Cash Amount Schedule (Schedule 1.1(a)).
1.4 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement, Purchaser shall not assume or be liable for any
liabilities or obligations of Seller other than the Assumed Liabilities and all
such other liabilities or obligations shall be the responsibility of the Seller
(the "Excluded Liabilities").
1.5 Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement and in consideration of the obligations of Purchaser herein
provided, the Shareholder hereby agrees to sell, convey, transfer, assign and
deliver to Purchaser, and the Purchaser hereby agrees to purchase from the
Shareholder, at the closing provided for herein (the "Closing"), all of the
Shares in accordance with the terms and conditions of this Agreement, free and
clear of any and all liens, security interests, mortgages, charges,
restrictions, adverse claims, encumbrances and rights of other persons of every
nature and description whatsoever, except as provided for in Section 4.7(b)
hereof.
1.6 Purchase of Stock of Clark/Bardes, Inc. The Shareholder hereby
agrees to refrain from purchasing any shares of Clark/Bardes Holdings, Inc.
("Holdings"), directly or indirectly, for a period of thirty (30) days from the
Closing Date. In addition, the Shareholder hereby agrees to cause any "Related
Person" to refrain from purchasing any shares of Holdings for a period of thirty
(30) days from the Closing Date. For purposes hereof, Related Person shall have
the meaning as provided in Section 197(f)(9)(C) of the Code.
ARTICLE 2
CONSIDERATION FOR THE PURCHASED ASSETS AND STOCK
2.1 Purchase Price. Subject to the terms and conditions of this
Agreement, in reliance on the representations and warranties of the Seller and
the Shareholder, and in consideration of the obligations of Seller and the
Shareholder herein the aggregate purchase price for the Purchased Assets and the
Shares shall be an amount equal to Twenty-Five Million Nine Hundred Thousand and
no/100 Dollars ($25,900,000) (the "Purchase Price") a portion of which shall be
payable to Seller or its designees and the Shareholder on the Closing Date,
subject to terms hereof, as follows:
(a) payable by Purchaser to Seller in consideration for the
Purchased Assets, by wire transfer of immediately available funds to such
account or accounts as shall have been designated in writing by Seller not less
than three (3) days prior to the Closing Date, an amount equal to Thirteen
Million Five Hundred Ninety Thousand and no/100 Dollars ($13,590,000) as
adjusted pursuant to Section 2.2 hereof;
(b) by wire transfer of immediately available funds to that certain
Escrow Account to be established pursuant to that certain Escrow Agreement in
form of Exhibit A hereto,
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<PAGE> 12
with such changes therein as the Escrow Agent thereunder designated as Purchaser
may request (the "Escrow Agreement") in an amount equal to Three Hundred Sixty
Thousand Dollars ($360,000);
(c) payable by Purchaser to Seller in consideration for the
Purchased Assets, an amount equal to Eleven Million Nine Hundred Thousand and
no/100 Dollars ($11,900,000) (the "Contingent Consideration"), which amount is
contingent in accordance with Section 2.5 hereof; and
(d) payable by Purchaser to Shareholder in consideration for the
Shares, by wire transfer of immediately available funds to such account or
accounts as shall have been designated in writing by Shareholder not less than
three (3) days prior to the Closing Date, an amount equal to Fifty Thousand and
no/100 Dollars ($50,000).
The Purchase Price shall be allocated among the Purchased Assets and
the Shares as set forth in Exhibit B attached hereto. If, subsequent to the
Closing, revisions of such allocations become necessary in order to conform with
the rules and regulations of the Internal Revenue Code of 1986, as amended (the
"Code"), such revisions shall be made in a manner reasonable to Purchaser and
Shareholder consistent with the rules and regulations of the Code. The parties
agree that such allocation shall be used by them and respected for all purposes,
including income tax purposes, and that the parties shall follow such allocation
for all reporting purposes, including, without limitation, Internal Revenue
Service ("IRS") Form 8594 so long as such allocation is in conformance with the
rules and regulations of the Code.
2.2 Required Cash Amount Adjustment. Within three (3) days prior to the
Closing, Seller shall notify Purchaser in writing of its good faith estimate of
the Required Cash Amount (as defined in Section 2.4 herein) as of the Closing
Date based on a schedule prepared by Seller as of the Closing Date (the
"Estimated Required Cash Amount"). Within three (3) business days after the
final determination of the Required Cash Amount pursuant to Section 2.3 below,
Seller shall pay Purchaser an amount equal to the excess of the Required Cash
Amount over the Estimated Required Cash Amount by wire transfer of immediately
available funds.
2.3 Procedures for Final Determination of Required Cash Amount. Within
thirty (30) days after the Closing Date, Purchaser shall prepare and deliver to
Seller at Purchaser's expense a statement setting forth Purchaser's
determination of the Required Cash Amount. Within thirty (30) days after receipt
thereof, Seller shall deliver to Purchaser a detailed written statement
describing its objections, if any, to such balance sheet and determination of
the Required Cash Amount. If Seller does not raise any objections within the
thirty (30) day period, Purchaser's determination of the Required Cash Amount
shall become final and binding upon all parties. Upon request by Seller at any
time after receipt of the aforementioned statement, Purchaser shall make
available to Seller and its accountants and other representatives the work
papers used in determining Purchaser's calculation of the Required Cash Amount
and such other documents as Seller may reasonably request in connection with its
review of the Required Cash Amount. If Seller does raise any objections,
Purchaser and Seller shall use reasonable efforts to resolve any such disputes.
If a final resolution is not obtained within thirty (30) days after Seller shall
have submitted its objections to Purchaser, any remaining disputes shall be
resolved by an accounting firm mutually agreeable to
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<PAGE> 13
Purchaser and Seller. If Purchaser and Seller are unable to mutually agree on
such an accounting firm within five (5) days after the expiration of said thirty
(30) day period, a "big-five" accounting firm shall be selected by lot after
elimination of one firm designated as objectionable by each of Purchaser and
Seller. The determination of the accounting firm so selected shall be set forth
in writing and shall be conclusive and binding upon the parties, and the fees
and expenses of such accounting firm shall be paid one-half by Purchaser and
one-half by Seller.
2.4 Required Cash Amount Definition. For purposes hereof, "Required
Cash Amount" shall be determined as of the opening of business on the Closing
Date and shall be cash in an amount equal to the Seller's accrued liabilities,
including, but not limited to, accrued payroll, accrued vacation, other benefits
of employees and other accrued expenses, as detailed on Schedule 1.1(a), at such
time in excess of the sum of the accounts receivable and other tangible assets
included in the Purchased Assets, excluding any equipment or other furniture and
fixtures, as detailed on Schedule 1.1(a).
2.5 Earn-Out Payment. (a) Receipt of payment of the Contingent
Consideration is contingent on Seller, or a division of Purchaser which includes
the business of the Seller (the "Division"), achieving certain financial
objectives (the "Financial Objectives") set forth in Section 2.5(b) hereof in
respect of Division Gross Margin (as hereinafter defined) for each year from
1999 through 2002 (the "Earn-Out Years"). Payment of the Contingent
Consideration is not contingent upon the Shareholder remaining as an employee of
Purchaser. Gross Revenue shall be deemed earned for purposes of meeting the
Financial Objectives when any fee is generated by the Division and is received
by Purchaser or when funds are wired to an insurance company by a customer for
the purchase of a life insurance contract.
For purposes of this Section 2.5(a), "Gross Revenue" means all and
every kind of revenue generated by the Division following the Closing Date,
including but not limited to, (i) all revenue from first year commissions earned
from the sale of life insurance by the Division or the Division's
representatives following the Closing Date and where the cash proceeds of such
sale is received by the Purchaser following the Closing Date, (ii) all revenue
transferred to Purchaser by Seller pursuant to that certain Commission Transfer
Agreement dated July 31, 1998 between Purchaser and the Company, effective
January 1, 1999, (iii) all revenues in the nature of renewals or service fees
related to life insurance sold by the Division, and (iv) all production bonuses
related to Business generated by the Division. "Division Gross Margin" means
Gross Revenue less Expenses (as hereinafter defined) for any Earn-Out Year.
"Expenses" means (i) expenses of the Division and of a nature historically
recognized as an expense by the Seller in the conduct of its business operations
(excluding (y) expenses of those employees of Seller who will become employees
of the Purchaser, but who will not dedicate a substantial portion of their time
to the Division and (z) expenses related to office space not used by the
Division), and (ii) commissions or fees paid to sales agents or producers of the
Division.
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<PAGE> 14
(b) The Financial Objectives for each Earn-Out Year are as follows:
<TABLE>
<CAPTION>
Period Financial Objectives
------ --------------------
<S> <C>
Closing date thru December 31, 1999 $3,600,000
January 1, 2000 thru December 31, 2000 $8,000,000
January 1, 2001 thru December 31, 2001 $8,000,000
January 1, 2002 thru December 31, 2002 $8,000,000
</TABLE>
(c) In the event that the Financial Objective is met for the
Earn-Out Year ending December 31, 1999, the Seller shall receive $1,475,000
within seventy-five (75) days of the end of 1999. In the event that the
Financial Objective is met for each or any of the Earn-Out Years ending December
31, 2000, December 31, 2001 or December 31, 2002, the Seller will receive
$3,475,000 for each such year within seventy-five (75) days following the end of
such year. If during a particular Earn-Out Year, the Division Gross Margin for
the Division for such year is greater than the Financial Objective for such year
(whether due to the Division Gross Margin for that year or due to the carry-over
of the Division Gross Margin from a prior year), the excess Division Gross
Margin shall be credited to the following year's Division Gross Margin for
purposes of the calculation of the Financial Objective.
(d) If any portion of the Contingent Consideration is not earned in
any Earn-Out Year, the aggregate unearned Contingent Consideration will be paid
in full within seventy-five (75) days following the year ended December 31, 2002
if the aggregate Division Gross Margin for the four years equals or exceeds
Twenty-Seven Million Six Hundred Thousand Dollars ($27,600,000). In the event
that the Division Gross Margin is less than the Financial Objective for any
given year, the Seller shall be eligible to receive a percentage of the
Contingent Consideration in accordance with the following schedule:
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<PAGE> 15
<TABLE>
<CAPTION>
Division Gross Margin
Total for Period from Earned Percentage of the
Closing Date thru December 31, 1999 Contingent Consideration
(000,000 deleted) -------------------------
-----------------------------------
<S> <C>
Less than $1.8 0%
Equal to or greater than $1.8 but less than $2.0 10%
Equal to or greater than $2.0 but less than $2.2 20%
Equal to or greater than $2.2 but less than $2.4 30%
Equal to or greater than $2.4 but less than $2.6 40%
Equal to or greater than $2.6 but less than $2.8 50%
Equal to or greater than $2.8 but less than $3.0 60%
Equal to or greater than $3.0 but less than $3.2 70%
Equal to or greater than $3.2 but less than $3.4 80%
Equal to or greater than $3.4 but less than $3.6 90%
Equal to or greater than $3.6 100%
</TABLE>
<TABLE>
<CAPTION>
Division Gross Margin
Total for Years ending Earned Percentage of the
December 31, 2000, 2001 and 2002 Contingent Consideration
(000,000 deleted) ------------------------
--------------------------------
<S> <C>
Less than $5.75 0%
Equal to or greater than $5.75 but less than $6.0 10%
Equal to or greater than $6.0 but less than $6.25 20%
Equal to or greater than $6.25 but less than $6.5 30%
Equal to or greater than $6.5 but less than $6.75 40%
Equal to or greater than $6.75 but less than $7.0 50%
Equal to or greater than $7.0 but less than $7.25 60%
Equal to or greater than $7.25 but less than $7.5 70%
Equal to or greater than $7.5 but less than $7.75 80%
Equal to or greater than $7.75 but less than $8.0 90%
Equal to or greater than $8.0 100%
</TABLE>
(e) (i) For each year, within 75 days of the end of such year,
Purchaser shall prepare at its own expense, and provide the Shareholder, a
calculation of the Division Gross Margin, together with a statement of Purchaser
that it was prepared in accordance with this Agreement (the "Annual
Determination").
(ii) If the Shareholder does not agree that any Annual
Determination correctly states the Division Gross Margin for the year under
examination, the Shareholder shall
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<PAGE> 16
promptly (but not later than 30 days after the delivery of such Annual
Determination) give written notice to Purchaser of any exceptions thereto (in
reasonable detail describing the nature of the disagreement asserted). If the
Shareholder and Purchaser reconcile their differences, the Annual Determination
shall be adjusted accordingly and shall thereupon become final and conclusive
upon all of the parties hereto. If the Shareholder and Purchaser are unable to
reconcile their differences in writing within 20 days after written notice of
exceptions is delivered by the Shareholder, the items in dispute shall be
submitted to the Chicago office of a mutually acceptable accounting firm
selected from among the five largest accounting firms in the United States in
terms of gross revenues for final determination (the "Independent Auditors"). If
the Shareholder and Purchaser are unable to mutually agree on such accounting
firm within 5 days after expiration of the 20-day period, the Chicago office of
a "big-five" accounting firm, which accounting firm has not within the previous
two years performed services for Purchaser or the Shareholder or any affiliate,
shall be selected by lot after elimination of one firm by the Shareholder and
one firm by Purchaser. The determination of the accounting firm so selected
shall be set forth in writing and shall be conclusive and binding upon the
parties. The Annual Determination shall be deemed adjusted in accordance with
the determination of the Independent Auditors and shall become binding, final
and conclusive upon all of the parties hereto. The Independent Auditors shall
consider only the items in dispute and shall be instructed to act within 30 days
(or such longer period as the Shareholder does and Purchaser may agree) to
resolve all items in dispute. If the Shareholder does not give notice of any
exception within 30 days after the delivery of an Annual Determination or if the
Shareholder in his discretion gives written notification of his acceptance of an
Annual Determination prior to the end of such 30 day period, such Annual
Determination shall thereupon become binding, final and conclusive upon all the
parties hereto.
(iii) The Independent Auditors shall determine the party (i.e.,
Purchaser or the Shareholder, as the case may be) whose asserted position as to
the amount of Division Gross Margin for the calendar year under examination
before the Independent Auditors is furthest from the determination of Division
Gross Margin by the Independent Auditors, and the non-prevailing party shall pay
the fees and expenses of the Independent Auditors.
(f) The following shall apply exclusively for the purposes of
calculating and paying the Contingent Consideration described in this Section
2.5 and shall in no way limit the Purchaser's ability to manage the Division or
to take specific actions with respect to the Division:
(i) The Division shall be accounted for as a separate business
unit from the other operations of Purchaser. Purchaser shall not
require the Division to operate any other business or acquire any other
assets except as consented to in writing by the Shareholder. The
Division shall be under no obligation to use, or otherwise purchase,
the goods or services of any other division or department owned by or
affiliated with the Purchaser. Purchaser shall keep separate books and
records with respect to the Division, which records shall clearly and
reasonably set forth the Division Gross Margin attributable to the
Division for the relevant periods.
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<PAGE> 17
(ii) For tax and financial accounting purposes, payments under
the Contingent Consideration shall be accounted for as additional
purchase price allocated to assets and not as compensation.
(g) Upon the death of Shareholder on or prior to December 31, 2002,
any portion of the Contingent Consideration not already paid to Seller shall be
paid in full within ninety (90) days of Shareholder's death.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND
SHAREHOLDER REGARDING SELLER AND PURCHASED ASSETS
As an inducement to Purchaser to enter into this Agreement, Seller and
Shareholder hereby, jointly and severally, represent and warrant to Purchaser as
of the Closing Date that:
3.1 Organization and Power. Seller is a corporation duly organized,
validly existing and in good standing under the laws of Illinois. Seller is
qualified to do business as a foreign corporation and is in good standing in the
jurisdictions specified on the "Qualifications Schedule" attached hereto as
Schedule 3.1, which are all jurisdictions in which ownership of its properties
or the conduct of its business requires it to be so qualified, except where the
failure to do so would not have a Material Adverse Effect. For purposes of this
Agreement, "Material Adverse Effect", as it relates to Seller, means any
material adverse effect on (a) the financial condition, credit, business,
prospects, properties or operations of the Seller, or (b) the ability of the
Seller to perform its obligations under this Agreement. Seller has all requisite
power and authority and all material licenses, permits and other authorizations
necessary to own and operate its properties and to carry on its business as now
conducted as they relate to the Business. The copies of the certificate of
incorporation and by-laws of Seller which have been previously furnished to
Purchaser reflect all amendments made thereto at any time prior to the date of
this Agreement and are correct and complete in all material respects.
3.2 Subsidiaries. Seller owns no stock, partnership interest, joint
venture interest or other security or interest in any other corporation,
organization or entity related to the Business which is not listed as an
Excluded Asset.
3.3 Authorization; No Breach. The execution, delivery and performance
of this Agreement and the other agreements contemplated hereby and the
transactions contemplated hereby and thereby have been duly and validly
authorized by Seller. No other corporate act or proceeding on the part of
Seller, its Board of Directors or its Shareholder is necessary to authorize the
execution, delivery or performance of this Agreement or any other agreement
contemplated hereby or the consummation of the transactions contemplated hereby
or thereby. This Agreement has been duly executed and delivered by Seller and
Shareholder, and this Agreement constitutes, and the other agreements
contemplated hereby upon execution and delivery by Seller and Shareholder shall
each constitute, a valid and binding obligation of Seller and Shareholder,
enforceable in accordance with
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<PAGE> 18
their terms. The execution, delivery and performance of this Agreement and the
other agreements contemplated hereby by Seller and Shareholder and the
consummation of the transactions contemplated hereby and thereby do not and
shall not (a) conflict with or result in any breach of any of the provisions of,
(b) constitute a default under, result in a violation of, or cause the
acceleration of any obligation under, (c) result in the creation of any lien,
security interest, charge or encumbrance upon any of the Purchased Assets under,
or (d) require any authorization, consent, approval, exemption or other action
by or notice to any court or other governmental body under the provisions of
Seller's articles of incorporation, by-laws, any indenture, mortgage, lease,
loan agreement or other agreement or instrument by which Seller or Shareholder
is bound or affected.
3.4 Financial Statements. Seller has furnished Purchaser with copies
of its (a) audited balance sheet as of December 31, 1998 (the "Latest Balance
Sheet") and as of December 31, 1997 and the related audited financial statements
for such twelve-month period then ended, (b) unaudited balance sheets as of
December 31, 1996 and December 31, 1995 and the related audited financial
statements for the fiscal years then ended, and (c) unaudited financial
statements as at and for the seven-month period ended July 31, 1999. Each of the
foregoing financial statements has been based upon the information contained in
Seller's books and records (which are accurate and complete in all material
respects) and fairly presents the financial condition and results of operations
of Seller as of the times and for the periods referred to therein, and such
financial statements contain proper accruals and adequate reserves and have been
prepared in accordance with the income tax method of accounting, consistently
applied throughout the periods indicated, except as otherwise noted therein.
3.5 Absence of Undisclosed Liabilities. As of the Closing, Seller
shall have no liabilities or obligations, whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due, arising out of or
related to transactions entered into at or prior to the Closing, or out of any
action or inaction by Seller or any employee, or, to Seller's knowledge, agent,
licensee or contractor of any of them at or prior to the Closing, or out of any
state of facts existing at or prior to the Closing, regardless of when any such
liability or obligation is asserted, including, without limitation, taxes with
respect to or based upon transactions or events occurring on or before the
Closing, except (a) liabilities and obligations under agreements, contracts,
leases or commitments described on the Leases Schedule (as defined in Section
3.8(b) hereof) and the Contracts Schedule and the Customer Contracts Schedule
(as such terms are defined in Section 3.10 hereof) or under agreements, leases,
contracts and commitments which are not required pursuant to this Agreement to
be disclosed thereon (but not liabilities for breaches thereof), (b) liabilities
and obligations reflected on Schedule 1.1(a), and (c) liabilities and
obligations which have arisen after the Closing Date in the ordinary course of
business (none of which is a liability for breach of contract, breach of
warranty, tort, infringement, claim or lawsuit). For purposes of this Agreement,
"to Seller's knowledge" shall mean the knowledge of the Shareholder, Carol B.
Marsh, Alison A. Hoffman and Virginia Garrison.
3.6 No Material Adverse Changes. Since the date of the Latest Balance
Sheet, there has been no material adverse change in the financial condition,
operating results, assets, operations, employee relations or customer relations
of Seller.
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3.7 Absence of Certain Developments. Except as set forth in the
"Developments Schedule" attached hereto as Schedule 3.7 or as otherwise
contemplated hereby, since the date of the Latest Balance Sheet, Seller has not:
(a) borrowed or agreed to borrow any amount or incurred or become
subject to any material liabilities, except current liabilities incurred in the
ordinary course of business and liabilities under contracts entered into in the
ordinary course of business;
(b) discharged or satisfied, or agreed to discharge or satisfy,
any material lien or encumbrance or paid any material liability, other than
current liabilities paid in the ordinary course of business;
(c) mortgaged, pledged or subjected to any lien, charge or any
other encumbrance, any portion of the Purchased Assets, except liens for current
property taxes not yet due and payable;
(d) sold, assigned or transferred, or agreed to do so, any of the
Purchased Assets, except in the ordinary course of business, or canceled without
fair consideration any material debts or claims owing to or held by it;
(e) sold, assigned, transferred, abandoned or permitted to lapse
any patents, trademarks, trade names, copyrights, trade secrets or other
intangible assets, or disclosed any material proprietary confidential
information to any person;
(f) made or granted, or agreed to make or grant, any bonus or any
wage or salary increase to any employee or group of employees or made or granted
any increase in any employee benefit plan or arrangement (except, in each case,
in accordance with past custom and practice), or amended or terminated, or
agreed to amend or terminate, any existing employee benefit plan or arrangement
or adopted any new employee benefit plan or arrangement;
(g) made, or agreed to make, any capital expenditures or
commitments therefor that aggregate in excess of $10,000;
(h) made, or agreed to make, any loans or advances to, or
guaranties for the benefit of, any persons;
(i) suffered any extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of business or consistent
with past practice;
(j) entered into, or agreed to enter into, any other material
transaction other than in the ordinary course of business;
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(k) made, or agreed to make, any charitable contributions or
pledges in excess of $1,000;
(l) made any purchase commitment in excess of the normal,
ordinary and usual requirements of its business or at any price in excess of the
then current market price or upon terms and conditions more onerous than those
usual and customary in the industry, or made any change in its selling, pricing,
advertising or personnel practices inconsistent with its prior practices and
prudent business practices prevailing in the industry; or
(m) suffered any material damage, destruction or casualty loss to
the Purchased Assets, whether or not covered by insurance.
3.8 Title and Condition of Properties.
(a) The Seller owns no real estate.
(b) The leases described on the "Leases Schedule" attached hereto
as Schedule 3.8(b) (the "Lease Agreement") is in full force and effect, and
Seller (as indicated on such schedule) holds a valid and existing leasehold
interest under such Lease Agreement for the term set forth on the Leases
Schedule. The Lease Agreement described on the Leases Schedule constitutes the
only lease under which Seller holds a leasehold interest in real estate. Seller
has delivered to Purchaser complete and accurate copies of the Lease Agreement
described on the Leases Schedule, and such Lease Agreement has not been modified
in any respect, except to the extent that such modifications are disclosed by
the copies delivered to Purchaser. Seller is not in default under such Lease
Agreement, and no other party to such Lease Agreement has the right to
terminate, accelerate performance under or otherwise modify such Lease
Agreement, including upon the giving of notice or the passage of time. To the
best of Seller's knowledge, no third party to such Lease Agreement is in default
under such Lease Agreement.
(c) The real estate demised by the Lease Agreement described on
the Leases Schedule constitutes all of the real estate presently owned, used or
occupied by Seller in the conduct of the Business.
(d) Seller owns good and marketable title, free and clear of all
liens, charges, security interests, encumbrances, encroachments and claims of
others, to all of the Purchased Assets, except for leased equipment, for liens
of current taxes not yet due and payable (which shall be pro-rated) and liens
disclosed on the Latest Balance Sheet ("Permitted Encumbrances"), and all of
such personal property is necessary or useful in the conduct of the Business as
presently conducted by Seller. At the Closing, Seller shall sell, assign,
transfer and convey to Purchaser by customary Bill of Sale good and marketable
title to all of the personal property included within the Purchased Assets, free
and clear of all liens, security interests, charges, encumbrances and claims of
others, other than Permitted Encumbrances.
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(e) Seller's buildings, machinery, equipment and other tangible
assets are in good condition and repair in all material respects (other than
normal wear and tear), have been maintained in accordance with normal industry
standards and are usable in the ordinary course of business. Seller owns or
leases under valid leases all buildings, machinery, equipment and other tangible
assets necessary for the conduct of the Business as presently conducted.
(f) Since the commencement of Seller's tenancy under the Lease
Agreement, Seller has received no notice of any violation of any applicable
zoning, building, fire or other ordinance or other law, regulation or
requirement relating to the operation of the leased real property that is the
subject of the Lease Agreement and Seller has not within three years prior to
the date of this Agreement received any such notice with respect to owned or
leased personal property included in the Purchased Assets, including, without
limitation, applicable environmental protection and occupational health and
safety laws and regulations or any condemnation proceeding with respect to any
properties owned, used or leased by Seller.
(g) The Purchased Assets and the Excluded Assets, together with
the services and arrangements described on the Contracts Schedule, comprise all
assets and services required for the continued conduct of the Business by the
Purchaser as now being conducted. The Purchased Assets and the Excluded Assets,
taken as a whole, constitute all the properties and assets relating to or used
or held for use in connection with the Business during the past twelve months
(except supplies utilized, cash disposed of, accounts receivable collected,
prepaid expenses realized, contracts fully performed, properties or assets
replaced by equivalent or superior properties or assets, in each case in the
ordinary course of business). Except for the Excluded Assets, there are no
assets or properties used in the operation of the Business and owned by any
person other than the Seller that are not included in the Purchased Assets. The
Purchased Assets are in all material respects adequate for the purposes for
which such assets are currently used or are held for use, and are in reasonably
good repair and operating condition (subject to normal wear and tear).
3.9 Tax Matters.
(a) Seller has duly filed all federal, foreign, state and local
tax information and tax returns of any and every nature and description (the
"Returns") required to be filed by it (all such returns being accurate and
complete in all respects) and has duly paid or made provision for the payment of
all taxes and other governmental charges (including without limitation any
interest, penalty or additions to tax thereto) which have been incurred or are
shown to be due on said Returns or are claimed in writing to be due from Seller
or imposed on Seller or its properties, assets, income, franchises, leases,
licenses, sales or use, by any federal, state, local or foreign taxing
authorities (collectively, the "Taxes") on or prior to the date hereof, other
than Taxes which are being contested in good faith and by appropriate
proceedings and as to which Seller has set aside on its books adequate reserves
or which may be attributable to the transactions contemplated hereby. Except as
set forth on the Tax Matters Schedule attached hereto as Schedule 3.9, (i)
neither the IRS nor any foreign, state, local or other taxing authority is in
the process of examining any federal, foreign, state, local or other tax return
of Seller, (ii) there are no disputes pending, or claims asserted, for Taxes
upon Seller, (iii) Seller has not been required to give any currently effective
waivers extending the
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statutory period of limitation applicable to any foreign, federal, state or
local tax return or agreed to an extension of time with respect to a Tax
assessment or deficiency, (iv) Seller has in effect no power of attorney or
authorization of anyone to represent it with respect to any Taxes, and (v) no
claim has ever been made by an authority in a jurisdiction where the Seller does
not file Returns that Seller is or may be subject to taxation by that
jurisdiction. Seller has not filed any consolidated federal income tax return
with an "affiliated group" (within the meaning of Section 1504 of the Code),
where Seller was not the common parent of the group. Seller is not, nor has it
been, a party to any tax allocation agreement or arrangement pursuant to which
it has any contingent or outstanding liability to anyone. Seller has no
liability for Taxes as a transferee of, or successor to, any other person.
Seller has not filed a consent under Section 341(f) of the Code. Seller and the
Shareholder have provided to Purchaser or its representatives complete and
correct copies of their respective federal, state and local income tax returns
filed on or prior to the date hereof and all examination reports, if any,
relating to the audit of such returns by the IRS or other tax authority for each
taxable year beginning on or after January 1, 1992. Except as disclosed in
Schedule 3.9, there exists no proposed assessment against Seller or the
Shareholder or notice, whether formal or informal, of any deficiency or claim
for additional Tax (including, without limitation, interest, additions to tax or
penalties).
(b) All monies required to be withheld from employees, and to
Seller's knowledge, from independent contractors, shareholders, or creditors of
Seller for Taxes, including, but not limited to, income taxes, back-up
withholding taxes, social security and unemployment insurance taxes, or
collected from customers or others as Taxes, including, but not limited to,
sales, use or other taxes, have been withheld or collected and paid, when due,
to the appropriate governmental authority, or if such payment is not yet due, an
adequate reserve has been established for such Taxes.
(c) Seller does not have any arrangement of the type described in
Code Section 280G.
3.10 Contracts and Commitments.
(a) Except as set forth in Section 3.16 or in the "Contracts
Schedule" attached hereto as Schedule 3.10(a) or in the "Customer Contracts
Schedule" attached hereto as Schedule 3.10(d), (such contracts and agreements
listed on such schedules are referred to herein as the "Contracts"), Seller is
not a party to any:
(i) bonus, pension, profit sharing, retirement or deferred
compensation plan or stock purchase, stock option, hospitalization insurance or
similar plan or practice, whether formal or informal, or severance agreements or
arrangements;
(ii) contract with any labor union or contract for the
employment of any officer, individual employee or other person on a full-time,
part-time or consulting basis;
(iii) mortgage, pledge or other lien placed on any of the
Purchased Assets;
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(iv) guarantee of any obligation for borrowed money or
otherwise, other than endorsements made for collection in the ordinary course of
business;
(v) agreement or commitment with respect to the lending or
investing of funds to or in other persons or entities;
(vi) license or royalty agreement related to the Business;
(vii) lease or agreement related to the Business under which
it is lessee of or holds or operates any personal property owned by any other
party;
(viii) lease or agreement related to the Business under which
it is lessor of or permits any third party to hold or operate any property, real
or personal, owned or controlled by it;
(ix) contract or group of related contracts related to the
Business with the same party for the purchase or sale of products or services
other than the Customer Contracts (as defined in Section 3.10(d) hereof);
(x) other contract related to the Business with any party
continuing over a period of more than six months from the date or dates thereof,
not terminable by it on thirty (30) days' or less notice without penalties;
(xi) contract which prohibits it from freely engaging in
business anywhere in the world;
(xii) contract relating to the distribution of its products as
it relates to the Business; or
(xiii) other agreements related to the Business whether or not
entered into in the ordinary course of business.
(b) Except as specifically disclosed in the Contracts Schedule or
the Customer Contracts Schedule, (i) no contract or commitment related to the
Business has been breached in any material respect by Seller, and to Seller's
knowledge no contract or commitment related to the Business has been breached in
any material respect by the other party thereto or canceled by the other party,
(ii) since December 31, 1998, no supplier of the Business has notified Seller
that it shall stop or decrease in any material respect the rate of business done
with Seller, (iii) Seller has in all material respects performed all the
obligations required to be performed by it to the date of this Agreement and is
not in receipt of any claim of default under any material lease, contract,
commitment or other agreement related to the Business to which it is a party;
(iv) no event has occurred which with the passage of time or the giving of
notice or both would result in a breach or default under any lease, contract,
instrument or other agreement related to the Business to which
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Seller is a party, except for any such event that would not have a Material
Adverse Effect; and (v) Seller is not a party to any contract which is adverse
to the Business's operations, financial condition, operating results or business
prospects.
(c) Purchaser has been supplied with a true and correct copy of
all written contracts which are referred to on the Contract Schedule and
Customer Contracts Schedule, together with all amendments, waivers or other
changes thereto.
(d) Seller has no knowledge of any (i) pending or threatened
termination, cancellation, limitation, modification or change in any of Seller's
business relationship with any customer or group of customers related to the
Business or (ii) changes or pending changes in any business relationship or
other circumstance that could result in the loss of any customers related to the
Business after the date hereof. Each contract, agreement or lease with customers
of Seller relating to the Business ("Customer Contracts") are listed in the
"Customer Contracts Schedule" attached hereto as Schedule 3.10(d). Except as
indicated on the Customer Contracts Schedule, (A) each of the Customer Contracts
is valid, enforceable and in full force and effect in accordance with the terms
thereof, (B) there is no existing default or event or condition which, with
notice or lapse of time or both, would constitute an event of default under any
Customer Contract, (C) no Customer Contract has been amended, modified,
supplemented or otherwise altered orally, in writing or by course of conduct,
(D) no Customer Contract requires the consent of the customer or any other party
to effect a valid assignment thereof to Purchaser without causing a default or
giving rise to a right of termination thereunder and (E) to Seller's knowledge,
each Customer Contract complies with all applicable laws, rules and regulations.
3.11 Proprietary Rights. Set forth on the "Proprietary Rights Schedule"
attached hereto as Schedule 3.11 is a list and summary description of all
patents, patent applications, trademarks, service marks, trade names, corporate
names and copyrights owned by Seller which are related to the Business or used
by Seller in the conduct of the Business. Seller owns and possesses all right,
title and interest in and to the proprietary rights necessary to conduct the
Business as presently conducted by Seller. Seller has taken all necessary or
desirable action to protect the proprietary rights necessary or desirable to
conduct the Business as presently conducted by Seller. Seller has not received
any notices of infringement, misappropriation, invalidity or conflict from any
third party with respect to such proprietary rights. To Seller's knowledge,
Seller has not infringed, misappropriated or otherwise conflicted with any
proprietary rights of any third parties and, to the best of Seller's knowledge,
Seller's proprietary rights have not been infringed by any third parties.
3.12 Litigation; Proceedings. Except as disclosed on Schedule 3.12,
there are no actions, suits, proceedings, orders or investigations pending
against or affecting Seller or the Purchased Assets at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, and
Seller has no knowledge of any such threatened actions and there is no basis
known to Seller for any of the foregoing. No officer, director, employee or
agent of Seller has been or is authorized to make or receive, and Seller knows
of no such person making or receiving, any bribe, kickback or other illegal
payment at any time.
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3.13 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Seller.
3.14 Governmental Consent, etc.
(1) No material permit, consent, approval or authorization of, or
declaration to or filing with, any governmental or regulatory authority is
required in connection with the execution, delivery or performance of this
Agreement by Seller, or the consummation by Seller of any of the transactions
contemplated hereby, except as disclosed on the "Consents Schedule" attached
hereto as Schedule 3.14.
(2) The Consents Schedule attached hereto as Schedule 3.14 sets
forth all material governmental approvals or consents required for the conduct
of the Business as presently conducted. All such governmental approvals and
consents have been duly obtained and are in full force and effect, and Seller is
in compliance with each of such governmental approvals and consents held by it
with respect to the Purchased Assets and the Business.
3.15 Employees. To Seller's knowledge, no key employee, nor group of
Seller's employees related to the Business, has any plans to terminate
employment with Seller other than to become employed by Purchaser on the Closing
Date. Seller has complied in all material respects with all applicable laws
relating to the employment of labor and, to Seller's knowledge, the engagement
of independent contractors related to the Business, including provisions thereof
relating to wages, hours, equal opportunity, immigration, collective bargaining,
disabilities, family leave and the payment of social security and other taxes.
Seller has no existing relationships with any union or employee representative
or any labor relations problems, and to Seller's knowledge, there have been no
union organization efforts with respect to the Business within the last five
years. Except as to the services provided by Shareholder pursuant to that
certain Sales Office Agreement between Shareholder and Purchaser, no present
employee of Seller has advised the Seller or the Shareholder that he or she will
not be available for continued conduct of the Business after the Closing on
substantially the same terms as now conducted.
3.16 Employee Benefit Plans.
(a) The "Employee Benefits Schedule" attached hereto as Schedule
3.16 contains a list and a true and correct copy, including all amendments
thereto, of any employee benefit plan, within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which
Seller and/or any corporation, partnership or other trade or business which is
or would be a member of a controlled group of corporations, group of trades or
business under common control, or an affiliated service group including Seller,
under the provisions of Code Section 414(b), (c), (m) or (o) (each an "ERISA
Affiliate") maintains, to which Seller or any ERISA Affiliate contributes, or is
obligated to contribute, or under which any employee or former employee, officer
or former officer, director or former director, shareholder or former
shareholder of Seller or
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any ERISA Affiliate (collectively, "Participants"), or any beneficiary of any
Participant, is covered or has benefit rights and pursuant to which any
liability of Seller or any ERISA Affiliate exists or is reasonably likely to
occur, and each other arrangement, program or plan pursuant to which any benefit
is or shall be provided to any Participant or any Participant's beneficiary,
whether formal or informal, including, without limitation, those providing any
form of medical, health or dental insurance, life, disability and accidental
death and dismemberment insurance, severance pay or benefits continuation,
nonqualified deferred compensation, relocation assistance, vacation pay, tuition
aid, apprenticeship benefits or matching gifts for charitable contributions to
educational or cultural institutions (collectively, the "Benefit Plans"). Except
as set forth on the Employee Benefits Schedule, neither the Seller nor any ERISA
Affiliate maintains or has entered into any Benefit Plan or other document, plan
or agreement which contains any change in control provisions which would cause
an increase or acceleration of benefits or benefit entitlements to Participants
or their beneficiaries, or other provisions which would cause an increase in
liability of Seller or to Purchaser as a result of the transactions contemplated
by this Agreement or any related action thereafter. Each of such plans that is
an employee pension benefit plan within the meaning of Section 3(2) of ERISA
that is intended to be a qualified plan under Section 401(a) of the Code has
been amended to comply in all material respects with current law as required and
each such plan has obtained a favorable determination letter with respect to
such amendment. Neither Seller nor Shareholder is aware of any facts or
circumstances that might jeopardize the qualified status of any such Benefit
Plan.
(b) Except as set forth in the Employee Benefits Schedule, to
Seller's knowledge, all accrued contributions and other payments to be made by
Seller or any ERISA Affiliate to any Benefit Plan through the Closing Date have
been made or reserves adequate for such purposes have been set aside therefor as
of the Closing Date. To Seller's knowledge, neither Seller nor any ERISA
Affiliate is in default in performing any of its material contractual
obligations under any of the Benefit Plans or any related trust agreement or
insurance contract, and there are no outstanding liabilities of any Benefit Plan
other than liabilities for benefits to be paid to Participants and beneficiaries
in such Benefit Plan in the ordinary course of business.
(c) There is no pending litigation or, to the best knowledge of
Seller, overtly threatened litigation or pending claim (other than benefit
claims made in the ordinary course) by or on behalf of or against any of the
Benefit Plans (or with respect to the administration of any of the Benefit
Plans) now or heretofore maintained by Seller or any ERISA Affiliate which
allege violations of applicable state or federal law.
(d) Each Benefit Plan is and has been in compliance in all
material respects with, and each such Plan is and has been operated in
accordance in all material respects with, the applicable laws, rules and
regulations governing such Plan, including, without limitation, the rules and
regulations promulgated by the Department of Labor, the Pension Benefit Guaranty
Corporation ("PBGC") and the IRS under ERISA, the Code or any other applicable
law.
(e) None of the Benefit Plans is or ever has been subject to Title
IV of ERISA, and neither Seller nor any ERISA Affiliate is or has been required
to contribute to an employee
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benefit plan that is a "multiemployer plan" within the meaning of Section 3(37)
of ERISA nor has been so required during the five-year period ending on the
Closing Date.
(f) All reporting and disclosure requirements of ERISA and the
Code applicable to the Benefit Plans have been satisfied in all material
respects.
(g) Neither Seller nor any ERISA Affiliate has any liability on
account of any accumulated funding deficiency (as defined in Section 412 of the
Code) or on account of any failure to make contributions to or pay benefits
under any Benefit Plan, nor is Seller aware of any claim pending or threatened
to be brought by any party regarding such matters. No prohibited transaction has
occurred with respect to any Benefit Plan that would result, directly or
indirectly, in the imposition of any excise tax under Section 4975 of the Code.
(h) None of the Benefit Plans provides for (or has ever provided
for) medical or health care or benefits for any former employee of Seller or any
ERISA Affiliate, except to the extent required by Section 4980B of the Code or
Part 6 of Title I of ERISA.
(i) The transactions contemplated by this Agreement will not
entitle any Participant or any Participant's beneficiary in any Benefit Plan to
any severance benefit under the terms of any Benefit Plan or any personnel or
employment policy of Seller or any ERISA Affiliate.
3.17 Insurance. The "Insurance Schedule" attached hereto as Schedule
3.17 lists each insurance policy maintained by Seller with respect to the
Purchased Assets. The Seller has delivered to the Purchaser complete and correct
copies of all such policies together with all riders and amendments thereto. All
of such insurance policies are in full force and effect, and, to Seller's
knowledge, Seller is not and never has been in default with respect to its
obligations under any of such insurance policies. The Seller shall provide tail
coverage on its errors and omissions insurance policies listing Seller and the
Shareholder as beneficiaries for a period of three (3) years from the date
hereof to cover any claims following the Closing Date.
3.18 Affiliated Transactions. Except as set forth on the "Affiliated
Transactions Schedule" attached hereto as Schedule 3.18, no officer, director,
shareholder or affiliate of Seller or any person related by blood or marriage to
any such person or any entity in which any such person owns any beneficial
interest is a party to any agreement, contract, commitment or transaction
related to the Business of Seller or has any interest in any property that, in
each case, is included in the Purchased Assets.
3.19 Compliance with Laws; Permits; Certain Operations.
(a) Seller and its officers, directors, employees, and to Seller's
knowledge, their agents and employees have complied in all material respects
with all applicable laws and regulations of foreign, federal, state and local
governments and all agencies thereof which affect the Business or the Purchased
Assets or to which Seller may otherwise be subject, and, to Seller's knowledge,
no claims have been filed against Seller alleging a violation of any such law or
regulation, except as set
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forth on the "Compliance Schedule" attached hereto as Schedule 3.19(a). In
particular, but without limiting the generality of the foregoing, Seller has
complied in all material respects with, and has not received a notice or charge
asserting any violation of, the Immigration Reform and Control Act of 1986, the
Occupational Safety and Health Act of 1970, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Toxic Substances Control Act of 1976, the Americans
With Disabilities Act, or any other state or federal act (including rules and
regulations thereunder) regulating or otherwise affecting the employment of
aliens, employee health and safety, the environment, zoning, building, fire or
other ordinances or any other aspect of the Business.
(b) Seller holds all of the permits, licenses, certificates and
other authorizations of foreign, federal, state and local governmental agencies
required for the conduct of the Business, all of which are set forth in the
"Permits Schedule" attached hereto as Schedule 3.19(b). Seller has not received
any notice (and Seller has no reason to believe) that revocation is being
considered with respect to any of such licenses, permits, certificates or
authorizations, or that Seller is in violation of any such license, permit,
certificate or authorization.
3.20 Environmental Health and Safety.
(a) Seller has complied in all material respects with, and is
currently in compliance with all Environmental, Health and Safety Laws, and, to
Seller's knowledge, no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been threatened, filed or commenced
against it alleging any failure so to comply, alleging any liability under any
Environmental, Health and Safety Laws or requesting any investigation related
thereto. To Seller's knowledge, no condition exists or event has occurred which,
with or without notice or the passage of time, would constitute a violation of
or give rise to a lien under any Environmental, Health and Safety Laws, except
for violations or liens that would not have a Material Adverse Effect. Without
limiting the generality of the preceding sentences, Seller has obtained and been
in compliance in all material respects, and is currently in compliance in all
material respects, with all of the terms and conditions of all permits, licenses
and other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables which are contained in, all
Environmental, Health and Safety Laws. For purposes hereof, "Environmental,
Health and Safety Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976 and the Occupational Safety and Health Act of 1970, each as amended,
together with all other laws (including statutes, rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies thereof)
relating to fines, injunctions, penalties, damages, liability, contribution,
cost recovery, compensation for losses or injuries concerning pollution or
protection of the environment, natural resources, public health and safety, or
employee health and safety, or the protection of human, plant or animal welfare
or health, including laws relating to use, emissions, discharges, releases, or
threatened releases of Hazardous Materials, Extremely Hazardous Substances,
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into or onto ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal,
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transport, or handling of Hazardous Materials, Extremely Hazardous Substances,
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes. For purposes hereof, "Extremely Hazardous Substance" means such term
as set forth in ss.302 of the Emergency Planning and Community Right-to-Know Act
of 1986, as amended. For purposes hereof, "Hazardous Materials" means any
dangerous, toxic or hazardous pollutant, contaminant, chemical, waste, material
or substance as defined in, regulated by or governed by any Environmental,
Health and Safety Laws, federal, state, local or foreign law, statute, code,
ordinance, regulation, rule or other requirement relating to such substance or
otherwise relating to the environment or human health or safety, including
without limitation any waste, material, substance, pollutant or contaminant that
might cause any injury to human health or safety or to the environment or might
subject the Seller to any imposition of penalties, fines, orders, decrees,
licenses, permits, judgments, costs or liability under any Environmental, Health
and Safety Laws.
(b) To Seller's knowledge, all properties and equipment used in
the Business of the Seller have been free of asbestos, PCBs, methylene chloride,
trichlorethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans and other
hazardous substances.
3.21 Product and Warranty Claims; Warranties. Except as disclosed in
the "Claims Schedule" attached hereto as Schedule 3.21, Seller has no knowledge
of and has not received during the past five (5) years any claim or notice with
respect to any occurrences arising out of the use of, or related to, the
products designed, sold, implemented or serviced by or on behalf of Seller
related to the Business, which has resulted in any claim or notice that any such
products do not conform to any agreement, representation or warranty made by
Seller (or implied by law) with respect to such products. To Seller's knowledge,
Seller is insured against all damages, liability and expenses for any claims
based upon products designed, sold, implemented or serviced by or on behalf of
Seller (including, but not limited to, costs of investigation and attorneys'
fees and expenses) under policies of insurance described on the Insurance
Schedule, except as to claims for breach of any agreement, representation or
warranty made with respect to such products against which Seller has established
good and sufficient reserves therefor on its books and records and except where
such claims would not have a Material Adverse Effect.
3.22 Disclosure. No representation or warranty of Seller or Shareholder
contained in this Agreement and none of the schedules, attachments or exhibits
hereto furnished by Seller contain any untrue statement of a material fact or
omit a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading.
There is no material fact which has not been disclosed in writing to Purchaser
of which the Seller or any officer, director or key employee of Seller is aware
and which materially adversely affects or could reasonably be anticipated to
affect materially adversely the Business or the Purchased Assets.
3.23 Closing Date. All of the representations and warranties of Seller
and the Shareholder in this Article 3 and elsewhere in this Agreement and all
information delivered by Seller in any schedule, attachment or exhibit hereto or
in any certificate delivered by Seller to Purchaser are true and correct in all
respects on the date of this Agreement and shall be true and correct in all
respects on the Closing Date.
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3.24 Name Change. Seller agrees to change its name from "The Wamberg
Organization, Inc." to a different corporate name within sixty (60) days of the
Closing Date which is not similar to, or could not be confused with, the name
"The Wamberg Organization, Inc.".
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder represents and warrants to and covenants with Purchaser as
follows:
4.1 Organization of WFC. WFC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois. WFC is
duly qualified as a foreign corporation to transact business in each
jurisdiction where the conduct of WFC's business activities or the ownership of
its assets necessitates qualification. WFC has all right, power and authority to
own or lease its properties and conduct its business as such business is now
being conducted. Except as set forth on Schedule 4.1 hereto, WFC does not own
any capital stock of any other corporation or any other equity investment in any
joint venture, partnership or other entity.
4.2 Capital Stock of WFC.
(a) WFC has duly authorized capital stock consisting of one
thousand (1,000) shares of common stock, no par value, one hundred (100) of
which are issued and outstanding and constitute the Shares. All of the Shares
are duly authorized, validly issued and outstanding, fully paid and
nonassessable, and were not issued in violation of, and are otherwise free of
any preemptive or other rights of third parties. The issuance of the Shares was
in full compliance with all applicable state and federal securities laws and all
other applicable laws, and no person has a claim against WFC or the Shareholder
under any such law. The Shares are held by the Shareholder in accordance with
Schedule 4.2 attached hereto. WFC does not hold any treasury shares.
(b) Shareholder has good title to, and is the beneficial and
record owner of, all of the Shares free and clear of any security interest,
lien, claim, charge, pledge, encumbrance, or rights of other persons of every
nature and description whatsoever. The Shares are not subject to any restriction
with respect to their transferability. Except as described above in Section
4.2(a), there are no equity securities of the Company outstanding on the date
hereof and there is no existing subscription, warrant, right, option, call,
commitment, understanding, conversion privilege or other agreement obligating
WFC to issue, assign, pledge, sell or transfer any of its capital stock, whether
now or hereafter authorized. No Shares have been issued in violation of any
preemptive right of any shareholder.
4.3 Consents and Approvals. Except as set forth in Schedule 4.3 hereto,
the execution, delivery and performance of this Agreement by the Shareholder and
WFC, as the case may be, and the consummation by the Shareholder of the
transactions contemplated hereby or thereby will not
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require any notice to, or consent, authorization or approval from any court or
governmental authority or any other third party.
4.4 Assets Used in or Necessary in the Business of WFC. All equipment
and other tangible assets ("Business Assets") reflected on Schedule 4.4 hereto
(a) are currently used or useful in the business and operations of WFC, (b) are
all of the assets currently used, and are all of the assets needed, to conduct
said business and operations, and (c) are in good operating condition, except as
otherwise disclosed in Schedule 4.4 hereto. Except as provided in Schedule 4.4,
neither the Shareholder nor any other party own any Business Assets which are
being used to carry on the business or operations of WFC.
4.5 Compliance with Laws; Ability to Conduct Business.
Except as set forth in Schedule 4.5 hereto:
(a) WFC is not in default or violation (nor is there any event
which, with notice or lapse of time or both, would constitute a default or
violation) in any respect (A) under any contract, agreement, lease, consent
order, or other commitment to which WFC is a party or the business of WFC is
subject or bound or (B) under any law, rule, regulation, writ, injunction, order
or decree of any court or any federal, state, local, or other governmental
department, commission, board, bureau, agency or instrumentality (including,
without limitation, applicable laws, rules and regulations relating to
environmental protection, antitrust, civil rights, health and occupational
health and safety);
(b) There are no actions, suits, claims, investigations, or legal
arbitration or administrative proceedings in progress, pending or, to Seller's
or Shareholder's knowledge, threatened by or against WFC (or any of its assets
or properties) whether at law or in equity, whether civil or criminal in nature,
or whether before or by a federal, state, county, local, or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, nor has WFC or the Shareholder been charged with or received any
currently effective notice of any violation of any rule, regulation, ordinance,
law, order, decree, or requirement relating to WFC, its properties, assets, or
the transactions contemplated by this Agreement; and
(c) No action, suit or proceeding has been instituted or, to
Seller's or Shareholder's knowledge, threatened to restrain or prohibit or
otherwise challenge the legality or validity of the transactions contemplated by
this Agreement.
4.6 Federal, State and Local Taxes. Except as set forth in Schedule 4.6
hereto:
(a) All material federal, state, county and local taxes, and all
other taxes of any kind or character, including, without limitation, income
(including gross and adjusted gross), receipts, property (including real,
personal and intangible), sales, use, franchise, value added, excise, recording,
financial institutions, employees' income and social security withholding, and
all other withholding, and social security and unemployment taxes, which are due
and payable by or on behalf
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of WFC, and all interest and penalties thereon (collectively, the "WFC Taxes"),
have been paid (and, to the extent applicable, withheld) in full, other than WFC
Taxes that are being contested in good faith and by appropriate proceedings and
as to which WFC has set aside on its books adequate reserves or which may be
attributable to the transactions contemplated hereby.
(b) WFC has filed, or the Shareholder on behalf of WFC has filed,
all currently due federal, state, county, local and other tax returns,
statements, forms, reports and similar documents with respect to WFC Taxes
required to be filed with the appropriate third parties and governmental
agencies in all jurisdictions in which such returns, statements, forms, reports
and similar documents are required to be filed (collectively, the "WFC Returns")
and all such WFC Returns are true, correct and complete in all material
respects.
(c) There is not now in force any extension of time with respect
to the date on which any WFC Return was or is due to be filed by or on behalf of
or with respect to WFC, or any waiver or agreement by the Shareholder (on behalf
of WFC) or WFC, for an extension of time for the assessment of any WFC Tax.
(d) WFC is not subject to any penalty by reason of a violation of
any order, rule or regulation of, or with respect to any WFC Return or any other
WFC Tax return or report required to be filed with, any taxing authority.
(e) All monies required to be withheld from employees of WFC for
income taxes, social security and unemployment insurance, taxes or collected
from customers or others as sales, use or other taxes have been withheld or
collected and paid, when due, to the appropriate governmental authority.
(f) None of WFC's federal or state income tax returns has ever
been audited.
(g) WFC does not have any pending requests for a ruling with any
taxing authority.
(h) There are no liens for WFC Taxes upon the assets of WFC except
liens for current WFC Taxes not yet due.
4.7 Title to Assets. WFC has and at the Closing Date will have good,
valid and marketable title to all of the properties, interests in properties and
assets, tangible or intangible, that are used in its business, in each case free
and clear of all mortgages, liens, pledges, charges, claims, security interests,
encumbrances, easements or other interest of any kind or character, except for:
(a) liens for current taxes and assessments not yet due and
payable; and
(b) liens and encumbrances set forth in Schedule 4.7 hereto.
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4.8 Litigation. There is no action, suit or proceeding or governmental
investigation, judgment, order, writ, injunction or decree outstanding, pending
or threatened against or relating to WFC or the assets, properties or business
of WFC, before any court or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
nor does WFC know or have reasonable grounds to know of any basis for any such
action or for any governmental investigation relating to WFC or the assets,
properties or business of WFC.
4.9 Insurance. WFC, through financially sound and reputable insurers,
continuously maintained fire, theft, casualty, extended coverage and such other
insurance coverages and in such amounts as are dictated by prudent business
practices and customary for companies engaged in similar businesses. Each of the
insurance policies WFC has in place is listed on Schedule 4.9 hereto, and each
such policy is in full force and effect, will continue after the Closing in full
force and effect for their stated term and all premiums due and occurring with
respect to such policies are currently paid.
4.10 Liabilities. Except as set forth in Schedule 4.10 hereto, on the
date of the Closing, WFC will have no debts, liabilities, contracts, commitments
or other obligations, direct or indirect, absolute or contingent, determined or
undetermined.
4.11 Governmental Authorizations. Except as set forth in Schedule 4.11
hereto, WFC has all federal, state and local licenses, franchises, permits and
other governmental authorizations which are legally required to enable it to
conduct its business in all respects as currently being conducted.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller and Shareholder as
of the date thereof and as of the Closing Date that:
5.1 Corporate Organization and Power. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and any state in which it conducts business, except where the
failure to do so would not have a Material Adverse Effect on Purchaser. For
purposes of this Agreement, "Material Adverse Effect," as it relates to
Purchaser, means any material adverse effect on (a) the financial condition,
credit, business, prospects, properties or operations of the Purchaser or (b)
the ability of the Purchaser to perform its obligations under this Agreement.
Purchaser has all requisite power and authority and all material licenses,
permits and other authorizations necessary to own and operate its properties and
to carry on its business as now conducted as such licenses and permits relate to
the business of Purchaser. The copies of the certificate of incorporation and
by-laws of Purchaser which have been previously furnished to Seller reflect all
amendments made thereto at any time prior to the date of this Agreement and are
correct and complete in all material respects.
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5.2 Authorization. The execution, delivery and performance by
Purchaser of this Agreement and the other agreements contemplated hereby and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all requisite corporate action, and no other corporate
proceedings on the part of Purchaser are necessary to authorize the execution,
delivery or performance of this Agreement or the other agreements contemplated
hereby. This Agreement constitutes and, upon execution and delivery by
Purchaser, the other agreements contemplated hereby shall each constitute a
valid and binding obligation of Purchaser enforceable against Purchaser in
accordance with their respective terms.
5.3 No Violation. Purchaser is not subject to or obligated under its
articles of incorporation, any applicable law, rule or regulation of any
governmental authority, or any agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction or decree which
would materially adversely affect its ability to perform this Agreement or the
other agreements contemplated hereby.
5.4 Litigation. There are no actions, suits, proceedings, orders or
investigations pending or, to the best of Purchaser's knowledge, threatened
against or affecting Purchaser, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which would materially
adversely affect Purchaser's performance under this Agreement or the
consummation of the transactions contemplated hereby.
5.5 Closing Date. All of the representations and warranties of
Purchaser contained in this Article 5 and elsewhere in this Agreement and all
information delivered by Purchaser in any schedule, attachment or exhibit hereto
or in any certificate delivered by Purchaser to Seller are true and correct in
all respects as of the date of this Agreement and shall be true and correct in
all respects as of the Closing Date.
5.6 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Purchaser.
5.7 Governmental Consent, etc. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental or
regulatory authority is required in connection with the execution, delivery or
performance of this Agreement by Purchaser, or the consummation by Purchaser of
any of the transactions contemplated hereby.
5.8 Disclosure. No representation or warranty of Purchaser contained
in this Agreement (including the schedules or attachments furnished by
Purchaser) contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading. There is no material
fact which has not been disclosed in writing to Seller of which Purchaser or any
officer, director or key employee of Purchaser is aware and which materially
adversely affects, or could reasonably be anticipated to materially adverse
affect, Purchaser.
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ARTICLE 6
CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE
6.1 Conditions to Purchaser's Obligation. The obligation of Purchaser
to consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article 3 and
Article 4 hereof shall be true and correct in all material respects at and as of
the Closing as though then made and as though the Closing Date was substituted
for the date of this Agreement;
(b) Seller and Shareholder shall have performed in all material
respects all of the covenants and agreements required to be performed by it
under this Agreement prior to the Closing;
(c) there shall have been no material adverse change in the
operations, financial condition, operating results, assets or business prospects
of the Business, and there shall have been no material casualty loss or damage
to the Purchased Assets or the assets of WFC (the "WFC Assets"), taken as a
whole, whether or not covered by insurance;
(d) all consents by third parties that are required for the
transfer of the Purchased Assets, the Business and the Shares to Purchaser as
contemplated hereby, which are required for the consummation of the transactions
contemplated hereby or that are required to prevent a breach of or a default
under or a termination or modification of any instrument, contract, license,
lease or other agreement to which Seller or WFC is a party or to which any of
the Purchased Assets, the Shares or the WFC Assets are subject, and releases of
all liens, charges, security interests, encumbrances and claims of others on or
with respect to the Purchased Assets, the Shares or the WFC Assets shall have
been obtained on terms and conditions satisfactory to Purchaser in its sole
discretion;
(e) no action or proceeding before any court or government body
shall be pending or threatened which, in the judgment of Purchaser, made in good
faith and upon the advice of counsel, makes it inadvisable or undesirable to
consummate the transactions contemplated hereby by reason of the probability
that the action or proceeding shall result in a judgment, decree or order which
would prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement, cause such transactions to be rescinded or materially and adversely
affect the value or use of the Purchased Assets, Business or the Shares;
(f) Purchaser shall have received from Seller's counsel, Freeborn
and Peters, an opinion addressed to Purchaser and dated the Closing Date, in
form and substance reasonably satisfactory to Purchaser;
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(g) Purchaser shall have obtained UCC search reports ("UCC
Searches") of Seller and WFC disclosing no liens or encumbrances against the
Purchased Assets or the WFC Assets, other than the Permitted Encumbrances. If
the UCC Searches disclose any title encumbrances, defects, liens, encumbrances
or matters other than Permitted Encumbrances, Seller or WFC shall have caused
the same to be removed;
(h) all proceedings to be taken by Seller or WFC in connection
with the consummation of the Closing and the other transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby reasonably requested by Purchaser
shall be reasonably satisfactory in form and substance to Purchaser and its
counsel;
(i) Purchaser's Board of Directors shall have approved the
transaction contemplated hereby; and
(j) Purchaser and Shareholder shall have entered into an
Employment Agreement mutually acceptable to Purchaser and Shareholder (the
"Wamberg Employment Agreement").
Any conditions specified in this Section 6.1 may be waived by Purchaser;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by Purchaser, except as otherwise provided in Section 10.3.
ARTICLE 7
CONDITIONS TO SELLER'S OBLIGATION TO CLOSE
7.1 Conditions to the Seller's Obligations. The obligation of Seller
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article 5
hereof shall be true and correct in all material respects at and as of the
Closing as though then made and as though the Closing Date was substituted for
the date of this Agreement throughout such representations and warranties;
(b) Purchaser shall have performed in all material respects all
the covenants and agreements required to be performed by it under this Agreement
prior to the Closing;
(c) Seller shall have received from Purchaser's counsel, Vedder,
Price, Kaufman & Kammholz, an opinion, addressed to Seller and dated the Closing
Date, in form and substance reasonably satisfactory to Seller;
(d) Purchaser and Shareholder shall have entered into the Wamberg
Employment Agreement mutually acceptable to Purchaser and Shareholder;
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(e) there shall have been no material adverse change in the
operations, financial condition, operating results, assets or business prospects
of the Purchaser, and there shall be no material casualty loss or damage to the
assets of Purchaser, taken as a whole, whether or not covered by insurance;
(f) all consents by third parties that are required for the
transfer of the Purchased Assets and the Business to Purchaser as contemplated
hereby, which are required for the consummation of the transactions contemplated
hereby or that are required to prevent a breach of or a default under or a
termination or modification of any instrument, contract, license, lease or other
agreement to which Seller is a party or to which any of the Purchased Assets are
subject, and releases of all liens, charges, security interests, encumbrances
and claims of others on or with respect to the Purchased Assets shall have been
obtained on terms and conditions satisfactory to Seller in its sole discretion;
(g) the Board of Directors of Holdings shall have approved the
appointment of W.T. Wamberg as Chief Executive Officer of Holdings pursuant to
terms acceptable to Shareholder and Seller;
(h) no action or proceeding before any court or governmental body
shall be pending or threatened which, in the judgment of Seller, made in good
faith and upon the advice of counsel, makes it inadvisable or undesirable to
consummate the transactions contemplated hereby by reason of the probability
that the action or proceeding shall result in a judgment, decree or order which
would prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement, cause such transactions to be rescinded or materially and adversely
affect the value or use of the Purchased Assets or Business;
(i) Purchaser shall have made offers of full-time employment to
all employees of Seller and WFC; and
(j) all proceedings to be taken by Purchaser in connection with
the consummation of the Closing and the other transactions contemplated hereby
and all certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby reasonably requested by Seller shall
be reasonably satisfactory in form and substance to Seller and its counsel.
Any condition specified in this Section 7.1 may be waived by Seller; provided
that no such waiver shall be effective against Seller unless it is set forth in
a writing executed by Seller, except as otherwise provided in Section 10.3.
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ARTICLE 8
CLOSING TRANSACTIONS
8.1 The Closing. Subject to the conditions contained in this
Agreement, the closing of the transactions contemplated by this Agreement shall
take place at the offices of Vedder, Price, Kaufman & Kammholz at 10:00 a.m.
local time on September 1, 1999, or at such other place or on such other date as
may be mutually agreeable to the parties. The date and time of the Closing are
referred to herein as the "Closing Date."
8.2 Action to Be Taken at the Closing. The sale, conveyance,
assignment and delivery of the Purchased Assets and the payment of the Purchase
Price pursuant to the terms of this Agreement shall take place at the Closing,
and, simultaneously, the other transactions contemplated by this Agreement shall
take place by the delivery of all of the closing documents set forth in Section
8.3.
8.3 Closing Documents.
(a) Seller shall deliver or cause to be delivered to Purchaser at
the Closing the following documents, duly executed by Seller where necessary to
make them effective:
(i) an officer's certificate in the form set forth in Exhibit
C attached hereto, stating that the preconditions specified in Section
6.1(a) through (j) have been satisfied;
(ii) copies of all necessary third party and governmental
consents, approvals, releases and filings required in order to effect
the transactions contemplated by this Agreement;
(iii) such stamped recordable warranty deeds and instruments
of sale, transfer, assignment, conveyance and delivery (including all
vehicle titles) as are required in order to transfer to Purchaser good
and marketable title to the Purchased Assets, free and clear of all
liens, charges, security interests and other encumbrances, except for
Permitted Encumbrances;
(iv) the Shares duly endorsed over to Purchaser and the minute
book of WFC;
(v) such estoppel certificates and assignments of leases as
Purchaser may reasonably request;
(vi) certified copies of the resolutions duly adopted by the
Board of Directors and Shareholder of Seller authorizing the execution,
delivery and performance of this Agreement and each of the other
agreements contemplated hereby, and the consummation of all other
transactions contemplated by this Agreement;
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(vii) all of Seller's contracts and commitments, files, books,
records and other data relating to the Business, the Purchased Assets
and WFC;
(viii) copies of good standing certificates in all
jurisdictions where the Seller and WFC are qualified to do business in
which ownership of the Purchased Assets or the conduct of the Business
or the conduct of the business of WFC requires Seller or WFC to be so
qualified;
(ix) certificates of the Secretary of Seller and Secretary of
WFC, certifying as to the correctness and completeness of the Articles
of Incorporation and Bylaws of Seller and WFC, as appropriate, and all
amendments thereto;
(x) that certain Sublease regarding the Lease Agreement
between the Seller and the landlord (the "Sublease");
(xi) the Wamberg Employment Agreement; and
(xii) such other documents or instruments as Purchaser may
reasonably request to effect the transactions contemplated hereby.
All of the foregoing documents in this Section 8.3(a) shall be
reasonably satisfactory in form and substance to Purchaser and shall be dated as
of the Closing Date.
(b) Purchaser shall deliver or cause to be delivered to Seller and
Shareholder at the Closing the following items, duly executed by Purchaser where
necessary to make them effective:
(i) the amount of the Purchase Price payable at Closing as
provided in Section 2.1;
(ii) an officer's certificate in the form set forth as Exhibit
D attached hereto, stating that the preconditions specified in Section
7.1(a) through (j) hereof have been satisfied;
(iii) copies of all necessary third party and governmental
consents, approvals, releases and filings required in order for
Purchaser to effect the transactions contemplated by this Agreement;
(iv) the Sublease;
(v) the Wamberg Employment Agreement; and
(vi) such other documents or instruments as Seller reasonably
may request to effect the transactions contemplated hereby.
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All of the foregoing documents in this Section 8.3(b) shall be
reasonably satisfactory in form and substance to Seller and shall be
dated as of the Closing Date.
8.4 Nonassignable Contracts. To the extent that the assignment
hereunder by Seller to Purchaser of the Contracts is not permitted or is not
permitted without the consent of any other party to the Contract, this Agreement
shall not be deemed to constitute an assignment of any such Contract if such
consent is not given or if such assignment otherwise would constitute a breach
of, or cause a loss of contractual benefits under, any such Contract, and
Purchaser shall assume no obligations or liabilities thereunder. Seller shall
advise Purchaser promptly in writing with respect to any Contract which it
knows, should know or has reason to know that it will not receive any required
consent. Without in any way limiting Seller's obligation to obtain all consents
necessary for the sale, transfer, assignment and delivery of the Contracts and
the Purchased Assets to Purchaser hereunder, if any such consent is not obtained
or if such assignment is not permitted irrespective of consent and the Closing
hereunder is consummated, Seller shall cooperate with Purchaser in any
reasonable arrangement designed by Purchaser to provide Purchaser with the
rights and benefits, subject to the obligations, under the Contract, including
enforcement for the benefit of Purchaser of any and all rights of Seller against
any other person arising out of breach or cancellation by such other person and,
if requested by Purchaser, Seller shall act as an agent on behalf of Purchaser
or as Purchaser shall otherwise reasonably require, in each case at Seller's
cost. Seller agrees to continue its existence for at least three (3) years from
the Closing Date.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Seller and Shareholder. Seller and Shareholder,
jointly and severally, agree to and shall indemnify in full Purchaser and its
officers, directors, employees, agents, shareholders and partners (collectively,
the "Purchaser Indemnified Parties") and defend and hold them harmless against
any loss, liability, deficiency, damage, expense or cost (including reasonable
legal expenses), that Purchaser Indemnified Parties may suffer, sustain or
become subject to as a result of (a) any misrepresentation in any of the
representations or breach of any of the warranties of Seller or Shareholder
contained in this Agreement or in any exhibits, schedules, certificates or other
agreements or documents delivered or to be delivered pursuant to the terms of
this Agreement or otherwise incorporated in this Agreement (collectively, the
"Related Documents"), (b) any breach of, or failure to perform, any agreement or
covenant of Seller or the Shareholder contained in this Agreement or any of the
Related Documents, or (c) any matters disclosed on any schedule hereto
(collectively, "Purchaser Losses").
9.2 Indemnification by Purchaser. Purchaser agrees to indemnify in
full Seller and its officers, directors, employees, agents, shareholders and
partners (collectively, the "Seller Indemnified Parties") and hold them harmless
against any loss, liability, deficiency, damage, expense or cost (including
reasonable legal expenses), which the Seller Indemnified Parties may suffer,
sustain or become subject to as a result of (a) any misrepresentation in any of
the
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representations or breaches of any of the warranties of Purchaser contained in
this Agreement or in any of the Related Documents or (b) any breach of, or
failure to perform, any agreement or covenant of Purchaser contained in this
Agreement or any of the Related Documents (collectively, "Seller Losses")
(Purchaser Losses and Seller Losses shall collectively be referred to as the
"Losses").
9.3 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a "Purchaser Indemnified Party" or "Seller Indemnified Party," as
applicable, the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Seller Losses or Purchaser Losses, as the case may be (any such third
party action or proceeding being referred to as a "Claim"), the Notifying Party
shall give the Indemnifying Party prompt notice thereof. The failure to give
such notice shall not affect any Indemnified Party's ability to seek
reimbursement unless such failure has materially and adversely affected the
Indemnifying Party's ability to defend successfully a Claim. The Indemnifying
Party shall be entitled to contest and defend such Claim; provided, that the
Indemnifying Party (i) has a reasonable basis for concluding that such defense
may be successful and (ii) diligently contests and defends such Claim. Notice of
the intention so to contest and defend shall be given by the Indemnifying Party
to the Notifying Party within twenty (20) business days after the Notifying
Party's notice of such Claim (but, in all events, at least five (5) business
days prior to the date that an answer to such Claim is due to be filed). Such
contest and defense shall be conducted by reputable attorneys employed by the
Indemnifying Party. The Notifying Party shall be entitled at any time, at its
own cost and expense (which expense shall not constitute a Loss unless the
Notifying Party reasonably determines that the Indemnifying Party is not
adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties), to participate
in such contest and defense and to be represented by attorneys of its or their
own choosing. If the Notifying Party elects to participate in such defense, the
Notifying Party shall cooperate with the Indemnifying Party in the conduct of
such defense. Neither the Notifying Party nor the Indemnifying Party may
concede, settle or compromise any Claim without the consent of the other party,
which consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, in the event the Indemnifying Party fails or is not entitled to
contest and defend a claim, the Notifying Party shall be entitled to contest,
defend and settle such Claim.
(b) In the event any Indemnified Party should have a claim against
any Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable promptness to the Indemnifying
Party. If the Indemnifying Party notifies the Notifying Party that it does not
dispute the claim described in such notice or fails to notify the Notifying
Party within thirty (30) days after delivery of such notice by the Notifying
Party whether the Indemnifying Party disputes the claim described in such
notice, the Loss in the amount specified in the Notifying Party's notice shall
be conclusively deemed a liability of the Indemnifying Party and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on
demand.
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If the Indemnifying Party has timely disputed its liability with respect to such
claim, a representative of each of the Indemnifying Party and the Notifying
Party (or their respective designees) shall proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through the negotiations of such
representatives or designees within sixty (60) days after the delivery of the
Notifying Party's notice of such claim, such dispute (except for any such
dispute which gives rise or could give rise to equitable relief under this
Agreement) shall be resolved fully and finally in Chicago, Illinois by an
arbitrator selected pursuant to, and an arbitration governed by, the Commercial
Arbitration Rules of the American Arbitration Association. The arbitrator shall
resolve the dispute within thirty (30) days after selection and judgment upon
the award rendered by such arbitrator may be entered in any court of competent
jurisdiction.
9.4 Survival; Limitations on Liability.
(a) Subject to the provisions of Section 9.4(b) and Section 11.1
hereof, the covenants, agreements, representations, and warranties contained in
or made pursuant to this Agreement shall survive the Closing.
(b) The liabilities and obligations of the parties (and the
Indemnifying Parties) under this Agreement shall be subject to the limitation
that no Indemnifying Parties shall be responsible for any Losses until the
cumulative aggregate amount thereof shall exceed Twenty-Five Thousand Dollars
($25,000.00) (the "Minimum Amount"), in which case such Indemnifying Parties
shall then be liable for all Losses; provided, however, that any provision of
this Agreement to the contrary notwithstanding, the dollar limitations set forth
in this Section 9.4 shall not apply to any Claim relating to breach of Seller's
obligations with respect to Taxes or WFC Taxes or any claim related to a breach
of a representation or warranty where Seller, Shareholder or Purchaser had
knowledge of such breach at Closing.
9.5 Escrow Amount. Seller and Shareholder agree that, in addition to
any other rights or remedies available to Purchaser, Purchaser may draw upon the
Escrow Account pursuant to the Escrow Agreement, including, without limitation,
(i) any of the obligations of Seller and Shareholder or any of them under
Section 9.1 of this Agreement and (ii) any amount due from Seller or the
Shareholder in connection with the final determination of the Required Cash
Amount.
ARTICLE 10
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of Purchaser and Seller;
(b) by either Purchaser or Seller if there has been a material
misrepresentation or breach of warranty or breach of covenant on the part of the
other party in the representations and warranties or covenants set forth in this
Agreement and any such misrepresentation or breach, if
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capable of cure, is not cured within fifteen (15) days after written notice
thereof to such other party, or if events have occurred which have made it
impossible to satisfy a condition precedent to the terminating party's
obligations to consummate the transactions contemplated hereby (other than as a
result of any willful act or omission by the terminating party); or
(c) by either Purchaser or Seller if the transactions contemplated
hereby have not been consummated by September 30, 1999; provided, that neither
Purchaser nor Seller shall be entitled to terminate this Agreement pursuant to
this subsection (c) if such party's willful breach of this Agreement,
respectively, has prevented the consummation of the transactions contemplated
hereby.
10.2 Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void, and
there shall be no liability on the part of Seller or Purchaser, except for
willful breaches of this Agreement prior to the time of such termination and
except for the provisions of Section 11.7.
10.3 Effect of Closing. Seller and Purchaser shall be deemed to have
waived their respective rights to terminate this Agreement upon the completion
of the Closing. No such waiver shall constitute a waiver of any other rights
arising from the non-fulfillment of any condition precedent set forth in Article
6 or 7 unless such waiver is made in writing. 1.1
ARTICLE 11
ADDITIONAL AGREEMENTS
11.1 Survival. The representations, warranties, covenants and
agreements set forth in this Agreement or in any writing delivered to Purchaser
or Seller in connection with this Agreement shall survive the Closing Date and
the consummation of the transactions contemplated hereby and shall not be
affected by any examination made for or on behalf of Purchaser or Seller, the
knowledge of any of Purchaser's or Seller's officers, directors, shareholders,
employees or agents, or the acceptance by Purchaser or Seller of any certificate
or opinion.
11.2 Mutual Assistance. Subsequent to the Closing, Seller on the one
hand and Purchaser on the other, at their own cost, shall assist each other
(including making records available) in the preparation of their respective tax
returns and the filing and execution of tax elections, if required, as well as
any audits or litigation that may ensue as a result of the filing thereof, to
the extent that such assistance is reasonably requested.
11.3 Press Release and Announcements. No press release related to this
Agreement or the transactions contemplated hereby, or other announcements to the
employees, customers or suppliers of Seller, shall be issued without the joint
approval of Purchaser and Seller. No other public announcement related to this
Agreement or the transactions contemplated hereby shall be made by either party,
except as required by law, in which event the parties shall consult as to the
form and substance of any such announcement required by law.
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11.4 Expenses. Each party shall pay all of its expenses in connection
with the negotiation of this Agreement, the performance of its obligations
hereunder and the consummation of the transactions contemplated by this
Agreement. Seller shall pay the cost of recording all documents necessary to
place record title to the Purchased Assets and the Shares in the condition
warranted by or required of Seller and the Shareholder by this Agreement.
11.5 Further Transfers. After the Closing, Seller shall, and shall
cause its affiliates to, execute and deliver such further instruments of
conveyance and transfer and take such additional action as Purchaser may
reasonably request to effect, consummate, confirm or evidence the transfer to
Purchaser of the Purchased Assets. Seller shall execute such documents as may be
necessary to assist Purchaser (or its designees) in preserving or perfecting
their rights in the Purchased Assets and the Shares.
11.6 Transition Assistance. From the date hereof and until five (5)
years after the Closing, Seller shall not in any manner take any action which is
designed, intended or might be reasonably anticipated to have the effect of
discouraging customers, suppliers, lessors, employees, sales agents and other
business associates from maintaining the same business relationships with
Purchaser after the date of this Agreement as were maintained with Seller and
WFC prior to the date of this Agreement.
11.7 Confidentiality. If the transactions contemplated by this
Agreement are not consummated, Purchaser shall maintain the confidentiality of
all information and materials received by it reasonably designated by Seller as
confidential, and Purchaser shall return to Seller or destroy any materials (and
copies thereof) obtained from Seller in connection with the transactions
contemplated hereby. Whether or not the transactions contemplated hereby are
consummated, Seller shall maintain the confidentiality of all information and
materials regarding Purchaser and its affiliates, reasonably designated as
confidential by Purchaser. If the transactions contemplated by this Agreement
are consummated, Seller shall maintain the confidentiality of all proprietary
and other non-public information regarding the Business and the Purchased Assets
and shall turn over to Purchaser all such materials in their possession.
11.8 Remittances. All remittances, mail and other communications
relating to the Purchased Assets, the Business or WFC (but not the Excluded
Assets) received by Seller or the officers and directors of Seller or the
Shareholder at any time after the Closing Date shall be immediately turned over
to Purchaser by such parties. Seller shall cooperate with Purchaser, and take
such actions as Purchaser reasonably requests, to assure that customers of the
Business send their remittances directly to Purchaser, and to assure that
remittances from customers of the Business which are improperly sent to Seller
are not commingled with Seller's assets and are turned over to Purchaser.
11.9 Best Efforts to Consummate Closing Transactions. On the terms and
subject to the conditions contained in this Agreement, Seller, Purchaser and
Shareholder agree to use their respective best efforts to take, or to cause to
be taken, all reasonable actions, and to do, or to cause
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to be done, all reasonable things, necessary, proper or advisable under
applicable laws and regulations to consummate, as soon as reasonably
practicable, the Closing, including the satisfaction of all conditions thereto
set forth herein.
11.10 Employees and Agents of Seller. Purchaser is under no legal
obligation to employ any personnel presently employed by Seller. Prior to the
Closing Date, Purchaser may, but shall not be required to, offer employment to
such persons currently employed by Seller as Purchaser in its sole discretion
shall determine. Purchaser shall have the absolute right to establish all terms
and conditions of employment, including wages, benefits and benefit plans, for
any employees of Seller to whom it chooses to make an offer of employment to be
employed by Purchaser. Further, it is expressly agreed that Purchaser is not
bound to assume, implement or continue any wages, terms and conditions of
employment, benefits or benefit plans which may currently exist for any of
Seller's employees. All such offers of employment shall be on the terms and
conditions established by Purchaser and shall be contingent upon employment
commencing with Purchaser only following the Closing Date. Seller agrees not to
discourage any individuals who are offered employment or an agency relationship
with Purchaser from accepting such employment or agency relationship with
Purchaser.
11.11 Non-Compete; Non-Solicitation.
(a) Although it is understood among the parties that Seller
desires to no longer engage in business operations similar to that of the
Business, as an additional inducement to Purchaser to enter into and to perform
its obligations under this Agreement, Seller agrees that, for a period of five
(5) years after the Closing Date (the "Non-Competition Period"), Seller shall
not in the United States or in any foreign country in which such Seller
currently does business, directly or indirectly, either for itself or any other
person or entity, own, manage, control, participate in, permit its name to be
used by, consult with, render services for or otherwise assist in any manner any
entity that owns, invests in, manages, controls or engages in the business of
manufacturing, selling and distributing products similar to those of the
Business.
(b) Seller agrees that for a period of five (5) years after the
Closing, it shall not directly or indirectly offer employment to or hire any
current or future employee or sales agent of Purchaser without the prior written
consent of Purchaser.
(c) If, at the time of enforcement of this Section 11.11, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area.
(d) Seller recognizes and affirms that in the event of breach of
it of any of the provisions of this Section 11.11 money damages would be
inadequate and neither Purchaser nor Seller would have any adequate remedy at
law. Accordingly, Seller and Purchaser agree that the other party shall have the
right, in addition to any other rights and remedies existing in its favor, to
enforce its rights and the obligations under this Section 11.11 by an action or
actions for specific
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performance, injunction and/or other equitable relief without posting any bond
or security to enforce or prevent any violations, whether anticipatory,
continuing or future, of the provisions of this Section 11.11, including,
without limitation, the extension of the Non-Competition Period by a period
equal to (i) the length of the violation of this Section 11.11 plus (ii) the
length of any court proceedings necessary to stop such violation. In the event
of a breach or violation by Seller of any of the provisions of this Section
11.11, the running of the Non-Competition Period, but not of Sellers'
obligations under this Section 11.11, shall be tolled during the period during
which the occurrence of any such breach or violation is investigated and during
the continuance of any such breach or violation.
ARTICLE 12
MISCELLANEOUS
12.1 Amendment and Waiver. This Agreement may be amended, and any
provision of this Agreement may be waived; provided that any such amendment or
waiver shall be binding on Seller and Shareholder only if such amendment or
waiver is set forth in a writing executed by Seller and Shareholder and that any
such amendment or waiver shall be binding upon Purchaser only if such amendment
or waiver is set forth in a writing executed by Purchaser. No course of dealing
between or among any persons having any interest in this Agreement shall be
deemed effective to modify, amend or discharge any part of this Agreement or any
rights or obligations of any person under or by reason of this Agreement.
12.2 Notices. All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when personally delivered, mailed
by first class mail, return receipt requested, or delivered by a nationally
recognized courier service. Notices, demands and communications to Seller or
Purchaser shall, unless another address is specified in writing in accordance
herewith, be sent to the address indicated below:
Notices to Seller
The Wamberg Organization, Inc.
102 South Wynstone Park Drive
North Barrington, Illinois 60010
Attention: W.T. Wamberg
Phone: (847) 304-5800
Fax: (847) 304-5898
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with a copy to:
Freeborn and Peters
311 South Wacker Drive
Suite 3000
Chicago, Illinois 60606-6677
Attention: Craig McCrohon, Esq.
Phone: (312) 360-6000
Fax: (312) 360-6575
Notices to Purchaser:
Clark/Bardes, Inc.
2121 San Jacinto Street, Suite 2200
Dallas, Texas 75201
Attention: Mel G. Todd, President
Phone: (214) 871-8717
Fax: (214) 871-7690
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
Attention: Stanley B. Block, Esq.
Lane R. Moyer, Esq.
Phone: (312) 609-7500
Fax: (312) 609-5005
12.3 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legatees, personal representatives, successors and permitted
assigns (including all successors and assignees in the event of Seller's
liquidation) as the case may be, but neither this Agreement nor any of the
rights, interests or obligations hereunder of Seller and Shareholder shall be
assignable by Seller and Shareholder without the prior written consent of
Purchaser. Purchaser may assign its interest under this Agreement without
restriction to any of its affiliates, existing as of the date hereof or in the
future; provided Purchaser unconditionally guarantees to Seller and Shareholder
at the time of such assignment the prompt and complete performance of all of
such affiliates' obligations hereunder.
12.4 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
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12.5 No Third Party Beneficiaries. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any other persons other than the parties hereto and
the indemnified parties under Sections 9.1 and 9.2 hereof and their respective
successors, permitted assigns, heirs, legatees and personal representatives, as
the case may be, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any person, nor
shall any provision give any third parties, except the indemnified parties under
Sections 9.1 and 9.2 hereof, any right of subrogation or action over or against
any party. This Agreement is not intended to and does not create any third party
beneficiary rights whatsoever, except the indemnified parties under Sections 9.1
and 9.2 hereof.
12.6 No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
person.
12.7 Captions. The captions used in this Agreement are for convenience
of reference only and do not constitute a part of this Agreement and shall not
be deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no captions had been used in this Agreement.
12.8 Complete Agreement. This document and the documents referred to
herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
12.9 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
instrument.
12.10 Governing Law. The internal law, not the law of conflicts, of the
State of Illinois shall govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement.
12.11 Remedies Cumulative. Except as set forth in Section 9.3(b), all
remedies of the parties provided herein shall, to the extent permitted by law,
be deemed cumulative and not exclusive of any thereof or of any other remedies
available to the parties, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained herein, and
every remedy given herein or by law to any party hereto may be exercised from
time to time, and as often as shall be deemed expedient, by such party.
12.12 Use of the Wamberg Name. Notwithstanding the acquisition by
Purchaser of the name "The Wamberg Organization," Purchaser shall not have any
right or license to, and hereby agrees not to, use the "The Wamberg
Organization" name at any time or in any manner in connection with any business
or activity other than lawfully organized and operated insurance or financial
service related businesses.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
CLARK/BARDES, INC.
By: /s/ [ILLEGIBLE]
----------------------------------
Its:
---------------------------------
THE WAMBERG ORGANIZATION, INC.
By: /s/ W.T. WAMBERG
----------------------------------
Its:
---------------------------------
/s/ W.T. WAMBERG
-------------------------------------
W.T. Wamberg
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EXHIBIT 99.1
[CLARK/BARDES LOGO]
CLARK/BARDES COMPLETES ACQUISITION OF
THE WAMBERG ORGANIZATION
DALLAS, TX. September 2, 1999 - Clark/Bardes Holdings Inc. (Nasdaq: CLKB; or
"CBH"), a nationally recognized firm providing employee compensation and benefit
services to US corporations, banks, and healthcare organizations, today
announced it has completed its acquisition of The Wamberg Organization. CBH,
through its wholly-owned subsidiary Clark/Bardes Inc. ("CBI"), acquired
substantially all of the operating assets and renewal commissions of The Wamberg
Organization. Consideration for the acquisition consists of an initial cash
payment of $14.0 million and additional contingent payments of $11.9 million
over the next four years. This acquisition reduces CBI's commission expense and
is expected to generate net renewal revenues of $55 million over the next ten
years.
Along with creating additional streams of recurring revenue for the
organization, CBH expects to benefit immediately from increased operating
income. This income will be generated from the newly acquired business and by
continued strong sales production from its staff of 20 experienced employees and
the recent addition of three seasoned sales professionals. The acquisition
furthers CBH's objective of becoming the nation's most comprehensive provider of
compensation and benefit programs for banking, corporate and healthcare
organizations by continuing to add companies with proven track records to the
CBH group.
Concurrent with the acquisition, Tom Wamberg was appointed Chief Executive
Officer of CBH. Previously, Mr. Wamberg was Chairman of CBH and President of The
Wamberg Organization. Mel Todd remains President and CEO of CBI, which now
includes The Wamberg Organization.
The fair value of the acquisition was determined by an arm's length negotiation
between parties through an independent committee composed of CBH's outside
directors. In order for the Company to achieve certain tax benefits, Mr. Wamberg
is limited to owning less than 20% of Clark/Bardes stock. This restriction
effectively precludes him from receiving any additional stock as consideration
for the acquisition. "The acquisition was structured to provide value to
shareholders under a very wide range of potential scenarios. Nearly one-half of
the purchase price is contingent on the achievement of certain operating goals,"
said Thomas M. Pyra, Chief Financial Officer of CBH.
Tom Wamberg concluded, "This acquisition delivers on our continuing promise to
make strategic, accretive acquisitions that enhance shareholder value."
Founded in 1967, Clark/Bardes is a nationally recognized firm that provides a
variety of compensation and benefit services to US corporations, banks, and
healthcare organizations. These services include the evaluation, design,
marketing, funding and administration of innovative compensation programs for
executives and other employed professionals.
# # #
Clark/Bardes Holdings Inc. 102 S. Wynstone Park Drive Suite 200
North Barrington, IL 60010
Company Contacts: Jim Radosevich Manager Financial
Analysis/Investor Relations 847-304-5800
