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) February 23, 1999
COMPUTER TASK GROUP, INCORPORATED
(Exact name of registrant as specified in its charter)
New York 1-9410 16-0912632
_______________________________________________________________________________
(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) Identification No.)
800 Delaware Avenue, Buffalo, NY 14209
_______________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 882-8000
Not Applicable
_______________________________________________________________________________
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On February 23, 1999, the Registrant completed its previously announced
acquisition (the "Acquisition") of Elumen Solutions, Inc., a Delaware
corporation ("Elumen"), pursuant to a Stock Purchase Agreement dated as of
January 29, 1999, between the Registrant, nine private stockholders unrelated to
the Registrant, and Elumen.
On February 23, 1999, the Registrant issued a press release, a copy of
which is annexed hereto as Exhibit 99.1 and incorporated herein by reference.
The aggregate acquisition price of $89 million was paid with $3.2
million of the Registrant's common stock (128,385 shares), $34 million of the
Registrant's cash, and borrowings on the Registrant's credit lines with banks as
follows: Marine Midland Bank -- $22 million; Chase Manhattan Bank -- $11
million; KeyBank -- $11.5 million; and Manufacturers & Traders Trust Company --
$7.5 million.
Item 7. Financial Statements and Exhibits
Financial information and exhibits filed as part of this report.
(a) Financial statements of acquired business.
Required financial statement information for the acquired
business will be filed as soon as possible, but in any event
not later than 75 days after February 23, 1999.
(b) Pro forma financial information.
Required pro forma financial information will be filed as soon
as possible, but in any event not later than 75 days after
February 23, 1999.
(c) Exhibits.
2.1 - Stock Purchase Agreement, dated as of January
29,1999, by and among Computer Task Group,
Incorporated, Elumen Solutions, Inc., and the
individual shareholders of Elumen.
99.1 - Press Release dated February 23, 1999, announcing
the completion of the Acquisition of Elumen by the
Registrant.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPUTER TASK GROUP, INCORPORATED
(Registrant)
Date: March 8, 1999 By:s/James R. Boldt
___________________________________
James R. Boldt
Vice President and
Chief Financial Office
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of
January 29, 1999, by and among COMPUTER TASK GROUP, INCORPORATED, a New York
corporation ("Buyer"), ELUMEN SOLUTIONS, INC., a Delaware corporation (the
"Company"), and each of the individuals and the entities whose name appears on
the signature pages of this Agreement (each a "Seller" and collectively the
"Sellers").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of
the issued and outstanding shares of capital stock of the Company, for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
The Buyer, the Company and Sellers, intending to be legally
bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"Acceptable Insurance" -- an errors and omissions insurance
policy or policies that are obtained by the Acquired Companies prior to the
Closing Date that meets all of the following requirements: (a) the policy or
policies shall provide coverage with respect to claims made on or before August
1, 2000 arising out of any occurrence (as defined in such policy or policies)
prior to August 1, 2000 with respect to services or work product of the Acquired
Companies performed prior to the Closing Date, and shall be in an amount of at
least $5 million; (b) the policy or policies shall not contain any exception
from coverage for any claims that any services or work product is not Year 2000
Compliant (as such term is defined in Section 3.27 of this Agreement); (c)
without the prior written consent of Buyer, the cost to the Acquired Companies
of obtaining the policy or policies shall be no more than 15% higher than the
cost to the Acquired Companies of their current policy or policies; (d) the
policy or policies shall be from an insurance carrier or carriers with a rating
that is not materially lower than the rating for the Acquired Companies' current
carrier or carriers; (e) the inception and retroactive coverage date for such
policy or policies shall be no later than December 31, 1993; (f) without the
prior written consent of Buyer, the aggregate deductible under such policy or
policies shall not exceed the aggregate deductible under the Acquired Companies'
current policy or policies; and (g) unless consented to in writing by Buyer,
which consent shall not be unreasonably withheld, the form of insurance contract
for such policy or policies shall be equivalent in all material respects to the
form of insurance contract for the Acquired Companies' current errors and
omissions policy or policies which extend through August 1, 1999.
"Acquired Companies" -- the Company and its Subsidiaries,
collectively.
"Applicable Contract" -- any Contract (a) under which any
Acquired Company has or may acquire any rights, (b) under which any Acquired
Company has or may become subject to any obligation or liability, or (c) by
which any Acquired Company or any of the assets owned or used by it is or may
become bound.
"Balance Sheet" -- as defined in Section 3.4.
"Best Efforts" -- the efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the Person
subject to that obligation (a) to take actions that would result in a materially
adverse change in the benefits to such Person of this Agreement and the
Contemplated Transactions or (b) with respect to the Sellers, to incur any
contingent liability or expense (other than Transaction Expenses).
"Breach" -- a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if there is
or has been any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
and the term "Breach" means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
"Buyer" --as defined in the first paragraph of this Agreement.
"Buyer's Closing Documents" -- each of the agreements and
instruments to be delivered by Buyer pursuant to Sections 2.4 and 2.5 or any
other provision of this Agreement.
"Closing" -- as defined in Section 2.3.
"Closing Date" -- the date and time as of which the Closing
actually takes place.
"Company" -- as defined in the Recitals of this Agreement.
"Company's Accountants" -- means PricewaterhouseCoopers, LLP.
"Consent" -- any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions
contemplated by this Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the agreements
and other instruments to be delivered pursuant to Sections 2.4 and 2.5;
(c) the performance by Buyer and Sellers of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of all of the
authorized, issued and outstanding Shares of the Acquired Companies.
"Contract" -- any agreement, contract, obligation, promise, or
undertaking that is legally binding.
"CTG Common Stock" -- shall mean common shares, $.01 par value
per share, of Computer Task Group, Incorporated.
"CTG Shares" -- shall mean 128,385 shares of CTG Common Stock
(being the number of shares of CTG Common Stock determined by divided (a)
$3,200,000 by (b) the average closing price for CTG Common Stock for the five
trading days immediately prior to, but not including the date of, the signing of
this Agreement, rounded to the nearest whole share).
"Damages" -- as defined in Section 10.2.
"Encumbrance" -- any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"Environment" -- soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"Environmental, Health, and Safety Liabilities" -- any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and consisting of
or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for any
natural resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et
seq., as amended ("CERCLA").
"Environmental Law" -- any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to the Environment when
used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"Escrow Amount" -- as defined in Section 2.4(c) and "Escrow
Fund" as defined in the Escrow Agreement.
"Escrow Agent" -- as defined in Section 2.4(d).
"Escrow Agreement" -- as defined in Section 2.4(d).
"Escrow Distribution" -- as defined in Section 10.4.1.
"Facilities" -- any real property, leaseholds, or other
interests currently or formerly owned or operated by any Acquired Company and
any buildings, structures, or equipment (including motor vehicles) currently or
formerly owned or operated by any Acquired Company.
"GAAP" -- generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4(b) were
prepared.
"Governmental Authorization" -- any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"Governmental Body" -- any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any
nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"Hazardous Activity" -- the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use
(including any withdrawal or other use of groundwater) of Hazardous Materials
in, on, under, about, or from the Facilities or any part thereof into the
Environment.
"Hazardous Materials" -- any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"HSR Act" -- the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Indebtedness" shall mean, without duplication with
respect to any Person, (a) all indebtedness of such Person for borrowed money
(including all accrued interest and accumulated amortization), (b) all
obligations of such Person for the deferred purchase price of property or
services (other than trade payables created in the ordinary course of business),
(c) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (d)
all obligations of such Person as lessee under leases that have been or should
be, in accordance with GAAP, recorded as capital leases, (e) all obligations,
contingent or otherwise, of such Person under acceptance, letter of credit or
similar facilities (other than that certain letter of credit issued by KeyBank
N.A.), (f) Indebtedness of others referred to in clauses (a) through (e) above
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement (i) to pay
or purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the holder
of such Indebtedness against loss, (iii) to supply funds to or in any other
manner invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such services are
rendered) primarily for the purpose of enabling the debtor to make payment of
such Indebtedness or to assure the holder of such Indebtedness against loss, or
(iv) otherwise to assure a creditor against loss in respect of such
Indebtedness, and (g) all Indebtedness referred to in clauses (a) through (e)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Encumbrance on property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such person has not assumed or become liable for the payment
of such Indebtedness.
"Intellectual Property Assets" -- as defined in Section 3.22.
"IRC" -- the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS" -- the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"Knowledge" -- an individual will be deemed to have
"Knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) an individual could be expected to discover (i) in the
course of a reasonably thorough review of the following records of the Acquired
Companies: the financial statements, accounting books and accounting records,
minutes of meetings of the board of directors and shareholders of the Acquired
Companies and consents in lieu thereof, including all reports presented to the
Board of Directors, and records relating to Proceedings, claims and Threatened
claims, and (ii) in discussions regarding the representations and warranties
contained in Section 3 hereof with the Company's Accountants, the attorneys who
regularly represent the Acquired Companies and the Persons who are actuaries,
administrators or fiduciaries of the Company Plans.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as a director
or officer of such Person has, or at any time had, Knowledge of such fact or
other matter provided that the "Knowledge of the Acquired Companies," shall mean
only the Knowledge of one or more of Christopher Bergmann, Mary Pat Fralick,
Juan Fraiz, John Nichols, Thomas Niehaus, Scott Collins, Thomas Roberts, John
Derosier, and/or Mark Fischer.
"Legal Requirement" -- any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"Management Stockholders" -- means Christopher Bergmann, Mary
Pat Fralick, John Nichols and Thomas Niehaus.
"Material Adverse Effect" -- means, with respect to any
Person, any effect, event, circumstance, or condition which, when considered
with all other effects, events, circumstances, or conditions, would be
reasonably likely to result in "Damages" having the effect of materially and
adversely affecting the business, assets, properties, results of operations or
financial condition of such Person and its Subsidiaries taken as a whole. In no
event shall any of the following constitute a Material Adverse Effect: (i)
effects, events, circumstances or conditions generally affecting the industry in
which the Acquired Companies operate or arising from changes in general business
or economic conditions; (ii) changes in the prospects of the Acquired Companies;
(iii) effects, events, circumstances or conditions directly attributable to (a)
out-of-pocket expenses (including without limitation legal, accounting,
investigatory, investment banking, and other fees,and expenses) incurred in
connection with the Contemplated Transactions, or (b) the payment by the Company
or any Subsidiary thereof of severance or bonus amounts to the officers or
employees of the Acquired Companies as set forth on Schedule 6.4; (iv) any
effects, events circumstances or conditions arising after the date hereof
resulting from any change in any Legal Requirement or GAAP, which affect
generally entities such as the Company or any Subsidiary thereof; and (v) any
effect resulting from compliance by the Acquired Companies with the terms of
this Agreement or the Contemplated Transactions or the announcement thereof.
"Noncompetition Agreements" -- as defined in Section 2.5(a).
"Occupational Safety and Health Law" -- any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
"Options" -- means the options to purchase Common Stock of the
Company as listed on Schedule 3.3; and "Optionees" means the Persons owning
Options as listed on Schedule 3.3.
"Order" -- any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person; and
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person.
"Organizational Documents" -- (a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"Person" -- any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"Plan" -- as defined in Section 3.13.
"Proceeding" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Related Person" -- with respect to a particular individual:
(a) each other member of such individual's Family; and
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family.
With respect to a specified Person other than an individual, any Person that
directly or indirectly controls, is directly or indirectly controlled by, or is
directly or indirectly under common control with such specified Person.
For purposes of this definition, the "Family" of an individual includes (A) the
individual, (B) the individual's spouse, and (C) the lineal descendants of such
individual.
"Release" -- any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"Representative" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Restricted Stock Agreements" -- as defined in Section 2.5(b).
"Securities Act" -- the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Sellers" -- as defined in the first paragraph of this
Agreement.
"Sellers' Closing Documents" -- each of the agreements or
instruments to be delivered by a Seller pursuant to Sections 2.4 and 2.5 or any
other provision of this Agreement.
"Sellers' Releases" -- as defined in Section 2.4
"Shares" -- all of the authorized, issued and outstanding
shares of common stock, par value $.01 per share (the "Common Stock") and Series
A Redeemable Preferred Stock, par value $10.00 per share of the Company (the
"Preferred Stock").
"Subsidiary" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"Tax" -- means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not.
"Tax Return" -- any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release" -- a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"Threatened" -- a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing) that such a claim, Proceeding, dispute, action, or other matter is
likely to be asserted, commenced, taken, or otherwise pursued in the future.
"Transaction Expenses" -- shall mean all fees, costs, expenses
and disbursements, incurred by the Sellers and Acquired Companies, in connection
with the Contemplated Transactions, including, without limitation, (a) the fees
and expenses of Hutchins, Wheeler & Dittmar and any other counsel retained by
any of the Sellers, (b) the fees and expenses of, and any other amount payable
to, The Beacon Group Capital Services, LLC ("Beacon") and any other investment
or financial advisors retained by Sellers or any Acquired Company, (c) the fees
and expenses of the Company's Accountants in excess of $25,000, (d) any fees and
expenses incurred by the Sellers' Representative, (e) any incentive bonuses
payable to the management of any of the Acquired Companies in connection with
the transactions contemplated hereby other than an incentive payment to
Christopher J. Bergmann not to exceed $200,000, (f) the Sellers'
Representative's share of any expenses of the Escrow Agent, but not the annual
fees of the Escrow Agent, and (g) any fees and expenses of any other counsel,
accountants or other similar professionals with respect to services rendered to
any of the Sellers, or the Acquired Companies in connection with the
transactions contemplated by this Agreement and the Escrow Agreement.
"Year 2000 Claim" -- any claim, cause of action, suit or
proceeding of any kind by any Person against any of the Acquired Companies
arising out of or related to services or work product provided to that Person by
any of the Acquired Companies prior to the Closing Date, that alleges that such
services or work product were not Year 2000 Compliant (as such term is defined
in Section 3.27 of this Agreement).
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1. SHARES. Subject to the terms and conditions of this Agreement, at
the Closing, Sellers will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Sellers.
2.2. CONSIDERATION. The total consideration payable by Buyer for the
purchase of the Shares and for the cancellation of all Options shall be
$80,780,409 (the "Aggregate Payment Amount"). The Aggregate Payment Amount is
the remainder of (a) $89 million, minus (b) all Indebtedness of the Acquired
Companies outstanding as of November 30, 1998 (including the unpaid principal,
accrued interest, any premium reduced by any unamortized discount -- including
any prepayment penalties or other charges payable by reason of the prepayment of
such Indebtedness on the Closing Date -- and other charges payable in connection
therewith) as set forth in Schedule 2.2.
2.2.1 Preferred Stock. Buyer shall purchase all shares of
Preferred Stock owned by the Sellers as of the Closing Date for an amount per
share equal to the sum of (i) $100 plus (ii) all accrued but unpaid dividends
through the Closing Date (the aggregate purchase price for the Preferred Stock
being the "Aggregate Preferred Stock Amount").
2.2.2 Common Stock and Options. Subject to Section 2.2.3,
Buyer shall pay to the Sellers and Optionees, or provide funds for the payment
of, the following consideration in respect of their Common Stock and Options in
the manner provided for in this Agreement:
(a) Per Share Amount. The term "Per Share Amount"
means for each share of Converted Stock represented by Company Stock or Options
a cash amount equal to (a) the sum of (x) the Aggregate Converted Stock Payment
Amount, plus (y) the Aggregate Exercise Price multiplied by (b) a fraction, the
numerator of which is one and the denominator of which is the total Converted
Stock Amount.
(b) Option Value. The term "Option Value" means,
with respect to each Option, an amount equal to the product of (a)(x) the Per
Share Amount, minus (y) the per share Exercise Price of such Option, multiplied
by (b) the number of shares (or fractions thereof) of Converted Stock
represented by such Option; provided, however, that the payment with respect to
each Option shall be reduced by the amount of Option Withholding attributable to
each such Option.
The Aggregate Common Stock Payment Amount shall be comprised of (a) the CTG
Shares having an agreed upon value of $3,200,000 and (b) the balance in cash.
2.2.3 Closing; Adjustment For Escrow. At least three business
days prior to the Closing Date, the chief financial officer of the Company shall
certify in writing to Buyer the amount of the Aggregate Preferred Stock Amount
provided for in Section 2.2.1 as of the Closing Date. In addition, the amounts
payable to the Sellers as contemplated by Section 2.2.2 shall be adjusted
downwards to account for the Escrow Amount. Accordingly, as soon as practicable
prior to the Closing Date and based on the certification referred to above,
Buyer and Sellers' Representative shall jointly calculate (a) the Initial Per
Share Amount, (b) the Option Payment Amount and the Aggregate Option Payment
Amount, and (c) the Initial Aggregate Common Stock Payment Amount. The Closing
shall occur and the payments to be made at Closing as provided for in Section
2.4 shall be based upon the notice provided for herein, and upon such joint
calculations.
2.2.4 Definitions. As used in this Section 2, the following
terms have the meanings set forth below:
"Aggregate Converted Stock Payment Amount" shall mean the
Aggregate Payment Amount minus the Aggregate Preferred Stock Amount.
"Aggregate Exercise Price" shall mean the sum of all the
Exercise Prices of all the Options (not including Options having a per-share
exercise price equal to or greater than the Initial Per Share Amount)
outstanding immediately prior to the Closing Date. "Exercise Price" shall mean
an amount equal to the product of (i) the per share exercise price of each
Option, multiplied by (ii) the number of shares of Converted Stock represented
by such Option.
"Aggregate Option Payment Amount" shall mean the Option Value
multiplied by the number of shares of Common Stock issuable upon exercise of the
Options outstanding immediately prior to the Closing Date.
"Common Stock Payment Amount" shall mean the Per Share Amount
multiplied by the number of shares of Common Stock outstanding immediately prior
to the Closing Date.
"Converted Stock" shall mean (i) with respect to each Option
outstanding immediately prior to the Closing Date, such number of shares of
Common Stock that would be issuable upon exercise if such Option were exercised
in full immediately prior to the Closing Date, and (ii) with respect to each
share of Common Stock outstanding immediately prior to the Closing Date, one
share of Common Stock.
"Converted Stock Amount" shall mean the total number of shares
of Converted Stock outstanding immediately prior to the Closing Date.
"Initial Aggregate Common Stock Payment Amount" shall mean the
Initial Per Share Amount multiplied by the number of shares of Common Stock
outstanding immediately prior to the Closing.
"Initial Aggregate Converted Stock Payment Amount" shall
mean (a) the Aggregate Converted Stock Payment Amount minus (b) the Escrow
Amount.
"Initial Per Share Amount" shall mean (a) the Initial
Aggregate Converted Stock Payment Amount plus (b) the Aggregate Exercise Price
divided by the Converted Stock Amount.
"Option Withholding" shall mean the total amount of income tax
withholding required with respect to Options.
2.2.5 Further Adjustments. When and to the extent the Escrow
Agent is to release all or part of the Escrow Fund to the Sellers after the
Closing (a "Released Payment"), Buyer shall (a) calculate an adjusted Per Share
Amount taking into account the amount of the Escrow Fund so released, in a
manner consistent with the provisions of this Section 2.2 and Schedule A to the
Escrow Agreement, and (b) deliver a notice to the Sellers' Representative and
Escrow Agent which (i) sets forth the adjusted Per Share Amount and (ii)
indicates the amount payable to each Seller. Unless the Sellers' Representative
objects to such notice within 30 days, the Escrow Agent shall allocate and make
the Released Payment as set forth in such notice.
2.3. CLOSING. The purchase and sale (the "Closing") provided for in
this Agreement will take place at the offices of Buyer's counsel Hodgson Russ
Andrews Woods & Goodyear, LLP, 1800 One M&T Plaza, Buffalo, New York 14203-2391,
at 10:00 a.m. (local time) on the date that is four business days following the
termination of the applicable waiting period under the HSR Act, or at such other
time and place as the parties may agree. Subject to the provisions of Section 9,
failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.3 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement.
2.4. CLOSING OBLIGATIONS. At or prior to the Closing:
(a) Sellers will deliver to Buyer:
(i) Certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures guaranteed by a
commercial bank or by a member firm of the New York Stock Exchange, for transfer
to Buyer;
(ii) A certificate executed by Sellers certifying that the
requirements of Sections 7.1(c) and 7.2(b) have been met or satisfied;
(iii) Releases in the form of Exhibit 2.4(a) (collectively,
the "Sellers' Releases"); and
(iv) In the case of any Seller other than a Management
Stockholder, a certificate of an officer (or person holding a similar function)
of each such Seller certifying that all action under its Organizational
Documents required to authorize the sale of its Shares to the Buyer has been
taken.
(b) The Company will deliver to the Buyer:
(i) Certificates of the Secretary of each of the Acquired
Companies certifying the incumbency of officers and genuineness of all officers
executing this Agreement or any document or certificate delivered in connection
therewith for them, copies of their Bylaws, and copies of their director
resolutions or consents authorizing the Contemplated Transactions; and
(ii) Certificates of the Chief Executive Officer and Chief
Financial Officer of each of the Acquired Companies certifying that the
requirements of Sections 7.1(a), 7.1(b) and 7.2(a) have been met and satisfied;
and
(iii) Certificates of Incorporation, as amended, of each of
the Acquired Companies certified as of a recent date by the Secretary of State
of its state of incorporation;
(iv) Certificates of corporate good standing and legal
existence of each of the Acquired Companies as of a recent date from the
Secretary of State of each state in which it is qualified to do business; and
(v) Resignations, effective as of the Closing, of each
director and officer of the Acquired Companies.
(c) Buyer will deliver to the Company and Sellers:
(i) the following amounts by wire transfer, to accounts to
be specified by the Sellers.
(A) the cash portion of the Initial Aggregate Common
Stock Payment Amount to the Sellers holding Common Stock as of the Closing Date
in the percentages set forth on Schedule 2.4;
(B) the Aggregate Preferred Stock Amount to the Sellers
holding Preferred Stock as of the Closing Date as set forth on Schedule 2.4;
(ii) The Buyer shall pay, or make available for payment by
the Company to, the Optionees the Aggregate Option Payment Amount (less any
required Option Withholding), and the Optionees, subject to Section 5.9, shall
be paid the Option Value at Closing.
(iii) the sum of $4,000,000.00 (the "Escrow Amount") to the
escrow agent referred to in Section 2.4(d) by wire transfer or bank cashier's or
certified check;
(iv) the following certificates:
(A) A Certificate of the Secretary of the Buyer
certifying the incumbency of officers and genuineness of signatures of all
officers executing this Agreement or any document or certificate delivered in
connection herewith for it, and a copy of its director resolutions
authorizing the Contemplated Transactions; and
(B) A Certificate of the Chief Executive Officer of the
Buyer certifying that the requirements of Sections 8.1 and 8.2(b) have been met
or satisfied; and
(C) Certificate of Incorporation, as amended, of the
Buyer and the certified as of a recent date by the Secretary of State of its
state of incorporation; and
(D) Certificate of New York Secretary of State that
Buyer is a subsisting corporation as of a recent date.
(v) Buyer shall issue the CTG Shares on the Closing Date in
the names of the Management Stockholders as set forth on Schedule 2.4. The
certificates representing the CTG Shares shall be subject to, and held as
provided for in, the Restricted Stock Agreements.
(d) Buyer and Sellers will enter into an escrow agreement in
the form of Exhibit 2.4(d) (the "Escrow Agreement") with Manufacturers and
Traders Trust Company, Buffalo, New York or such other financial institution as
may be mutually agreed upon by Buyer and Sellers' Representative ("Escrow
Agent").
2.5. MANAGEMENT STOCKHOLDER AGREEMENTS. Simultaneously with
the execution and delivery of this Agreement, the Management Stockholders are
delivering to Buyer:
(a) Noncompetition and Nondisclosure Agreements in the form
of Exhibit 2.5(a), executed by the Management Stockholders (collectively,
"Noncompetition Agreements");
(b) restricted stock agreements in the form of Exhibit
2.5(b), executed by each of the Management Stockholders (collectively, the
"Restricted Stock Agreements"); and
(c) employment letters executed by Buyer and the Management
Stockholders.
Such agreements will become effective on the Closing Date and only if the
Closing occurs.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to Buyer as follows:
3.1. ORGANIZATION AND GOOD STANDING.
(a) Schedule 3.1(a) contains a complete and accurate list for
each Acquired Company of its name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held by
each). Each Acquired Company is a corporation duly organized, validly existing,
and in good standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. Each
Acquired Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification except for those
states in which the failure to be so qualified would not have a Material Adverse
Effect on the Company.
(b) The Company has delivered to Buyer copies of the
Organizational Documents of each Acquired Company, as currently in effect.
3.2. AUTHORITY; NO CONFLICT
(a) The execution and delivery by the Company of this
Agreement, and the performance by the Company of its obligations hereunder, have
been duly and validly authorized by the Board of Directors of the Company, no
other corporate action on the part of the Company or its stockholders being
necessary. This Agreement has been duly and validly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws relating to or affecting
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity.
(b) Except as set forth in Schedule 3.2(b), neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents of the Acquired Companies,
or (B) any resolution adopted by the board of directors or the stockholders of
any Acquired Company;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which any Acquired Company or
either Seller, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any Acquired Company; or
(iv) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any Applicable Contract.
Except as set forth in Schedule 3.2(b), no Acquired Company is or will be
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
3.3. CAPITALIZATION. The authorized equity securities of the Company
consist of 2,500,000 shares of common stock, par value $.01 per share, of which
1,865,947 shares are issued and outstanding and 89,630 shares of preferred
stock, par value $10.00 per share, of which 89,525.41 shares are issued and
outstanding. Except as set forth on Schedule 3.3., no legend or other reference
to any purported Encumbrance appears upon any certificate representing equity
securities of any Acquired Company. All of the outstanding equity securities of
each Acquired Company have been duly authorized and validly issued and are fully
paid and nonassessable. Schedule 3.3 lists the Options and any warrants and
other rights to purchase capital stock of the Company. Except as set forth on
Schedule 3.3, there are no Contracts relating to the issuance, sale, or transfer
of any equity securities or other securities of any Acquired Company. No
Acquired Company owns, or has any Contract to acquire, any equity securities or
other securities of any Person (other than Acquired Companies) or any direct or
indirect equity or ownership interest in any other business.
3.4. FINANCIAL STATEMENTS. The Company has delivered to Buyer: (a)
audited consolidated balance sheets of the Acquired Companies as at December 31
in each of the years 1996 and 1997, and the related audited consolidated
statements of income, changes in stockholders' equity, and cash flow for each of
the fiscal years then ended, together with the report thereon of the Company's
Accountants (or a predecessor thereto), independent certified public
accountants, and (b) an audited consolidated balance sheet of the Acquired
Companies as at November 30, 1998 (including the notes thereto, the "Balance
Sheet"), and the related consolidated statements of income, changes in
stockholders' equity, and cash flow for the 11 month period then ended, together
with the report thereon of the Company's Accountants, independent certified
public accountants. Such financial statements and notes fairly present the
financial condition and the results of operations, changes in stockholders'
equity, and cash flow of the Acquired Companies as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP; the financial statements referred to in this Section 3.4 reflect the
consistent application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial statements. No
financial statements of any Person other than the Acquired Companies are
required by GAAP to be included in the consolidated financial statements of the
Company.
3.5. BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Acquired Companies, all of which have
been made available to Buyer, are complete and correct and have been maintained
in accordance with sound business practices. The minute books of the Acquired
Companies contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Boards of Directors, and
committees of the Boards of Directors of the Acquired Companies, and no meeting
of any such stockholders, Board of Directors, or committee has been held for
which minutes have not been prepared and are not contained in such minute books.
At the Closing, all of those books and records will be in the possession of the
Acquired Companies.
3.6. TITLE TO PROPERTIES; ENCUMBRANCES. None of the Acquired Companies
owns any real property. Schedule 3.6 contains a complete and accurate list of
all real property leased by any Acquired Company or with respect to which any
Acquired Company has any ownership interest or right except for property leases
in the Ordinary Course of Business for temporary housing of employees in
connection with work engagements ("Temporary Leaseholds"). Subject only to the
matters permitted by the following sentence, the Acquired Companies own all the
assets (whether tangible or intangible) that they purport to own located in the
Facilities occupied by the Acquired Companies or reflected as owned in the books
and records of the Acquired Companies, including all of the properties and
assets reflected in the Balance Sheet (except for assets held under capitalized
leases disclosed or not required to be disclosed in Schedule 3.6 and personal
property sold since the date of the Balance Sheet in the Ordinary Course of
Business), and all of the properties and assets purchased or otherwise acquired
by the Acquired Companies since the date of the Balance Sheet (except for
personal property acquired and sold since the date of the Balance Sheet in the
Ordinary Course of Business and consistent with past practice), which
subsequently purchased or acquired properties and assets (other than inventory
and short-term investments) are listed in Schedule 3.6. Except as set forth in
Schedule 3.6, all material assets reflected in the Balance Sheet are free and
clear of all Encumbrances.
3.7. CONDITION AND SUFFICIENCY OF ASSETS. The equipment of the Acquired
Companies are in good operating condition and repair, subject to normal wear and
tear and obsolescence, and are adequate for the uses to which they are being put
and none of the buildings leased by any Acquired Company (excluding Temporary
Leaseholds) and none of their equipment is in need of maintenance or repairs for
which any Acquired Company is financially responsible except for ordinary,
routine maintenance and repairs that are not material in nature or cost.
3.8. ACCOUNTS RECEIVABLE. All accounts receivable of the Acquired
Companies that are reflected on the Balance Sheet or on the accounting records
of the Acquired Companies as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business,
and the respective reserves shown on the Balance Sheet or on the accounting
records of the Acquired Companies as of the Closing Date are calculated
consistent with GAAP and with past practice and, in the case of the reserve as
of the Closing Date, will be so calculated. There is no contest, claim, or right
of set-off which has been asserted by any account debtor, other than warranty
obligations incurred in the Ordinary Course of Business, under any Contract with
any obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable.
3.9. [INTENTIONALLY OMITTED]
3.10. NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 3.10,
the Acquired Companies have no material liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise) required to be disclosed in accordance with GAAP except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
date thereof.
3.11. TAXES.
(a) Each of The Acquired Companies has filed all Tax Returns
that it is or was required to file either separately or as a member of a group
of corporations, pursuant to applicable Legal Requirements. The Company has
delivered to Buyer copies of, and Schedule 3.11 contains a complete and accurate
list of, all income Tax Returns for the tax periods ended on or after December
31, 1994. Except as may otherwise have been communicated to the Buyer in a
writing referring to this Section, the Acquired Companies have paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, and has made adequate provision for
payment of all accrued but unpaid Taxes anticipated in respect of periods since
the periods covered by such Tax Returns.
(b) Schedule 3.11 contains a complete and accurate list of all
audits of all Tax Returns of the Acquired Companies relating to tax periods
ended on or after December 31, 1994, including a reasonably detailed description
of the nature and outcome of each audit. All deficiencies proposed as a result
of such audits have been paid, reserved against, settled, or, as described in
Schedule 3.11, are being contested in good faith by appropriate proceedings.
Schedule 3.11 describes all adjustments to the United States federal income Tax
Returns filed by any Acquired Company or any group of corporations including any
Acquired Company for all taxable years ended on or after December 31, 1994, and
the resulting deficiencies proposed by the IRS. No Acquired Company has given
any waiver or extensions of any statute of limitations relating to the payment
of Taxes of any Acquired Company or for which any Acquired Company may be
liable.
(c) There exists no proposed tax assessment against any
Acquired Company except as disclosed in the Balance Sheet or in Schedule 3.11.
No consent to the application of Section 341(f)(2) of the IRC has been filed
with respect to any property or assets held, acquired, or to be acquired by any
Acquired Company. All Taxes that any Acquired Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Body or
other Person.
(d) All Tax Returns filed by (or that include on a
consolidated basis) any Acquired Company are true, correct, and complete in all
material respects. There is no tax sharing agreement that will require any
payment by any Acquired Company after the date of this Agreement.
3.12. NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet,
there has not been any change with respect to the Acquired Companies which could
reasonably be expected to have a Material Adverse Effect.
3.13. EMPLOYEE BENEFITS.
(a) As used in this Section 3.13, the following terms
have the meanings set forth below.
"Company Other Benefit Obligation" means an Other Benefit
Obligation owed, adopted, or followed by an Acquired Company or an ERISA
Affiliate of an Acquired Company.
"Company Plan" means all Plans of which an Acquired Company or
an ERISA Affiliate of an Acquired Company is a Plan Sponsor, or to which an
Acquired Company or an ERISA Affiliate of an Acquired Company otherwise
contributes, or in which an Acquired Company or an ERISA Affiliate of an
Acquired Company otherwise participates or for which an Acquired Company or
ERISA Affiliate has any liability or contingent liability. All references to
Plans are to Company Plans unless the context requires otherwise.
"Company VEBA" means a VEBA whose members include employees of
any Acquired Company or any ERISA Affiliate of an Acquired Company.
"ERISA Affiliate" means, with respect to an Acquired Company,
any other person that, together with the Company, would be treated as a single
employer under IRC ss. 414.
"Multi-Employer Plan" has the meaning given in ERISA
SS3(37)(A).
"Other Benefit Obligations" means all obligations,
arrangements, or customary practices to provide benefits, other than cash
compensation, as compensation for services rendered, to present or former
directors or employees, other than obligations, arrangements, and practices that
are Plans. Other Benefit Obligations include consulting agreements under which
the compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, and fringe benefits within the
meaning of IRC ss. 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" has the meaning given in ERISA ss. 3(2)(A).
"Plan" has the meaning given in ERISA ss. 3(3).
"Plan Sponsor" has the meaning given in ERISA ss. 3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet
the requirements of IRC SS. 401(a).
"Title IV Plans" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. ss. 1301 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association
under IRC ss. 501(c)(9).
"Welfare Plan" has the meaning given in ERISA ss. 3(1).
(b) Schedule 3.13(b) contains a complete and accurate list of
all Company Plans, Company Other Benefit Obligations, and Company VEBAs.
(c) The Company has delivered to Buyer:
(i) the documents that set forth the terms of
each Company Plan, Company Other Benefit Obligation, or Company VEBA and of any
related trust, including (A) current summary plan descriptions of Company Plans
for which the Acquired Companies are required to prepare, file, and distribute
plan descriptions and summary plan descriptions, and (B) all summaries furnished
to participants and beneficiaries regarding Company Plans, Company Other Benefit
Obligations, and Company VEBAs for which a summary plan description is not
required;
(ii) all personnel, payroll, and employment
manuals and policies;
(iii) all collective bargaining agreements
pursuant to which contributions have been made or obligations incurred
(including both pension and welfare benefits) by the Acquired Companies and the
ERISA Affiliates of the Acquired Companies, and all collective bargaining
agreements pursuant to which contributions are being made or obligations are
owed by such entities;
(iv) a written description of any Company Plan or
Company Other Benefit Obligation that is not otherwise in writing;
(v) all insurance policies purchased by or to
provide benefits under any Company Plan;
(vi) all contracts with third party
administrators, actuaries, investment managers, consultants, and other
independent contractors that relate to any Company Plan, Company Other Benefit
Obligation, or Company VEBA;
(vii) the Form 5500 filed in each of the most recent
three plan years with respect to each Company Plan, including all schedules
thereto and the opinions of independent accountants;
(viii) with respect to Qualified Plans and VEBAs,
the most recent determination letter for each Plan of the Acquired Companies
that is a Qualified Plan and the most recent exemption letter for each Plan of
the Acquired Companies that is a VEBA; and
(ix) with respect to Title IV Plans, the Form
PBGC-1 filed for each of the three most recent plan years.
(d) Except as set forth in Schedule 3.13(d):
(i) The Acquired Companies have performed in all
material respects all of their respective obligations under all Company Plans,
Company Other Benefit Obligations, and Company VEBAs.
(ii) To the Knowledge of the Acquired Companies,
no statement, either written or oral, has been made by any Acquired Company to
any Person with regard to any Plan or Other Benefit Obligation that was not in
accordance with the Plan or Other Benefit Obligation and that could have an
adverse economic consequence to any Acquired Company or to Buyer.
(iii) The Acquired Companies, with respect to all
Company Plans, Company Other Benefits Obligations, and Company VEBAs, are, and
each Company Plan, Company Other Benefit Obligation, and Company VEBA is, in
material compliance with ERISA, the IRC, and other applicable Laws including the
provisions of such Laws expressly mentioned in this Section 3.13, and with any
applicable collective bargaining agreement.
(A) No transaction prohibited by ERISA
SS. 406 and no "prohibited transaction" under IRC ss. 4975(c) have occurred with
respect to any Company Plan.
(B) No Seller or Acquired Company has
any material liability to the IRS with respect to any Plan, including any
liability imposed by Chapter 43 of the IRC.
(C) All filings required by ERISA and
the IRC as to each Plan have been timely filed, and all notices and disclosures
to participants required by either ERISA or the IRC have been timely provided.
(D) All contributions and payments made
or accrued with respect to all Company Plans, Company Other Benefit Obligations,
and Company VEBAs are deductible under IRC ss. 162 or ss. 404. No amount, or any
asset of any Company Plan or Company VEBA, is subject to tax as unrelated
business taxable income.
(iv) Since January 1, 1998, there has been no
establishment or amendment of any Company Plan, Company VEBA, or Company Other
Benefit Obligation.
(v) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding involving,
any Company Plan, Company Other Benefit Obligation, or Company VEBA is pending
or, to the Knowledge of the Acquired Companies, is Threatened.
(vi) Each Qualified Plan of each Acquired Company
has a determination letter from the IRS and nothing has occurred that is
reasonably likely to result in its revocation; each trust for each such Plan is
exempt from federal income tax under IRC ss. 501(a). Each Company VEBA is exempt
from federal income tax.
(vii) No Company Plan is or has been subject to
Title IV of ERISA or the IRC ss. 412.
(viii) No Acquired Company or any ERISA Affiliate
of an Acquired Company has ever established, maintained, or contributed to or
otherwise participated in, or had an obligation to maintain, contribute to, or
otherwise participate in, any Multi-Employer Plan.
(ix) Except to the extent required under ERISA
ss. 601 et seq. and IRC ss. 4980B or other applicable law, no Acquired Company
provides health or welfare benefits for any retired or former employee or is
obligated to provide health or welfare benefits to any active employee following
such employee's retirement or other termination of service.
(x) No payment that is owed or may become due to
any director, officer, employee, or agent of any Acquired Company will be
non-deductible to the Acquired Companies or subject to tax under IRC ss. 280G or
ss. 4999; nor will any Acquired Company be required to "gross up" or otherwise
compensate any such person because of the imposition of any excise tax on a
payment to such person.
(xi) The consummation of the Contemplated
Transactions will not result in the payment, vesting, or acceleration of any
benefit.
3.14. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Schedule 3.14:
(i) each Acquired Company is, and at all times
since January 1, 1994 has been, in material compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets;
(ii) no event has occurred or circumstance
exists that (with or without notice or lapse of time) (A) may constitute or
result in a material violation by any Acquired Company of, or a failure on the
part of any Acquired Company to comply in any material respect with, any Legal
Requirement, or (B) may give rise to any obligation on the part of any Acquired
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) no Acquired Company has received at any
time since January 1, 1994, any written notice or other communication from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual or alleged obligation on the part of any Acquired
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
(b) Schedule 3.14 contains a complete and accurate list of
each Governmental Authorization that is held by any Acquired Company or that
otherwise relates to the business of, or to any of the assets owned or used by,
any Acquired Company. Each Governmental Authorization listed or required to be
listed in Schedule 3.14 is valid and in full force and effect. Except as set
forth in Schedule 3.14:
(i) each Acquired Company is, and at all times
has been, in material compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in Schedule
3.14;
(ii) no event has occurred or circumstance exists
that may (with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply in any material
respect with any term or requirement of any Governmental Authorization listed or
required to be listed in Schedule 3.14, or (B) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Schedule 3.14;
(iii) no Acquired Company has received, at any
time since January 1, 1994, any written notice or other communication from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or required to be
listed in Schedule 3.14 have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Schedule 3.14 collectively constitute
all of the Governmental Authorizations necessary to permit the Acquired
Companies to lawfully conduct and operate their businesses substantially in the
manner they currently conduct and operate such businesses and to permit the
Acquired Companies to own and use their assets substantially in the manner in
which they currently own and use such assets.
3.15. LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Schedule 3.15, there is no
pending Proceeding:
(i) that has been commenced by or against any
Acquired Company or, to the Knowledge of the Acquired Companies, that otherwise
directly relates to any Acquired Company; or
(ii) to the Knowledge of the Acquired Companies,
that challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated Transactions.
To the Knowledge of the Acquired Companies, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding that
would have a Material Adverse Effect on the Acquired Companies. The Company has
delivered to Buyer copies of all pleadings, correspondence, and other documents
relating to each Proceeding listed in Schedule 3.15.
(b) Except as set forth in Schedule 3.15:
(i) there is no Order to which any of the
Acquired Companies, or any of the assets owned or used by any Acquired Company,
is subject; and
(ii) to the Knowledge of the Acquired Companies,
no officer, director, agent, or employee of any Acquired Company is subject to
any Order that prohibits such officer, director, agent, or employee from
engaging in or continuing any conduct, activity, or practice relating to the
business of any Acquired Company.
(c) Except as set forth in Schedule 3.15:
(i) each Acquired Company is, and at all times has
been, in material compliance with all of the terms and requirements of each
Order to which it, or any of the assets owned or used by it, is or has been
subject; and
(ii) no Acquired Company has received any written
notice or other communication from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential violation of, or failure
to comply with, any term or requirement of any Order to which any Acquired
Company, or any of the assets owned or used by any Acquired Company, is or has
been subject.
3.16. ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 3.16, since the date of the Balance Sheet, the Acquired Companies have
conducted their businesses only in the Ordinary Course of Business and there has
not been any:
(a) change in any Acquired Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of any Acquired Company except as set forth on Schedule 3.16; issuance of
any security convertible into such capital stock; grant of any registration
rights; purchase, redemption, retirement, or other acquisition by any Acquired
Company of any shares of any such capital stock; or declaration or payment of
any dividend or other distribution or payment in respect of shares of capital
stock;
(b) amendment to the Organizational Documents of any
Acquired Company;
(c) payment or increase by any Acquired Company of any
bonuses, salaries, or other compensation to any stockholder, director, officer,
or employee or entry into any employment, severance, or similar Contract with
any director, officer, or employee other than in the Ordinary Course of Business
except as set forth on Schedule 3.16;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees of
any Acquired Company;
(e) damage to or destruction or loss of any asset or property
of any Acquired Company, whether or not covered by insurance, which could
reasonably be expected to have a Material Adverse Effect on the Acquired
Companies;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to any Acquired Company in either
such case of at least $100,000;
(g) sale, lease, or other disposition of any asset or property
of any Acquired Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of any Acquired Company except in
the Ordinary Course of Business, including the sale, lease, or other disposition
of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a
value to any Acquired Company in excess of $100,000 in the aggregate;
(i) material change in the accounting methods used by any
Acquired Company; or
(j) agreement, whether oral or written, by any Acquired
Company to do any of the foregoing.
3.17. CONTRACTS; NO DEFAULTS
(a) Schedule 3.17(a) contains a complete and accurate list,
and Sellers have delivered to Buyer true and complete copies, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by one or more
Acquired Companies of an amount or value in excess of $100,000 measured for the
nine-month period ended September 30, 1998;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to one or more
Acquired Companies of an amount or value in excess of $100,000 measured with for
the nine-month period ended September 30, 1998;
(iii) each Applicable Contract that was not
entered into in the Ordinary Course of Business and that involves expenditures
or receipts of one or more Acquired Companies in excess of $100,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except the
Temporary Leaseholds and personal property leases and installment and
conditional sales agreements having a value per item or aggregate payments of
less than $100,000 and with terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(vi) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by any Acquired Company with any other Person;
(viii) each Applicable Contract containing
covenants that in any way purport to restrict the business activity of any
Acquired Company or any Affiliate of an Acquired Company or limit the freedom of
any Acquired Company or any Affiliate of an Acquired Company to engage in any
line of business or to compete with any Person;
(ix) each Applicable Contract providing for
commissions or similar payments to or by any Person based on sales, purchases,
or profits, other than direct payments for goods and other than commissions
payable in the Ordinary Course of Business to sales personnel of the Acquired
Companies;
(x) each power of attorney that is currently
effective and outstanding;
(xi) each Applicable Contract entered into other
than in the Ordinary Course of Business that contains or provides for an express
undertaking by any Acquired Company to be responsible for indirect,
consequential or punitive damages;
(xii) each Applicable Contract for capital
expenditures in excess of $100,000;
(xiii) each written warranty, guaranty, and or
other similar undertaking with respect to contractual performance extended by
any Acquired Company other than in the Ordinary Course of Business and
consistent with prior business practices; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
The Company has delivered to Buyer complete copies of each of the Contracts
listed on Schedule 3.17(a).
(b) Except as set forth in Schedule 3.17(b), each Contract
identified or required to be identified in Schedule 3.17(a) is in full force and
effect and, to the Knowledge of the Acquired Companies, is valid and enforceable
in accordance with its terms.
(c) Except as set forth in Schedule 3.17(c):
(i) each Acquired Company is, and at all times
has been, in material compliance with all applicable terms and requirements of
each Contract (either currently in effect or the Breach of which would not be
barred by a statute of limitations) under which such Acquired Company has or had
any obligation or liability or by which such Acquired Company or any of the
assets owned or used by such Acquired Company is or was bound;
(ii) to the Knowledge of the Acquired Companies,
each other Person that has or had any obligation or liability under any Contract
under which an Acquired Company has or had any rights is, and at all times has
been, in material compliance with all applicable terms and requirements of such
Contract;
(iii) other than the Contemplated Transactions, no
event has occurred or circumstance exists that (with or without notice or lapse
of time) may contravene, conflict with, or result in a material violation or
breach of, or give any Acquired Company or other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received
from any other Person any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Contract.
(d) There are no active renegotiations of, or active attempts
to renegotiate, any material amounts paid or payable to any Acquired Company
under current or completed Contracts with any Person, and no such Person has
made written demand for such renegotiation.
3.18. INSURANCE
(a) The Company has delivered to Buyer true and complete
copies of (i) all current policies of insurance to which any Acquired Company is
a party or under which any Acquired Company is covered and (ii) general
liability policies to which any Acquired Company was a party in 1996, 1997 and
1998.
(b) Schedule 3.18(b) describes:
(i) any self-insurance arrangement by or
affecting any Acquired Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk by any Acquired
Company; and
(iii) all obligations of the Acquired Companies to
third parties with respect to insurance (including such obligations under leases
and service agreements) and identifies the policy under which such coverage is
provided.
(c) Schedule 3.18(c) sets forth loss runs requested by the
Buyer.
(d) Except as set forth on Schedule 3.18(d):
(i) All policies to which any Acquired Company
is a party or that provide coverage to either Seller, any Acquired Company, or
any director or officer of an Acquired Company:
(A) are sufficient for compliance with
all Legal Requirements and all Contracts listed on Schedule 3.17 to which any
Acquired Company is a party or by which any of them is bound;
(B) will continue in full force and
effect following the consummation of the Contemplated Transactions; and
(C) do not provide for any retrospective
premium adjustment or other experienced-based liability on the part of any
Acquired Company.
(ii) No Seller or Acquired Company has received
(A) any refusal of coverage or any notice
that a defense will be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer of any policy is
not willing or able to perform its obligations thereunder.
(iii) The Acquired Companies have paid all
premiums due, and have otherwise performed all of their respective obligations,
under each policy to which any Acquired Company is a party or that provides
coverage to any Acquired Company or director thereof.
(iv) The Acquired Companies have given notice to
the insurer of all claims that may be insured thereby.
Notwithstanding anything to the contrary in this Section 3.18, none of the
representations and warranties in this Section 3.18 shall apply to any insurance
policy or self-insured arrangement which provides benefits or coverage under any
Company Plan as defined in Section 3.13.
3.19. ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.19:
(a) Each Acquired Company is, and at all times has been, in
full compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. No Acquired Company has any basis to expect, nor
has any of them or any other Person for whose conduct they are or may be held to
be responsible received, any actual or Threatened order, notice, or other
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which any Acquired Company has had an interest, or with
respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
any Acquired Company, or any other Person for whose conduct it is or may be held
responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of the Acquired
Companies, Threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect to or affecting any of
the Facilities or any other properties and assets (whether real, personal, or
mixed) in which any Acquired Company has or had an interest.
(c) No Acquired Company has any basis to expect, nor has any
of them or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning, or other communication that relates to any alleged or actual violation
or failure to comply with any Environmental Law, or of any alleged, actual
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which any Acquired Company had
an interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by any Acquired Company or any other Person for whose conduct it is or
may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) No Acquired Company, or any other Person for whose
conduct it is or may be held responsible, has any Environmental, Health, and
Safety Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which any Acquired
Company (or any predecessor), has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any such other
property or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the currently owned or operated Facilities or, to the Knowledge
of the Acquired Companies, at any formerly owned or operated Facility or at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or deposited or
located in land, water, sumps, or any other part of the Facilities, or, to the
Knowledge of the Acquired Companies, incorporated into any structure therein or
thereon.
(f) There has been no Release or, to the Knowledge of the
Acquired Companies, Threat of Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which any Acquired Company has or
had an interest, whether by any Acquired Company, or any other Person.
(g) The Company has delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by any Acquired Company pertaining to Hazardous Materials
or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by any Acquired Company, or any other Person for whose conduct it is
or may be held responsible, with Environmental Laws.
3.20. EMPLOYEES
(a) Schedule 3.20(a) contains a complete and accurate list of
the following information for each employee or officer of the Acquired Companies
with a base annualized salary in excess of $50,000 as of January 13, 1999,
including each such employee on leave of absence or layoff status: employer;
name; job title; current compensation paid or payable and any change in
compensation since December 1, 1998; and vacation accrued as of December 22,
1998.
(b) To the Knowledge of the Acquired Companies, no employee
or director of any Acquired Company is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and any other
Person ("Proprietary Rights Agreement") that in any way adversely affects or
will affect (i) the performance of his duties as an employee or director of the
Acquired Companies, or (ii) the ability of any Acquired Company to conduct its
business, including any Proprietary Rights Agreement with Sellers or the
Acquired Companies by any such employee or director. To the Company's Knowledge,
none of the individuals on Schedule 3.20(b) intends to terminate his employment
with such Acquired Company.
3.21. LABOR RELATIONS; COMPLIANCE. No Acquired Company has been or is a
party to any collective bargaining or other labor Contract. Except as set forth
on Schedule 3.21, since January 1, 1994, there has not been, there is not
presently pending or existing, and there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
Proceeding against or affecting any Acquired Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Acquired Companies or their
premises, or (c) any application for certification of a collective bargaining
agent. No event has occurred or circumstance exists that could provide the basis
for any work stoppage or other labor dispute. There is no lockout of any
employees by any Acquired Company, and no such action is contemplated by any
Acquired Company. Except as set forth on Schedule 3.21, each Acquired Company
has complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing. Except as set forth on
Schedule 3.21, no Acquired Company is liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22. INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "Intellectual
Property Assets" includes:
(i) the name Elumen and DARCA, all fictional
business names, trading names, registered and unregistered trademarks, service
marks, and applications (collectively, "Marks"); and
(ii) all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, "Trade Secrets");
owned, used, or licensed by any Acquired Company as licensee or licensor. The
Company has (A) no patents, patent applications, or inventions and discoveries
that may be patentable and (B) no material copyrights in published works or
unpublished works.
(b) Agreements -- Schedule 3.22(b) contains a complete and
accurate list and summary description, including any royalties paid or received
by the Acquired Companies, of all Contracts relating to the Intellectual
Property Assets to which any Acquired Company is a party or by which any
Acquired Company is bound, except for any license implied by the sale of a
product and perpetual, paid-up licenses for commonly available software programs
with a value of less than $20,000 in the aggregate under which an Acquired
Company is the licensee. There are no outstanding and, to Company's Knowledge,
no Threatened disputes or disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all
those necessary for the operation of the Acquired Companies' businesses as they
are currently conducted. One or more of the Acquired Companies is the owner of
all right, title, and interest in and to each of the Intellectual Property
Assets, free and clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims, and has the right to use without payment to
a third party all of the Intellectual Property Assets.
(ii) Except as set forth in Schedule 3.22(c), al
former and current employees of each Acquired Company have executed written
Contracts with one or more of the Acquired Companies that assign to one or more
of the Acquired Companies all rights to any inventions, improvements,
discoveries, or information relating to the business of any Acquired Company. To
the Knowledge of the Acquired Companies, no employee of any Acquired Company has
entered into any Contract that restricts or limits in any way the scope or type
of work in which the employee may be engaged or requires the employee to
transfer, assign, or disclose information concerning his work to anyone other
than one or more of the Acquired Companies.
(d) Trademarks
(i) Schedule 3.22(d) contains a complete and
accurate list and summary description of all Marks. Except as set forth on
Schedule 3.22(d), one or more of the Acquired Companies is the owner of all
right, title, and interest in and to each of the Marks, free and clear of all
liens, security interests, charges, encumbrances, equities, and other adverse
claims.
(ii) Except as set forth on Schedule 3.22(d), all
Marks that have been registered with the United States Patent and Trademark
Office are currently in compliance with all formal legal requirements (including
the timely post-registration filing of affidavits of use and incontestability
and renewal applications), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety days after the
Closing Date.
(iii) No Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to the Knowledge of the Acquired
Companies, no such action is Threatened with the respect to any of the Marks.
(iv) To the Knowledge of the Acquired Companies,
there is no potentially interfering trademark or trademark application of any
third party.
(v) To the Knowledge of the Acquired Companies,
no Mark is infringed or has been challenged or threatened in any way. None of
the Marks used by any Acquired Company infringes or is alleged to infringe any
trade name, trademark, or service mark of any third party.
(vi) All products and materials containing a Mark
bear the proper federal registration notice where permitted by law.
(e) Trade Secrets
(i) The Acquired Companies have taken all
reasonable precautions to protect the secrecy, confidentiality, and value of
their Trade Secrets.
(ii) One or more of the Acquired Companies has
good title and an absolute (but not necessarily exclusive) right to use the
Trade Secrets. The Trade Secrets are not part of the public knowledge or
literature, and, to the Knowledge of the Acquired Companies, have not been used,
divulged, or appropriated either for the benefit of any Person (other than one
or more of the Acquired Companies) or to the detriment of the Acquired
Companies. No Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
3.23. CERTAIN PAYMENTS. No Acquired Company or director, officer,
agent, or employee of any Acquired Company, or any other Person associated with
or acting for or on behalf of any Acquired Company, has directly or indirectly
(a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of any Acquired Company or any Affiliate of an Acquired
Company, or (iv) in violation of any Legal Requirement, (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Acquired Companies.
3.24. DISCLOSURE
(a) No representation or warranty of the Company in this
Agreement and no statement in any Schedule attached hereto omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
3.25. RELATIONSHIPS WITH RELATED PERSONS. No Seller or any Related
Person of Sellers or of any Acquired Company has, or since January 1, 1997 has
had, any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Acquired Companies'
businesses. No Seller or any Related Person of Sellers or of any Acquired
Company currently has, or since January 1, 1997 has owned (of record or as a
beneficial owner), an equity interest or any other financial or profit interest
in, a Person that has had business dealings or a material financial interest in
any transaction with any Acquired Company other than business dealings or
transactions conducted in the Ordinary Course of Business with the Acquired
Companies at substantially prevailing market prices and on substantially
prevailing market terms. Except as set forth in Schedule 3.25, no Seller or any
Related Person of Sellers or of any Acquired Company is a party to any Contract
with, or has any claim or right against, any Acquired Company.
3.26. BROKERS OR FINDERS. Except as set forth in Schedule 3.26, the
Acquired Companies, Sellers and their respective agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.27. YEAR 2000 COMPLIANCE. To the Knowledge of the Acquired Companies,
except as set forth on Schedule 3.27, the computer systems of the Acquired
Companies (including without limitation all software, hardware, workstations and
related components, and, specifically, the telephone switch, personal computers
and LAN owned or used by the Acquired Companies) are Year 2000 Compliant or will
be Year 2000 Compliant by December 31, 1999. The term "Year 2000 Compliant" as
used herein means that the computer systems (a) are capable of recognizing,
processing, managing, representing, interpreting, and manipulating correctly
date related data for dates earlier and later than January 1, 2000, including,
but not limited to, calculating, comparing, sorting, storing, tagging and
sequencing, without resulting in or causing logical or mathematical errors or
inconsistencies in any user-interface functionalities or otherwise, including
data input and retrieval, data storage, data fields, calculations, reports,
processing, or any other input or output, (b) have the ability to provide date
recognition for any data element without limitation (including, but not limited
to, date-related data represented without a century designation, date-related
data whose year is represented by only two digits and the date fields assigned
special values), (c) have the ability to automatically function into and beyond
the year 2000 without human intervention and without any change in operations
associated with the advent of the year 2000, (d) have the ability to correctly
interpret data, dates and time into and beyond the year 2000, (e) have the
ability not to produce noncompliance in existing information, nor otherwise
corrupt such data into and beyond the year 2000, (f) have the ability to
correctly process after January 1, 2000 data containing dates before that date,
and (g) have the ability to recognize all "leap years" including February 29,
2000.
3.28. INDEBTEDNESS. The indebtedness and obligations identified on
Schedule 2.2 constitutes all of the Indebtedness as defined in Article 1 of this
Agreement.
3.A. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Each Seller, severally and not jointly, hereby represents and warrants
as to such Seller (and not as to any other Seller) to the Buyer as follows:
3.A.1. AUTHORITY; NO CONFLICT
(a) The Seller has all requisite power and legal capacity to execute
and deliver this Agreement and the Sellers' Closing Documents to which it is a
party. The execution and delivery by such Seller of this Agreement and its
Sellers' Closing Documents, and the performance of its respective obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby, including without limitation the sale and transfer pursuant
to this Agreement of the Shares, have been duly and validly authorized and no
other corporate or partnership action on the part of such Seller is necessary.
This Agreement and each Sellers' Closing Document to which it is a party have
been duly and validly executed and delivered by such Seller and constitutes a
legal, valid and binding obligation of such Seller enforceable against such
Seller in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to or affecting creditors' rights
generally and except as enforcement thereof is subject to general principles of
equity.
(b) Except as set forth in Schedule 3.A.1, neither the execution and
delivery of this Agreement by such Seller, nor the consummation or performance
of any of the Contemplated Transactions by such Seller will directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the Seller, or
(B) any resolution adopted by the board of directors or the stockholders of the
Seller (or any governing body with similar duties);
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which the Seller,
may be subject; or
(iii) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any material Contract to
which the Seller is a party.
Except as set forth in Schedule 3.A.1, the Seller is not or will not be required
to give any notice to or obtain any Consent from any Person in connection with
the execution and delivery of this Agreement or the consummation or performance
of any of the Contemplated Transactions.
3.A.2 TITLE TO SHARES. Such Seller owns the Shares opposite its name on
Schedule 3.A.2, beneficially and of record, free and clear of all Encumbrances.
Except for this Agreement and as disclosed in Schedule 3.A.2, there are no
outstanding options, warrants or other rights with respect to such Seller's
Shares. Except as set forth on Schedule 3.A.2, such Seller is not bound by any
Contract relating to its Shares.
3.A.3 BROKERS. Except as disclosed in Schedule 3.A.3, all negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out by the Sellers directly with Buyer without the intervention of any
Person on behalf of the Sellers in such manner as to give rise to any valid
claim by any Person against Buyer for a finder's fee, brokerage commission or
similar payment.
3.A.4 LEGAL PROCEEDINGS. There is no pending Proceeding that has been
commenced against such Seller and that challenges or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To such Seller's Knowledge, no such Proceeding has
been Threatened.
3.A.5 COMPANY'S REPRESENTATIONS. To the Knowledge of the Seller, as of
the date of this Agreement none of the representations and warranties of the
Company in Article 3 contain any untrue or misleading statement or omits to
state a material fact necessary to make the statements therein not misleading.
3.B NO ADDITIONAL REPRESENTATIONS OR WARRANTIES. The representations
and warranties contained in Article 3 are the only representations and
warranties made by the Company in connection with the Contemplated Transactions
and supersede any and all previous written or oral statements made by the
Company to the Buyer. The representations and warranties contained in Article
3.A. are the only representations and warranties made by the Sellers in
connection with the Contemplated Transactions and supersede any and all previous
written or oral statements made by the Sellers to the Buyer. The Buyer
acknowledges and agrees that neither the Company, any of its Subsidiaries, the
Seller nor any other Person has made any representation or warranty, express or
implied, as to the accuracy or completeness of any information regarding the
Company, its Subsidiaries or their business, except as expressly set forth in
this Agreement and the disclosure schedules. Except as provided in this
Agreement, the Buyer further agrees that, neither the Company, the Seller, nor
any other Person shall have, or be subject to, any liability to the Buyer or any
other Person resulting from the distribution or, or the use by, the Buyer or
Buyer's Representatives of any information, document or material made available
to them in connection with the transactions contemplated by this Agreement.
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE 3,
BY THE COMPANY AND IN ARTICLE 3.A. BY SELLERS, THE COMPANY AND SELLERS MAKE NO
REPRESENTATION OR WARRANTY.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers and the Company as follows:
4.1. ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
New York. Buyer has the absolute and unrestricted right, power, and authority to
execute and deliver this Agreement and the Buyer's Closing Documents and to
perform its obligations under this Agreement and the Buyer's Closing Documents.
4.2. AUTHORITY; NO CONFLICT
(a) This Agreement and each of the Buyer's Closing Documents
have been duly and validly executed and delivered and will constitute the legal,
valid, and binding obligations of Buyer, enforceable against Buyer in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws relating to or affecting creditors' rights generally and except as
enforcement thereof is subject to general principles of equity.
(b) Except as set forth in Schedule 4.2, neither the execution
and delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of Buyer, or (B)
any resolution adopted by the board of directors or the shareholders of Buyer;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which Buyer, may
be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by Buyer; or
(iv) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any material Contract to
which Buyer is a party.
Except as set forth in Schedule 4.2, Buyer is not or will not be required to
give any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
4.3. INVESTMENT INTENT. Buyer is acquiring the Shares for
its own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act.
4.4. CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.5. BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Sellers harmless from any such
payment alleged to be due by or through Buyer as a result of the action of Buyer
or its officers or agents.
4.6. BUYER COMMON STOCK. The Buyer has taken all necessary action to
permit it to issue the CTG Shares to be issued pursuant to this Agreement. The
CTG Shares issued pursuant to this Agreement will, when issued, be validly
issued, fully paid and non-assessable, and no shareholder of the Buyer has or
will have any preemptive right of subscription or purchase in respect thereof.
All of the CTG shares issued pursuant to this Agreement shall be freely
tradeable under state and federal securities laws except (a) as set forth in the
Restricted Stock Agreements between the Buyer and the Management Stockholders
and (b) with respect to any Management Stockholder who is an affiliate of Buyer,
as may be limited by Legal Requirements.
4.7. CORPORATE APPROVALS. The Board of Directors of the Buyer has taken
all corporate action necessary to authorize the execution of this Agreement and
the consummation of the transactions contemplated hereby. No approval of the
shareholders of the Buyer is required to approve this Agreement or the
transactions contemplated hereby.
4.8. SEC FILINGS. The Buyer has made available to Sellers a copy of any
filings made by Buyer under the Securities Act of 1933 and the Securities
Exchange Act of 1934 (the "SEC Filings") which have been requested by the
Sellers. As of the date of filing with the SEC of the SEC Filings, each such
document did not contain any untrue statement of a material fact or omission
of any material fact required to be stated therein in order to make the
statements contained therein, in light of the circumstances in which they were
made, no misleading. At the date of filing of each of the SEC Filings, each such
document complied in all material respects with the published rules and
regulations of the SEC with respect thereto.
4.9. KNOWLEDGE OF BREACH. The Buyer has no Knowledge on the date of
this Agreement of any Breach by the Company of any of its representations and
warranties set forth in this Agreement.
4.10. RESTRICTED STOCK AGREEMENTS. All of the statements made by the
Buyer in the Restricted Stock Agreements are true and correct in all material
respects.
5. COVENANTS OF COMPANY PRIOR TO CLOSING DATE
5.1. ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, the Company will, and will cause each other Acquired Company
and their Representatives to, (a) afford Buyer and its Representatives and
prospective lenders and their Representatives (collectively, "Buyer's Advisors")
access during normal business hours to each Acquired Company's personnel,
properties (including subsurface testing), contracts, books and records, and
other documents and data, upon reasonable prior notice and in a manner which
does not have any significant and unreasonably disruptive effect on the
operations of the Acquired Companies, (b) furnish Buyer and Buyer's Advisors
with copies of all such contracts, books and records, and other existing
documents and data as Buyer may reasonably request, and (c) furnish Buyer and
Buyer's Advisors with such additional financial, operating, and other data and
information as Buyer may reasonably request.
5.2. OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES.
Between the date of this Agreement and the Closing Date, the Company will, and
will cause each Acquired Company to:
(a)conduct the business of such Acquired Company only in the
Ordinary Course of Business; and
(b) use their Best Efforts to preserve intact the current
business organization of such Acquired Company, keep available the services of
the current officers, employees, and agents of such Acquired Company, and
maintain the relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships with such
Acquired Company.
5.3. NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, the
Company will not, and will cause each Acquired Company not to, without the prior
consent of the Chief Executive Officer of Buyer, take any affirmative action, or
fail to take any reasonable action within their or its control, as a result of
which any of the changes or events listed in Section 3.16 is likely to occur,
except as expressly set forth on Schedule 3.16. Without limiting the foregoing,
the Company will cause each Acquired Companies not to incur any Indebtedness in
excess of the amount shown on the Balance Sheet other than drawings under the
Company's line of credit with BankBoston, N.A. and lease line with BankBoston
N.A. and accrued interest and amortization related thereto and on the Company's
12.5% Subordinated Debentures due 2002.
5.4. REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, the Company will, and will cause each Acquired Company to, make
all filings required by Legal Requirements to be made by them in order to
consummate the Contemplated Transactions (including all filings under the HSR
Act). Between the date of this Agreement and the Closing Date, the Company will,
and will cause each Acquired Company to, (a) cooperate with Buyer with respect
to all filings that Buyer is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (b) cooperate with Buyer in
obtaining all consents identified in Schedule 4.2 (including taking all actions
reasonably requested by Buyer to cause early termination of any applicable
waiting period under the HSR Act).
5.5. NOTIFICATION. Between the date of this Agreement and the Closing
Date, the Company will promptly notify Buyer in writing if the Company or any
Acquired Company becomes aware of any fact or condition that causes or
constitutes a Breach of any of the Company's representations and warranties as
of the date of this Agreement. Between the date of this Agreement and the
Closing Date, the Company will also promptly notify Buyer in writing if the
Company or any Acquired Company becomes aware of any fact or condition hereafter
arising ("New Facts") which, if existing or occurring at the date of this
Agreement, would have been required to be set forth in a disclosure Schedule in
the form of a "Revised Schedule" delivered to the Buyer. Each such date of
disclosure shall hereinafter be referred to as a "Disclosure Date." Any Revised
Schedule shall be marked to show changes between the original disclosure
Schedule and the Revised Schedule. The Buyer shall have ten days following each
Disclosure Date to review the New Facts or other variance(s) disclosed. In the
event that such New Facts or other variance(s) could reasonably be expected to
have a Material Adverse Effect on the Acquired Companies, the Buyer may deliver
to the Company a notice setting forth in reasonable detail the basis for such
conclusion and its election to terminate its obligations under this Agreement
(the "Termination Notice") no later than 5:00 p.m. Eastern Standard Time on the
tenth calendar day following the Disclosure Date. In the event that such New
Facts or other variance(s) could reasonably be expected to have a Material
Adverse Effect on the Acquired Companies and if a Termination Notice has been
given as provided herein, this Agreement shall forthwith become null and void,
and there shall be no liability or obligation whatsoever on the part of any
party hereto. In the event the Buyer does not have the right or for any reason
does not terminate this Agreement pursuant to this Section, then such Revised
Schedule shall be deemed to amend and/or supplement the original disclosure
Schedule hereto and cure and correct for all purposes any Breach of any
representation and warranty which would have existed by reason of the Company
not having added such Revised Schedule.
5.6. PAYMENT OF INDEBTEDNESS BY RELATED PERSONS.
(a) Except as expressly provided in Paragraph (b) of this
Section 5.6, the Company will cause all indebtedness owed to an Acquired Company
by any Seller or any Related Person of any Seller to be paid in full prior to
Closing.
(b) IT Capital Partners, Inc., one of the Sellers, is party to
promissory notes in the aggregate principal amount of approximately $504,000
from the Company (the "Stockholder Loan"). The Company shall forgive, effective
prior to the Closing Date, all principal and interest owing to the Company under
the Stockholder Loan.
5.7. NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, the Company will not, and will cause each
Acquired Company and each of their Representatives not to, directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Buyer) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of any Acquired Company,
or any of the capital stock of any Acquired Company, or any merger,
consolidation, business combination, or similar transaction involving any
Acquired Company.
5.8. BEST EFFORTS. Between the date of this Agreement and the Closing
Date, the Company will use its Best Efforts to cause the conditions in Sections
7 and 8 to be satisfied.
5.9. [INTENTIONALLY OMITTED]
5.10. APPOINTMENT OF SELLERS' REPRESENTATIVE.
(a) Each of the Sellers has as of the date of this Agreement
appointed Scott C. Collins (the "Sellers' Representative") as such Sellers'
attorney-in-fact, to act in the Seller's name, place and stead pursuant to that
certain agreement among Sellers in the form of Exhibit 5.10 attached hereto, a
copy of the executed form of which has been delivered to Buyer ("Seller's
Representative Agreement").
(b) Each of the Sellers acknowledges and agrees that it shall
be bound by the acts of the Sellers' Representative to the extent authorized in
the Sellers' Representative Agreement, and each of the Buyer, the Company, and
the Escrow Agent shall be entitled to conclusively rely on such appointment and
authority. Each of the Sellers consents and agrees that any notice delivered to
the Sellers' Representative pursuant to this Agreement or Escrow Agreement
shall constitute a notice to such Seller.
5.11. STATUTE OF LIMITATIONS. Prior to the Closing, the Company shall
not permit any Acquired Company to agree with any Governmental Body to extend
the statute of limitations with respect to any Taxes, without the prior written
consent of Buyer.
5.12. INTERIM FINANCIAL STATEMENTS. From the date of this Agreement
through the closing Date, the Company will prepare monthly financial statements
for the Company and Acquired Companies on a consolidated basis (beginning with
the month of December 1999), and will deliver them to Buyer within 48 hours
after they are finalized and available. These unaudited financial statements
will be prepared in accordance with GAAP (except for the absence of footnotes
and subject to normal year end adjustments which will be immaterial in amount),
and will fairly present the consolidated financial position, results of
operations, cash flows and changes in shareholders' equity of the Acquired
Companies as at and for the periods indicated.
5.13. PENSION PLANS. The Company will cause all amounts required to be
contributed to any Company Plan by the Acquired Companies, as of the Closing
Date, to have been paid or properly accrued on the books of the Acquired
Companies by such date, and any amounts required to be accrued as expenses in
accordance with applicable pension accounting requirements through the Closing
Date to have been or to be properly recorded on the books of the Acquired
Companies as of the Closing Date. The Company will cause the Acquired Companies
to either contribute or account on their respective books the amount of any
employer matching contributions or discretionary contributions (in an amount
determined in accordance with the Company's past practices) to any Company Plan
which in the ordinary course of business would be contributed for or
attributable to the period prior to the Closing Date.
5.A COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.A.1 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9 or otherwise pursuant to this Agreement, the
Sellers will not, and will cause each of their Representatives not to, directly
or indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Buyer) relating to any transaction involving the sale of business or assets
(other than in the Ordinary Course of Business) of any Acquired Company, or any
of the capital stock of any Acquired Company, or any merger, consolidation,
business combination, or similar transaction involving any Acquired Company.
5.A.2 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, the Sellers will use their Best Efforts to cause the conditions in
Sections 7 and 8 to be satisfied.
5.A.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, each
Seller will not, and will use his, her or its Best Efforts cause the Acquired
Companies not to, without the prior consent of the Buyer, take any affirmative
action as a result of which any of the changes or events listed in Section 3.16
will occur, except as expressly set forth on Schedule 3.16.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1. REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Buyer will, and will cause each of its Related Persons to, make
all filings required by Legal Requirements to be made by them to consummate the
Contemplated Transactions (including all filings under the HSR Act). Between the
date of this Agreement and the Closing Date, Buyer will, and will cause each
Related Person to, cooperate with the Company and Sellers with respect to all
filings that the Company and Sellers are required by Legal Requirements to make
in connection with the Contemplated Transactions, and (ii) cooperate with the
Company and Sellers in obtaining all consents identified in Schedule 3.2;
provided that this Agreement will not require Buyer to dispose of or make any
change in any portion of its business or to incur any unreasonable burden to
obtain a Governmental Authorization.
6.2. BEST EFFORTS. Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, Buyer will use its Best
Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
6.3. ANTIDILUTION OF CTG SHARES. In the event that prior to the Closing
Date there occurs, with respect to CTG Common Stock a stock split, reverse stock
split, reorganization, recapitalization, stock dividend or other similar
corporate transaction which affects the CTG Common Stock such that an adjustment
is appropriate to prevent dilution or enlargement of the rights of the
Management Stockholders who are to receive CTG Shares, then the number of shares
of CTG Common Stock or the kind of shares that shall comprise the CTG Shares
shall be equitably adjusted; provided, however, that no adjustment shall be made
pursuant to this Section 6.3 on account of the increase or decrease in the
market price of CTG Common Stock.
6.4. EMPLOYEE BENEFIT AND RELATED MATTERS.
(a) The Buyer agrees that on and after the Closing Date, it
will cause the Acquired Companies to honor all employment, severance,
termination and retirement agreements to which any of the Acquired Companies are
presently a party as set forth on Schedule 6.4, as such agreements may hereafter
be amended, modified or terminated with the consent of Buyer and the other party
or as otherwise permitted by such agreements and severance policies in effect on
the date hereof.
(b) Following the Closing and through December 31, 1999, Buyer
agrees that any employee whose employment with an Acquired Company continues
after the Closing Date will receive base salary and bonus opportunities at a
level no less than the base salary and bonus opportunities he or she received
prior to the Closing Date and that Buyer will maintain benefit plans which are
comparable to the Company plans.
(c) For any employees of the Acquired Companies who become
employees of Buyer after the Closing Date, for purposes of any employee benefit
plan, program, or arrangement maintained by Buyer on or after the Closing Date,
any employment by such employees shall be credited as service for vesting and
eligibility purposes under Buyer's plans, programs and arrangements.
(d) Indemnification and Insurance. The Buyer agrees that all
rights to indemnification or exculpation now existing in favor of the employees,
agents, directors or officers of any of the Acquired Companies (the "Company
Indemnified Parties") as provided in its Certificate of Incorporation or
By-Laws, or otherwise in effect on the date hereof shall continue in full force
and effect for a period of not less than six years after the Closing Date;
provided, however, that, in the event any claim or claims are asserted or made
within such six-year period, all rights to indemnification in respect of any
such claim or claims shall continue until disposition of any and all such
claims. Any determination required to be made with respect to whether a Company
Indemnified Party's conduct complies with the standards set forth in the
Certificate of Incorporation or By-Laws of the Company or otherwise shall be
made by independent counsel selected by the Company reasonably satisfactory to
the Company Indemnified Party (whose fees and expenses shall be paid by the
Company).
The Buyer shall cause each of the Company Indemnified Parties
covered by policies of directors' and officers' liability insurance maintained
by or on behalf of the Company and its Subsidiaries to be covered with respect
to matters occurring prior to the Closing Date for a continuous period of not
less than six years from the Closing Date (without any gap or lapse in coverage)
under either (a) the directors' and officers' liability insurance policies most
recently maintained by or on behalf of the Company and its Subsidiaries or (b)
Buyer's directors' and officers' liability insurance policy (provided that the
Buyer may substitute therefore policies with reputable and financial sound
carriers of at least the same coverage as the Company's current policy and
containing terms and conditions which are not materially less advantageous so
long as such substitution does not result in gaps or lapses in coverage with
respect to claims arising from or relating to matters occurring prior to the
Closing Date).
6.5. SOLVENCY AFTER THE CLOSING. After the Closing, the Buyer agrees
that it shall not, and that it shall cause the Company not to, take or cause to
be taken or omit to take any action reasonably likely to result in a
determination pursuant to Legal Requirements that, after giving effect to the
Contemplated Transactions (or after giving effect to the Contemplated
Transactions and to such other subsequent actions or omissions), any Acquired
Company (i) was insolvent at the time of the Closing, (ii) becomes insolvent as
a result of the Contemplated Transactions, (iii) was left with unreasonably
small capital with which to engage in its business or (iv) incurred debts beyond
its ability to pay such debts as they mature, such that the payment of the
Aggregate Payment Amount or the repayment of the obligations set forth on
Schedule 2.2 pursuant hereto may be deemed a fraudulent conveyance or
impermissible dividend or distribution under any applicable Legal Requirement or
otherwise subject to claims of creditors of any Acquired Company or its
Representatives in a bankruptcy proceeding. Buyer agrees that the Sellers are
intended third-party beneficiaries of this Section 6.5.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the
other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1. ACCURACY OF REPRESENTATIONS.
(a) Except as affected by the actions contemplated by this
Agreement or by actions not prohibited by Sections 5.2 and 5.3, all of the
Company's representations and warranties in Article 3 of this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
(b) Except as affected by the actions contemplated by this
Agreement, each of the Company's representations and warranties in Section 3.3
must have been accurate in all respects as of the date of this Agreement, and
must be accurate in all respects as of the Closing Date as if made on the
Closing Date.
(c) Except as affected by the actions contemplated by this
Agreement, each of the Sellers' representations and warranties in Article 3.A.
of this Agreement (considered collectively) and each of these representations
and warranties (considered individually), must have been accurate in all
material respects as of the date of this Agreement, and must be accurate in all
material respects as of the Closing Date as if made on the Closing Date.
7.2. COMPANY'S AND SELLERS' PERFORMANCE
(a) All of the covenants and obligations that the Company are
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) All of the covenants and obligations of that the Sellers
are required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(c) Each document required to be delivered by the Company or
the Sellers pursuant to Section 2.4 must have been delivered.
(d) None of the Management Stockholders shall have terminated
or rescinded, or Threatened to terminate or rescind, the agreements provided for
in Section 2.5.
7.3. HSR ACT. The waiting period under the HSR Act shall have expired
or been earlier terminated.
7.4. ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:
(a) an opinion of Hutchins, Wheeler & Dittmar, dated the
Closing Date, in the form of Exhibit 7.4(a); and
(b) such other documents as Buyer may reasonably request for
the purpose of (i) evidencing the satisfaction of any condition referred to in
this Section 7, or (ii) otherwise facilitating the consummation or performance
of any of the Contemplated Transactions.
7.5. NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, any Proceeding (a) involving
any challenge to, or seeking damages or other relief in connection with, any of
the Contemplated Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the Contemplated
Transactions.
7.6. NO PROHIBITION. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of any applicable Legal Requirement or Order.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other
actions required to be taken by Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Sellers, in whole or in part):
8.1. ACCURACY OF REPRESENTATIONS. Except as contemplated by this
Agreement, all of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2. BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
(b) Buyer must have delivered each of the documents required
to be delivered by Buyer pursuant to Section 2.4 and must have made the cash
payments required to be made by Buyer pursuant to Sections 2.4(c)(i),
2.4(c)(ii), and 2.4(c)(iii).
8.3. HSR ACT. The waiting period under the HSR Act shall have expired
or been earlier terminated.
8.4. ADDITIONAL DOCUMENTS. Buyer must have caused the following
documents to be delivered to Sellers:
(a) an opinion of Hodgson, Russ, Andrews, Woods & Goodyear,
LLP, dated the Closing Date, in the form of Exhibit 8.4(a); and
(b) such other documents as Sellers may reasonably request for
the purpose of (i) evidencing the satisfaction of any condition referred to in
this Section 8, or (ii) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.5. NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, any Proceeding (a) involving
any challenge to, or seeking damages or other relief in connection with, any of
the Contemplated Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the Contemplated
Transactions.
8.6. NO PROHIBITION. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of any applicable Legal Requirement or Order.
9. TERMINATION
9.1. TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by Sellers, if any of the conditions in
Section 8 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Sellers
to comply with their obligations under this Agreement) and Sellers have not
waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before March
15, 1999 except that, at the request of Buyer or Sellers' Representative, such
date shall be extended until March 31, 1999 for the purpose of complying with
requests for information from any Governmental Body under the HSR Act, or such
later date as the parties may agree upon.
9.2. EFFECT OF TERMINATION. Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 11.1 and 11.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the Breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE. All representations, warranties, covenants, and obligations in this
Agreement, the Schedules, any Revised Schedules and the certificates delivered
pursuant to Section 2.4(a)(ii) and Section 2.4(b)(ii) will survive the Closing
(subject to Section 10.7). The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations except to the extent provided for in Section 5.5.
10.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Sellers will
indemnify and hold harmless Buyer, the Acquired Companies, and their respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Buyer Indemnified Persons") for, and will pay to the Buyer
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Sellers in Article 3.A. in this Agreement (without giving effect to any update
to any schedule) or any certificate delivered by Sellers pursuant to this
Agreement;
(b) any Breach of any representation or warranty made by the
Company (i) in Article 3 of this Agreement as if such representation or warranty
were made on and as of the Closing Date, after giving effect to any Revised
Schedule or (ii) in any certificate delivered by the Company pursuant to Section
2.4 of this Agreement;
(c) any Breach by any of the Sellers or any Breach by the
Company of any covenant or obligation of such Seller or the Company, as the case
may be, in this Agreement; and
(d) any Year 2000 Claim.
Notwithstanding the foregoing, no claim for indemnification may be
made by any Buyer Indemnified Person under this Article 10 for (i) any Year 2000
Claim, (ii) a breach of a representation or warranty contained in Section 3.11,
or (iii) any recovery under Section 10.4 unless such claim for indemnification
is based on Damages actually incurred, or which Buyer reasonably believes it or
one or more of the Acquired Companies may incur, on the basis of a Third Party
Claim. For purposes of this Section 10.2, the term "Third Party Claim" shall
mean (a) a Threatened claim by a third party (other than Buyer or its
Affiliates) or a Governmental Body (including any investigation by any such
Governmental Body) based on an assertion which, if true, would entitle the Buyer
Indemnified Person to obtain indemnification under this Article 10 or (ii) a
request by a third party for Buyer or an Acquired Company to undertake
assessment, remedial or corrective action for such third party relating to
whether or not services or work product delivered by an Acquired Company prior
to the Closing Date were or are Year 2000 Compliant ("Y2K Service Requests")
where, if the customer were to make or Threaten a Year 2000 Claim, an
unfavorable outcome for a Buyer Indemnified Person would be reasonably probable.
Buyer agrees not to take any affirmative action to encourage or solicit Third
Party Claims; provided that nothing herein shall be deemed in any way to limit
Buyer's right and ability (x) to prepare and file tax returns which are required
to be filed on behalf of the Buyer or the Acquired Companies after the Closing
Date or (y) to respond to any Y2K Service Request, in either such case, in such
manner as Buyer, in its sole discretion (but in the case of Tax Returns, based
upon the advice of its accountants or counsel), deems necessary or appropriate.
10.3. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS-ENVIRONMENTAL
MATTERS. In addition to the provisions of Section 10.2, Sellers will indemnify
and hold harmless Buyer, the Acquired Companies, and the other Buyer Indemnified
Persons for, and will pay to Buyer, the Acquired Companies, and the other Buyer
Indemnified Persons the amount of, any Damages (including costs of cleanup,
containment, or other remediation) arising, directly or indirectly, from or in
connection with:
(a) any Environmental, Health, and Safety Liabilities arising
out of or relating to: (i) (A) the ownership, operation, or condition at any
time on or prior to the Closing Date of the Facilities or any other properties
and assets (whether real, personal, or mixed and whether tangible or intangible)
in which any Acquired Company has or had an interest, or (B) any Hazardous
Materials or other contaminants that were present on the Facilities or such
other properties and assets at any time on or prior to the Closing Date; or (ii)
(A) any Hazardous Materials or other contaminants, wherever located, that were,
or were allegedly, generated, transported, stored, treated, Released, or
otherwise handled by any Acquired Company or by any other Person for whose
conduct it is or may be held responsible at any time on or prior to the Closing
Date, or (B) any Hazardous Activities that were, or were allegedly, conducted by
any Acquired Company or by any other Person for whose conduct it is or may be
held responsible; or
(b) any bodily injury (including illness, disability, and
death, and regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee of
any Acquired Company or any other Person for whose conduct they are or may be
held responsible, in any way arising from or allegedly arising from any
Hazardous Activity conducted or allegedly conducted with respect to the
Facilities or the operation of the Acquired Companies prior to the Closing Date,
or from Hazardous Material that was (i) present or suspected to be present on or
before the Closing Date on or at the Facilities (or present or suspected to be
present on any other property, if such Hazardous Material emanated or allegedly
emanated from any of the Facilities and was present or suspected to be present
on any of the Facilities on or prior to the Closing Date) or (ii) Released or
allegedly Released by any Acquired Company or any other Person for whose conduct
it is or may be held responsible, at any time on or prior to the Closing Date.
Buyer will be entitled to control any Cleanup, any related Proceeding, and,
except as provided in the following sentence, any other Proceeding with respect
to which indemnity may be sought under this Section 10.3. The procedure
described in Section 10.11 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 10.3.
10.4. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS - TAX
MATTERS.
10.4.1 General.
(a)(i) In addition to the provisions of Section
10.2, Sellers shall indemnify each Buyer Indemnified Person and hold them
harmless from (A) all liability for Taxes of the Acquired Companies for all
taxable periods ending on or before the Closing Date and the portion ending on
the Closing Date of any taxable period that includes (but does not end on) such
day (the "Pre-Closing Tax Period") (including Taxes imposed in connection with
this Agreement or transactions contemplated hereby) reduced without duplication
by (I) the actual payment of Taxes prior to the Closing Date and any reserves
with respect to Taxes set forth on the Balance Sheet and (II) all liability for
Taxes incurred in the Ordinary Course of Business from the date of the Balance
Sheet through the Closing Date, (B) all liability (as a result of Treasury
Regulation ss. 1. 15026(a) or otherwise) for Taxes of any Person (other than any
of the Acquired Companies) with which any of the Acquired Companies is or has
been affiliated or has filed or has been required to file a consolidated,
combined or unitary Tax Return and (C) subject to the last sentence of Section
10.4.2(b), all liability for reasonable legal, accounting, or similar fees and
expenses attributable to any Tax Claim or for any matter indemnifiable under
clauses (A) or (B) of this sentence.
(ii) In the case of any taxable period that
includes (but does not end on) the Closing Date (a "Straddle Period"):
(1) real, personal and intangible property Taxes
("Property Taxes") of the Acquired Companies for the
Pre-Closing Tax Period shall be equal to the amount of such
property Taxes for the entire Straddle Period multiplied by
a fraction, the numerator of which is the number of days
during the Straddle Period that are in the Pre-Closing Tax
Period and the denominator of which is the number of days in
the Straddle Period; and
(2) the Taxes of the Acquired Companies (other
than Property Taxes) for the Pre-Closing Tax Period shall be
computed as if such taxable period ended as of the close of
business on the Closing Date and, in the case of any Taxes
attributable to the ownership by any of the Acquired
Companies of any equity interest in any partnership or other
"flow through" entity, as if a taxable period of such
corporation, partnership or other "flow through" entity
ended as of the closing of business on the Closing Date.
(b) Any amounts required to be paid under this
Section 10.4.1 by the Sellers to a Buyer Indemnified Person (the "Tax
Indemnification Amount") shall be paid (i) first, prior to the distribution of
all or a part of the Escrow Fund on the first anniversary of the Closing Date
(the "Escrow Distribution"), out of the Escrow Fund and (ii) second, after the
Escrow Distribution, then pursuant to Section 10.4.2.
(c) The Buyer shall indemnify and hold harmless
the Seller Indemnified Persons from any Taxes of the Buyer, the Acquired
Companies or any Related Person thereof with respect to any tax period or
portion thereof beginning after the Closing Date and for any Taxes on the
Closing Date from transactions not contemplated by this Agreement.
10.4.2 Tax Indemnification Procedures
(a) If a claim is made by any Governmental Body,
which, if successful, would result in an indemnity payment to any Indemnified
Person pursuant to Section 10.4.1 (a "Tax Claim"), then Buyer shall promptly
give notice to the Sellers' Representative in writing of such claim; provided,
however, the failure to give such notice shall not affect the indemnification
provided pursuant to Section 10.4.1 except to the extent that the Sellers have
been actually prejudiced as a result of such failure. Notice to the Sellers'
Representative hereunder shall constitute notice to each Seller.
(b) With respect to any Tax Claim relating to a
taxable period ending on or prior to the Closing Date, subject to delivery to
Buyer of a written acknowledgement by Sellers' Representative of Sellers'
obligation to indemnify Buyer with respect to a Tax Claim. Sellers shall control
all proceedings and may make all decisions taken in connection with such Tax
Claim (including selection of counsel) and, without limiting the foregoing, may
in their sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Governmental Body with respect
thereto, and may, in its sole discretion, either pay the Tax claimed and sue for
a refund where applicable law permits such refunded suits or contest the Tax
Claim in any permissible manner; provided, however, that the Sellers must first
consult in good faith with the Buyer before taking any action with respect to
the conduct of a Tax Claim. Notwithstanding the foregoing, (a) the Sellers shall
not settle any Tax Claim without the prior written consent of the Buyer, which
consent shall not be unreasonably withheld or delayed, (b) the Buyer, and
counsel of its own choosing, shall have the right to participate fully in all
aspects of the defense of such Tax Claim, (c) the Sellers shall inform the
Buyer, reasonably in advance, of the date, time and place of
such administrative and judicial meetings, conferences, hearings and other
proceedings relating to such Tax Claim, (d) the Buyer shall be entitled to have
its Representatives (including counsel, accountants and consultants) attend and
participate in any such administrative and judicial meetings, conferences,
hearings and other proceedings relating to such Tax Claim and (e) the Sellers
shall provide to the Buyer all information, document requests and responses,
proposed notices of deficiency, notices of deficiency, revenue agent's reports,
protests, petitions and any other documents relating to such Tax Claim promptly
upon receipt from, or in advance of submission to (as the case may be), the
relevant Governmental Body. If the Buyer elects to participate in the defense of
a Tax Claim, it shall pay its own expenses for legal, accounting, consulting or
similar fees and expenses.
(c) The Sellers and the Buyer shall jointly
control and participate in all proceedings taken in connection with any Tax
Claim relating to Taxes of the Acquired Companies for a Straddle Period. Neither
the Sellers nor the Buyer shall settle any such Tax Claim without the prior
written consent of the other party, which consent shall not be unreasonably
withheld or delayed. Each party shall pay its own expenses with respect to any
such Tax Claim.
(d) The Buyer shall control all proceedings with
respect to any Tax Claim
relating to a taxable period beginning after the Closing Date. The Sellers shall
have no right to participate in the conduct of any such proceeding, provided,
however, that Buyer shall not settle or prosecute any such Tax Claim in a manner
that would have a Material Adverse Effect on the Sellers without the prior
written consent of Sellers which shall not be unreasonably withheld or delayed.
(e) The Buyer and the Acquired Companies on the
one hand, and the Sellers on the other, shall reasonably cooperate in contesting
any Tax Claim, which cooperation shall include the retention and, upon request,
the provision to the requesting Person of records and information which are
reasonably relevant to such Tax Claim, and making employees available on a
mutually convenient basis to provide additional information or explanation of
any material provided hereunder or to testify at proceedings relating to such
Tax Claim.
(f) Claims made for indemnification pursuant to
this Section 10.4 or Section 10.2 with respect to a Breach of Section 3.11 (in
each instance within the time period provided for in Section 10.7 of this
Agreement) which are made following the Escrow Distribution shall be made by
delivery of notice to the Sellers' Representative and subject to the procedures
set forth in Sections 10.4.2 or 10.11, as applicable. Sellers' total liability
for Tax Claims after the Escrow Distribution shall be limited to the lesser of
(i) $1,000,000 or (ii) the aggregate amount of the Escrow Amount disbursed to
Sellers.
10.5. INDEMNIFICATION AND PAYMENT BY SELLERS - TRANSACTION
EXPENSES
(a) Prior to the Closing Date, the Company shall have
requested final invoices from all relevant third parties (including accountants,
attorneys and other similar professionals) reflecting Transaction Expenses. Not
later than three business days prior to the Closing Date, the chief financial
officer of the Company shall certify in writing to the Buyer the amount of (i)
any Transaction Expenses that will have been paid by Sellers or any Acquired
Company immediately prior to the Closing Date, (ii) an estimate of any
Transaction Expenses incurred but not paid as of the Closing Date, and (iii) an
estimate of any Transaction Expenses reasonably expected to be incurred after
the Closing Date.
(b) In addition to the provisions of Section 10.2, the Sellers
agree to indemnify, defend and hold the Buyer Indemnified Persons harmless from
and against any and all Losses that the Buyer Indemnified Persons may suffer,
sustain, incur or become subject to arising out of or due to the failure of
Sellers to pay in full all Transaction Expenses in excess of $1,000,000
("Expense Limit"). Any amounts to be paid under this Section 10.5 by the Sellers
to a Buyer Indemnified Person shall be paid first, out of the Escrow Amount to
the extent available and (ii) second, by the Sellers' Representative (on behalf
of the Sellers and not in his individual capacity) immediately upon receipt of
written notice from Buyer demanding payment and setting forth the nature and
basis for, and reasonably describing, any such claim.
(c) Notwithstanding the other provisions of this Agreement,
the Sellers' Representative may, upon written notice delivered to Buyer at least
two (2) business days prior to the Closing Date, elect to increase the Expense
Limit by an amount not in excess of $250,000, in which event the cash portion of
the Aggregate Payment Amount shall be decreased, dollar for dollar, by the
amount of the increase in the Expense Limit.
10.6. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers and their respective Representatives,
stockholders, controlling persons and affiliates (collectively, the "Seller
Indemnified Persons"), and will pay to Seller Indemnified Persons the amount of
any Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions.
10.7. TIME LIMITATIONS.
(a) If the Closing occurs, Sellers will have no liability
under Sections 10.3 or 10.5, under Section 10.2 except for (i) any Breach of any
representation or warranty in Section 3.11 or (ii) any Year 2000 Claim, or with
respect to any covenant or obligation to be performed and
complied with prior to the Closing Date unless on or before the first
anniversary of the Closing Date Buyer notifies Sellers' Representative of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Buyer. In addition, Sellers will have no liability with
respect to (x) the representations and warranties in Section 3.11 or a claim for
indemnification under Section 10.4 unless on or before the third anniversary of
the Closing Date Buyer notifies Sellers of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Buyer or (y) any
Year 2000 Claim or a claim for indemnification under Section 10.2(d) unless on
or prior to December 31, 2000 Buyer notifies Sellers' Representative of a Year
2000 Claim specifying the factual basis of that claim in reasonable detail to
the extent then known by Buyer ("Y2K Termination Date"); provided, however, that
the Y2K Termination Date shall be the first anniversary of the Closing Date
instead of December 31, 2000 if, prior to the Closing Date, the Company obtains
Acceptable Insurance.
(b) If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, unless on or before the first anniversary of the date of closing Sellers
notify Buyer of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Sellers.
10.8. LIMITATIONS ON AMOUNT--SELLERS.
(a) Sellers will have no liability (for indemnification or
otherwise) with respect to the matters described in Sections 10.2, 10.3 and 10.4
until Buyer has suffered Damages in excess of $100,000.00 (at which point
Sellers will be obligated to indemnify Buyer from and against only such Damages
in excess of $100,000).
(b) The Sellers will have no liability under Section 10.2 with
respect to Year 2000 Claims in excess of the lesser of (i) $3,000,000 or (ii)
the remainder of $4,000,000 less all Damages paid to Buyer from the Escrow Fund
in respect of non-Year 2000 Claims; provided, however, that if the Company
obtains Acceptable Insurance prior to the Closing Date, Sellers' maximum
liability for Year 2000 Claims shall be $2,000,000.
(c) The total liability of the Sellers for indemnification
under this Article 10, other than for Year 2000 Claims and other than for claims
made by the Buyer under Section 10.5, shall be $2,000,000.
(d) The total liability of the Sellers for indemnification
under this Article 10, other than for claims made by the Buyer under Section
10.5, shall not exceed $4,000,000.
(e) Except as provided for in Paragraph (f) of this Section
10.8 and in Section 10.5, Sellers liability for indemnification and payment of
Damages under this Article 10 shall be several and not joint and shall be
limited to their pro rata portion of the Escrow Fund.
(f) From and after the date of the Escrow Distribution, (i)
the Sellers' liability for indemnification and payment of Damages under Section
10.4 or in respect of any Breach by the Company's representations and warranties
in Section 3.11 shall be joint and several (but otherwise limited by the
provisions of this Section 10.8) and (ii) in addition, the maximum amount of
Damages as which Sellers shall be obligated under Section 10.4 or with respect
to Section 3.11 shall be as provided for in Section 10.4.2(f).
(g) The Buyer's right to indemnification under this Article 10
shall be its sole and exclusive remedy for any breach by the Company or any
Acquired Company or any one or more of the Sellers hereunder of any
representation, warranty or covenant in this Agreement; provided, however, that
nothing in this Section 10.8 or elsewhere in the Agreement (or the Escrow
Agreement) shall limit or preclude Buyer from exercising any rights with respect
to any fraudulent activity by Sellers or the Acquired Companies.
(h) Any claim for indemnification by the Buyer, except for
claims under Section 10.5, shall be funded solely from the Escrow Fund; provided
that once the Escrow Distribution has been made, claims for indemnification
under Section 10.4 and, if the Company has not obtained Acceptable Insurance,
Year 2000 Claims, may be asserted against the Sellers as herein provided.
10.9. LIMITATIONS ON AMOUNT--BUYER. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a) or (b) of Section 10.6 until Sellers have suffered Damages in excess of
$100,000 (at which point Buyer will be obligated to indemnify Sellers from and
against only such Damages in excess of $100,000.
10.10. [INTENTIONALLY OMITTED]
10.11. PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under
Section 10.2, 10.4, or (to the extent provided in the last sentence of Section
10.3) Section 10.3 of notice of the commencement of any Proceeding against it,
such indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.11(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes and is subject to Section 10.4.2, be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel reasonably satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
10.12. PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS. A claim for
indemnification under Sections 10.2, 10.3 and 10.4 (as applicable) for any
matter not involving a third-party claim may be asserted by notice to the party
from whom indemnification is sought and, in the case of Sellers, to the Sellers'
Representative.
10.13. REDUCTION FOR INSURANCE. The amount which Sellers are required
to pay to, for, or on behalf of any Buyer Indemnified Party pursuant to this
Article 10 shall be reduced (including, without limitation, retroactively) by
any insurance proceeds actually recovered by or on behalf of the Buyer
Indemnified Party reduced by the sum of (a) any retrospective premium adjustment
or other experience-based liability as a result of the indemnified claim and (b)
the insurance premiums paid by the Buyer or any Buyer Indemnified Person (other
than premiums for the Acceptable Insurance, if any, obtained prior to Closing to
cover Year 2000 Claims) after the Closing for the insurance policy for the
Acquired Companies under which such insurance proceeds were paid (the amount of
such net loss referred to herein as the "Indemnifiable Loss"). Amounts required
to be paid, as so reduced, are hereinafter sometimes called an "Indemnity
Payment." If Buyer Indemnified Party shall have received, or if Sellers shall
have paid on its behalf, an Indemnity Payment in respect of and Indemnifiable
Loss and shall subsequently receive, directly or indirectly, insurance proceeds
in respect of such Indemnifiable Loss, then such Buyer Indemnified Party shall
promptly pay to the Sellers' Representative the amount of such insurance
proceeds, or, if less, the amount of the Indemnity Payment. The parties hereto
agree that the foregoing shall not affect the subrogation rights of any
insurance companies making payments hereunder.
10.14. TAX BENEFITS; PURCHASE PRICE ADJUSTMENT.
(a) Subject to Paragraph (b) of this Section 10.14, to the
extent that the incurrence of any Loss or the payment of any Damages for which a
Buyer Indemnified Party seeks indemnification from Sellers under Sections 10.2,
10.3, 10.4 or 10.5 results in a net tax benefit to Buyer or the Acquired
Companies, the amount of Damages for which Seller shall be liable shall be
correspondingly reduced.
(b) The Sellers and Buyer agree that any indemnity payment
made under Article 10 will be treated by the parties on their respective Tax
returns as an adjustment to the purchase price. If, notwithstanding such
treatment by the parties, any indemnity payment is determined by any Tax
authority to be subject to Tax payable by and of the Buyer's Indemnified
Persons, the Sellers also shall indemnify the Buyer's Indemnified Persons for
any increase in Tax liability that is imposed on and paid by the Buyer's
Indemnified Persons by reasons of the receipt of the indemnity payments under
this Article 10.
10.15. ADDITIONAL TAX MATTERS.
(a) Buyer and Seller agree to report all transactions not in
the Ordinary Course of Business occurring on the Closing Date after Buyer's
purchase of Seller's stock on Buyer's federal income Tax Return to the extent
permitted by Treasury Regulation Section 1.1502-76(b)(1)(B). In the event any
additional Tax is owed from any transaction not in the Ordinary Course of
Business occurring on the Closing Date but after Buyer's purchase of the Shares,
Sellers shall not be obligated to indemnify Buyer or any other Person for such
additional Tax.
(b) The Company shall file or cause to be filed when due all
income Tax Returns for taxable years or periods ending on or before the Closing
Date and shall remit or cause to be remitted any Taxes due in respect of such
Tax Returns, which Tax Returns shall be subject to review by the Sellers'
Representative. All Tax Returns which the Company is required to file or cause
to be filed with respect to taxable years or periods ending on or before the
Closing Date shall be prepared and filed in a manner consistent with past
practice and custom and no position shall be taken, elections made or method
adopted that is inconsistent with positions taken, elections made or methods
used in preparing and filing similar Tax Returns in prior periods. Neither the
Company nor any affiliate thereof, shall amend, refile or otherwise modify any
Tax Return relating in whole or in part to the Company or any Subsidiary with
respect to any taxable year or period ending on or before the Closing Date
without the prior written consent of Sellers' Representative, which consent
shall not be unreasonably withheld.
11. GENERAL PROVISIONS
11.1. EXPENSES.
(a) Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, accountants and investment bankers.
(b) Buyer will pay the HSR Act filing fee.
(c) If the Closing takes place, (i) Buyer or the Acquired
Companies will pay the Company's and Sellers' Transaction Expenses up to the
Expense Limit (and any Transaction Expenses of the Company or Sellers paid or
incurred by the Acquired Companies or on behalf of the Sellers or the Acquired
Companies in excess of the Expense Limit shall be subject to Section 10.5) and
(ii) Buyer will pay on behalf of the Company a bonus to Christopher Bergmann not
to exceed $200,000. If the Closing does not take place for any reason other than
a failure of the conditions to Closing set forth in Section 7.1, Buyer agrees to
pay or reimburse the Company and/or Sellers for up to an aggregate of $100,000
of their Transaction Expenses.
(d) In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.
11.2. PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Buyer determines after
consultation with the Company and taking into account Buyer's Legal
Requirements. Unless consented to by Buyer in advance or required by Legal
Requirements, prior to the Closing Sellers shall, and shall cause the Acquired
Companies to, keep this Agreement strictly confidential and may not make any
disclosure of this Agreement to any Person. Sellers and Buyer will consult with
each other concerning the means by which the Acquired Companies' employees,
customers, and suppliers and others having dealings with the Acquired Companies
will be informed of the Contemplated Transactions, and Buyer will have the right
to be present for any such communication.
11.3. CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Acquired
Companies to maintain in confidence, and not use to the detriment of another
party or an Acquired Company any written, oral, or other information obtained in
confidence from written information stamped "confidential" when originally
furnished by another party or an Acquired Company in connection with this
Agreement or the Contemplated Transactions, unless (a) such information is
already known to such party or to others not bound by a duty of confidentiality
or such information becomes publicly available through no fault of such party,
(b) the use of such information is necessary or appropriate in making any filing
or obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by or necessary or appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request. Whether or not the Closing takes place, Sellers
waive, and will upon Buyer's request cause the Acquired Companies to waive, any
cause of action, right, or claim arising out of the access of Buyer or its
representatives to any trade secrets or other confidential information of the
Acquired Companies except for the intentional competitive misuse by Buyer of
such trade secrets or confidential information.
11.4. INTENTIONALLY OMITTED.
11.5. NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers:
Scott C. Collins
c/o Summit Partners
600 Atlantic Avenue, Suite 2800
Boston, Massachusetts 02210
Facsimile No.: 617-824-1150
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attention: James Westra, Esq.
Facsimile No.: 617-951-1295
Company:
Elumen Solutions, Inc.
312 Plum Street, Suite 700
Cincinnati, Ohio 4202
Attention: President
Facsimile No.: 888-564-0913
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attention: James Westra, Esq.
Facsimile No.: 617-951-1295
Buyer:
Computer Task Group, Incorporated
800 Delaware Avenue
Buffalo, New York 14209
Attention: Vice President and Chief Financial Officer
Facsimile No.: 716-887-8000
with a copy to:
Hodgson, Russ, Andrews, Woods & Goodyear, LLP
1800 One M&T Plaza
Buffalo, New York 14203
Attention: Robert B. Fleming, Jr., Esq.
Facsimile No.: 716-849-0349
11.6. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of New York, County of Erie, or, if it has or can acquire jurisdiction, in the
United States District Court for the Western District of New York, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
11.7. FURTHER ASSURANCES. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement.
11.8. WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law except as set forth in this Agreement
or the Stockholders Representative Agreement, (a) no claim or right arising out
of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
11.9. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated on or about
December 17, 1998) and constitutes (along with the Schedules and documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
11.10. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, except that Buyer may assign any of its rights
under this Agreement to any Subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
11.11. SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.12. SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All references to
"Schedule" or "Schedules" refer to the corresponding Schedule or Schedules
attached to and made a part of this Agreement. All words used in this Agreement
will be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
11.13. TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.14. GOVERNING LAW. This Agreement will be governed by the laws of
the State of Delaware without regard to conflicts of laws principles.
11.15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
11.16. DISCLOSURE SCHEDULES. Items required to be disclosed on a
disclosure Schedule under Section 3 or Section 3.A. shall be deemed to be
disclosed on such Schedule for all purposes of Section 3 if such items are
disclosed on one Schedule and fully describe all information required to be
disclosed under each section of Section 3 or Section 3.A. The disclosure of any
information in the Disclosure Schedule shall not be deemed to constitute an
acknowledgement that such information is required to be disclosed in connection
with the representations and warranties made in this Agreement or that it is
material, nor shall such information be deemed to establish a standard of
materiality.
11.17. SPECIFIC PERFORMANCE. Each party agrees that remedies at law may
be inadequate to protect the other party from and against any actual or
threatened breach of this Agreement by such part or any of its representatives.
Without prejudice to the rights and remedies otherwise available to it, each
party agrees that any other party may seek equitable relief in favor of
the other party by way of specific performance or otherwise without proof of
actual damages, if such party or any of its Representatives breach or threaten
to breach any of the provisions of this Agreement.
[SIGNATURES APPEAR OF PAGES 67 AND 68]
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
Buyer: Company:
COMPUTER TASK GROUP, ELUMEN SOLUTIONS, INC.
INCORPORATED
By: /s/ Gale S. Fitzgerald, By: /s/ Christopher J. Bergmann,
Chairman & CEO President and CEO
Sellers:
SUMMIT INVESTORS III, L.P.
By: /s/ Tom Roberts
(Title)
SUMMIT VENTURES IV, L.P.
By: Summit Ventures IV, L.P.,
its General Partner
By: Stamps, Woodsum & Co. IV,
its General Partner
By: /s/ Tom Roberts
(Title)
IT CAPITAL PARTNERS, LLC
By: /s/ John N. Desrosier
Manager
/s/ John C. Nichols
John C. Nichols, trustee of the
John C. Nichols Trust u/a/d July 1, 1997
/s/ Mary Pat Fralick
Mary Pat Fralick, trustee of the
Mary Pat Fralick Trust u/a/d June 16, 1997
/s/ Christopher J. Bergmann
Christopher J. Bergmann
/s/ Thomas J. Niehaus
Thomas J. Niehaus, trustee of the
Thomas J. Niehaus Trust dated 6/5/97
/s/ Teresa A. Niehaus
Teresa A. Niehaus, trustee of the
Teresa A. Niehaus Trust dated 6/5/97
THOMAS J. NIEHAUS FAMILY
LIMITED PARTNERSHIP
By: /s/ Thomas J. Niehaus
Thomas J. Niehaus, General Partner
/s/ Michael Lippman
Michael Lippman
SCHEDULE 4.2(b)
Authority; No Conflict
i. None.
ii. The Buyer will have to make a filing in order to comply with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
iii. None.
iv. None.
<PAGE>
N E W S R E L E A S E
CONTACTS:
Investors: Media:
James R. Boldt Amy Hayes Atkinson
Vice President & Chief Financial Officer Global Communications
(716) 887-7221 (716) 887-7299
[email protected]
CTG Completes Acquisition of
Elumen Solutions, Inc.
CTG HealthCare Solutions -- A Leading Information Technology
Consulting Firm for the Heath Care Industry
BUFFALO, N.Y. -- February 23, 1999 -- CTG (Computer Task Group [NYSE: TSK]), a
$468 million international information technology (IT) services company, today
announced that it completed its acquisition of Elumen Solutions, Inc. (Elumen),
after receiving all required regulatory approvals.
As a result of the acquisition, Elumen has been combined with CTG's health care
practice to form CTG HealthCare Solutions, a leading national IT consulting firm
to the health care industry. Together, Elumen and CTG's health care practice
account for approximately $44 million in 1998 revenues, serve approximately 250
health care clients, and comprise more than 300 health care IT consultants.
Commenting on the acquisition, CTG Chairman and Chief Executive Officer Gale S.
Fitzgerald said, "This strategic combination of Elumen Solutions and CTG earns
CTG HealthCare Solutions a leadership position in IT consulting for health care
organizations. This is one of the fastest growing sectors of IT consulting, and
this investment is consistent with CTG's strategy to step up our growth through
Key Client relationships and higher-value managed services."
MORE
Ms. Fitzgerald continued, "Industry analysts expect annual growth rates of over
20 percent in the health care IT sector due to the creation of large, integrated
health care delivery systems, the ongoing consolidation of health care providers
and systems, the impact of managed care, and the need to invest in information
technology to improve patient care and achieve cost and operating efficiencies."
The aggregate transaction value was $89 million, of which $86 million was
paid in cash or through the assumption of Elumen's debt. The remainder of the
consideration was the issuance of approximately
128,000 shares of CTG common stock. The acquisition is being accounted for as a
purchase and is expected to be neutral to slightly accretive to earnings in
1999.
Ms. Fitzgerald noted that CTG HealthCare Solutions will initially represent
about 10 percent of CTG's total revenues. CTG HealthCare Solutions is expected
to provide significant growth to CTG in revenues and profitability.
CTG HealthCare Solutions will be led by Christopher J. Bergmann, who was the
president and chief executive officer of Elumen Solutions and has been named a
vice president of CTG, reporting to Ms.
Fitzgerald.
CTG provides IT solutions to Fortune 500 and other companies through strategic
partnerships. Leveraged by more than 30 years' experience, CTG manages IT
services for some of the worldis leading companies so they can focus on their
core businesses and use IT, which has become vital to competitiveness, to excel
in their markets. CTG's resources include its 55 offices in North America and
Europe, more than 6,000 IT professionals, a suite of proprietary service
methodologies, strong project management expertise, and a proactive recruiting
approach, CTG-SmartSource.
MORE
Named by Computerworld magazine as one of the 100 best places to work in
information systems for the last three years, CTG has earned a reputation
as a progressive employer.
-- END --
Today's news release, along with CTG news releases for the past year, is
available by fax at no charge by calling Corporate News on the Net at (800)
742-7505. Additional information about CTG is available on the World Wide
Web at these addresses: http://www.ctg.com and
http://www.businesswire.com/cnn/tsk.htm.
This document contains certain forward-looking statements concerning the
Company's current expectations as to future growth. These statements are
based upon a review of industry reports, current business conditions in the
areas where the Company does business, the availability of qualified
professional staff and other factors which involve risk and uncertainty. As
such, actual results may differ materially in response to a change in such
factors. Such forward-looking statements should be read in conjunction with
the Company's disclosures set forth in the Company's 1997 Form 10-K and the
Management's Discussion and Analysis section of the Company's 1997 annual
report, which are incorporated by reference.
