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UNITED STATES
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: March 4, 1996
QUIXOTE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-7903 36-2675371
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(Commission File Number) (I.R.S. Employer
Identification Number)
One East Wacker Drive, Suite 3000, Chicago, IL 60601
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(Address of principal executive offices) (zip code)
(312) 467-6755
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(Registrant's telephone number, including area code)
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Item 2. Disposition of Assets
On February 16, 1996, Quixote Corporation (Quixote) sold certain assets
and liabilities of Stenograph Corporation (Stenograph), including its
Integrated Information Services (IIS) division to Pettibone Corporation, for
approximately $7,000,000 cash. The assets and liabilities retained by the
Company include net deferred tax assets and certain litigation including
Stenograph's repetitive stress injury cases. The Company also acts as
guarantor under certain lease obligations.
Quixote used a substantial portion of the proceeds of the sale to retire
debt under its revolving credit facility.
Prior to the above transaction, Stenograph had sold certain assets of its
Litigation Sciences (LSI) division to a third party for the assumption by the
Purchaser of certain liabilities of LSI. The remaining LSI assets and
liabilities were retained by Stenograph. These remaining LSI assets and
liabilities, including accounts receivable and liabilities under certain lease
obligations, were not sold in the transaction with Pettibone.
Item 7. Financial Statements and Exhibits
(b)(1) It is impractical to provide the required pro forma financial
information at the filing date of this report on Form 8-K. The
required pro forma financial information will be filed as soon
as practicable, but not later than sixty days after the filing
date of this report on Form 8-K.
(c) Exhibits
See index of exhibits filed as part of this Form 8-k.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
QUIXOTE CORPORATION
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/s/ Myron R. Shain
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By: Myron R. Shain
Its: Executive Vice
President-Finance
Date: March 4, 1996
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Index of Exhibits
Exhibit Description
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2.1 Agreement for Purchase and Sale dated February 13, 1996 between
Stenograph Acquisition Corp., IIS Acquisition Corp. and
Pettibone Corporation, and Quixote Corporation, Stenograph
Corporation, Legal Technologies, Inc., Legal Technologies
Limited, and Integrated Information Services, Inc.
2.2 Agreement for Purchase and Sale dated January 25, 1996 by and
among Stenograph Corporation and LSI Acquisition, Inc.
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Exhibit 2.1
AGREEMENT
FOR
PURCHASE AND SALE OF ASSETS
THIS AGREEMENT is made and entered into this 13th day of February,
1996, by and between Stenograph Acquisition Corp., a Nevada corporation
("SAC"), and IIS Acquisition Corp., a Nevada corporation ("IAC") and Pettibone
Corporation, a Delaware corporation, (collectively, SAC, IAC and Pettibone
Corporation are referred to herein as the "Buyer"), on the one hand and
Quixote Corporation, a Delaware corporation ("Parent"), Legal Technologies,
Inc., a Delaware corporation ("LTI"), Stenograph Corporation, a Delaware
corporation ("Stenograph") Legal Technologies Limited, a United Kingdom
corporation ("Stenograph UK") and Integrated Information Services, Inc., a
Delaware corporation ("IIS"), on the other hand (collectively, IIS,
Stenograph, LTI and Parent are referred to herein as the "Selling Entities").
WHEREAS, through Stenograph and Stenograph UK, Parent is engaged
in the business of developing, manufacturing, marketing and selling manual,
electric and electronic shorthand machines and related transcription, printing
and other products, supplies, systems, hardware and software (the "Court
Reporting Business");
WHEREAS, through the IIS division of Stenograph, Parent is engaged
in the business of developing, marketing and selling imaging services,
consulting services and computerized litigation support and related software
in the United States (the "IIS Business");
WHEREAS, Court Reporting Business and the IIS Business are
referred to herein as the "Business";
WHEREAS, the Selling Entities lease certain facilities in Mt.
Prospect, Illinois; Alameda, California; New York, New York; and Carmel,
Indiana (the "Facilities") at which the Business is conducted;
WHEREAS, Buyer desires to purchase from the Selling Entities and
the Selling Entities desire to sell to Buyer the assets and business of the
Business with the IIS Business being purchased by IAC and the Court Reporting
Business being purchased by SAC;
WHEREAS, the Selling Entities are also engaged in other businesses
which are not being purchased pursuant to this Agreement, including but not
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limited to Energy Absorption Systems, Inc., Disc Manufacturing, Inc., the non-
Court Reporting Business of Stenograph U.K., Discovery Products, Inc. and the
Litigation Sciences division of Stenograph;
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements herein contained, the parties agree as
follows:
ARTICLE I
THE TRANSACTION
1.1 Purchase and Sale of Assets. Upon the terms and subject to
the conditions of this Agreement, at the Closing, the Selling Entities shall
sell, transfer, assign and deliver to the applicable Buyer (or its affiliated
designee), and the applicable Buyer (or its affiliated designee) shall
purchase, accept and receive, all right, title and interest in and to the
Purchased Assets (as defined below).
1.2 Purchased Assets. The "Purchased Assets" means (i) all of
the Business, (ii) all of the assets used in the operation of the Business,
(iii) all of the assets located at, used in connection with and/or directly
related to the Facilities and their operations, (iv) all of the assets,
properties and rights of Quixote and LTI listed on Schedule 1.2(a), and (v)
all of the assets, properties and rights of Stenograph, Stenograph UK and IIS,
including the following:
(a) All rights under the leases to real estate described on
Schedule 4.11, including options to purchase and renew, and other
rights thereunder, as more particularly described on Schedule 4.11
(the "Real Estate");
(b) all tools, machinery and equipment, office furniture
and office equipment;
(c) all inventories of raw materials, components, spare
parts and supplies, work in process and finished goods
("Inventory");
(d) all cash and cash equivalents (net of the amount of
outstanding unpaid checks as of the Closing that are payable to
third parties in the ordinary course of business and net of unpaid
wages and salary for the pay period from the last payroll date
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through the end of the Closing Date subject to reimbursement of
the IIS Wages as provided in Section 2.3), accounts and notes
receivable, including rights under the outstanding Collection
Cases and other litigation cases referred to in Section 1.3(c);
(e) all computer software programs, source codes, object
codes, information systems, program specifications and related
material and documentation and any and all licenses and copies
thereof and rights thereto (the "Software");
(f) all information in the nature of know-how, trade
secrets, inventions, processes, designs, devices and related
information and documentation (the "Technical Information");
(g) all patents, trademarks, trade names, trade styles,
logos, product designations and service marks and all applications
(pending or in process) and registrations therefor and licenses
thereof, including the names Stenograph Corporation and Integrated
Information Services, Inc. (the "Intellectual Property");
(h) all documents and records relating to the Business,
each Facility (or its operations) and the Purchased Assets;
(i) all records relating to those employees subsequently
hired by Buyer;
(j) all permits, licenses, approvals, registrations,
authorizations and indicia of authority and pending applications
for any thereof ("Licenses and Permits");
(k) all rights of or relating to insurance claims and
proceeds to the extent related to any Assumed Liabilities;
(l) all contractual rights and leasehold interests,
including open purchase and sales orders and rights and interests
of the applicable Selling Entity under leases and contracts
referred to in Schedule 1.3(a) and all other rights of each
Selling Entity under all other agreements referred to in Schedule
1.3(a); and
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(m) prepaid expenses, deposits, advances and similar
amounts.
The definition of Purchased Assets shall not include assets that relate
primarily to businesses of the Selling Entities other than the Court Reporting
Business in the United States and Europe and the IIS Business in the United
States or (ii) the assets set forth on Schedule 1.2(b) (the "Excluded
Assets"). The Purchased Assets relating primarily to the IIS Business are
referred to herein as the "IIS Purchased Assets" and will be purchased by IAC.
The Purchased Assets other than the IIS Purchased Assets are referred to
herein as the "Stenograph Purchased Assets" and will be purchased by SAC.
1.3 Liabilities and Obligations. Buyer shall not assume and
shall not be liable or responsible for any debt, obligation or liability of or
relating to any Facility, the Business, the Purchased Assets, any Selling
Entity or otherwise of any kind, whether known or unknown, contingent,
absolute, or otherwise, except for the following (the "Assumed Liabilities"):
(a) obligations under the agreements described on Schedule
1.3(a) to the extent obligations thereunder are required to be
performed after the end of the Closing Date, were incurred in the
ordinary course of business and do not relate to any failure to
perform, improper performance or other breach by any Selling
Entity prior to the end of the Closing Date;
(b) the trade accounts payable and accrued expenses of the
Business as of the end of the Closing Date to the extent reflected
on the Balance Sheet dated December 31, 1995 attached as Schedule
1.3(b) (the "Balance Sheet") and to the extent accrued in the
ordinary course of the Business consistent with past practice
thereafter (but excluding any items payable to any Selling Entity
or any Affiliate (as hereinafter defined) of any Selling Entity),
other than those related to the Excluded Liabilities provided,
however, that Buyer shall not be responsible for any wages or
salary obligations for employees of the Selling Entities that
relate to the period through the end of the Closing Date;
(c) liabilities and obligations arising from the
prosecution of the plaintiff's rights in the collection cases
listed on Schedule 1.3(c) after the end of the Closing Date (the
"Collection Cases") as well as the Bossard Case described in
item 3 of Schedule 4.21 and the David Paplham Case described in
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item 5 of Schedule 4.21, excluding any legal fees and expenses
relating to the period prior to the end of the Closing Date in
excess of amounts reflected on the Balance Sheet; and
(d) liabilities for sales and use taxes arising from sales
of products of the Business prior to Closing but only up to the
amount of the accrual for such taxes set forth on the Balance
Sheet (Buyer shall use reasonable efforts to notify the Selling
Entities of amounts in excess of $25,000 that are applied to such
accrual, but failure to give such notice shall not affect any
party's obligations hereunder) .
The Assumed Liabilities relating to the IIS Business are referred to herein as
the "IIS Assumed Liabilities." The Assumed Liabilities other than the IIS
Assumed Liabilities are referred to herein as the "Stenograph Assumed
Liabilities." IAC agrees to timely discharge and perform all of the IIS
Assumed Liabilities as they become due and SAC agrees to timely discharge and
perform all of the Stenograph Assumed Liabilities as they become due.
1.4 Excluded Liabilities. Except for the Assumed Liabilities,
each Selling Entity agrees to timely discharge and perform all of its
liabilities and obligations related to the Business, the Purchased Assets or
the Facilities payable after Closing as they become due, including the
following (the foregoing, including the following being the "Excluded
Liabilities"):
(a) liabilities and obligations arising from (x) the
litigation matters (the "Retained Litigation") described on
Schedule 4.21 (except to the extent of liabilities assumed by
Buyer pursuant to Section 1.3(c)), (y) environmental matters
described on Schedule 4.10 and (z) claims described on
Schedule 4.18;
(b) liabilities and obligations relating to products sold
prior to the end of the Closing Date, including product liability
claims, claims for damages to person or property and claims
relating to carpal tunnel syndrome;
(c) liabilities and obligations for any products sold prior
to the end of the Closing Date that do not comply with applicable
warranties or that are otherwise defective to the extent such
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liability is in excess of the reserve set forth on the Balance
Sheet;
(d) liabilities and obligations relating to any federal,
foreign, state, county and other tax returns, reports and
declarations of every nature (including income, employment,
excise, property, sales and use taxes), except to the extent
assumed by Buyer pursuant to Section 1.3(d);
(e) liabilities and obligations relating to any Plan (as
hereinafter defined), as well as any and all claims of and obligations
to (including wages, salary and overtime) employees of the Business to
the extent related to the period through the end of the Closing Date or
otherwise related to the acts of the Selling Entities except for
severance liabilities arising from Buyer's failure to offer employment
as required by Section 7.1 and accrued vacation reflected on the
Settlement Statement; and
(f) liabilities and obligations to the Selling Entities and
their Affiliates (as hereinafter defined) except as arising
pursuant to this Agreement.
The Buyer agrees that any benefits, rights, actions, settlements, or assets
arising from any of the Excluded Liabilities and not the Purchased Assets or
the Assumed Liabilities shall belong exclusively to the Selling Entities, and
Buyer hereby waives any right or claim thereto.
1.5 Nonassignable Contracts.
(a) To the extent that the assignment by any Selling Entity of
any sales order, purchase order, lease or other contract included in the
Assumed Liabilities or Purchased Assets is not permitted without (i) the
consent of the other party to the contract, (ii) the approval of Buyer as a
source of the products or services called for by such contract or (iii) the
approval of Buyer as a lessee, then this Agreement shall not be deemed to
constitute an assignment or an attempted assignment of the same, if such
assignment or attempted assignment would constitute a breach thereof.
However, unless otherwise agreed as to any particular contract or order (or
class thereof), the applicable Selling Entity shall use its reasonable
commercial efforts (which shall not include payment of any additional
consideration to any party) to obtain any and all such consents, approvals and
novations.
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(b) If any necessary consent, approval or novation is not
obtained, the applicable Selling Entity shall cooperate with Buyer in any
reasonable arrangement designed to provide Buyer with all of the benefits
under such contract, lease or order as if such consent, approval or novation
had been obtained, including subleases from the applicable Selling Entity and,
undertakings by Buyer of the work necessary to complete contracts as the agent
of the applicable Selling Entity with the understanding that the applicable
Selling Entity shall then invoice the customer for services rendered and
promptly remit the amount of the receivable to Buyer. Nothing herein shall
excuse the Selling Entity from responsibility for any of its representations
and warranties or covenants hereunder.
ARTICLE II
CONSIDERATION FOR TRANSFER
2.1 Consideration. The aggregate consideration for the
Purchased Assets shall be as follows (the "Purchase Price"):
(a) Seven Million Dollars ($7,000,000) plus or minus the
Adjustment Amount (as defined below); and
(b) the assumption of the Assumed Liabilities by IAC and
SAC.
2.2 Transfer Taxes. At Closing, the Selling Entities shall pay
or provide for the transfer taxes and sales taxes payable as a result of the
transfer of the Purchased Assets provided for herein.
2.3 Adjustment to Purchase Price. The Purchase Price shall be
reduced dollar for dollar by the amount of any cash distributed by or
transferred from the Business to the Selling Entities and their Affiliates
between November 30, 1995 and the Closing ("Cash Distributions") plus the
aggregate amount of wages and salary payable to employees of the IIS Business
from January 31, 1996 through the end of the Closing Date ("IIS Wages") less
any Qualified Payments (the "Adjustment Amount"). Cash Distributions shall
include, but are not limited to: dividend payments; management fees;
corporate overhead charges; intercompany loans and interest payments on
intercompany loans; and other cash payments or transfers from the Business to
the Selling Entities and their Affiliates. Any payment by the Business to any
Selling Entity or its Affiliates between November 30, 1995 and the Closing for
reimbursement of products or services at a fair market price in the ordinary
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course of business and not inconsistent with practice prior to November 30,
1995 (such as insurance premiums or third party professional fees and
expenses) shall be a "Qualified Payment".
2.4 Post-Closing Adjustment. Within thirty (30) days after the
Closing Date, the Selling Entities shall deliver to the Buyer a statement (the
"Settlement Statement") setting forth their determination of all Cash
Distributions, IIS Wages and Qualified Payments. In connection therewith,
from and after Closing, the Selling Entities shall provide the Buyer and its
representatives with reasonable access to all records and work papers
necessary to compute and verify the Cash Distributions, IIS Wages and
Qualified Payments. This Settlement Statement as delivered to the Buyer shall
be final for purposes of this Agreement unless, within ten (10) days after
delivery to the Buyer, the Buyer shall deliver to the Selling Entities a
Dispute Notice. After delivery of a Dispute Notice, the Selling Entities and
Buyer shall promptly negotiate in good faith with respect to the subject of
the Dispute Notice, and if they are unable to reach an agreement within
fifteen (15) business days after delivery to the Buyer of the Dispute Notice,
the dispute shall be submitted to the Independent Auditor. The Independent
Auditor shall be directed to issue a final and binding decision within fifteen
(15) days of submission of the Dispute Notice, as to the issues of
disagreement referred to in the Dispute Notice and not resolved by the
parties. The Settlement Statement, as so adjusted by agreement or by the
Independent Auditor (if required), shall be final and binding on the parties.
Within five (5) days after final determination of the Settlement Statement the
Selling Entities shall pay Buyer the Adjustment Amount.
2.5 Settlement Statement. The Settlement Statement shall be
prepared in accordance with generally accepted accounting principles ("GAAP")
as consistently applied by the Selling Entities and shall be accompanied by
supporting documentation for all Cash Distributions and Qualified Payments
listed on the Settlement Statement.
In connection with the Settlement Statement, a "Dispute Notice"
shall mean a written notice from the Selling Entities indicating disagreement
with the statement and summarizing the items in dispute. The "Independent
Auditor" shall mean one of the "Big Six" public accounting firms with no
material relationship to either of the parties chosen by agreement of the
parties, or if they are unable to agree, shall mean one of the "Big Six" firms
with no such material relationship chosen by lot. The fees and expenses of
the Independent Auditor retained as a result of any dispute related to any
statement shall be equitably allocated by the Independent Auditor. The
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decision of the Independent Auditor with respect to the Settlement Statement
shall be final and binding on the parties. The full force and effect of the
representations and warranties shall in no way be diminished by the adjustment
to the Purchase Price pursuant to the Settlement Statement.
2.6 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Selling Entities and the Purchased Assets as provided on
an Allocation Schedule in form provided by Buyer to the Selling Entities
promptly after Closing (the "Allocation Schedule"). Buyer and the Selling
Entities agree (i) to jointly complete and timely file Form 8594, and any
other required reports in accordance with Section 1060 of the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder, with
their respective federal income tax returns for the tax year in which the
Closing Date occurs (and any amended Form 8594, if necessary) in accordance
with the Allocation Schedule and (ii) that no party will take a position on
any report, return, or other documents filed with any governmental authority
in any judicial or administrative proceeding, that is in any manner
inconsistent with the Allocation Schedule.
ARTICLE III
THE CLOSING AND TRANSFER OF ASSETS
3.1 Closing. The transfer of assets contemplated by this
Agreement shall be effective as of the end of the Closing Date, as hereafter
defined (the "Closing") and shall occur at the offices of McDermott, Will &
Emery, 227 West Monroe Street, Chicago, Illinois at 10:00 A.M. on February 16,
1996 or at such other time or place as may be mutually agreed upon by the
parties (the "Closing Date").
3.2 Deliveries by Buyer. At the Closing, Buyer shall deliver (or
cause to be delivered) the following:
(a) $7,000,000 payable by wire transfer of immediately
available funds;
(b) an Officer's Certificate as to the accuracy at Closing of all
of Buyer's representations and warranties as if made at and as of
Closing, the fulfillment of all of Buyer's agreements and covenants and
the satisfaction of all Closing conditions to be performed by Buyer; and
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(c) such other instruments or documents as may be necessary
or appropriate to carry out the transactions contemplated hereby.
3.3 Deliveries by the Selling Entities. At the Closing, the
Selling Entities shall deliver the following:
(a) a bill (or bills) of sale in the form provided by
Buyer;
(b) the Consents referred to in Section 8.3 and the
assignments referred to in Section 8.5;
(c) an Officer's Certificate as to the accuracy at Closing
of all of the Selling Entities' representations and warranties as
if made at and as of Closing, the fulfillment of all of the
Selling Entities' agreements and covenants and the satisfaction of
all Closing conditions to be performed by the Selling Entities;
(d) patent, trademark and copyright assignments for items
included in the Purchased Assets in form provided by Buyer;
(e) possession of the Purchased Assets; and
(f) such other instruments or documents as may be necessary
or appropriate to carry out the transactions contemplated by this
Agreement.
3.4 Closing Agreements. At the Closing, the parties shall
execute, acknowledge and deliver such other instruments or documents as may be
necessary or appropriate to carry out the transactions contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SELLING ENTITIES
The Selling Entities hereby jointly and severally represent and
warrant to Buyer, as of the date hereof, and as of the Closing Date, as set
forth below. For purposes of this Agreement, "Material Adverse Effect" shall
mean any effect which is materially adverse to the operations (as presently
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conducted), assets, liabilities, condition (financial or otherwise) or to each
Selling Entity's knowledge the prospects of the Purchased Assets, the Business
or the Facilities.
4.1 Authority. Each Selling Entity has the full corporate
right, power and authority, without the consent of any other person, to
execute and deliver this Agreement and the agreements it is hereby
contemplated to execute and to carry out the transactions contemplated hereby
and thereby, including the transfer of each of the Purchased Assets. All
corporate and other acts or proceedings required to be taken by each Selling
Entity to authorize the execution, delivery and performance of this Agreement
and all agreements and transactions contemplated hereby have been duly and
properly taken.
4.2 Validity. This Agreement has been, and the agreements and
other documents to be delivered by each Selling Entity at Closing will be,
duly executed and delivered and constitute the valid and legally binding
obligations of each Selling Entity enforceable in accordance with their
respective terms.
4.3 Violations and Approvals. Except as set forth on
Schedule 4.3, the execution and delivery of this Agreement and the agreements
contemplated hereby and the consummation of the transactions contemplated
hereby and thereby will not (immediately, upon notice, with the passage of
time or both) result in the creation of any lien, charge or encumbrance of any
kind or the termination or acceleration of any obligation of or relating to
the Business, the Facilities or the Purchased Assets and are not prohibited
by, do not and will not violate or conflict with any provision of, and do not
and will not (immediately, upon notice, with the passage of time or both)
constitute a default under or a breach of (i) the charter or by-laws of any
Selling Entity, (ii) any note, bond, indenture, contract, agreement, permit,
license or other instrument to which any Selling Entity is a party or, by
which any Selling Entity, the Business, any Facility or the Purchased Assets
are bound, (iii) any order, writ, injunction, decree or judgment of any court
or governmental agency applicable to any Selling Entity, the Business, any
Facility or the Purchased Assets or (iv) any law, rule or regulation
applicable to any Selling Entity, any Facility, the Business or the Purchased
Assets. Except as set forth on Schedule 4.3, and consents to assignment and
other consents that are obtained in connection with the Closing, no approval,
authorization, registration, consent, order or other action of or filing with
any person, including any court, administrative agency or other governmental
authority of any country, is required for the execution and delivery by each
Selling Entity of this Agreement or the agreements contemplated hereby or the
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consummation of the transactions contemplated hereby and thereby.
4.4 Due Organization. Each Selling Entity is a corporation duly
organized and validly existing under the laws of its state or jurisdiction of
incorporation. Each Selling Party, as applicable, has full power and
authority and all requisite rights, licenses, permits and franchises to own
and operate each Facility and to own, lease and operate the Purchased Assets
and to carry on the Business. For purposes of the Business, the applicable
Selling Entities are duly qualified to do business in New York, California,
Indiana and Illinois and are not required to be qualified to do business in
any other state.
4.5 Transactions with Affiliates. Except (i) for assets
included in the Purchased Assets, (ii) as permitted under Section 6.6 and
(iii) as otherwise set forth in Schedule 4.5, no Affiliate:
(a) owns, directly or indirectly, any material interest in
any entity which is a competitor, lessor, lessee, or material
supplier of any Facility or the Business;
(b) has any cause of action or other claim against or owes
any material amount to, or is owed any material amount by, any
Selling Entity with respect to any Facility, the Business or the
Purchased Assets; or
(c) has any interest in or owns any assets, property or
rights used in the conduct of the Business or the operation of any
Facility.
The term "Affiliate" shall mean any corporation, partnership, trust or other
entity (i) in which a Selling Entity has, directly or indirectly, a five
percent (5%) or greater interest or (ii) which controls, is controlled by, or
is under common control with a Selling Entity or any of the entities described
in the preceding clause (i).
4.6 Financial Statements and Taxes. The financial statements of
the Business for the year ended June 30, 1995 and the six months ended
December 31, 1995 attached hereto as Schedule 4.6(a) (the "Financial
Statements") are and the Settlement Statement will be (a) in accordance with
the books of account and records of the Selling Entities, (b) fair
presentations of the financial condition and the results of operations as of
the dates and for the periods indicated and (c) prepared in accordance with
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generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby (except as specified therein and except
for the lack of footnotes, and in the case of interim Financial Statements
subject to year-end audit adjustments consisting only of normally recurring
accruals which in the aggregate are not material). The Business is not
subject to any liability or obligation (whether absolute, accrued, contingent
or otherwise) which is not shown or provided for on the Financial Statements
or on Schedule 4.6(a). Except as set forth on Schedule 4.6(b) all federal,
foreign, state, county and other tax returns, reports and declarations of
every nature (including income, employment, excise, property, sales and use
taxes) required to be filed by or on behalf of the Selling Entities (as it
relates to the Business) and the Business have been filed and such returns are
complete and accurate in all material respects and disclose all taxes required
to be paid for the periods covered thereby. All taxes required to be paid,
withheld or accrued by the Selling Entities (as related to the Business) and
the Business and any deficiency assessments, penalties and interest have been
paid, withheld or accrued. The accruals for taxes on the Balance Sheet are
sufficient for the payment of all unpaid federal, state and other taxes of the
Business. All tax payments related to employees, including income tax
withholding, FICA, FUTA, unemployment and worker's compensation, required to
be made by the Selling Entities (relating to the Business) and the Business
have been fully and properly paid, withheld, accrued or recorded. There are
no outstanding federal, state or local tax audits related to the Business.
4.7 Interim Change. Except as set forth in Schedule 4.7, since
November 30, 1995, the Selling Entities have operated the Business in the
ordinary course, consistent with past operations, and there has not been any
of the following in connection with the Business:
(a) any event resulting in, or that is reasonably likely to
result in, a Material Adverse Effect;
(b) any material change in significant personnel or
relationships with third parties, including suppliers, customers
and others;
(c) any increase in the compensation, or benefits payable
or to become payable to or on account of employees (other than
regularly scheduled increases in accordance with the past
practices of the Business);
(d) any work stoppage or labor dispute;
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(e) any damage to or destruction of a material asset, or
any disposition of assets or transfers of assets from any
Facility, other than sales of finished goods and use and disposal
of assets in the ordinary course of business on terms consistent
with past practice;
(f) any change in collection, credit or accounting
practices, including any write-up or write-down in the value of
the Inventory;
(g) any dividend, distribution or payment of intercompany
payables; or
(h) any agreement to take any of the foregoing actions.
4.8 Work in Process. All work performed on products and
projects in process as of the date thereof and as of the Closing has been or
will be performed in accordance with customer specifications and all
applicable warranties, industry standards, laws, rules and regulations in all
material respects.
4.9 Purchased Assets. Except as set forth on Schedule 4.9, the
Selling Entities are the sole and exclusive legal and equitable owner of all
right, title and interest in and have good and marketable title to all of the
Purchased Assets free and clear of the interests and rights of any other
party. Except for consents of the persons listed on Schedule 4.9(a) which
will be obtained prior to Closing, all of the Purchased Assets may be
transferred to Buyer without the consent or approval of any person. Except as
set forth on Schedule 4.9(a), none of the Purchased Assets are subject to any
lease, license, security interest, mortgage, pledge, lien, charge,
encumbrance, claim, covenant or restriction of any kind or character.
Schedule 4.9(b) sets forth an accurate, correct and complete list and summary
description of all the depreciable Purchased Assets. Except for the interests
of lessors in property leased pursuant to leases described in Schedule 1.3(a),
no person other than the Selling Entities has any interest in any Facility or
any assets at any Facility. The Purchased Assets are in good repair, order
and condition (reasonable wear and tear excepted), are suitable for the
purposes for which they are presently being used, and are adequate to meet all
present and reasonably anticipated requirements of the Business and each
Facility as the Selling Entities conduct the Business at each Facility. The
Purchased Assets will furnish Buyer with all of the capacity and rights to
operate the Business and each Facility in the same manner as presently
operated by the Selling Entities.
<PAGE>
4.10 Environmental Matters.
(a) Except as set forth on Schedule 4.10 (which shall remain the
responsibility of the Selling Entities), each Selling Entity has previously
and is currently complying in all respects with its obligations under all
Environmental Laws in connection with the operation of the Business, its
occupancy of the Facilities and otherwise except for such failures to comply
which can be readily cured and which could not result in any material expense
or liability. No Selling Entity has received any notice alleging any
potential non-compliance with or potential liability pursuant to any
Environmental Laws or with respect to any Materials of Environmental Concern.
(b) Except as set forth on Schedule 4.10 (which shall remain the
responsibility of the Selling Entities), no Materials of Environmental Concern
have ever been unlawfully generated, treated, stored, or disposed of at any
Facility. No underground storage tanks, as defined in RCRA or under
applicable state law, are present at any Facility or are operated by any
Selling Entity at any Facility, and, to each Selling Entity's knowledge after
due inquiry, no such tanks were previously abandoned or removed. There are no
Materials of Environmental Concern or other condition or use of any Facility,
whether natural or man-made, which poses a significant threat of damage to the
health of persons, to property, to natural resources, or to the environment.
(c) Except as set forth on Schedule 4.10 (which shall remain the
responsibility of the Selling Entities), with respect to the Business, each
Facility and the Purchased Assets, neither the Selling Entities nor the
Business has any liability or unfulfilled obligation, whether fixed,
unliquidated, absolute, contingent or otherwise, under any Environmental Laws,
including any liability, responsibility or obligation for fines or penalties,
or for investigation, expense, removal, or remedial action to effect
compliance with or discharge any duty, obligation or claim under any such laws
or regulations, and none of the Selling Entities has any knowledge that any
such claims, actions, suits, proceedings or investigations under such laws or
regulations exist or may be brought or threatened. There has not been, and is
not occurring at any Facility, or any location to which any Selling Entity
ever sent any materials in respect of the Business, or its current or former
operations, any release or threatened release, as those terms are defined in
CERCLA, of any Materials of Environmental Concern, nor has any Selling Entity
any knowledge that such a release is occurring or has occurred at any time in
the past except as identified on Schedule 4.10 (which shall remain the
responsibility of the Selling Entities). Except as identified in
<PAGE>
Schedule 4.10 (which shall remain the responsibility of the Selling Entities),
none of the Selling Entities has ever applied or disposed, transported or
arranged for the transportation or disposal of any Materials of Environmental
Concern, in any manner which may form the basis for any present or future
claim, demand or action seeking investigation, expense, removal, remedial
action or expense at any facility, site, location or body of water, surface or
subsurface. Except as identified in Schedule 4.10 (which shall remain the
responsibility of the Selling Entities), none of the Selling Entities has ever
arranged for disposal or treatment, arranged with a transporter for transport
for disposal or treatment, transported, or accepted for transport any
Materials of Environmental Concern, to a facility, site or location, which,
pursuant to CERCLA or any similar state or local law, (i) has been placed or
has been publicly proposed by authorities having jurisdiction to be placed, on
the National Priorities List or its state equivalent, or (ii) which is subject
to a claim, administrative order or other request to take removal or remedial
action by any person having jurisdiction and authority in the matter.
(d) Schedule 4.10 identifies all environmental audits or
assessments or occupational health studies undertaken by or on behalf of any
Selling Entity or, to the knowledge of the Selling Entities, governmental
agencies with respect to each Facility and the Business, in the past three
years.
(e) For purposes of this Agreement, the following terms shall
have the meanings set forth below:
(i) "Environmental Laws" (A) means all federal, state and
local laws, statutes, decisions, rules, ordinances, regulations,
moratoria, orders and requirements ("Laws") relating to
(i) pollution or the protection of the environment (including air,
surface water, ground water, soil, land surface or subsurface
strata), or (ii) disposal, emissions, discharges, spills, releases
or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution,
use, import, export, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern, and (B) shall
include the Resource Conservation and Recovery Act, as amended
("RCRA"); the Comprehensive Environmental Response Compensation
and Liability Act, as amended ("CERCLA"); the Federal Water
Pollution Control Act, as amended; the Occupational Safety and
<PAGE>
Health Act, as amended; the Clean Air Act, as amended; the Safe
Drinking Water Act, as amended; the Toxic Substances Control Act,
as amended; the Emergency Planning and Community Right-to-Know
Act; the Hazardous Materials Transportation Act, as amended; all
Laws related thereto, all implementing Laws and all similar state
and local Laws with respect to each of the foregoing acts.
(ii) "Materials of Environmental Concern" means any and all
hazardous chemicals and materials, and any and all hazardous
substances as defined in CERCLA, hazardous wastes as defined in
RCRA, petroleum and petroleum products, radioactive materials, and
any and all other hazardous chemicals, materials, constituents,
pollutants or contaminants regulated under any Environmental Laws.
4.11 Real Estate.
(a) Schedule 4.11 sets forth the street address of each parcel of
leased Real Estate. The applicable Selling Entity has been in peaceable
possession of each parcel of leased Real Estate since the beginning of each
applicable lease.
(b) The lease for each parcel of Real Estate includes all
necessary rights to utilities, services, roadways and other means of ingress
and egress, to the extent necessary to conduct the Business and operate each
Facility as presently operated and conducted. No Real Estate is located
within a flood hazard area. No portion of any Real Estate has been condemned,
requisitioned or otherwise taken by any public authority, no notice of any
such condemnation, requisition or taking has been received, and, to the
knowledge of the Selling Entities, no such action is threatened. None of the
Selling Entities has knowledge of any public improvements planned or commenced
which may result in special assessments against or otherwise affect the Real
Estate. To the knowledge of the Selling Entity, no fact or condition exists
which would result in the termination or impairment of access to the Real
Estate or discontinuation of necessary sewer, water, electric, gas, telephone
or other utilities and services.
(c) The zoning of each parcel of Real Estate permits the existing
improvements and the continuation of business as presently conducted thereon.
There has been no violation of any zoning, building, health, safety, fire,
water use, or similar statute, ordinance, law, regulation or code by the
Selling Entities or to the knowledge of the Selling Entities any other person
in connection with the Real Estate except for such violations which can be
readily cured and which could not result in any material liability or expense.
<PAGE>
No notice from any governmental authority exercising jurisdiction over the
Real Estate requiring or calling attention to the necessity of any work,
repairs, new construction, installation or alteration in connection with any
parcel of Real Estate has been served upon the Selling Entities and is pending
or unresolved.
(d) No Real Estate is leased or subleased by the Selling Entities
to any third party.
(e) There is no construction work being done at, or construction
materials being supplied to, any parcel of Real Estate, except in connection
with routine maintenance projects and materials used in the Business in the
ordinary course.
4.12 Software and Information Systems. Schedule 4.12 sets forth
an accurate and complete list and summary description of all the Software.
Schedule 4.12 identifies or describes (i) Software which is owned by the
Selling Entities; and (ii) Software which is licensed to the Selling Entities
by third parties. Except as provided on Schedule 4.12, with respect to the
Software that is reflected as being owned by one or more of the Selling
Entities:
(a) all Software documentation for the end user is
reasonably current, accurate and sufficient in detail and content
to identify, explain the nature and permit the intended use
thereof;
(b) all source codes, object codes and source code comments
included in the Software are sufficient to the extent reasonably
necessary to enable Buyer to maintain and modify the Software,
using persons skilled in the programming language, operating
systems, and hardware involved;
(c) Except for Incorporated Products (as hereinafter
defined), the applicable Selling Entity has good, sole, and
marketable right, title, and interest in and to the Software
(including the exclusive right to make, copy, sell, exploit, and
provide to others the use of the Software and all derivative works
thereof) free and clear of any liens, claims, encumbrances and
adverse rights of every kind, nature, and description. The
applicable Selling Entity is in actual and sole possession of and
will transfer to Buyer at Closing all copies of the source code,
source code comments and object code (except for copies of object
<PAGE>
code held by licensees) and other proprietary rights included in
the Software. Schedule 4.12 lists all current and former
employees of the Selling Entities who were authors of the Software
and to the knowledge of the Selling Entities any other person or
entity who materially participated in the development of the
Software or any portion thereof or performed any work related to
the Software (such authors and other persons or entities are
collectively referred to as the "Software Authors"). Each
Software Author identified as "internal" made his contribution to
the Software within the scope of employment with the applicable
Selling Entity, as "work made for hire." Except for the
Incorporated Products, the Software and every portion thereof is
an original creation of the Software Authors (or other persons not
having any rights thereto) and does not contain any source code or
portions of source code (including any "canned program") created
by any parties other than the Software Authors (or other persons
not having any rights thereto). The Selling Entities have not, by
any acts or omissions, or by acts or omissions of affiliates,
directors, officers, employees, agents, or representatives caused
any of their proprietary rights in the Software, including
copyrights, trademarks, and trade secrets to be transferred,
diminished, or adversely affected to any material extent.
(d) Except as set forth in Schedule 4.12:
(i) there are no defects or errors in the
Software, which defects or errors could materially and
adversely affect Buyer's or any licensee's use of the
Software or the functioning of the Software in
accordance with the specifications for the Software
published by the applicable Selling Entity or provided
to customers, the Software has all the features
described in the user manuals or advertisements and
materials made available to the applicable Selling
Entity's customers; and the Software does not contain
any "back door," "time bomb," "Trojan horse," "worm,"
"drop dead device," "virus" (as these terms are
commonly used in the computer software industry), or
other software routines or hardware components
designed to permit unauthorized access, to disable or
erase software, hardware, or data in a manner
unauthorized by, and contrary to the intentions of,
<PAGE>
the user, or to perform any other similar unauthorized
destructive type of functions;
(ii) no person or entity other than the
applicable Selling Entity has any interest of any kind
or nature in or with respect to the Software,
including the right to use, make, copy, sell, exploit
and provide to others the use of, the Software and all
derivative works thereof, and no government funding or
university or college facilities were used in the
development of the Software, and the Software was not
developed pursuant to an agreement giving any person
or entity rights to the Software, and no situation,
matter, or agreement exists that would preclude Buyer
from making any change to the Software or combining it
with other software in any lawful manner;
(iii) all copies of copyrighted Software
contain copyright legends; the Selling Entities have
no knowledge that any third party is violating or has
violated any of the applicable Selling Entity's
proprietary rights in the Software; other than license
fees for Incorporated Products, no third party has any
interest in, or right to compensation from the Selling
Entities by reason of, the use, exploitation, or sale
of the Software; there are no restrictions on the
ability of the Selling Entities (or any successor or
assignee of the Selling Entities, including Buyer) to
use or otherwise exploit the Software, and such use or
exploitation does not and will not obligate the
Selling Entities (or any successor or assignee of the
Selling Entities, including Buyer) to pay any royalty,
fee, or other compensation to any person or entity
other than license fees for Incorporated Products; and
the Selling Entities have not received any notice and
do not have any knowledge of any complaint, assertion,
threat, or allegation inconsistent with the preceding
statements in this paragraph; and
<PAGE>
(iv) the Software has been licensed for use by
third parties only pursuant to the terms of the
standard license agreement in form attached to
Schedule 4.12 which has been in effect since
January 1, 1996, and prior to January 1, 1996,
pursuant to the standard form in effect at the time
the license was granted, copies of which have been
made available to Buyer and no license contains any
term or provision other than those set forth in the
applicable standard form, except for such minor
deviations therefrom as do not materially and
adversely effect the Licensor's rights or obligations
thereunder.
(e) The Selling Entities have delivered or will deliver at
Closing all of their records with respect to Software fixes
(including fixes currently in progress), problem lists,
maintenance of the Software, and customer complaints, and all
warranty claims (including any pending claims) related to the
Software all of which are described in Schedule 4.12. Except as
set forth in Schedule 4.12, there are no representations and
warranties that have been made with respect to the Software.
(f) Schedule 4.12 contains a complete list of all third
party software and patent rights which are a component of or
incorporated in or specifically required to develop or support any
of the Software ("Incorporated Products"), and a list of all
restrictions on the Selling Entities' unrestricted right to use,
incorporate or distribute the Incorporated Products. The Selling
Entities are not in violation of any license, sublicense or
agreement with respect to an Incorporated Product.
(g) No person or entity is entitled to receive the source
code for any Software for any reason; and the Selling Entities
have not disclosed the source code for any Software to any third
party except as set forth on Schedule 4.12.
(h) Notwithstanding the foregoing, with respect to Software
designated as "obsolete" on Schedule 4.12, the Buyer shall be
entitled to indemnification with respect to breaches of the
representations and warranties in paragraphs (a), (b) and (d)(i)
only in connection with claims of third parties.
<PAGE>
4.13 Customers and Suppliers. Schedule 4.13 sets forth an
accurate and complete list of those suppliers that have provided raw
materials, products or services for the Business or any Facility at a cost to
the Selling Entities of greater than $25,000 during the period since July 1,
1995 through December 31, 1995. The Selling Entities have no knowledge of any
fact, condition or event (i) which would cause Buyer's relationship with any
supplier to be materially and adversely different than the current
relationship of such supplier with respect to the Business or any Facility, or
(ii) which would materially and adversely affect any supplier's ability to
supply raw materials, products or services to Buyer. Schedule 4.13 sets forth
an accurate and complete list of those customers that have purchased products
or services from the Business or any Facility at a cost to the purchaser of
greater than $25,000 during the period since July 1, 1995 through December 31,
1995. The Selling Entities have no knowledge of any fact, condition or event
(i) which would cause Buyer's relationship with any customer to be materially
and adversely different than the current relationship of such customer with
respect to the Business or any Facility, or (ii) which would materially and
adversely effect any customer's ability to purchase products or services from
Buyer.
4.14 Employees. Schedule 4.14 is an accurate and complete
schedule containing, with respect to the Business and each Facility:
(a) a list of all employees (including name, title and
position);
(b) the employee's length of service;
(c) a list of all agreements, arrangements or
understandings, written or oral (the "Employment Contracts"),
regarding services to be rendered, terms and conditions of
employment, confidentiality and assignment of inventions (with
respect to such items listed on Schedule 4.14, accurate and
complete copies have been delivered to Buyer);
(d) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of
each employee; and
(e) copies of all OSHA reports and responses given or
received by any Selling Entity with respect to the Business since
January 1, 1995.
<PAGE>
Except in the case of each of (i) through (xii) below, as set forth in
Schedule 4.14, with respect to the Business and each Facility, (i) there have
not been any labor disputes, any work stoppages, pickets or work slow-downs
due to labor disagreements in the past five years, (ii) there are and have
been no unresolved violations of any local, state, or federal laws respecting
the employment of any employees, including the National Labor Relations Act,
the Fair Labor Standards Act, the Americans with Disabilities Act, wage-
payment laws, laws prohibiting employment discrimination, and laws addressing
workplace safety and health; (iii) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of the Selling Entities,
threatened before the National Labor Relations Board; (iv) there is no labor
strike, dispute, grievance, request for representation, slowdown or stoppage
actually pending or, to the knowledge of the Selling Entities, threatened; (v)
there has been no question concerning representation raised or, to the
knowledge of the Selling Entities, threatened respecting employees in the past
five years; (vi) each Selling Entity is in compliance with all contracts of or
respecting employment, including all collective bargaining agreements
identified in Schedule 4.14; (vii) there is no employment handbook, personnel
policy manual, or similar document that creates prospective employment rights
or obligations; (viii) the transactions contemplated by this Agreement will
not violate any of the terms of any applicable collective bargaining
agreement; (ix) each Selling Entity has discharged all collective bargaining
obligations respecting the transactions contemplated by this Agreement imposed
by law or by any valid existing collective bargaining agreement, including any
obligations to provide notice to any union or to bargain over the effects of
the transactions contemplated by this Agreement; (x) each Selling Entity has
provided or will timely provide prior to Closing all notices required by law
to be given prior to Closing of the transactions contemplated by this
Agreement to all local, state, or federal labor, wage-payment, equal
employment opportunity, unemployment-insurance and related agencies; (xi) each
Selling Entity has paid or properly accrued in the ordinary course of business
all wages and compensation due to employees, including all vacations or
vacation pay, holidays or holiday pay, sick days or sick pay, and bonuses; and
(xii) the transactions contemplated by this Agreement will not create
liability under any local, state, or federal law respecting reductions in
force or the impact on employees on plant closing or sales of businesses.
4.15 Employee Benefit Plans.
(a) For purposes hereof, a "Plan" shall mean any "employee
benefit plan" (as that term is defined in Section 3(3) of the Employee
<PAGE>
Retirement Income Security Act of 1974, as amended "ERISA"), as well as any
other written or formal benefit plan, contract or arrangement, whether or not
terminated, involving direct or indirect compensation, established, maintained
or contributed to by one of the Selling Entities with respect to employees of
the Business, or with respect to which a Selling Entity has any present or
future, direct or indirect, actual or contingent obligation or liability on
behalf of its employees, former employees, officers, directors, agents,
brokers, consultants or independent contractors of the Business or the
dependents or beneficiaries of any of the foregoing, including but not limited
to, (A) each retirement, pension, profit-sharing, thrift, savings, target
benefit or employee stock ownership plan or cash or deferred arrangement; (B)
each other deferred or incentive compensation, bonus, stock option, employee
stock purchase, "phantom stock" or stock appreciation right plan; (C) each
program providing for (1) payment for or reimbursement of the expenses of
medical, dental or visual care or psychiatric counseling, (2) vacation, sick,
disability or severance pay, or (3) life insurance; and (D) each other "fringe
benefit" plan or arrangement, and shall also include any employee benefit plan
or plan of the type specified above under which a Selling Entity acts as a
fiduciary or is a sponsor. Schedule 4.15 hereto sets forth a true, correct
and complete list of all Plans applicable to any employee of the Business.
The applicable Selling Entity has, with respect to each Plan, delivered to
Buyer true and complete copies of (i) all Plan texts and trust agreements,
group annuity or other insurance contracts, and any other agreements relating
to the Plans; (ii) all summary Plan descriptions and material employee
communications; (iii) the three most recent annual reports on Form 5500
(including all schedules thereto); and (iv) if the Plan is intended to qualify
under Section 401(a) or 403(a) of the Internal Revenue Code, as amended (the
"Code"), the most recent determination letter received from the Internal
Revenue Service.
(b) With respect to each Plan, the applicable Selling Entity has
no direct or indirect, actual or contingent liability, other than to make
payments for contributions, premiums or benefits when due in the ordinary
course or in connection with the termination of Plans, all of which payments
that are due have been made.
(c) With respect to each Plan: (i) each such Plan has at all
times conformed to, and its administration has been at all times in compliance
with, all applicable laws and regulations; (ii) each such Plan has been at
all times administered in accordance with the terms of that Plan; (iii) each
such Plan which is intended to qualify under Sections 401(a) or 403(a) of the
<PAGE>
Code so qualifies; (iv) all payments required with respect to such Plans to
date have been and as of the Closing Date will be, made, all amounts accrued
as liabilities and expenses of the applicable Selling Entity which have not
been paid are reflected on Schedule 4.15; (v) all payments, contributions and
premiums paid or required to be paid meet the requirements for deductibility
under the Code, and no payment is required under any such Plan or any other
employment related agreement that, by operation of Section 280G of the Code,
would not be deductible; (vi) there are no actions, suits or claims pending
or, to the knowledge of the Selling Entities, threatened (other than routine
claims for benefits); (vii) each Plan which is a "group health plan" (as
defined in Section 607(l) of ERISA) has been operated in compliance with the
Code, ERISA and COBRA (as hereafter defined) at all times; (viii) the Selling
Entities have not engaged in, nor has any Plan engaged in, any transaction
which would result in a civil penalty pursuant to Section 502(i) of ERISA or
which would constitute a prohibited transaction under ERISA or be subject to a
tax imposed under Section 4975 of the Code; and (ix) the applicable Selling
Entity has never sponsored, maintained, or been an employer under a plan sub-
ject to Title IV of ERISA and/or to Section 302 of ERISA and Section 412 of
the Code.
(d) No Plan is funded through a "rabbi trust" or similar funding
vehicle, and no assets of the applicable Selling Entity are held in such a
trust or funding vehicle. Except as specified on Schedule 4.15 there are no
(i) Retiree Welfare Plans, (ii) unfunded benefit obligations of the applicable
Selling Entity relating to former or current employees of the applicable
Selling Entity, or (iii) reserves, assets, surpluses or prepaid premiums under
any Welfare Plan. Except as set forth in Schedule 4.15, no Plan provides for
severance pay, unemployment compensation, deferred compensation or any similar
payment with respect to any current or former employee, officer, director or
agent of or consultant to any Selling Entity. The consummation of the
transactions contemplated by this Agreement will not, except as otherwise
provided for in this Agreement or as set forth on Schedule 4.15, (x) entitle
any current or former employee, officer, director or agent of or consultant to
any Selling Entity to severance pay, unemployment compensation, deferred
compensation or any similar payment, (y) accelerate the time of payment or
vesting of or increase the amount of compensation due to any such current or
former employee, officer, director or agent of or consultant to any Selling
Entity, or (z) constitute or involve a "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code).
<PAGE>
(e) Except as set forth on Schedule 4.15 and as provided under
applicable laws and regulations, the applicable Selling Entity has the
unqualified right to amend, modify and terminate each Plan and has included in
such Plan the procedures for such amendment or termination in accordance with
Section 402(b)(3) of ERISA.
(f) No Plan is a "multiple employer plan" or a "multiemployer
plan," within the meaning of ERISA or the Code. None of the Selling Entities,
nor any of their ERISA Affiliates has any direct or indirect, actual or
contingent liability with respect to any partial or complete withdrawal (as
such terms are defined in Sections 4203 and 4205 of ERISA) from any such
multiemployer plan. For purposes of this Agreement, "ERISA Affiliate" means
any entity (whether or not incorporated) which would be treated as a single
employer with the applicable Selling Entity under Section 414(b), (c), (m) or
(o) of the Code and the regulations thereunder.
(g) None of the Selling Entities nor any of their ERISA
Affiliates has engaged in any transaction with respect to a Plan which was in
violation of Section 4069 of ERISA.
4.16 Licenses and Permits. Schedule 4.16 contains an accurate
and complete list and summary description of each License and Permit. The
Licenses and Permits are valid and in full force and effect, no violations of
any Selling Entity in respect of the Business exist in respect thereof and
there are not pending, or to the knowledge of any Selling Entity, threatened
any proceedings or circumstances which could result in the termination,
revocation, limitation or impairment of any License or Permit in respect of
the Business. The Licenses and Permits included in the Purchased Assets are
all of such items that are necessary to own and operate each Facility, own the
Purchased Assets and conduct the Business as presently owned, operated or
conducted except for such items where failure to have such item could not
result in any material expense or liability and that can be readily obtained
without any material cost. Except as set forth as described in Schedule 4.16,
all Licenses and Permits are freely assignable to Buyer without the consent or
approval of any third party, unless provided otherwise on Schedule 4.16. No
violations of any Selling Entity or its agents have been recorded in respect
of any Licenses and Permits in the past three years, and the Selling Entities
know of no basis therefor.
4.17 Material Contracts. Schedule 4.17 hereto sets forth an
accurate, correct and complete list of all contracts, instruments,
commitments, agreements, arrangements and understandings including all
<PAGE>
amendments and supplements thereto, relating to the Business, to which any
Selling Entity is a party or is bound, or by which any of the assets of any
Selling Entity are subject or bound (i) which involve benefits or obligations
with a value individually or in the aggregate, of $15,000 or more, or (ii)
which otherwise involve any of the following types of contracts (the items in
(i) and (ii) being collectively referred to herein as the "Material
Contracts"):
(a) all purchase orders, agreements or contracts for the
purchase of any materials or services involving an amount in
excess of $15,000 or which were not entered into in the ordinary
course of business;
(b) any sales, license, service or distribution agreements
and contracts;
(c) all leases, agreements, contracts and other instruments
affecting the Real Estate;
(d) all leases for personal property involving annual
payments of in excess of $15,000;
(e) all Employment Contracts;
(f) all licenses, agreements, contracts and other
instruments affecting the Intellectual Property or the Software;
(g) all waste disposal, maintenance and related agreements and
contracts involving an amount in excess of $10,000;
(h) all agreements and contracts containing requirements or
"take or pay" provisions;
(i) all agreements and contracts for Insurance;
(j) all agreements and contracts with state, federal,
local, regulatory or other governmental entities;
(k) all agreements and contracts not to compete or
otherwise restricting activities; and
(l) all agreements and contracts containing a provision to
indemnify any party or assume any tax, environmental or other
liability.
<PAGE>
(m) any other contract, commitment, agreement, arrangement
or understanding which provides for payment or performance by any
party thereto having an aggregate value of $15,000 or more or
which is otherwise material to the Business.
All Material Contracts are valid, binding and enforceable in accordance
with their terms and are in full force and effect and none of the parties to
any Material Contract are in breach of, violation of, or in default under the
terms of any such Material Contract except for such breaches, violations and
defaults which can be readily cured by Buyer and which will not result any
material expense or liability. No event has occurred which with notice or
passage of time or both would result in a breach of, violation of, or in
default under, the terms of any Material Contract. The consummation of the
transactions contemplated hereby, without notice to or consent or approval of
any party, will not constitute a breach of, violation of, or default under any
provision of any Material Contract. Except as set forth on Schedule 4.17,
there is no adverse claim on the rights of any Selling Entity under any
Material Contract. None of the rights of any Selling Entity under any
Material Contract will be impaired by the consummation of the transactions
contemplated by this Agreement (except for such impairments as can be readily
cured by Buyer without any material expense or liability), and all of such
rights will be enforceable by Buyer after the Closing Date without the consent
or agreement of any other party, including all rights to renew the applicable
Material Contract. The Selling Entities shall deliver to Buyer any consents
or approvals of any parties required with respect to the assignment of the
Material Contracts in connection with the transactions contemplated hereby and
as provided in Section 8.3. The Selling Entities have delivered accurate,
correct and complete copies of each Material Contract to Buyer. No Material
Contract permits or requires any Selling Entity (A) to obtain goods, services
or benefits on terms substantially more favorable than fair market terms or
(B) to provide goods, services or benefits on terms substantially less
favorable than fair market terms. With respect to each Material Contract
which is to be assigned to Buyer pursuant to the terms hereof, Buyer will
succeed to all the rights and benefits of each Selling Entity provided the
Buyer performs its obligations thereunder.
4.18 Complaints and Claims. Schedule 4.18 sets forth an accurate
and complete list and summary description of all claims, expenses, liabilities
and obligations relating to or alleged to relate to any injury to person or
property as a result of the use of any products of the Business sold prior to
Closing, the operation of each Facility or the services rendered by the
Business or each Facility performed prior to the Closing Date, which (i) are
currently being asserted, or (ii) were asserted at any time within the prior
three years. Buyer will not be subject to any claim, expense, liability or
obligation arising from any injury to person or property as a result of the
use of any products sold prior to Closing, the operation of any Facility or
<PAGE>
the services rendered by the Business or any Facility prior to the Closing
Date.
4.19 Intellectual Property. Schedule 4.19 sets forth an accurate
and complete list and summary description of all Intellectual Property and
contains an indication of any renewals, taxes or fees due in respect thereof
within ninety (90) days of the Closing Date. Except as set forth in
Schedule 4.19, with respect to the Intellectual Property, (i) the applicable
Selling Entity is the sole and exclusive owner and has the sole and exclusive
right to use the Intellectual Property and no other person has any interest in
any Intellectual Property; (ii) no action, suit, proceeding or investigation
has been instituted and is pending, unresolved or, to Selling Entity's
knowledge, threatened; (iii) none of the Intellectual Property or products or
methods of the Business interferes with, infringes upon, conflicts with or
otherwise violates the rights of others or, to the knowledge of the Selling
Entities, is being interfered with or infringed upon by others, and none is
subject to any outstanding order, decree or judgment except for such
infringements, conflicts or violations as could not result in any material
expense or liability and which can be readily cured by Buyer without any
material expense or liability; (iv) there are no royalty, commission or
similar arrangements, and no licenses, sublicenses or agreements, pertaining
to any of the Intellectual Property or products or methods of the Business;
(v) the Selling Entities have not agreed to indemnify any person for or
against any infringement of or by the Intellectual Property or the Purchased
Assets; (vi) all registrable items of Intellectual Property currently being
used are properly registered under applicable law; and (vii) the Intellectual
Property constitutes all such assets, properties and rights which are used in
or necessary for the conduct of the operations of the Business and each
Facility as currently conducted. Except as set forth on Schedule 4.19, all
rights of the applicable Selling Entity in and to the Intellectual Property
are transferable to Buyer as contemplated herein without any consent or other
approval. Buyer has been provided with accurate and complete copies or
written descriptions of all studies, opinions and searches of which the
Selling Entities have knowledge relating to any Intellectual Property or any
infringement of or by any Intellectual Property, all of which are listed on
Schedule 4.19.
<PAGE>
4.20 Technical Information. Schedule 4.20 sets forth an accurate
and complete list and summary description of all Technical Information. All
Technical Information:
(a) is owned solely and exclusively by the applicable
Selling Entity or available for use by Buyer without payment to
any person; and
(b) is documented in a manner comparable to that of
similarly situated businesses and in condition for conveyance to
and readily useable by Buyer.
All Technical Information and any copies thereof shall be delivered to Buyer
at Closing. There is no violation of any patents, trademarks, trade secret
rights, copyrights or other proprietary rights by, or with respect to, the
Technical Information. Buyer has been provided with accurate and complete
copies or written descriptions of all studies, opinions and searches of which
the Selling Entities have knowledge relating to any Technical Information or
any infringement of or by any Technical Information, all of which are listed
on Schedule 4.20.
4.21 Legal Proceedings. Except as set forth on Schedule 4.21,
the Selling Entities are not engaged in or a party to or, to the knowledge of
any Selling Entity, threatened with any dispute, action, suit or other
proceeding relating to any Facility, the Business or any of the Purchased
Assets. To the knowledge of the Selling Entities, no basis exists for any
such proceeding which could have a Material Adverse Effect. The Selling
Entities have no knowledge of any investigation threatened or contemplated by
any governmental or regulatory authority. Neither the Selling Entities, the
Facility, the Business nor any of the Purchased Assets is the named subject of
or directly subject to any judicial or administrative adjudicatory judgment,
order, writ, injunction, stipulation or decree of any court or any
governmental agency or any arbitrator.
4.22 Compliance with Law. Except as set forth on Schedule 4.22,
as of and prior to the Closing, the Business, each Facility and the Purchased
Assets conform to all applicable statutes, codes, laws, ordinances, rules and
regulations and each Selling Entity has complied with all such statutes,
codes, laws, ordinances, rules and regulations as they apply to the Business
and where the failure of such compliance can be readily cured and will not
result in any material liability or expense. The Selling Entities have no
knowledge of any proposed or pending change in any such statutes, codes, laws,
ordinances, rules and regulations which would have a Material Adverse Effect.
Neither the Selling Entities, nor, to the knowledge of the Selling Entities,
<PAGE>
any employee or representative thereof has made any unlawful gratuities or
other payments (or taken similar actions) for the purpose of benefiting the
Selling Entities with respect to the Business.
4.23 Insurance. Schedule 4.23 sets forth an accurate and
complete list and summary description (including the name of the insurer,
coverage, premium and expiration date) of all binders, policies of insurance,
insurance programs or fidelity bonds ("Insurance") maintained with respect to
each Facility, the Business or the Purchased Assets. Schedule 4.23 sets forth
the claims experience since January 1, 1993 with respect to the Insurance.
Except as disclosed on Schedule 4.23, no pending notice of cancellation or
nonrenewal with respect to, or material increase of premium for, any Insurance
has been received by any Selling Entity. Except as set forth on
Schedule 4.23, no Selling Entity has knowledge of any facts or the occurrence
of any event which might materially increase the premiums payable under any
Insurance.
4.24 Brokers. The Selling Entities have not retained any broker,
finder or agent or incurred any liability or obligation for any brokerage
fees, commissions or finders fees with respect to this Agreement or the
transactions contemplated hereby, except for those to whom Buyer will have no
liability or obligation.
4.25 Disclosure. The representations and warranties of the
Selling Entities contained in this Agreement and each agreement, attachment,
schedule, certificate or other written statement delivered pursuant to this
Agreement or in connection with the transactions contemplated herein and
therein are accurate and complete in all material respects, and do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements and information contained herein or
therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Each Buyer hereby represents and warrants to the Selling Entities
as of the date hereof, and as of the Closing Date, as set forth below.
5.1 Authority. Buyer has full corporate right, power and
authority, without the consent of any other person, to execute and deliver
<PAGE>
this Agreement and the agreements contemplated hereby and to consummate the
transactions contemplated hereby and thereby. All corporate and other acts or
proceedings required to be taken by Buyer to authorize the execution, delivery
and performance of this Agreement and the agreements contemplated hereby and
all transactions contemplated hereby and thereby have been duly and properly
taken.
5.2 Validity. This Agreement has been, and the agreements and
other documents to be delivered at Closing will be, duly executed and
delivered by Buyer and will constitute lawful, valid and legally binding
obligations of Buyer, enforceable in accordance with their respective terms.
5.3 Violations and Approvals. The execution and delivery of
this Agreement and the agreements contemplated hereby and the consummation of
the transactions contemplated hereby and thereby will not (immediately, with
notice, the passage of time or both) result in the creation of any lien,
charge or encumbrance or the acceleration of any indebtedness or other
obligation of Buyer and are not prohibited by, do not violate or conflict with
any provision of, and do not and will not (immediately, with notice, the
passage of time or both) result in a default under or a breach of (i) the
charter or by-laws of Buyer, (ii) any contract, agreement, permit, license or
other instrument to which Buyer is a party or by which it is bound, (iii) any
order, writ, injunction, decree or judgment of any court or governmental
agency, or (iv) any law, rule or regulation applicable to Buyer, except for
such creations, terminations, violations, conflicts, breaches, defaults,
charges or encumbrances which, in the aggregate will not have an adverse
effect on Buyer's ability to consummate the transactions contemplated hereby.
5.4 Brokers. Buyer has not retained any broker or finder or
incurred any liability or obligation for any brokerage fees, commissions or
finders fees with respect to this Agreement or the transactions contemplated
hereby.
5.5 Due Organization. Each Buyer is a corporation duly organized
and validly existing under the laws of its state of incorporation and has full
corporate power and authority to acquire and operate each Facility and to
own, lease and operate the Purchased Assets and to carry on the Business.
<PAGE>
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS OF
SELLING ENTITIES AND BUYER
The Selling Entities jointly and severally hereby agree to keep,
perform and fully discharge the following covenants and agreements.
6.1 Interim Conduct of Business. From the date hereof until the
Closing, the Selling Entities shall preserve and maintain the Business, each
Facility and the Purchased Assets, and shall operate the Business and each
Facility consistent with past practice and in the ordinary course of business,
except as specifically provided herein. Without limiting the generality of
the foregoing, except as otherwise required hereby or agreed to in writing by
Buyer from the date hereof until the Closing and, as set forth on
Schedule 6.1, the Selling Entities shall, with respect to the Business, each
Facility and the Purchased Assets:
(a) maintain each Facility and the Purchased Assets in good
repair, order and condition, reasonable wear and tear excepted;
(b) comply with their obligations under all the Material
Contracts;
(c) except as otherwise provided herein and as set forth on
Schedule 6.1, use reasonable efforts to keep available the
services of the present employees and agents of the Business (and
pay benefits related thereto in the ordinary course of business
and consistent with applicable law and past practice) and preserve
the goodwill of customers, suppliers and others having business
relationships with the Business;
(d) maintain their books, accounts and records in the
usual, regular and ordinary manner on a basis consistent with past
practice and not revalue any assets;
(e) not enter into, amend or terminate or agree to enter
into, amend or terminate any Plan or any employment, bonus,
severance or retirement contract or arrangement, nor increase or
agree to increase any salary or other form of compensation or
benefits payable or to become payable to any employee, except in
the ordinary course of business consistent with past practice;
<PAGE>
(f) not enter into, amend or terminate, or agree to enter
into, amend or terminate, any Material Contract other than
entering into purchase and sale orders and service contracts all
in the ordinary course of business and at prices, in quantities
and on terms consistent with past practice;
(g) not sell, lease or otherwise dispose of or agree to
sell, lease or otherwise dispose of, any assets, properties,
rights or claims other than use and disposal of assets in the
ordinary course consistent with past practices except as set forth
on Schedule 6.1;
(h) not incur or become subject to, nor agree to incur or
become subject to, any debt, obligation or liability, contingent
or otherwise, that in any way would adversely affect Buyer's
ownership of the Business, any Facility or the Purchased Assets,
except current liabilities in the ordinary course of business and
consistent with past practice;
(i) not pay any dividend or distribution or make payment of any
intercompany payables from cash generated by the Business except as set
forth on Schedule 6.1;
(j) not take or omit to take any action which could have a
Material Adverse Effect or cause any representation or warranty herein
to become false; and
(k) not (and shall instruct its officers, representatives,
agents and advisors not to) solicit, encourage or negotiate any
proposal from or with, or supply information to, persons other
than Buyer or its representatives with respect to, or in
connection with, the acquisition of any of the Selling Entities,
the Business or the Purchased Assets or any material portion
thereof, and the Selling Entities shall promptly advise Buyer of
any acquisition proposal or inquiry with respect to such a
proposal that any Selling Entity receives.
From the date hereof through the Closing, the Selling Entities shall confer on
a regular and frequent basis with one or more designated representatives of
Buyer to report on the general status of on-going operations of each Facility
and the Business. The Selling Entities shall promptly notify Buyer of any
event that could have a Material Adverse Effect and shall keep Buyer fully
informed of such events.
<PAGE>
6.2 Access to Information. From the date hereof through
Closing, the Selling Entities will provide to Buyer and its business, legal
and accounting representatives and advisors reasonable access during normal
business hours to the corporate, business, financial and other records and
information of the Selling Entities to the extent reasonably relating to the
Business, Facilities and the Purchased Assets, and will make available all
such information and personnel as may reasonably be requested in connection
therewith.
6.3 Further Assurances; Cooperation. From time to time, after
Closing at Buyer's request and without further consideration, the Selling
Entities shall execute, acknowledge and deliver such documents, instruments or
assurances and take such other actions as Buyer may reasonably request with
respect to assigning, conveying and transferring to Buyer any of the Purchased
Assets. With respect to the Collection Cases, the Selling Entities shall
assist Buyer with the transition of the underlying claims and make available
to Buyer such records, documents and employees as may be reasonably requested
by Buyer in connection with the Collection Cases. Buyer shall reimburse the
Selling Entities for their reasonable out-of-pocket expenses in connection
with transition of the Collection Cases as well as salary or wages payable to
employees with respect to the time required of each employee who is required
to devote more than one (1) week of working time in the aggregate to
cooperation pursuant to this Section. In no event shall the Selling Entities
be required to take any action hereunder that unreasonably interferes with the
ongoing operation of their business.
6.4 Records and Documents. Following the Closing Date, the
Selling Entities shall retain and grant to Buyer and its representatives, at
Buyer's request (and subject to Buyer's reimbursement of the Selling Entities
out-of-pocket expenses), access to and the right to make or obtain copies of
those records and documents related to the Business, any Facility or the
Purchased Assets, possession of which is retained by the Selling Entities, as
may be necessary or useful in connection with Buyer's operation of the
Business and each Facility after the Closing. If during the seven year period
following Closing, the Selling Entities elect to dispose of such records, the
Selling Entities shall first give Buyer sixty (60) days' written notice,
during which period Buyer shall have the right to obtain the records without
further consideration; provided, however, that the Selling Entities shall have
no liability to Buyer for disposal of any record unless done intentionally in
contravention of this Section. If reasonably necessary, the Selling Entities
shall also make reasonably available their employees and agents to provide
<PAGE>
information related to the Business, any Facility or the Purchased Assets on
the same basis.
6.5 Consummation. Subject to the terms and conditions provided
herein, the Selling Entities and the Buyers agree to use all reasonable
efforts to take, or cause to be taken all actions and to do, or cause to be
done all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Agreement in accordance with its terms. The Selling Entities and the
Buyer shall not take any action inconsistent with their obligations hereunder
or which would hinder or delay the consummation of the transactions
contemplated hereby.
6.6 Noncompetition and Nondisclosure.
6.6.1 Noncompetition. In order to protect the value of the
Business and the Purchased Assets, each Selling Entity and its Affiliates
(collectively, the "Seller Group") agrees for three (3) years from the Closing
Date, not to (i) engage, directly or indirectly, in any manner in the Business
anywhere in the United States or Europe, (ii) directly or indirectly engage in
any activity that competes with the Business anywhere in the United States or
Europe, (iii) solicit any customer of the Business for products or services
directly or indirectly competitive with the Business and (iv) attempt in any
way, directly or indirectly, to obtain for itself, or others, or to divert
from Buyer and its subsidiaries and affiliates, any rights benefits, sales or
profits arising out of or in connection with the Purchased Assets or the
Business; provided, however, that no member of the Seller Group will be deemed
to have violated (I) clause (ii) of this Section by virtue of engaging in
business in Europe that does not directly or indirectly compete with the Court
Reporting Business or (II) clause (ii) of this Section (and for CaseView for
Windows clauses (iii) and (iv) as well) by virtue of engaging in the business
of providing litigation consulting services, including jury research,
courtroom communications, preparation of demonstrative exhibits, live action
video and computer animation, or the business of developing, publishing and
distributing the following litigation support software products (and
substitutes therefor) provided such products shall be limited to the current
purposes for which they are currently sold: DiscoveryPRO, DiscoveryZX for DOS,
DiscoveryZX for DOS Network Administration Guide, DiscoveryZX for Windows,
ConvertZX, Discovery VideoZX attorney, Premier Power Discovery VideoZX,
DiscoveryVideoZX for Post Production, CaseView for Windows, DiscoveryBase,
Discovery Magic and Showcase equivalent.
<PAGE>
6.6.2 Nondisclosure. After the Closing, except as required
by law or court order, the Seller Group will not disclose, or use directly or
indirectly, to, or for the benefit of any person or entity other than Buyer,
any Technical Information or confidential information, data or materials
related to the Business.
6.6.3 Breach. The Seller Group agrees that any breach of
Sections 6.6.1 or 6.6.2 above will result in irreparable damage to Buyer for
which Buyer will have no adequate remedy at law, and, therefore if such a
breach should occur, the Seller Group consents to any temporary or permanent
injunction or decree of specific performance by any court of competent
jurisdiction in favor of Buyer enjoining any such breach, without prejudice to
any other right or remedy to which Buyer shall be entitled. In the event that
any portion of this Section 6.6 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its being extended over too
great a period of time or too large a geographic area or over too great a
range of activities, it shall be interpreted to extend only over the maximum
lesser period of time, geographic area, or range of activities as to which it
may be enforceable. Each of the covenants herein shall be deemed a separate
and severable covenant. In the event any member of the Seller Group breaches
any provision of this Section 6.6, Buyer shall be entitled to recover all
costs of enforcement, including reasonable attorneys' fees.
6.7 Bulk Transfer Compliance. As between Buyer and the Selling
Entities , Buyer shall have no obligation to give bulk transfer notices to
creditors, claimants or other persons or entities. The Selling Entities shall
jointly and severally indemnify and hold harmless Buyer against any and all
expense, loss, damage or liability, including court costs and reasonable
attorneys' fees, arising from or related to claims asserted by third parties
due to the failure of the Selling Entities to pay any liability of the
Business except the Assumed Liabilities.
6.8 Change of Names. Within ten (10) business days after the
Closing, Stenograph will provide evidence to Buyer that it has taken all
necessary action and made all necessary state filings to change its corporate
name to Quixote Steno Corporation. Within ten (10) business days after the
Closing, IIS will provide evidence to Buyer that it has taken all necessary
action and made all necessary state filings to change its corporate name to
Quixote IIS Corporation. Upon the request of Buyer, the Selling Entities will
assign to Buyer or terminate the use of all "d/b/a's" used in the conduct of
the Business, all of which "d/b/a's" are listed on Schedule 6.8.
<PAGE>
Buyer hereby agrees to keep, perform and fully discharge the
following covenants and agreements:
6.9 Records and Documents. Following the Closing Date, Buyer
shall grant to each Selling Entity and its representatives, at the Selling
Entity's request (and subject to the Selling Entity's reimbursement of Buyer's
out-of-pocket expenses), access to and the right to make or obtain copies of
those records and documents related to the Business, any Facility or the
Purchased Assets, possession of which is transferred to Buyer, as may be
reasonably necessary for the Selling Entity's tax, employee benefit or
financial reporting obligations or other investigation required by law or, for
the Selling Entity's dealing with, handling or discharging of any debt,
obligation or liability of or relating to the Business, the Facility or the
Purchased Assets which is not an Assumed Liability. If during the seven year
period following Closing, the Buyer elects to dispose of such records, the
Buyer shall first give the Selling Entities written notice, during which
period the Selling Entities shall have the right to obtain the records without
further consideration; provided, however, that the Buyer shall have no
liability to the Selling Entities for disposal of any record unless done
intentionally in contravention of this Section. If reasonably necessary,
Buyer shall also make reasonably available its employees to provide
information for the same purposes on the same basis.
6.10 Litigation. With respect to the Retained Litigation, the
Buyer shall make available to the Selling Entities such records, documents and
employees as may be reasonably requested by the Selling Entities in connection
with the Retained Litigation. The Selling Entities shall reimburse the Buyer
for its reasonable out-of-pocket expenses in connection with its cooperation
with respect to the Retained Litigation as well as salary or wages payable to
employees with respect to the time required of each employee who is required
to devote more than one (1) week of working time in the aggregate to
cooperation pursuant to this Section. In no event will the Buyer be required
to take any action hereunder that unreasonably interferes with the ongoing
operations of its business.
6.11 Guarantees. After the Closing, Buyer will agree to execute
guarantees in substantially the forms attached as Schedule 6.11 to replace the
guarantees of Quixote attached as Schedule 6.11.
6.12 Software Licenses. After the Closing, Buyer agrees to
<PAGE>
negotiate in good faith with the Selling Entities (or their designee) to
finalize license agreements with Stenograph UK and Discovery Products, Inc.
with respect to the "Intellect 95" Software included in the Purchased Assets.
Buyer hereby grants Stenograph UK and Discovery Products, Inc. a non-exclusive
license (without charge and without representation or warranty of any kind) to
use Intellect 95 for purposes of internal operations. Such license shall
include Stenograph UK's right to copy, modify and distribute copies of
Intellect 95 incorporated into data bases created to support law firms and
courts. Stenograph UK may assign this license to a purchaser of its business.
Stenograph UK and Discovery Products, Inc. hereby acknowledge that Buyer will
retain all ownership rights to Intellect 95.
ARTICLE VII
EMPLOYEES
7.1 Continued Association with the Business. Buyer will offer
employment to all current employees of the Business from among those listed on
Schedule 4.14 who are actively performing services for the Business as of the
Closing Date. All of the employees listed on Schedule 4.14 are employed by
one of the Selling Entities in the Business. The Selling Entities will use
all reasonable efforts to retain all present employees through the Closing.
None of the Selling Entities nor their Affiliates have offered and will not
offer employment to any such employees (other than Lynn Fleece) in respect of
any period after Closing, without the prior written consent of Buyer;
provided, however, that after the expiration of three (3) years following
Closing the Selling Entities may hire any employee who voluntarily terminates
employment with Buyer without any inducement from the Selling Entities. Buyer
shall not incur any liability or obligation with respect to any employee that
does not accept employment with Buyer. The Buyer shall use reasonable efforts
to request each employee that accepts employment to confirm the acceptance of
employment in writing. Buyer will not incur as a result of the transfer of
the Purchased Assets, any present, future or contingent liability or
obligation to pay any pension benefits, medical benefits, compensation for
loss of employment or other compensation or benefits to any employee
terminated at or prior to Closing. The employees of the Business hired by
Buyer are referred to herein as the "Buyer Employees".
7.2 Benefit Plans. Buyer shall have no liability under any Plan
maintained or contributed to for the benefit of any of the employees or other
persons performing services at or for any Facility or for the Business.
<PAGE>
Notwithstanding the foregoing to the extent that accrued vacation is recorded
on the Settlement Statement as an Assumed Liability, Buyer will give the
employees of the Selling Entities credit for such accrued vacation. The
Selling Entities have made all existing payment options available to the
employees of the Business participating in any applicable 401(K) Plan.
7.3 Section 401(k) Plans. As soon as practicable after the
Closing Date, the parties will transfer the account balances of Buyer
Employees from the trustee of the Quixote 401(k) Plan (the "Quixote 401(k)
Plan") to the trustee of the Pettibone 401(k) Plan. The Selling Entities will
take all action necessary so that Buyer Employees will be fully vested in
their accounts in the Quixote 401(k) Plan as of the Closing Date. Assets of
the Quixote 401(k) Plan equal to the sum of the account balances of the Buyer
Employees in such plan as of the last day of the month coincident with or
immediately preceding the date of transfer (the "Transfer Date") shall be
transferred to the Pettibone 401(k) Plan as soon as practicable following the
Closing Date and the Selling Entities shall be responsible for determining
whether the correct amount of balances are transferred to the Pettibone 401(k)
Plan. The transfer will be made after any distributions that Buyer Employees
are entitled to receive under the Quixote 401(k) Plan before the Transfer Date
have been made and after Buyer presents to the Selling Entities a copy of a
current IRS favorable determination letter or other evidence that the
Pettibone 401(k) Plan is a "qualified" plan within the meaning of
Section 401(a) of the Internal Revenue Code. The Selling Entities will allow
each Buyer Employee to elect any benefit option available under the Quixote
401(k) Plan, and transfers to the Pettibone 401(k) Plan will occur only if
such employee elects such a transfer. The transfer will be made in cash. The
Selling Entities represent that the transfer described in this Section shall
be made in accordance with Section 414(l) of the Internal Revenue Code.
7.4 COBRA Obligations. The Selling Entities shall retain all
liabilities, perform all obligations and maintain all insurance under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") with respect
to its employees and former employees of the Business and their covered
dependents, whether or not such employees accept employment with Buyer.
7.5 Severance. The Selling Entities shall be liable for any
severance, separation or similar liabilities, that are payable (i) to any
person whose right to severance or separation benefits arises as a result of
the transactions contemplated by this Agreement, (ii) to any person whose
<PAGE>
employment with a Selling Entity was terminated prior to the Closing, and
(iii) to any employee of any of the Selling Entities not hired by Buyer (a
"Seller Employee"). Buyer shall be liable for any severance, separation or
similar liabilities for all Buyer Employees under Buyer's employment policies
and procedures.
7.6 Workers Compensation. The Selling Entities shall be liable
for the administration and payment of all workers' compensation liabilities
and benefits with respect to (i) Buyer Employees to the extent resulting from
claims, events, circumstances, exposures, conditions or occurrences occurring
prior to the Closing Date, and (ii) Seller Employees. Buyer shall be
responsible for the administration and payment of all workers' compensation
liabilities and benefits with respect to Buyer Employees resulting from claims
reported following the Closing Date, to the extent resulting from events,
circumstances, exposures, conditions, or occurrences after the Closing Date.
7.7 Health Benefits. The Selling Entities shall be liable for
the administration and payment of all health and welfare liabilities and
benefits under the Plans with respect to (i) Buyer Employees to the extent
resulting from claims, events, circumstances, exposures, conditions or
occurrences occurring through the end of the Closing Date, and (ii) Seller
Employees. Buyer shall be responsible for the administration and payment of
all health and welfare liabilities and benefits under the Buyer's benefit
programs with respect to Buyer Employees resulting from claims reported
following the Closing Date, to the extent resulting from events,
circumstances, exposures, conditions, or occurrences after the end of the
Closing Date. The Selling Entities shall retain responsibility for health and
welfare benefits and liabilities for any disabled employees of the Business
and disabled dependents of employees of the Business until such persons are no
longer disabled.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Each and all of the obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to fulfillment prior
to or at the Closing of the following conditions (unless waived in writing in
the sole discretion of Buyer):
8.1 Accuracy of Warranties and Performance of Covenants. The
representations and warranties of the Selling Entities contained herein shall
<PAGE>
be accurate in all respects when made and as of the Closing Date. The Selling
Entities shall have performed all obligations and complied with each and all
of the covenants, agreements and conditions required to be performed or
complied with on or prior to the Closing in all respects.
8.2 No Pending Action. No action, suit, proceeding or
investigation before any court, administrative agency or other governmental
authority shall be pending or threatened wherein an unfavorable judgment,
decree or order would prevent the carrying out of this Agreement or any of the
transactions contemplated hereby, declare unlawful the transactions
contemplated hereby, cause such transactions to be rescinded, or would affect
the right of Buyer to own, operate or control any Facility, the Business or
the Purchased Assets.
8.3 Consents. Except for consents required to assign the
contracts described on Schedule 1.3(a) that are not described on Schedule 8.3,
all notices to, consents, approvals, authorizations and waivers from third
parties and governmental agencies that are required for the transfer of any
Facility, the Business or any of the Purchased Assets or that are otherwise
required for the consummation of the transactions contemplated hereby upon the
terms hereof shall have been obtained or provided for and shall remain in
effect. The Selling Entities shall obtain consents necessary to assign the
contracts described on Schedule 8.3 prior to Closing and consents necessary to
assign all other contracts described on Schedule 1.3(a) as promptly as
practicable after Closing.
8.4 Condition of Business and Assets. There shall have been no
fact, event, condition or circumstance which does or could (except for matters
reflected on the schedules), reasonably be expected to result in a Material
Adverse Effect.
8.5 Real Estate Matters. The Selling Entities shall have
provided to Buyer an assignment, in form and substance satisfactory to Buyer
and its counsel, executed by each lessor of each Real Estate lease.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE SELLING ENTITIES
Each and all of the obligations of the Selling Entities to
consummate the transactions contemplated by this Agreement are subject to
fulfillment prior to or at the Closing of the following conditions (unless
<PAGE>
waived in writing in the sole discretion of the Selling Entities):
9.1 Accuracy of Warranties and Performance of Covenants. The
representations and warranties of Buyer contained herein shall be accurate in
all respects as if made on and as of the Closing Date. Buyer shall have
performed all of its obligations and complied with each and all of the
covenants, agreements and conditions required to be performed or complied with
on or prior to the Closing in all respects.
9.2 No Pending Action. No action, suit, proceeding or
investigation before any court, administrative agency or other governmental
authority shall be pending wherein an unfavorable judgment, decree or order
would prevent the carrying out of this Agreement or any of the transactions
contemplated hereby in a way materially adverse to the Selling Entities,
declare unlawful the transactions contemplated hereby or cause such
transactions to be rescinded.
ARTICLE X
SURVIVAL AND INDEMNIFICATION
10.1 Survival. All covenants and agreements contained in this
Agreement or in any agreement or other document delivered pursuant hereto
shall be deemed to be material and to have been relied upon by the parties
hereto and shall survive the Closing and be enforceable until the covenant or
agreement has been fully performed. Unless otherwise specified, the
representations and/or warranties contained in this Agreement or in any
agreement or other document delivered pursuant hereto shall be deemed to be
material and to have been relied upon by the parties hereto and shall survive
the Closing for a period ending two years from the Closing Date, provided that
(i) the representations and warranties in the following Sections shall survive
and be enforceable indefinitely: section 4.1, section 4.2, the first sentence
of section 4.4, the first sentence of section 4.9, section 5.1, section 5.2,
section 5.5, (ii) the representations and warranties in Section 4.10 shall
survive for seven years and (iii) the representations and warranties in
section 4.6 as to tax matters only, section 4.15 and section 4.22 shall survive
until expiration of the applicable statutes of limitation and any extensions
thereof. Any claim for indemnification under the representations and warranties
that survive for a period of time that is asserted in writing within the
survival period shall survive until resolved or judicially determined. The
representations and warranties set forth in this Agreement or in any agreement
<PAGE>
or other document delivered pursuant hereto shall not be affected by any
investigation, verification or examination by any party hereto or by anyone on
behalf of any such party. The survival period for the representations and
warranties shall in no way affect Buyer's responsibility to indemnify the
Selling Entities with respect to the Assumed Liabilities, nor the Selling
Entities responsibility to indemnify Buyer for the Excluded Liabilities.
10.2 Indemnification. Buyer shall jointly and severally
indemnify and hold harmless the Selling Entities, from and against any and all
loss, diminution in value, damage, cost, expense (including court costs and
attorneys' fees and expenses and costs of investigation), suit, action, claim,
deficiency, liability or obligation related to, caused by or arising from (i)
any misrepresentation, breach of warranty or failure to fulfill any covenant
or agreement of Buyer contained herein or in any agreement or other document
delivered pursuant hereto; (ii) any and all claims of third parties made based
upon facts alleged that, if true, would have constituted such a
misrepresentation, breach or failure; and (iii) the Assumed Liabilities. The
Selling Entities shall jointly and severally indemnify and hold harmless
Buyer, from and against any and all loss, diminution in value, damage, cost,
expense (including court costs and attorneys' fees and expenses and costs of
investigation), suit, action, claim, deficiency, liability or obligation
related to, caused by or arising from (i) any misrepresentation, breach of
warranty or failure to fulfill any covenant or agreement of any Selling Entity
contained herein or in any agreement or other document delivered pursuant
hereto; (ii) any and all claims of third parties made based upon facts alleged
that, if true, would constitute such a misrepresentation, breach or failure;
(iii) any Excluded Liability, as well as any other liability or obligation of
the Selling Entities not assumed pursuant to the express terms hereof and
regardless of whether any liability or obligation is imposed upon Buyer by any
applicable law. The party seeking indemnification shall give written notice
to the indemnifying party of the facts and circumstances giving rise to any
claim for indemnification. All rights contained in this Article are cumulative
and are in addition to all other rights and remedies which are otherwise
available, pursuant to the terms of this Agreement or applicable law. All
indemnification rights shall be deemed to apply in favor of the indemnified
party's officers, directors, representatives, subsidiaries, affiliates,
successors and assigns.
10.3 General. Neither the Selling Entities nor the Buyer shall
have any right to indemnification for any breach of representation or warranty
hereunder until it has claims of at least $50,000 in the aggregate and then
the indemnifying party or parties shall only be responsible for claims in
<PAGE>
excess of the first $50,000. With respect to indemnification of matters
relating to Section 4.10, Buyer shall, to the extent reasonably practicable,
consult with the Selling Entities as to the method of remediating
circumstances for which Buyer is entitled to indemnification, but shall not be
bound to adhere to any recommendation or desire of the Selling Entities.
ARTICLE XI
TERMINATION, WAIVER, AMENDMENT AND CLOSING
11.1 Termination or Abandonment. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement may be terminated
and abandoned at any time prior to the Closing Date:
(a) by the mutual written consent of the Selling Entities
and Buyer;
(b) by the Selling Entities or Buyer if any court of
competent jurisdiction or governmental body, authority or agency
having jurisdiction shall have issued an order, decree or ruling
or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final
and nonappealable;
(c) by Buyer, if one or more of the conditions to the
obligation of Buyer to Close as provided in Article VIII has not
been fulfilled by February 29, 1996; or
(d) by the Selling Entities, if one or more of the
conditions to the obligation of the Selling Entities to Close as
provided in Article IX has not been fulfilled by February 29,
1996.
In the event of termination of this Agreement pursuant to this Section 11.1,
this Agreement shall terminate and there shall be no other liability on the
part of Selling Entities or Buyer to the other party hereto except liability
arising out of a breach of this Agreement or the failure by a party to fulfill
its conditions hereunder, in which event, the non-breaching party reserves the
right to seek all available remedies. The termination of this Agreement
pursuant to this Section 11.1 shall become effective on the date (x) in the
case of a termination pursuant to Section 11.1(a), the consent is executed and
(y) in the case of a termination pursuant to Section 11.1(b), (c) or (d),
<PAGE>
written notice is given by the terminating party to the other party hereto.
11.2 Extension of Time, Waiver, Etc. At any time prior to the
Closing Date, the Selling Entities and Buyer may by written instrument:
(a) extend the time for the performance of any of the
obligations or acts of the other party; and
(b) waive compliance with any of the agreements of the
other party contained herein; provided, however, that no failure
or delay by the Selling Entities or Buyer in exercising any right
hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise
thereof of the exercise of any other right hereunder.
ARTICLE XII
GENERAL PROVISIONS
12.1 Amendments and Waiver. No amendment, waiver or consent with
respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing and signed by the parties hereto, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
12.2 Notices. All notices, requests, consents, demands and other
communications hereunder must be in writing and shall be delivered in person,
by courier service or by telecopy, telegram or telex as follows:
(a) If to the Selling Entities:
Legal Technologies, Inc.
One East Wacker Drive
Chicago, Illinois 60601
Telephone No.: (312) 467-6755
Telecopy No.: (312) 467-1356
Attn: James H. DeVries
<PAGE>
With copies to:
McBride Baker & Coles
500 W. Madison Street
40th Floor
Chicago, IL 60621
Telephone No.: (312) 715-5700
Telecopy No.: (312) 993-9350
Attn: Anne Hamblin Schiave, P.C.
(b) If to Buyer:
Stenograph Acquisition Corp.
c/o Heico Acquisitions
5600 Three First National Plaza
Chicago, Illinois 60602
Telephone No.: (312) 419-8220
Telecopy No.: (312) 419-9417
Attn.: Michael E. Heisley
With copies to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, IL 60606
Telephone No.: (312) 372-2000
Telecopy No.: 312-984-3669
Attn: Stanley H. Meadows, P.C.
Notice shall be deemed given when sent or delivered as provided herein. Any
party may change its address or add or change parties for receiving notice by
written notice given to the others named above.
12.3 Expenses. Except as otherwise expressly provided herein,
each party to this Agreement shall pay its own costs and expenses in
connection with the transactions contemplated hereby.
12.4 Rules of Construction. The word "including" shall mean
including, without limitation. The Article, Section and other headings
contained herein are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
12.5 Counterparts. This Agreement may be executed (which may be
by facsimile with hard copy by express delivery) in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
<PAGE>
12.6 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the parties named herein and their respective successors and
assigns. The Selling Entities may not assign any rights, benefits, duties or
obligations under this Agreement. Each Buyer may assign its rights, benefits,
duties and obligations to an affiliated corporation or a purchaser of the
Court Reporting Business or the IIS Business or both.
12.7 Entire Agreement. This Agreement and the documents referred
to herein contain the entire agreement and understanding among the parties
with respect to the transactions contemplated hereby and supersede all other
agreements, understandings and undertakings among the parties on the subject
matter hereof.
12.8 Announcements. No announcement of the specific terms of
this Agreement shall be made by any party without the written approval of the
other party (which approval shall not be unreasonably withheld), except
filings required to be made with the Securities and Exchange Commission and as
otherwise required by applicable law or rules of a national securities
exchange.
12.9 Partial Invalidity. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
12.10 Applicable Law. This Agreement shall be interpreted in
accordance with the substantive laws of the State of Illinois applicable to
contracts made and to be performed wholly within said State.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by a duly authorized officer all as of the date
first written above.
STENOGRAPH ACQUISITION CORP. QUIXOTE CORPORATION
By: /s/ Larry Gies By: /s/James H. DeVries
--------------------------- --------------------------
Its:Vice President Its:Executive Vice President
--------------------------- --------------------------
IIS ACQUISITION CORP. LEGAL TECHNOLOGIES, INC.
By: /s/Larry Gies By: /s/James H. DeVries
--------------------------- --------------------------
Its: Vice President Its:President
--------------------------- --------------------------
PETTIBONE CORPORATION STENOGRAPH CORPORATION
By: Larry Gies By: /s/James H. DeVries
----------------------------- --------------------------
Its:Executve Vice President-CFO Its:Vice Chairman
----------------------------- --------------------------
INTEGRATED INFORMATION SERVICES,
INC.
By: /s/James H. DeVries
---------------------------
Its:President
---------------------------
LEGAL TECHNOLOGIES LIMITED
By: /s/James H. Devries
--------------------------
Its:Chairman
-------------------------
<PAGE>
Exhibit 2.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 25th day of January 1996, by and among LSI Acquisition, Inc.,
a Delaware corporation ("Purchaser"), and Stenograph Corporation, a Delaware
corporation ("Seller").
R E C I T A L S
A. Seller owns and operates an unincorporated business unit commonly
known as Litigation Sciences, Inc. (the "Business") from certain premises
(collectively, the "Premises") situated at (i) 200 Corporate Pointe, Culver
City, California, (ii) 1111 Bagby Street, Houston, Texas, (iii) 120 White
Plains Road, Tarrytown, New York, (iv) 999 Peachtree Street, N.E., Atlanta,
Georgia, (v) 225 West Washington Street, Chicago, Illinois, (vi) 110 Sutter
Street, San Francisco, California, and (vii) Ten Post Office Square, Boston,
Massachusetts.
B. Purchaser desires to purchase and acquire from Seller, and Seller
desires to sell and transfer to Purchaser, on the terms and conditions of this
Agreement, substantially all of the assets of Seller used in connection with
the Business.
A G R E E M E N T
In consideration of the foregoing recitals and the mutual covenants and
conditions contained herein, the parties, intending to be legally bound, agree
as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale. Subject to the terms of this Agreement, at the
Closing (as defined in Section 4.1, below), Seller shall sell, assign and
deliver to Purchaser, and Purchaser shall purchase from Seller, all of
Seller's right, title and interest in and to all of the assets, rights and
claims of Seller, which Seller is now using at the Premises, or the use of
which is necessary to, and which have been used in, the current operation of
the Business (collectively, the "Purchased Assets"), including, without
limitation, the following:
(a) Subject to Section 5.3(b), below, cash in the amount of
$625,975 (the "Cash Assets");
(b) All furniture, fixtures, equipment and other tangible
personal property of the Business, as specified on Schedule 1.1(b) hereto (the
"FF&E");
(c) All work-in-process of the Business, and the unbilled
services pertaining thereto, as specified on Schedule 1.1(c) hereto (the
"Work-in-Process");
(d) All contracts, licenses, leases, arrangements,
understandings or other agreements, whether oral or written, related in any
way to the Business or the Purchased Assets (the "Contracts"), as specified on
Schedule 1.1(d) hereto;
(e) All Intellectual Property Rights (as defined in Section
2.13, below), including, without limitation, the name "Litigation Sciences,
Inc.";
<PAGE>
(f) All prepaid items of the Business, including, but not
limited to, prepaid taxes, prepaid expenses, deferred charges, advance
payments, security deposits and other prepaid items related to the Business,
as specified on Schedule 1.1(f) hereto (the "Prepaid Items");
(g) All catalogs, price lists, product brochures and related
sales materials utilized by Seller in connection with the Business;
(h) The Books and Records (as defined in Section 2.7, below);
and
(i) To the extent assignable, all permits, licenses, approvals,
authorizations, orders, consents and other rights relating to the conduct of
the Business and the ownership or use of the Purchased Assets, as specified on
Schedule 1.1(i) hereto (the "Permits").
1.2 Excluded Assets. Notwithstanding the foregoing, Seller shall not
sell, assign or deliver to Purchaser, and the Purchased Assets do not include,
any of the assets set forth on Schedule 1.2 hereto or any of Seller's assets
other than the Purchased Assets (the "Excluded Assets").
1.3 Purchased Assets Free of Liens. All of the Purchased Assets shall
be transferred by Seller to Purchaser free and clear of all claims, liens,
pledges, options, charges, security interests, restrictions, encumbrances or
other rights of third parties, of any kind or nature ("Encumbrances") other
than (a) liens for taxes, assessments or other governmental charges, and (b)
filings made in connection with Purchased Assets by Seller (the "Permitted
Encumbrances").
1.4 Liabilities.
(a) Pursuant to and in accordance with the Assignment and
Assumption Agreement to be executed by Purchaser and Seller in the form
attached as Exhibit C hereto, Purchaser shall, on and as of the Closing Date
(as defined in Section 4.1, below), expressly assume, perform or otherwise
discharge as the same shall become due in accordance with their respective
terms, only the following liabilities and obligations of Seller with respect
to the Business (collectively, the "Assumed Liabilities"):
(i) All liabilities and obligations of Seller related to
deferred revenue of the Business as of the Closing Date, in the amount of
$47,169, for the matters set forth in Schedule 1.4(a)(i) hereto;
(ii) All liabilities and obligations of Seller related to
customer overpayments of the Business as of the Closing Date, in the amount of
$45,169;
(iii) All liabilities and obligations of Seller related to
retainers of the Business as of the Closing Date, in the amount of $19,829;
(iv) Subject to Section 5.1, below, all liabilities and
obligations of Seller to complete and fully perform the Work-in-Process; and
(v) Subject to Section 1.6, below, all of Seller's
liabilities and obligations under the Contracts which become due and payable
or which are required to be performed after the Closing Date.
(b) Notwithstanding anything to the contrary herein, or in any
Schedule or Exhibit hereto, except for the Assumed Liabilities, Purchaser
shall not assume any liabilities or obligations of Seller, whether arising
<PAGE>
before, on or after the Closing Date, and all such liabilities and obligations
(the "Excluded Liabilities") shall remain the exclusive liabilities and
obligations of Seller.
1.5 Purchase Price. Subject to the terms hereof, the consideration
for the sale, assignment and transfer of the Purchased Assets from Seller to
Purchaser (the "Purchase Price") is (i) Purchaser's assumption of the Assumed
Liabilities; and (ii) Purchaser's undertaking of certain additional
obligations hereunder for the benefit of Seller, on the terms and subject to
the conditions of this Agreement.
1.6 Proration of Expenses. With regard to state and local personal
property taxes payable with respect to the Purchased Assets, Seller will pay
such taxes applying to the period up to the Closing Date and Purchaser will
pay such taxes applying to any period from or after the Closing Date. With
regard to payments due under Contracts and payments for services, including
telephone, gas, electricity, water, sewage and other utilities relating to the
Business, Seller will pay any charges applicable to the Business or Purchased
Assets for all periods up to the Closing Date and Purchaser will pay any
charges applicable to the Business or Purchased Assets for all periods on or
after the Closing Date. If either party pays any amount which the other party
is obligated to pay by this Section 1.6, the party making such payment shall
be reimbursed within 10 business days after demand therefor.
1.7 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets in accordance with Exhibit A hereto.
Seller and Purchaser each agree to report the sale of the Purchased Assets for
federal and state income tax purposes in accordance with the allocations set
forth on Exhibit A.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser that the following
statements are true and correct as of the Closing Date:
2.1 Organization and Existence. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Seller has the requisite power and authority to own, lease and
operate the Business and the Purchased Assets, to carry on the Business as
presently conducted, and to consummate the transactions contemplated hereby.
Seller is qualified to do business as a foreign corporation in each
jurisdiction in which the character and location of its assets and the nature
of the Business require such qualification, except in those jurisdictions in
which the failure to so qualify would not have a material adverse effect on
the Business. Litigation Sciences, Inc., a Delaware corporation ("LSI"), has
no assets (other than its name and certain qualifications to do business as a
foreign corporation in jurisdictions other than the State of Delaware (the
"Qualified Jurisdictions")) and has no employees and has never conducted any
business.
2.2 Authorization of Seller. Seller has full corporate power,
corporate authority and legal right and capacity to enter into this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Seller of
this Agreement have been duly authorized by all necessary corporate action on
the part of Seller. This Agreement is valid and binding upon Seller in
accordance its terms, except as enforcement thereof may be limited by
insolvency, bankruptcy, reorganization or other similar laws relating to
creditors' rights generally or by general equitable principles.
<PAGE>
2.3 No Conflict or Violation. Neither the execution and delivery of
this Agreement by Seller, nor the consummation of the transactions
contemplated hereby, will result in (a) a violation of, or a conflict with,
any of Sellers' charter documents; (b) a material breach of, or a material
default under, any Contract to which Seller is a party (other than breaches or
defaults arising from Seller's failure to obtain any required consent or
approvals in connection with the assignments of Contracts contemplated hereby
or the occupation rights of Purchaser contemplated hereby with respect to the
Leased Premises (as defined in Section 5.2, below)); (c) to Seller's
knowledge, a violation by Seller of any applicable law; (d) a violation by
Seller of any order, judgment, injunction, decree or award to which Seller is
a party or by which the Purchased Assets or the Business are bound, which
violation would have a material adverse effect on the Business; or (e) an
imposition of any Encumbrance.
2.4 Consents and Approvals. No consent, Permit, approval or
authorization of, or declaration, filing, application, transfer or
registration with, any governmental or regulatory authority, or any other
person or entity (other than consents or approvals required in connection with
the assignments of Contracts contemplated hereby or the occupation rights of
Purchaser contemplated hereby with respect to the Leased Premises), is
required to be made or obtained by Seller by virtue of its execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby, as to which the failure to obtain such approval would
have a material adverse effect on the Business.
2.5 No Adverse Actions. There is no pending or, to Seller's
knowledge, threatened action, claim, suit, litigation, proceeding,
arbitration, mediation or other dispute (an "Action"), affecting Seller or the
Business which could reasonably be expected to affect the enforceability of
this Agreement, or which could reasonably be expected to materially adversely
affect the Business or Seller's ability to consummate the transactions
contemplated by this Agreement.
2.6 No Violation of Applicable Law. Seller is not in violation of
any law with respect to its operation of the Business or affecting any of the
Purchased Assets which violation would have a material adverse effect on the
Business. Seller's operation of the Business and ownership and use of the
Purchased Assets is in material compliance with all applicable laws. Seller
has not received any notice from or otherwise been advised in writing that any
governmental entity or other person is claiming any violation of any law in
connection with Seller's operation of the Business.
2.7 Books and Records. Seller has made and kept (and given
Purchaser such access as Purchaser has desired to) the books and records of
the Business (the "Books and Records"), which, taken as a whole, accurately
and fairly reflect in all material respects the activities and transactions of
the Business, the Purchased Assets, the Assumed Liabilities, and the financial
condition of the Business.
2.8 Financial Statements and Other Information. Seller has
heretofore furnished to Purchaser copies of the unaudited balance sheets of
the Business at December 31, 1995, and the related statement of income for the
period then ended, a copy of which is attached hereto as Schedule 2.8 (the
"Financial Statements"). The statement of income referred to in this Section
2.8 is complete and correct in all material respects, taken as a whole, and
has been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the applicable period, and fairly
presents the results of operations of the Business for the period covered by
the statement of income.
<PAGE>
2.9 No Materially Adverse Change. Since December 31, 1995, there
have been no changes in the financial condition of the Business, whether or
not arising from transactions in the ordinary course of business, that,
individually or in the aggregate, have been materially adverse to the
earnings, properties or financial condition of the Business. Since December
31, 1995, the Business has been conducted in the ordinary course of business.
2.10 Title to Purchased Assets. Seller either owns or holds under
Contracts all of the material properties used by it in the Business and all
such properties are included in the Purchased Assets. Seller has good and
marketable title to all of the Purchased Assets owned by it, and to all leased
interests in all assets leased by it, free and clear of all Encumbrances,
other than the Permitted Encumbrances. All of the FFE and trademarks and
servicemarks which Seller is now using at the Premises, or the use of which is
necessary to, and which have been used in, the operation of the Business, is
set forth on Schedules 1.1(b) and 2.13, respectively, hereto. Except for the
Excluded Assets, all Work-in-Process, Contracts, Prepaid Items and Permits for
the Business as of the Closing Date are set forth on Schedules 1.1(c), 1.1(d),
1.1(f) and 1.1(i), respectively, hereto.
2.11 Contracts. All Contracts are legal, valid, binding and in full
force and effect, and Seller has duly performed all of its material
obligations under each Contract to the extent those obligations have accrued
and no material default, violation or breach by Seller under any Contract has
occurred, except with respect to any failure by Seller to obtain any consent
to assignment that may be required under such Contracts in connection with the
consummation of the transactions contemplated by this Agreement. Since
December 31, 1995, Seller has not entered into any Contracts with respect to
the Business with customers, vendors, suppliers, lessors or others other than
those set forth on the Schedules hereto, except only in the ordinary course of
the Business. True and complete copies of all Contracts, as amended to the
Closing Date, have been furnished or made available to Purchaser. Seller has
no outstanding Contracts with respect to the Business with customers, vendors,
suppliers, lessors or others requiring payments in excess of $25,000 on an
annualized basis, except for those listed on Schedule 2.11 hereto.
2.12 Permits. All Permits are sufficient for the lawful ownership
of the Purchased Assets and the lawful operation of the Business.
2.13 Intellectual Property Rights. For purposes of this Agreement,
"Intellectual Property Rights" shall mean all of Seller's rights in any (i)
trademarks, service marks and trade names, copyrights, patents, and all
renewals thereof, related to the Business; (ii) all registration and
applications for registration for each of the foregoing; (iii) technology,
know-how, trade secrets, proprietary data and confidential information
(including, without limitation, ideas, development techniques, specifications,
designs, proposals, financial and accounting data, business and marketing
plans and related information), related to the Business; (iv) "ShowCase" and
all other computer software (including both source and object code) and all
related programming, systems, user and other documentation, related to the
Business; and (v) all rights or obligations under any license agreement with
any other party, related to the Business. The Intellectual Property Rights
constitute all of the proprietary rights used by Seller in the operation of
the Business as it is currently being conducted. Seller owns or rightfully
possesses all of such Intellectual Property Rights which rights do not violate
in any material respect the rights of third parties. Attached hereto as
Schedule 2.13 is a list of all of the trademarks and service marks related to
the Business, true, correct and complete copies of which have been furnished
or made available to Purchaser. To the extent the Intellectual Property
Rights are licensed from third parties, such rights constitute valid and
enforceable rights of Seller and will not cease to be valid and enforceable
<PAGE>
upon consummation of the transactions contemplated hereby. To Seller's
knowledge, no third party is infringing or otherwise violating Seller's rights
in and of the Intellectual Property Rights.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
3.1 Organization and Existence of Purchaser. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to enter into and perform this Agreement and the transactions
contemplated hereby.
3.2 Authority of Purchaser. Purchaser has full corporate power,
corporate authority and legal right and capacity to enter into this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Purchaser of
this Agreement have been duly authorized by all corporate action necessary on
the part of Purchaser. This Agreement is valid and binding upon Purchaser in
accordance with its terms, except as enforcement thereof may be limited by
insolvency, bankruptcy, reorganization or other similar laws relating to
creditors' rights generally or by general equitable principles.
3.3 No Conflict or Violation. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will result in (a) a violation of, or a conflict with, Purchaser's charter
documents; (b) to Purchaser's knowledge, a violation by Purchaser of any
applicable law; or (c) a violation by Purchaser of any order, judgment, writ,
injunction decree or award to which Purchaser is subject.
3.4 Consents and Approvals. No consent, permit, approval or
authorization of, or declaration, filing, application, transfer or
registration with, any governmental or regulatory authority, or to Purchaser's
knowledge, any other person or entity is required to be made or obtained by
Purchaser by virtue of its execution, delivery and performance of this
Agreement.
3.5 No Adverse Actions. There is no pending or, to Purchaser's
knowledge, threatened Action affecting Purchaser which could reasonably be
expected to affect the enforceability of this Agreement or which could
reasonably be expected to materially and adversely affect Purchaser's ability
to consummate the transactions contemplated by, or to perform its obligations
under, this Agreement.
ARTICLE 4
THE CLOSING
4.1 Closing. The closing of the purchase and sale of the Purchased
Assets (the "Closing" or "Closing Date") shall take place concurrently with
the execution and delivery of this Agreement at the offices of Riordan &
McKinzie, 695 Town Center Drive, Suite 1500, Costa Mesa, California 92626, on
January 25, 1996.
4.2 Seller's Obligations. At the Closing, Seller shall deliver to
Purchaser the following:
(a) Cash by wire transfer to Purchaser' account, in the amount
of $625,976, in full satisfaction of the obligation to deliver the Cash Assets
referred to in Section 1.1(a), above;
<PAGE>
(b) The Bill of Sale attached hereto as Exhibit B, duly
executed by Seller;
(c) The Assignment and Assumption Agreement attached hereto as
Exhibit C, duly executed by Seller;
(d) Consents to Assignment in the form attached hereto as
Exhibit D, with respect to the employment agreements between Seller and Adrian
D. Heryford, Philip Wirzbicki and Julian O. von Kalinowski, duly executed by
Seller and Adrian D. Heryford, Philip Wirzbicki or Julian O. von Kalinowski,
as appropriate;
(e) The Assignment of Trademarks in the form attached hereto
as Exhibit E, duly executed and acknowledged by Seller;
(f) The License Agreement attached hereto as Exhibit F, duly
executed by Discovery Products, Inc., a Delaware corporation ("DPI");
(g) The License Agreement attached hereto as Exhibit G, duly
executed by Legal Technologies, Ltd., a United Kingdom corporation ("LTL");
and
(h) Such other customary closing certificates and documents as
may be reasonably requested by Purchaser or its counsel.
4.3 Purchaser's Obligations. At the Closing, Purchaser shall
deliver to Seller the following:
(a) The Assignment and Assumption Agreement attached hereto as
Exhibit C, duly executed by Purchaser;
(b) Consents to Assignment in the form attached hereto as
Exhibit D, with respect to the employment agreements between Seller and Adrian
D. Heryford, Philip Wirzbicki and Julian O. von Kalinowski, duly executed by
Purchaser;
(c) The License Agreement attached hereto as Exhibit F, duly
executed by Purchaser;
(d) The License Agreement attached hereto as Exhibit G, duly
executed by Purchaser;
(e) The Guaranty attached hereto as Exhibit H, duly executed
by Thomas T. Gores and consented to by Holly Gores (the "Guaranty"); and
(f) Such other customary closing certificates and documents as
may be reasonably requested by Seller or its counsel.
ARTICLE 5
POST CLOSING OBLIGATIONS
5.1 Work-in Process. At its option, Purchaser shall (a) complete
and fully perform all Work-in-Process, in accordance with and subject to the
terms and conditions of the applicable Contracts thereto; (b) make such other
arrangements with respect to any of such Work-in-Process as may be agreed to
by Purchaser and the client for whom such Work-in-Process is to be completed
by Seller; provided, however, that no such arrangement shall leave Seller with
any residual liability for the completion of such Work-in-Process; or (c)
pursuant to the request of the client for whom such Work-in-Process is to be
performed, cease any work in connection with such client's Work-in-Process.
<PAGE>
5.2 Facility Leases. Seller will allow Purchaser to occupy each of
the Premises described in Schedule 5.2 hereto (the "Leased Premises") on and
from the Closing Date through the period ending on April 30, 1996. Such
occupancy will be at no cost or expense to Purchaser; provided, however, that
Purchaser shall be responsible for (a) all expenses in connection with such
occupancy that are either (i) utilities costs which are not included in, or
are separately listed from, rent for the Leased Premises, or (ii) other costs
billed directly to Purchaser, and (b) all damage and injury, reasonable wear
and tear excepted, to the Leased Premises occupied by Purchaser during the
period that Purchaser so occupies the Leased Premises. By March 31, 1996,
Purchaser shall vacate that portion of each of the Leased Premises in excess
of the square footage listed in Schedule 5.2 hereto (the "Reduced Square
Footage"). By April 30, 1996, Purchaser shall, with respect to each of the
Leased Premises (other than 110 Sutter Street, San Francisco, California),
either (a) enter into a sublease agreement with Seller pursuant to which
Purchaser will sublet the Reduced Square Footage for each of the Leased
Premises, or (b) vacate such Leased Premises. Any sublease agreement will (i)
be at the annual rental rate that is specified in Schedule 5.2, (ii) commence
on a date no later than May 1, 1996 and end no earlier than April 30, 1999,
(iii) require Purchaser to vacate the Leased Premises upon 90 days prior
written notice from Seller or, in the event that Purchaser is unwilling to so
vacate the Premises, provide that the annual rental rate for the Leased
Premises shall automatically increase to the full amount, including all costs
and expenses, for which Seller is then itself paying to lease the Leased
Premises, (iv) be subject to a guaranty from Thomas T. Gores in form and
substance reasonably satisfactory to Seller to guarantee Purchaser's
performance of its obligations under the sublease agreement; and (v) otherwise
be on terms and conditions reasonably satisfactory to each of the parties.
Notwithstanding the foregoing, at any time after January 31, 1996, regardless
of whether Seller and Purchaser have entered into the aforementioned sublease
agreement, Purchaser, upon 90 days' prior written notice from Seller, shall
vacate the Leased Premises situated at (a) 1111 Bagby Street, Houston, Texas,
and/or (b) 120 White Plains Road, Tarrytown, New York.
5.3 LSI Employees.
(a) Immediately after the Closing, Purchaser shall make offers
of employment, in a form mutually agreeable to Purchaser and Seller, to each
employee of Seller set forth on Schedule 5.3 hereto (the "LSI Employees") for
a minimum term equal to the period of time that is required for Purchaser to
compensate the LSI Employee, whether in the form of salary, wages, bonuses or
other compensation (excluding benefits), in an amount that is equal to the
severance benefits due and payable by Seller to such LSI Employee as of the
Closing Date, as set forth on Schedule 5.3 hereto. Purchaser shall also offer
to credit each LSI Employee with accrued vacation equal to the amount of
vacation that each LSI Employee has accrued pursuant to Seller's vacation
policy as of the Closing Date, as set forth on Schedule 5.3 hereto.
Notwithstanding the foregoing, Seller acknowledges and agrees that Purchaser
is not hereby assuming, and Purchaser shall not be responsible for, any
liability or obligation of Seller arising out of or in connection with
Seller's failure to pay any of the LSI Employees any accrued severance or
vacation pay at the time such LSI Employee is terminated by Seller. Except as
provided in this Section 5.3, Purchaser shall have no liability whatsoever on
account of any LSI Employee's previous employment by Seller, nor shall
Purchaser assume or otherwise be responsible for any past or future obligation
of Seller to such LSI Employees. Seller acknowledges that, except as provided
in this Section 5.3, it shall be solely responsible for discharging any such
liability to such LSI Employees, including, but not limited to, any payment,
compensation or other benefit under any severance, vacation, sick pay,
employee benefit, medical, insurance, bonus or similar plan or arrangement and
shall indemnify and hold harmless Purchaser with regard to such liabilities,
<PAGE>
subject to and in accordance with the procedures set forth in Section 5.5,
below.
(b) If, for whatever reason, any LSI Employee has not accepted
employment with Purchaser by properly executing and delivering his or her
acceptance of Purchaser's offer of employment within five business days after
the Closing Date, then, in such event, the Cash Assets shall be adjusted
downward by (i) the amount, on a dollar-for-dollar basis, of the severance
benefits paid such LSI Employee by Seller through the Closing Date, as set
forth on Schedule 5.3 hereto, and (ii) $0.75 for each dollar of the amount of
the accrued vacation benefits paid such LSI Employee by Seller through the
Closing Date, as set forth on Schedule 5.3 hereto. The amount of any such
adjustment shall be paid to Seller by Purchaser within 10 business days after
the Closing Date in cash, by certified check, or by wire transfer of
immediately available funds to an account designated by Seller.
5.4 Other Party's Property.
(a) Any amounts or other property (including accounts
receivable) paid to or received by either party which are the property of the
other party shall be paid or delivered by the receiving party to the other
party within 10 business days after receipt of such amounts or such other
property. If any party, upon five business days after receipt of written
demand from the other party, shall fail to pay over such amounts or other
property as required by this Section 5.4(a), then interest shall accrue on the
amounts due or the fair market value of such other property until paid at an
annual rate of interest of 8%.
(b) After the Closing, Seller and Purchaser shall jointly send a
letter to each of the accounts receivable obligors, instructing them to remit
all payments and other items in respect of such accounts receivable (i) to
Seller, but only with respect to accounts receivable that are Excluded Assets
("Seller's Receivables"), and (ii) to Purchaser, but only with respect to
accounts receivable that are not Excluded Assets. The parties shall apply all
payments received from accounts receivable obligors in accordance with each of
such accounts receivable obligor's instructions. If, however, no instructions
are given, then all such payments shall be applied to the oldest invoices
first. Each month, Seller shall provide Purchaser with a list of all
outstanding Seller's Receivables and Purchaser, within 10 business days after
its receipt of Seller's list, shall notify Seller in writing of all payments
received by Purchaser, if any, with respect to the obligors set forth on
Seller's list, together with copies of all instructions, if any, of such
account receivables obligors regarding the manner in which its payments should
be applied to the accounts receivables.
5.5 Indemnification.
(a) Seller shall indemnify, defend and hold harmless Purchaser
from and against any claim, demand, obligation, liability, loss, cost, damage
or expense, including interest, penalties and reasonable attorneys',
accountants' and experts' fees (collectively, "Damages"), caused by or arising
out of the following: (i) any breach of a representation, warranty or
covenant made by Seller herein, or in any certificate or other instrument
delivered by or on behalf of Seller pursuant hereto; (ii) any of the Excluded
Liabilities; or (iii) Purchaser's failure to comply with any applicable bulk
transfer act.
(b) Purchaser shall indemnify, defend and hold harmless Seller
from and against any Damages caused by or arising out of (i) any breach of a
representation, warranty or covenant made by Purchaser herein, or in any
<PAGE>
certificate or other instrument delivered by or on behalf of Purchaser
pursuant hereto, or (ii) any of the Assumed Liabilities.
(c) Notwithstanding any provision to the contrary contained in
this Agreement, the indemnifying party shall not be obligated to indemnify the
indemnified party for any Damages caused by or arising out of any breach of a
representation or warranty made by the indemnifying party herein, and neither
party shall be entitled to make any claim for Damages due to any breach of a
representation or warranty made by the other party herein, or in any
certificate or other instrument delivered by or on behalf of such other party
pursuant hereto, unless and until the amount of all such Damages, in the
aggregate (but only counting Damages due to breaches of representations and
warranties once even though the injured party may have a claim directly and
under the above indemnity), shall be equal to $25,000, and then only to the
extent of such excess.
(d) All representations and warranties made hereunder or
pursuant hereto or in connection with the transactions contemplated hereby
shall survive the Closing for 120 days. All covenants made hereunder or
pursuant hereto or in connection with the transactions contemplated hereby
shall survive the Closing.
5.6 Announcements. Seller and Purchaser will cooperate with respect
to and mutually agree on any public announcements or other widely disseminated
communications that may be made to employees, suppliers and customers of the
Business concerning the transaction contemplated herein. Neither party will,
without the prior approval of the other party, which approval will not be
unreasonably withheld or delayed, issue any press release or public statement
or make any public disclosure of the existence, contents or terms of this
Agreement, or any of the arrangements contemplated hereby, except to the
extent required by applicable law or a listing agreement with a national
securities exchange. The parties will advise and confer with each other prior
to the issuance of any releases or statements required to fulfill any legally-
mandated public disclosure obligations or any obligations of a listing
agreement with a national securities exchange.
5.7 Customer Information. Upon the Closing, Purchaser will have
access to certain customer information, including, without limitation, the
work-product for such customers, which is confidential and proprietary to such
customers. Accordingly, Purchaser shall not, directly or indirectly, in any
manner or form disclose, provide, utilize or otherwise make available in any
manner in whole or in part any such information which is confidential to such
customers other than to Purchaser's employees in the normal scope of their
employment, or to other agents performing services for Purchaser in connection
with the services performed by Purchaser for such customer, or as otherwise
directed by such customers. In the event any customer requests that its
confidential and proprietary information, including any applicable work-
product, be returned to it, Purchaser shall promptly comply with such requests
in a prompt and timely manner.
5.8 Non-Compete Covenant.
(a) The parties agree that, for a period of three years from the
Closing Date, neither Seller nor its parent company nor any of the parent's
majority-owned subsidiaries will, without the prior written consent of
Purchaser, directly or indirectly, own, manage, finance, operate, control or
participate in the ownership, management, financing, operation or control of,
or be employed or connected in any manner with, any business competitive with
the Business. For purposes of this Agreement, a business is "competitive with
the Business" if the business is (i) soliciting for a competitive product or
service of the Business or taking away as a client or customer any person that
was a client or customer of the Business during the 12 month period
<PAGE>
immediately preceding any such act; (ii) initiating or soliciting the hiring
or taking away of any employee related to the Business either on behalf of
itself or any other person or entity; or (iii) entering into or attempting to
enter into any business substantially similar to or competing in any way with
the Business, either alone or with any individual, partnership, corporation or
association.
(b) Notwithstanding any provision of this Section 5.8 to the
contrary, neither (i) the ownership or acquisition by Seller or its parent
company or any of the parent's majority owned subsidiaries of less than 5% of
the outstanding stock of any publicly traded company, nor (ii) the use of
Showcase by DPI or LTL, to the extent permitted under and pursuant to each of
the license agreements set forth in Sections 4.2(e) and (f) above, shall, in
either case, constitute a violation of this Section 5.8.
(c) Seller agrees that Purchaser shall be entitled, in addition
to any other remedies it may have under this Agreement or otherwise, to
temporary, preliminary and/or permanent injunctive and other equitable relief
to prevent or curtail any breach of this Agreement, without proof of actual
damages that have been or may be caused to Purchaser by such breach or
threatened breach.
5.9 Access to Records. After the Closing, upon reasonable notice,
Purchaser shall afford to Seller, its predecessor-in-interest and their
attorneys, accountants, officers and other representatives reasonable access
during normal business hours to Books and Records relating to the Business and
the Purchased Assets to the extent they relate to a period prior to the
Closing (and shall permit such persons to examine and copy such Books and
Records at such person's expense to the extent reasonably requested by such
person) in connection with financial reporting and tax matters (including
financial and tax audits and tax contests) and other matters reasonably
related to Seller's purchase of the Business. Purchaser shall retain all
schedules, work papers and all material records or other documents relating to
tax matters of the Business and the Purchased Assets for the first taxable
year or other taxable period ending after the Closing and for all prior
taxable years or other taxable periods until the later of (a) seven years
after the later of the filing or the due date of the applicable return, or (b)
the expiration of all applicable statutes of limitation, and provide Seller
and its predecessor-in-interest with any record or information (including
making employees available to such other party for reasonable periods of time
provided it does not significantly disrupt such employees' normal duties for
an extended period of time) which may be relevant to such return, audit,
proceeding or determination. Unless otherwise notified by Seller, prior to
December 31, 2003, Purchaser shall not destroy or dispose of or allow the
destruction or disposition or any Books and Records relating to the Business
and the Purchased Assets on or prior to the Closing, without first having
offered in writing to deliver such books, records and files to Seller.
Purchaser shall be entitled to dispose of the Books and Records described in
such notice if Seller shall fail to request copies of such books, records and
files within 120 days after receipt of the notice described in the preceding
sentence.
5.10 Litigation Cooperation. If Seller or its predecessor-in-
interest shall become engaged or participate in any Action with respect to the
Purchased Assets or the Business as conducted on or prior to the Closing,
Purchaser shall cooperate in all reasonable respects with Seller and its
predecessor-in-interest in connection therewith, including, without
limitation, making reasonably available to Seller and its predecessor-in-
interest relevant records and employees of Purchaser which or who may be
helpful with respect to such Action; provided that Purchaser shall not be
<PAGE>
obligated to make its employees available to Seller and its predecessor-in-
interest in any manner that would significantly disrupt such employees' normal
duties for an extended period of time. Seller agrees to reimburse Purchaser
for any reasonable out-of-pocket expenses incurred in connection with the
foregoing.
5.11 Financial Reporting and Audit Cooperation. Upon Seller's
written request and agreement to pay for reasonable out-of-pocket expenses
incurred, Purchaser shall cause its employees and agents to, within a
reasonable time after any request, cooperate reasonably with and reasonably
assist Seller or its predecessor-in-interest in connection with any other
financial reporting (including financial and tax audits) consistent with the
past practices for similar activities; provided that Purchaser shall not be
obligated to make its employees available to Seller or its predecessor-in-
interest in any manner that would significantly disrupt such employees' normal
duties for an extended period of time.
5.12 Expenses. Each of the parties shall pay all costs and expenses
incurred by it or on its behalf in connection with this Agreement, including,
without limiting the generality of the foregoing, fees and expenses of its own
financial consultants, brokers, investment bankers, accountants and counsel.
5.13 Abandonment of Names. Within 10 business days after the
Closing Date, Seller shall take all necessary action to (a) change in the
State of Delaware and any Qualified Jurisdictions the name of LSI to a name
other than "Litigation Sciences, Inc." or any variation thereof, and (b)
withdraw, abandon and surrender its use of the fictitious business names,
"Litigation Sciences, Inc," "LSI," or any variation thereof, wherever Seller
has made such a fictitious business name filing.
5.14 Further Assurances. Each party will execute, acknowledge and
deliver any further instruments reasonably requested by the other party, and
will take any other action consistent with the terms of this Agreement that
may reasonably be requested by the other party, for the purpose of carrying
out the terms of this Agreement, including the selling, assigning and
delivering to Purchaser of any or all property to be sold, assigned and
delivered by this Agreement. Without limiting the generality of the
foregoing, to the extent that the assignment of any Contract or any
Intellectual Property Right to be assigned hereunder requires the consent of a
third party, Seller agrees that it will use all reasonable efforts to obtain a
written consent from such third party to the assignment of all such Contracts
and Intellectual Property Rights, and if such consent is not obtained, Seller
will cooperate with Purchaser in any reasonable arrangement designed to
provide Purchaser the benefits under any such Contract and Intellectual
Property Right.
ARTICLE 6
MISCELLANEOUS PROVISIONS
6.1 Entire Agreement. This Agreement, together with the agreements
referred to herein and the Schedules and Exhibits hereto and thereto, set
forth the entire agreement between the parties with regard to the subject
matter of this Agreement.
6.2 Governing law. The validity, construction and performance of
this Agreement shall be governed by the laws, without regard to the laws as to
choice or conflict of laws, of the State of California.
6.3 Amendment. This Agreement may be amended, supplemented,
modified and/or rescinded only through an express written instrument signed by
all parties or their respective successors and permitted assigns.
<PAGE>
6.4 Assignment. Neither this Agreement nor any interest herein
shall be assignable (voluntarily, involuntarily, by judicial process,
operation of law or otherwise), in whole or in part, by any party without the
prior written consent of all other parties.
6.5 Successors and Assigns. Each of the terms, provisions and
obligations of this Agreement shall be binding upon, shall inure to the
benefit of, and shall be enforceable by the parties and their respective legal
representatives, successors and permitted assigns.
6.6 Notices. All notices made under this Agreement shall be in
writing, correctly addressed to the recipient at the addresses set forth under
such recipient's signature on the signature page hereto and shall be deemed to
have been duly given; (a) upon delivery, if served personally on the party to
whom notice is to be given; or (b) on the date or receipt, refusal or non-
delivery indicated on the receipt if mailed to the party to whom notice is to
be given by first class mail, registered or certified, postage prepaid, or by
air courier.
6.7 Severability. Should any provision of this Agreement or the
application thereof be judicially declared to be or becomes illegal, invalid,
unenforceable or void, the remainder of this Agreement will continue in full
force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto.
6.8 Cumulative Remedies. No remedy made available hereunder by any
of the provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or
in equity or by statute or otherwise.
6.9 Warranty of Authority. Each of the individuals signing this
Agreement on behalf of a party warrants and represents that such individual is
duly authorized and empowered to enter into this Agreement and bind such party
hereto.
[rest of page intentionally left blank]
<PAGE>
6.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first set forth above.
"SELLER": "PURCHASER":
STENOGRAPH CORPORATION, LSI ACQUISITION, INC.,
a Delaware corporation a Delaware corporation
By:/s/James H. DeVries By:/s/Thomas T. Gores
----------------------- --------------------------
James H. DeVries Thomas T. Gores
Vice Chairman President
Address: Address:
One East Wacker Drive 13601 Ventura Boulevard, Suite 121
Chicago, Illinois 60601 Sherman Oaks, California 91423
Phone No.: (312) 467-6755 Phone No.: (818) 380-9240
FAX No.: (312) 467-1356 FAX No.: (818) 380-9249
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS:
A Allocation of Purchase Price
B Bill of Sale
C Assignment and Assumption Agreement
D Form of Consent to Assignment
E Assignment of Trademarks
F License Agreement (DPI)
G License Agreement (LTL)
H Guaranty
SCHEDULES:
1.1(b) FF&E
1.1(c) Work-in-Process
1.1(d) Contracts
1.1(f) Prepaid Items
1.1(i) Permits
1.2 Excluded Assets
1.4(a)(i) Deferred Revenue
2.8 Financial Statements
2.11 Material Contracts
2.13 Intellectual Property Rights
5.2 Leased Premises
5.3 LSI Employees
