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 Earliest Event Reported - August 20, 1997
ATC GROUP SERVICES INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-10583 46-0399408
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
104 East 25th Street, 10th Floor
New York, New York 10010
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 353-8280
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Item 5. Other Events
Effective August 20, 1997, ATC Group Services Inc. ("ATC") purchased
certain assets and assumed certain liabilities of the environmental consulting
and engineering services division of Smith Technology Corporation ("Smith")
which operated primarily as BCM Engineers Inc. ("BCM" or the "Engineering
Division"). For its most recent 12-month period ended July 31, 1997, the
Engineering Division had revenues of $40,531,000 and division operating income
before corporate allocations of $3,673,000. For the most recent 3-month period
ended July 31, 1997 revenues totaled $7,946,000.
This acquisition will be accounted for as a purchase. The assets acquired
by ATC consists of intangible assets including customer contract rights,
customer lists, order backlog, patents and the right to the "BCM Engineers Inc."
name and tangible assets including trade accounts receivable, work in process,
property and equipment, supplies and general records. ATC additionally entered
into non-competition agreements with Smith and a major shareholder/officer of
Smith. Total consideration paid to the seller for the assets and non-competition
agreements totaled $8,375,539 including a $5,425,539 cash payment at closing and
short-term notes payable totaling $2,950,000. The notes payable are subject to
setoffs for uncollected accounts receivable and work in process, and changes in
the net tangible assets through the date of closing. In addition, ATC assumed
certain liabilities of Smith of approximately $4,300,000, including, a portion
of the trade payables of BCM/Smith, employee obligations and certain other
specified liabilities.
BCM, founded in 1890, is a leading municipal water and wastewater
environmental engineering firm with current operations at multiple locations in
the east and Gulf Coast. Approximately 60% of its revenues are derived from
private sector clients and the remaining 40% from Municipal and Federal sectors.
Its other primary services specializations include water resource management,
environmental compliance and site investigation, remedial design and
engineering, asbestos, and air quality management. BCM serves major industrial
clients in the chemical, petrochemical, oil and gas manufacturing, water supply,
commercial development and utilities industries among others.
Item 7. Exhibits and Financial Statements
(a) - (b) Financial statements and exhibits of BCM Engineers Inc. have
not been filed herewith as the acquisition did not qualify as a significant
acquisition under the tests proscribed by Regulation S-X.
(c) Exhibits
(10.1) Agreement for Sale and Purchase of Business Assets dated August
18, 1997, between ATC Group Services Inc. and Smith Technology
Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
ATC GROUP SERVICES INC.
(Registrant)
September 3, 1997 By: /s/ RICHARD L. PRUITT
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(Dated) RICHARD L. PRUITT
Vice President and
Principal Accounting Officer
AGREEMENT
FOR SALE AND PURCHASE
OF BUSINESS ASSETS
This AGREEMENT (the "Agreement"), dated the 18th day of
August , 1997, is entered into by and among ATC GROUP
SERVICES INC., a Delaware corporation with its principal office at
104 East 25th Street, New York, New York 10010 (the "Purchaser");
SMITH TECHNOLOGY CORPORATION, a Delaware corporation with its
principal office at 3501 Jamboree Road, Suite 304, Newport Beach,
CA 92660 ("Smith"); BCM ENGINEERS INC., a Delaware corporation
with its principal office at One Plymouth Meeting, Plymouth
Meeting, PA 19462 ("BCMD"); BCM ENGINEERS INC., a Pennsylvania
corporation with its principal office at One Plymouth Meeting,
Plymouth Meeting, PA 19462 ("BCMP"); BCM ENGINEERS INC., an Alabama
corporation with its principal office at 63 South Royal Street,
Suite 200, Mobile, AL 36633 ("BCMA"); BCM ENGINEERS INC., a West
Virginia corporation with its principal office at One Plymouth
Meeting, Plymouth Meeting, PA 19462 ("BCMWV"); (Smith, BCMD, BCMP,
BCMA, and BCMWV are collectively referred to as the "Sellers").
The Purchaser desires to purchase certain business assets of
Sellers in exchange for cash and other consideration as hereinafter
provided, and Sellers desire to effect such asset purchase through
sale in accordance with the covenants and terms of this Agreement.
I. SALE AND PURCHASE OF ASSETS
1.01 Basic Terms of Sale and Purchase of Assets
On the basis of the representations, warranties, covenants,
and agreements in this Agreement and subject to the terms and
conditions of this Agreement:
(a) At Closing, Sellers agree to sell, convey, assign, deliver and
transfer to Purchaser, and Purchaser agrees to acquire, accept and
purchase from Sellers, all of the properties and assets of Sellers,
tangible and intangible, personal, real and mixed, known or
unknown, vested or contingent, which constitute Sellers'
Engineering Division (the "Engineering Division"), which includes
all of the assets of Sellers based in or out of Sellers'
Burlington, New Jersey, Dallas, Texas, Fairhope, Alabama, Fort
Walton, Florida, Gulfport, Mississippi, Jackson, Mississippi,
Meridian, Mississippi, Mobile, Alabama, Modesto, California,
Norristown, Pennsylvania, Panama City, Florida, Pascagoula,
Mississippi, Pittsburgh, Pennsylvania, Pleasanton, California,
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Pocono Summit, Pennsylvania, Sandia Laboratories, New Mexico, and
Washington, D.C., offices and Sellers' assets used primarily by or
associated primarily with the Engineering Division at Sellers'
Plymouth Meeting, Pennsylvania, Livonia, Michigan, and Mt.
Prospect, Illinois offices. The Engineering Division consists of
the operations of Sellers engaged in the functions of (i) testing,
(ii) consulting, (iii) engineering, (iv) design, (v) project
management and (vi) training. For purposes of defining what assets
are to be conveyed as assets of the Engineering Division under this
1.01(a), the Engineering Division does not include the operations
and assets, regardless of function or service fields, of Sellers'
Denver, Colorado and Porter, Indiana offices. The assets to be
sold and purchased under this Agreement are all of the Engineering
Division assets of all of the Sellers, (the Engineering Division
assets to be purchased by Purchaser from Sellers, whether or not
itemized below, are collectively referred to as the "Purchased
Assets"). The Purchased Assets do not include those assets of
Sellers excluded by 1.01(d). The Purchased Assets include, but
are not necessarily limited to:
(1) All of the Engineering Division's supply inventory,
including but not limited to field supplies, laboratory
supplies, office supplies, processing supplies, labeling
supplies, packaging and shipping materials and selling and
promotional materials.
(2) All of Seller's right, title and interest in the
telephone and fax numbers set forth on Schedule 1.01(a)(2).
Purchaser shall have the exclusive right to apply for changes
in such numbers or in their location.
(3) All of the Engineering Division's fixed assets, including
all furniture, fixtures, vehicles, office, field and
production equipment, including computer equipment, and
inventory (Schedule 1.01(a)(3) sets forth a substantially
complete list of all fixed assets of the Engineering
Division).
(4) All of Sellers' interest in real property leases which
are assumed as Assumed Liabilities (as defined in 1.02)
("Assumed Premises Leases") and all rights to pre-payments,
deposits and leasehold improvements pertaining to the Assumed
Premises Leases. The Assumed Premises Leases are listed on
Schedule 1.02. Sellers' real property leases other than
Assumed Premises Leases are referred to as "Non-Assumed
Premises Leases."
(5) All right, title and interest in and to all of the
Engineering Division's customer contracts and agreements,
whether written or oral ("Customer Contracts") and customer
business arrangements and relationships. At Closing, Sellers
shall deliver all of the Customer Contracts by surrendering
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possession of them to Purchaser at Closing at their then
current location.
(6) All right, title and interest in (i) all subcontracts of
the Engineering Division (the "Subcontracts"); and (ii) all
contracts of the Engineering Division other than Customer
Contracts or Subcontracts which are assumed by Purchaser as
Assumed Liabilities by inclusion on Schedule 1.02 ("Assumed
Contracts").
(7) All of Sellers' right, title, and interest in the names
"BCM Engineers Inc.," "BCM," and any other names or any
customarily utilized portion or abbreviation thereof, either
alone or in conjunction with other words, utilized as business
names by Sellers primarily in connection with the Engineering
Division's operations; and all right, title and interest in
any trademarks, logos, service marks, the goodwill associated
therewith and all registrations and applications in connection
with such names. As set forth with particularity in 4.09(d),
Smith also grants Purchaser a one (1) year limited license to
use the names "Smith Technology Corporation," "Reidel
Environmental Services Inc.," and "Canonie Environmental
Services Corp." on a transitional basis to enable Purchaser to
use, obtain the benefits from, including payment, and effect
the transfer of, the Purchased Assets. Purchaser agrees to
indemnify Smith pursuant 1.03 for Third Party Claims against
Sellers arising from Purchaser's use of such names or for any
breach by Purchaser of the limitations on use contained in
4.09(d).
(8) At Sellers' election, either originals or copies of the
business records of the Engineering Division, including all
such business records of Sellers pertaining to the Purchased
Assets or the Assumed Liabilities as Purchaser reasonably
determines are necessary to enable Purchaser to obtain
possession of and title to the Purchased Assets, to realize
the value of and benefits from the Purchased Assets, to carry
out its obligations under the Assumed Liabilities and to
conduct the business associated with the Purchased Assets and
Assumed Liabilities ("Records"). The Records include (but are
not necessarily limited to) documents of title, accounting
records, job files, invoices, correspondence, sales records,
technical records, customer records and other data and records
relating to sales, customers, the Purchased Assets and the
Assumed Liabilities, and include those which exist on paper,
on film, tape, videotape or other storage media and on any and
all electronic media such as computer hard drives, diskettes
or magnetic tape. The Records do not include any of the
financial records of Sellers or records not primarily related
to the Engineering Division, but Purchaser shall have access
to such records under 4.06. Sellers shall deliver the
Records located at premises which are Assumed Premises Leases
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at Closing (as defined in 6.01) at their then current
location and the Records located at Sellers' other offices or
premises promptly at such times, from time to time, after
Closing and at Purchaser's sole expense, as records in
Sellers' possession are reasonably determined by Purchaser to
constitute Records as defined in this section. In conjunction
with the delivery of the Closing ED Financial Statements,
Sellers shall deliver to Purchaser a copy of the job and
financial accounting computer systems back-up tapes for the
Engineering Division as of the Effective Time.
(9) All of Sellers' right, title, interest or proprietary
interest claims in and to any patents or unpatented
proprietary technology or processes primarily used by or sold
or licensed to third parties by the Engineering Division
(listed on Schedule 1.01(a)(9)).
(10) All of Sellers' right, title, interest or proprietary
interest claims in and to all copyrights used primarily by or
sold or licensed to third parties by the Engineering Division
(listed on Schedule 1.01(a)(10)) and all reports, forms,
archives, data bases, studies, methods, research, technical
and other books, manuals, videos, scripts, recordings,
training materials, journals, handbooks, and all other
intellectual property in whatever form primarily used by the
Engineering Division, whether or not copyrighted or
proprietary to Sellers.
(11) All of Sellers' right, title, interest or proprietary
interest claims in and to any and all business or technical
computer software associated primarily with, primarily used by
or sold by the Engineering Division and all system manuals and
supporting materials related to such software (each such
software system is listed on Schedule 1.01(a)(11)); provided
that any such software for which any Seller is obligated to
pay royalties, lease payments or license fees or which
contains assignability restrictions shall be acquired by
Purchaser only to the extent assumed as an Assumed Liability.
(12) Sellers' complete Engineering Division customer list(s),
prospect contact list(s) or log(s), order backlog and
proposals outstanding and under development. At Closing,
Sellers shall deliver their list(s) or data base(s) of all
known past (within previous three years) and current
Engineering Division customers or clients and the Engineering
Division's sales prospect contact list(s), data base(s) or
log(s), to the extent that such lists, data bases or logs are
presently stored and available on Sellers' current data
management systems, whether manual or electronic. At Closing,
Sellers will also provide as Schedule 1.01(a)(12) a detail of
its order backlog. This schedule will include the customer's
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name, project name, order amount, amount billed to date and
backlog amount.
(13) Sellers' vendor list applicable to the Engineering
Division and all of Sellers' right, title and interest in
contracts with vendors which are assumed by Purchaser as
Assumed Liabilities.
(14) All accounts receivable and all unbilled work in process
(whether or not such work in process has been booked as
revenue or included on any schedule) attributable to services
performed by or contracts of the Engineering Division,
including associated retainages. The aging report of accounts
receivable recorded on the Interim ED Balance Sheet (see
2.03) shall be provided at Closing as Schedule
1.01(a)(14)(i). An aging report of the work in process
recorded on the Interim ED Balance Sheet shall be provided at
Closing as Schedule 1.01(a)(14)(ii). Final aging reports of
both accounts receivable and work in process, current to the
Effective Time and including all accounts receivable and work
in process recorded on the Closing ED Balance Sheet, shall be
delivered in connection with the Closing ED Financial
Statements (see 1.01(b)(4) and 2.03).
(15) All deposits, bonds, bond collateral, proceeds, refunds,
and prepaid expenses (including any refunds thereof)
associated with the Purchased Assets, the Assumed Premises
Leases, the Assumed Equipment Leases or the Assumed
Liabilities (listed on Schedule 1.01(a)(15)).
(16) All of Sellers' right, title and interest in those
specific personal property leases assumed as Assumed
Liabilities ("Assumed Equipment Leases").
(17) To the extent assignable, all licenses, permits,
accreditations, registrations, approvals and the like of
governmental agencies and other licensing or accrediting
entities used exclusively or primarily by the Engineering
Division.
(18) The real estate set forth on Schedule 1.01(a)(18) to the
extent that Purchaser accepts the conveyance thereof following
its environmental due diligence with respect thereto (the
"Purchased Real Estate"). Upon Purchaser's request after
Closing, Sellers will deliver a recordable special warranty
deed for each parcel of Purchased Real Estate.
(19) All right to the Sellers' lock box no. 35053 maintained
with Chase Manhattan Bank of New York for receipt and deposit
of the Engineering Division's collections, proceeds and other
cash receipts.
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(20) The Marion Bank claim.
Sellers agree to use their best efforts to provide complete
information on the schedules provided for in this 1.01(a) on the
date provided. However, the omission of any item shall not operate
to exclude the omitted item from the sale, delivery and assignment
thereof (except in those cases where the asset is to be acquired
only to the extent a coupled liability is to be assumed as an
Assumed Liability in which case it will be deemed included only if
the liability is specifically assumed as an Assumed Liability), and
the omission of any item shall abridge neither Sellers' obligation
to deliver possession and title thereto nor Purchaser's obligation
to pay the purchase price provided Purchaser acquires actual
possession and beneficial ownership of the omitted item.
(b) As consideration for the Purchased Assets and the other
promises, agreements, warranties, and covenants hereof, the
Purchaser shall:
(1) Pay to Smith at Closing the sum of Five Million Four
Hundred Twenty-Five Thousand Five Hundred Thirty-Nine Dollars
($5,425,539). Such payment shall be paid by wire transfer of
immediately available funds to the accounts in the amounts
specified by Sellers in Schedule 1.01(b)(1).
(2) At closing, deliver to Smith a six (6) month conditional,
non-negotiable promissory note in the form of Exhibit
1.01(b)(2) (the "Note") evidencing Purchaser's obligation to
pay to Smith the sum of Two Million Seven Hundred Fifty
Thousand Dollars ($2,750,000), with no interest thereon,
payable on the date seven (7) days after the date six (6)
months after the Closing Date (the seven day delay is to
enable the parties to settle the accounts receivable and work
in process collection adjustment set forth below). The Note
shall be subject to the condition that Purchaser shall have
available to it the right of set-off against payments to be
made under the Note in accordance with the provisions of
1.04, including specifically the right of set-off for
uncollected accounts receivable and work in process (see
2.06 and 4.01) and for any other purpose for which the right
of set off may be exercised under 1.04, but not including any
right of set off for any overstatement of Adjusted Equity
Value on the Interim ED Balance Sheet (including any reduction
in Adjusted Equity Value which occurs between the Interim ED
Balance Sheet and the Closing ED Balance Sheet) which shall be
adjusted in accordance with 1.01(b)(3), (4) and (5).
Purchaser acknowledges that the Note will be assigned to
Sellers' senior lender, The Chase Manhattan Bank, pursuant to
a collateral assignment of even date herewith, subject to
Purchaser's set-off rights in 1.04 hereof.
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(3) Conditionally assume at Closing those Closing ED Balance
Sheet liabilities of the Sellers related to the Engineering
Division, in an aggregate amount not to exceed Four Million
Three Hundred One Thousand Dollars ($4,301,000), which are set
forth on Schedule 1.01(b)(3) (the "Assumed Balance Sheet
Liabilities"). The aggregate amount of, and the specific
liabilities included in, the Assumed Balance Sheet Liabilities
shall be adjusted, and Schedule 1.01(b)(3) shall be revised
accordingly, to reflect the difference between the Adjusted
Equity Value of the Engineering Division on the Interim and
Closing ED Balance Sheets in accordance with 1.01(b)(4).
(4) Within ten (10) days following the Closing Date, Sellers
shall provide to Purchaser the Closing ED Financial Statements
(as defined in 2.03). Any disagreements between Purchaser
and Sellers concerning the Engineering Division's final
Adjusted Equity Value as shown on the Closing ED Balance Sheet
shall be resolved in accordance with 2.03(c) during the
twenty (20) day period thereafter. At such time as the
Closing ED Balance Sheet has been finally determined between
the parties within thirty (30) days after Closing, a final
adjustment to the amount of Assumed Balance Sheet Liabilities
to be assumed under 1.01(b)(3) shall be made and Schedule
1.01(b)(3) shall be amended to reflect such adjustment, equal
to the amount, if any, by which the Engineering Division's
Adjusted Equity Value as of the Effective Time as set forth on
the finally determined Closing ED Balance Sheet exceeds or is
less than the warranted Adjusted Equity Value set forth on the
Interim ED Financial Statements, net of any set-off for such
purpose taken by Purchaser against the Short Term Note under
1.01(b)(5). If the Engineering Division's Adjusted Equity
Value as of the Effective Time is less than the Interim ED
Balance Sheet value, the aggregate amount of Assumed Balance
Sheet Liabilities assumed by Purchaser shall be reduced by
such difference less any amount which Purchaser has elected to
take as a set-off for such purpose against the Short Term Note
as provided in 1.01(b)(5)(B). If the Adjusted Equity Value
is greater than the Interim ED Balance Sheet value, the
aggregate amount of Assumed Balance Sheet Liabilities assumed
by Purchaser shall be increased by such difference. Purchaser
shall have the right to select which Closing ED Balance Sheet
liabilities are added to or deleted from Schedule 1.01(b)(3)
to reflect the adjustment effected by this paragraph.
Purchaser shall be given credit for any Assumed Balance Sheet
Liabilities which it discharges prior to the amendment of
Schedule 1.01(b)(3).
(5) At Closing, deliver to Smith a thirty (30) day
conditional, non-negotiable promissory note in the form of
Exhibit 1.01(b)(5) (the "Short Term Note") evidencing
Purchaser's obligation to pay to Smith the sum of Two Hundred
Thousand Dollars ($200,000), with interest thereon at the
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Chase Manhattan Bank prime rate as of the Closing Date,
payable on the date thirty (30) days after the Closing Date.
The Short Term Note shall be subject to the condition that
Purchaser shall have available to it the right of set-off
against payments to be made under the Short Term Note for:
(A) Any payment which Purchaser elects to make on behalf
of Sellers of any liability of the Engineering Division:
(i) which is not set forth as an account payable of the
Engineering Division on Schedule 1.01(b)(5) (Schedule
1.01(b)(5) is the ledger of trade accounts payable
included as liabilities of the Engineering Division
recorded on the Interim ED Balance Sheet); (ii) which is
not an Assumed Liability; and (iii) which Sellers do not
pay within seven (7) days after being requested by
Purchaser in writing to do so in accordance with 4.14;
or
(B) The amount, if any, by which the Engineering
Division's Adjusted Equity Value as of the Effective Time
as set forth on the finally determined Closing ED Balance
Sheet is less than the Interim ED Balance Sheet value,
determined in accordance with 1.01(b)(4), to the extent
that Purchaser elects to take such adjustment as a set-
off against the Short Term Note instead of a reduction in
Assumed Balance Sheet Liabilities.
Purchaser acknowledges that the Short Term Note will be assigned to
Sellers' senior lender, The Chase Manhattan Bank, pursuant to a
collateral assignment of even date herewith, subject to Purchaser's
set-off rights in this 1.01(b)(5).
(c) The purchase price shall be allocated to the Purchased Assets
by agreement of the parties as set forth on Schedule 1.01(c), with
final adjustments to conform to the Closing ED Balance Sheet made
by agreement between the parties within 45 days after Closing.
(d) The Purchased Assets will not include the following
(collectively, the "Excluded Assets"):
(1) All cash bank accounts or cash equivalents of Sellers on
hand on the Closing Date, except as provided in 1.01(a)(15).
(2) All insurance policies of the Sellers, in respect of the
Purchased Assets or otherwise.
(3) Sellers' interest in that certain Technical Services
Agreement dated May 1, 1993, between Schlumberger Technology
Corporation and Canonie Environmental Services Corp.,
including the right of any proceeds, accounts receivable,
claims for payment or other rights arising from or related to
such agreement.
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(4) All rights of Sellers arising from or related to the
lawsuit filed in the Superior Court of California, County of
Alemeda, Case No. V-013711-1 against Locus Technologies, Neno
Duplancic and other unidentified defendants.
(5) Any permits, licenses, agreements, leases, instruments,
contracts and contract rights which would be Purchased Assets
but for this 1.01(d)(5), but which require the consent,
approval, novation or waiver of a third person if the transfer
of such would constitute a breach of such contract or a
violation of any law and if such consent, approval, novation
or waiver is not obtained, provided, however, that the
benefits of any such agreement, lease, instrument, contract or
contract right, including the right to payment arising
therefrom, shall nevertheless constitute Purchased Assets to
the extent that such benefits can be afforded to Purchaser by
means of the covenants set forth in 4.09, 6.02(l) and 7.02
or any other covenant of this Agreement whose purpose is to
assure to Purchaser the benefits of the Purchased Assets for
which Purchaser is paying the consideration provided for in
this Agreement.
(6) All of Seller's assets of every type and description
which are not primarily used by or related to the Engineering
Division.
(7) All real estate owned or leased by Sellers except for
any: (i) owned real estate expressly itemized on Schedule
1.01(a)(18) as a Purchased Asset; or (ii) interests in leased
real estate which are Assumed Premises Leases.
(8) All claims of Sellers, including those related to the
Engineering Division, arising prior to the Effective Time,
except for the Marion Bank claim (the "Retained Claims").
(9) All rights in former accounts receivable of the
Engineering Division which were charged off prior to the
Effective Time.
(10) Deposits, pre-payments, fixtures, and tenant improvements
associated with Non-Assumed Leases.
(11) Records related to Sellers' pending or threatened
litigation, proceedings, investigations or claims.
(12) All of Sellers' recorded goodwill.
(13) Sellers' computer network equipment and licensed network
software, including those components used by the Engineering
Division prior to Closing.
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(14) All of Sellers' leased real and personal properties other
than those assumed by Purchaser as Assumed Premises or Assumed
Equipment Leases.
1.02 Liabilities of Seller and Purchaser
(a) Purchaser has not, and shall not be construed to have,
assumed, adopted or taken over any obligations, debts, liabilities
or responsibilities of Sellers whatsoever, including (but not
limited to) liabilities for local, state or federal taxes, except
for: (i) the liabilities itemized on Schedule 1.02; (ii) the
Assumed Balance Sheet Liabilities set forth on Schedule 1.01(b)(3)
as adjusted; and (iii) such future (i.e. post-Effective Time)
performance as is obligated under the terms and conditions of those
Customer Contracts or Subcontracts which constitute Purchased
Assets (collectively the "Assumed Liabilities"). Purchaser shall
use its diligent efforts to secure the assignment to Purchaser or
novation of contracts which are Assumed Liabilities. Purchaser
shall be free to seek the amendment or renegotiation of terms of
Customer Contracts, Subcontracts or Assumed Liabilities in its sole
discretion provided that Purchaser shall indemnify Sellers from any
adverse effect on Sellers arising from such actions. Purchaser
shall cooperate with Sellers in attempting to obtain the release
and waiver or settlement of claims of parties under the Customer
Contracts in favor of Sellers for any damages or losses alleged to
have been incurred by such parties arising from performance prior
to the Effective Time. Notwithstanding Purchaser's acceptance of
a Customer Contract and the obligation of future performance,
Sellers, as their interests are defined by such contracts or by law
(which shall not be altered or enlarged with respect to third
parties by virtue of this Agreement), shall retain responsibility
and liability, except as such are expressly assumed as Assumed
Liabilities, for all obligations, performance and liability due,
occurring or accruing under all Customer Contracts or Subcontracts
prior to the Effective Time, with Purchaser assuming all
responsibility and liability for obligations and performance due
and performed after the Effective Time and all liabilities arising
out of such post-Effective Time performance.
(b) Except for the Assumed Liabilities, Sellers agree, jointly and
severally, to retain or assume full liability and responsibility
for satisfaction of all of Sellers' debts or liabilities of any
kind, whether known or unknown, fixed or contingent, including any
and all liability for trade payables and other accounts payable,
federal, state or local taxes, employment taxes, tort or contract
claims, and employee compensation, benefits or claims.
(c) The disclosure by Sellers of any liability or any item or
matter that creates a liability in the future on the schedules to
this Agreement or otherwise shall not result in an assumption by,
or shifting to, Purchaser of liability with respect to such matter
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except to the extent that Purchaser has expressly agreed to the
assumption of such liability as an Assumed Liability.
1.03 Indemnity Against Liabilities, etc.
(a) Sellers, jointly and severally, agree to indemnify and hold
harmless the Purchaser, its subsidiaries, their employees and their
successors against and in respect of any and all:
(1) Claims, suits, actions, proceedings (formal or informal),
governmental investigations, judgments, deficiencies, set-
offs, damages, settlements, liabilities, and reasonable legal
and other expenses (including reasonable attorneys' fees) as
and when incurred arising out of or based upon any breach of
any representation, warranty, covenant, or agreement of
Sellers or any person other than Purchaser contained in this
Agreement or any of the Related Agreements;
(2) Debts or liabilities of any kind and claims, liens, set-
offs, suits, actions, and proceedings (formal and informal) of
persons or entities and related judgments, deficiencies,
damages, settlements, set-offs, liens, liabilities, and legal
and other expenses (including reasonable attorneys' fees) as
and when incurred arising (i) out of the Purchased Assets or
the business associated therewith prior to the Effective Time
except to the extent expressly assumed by Purchaser as Assumed
Liabilities or (ii) out of or based upon the acts, omissions,
contractual performance or conduct of the business of Sellers
whether before or after the Effective Time, except to the
extent expressly assumed by Purchaser as Assumed Liabilities;
and
(3) Any loss, damage or cost for which Sellers or any of them
have agreed to indemnify Purchaser under any provision of this
Agreement or any Related Agreement.
(b) Purchaser agrees to indemnify and hold harmless Sellers, their
affiliated corporations, their employees and their successors,
against and in respect of any and all:
(1) Claims, suits, actions, proceedings (formal or informal),
governmental investigations, judgments, deficiencies, set-
offs, damages, settlements, liabilities, and reasonable legal
and other expenses (including reasonable attorneys' fees) as
and when incurred arising out of or based upon any breach of
any representation, warranty, covenant, or agreement of
Purchaser contained in this Agreement or any of the Related
Agreements;
(2) Debts or liabilities of any kind and claims, liens, set-
offs, suits, actions, and proceedings (formal and informal) of
persons or entities and related judgments, deficiencies,
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damages, settlements, set-offs, liens, liabilities, and
reasonable legal and other expenses (including reasonable
attorneys' fees) as and when incurred arising (i) out of the
Purchased Assets or the business associated therewith after
the Effective Time, except for Sellers' debts or liabilities
not expressly assumed by Purchaser as Assumed Liabilities;
(ii) out of or based upon the acts, omissions, contractual
performance or conduct of the business of Purchaser whether
before or after the Effective Time; or (iii) out of the
Assumed Liabilities after the Effective Time; and
(3) Any loss, damage or cost for which Purchaser has agreed
to indemnify Sellers or any of them under any provision of
this Agreement or any Related Agreement.
(c) If any party to be indemnified hereunder (the "indemnitee")
receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity who is not
a party to this Agreement or an affiliate of such party (a "Third
Party Claim") against such indemnitee, against which any person or
entity that may be required to provide indemnification therefor
under this Agreement (the "indemnitor"), the indemnitee will give
such indemnitor reasonably prompt written notice thereof after
receipt of such notice of such Third Party Claim in reasonable
detail, and will indicate the estimated amount, if reasonably
practicable, of the loss that has been or may be sustained by the
indemnitee. The indemnitor will have the right to participate in
or, by written notice to the indemnitee no later than thirty (30)
calendar days after receipt of the above-described notice of such
Third Party Claim, to elect to assume the defense of such Third
Party Claim at such indemnitor's own expense and by such
indemnitor's own counsel, and the indemnitee will cooperate in good
faith in such defense. If within the 30 calendar days set forth in
this paragraph, an indemnitee receives written notice from an
indemnitor that such indemnitor has elected to assume the defense
of any Third Party Claim, the indemnitor will not be liable for any
legal expenses subsequently incurred by the indemnitee in
connection with the defense thereof (except as provided in this
paragraph or paragraphs (d) or (f) below). The indemnitee will,
however, have the right to participate in the defense of any Third
Party Claim assisted by counsel of its own choosing at its own
expense. If the indemnitee has not received written notice within
such thirty (30) calendar day period that the indemnitor has
elected to assume the defense of such Third Party Claim, the
indemnitee may, at its option, elect to settle, subject to
paragraphs (e) and (f), or assume such defense, assisted by counsel
of its own choosing, the cost of which shall constitute an
indemnified loss.
(d) An indemnitor shall not be entitled to control, and the
indemnitee shall be entitled to have sole control over, the defense
or settlement of any claim against such indemnitee to the extent
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that (i) such claim seeks an order, injunction or other equitable
relief against the indemnitee which if successful, could reasonably
be expected to materially interfere with the business, operations,
assets or condition (financial or otherwise) of the indemnitee or
(ii) such claim arises out of a Customer Contract and seeks
recovery against both Sellers and Purchaser under circumstances
subjecting the claim to liability and indemnity apportionment under
paragraph (j)(1) of this section, in which event indemnitor and
indemnitee shall have control over their respective defenses.
(e) Without the prior written consent of the other, indemnitor
will not enter into any settlement of any Third Party Claim or
cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation: (i) injunctive or other equitable
relief would be imposed against the indemnitee; or (ii) such
settlement or cessation would lead to liability or create any
financial or other obligation on the part of the indemnitee for
which it is not entitled to or is unlikely to receive full
indemnification hereunder (exclusive of the Indemnity Deductible,
or any portion thereof). Indemnitor shall not consent to the entry
of any judgment or enter into any settlement that does not include
as an unconditional term thereof the giving by the claimant or
plaintiff to each indemnitee of a release from all liability in
respect of such claim.
(f) If a firm offer is made to settle a Third Party Claim and
either indemnitor or indemnitee desires to accept and agree to such
offer, such party will give written notice to the other to that
effect. If the other party fails to consent to such firm offer
within 30 calendar days after its receipt of notice, the party
desiring to so settle may continue to contest or defend such Third
Party Claim and, in such event: (i) if the party desiring to
settle is the indemnitor, the maximum liability of the indemnitor
as to such Third Party Claim will not exceed the amount of such
settlement offer, plus costs and expenses paid or incurred by the
indemnitee through the end of such 30-day period to the extent
otherwise indemnifiable hereunder; or (ii) if the party desiring to
settle is the indemnitee, the indemnitee is participating in the
defense of such Third Party Claim at its cost and the final
judgment or settlement is equal to or greater than the firm offer,
the indemnitee's costs and expenses incurred after such 30-day
period shall constitute an indemnified loss.
(g) Any claim by an indemnitee for indemnification other than
indemnification against a Third Party Claim (a "Direct Claim") will
be asserted by giving the indemnitor reasonably prompt written
notice thereof, and the indemnitor will have a period of 15
calendar days within which to respond in writing to such Direct
Claim. If the indemnitor does not so respond within such 15
calendar day period, the indemnitor will be deemed to have rejected
such claim, in which event the indemnitee will be free to pursue
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such remedies as may be available to the indemnitee under this
Agreement.
(h) With regard to claims for which indemnification is payable
hereunder, such indemnification shall be paid by the indemnitor
promptly upon (i) the entry of a judgment against the indemnitee
and the expiration of any applicable appeal period; (ii) the entry
of an unappealable judgment of final appellate decision against the
indemnitee; or (iii) a settlement permitted under 1.03. In the
event that the indemnitee has taken a provisional set-off against
amounts due to the indemnitor for the indemnified claim pursuant to
1.04(c) and the amount finally determined to be payable as
provided in this paragraph is less than the amount so set-off, the
excess shall thereupon be payable to the indemnitor together with
interest on such excess at the Chase Bank prime rate quoted for the
date on which the payment against which the set-off was taken would
have otherwise been due. This provision shall not apply to
Purchaser's set off rights against the Note for uncollected
accounts receivable and work in process and against the Short Term
Note for Purchaser's payment of unscheduled accounts payable under
1.01(b)(5) which shall be governed by 1.04 and 1.01(b)(5),
respectively, and shall be finally determined in accordance with
the procedure set forth for resolution of accounting issues in
2.03.
(i) If the Purchaser is the indemnitee, payment of an
indemnification claim shall first be made by a set-off against the
principal amount of the Note remaining unpaid, subject to
paragraphs (j)(3) and (5) of this section.
(j) The parties' respective indemnity obligations hereunder shall
be further subject to the following:
(1) In the event any contracting party of a Customer Contract
(other than Purchaser) asserts any claim for damages, failure
or inadequacy of performance, breach of warranty or breach of
contract relating to the Customer Contract and such claim is
founded on allegations of breach of contract, negligence or
other legal fault of both a Seller and Purchaser, then, and in
that event, Purchaser and Sellers indemnification obligations
contained herein shall apply only to the extent of their
respective actual comparative negligence or other legal fault
as determined by the dispute resolution procedures set forth
in this Agreement, by a court or by agreement of the parties.
A determination of liability on the part of Purchaser based
upon the assignment or novation to, or undertaking of
performance by, Purchaser of any Customer Contract or based
upon successor liability or similar theory shall not
constitute legal fault of the Purchaser, it being the
intention of this section to apportion liability to the party
whose act or omission was actually responsible for creating
the liability.
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(2) Except with respect to claims arising from performance
under Customer Contracts prior to Closing or claims of breach
of any contract by any Seller prior to Closing, rights to
indemnification pursuant to 1.03(a) hereof shall survive
Closing for a period of thirty (30) months. Rights to
indemnification for claims arising from any Seller's
performance under any Customer Contract or breach of contract
by any Seller prior to Closing shall survive for a period of
six (6) years after the date of the making of the contract.
All such non-excepted claims for indemnification hereunder
shall be forever barred unless made by notifying the Sellers
in writing of such claim within the time period set forth in
this paragraph.
(3) The Sellers' and Purchaser's respective indemnity
obligations hereunder shall be limited to: (i) individual
losses, claims, etc. having a value of $2,500.00 or more (an
"Indemnified Claim"); and (ii) losses, claims, etc. after the
first $100,000.00, in the aggregate, of Indemnified Claims
(the "Indemnity Deductible"), in which event only the
aggregate amount of Indemnified Claim(s) in excess of the
Indemnity Deductible shall be subject to indemnification
hereunder. Sellers shall not be responsible for any loss or
claim to the extent that a reserve exists therefore on the
Closing ED Balance Sheet and remains available. The following
are not subject to either the Indemnified Claim threshold or
the Indemnity Deductible and are covered from the first dollar
over the reserved amount: (iii) Sellers' warranty that
accounts receivable and recorded work in process recorded on
the Closing ED Balance Sheet, net of reserves, will be
collected as specified in 2.06(a); (iv) Sellers' warranty
that there are no unearned billings or receipts net of
reserves for such purpose as set forth in 2.06(a) and
2.07(b); (iv) Sellers' warranty that both the Interim and
Closing Balance Sheets correctly stated tangible net equity
for the Engineering Division as of the Effective Time; (v)
Sellers' warranty that Hazardous Materials have been removed
from the Assumed Premises Leases and Purchased Real Estate
prior to Closing; (vi) Sellers' covenants to pay unrecorded
accounts payable of the Engineering Division under 4.14 and
to pay insurance premiums under 4.12; and (viii) Purchaser's
covenant to make payments required in the ordinary course
under Assumed Balance Sheet Liabilities or leases assumed as
Assumed Liabilities.
(4) The terms "loss" or "cost" as used in 1.03(a) include
corrective services performed by Purchaser (including its
subcontractors) to remedy a deficiency in Sellers' performance
under any contract for the performance of services by a Seller
to the extent that Purchaser reasonably determines: (i) that
such corrective services are in fact necessary to remedy a
defective performance by a Seller; and (ii) that Purchaser
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must perform such corrective services in order to preserve its
relationship with (x) any customer under a Customer Contract
or other engagement for services having remaining billings of
$20,000 or more in excess of the cost of such corrective
services, (y) any pre-existing customer from which Purchaser
accrued revenue in excess of $30,000 within the previous year
or (z) any customer from which the Engineering Division
accrued more than $50,000 in revenue in either of the two
years prior to Closing. Corrective services performed by
Purchaser at the request of Sellers shall not be subject to
any threshold.
(5) The maximum aggregate liability of the Sellers for
indemnification under this Agreement and set-offs under 1.04
and 1.01(b)(5), exclusive of liability covered by Sellers'
insurance coverage for any indemnified claim, shall be equal
to Two Million Seven Hundred Fifty Thousand Dollars
($2,750,000) (the "Maximum Aggregate Indemnity Amount"), and
the obligations of the Sellers for indemnification hereunder
will terminate when the Maximum Aggregate Liability Amount has
been paid or set-off, except that if Purchaser exercises set-
off rights against the Note and the Short Term Note in excess
of $1,250,000 in the aggregate for uncollected accounts
receivable and work in process and for payments of unrecorded
accounts payable, the maximum aggregate liability of the
Sellers for indemnification shall nevertheless be equal to
$1,500,000 for other indemnified matters regardless of the
amount set-off for the foregoing purposes.
(6) To the extent that an indemnitee actually receives
proceeds of insurance or any other recovery of amounts claimed
as an indemnified loss or cost hereunder, the indemnification
obligation of the indemnifying party shall be reduced to the
extent of the net insurance proceeds or other recovery
received by the indemnitee. If the amount of any
indemnifiable loss at any time subsequent to the making of a
payment in respect thereof (an "Indemnity Payment") is reduced
by recovery, settlement or otherwise under or pursuant to any
insurance coverage, or pursuant to any claim, recovery,
settlement or payment, the amount so received will be promptly
repaid by the indemnitee to the indemnitor, together with
interest thereon from the date of payment thereof at a rate
equal to the then current prime rate.
(7) Upon making any Indemnity Payment, the indemnitor will,
to the extent of such Indemnity Payment, be subrogated to all
rights of the indemnitee against any third party that is not
an affiliate of the indemnitee in respect of the loss to which
the Indemnity Payment relates. Without limiting the
generality or effect of any other provision hereof, each such
indemnitee and indemnitor will duly execute upon request all
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instruments which fairly reflect, and are reasonably necessary
to evidence and perfect, the above-described rights.
(8) Sellers and Purchaser, or any indemnitee claiming under
them, shall each give the other prompt notice as provided in
this section of any allegedly indemnified item incurred,
asserted or threatened on the basis of which an indemnitee
intends to seek indemnification from an indemnitor as provided
herein; provided, however, that the obligation of an
indemnitor shall be reduced for the failure to give notice at
any particular time only to the extent that the indemnitor has
been actually prejudiced thereby.
(9) The indemnity agreements contained in this Agreement
shall inure only to the benefit of Purchaser and Sellers,
respectively, (and their respective subsidiaries, affiliates,
employees and successors to the extent they are indemnitees),
and shall not be for the benefit of any other person or
entity. These indemnity provisions shall not be construed to
abrogate the corporate liability shield as provided by law, to
extend a right of action to any third party not otherwise
available, or to enlarge the underlying liability of any
indemnitor or indemnitee to any third party.
(k) Notwithstanding any other provision contained in this
Agreement to the contrary, neither Sellers nor Purchaser shall have
any liability to the other or to any other indemnitee under this
Agreement, or under any Related Agreement, document or instrument
delivered pursuant to this Agreement, or in connection with the
transactions contemplated hereby or thereby, for any indirect,
consequential or incidental damages of any kind or nature. The
following shall not constitute indirect, consequential or
incidental damages: (i) amounts that an indemnitee is required to
pay to a Third Party even if such amounts are for indirect,
incidental or consequential damages sustained by such Third Party;
or (ii) attorneys fees and defense costs and expenses for which a
right to indemnification is provided in this 1.03.
(l) The indemnification obligation of an indemnitor shall be
adjusted so as to give credit to the indemnitor for any tax
benefits available to the indemnitee by virtue of or as a result of
the matter for which the indemnitee is being indemnified (net of
tax detriments resulting to the indemnitee by virtue of such
indemnification).
(m) Purchaser and Sellers each agree that the remedies provided to
each party in this 1.03 shall be the sole and exclusive remedies
of such party (or any person claiming by or through such party) for
breach, misrepresentation or default by the other party under or
with respect to this Agreement or any Related Agreement except for
the following: (i) the parties shall be entitled to equitable
remedies with respect to matters where an equitable remedy is
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provided in this Agreement or where such relief is available under
principles of equity generally; and (ii) the parties shall not be
limited as to remedy under circumstances constituting fraud in the
inducement.
1.04 Rights of Set Off
(a) Without limiting such other rights as it may have at law or
equity or by agreement, the Purchaser shall have the right, subject
to the procedures of this 1.04, to set off against, and withhold
from, any payment otherwise due to Sellers under the Note: (i) the
amount of any account receivable or work in process which is a
Purchased Asset and is determined to be uncollected pursuant to
2.06(a) and 4.01; (ii) any amount for which Purchaser is entitled
to an indemnification payment as provided in 1.03 (subject to the
limitations of 1.03(j)(3) and 1.03(j)(5)); and (iii) as provided
in paragraph (c) below. In-kind goods or services provided by
Purchaser for which Purchaser would be entitled to set-off if paid
by Purchaser in money shall be valued at Standard Rates (as defined
in 4.11).
(b) Without limiting such other rights as they may have at law or
equity or by agreement, Sellers shall have the right, subject to
the procedures of this 1.04, to set off against, and withhold
from, any payment otherwise due to Purchaser under this Agreement
or under any Related Agreement any amount for which Sellers are
entitled to an indemnification payment under 1.03 (subject to the
limitations of 1.03(j)(3) and 1.03(j)(5)); and (iii) as provided
in paragraph (c) below. In-kind goods or services provided by a
Seller for which Sellers would be entitled to set-off if paid by
Sellers in money shall be valued at Standard Rates (as defined in
4.11).
(c) Subject to the procedures set forth below, but only with
respect to Third Party Claims, it shall not be necessary that a
Third Party Claim or a threatened Third Party Claim has resulted in
actual damage to a party having set-off rights under this section
for the party to exercise its set-off rights under this section,
but rather such party shall have the right to provisionally
withhold payment to cover the future effects of any Third Party
Claim or threatened Third Party Claim pending actual conclusion of
the matter, provided that the party asserting the right of set-off
for a threatened Third Party Claim shall have produced sufficient
objective evidence of facts and sufficient supporting legal
authority for a competent, experienced attorney to conclude that:
(1) A written notice of the claim or threatened claim has
been received by the party seeking to withhold;
(2) Either the loss-threatening event has occurred or there
is a substantial probability that it will occur;
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(3) There is a substantial probability that the occurrence or
probable occurrence will cause a loss;
(4) An action to hold the party liable for the loss could
withstand a motion to dismiss or a motion for summary
judgment;
(5) There is a substantial probability that the loss,
including associated attorney fees and costs of defense, will
be as great as the amount asserted for set-off;
(6) Either there is a substantial issue as to whether an
available insurance policy provides coverage for the claim or
there is a substantial potential that the insurance coverage
available will not be adequate in amount to pay the portion of
the loss asserted as a set-off; and
(7) If the set-off is not asserted at the present time,
insufficient funds will remain subject to set-off following
the next payment to enable the asserting party to protect its
interests.
If (i) any of the above findings becomes no longer true, (ii) a
formal proceeding has not been commenced with respect to such Third
Party Claim within one (1) year after the notice of intent to set-
off, (iii) settlement negotiations are not actively in progress to
resolve such Third Party Claim after one (1) year from the notice
of intent to set-off, or (iv) such loss or damage does not in fact
occur, then upon the earlier to occur of such events such party
shall then pay the withheld amount to the other party together with
interest on such amount from the payment due date at the Chemical
Bank prime rate in effect on the due date for such payment.
(d) Purchaser may not set off any amounts under this section
except to the extent that any reserve recorded on the Closing
Balance Sheet for such liability or class of liabilities is not
available or is inadequate to cover the asserted amount.
(e) If the parties have a dispute involving the exercise of set-
off rights, including any issue as to insurance coverage or
liability exposure, then within ten (10) days, Sellers and
Purchaser shall confer in good faith in an effort to resolve the
dispute. If the parties are unable to agree within thirty (30)
days after the issue is first asserted, then such issue shall be
submitted to non-binding mediation as provided in 7.15. Pending
agreement or determination of a charge against available reserves
and/or a set-off, the amount asserted for set-off may be withheld
by the asserting party (subject to the provisions of paragraph (c)
above) and shall not constitute a breach or default under this
Agreement, provided that the withholding is reasonable as to amount
and is undertaken in good faith with a reasonable belief as to the
entitlement to the set-off.
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II. REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Purchaser to enter into this
Agreement, Sellers represent and warrant to Purchaser as follows:
2.01 Organization and Qualification
(a) Sellers are each corporations which are validly existing under
the laws of their state of incorporation with the full corporate
power and authority to enter into contracts, to sell their assets
and to perform the other agreements and covenants as provided in
this agreement. Sellers are authorized to do business and are in
good standing in each jurisdiction in which the Engineering
Division maintains an office or is required to be qualified except
where the failure to be so qualified could not reasonably be
expected to have a material adverse effect on the Engineering
Division. Schedule 2.01(a) lists each such jurisdiction in which
the Engineering Division maintains an office and Sellers are
authorized to do business. Sellers will not be, as a result of
executing and performing this Agreement and related agreements, in
violation or breach of, or in default with respect to, any term of
their respective certificates of incorporation, by-laws or other
charter documents.
(b) Sellers have no subsidiary or affiliated corporations or
entities other than those listed on Schedule 2.01(b).
2.02 Capitalization and Shareholder Action
Except as set forth on Schedule 2.02, the stock or equity
interests of Sellers are not encumbered or restricted in any way or
subject to any agreement that will interfere with this transaction,
affect Purchaser's title to or beneficial use of the Purchased
Assets or subject Purchaser to liability to any stockholder.
Stockholder approval of this sale of assets either has been duly
obtained prior to Closing or is not required by law or under
Sellers' respective certificates or articles of incorporation or
by-laws.
2.03 Financial Condition
(a) Sellers have delivered to the Purchaser and attached hereto as
Schedule 2.03 true and correct copies of the following: (i)
audited balance sheets, statements of income, statements of
retained earnings, and statements of cash flow of Smith or its
predecessors for the fiscal year ended February 28, 1995, and the
seven months ended September 30, 1995; (ii) unaudited balance
sheet, statement of income, statement of retained earnings and
statement of cash flow of Smith for the fiscal year ended September
30, 1996; (iii) unaudited selected balance sheet accounts and
statements of income for the Engineering Division for the twelve
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(12) months ended September 30, 1996; (iv) unaudited selected
balance sheet accounts and statements of income for the Engineering
Division for the ten (10) months ended July 31, 1997 (the "Interim
ED Financial Statements"). Within ten (10) days following the
Closing Date, Sellers shall provide (v) final unaudited selected
balance sheet accounts ("Closing Balance Sheet") and statements of
income, retained earnings and cash flows of Sellers for the period
beginning October 1, 1996, and ending on the Effective Time (the
"Closing Financial Statements"); and (vi) final unaudited balance
sheet ("Closing ED Balance Sheet") and statements of income,
retained earnings and cash flows of the Engineering Division for
the period beginning October 1, 1996, and ending on the Effective
Time (the "Closing ED Financial Statements").
(b) The Smith financial statements referred to in 2.03 have been
prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods
involved. The balance sheet and financial statements of the
Engineering Division have been prepared consistent with the
accounting principles used in preparing the financial statements of
Smith for contemporaneous periods and are representative of stand-
alone financial statements except as follows: corporate costs were
not allocated; there were no footnote disclosures; intercompany
accounts were excluded; common area maintenance was excluded; cash
was excluded; shut down expenses for Norristown laboratory facility
was excluded; $542,000 of accounts payable was excluded in exchange
for the addition of a $542,000 employment agreement liability;
legal expenses were excluded. Purchaser and Sellers have agreed to
the value for fixed assets on the Interim ED Balance Sheet, and
there shall be no post-Closing adjustment for fixed assets.
(c) Purchaser's in-house and independent accountants shall be
afforded free and full access to the non-proprietary working papers
and records used by Sellers' independent accountants and the
working papers and records used by Sellers' in-house accountants in
conducting their audits and in preparing their audited financial
statements and unaudited Interim and Closing Financial Statements.
If there is a difference of opinion between the two accounting
firms as to the general acceptability of any of the accounting
principles followed in connection with preparing or reviewing the
unaudited Interim or Closing ED Financial Statements, the
respective accountants shall immediately confer in an effort to
resolve such differences. If the firms are unable to resolve a
difference involving Closing Financial Statements delivered after
Closing, the difference shall be resolved by submitting the dispute
to a third firm of accountants who shall summarily decide the issue
following a conference between the three firms at which the
parties' respective accounting firms shall each be afforded the
opportunity to present its position and the evidence supporting
such position.
2.04 Tax and Other Liabilities
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(a) Sellers have filed all payroll and other federal, state, local
and foreign tax returns required to be filed by them and have duly
paid the trust portion of all employee-related taxes and have duly
paid or established adequate reserves for the proper payment of all
taxes and other governmental charges which may in any way result in
a Lien on or claim against the Purchased Assets or on Purchaser's
other assets or a liability or claim of liability against Purchaser
for such taxes. Except for any specifically Assumed Liabilities
for taxes, Purchaser shall incur no liability, cost or expense in
connection with Sellers' federal, state, local or employee-related
taxes, including any cost or expense arising from investigations,
audits, proceedings or actions taken by taxing authorities.
(b) Sellers have paid or will pay all Sellers' expenses, taxes
(except sales taxes), and other liabilities, resulting from the
preparation of, or the transactions contemplated by, this
Agreement. These costs will not be assumed by Purchaser except to
the extent they are included on the Closing ED Balance Sheet and
expressly assumed as Assumed Balance Sheet Liabilities.
(c) Except for the Assumed Liabilities, Sellers retain and
Purchaser will incur no liability as a result of environmental
conditions associated with any acts, omissions, or real property
ownership, leasing or use by Sellers prior to the Effective Time.
2.05 Litigation and Claims
(a) Except as set forth on Schedule 2.05: (i) there is no
material litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending or, to
the knowledge of Sellers, threatened (or any basis therefore known
to Sellers) which, if adversely determined, could reasonably be
expected to have a material adverse effect on the Engineering
Division or the Purchased Assets; (ii) within the last two years,
the Engineering Division has not been subject to any union activity
or organized labor dispute; (iii) Sellers are not in violation of,
or in default with respect to, any law, rule, regulation, order,
judgment, or decree, including any environmental laws or
regulations which could reasonably be expected to have a material
adverse effect on the Engineering Division taken as a whole.
Schedule 2.05 shall set forth, among other matters, all past
(previous three years) and current material citations, violations,
fines, judgments, decrees, orders, consent decrees or orders, and
pending proceedings of any type arising out of the alleged
violation of any federal, state or local criminal, bidding or
procurement, environmental, health and safety, licensing or labor
law or regulation or out of alleged deficiencies, negligence,
intentionally wrongful act or breach of contract in the performance
of services known to Sellers.
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(b) Purchaser will incur no liability, loss or cost as a result of
claims, proceedings or litigation arising from Sellers' alleged
acts or omissions.
2.06 Accounts Receivable and Properties
(a) All accounts receivable and work in process of the Engineering
Division recorded on the Closing Balance Sheet are set forth on the
agings delivered in connection with the Closing Financial
Statements, will have arisen from valid transactions in the
ordinary course of Sellers' business and will be collected by
Purchaser, net of reserves for uncollectible accounts, within six
(6) months of the Closing Date utilizing reasonable and customary
collection procedures (i.e. measures such as legal action, referral
to outside collection agency or mechanics lien shall not be
required of Purchaser to conform to this standard). All accounts
receivable and work in process of the Engineering Division recorded
on the Closing ED Balance Sheet were fully earned as of the
Effective Time, net of the reserve for billings in excess (no
account receivable or work in process entry represents a pre-
billing except to the extent an allowance is reserved for it).
4.01 sets forth certain covenants of the parties with respect to
the collection of accounts receivable.
(b) Except as disclosed on Schedule 2.06(b), each physical asset
whose value is recorded on the Closing ED Balance Sheet will be in
fully operational condition as of the Effective Time (except for
normal wear and tear which is not such as to affect their
operability).
(c) Except as noted on Schedule 2.06(c), no parcel of the
Purchased Real Estate nor any property covered by any Assumed
Premises Lease is encumbered by any liability arising from the
presence of Hazardous Materials or pollutants on such property.
Purchaser will incur no liability as a result of environmental
conditions associated with any Purchased Real Estate, Assumed
Premises Lease, or real property ownership, leasing or use by
Sellers prior to the Effective Time.
2.07 Contracts and Other Instruments
(a) The Customer Contracts delivered at Closing pursuant to
1.01(a)(5) are all of the Customer Contracts of the Engineering
Division. Schedule 2.07(a) or the other schedules to this
Agreement set forth a true and correct listing of all material
contracts, other than Customer Contracts and contracts with
subcontractors, to which any Seller is a party for the use or
benefit of the Engineering Division, including material leases and
licenses and all supply, distribution, agency, financing or other
arrangements and understandings. Any of the foregoing not
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disclosed on the other schedules to this Agreement are listed on
Schedule 2.07(a). For purposes of this 2.07(a) only, "material
contract" means a contract, including Customer Contracts, which
provides for the provision or purchase of goods or services in
excess of $20,000 per annum or requires performance by Seller for
a period of more than twelve months. With respect to Customer
Contracts, "material arrangement or understanding" includes any
relationship between Seller and any customer or group of related
customers, whether formalized by binding written contract or not,
from which Sellers derived more than $50,000 in the twelve months
preceding the Closing Date. Neither Sellers nor, to Sellers'
knowledge, any other party to any material contract, agreement,
instrument, lease, or license is now or is expected by Sellers as
of Closing to be in the future in violation or breach of, or in
default with respect to complying with, any material provision
thereof, and to Sellers' knowledge, each such material contract,
agreement, instrument, lease, or license is in full force and is
the legal, valid, and binding obligation of the parties thereto and
is enforceable as to them in accordance with its terms, except as
disclosed on Schedule 2.07(a). Neither any Seller nor, to Sellers'
knowledge, any other party to any material contract, arrangement or
understanding has given notice of termination or taken any action
inconsistent with the continuance of such material contract,
arrangement or understanding.
(b) Except for situations disclosed on Schedule 2.07(b) and for
the cost of correction of which an adequate reserve is or will be
recorded on the Closing ED Balance Sheet as a liability: all
services rendered and products supplied by the Engineering Division
prior to the Effective Time have been in conformity with the scope
of performance defined by the contract or arrangement, and to the
reasonable satisfaction of the customer; no curative or corrective
work, replacements or payments are necessary to render such
performance legally or contractually sufficient; and all costs for
performance completed prior to Closing shall have been duly
recorded as liabilities on the Closing ED Balance Sheet. Billings
by Sellers on each Customer Contract to be acquired by Purchaser as
a Purchased Asset shall not, as of the Effective Time, have
constituted a greater percentage of total allowable billings under
such contract than the percentage of work performed prior to the
Effective Time shall have constituted of total work to be performed
under such contract.
(c) Sellers enjoy peaceful and undisturbed possession under all
Assumed Premises Leases and licenses under which the Engineering
Division is operating. No Seller is a party to or bound by any
contract, agreement, instrument, lease, license, arrangement, or
understanding, or subject to any charter or other restriction,
which, to the knowledge of Sellers, could reasonably be expected to
have a material and adverse affect on the Purchased Assets or the
operations or business of the Engineering Division. Sellers have
no contract, agreement, lease, license, arrangement, or
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understanding related to, or which could reasonably expected to
have a material adverse effect upon, the Purchased Assets or
Purchaser's title thereto or the operations of the Engineering
Division with, any shareholder, any director, officer, or employee
of any Seller, or any other corporation or enterprise in which any
Seller, or any shareholder, any director, officer, or employee of
any Seller, has a five percent (5%) or greater equity or voting or
other substantial interest, other than such contracts and
agreements as so listed and specified on Schedule 2.07(c). There
exists no contract, agreement, right or understanding material to
the business of the Engineering Division which is in the name of
any principal, officer, director, shareholder or any other person
or entity other than a Seller except as disclosed and so identified
on Schedule 2.07(c).
(d) The backlog schedule provided as Schedule 1.01(a)(12) is
correct to Sellers' knowledge as of the Effective Time, and, to
Sellers' knowledge, the backlog items listed on such schedule all
represent actual commitments by customers for the performance of
services by the Engineering Division which are either actual
contractual commitments or actual written or verbal communications
of commitment received by a Seller from the customers to hire a
Seller for the performance of such services in such amounts as are
shown on the schedule.
2.08 Employees and Employee Liabilities
Except for the Assumed Liabilities and as provided in 4.04
hereof, Purchaser will not incur any liability to any governmental
authority, to any third person (including employee benefit plans of
Sellers or to or on behalf of Sellers' employees, any of which
arise out of the employees employment with Sellers, out of the
employees' participation in any employee benefit plans of Sellers
or out of Sellers' acts or omissions (as distinguished from
Purchaser's acts or omissions, including without limitation its
decision to hire or not hire any particular employee of Sellers),
including (but not limited to) any liability: under ERISA or the
Internal Revenue Code; for obligations to, or arrangements with
employees for wages, salary, bonuses, incentive compensation,
vacation pay, severance pay, insurance, or other benefits; for
employee-related taxes; for personal injury or property damage; or
for discrimination, harassment, or wrongful discharge under
federal, state or local laws.
2.09 Patents, Trademarks, Copyrights, etc.
Sellers neither own, nor have pending or are licensed under
any patent, patent application, trademark, trademark application,
trade name, service mark, copyright, franchise, or other intangible
property or asset used by or sold or licensed to others by the
Engineering Division and material to the Engineering Division's
operations ("Intangibles"), other than as described in the
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Schedules to 1.01(a) or on Schedule 2.09, all of which are in good
standing and uncontested. Except as disclosed on such schedules,
no person other than Sellers own any interest in any such
Intangible.
2.10 Questionable Payments and Activities
Except to the extent assumed as an Assumed Liability,
Purchaser will not be subject to any action, proceeding or
liability or any debarment or other limitation on bidding or
contracting and will not incur any costs in connection with ethics
or contractor integrity rehabilitation programs as a result of any
investigation or proceeding by a governmental agency based upon any
bribe, ethics violation, or improper conduct by Sellers or persons
for whose acts or omissions Sellers are responsible.
2.11 Authority to Sell
Sellers have all requisite corporate power and authority to
execute, deliver, and perform this Agreement. All necessary
corporate proceedings of Sellers, including all shareholder notice
and approvals required by law or the certificates or articles of
incorporation or by-laws of Sellers, have been or as of the Closing
Date will have been duly taken to authorize the execution,
delivery, and performance of this Agreement by Sellers. This
Agreement has been duly authorized, executed, and delivered by
Sellers, constitutes the legal, valid, and binding obligation of
Sellers, and is enforceable as to them in accordance with its
terms, except as enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the enforcement of creditor's
rights generally. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or
filing with, any governmental authority, court or other tribunal or
entity or individual is required by Sellers for the execution,
delivery, or performance of this Agreement by them. The execution,
delivery, and performance of this Agreement will not materially
violate or result in a breach of any term of the certificate of
incorporation, by-laws or other charter document of any Seller or
violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree binding on any Seller or to
which any of their operations, business, properties, or assets are
subject.
2.12 Fictitious Names
Schedule 2.12 sets forth each fictitious name utilized by
Sellers within the past two years.
2.13 Absence of Undisclosed Liabilities
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Except as set forth in the schedules to this Agreement or the
Closing ED Balance Sheet, Sellers have no obligations or
liabilities of any kind, fixed, accrued or contingent which would
materially affect the value of the Purchased Assets or Purchaser's
title to the Purchased Assets or the business associated therewith.
2.14 Assets Free and Clear of Liens
Except as set forth on Schedule 2.14, Sellers have, prior to
Closing, good title to all of the Purchased Assets, free and clear
of all liens, mortgages, security interests, pledges, charges,
encumbrances, shareholders' agreements, or claims (collectively,
"Liens"). Except for the Assumed Liabilities or as set forth on
Schedule 2.14, at Closing the Purchased Assets will be free and
clear of all Liens, and Sellers will have procured and delivered at
or prior to the Closing proof of release and satisfaction of each
and every Lien which is not assumed as an Assumed Liability or, but
only to the extent that Purchaser consents in writing thereto at or
prior to Closing, Sellers will have procured the written agreement
of the holder of any such Lien to so release its Lien(s) as soon as
the preparation and filing of the release can be completed, not to
exceed ten (10) days after the Closing. Upon the Closing,
Purchaser will have good title to the Purchased Assets, free and
clear of all Liens except those expressly assumed as Assumed
Liabilities.
2.15 Hazardous Materials - Lab and Field Samples
Prior to the Effective Time, Sellers have disposed of or moved
to locations which are not Assumed Premises Leases or Purchased
Real Estate: (i) all hazardous substances, pollutants or
contaminants (as those terms are defined in 42 U.S.C 9601 or under
any similar, applicable state or local law); (ii) all petroleum
wastes; (iii) all asbestos-containing materials, except for those
incorporated in building materials in premises; (iv) all obsolete,
discarded or off-specification laboratory or other commercially
packaged chemicals or nuclear source materials (but not unconsumed
laboratory chemicals, nuclear source materials which are components
of equipment or other commercially packaged supplies conveyed as
Purchased Assets and currently used in the Engineering Division's
business); and (v) all laboratory or field samples upon which work
has been completed prior to Closing (collectively "Hazardous
Materials"). The foregoing warranty applies to all Hazardous
Materials which, if not so disposed of or moved (vi) would be
located in or on the Purchased Real Estate or in premises to be
assumed by Purchaser under the Assumed Premises Leases or (vii)
would be in the possession of the Engineering Division; or for
which (viii) the Engineering Division could be held responsible for
the care, custody or disposal.
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III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to Sellers to enter into this
Agreement, Purchaser represents and warrants as follows:
3.01 Organization and Good Standing
Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and
duly qualified to engage in business in the state of Pennsylvania,
with full power and authority to enter into and perform each of the
transactions contemplated by this Agreement.
3.02 Execution and Performance Authorized
This Agreement and all other documents and agreements
contemplated hereunder have been duly executed and delivered by the
Purchaser, such execution and delivery and the consummation by
Purchaser of the transactions contemplated hereunder have been duly
authorized by all necessary corporate action, and no further action
is required by law, its corporate charter, bylaws or otherwise to
authorize all action to be taken by Purchaser with respect to this
Agreement and the consummation of the transactions contemplated
hereunder. The Agreement and the other documents contemplated
hereunder are binding and are enforceable against Purchaser in
accordance with their terms, except as enforceability may be
limited by applicable equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting
the enforcement of creditor's rights generally.
3.03 Absence of Litigation
Except as set forth on Schedule 3.03, there is no action,
lawsuit, proceeding or investigation of any kind or nature pending
or threatened against Purchaser before any court, tribunal or
administrative agency or board which might, individually or in the
aggregate, materially and adversely (i) affect Purchaser's solvency
or its ability to perform hereunder, or (ii) render any one or more
of the transactions contemplated hereunder void or voidable.
3.04 No Other Default
The execution and delivery of this Agreement by Purchaser and
the consummation of the transactions contemplated hereunder will
not conflict with or violate or require any consent under and will
not result in any breach or termination of Purchaser's corporate
articles, bylaws or minutes or any agreement to which Purchaser is
a party or by which any of its property is subject or by which it
is bound, except for the agreements set forth on Schedule 3.04 for
which Purchaser has obtained such waivers or consents as are
required by such agreements.
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3.05 Permits and Filings
There is no requirement applicable to Purchaser to make any
filing with, or to obtain any permit, authorization, consent or
approval of any third party or any governmental or other regulatory
authority as a condition of the lawful consummation of the
transactions contemplated under this Agreement.
3.06 Absence of Lien
Except for the conditions specified elsewhere in this
Agreement, the monies to be paid by Purchaser under 1.01 shall be
paid by Purchaser and received by Sellers free and clear of any
lien, charge or encumbrance arising out of any agreement or
instrument to which Purchaser is subject or by which their
properties are bound.
3.07 Solvency
At the Closing and after payment of the purchase price as
required under 1.01, Purchaser will be and will remain solvent
under all applicable federal and state laws and regulations.
Purchaser also agrees that it will not intentionally cause its
business to be conducted in a manner that results in its becoming
insolvent; provided, however, that consistent with the foregoing,
this covenant shall not restrict the future business decisions of
Purchaser which relate to the Purchased Assets or the business
associated therewith.
3.08 Corporate Documents
Purchaser has furnished to Sellers its certificate of
incorporation and a certificate of good standing in Delaware and a
good standing certificate evidencing Purchaser's qualification as
a foreign corporation in good standing in Pennsylvania, each dated
within thirty (30) days of the Closing.
3.09 Disclosure of Discovered Facts
Prior to Closing, Purchaser shall have disclosed to Sellers
the existence of any facts discovered by Purchaser in the course of
its due diligence which would render any of Sellers'
representations or warranties materially untrue as of Closing.
IV. COVENANTS
In addition to the other covenants of this Agreement, Sellers
and Purchaser agree as follows:
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4.01 Collection of Accounts Receivable
(a) In event that any account receivable or work in process which
is a Purchased Asset and subject to 2.06(a) has not been collected
by Purchaser within six (6) months, Purchaser may deem such account
receivable or work in process to be uncollectible and transfer such
account receivable or work in process to Sellers by written notice
within seven (7) days after the end on such six (6) month period.
Accounts or work in process may also be deemed uncollectible by
agreement of the parties as provided in 4.01(c) and shall
thereupon be transferred to Sellers. Purchaser may recover from
the Sellers the amount of any such uncollected accounts and work in
process, net of the reserve for such purpose on the Closing ED
Balance Sheet, by set-off against the Note under 1.04.
(b) Purchaser shall provide Sellers with a monthly aging report of
the purchased accounts receivable and work in process together with
contact log summary of problem accounts. If at any time Purchaser
determines that measures in addition to Purchaser's customary
collection procedures (e.g. measures such as mechanics lien, legal
action or referral to collection agency) should be employed on a
specific account to obtain collection, Purchaser shall notify
Sellers in writing of the measures proposed to be taken. If
Sellers agree in writing that the proposed extraordinary measures
should be taken or if Sellers themselves deem such action to be
necessary without notice from Purchaser, Sellers shall notify
Purchaser in writing of their agreement to such measures. Sellers'
agreement to the taking of extraordinary collection measures shall
constitute their agreement to having the reasonable cost of such
measures actually incurred, first charged against the reserve for
uncollectible accounts and the excess, if any, set-off under 1.04.
(c) At any time the parties may by mutual written agreement deem
an account uncollectible, Purchaser shall re-assign it to Sellers
and charge it off of available reserves and set off the excess, if
any. Purchaser shall not unreasonably deny such request. Such
request by Sellers for re-assignment shall constitute Sellers'
agreement to a reduction in the reserve for uncollectible accounts
by such amount or, to the extent that the remaining reserve balance
is thereby exceeded, to a set-off in such excess amount, which
Purchaser shall exercise at the time of its payment on the Note.
(d) Purchaser agrees to use its best efforts to bill all work in
process which is a Purchased Asset as soon as is possible under the
contract giving rise to the work in process and within the
administrative capabilities of Purchaser in the transition after
Closing. Within 30 days after Closing, Purchaser shall deliver an
opening ledger of work in process billings which documents amount
billed on each account, amounts charged off as un-billable and
amounts for which billing is not yet possible or has not yet been
completed. Within 10 days after its receipt of such ledger,
Sellers shall object to any of Purchaser's determinations that all
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or a portion of any work in process account is not billable or is
not yet able to be billed.
(e) The parties agree to confer in good faith to resolve any
disputes concerning the covenants set forth in 4.01, and if a
dispute cannot be so resolved, to follow the procedure set forth in
2.03(c) for resolution of disputes involving accounting issues to
determine the matter.
4.02 Public Statements
Before Sellers or Purchaser shall release any information
concerning this Agreement or the transactions contemplated by this
Agreement which is intended for or may result in public
dissemination thereof, they shall cooperate with the other party
hereto and shall furnish drafts of all documents or proposed oral
statements for comments, and shall not release any such information
without the written consent of the other party hereto. Nothing
contained herein shall prevent Purchaser or Sellers from making any
release or furnishing any information if required to do so by law
or regulation, but even in such case, the other party shall be
given notice of the release and an opportunity to comment on the
contents.
4.03 Non-Competition
(a) In consideration of the payments to be made and the
Purchaser's other covenants hereunder, Sellers agree to strictly
abide by the following covenants. Sellers agree that for a period
of two (2) years after Closing, they will not:
(1) Non-Competition. Within the regulated zone, either
directly or indirectly, perform for hire services in the same
fields in which the Engineering Division has been engaged or
own, or participate in, be employed by, or serve as a
consultant or other agent or contractor to or for any business
or enterprise, other than Purchaser, engaged in such fields of
services in which the Engineering Division has been engaged,
without the express written consent of Purchaser. The
"regulated zone" means all area within one hundred miles of
the city limits of an Engineering Division office as listed in
1.01(a) during the year prior to Closing. The "fields in
which the Engineering Division has been engaged" means the
service types and functions with respect thereto performed by
the Engineering Division within the two (2) year period prior
to Closing, including (but are not necessarily limited to) the
functions set forth in 1.01(a). Notwithstanding the
foregoing, Sellers shall not be precluded from performing the
following services in the regulated zone: (i) turn-key
remediation design and construction contracts; or (ii) after
giving at least five (5) days prior written notice to
Purchaser, sole source contracts for clients which were, prior
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to Closing, clients of the Sellers' operations other than the
Engineering Division and were not actively solicited by
Sellers for such contract in violation of (4) (i.e. the client
was the initiator of the request for Sellers to perform such
services on a sole source basis). Furthermore, in the event
of an acquisition by any of the Sellers of, the acquisition of
any of the Sellers by, or a merger of any of the Sellers with
another entity providing services in the fields in which the
Engineering Division has been actively engaged (individually
or collectively "M&A Transaction"), nothing herein shall
prevent the Sellers or such entity from continuing to provide
such services in the regulated zone, provided that to the
extent that the acquired or acquiring entity does not maintain
an office within the regulated zone as of the closing of such
M&A Transaction, neither the Sellers nor any such entity shall
establish an office within the regulated zone within the two
(2) year period following Closing.
(2) Non-Disclosure. Use for their benefit, or disclose,
communicate or divulge to, or use for the direct or indirect
benefit of, any person, firm, association or company other
than Purchaser or its affiliates, any information regarding
the business methods, business policies, procedures,
techniques, research or development projects or results, trade
secrets, customers or clients or any other confidential
information relating to or dealing with the business
operations of the Engineering Division. The covenants in this
clause (2) shall not apply to (i) information that is
generally known in the industry, (ii) information that is in
the public domain not as a result of the violation of the
Sellers' undertakings herein, or (iii) any disclosure or use
required by law or court order.
(3) Non-Solicitation - Employees. Either directly or
indirectly, for themselves or any person or entity other than
Purchaser, hire, or induce or attempt to influence to
terminate his employment, any employee or former employee of
the Engineering Division to which Purchaser extended an offer
of employment conforming to 4.04. An "employee" shall be
considered a "former employee" for a period of one (1) year
following termination of employment with the Engineering
Division, Purchaser or Purchaser's subsidiaries or affiliates.
(4) Non-Solicitation - Customers. Directly or indirectly on
behalf of themselves or any third party, make any sales
contact with, or solicit or accept business from, any customer
or prospective customer of the Engineering Division for the
purpose of securing a commitment from such customer or
prospect to purchase services in the fields in which the
Engineering Division has been engaged, unless such customers
were also customers of any entity involved in M&A Transaction
with Sellers.
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(5) Use of Names. Except for the benefit of Purchaser or its
subsidiaries or affiliates, use the names included as
Purchased Assets by 1.01(a)(7).
(b) Except as otherwise defined in this section or as the context
otherwise plainly requires, terms used in this section shall have
the same meaning as elsewhere in this Agreement. Undefined terms
shall have their ordinary meaning.
(1) The term "participate in" means "directly or indirectly,
for their own benefit or for, with, or through any other
person or entity, own, manage, operate, control, loan money
to, give money to, or participate in the ownership (except as
a non-controlling owner of less than 5% of the stock of a
publicly-held corporation), management, operation, or control
of, or be connected as a director, officer, employee, partner,
consultant, agent, independent contractor, or otherwise with,
or acquiesce in the use of their names in."
(2) The term "customer" means any entity with whom Sellers
had entered into a contract or engagement, either written or
oral, for the performance of a service by the Engineering
Division or from whom Sellers recorded revenue for Engineering
Division services, within the two (2) year period prior to
Closing.
(3) The term "customer prospect" means any person or entity
who had a potential need for services of a type provided by
the Engineering Division (i) to whom Sellers submitted a
written proposal for either specific services by the
Engineering Division or for a master or general services
arrangement with the Engineering Division within the two (2)
years prior to Closing or (ii) with whom the Engineering
Division, within the two (2) years prior to Closing, developed
or maintained a business relationship or about whom Sellers
acquired knowledge of its desire to purchase Engineering
Division services.
(4) The term "indirectly" includes, but is not limited to,
means such as acting through or on behalf of, assisting,
arranging, encouraging, making a loan or gift to, owning or
having an ownership interest in (except for passive
investments in publicly traded securities of less than five
percent of the outstanding voting stock of) or entering into
a partnership or similar arrangement with.
(5) The term "turn-key" means a contract where the contractor
is required by the terms of the contract to undertake all of
the services of design and construction of a remediation
system as a condition of entering into the contract.
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(6) The term "sole source" means a contract which is awarded
to Sellers on the basis of a relationship which pre-existed
the decision to award such contract to Sellers and which was
offered to Sellers alone because of such relationship on a
non-competitive basis.
(c) Sellers agree that the restrictive covenants of this 4.03 are
reasonable in scope and duration and are necessary to protect the
bona fide confidential business information purchased by Purchaser
from Sellers and to protect the value for Purchaser of the
Purchased Assets, the associated good will, and Purchaser's
employee, customer and business relationships. Sellers agree that
the Engineering Division has either had offices or has actively and
substantially performed services throughout the entire United
States and that the regulated zone limiting the applicability of
(a) hereof is therefore a necessary and reasonable coverage area.
Sellers expressly agree that the customer list and other customer
and business information purchased by Purchaser as Purchased Assets
are proprietary, and they agree that a breach of any of these
provisions will cause immediate and irreparable harm for which
money damages alone will not be an adequate remedy and that
Purchaser shall have available to it, in addition to any other
remedies available by law, equitable remedies, including the
remedies of specific performance, preliminary injunction and
injunction, to compel performance of and to enjoin the breach or
threatened breach of the provisions of this section, without the
necessity of proof of immediate and irreparable harm and of
providing any injunction bond.
(d) If any restrictive covenant contained in this 4.03 shall be
deemed by a court or arbitrator to be invalid, illegal, or
unenforceable under the laws of any jurisdiction by reason of the
extent, duration, or geographical scope thereof or otherwise, the
balance of this section shall remain in effect in such jurisdiction
and the entire agreement shall remain in effect in all
jurisdictions in which such provision is lawful and enforceable.
If any such provision is unenforceable as to any circumstance, it
shall nevertheless remain applicable to all other circumstances.
Sellers and Purchaser agree that the court or arbitrator shall be
authorized to reform such provision by reducing such extent,
duration, geographical scope, or other provision hereof, or
otherwise modifying or limiting such provision to the minimum
extent necessary to render such provision enforceable, and in its
reformed form such restriction shall be enforceable in the manner
contemplated hereby.
4.04 Hiring of Engineering Division Employees
(a) Effective as of the Closing, the Purchaser shall offer
employment, on an "at will" basis, at their then current rates of
base pay and employment status to all employees who are employed by
the Sellers in the Engineering Division listed on Schedule 4.04
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("Offerees"). Such Offerees who accept employment with the
Purchaser shall be referred to herein as the "Hired Employees."
Purchaser shall provide the Hired Employees the same benefits and
benefit options, including health insurance coverage, provided to
the other employees of Purchaser. Purchaser's health plan shall
not impose any limitation or exclusion with respect to any
preexisting condition that affects coverage for the Hired Employees
or their spouses or dependents, and Purchaser shall make such
coverage available to all of the Hired Employees, spouses and
dependents who were eligible as of the Closing Date to receive such
coverage under Sellers' plan. In addition, Purchaser shall provide
to the Hired Employees the same benefits provided to Purchaser's
other employees. Subject to the preceding two sentences, Purchaser
may modify, alter or terminate any of the terms and conditions of
employment of the Hired Employees. Nothing in this Agreement shall
prevent the Purchaser from terminating the employment of any Hired
Employee at any time after the Closing Date. Purchaser represents
to Seller that it does not intend to implement a "plant closing" or
a "mass layoff", as those terms are defined in the Worker
Adjustment and Retraining Notification Act ("WARN"), in respect of
the Engineering Division within 150 days after the Closing Date.
Purchaser further agrees to assume responsibility for giving any
and all notices required by WARN and to assume liability for any
alleged failure to give a WARN Notice.
(b) The Sellers agree to cause the release of the Hired
Employees from any contractual provision with the Sellers which
would impair the utility of such employees' services to Purchaser
or which would impose upon such employees any monetary or other
obligation to the Sellers which otherwise would be occasioned by
the termination of such employees' employment or relationship
including, without limitation, any agreements of noncompetition or
confidentiality.
(c) At the Closing, Purchaser shall assume all liabilities of
Sellers to the extent included in the Assumed Balance Sheet
Liabilities relating to the payment of all accrued but unpaid
overtime, vacation and holiday pay, sick pay and short-term
disability pay of the Hired Employees, regardless of whether such
individuals are actively at work on the Closing Date or are on a
leave of absence. For purposes of this Agreement the term "leave
of absence" shall include medical leave of absence, military leave
of absence and workers' compensation leave of absence. Effective
as of the Closing Date, Purchaser shall assume liability for all
post-Closing claims (including, without limitation, claims arising
under the health care continuation coverage requirements of Section
4980B of the Code and Sections 601 through 608 if ERISA) which are
properly payable with respect to the Hired Employees under each of
Purchaser's benefit plans, including without limitation, all life
insurance, medical, dental, accident and disability plans,
programs, policies or arrangements.
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(d) Purchaser shall offer all Hired Employees the option to
participate from and after the Closing Date in Purchaser's 401(k)
plan ("Purchaser's Plan") on the same terms as Purchaser's other
employees. Purchaser shall permit all Hired Employees who were
participants in the Smith Environmental Technologies Corporation
Profit-sharing and 401(k) Plan ("Sellers' Plan") as of the day
immediately preceding the Closing Date to roll over their shares in
Sellers' Plan into Purchaser's Plan. Purchaser's Plan shall, for
purposes of vesting and eligibility, recognize all service of Hired
Employees that was recognized under Sellers' 401(k) Plan as of the
day immediately preceding the Closing Date.
(e) Following the Closing Date, the Sellers shall take such
action as may be necessary to cause the account balances of all
Hired Employees in the BCM Engineers Inc. Employee Stock Ownership
and Profit Sharing Plan to be distributed pursuant to the terms of
such plan, and Purchaser shall permit Hired Employees to rollover
such distributions into Purchaser's Plan to the extent such
rollover is allowable under Purchaser's Plan.
4.05 Transaction Costs and Expenses
Except as otherwise expressly agreed herein, Sellers and
Purchaser shall each bear and pay all of their respective costs,
fees, expenses and taxes incurred in connection with bringing about
this transaction including, without limitation, all legal,
accounting, auditing and appraisal fees in negotiating and
preparing the documents and in consummating, closing and carrying
out the transactions contemplated hereby. Any costs to be charged
to the Engineering Division shall be included on the Closing ED
Balance Sheet.
4.06 Information, Books and Records
(a) Each party shall provide to the other, with reasonable
promptness following a request in writing (not to exceed ten (10)
business days), such information and data with respect to the
Engineering Division business before the Effective Time and/or the
Purchased Assets as may from time to time be requested by the other
party. In the event either Purchaser or Sellers are required or
desire to prepare audited statements for any reasonable purpose
including the desire to verify any information provided to the
other party relative to this Agreement or in connection with future
financings or transactions desired by either party, the parties
agree to allow the other party reasonable access to documents and
records, including the non-proprietary working papers of the other
party's accountants, subject to standard hold harmless agreements
which may be required by such accountants, and to provide
reasonable cooperative assistance in the preparation of reports,
documents, etc. (including the signing of management representation
letters and the like) without charge except for reimbursement of
any actual, out-of-pocket expenses, exclusive of the cost of in-
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house staff time. Notwithstanding the foregoing, in the event that
a party is or anticipates becoming a party to litigation, neither
this 4.06 nor any other provision of this Agreement shall be
construed to require such party to provide information to the other
which could prevent such party from making a bona fide claim of
attorney/client privilege or such other privileges as may be
applicable with respect to such information.
(b) Neither party shall intentionally dispose of or destroy any of
the Records in its possession except in conformity with the
procedures set forth in this section. If a party wishes to dispose
of or destroy any of such Records, it shall first give thirty (30)
days prior written notice to the other party of the action it
intends to take, and the other party shall have the right, at its
option and expense, upon prior written notice to the notifying
party within such 30-day period, to take possession of such
affected Records within 30 days after the date of the notice of
intent to take possession.
(c) Each party shall exercise reasonable care in the care, custody
and maintenance of the Records and records of Sellers pertaining to
the Engineering Division or the Purchased Assets in its possession.
A party shall be responsible for actual damage caused to the other
party only as a result of its intentionally wrongful act in
maintaining the records. Neither party shall have liability to the
other party or any other person as a consequence of the non-
existence of any record or such party's inability to locate any
record unless the loss or destruction of the record is proven, by
clear and convincing affirmative evidence, to have been due to the
allegedly possessing party's intentionally wrongful act.
4.07 Addresses, Mail and Deliveries
Purchaser shall have the right to receive and open for
inspection any mail or deliveries received at any of its offices,
including any office that is an Assumed Premises Lease, which is
addressed to any name in which the Engineering Division did
business prior to Closing or to any person who was an employee or
former employee of the Engineering Division or which otherwise
reasonably appears to potentially contain Purchased Assets or
correspondence or documents which would customarily be received by
the owner of the Purchased Assets unless it is clear from the
envelope that the contents relate to the business of Sellers other
than the Engineering Division or are personal in nature. Purchaser
and Sellers agree to cooperate in good faith to achieve the prompt
delivery to each other of mail and deliveries, to use their best
efforts to avoid opening mail or deliveries which rightfully
belongs to the other and to turn over to the other any property,
including checks or money, belonging to the other within three (3)
days after determining its rightful ownership. Purchaser shall
have the exclusive right to apply for change of address, change of
telephone numbers or location of telephone numbers applicable to
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the purchased names or Purchased Assets. Sellers agree to execute
and return to Purchaser within three (3) days after receipt thereof
such assignment or consent forms as Purchaser requests to effect
such changes of address, telephone number location or telephone
numbers.
4.08 Related Agreements
Sellers and Purchaser each agree to execute and deliver at
Closing the Related Agreements to which they are a party referenced
in 5.01.
4.09 Assignment of Agreements - Benefits of
Ownership to be Provided Where Assignment or
Novation Not Possible
(a) Sellers shall use their best efforts to attempt to secure (and
to assist Purchaser in securing) all consents and approvals
required to effect the assignment of the Customer Contracts and
other agreements to be transferred to Purchaser hereunder. Use of
best efforts shall not require Sellers to pay funds to third
parties for their agreement to provide such a consent. Sellers
agree that, upon the written request of Purchaser, they will
execute and return to Purchaser each and every assignment, consent
to assignment or novation, or other document reasonably necessary
to effect the transfer or execution of any Customer Contract or
other contract, asset or benefit to be conveyed hereunder within
two (2) business days after receipt of such document. Sellers'
covenant in this regard shall be absolute and not subject to any
right of non-performance for any reason, including breach by
Purchaser, and Sellers expressly acknowledge and agree: (i) that
this covenant is of critical importance to Purchaser; (ii) that its
breach will cause Purchaser immediate and irreparable harm for
which money damages alone will be difficult of ascertainment and
inadequate; and (iii) that in the event of a breach hereof,
Purchaser shall be entitled to immediate equitable relief in the
form of an emergency, preliminary injunction or decree on a summary
basis for specific performance or mandatory injunction without any
requirement for the posting of any bond or undertaking or proof of
immediate and irreparable harm.
(b) Sellers agree that, as of the Closing Date, they will appoint
and authorize one or more persons to execute after Closing
assignments, novations, consents to assignment and other documents
necessary to effect the transfer of contracts, the Purchased Assets
or the benefits thereof to Purchaser in cases where such documents,
in addition to those executed and delivered at Closing, are
required by a customer, a title registration officer or other third
party as a condition of permitting the transfer or conferring the
benefit. Sellers shall provide such persons the corporate seals of
Sellers to be used for the purpose of executing transfer documents.
Sellers will promptly notify Purchaser in writing of any changes
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from time to time in the identity of the persons so authorized. If
the persons appointed under this section are employees of Purchaser
or its affiliate, Purchaser shall indemnify Seller pursuant to
1.03 for any damage caused to Sellers as a result of such
appointed persons' acts or omissions.
(c) With respect to any Customer Contract, Subcontract or Assumed
Liability which Sellers and Purchaser are not able to promptly
obtain a consent to assign or novate, which are otherwise not
capable of assignment or novation or which Purchaser is precluded
from performing on a stand-alone basis because of a transitional
licensing issue, Purchaser shall nevertheless be deemed to be
entitled to all beneficial interest in such Customer Contract,
Subcontract, or Assumed Liability as against Sellers, and Sellers
shall use their best efforts to: (i) subcontract such Customer
Contract or Assumed Liability to Purchaser on the same terms and
conditions as the original (except that Sellers shall retain all
pre-closing liability as provided in 1.02 except as assumed as an
Assumed Liability); and/or (ii) cooperate in any reasonable and
lawful arrangement to provide to the Purchaser all the benefits of
such Customer Contract or Assumed Liability, such as (but not
limited to) re-hiring such of Purchaser's employees on a part-time,
temporary basis as are necessary to perform such contractual
obligations on Purchaser's behalf, provided Purchaser pays all
Sellers' direct costs and expenses associated with such re-hiring
and work and assumes and indemnifies Sellers against all direct
costs and liability associated with such re-hiring and performance
of services. Similarly, Purchaser shall cooperate with Sellers to
ensure that Sellers receive the benefit of the assumption of the
Assumed Liabilities by Purchaser.
(d) Sellers hereby grant to Purchaser a one-year limited license
to use the names "Smith Technology Corporation," "Reidel
Environmental Services Inc.," and "Canonie Environmental Services
Corp." on a transitional basis to enable Purchaser to use, obtain
the benefits from (including payment), and effect the transfer of,
the Purchased Assets. Sellers authorize Purchaser to endorse
checks payable to any of these names where the check is delivered
in payment of amounts due under a Customer Contract, an account
receivable or work in process, any deposit, bond, bond collateral,
proceeds, refund, or prepaid expenses which are Purchased Assets.
Purchaser agrees to strictly restrict its use of such names to the
minimum extent necessary to achieve the purposes set forth in this
section. Purchaser shall not conduct any sales or marketing
activities under such licensed names. Purchaser agrees to
indemnify Smith pursuant to 1.03 for Third Party Claims against
Sellers arising from Purchaser's use of such names or for any
breach by Purchaser of the limitations on use contained in
4.09(d).
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4.10 Reserves and Allowances
To the extent such reserves or allowances are assumed as
Assumed Balance Sheet Liabilities, Purchaser shall be obligated to
make payments or reimbursements to or on behalf of Sellers for
amounts recorded on the Closing ED Balance Sheet as reserves or
allowances for anticipated expenses or liabilities. Such payments
shall be paid by Purchaser up to the recorded amount of the reserve
or allowance upon presentation of vendor invoices or proof of
payment approved in writing by a person designated by Sellers in
writing as authorized to submit invoices for such purpose on
Sellers' behalf. Purchaser shall have no liability to Sellers as
a result of paying any expense so approved. Purchaser's payment or
reimbursement of expenses covered by Seller's reserves or
allowances which are Assumed Balance Sheet Liabilities shall not be
construed as any indication whatsoever that Purchaser has assumed
liability for Sellers' debts, liabilities or administrative
responsibility, either for the specific class covered by such
reserve or in general, beyond the amount of the recorded reserve
except as such are themselves assumed specifically as Assumed
Liabilities.
4.11 Standard Rates
Whenever any goods or services are provided or procured by
Sellers or Purchaser to correct or remedy the other party's breach,
default, or deficiency of performance under any representation,
warranty, or covenant of this Agreement, such goods or services
shall be valued at Purchaser's or Sellers' Standard Rates,
respectively. "Standard Rates" means the rate which Purchaser or
Sellers would charge an ordinary commercial customer for the
particular class of services being performed or the retail market
price for goods supplied. Such rates shall not exceed the rates
which similar firms would charge for such goods or services in the
location in which they are being delivered.
4.12 Insurance after Closing
Sellers shall either: (i) for a three (3) year period after
Closing, maintain in full force and effect, and timely pay all
premiums on, each policy of insurance in effect prior to Closing
which was written on a claims made basis or procure other policies
of equal coverage and financial strength covering such three (3)
year period in order to ensure coverage for a three year period of
claims or losses arising from Sellers' alleged professional or
other acts, omissions and negligence; or (ii) prior to the Closing
or prior to the expiration of any policy referred to in (i),
procure an extended reporting period under such policy which shall
not expire sooner than the date three (3) years after the Closing
Date. Such insurance shall have limits of not less than $2,000,000
per occurrence and $5,000,000 in the aggregate with a deductible
not to exceed $150,000. Purchaser shall be named as an additional
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insured under each such policy. At Closing and thereafter, Sellers
shall deliver certificates evidencing the continuing existence and
adequacy of the insurance required by this section and, on request
by Purchaser, a copy of each such policy.
4.13 Successor Payroll Issues
Purchaser shall be the successor employer to Sellers, with
respect to the Hired Employees, for purposes of post-Closing FICA
taxes and reporting, FUTA taxes and reporting, and corresponding
state payroll laws and regulations. Purchaser agrees to perform
the obligations of a successor employer for such taxes and
reporting purposes and will indemnify, defend and hold Sellers
harmless from and against any and all liabilities or obligations
arising out of Purchaser's election to be treated as a successor
employer for such purposes or its failure to perform or properly
perform all of Purchaser's obligations as a successor employer of
Sellers for the purposes set forth in this section, including but
not limited to completing accurately and completely all Forms 941,
940, W-2 and W-3 related to obligations accruing after Closing
required of Purchaser in its status as successor employer. Sellers
shall perform such obligations for pre-Closing accruals. This
section shall not be construed to imply that Purchaser is liable as
a successor employer or otherwise as a successor to Sellers for any
purpose except for the limited purposes set forth in this section.
4.14 Unrecorded Payables
The parties anticipate that Sellers will incur trade payables
in the ordinary course after Closing which relate to goods
delivered to or services performed for the Engineering Division
prior to Closing but which were not recorded on Schedule 1.01(b)(5)
and the Interim ED Balance Sheet because of non-receipt of invoice
or delay in Sellers' internal routing and recording of such
payables. Sellers agree that prompt payment of certain of accounts
payable that are from utility services (including telephone) or
from vendors, subcontractors or suppliers of direct materials
related to purchased accounts receivable or work in process (the
"Payables in Process") are of material importance to Purchaser, and
Sellers accordingly agree to either: (i) pay any Payable in Process
within seven (7) days after receipt; or (ii) provide notice to
Purchaser within seven (7) days of Sellers' receipt of such Payable
in Process and of its intention not to pay it within seven (7)
days. If Purchaser then requests Sellers to pay such Payable in
Process, Sellers shall use its best efforts to pay the same within
seven (7) days. If Sellers are unable to, or otherwise do not, so
pay, Purchaser shall be authorized to pursue its rights under
1.01(b)(5), and if such remedy is not available, its other rights
and remedies under this Agreement. Any dispute between the parties
under this section or 1.01(b)(5) shall be resolved as provided in
2.03(c).
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V. RELATED AGREEMENTS
5.01 Related Agreements
The following related agreements (the "Related Agreements")
shall be executed at Closing by the applicable parties:
(a) The Smith Non-Competition Agreement between Brian Smith and
Purchaser.
(b) The Joint Services Agreement providing for the joint occupancy
of shared premises and temporary access to information, data
processing, computer systems and other services which were, prior
to Closing, used by both the Engineering Division and Sellers'
other operations.
(c) Audit Representation Letter Agreements of Brian Smith, Thomas
Campbell and W. D. Nelson pursuant to which Mr. Smith, Mr. Campbell
and Mr. Nelson will each agree to provide a standard representation
of liabilities and contingent liabilities letter in connection with
any audit which Purchaser elects to perform or auditor's consent
which Purchaser requires.
VI. CLOSING
6.01 Closing, Closing Date and Effective Time
The closing of the transactions contemplated hereunder took
place at 3:00 p.m. on August 19, 1997, at the offices of Smith
Technology Corporation, at One Plymouth Meeting, Plymouth Meeting,
PA. The effective time for the consummation of the transactions
contemplated in this Agreement to occur "at Closing" or "on the
Closing Date" shall be 12:00 a.m. EST on August 20, 1997 (the
"Effective Time").
6.02 Sellers' Obligations at Closing
At or prior to the Closing, Sellers shall deliver or cause to
be delivered to Purchaser, in form reasonably satisfactory to
Purchaser, the following:
(a) A Bill of Sale and Assignment substantially in the form set
forth in Exhibit 6.02(a), sufficient to effect and evidence the
transfer, conveyance and delivery of the Purchased Assets.
(b) A fully executed assignment of each Assumed Premises Lease.
(c) The fully executed Smith Non-Competition Agreement between
Purchaser and Brian Smith and the Audit Representations Letter
Agreements of Brian Smith, Thomas Campbell and W. D. Nelson.
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(d) A certificate of title duly assigned and a bill of sale for
each vehicle which is a Purchased Asset.
(e) A fully executed UCC-3 in the case of security interests
governed by the Uniform Commercial Code and, in other cases, a
fully executed release and satisfaction of each security interest,
lien or encumbrance against any of the Purchased Assets except:
(i) those for which Purchaser has expressly assumed in full as an
Assumed Liability either the obligation underlying such security
interest or the responsibility for obtaining the release of such
interest or (ii) as provided in 2.14.
(f) Certificates of insurance naming Purchaser as an additional
insured evidencing the insurance policy(ies) under 4.12.
(g) A resolution of Sellers' Board of Directors authorizing the
execution, delivery and performance of this Agreement and all
Related Agreements by Sellers, to the extent they are parties
thereto.
(h) Fully executed appointment or appointments of one or more
officers or agents to act on behalf of Sellers to execute
assignments and novations of contracts as provided in 4.09(b).
(i) An opinion of counsel to Sellers, satisfactory to counsel for
the Purchaser.
(j) All material approvals, consents and/or waivers that are
necessary to effect the transactions contemplated hereby.
(k) Such other documents (including certificates of officers of
Sellers) as the Purchaser may reasonably request in order to enable
the Purchaser to determine whether the conditions to their
obligations under this Agreement have been met and otherwise to
carry out the provisions of this Agreement.
(l) All other schedules, certificates and other documents required
by this Agreement to be delivered on or before Closing.
(m) At any time or times on or after the Closing, Sellers shall
execute, acknowledge, and deliver any and all further assurances,
documents, and instruments reasonably requested by Purchaser in
order to effectively convey the Purchased Assets and all ownership
of such assets free and clear of encumbrances or title defects
except as expressly authorized herein and shall take all other
actions consistent with the terms of this Agreement that may
reasonably be requested by Purchaser in order to effectuate the
purposes and intent hereof.
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6.03 Purchaser's Obligations at Closing
At or prior to the Closing, Purchaser shall deliver or cause
to be delivered to Sellers, in form reasonably satisfactory to
Sellers, the following:
(a) The cash payable at Closing under 1.01(b)(1).
(b) The Note deliverable at Closing under 1.01(b)(2).
(c) The Short Term Note deliverable at Closing under 1.01(b)(5).
(d) A resolution of the Board of Directors of Purchaser
authorizing its execution, delivery and performance of this
Agreement.
(e) An opinion of counsel to Purchaser, satisfactory to counsel
for the Sellers.
(f) All material approvals, consents and/or waivers that are
necessary to effect the transactions contemplated hereby.
(g) Such other documents (including certificates of officers of
Purchaser) as the Sellers may reasonably request in order to enable
the Sellers to determine whether the conditions to their
obligations under this Agreement have been met and otherwise to
carry out the provisions of this Agreement.
(h) At any time or times on or after the Closing, Purchaser shall
execute, acknowledge, and deliver any and all further assurances,
documents, and instruments reasonably requested by Sellers in order
to effectively convey or assure payment for the Purchased Assets
and shall take any other action consistent with the terms of this
Agreement that may reasonably be requested by Sellers in order to
effectuate the purposes and intent hereof.
VII. MISCELLANEOUS
7.01 Brokerage Fees
(a) Sellers acknowledge that The Environmental Financial
Consulting Group, Inc. ("EFCG") acted as a broker for Sellers
relative to this transaction, and Sellers further acknowledge that
they are obligated to pay EFCG a commission for such services.
Sellers agree to pay such amounts and to hold Purchaser harmless
from any liability for the obligation to pay such finders fee to
EFCG.
(b) Except for such brokerage arrangement specified in (a),
neither the Purchaser nor Sellers have consented to or authorized
any broker, or third party to act on its behalf, directly or
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indirectly, as a broker or finder in connection with the
transaction contemplated by this Agreement. In the event any claim
is made for a broker's or finder's fee other than that described in
(a) in connection with the transactions contemplated hereunder, the
party responsible for retaining or securing said broker or finder
shall be solely responsible for the payment of any broker's or
finder's fees incurred as a result thereof. Further, the
responsible party shall indemnify the other party against any loss
or liabilities by reason of such broker's or finder's fees.
7.02 Further Actions
At any time and from time to time, each party agrees, at its
or his expense, to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the
transfer of the assets hereunder and the purposes of this
Agreement.
7.03 Availability of Equitable Remedies
Since a breach of the provisions of this Agreement could not
adequately be compensated by money damages and would cause
immediate and irreparable harm, either party shall be entitled,
either before or after the Closing, in addition to any other right
or remedy available to it, to an injunction restraining such breach
or a threatened breach and to specific performance of any such
provision of this Agreement, and the parties hereby consent to the
issuance of such an injunction and to the ordering of specific
performance to compel performance hereof without proof of immediate
and irreparable injury or uniqueness of the assets to be conveyed
or without the necessity of the posting of a bond for such relief.
7.04 Survival
Except as otherwise provided herein, the covenants,
agreements, representations, and warranties contained in, made or
undertaken pursuant to this Agreement or any Related Agreement are
(i) material, (ii) have been relied upon by the party to whom
given, irrespective of any investigation made by or on behalf of
such party, (iii) shall survive the Closing and any delivery of the
purchase price by the Purchaser and Purchased Assets by Sellers,
and (iv) shall not merge in the performance of any obligation by
any party to this Agreement or any Related Agreement.
7.05 Entire Agreement - Modification
The Agreement and the exhibits, schedules and Related
Agreements hereto set forth the entire understanding of the parties
with respect to the subject matter hereof, supersede all existing
agreements among them concerning such subject matter, and may be
modified only by a written instrument duly executed by each party.
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7.06 Notices
All notices, elections, payments, reports or other
correspondence required or permitted hereunder shall be in writing
and deemed to have been properly given or delivered when personally
delivered, mailed by certified mail or delivered by a nationally
recognized overnight express courier, postage or delivery fees
prepaid, to the party to whom directed at the below specified
addresses:
A. If to Sellers:
Thomas F. Herlihy
President and CEO
The Smith Technology Corporation
One Plymouth Meeting
Plymouth Meeting, PA 19462
with a copy sent in one of the prescribed manners to:
John E. Zamer, Esq.
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peach Street
Atlanta, GA 30308-3242
B. If to Purchaser:
Mr. Morry F. Rubin, President
ATC Group Services Inc.
104 East 25th Street, 10th Floor
New York, NY 10010
with a copy sent in one of the prescribed manners to:
John Smith, Esq.
ATC Group Services Inc.
1515 East 10th Street
Sioux Falls, South Dakota 57103-1721
Any such notice shall be deemed given at the time of personal
delivery, three days after deposit with the mail or one day
following deposit with an overnight express courier. The address
of a party may be changed in accordance with the notice provisions
of this section.
7.07 Waiver
Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of
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any other breach of that provision or of any breach of any other
provision of this Agreement. The failure of a party to insist upon
strict adherence to any term of this Agreement on one or more
occasions will not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver must be in
writing.
7.08 Binding Effect
The provisions of this Agreement shall be binding upon and
inure to the benefit of Sellers, Purchaser, and their respective
successors and assigns, and shall inure to the benefit of the
indemnitees and their respective successors, assigns, heirs, and
personal representatives.
7.09 No Third-Party Beneficiaries
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this
Agreement (except as provided in 7.08).
7.10 Separability
If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in
effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other
persons and circumstances unless the result thereof would result in
an unjust modification of the balance of rights and obligations
hereunder.
7.11 Headings
The headings of this Agreement are solely for convenience of
reference and shall be given no effect in the construction or
interpretation of this Agreement.
7.12 Governing Law
To the extent permitted by law, this Agreement shall be
governed by and construed in accordance with the laws of the state
of Delaware without giving effect to conflict of laws. Each of the
parties hereby consents to the jurisdiction of the courts of the
state of Delaware, agrees to submit to service therefrom and waives
any claim it may have as to forum non conveniens in connection with
any action brought in the state of Delaware.
7.13 Separate Counterparts
This Agreement is being executed in several identical
counterparts, each one of which shall be considered an original and
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all of which when taken together shall constitute but one
instrument.
7.14 Incorporation of Recitals, Exhibits and
Schedules
All exhibits, schedules and Related Agreements attached hereto
are incorporated herein by reference and expressly made a part of
this Agreement.
7.15 Mediation
Except in cases where the remedy of preliminary injunction is
reasonably sought by a party because of the irreparability and
immediacy of the harm alleged to be caused or threatened, in the
event there shall arise any dispute or claim in law or equity
arising out of this Agreement or any breach thereof or any
resulting transaction between the parties under this Agreement and
if such dispute cannot be resolved through negotiation or, in the
case of those matters to be resolved under this Agreement by the
procedure specified for settlement of accounting and collection
related issues in 2.03(c), the parties agree that such dispute
shall be submitted to non-binding mediation under the Commercial
Mediation Rules of the American Arbitration Association before
resorting to litigation. The mediation shall be held in Dover,
Delaware before a single mediator selected by the American
Arbitration Association.
7.16 Non-Working Dates
When any date on which payment or any other performance is due
under this agreement falls on a Saturday, Sunday or national
holiday, such payment or performance shall be due on the next
business day following such date.
7.17 Opportunity to Cure
All parties to this Agreement shall be afforded a period of
ten (10) days following written notice thereof to cure any alleged
breach of this Agreement unless the loss threatened by such breach
is of such gravity to require immediate action.
VIII. DEFINED WORDS AND PHRASES
8.01 Convention for Definition of Terms
Words used in this Agreement shall have their ordinary meaning
unless specifically defined in this Agreement. Where a word or
phrase appears in quotation marks within parentheses (whether or
not listed in 8.02), the word or phrase in quotation marks shall
have the meaning throughout this Agreement (unless a more limited
scope is specified or is obvious from the context) defined by the
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definition immediately preceding and in apposition to the quoted
word or phrase. Most (but not all) defined words or phrases are
delineated as such by the use of capitalized first letters.
8.02 Certain Definitions
(a) Unless otherwise expressly stated in a particular case, the
term "including" shall mean "including, but not limited to."
(b) Unless otherwise expressly stated in a particular case, the
term "knowledge of the Sellers" means the knowledge of an officer,
director, regional manager or branch manager of Smith or of any
director, regional officer or regional or branch manager of any
Seller other than Smith.
(c) Unless otherwise expressly stated in a particular case, the
term "Sellers" means the "Sellers, jointly and severally."
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date set forth in the opening paragraph hereof.
ATC GROUP SERVICES INC. SMITH TECHNOLOGY CORPORATION
By /s/ Nicholas J Malino By /s/ Thomas F. Herlihy
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Nicholas J. Malino Thomas F. Herlihy
Senior Vice President President and CEO
BCM ENGINEERS INC., Delaware BCM ENGINEERS INC., Alabama
By /s/ William T. Campbell By /s/ William T. Campbell
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BCM ENGINEERS INC., Penn. BCM ENGINEERS INC., West Vir.
By /s/ William T. Campbell By /s/ William T. Campbell
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