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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
AUGUST 31, 1999
THE OFFICIAL INFORMATION COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-10263 73-1341805
(STATE OR OTHER JURISDICTION OF (COMMISSION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) FILE NUMBER) IDENTIFICATION NO.)
250 West 57th Street, Suite 2421, New York, New York 10019
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 247-5160
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As of August 31, 1999, The Official Information Company (the
"Company"), through a subsidiary, acquired all of the capital stock of Records
Search, Inc., a Florida corporation ("RSI"), pursuant to an Agreement for Stock
Purchase dated as of August 31, 1999. The consideration paid by the Company to
the stockholders of RSI was $9 million in cash and $3.780 million in the form of
promissory notes (subject to adjustment for working capital and including the
assumption of approximately $530,000 of indebtedness). The Company financed the
acquisition out of existing working capital.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
2.1 Agreement for Stock Purchase dated as of August 31, 1999 among
Total Information Services, Inc., Records Search, Inc. and the
stockholders thereof
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: September 13, 1999
THE OFFICIAL INFORMATION COMPANY
By /s/ Ian L.M. Thomas
----------------------------------------
IAN L. M. THOMAS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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EXECUTION COPY
AGREEMENT FOR STOCK PURCHASE
This Agreement For Stock Purchase (the "Agreement") is made on August
31, 1999 (the "Closing Date") by and among Christopher M. Cavallo ("C.
Cavallo"), Robin K. Cavallo ("R. Cavallo") (C. Cavallo and R. Cavallo, sometimes
referred to as "Operating Stockholders"), Stefan A. Cavallo ("S.A. Cavallo") and
Stephen J. Cavallo ("S.J. Cavallo") (S.A. Cavallo and S.J. Cavallo sometimes
referred to as "Passive Stockholders") (C. Cavallo, R. Cavallo, S.A. Cavallo and
S.J. Cavallo sometimes referred to individually as "Stockholder" or "Seller" and
collectively as "Stockholders" or "Sellers"), on the one hand, and Total
Information Services, Inc., an Oklahoma corporation ("Buyer"), with respect to
the following facts:
A. Sellers are the owners of all of the issued and outstanding shares
of stock of all classes of Records Search, Inc., a Florida corporation ("RSI",
"Company" or "Business");
B. Buyer desires to purchase all of the issued and outstanding shares
of stock of the Company from Sellers and Sellers desire to sell all such shares
of stock to Buyer upon the terms and conditions hereinafter set forth.
C. The Official Information Company, a Delaware corporation ("Parent"),
is the sole shareholder of Buyer and desires that Buyer consummate the
transactions contemplated herein and has agreed to be guarantor of certain
obligations of Buyer in connection herewith.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
The following terms shall be defined as set forth below:
1.1 The term "Accounts Receivable" shall mean all accounts receivable,
trade receivables, notes receivable, future receivables and other receivables,
which are payable as a result of goods sold or services provided (or which will
be sold or provided), or goods or services billed, by Seller prior to the
Closing.
1.2 The term "Assets" means all of the tangible and intangible assets
of the Company as of the Closing Date.
1.3 The term "Assumed Liabilities" means (i) Company's obligations to
provide Records Services to the Customers on the day following the Closing Date
pursuant to the Customer Agreements, including obligations to provide services
after the Closing Date which have been prepaid by Company's Customers but not
including any obligations resulting from
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any default under such Customer Agreements prior to the Closing Date; (ii) all
liabilities and obligations, including normal course trade payables to the
extent specifically included in the Closing Date Balance Sheet or provided for
in the WC Adjustment; and (iii) the executory portions of all (a) yellow pages
advertising contracts for telephone numbers acquired by Buyer, and (b) other
executory contracts (including real property leases) included on Schedule 4.2 or
Schedule 5.5.
1.4 The term "Audited Financial Statements" shall mean the audited
financial statements of the Company for the fiscal years ended December 31,
1996, 1997 and 1998, including the Balance Sheets at December 31, 1996, 1997 and
1998, the Statements of Income for the twelve months ended December 31, 1996,
1997 and 1998, and the Statement of Cash Flows for the years ended December 31,
1996, 1997 and 1998.
1.5 The term "Closing Balance Sheet" means an internally prepared
unaudited balance sheet for the Company as of the Closing Date.
1.6 The term "Closing Date" means August 31, 1999 when the closing of
the purchase and sale of the Stock is consummated (the "Closing"). The transfer
of control and the responsibility of Company shall be effective as of 11:59:59
p.m. Eastern Time on the Closing Date.
1.7 The term "Code" shall mean the United States Internal Revenue Code
of 1986, as amended.
1.8 The term "Customer" means any person, business, corporation or
other entity that has a Customer Account with the Company at any relevant time
as set forth herein.
1.9 The term "EBITDA" shall mean, for any period, the Company's
operating income plus depreciation and amortization (as such terms are defined
by GAAP). For the avoidance of doubt, excluded from EBITDA are interest
expenses, income taxes, depreciation and amortization. Notwithstanding anything
to the contrary, EBITDA shall exclude any Unapproved Chargebacks and the costs
associated with this transaction.
1.10 The term "EBITDA Shortfall" means $1.136 million minus the EBITDA
of the Company for the year ended December 31, 2002. If the EBITDA of the
Company for the year ended December 31, 2002 equals or exceeds $1.136 million,
such amount shall be zero and there shall be no reduction to any Note therefor.
1.11 The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.12 The term "GAAP" shall mean U.S. generally accepted accounting
principles, consistently applied with prior periods.
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1.13 The term "Governmental Entity" shall mean any governmental or
regulatory authority or instrumentality, domestic or foreign, or any department
or agency thereof, including without limitation, any court, administrative
agency, commission or central banking authority.
1.14 The term "Intellectual Property" shall mean all United States and
foreign patents (including continuations, continuations-in-part, reissues and
re-examinations thereof) and patent applications; registered and unregistered
trade names, trademarks, service names and service marks (and applications for
registration of the same) and all goodwill associated therewith; copyrights and
copyright registrations (and applications for the same); trade secrets; computer
data (including formulations and analyses), computer programs and software (in
source code and object code form) and firmware and all related programming, user
and systems documentation; inventions, processes and designs (whether or not
patentable or reduced to practice); know-how and formulae; and all other
intellectual property rights and assets.
1.15 The term "Interim Financial Statements" shall mean the unaudited
balance sheet as of July 31, 1999 and the related statement of income for the
seven months ended July 31, 1999, which are set forth on SCHEDULE 1.15 and which
have been prepared by the Company in accordance with GAAP applied on a
consistent basis and using the same accounting policies and procedures used to
prepare the Company's audited balance sheet as of December 31, 1998 and the
related statement of income for the twelve months ended December 31, 1998,
except for normal, occurring, year-end adjustments and except for footnotes
(other than any footnotes required to describe any inconsistencies with GAAP or
prior reporting period).
1.16 The term "Law" shall mean any law (including common law), statute,
rule, regulation or ordinance enacted, promulgated or imposed by any
Governmental Entity.
1.17 The term "Lien" shall mean any mortgage, deed of trust, lien,
pledge, security interest, charge, option, right of refusal, easement,
encroachment or other encumbrance.
1.18 The term "Material Adverse Effect" shall mean an effect on the
business, operations, liabilities, financial condition, prospects or results of
operations of the Business or the Assets that is material and adverse.
1.19 The term "Person" shall mean any individual, corporation,
proprietorship, firm, partnership, limited liability partnership, limited
liability company, trust, association or other entity.
1.20 The term "Purchase Price Adjustment" shall mean any and all
adjustments to the Purchase Price made pursuant to any term of this Agreement
including without limitation those adjustments provided in Section 3.2. and
Section 7.
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1.21 The term "Second Look Date" means December 31, 2002.
1.22 The term "Stock" means all of the issued and outstanding capital
stock of the Company owned by any and all of the Sellers on the Closing Date
representing 100% ownership of the Company.
1.23 The term "Tax Return" shall mean any report, return, declaration
or other information filing required to be supplied to a Governmental Entity in
connection with any Taxes, including all exhibits, schedules and amendments
thereto.
1.24 The term "Taxes" shall mean all taxes, charges, fees, duties,
levies or other assessments, including, but not limited to, income, alternative
or add-on minimum, gross receipts, net proceeds, ad valorem, real and personal
property (tangible and intangible), sales, use, franchise, excise, value added,
stamp, user, transfer, fuel, excess profits, occupational, interest
equalization, windfall profits, license, payroll, capital stock, disability,
severance, employee's income withholding, unemployment and Social Security
taxes, which are imposed by any Governmental Entity, and such term shall include
any interest, penalties or additions to tax attributable thereto, whether
disputed or not.
1.25 The term "Transfer Taxes" shall mean all transfer, value added,
recording, registration, stamp and similar taxes or fees imposed in connection
with the transactions contemplated by this Agreement.
1.26 The term "Unapproved Chargeback" means any charges or corporate
allocations for services, overhead or products by Buyer, Parent or any
affiliated company not expressly approved in writing by an Operating
Stockholder, or to the extent on terms less favorable to Company than generally
prevailing terms that can be obtained from unrelated third parties.
1.27 Interpretation. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender or the singular or plural form of words
herein shall not limit any provision of this Agreement. The use of the terms
"including" or "include" shall in all cases herein mean "including, without
limitation" or "include, without limitation", respectively. The use of the term
"or" shall, unless the context explicitly contemplates otherwise, herein mean
"and/or". Reference to any Person includes such Person's successors and assigns
to the extent such successors and assigns are permitted by the terms of any
applicable agreement. Reference to a Person in a particular capacity excludes
such Person in any other capacity or individually. Reference to any agreement
(including this Agreement), document or instrument means such agreement,
document or instrument as amended or modified and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms hereof.
Reference to any Law means such
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Law as amended, modified, codified, replaced or re-enacted, in whole or in part,
including rules, regulations, enforcement procedures and any interpretations
promulgated thereunder. Underscored references to Articles, Sections, clauses,
Exhibits or Schedules shall refer to those portions of this Agreement, and any
underscored references to a clause shall, unless otherwise identified, refer to
the appropriate clause with the same Section in which such reference occurs. The
use of the terms "hereunder," "hereof," "hereto" and words of similar import
shall refer to this Agreement as a whole and not to any particular Article,
Section or cause of or Exhibit or Schedule to this Agreement.
2. Agreement to Purchase and Sell Stock.
2.1 Purchase of Stock.
In reliance upon the warranties, representations and covenants of
Sellers contained in this Agreement, and subject to the provisions in this
Agreement, Buyer agrees to purchase all of the Stock from Sellers.
2.2 Sale of Stock.
In reliance on the warranties, representations and covenants of Buyer
contained in this Agreement, and subject to the provisions in this Agreement,
Sellers agree with Buyer to sell all of the Stock to Buyer free and clear of all
Liens.
2.3 Transfer of Stock.
To effectuate the sale of the Stock hereunder, Sellers hereby deliver
and transfer to Buyer full title to the Stock by delivering to Buyer
certificates evidencing all of the Stock; such certificates shall, as and to the
extent required by Buyer, be duly endorsed in blank or have duly executed blank
stock powers attached, and shall be in proper form for transfer to Buyer.
3. Purchase Price: Adjustments to Purchase Price: Payments; Deposits.
In consideration of the sale of the Stock, the parties agree as
follows:
3.1 Purchase Price.
The purchase price ("Purchase Price") for the sale of the Stock is
$12,780,000, subject to adjustment pursuant to Section 3.2.
3.2 Purchase Price Adjustments
3.2.1 Working Capital and Debt Adjustment.
(a) The Purchase Price shall be (i) increased by the amount by which
the total current assets as of the Closing Date exceed the total
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current liabilities (including the current portion of long-term debt) of the
Company as of the Closing Date or (ii) decreased by the amount by which the
total current liabilities (including the current portion of long-term debt) as
of the Closing Date exceed the total current assets of the Company as of the
Closing Date. Such increase or decrease, as the case may be, referred to as the
"Working Capital Adjustment". In addition, to the extent not included in the
Working Capital Adjustment, the Purchase Price shall be reduced by the amount of
long-term indebtedness for borrowed money as of the Closing Date (the "Long-Term
Debt Adjustment").
(b) Within sixty (60) days after the Closing Date, Buyer shall prepare
and deliver to Sellers the Closing Date Balance Sheet and its calculations (the
"Adjustment Schedule") of the Working Capital Adjustment ("Adjusted WC") and the
Long-Term Debt Adjustment. The Adjustment Schedule shall be accompanied by a
certificate signed by the President and the Chief Financial Officer of Buyer
setting forth that the schedule and adjustments have been prepared in accordance
with GAAP applied on a consistent basis and using the same accounting policies
and procedures used to prepare Seller's audited balance sheet as of December 31,
1998 and the related statement of income for the twelve months ended December
31, 1998. The Closing Date Balance Sheet shall provide an accrual for unpaid
Taxes resulting from the change on the Closing Date from cash basis to an
accrual basis tax treatment. Notwithstanding anything to the contrary, there
shall be no WC Adjustment for capital expenditures (not to exceed $60,000) made
by the Company during August 1999 with respect to software and hardware for
Internet-enabled connectivity. In addition, the parties agree that the costs of
this transactions shall not be included (either positively or negatively) on the
Closing Date Balance Sheet and, therefore, will not impact the calculation of
the Adjusted WC.
(c) Promptly following the delivery of the Adjustment Schedule (if not
disputed pursuant to Section 3.2.6) or if disputed, promptly following the
resolution of such dispute, the principal amount of the Notes shall be increased
or decreased, as the case may be, by the amount of the Adjusted WC and the
amount of the Long-Term Debt Adjustment.
3.2.2 1999 EBITDA Adjustment
(a) Within ninety (90) days after December 31, 1999, Buyer shall
prepare and deliver to Sellers at Buyer's expense a schedule, certified by the
President and Chief Financial Officer of Buyer, showing EBITDA of the Company
for the year ended December 31, 1999 ("1999 EBITDA"), which schedule shall be
prepared by Buyer in accordance with GAAP applied on a consistent basis and
using the same accounting policies and procedures used to prepare the Company's
audited balance sheet as of December 31, 1998 and the related statement of
income for the twelve months ended December 31, 1998; provided that,
notwithstanding anything to the contrary, EBITDA calculations for purposes of
determining any Shortfall shall not include any costs incurred in connection
with this transaction.
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If the 1999 EBITDA is less than $1.136 million, then the Purchase Price
shall be reduced by the product of (i) such shortfall multiplied by (ii) eleven
(such amount being the "1999 EBITDA Adjustment"). If the 1999 EBITDA is equal to
or exceeds $1.136 million, there shall be no adjustment to the Purchase Price
pursuant to this Section 3.2.2. Any EBITDA Adjustment shall be paid to Buyer as
an offset to Buyer's obligations to the Stockholders under the Notes (as
hereinafter defined).
(b) If the Purchase Price is reduced pursuant to Section 3.2.2(a),
within ninety (90) days after December 31, 2000, Buyer shall prepare and deliver
to Sellers at Buyer's expense a schedule, certified by the President and Chief
Financial Officer of Buyer, showing EBITDA of the Company for the year ended
December 31, 2000 ("2000 EBITDA"), which schedule shall be prepared by Buyer in
accordance with GAAP applied on a consistent basis and using the same accounting
policies and procedures used to prepare the Company's audited balance sheet as
of December 31, 1999 and the related statement of income for the twelve months
ended December 31, 1999.
If the 2000 EBITDA exceeds $1.136 million, then the Purchase Price
shall be increased by the product of (i) such excess multiplied by (ii) 5.5
(such amount being the "2000 EBITDA Adjustment"); provided, that in no event
shall the 2000 EBITDA Adjustment exceed the 1999 EBITDA Adjustment. If the 1999
EBITDA is less than $1.136 million, there shall be no adjustment to the Purchase
Price pursuant to this Section 3.2.2(b). Any 2000 EBITDA Adjustment shall be
paid to Sellers as an increase to Buyer's obligations to the Stockholders under
the Notes.
3.2.3 EBITDA Shortfall.
Within ninety (90) days after the Second Look Date, Buyer shall compute
the EBITDA Shortfall and deliver to Sellers a schedule (the "DP Adjustment
Schedule") setting forth the EBITDA Shortfall and the resulting proposed
adjusted amount of the Deferred Payment, if any. The DP Adjustment Schedule
shall be accompanied by a certificate signed by the President and Chief
Financial Officer of Buyer setting forth that the schedule and adjustments have
been prepared in accordance with the terms and provisions of this Agreement.
The Purchase Price shall be reduced, dollar for dollar, by the product
of (i) the EBITDA Shortfall multiplied by (ii) eleven (11), together with
interest on such amount from the Closing Date to the date of payment, at an
annual rate of interest equal to 7.25% (such amount being the "2002 EBITDA
Shortfall"). Any 2002 EBITDA Shortfall shall be paid to Buyer as an offset to
Buyer's obligations to the Stockholders under the Notes. Notwithstanding the
foregoing, if the Notes are insufficient to satisfy such purchase price
adjustment (together with interest thereof), Sellers shall satisfy such
deficiency by wire transfer of immediately available funds to an account
designated by Buyer within ten (10) business days of the delivery of the
Adjustment Schedule if not disputed pursuant to Section 3.2.6 or within ten (10)
business days of resolution if disputed.
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3.2.4 Exceptions to EBITDA Shortfall.
In the event that Buyer or Parent, or any person or entity working for
or on their behalf, shall make any change in the Company's business or operation
of the Company's business, which change is objected to in writing by both of the
Operating Stockholders within 30 days of such change, including without
limitation, changes in accounting methods or procedures, transfers or assignment
of assets or Customers (other than in the ordinary course of business), changes
in insurance coverage, unit increases in costs incurred by Company on the
Closing Date for products or services (e.g., insurances, accounting services,
records checks, etc.) except to the extent such reflect increases in costs of
products and services occurring generally in the trade and such costs for such
products and services are competitive, then the effect of any such change
(whether positive or negative) shall be excluded from the calculation of EBITDA
for purposes of Sections 3.2.2 and 3.2.3.
3.2.5 Apportionment of Purchase Price Adjustment.
Any adjustment to the Purchase Price shall be made to the Purchase
Price and Deferred Payment due each Seller in proportion to each of the Sellers'
percentage of Stock in the Company being sold hereunder. Except as otherwise
provided herein, any adjustment made to the Deferred Payment shall be made in
the first instance to the second principal installment and, thereafter, equally
to the first (to the extent not paid) and last principal installment.
3.2.6 Sellers' Review, Resolution of Purchase Price and Adjustment
Disputes.
(a) Sellers or their representatives shall have the right to review
originals and make copies of such books and records and other documents or
information which are reasonably necessary in order to verify Buyer's
calculation of the adjustments to the Adjusted Purchase Price, Adjusted WC, the
Long-Term Debt Adjustment and the Deferred Payment Adjustment and Buyer's
determination of the final Purchase Price (collectively the "Buyer's
Adjustments"). If any Seller contests or objects to the Buyer's Adjustments said
Seller shall notify Buyer of such contest or objection within sixty (60)
business days of receipt of both the WC Adjustment Schedule and the DP
Adjustment Schedule. Buyer and Sellers shall use their best efforts and good
faith to settle any disputes regarding the Buyer's Adjustments as expeditiously
as possible. If any Sellers' objections are not resolved by the good faith
efforts of the parties, the matter shall be referred to the Certified Public
Accountants of Sellers and Buyer, who shall jointly review Buyer's calculations
and determine the correct amounts of the final Purchase Price, which
determination shall be final and binding on the parties. If the accountants can
not so agree, they shall appoint a nationally recognized independent accounting
firm to make such determination, which determination shall be final and binding
on the parties. Such determination shall be delivered to the parties within
thirty (30) days from the date of its submission to the accountants.
(b) The fees of any such third accounting firm shall be apportioned by
the
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Accounting Firm based upon the degree to which each party's claims were
unsuccessful and shall be paid by the parties in accordance with such
determination. For example, if pursuant to this Section 3.2.6, Sellers submitted
an objection affecting the Purchase Price in an amount of $100,000 and prevailed
as to $45,000 of the amount, then Sellers would bear 55% and Buyer would bear
45% of the fees and expenses of such Accounting Firm.
3.3 Payment Terms.
The Closing Purchase Price is payable as follows:
3.3.1 Closing Payment.
(i) At the Closing, NINE MILLION ($9,000,000) DOLLARS shall be paid to
Sellers by wire transfer in accordance with the instructions set forth on
SCHEDULE 3.3.1(I) as follows:
Stockholder No. of Shares Certificate No. Payment Amount
- ----------- ------------- --------------- --------------
C. Cavallo and R. Cavallo 300 003 $5.4 million
S.A. Cavallo 100 004 1.8 million
S.J. Cavallo 100 004 1.8 million
------------
Total $9.0 million
(ii) The balance (the "Deferred Payment") shall be evidenced by three
non negotiable promissory notes (the "Notes") delivered by Buyer and Parent as
follows:
Stockholder Principal Amount
----------- ----------------
C. Cavallo and R. Cavallo $2.268 million
S.A. Cavallo .756 million
S. J. Cavallo .756 million
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Total $3.780 million
(iii) The form of the Notes is set forth on SCHEDULE 3.3.1.(III). The
Notes shall bear interest at 7.25% per annum. The Notes shall be guaranteed by
Parent pursuant to a guarantee in the form of SCHEDULE 3.3.1(III)(A). All
adjustments to the Deferred Payment as may be required pursuant to this Article
3 shall be evidenced by an allonge to the Notes, which shall be executed by
Buyer, Parent and Sellers. As more fully set forth in the Notes, for the purpose
of calculating interest on the Deferred Payment and due under the Notes,
adjustments to the
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Deferred Payment and Notes arising out of Section 3.2.1 shall relate back to the
Closing Date; and adjustments to the Deferred Payment and Notes arising out of
Section 3.2.3 shall relate back to the Second Look Date.
3.3.2 Sale of Buyer to Third Party.
As more fully set forth in the Notes, if a controlling interest in the
Company or Buyer is sold or Buyer or the Company sell, in bulk, the Assets to a
third party (a "Change of Control") prior to December 31, 2002, then the
provisions of Section 3.2.3 shall no longer apply. In addition, (a) if such
Change of Control shall occur prior to December 31, 1999, for purposes of
Section 3.2.2(a), the 1999 EBITDA shall be deemed to be $1.136 million and (ii)
if such Change of Control shall occur after December 31, 1999 but prior to
December 31, 2000 and the Purchase Price was adjusted pursuant to Section
3.2.2(a), then for purposes of Section 3.2.2(b) the 2000 EBITDA Adjustment shall
be deemed to equal the amount of the 1999 EBITDA Adjustment.
3.3.3 Change In Operation; Stockholders' Status
As more fully set forth in the Notes, (i) if the duties, authorities,
terms or conditions of employment of either Operating Stockholder is changed
(other than expressly provided in the Employment Agreements or as otherwise
agreed by such Operating Stockholder) by Buyer, Parent or anyone acting for or
on their behalf; (ii) if either Operating Stockholder's employment is terminated
pursuant to Section 7.03 or 7.04 of such Operating Stockholder's Employment
Agreement or (iii) if Buyer terminates Stephen Bodnar or Albert Bueno other than
for cause (as defined in Section 7.01 of the Employment Agreements) (each a
"Change of Status") prior to December 31, 2002, then the provisions of Section
3.2.3 shall no longer apply. In addition, (a) if such Change of Status shall
occur on or prior to December 31, 1999, for purposes of Section 3.2.2(a) , the
1999 EBITDA shall be deemed to be $1.136 million and (ii) if such Change of
Status shall occur after December 31, 1999 but on or prior to December 31, 2000
and the Purchase Price was adjusted pursuant to Section 3.2.2(a), then for
purposes of Section 3.2.2(b) the 2000 EBITDA Adjustment shall be deemed to equal
the amount of the 1999 EBITDA Adjustment. In the event that either Operating
Stockholder's employment is terminated pursuant to Section 7.01(c) or (d) of
such Operating Stockholder's Employment Agreement, such termination shall be
treated as a Change of Status for purposes of this Section 3.3.3 until a
mutually agreed resolution with such Operating Stockholder or a final and
binding determination of whether such termination was in accordance with the
terms of such Operating Stockholder's Employment Agreement. However, if it is
determined that such termination was permitted in accordance with such
provisions of such Operating Stockholder's Employment Agreement, then the
provisions of this Section 3.3.3 shall not apply with respect to such
termination and any amounts paid to the Sellers pursuant to Section 3.2 that
would not have paid had the provisions of Section 3.3.3 not been applicable
shall be repaid to Buyer within ten (10) days following such final and binding
determination or mutually agreed resolution.
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3.3.4 Bankruptcy of Company, Buyer or Parent.
As more fully set forth in the Notes, if Company, Buyer or Parent files
a petition in bankruptcy, or such a petition is filed against Buyer or Parent
which is not dismissed within one hundred twenty (120) days, or Buyer or Parent
is adjudicated as bankrupt under the laws of any jurisdiction of the United
States, then the Notes, shall, subject to applicable law, be immediately due and
payable in full.
3.4 Transfer Taxes.
The Transfer Taxes, if any, concerning the transfer of the Shares shall
be payable by Sellers.
3.5 Allocation of Consideration. The Purchase Price shall be allocated
in accordance with Section 1060 of the Code among the Stock and the
non-competition covenants set forth in Section 9.3 as set forth on SCHEDULE 3.5.
Following the Closing, Buyer and Sellers and their respective affiliates in
connection with their respective U.S. federal, state and local income Tax
Returns and other filings (including Internal Revenue Service Form 8594) shall
not take any position inconsistent with such allocation. Any adjustment to the
Purchase Price shall be allocated as provided by Temp. Treas. Reg. ss.
1.1060-1T(f).
4. Schedules and Adjustments Delivered at Execution Date and Closing
Date.
In addition to other schedules specified herein, the parties shall
prepare and deliver herewith on the Closing Date the following schedules and
agreements:
4.1 Customer Accounts.
A schedule setting forth the Customer Accounts of the Company as of the
date of Closing Date.
4.2 Asset List.
A schedule of all of the tangible and intangible Assets (other than the
Customer Accounts) of the Company as of the Closing Date, with the exception of
immaterial assets (which have no more than a fair market value of $5,000.)
4.3 Assumed Liabilities.
A schedule of the Assumed Liabilities.
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4.4 Notes.
Buyer shall deliver to Sellers the executed Notes substantially in the
form set forth in SCHEDULE 3.3.1(III).
4.5 Guaranty Agreement.
Parent shall deliver to Sellers an executed Guaranty Agreement
substantially in form set forth in SCHEDULE 3.3.1(III)(A).
4.6 Employment Agreements.
Buyer on the one hand, and C. Cavallo and R. Cavallo on the other hand,
shall exchange Employment Agreements substantially in the form set forth in
SCHEDULE 4.6.
4.7 Audited Financial Statements.
Seller shall deliver to Buyer audited financial statement of the
Company for the fiscal years ended December 31, 1996, 1997 and 1998.
4.8 Other Closing Documents.
Sellers, Buyer and Parent shall deliver (a) all consents or approvals
of any Person required for the consummation of the transactions contemplated
hereby, including any consents required under any Agreements or Permits; (b) the
written resignations of all directors and the Passive Stockholders in any
capacity; (c) evidence of the release of all Liens on the assets of the Company
and of all Liens on the Shares; provided that the form of such evidence is
delivered to Buyer at least one (1) business day prior to the Closing Date and
is in form and substance reasonably satisfactory to Buyer; and (d) such other
documents, instruments, certificates and writings as reasonably may be requested
by Buyer or Sellers at least three (3) business days prior to the Closing.
5. Representation, Warranties and Agreements of Operating Stockholders.
Except as otherwise set forth or described on SCHEDULE 5 ("Operating
Stockholders' Disclosure Schedule") or any other schedule or exhibit attached
hereto the Operating Stockholders, jointly and severally, agree, represent and
warrant as follows and, with respect to Sections 5.2 and 5.4, each of the
Stockholders, severally and not jointly, agree, represent and warrant as
follows:
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5.1 Corporate Status of Companies.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida and has all required
corporate power, authority, qualification and approval to carry on the Business
as now conducted by it and to own, lease and operate its properties and assets
in each jurisdiction in which they are located. The Company is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction in which the Company maintains an office or employees except where
the failure to qualify would not have a Material Adverse Affect. Except as set
forth on SCHEDULE 5.1, the Company does not have any subsidiaries, is not party
to any partnership or joint venture and otherwise does not have any debt or
equity interest in any Person.
5.2 Outstanding Stock of the Companies.
RSI's capital stock consists of one thousand authorized shares of
common stock, no par value, of which five hundred shares have been issued to
Sellers as follows:
Sellers Number of Shares
------- ----------------
Christopher M. Cavallo and
Robin K. Cavallo, JT 300
Stefan A. Cavallo 100
Stephen J. Cavallo 100
All of the issued and outstanding shares of Stock have been validly
issued, fully paid and non-assessable. Each of the Sellers has good and valid
title to the Stock with full lawful right, power, capacity and authority to
sell, assign, transfer and deliver the Stock to Buyer pursuant to this Agreement
and to consummate the transactions contemplated hereby. At the Closing, Buyer
will receive good and valid title to the Stock, free and clear of all Liens.
Sellers have no knowledge of any adverse claims of stock ownership. The Company
has not authorized or issued any securities which are currently outstanding
other than the Stock and no person, corporation, or other entity holds any
option, warrant or right to purchase or otherwise acquire any shares of capital
stock of Company. There are no outstanding contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance of any
capital stock or other equity of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights or stock
appreciation rights plans or other "phantom" stock plans.
5.3 Corporate Documentation.
Sellers' have furnished Buyer with a true and complete copy of the
Company's articles of incorporation, as currently in effect, certified by the
Secretary of the Company, true and
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complete copy of the Company's By-Laws as currently in effect, certified by the
Secretary of Company, and a certificate of the Secretary of State of the
Company's state of incorporation evidencing the good standing and valid
existence of the Company under the laws of that state.
5.4 Authorization of Sellers.
This Agreement has been duly executed and delivered by Sellers and
constitutes a valid obligation legally binding on Sellers and is enforceable
against each Seller in accordance with its terms, except as enforceability may
be limited or affected by applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the rights of
creditors and except as enforceability may be limited by rules of law governing
specific performance, injunctive relief or other equitable remedies. The
execution, delivery and performance of this Agreement by Sellers and the
consummation of the transactions contemplated hereby by Sellers: (i) does not
conflict with, or result in a material breach, default, violation or loss of a
material benefit under any material agreement, mortgage, lease, license or other
instrument or obligation of Sellers or Company in connection with the operation
of Company's business or any of the Assets; (ii) do not require the consent or
permission of any person or governmental agency not obtained at or prior to
Closing; and (iii) will not violate any material law, rule or regulation of any
agency or governmental body to which Seller or the Company are subject and that
is reasonably likely to have individually or in the aggregate have a material
adverse effect on the transactions contemplated hereby.
5.5 Assets.
All of the Assets of the Company as of the Closing Date are included on
the Asset List (SCHEDULE 4.2). The Assets constitute the only tangible and
intangible operating assets used in the conduct of the Business of the Company
as of the Closing. The Company has good and marketable title to all of the Owned
Assets, and a valid and enforceable leasehold or like interest in all other
Assets, free and clear of all security interests, Liens, claims, or encumbrances
of any nature or kind whatsoever, except for the Assumed Liabilities or as set
forth on SCHEDULE 5.5. No Seller or Seller affiliate owns any assets used in the
Business or is entitled to any payments in respect of the use of any assets used
in the Business. Except for fully depreciated, obsolete computer workstations,
all of the Assets are in good working condition, normal wear and tear excepted,
and are sufficient for the purposes for which they are used.
5.6 Assumed Liabilities.
The Company has no, and at the Closing will not, have any obligations,
indebtedness or liabilities, contingent or otherwise, other than: (i)
obligations of the Company to customers pursuant to Customer Agreements; (ii)
those disclosed or adequately reserved for in the Closing Date Balance Sheets;
(iii) those expressly described or listed in the schedules hereto, and including
those liabilities set forth in SCHEDULE 4.3; (iv) immaterial obligations,
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indebtedness or liabilities arising in the ordinary course of business and not
required by GAAP to be recorded in financial statements or notes thereto, and
which in the aggregate does not exceed $25,000 as to the Company.
5.7 Financial Statements.
(a) The Audited Financial Statements are true, correct and complete and
present fairly the assets, liabilities and stockholders' equity; the results of
operations; and cash flows of the Company at the dates thereof and for the
periods then ended in accordance with GAAP.
(b) The Interim Financial Statements have been prepared from the books
and records of the Company, present fairly the assets, liabilities and
stockholders' equity and the results of operations of the Company at the date
thereof and for the period then ended, and have been prepared in accordance with
GAAP consistently applied with the Audited Financial Statements, except for
normal, recurring, year-end adjustments and except for footnotes (other than any
footnotes required to describe any inconsistencies with GAAP or prior reporting
periods).
5.8 Leases and Agreements.
5.8.1 Real Property and Personal Property Leases.
SCHEDULE 5.8.1 lists all leases of real property which are used in the
Business (the "Leased Real Estate"). Each agreement relating to the Lease Real
Estate is a valid and binding agreement of the parties thereto, is in full force
and effect and no other party is in default (with or without due notice or lapse
of time or both) under any of the terms of any such agreement. The Company does
not own any real property. There are no leases, subleases, licenses or other
agreements granting to any person other than the Company any right to the
possession, use, occupancy or enjoyment of the Leased Real Estate or any portion
thereof. Except as set forth on SCHEDULE 5.8.1, the Company does not own or hold
and is not obligated under or a party to any option, right of first refusal or
other contractual right to purchase, acquire, sell or dispose of any of the
Leased Real Estate or any portion thereof or interest therein. There is no
pending, threatened or contemplated condemnation or similar proceeding affecting
the Leased Real Estate or any part thereof or any sale or other disposition of
the Leased Real Estate or any part thereof in lieu of condemnation.
5.8.2 Other Agreements.
SCHEDULE 5.8.2 sets forth a true, accurate and complete list as of the
date hereof of all Contracts of the following types to which the Company is a
party:
(a) any contract with a Customer;
(b) any contract of any kind with any director, officer or employee of
Seller,
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including any contract of any kind with any Employee involving any
post-termination commission, benefit or payment other than retirement benefits
paid pursuant to a union, employee or employer sponsored benefit plan;
(c) any contract with a sales representative, sales agency, advertising
agency or other Person engaged in sales, distributing or promotional activities,
or any contract to act as one of the foregoing on behalf of any Person;
(d) any contract involving any restrictions with respect to the
geographical area of operations or scope or type of business of Seller; and
(e) any other contract that requires a payment by any party in excess
of, or a series of payments which in the aggregate exceed, $10,000.
Seller has made available to Buyer a true and complete copy of all
written Contracts and summaries of all oral Contracts.
All of the contracts of the Company included among the Assets are in
full force and effect, binding on the Company, and, to Sellers' best knowledge,
binding on the other parties thereto, and there are no material defaults by the
Company or, to Sellers' best knowledge, by any other party thereto, and no event
has occurred (or failed to occur) that, with the passing of time or the giving
of notice or both would constitute a material default under such lease. None of
the contracts is subject to any restriction which prohibits the consummation of
the transactions contemplated by this Agreement or the use thereof in the manner
in which Company is now using the same.
5.9 Intangibles.
(a) Other than office word processing and similar software, SCHEDULE
5.9 lists all Intellectual Property and all agreements pursuant to which the
Company is licensed or authorized by others to use any Intellectual Property or
pursuant to which the Company licenses or authorizes others to use any
Intellectual Property. The Company has the contractual right to use any
Intellectual Property licensed from third parties, subject to the terms of the
applicable Agreements and is the record owner of the patents, patent
applications, trademark and copyright registrations and trademark and copyright
applications free from Liens.
(b) Except as set forth on SCHEDULE 5.9, during the three (3) years
preceding the date of this Agreement, (i) no claim has been asserted or
threatened against the Company to the effect that the operation of the Business
or the making, using or selling of any product or service infringes upon or
conflicts with the rights of any Person with respect to any patents, patent
applications, trademarks, trade names, trade secrets, designs, inventions, or
copyrights, (ii) no claim has been asserted by the Company against any Person
that such Person has
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infringed any of the Intellectual Property; and (iii) no claim has been asserted
or threatened (A) to the effect that any of the Intellectual Property is invalid
or unenforceable or (B) otherwise related to any of the Intellectual Property.
(c) Except as set forth in SCHEDULE 5.9, to Sellers' knowledge, no
product or service sold by the Company or other activity of the Business
infringes or conflicts with any intellectual property right of any Person; and
the Company's use of the Company's trademarks in the conduct of the Business
does not infringe any trademark, trade name or service mark of any Person.
(d) The Intellectual Property which are registered trademarks are valid
and in full force and effect.
5.10 No Defaults.
The Company is not in material default or to Sellers' best knowledge,
alleged to be in default under any material agreement, license or obligation
relating to the Assets or Assumed Liabilities. To the best knowledge of Sellers,
except for delinquent payments by some of its customers, no other party to any
such agreement, license, or obligation is in default thereunder and there exists
no condition or event which, after notice or lapse of time or both, would
constitute a material default by any other party to any such agreement, license
or obligation.
5.11 Licenses and Permits.
Copies of all of the Company's licenses, permits or other governmental
authorization (each a "Permit") are included in SCHEDULE 5.11. Since 1998 the
Company has not received any notification of any violations in respect of any
such licenses or permits of the Company, and no proceedings are pending or to
Seller's best knowledge, threatened concerning the revocation or limitation of
any such license or permit of the Company. Such permits are valid and in full
force and effect.
5.12 Environmental Compliance.
The Company is not in violation, in any material respect, of any
material federal, state or local law, rule, regulation or order governing
environmental matters, including but not limited to discharge of materials into
the environment, noise abatement and other similar matters. The Company does not
own, lease or otherwise have any obligations with respect to or responsibility
for any underground fuel storage tanks or facilities and have not and do not
transport, store or use any hazardous substance in violation of any federal,
state or local law, rule, regulation permit, order or other directive addressing
environmental matters. For the purposes of this section "hazardous substances"
shall mean (1) any chemical, material or substance defined as or included in the
definition of "hazardous substances," "hazardous wastes, "hazardous materials,"
"extremely hazardous waste," "restricted hazardous waste,"
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"toxic pollutants," "toxic substances" or words of similar import under any
applicable environmental law, (2) any oil, petroleum or petroleum products, (3)
asbestos and asbestos containing materials in any form which is or could become
friable, and (4) radon gas, urea formaldehyde foam insulation or polychlorinated
biphenyls. The Company has not received notice nor taken any action or failed to
take any action which action or failure will or would, in any way, preclude or
prevent the Company from continuing to use the Assets after the Closing in
substantially the same manner as theretofore used by the Company.
5.13 Litigation.
Except as listed on SCHEDULE 5.13, there are no claims, litigation, or
proceedings pending or to Seller's best knowledge threatened against the
Company, nor, to Sellers' best knowledge, is the Company subject to any
government instituted investigations. Neither the Company nor any of the Sellers
is a party to or is bound by any judgment, injunction, award or order of any
Governmental Entity, arbitrator or any other Person which would bind the Buyer
or the Company after the Closing Date. SCHEDULE 5.13 lists all actions, suits,
claims, arbitrations, investigations or proceedings against or affecting the
Company, the Business or any assets of the Company commenced or in existence
within the last three (3) years, including the disposition thereof.
5.14 Brokers.
Sellers have not employed any broker, finder or agent or dealt with
anyone purporting to act in such capacity or agreed to pay any brokerage fee,
finder's fee, or commission in connection with the transactions contemplated by
this Agreement.
5.15 Insurance.
The operations of the Company has been covered by policies of
automobile liability insurance and commercial general liability insurance
("Liability Insurance"), which are in full force and effect as of the Closing.
The Company and Sellers are not in default, and to Sellers' best knowledge, no
event has occurred (or failed to occur) that, with the passing of time or the
giving of notice or both would constitute a default by the Sellers or the
Company under any such policy of insurance, or would entitle the insurer under
such insurance to deny coverage of any claim against the Company. The Company
has not, during the past five (5) years, been denied insurance coverage with
respect to the Business, the assets, employees or operations of the Company, no
such insurance has been canceled or not renewed by the applicable insurers and
no such insurance contains any exclusions not standard in the industry.
5.16 Absence of Certain Changes.
Except as set forth on SCHEDULE 5.16, since December 31, 1998, (a) the
Business has been conducted in the ordinary course consistent with past
practices; (b) there has not been any
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occurrence, transaction or event which has resulted in or reasonably could
result in a Material Adverse Effect; (c) the Company has not in any one case or
in the aggregate suffered any material damage, material destruction or similar
material loss to any of its assets (whether or not covered by insurance); (d)
the Company has not incurred any strike or work stoppage; (e) the Company has
not made any material forward purchase commitments with respect to the Business,
except for purchase commitments in the ordinary course of business and
consistent with the historical purchase commitment practices of the Business;
(f) the Company has not entered into any (i) employment, consulting or severance
agreements; or (ii) other agreements, commitments or contracts of a nature
required to be disclosed in Section 4.09, relating to the Business, except in
the case of (ii), agreements, commitments or contracts made in the ordinary
course of business consistent with past practice; (g) all transactions with
affiliates has been at arms length and on terms no less favorable to the Company
than the Company could secure in a similar transaction with an unaffiliated
third party.
5.17 Compliance with Laws.
Except as set forth in SCHEDULE 5.17, (a)(i) the Business and all
Leased Real Estate operated by the Company, have been in the past and currently
are operated and conducted in compliance with all Laws (other than state Laws
governing whether a company (y) is deemed to be doing business in such state or
(z) requires licensure as a private investigation company in such state) and
(ii) to the best of Sellers' knowledge, the Business and all Leased Real Estate
operated by the Company, have been in the past and currently are operated and
conducted in compliance with all state Laws governing whether a company (y) is
deemed to be doing business in such state or (z) requires licensure as a private
investigation company in such state; (b) the Company has all Permits required in
connection with the ownership of its assets, and the use of the Leased Real
Estate; and (c) during the past three (3) years no notice has been received by
the Company and no investigation or review is pending or, to the knowledge of
Sellers, threatened by any Governmental Entity with respect to (i) any alleged
violation by the Company or any Seller of any Law in connection with the
ownership of its assets, the use of the Leased Real Estate or the operation of
the Business or (ii) any alleged failure to have all Permits required in
connection with the ownership of its Assets, the use of the Leased Real Estate
or the operation of the Business or any alleged defect or inadequacy with
respect to any Permit held by Company.
5.18 Books and Accounts. The books and accounts of the Business have
been maintained in accordance with good business practice and accurately and
fairly present all assets, liabilities and transactions of the Company in a
manner consistent with such good business practice and in accordance with GAAP.
5.19 Potential Conflicts of Interest.
Except as set forth on SCHEDULE 5.19, none of the Sellers nor any
officer or director of the Company and no relative or spouse (or relative of
such spouse) of any Seller or any such
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officer or director:
(a) owns, directly or indirectly, in whole or in part, any tangible
property or any Intellectual Property that the Company uses in the conduct of
the Business;
(b) has any cause of action or other claim whatsoever against, or owes
any amount to, the Company, except for claims in the ordinary course of the
Business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements existing on the date hereof,
all of which are fully reserved for on the Closing Date Balance Sheet;
(c) is the obligor for any debt or other obligation that is guaranteed
by the Company or secured by the assets of the Company; or
(d) owns, directly or indirectly, any interest in (excepting less than
5% stock holdings for investment purposes in securities of publicly held and
traded companies), is an employee, officer, director or a consultant of, any
Person which is, or is engaged in business as, a competitor, lessor, lessee,
supplier, distributor, sales agent or customer of the Company.
5.20 Account Receivable.
Attached as SCHEDULE 5.20 is a true and complete aging report of the
Company's Accounts Receivables as of the date set forth thereon. Except as set
forth in SCHEDULE 5.20, Sellers have no knowledge of any customer who is
reasonably likely not to pay within the historical payment patterns of such
customer (but in no event more than 180 days), in an amount not less than the
amounts shown on the Interim Financial Statements, less reserves for bad debts
set forth therein. For the purpose of determining whether such receivables have
been collected, payments against invoices by account debtors shall be
attributable to the specific invoices against which payment is made, and
payments by any account debtor other than against specific invoices shall be
deemed to be payments with respect to the oldest outstanding invoice submitted
to such account debtor.
5.21 Computer Matters.
SCHEDULE 5.21 sets forth a complete and accurate list of all software
owned or licensed by the Company in connection with the Business and all related
computer hardware used by the Company in connection with the Business. The
Company has taken commercially reasonable action to ensure that all of the
material software programs owned by the Company and to the knowledge of Sellers,
all other material software used by the Company are year 2000 compliant such
that attaining the year 2000 will not have a Material Adverse Effect.
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5.22 Proper Business Practices.
Neither the Company nor, to the knowledge of Sellers, its officers,
managers, employees, agents and representatives have, to obtain or retain
business for the Company, directly or indirectly, offered, paid or promised to
pay, or authorized the payment of any money or thing of value, or any commission
payment to (i) any person who is an official, officer, agent, employee or
representative of any governmental body or of any existing or prospective
customer, (ii) any political party or official thereof, (iii) any candidate for
political or political party office, or (iv) any other individual or entity
while knowing or having reason to believe that all or any portion of such money
or thing of value would be offered to any such person or entity referred to in
clause (i), (ii) or (iii) above. Each transaction of the Business is properly
and accurately recorded on the books and records of the Company in all material
aspects.
5.23 Relations with Customers.
Except as disclosed on SCHEDULE 5.23, to the knowledge of Sellers, no
supplier, sponsor or exhibitor intends to terminate or materially reduce its
relationship with the Business in the future or as a result of the consummation
of the transactions contemplated hereby.
5.24 Certain Tax Matters.
5.24.1 Except as set forth in SCHEDULE 5.24, the Company has timely
filed or caused to be timely filed, and after the Closing Date, Sellers will
timely file or cause to be timely filed, all Tax Returns (as defined below)
required to be filed with respect to the Company and all predecessors for all
periods ending on or before the Closing Date (the "Pre-Closing Periods") and for
all matters or transactions which occurred during any Pre-Closing Periods") and
for all matters or transactions which occurred during any Pre-Closing Periods.
The financial and other information provided by Sellers to Buyer and its
representatives with respect to Tax matters for periods prior to the Closing is
true, correct and complete and does not contain any untrue statement of a
material fact or omission to state a material fact. As soon as practicable after
the Closing Date, Buyer shall prepare, at Sellers' request and expense and for
Sellers' benefit, Tax Returns to be filed by Sellers (upon Sellers' review and
approval) with respect to Pre-Closing Periods. Sellers shall comply with
reasonable requests timely made by the Buyer with respect to all Tax Returns.
All Tax Returns were or will be properly prepared, as the case may be, as
required by applicable law. There are and will be no Liens for Taxes upon any of
the assets of the Company. For purposes of this Agreement, "Tax Returns" shall
mean all returns, declarations, reports, statements and other documents required
to be filed with any Governmental Entity in respect of any Tax.
5.24.2 None of the Sellers nor the Company has been made a party to any
pending action or proceeding by any Governmental Entity for the assessment or
collection of Taxes, nor has any claim for the assessment or collection of Taxes
been asserted against Sellers or the
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Company nor has any notice of a pending or threatened Tax investigation been
given to any of the Sellers of the Company.
5.24.3 No waivers of applicable statutes of limitation with respect to
the Tax Returns have been given by or requested from the Company. SCHEDULE
5.24.3 sets forth (i) the taxable years of the Company to which the respective
statutes of limitations with respect to any Tax have not expired, and (ii) with
respect to such taxable years, those years for which examinations have been
completed, those years for which examinations are presently being conducted, and
those years for which examinations have not been initiated.
5.24.4 All material elections and consents with respect to any Tax
affecting the Company as of the date hereof are as set forth on SCHEDULE 5.24.4.
5.25 Benefit Plans, Employees and Labor Commitments.
5.25.1 Except as set forth on SCHEDULE 5.25.1, the Company does not
maintain, is not a party to, does not contribute to and is not obligated to
maintain or contribute to or have any other liability with respect to any
employee welfare benefit plan or any employee pension benefit plan (as such
terms are defined in ERISA) or any other plan, contract, policy or arrangement,
employment, consulting, severance or other similar contract or policy, or any
other plan or arrangement providing for hospital, medical, life or other
insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefit or for deferred compensation, profit-sharing,
bonus, stock options, stock appreciation or other forms of incentive
compensation or pension or welfare benefit (any of the foregoing shall be
referred to as a "Benefit Plan"). Correct and complete copies of all contracts,
plan documents, summary plan descriptions, governmental filings, policy
statements, written communications and other written materials describing or
governing all Benefit Plans and their related funding arrangements (if any) and
the most recent actuarial valuation reports, if any, have been provided or made
available by Sellers to Buyer. All contributions required to be made to any
Benefit Plan pursuant to their terms and provisions and pursuant to applicable
law have been made timely.
5.25.2 All Benefit Plans have been administered in compliance with the
governing documents and all applicable laws and regulations, and have not (and
the Company has not) incurred any penalty, tax or other obligation which remains
unpaid. There is no act or omission of any Seller or the Company which would
constitute a "prohibited transaction" under ERISA or the Code.
5.25.3 No Benefit Plan provides post-retirement medical, health or
other welfare benefits to employees or former employees or their dependents or
beneficiaries. The Company does not maintain, is not a party to, does not
contribute to (and within the past five years, has not maintained, was not a
party to, or contributed to) and is not obligated to
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maintain or contribute to any "multiemployer plan" (as defined in Section 4001
(a)(3) of ERISA) or any "multiemployer plan" (as defined in Section 413(d) of
the Code).
5.25.4 Except to the extent reserved for on the Closing Date Balance
Sheet or as set forth on SCHEDULE 5.25.4, there are no actions, suits or claims
pending or threatened against or with respect to any Benefit Plan or the assets
thereof (or any legal basis therefor) which, as of the Closing Date, will not
have been satisfied and which will be or become an obligation or liability of
Buyer or the Company after the Closing Date.
5.25.5 Except with respect to Benefit Plans referred to in subsection
5.25.6 below and except to the extent reserved for on the Closing Date Balance
sheet, none of the Sellers nor the Company has any obligation or liability with
respect to periods prior to the Closing Date under any Benefit Plan which, as of
the Closing Date, will not have been satisfied and which will be or become an
obligation or liability of Buyer or the Company after the Closing Date.
5.25.6 There is no Benefit Plan which is a defined benefit pension plan
(as defined in ERISA). There are no unfunded benefit obligations under any
Benefit Plan, and there are no reserves under any Benefit Plan which is a
"welfare benefit plan" under ERISA.
5.25.7 Except as set forth on SCHEDULE 5.25.7, None of the Sellers nor
the Company (i) is obligated by or subject to any collective bargaining
agreement, agreement to follow any industry group's collective bargaining
agreements, selection of a collective bargaining representative for employees,
order of any labor board of administration, or any unfair labor practice
decision, (ii) has received written notice of its being a party to any labor
dispute or unfair labor practice proceedings with respect to claims of, or
obligations to, the employees, (iii) has been the subject of any union attempts
to organize any employees during the last five (5) years, or has experienced
during the last five (5) years, or is now experiencing, any work stoppage or
slowdown, (iv) has received written notice of any claim made by any employee of
the Company within the past five (5) years (whether or not such claim was
brought before any Governmental Entity) under Title VII or similar state law or
(v) except as set forth on SCHEDULE 5.25.8, has received within the past five
(5) years any "right to sue" letters with respect to any claim by any employee
of the Company.
5.25.8 SCHEDULE 5.25.8 contains a complete and accurate list of (1) all
employees and regularly employed consultants of the Company; (2) each of their
respective annual salaries, bonus eligibility or wages or, in the case of
consultants, their consultancy fees; and (3) each of their respective accrued
vacation and all other benefits and Benefit Plans to which they are entitled or
in which they participate. The Persons listed on SCHEDULE 5.25.8 as consultants
of the Company are independent contractors and not employees of the Company.
5.25.9 Except with respect to the Bodnar/Bueno Agreements, as a result
of the transactions contemplated hereby, no severance or "parachute payment" (as
defined in Section 280G of the Code) will be payable and no other benefits or
compensation will increase in time
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of payment or amount or vest or become due to any employee of the Company.
5.25.10 The Company has no consulting or similar agreements with anyone
other than as set forth on SCHEDULE 5.25.10. Except as set forth on SCHEDULE
5.25.10, the Company has no obligation or liability with respect to social
security or any other social contribution or with respect to severance.
5.26 No Material Misstatements.
To Seller' best knowledge, no representation or warranty by Sellers
contained in this Agreement, or in any exhibit or schedule attached hereto,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
6. Representations. Warranties and Agreements of Buyer.
Except as set forth on SCHEDULE 6 ("Buyer's Disclosure Schedule"), or
any other schedule or exhibit hereto, Buyer represents and warrants as follows:
6.1 Corporate Status of Buyer.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Oklahoma, and is qualified as a foreign
corporation to conduct business in each jurisdiction in which the nature of the
business requires it to be qualified. Buyer has full corporate power and
corporate authority to purchase and acquire the Stock as herein provided.
6.2 Authorization of Buyer.
This Agreement has been duly executed and delivered by Buyer, and
constitutes a valid obligation legally binding on Buyer and is enforceable
against Buyer in accordance with its terms; except as enforceability may be
limited or affected by applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the rights of
creditors and except as enforceability may be limited by rules of law governing
specific performance, injunctive relief or other equitable remedies.
6.3 Approval by Buyer Board.
The Board of Directors of Buyer has approved, in accordance with its
Certificate of Incorporation and By-Laws (i) the Agreement and the execution and
delivery hereof by the Buyer, and (ii) the performance by Buyer of all of its
respective obligations pursuant to this Agreement. Certified copies of Buyer's
Board of Directors minutes authorizing the transactions contemplated by this
Agreement have been delivered to Sellers.
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6.4 Compliance with Other Instruments.
The execution and delivery of this Agreement by Buyer, and consummation
of the transactions contemplated herein will not, either alone or with the
giving of notice or passage of time, constitute a default of or violation of any
material term of its Certificate of Incorporation or By-Laws, nor, to the best
knowledge of the Buyer, of any material term or provision of any mortgage,
indebtedness, or material agreement, judgement or decree applicable to the
Buyer.
6.5 Investment Intent.
Buyer is acquiring the Stock for its own account and not with a view to
any resale or distribution in violation of applicable securities law, although
Buyer may, after the Closing, register or qualify the Stock for sale to the
public in accordance with all applicable securities laws. Buyer is an
"accredited investor" as such term is defined in Regulation D under the
Securities Act of 1933, as amended ("Securities Act"). Buyer acknowledges that
the Stock has not been registered under the Securities Act or registered or
qualified under the securities laws of any state and may not be offered, sold,
pledged, hypothecated or otherwise transferred unless so registered or qualified
or unless an exemption from the registration requirements under the Securities
Act and any applicable state securities laws is available.
6.6 Litigation Involving Buyer.
Buyer is not engaged in any legal proceedings and there are no legal
proceedings, government initiated proceedings, or claims of any kind pending or,
to the best knowledge of the Buyer, threatened against Buyer relating to or
potentially affecting their ability to perform their obligations in accordance
with this Agreement.
6.7 Brokers.
Buyer will hold Sellers harmless and indemnify them from any liability
for any broker's fee or finder's fee of anyone acting in, or purporting to act
in, such capacity for Buyer in connection with the transactions contemplated by
this Agreement.
6.8 No Material Misstatements.
To the best knowledge of Buyer, no representation or warranty by Buyer
contained in this Agreement, or in any exhibit or schedule attached hereto,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
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7. Indemnification By Seller of Buyer and Shareholder.
7.1 Indemnification.
Sellers covenant and agree that they will indemnify, defend and hold
harmless Buyer from, for and against any loss, damage, liability or deficiency
(including without limitation reasonable attorneys' fees and other costs and
expenses incident to any suit, action, investigation or other proceeding)
arising out of or resulting from, and, except as hereinafter limited, will pay
Buyer on demand the full amount of any sum which Buyer may pay or become
obligated to pay on account of, or reimburse Buyer for any loss suffered on
account of:
(a) any inaccuracy in any representation or the breach of any warranty
made hereunder (as described in Article 5) by Sellers;
(b) any federal, state, local or other tax of any nature imposed on the
Company with respect to any period of time through the Closing Date, including,
but not limited to, any penalty assessed against the Company, or any interest
assessed on deficiencies but excluding any tax, penalty or interest included in
the Assumed Liabilities;
(c) any failure of Sellers to duly perform or observe any term,
provision, covenant, agreement or condition to be performed or observed
hereunder on the part of Sellers;
(d) any undisclosed claim or liability arising out of or related to the
litigation and claims, or written threats thereof, existing as of Closing Date;
(e) any undisclosed claim or liability of the Companies to third
parties of any nature arising out of any act performed or state of facts
suffered to exist by the Company through the Closing Date, other than Assumed
Liabilities; and
(f) any claim of any employee of the Company or of any other person,
with respect to any period of time prior to the Closing Date, arising out of or
relating to any compensation due to an employee prior to the Closing Date,
employee stock option, medical reimbursement plan, bonus, retirement, profit
sharing, pension or other similar plan of the Company or the operation or
termination of any such plan by the Company through the Closing Date, other than
the Assumed Liabilities.
Notwithstanding anything to the contrary, Sellers shall have no
obligation to defend, indemnify or hold Buyer harmless for any breach, claim or
failure covered by insurance carried by Buyer or Company (except to the extent
of any deductibles and retrorated premiums for workers' compensation resulting
from such claims) and in this regard Buyer on its behalf and on behalf of its
insurers waive any and all rights of subrogation.
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In addition, Sellers will indemnify, defend and hold harmless Buyer
from, for and against any costs and expenses (including reasonable attorneys'
fees at trial and in any appeal) which it may suffer or incur in connection with
enforcement of the indemnification obligation of Seller hereunder.
Any claim for indemnification by Buyer pursuant to this Section 7.1
shall hereinafter be referred to as a "Buyer's Claim". Buyer shall be authorized
to off-set against the Notes any amounts payable pursuant to this Section 7.1.
7.2 Notice; Tendering Defense to Seller.
If Buyer intends to seek indemnity under this Section 7.1, Buyer shall
promptly notify Sellers in writing of such claims setting forth briefly the
basis for and the amount of such claims, provided that the failure to provide
such notice shall not affect the obligations of Sellers unless it is actually
prejudiced thereby. In the event such claim involves a claim by a third party
against the Buyer, Sellers shall have fifteen (15) days after receipt of such
notice to decide whether they will undertake, conduct and control, through
counsel of their own choosing and at their own expense the settlement or defense
thereof, and if they so decide, Buyer shall cooperate with them in connection
therewith, provided that Buyer may participate in such settlement or defense
through counsel chose by it, and provided further that the fees and expenses of
such Buyer's counsel shall be borne by the Buyer. Sellers shall not, without the
written consent of the Buyer, settle or compromise any action. If Sellers do not
notify the Buyer within fifteen (15) days after the receipt of the Buyer's
notice of a claim of indemnity hereunder that they elect to undertake the
defense thereof, Buyer shall have the right to contest, settle or compromise the
claim but shall not thereby waive any right to indemnity therefor pursuant to
this Agreement. So long as Sellers are contesting any such claim in good faith,
Buyer shall not pay or settle any such claim, unless such settlement includes as
an unconditional term thereof the delivery by the claimant or plaintiff and by
the Buyer to Sellers of duly executed written releases of Sellers from all
liability in respect of such claim which written releases shall be reasonably
satisfactory in form and substance to counsel for Sellers. Buyer shall cooperate
fully in all aspects of any investigation, defense, pre-trial activities, trial,
compromise, settlement or discharge of any claim in respect of which indemnity
is sought pursuant to Section 7.2, including without limitation, by providing
Sellers with reasonable access to employees and officers (including as
witnesses) and other information. Notwithstanding the foregoing, the procedures
of Section 9.6 shall apply with respect to any claim for indemnification
relating to Taxes.
7.3 Buyer's Claim Basket
With the exception of Buyer's Claims (a) relating to adjustments of the
Purchase Price, (b) involving fraud by Seller; or (c) involving Sellers' title
to the stock or Company's title to the Asset, Sellers' obligations with respect
to indemnity pursuant to this Article 7 shall be
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limited to the extent that the aggregate of such Buyer's Claims are greater than
$10,000 ("Buyer's Claim Basket") except that any Buyer's Claims covered by
Company's insurance net of any applicable deductible, retrorated premiums or
premium adjustments resulting from such claims shall not be counted against such
Buyer's Claim Basket.
7.4 Survivability.
In order for Buyer to be entitled to indemnification for a Buyer's
Claim for any breach of representation or warranty as provided for in Section
7.1, a notice of a Buyer's Claim(s) must be submitted to Seller within eighteen
(18) months after the Closing Date except that the representations and
warranties in Section 5.2 shall survive without limitation and the
representations and warranties in Sections 5.23 and 5.24 shall survive until the
expiration of the applicable statute of limitations (including all extensions)
relating to any issue thereunder. All covenants and agreements of the parties
contained in this Agreement shall survive the Closing according to their terms.
7.5 Sole and Exclusive Remedy.
After the Closing, the indemnification provided in this Article 7 shall
be the sole and exclusive remedy of Buyer with respect to the matters described
in this Article 7 without regard to whether such matter involves claims framed
in contract, tort, equity or otherwise.
8. Indemnification By Buyer and Shareholder of Seller
8.1 Scope of Indemnification.
Buyer covenants and agrees that it shall indemnify and hold harmless
each and every Seller from, for and against any loss; damage, liability or
deficiency (including without limitation reasonable attorneys' fees and other
costs and expenses incident to any suit, action, investigation or other
proceeding) arising out of or resulting from, and will pay each and every Seller
on demand the full amount of any sum which any and every Seller may pay or
become obligated to pay on account of, or reimburse each Seller for any loss
suffered on account of:
(a) any inaccuracy in any representation or the breach of any warranty
made hereunder (as described in Article 6) by Buyer;
(b) any failure of Buyer to duly perform or observe any term,
provision, covenant, agreement or condition to be performed or observed
hereunder on the part of Buyer, including, but not limited to, payment or
satisfaction of any of the Assumed Liabilities;
(c) any undisclosed claim or liability of the Company to employees or
other third parties, including but not limited to any litigation or other
action, of any nature arising out of any act performed, or state of facts
suffered to exist by Buyer or the Company subsequent to
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the Closing Date; and
(d) any undisclosed claim or liability of any nature in connection with
the payment of any broker's fees, finder's fees or commission in connection with
any broker, finder or agent or anyone dealt with by Buyer in connection
herewith.
Notwithstanding anything to the contrary, Buyer shall have no
obligation to defend, indemnify or hold Sellers harmless for any breach, claim
or failure covered by insurance carried by Sellers (except to the extent of any
deductibles and retrorated premiums for workers' compensation resulting from
such claims) and in this regard Sellers on their behalf and on behalf of its
insurers waive any and all rights of subrogation.
In addition, Buyer will indemnify, defend and hold harmless each and
every Sellers from, for and against any costs and expenses (including reasonable
attorneys' fees at trial and in any appeal) which it may suffer or incur in
connection with enforcement of the indemnification obligation of Buyer
hereunder.
Any claim for indemnification by Seller pursuant to this Section 8.1
shall hereinafter be referred to as a "Sellers' Claim."
8.2 Notice; Tendering Defense to Buyer.
If Sellers intend to seek indemnity under this Section 8.2,
Sellers shall promptly notify Buyer, in writing, of such claims setting forth
briefly the basis for and the amount of such claims, provided that the failure
to provide such notice shall not affect the obligations of Buyer unless it is
actually prejudiced thereby. In the event such claim involves a claim by a third
party against the Sellers, Buyer shall have fifteen (15) days after receipt of
such notice to decide whether they will undertake, conduct and control, through
counsel of their own choosing and at their own expense the settlement or defense
thereof, and if they so decide, Sellers shall cooperate with them in connection
therewith, provided that Sellers may participate in such settlement or defense
through counsel chose by it, and provided further that the fees and expenses of
such Sellers' counsel shall be borne by the Sellers. Buyer shall not, without
the written consent of the Sellers, settle or compromise any action. If Buyer
does not notify the Sellers within fifteen (15) days after the receipt of the
Sellers' notice of a claim of indemnity hereunder that they elect to undertake
the defense thereof, Sellers shall have the right to contest, settle or
compromise the claim but shall not thereby waive any right to indemnity therefor
pursuant to this Agreement. So long as Buyer is contesting any such claim in
good faith, Sellers shall not pay or settle any such claim, unless such
settlement includes as an unconditional term thereof the delivery by the
claimant or plaintiff and by the Sellers to Buyer of duly executed written
releases of Buyer from all liability in respect of such claim which written
releases shall be reasonably satisfactory in form and substance to counsel for
Buyer. Sellers shall cooperate fully in all aspects of any investigation,
defense, pre-trial
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activities, trial, compromise, settlement or discharge of any claim in respect
of which indemnity is sought pursuant to Section 8.2, including without
limitation, by providing Buyer with reasonable access to employees and officers
(including as witnesses) and other information. Notwithstanding the foregoing,
the procedures of Section 9.6 shall apply with respect to any claim for
indemnification relating to Taxes.
8.3 Seller's Claim Basket
With the exception of Sellers' Claims (a) relating to adjustments of
the Purchase Price, or (b) involving fraud by Buyer, Buyer's obligation with
respect to indemnity pursuant to this section shall be limited to the extent
that the aggregate of such Sellers' Claim must first exceed $10,000 ("Sellers'
Claim Basket"), except that any Sellers' Claims covered by insurance of Buyer or
the Company, net of any applicable deductible retrorated premiums or premium
adjustments, shall not be counted against the Sellers' Claim Basket.
8.4 Survivability.
In order for Seller to be entitled to indemnification for a Claim as
provided for in Section 8.1, a notice of a Seller's Claim(s) must be submitted
to Buyer within the following applicable time limitations:
(i) a Sellers' Claim must be submitted within one (1) year after the
Closing Date;
(ii) a notice of a Sellers Claim pursuant to Section 8.1(ii) resulting
from Buyer's failure to perform or observe any of the terms, provisions,
covenants, agreements or conditions of this Agreement must be submitted: (a)
within one (1) year after Sellers' actual notice or knowledge of the breach that
gives rise to such Sellers' Claim occurs; or (b) prior to the expiration of the
applicable statute of limitations which ever shall occur first.
8.5 Sole and Exclusive Remedy.
After the Closing, the indemnification provided in this Article 8 shall
be the sole and exclusive remedy of Buyer with respect to the matters described
in this Article 8 without regard to whether such matter involves claims framed
in contract, tort, equity or otherwise.
9. Post-Closing Covenants.
9.1 Employment of Operating Stockholders; Auto Leases.
Contemporaneously with the execution and delivery of this Agreement,
the Buyer, Company and Operating Stockholders shall enter into employment
agreements substantially in the form of the agreements set forth on SCHEDULE
9.1. Immediately prior to the Closing, the
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Company shall assign to the Operating Stockholders, and the Operating
Stockholders shall assume, all obligations under those certain auto leases with
respect to autos currently provided by the Company to the Operating
Stockholders.
9.2 Operating Changes.
Until the Second Look Date, Buyer will not take any action for the
express purpose of preventing the Company from achieving the EBITDA targets set
forth in Sections 3.2.2 and 3.2.3.
9.3 Confidentiality.
After the Closing Date, Sellers shall maintain in strict confidence all
non-public or confidential information relating to the Company and not disclose
to any Person or use any such information.
9.4 Non Competition.
Each of Sellers covenants and agrees that, conditional on the
occurrence of the Closing, for a period commencing on the Closing Date and
expiring on the fourth (4th) anniversary of the Closing Date (the "Restricted
Period"), neither it nor any of its affiliates will, directly or indirectly,
own, manage, operate, control or engage or participate in the ownership,
management, operation or control of, or be connected as a stockholder, agent,
partner, joint venture, employee, officer, director, consultant or otherwise
with, any business or organization any part of which engages in a business which
is competitive with that of the Business or the business of Buyer on the Closing
Date (a "Competitive Action"). During the Restricted Period, none of the Sellers
nor any affiliate of Sellers, directly or indirectly, will solicit, or in any
manner attempt to induce, any officer, executive employee, research and
development employee, sales employee or sales agent of the Company (other than
family members or relatives) to leave the employ of the Company or to work for
Sellers or any of their affiliates. During the Restricted Period, none of the
Sellers nor any affiliate of Sellers, directly or indirectly, will solicit, or
in any manner attempt to induce, any family members or relatives to leave the
employ of the Company or to work for Sellers or any of their affiliates in any
business that is competitive with the Business. During the Restricted Period,
none of Sellers or any Affiliate of Sellers, directly or indirectly, will
solicit, raid, entice, induce or contact, or attempt to solicit, raid entice,
induce or contact, any Person that is a customer, supplier or distributor of
Buyer or the Company to terminate such Person's contractual or business
relationship with Buyer or the Company or directly or indirectly solicit or
attempt to solicit the business of, enter into any written or oral agreement
with, or otherwise deal with any customers of Buyer or the Company, except in
regard to businesses outside the scope of the business of Buyer or the Company
on the Closing Date. In the event that the Buyer ascertains the start of a
Competitive Action on the part of any such Persons, Buyer shall be entitled to
obtain an injunctive relief without any objection from Sellers. The parties
further
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agree that, if a court of competent jurisdiction determines that this covenant
is unenforceable in any respect, the remainder of this covenant shall not
thereby be affected and shall be given full effect, without regard to any
invalid portions, and this covenant may be modified by such court in any
necessary respect in order to render it enforceable in its least reduced form.
If the courts of any one or more jurisdictions determine that this covenant is
unenforceable, it is the intention of Buyer, on the one hand, and Sellers, on
the other hand, that such determination no bar or in any way affect Buyer's
right to the relief provided above in the courts of any other jurisdiction as to
breaches of this covenant in such other respective jurisdiction, it being the
intention of Buyer, on the one hand, and Sellers, on the other hand, that this
covenant be considered a separate and independent covenant insofar as it relates
to each such jurisdiction.
9.5 Maximum Liability and Offset
Notwithstanding anything to the contrary, Stockholders' maximum
exposure for any liability, including without limitation, any Purchase Price
Adjustment and any obligation under Section 7 of this Agreement, shall not
exceed, in the aggregate, $3.75 million.
9.6 Responsibility for Taxes; Cooperation.
(a) Sellers shall be responsible for and shall pay all Taxes payable
with respect to the Company for Pre-Closing Period in excess of reserves for
Taxes on the Closing Date Balance Sheet. Buyer shall be responsible for and
shall pay all Taxes payable with respect to the Company (and Buyer shall be
entitled to any refunds with respect thereto) for periods other than Pre-Closing
Periods and any Pre-Closing Periods to the extent such Taxes are of a type
reserved against on the Final Closing Date Balance Sheet and then only to the
extent of such reserves. To the extent reserved on the Closing Date Balance
Sheet, the payment shall be made in accordance with Section 3.2.2.
(b) Sellers shall provide Buyer, without cost and expense to Buyer,
with such assistance as reasonably may be requested by Buyer in connection with
the preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes relating to the Business, the Company and all predecessors (for a
period of time not to exceed the greater of ten years after the Closing Date or
the applicable statute of limitations in the jurisdiction in which such Taxes
are paid, including all extensions) and Buyer shall direct and control all such
audits, examinations and proceedings. Sellers shall retain, for a reasonable
period of time (but not less than the greater of ten years after the Closing
Date or the applicable statute of limitations in the jurisdiction in which such
Taxes are paid, including all extensions), and provide Buyer with, any records
or information which may be relevant to any such Tax Return, audit or
examination, proceedings or determination.
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9.7 Release of Seller Guarantees.
Promptly following the Closing, Buyer shall cause the Company to pay
off its current line of credit with First Union National Bank and shall cause
the Stockholders' guarantee thereof to be released. In addition, promptly
following the Closing, Buyer shall cause the Company to use its best efforts to
obtain a release of any guaranty made by any Seller in favor of Softech with
respect to the Company's lease of certain personal property..
10. Expenses.
The Buyer, Parent and Sellers shall each pay all of their own
respective expenses incurred by or on behalf of each of them in connection with
this Agreement and the transactions contemplated hereunder, including, but not
limited to, all due diligence, legal and accounting expenses. Sellers shall be
responsible for the payment of any and all stock transfer taxes incurred in
connection with the transaction contemplated herein.
11. Miscellaneous.
11.1 No Third Party Beneficiaries.
No provision of this Agreement shall create any third party beneficiary
or other rights in any employee or former employee (including any beneficiary or
dependent thereof) of Sellers or the Company in respect of continued employment
(or resumed employment) with either Buyer or the Company or any of Buyer's or
Sellers' Affiliates and no provision of this Agreement shall create any such
rights in any such employee or former employee in respect of any benefits that
may be provided, directly or indirectly, under any Benefit Plan or any plan or
arrangement which may be established by Buyer or the Company. No provision of
this Agreement shall constitute a limitation on rights to amend, modify or
terminate after the Closing Date any such plans or arrangements of Sellers,
Buyer or any of their respective Affiliates or the Company.
11.2 Notices.
Any and all notices, demands or other communications required or
desired to be given hereunder by any party shall be in writing and shall be
validly given or made to another party if served either personally or if by
overnight carrier. If such notice, demand or other communication is served
personally, or by facsimile (with verbal verification of complete receipt),
service shall be conclusively deemed made at the time of such personal service
or facsimile transmission. If such notice, demand or other communication is
given by mail, such notice shall be conclusively deemed given seventy-two (72)
hours after the deposit thereof in the United States mail addressed to the party
to whom such notice, demand or other communication is to be given as hereinafter
set forth:
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If to Sellers: Christopher M. Cavallo
1134 Washington Street
Hollywood, Florida 33019
Robin K. Cavallo
1134 Washington Street
Hollywood, Florida 33019
Stefan A. Cavallo
139 East 95th Street
New York, New York 10028
Stephen J. Cavallo
127 East 90th Street
New York, New York 10028
with a copy to: Ingber & Ingber
335 Greenwich Avenue
Greenwich, CT 06830
Attn: Clifford J. Ingber, Esq.
If to Buyer or Parent: Total Information Services, Inc.
C/o The Official Information Company
250 West 57th Street
Suite 2421
New York, New York 10019
Attention: Brian A. Meyer
Any party hereto may change its address for the purpose of receiving notices,
demands and other communications as herein provided by a written notice given in
the manner provided hereby to the other party or parties hereto.
11.3 Modifications or Amendments.
No amendment, change or modification of this Agreement shall be valid
unless in writing and signed by all parties hereto.
11.4 Waiver.
No reliance upon or waiver of one or more provisions of this Agreement
shall constitute a waiver of any other provisions hereof. All waivers must be in
writing and signed by the party waiving compliance.
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11.5 Successors and Assigns.
All of the terms and provisions contained herein shall inure to the
benefit of and shall be binding upon the parties hereto, and their respective
heirs, personal representatives, successors and assigns. Buyer may not assign or
delegate any of its duties or obligations under this Agreement without Sellers'
consent first obtained, which consent will not be unreasonably withheld (except
that Buyer shall be permitted to assign its rights hereunder to its lenders).
11.6 Separate Counterparts.
This document may be executed in one or more separate counterparts,
each of which, when so executed, shall be deemed to be an original. Such
counterparts shall, together, constitute and shall be one and the same
instrument.
11.7 Further Assurances.
Each of the parties hereto shall execute and deliver any and all
additional papers, documents, and other assurances, and shall do any and all
acts and things reasonably necessary in connection with the performance of their
obligations hereunder and to carry out the intent of the parties hereto.
11.8 Severability.
If any provisions of this Agreement are found to be unenforceable or
invalid, the remaining provisions shall nevertheless be enforceable and valid.
If feasible, the term or provision which is found to be unenforceable or invalid
shall be deemed to be modified or limited to the extent necessary to be valid
and enforceable.
11.9 Attorneys' Fees and Costs.
In the event any action is instituted by a party hereto to enforce any
of the terms or provisions hereof, the prevailing party in such action, as
determined by the court, shall be entitled to such reasonable fees, costs and
expenses at trial, on appeal and in connection with any review.
11.10 Captions.
Any captions to the sections of this Agreement are solely for the
convenience of the parties and are not a part of this Agreement and shall not be
used for the determination of the validity of this Agreement or any provision
therefor.
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11.11 Entire Agreement.
This document, together with any exhibits, schedules or documents
attached hereto, or delivered and initialed by the parties in connection
herewith, constitutes the entire understanding and agreement of the parties with
respect to the subject matter of this Agreement and supersedes any and all prior
agreements with respect to the subject matter hereof.
11.12 Confidentiality.
The parties agree that no party shall disclose the existence of any
economic and other terms of this Agreement for any purpose, without the prior
written consent of the other parties, unless such disclosure is required by law,
court order, rule or regulation or is being made to management advisors, any
investor or lender (including their respective counsel, tax preparers and
advisors) of Buyer, the Company or Sellers.
11.12. Exclusive Jurisdiction.
This Agreement shall be governed by and shall be construed and enforced
in accordance with the internal laws of the State of Florida, without regard to
conflicts of laws and principles. The parties hereto hereby consent to the
jurisdiction of any state or federal court located within the County of Broward
or County of Dade, State of Florida and irrevocably agree that all actions or
proceedings arising out of or relating to this Agreement or the other related
documents shall be litigated in such courts. Each of the parties hereto accept
for itself and in connection with its properties, generally and unconditionally,
the nonexclusive jurisdiction of the aforesaid courts and waive any defense of
forum non conveniens, and irrevocably agree to be bound by any judgment rendered
thereby in connection with this Agreement. A copy of any process so served shall
be mailed by registered mail to each of the parties hereto as provided herein,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by any party refuses to accept service, each hereby agrees that
service upon it by registered mail shall constitute sufficient notice. Nothing
herein shall affect the right to serve process in any other manner permitted by
law.
11.12 Joint Preparation.
This Agreement was prepared by the joint efforts of the parties and it
is agreed that this Agreement shall be construed without consideration as to
which party actually drafted this Agreement.
11.13 Counterparts; Facsimile Signature. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The parties agree that
signature by facsimile shall hereby be deemed an original
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signature, and fully binding upon the parties hereto.
11.14. Press Releases and Public Announcements. No party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of the other party;
provided, however, that any party may make any public disclosure it believes in
good faith is required by applicable law (in which case the disclosing party
will use its reasonable best efforts to advise the other party prior to making
the disclosure).
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
RECORDS SEARCH, INC. ATTEST:
By:
-------------------------------------- ------------------------------
TOTAL INFORMATION SERVICES, INC. ATTEST:
By:
-------------------------------------- ------------------------------
WITNESS:
- ----------------------------------------- ------------------------------
CHRISTOPHER M. CAVALLO
WITNESS:
- ----------------------------------------- ------------------------------
ROBIN K. CAVALLO
WITNESS:
- ----------------------------------------- ------------------------------
STEFAN A. CAVALLO
WITNESS:
- ----------------------------------------- ------------------------------
STEPHEN J. CAVALLO
